Hydro Quebec 18-K/A Annual report (foreign governments) (amended)

Exhibit 99.2

	Hydro-Québec First Quarter 2021
	Management’s Discussion and Analysis
Summary of results	For the first quarter of 2021, Hydro-Québec posted net income of $1,641 million, compared to $1,525 million a year ago. This $116-million increase is due to two main factors. On markets outside Québec, net electricity exports rose by $53 million or 1.8 TWh compared to the corresponding quarter in 2020. They reached 10.5 TWh, a historic peak for a single quarter. Financial expenses fell by $62 million. This decrease is primarily attributable to the maturity of certain high-interest debts and the issuance of new debt at a much lower rate, given the favorable market conditions.
Consolidated results	Revenue totaled $4,447 million, compared to $4,371 million in first quarter 2020. Revenue from ordinary activities was $4,406 million, compared to $4,287 million for the same period last year, due to a $119-million increase in electricity sales. In Québec, these amounted to $3,843 million, or $17 million more than the $3,826 million posted a year earlier, mainly because of slightly colder temperatures in winter 2021, particularly in February. The rise in sales was mitigated, however, by a decrease in baseload demand resulting from a combination of three factors. In the residential segment, demand increased, partly because many customers continued to work from home in the context of the COVID-19 pandemic. Conversely, the pandemic led to lower consumption in the commercial, institutional and small industrial segment on account of the shutdown of a large number of businesses for several weeks during the winter. Moreover, the fact that the 2020 leap year included an additional day of sales led to a negative variance in all customer categories in 2021. Revenue from electricity sales on markets outside Québec was $529 million, a $102-million increase from first quarter 2020.

Revenue from other activities declined by $43 million as a result of the impact of the derivative instruments related to electricity exports, which was less favorable in 2021 than in 2020. Total expenditure amounted to $2,197 million, which is comparable to the $2,175 million recognized in the corresponding period last year. Financial expenses totaled $609 million, a $62-million decrease from the $671 million recorded a year earlier.

Segmented results

At the beginning of the year, Hydro-Québec made changes to its organizational structure, replacing its divisions and other first-tier units with groups. The adjustments came into effect on February 22, 2021. As a result, the company now comprises 11 groups, including the following: ◾  Innovation, production, santé, sécurité et environnement [innovation, generation, health, safety and environment] ◾  TransÉnergie et équipement [TransÉnergie and construction] ◾  Distribution, approvisionnement et services partagés [distribution, procurement and shared services] This restructuring had no impact on the company’s business segments or the reporting of segmented information in the consolidated financial statements. Hydro-Québec therefore continues to carry out its principal activities in four reportable business segments—Generation, Transmission, Distribution and Construction—its other activities being grouped together under the heading Corporate and Other Activities. Generation The Generation segment (the “Generator”) posted net income of $1,016 million, or $107 million more than the $909 million recorded in first quarter 2020. Net electricity exports rose by $53 million compared to last year, essentially because of a 1.8-TWh increase in volume that led to a new quarterly record of 10.5 TWh. Electricity supplies provided to the Distribution segment increased by $33 million. Transmission The Transmission segment (the “Transmission Provider”) recorded net income of $183 million, comparable to the $172 million posted a year earlier.

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Distribution The Distribution segment (the “Distributor”) posted net income of $487 million, compared to $521 million for the same period in 2020. Electricity sales in Québec rose by $17 million, mainly because of the positive impact of temperatures. Electricity purchases and the related transmission costs increased by $58 million. More specifically, supplies from the Generator were up by $33 million, while electricity purchases from third parties rose by $26 million, due in part to an increase in wind power purchases resulting from higher output from wind farms under contract. Construction The Construction segment includes activities related to the design and execution of construction and refurbishment projects involving power generation and transmission facilities. The volume of activity in this segment totaled $452 million, compared to $497 million in first quarter 2020.

Investments

In the first three months of 2021, Hydro-Québec invested $717 million in property, plant and equipment and intangible assets, compared to $738 million a year earlier. The Generator allotted a large portion of its investments to ongoing work at the Romaine-4 jobsite, in the Minganie region. At the same time, it continued investing to ensure the long-term operability of its generating facilities and optimize their output. For instance, projects are under way at the Robert-Bourassa, Rapide-Blanc, Carillon and Beauharnois generating stations. In keeping with the energy transition, the Generator also continued to build two photovoltaic solar power plants in the Montérégie region. The Transmission Provider allocated part of its investments to building substations and transmission lines. It also pursued upgrading and modernization projects to ensure the reliability and long-term operability of its assets and enhance service quality. Some examples of this include construction of the 735-kV Micoua–Saguenay line, the projects to replace the transmission grid control and special protection systems, as well as ongoing work under the architecture development plan for the 315-kV system on the island of Montréal. The Transmission Provider also continued to invest in the deployment of a 320-kV direct-current line in the Chaudière-Appalaches and Estrie regions, as part of a larger project aimed at building a new 1,200-MW interconnection between Québec and the New England grid.

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The Distributor continued to invest to better meet the needs of its customers. This includes connecting the village of La Romaine and the Innu community of Unamen Shipu, both located in Basse-Côte-Nord region and currently served by an off-grid system, to the main grid, as well as building a new generating station to supply the Inuit village of Tasiujaq, in the Nord-du-Québec region. The Distributor is also pursuing projects to maintain and improve the quality of its facilities, such as replacing the distribution grid control system.

Financing

During the first quarter, Hydro-Québec made two fixed-rate bond issues on the Canadian capital market, at an average cost of 2.52%. These bonds will mature in 2060. The issues raised $0.9 billion. The proceeds were used to support part of the investment program and to repay higher-rate maturing debt.

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CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Consolidated Statements of Operations

In millions of Canadian dollars (unaudited)		Three months ended March 31
	Notes	2021			2020
Revenue	11		4,447			4,371
Expenditure
Operations			768			738
Other components of employee future benefit cost	8		(186	)		(124	)
Electricity purchases			631			594
Depreciation and amortization	4		652			647
Taxes			332			320
			2,197			2,175
Income before financial expenses			2,250			2,196
Financial expenses	5		609			671
Net income			1,641			1,525
Consolidated Statements of Comprehensive Income
In millions of Canadian dollars (unaudited)		Three months ended March 31
	Notes	2021			2020
Net income			1,641			1,525
Other comprehensive income	9
Net change in items designated as cash flow hedges	6		241			158
Net change in employee future benefits			37			31
Other			(9	)		4
			269			193
Comprehensive income			1,910			1,718

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Balance Sheets

In millions of Canadian dollars (unaudited)	Notes	As at March 31, 2021		As at December 31, 2020
ASSETS
Current assets
Cash and cash equivalents		2,475		1,467
Short-term investments		707		304
Accounts receivable and other receivables		3,222		2,313
Derivative instruments	6	124		147
Regulatory asset		121		123
Materials and supplies		333		316
		6,982		4,670
Property, plant and equipment		66,977		66,900
Intangible assets		1,074		1,053
Investments		1,705		1,717
Derivative instruments	6	52		11
Regulatory assets		5,600		5,700
Other assets		842		844
		83,232		80,895
LIABILITIES
Current liabilities
Borrowings		3,389		–
Accounts payable and accrued liabilities		2,022		2,080
Dividend payable		–		1,727
Accrued interest		486		933
Asset retirement obligations		79		84
Derivative instruments	6	11		14
Current portion of long-term debt	6	2,046		1,900
		8,033		6,738
Long-term debt	6	45,591		46,257
Asset retirement obligations		867		838
Derivative instruments	6	14		3
Regulatory liabilities		328		331
Other liabilities		4,915		5,150
Perpetual debt	6	252		256
		60,000		59,573
EQUITY
Share capital		4,374		4,374
Retained earnings		21,699		20,058
Accumulated other comprehensive income	9	(2,841	)	(3,110	)
		23,232		21,322
		83,232		80,895
Contingencies	10

The accompanying notes are an integral part of the consolidated financial statements.

On behalf of the Board of Directors,
/s/ Geneviève Brouillette	/s/ Jacynthe Côté
Chair of the Audit Committee	Chair of the Board

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Consolidated Statements of Changes in Equity

In millions of Canadian dollars (unaudited)						Three months ended March 31
	Note	Share capital		Retained earnings		Accumulated other comprehensive income			Total equity
Balance as at December 31, 2020			4,374		20,058		(3,110	)		21,322
Net income			–		1,641		–			1,641
Other comprehensive income	9		–		–		269			269
Balance as at March 31, 2021			4,374		21,699		(2,841	)		23,232
Balance as at December 31, 2019			4,374		19,482		(2,408	)		21,448
Net income			–		1,525		–			1,525
Other comprehensive income	9		–		–		193			193
Balance as at March 31, 2020			4,374		21,007		(2,215	)		23,166

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Statements of Cash Flows

In millions of Canadian dollars (unaudited)		Three months ended March 31
	Notes	2021			2020
Operating activities
Net income			1,641			1,525
Adjustments to determine net cash flows     from operating activities
Depreciation and amortization	4		652			647
Amortization of premiums, discounts and issue expenses related to debt securities			1			49
Deficit of net cost recognized with respect to amounts paid for employee future benefits			(82	)		(36	)
Interest and other	7		43			(186	)
Regulatory assets and liabilities			(14	)		(9	)
Change in non-cash working capital items	7		(1,394	)		(1,405	)
			847			585
Investing activities
Additions to property, plant and equipment			(675	)		(702	)
Additions to intangible assets			(42	)		(36	)
Acquisition of an investment			–			(661	)
Net change in short-term investments and sinking fund			(399	)		(231	)
Other			2			–
			(1,114	)		(1,630	)
Financing activities
Issuance of long-term debt			1,066			1,278
Repayment of long-term debt			(1,079	)		(190	)
Cash receipts arising from credit risk management			549			2,252
Cash payments arising from credit risk management			(908	)		(1,255	)
Net change in borrowings			3,418			3,209
Dividend paid			(1,727	)		(2,192	)
Other			(38	)		26
			1,281			3,128
Foreign currency effect on cash and cash equivalents			(6	)		54
Net change in cash and cash equivalents			1,008			2,137
Cash and cash equivalents, beginning of period			1,467			1,115
Cash and cash equivalents, end of period			2,475			3,252
Supplementary cash flow information	7

The accompanying notes are an integral part of the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the three-month periods ended March 31, 2021 and 2020

Amounts in tables are in millions of Canadian dollars, unless otherwise indicated.

Note 1 Basis of Presentation

Hydro-Québec’s consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).

These quarterly consolidated financial statements, including these notes, do not contain all the required information regarding annual consolidated financial statements and should therefore be read in conjunction with the consolidated financial statements and accompanying notes in Hydro-Québec’s Annual Report 2020.

The accounting policies used to prepare the quarterly consolidated financial statements are consistent with those presented in Hydro-Québec’s Annual Report 2020.

Management is of the opinion that these quarterly consolidated financial statements present fairly, in all material respects, the consolidated financial position of Hydro-Québec.

Hydro-Québec’s quarterly results are not necessarily indicative of results for the year on account of seasonal temperature fluctuations. Because of higher electricity demand during winter

months, revenue from electricity sales in Québec is higher during the first and fourth quarters.

Management has reviewed events occurring until May 14, 2021, the date of approval of these quarterly consolidated financial statements by the Board of Directors, to determine whether circumstances warranted consideration of events subsequent to the balance sheet date.

COVID-19 pandemic

The global COVID-19 pandemic has continued to evolve and to affect Hydro-Québec’s activities due to the extension of the public health emergency declared by the Québec government in 2020.

However, it did not have a significant impact on the quarterly consolidated financial statements. At the present time, it is impossible to estimate precisely the duration and scope of the health crisis and the extent of the resulting economic downturn, or the repercussions on Hydro-Québec’s operations and results over the short and long term.

Note 2 Change to Accounting Policy

Standard issued but not yet adopted

Financial instruments

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

This ASU provides new guidance on the impairment of financial assets that are not accounted for at fair value in results. It will be applied on a modified retrospective basis to the financial statements for interim and annual periods beginning on or after January 1, 2023. Hydro-Québec is currently examining the impact of this ASU on its consolidated financial statements.

Note 3 Regulation

Distribution

Under the Act to simplify the process for establishing electricity distribution rates (S.Q. 2019, c. 27), electricity distribution rates were indexed by 1.3% on April 1, 2021, with the exception of Rate L, which was indexed by 0.8%.

Transmission

In decision D-2020-179 of December 21, 2020, the Régie de l’énergie of Québec (the “Régie”) authorized the extension of Hydro-Québec’s 2020 power transmission rates on a provisional basis commencing on January 1, 2021. These rates were set by decision D-2020-063 and came into effect on January 1, 2020. The authorized return on the rate base was set at 6.78%, assuming a capitalization with 30% equity. The Transmission Provider’s rate applications for 2021 and 2022 will be reviewed simultaneously by the Régie.

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Note 4 Depreciation and Amortization

	Three months ended March 31
	2021		2020
Property, plant and equipment		594		589
Intangible assets		25		25
Regulatory assets and liabilities		21		27
Retirement of capital assets		12		6
		652		647

Note 5 Financial Expenses

	Three months ended March 31
	2021		2020
Interest on debt securities		597		686
Net foreign exchange loss (gain)		1		(2	)
Guarantee fees related to debt securitiesa		57		54
		655		738
Less
Capitalized financial expenses		39		45
Net investment income		7		22
		46		67
		609		671

a) Guarantee fees related to debt securities are charged at a rate of 0.5% and are paid to the Québec government.

Note 6 Financial Instruments

In the course of its operations, Hydro-Québec carries out transactions that expose it to certain financial risks, such as market, liquidity and credit risk. Exposure to such risks and the impact on results are reduced through careful monitoring and implementation of strategies that include the use of derivative instruments.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market prices. Hydro-Québec is exposed to three main types of market risk: currency risk, interest rate risk and risk associated with energy and aluminum prices. Active integrated management of these three types of risk aims to limit exposure to each risk and reduce their overall impact on results.

Management of long-term risk

Management of risk associated with sales in U.S. dollars

Currency risk – Hydro-Québec uses forward contracts to manage the currency risk associated with probable U.S.-dollar sales, designating them as cash flow hedges. The impact of these hedging transactions on results is recognized in Revenue.

Management of risk associated with debt

Currency risk and interest rate risk – Hydro-Québec uses currency forward contracts and swaps to manage the currency risk associated with long-term debt and perpetual debt, as well as interest rate forward contracts and swaps to modify long-term exposure to interest rate risk. When designated as hedging items, these derivative instruments are recognized as cash flow hedges or fair value hedges, depending on the risk hedged. The impact on results of foreign currency hedging transactions and those associated with debt interest rates is recognized in Financial expenses.

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Note 6 Financial Instruments (continued)

The following table presents the notional amounts, expressed in Canadian dollars or foreign currencies, of forward contracts and swaps used to manage long-term risk:

	As at March 31, 2021a		As at December 31, 2020a
Forward contracts
Canadian dollars	(2,000	)	(2,000	)
U.S. dollarsb	(542	)	(542	)
Swaps
Canadian dollars	(5,779	)	(6,890	)
U.S. dollars	4,820		5,720

a) Figures in parentheses represent amounts to be paid.

b) As at March 31, 2021, and December 31, 2020, sales and purchase contracts totaled US$743 million and US$201 million, respectively.

Management of short-term risk

Currency risk – Hydro-Québec uses forward contracts to manage its foreign currency risk exposure over the short term. When designated as hedging items, these derivative instruments are recognized as cash flow hedges. The impact of currency risk hedging transactions on results is recognized in the line items affected by the hedged item, namely Revenue, Electricity purchases or Financial expenses. In this context, Hydro-Québec traded foreign currency sales and purchase contracts for which the notional amounts of open positions as at March 31, 2021, were US$833 million and US$2,706 million, respectively (US$1,133 million for sales contracts and US$8 million for purchase contracts as at December 31, 2020).

Interest rate risk – Hydro-Québec uses interest rate forward contracts and swaps to manage short-term interest rate risk. When designated as hedging items, these derivative instruments are recognized as cash flow hedges. The impact on results of transactions to hedge short-term interest rate risk is recognized

in the line item affected by the hedged item, namely Financial expenses.

Price risk – Hydro-Québec uses mainly commodity futures and swaps to manage risk resulting from fluctuations in energy and aluminum prices. When designated as hedging items, these derivative instruments are recognized as cash flow hedges. The impact on results of transactions to hedge the risk related to energy and aluminum prices is recognized in the line items affected by the hedged item, namely Revenue or Electricity purchases. In this context, Hydro-Québec traded electricity futures and swaps for which open positions as at March 31, 2021, totaled 22.8 TWh (22.4 TWh as at December 31, 2020), natural gas futures for which open positions as at March 31, 2021, and December 31, 2020, totaled 1.5 million MMBtu, petroleum product swaps for which open positions as at March 31, 2021, totaled 62 million litres (62.7 million litres as at December 31, 2020), as well as aluminum swaps for which open positions as at March 31, 2021, totaled 337,850 tonnes (262,750 tonnes as at December 31, 2020).

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Note 6 Financial Instruments (continued)

Fair value

Fair value of derivative instruments

The following tables present the fair value of derivative instruments, excluding the impact of offsets, by type and depending on whether they are designated as fair value hedges or cash flow hedges, or not designated as hedges:

				As at March 31, 2021
	Derivatives designated     as fair value hedges	Derivatives designated   as cash flow hedges		Derivatives not designated as hedges	a	Gross     amounts of derivatives recognized	b
Assets
Contracts – Currency risk	–	921		6		927
Contracts – Interest rate risk	383	208		–		591
Contracts – Price risk	–	62		66		128
	383	1,191		72		1,646
Liabilities
Contracts – Currency risk	–	(168	)	(139	)	(307	)
Contracts – Interest rate risk	–	(18	)	–		(18	)
Contracts – Price risk	–	(104	)	(15	)	(119	)
	–	(290	)	(154	)	(444	)
Total	383	901		(82	)	1,202

				As at December 31, 2020
	Derivatives designated     as fair value hedges	Derivatives designated     as cash flow hedges		Derivatives not designated as hedges	a	Gross     amounts of derivatives recognized	b
Assets
Contracts – Currency risk	–	1,157		6		1,163
Contracts – Interest rate risk	569	3		–		572
Contracts – Price risk	–	105		55		160
	569	1,265		61		1,895
Liabilities
Contracts – Currency risk	–	(150	)	(214	)	(364	)
Contracts – Interest rate risk	–	(43	)	–		(43	)
Contracts – Price risk	–	(46	)	(14	)	(60	)
	–	(239	)	(228	)	(467	)
Total	569	1,026		(167	)	1,428

a) These derivative instruments are mainly traded as part of Hydro-Québec’s risk management. As at March 31, 2021, $(104) million was in consideration of amounts received or disbursed [$(173) million as at December 31, 2020] with respect to agreements to limit the market value of the main portfolios of derivative instruments. These agreements arise from frameworks applied by Hydro-Québec to reduce its credit risk exposure and limit risk concentration.

b) Fair value measurements of derivative instruments are Level 2 measurements. These measurements are obtained by discounting future cash flows, which are estimated on the basis of the spot rates, forward rates or forward prices (foreign exchange rates, interest rates, and energy or aluminum prices) in effect on the balance sheet date and take into account the credit risk assessment. The valuation techniques make use of observable market data.

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Note 6 Financial Instruments (continued)

The impact of offsetting derivative instruments is presented in the table below:

	As at March 31, 2021								As at December 31, 2020
	Gross amounts of derivatives recognized		Gross amounts offset	a	Cash (received) paid as collateral	b	Net amounts presented on the balance sheet		Gross amounts of derivatives recognized		Gross amounts offset	a	Cash (received) paid as collateral	b	Net amounts presented on the balance sheet
Assets
Current	540		(150	)	(266	)	124		429		(132	)	(150	)	147
Long-term	1,106		(242	)	(812	)	52		1,466		(300	)	(1,155	)	11
	1,646		(392	)	(1,078	)	176		1,895		(432	)	(1,305	)	158
Liabilities
Current	(282	)	244		27		(11	)	(314	)	282		18		(14	)
Long-term	(162	)	148		–		(14	)	(153	)	150		–		(3	)
	(444	)	392		27		(25	)	(467	)	432		18		(17	)
Total	1,202		–		(1,051	)	151		1,428		–		(1,287	)	141

a) The gross amounts of derivatives offset are related to contracts traded according to International Swaps and Derivatives Association (“ISDA”) guidelines and constituting enforceable master netting arrangements. Such master netting arrangements apply to all derivative instrument contracts traded over the counter.

b) Cash amounts offset are amounts received or paid under collateral exchange agreements signed in compliance with ISDA guidelines.

Moreover, although certain derivatives cannot be offset for lack of enforceable master netting arrangements, margin calls may result in amounts received from or paid to clearing agents, based on the fair value of the instruments concerned. As at

March 31, 2021, $63 million payable in consideration of net cash receipts was included in Accounts payable and accrued liabilities ($137 million as at December 31, 2020).

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Note 6 Financial Instruments (continued)

The impact of derivative instruments on results and other comprehensive income is presented in the tables below. It should be noted that most derivative instruments traded are designated as cash flow hedges or fair value hedges and therefore reduce the volatility of results. Derivative instruments which are not designated as hedges, but which nonetheless provide an economic hedge for at-risk opposite positions, also reduce the volatility of results. The sensitivity of results is thus limited to net exposure to unhedged risks.

							Three months ended March 31, 2021
	Losses (gains) on derivatives designated as fair value hedges			Losses (gains) on derivatives designated as cash flow hedges						Losses (gains) on derivatives not designated as hedges
	Recognized in results			Recognized in Other  comprehensive income			Reclassified from   Other comprehensive income to results			Recognized in results
Contracts – Currency risk		–			89			38	a		32
Contracts – Interest rate risk		166			(386	)		3	b		–
Contracts – Price risk		–			141			44	c		(7	)
		166	b, d		(156	)		85	d		25	d, e
Impact of hedged items on results		(162	)					(85	)		(33	)

							Three months ended March 31, 2020
	Losses (gains) on derivatives designated as fair value hedges			Losses (gains) on derivatives designated as cash flow hedges						Losses (gains) on derivatives not designated as hedges
	Recognized in results			Recognized in Other  comprehensive income			Reclassified from   Other comprehensive income to results			Recognized in results
Contracts – Currency risk		–			(862	)		(650	)a		(209	)
Contracts – Interest rate risk		(210	)		219			2	b		14
Contracts – Price risk		–			(317	)		(154	)c		(34	)
		(210	)b, d		(960	)		(802	)d		(229	)d, e
Impact of hedged items on results		211						804			216

a) In 2021, $(38) million was recognized in Revenue ($2 million in 2020), and $76 million in Financial expenses [$(652) million in 2020].

b) These amounts were recognized in Financial expenses.

c) In 2021, $41 million was recognized in Revenue [$(154) million in 2020], and $3 million in Electricity purchases (nil in 2020).

d) In 2021, the items Revenue, Electricity purchases and Financial expenses totaled $4,447 million, $631 million and $609 million, respectively ($4,371 million, $594 million and $671 million in 2020).

e) These instruments are essentially related to integrated risk management transactions. Their impact on results is recognized in the line items affected by the managed risk. Therefore, in 2021, $(1) million was recognized in Revenue [$(37) million in 2020], $(6) million in Electricity purchases ($8 million in 2020), and $32 million in Financial expenses [$(200) million in 2020].

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Note 6 Financial Instruments (continued)

For the three-month period ended March 31, 2021, Hydro-Québec did not reclassify any amount from Accumulated other comprehensive income to results after having discontinued cash flow hedges (net loss of $2 million for the three-month period ended March 31, 2020).

As at March 31, 2021, Hydro-Québec estimated the net amount of gains presented in Accumulated other comprehensive income

that would be reclassified to results in the next 12 months to be $85 million ($153 million as at March 31, 2020).

As at March 31, 2021, the maximum period during which Hydro-Québec hedged its exposure to the variability of cash flows related to anticipated transactions was nine years (three years as at March 31, 2020).

Fair value of other financial instruments

Fair value measurements for other financial instruments are Level 2 measurements. Fair value is obtained by discounting future cash flows, based on rates observed on the balance sheet date for similar instruments traded on financial markets.

The fair value of cash equivalents, receivables – accounts receivable, other receivables and financial liabilities approximates their carrying amount because of the short-term nature of these financial instruments, except for the items presented in the table below:

	As at March 31, 2021				As at December 31, 2020
	Carrying amount		Fair value		Carrying amount		Fair value
Assets
Sinking fund	600		634		600		657
Liabilities
Long-term debta	(47,637	)b	(61,579	)	(48,157	)b	(70,432	)
Perpetual debt	(252	)	(287	)	(256	)	(293	)

a) Including the current portion.

b) Including an amount of $1,996 million as at March 31, 2021 ($1,997 million as at December 31, 2020) for debts subject to a fair value hedge, which resulted in an adjustment of $368 million ($532 million as at December 31, 2020) in connection with the hedged risk for existing hedging relationships and of $(76) million [$(78) million as at December 31, 2020] for discontinued relationships.

Accounts receivable and other receivables

As at March 31, 2021, accounts receivable and other receivables included $2,441 million ($1,944 million as at December 31, 2020) from contracts with customers, of which unbilled electricity deliveries totaled $1,176 million ($1,244 million as at December 31, 2020).

Note 7 Supplementary Cash Flow Information

	Three months ended March 31
	2021			2020
Change in non-cash working capital items
Accounts receivable and other receivables		(900	)		(493	)
Materials and supplies		(17	)		1
Accounts payable and accrued liabilities		(14	)		(483	)
Accrued interest		(463	)		(430	)
		(1,394	)		(1,405	)
Activities not affecting cash
Increase in property, plant and equipment and intangible assets		11			11
Interest paida		958			1,099

a) Including interest paid upon redemption of zero-coupon bonds, which totaled $4 million for the three-month period ended March 31, 2021 ($149 million for the three-month period ended March 31, 2020). This interest is presented in the line item Interest and other under Operating activities in the Consolidated Statements of Cash Flows.

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Note 8 Employee Future Benefits

													Three months ended March 31
	Pension Plan						Other plans						Total
	2021			2020			2021			2020			2021			2020
Current service cost		176			153			14			13			190			166
Other components of employee future benefit cost
Interest on obligations		170			212			11			13			181			225
Expected return on plan assets		(463	)		(429	)		(1	)		(1	)		(464	)		(430	)
Amortization of net actuarial loss		86			72			10			8			96			80
Amortization of past service costs (credits)		2			2			(1	)		(1	)		1			1
		(205	)		(143	)		19			19			(186	)		(124	)
Net (credit) cost recognized		(29	)		10			33			32			4			42

Note 9 Accumulated Other Comprehensive Income

							Three months ended March 31, 2021
	Cash flow hedges			Employee future benefits			Other			Accumulated other comprehensive income
Balance as at December 31, 2020		(162	)		(2,940	)		(8	)		(3,110	)
Other comprehensive income before reclassifications		156			–			(9	)		147
Amounts reclassified outside of Accumulated other comprehensive income		85			37			–			122
Other comprehensive income		241			37	a		(9	)		269
Balance as at March 31, 2021		79			(2,903	)		(17	)		(2,841	)
							Three months ended March 31, 2020
	Cash flow hedges			Employee future benefits			Other			Accumulated other comprehensive income
Balance as at December 31, 2019		67			(2,476	)		1			(2,408	)
Other comprehensive income before reclassifications		960			–			4			964
Amounts reclassified outside of Accumulated other comprehensive income		(802	)		31			–			(771	)
Other comprehensive income		158			31	a		4			193
Balance as at March 31, 2020		225			(2,445	)		5			(2,215	)

a) Other comprehensive income includes the change in the employee future benefit regulatory asset, which totaled $(60) million as at March 31, 2021 [$(50) million as at March 31, 2020].

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Note 10 Contingencies

Guarantees

In accordance with the terms and conditions of certain debt securities issued outside Canada, Hydro-Québec has undertaken to increase the amount of interest paid to non-residents in the event of changes to Canadian tax legislation governing the taxation of non-residents’ income. Hydro-Québec cannot estimate the maximum amount it might have to pay under such circumstances. Should an amount become payable, Hydro-Québec has the option of redeeming most of the securities in question. As at March 31, 2021, the amortized cost of the long-term debts concerned was $2,831 million ($2,843 million as at December 31, 2020).

Litigation

In the normal course of its development and operating activities, Hydro-Québec is sometimes party to claims and legal proceedings. Management is of the opinion that an adequate provision has been made for these legal actions. Consequently, it does not foresee any significant adverse effect of such contingent liabilities on Hydro-Québec’s consolidated results or financial position.

Among other ongoing actions, some Indigenous communities have instituted proceedings before the Québec courts against

the governments of Canada and Québec, as well as against Hydro-Québec, based on demands concerning their ancestral rights. In particular, the Innus of Uashat mak Mani-Utenam are demanding $1.5 billion in damages resulting from various activities carried out on land they claim as their own. As well, in November 2006 the Innus of Pessamit reactivated an action brought in 1998, aimed at obtaining, among other things, the recognition of ancestral rights related to Québec lands on which certain hydroelectric generating facilities of the Manic–Outardes complex are located. This community is claiming $500 million. Hydro-Québec is challenging the legitimacy of these claims.

Moreover, in October 2020, Innu Nation Inc. brought an action for damages before the courts of Newfoundland and Labrador against Churchill Falls (Labrador) Corporation Limited [“CF(L)Co”] and Hydro-Québec. It claims that the construction and operation of the Churchill Falls hydroelectric complex in Labrador, which is owned and operated by CF(L)Co, is the result of a joint venture between CF(L)Co and Hydro-Québec and allegedly infringes on the ancestral rights of the Innu of Labrador. Innu Nation Inc. claims that CF(L)Co and Hydro-Québec should refund the profits derived from the complex or, alternatively, provide monetary restitution which, in Hydro-Québec’s case, amounts to $4 billion. Hydro-Québec is challenging the legitimacy of this action.

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Note 11 Segmented Information

The following tables present information related to results, assets and investing activities by segment:

	Three months ended March 31, 2021
	Generation		Transmission		Distribution		Construction		Corporate and Other Activities			Total
Revenue
External customers		555		23		3,860		3		6			4,447	a
Intersegment customers		1,640		879		21		449		(2,989	)b		–
Net income (loss)		1,016		183		487		2		(47	)		1,641
Total assets as at March 31, 2021		33,661		24,318		14,707		50		10,496			83,232

	Three months ended March 31, 2020
	Generation		Transmission		Distribution		Construction		Corporate and Other Activities			Total
Revenue
External customers		494		49		3,855		1		(28	)		4,371	a
Intersegment customers		1,606		866		20		496		(2,988	)b		–
Net income (loss)		909		172		521		–		(77	)		1,525
Total assets as at March 31, 2020		33,733		23,957		14,285		37		10,437			82,449

a) Including $41 million from sources other than contracts with customers [$84 million in 2020].

b) Including intersegment eliminations of $(3,522) million [$(3,459) million in 2020].

Note 12 Comparative Information

Some corresponding period data of the prior year have been reclassified to conform to the presentation adopted for the current period.

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CONSOLIDATED FINANCIAL HIGHLIGHTS

(UNAUDITED)

Amounts shown in tables are in millions of Canadian dollars.

	Three months ended     March 31
Summary of Results		2021	2020	Change (%)
Revenue		4,447	4,371	1.7	h
Expenditure		2,197	2,175	1.0	h
Financial expenses		609	671	9.2	i
Net income		1,641	1,525	7.6	h

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