LIQUIDITY AND CAPITAL RESOURCES
As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations, debt — which is borrowed through the province’s General Revenue Fund — and equity advances from CIC, the Province’s Crown corporation holding company. Equity advances are rarely used to finance Crown corporations as CIC prefers to use its Subsidiary Crown Dividend Policy to manage its equity interests in its commercial enterprises. Cash from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies upon it to fund its investment in natural gas facilities, including new construction to support provincial growth and integrity spending on existing infrastructure. Long and short-term debt can be borrowed through the Province of Saskatchewan to meet any long or short-term incremental capital requirements, and to repay debt as it matures. Sources of liquidity include Order in Council authority to borrow up to $500 million in short-term loans, and a $35 million uncommitted line of credit with the Toronto-Dominion Bank. By borrowing through the Province, SaskEnergy has access to the Province’s borrowing capacity and North American capital markets. Throughout 2020-21, The SaskEnergy Act allows the Corporation to borrow up to $2,500 million.
Three months ended June 30,
(millions)
2020
2019
Change
Cash provided by operating activities Cash used in investing activities Cash used in financing activities
$
56
$
61
$
(5)
(42) (13)
(56) (11)
14
(2)
Increase/(decrease) in cash and cash equivalents
$
1
$
(6)
$
7
Operating Activities
Cash provided by operating activities was $56 million for the three months ended June 30, 2020, a decrease of $5 million from 2019-20. Cash flows from operations are down due to lower commodity and asset optimization margins and higher operating and maintenance costs.
Investing Activities
Cash used in investing activities totaled $42 million for the three months ended June 30, 2020, $14 million less than the three month period ended June 30, 2019. Capital investment levels are lower in 2020-21 due to the deferral of some system expansion projects resulting from changing customer requirements. In addition, the prior year included substantial system growth spending around the city of Saskatoon.
Financing Activities
Cash used in financing activities was $13 million through the three months ended June 30, 2020, compared to $11 million used in financing activities in 2019-20. The Corporation used $21 million for interest payments, $25 million to pay long-term debt, and $129 million to pay short-term debt. The Corporation borrowed an additional $150 million in long-term debt at a premium of $11 million to support its capital investment requirements and repay short-term debt. SaskEnergy’s debt ratio at the end of June 30, 2020 of 58 per cent debt and 42 per cent equity is equal to the debt ratio at the end of 2019-20. This is within the Corporation’s long-term target range of 58 to 63 per cent debt.
2020-21 First Quarter Report
14
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