2020-21 SaskEnergy Annual Report

Management’s Discussion and Analysis

OUTLOOK SaskEnergy continues to focus on the impacts of the COVID-19 pandemic, which includes promoting and maintaining the health and safety of personnel and the public, and maintaining its ability to deliver core services. In addition to the pandemic, the volatility of global oil prices continues to create uncertainty for natural gas production. More than 70 per cent of the production of natural gas in Saskatchewan is associated with oil production; hence, as oil producers face price instability and uncertain capital markets, variable oil production results in variable natural gas production. The reduction in Saskatchewan gas supply will need to be met by increased imports from Alberta. Changing customer demand, global supply chain disruptions, and shifting regulatory timelines have resulted in the deferral of some projects and delays to others still in progress. To date, these have not caused any atypical impacts to transport capacity, but SaskEnergy will continue to monitor and manage the impacts to ensure continued service and strong business strategies going forward. As SaskEnergy adapts to flat or declining customer demand, there will be an increased focus on core operations and operational excellence to safeguard its financial strength into the future. In 2021-22, income from operations is projected to be $50 million, which is a decrease of $9 million from the 2020-21 result. The decrease is primarily due to large transmission customer RISK MANAGEMENT AND DISCLOSURE SaskEnergy is subject to a number of risks in the transmission, storage, distribution and sale of natural gas and the effectiveness in managing them is a key determinant to its overall corporate performance. The Corporation’s approach to risk management is to thoroughly examine its operating activities to identify existing and emerging risks, effectively communicate those risks throughout the organization and actively manage them through its Enterprise Risk Management (ERM) process. SaskEnergy undertakes annual risk assessments that are used as inputs to the strategic and business planning process. The ERM process establishes roles and responsibilities as well as a general strategy for the Corporation to manage its risks. While risk management is the responsibility of all levels of management, the Board of Directors and Executive Committee set the tone and provide leadership direction for the ERM process. The Executive Committee

connections that were completed in the prior year resulting in higher customer contribution revenue. The number of residential customers connecting to SaskEnergy’s distribution system is expected to remain low, with 2,000 new customers forecasted in 2021-22. In addition to the decline in the customer numbers, energy efficiencies implemented by SaskEnergy customers reduce the amount of natural gas they use. Initiatives targeted to support a greener energy strategy, increasing Government policy and regulations, and increasing needs for business and technology support create cost pressure for SaskEnergy. To offset the decline in revenue and increased costs, SaskEnergy will continue to focus on operational excellence, achieving cost savings through business process improvements, leveraging technology and collaboration with other Crown corporations and executive government. SaskEnergy is committed to providing solutions and service that benefit customers and Saskatchewan by leveraging the Corporation’s expertise and the province’s private sector. Throughout 2021-22, SaskEnergy will make $263 million in net capital investments in the province, including maintaining the safety and reliability of the natural gas transmission and distribution systems, meeting regulatory compliance, and optimizing the Corporation’s business systems. is responsible for formally identifying strategic risks that impact SaskEnergy’s goals, participating in the risk assessment process and developing strategic risk management plans. As many of the risks facing the organization evolve, the Corporation’s risk management plans remain adaptive and flexible. The Board of Directors is responsible for the risk management policy and framework. The Board oversees risk management efforts by reviewing annual reports on risk management processes and controls, and ensuring that key corporate initiatives appropriately address the identified risks. Government Climate Policy

The possibility that government(s) impose new environmental or operational regulations that impair or restrict operations or prevent further development of the Corporation’s gas system.


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