access to the Province’s borrowing capacity and North American capital markets. The SaskEnergy Act allows the Corporation to borrow up to $1,700 million.
SaskEnergy Incorporated First Quarter Report Operating Activities
March 31, 2011
Cash from operating activities of $59 million for the three months ended June 30, 2018 was $14 million lower than the same period in 2017. Higher delivery revenue and transportation revenue contributed to higher operating cash flows compared to 2017. However, this was offset by the Corporation taking advantage of low natural gas market prices by purchasing and injecting lower priced natural gas into storage while managing employee benefit and operating and maintenance costs.
Investing Activities
Cash used in investing activities totaled $38 million for the three months ended June 30, 2018; $1 million higher than 2017. Capital investment levels are increasing in 2018 compared to 2017, primarily due to higher investment in safety and integrity programming to maintain infrastructure and manage increasing regulatory requirements.
Financing Activities
Cash used in financing activities was $18 million during the three months of 2018 compared to $35 million in 2017. From a cash management perspective, SaskEnergy uses cash from operations to pay for its investing activities, dividend payments and debt servicing costs (including interest payments and sinking fund installments). Any remaining cash from operations is applied to reducing the short-term debt balance. If there is insufficient cash from operations, SaskEnergy will borrow more debt, usually short-term debt, to meet its cash requirements. SaskEnergy issued $101 million of long-term debt including a premium of $1 million during the first quarter which was used to repay $72 million of short term debt and $29 million to invest in capital expenditures. SaskEnergy’s debt ratio at June 30, 2018 of 56 per cent is unchanged from March 31, 2018.
CAPITAL EXPENDITURES
Three months ended June 30
(millions)
2018
2017 Change
Customer growth and system expansion
$
22 13
$
14 19
$
8
Safety and system integrity
(6)
Information systems
2 1
2 2
-
Vehicles & equipment, buildings, furniture
(1)
$
38
$
37
$
1
SaskEnergy continues to invest in its pipeline system to accommodate growth in the natural gas customer base and its increasing reliance on Alberta Gas to meet load requirements. Capital expenditures of $38 million for the three months ended June 30, 2018 are $1 million higher than the same period in 2017. Customer growth and system expansion is $8 million above the same period in 2017, a result of higher spending on distribution system growth relating to industrial customers and transmission system growth relating to increasing compression requirements as increasing natural gas demand in the Province has resulted in additional Alberta supply onto the transmission system. Safety and system integrity capital expenditures are $6 million lower than 2017, primarily due to slower progress on distribution system integrity programs.
OUTLOOK
With the Corporation’s fiscal period beginning April 1, peak winter heating loads only begin to have a positive impact on the financial results in the third and fourth quarters. Without revenue from heating loads it is not uncommon for SaskEnergy to experience minimal net income and even losses through the first two quarters. Factors that are expected to affect SaskEnergy through the remainder of the year include the growth of the provincial economy, reliance on imported natural gas and interconnected pipeline systems, and Saskatchewan weather conditions through the winter months. Assuming normal weather conditions for 2018-19, net income before market value adjustments is expected to be approximately $68 million, a decrease of $42 million over the 2017-18 actual result. This decrease is primarily due to the return to normal weather as 2017-18 was five per cent colder than normal, and lower anticipated gas marketing margins. While SaskEnergy continues to effectively manage expenses, increased transportation costs to move natural gas into and throughout the province will create cost pressure.
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2018-19 FIRST QUARTER REPORT
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