NOVA Gas Transmission Ltd. (NGTL) currently has a project before the Canada Energy Regulator which is intended to relieve this constraint by adding additional gas line and compressor facilities. SaskEnergy will continue to monitor this situation and take an active role in the process to ensure access to a reliable source of natural gas.
SaskEnergy Incorporated First Quarter Report
March 31, 2011
CONSOLIDATED FINANCIAL RESULTS
Consolidated Net Income
Three months ended December 31
Nine months ended December 31
(millions)
2019
2018 Change
2019
2018 Change
Income before unrealized market value adjustments Impact of fair value adjustments Revaluation of natural gas in storage
$
44
$
66 12
$
(22) (20)
$
54
$
73 13 14
$
(19) (48) (11)
(8)
(35)
3
(2)
5
3
Consolidated net income
$
39
$
76
$
(37)
$
22
$
100
$
(78)
Excluding market value adjustments, financial results for the nine months ending December 31, 2019 are $19 million lower than the same period in 2018. The decrease in net income is due to a lower commodity margin, higher employee benefit expenses, and higher operating and maintenance expenses. This is partially offset by increased transportation revenue and higher customer contributions relating to both transmission and distribution customers.
The commodity margin is $15 million lower in 2019-20 compared to the same nine months in 2018-19, which is resulting from the commodity rate decreasing from $2.95 per GJ to $2.57 per GJ effective April 1, 2019.
An increase in customer load growth contributed to additional transportation revenue relative to 2018-19. Much of the load growth is the result of continued economic growth in the province, driven by expansion in the major industrial sectors of enhanced oil recovery and power generation. As natural gas production continues to decline, Saskatchewan increasingly relies on gas production in Alberta to meet its delivery requirements. This results in increased transportation utilization on the TC Energy Mainline system to import natural gas from Alberta. These increasing requirements have resulted in higher overall operating costs compared to prior year. While the increase in load requires higher spending in some areas, the continued focus on efficiency and cost management have helped to mitigate increases in both operating costs and employee benefits. Market value adjustments reduced SaskEnergy’s consolidated net income by $32 million. The differential between the contract price and market prices, decreasing from $0.46 per GJ at the end of 2018-19 to $0.22 per GJ in 2019-20, are resulting in an unfavourable market value adjustment of $36 million on outstanding asset optimization purchase contracts. This was partially offset by an increased price differential on asset optimization sales contracts resulting in a favourable market value adjustment of $3 million. The value of natural gas in storage is sensitive to natural gas prices. At December 31, 2019, the value of gas in storage was $42 million, or $11 million below cost. At the end of March 2019, the value of natural gas in storage was $26 million, or $14 million below cost. A decrease in near term natural gas market prices is the primary driver of the increase in the unfavourable revaluation of natural gas in storage. The difference between the $14 million unfavourable adjustment at the end of the previous fiscal year and the current $11 million unfavourable adjustment to the cost of gas in storage has been reported as a $3 million favourable market value adjustment during the nine months ending December 31, 2019.
Natural Gas Sales and Purchases
Included within natural gas sales and purchases are rate-regulated commodity sales to distribution customers and non-regulated asset optimization activities. IFRS requires these activities to be presented together within the consolidated financial statements; however, the Corporation manages these activities as distinct and separate businesses and, as such, the MD&A addresses these natural gas sales and purchases separately.
5
2019-20 THIRD QUARTER REPORT
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