SaskEnergy Incorporated First Quarter Report LIQUIDITY AND CAPITAL RESOURCES
March 31, 2011
Three months ended
Nine months ended December 31
December 31
2016
2015 Change
2016
2015 Change
(millions)
$
39
$
120
Cash provided by operating activities Cash used in investing activities
$
57
$
(18)
$
171
$
(51)
(69)
(156)
(83)
14
(184)
28 18
29
24
Cash provided by (used in) financing activities
28
1
6
$
(1)
$
(12)
Decrease in cash and cash equivalents
$
2
$
(3)
$
(7)
$
(5)
Cash provided from operations and debt borrowed from the Province of Saskatchewan’s General Revenue Fund is the primary source of liquidity and capital for SaskEnergy. Generally, SaskEnergy finances its investment activity with cash from operations. To the extent that cash from operations is insufficient to support investment activity, debt servicing costs and dividends, additional short and long term debt is borrowed. Sources of liquidity include Order in Council authority to borrow up to $500 million in short-term loans. The Corporation holds a $35 million uncommitted line of credit with the Toronto-Dominion Bank. Over the longer term, The SaskEnergy Act allows the Corporation to borrow up to $1,700 million.
Operating Activities
Cash from operating activities of $120 million for the nine months ended December 31, 2016 was $51 million lower than the same period in 2015. Natural gas sales declined in 2016, a result of commodity rate decreases and warmer weather. Both contributed to lower cash from operations in 2016 compared to 2015. The Corporation also took advantage of low natural gas market prices by purchasing and injecting lower priced natural gas into storage. Higher transportation revenue and delivery revenue combined with lower employee benefits expense partially offset the decreases in operating cash flows compared to 2015.
Investing Activities
Cash used in investing activities totaled $156 million for the nine months ended December 31, 2016; $28 million lower than 2015. Capital investment levels are declining in 2016 compared to 2015, primarily due to lower investment in customer connections and system expansions, while spending on safety and integrity programming to maintain a safe and reliable system remains consistent with 2015.
Financing Activities
Cash provided by financing activities was $24 million during the nine months of 2016 compared to $6 million in 2015. 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. Excluding short-term debt repayments and borrowings, cash used in financing was $6 million in 2016 compared to $119 million in 2015. Long-term debt of $84 million matured in 2016, which was replaced with $133 million of new long-term debt. In comparison, 2015 operating cash flows were $51 million higher than in 2016 and were sufficient to pay the $50 million of debt that matured in 2015, plus cover operating cash requirements without requiring new long-term debt. SaskEnergy’s debt ratio at December 31, 2016 was 59 per cent compared to 61 per cent at March 31, 2016 and 62 per cent at December 31, 2015. CAPITAL EXPENDITURES
Three months ended
Nine months ended December 31
December 31
2016
2015 Change
2016
2015 Change
(millions)
$
35 30
$
77 65 10
Customer growth and system expansion
$
43 31
$
(8) (1) (2) (4)
$
101
$
(24)
Safety and system integrity
65 11
-
4
Information systems
6 4
(1) (5)
-
2
Vehicles & equipment, buildings, furniture
7
$
69
$
154
$
84
$
(15)
$
184
$
(30)
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 $154 million for the nine months ended December 31, 2016 are $30 million below the same period in 2015. Customer growth and system expansion capital
9
2016-17 THIRD QUARTER REPORT
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