SaskEnergy Incorporated First Quarter Report Transportation Revenue Transportation and storage service rate increases implemented effective January 1, 2016 are resulting in higher transportation and storage revenue compared to 2015. The rate increases are addressing rising capital and operating costs related to an increasing focus on system integrity, emergency response, public awareness and the increasing cost of importing natural gas supply from Alberta. On December 16, 2016, a new transportation record was achieved with eight of the top ten Saskatchewan load peak days occurring during the past winter. Natural gas market prices are forecasted to remain low making expansion of Saskatchewan natural gas production uneconomical. Continued load growth within the industrial sector, increases the amount of natural gas imported into the province. Rising demand for natural gas will continue to be sourced from natural gas production in Alberta. Importing natural gas generally requires SaskEnergy to transport the gas over longer distances, which increases operating, maintenance, compression, and capital costs. In the short term, the current transportation rates are expected to cover these higher transportation costs and no rate increases are expected through 2017- 18. Other Expenses March 31, 2011 In response to the economic downturn in the Province and increasing pressures on transportation and delivery rates, SaskEnergy has made a significant effort to manage costs throughout 2016-17. The growing investment in pipeline infrastructure and increasing dependency on Alberta natural gas supply resulting from growth in the customer base and industrial customer load is increasing pressure on operating costs. In the face of these cost pressures, the Corporation is focused on finding efficiencies in its operations through collaboration with other Crown Corporations, business process changes and technology initiatives The Corporation has achieved more than $38 million in efficiencies since 2009, with another $4 million planned this fiscal year. The Corporation is expecting staffing levels to remain consistent through 2016. Leveraging efficiency and productivity initiatives, SaskEnergy will continue to meet the Province’s growing natural gas requirements while keeping cost increases to a minimum. Capital Investment SaskEnergy will continue to focus its efforts on providing safe and reliable service to customers while managing rate pressure through judicious expense management. Spending is focused on upgrading infrastructure to meet industrial customer load growth, new service requirements, as well as the integrity of the transmission, distribution and storage systems. The Corporation is forecasting to invest $216 million in capital projects ($197 after customer contributions) for the 12 months ending March 31, 2017. This is well below the budgeted capital investment for the year of $292 million ($249 after customer contributions) due primarily to customer projects that did not proceed during the year at the customers' request. These capital expenditures will be funded through operating cash flows and debt made available through the Province at what are expected to be historically low interest rates.
In summary, SaskEnergy will continue to focus on investing in safety and growth initiatives and realizing efficiencies, while forecasting income before unrealized market value adjustments of $83 million for 2016-17.
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2016-17 THIRD QUARTER REPORT
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