Depreciation and Amortization
SaskEnergy Incorporated First Quarter Report Balancing safety and system integrity with the growing demand for service continues through 2019-20. Strategic capital investments required to ensure the necessary infrastructure is in place to meet increasing load growth, has increased the capital asset base, resulting in increasing depreciation and amortization. The Corporation implemented an external depreciation study, decreasing depreciation and offsetting increased depreciation resulting from an increasing asset base. In 2019-20, depreciation and amortization was $53 million, equaling the same period in 2018-19. Depreciation and amortization expenses of $27 million for the three months ending September 30, 2019 were $1 million lower than the same period in 2018-19. This is due to the implementation of the third party depreciation study.
March 31, 2011
Net Finance Expense
Net finance expenses of $27 million and $14 million for the six and three months ending September 30, 2019 were $2 million and $1 million higher than the same periods in 2018-19. The increase in finance expenses that resulted from increased investment was partly offset by lower interest rates. The low interest rate environment has allowed the Corporation to replace maturing long-term debt with lower cost debt.
LIQUIDITY AND CAPITAL RESOURCES
As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations, debt — which is borrowed through the province’s General Revenue Fund — and equity advances from CIC, the Province’s Crown corporation holding company. Equity advances are rarely used to finance Crown corporations as CIC prefers to use its Subsidiary Crown Dividend Policy to manage its equity interests in its commercial enterprises. Cash from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies upon it to fund its investment in natural gas facilities, including new construction to support provincial growth and integrity spending on existing infrastructure. Long and short-term debt can be borrowed through the Province of Saskatchewan to meet any long or short-term incremental capital requirements, and to repay debt as it matures. Sources of liquidity include Order in Council authority to borrow up to $500 million in short-term loans, and a $35 million uncommitted line of credit with the Toronto-Dominion Bank. By borrowing through the Province, SaskEnergy has access to the Province’s borrowing capacity and North American capital markets. The SaskEnergy Act allows the Corporation to borrow up to $2,500 million.
Three months ended
Six months ended September 30
September 30
(millions)
2019
2018 Change
2019
2018 Change
Cash provided by operating activities Cash used in investing activities Cash provided by financing activities (Decrease)/increase in cash and cash equivalents
$
48
$
32
$
16
$
109
$
91
$
18
(104)
(81)
(23) (15)
(161)
(119)
(42)
35
50
47
32
15
$
(21)
$
1
$
(22)
$
(5)
$
4
$
(9)
Operating Activities
Cash provided by operating activities was $109 million for the six months ending September 30, 2019, an increase of $18 million from 2018-19. Cash flows from operations are up due to the impact of a higher transportation revenue.
Investing Activities
Cash used in investing activities totaled $161 million for the six months ending September 30, 2019, $42 million more than the same period in 2018-19. Capital investment levels increased in 2019-20 due to higher system growth combined with higher system integrity spending compared to 2018-19. The majority of capital investment to the end of September 2019 focused on $93 million of customer growth and system expansion projects, which were a result of Saskatchewan residential and industrial growth, as well as safety and system integrity programming of $55 million - a sign of the Corporation’s ongoing commitment to a safe, reliable system.
10
2019-20 SECOND QUARTER REPORT
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