The winter of 2013/14 was one of the coldest Saskatchewan has experienced in the past 30 years and it has impacted almost all business components of the 2014 financial results. Saskatchewan’s 2014 winter was not only significantly colder than normal but longer than normal with cold weather persisting through April (22 per cent colder than normal), and into June (36 per cent colder than normal). Typically, such conditions would generate positive results for the Corporation as additional natural gas is delivered to residential and commercial customers to meet heating requirements. While the cold weather impact is evident in the $15 million growth in delivery revenue, the system and supply challenges associated with such conditions also led to additional costs, contributing to a $32 million decline in income before unrealized market value adjustments.
2015 Outlook SaskEnergy plays a vital role in providing key infrastructure for new homes, subdivisions, businesses and industrial facilities. At a time when pipeline and energy companies across North America are facing high expectations related to safety, customer service and environmental stewardship, SaskEnergy will continue to develop processes and procedures that meet or exceed evolving industry standards. While growth of the distribution customer base is anticipated to slow slightly from recent years, new customers are still being added at a higher rate than the 10-year average, with another 5,500 customers expected in 2015. Meanwhile, industrial sector strength in the Province has contributed to increased demand for natural gas transmission service. Potash mines, fertilizer plants and enhanced oil recovery are expected to be continued major areas of industrial load growth for TransGas, and will require that the Corporation continues to be nimble to ensure delivery needs are met. To meet customer expectations, SaskEnergy has developed effective processes to manage growth in its core lines of business. The Corporation expects stable earnings from core operations and non-regulated gas marketing activity, and will continue to focus on service delivery efficiencies and on effectively managing capital deployment. In alignment with the Government of Saskatchewan’s Crown Sector Priorities, this includes effective Crown collaboration and continued work with private sector partners to pursue new energy-related growth opportunities and accelerate capital investments in Saskatchewan. As Saskatchewan natural gas production declines and demand for gas grows, SaskEnergy is committed to diversifying access to gas supply. This includes managing current interconnections for importing supply from Alberta, exploring new import options, and pursuing additional associated gas, and flare gas capture, in Saskatchewan. Within the competitive provincial labour market, SaskEnergy will continue to develop its recruitment, employee development and engagement strategies for 2015. The Corporation will also collaborate with other Crown corporations to assist with workload resourcing and achieving efficiencies. At the same time, SaskEnergy will continue to balance internal and external resources to effectively meet customer needs and complete priority work.
Consolidated Financial Results
$100 $120
$20 $40 $60 $80
$-40 $-20 $0
2010
2011
2012
2013
2014
Income before unrealized market value adjustments Consolidated net income (loss)
The cold weather was not isolated to Saskatchewan; it was experienced across North America and resulted in significant natural gas price increases. For Western Canada, the high demand challenged the ability of pipeline systems to meet customer requirements, creating temporary shortages that drove up gas prices. Consequently, the cold resulted in SaskEnergy purchasing more gas than expected at prices that were higher than the approved commodity rate. These circumstances negatively impacted the Corporation’s realized margin on commodity sales by $9 million compared to 2013. To meet the additional weather-driven demand, the Corporation increased storage withdrawals and imported more gas from Alberta, which increased operating costs and transportation charges from interconnecting pipeline systems. Capital spending on the transmission and distribution infrastructure was also increased to improve operating flexibility during the types of load experienced during the winter of 2013/14. Additionally, the Corporation’s team of dedicated employees and contractors worked long hours to ensure customers’ natural gas requirements were served; however, this effort also contributed to higher operating costs.
Consolidated Financial Results Consolidated Net (Loss) Income (millions) 2014
2013
Change
Income before unrealized market value adjustments
$ 79
$ (32)
$ 47
Impact of fair value adjustments
(13)
(55)
(68)
Revaluation of natural gas in storage
13
(25)
(12)
Consolidated net (loss) income
$ 79
$ (112)
$ (33)
25
2014 Annual Report SaskEnergy
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