A number of new industrial projects required increased transmission system connections within the Province. This included a $21 million project that was completed and put into service late in 2014 in central Saskatchewan. The Distribution Utility continued its multi-year AMI project, which increases the frequency and accuracy of natural gas meter reads and allows for the direct integration of customer meter reads into the Corporation’s new customer billing system. The distribution system saw record numbers of province-wide meter exchanges and, at the end of 2014, more than 150,000 AMI modules had been installed and were being utilized in Regina and Saskatoon. In 2014, $20 million was spent on the project, bringing the total cost to $31 million, as planned. Net Finance Expenses Net finance expenses in 2014, before the impact of fair value adjustments, were $44 million compared to $40 million in 2013, a direct result of the additional debt required to fund the Corporation’s growing capital expenditure requirements. There was also a $7 million favourable fair value adjustment on debt retirement funds during 2014, an outcome of lower interest rates affecting the value of primarily fixed-rate investments held within the debt retirement funds. Other Gains (Losses) In 2014, the Corporation had significant asset disposals and impairments that have been disclosed as other gains (losses) in the statement of consolidated comprehensive income. The Corporation recognized the sale of the assets of the Swan Valley Gas distribution system and some of the Melville storage caverns assets in 2014. The two separate sales transactions were identified as assets held for sale in the Corporation’s December 31, 2013 consolidated financial statements. Also included in other gains (losses) are proceeds from the sale of SaskEnergy’s interest in an ethane extraction plant and lateral pipeline that was under construction in southeast Saskatchewan, the impairment of gas processing plant assets, and the asset impairment costs related to the Prud’homme incident. Recent changes in the oil and gas market have led to declining natural gas and natural gas liquid prices, which have adversely affected cash flows generated from gas processing plant assets. At year end, a $3 million impairment on gas processing plant assets was recorded to recognize the current decline in its value in use. The Corporation recorded $2 million as disposal of assets in other gains (losses) consisting of $1 million related to the loss of cushion gas from the Prud’homme storage cavern and $1 million as a write-off of impaired assets at the facility. The costs of the emergency response efforts for the incident to the end of December 31, 2014 were $5 million and were accounted for in operating and maintenance expenses. The emergency response costs were offset by $5 million of insurance proceeds, of which $2 million was received in early January 2015 and is recorded in accounts receivable.
Another $6 million of insurance proceeds has been disclosed as a contingent asset in the Corporation’s 2014 financial statements. Liquidity And Capital Resources Cash from operations and debt borrowed from the Province of Saskatchewan’s General Revenue Fund are the primary sources of liquidity and capital for SaskEnergy. Sources of liquidity include Order in Council authority to borrow up to $400 million in short-term loans from the Province’s General Revenue Fund and 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.
Consolidated Statement of Cash Flows (millions) 2014
2013
Change
Cash provided by operating activities Cash (used in) investing activities
$ 244
$ 4
$ 248
(221)
(62)
(283)
Cash provided by (used) in financing activities Increase (decrease) in cash during the period
(25)
65
40
$ (2)
$ 7
$ 5
Cash from operating activities was $248 million in 2014, an increase of $4 million from 2013. Colder than normal weather resulted in increased cash flow, despite additional costs to maintain the transmission and distribution system reliability and natural gas supply. With the surge in natural gas prices, the Corporation limited its gas marketing purchases, and as a result, the volume of gas marketing natural gas in storage declined by more than 22 PJ from 2013 as sales contracts were settled, contributing $56 million to cash from operating activities.
Capital Expenditures
$300
$250
$200
$150
$100
$50
$0
2010
2011
2012
2013
2014
31
2014 Annual Report SaskEnergy
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