recognized in the fourth quarter. This increase in contribution revenue was partially offset by a decrease in transmission system customer connections, a result of fewer capital projects in 2015.
Other Revenue
Other revenue primarily consists of revenues from natural gas liquid extraction operations from two separate gas plants, consisting of compression and gathering revenue; gas processing revenue and the sale of natural gas liquids. In addition, Royalty revenues are generated from a gross overriding royalty on several natural gas-producing properties in Saskatchewan and Alberta. Other revenue of $12 million for the twelve months of 2015 is $4 million lower than 2014, a result of declining natural gas liquid prices. The $4 million of revenue for the fourth quarter of 2015 was comparable to 2014.
Other Expenses
Other expenses, as reported in the consolidated financial statements, are as follows:
Three months ended December 31
Twelve months ended December 31
2015
2014 Change
2015
2014 Change
(millions)
$
22 32 23
$
91
Employee benefits
$
24 41 23
$
(2) (9)
$
92
$
(1) (8)
118
Operating and maintenance Depreciation and amortization
126
87 12
-
83 11
4 1
3
Saskatchewan taxes
2
1
$
80
$
308
Other Expenses
$
90
$
(10)
$
312
$
(4)
With strong growth in the provincial economy in recent years, the Corporation has experienced significant growth in its customer base and pipeline facilities. The increasing investment in facilities directly increases ongoing operating and maintenance costs, depreciation and amortization and corporate capital taxes. Other expenses of $308 million for the twelve months in 2015 represent a slight decrease of $4 million over the same period in 2014. On a quarterly basis, other expenses of $80 million were $10 million below 2014. In both cases, the Corporation was able to realize lower operating and maintenance expenses through austerity program cost reduction initiatives relating to contract/consulting, materials/supplies, vehicle, sustenance and advertising expenses despite increasing cost pressures driven by growth in customer base and customer facilities. This was partially offset by increased transportation expenses, depreciation and amortization expenses and Saskatchewan taxes, all being a direct result of the growth in pipeline facilities.
Net Finance Expenses
Net finance expenses, before the impact of fair value adjustments, were $46 million for the twelve months of 2015 and were $2 million higher than 2014. Increased earnings on debt retirement funds were fully offset by the higher debt financing needed to fund the Corporation’s capital expenditure requirements. There was also a $3 million unfavourable fair value adjustment on debt retirement funds during 2015, an outcome of higher interest rates on fixed-rate investments. On a quarterly basis, net finance expenses of $13 million, before the impact of fair value adjustments, were slightly above 2014 due to increased levels of debt.
Other (Losses) Gains
Recent changes in the oil and gas industry have led to declining natural gas and natural gas liquid prices, which have adversely affected cash flows generated from natural gas liquid extraction plant assets. An impairment loss on natural gas liquid extraction plant assets of $3 million was recorded in the first quarter of 2015 and in the fourth quarter of 2014 to recognize the impact of a decline in natural gas liquid prices on the asset’s value in use. The 2015 impairment loss plus losses on other asset disposals were partially offset by $5 million of insurance proceeds relating to Prud’homme and Landis incidents that occurred in prior years. The Prud’homme insurance proceeds were disclosed as a contingent asset in the December 31, 2014 financial statements. The 2014 impairment loss on the extraction plant assets plus losses on other asset disposals were fully offset by a $5 million gain recorded for the sale of storage and distribution assets and the Corporation’s interest in an ethane extraction plant.
10
2015/2016 FOURTH QUARTER REPORT
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