SaskEnergy Third Quarter Report - December 31, 2020

Depreciation and Amortization

Balancing safety and system integrity with the demand for service continues through 2020-21. Strategic capital investments required to ensure the necessary infrastructure is in place to meet customer demand, has increased the capital asset base from the previous year, resulting in increased depreciation and amortization. For the nine months ended December 31, 2020, depreciation and amortization was $86 million, which was $5 million higher than the same period in 2019-20.

Net Finance Expense

Net finance expenses were $41 million for the nine months ended December 31, 2020, which equaled the same period in the prior year as higher debt retirement fund earnings and lower short-term debt interest expense was fully offset by higher long-term debt interest expense. 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. Throughout 2020-21, The SaskEnergy Act allows the Corporation to borrow up to $2,500 million.

Three months ended December 31,

Nine months ended December 31,

2020

2019 Change

2020

2019 Change

(millions)

$

44

$

125

Cash provided by operating activities Cash used in investing activities Cash provided by financing activities Increase/(decrease) in cash and cash equivalents

$

57

$

(13)

$

166

$

(41)

(83)

(186)

(97)

14 12

(258)

72

76

50

85

(9)

38

$

11

$

15

$

(2)

$ 13

$

(7)

$ 22

Operating Activities Cash provided by operating activities was $125 million for the nine months ended December 31, 2020, a decrease of $41 million from 2019-20. Cash flows from operations decreased due to lower commodity margins, asset optimization margins, lower customer contribution revenue combined with higher employee benefit, operating and maintenance and depreciation and amortization costs.

2020-21 Third Quarter Report

14

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