SaskEnergy Third Quarter Report - December 31, 2020

CAPITAL ADDITIONS

Capital additions, as reported in the consolidated financial statements, were as follows:

Three months ended December 31,

Nine months ended December 31,

2020

2019 Change

2020

2019 Change

(millions) Strategic

$

29 20 49

$

50 54

Customer growth System expansion

$

16 47 63

$

13

$

44

$

6

(27) (14)

114 158

(60) (54)

104

Operational

18

47 19

Risk management

23

(5)

66 19

(19)

8 4

Reliability of natural gas service

6 2

2 2

- -

8

Business and technology optimization

8

30

74

31

(1)

93

(19)

$

79

$

178

Capital additions

$

94

$

(15)

$

251

$

(73)

Capital additions during the nine months ended December 31, 2020 of $178 million were $73 million lower than prior year as spending declined, primarily during the second quarter of 2020-21, compared to 2019-20.

Many system expansion projects planned for 2020 have been reduced or deferred by the Corporation and its customers, a result of the economic downturn resulting from the effects of a suppressed oil and gas market and COVID-19. Higher system expansion spending of $36 million on transmission urban infrastructure projects in 2019 resulted from growth in and around the City of Saskatoon. This consisted of a multi-year initiative that addressed increased natural gas capacity and moving high pressure transmission lines further away from populated areas. Preliminary capital expenditures on an 85 km NPS 20 gas line from Rosetown to Vanscoy, which were incurred in 2019 prior to the project being deferred, is expected to resume in spring 2021 with a completion date of fall 2021. It will connect Rosetown supply to the Saskatoon South Bypass NPS 20 gas line. These two projects are the primary drivers for system expansion project spending through the nine months ended December 31, 2019 being $60 million higher than the same period in the current year. Risk management spending on the distribution system declined $19 million year-over-year as the timing of some service upgrade projects have been adjusted as requirements changed. OUTLOOK SaskEnergy continues to focus on the impacts of the COVID-19 pandemic, promoting and maintaining the health and safety of the Corporation’s personnel and the public while maintaining its ability to deliver core services. In addition to the pandemic, the volatility of global oil prices continues to create uncertainty for producers and consumers of natural gas. Over 70 per cent of the production of natural gas in Saskatchewan is associated with oil production; hence, as oil producers were forced to shut-in wells due to record low oil prices, associated natural gas production was also shut-in. The reduction in Saskatchewan gas supply will require more natural gas to be imported from Alberta. Changing customer demand, global supply chain disruptions, and social distancing requirements have caused challenges and delays to system improvement projects, but have not impacted the Corporation’s ability to transport or market natural gas. SaskEnergy will continue to monitor and manage the impact of both COVID-19 and the volatility of oil prices on its business strategies as both situations evolve.

2020-21 Third Quarter Report

16

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