SaskEnergy Third Quarter Report - December 31, 2020

14. Financial risk management (continued)

At period end, the Corporation’s borrowing capacity, together with stable operating cash flows, provide sufficient liquidity to fund these contractual obligations. Interest rates used in calculating financial obligations are effective December 31, 2020. In addition to the above, the Corporation has posted a $15 million (March 31, 2020 - $15 million) letter of credit with ICE NGX as security for natural gas purchases and sales conducted by the Corporation on the ICE NGX natural gas exchange in Alberta. ICE NGX may draw upon the letter of credit if the Corporation fails to make timely payment for, or delivery of, natural gas as per the related contract.

c. Credit risk

Credit risk is the risk of financial loss if a customer or counterparty to a financial or derivative instrument fails to meet its contractual obligations. The Corporation is exposed to credit risk through cash, trade and other receivables, debt retirement funds and derivative instrument assets. Credit risk related to cash and debt retirement funds is minimized by dealing with institutions that have strong credit ratings and holding highly-rated financial securities. The Corporation extends credit to its customers in the normal course of business and is at risk of loss in the event of non-performance by counterparties on certain of the financial and derivative instruments. To reduce its credit risk, the Corporation has established policies and procedures to monitor and limit the amount of credit extended to its customers and counterparties and may require letters of credit and other forms of security.

The carrying amount of financial and derivative assets represents the maximum credit exposure as follows:

As at

As at

March 31,

December 31,

2020

2020

(millions)

$

16

$

1

Cash

132 141

Trade and other receivables Debt retirement funds

155 136

13

15

Fair value of derivative instrument assets

$

302

$

307

The exposure to credit risk for trade receivables by type of customer is as follows:

As at

As at

December 31,

March 31,

2020

2020

(millions)

$

81 26

$

89 31

Distribution customers

Transmission and storage customers

2

Gas Marketing customers

7

23

Other customers

28

$

132

$

155

Trade and other receivables

2020-21 Third Quarter Report

32

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