Management’s Discussion and Analysis
32
Commodity Fair Value Adjustments For the 12 months ended March 31, 2026, the fair value adjustment on commodity derivative instruments decreased net commodity sales by $13 million. The unfavorable price differential between contract prices and market prices on future commodity purchase contracts deteriorated by $0.68 per GJ, from $0.17 per GJ the previous year to $0.85 per GJ as of March 31, 2026. Although the differential had narrowed in recent months due to increasing market prices in Western Canada, market prices have since dropped, causing the difference to increase. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS Accounting Standards, such own-use contracts are not required to be reported at market value. Asset Optimization Margin SaskEnergy leverages its off-peak transportation and storage capacity and its access to natural gas markets to execute purchases and sales of natural gas and generate a positive return. This approach allows SaskEnergy to capitalize on pricing differentials between transportation hubs, delivery points and time periods. By executing most purchase and sales contracts simultaneously, the Corporation mitigates much of the price risk typically associated with such transactions. Additionally, SaskEnergy uses these transactions to address transportation constraints, albeit at a cost, in order to maintain reliability of service. The realized margin on asset optimization sales for the 12 months ended March 31, 2026, which removes fair value adjustments on derivative instruments, was $14 million higher than the same period ended March 31, 2025.
During the fiscal year, the average margin on realized asset optimization sales was $0.27 per GJ, which was greater than the same 12-month period in the prior year, which saw a margin of $0.19 per GJ. Opportunities in the market saw volumes increase by six petajoules (PJ) year over year, in addition to the improved margins realized year to date. SaskEnergy was also able to leverage unutilized transportation capacity to capitalize on favourable natural gas market spreads between Western Canada and other downstream markets. During the year ended March 31, 2026, the Corporation was able to recover $16 million in third-party transportation costs by utilizing spare transportation capacity in off-peak periods to move gas to other markets. Asset Optimization Fair Value Adjustments Through asset optimization strategies, the Corporation enters into various natural gas contracts which are subject to the volatility of natural gas market prices until the natural gas contracts are realized. The unrealized fair value adjustment on outstanding asset optimization derivative instruments had a favourable $1 million impact on the asset optimization margin. Compared to the prior year, the $1 million positive fair value adjustment represented a $1 million improvement from a nil adjustment in the prior year. The price differential on asset optimization sales improved by $0.21 per GJ compared to March 31, 2025, shifting from an unfavourable differential of $0.07 per GJ in the prior year to a favourable differential of $0.14 per GJ at March 31, 2026. This improvement resulted in a $3 million favourable impact for the 12 months ended March 31, 2026. This was offset by a $2 million unfavourable impact on purchases, where the negative differential between the average market price and the average contract price increased by $0.19 per GJ compared to March 31, 2025.
(millions)
March 31, 2026
March 31, 2025
Change
$
138 $
Asset optimization sales
101 $
37 23 14
104
Asset optimization purchases
81 20
34
Realized margin on asset optimization sales
1
Unrealized fair value adjustments Margin on asset optimization sales
-
1
$
35 $
20 $
15
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