Management’s Discussion and Analysis
The Corporation’s ongoing commitment to safety and the environment, combined with the recent installation of two key transmission system natural gas line projects, are resulting in leak survey, post-project environmental monitoring and cathodic protection costs increasing. In addition, overall global inflation is leading to increasing operating materials and supply costs as well as external contractor costs. With growing system requirements — resulting from customers continuing to choose, and other customers transitioning to, natural gas as their energy source — transportation costs are increasing as more natural gas is being transported. Lastly, higher regulatory fees for the Corporation’s cross- border transmission system are resulting from the subsidiary transitioning into a higher fee structure. Depreciation and Amortization Depreciation and amortization were $6 million lower than the same period in 2022-23, as a major information system asset was fully depreciated in 2023-24, resulting in reduced depreciation. In addition, depreciation and amortization through 2022-23 was higher than normal, resulting from implementation of changes to depreciation rates as well as a change in management assumptions for amortization of intangible assets. Both were based on recommendations from an external depreciation study. This was partially offset by balancing safety and system integrity with the growing demand for natural gas services through 2023-24. Strategic capital investments required that the necessary infrastructure be put in service to meet this growing customer demand. Loss on Trade and Other Receivables The adjustment on trade and other receivables was $nil in 2023-24 compared to a loss of $7 million in 2022-23. Significantly warmer weather throughout February and March of 2024, a commodity rate decrease effective October 1, 2023, and the January 1, 2024 removal of federal carbon charges from residential customer bills, all contributed to significantly lower account receivable balances at March 31, 2024 compared to the same period in the prior year.
However, no adjustment to the allowance at March 31, 2024 has been made as high collection and credit risks continue to persist. The rapid interest rate increases and high inflation that led to the $7 million loss adjustment in 2022-23 remain in effect. Net Finance Expenses Net finance expenses for 2023-24 were $5 million higher than 2022-23, primarily resulting from additional long-term debt issuances of $125 million. These were used to fund a portion of the current year’s capital investment in the Corporation’s natural gas line infrastructure — which benefits Saskatchewan customers in the short and long term. Increasing short-term interest rates are also contributing to the higher finance costs, as the Corporation’s average short-term debt interest costs climbed to 4.9 per cent through the 12 months ending March 31, 2024 compared to 3.1 per cent through the same period in 2022-23. Other Net Losses Other net losses of $5 million in 2023-24 were $3 million unfavourable, compared to other net losses of $2 million in 2022-23. This is resulting from increasing decommissioning costs pertaining to forecasted abandonment activities at a non- operational storage facility. These losses were partially offset by a gain resulting from the sale of land and building assets at one of the Corporation’s construction facilities.
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