2023-24 SaskEnergy Annual Report

Management’s Discussion and Analysis

Critical Accounting Policies and Estimates The Corporation prepares its consolidated financial statements in accordance with IFRS, using the accounting policies described in Note 3 of the consolidated financial statements. The application of these accounting policies requires management to make a number of judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. These judgments, estimates and assumptions, which are based on historical experience and other factors that are considered relevant, are reviewed on an ongoing basis. The Corporation’s critical accounting policies and estimates, which could materially impact the Corporation’s consolidated financial statements, have been summarized below.

Fair Value of Financial and Derivative Instruments

Financial statement reference – Note 9a The Corporation uses natural gas derivative instruments to secure its supply of natural gas and manage the impact of natural gas price variability. Prior to settlement, SaskEnergy records all natural gas derivative instruments at fair value. The fair value is determined based on quoted market prices and takes into account the credit quality of both counterparties and the Corporation. Given fluctuations in natural gas prices, fair value adjustments vary throughout the length of the contract. • At March 31, 2024, a $1.00 per GJ increase in natural gas prices throughout the forward curve would have increased the fair value of outstanding natural gas contracts by $35 million. • Conversely, a decrease of $1.00 per GJ would have decreased the fair value of natural gas derivative instruments by $35 million. Useful Lives and Depreciation and Amortization Rates for Property, Plant and Equipment, Intangible Assets and Right-of-Use Assets Financial statement reference – Notes 11-13 With a combined carrying amount of $3,210 million, property, plant and equipment, intangible assets and right-of-use (ROU) assets constitute a significant component of the Corporation’s assets. As a result, changes in assumptions related to the calculation of depreciation and amortization expense may have a significant impact on SaskEnergy’s net income. • At March 31, 2024, a one-year decrease in the estimated service life of the Corporation’s capital asset base would have increased the Corporation’s depreciation and amortization expense by approximately $3 million. • A one-year decrease in the estimated service life of ROU assets would have increased depreciation expense by approximately $3 million.

Estimated Unbilled Revenue Financial statement reference – Note 5

Commodity sales and delivery revenues are recognized when natural gas is delivered to customers. SaskEnergy estimates the volume of natural gas delivered but not billed, as it is currently impracticable to read all customer meters on March 31 of each year. The volume of unbilled revenue is determined by comparing the estimated total volume of natural gas delivered to the distribution system with the volume of natural gas billed to customers. Regular meter readings throughout the year are used to reconcile volumes purchased with volumes billed. • At March 31, 2024, the unbilled revenue related to commodity sales and delivery revenue was $37 million. • The unbilled revenue related to transportation and storage revenue was $21 million at March 31, 2024.

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