Management’s Discussion and Analysis
Employee Benefits Demographics, coupled with post-covid employee expectations, are resulting in labour shortages and prolonged vacancies for many organizations. SaskEnergy is facing greater challenges with attraction and retention of personnel than historically experienced. The turnover rate, which is typically low, has increased to just under 5 per cent. In response, SaskEnergy is focusing on enhancing the employee experience by introducing hybrid remote work arrangements, improving versatility with benefits and strengthening the Corporation’s talent programs. Although full-time equivalents are trending slightly below 2021 levels, employee benefit costs are $3 million higher than 2021, as fewer employee benefit costs are being allocated to capital projects than in 2021. This is due to the overall investment in capital projects declining in 2022 compared to 2021 along with the mix of projects worked on differing from 2021. Operating and Maintenance Operating and maintenance expenses were $10 million higher than in 2021, as growing demand and increasing natural gas imports from Alberta are resulting in more natural gas being transported and over greater distances, thus increasing transportation expenses. Vehicle and equipment operating costs are also higher in 2022, resulting from increasing fuel prices, but were partially mitigated by implementing additional scheduling efficiencies resulting in reduced vehicle and equipment costs. Depreciation and Amortization Balancing safety and system integrity with demand for service continued through 2022. Strategic capital investments required the necessary infrastructure be put in-service to meet current customer demand, resulting in increased depreciation and amortization — which was $2 million higher than the same period in 2021. Impairment loss on Trade and Other Receivables The estimate of the impairment loss on trade and other receivables increased $5 million in 2022, as colder weather, rate increases and increasing carbon charges are contributing to higher customer account receivable balances. Net Finance Expenses Net finance expenses for 2022 were $11 million higher than in 2021, primarily due to higher long- and short-term debt interest costs. The Corporation borrowed additional long-term debt, at higher rates, to support its capital investment requirements while short-term debt interest rate increases, along with declining debt retirement fund earnings, contributed to higher net finance expenses year over year. Debt retirement funds are monies set aside, typically one per cent of a debt issuance, to retire the long-term debt upon maturity. The Corporation makes regular contributions to the debt retirement funds, which are held and invested by the Saskatchewan Ministry of Finance and can be inversely impacted by interest rate movements. LIQUIDITY AND CAPITAL RESOURCES As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations and debt — which is borrowed through the Province’s General Revenue Fund. Cash from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies on it to fund a significant proportion of its investment in its natural gas facilities and the debt servicing costs on those investments. Long- and short-term debt can be borrowed through the Province of Saskatchewan to meet any long- or short-term incremental capital requirements and to repay debt as it matures. Sources of liquidity include Order in Council authority to borrow up to $500 million in short-term loans and a $35 million line of credit with the Toronto-Dominion Bank. Under The SaskEnergy Act , the Corporation may borrow up to $2,500 million of debt upon approval of the Lieutenant Governor in Council.
Three months ended December 31,
Nine months ended December 31,
(millions)
2022
2021 Change 2022
2021 Change
$
66
$
162 $
Cash provided by operating activities Cash used in investing activities
$
28
$
38
130
$
32 31
(62)
(161)
(70)
8
(192)
(1)
10 11
Cash provided by (used in) financing activities Increase in cash and cash equivalents
46
(47)
65
(55)
$
3
$
$
4
$
(1)
$
3
$
8
11
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