LIQUIDITY AND CAPITAL RESOURCES
Three months ended June 30
SaskEnergy Incorporated First Quarter Report (millions) Cash provided by operating activities Cash used in investing activities
March 31, 2011 2016 Change
2017
$
73
$
54
$
19
(37) (35)
(31) (33)
(6) (2)
Cash provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
$
1
$
(10)
$
11
As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations, debt – which is borrowed through the province’s General Revenue Fund – and equity advances from CIC, the Province’s crown corporation holding company. Equity advances are rarely used to finance Crown corporations as CIC prefers to use its Subsidiary Crown Dividend Policy to manage its equity interests in its commercial enterprises. Cash provided from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies upon it to fund dividends, debt servicing costs, and a significant proportion of its investment in pipeline facilities. 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 uncommitted line of credit with the Toronto-Dominion Bank. By borrowing through the province, SaskEnergy has access to the province’s borrowing capacity and North American capital markets. The SaskEnergy Act allows the Corporation to borrow up to $1,700 million.
Operating Activities
Cash from operating activities of $73 million for the three months ended June 30, 2017 was $19 million higher than the same period in 2016. Higher transportation revenue and delivery revenue contributed to higher operating cash flows compared to 2016. The Corporation also took advantage of low natural gas market prices by purchasing and injecting lower priced natural gas into storage.
Investing Activities
Cash used in investing activities totaled $37 million for the three months ended June 30, 2017; $6 million higher than 2016. Capital investment levels are increasing in 2017 compared to 2016, primarily due to higher investment in safety and integrity programming to maintain a safe and reliable system.
Financing Activities
Cash used in financing activities was $35 million during the three months of 2017 compared to $33 million in 2016. From a cash management perspective, SaskEnergy uses cash from operations to pay for its investing activities, dividend payments and debt servicing costs (including interest payments and sinking fund installments). Any remaining cash from operations is applied to reducing the short-term debt balance. If there is insufficient cash from operations, SaskEnergy will borrow more debt, usually short-term debt, to meet its cash requirements. SaskEnergy issued $120 million of long-term debt during the first quarter which was used to repay a $19 million maturity and $101 million of new long-term debt. SaskEnergy’s debt ratio at June 30, 2017 was 61 per cent compared to 59 per cent at March 31, 2017 and June 30, 2016.
CAPITAL EXPENDITURES
Three months ended June 30
(millions)
2017
2016 Change
Customer growth and system expansion
$
14 19
$
14 13
$
-
Safety and system integrity
6
Information systems
2 2
2
-
Vehicles & equipment, buildings, furniture
-
2 8
$
37
$
29
$
SaskEnergy continues to invest in its pipeline system to accommodate growth in the natural gas customer base and its increasing reliance on Alberta Gas to meet load requirements. Capital expenditures of $37 million for the three months ended June 30, 2017 are $8 million higher than the same period in 2016. Safety and system integrity capital expenditures are $6 million higher than 2016, primarily due to faster progress on system integrity programs.
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2017-18 FIRST QUARTER REPORT
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