Management’s Discussion and Analysis
Operating Activities Cash provided by operating activities increased $46 million through the six months ended September 30, 2023 compared to the same period in 2022, due to favourable changes in working capital. High accounts receivable balances at March 31, 2023 were collected through the six months ending September 30, 2023 as the Corporation was emerging from the winter heating season. In addition, decreasing natural gas market prices through 2023 resulted in reduced natural gas in storage purchase prices in the current period compared to the prior year, as the Corporation prepares for the upcoming winter by injecting natural gas inventory into storage facilities for withdrawal through the upcoming cold winter weather. Investing Activities Cash used in investing activities increased $12 million compared to 2022, primarily due to capital investment required for system expansion, risk management and reliability of natural gas service projects increasing in 2023. Financing Activities Cash used in financing activities of $33 million in 2023 was $44 million more than the $11 million provided by financing activities in 2022, primarily due to higher cash from operating activities decreasing the Corporation’s reliance on short-term debt, a positive result taking into account short-term market interest rates are continuing to trend higher through 2023. The Corporation used $34 million for interest payments, $10 million for dividend payments and $11 million to pay debt retirement fund installments. In addition, the Corporation borrowed an additional $125 million of long-term debt in three increments in the first quarter to support its capital investment requirements.
CAPITAL ADDITIONS Capital additions, as reported in the condensed consolidated financial statements, were as follows:
Three months ended September 30,
Six months ended September 30,
(millions)
2023
2022 Change 2023
2022 Change
$
12 28 28
$
21 31 41 13
Customer growth System expansion Risk management
$
34
$
(22)
$
43
$
(22)
3
25
5
26
23
5 2 1
34 10
7 3 1
9 2
Reliability of natural gas service
7 1
3
Business and technology optimization
2
$
79
$
109
Capital additions
$
68
$
11
$
94
$
15
Capital additions through the six months ended September 30, 2023, were $15 million higher than the investment made in 2022. Investment in customer growth projects was $22 million lower than 2022 investment levels, as the Corporation focuses on investing in urban and rural mains and services in 2023 to support existing and future customer connections to the distribution system. In 2022, the Corporation’s focus was on expanding the transmission system to accommodate growing natural gas demand within the province’s value-added agriculture sector and gas-fired power generation industry. System expansion capital projects provide incremental capacity for the transmission and distribution systems, through the installation of new or expanded gas line or facility assets, thus enabling demand growth and the addition of new customers. Higher investment of $26 million in system expansion projects through 2023 are resulting from spending on Regina reinforcement projects, which will increase available delivery capacity in west Regina, and position the Corporation to meet new customer demand. In addition, transmission system work in 2023 is focused on the Melfort East Expansion project. The project began in 2022-23 and involves gas line expansion to meet demand growth. Over 80 per cent of the project costs are expected to take place in 2023-24. Risk management capital projects concentrate on mitigating the likelihood of a negative consequence occurring on the SaskEnergy system, such as damage or loss of gas containment. These consequences typically include damage to infrastructure, environment and potential harm to or loss of human life. Risk management spending of $41 million is approximately one-third of the Corporation’s 2023 year-to-date capital investment and increased $7 million over 2022 expenditures.
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