Management’s Discussion and Analysis
The decreasing natural gas market prices, from an average of $2.33 per GJ through the twelve months ended March 31, 2024, to $1.30 per GJ for the same period in 2025, decreased commodity cost of sales compared to 2024. In addition to lower market prices, colder weather in 2024-25 and increased customers also contributed to the higher net result compared to the prior year. The GCVA balance was $10 million owing to customers at March 31, 2025, compared to $8 million owing to customers at March 31, 2024, as the declining AECO daily index reduced commodity cost of sales below the rate decrease implemented effective October 1, 2023. Commodity Fair Value Adjustments For the 12 months ending March 31, 2025, the fair value adjustment on commodity derivative instruments increased net commodity sales by $8 million. The unfavorable price differential between contract prices and market prices on future commodity purchase contracts improved by $0.12 per GJ, from $0.29 per GJ the previous year to $0.17 per GJ as of March 31, 2025. It is noteworthy that western Canadian market prices experienced a slight increase at the conclusion of 2024-25, despite expectations for a decline following the end of the most recent heating season, which helped narrow this differential. This improvement was further supported by a 15 PJ reduction in the volume of forward commodity purchase contracts outstanding at March 31, 2025, compared to the previous year. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS Accounting Standards, such own-use contracts are not required to be reported at market value. Asset Optimization Margin SaskEnergy leverages its off-peak transportation and storage capacity and its access to natural gas markets to execute purchases and sales of natural gas and generate a positive return. This approach allows SaskEnergy to capitalize on pricing differentials between transportation
hubs, delivery points and time periods. By executing most purchase and sales contracts simultaneously, the Corporation mitigates much of the price risk typically associated with such transactions. Additionally, SaskEnergy uses these transactions to address transportation constraints, albeit at a cost. The realized margin on asset optimization sales for the 12 months ending March 31, 2025, which removes fair value adjustments on derivative instruments, was $8 million higher than the same period ending March 31, 2024. The increase in 2024-25 is attributed to the Corporation leveraging unutilized transportation capacity to capitalize on favorable natural gas market spreads between Western Canada and other downstream markets. With AECO market prices typically being half of the market prices in other markets through 2024-25, there was opportunity to recover a portion of the cost of third-party transportation by utilizing spare transportation capacity in off-peak periods to move gas to other markets. Asset Optimization Fair Value Adjustments Through asset optimization strategies, the Corporation enters into various natural gas contracts which are subject to the volatility of natural gas market prices until the natural gas contracts are realized. The unrealized fair value adjustment on outstanding asset optimization derivative instruments had a $nil impact on the asset optimization margin. Rising natural gas market prices at the very end of 2024-25 led to the differential between contract prices and market prices on future asset optimization purchase contracts improving by $0.10 per GJ, reducing the unfavorable differential from $0.17 per GJ at March 31, 2024, to $0.07 per GJ. This $0.10 per GJ improvement resulted in a $1 million favorable fair value adjustment. However, this was equally offset by a $1 million unfavorable fair value adjustment on outstanding asset optimization sales contracts, as the unfavorable price differential at March 31, 2024, of $0.03 per GJ increased to $0.07 per GJ unfavourable, as market prices climbed at the end of March 31, 2025.
(millions)
March 31, 2025
March 31, 2024
Change
$
101 $
Asset optimization sales
141 $
(40) (48)
81 20
Asset optimization purchases
129
Realized margin on asset optimization sales
12
8 2
-
Unrealized fair value adjustments Margin on asset optimization sales
(2)
$
20 $
10 $
10
35
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