Management’s Discussion and Analysis
The GCVA balance increased to $9 million owing to customers at December 31, 2023, compared to $2 million owing to customers at March 31, 2023 — a result of the average AECO daily index decreasing to $2.32 per GJ for the nine months ended December 31, 2023 compared $4.68 per GJ for the twelve months ended March 31, 2023. The 24.5 per cent decrease of commodity rate effective October 1, 2023, coupled with the Corporation’s commodity price risk management strategy, will ensure that the GCVA balance stays within the targeted level, and maintain a steady competitive commodity rate for customers. Commodity Fair Value Adjustments Fair value adjustments on commodity derivative instruments decreased the margin on commodity sales by $35 million as the $20 million favourable fair value position at March 31, 2023 decreased to $15 million unfavourable at December 31, 2023. The favourable price differential of $0.30 per GJ between contract prices and market prices on future commodity purchase contracts at March 31, 2023, decreased to an unfavourable price differential of $0.32 per GJ at December 31, 2023 due to significant decreases in gas prices. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS, such contracts, termed “own use contracts”, are not required to be reported at market value. Asset Optimization Margin SaskEnergy uses its access to natural gas markets to execute purchases and sales of natural gas to generate margins. By utilizing off-peak transportation and storage capacity, SaskEnergy is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods. In most cases, the Corporation executes purchase and sales contracts at the same time, thereby mitigating much of the price risk that would normally be associated with such transactions. SaskEnergy also uses purchases and sales of natural gas to mitigate transportation constraints, which are executed at a cost. The asset optimization margin, as reported in the condensed consolidated financial statements, was as follows:
Three months ended December 31,
Nine months ended December 31,
(millions)
2023
2022 Change 2023
2022 Change
$
26 22
$
101 $
Asset optimization sales
$
75 68
$
(49) (46)
295 267
$
(194) (176)
91 10
Asset optimization cost of sales
4
Realized margin on asset optimization sales Unrealized fair value adjustments Revaluation of natural gas in storage
7
(3)
28
(18)
- -
(3)
- -
- -
(1)
(2)
-
-
-
$
4
$
7
Margin on asset optimization sales
$
7
$
(3)
$
27
$
(20)
The realized margin on asset optimization sales for the nine months ended December 31, 2023, which removes fair value adjustments on derivative instruments and the revaluation of natural gas in storage, was $18 million lower than in 2022. In the prior year, energy prices in Western Canada increased through the nine months ending December 31, 2022, as major pipeline capacity projects in Alberta experienced continued construction delays. In combination with increased maintenance projects on natural gas systems in Alberta, both components factored into creating transportation capacity constraints, resulting in increasing natural gas market prices, increasing market price volatility through 2022 and increasing AECO to TEP price differentials. The Corporation was able to capitalize on its unutilized transportation capacity through the nine months ending December 31, 2022, and executed 53.0 PJ of asset optimization contracts at an average margin of $0.55 per GJ. The delayed construction projects in Alberta were operationalized in early 2023 and increased transportation capacity in Alberta. Natural gas prices, location price differentials and market price volatility have declined, as the transportation capacity constraints seen in 2022 are not being experienced in 2023. This is resulting in decreased opportunities for SaskEnergy to use its unutilized transportation capacity for asset optimization activities. The Corporation executed 37.9 PJ of asset optimization contracts at an average margin of $0.25 per GJ through the nine months ended December 31, 2023.
8
Made with FlippingBook Ebook Creator