SaskEnergy First Quarter Report - June 30, 2023

202 3 -2 4 Financial Statements First Quarter Report June 30, 2023

VISION Environmental sustainability and economic prosperity for future generations. CORPORATE VISION Providing critical energy for a greener Saskatchewan and reducing our emissions from operations by 35 per cent by 2030. MISSION SaskEnergy delivers natural gas and energy solutions responsibly to the residents, businesses and industries of Saskatchewan. VALUES

STEWARDSHIP We are responsible in our use of all resources. INTEGRITY We are accountable for our decisions, our actions, and the results. SAFETY We are always committed to our personal safety, the safety of our team and the public.

SPIRIT We support a respectful,

dynamic and a diverse work environment that encourages achievement.

RELATIONSHIPS We succeed through strong internal and external collaboration, trust and open communication.

TABLE OF CONTENTS Financial and Operating Highlights Management's Discussion and Analysis Introduction

3 4 4 6

Operating Environment

Consolidated Financial Results Liquidity and Capital Resources

11 12 1 2 1 4

Capital Additions

Outlook

Consolidated Financial Statements

Financial and Operating Highlights

Three months ended June 30,

CONSOLIDATED FINANCIAL INFORMATION ($ millions)

2023

2022

57 59 15

Delivery

57 57

Transportation and storage

Commodity margin

2 6 5

1 4

Asset optimization margin Customer capital contributions Total revenue and margins

136

127

28 48 35

Employee benefits

27 45 31

Operating and maintenance Depreciation and amortization

Saskatchewan taxes Net finance expense

Other losses

Total expenses

136

124

Income before unrealized market value adjustments

(17) (17)

Market value adjustments

(2)

CONSOLIDATED NET (LOSS) INCOME Cash provided by operating activities

84 32 33

73 28 36

Cash used in investing activities Cash used in financing activities

Dividends declared

3,513 1,781 59.0%

Total assets Total net debt

3,453 1,754 58.6%

Debt ratio

OPERATING STATISTICS Distribution energy (petajoules) Residential/Farm

5 5

5 6

Commercial

45 55

Industrial

43 54

Total

13% warmer

Weather (compared to last 30 years) Transmission energy (petajoules) Domestic

8% colder

82 14 96

Export

Total

Cash used in Investing Activities $ millions

Income before MVA $ millions

Cash from Operations $ millions

100

(5)

(8)

2023

2022

2021

2023

2022

2021

2023

2022

2021

Management’s Discussion and Analysis

INTRODUCTION The Management’s Discussion and Analysis (MD&A) highlights the primary factors that affected SaskEnergy’s consolidated financial performance for the three months ended June 30, 2023. Using financial and operating results as its basis, the MD&A describes the Corporation’s past performance and future prospects, enabling readers to view SaskEnergy from the perspective of management. The MD&A is presented as at August 23, 2023 and should be read in conjunction with the Corporation’s condensed consolidated financial statements, which have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (IFRS). For additional information related to the Corporation, refer to SaskEnergy’s 2022-23 Annual Report. The MD&A contains certain forward-looking statements that are subject to inherent uncertainties and risks. Many of these risks are described in the Risk Management and Disclosure section of SaskEnergy’s 2022-23 Annual Report. All forward-looking statements reflect the Corporation’s best estimates and assumptions based on information available at the time the statements were made. However, actual results and events may vary significantly from those included in, contemplated by, or implied by such statements. The volume of natural gas delivered to customers is sensitive to variations in weather, particularly through the prime heating season of November to March. Additionally, changes in market value adjustments may cause significant fluctuations in net income due to the volatility of natural gas prices. Therefore, the condensed consolidated financial results for the first three months of 2023-24 should not be taken as indicative of the performance to be expected for the full year. The Corporation’s financial results are subject to variation, especially given the volatility of natural gas prices. To compare financial performance from period to period, the Corporation uses the following measures: income before unrealized market value adjustments; realized margin on commodity sales; and realized margin on asset optimization sales. Each measure removes the impact of fair value adjustments on financial and derivative instruments and the revaluation of natural gas in storage to the lower of cost and net realizable value. Unrealized market value adjustments vary considerably with market prices of natural gas, drive significant changes in the Corporation’s consolidated net income and may obscure other business factors that are also important to understanding the Corporation’s financial results. The measures referred to above are non-IFRS measures, in that there is no standardized definition and may not be comparable to similar measures presented by other entities. The discussion of the Corporation’s results in the MD&A, set out on the following pages, is a comparison of the results for the three months ended June 30, 2023, to the results for the three months ended June 30, 2022, unless otherwise noted.

OPERATING ENVIRONMENT SaskEnergy monitors a number of crucial factors that could influence financial performance. Forest Fire Impacts

Forest fires had an uncharacteristically significant impact on the gas market last quarter. The Canadian fire season appears to be on pace to record the largest ever area burned. While the fires of Quebec and Ontario made national and international news for their regional air quality impacts, it was the fires of Alberta and BC that had the greatest impact to gas supply. Production in NW Alberta and NE BC fell by nearly 25 per cent in early May as fires in the producing areas were causing shut-ins at facilities at risk from fire. For context, this loss of supply was about two times larger than shut-ins from extreme cold last winter. The NGTL transmission system also had controlled precautionary shutdowns to compressor stations west of Edmonton. Fortunately, this loss of compression did not impede capabilities – due to the loss of upstream receipts. The loss in supply was short lived, with most of the supply back within a week of the initial declines. The price mechanism seemed to operate efficiently during the fire impacts. Temporary extreme high prices at AECO (as high as $7 per GJ during the initial weekend) kept Alberta exports subdued and allowed the market to find a balance. Over the following week, prices returned to their post-winter lows and stayed there for the remainder of the quarter. Elsewhere on the continent, low prices have begun to affect gas drilling rig deployment; the quarterly drop in rigs was the largest since 2016 bringing counts down to a level they were at prior to the large price run up last summer. Despite lower rig counts, US production remains at all-time highs. Offsetting this is continued growth in demand from power producers and LNG importing countries. Unlike last year, however, global prices for LNG remain relatively low. This has reduced the impact to North American prices and has also allowed several poorer countries to secure LNG cargos after being priced out of the market last year.

Management’s Discussion and Analysis

Saskatchewan Supply and Demand Saskatchewan has been downstream of transportation bottlenecks in Alberta since 2018. For the first time since 2018, NGTL made primary capacity to the Alberta-Saskatchewan border available to the market (to begin flowing in 2026); this Open Season was met with strong demand as the capacity was fully subscribed with multi-decade commitments from shippers. The availability of incremental transport remains a high-priority variable and SaskEnergy is looking at several ways to increase the province’s import capacity reliably and affordably. Saskatchewan Natural Gas Prices The AECO daily index averaged $2.32 per GJ through the 3 months ended June 30, 2023. The year-over-year decrease from $6.86 per GJ was largely a function of lower global prices. Traditionally, most natural gas in Saskatchewan (TEP) is priced at a differential to the AECO price. This AECO to TEP differential for the quarter averaged $0.06 per GJ premium compared to $0.34 per GJ the year prior. Daily capacity from AECO to TEP has been readily available this year causing the spread to flatten out; the market continues to price in risk of larger spreads through July as maintenance upstream will limit the availability Alberta exports. The following chart shows AECO natural gas prices:

AECO Monthly Index Historical Prices

$8.00

Limited Export Capacity from Alberta

$7.00

Forward Price at June 30, 2023 Average Price: $3.48/GJ

$6.00

2015-Present Average Price: $2.61/GJ

$5.00

$4.00

$3.00

$2.00

$1.00

$0.00

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Management’s Discussion and Analysis

CONSOLIDATED FINANCIAL RESULTS Consolidated Net Income

Three months ended June 30,

(millions)

2023

2022 Change

Income before unrealized market value adjustments

(3)

(17)

Impact of fair value adjustments Revaluation of natural gas in storage Consolidated net (loss) income

(1) (1)

(16)

(17)

(18)

Income before unrealized market value adjustments was $nil in 2023, $3 million unfavourable compared to income of $3 million in 2022, resulting from lower asset optimization margins, combined with higher operating and maintenance expenses, depreciation and amortization expense and finance costs. This was partially offset by a higher commodity margin and transportation and storage revenue. Through the three months ended June 30, 2022, the Corporation was able to take advantage of unutilized transportation capacity as natural gas line projects continued to be delayed in Alberta and increased maintenance projects limited transportation capacity on Alberta systems — the result being improved asset optimization margins. The Alberta natural gas projects were operationalized in 2023 and have contributed to lower natural gas market prices and decreased market price volatility, both limiting the Corporation’s asset optimization opportunities. Operating and maintenance expenses increased in 2023 compared to 2022 as the Corporation implemented an updated online customer portal, resulting in higher hosting fees to support the additional functionality implemented. In addition, transportation and storage expenses increased as natural gas is sourced from farther distances and transportation service providers implemented rate increases. Depreciation and amortization expenses increased in 2023 compared to 2022 as the Corporation implemented the results of a third-party depreciation study and a change in management estimate on useful lives of intangible assets in the fourth quarter of 2022-23. Finance costs continued to increase as short-term debt financing costs increase, primarily resulting from increasing short-term interest rates. These unfavourable impacts were partially offset by a higher commodity margin in 2023 compared to 2022, as the Corporation received approval to increase its commodity rate effective August 1, 2022 to address increasing natural gas market prices, which have significantly decreased since last winter, and to address the large gas cost variance account balance owing from customers to the Corporation. Transportation and storage revenue also increased in 2023 compared to 2022 as customers increased transportation services to meet their natural gas operating requirements. Forward market prices declined below March 2023 levels as the first quarter closed generating a $17 million unfavourable fair value adjustment as the favourable price differential between average deal price and average market price on outstanding commodity purchase contracts declined $0.24 per GJ at June 30, 2023 compared to March 31, 2023. In addition, natural gas in storage was recorded at weighted average cost, which was equal to net realizable value at June 30, 2023. There was no impact on 2023 net income resulting from the revaluation of natural gas in storage. Natural Gas Sales and Purchases Included within natural gas sales and purchases are rate-regulated commodity sales to distribution customers and non- regulated asset optimization activities. IFRS requires these activities to be presented together within the consolidated financial statements; however, the Corporation manages these activities as distinct and separate businesses and, as such, the MD&A addresses these natural gas sales and purchases separately. With the exception of those contracts entered into for an entity’s normal usage, IFRS requires derivative instruments such as natural gas purchase and sales contracts to be recorded at fair value until their settlement date. Changes in the fair value of the derivative instruments, driven by changes in future natural gas prices, are recorded in net income through natural gas sales or natural gas purchases depending on the specific contract. Upon settlement of the natural gas contract, the amount paid or received by SaskEnergy becomes realized and is recorded in natural gas sales or purchases. The majority of SaskEnergy natural gas contracts are normal usage and are not recorded at fair value.

Management’s Discussion and Analysis

Commodity Margin SaskEnergy sells natural gas to its distribution customers at a commodity rate approved by Provincial Cabinet based on the recommendations of the Saskatchewan Rate Review Panel (SRRP). The commodity rate is determined based on rate- setting principles and is designed to recover the realized costs associated with the sale of natural gas to distribution customers. Regulatory principles require that utilities do not earn a profit or realize losses on the sale of gas to customers over the long term. Consequently, SaskEnergy accumulates differences between the commodity revenue earned and the cost of natural gas sold in a Gas Cost Variance Account (GCVA). The balance in the GCVA, which is not included in SaskEnergy’s financial statements, is either recovered from, or refunded to, customers as part of future commodity rates. SaskEnergy prepares its financial statements on a consolidated basis while applying IFRS. Consequently, the amounts determined for rate-setting purposes are different than those reported within its IFRS consolidated financial statements. A gain or loss reported in the Corporation’s consolidated financial statements may not be reflected in the GCVA. SaskEnergy’s natural gas price risk management program has two objectives: to reduce the impact of natural gas price volatility on the cost of gas and to support rates that are competitive with other utilities. Reducing the impact of price volatility requires establishing certainty in the cost of gas, while supporting competitive rates often means allowing purchase prices to follow market prices. As a result, the balance between the two opposing objectives may change depending on current market conditions. In order to ensure a secure supply of natural gas, SaskEnergy contracts for the physical delivery of natural gas using non-financial derivatives, referred to as forward or physical natural gas contracts. The purchase price contained in these forward contracts may be fixed, or it may be based on a variable index price. While fixed price contracts reduce the impact of natural gas price volatility, variable or market prices can assist in offering competitive rates depending on the pricing environment. SaskEnergy may also use financial derivatives and physical swaps to manage the future purchase price of natural gas. The commodity margin on sales to customers, as reported in the condensed consolidated financial statements, was as follows:

Three months ended June 30,

(millions)

2023

2022 Change

36 21 15

Commodity sales

30 28

Commodity cost of sales

(7)

Realized margin on commodity sales Unrealized fair value adjustments

(16)

(1)

(15)

(1)

Margin on commodity sales

(2)

The realized margin on commodity sales excludes the impact of unrealized fair value adjustments on derivative instruments, as these adjustments can fluctuate significantly from one period to the next and do not necessarily represent the amount that will be paid upon settlement of the related natural gas contract. The Corporation’s realized margin on commodity sales for the three months ended June 30, 2023 was $13 million higher than in 2022, as the commodity margin was $1.66 per GJ through the three months ended June 30, 2023 compared to $0.23 per GJ for the same period ended June 30, 2022. SaskEnergy received approval to increase its commodity rate to $4.20 per GJ from $3.20 per GJ effective August 1, 2022 to address AECO daily index prices trending upwards in 2022. In addition, the AECO daily index dropped significantly in 2023, averaging $2.32 per GJ through the three months ended June 30, 2023, compared to $6.86 per GJ in the same period ended June 30, 2022. The GCVA balance increased to $9 million owing to customers at June 30, 2023, compared to $2 million owing to customers at March 31, 2023 — a result of the average AECO daily index decreasing to $2.32 for the three months ended June 30, 2023 compared $4.68 for the twelve months ended March 31, 2023. With AECO daily index pricing declining to current levels in February 2023, the Corporation applied for a Commodity rate decrease from $4.20 per GJ to $3.30 per GJ to address the declining AECO prices. If approved, the rate decrease would take effect October 1, 2023.

Management’s Discussion and Analysis

Commodity Fair Value Adjustments Fair value adjustments on commodity derivative instruments decreased the margin on commodity sales by $16 million as the $20 million favourable fair value position at March 31, 2023 decreased to $4 million favourable at June 30, 2023. The favourable price differential between contract prices and market prices on future commodity purchase contracts decreased to $0.06 per GJ at June 30, 2023, compared to $0.30 per GJ at March 31, 2023. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS, such 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 June 30,

(millions)

2023

2022 Change

37 36

Asset optimization sales

114 108

(77) (72)

Asset optimization cost of sales

Realized margin on asset optimization sales Unrealized fair value adjustments Revaluation of natural gas in storage

(5) (1)

(1)

- -

(1)

Margin on asset optimization sales

(5)

The realized margin on asset optimization sales for the three months ended June 30, 2023, which removes fair value adjustments on derivative instruments and the revaluation of natural gas in storage, was $5 million lower than in 2022. Energy prices in Western Canada began to increase through the three months ending June 30, 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 and increasing market price volatility through 2022. The Corporation was able to capitalize on its unutilized transportation capacity through the three months ending June 30, 2022 and executed 18.7 PJ of asset optimization contracts at an average margin of $0.31 per GJ. The delayed construction projects in Alberta were operationalized in early 2023 and increased transportation capacity in Alberta. Natural gas prices have declined and price volatility has decreased as transportation capacity seen in 2022 are not materializing in 2023. This is resulting in decreased opportunities for SaskEnergy to use its unutilized transportation capacity for asset optimization activities. The Corporation executed 13.7 PJ of asset optimization contracts at an average margin of $0.11 per GJ through the three months ended June 30, 2023. Asset Optimization Fair Value Adjustments The Corporation enters into various natural gas contracts in its asset optimization strategies, which are subject to volatility of natural gas market prices until the natural gas contracts are realized. The unrealized fair value adjustments on asset optimization derivative instruments had a $1 million impact on outstanding asset optimization contracts in 2023. Revaluation of Natural Gas in Storage The carrying amount of natural gas in storage is adjusted to reflect the lower of weighted average cost and net realizable value. At each reporting period, the Corporation measures net realizable value of natural gas in storage held for asset optimization transactions based on forward market prices and anticipated delivery dates. The Corporation sold its asset optimization natural gas in storage inventory in April 2023 when gas prices were still high compared to lower prices in the summer, resulting in no inventory held at June 30, 2023. The impact on 2023 net income was $nil.

Management’s Discussion and Analysis

Revenue Delivery revenue, transportation and storage revenue and customer capital contributions, as reported in the condensed consolidated financial statements, were as follows:

Three months ended June 30,

(millions)

2023

2022 Change

57 59

Delivery revenue

57 57

Transportation and storage revenue Customer capital contributions

(1)

120 $

Revenue

119

Delivery Revenue Natural gas delivery rates are designed to recoup all distribution facility and operating costs necessary for delivery of natural gas to customers throughout the year. Natural gas storage and transportation costs — as well as ongoing investments related to safety, system integrity and growing infrastructure — are factored into delivery rates. Other considerations impacting natural gas delivery services include regulatory code compliance and industry best practices regarding safety. To minimize these impacts on delivery service customers, the Corporation strives to make the most effective use of resources and technology and to collaborate with other Crown corporations and executive government. Delivery revenue is primarily driven by the number of customers and the amount of natural gas they consume. Weather is the most significant external factor affecting delivery revenue, as residential and commercial customers consume natural gas primarily as heating fuel. Delivery revenue of $57 million through the three months ended June 30, 2023 equaled the prior year results. Rate increases effective August 1, 2022 for all delivery services increased delivery revenue year-over-year, which was equally offset by the impact of lower consumption compared to the prior year as weather was The Corporation generates transportation revenue by receiving gas from customers at various receipt points in Saskatchewan and Alberta and delivering natural gas to customers at various delivery points in the province. The transportation toll structure consists of a receipt service charge, which customers pay when they put gas onto the natural gas transportation system and a delivery service charge that customers pay when they take delivery off the natural gas transportation system. For receipt and delivery services, the Corporation offers both firm and interruptible transportation contracts. Under a firm service contract, the customer has a right to deliver or receive a specified quantity of gas on each day of the contract. With a firm contract, customers either pay for the amount of capacity they have contracted for, whether they use it or not. Under an interruptible contract, customers may deliver or receive gas only when there is available capacity on the system and only pay receipt and delivery tolls when they deliver or receive gas. Integral to the Corporation’s transmission system are several strategically located natural gas storage sites, which have the capacity to provide operational flexibility along with a reliable and competitive natural gas storage service. 21 per cent warmer than the prior year. Transportation and Storage Revenue Transportation and Storage revenue was $2 million higher for the three months ended June 30, 2023 compared to the same period in 2022, as higher delivery service revenues are resulting from industrial customers executing higher contract demand and interruptible transportation services to meet their operating requirements. This was partially offset by customers decreasing export transportation service contracts in 2023 compared to 2022. High natural gas market prices in Canada through 2022 created incentives for customer to increase export services and supply Eastern Canada with natural gas as the region was experiencing higher natural gas market prices than Western Canada. Storage revenue of $3 million for the three months ended June 30, 2023 equaled the prior year results. Customers leverage storage services for balancing their transportation account and inject natural gas into storage in the summer to meet higher loads and demands in the winter.

Management’s Discussion and Analysis

Customer Capital Contributions The Corporation receives capital contributions from customers to partially offset the cost of constructing facilities to connect them to the transmission and distribution systems. Generally, contributions related to transmission system projects tend to be larger but less frequent than contributions related to the distribution system. The volume and magnitude of contribution revenue can significantly vary period-over-period, as several factors influence their receipt and recognition as revenue. Customer capital contributions were $1 million lower in 2023, resulting from fewer gas line installations in the distribution utility compared to the three months ended June 30, 2022. Other Expenses SaskEnergy’s expenses are driven to a large degree by its investment in its transmission, distribution and storage systems. Depreciation and amortization expense, net finance expense and Saskatchewan taxes are directly tied to the investment in facilities. As the level of investment in facilities increases, these expenses also increase. Employee benefit expenses and operating and maintenance expenses are also driven by the Corporation’s investment in facilities, although less directly. As the number of customers increases and infrastructure to serve those customers grows, the costs to operate and maintain the system increases. These expenses increase primarily because the amount of work to service and maintain the natural gas system grows as the kilometres of gas lines, number of service connections and amount of compression equipment increases. Additional regulatory requirements and changing public perceptions have resulted in accelerated prevention, detection and mitigation initiatives, adding pressure to transmission, distribution and storage rates. Other expenses, net finance expenses and other (gains) losses, as reported in the condensed consolidated financial statements are as follows:

Three months ended June 30,

(millions)

2023

2022 Change

28 48 35

Employee benefits

27 45 31

(1) (3) (4) (1) (9)

Operating and maintenance Depreciation and amortization

Saskatchewan taxes

116 $

107

Net finance expenses

(2)

Other losses

(1)

Employee Benefits Full-time equivalents are trending higher in 2023 than 2022 levels, resulting in employee benefit costs increasing $1 million compared to 2022 as the Corporation was able to fill vacant positions. Operating and Maintenance Operating and maintenance expenses were $3 million higher than in 2022, as the Corporation’s upgraded online customer- portal is resulting in additional hosting fees in 2023 compared to 2022. In addition, 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. Third party rate increases on transportation services are also contributing to the higher

transportation expenses in 2023. Depreciation and Amortization

Balancing safety and system integrity with demand for service continued through 2023. Strategic capital investments required the necessary infrastructure be put in-service to meet current customer demand, resulting in increased depreciation and amortization — which was $4 million higher than the same period in 2022. Higher depreciation resulted from changes made to depreciation rates based on an external depreciation study as well as a change in management assumptions for amortization of intangible assets.

Management’s Discussion and Analysis

Net Finance Expenses Net finance expenses for 2023 were $2 million higher than in 2022, primarily due to higher short-term debt interest costs, as market interest rates continue to climb in 2023 compared to 2022. 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. Cash provided by and used in activities, as reported in the condensed consolidated financial statements are as follows:

Three months ended June 30,

(millions)

2023

2022 Change

Cash provided by operating activities Cash used in investing activities Cash used in financing activities Increase in cash and cash equivalents

(32) (33)

(28) (36)

(4)

Operating Activities Cash provided by operating activities increased $11 million through the three months ended June 30, 2023 compared to the same period in 2022. A higher commodity margin and transportation and storage revenues are contributing to the increase, a result of a commodity rate increase to $4.20 per GJ effective August 1, 2022 from $3.20 per GJ as the Corporation addressed rising natural gas market prices in 2022. Investing Activities Cash used in investing activities increased $4 million compared to 2022, primarily due to capital investment required for risk management system expansion projects increasing in 2023. Financing Activities Cash used in financing activities decreased $3 million in 2023 compared to 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 interest rates are continuing to trend higher through 2023. The Corporation used $28 million for interest payments, $6 million for dividend payments and $10 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. The first debt issue of $50 million of long-term debt was borrowed at a discount of $3 million with an interest rate of 3.8 per cent. A second long-term debt issue of $25 million was borrowed, at par, with an interest rate of 3.9 per cent. A third long-term debt issue of $50 million was borrowed, at par, with an interest rate of 4.2 per cent.

Management’s Discussion and Analysis

CAPITAL ADDITIONS Capital additions, as reported in the condensed consolidated financial statements, were as follows:

Three months ended June 30,

(millions)

2023

2022 Change

9 3

Customer growth System expansion Risk management

9 2

1 2 1

4 1

Reliability of natural gas service

3 1

Business and technology optimization

Capital additions

Capital additions through the three months ended June 30, 2023 were $4 million higher than the investment made in 2022, primarily due to increasing expenditures in system expansion, risk management and reliability of natural gas service projects. Investment in customer growth projects of $9 million was consistent with 2022 investment levels as the Corporation focuses on investing in urban and rural mains and services. 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 $1 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. 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 $13 million is approximately one-third of the Corporation’s 2023 year-to-date capital additions and increased $2 million over 2022 expenditures. Reliability of natural gas in service includes enhancements, modifications or upgrades to facilities, ensuring that natural gas demand will be met without failure or loss of service. Reliability of natural gas service spending increased by $1 million in 2023 as the Corporation’s purchased additional construction equipment and focused on investing in system improvement work on town border stations and district regulator stations. Business and technology optimization ensures that every investment in information technology, every resource allocated and every application in development or in production, meets the Corporation’s business goals. The 2023 investment in business and technology optimization is comparable to 2022. OUTLOOK With the outlook for provincial natural gas demand continuing to grow in the short to intermediate term, SaskEnergy will continue to focus on core operations and strive for efficiencies to support its continued financial strength. Recognizing the importance of reducing emissions, SaskEnergy has several initiatives targeted to support emissions reductions from both internal operations and customer-focused initiatives. Offsetting the cost pressures created by these efforts, SaskEnergy continues its focus on operational excellence to achieve cost savings through business process improvements, leveraging technology, and collaboration with other Crown corporations and executive government. Modest incremental growth is expected primarily from SaskEnergy’s industrial customers in 2023-24, with additions from the value-added agricultural sector and from gas-fired power generation leading the way. While the number of residential customers connecting to SaskEnergy’s distribution system is expected to continue increasing, total demand and revenue growth from this customer segment is expected to remain stable due to energy efficiency improvements.

Management’s Discussion and Analysis

Despite the expected customer growth, SaskEnergy is forecasting lower earnings in 2023-24 due to a return to normal weather resulting in lower delivery and transportation revenue, as well as lower asset optimization margins.

In June 2023, SaskEnergy applied to the Saskatchewan Rate Review Panel (SRRP) for a 22.1 per cent decrease to the commodity rate, dropping it from $4.20 to $3.30 per gigajoule. At the same time, SaskEnergy brought forward a proposal for the SRRP to consider a five per cent delivery service rate increase. The combined commodity and delivery service rate adjustments will result in an overall bill decrease for the average residential customer. Affordability remains a top priority for SaskEnergy and its focus on operational excellence will mitigate cost pressures to keep the delivery of natural gas affordable for its customers. SaskEnergy is committed to providing solutions and service that benefit customers and Saskatchewan, by leveraging the Corporation’s expertise and the province’s private sector. Throughout 2023-24, SaskEnergy will increase its capital investment in the province, with key areas of focus including: maintaining the safety and reliability of the natural gas transmission and distribution systems, enhancing customer experience, and supporting the emissions reduction strategy.

Condensed Consolidated Financial Statements (unaudited)

1 5 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 1 6 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 1 7 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 18 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19 GENERAL INFORMATION 19 BASIS OF PREPARATION 2 0 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2 0 NATURAL GAS IN STORAGE HELD FOR RESALE 2 0 FINANCIAL AND DERIVATIVE INSTRUMENTS 2 2 FINANCIAL RISK MANAGEMENT 2 4 ASSETS HELD FOR SALE 2 4 PROPERTY, PLANT AND EQUIPMENT

2 5 LEASE LIABILITY 2 5 LONG-TERM DEBT 2 6 COMMITMENTS AND CONTINGENCIES 2 6 UNREALIZED MARKET VALUE ADJUSTMENTS 27 NATURAL GAS SALES AND PURCHASES 27 DELIVERY REVENUE 27 TRANSPORTATION AND STORAGE REVENUE 28 N ET FINANCE EXPENSES

Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)

March 31, 2023

June 30, 2023

Notes

(millions)

ASSETS Current assets Cash and cash equivalents

158

Trade and other receivables

248

27 20 11

Natural gas in storage held for resale

Inventory of supplies

Current portion of debt retirement funds

Assets held for sale

7 5

Fair value of derivative instruments

274

337

14 46

Right-of-use assets Intangible assets

12 51

3,021

Property, plant and equipment

3,020

158

Debt retirement funds

160

3,513

3,580

LIABILITIES AND PROVINCE'S EQUITY Current liabilities Short-term debt

196

311 145

Trade and other payables

Dividends payable Contract liability

Current portion of lease liability Current portion of long-term debt Fair value of derivative instruments

100

447

514

3 5 7

Employee future benefits

3 5 6

Deferred revenue

Lease liability

159

Provisions

158

1,667 2,288

Long-term debt

1,647 2,333

Province's equity Equity advances

(11)

Other components of equity

( 10)

1,214 1,225 3,513

Retained earnings

1,235 1,247 3,580

The accompanying notes are an integral part of the condensed consolidated financial statements

Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

For the Three Months Ended June 30, 2023

For the Three Months Ended June 30, 2022

Income before Unrealized Market Value Adjust- ments

Unrealized Market Value Adjust- ments (Note 12)

(millions)

Notes

Total

REVENUE Natural gas sales

73 57 59

(4)

69 57 59

13 14 15

144

161

- - -

Delivery

57 57

- - -

57 57

Transportation and storage Customer capital contributions

193

(4)

189

2 63

280

EXPENSES Natural gas purchases (net of change in inventory)

57 28 48 35

70 28 48 35

1 36

155

- - - -

Employee benefits

27 45 31

- - - -

27 45 31

Operating and maintenance Depreciation and amortization

Saskatchewan taxes

173

186

2 43

262

NET INCOME (LOSS) BEFORE THE FOLLOWING

(17)

(2)

(19)

- -

(19)

Net finance expenses

(17)

- -

(17)

(1)

Other losses

TOTAL NET (LOSS) INCOME ITEMS THAT MAY BE RECLASSIFIED TO NET (LOSS) INCOME Change in fair value of debt retirement funds designated as FVOCI (1)

(17)

(2)

(1)

(6)

COMPREHENSIVE (LOSS) INCOME

(18)

(8)

(5)

The accompanying notes are an integral part of the condensed consolidated financial statements (1) Fair value through other comprehensive income (FVOCI)

Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Other Components of Equity

Retained Earnings

Equity Advances

Total

(millions)

BALANCE, AT APRIL 1, 2022 Comprehensive income (loss)

1,234

1,220

(8) (2)

- -

(45)

Dividends

(45)

BALANCE, AT MARCH 31, 2023 Comprehensive income (loss)

1,247

1,235

(10)

(18)

(17)

- -

(1)

(4)

Dividends

(4)

BALANCE, AT JUNE 30, 2023

1,225

1,214

(11)

The accompanying notes are an integral part of the condensed consolidated financial statements

Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

For the Three Months Ended June 30,

(millions)

Notes

2023

2022

OPERATING ACTIVITIES Net (loss) income

(17)

Add (deduct) items not requiring an outlay of cash Net change in fair value of derivative instrument assets and liabilities Change in revaluation of natural gas in storage to net realizable value

12 12

1 1

35 19

Depreciation and amortization

31 17

Net finance expenses Other non-cash items

55 31 86

51 22 73

Net change in non-cash working capital related to operations

Cash provided by operating activities

INVESTING ACTIVITIES Additions to intangible assets

(1)

(29)

Additions to property, plant and equipment

(26)

(2)

Decommissioning costs

(1)

(32)

Cash used in investing activities FINANCING ACTIVITIES Debt retirement funds installments

(28)

(10)

(10) (29)

(115)

Repayment of short-term debt Proceeds from long-term debt

120

(1)

Repayment of principal on lease liability

(1)

(23)

Interest paid Dividends paid

(23) (11) (36)

(6)

(35)

Cash used in financing activities

INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

The accompanying notes are an integral part of the condensed consolidated financial statements

Notes to the Consolidated Financial Statements (unaudited)

1. GENERAL INFORMATION SaskEnergy Incorporated (SaskEnergy or the Corporation) is a Saskatchewan provincially owned Crown corporation operating under authority of The SaskEnergy Act . The address of SaskEnergy’s registered office and principal place of business is 1777 Victoria Avenue, Regina, Saskatchewan, Canada S4P 4K5. The Corporation owns and operates natural gas-related businesses located both within and outside of Saskatchewan. The condensed consolidated financial statements should not be taken as indicative of the performance to be expected for the full year due to the seasonal nature of the natural gas utility business. By virtue of The Crown Corporations Act, 1993 , SaskEnergy has been designated as a subsidiary of Crown Investments Corporation of Saskatchewan (CIC), a Saskatchewan provincially owned Crown corporation. Accordingly, the financial results of SaskEnergy are included in the consolidated financial statements of CIC. As a provincial Crown corporation, SaskEnergy and its wholly owned subsidiaries are not subject to Federal or Provincial income taxes in Canada.

BASIS OF PREPARATION

Statement of compliance The Corporation’s condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The condensed consolidated financial statements do not include all the information required for the Corporation’s annual consolidated financial statements. Accordingly, these statements should be read with reference to the annual report for the year ended March 31, 2023. The accounting policies used in the preparation of these condensed consolidated financial statements conform with those used in the Corporation's most recent annual consolidated financial statements. The condensed consolidated financial statements were authorized for issue by the Audit and Finance Committee of the Board of Directors on August 23, 2023. b. Basis of measurement The condensed consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries with all significant transactions and balances being eliminated. The condensed consolidated financial statements have been prepared on the historical cost basis except for the following items, which are described in Note 3: Financial instruments classified as at fair value through profit or loss Financial instruments classified as at fair value through other comprehensive income Employee future benefits Provisions Natural gas in storage held for resale c. Functional and presentation currency The condensed consolidated financial statements are presented in Canadian dollars, the Corporation’s functional currency, unless otherwise stated. All financial information presented in Canadian dollars has been rounded to the nearest million.

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