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
$
84
Cash provided by operating activities Cash used in investing activities Cash used in financing activities Increase in cash and cash equivalents
$
73
$
11
(32) (33)
(28) (36)
(4)
3
$
19
$
9
$
10
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.
11
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