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
13
11
4 1
Reliability of natural gas service
3 1
Business and technology optimization
-
$
30
Capital additions
$
26
$
4
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.
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