Revenue
SaskEnergy Incorporated First Quarter Report The delivery rate increase effectiv November 1, 2016 and the recommended rate increase November 1, 2017 will provide additional delivery revenue to help offset increasing cost pressures resulting from customer growth and integrity investments experienced in recent years. Customer connections, which are closely related to the strength of the provincial economy, were expected to increase modestly to 4,500 new customers through 2017-18. This estimate is now expected to realize between 3,800-4,000 new customers, slightly less than the 4,500 new customers initially expected. Industrial and commercial demand for service is expected to continue to grow. SaskEnergy currently expects revenue to increase by $60 million in 2017-18, driven by a six per cent increase in load and the delivery rate increase effective November 1, 2017. March 31, 2011
Gas Marketing and Commodity Margins
While long term natural gas prices have remained relatively unchanged from the end of March 2017, near term natural gas prices have declined. Over a longer period, forward gas prices have displayed a downward trend suggesting that the likelihood of higher prices in the future is small. Current market prices are fairly representative of long term prices, resulting in the differential between current and forward prices being fairly small. This differential is the driver for much of SaskEnergy’s gas marketing activity in the past, with the exception of summer to winter spreads. These market conditions adversely affect the prospect for generating the margins required to support SaskEnergy’s non-core storage business. The November 1, 2016 commodity rate reduction to $3.65 per GJ will reduce commodity revenue during 2017-18; however, lower natural gas market prices are expected to reduce the average cost of gas by an equal amount. Consequently, favourable margins are expected by the end of March 31, 2018 on commodity sales. As part of the normal course of business, commodity rates are reviewed regularly and adjusted as required.
Summary
Although, SaskEnergy’s financial performance is expected to remain strong, there are risks to the outlook. Capital expenditure requirements and rising costs will remain a challenge throughout the forecast period as SaskEnergy adjusts to continued customer load growth, infrastructure renewal requirements and shifting natural gas supply dynamics. A low natural gas price environment will continue to create challenges from a gas marketing perspective. Delivery and transportation revenue will continue to grow, but so will operating costs. SaskEnergy will continue to focus on providing safe and reliable service to its customers and investing in safety and growth initiatives while actively seeking operating and capital deployment efficiencies through collaboration and technology initiatives. Weather will be a key factor affecting 2017-18 financial results. Forecasted results are based on normal weather as defined by the 30-year average. To the extent that weather is colder than normal, delivery revenue will increase, and to the extent that weather is warmer than normal, delivery revenue will be lower. Assuming weather is not extremely cold, transportation, storage, and other revenue items are typically not impacted by weather, as is the case with operating expenses. Commodity revenue and gas purchases are both affected by weather but typically offset each other.
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2017-18 SECOND QUARTER REPORT
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