interruptible contract, customers may deliver or receive gas only when there is available capacity on the system and pay receipt and delivery tolls when they deliver or receive gas.
SaskEnergy Incorporated First Quarter Report
March 31, 2011 Transportation and storage revenue was $68 million for the six months ending September 30, 2017, $3 million higher than the same period in 2016, while revenue was $34 million for the three months ending September 30, 2017, $1 million higher than the same period in 2016. Industrial customer and power generation related load growth continues to increase demand for natural gas within the province and is driving higher transportation revenue.
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 distribution system projects. The volume and magnitude of customer contribution revenue can vary significantly period-over-period as their receipt and recognition as revenue is primarily driven by customer activity. The contributions received, less potential refunds, are recognized as revenue once the related property, plant and equipment is available for use. The Corporation may refund a customer for some or all of the contributions they make depending on how much gas they consume or transport through the system. The amount of contributions expected to be refunded is estimated and recorded in deferred revenue until the eligible refund period expires or a refund is earned by the customer. Customer capital contribution revenue for the three months and six months ending September 30, 2017 remain unchanged from the same periods in 2016.
Other Revenue
Other revenue primarily consists of gas processing fees and natural gas liquid sales from two natural gas liquid extraction plants. Compression and gathering service revenue and royalty revenues comprise the remaining balance of other revenue. Royalty revenues are generated from a gross overriding royalty on several natural gas-producing properties in Saskatchewan and Alberta, which have diminished due to the continuing decline of conventional natural gas production and as a result of low natural gas prices. Other revenue of $3 million is lower than prior year as a safety shut down during 2017 at one of the Corporation’s natural gas extraction plants decreased revenue in comparison to the same six month period in 2016.
Other Expenses and Net Finance Expense
Three months ended
Six months ended September 30
September 30
(millions)
2017
2016 Change
2017
2016 Change
Employee benefits
$
20 33 25
$
20 31 24
$
-
$
41 68 49
$
41 61 47
$
-
Operating and maintenance Depreciation and amortization
2 1 1
7 2 1
Saskatchewan taxes
6
5
8
7
Other Expenses
$
84
$
80
$
4
$
166
$
156
$
10
Net finance expense
$
12
$
11
$
1
$
24
$
22
$
2
Other (losses) gains
$
14
$
-
$
14
$
8
$
-
$
8
Expenditures on safety and integrity initiatives, strong customer growth, and the need to import more natural gas from Alberta as Saskatchewan natural gas production declines are key factors contributing to higher expenses. Employee benefits expense of $41 million for the six months ending September 30, 2017 remained unchanged from the same period in 2016. The Corporation continues to manage vacant positions and overtime costs through productivity and efficiency initiatives. Operating and maintenance expense of $68 million are $7 million higher than the same period in 2016, due to rising third party pipeline transportation costs as additional cross border transportation capacity is required to import gas from Alberta. This was part ially offset by continued cost management initiatives. Depreciation and amortization of $49 million for the six months ending September 30, 2017 slightly increased above prior year as capital additions increase the asset base and depreciation and amortization. Net finance expenses, before the impact of fair value adjustments, were $2 million higher than the same period in 2016. During the six months ending September 30, 2017, SaskEnergy issued $121 million of long term debt which was used to reduce short term debt balances and repay $59 million of maturing long term debt. Effective April 1, 2017, the Corporation early adopted IFRS 9 Financial Instruments. Under the new financial instruments standard, debt retirement funds are classified as fair value through other comprehensive income. As a result any market value adjustments associated with debt retirement funds no longer impact net income as they are recorded in other comprehensive income.
8
2017-18 SECOND QUARTER REPORT
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