2019-20 SaskEnergy Annual Report

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 12 months ending March 31, 2020. 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 May 21, 2020, and should be read in conjunction with the Corporation’s audited consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS). 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 the MD&A. 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 Corporation’s financial results are subject to variation, especially given the volatility of natural gas prices. In order 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 the 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. STRATEGIC SCORECARD MEASURES SaskEnergy ensures its mission, vision and values continue to align with the Crown Sector Strategic Priorities identified by CIC. SaskEnergy’s four strategic mandates — One Company, One Team; Industry Leader; Fuel of Choice; Business and Technology Optimization — as set out in the Business Plan, support

the vision, mission and values of the Corporation. These mandates and strategic priorities provide guidance to SaskEnergy in its business planning process as well as its performance management and reporting. They also assist employees in making a link between their everyday efforts and their contribution to the Strategic Plan and the overall direction of the Corporation. SaskEnergy’s five-year strategy balances resources and activities to deliver gas in a safe, reliable and affordable way, while ensuring service is easily accessible and is being mindful of the environment. Over the next five years, SaskEnergy will focus on: • system expansion required to meet changing customer demand to ensure gas line capacity and alleviate pressures of a constrained gas line system; • addressing increased regulatory requirements by investing in infrastructure and administering the proper resource complement; • managing utility and commodity rates through balancing delivery, transmission and storage rates between the needs of SaskEnergy and the needs of customers to ensure safe, reliable service; and, • meeting changing customer expectations by demonstrating convenient and responsive service and environmental responsibility related to a non-renewable resource. SaskEnergy’s number one priority is to maintain a safe and reliable natural gas system. The Corporation’s strategic focus over the planning period emphasizes customer value and how it is defined. SaskEnergy identified five areas that define value for its customers — safe, reliable, affordable, ease of service and environmental stewardship. Each year, as part of the business planning process, SaskEnergy incorporates the Province’s strategic directives and evaluates the continued relevance of the performance metrics contained in the previous year’s scorecard. Any changes deemed appropriate are made and associated targets are developed for each metric. The final scorecard, including metrics and targets for the five-year planning horizon, is presented to SaskEnergy’s Board of Directors as part of the annual Business Plan approval. The CIC Board reviews the Business Plan and confirms compliance with the Crown Sector Strategic Priorities prior to its approval. Progress toward these targets is monitored and reported throughout the year. Regular reporting on the specific scorecard targets allows management to closely monitor progress and take any corrective action to achieve the targets.

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