Management’s Discussion and Analysis
LIQUIDITY AND CAPITAL RESOURCES As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations, debt — which is borrowed through the Province’s General Revenue Fund — and equity advances from CIC, the Province’s Crown corporation holding company. Equity advances are rarely used to finance Crown corporations as CIC prefers to use its Subsidiary Crown Dividend Policy to manage its equity interests in its commercial enterprises. 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 uncommitted line of credit with the Toronto-Dominion Bank. By borrowing through the Province, SaskEnergy has access to the Province’s borrowing capacity and North American capital markets. Early in 2019-20, Cabinet approved a change to The SaskEnergy Act and revised the Corporation’s borrowing capacity to $2,500 million. This is an $800 million increase from the $1,700 million borrowing limit in place at March 31, 2019. The increased borrowing capacity will allow SaskEnergy to continue to invest in infrastructure to ensure a safe and reliable system for its customers.
March 31, 2020
March 31, 2019
(millions)
Change
$
270
Cash provided by operating activities Cash used in investing activities Cash provided by financing activities
$
280 $
(10) (70)
(341)
(271)
66
-
66
$
(5) $
(Decrease)/increase in cash and cash equivalents
9 $
(14)
Financing Activities Cash provided by financing activities totalled $66 million through the 12 months ending March 31, 2020, compared to breakeven financing activities in 2018-19. The Corporation used $55 million for interest payments, $65 million for dividends, and $44 million to pay debt and debt retirement fund obligations. An additional $212 million in long-term debt was borrowed to support capital investment requirements. SaskEnergy’s debt-to-equity ratio at the end of March 31, 2020 of 58 per cent debt and 42 per cent equity increased from 55 per cent debt and 45 per cent equity at the end of 2018-19. This is within the Corporation’s long-term target range of 58 to 63 per cent debt. Subsequent to March 31, 2020, the Corporation confirmed the issuance of $100 million of debt, which SaskEnergy will receive in the first quarter of 2020-21.
Operating Activities Cash provided by operating activities was $270 million for the 12 months ending March 31, 2020, a decrease of $10 million from 2018-19. Cash flows from operations are down due to the impact of a lower commodity margin and the impact of a warmer winter on lower delivery revenues. Investing Activities Cash used in investing activities totalled $341 million for the 12 months ending March 31, 2020, which is $70 million higher than the 12-month period ending March 31, 2019. Capital investment levels increased in 2019-20 due to increasing demand for natural gas in the province.
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