Management’s Discussion and Analysis
from the same period in 2025. Sales volumes to utility customers increased by 2 petajoules compared to the prior year, driven by consumption levels associated with weather that was 10 per cent colder than normal. However, the benefit of higher volumes was more than offset by a higher cost of gas, as natural gas market prices have increased year over year. The GCVA balance was $15 million owing to customers at June 30, 2026, unchanged from March 31, 2026. Gas prices experienced only minor fluctuations during the first quarter and ended the period at levels comparable to March 31, 2026, resulting in little change to the GCVA balance. Commodity Fair Value Adjustments For the three months ended June 30, 2026, the fair value adjustment on commodity derivative instruments increased the margin on commodity sales by $1 million due to an improvement in the position of commodity purchase contracts. While the overall position remains unfavourable, the improvement was primarily attributable to a lower volume of outstanding contracts compared to March 31, 2026. The volume of outstanding purchase contracts was 21 petajoules at March 31, 2026, compared to 18 petajoules at June 30, 2026. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS Accounting Standards, such own-use contracts are not required to be reported at market value. Asset Optimization Margin SaskEnergy uses its access to natural gas markets to execute purchases and sales of natural gas to generate margins. By utilizing off-peak transportation and storage capacity, SaskEnergy is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods. In most cases, the Corporation executes purchase and sales contracts at the same time, thereby mitigating much of the price risk that would normally be associated with such transactions. SaskEnergy also uses purchases and sales of natural gas to mitigate transportation constraints, which are executed at a cost.
The asset optimization margin, as reported in the condensed consolidated financial statements, was as follows:
Three months ended June 30,
(millions)
2026
2025 Change
Asset optimization sales
$
24 18
$
33 27
$
(9) (9)
Asset optimization purchases
Realized margin on asset optimization sales
6
6 1 7
-
Unrealized fair value adjustments Margin on asset optimization sales
-
(1) (1)
$
6
$
$
The realized margin on asset optimization sales for the three months ended June 30, 2026, which removes fair value adjustments on derivative instruments, totaled $6 million for the period, which was unchanged from the same period in 2025. The average margin on realized asset optimization sales was $0.26 per GJ, compared to $0.25 per GJ in the prior year. Realized volumes were 4 petajoules lower than the same period in 2025, as market conditions did not provide the same level of optimization opportunities available in the prior year. This reduction was largely offset by higher recoveries of third-party transportation costs, with the Corporation realizing $3 million from unutilized transportation capacity compared to $2 million in the same period of 2025. These recoveries are generated from the assignment of utilized spare transportation capacity during off-peak periods to third parties for use in natural gas marketing activity, thereby offsetting a portion of the Corporation's transportation costs. Asset Optimization Fair Value Adjustments Through asset optimization strategies, the Corporation enters into various natural gas contracts which are subject to volatility of natural gas market prices until the natural gas contracts are realized. At June 30, 2026, the net fair value adjustment on outstanding asset optimization contracts remained unchanged from March 31, 2026. Purchase contracts recorded a favourable adjustment of $1 million, primarily due to a lower volume of outstanding contracts at June 30, 2026. This benefit was fully offset by an unfavourable $1 million adjustment on sales contracts, reflecting both a reduction in outstanding contract volumes and a slight deterioration in the average contracted sale prices and current
6
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