Management Discussion and Analysis
Employee Benefits Employee benefit costs were $4 million higher in 2021 compared to 2020 due to filling certain vacant positions in strategic areas of the business as the Corporation continues to focus on meeting current and future business needs. Operating and Maintenance Operating and maintenance expenses were $11 million higher than 2020, resulting from higher transportation expenses as the Corporation increased transportation contracting on TC Energy’s transportation system. This is compounded by the Corporation utilizing asset optimization transactions in 2020 to meet a portion of customer transportation requirements. The result being higher transportation costs through operating and maintenance expenses in 2021 compared to 2020 as growing demand and increasing natural gas imports from Alberta continue to result in more natural gas being transported, and over greater distances. Depreciation and Amortization Balancing safety and system integrity with the demand for service continued through 2021. Strategic capital investments required to ensure the necessary infrastructure is in place to meet current customer demand were put into service and is resulting in increased depreciation and amortization. Depreciation and amortization was $6 million higher than the same period in 2020. Net Finance Expenses Net finance expenses for 2021 were $2 million higher than 2020, with lower debt retirement fund earnings contributing to the year over year variance. Debt retirement funds are monies set aside, typically 1 per cent of a debt issuance, to retire the long-term debt upon maturity. The Corporation makes regular contributions to the funds, which are held and invested by the Saskatchewan Ministry of Finance and can be impacted inversely by interest rate movements. In addition, the Corporation borrowed additional long-term debt to support its capital investment requirements, resulting in higher long-term debt interest costs. Impairment Loss on Trade and Other Receivables The impairment loss was $4 million lower in 2021 compared to 2020 as the allowance for doubtful accounts estimate was reduced, a result of the improved provincial economic outlook continuing through the quarter. In 2020, the Crown Utility Deferral Payment Program was offered to help alleviate the impacts of COVID-19 on customers. The result being increased trade receivables and the related allowance for doubtful accounts estimate growing through to the end of September 30, 2020. Customers could then elect to pay outstanding balances over a 12-month period starting from September 2020, which extended the timeframe trade receivables from customers remained outstanding. LIQUIDITY AND CAPITAL RESOURCES As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations and debt — which is borrowed through the Province’s General Revenue Fund. 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. Under The SaskEnergy Act , the Corporation may borrow up to $2,500 million of debt upon approval of the Lieutenant Governor in Council.
Three months ended December 31,
Nine months ended
December 31,
(millions)
2021
2020 Change 2021
2020 Change
$
28
$
130
Cash provided by operating activities Cash used in investing activities Cash provided by financing activities Increase in cash and cash equivalents
$
44
$
(16)
$
125
$
5
(70)
(192)
(83)
13
(186)
(6)
46
65
50 11
(4) (7)
76 15
(11) (12)
$
4
$
3
$
$
$
$
p.9
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