Management Discussion and Analysis
Winter prices appear to have stabilized looking forward, as expectations for cold weather are offset by warmer weather outside the prairie provinces and adequate storage levels across the continent. The following chart shows AECO natural gas prices:
CONSOLIDATED FINANCIAL RESULTS Consolidated Net Income
Three months ended December 31,
Nine months ended
December 31,
(millions)
2021
2020 Change 2021
2020 Change
$
40
$
15 30
Income before unrealized market value adjustments
$
29
$
11
$
11 12
$
4
(22)
Impact of fair value adjustments Revaluation of natural gas in storage
(12)
(10)
18
-
-
-
-
6
(6)
$
18
$
45
Consolidated net income
$
17
$
1
$
29
$
16
The income before unrealized market value adjustments of $15 million in 2021 was $4 million favourable compared to the income of $11 million in 2020. This was a result of an increasing commodity margin, higher transportation & storage revenue and a reduction in the estimate for impairment loss on trade and other receivables in 2021 compared to 2020. This was partially offset by decreased delivery revenue and increased operating expenses in other categories. The increased commodity margin is primarily due to the Corporation implementing a commodity rate increase effective November 1, 2021, which will address increasing natural gas market prices. Increased transportation & storage revenue is due to rate increases effective April 1, 2021, combined with domestic customers increasing firm transportation contracting on receipt and delivery services. Also contributing to higher income was a reduction in the allowance for doubtful accounts estimate, a result of the improved provincial economic outlook continuing through the quarter. These were partially offset by decreasing delivery revenues resulting from declining residential customer volumes as weather was 6 per cent warmer than prior year, combined with small increases in other expense categories. Stronger natural gas market prices at December 31, 2021, lead to the favourable price differential increasing between average contract prices and average market prices on the Corporation’s forward purchase contracts, resulting in a favourable fair value adjustment. In addition, natural gas in storage was recorded at weighted average cost, which was lower than net realizable value at December 31, 2021 and March 31, 2021. There was no impact on net income resulting from revaluation of natural gas in storage.
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