LIQUIDITY AND CAPITAL RESOURCES
SaskEnergy Incorporated First Quarter Report
Three months ended
Six months ended September 30
March 31, 2011
September 30
(millions)
2018
2017 Change
2018
2017 Change
Cash provided by operating activities Cash used in investing activities
$
32
$
39
$
(7)
$
91
$
112
$
(21) (15)
(81)
(67)
(14)
(119)
(104)
Cash provided by (used in) financing activities
50
24
26
32
(11)
43
Increase (decrease) in cash and cash equivalents
$
1
$
(4)
$
5
$
4
$
(3)
$
7
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 provided from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies upon it to fund dividends, debt servicing costs, and a significant proportion of its investment in pipeline facilities. 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. In September 2018 an Order-in-Council authorized changes to The SaskEnergy Act that increased the borrowing limit from $1,700 to $2,500 million.
Operating Activities
Cash from operating activities of $91 million for the six months ended September 30, 2018 was $21 million lower than the same period in 2017. Higher commodity sales, delivery revenue and transportation revenue contributed to higher operating cash flows compared to 2017. However, this was offset by the Corporation taking advantage of low natural gas market prices by purchasing and injecting lower priced natural gas into storage while managing employee benefit and operating and maintenance costs.
Investing Activities
Cash used in investing activities totaled $119 million for the six months ended September 30, 2018; $15 million higher than 2017. Capital investment levels are increasing in 2018 compared to 2017, primarily due to higher investment in customer growth and system expansion projects, as increasing growth in the transmission and distribution systems continues to drive higher customer requirements for natural gas.
Financing Activities
Cash provided by financing activities was $32 million during the six months of 2018 compared to $11 million used in 2017. From a cash management perspective, SaskEnergy uses cash from operations to pay for its investing activities, dividend payments and debt servicing costs (including interest payments and sinking fund installments). Any remaining cash from operations is applied to reducing the short-term debt balance. If there is insufficient cash from operations, SaskEnergy will borrow more debt, usually short-term debt, to meet its cash requirements. SaskEnergy issued $101 million of long-term debt including a premium of $1 million during the first quarter which was used to repay $72 million of short term debt and $29 million to invest in capital expenditures. SaskEnergy issued $50 million of long-term debt during the second quarter with the objectives of funding capital expenditures and taking advantage of low long term interest rates. SaskEnergy’s debt ratio at September 30, 2018 of 57 per cent is slightly higher than the 56 per cent at March 31, 2018.
CAPITAL EXPENDITURES
Three months ended
Six months ended September 30
September 30
(millions)
2018
2017 Change
2018
2017 Change
Customer growth and system expansion
$
43 31
$
35 25
$
8 6 1 1
$
65 44
$
49 44
$
16
Safety and system integrity
-
Information systems
4 3
3 2
6 4
5 4
1
Vehicles & equipment, buildings, furniture
-
$
81
$
65
$
16
$
119
$
102
$
17
9
2018-19 SECOND QUARTER REPORT
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