Management Discussion and Analysis
The following chart shows AECO natural gas prices:
AECO Monthly Index Historical Prices
$6.00
Forward Price at Sept 30, 2021
Limited Export Capacity from Alberta 2015-Present Average Price $2.16/GJ
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
CONSOLIDATED FINANCIAL RESULTS Consolidated Net Income
Three months ended September 30,
Six months ended
September 30,
(millions)
2021
2020 Change 2021
2020 Change
$
(20)
$
(25)
Loss before unrealized market value adjustments
$
(14)
$
(6)
$
(18)
$
(7)
37
52
Impact of fair value adjustments Revaluation of natural gas in storage
16
21
24
28
-
-
2 4
(2)
6
(6)
$
17
$
27
Consolidated net income
$
$
13
$
12
$
15
The loss before unrealized market value adjustments of $25 million in 2021 was $7 million unfavourable compared to the loss of $18 million in 2020. This was a result of delivery revenue decreasing, employee benefit costs increasing, operating and maintenance expenses increasing and additional net finance expenses in 2021. This was partially offset by realized asset optimization margins improving in 2021 and increasing transportation and storage revenue. Decreasing delivery revenues are a result of declining residential customer volumes, as weather was 17 per cent warmer than prior year. Employee benefit costs increased compared to the prior year as certain vacant positions were filled in key areas of the Corporation. Higher operating and maintenance expenses are primarily due to higher transportation expenses as the Corporation increased transportation contracting on TC Energy’s transportation system to meet customer’s increased transportation service requirements. Net finance expenses increased in 2021 as debt retirement fund earnings decreased. Realized asset optimization margins improved in 2021 as a component of the Corporation’s transport capacity, which was secured through asset optimization contracts, declined in 2020 and wound down through 2021, providing a positive variance year over year. Transportation and Storage revenue increased in 2021, a result of rate increases effective April 1, 2021, combined with domestic customers increasing firm transportation contracting on receipt and delivery services. Stronger natural gas market prices at September 30, 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 September 30, 2021 and March 31, 2021. There was no impact on net income resulting from revaluation of natural gas in storage.
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