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 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. The SaskEnergy Act allows the Corporation to borrow up to $1,700 million. Operating Activities Cash provided by operating activities was $225 million for the 12 months ending March 31, 2017, a decrease of $33 million from 2015-16. Cash flows from operation are down due to the impact of commodity rate reductions in January 2016 and November 2016, together with the cash flow impact of an unusually warm winter ending March 31, 2016, which significantly reduced cash receipts in the first quarter of 2016-17. Investing Activities Cash used in investing activities totalled $198 million for the 12 months ending March 31, 2017, $12 million less than the 12-month period ending March 31, 2016. Capital investment levels declined in 2016-17 due to lower system growth and customer connection requirements compared to 2015-16. The majority of capital investment to the end of March 2017 focused on $96 million of customer growth and system expansion projects, which were a result of Saskatchewan residential and industrial growth, as well as safety and system integrity programming of $91 million – a sign of the Corporation’s ongoing commitment to a safe, reliable system. Financing Activities Cash used in financing activities was $37 million through the 12 months ending March 31, 2017, which is $10 million less than the $47 million used in financing activities in 2015-16. The Corporation used $47 million for interest payments, $36 million for dividends, and $103 million to pay debt and debt retirement fund obligations. As a result, the Corporation required an additional $149 million in long-term debt. SaskEnergy’s debt ratio at the end of March 31, 2017 of 59 per cent debt and 41 per cent equity improved from 61 per cent debt and 39 per cent equity at the end of 2016. This remains within the Corporation’s long-term target range of 58 to 63 per cent debt, and continues to be affected by the negative impact of fair value adjustments on retained earnings and the increasing debt requirements to finance capital for safety and integrity programming.
Capital Expenditures The capital expenditures, as reported in the consolidated financial statements, were as follows:
12 Months
12 Months
3 Months
15 Months
Ended March
Ended March
Ended March
Ended March
31, 2017 1
31, 2016 1
Change
31, 2015
31, 2016
(millions)
Customer growth and system expansion
$ 19
$ 132
$ 96
$ 113
$ (17)
Safety and system integrity
11
87
83
76
7
Information systems
1
16
14
15
(1)
Vehicle, equipment, buildings & furniture
1
9
5
8
(3)
$ 32
$ 244
$ 198
$ 212
$ (14)
1 See note under table of Consolidated Net Income (loss) on page 27.
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Management’s Discussion & Analysis
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