PRESIDENT’S MESSAGE
revenue. While residential growth slowed from recent years, SaskEnergy added 4,000 new accounts throughout the year, bringing the distribution total to 390,886 customers, with a further 4,500 expected in 2017-18. Both industrial and residential customers continued to benefit from low natural gas commodity prices, though the long-term effects of this price environment are increasing both the costs and risks associated with supply acquisition. Each year since Saskatchewan became a net importer of natural gas, the gap between provincial demand and supply has grown, to the point where slightly more than 60 per cent of gas consumed in the province in 2016-17 was imported from Alberta. Given the cost and potential volatility of third-party transport tolls, SaskEnergy’s ability to affordably secure required supply will continue to directly affect virtually all aspects of its operations. Financially, SaskEnergy delivered strong results last year, with $70 million in operating net income and a debt-to-equity ratio that exceeded the 2016-17 target. Aggressive management of operating costs contributed to this achievement, offsetting such factors as slightly below-average delivery revenue (due to warmer than normal weather) and higher third-party transport costs. I extend my thanks to our employees for the significant role they played in meeting our fiscal restraint commitments in 2016-17 and the manner in which they did so. Similar levels of dedication will be required from SaskEnergy and TransGas teams as we continue to ensure our priorities are aligned and well-designed to meet current challenges. These include maturing our process safety practices to mitigate the risk of high-consequence events and evolving our stakeholder engagement efforts in engaging communities, landowners and interest groups. On a more fundamental level, regulations and codes related to climate change mitigation could have long-term implications for SaskEnergy’s business. To succeed within a constantly-evolving business environment, SaskEnergy will require organizational alignment and a continued focus on our core operations. Different ways of thinking will be required as we encounter new or evolving challenges. Most importantly, it is essential that we have the right people leading our company into the future. In that regard, I continue to be impressed with the dedication and resourcefulness of our teams and am confident that SaskEnergy will achieve its goals in the years ahead.
Having spent the first 26 years of my career working for the provincial natural gas utility, I was proud to return to SaskEnergy as President and Chief Executive Officer earlier this year. While my previous years with the company provided me with the technical and professional qualifications to lead the organization, the nine years I spent away from SaskEnergy were vital in shaping the way that I see the company’s current strengths and future opportunities as a variety of new factors affect the natural gas industry in potentially disruptive ways. SaskEnergy’s success in meeting its mandate — delivering affordable natural gas to customers in a safe, reliable way — is evident throughout its 2016-17 results. The realization of approximately $4 million in efficiency and process improvement savings brought the total in this area to $42 million since 2009, and enabled SaskEnergy to continue to offer customers one of the lowest natural gas delivery rates in Canada. This was accomplished without compromising our corporate safety focus, evidenced by a record-low internal Total Recordable Injury Frequency Rate (for the fourth consecutive year), strong results related to the frequency of pipeline leaks/failure, and continued reduction in the number of third-party line hits across the SaskEnergy system. Despite the subdued provincial economic environment in 2016-17, natural gas remained an attractive fuel source for Saskatchewan industry and power generation, resulting in a seven per cent increase in total provincial load, and a nearly three per cent increase in overall SaskEnergy/TransGas
Sincerely,
[Original signed by K. From]
Ken From President and Chief Executive Officer, SaskEnergy
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2016-17 ANNUAL REPORT SASKENERGY
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