LIQUIDITY AND CAPITAL RESOURCES
15 Months
3 Months
12 Months
12 Months
Ended March
Ended March
Ended
Ended
December
December
31, 2016 1
31, 2016
31, 2015
31, 2014
Change
(millions)
Cash provided by operating activities
$ 248
$ 12
$ 347
$ 87
$ 260
Cash used in investing activities
(283)
68
(241)
(26)
(215)
Cash (used in) provided by financing activities
40
(87)
(100)
(53)
(47)
Increase (decrease) in cash and cash equivalents
$ 5
$ (7)
$ 6
$ 8
$ (2)
1 See note under table of Consolidated net income (loss) on page 31.
Cash provided by operations and debt borrowed from the Province of Saskatchewan’s General Revenue Fund are the primary sources of liquidity and capital for SaskEnergy. Generally, SaskEnergy finances its investment activity with cash from operations. To the extent that cash from operations is insufficient to support investment activity, debt servicing costs and dividends, additional short and long-term debt is required. Sources of liquidity include Order in Council authority to borrow up to $500 million in short- term loans, which was increased by $100 million in the third quarter of 2015. The Corporation holds a $35 million uncommitted line of credit with the Toronto-Dominion Bank. Over the longer term, the SaskEnergy Act allows the Corporation to borrow up to $1,700 million. Operating Activities Cash provided by operating activities was $260 million for the 12 months ended December 31, 2015, an increase of $12 million from 2014, which is a result of higher transportation revenue and the commodity rate increase, both improving cash flow in 2015 compared to 2014. Gas marketing sales were higher than purchases in the declining price environment and lower operating expenses also contributed to increased operating cash flows. This was partially offset by lower commodity volumes sold and lower delivery service revenue, both due to the warmer than normal weather in 2015 compared to the significantly colder weather in 2014. Cash from operating activities was $87 million for the three months ended March 31, 2016, resulting from increasing transportation revenue and a higher commodity margin. Declining delivery and commodity volumes during the first three months of 2016 were due to weather being 14 per cent warmer than normal. Investing Activities Cash used in investing activities totaled $215 million for the 12 months ended December 31, 2015, $68 million below 2014. Capital investment levels declined in 2015 due to lower system growth and customer connection levels compared to 2014. The majority of capital investment to the end of December 31, 2015 focused on $118 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 $76 million – a sign of the Corporation’s ongoing commitment to a safe, reliable system. The Bayhurst-to-Rosetown pipeline project completed in 2014 was the Corporation’s largest capital investment project in recent years, contributing $70 million to the high level of capital investment in 2014. The Corporation funds its substantial capital requirements with cash from operations and debt from the Province of Saskatchewan. Cash used in investing activities was $26 million for the three months ended March 31, 2016, resulting from reduced capital expenditures and deferral of customer related facility requests. The Corporation also strategically prioritized capital investment decisions while monitoring debt levels. Financing Activities Cash used in financing activities was $47 million through the 12 months ended December 31, 2015, which is $87 million below the $40 million provided by financing activities in 2014. The Corporation used $50 million for interest payments, $33 million for dividends and $52 million to pay debt and debt retirement fund obligations. As a result, the Corporation required an additional $62 million in long-term debt and increased its short-term borrowings by $26 million. SaskEnergy’s debt ratio at the end of December 31, 2015 of 62 per cent debt and 38 per cent equity improved from 63 per cent debt and 37 per cent equity at the end of 2014. This remains within the Corporation’s long-term target range of 58 per cent to 63 per cent debt, and continues to be affected by the negative impact of market value adjustments on retained earnings and the increasing debt requirements to finance growing capital expenditures. Cash used in financing activities was $53 million for the three months ended March 31, 2016, as the Corporation was able to fund its capital requirements, pay its interest obligations, and dividend requirements while reducing its short-term debt using cash from operations.
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2015-16 ANNUAL REPORT SASKENERGY
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