CAPITAL EXPENDITURES The capital expenditures were as follows:
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)
Customer growth and system expansion
$ 203
$ (85)
$ 132
$ 14
$ 118
Safety and system integrity
80
(4)
87
11
76
Information systems
8
5
16
3
13
Vehicle & equipment, buildings, furniture
8
(1)
9
2
7
$ 299
$ (85)
$ 244
$ 30
$ 214
1 See note under table of Consolidated net income (loss) on page 31.
Provincial growth in the natural gas customer base, combined with the Corporation becoming a net importer of natural gas, place increasing capital investment requirements on the Corporation’s natural gas infrastructure.
Capital Expenditures
Customer growth and system expansion capital expenditures declined to normal levels in 2015, after an investment of $70 million in 2014 on the Bayhurst-to-Rosetown pipeline expansion project. This project enabled the transmission system to bring more gas into the province from Alberta and helped alleviate capacity constraints caused by the shift to becoming a net natural gas importer. The requirement to connect natural gas producers and residential customers declined relative to 2014. However, large industrial customer connections continue to grow. Through collaboration with other Crown corporations and private sector partnerships, SaskEnergy also realized efficiencies in connecting customers through the joint service trenching and turnkey initiatives. In the two largest urban centres, natural gas mains and services are now installed with power, telephone and cable services, reducing installation and administration costs that were incurred independently by each service provider. The expansion of the natural gas extraction plant at Coleville, and AMI system implementation, continued throughout 2015.
$300
$250
$200
$150
$100
$50
$0
2011
2012
2013
2014
2015
Safety and integrity initiatives continue to gain importance across the natural gas industry and the Corporation continues to make significant capital investment to ensure safe and reliable service to customers. Using a risk-based approach to safety and integrity programming, spending on transmission system integrity projects decreased, while work related to service upgrades, enhanced leak survey processes, reduced leaks due to external interference and ground shifting at resort communities along Last Mountain Lake increased in an effort to focus expenditures to the most urgent requirements. OUTLOOK In late November, the Government of Saskatchewan announced that, as a next step in the transition to summary budgeting, the fiscal year end of CIC and its subsidiaries, including SaskEnergy, would change from December 31 to March 31. For the current fiscal period, SaskEnergy reported a 15-month period ended March 31, 2016. Thereafter, SaskEnergy will report 12-month fiscal periods ending March 31 of each year. SaskEnergy is a capital intensive utility that operates within a regulatory framework. Revenue and results are affected by customer requirements, which influence capital investment and operating costs. Transportation, delivery, storage and commodity service rates are set by the Provincial Cabinet after review by the TransGas Customer Dialogue group (transportation and storage service) and the Saskatchewan Rate Review Panel (delivery and commodity service). Within the regulatory framework, SaskEnergy earns sufficient revenue to cover its operating costs plus a return on its investments in facilities used to serve customers. The rate of return on investment is determined by the weighted average cost of its debt and industry comparable returns on its accumulated equity.
40
Management’s Discussion & Analysis
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