Management Discussion and Analysis
LIQUIDITY AND CAPITAL RESOURCES As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations and debt — which is borrowed through the Province’s General Revenue Fund. Cash from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies on it to fund a significant proportion of its investment in its natural gas facilities, and the debt servicing costs on those investments. 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. Under The SaskEnergy Act , the Corporation may borrow up to $2,500 million of debt upon approval of the Lieutenant Governor in Council.
Three months ended June 30
(millions)
2021
2020
Change
$
64
Cash provided by operating activities Cash used in investing activities Cash used in financing activities Increase in cash and cash equivalents
$
56
$
8 9
(33) (30)
(42) (13)
(17)
$
1
$
1
$
-
Operating Activities Cash provided by operating activities increased $8 million in 2021 compared to 2020 as cash flows from operations continued to trend higher with higher asset optimization margins and increased customer capital contributions related to distribution system customer connections. Investing Activities Cash used in investing activities declined $9 million compared to 2020 as capital investment levels declined in the current year due to the deferral of some system expansion projects resulting from changing customer requirements. In addition, the Corporation’s spending on buildings and leasehold improvements decreased in 2021. Financing Activities Cash used in financing activities increased $17 million in 2021 compared to 2020. The Corporation used $21 million for interest payments, $7 million for dividend payments and decreased short-term debt by $39 million. This was partially offset by the Corporation entering into an agreement with the Province to borrow an additional $50 million of long-term debt with an interest rate of 2.8 per cent, maturing in 2052 to support its capital investment requirements. SaskEnergy’s debt-to-equity ratio at the end of June 30, 2021 of 58 per cent debt and 42 per cent equity is within the Corporation’s long- term target range of 58 to 63 per cent debt. CAPITAL ADDITIONS SaskEnergy continues to advance the maturity of its capital management governance, ensuring a best practice approach that ensures responsive customer service and safe and reliable natural gas delivery are priorities.
Three months ended June 30
2021
2020
Change
(millions)
Strategic Customer growth System expansion
$
6 9
$
8
$
(2) (7) (9)
16 24
15
Operational Risk management
14
12
2
2 1
Reliability of natural gas service
4 2
(2) (1) (1)
Business and technology optimization
17 32
18 42
$
Capital additions
$
$
(10)
p.9
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