Management’s Discussion and Analysis
The realized margin on commodity sales excludes the impact of unrealized fair value adjustments on derivative instruments. These adjustments can fluctuate significantly from one period to the next and do not necessarily represent the amount that will be paid upon settlement of the related natural gas contract. The Corporation’s realized margin on commodity sales for the six months ending September 30, 2025, remained consistent with the prior year, with both periods reporting a margin of $9 million. While overall sales volumes declined due to slightly warmer weather resulting in reduced consumption, the average revenue per GJ improved year-over-year. In the prior year, excess gas was sold at lower prices, which reduced the average revenue by approximately $0.15 per GJ. The improved pricing in the current period offset the impact of lower volumes, resulting in a stable overall margin. The GCVA balance was $13 million owing to customers at September 30, 2025, an increase of $3 million over the balance at March 31, 2025. Declining natural gas market prices have caused a lower cost of gas than anticipated, increasing the balance owed to customers in the short term. Commodity Fair Value Adjustments For the six months ending September 30, 2025, the fair value adjustment on commodity derivative instruments decreased the margin on commodity sales by $9 million. The unfavourable price differential of $0.17 per GJ between contract prices and market prices on future commodity purchase contracts at March 31, 2025, further declined $0.36 per GJ, to an unfavourable price differential of $0.53 per GJ at September 30, 2025. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS Accounting Standards, such own-use contracts are not required to be reported at market value. Asset Optimization Margin SaskEnergy uses its access to natural gas markets to execute purchases and sales of natural gas to generate margins. By utilizing off-peak transportation and storage capacity, SaskEnergy is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods. In most cases, the Corporation executes purchase and sales contracts at the same time, thereby mitigating much of the price risk that would normally be associated with such transactions. SaskEnergy also uses purchases and sales of natural gas to mitigate transportation constraints, which are executed at a cost.
The asset optimization margin, as reported in the condensed consolidated financial statements, was as follows:
Three months ended September 30,
Six months ended September 30,
(millions)
2025
2024
Change
2025
2024
Change
Asset optimization sales
$
16 15
$
14 12
$
2 3
$
49 42
$
27 24
$
22 18
Asset optimization purchases
Realized margin on asset optimization sales Unrealized fair value adjustments Revaluation of natural gas in storage
1 1
2
(1)
7 2
3
4 2
(2)
3
- -
-
1 1
(1)
-
-
Margin on asset optimization sales
$
2
$
$
1
$
9
$
3
$
6
The realized margin on asset optimization sales for the six months ended September 30, 2025, which removes fair value adjustments on derivative instruments and the revaluation of natural gas in storage, totaled $7 million for the period, which was $4 million greater than the same period ended September 30, 2024. During 2025, the average margin on realized asset optimization sales was $0.17 per GJ, which was greater than the same six- month period in 2024 which saw a margin of $0.13 per GJ. Opportunities in the market saw volumes increase by 7 petajoules year over year, in addition to the improved margins realized year to date. The Corporation was also able to leverage unutilized transportation capacity through the period to recover a portion of third-party transportation costs.
6
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