Management’s Discussions and Analysis
Asset Optimization Fair Value Adjustments Through asset optimization strategies, the Corporation enters into various natural gas contracts which are subject to volatility of natural gas market prices until the natural gas contracts are realized. The unrealized fair value adjustment on outstanding asset optimization derivative instruments had a favourable impact of $2 million on the asset optimization margin. Declining natural gas market prices through 2025 resulted in the differential between contract prices and market prices on future asset optimization sales contracts improving $0.30 per GJ, resulting in a $4 million favourable fair value adjustment, offset by a $2 million unfavourable fair value adjustment on asset optimization purchase contracts, which had a $0.14 per GJ margin reduction since the fiscal year end. Revaluation of Natural Gas in Storage The carrying amount of natural gas in storage is adjusted to reflect the lower of weighted average cost and net realizable value. At each reporting period, the Corporation measures net realizable value of natural gas in storage held for asset optimization transactions based on forward market prices and anticipated delivery dates. For the six months ended September 30, 2025, there was no revaluation on natural gas in storage inventory. Revenue Delivery revenue, transportation and storage revenue, and customer capital contributions, as reported in the condensed consolidated financial statements, were as follows:
Three months ended September 30,
Six months ended September 30,
(millions)
2025
2024
Change
2025
2024
Change
Delivery revenue
$
47 65 11
$
48 61 12
$
(1)
$
108 $
109 123
$
(1)
Transportation and storage revenue Customer capital contributions
4
130
7
(1)
36
15
21 27
Revenue
$
123 $
121
$
2
$
274 $
247
$
Delivery Revenue SaskEnergy provides reliable energy and competitive rates to customers, as they value low delivery charges. Natural gas delivery rates are designed to recoup all distribution facility and operating costs necessary for delivery of natural gas to customers throughout the year and earn a return for its shareholders. Natural gas storage and transportation costs — as well as ongoing investments related to safety, system integrity and growing infrastructure — are factored into delivery rates. Other considerations impacting natural gas delivery services include regulatory code compliance and industry best practices regarding safety. To minimize the financial impacts of these on delivery service customers, the Corporation strives to make the most effective use of resources and technology, and to collaborate with other Crown corporations and executive government. SaskEnergy continues to focus on items within the Corporation’s control to embed efficiency into processes, such as identifying opportunities for standardization, simplification, and the elimination of waste from processes. SaskEnergy will continue to strive to provide customers with access to low-cost energy sources compared to alternatives and delivery charges that are among the lowest in Canada. Delivery revenue is primarily driven by the number of customers and the amount of natural gas they consume. Weather is the most significant external factor affecting delivery revenue, as residential and commercial customers consume natural gas primarily as heating fuel. Delivery revenue of $108 million through the six months ended September 30, 2025, was only slightly lower than the same period in the prior year. While weather was slightly warmer than the prior year, resulting in less natural gas used as a heat source in homes around the province, the resulting reduction in revenues was offset by more customers served by the Corporation year-over-year. Transportation and Storage Revenue The Corporation generates transportation revenue by receiving gas from customers at various receipt points in Saskatchewan and Alberta and delivering natural gas to customers at various delivery points in the province. The transportation toll structure consists of a receipt service charge, which customers pay when they put gas onto the natural gas transportation system, and a delivery service charge that customers pay when they take delivery from the natural gas transportation system. For receipt and delivery services, the Corporation offers both firm and interruptible transportation contracts. Under a firm
7
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