SASKENERGY 2017-18 ANNUAL REPORT
CONSOLIDATED FINANCIAL RESULTS
Consolidated Net Income
(millions)
March 31, 2018
March 31, 2017
Change
$
110 46
$
70 63 13
$
40 (17) (25)
Income before unrealized market value adjustments Impact of fair value adjustments Revaluation of natural gas in storage
(12)
$
144 $
Consolidated net income
146 $
(2)
Excluding market value adjustments, financial results for 2017-18 are $40 million higher than the same period ending March 31, 2017. The increase in net income is due to improved returns on the commodity margin, gas marketing margin and delivery revenue. Weather was five per cent colder than normal in 2017-18 (12 per cent colder in comparison to the same period in 2016-17) and was the primary driver of increasing delivery revenue. For both transportation and delivery services, the number of customers and customer load continued to grow. To illustrate, on December 29, 2017 the provincial maximum daily consumption was 1.50 petajoules (PJ), a new record that is 13 per cent higher than the maximum daily consumption recorded in the prior year. These incremental loads contribute to additional transportation and delivery revenue relative to 2016-17.
over the prior year. In addition, a decrease in operating expenses was due to a reduction of transportation capacity available on the TransCanada pipeline system. Instead, transportation capacity was secured through gas marketing transportation contracts to bring gas into the province from Alberta, as Saskatchewan’s gas production is not increasing fast enough to accommodate the incremental provincial demand for natural gas. Market value adjustments contributed $34 million to SaskEnergy’s consolidated net income. During the year, a significant number of higher priced natural gas purchase contracts related to the Corporation’s commodity business expired, which had a positive impact on unrealized market value adjustments. Generally, short-term natural gas prices at the end of March 31, 2018 slightly recovered from the lows experienced throughout 2017-18, creating a favourable impact on unrealized market value adjustments as gas marketing contracts entered into during 2017-18 were at lower prices than natural gas market prices at March 31, 2018. On March 31, 2018, the natural gas price for gas to be delivered in April 2018 was $2.68 per GJ compared to $2.40 per GJ as at March 31, 2017. During the course of the year, higher volumes of gas marketing purchases and sales were contracted as prices were quite volatile and allowed for advantageous short-term pricing differentials. The value of natural gas in storage is sensitive to gas prices.
CONSOLIDATED FINANCIAL RESULTS
$140 $120 $60 $80 $100 $160
$40 $20 $0
At the end of March 2018, the value of gas in storage was $37 million, or $33 million below cost. At the end of March 2017, the value of natural gas in storage was $86 million, or $21 million below cost, due to the decline in gas prices in the last quarter of the 2016-17 fiscal year. The volume of natural gas in storage declined, improving the impact of the adjustment to net realizable value; however, the differential between the average cost of gas and the expected selling prices expanded, offsetting the impact of decreased volumes. The expansion in this differential was due to the recovery of market prices from the lows during the year. The difference between the $21 million adjustment at the end of the previous fiscal year and the current $33 million adjustment to the cost of gas in storage has been reported as a $12 million unfavourable market value adjustment during the current fiscal year.
$-20 $-40
Income before unreal ized market value adjustments
Consol idated net income (loss)
Much of the load growth is the result of continued economic growth in the province. SaskEnergy has seen an increase of 3,706 customers during the year and while the number of transportation customers has not increased significantly, existing customers continue to increase their level of activity driving additional load growth. While serving this increase in load requires additional expenditures, continued focus on efficiency and cost management have resulted in a $1 million reduction to employee benefits and a $2 million reduction to operating and maintenance expenses
26
Made with FlippingBook Ebook Creator