SASKENERGY 2017-18 ANNUAL REPORT
Commodity Fair Value Adjustments The fair value adjustments at March 31, 2018 decreased the margin on commodity sales by $2 million as the $35 million unfavourable fair value position at March 31, 2017 increased to $37 million unfavourable at March 31, 2018. The settlement of higher priced natural gas purchase contracts during the year reduced the volume of contracts outstanding from 49 PJ to 30 PJ, which was offset by the differential between the contract price and market prices increasing from $0.72 per GJ to $1.26 per GJ during 2017-18. SaskEnergy segregates a portion of its natural gas purchase contracts where the gas will ultimately be sold to commodity customers. Under IFRS, such contracts are not required to be reported at market value. The volume of contracts identified and segregated for the purpose of expected commodity sales was 134 PJ, compared to 36 PJ at March 31, 2017. The increase is a result of the Corporation’s ability to enter into more purchase contracts at lower natural gas prices.
The realized margin on commodity sales excludes the impact of unrealized fair value adjustments on derivative instruments, as 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 realized a $41 million margin on commodity sales for the 12 months ending March 31, 2018 compared to the $25 million margin for the same period ending March 31, 2017. Average revenue was $3.34 per GJ and average cost of gas sold was $2.73 per GJ, resulting in a margin of $0.61 per GJ. This compared to an average commodity margin of $0.41 per GJ through the same 12-month period in 2017. Higher margins in 2017-18 were a result of lower prices on natural gas purchases. Commodity rates remained unchanged from November 1, 2016 at $3.65 per GJ. Meanwhile the GCVA balance has decreased to $3 million owing to customers, down $16 million from the balance owing from customers at March 31, 2017. Gas Marketing 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 to help mitigate transportation constraints, SaskEnergy is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods while minimizing its exposure to price risk. In most cases the purchases and sales are executed at the
same time, thereby mitigating much of the price risk that would normally be associated with such transactions. During 2017-18, SaskEnergy’s gas marketing activities included the purchase of 93 PJ (62 PJ in 2016-17) of natural gas at an average price of $2.05 per GJ, the sale of 106 PJ (60 PJ in 2016-17) at an average price of $2.34 per GJ and a decrease to gas in storage of 13 PJ. The gas marketing margin, as reported in the consolidated financial statements, was as follows:
(millions)
March 31, 2018
March 31, 2017
Change
$
249 223
Gas marketing sales Gas marketing purchases
$
147 133
$
102 (90) 12 50 (25)
26 48 (12)
14
Realized margin on gas marketing sales Impact of fair value adjustments Revaluation of natural gas in storage
(2)
13
$
62 $
Margin on gas marketing sales
25 $
37
28
Made with FlippingBook Ebook Creator