SASKENERGY 2017-18 ANNUAL REPORT
uncontracted natural gas in storage, by $18 million (2017 - $21 million). Conversely, a decrease of $1.00 per GJ would have a negative impact on uncontracted natural gas in storage, by $15 million (2017 - $18 million). b. Interest rate risk The Corporation’s significant interest-bearing financial instruments are short-term variable rate debt and long-term fixed rate debt. Consequently, the Corporation is subject to interest rate risk on outstanding short-term debt balances as well as on future short-term and long-term borrowings. Interest rate risk is managed by adjusting the relative levels of short and long-term debt depending on current market conditions. The Corporation monitors long-term debt levels by maintaining an industry-comparable long-term debt to long-term capital requirements ratio. The Corporation also prepares an annual corporate debt management plan which includes forecasts of borrowing requirements, financing strategies and target rates for interest rate risk management activities. As at March 31, 2018, the Corporation had $254 million of short-term debt outstanding, and $50 million of long-term debt that will mature within the next fiscal year and may be refinanced. Based on these amounts, a 1.0 per cent change in interest rates would increase or decrease the annual finance expense by approximately $3 million (2017 - $4 million). The Corporation is also subject to interest rate risk related to debt retirement funds and provisions, as the recorded values are driven by market prices which are largely determined by interest rates. Fluctuations in the interest rates of debt retirement funds and provisions can have an impact on the Corporation. The estimated impact of a 1.0 per cent change in interest rates, assuming no change in the amount of debt retirement funds, would increase or decrease the market value of the debt retirement funds recorded through OCI by approximately $8 million (2017 - $8 million). The estimated impact of a 1.0 per cent increase in interest rates, assuming no change in the amount of provisions, would have decreased the value of the provision by approximately $31 million. Conversely, a 1.0 per cent decrease in interest rates, assuming no change in the amount of provisions, would have increased the value of the provision by approximately $47 million. c. Liquidity risk Liquidity risk is the risk that the Corporation is unable to meet its financial obligations as they become due. The Corporation has credit facilities available to refinance maturities in excess of anticipated operating cash flows. The contractual maturities of the Corporation’s financial obligations, including interest payments and the impact of netting agreements, as at March 31, 2018 were as follows: Contractual Maturities
Carrying Amount
Less Than 1 Year
More Than 5 Years
(millions)
1-2 Years
3-5 Years
Bank indebtedness Short-term debt Trade and other payables Dividends payable Long-term debt Derivative instruments
$
3 254 138 23 1,081 50
$
3 254 129
$
- - 6 -
$
- - 3 - 159 6
$
- - - - 1,532 -
23 96 67
78 14
Notional value 1,532 As at March 31, 2018, the Corporation’s borrowing capacity, together with relatively stable operating cash flows, provide sufficient liquidity to fund these contractual obligations. $ 1,549 $ 572 $ 98 $ 168 $ In addition to the above, the Corporation has posted a $12 million (2017 - $10 million) letter of credit with NGX Financial Inc. (NGX) as security for natural gas purchases and sales conducted by the Corporation on the NGX natural gas exchange in Alberta. NGX may draw upon the letter of credit if the Corporation fails to make timely payment for, or delivery of, natural gas as per the related contract. d. Credit risk Credit risk is the risk of financial loss if a customer or counterparty to a financial or derivative instrument fails to meet its contractual obligations. The Corporation is exposed to credit risk through cash, trade and other receivables, debt retirement funds and derivative instrument assets. Credit risk related to cash and debt retirement funds is minimized by dealing with institutions that have strong credit ratings and holding highly-rated financial securities.
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