Management’s Discussion and Analysis
Depreciation and Amortization Balancing safety and system integrity with demand for service continued through 2022. Strategic capital investments required the necessary infrastructure be put in-service to meet current customer demand, resulting in increased depreciation and amortization — which was $1 million higher than in the same period in 2021. Recovery on Trade and Other Receivables The estimate of the allowance for expected credit loss increased in 2022 and returned to normal levels after a $2 million recovery in 2021, which was a product of the provincial economic outlook beginning to improve in 2021. Net Finance Expenses Net finance expenses for 2022 were $6 million higher than in 2021, primarily due to higher long- and short-term debt interest costs. The Corporation borrowed additional long-term debt to support its capital investment requirements while short-term debt interest rate increases, along with declining debt retirement fund earnings, contributed to higher net finance expenses year over year. Debt retirement funds are monies set aside, typically one per cent of a debt issuance, to retire the long-term debt upon maturity. The Corporation makes regular contributions to the debt retirement funds, which are held and invested by the Saskatchewan Ministry of Finance and can be impacted inversely by interest rate movements. LIQUIDITY AND CAPITAL RESOURCES As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations and debt — which is borrowed through the Province’s General Revenue Fund. Cash from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies on it to fund a significant proportion of its investment in its natural gas facilities and the debt servicing costs on those investments. Long- and short-term debt can be borrowed through the Province of Saskatchewan to meet any long- or short-term incremental capital requirements and to repay debt as it matures. Sources of liquidity include Order in Council authority to borrow up to $500 million in short-term loans and a $35 million line of credit with the Toronto-Dominion Bank. Under The SaskEnergy Act , the Corporation may borrow up to $2,500 million of debt upon approval of the Lieutenant Governor in Council.
Three months ended September 30,
Six months ended September 30,
(millions)
2022
2021 Change 2022
2021 Change
$
23
$
96
Cash provided by operating activities Cash used in investing activities Cash provided by financing activities
$
38
$
(15)
$
102
$
(6)
(71)
(99)
(89)
18
(122)
23
47
11
49
(2)
19
(8)
$
(1)
$
8
Increase (decrease) in cash and cash equivalents
$
(2)
$
1
$
(1)
$
9
Operating Activities Cash provided by operating activities decreased $6 million through the six months ended September 30, 2022 compared to the same period in 2021. The Corporation’s working capital declined compared to 2021 as the Corporation purchased and injected natural gas into storage in anticipation of customer demands through the winter. The Corporation also paid down amounts owing to vendors, which was partially offset by receivables collected from customers. Investing Activities Cash used in investing activities decreased $23 million compared to 2021, primarily due to capital investment required for system expansion projects declining in 2022. Investment in 2021 included two significant projects, the 86-kilometre gas line from Rosetown to Vanscoy and the Pierceland expansion project, which were both placed into service in 2021-22.
11
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