The Corporation realized a margin of $nil on commodity sales for the three months ended September 30, 2020 compared to a margin of $1 million for the same three months ended September 30, 2019. The decreased margin is due to lower volumes sold during the three months ended September 30, 2020, as weather for the three months of 2020 was 12 percent warmer than normal compared to 12 per cent colder than normal for the same three months of 2019.
Commodity Fair Value Adjustments
Fair value adjustments at September 30, 2020 increased the margin on commodity sales by $19 million as the $4 million favourable fair value position at March 31, 2020 increased to $23 million favourable at September 30, 2020. The favourable price differential between contract prices and market prices on future commodity purchase contracts increased to $0.48 per GJ at September 2020 compared to a favourable price differential of $0.19 per GJ at March 31, 2020.
SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS, such contracts are not required to be reported at market value.
Asset Optimization 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 and 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. SaskEnergy also uses purchases and sales of natural gas to mitigate transportation constraints, which are executed at a cost.
The asset optimization margin, as reported in the condensed consolidated financial statements, was as follows:
Three months ended September 30,
Six months ended September 30,
(millions)
2020
2019 Change
2020
2019 Change
Asset optimization sales
$
33 33
$
31 28
$
2
$
70 74
$
66 59
$
4
Asset optimization purchases
(5) (3)
(15) (11)
Realized margin on asset optimization sales Impact of fair value adjustments Revaluation of natural gas in storage
-
3
(4)
7
2 2
(19)
21
5 6
(27)
32
2
-
-
6
Margin on asset optimization sales
$
4
$
(14)
$
18
$
7
$
(20)
$
27
2020-21 Second Quarter Report
10
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