LIQUIDITY AND CAPITAL RESOURCES
As a Crown corporation, SaskEnergy’s primary sources of capital are cash from operations, debt — which is borrowed through the province’s General Revenue Fund — and equity advances from CIC, the Province’s Crown corporation holding company. Equity advances are rarely used to finance Crown corporations as CIC prefers to use its Subsidiary Crown Dividend Policy to manage its equity interests in its commercial enterprises. Cash from operations is SaskEnergy’s most important source of capital. As a utility, cash from operations is relatively stable and the Corporation relies upon it to fund its investment in natural gas facilities, including new construction to support provincial growth and integrity spending on existing infrastructure. 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 uncommitted line of credit with the Toronto-Dominion Bank. By borrowing through the Province, SaskEnergy has access to the Province’s borrowing capacity and North American capital markets. Throughout 2020-21, The SaskEnergy Act allows the Corporation to borrow up to $2,500 million.
Three months ended September 30,
Six months ended September 30,
(millions)
2020
2019 Change
2020
2019 Change
Cash provided by operating activities Cash used in investing activities Cash provided by financing activities Increase/(decrease) in cash and cash equivalents
$
25
$
48
$
(23)
$
81
$
109
$
(28)
(61)
(104)
43
(103)
(161)
58
39
35
4
26
47
(21)
$
3
$
(21)
$
24
$
4
$
(5)
$
9
Operating Activities
Cash provided by operating activities was $81 million for the six months ended September 30, 2020, a decrease of $28 million from 2019-20. Cash flows from operations decreased due to lower asset optimization margins, lower customer contribution revenue and higher employee benefit costs.
Investing Activities
Cash used in investing activities totaled $103 million for the six months ended September 30, 2020, $58 million less than the six months ended September 30, 2019. Capital investment levels declined in 2020-21 due to the deferral of some system expansion projects resulting from changing customer requirements. In addition, the prior year included substantial system expansion spending around the city of Saskatoon. Decreased spending on risk management activities relating to distribution system service upgrade projects also contributed to the decline in spending on investing activities in 2020.
Financing Activities
Cash provided by financing activities of $26 million through the six months ended September 30, 2020 declined $21 million compared to the $47 million provided in 2019-20. The Corporation used $29 million for interest payments, $34 million to pay long-term debt, and $67 million to pay short-term debt. The Corporation borrowed an additional $150 million in long-term debt at a premium of $10 million to support its capital investment requirements and repay short-term debt. SaskEnergy’s debt ratio at the end of September 30, 2020 of 59 per cent debt and 41 per cent equity is within the Corporation’s long-term target range of 58 to 63 per cent debt.
2020-21 Second Quarter Report
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