Management’s Discussion and Analysis
Capital Additions Capital additions, as reported in the condensed consolidated financial statements, were as follows:
Three months ended June 30,
(millions)
2024
2023 Change
$
11
$
2
$
9 3
Customer growth System expansion Risk management
2
(1)
16
3
13
3 2
4 1
(1)
Reliability of natural gas service
1 4
Business and technology optimization
$
34
$
$
30
Capital additions
SaskEnergy is committed to providing solutions and services that benefit customers and Saskatchewan, leveraging the Corporation’s expertise and Saskatchewan’s private sector. The Corporation deploys its strategic capital to fund customer growth and create new business capabilities. Fulfilling customer demand for additional natural gas capacity is a core responsibility for the Corporation and demand is forecasted to increase as a result of the growing industrial and power generation sectors. Key focus areas include maintaining the safety and reliability of the natural gas transmission and distribution systems, enhancing customer experience, and supporting the emissions reduction strategy. Capital additions through the three months ended June 30, 2024, were $4 million higher than the investment made in 2023, primarily due to increasing expenditures in customer growth and risk management projects. Customer Growth Investment in customer growth projects of $11 million was $2 million higher than 2023 investment levels, as the Corporation continues to focus on investments that connect customers to the transmission system. System Expansion System expansion capital projects provide incremental capacity for the transmission and distribution systems, through the installation of new or expanded gas line or facility assets, thus enabling demand growth and the addition of new customers. Lower investment of $1 million in system expansion projects through 2024 compared to 2023, is resulting from spending on distribution system infrastructure reinforcement projects in the Regina area being initiated later than in the prior year. These projects will increase available delivery capacity in west Regina and position the Corporation to meet new Capital investment in safety and system integrity continues to be SaskEnergy’s top priority. SaskEnergy takes a long-term view and uses a risk-based approach, to determine project priorities and the appropriate level of total integrity spending. Industry comparable data also provides reference, as the industry as a whole has progressively elevated safety and system integrity capital investment over the last number of years. Risk management capital projects concentrate on mitigating the likelihood of a negative consequence occurring on the SaskEnergy system, such as damage or loss of gas containment. These consequences typically include damage to infrastructure, environment and potential harm to or loss of human life. Risk management spending of $16 million is approximately half of the Corporation’s 2024 year-to-date capital additions, and is $3 million higher than 2023 expenditures, as the Corporation increases focus on cathodic protection, measurement and service replacement projects. Reliability of Natural Gas Service SaskEnergy’s network of transmission and distribution infrastructure requires regular monitoring and inspection, maintenance, upgrading and replacement to maintain service reliability for customers, avoid public safety incidents, and meet growing regulatory requirements. Recent years have also seen an increase in the cyber threat landscape and as a critical infrastructure operator, the Corporation has developed a robust Enterprise Security program that addresses both cyber and physical risks. This program requires continual improvement to mitigate risks and ensure secure systems for reliable operations. customer demand. Risk Management
12
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