Management’s Discussion and Analysis
Consolidated Financial Results Consolidated Net Loss
Three months ended June 30,
(millions)
2024
2023 Change
$
(6) (3) (1)
Net Loss before unrealized market value adjustments
$
-
$
(6)
Impact of fair value adjustments Revaluation of natural gas in storage
(17)
14
-
(1)
$
(10)
Consolidated net loss
$
(17)
$
7
The Corporation is focused on balancing the challenges of maintaining affordability of natural gas services, while increasing environmental responsibility. These two priorities are strategic imperatives for the next three years as SaskEnergy works toward achieving the corporate vision of providing critical energy to support a greener Saskatchewan. The net loss before unrealized market value adjustments was $6 million in 2024, $6 million unfavourable compared to income of $nil in 2023, resulting from a lower commodity margin, combined with increased employee benefit costs. These were partially offset by the favourable impact of higher delivery and transportation and storage revenues. The Corporation’s realized margin on commodity sales for the three months ended June 30, 2024, was $9 million lower than in 2023, as the margin declined $0.97 per GJ compared to prior year. The Corporation received approval to decrease the commodity rate from $4.20 per GJ to $3.20 per GJ effective October 1, 2023. Furthermore, 20 per cent warmer than normal weather in April 2024 led to lower natural gas consumption compared to April 2023 when weather was 23 percent colder than normal. Employee benefit costs were higher than 2023, as a new Collective Bargaining Agreement took effect in February 2024 and full-time equivalents trended higher as the Corporation filled previously vacant positions. These unfavourable results were partially offset by higher delivery service revenues, driven by rate increases effective October 1, 2023, and higher transportation and storage revenues, resulting from customers executing higher contract demand services to meet their operating requirements. In addition, a 2 per cent average rate increase for transportation and storage services was implemented effective April 1, 2024, to address expansion of the transmission system and meet growing demand for natural gas services in Saskatchewan. Forward natural gas market prices at June 30, 2024, declined below March 2024 levels, generating a $3 million unfavourable fair value adjustment as the unfavourable price differential between average deal price and average market price on outstanding commodity purchase contracts declined a further $0.13 per GJ at June 30, 2024, compared to March 31, 2024. In addition, natural gas in storage at June 30, 2024, was recorded at net realizable value, which was lower than weighted average cost, resulting in a $1 million natural gas inventory revaluation and unfavourable impact on results, as natural gas market prices declined through 2024. Natural Gas Sales and Purchases Included within natural gas sales and purchases are rate-regulated commodity sales to distribution customers and non- regulated asset optimization activities. IFRS requires these activities to be presented together within the consolidated financial statements; however, the Corporation manages these activities as distinct and separate businesses and, as such, the MD&A addresses these natural gas sales and purchases separately. With the exception of those contracts entered into for an entity’s normal usage, IFRS requires derivative instruments such as natural gas purchase and sales contracts to be recorded at fair value until their settlement date. Changes in the fair value of the derivative instruments, driven by changes in future natural gas prices, are recorded in net income through natural gas sales or natural gas purchases depending on the specific contract. Upon settlement of the natural gas contract, the amount paid or received by SaskEnergy becomes realized and is recorded in natural gas sales or purchases. The majority of SaskEnergy’s natural gas contracts are normal usage and are not recorded at fair value but at the contract price upon settlement.
6
Made with FlippingBook Ebook Creator