Management’s Discussion and Analysis
Commodity Fair Value Adjustments For the three months ending June 30, 2024, the fair value adjustment on commodity derivative instruments decreased the margin on commodity sales by $5 million. The unfavourable price differential of $0.29 per GJ between contract prices and market prices on future commodity purchase contracts at March 31, 2024, further declined $0.13 per GJ, to an unfavourable price differential of $0.42 per GJ at June 30, 2024. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS, such own-use 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, SaskEnergy is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods. In most cases, the Corporation executes purchase and sales contracts 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 June 30,
(millions)
2024
2023 Change
$
13 12
Asset optimization sales
$
37 36
(24) (24)
$
Asset optimization purchases
1 2
Realized margin on asset optimization sales Unrealized fair value adjustments Revaluation of natural gas in storage
1
-
(1)
3
(1)
- -
(1)
$
2
Margin on asset optimization sales
$
2
$
The realized margin on asset optimization sales for the three months ended June 30, 2024, which removes fair value adjustments on derivative instruments and the revaluation of natural gas in storage, equaled the same period ending June 30, 2023. During 2024, the average margin on realized asset optimization sales was $0.11 per GJ, which equaled the same three- month period in 2023. Declining natural gas market prices and less volatility through 2024 compared to 2023, allowed for 4.4 PJ fewer asset optimization opportunities for the Corporation, resulting in $24 million lower sales and purchases in 2024 compared to 2023. Asset Optimization Fair Value Adjustments Through asset optimization strategies, the Corporation enters into various natural gas contracts which are subject to volatility of natural gas market prices until the natural gas contracts are realized. The unrealized fair value adjustment on outstanding asset optimization derivative instruments had a favourable impact of $2 million on the asset optimization margin. Declining natural gas market prices through 2024 resulted in the differential between contract prices and market prices on future asset optimization sales contracts improving $0.05 per GJ, resulting in a $2 million favourable fair value adjustment. Revaluation of Natural Gas in Storage The carrying amount of natural gas in storage is adjusted to reflect the lower of weighted average cost and net realizable value. At each reporting period, the Corporation measures net realizable value of natural gas in storage held for asset optimization transactions based on forward market prices and anticipated delivery dates. Declining natural gas market prices through 2024 resulted in a $1 million unfavourable net realizable value adjustment on natural gas in storage inventory.
8
Made with FlippingBook Ebook Creator