LIQUIDITY AND CAPITAL RESOURCES
SaskEnergy Incorporated First Quarter Report
Three months ended June 30
March 31, 2011
(millions)
2016
2015 Change
Cash provided by operating activities Cash used in investing activities Cash used in financing activities
$
54
$
80
$
(26)
(31) (33)
(44) (45)
13 12
Decrease in cash and cash equivalents
$
(10)
$
(9)
$
(1)
Cash provided from operations and debt borrowed from the Province of Saskatchewan’s General Revenue Fund is the primary source of liquidity and capital for SaskEnergy. Generally, SaskEnergy finances its investment activity with cash from operations. To the extent that cash from operations is insufficient to support investment activity, debt servicing costs and dividends, additional short and long term debt is borrowed. Sources of liquidity include Order in Council authority to borrow up to $500 million in short-term loans. The Corporation holds a $35 million uncommitted line of credit with the Toronto-Dominion Bank. Over the longer term, The SaskEnergy Act allows the Corporation to borrow up to $1,700 million.
Operating Activities
Cash from operating activities was $54 million for the three months ended June 30, 2016, a decrease of $26 million from the same period in 2015. A lower commodity margin, a result of a commodity rate decrease and warmer weather decreasing natural gas sales, contributed to lower cash from operations in 2016 compared to 2015. The Corporation also took advantage of low natural gas market prices by purchasing and injecting lower priced natural gas into storage. Higher transportation revenue and delivery revenue in 2016, combined with lower employee benefits expense, partially offset these decreases in operating cash flows compared to 2015.
Investing Activities
Cash used in investing activities totaled $31 million for the three months ended June 30, 2016, $13 million below 2015. Capital investment levels declined in 2016 compared to 2015, primarily due to lower investments in customer connections and system expansions, while spending on safety and integrity programming was consistent with 2015, a sign of the Corporation’s ongoing commitment to a safe, reliable system.
Financing Activities
Cash used for financing activities was $33 million during the three months of 2016 compared to $45 million in 2015. From a cash management perspective, SaskEnergy uses cash from operations to pay for its investing activities, dividend payments and debt servicing costs (including interest payments and sinking fund installments). Any remaining cash from operations is applied to reducing the amount of short-term debt, as was the case in 2015. If there is insufficient cash from operations, SaskEnergy will borrow more debt, usually short-term debt to meet its cash requirements, as was the case in 2016 with the issuance of $2 million of short-term debt. Excluding short-term debt repayments and borrowings, cash used in financing was $35 million in 2016 compared to $29 million in 2015, primarily due to larger dividend payments. In 2015, cash from operations was sufficient to cover its capital expenditure, debt servicing costs, and dividends, and also allowed it to repay $16 million of short-term debt. Long-term debt levels were consistent with prior year as the Corporation repaid $22 million in long-term debt with an effective interest rate of 4.8 per cent, which was replaced with $22 million in long-term debt with an effective interest rate of 3.2 per cent. SaskEnergy’s debt ratio at June 30, 2016 was 59 per cent in comparison to 61 per cent at March 31, 2016 and 60 per cent at June 30, 2015.
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2016-17 FIRST QUARTER REPORT
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