SASKENERGY 2018-19 ANNUAL REPORT
Safety/Vigilance SaskEnergy continues its strong emphasis on integrity-related initiatives addressing issues such as gas leaks, gas line failures and third-party line hits to ensure safe and reliable service. SaskEnergy’s service upgrade program ensures safe and reliable natural gas service to customers. This program, together with enhanced leak survey processes and damage prevention initiatives, is aimed at reducing leaks. The damage prevention initiative seeks to reduce leaks resulting from external interference and includes a number of measures such as increased supervision at excavation sites and increasing public awareness. These efforts have resulted in a 37 per cent reduction in line hits since 2013. Despite these efforts, unique ground conditions associated with a long winter with many freeze and thaw cycles started to cause failures of a certain type of fitting used during early system installations. This resulted in SaskEnergy’s leaks metric being higher than historical levels and greater than the 2018-19 target of 5.50. TransGas continued to manage risk for its transmission lines using a combination of aerial and ground patrols, state-of-the-art remote monitoring, inspection digs and in-line inspection tools that look for the early signs of corrosion and check for unreported damage. In 2018-19, there were four failures on the transmission system resulting in this metric being higher than target. One occurred due to a third party digging prior to the lines being located. A second was discovered by a leak surveyor, and a third was found through direct examination while performing a planned repair. The fourth failure was the result of a rupture of a natural gas line in a remote part of the province. There was no loss of natural gas service to customers as a result of any of these failures. SaskEnergy achieved the safety and integrity target, demonstrating the Corporation’s commitment to the safety and integrity of its gas line system. Financial Strength SaskEnergy preserves an adequate capital structure while providing reasonable financial returns to its holding company, CIC, and competitive rates to customers. The Corporation balances the interests of both CIC and its customers, while focusing on annual profitability and efficient operations with a long-term view of financial sustainability.
Income from operations was affected by the colder than normal weather and increased load growth in 2018-19, which positively impacted delivery and transportation revenue. In addition, by utilizing off-peak transportation and storage capacity, the Corporation was able to generate asset optimization margins that were higher than planned. This higher than anticipated demand for natural gas meant higher costs to transport natural gas in Saskatchewan, increasing operating and maintenance expenses in 2018-19. SaskEnergy was able to mitigate the impact of transportation cost increases through operating efficiencies and employee vacancy management. SaskEnergy’s renewed focus on core delivery, transportation and storage of natural gas triggered a financial gain from the divestiture of its natural gas processing plant assets at Coleville and Kisbey. Capital investment levels during the year were managed as planned. Expansion of the natural gas system to meet increasing customer demand and investment in the safety and integrity of the system were the key drivers for capital investment in 2018-19. Net income before market value adjustments was $134 million at March 31, 2019. These strong financial earnings provided an improved debt-to-equity ratio with less debt required to execute on capital projects. As a result, the Corporation’s debt levels were also lower than planned for the period. SaskEnergy’s consolidated debt-to-equity ratio was 55 per cent debt and 45 per cent equity at March 31, 2019. The lower debt-to-equity ratio was a result of a combination of the colder winter in 2017-18 generating higher cash flows and higher net income in 2018-19. The consolidated return on average equity for the period ending March 31, 2019 was 12.9 per cent, which is higher than the target set for the year. The Corporation had a larger than anticipated equity balance at year-end as last year’s actual earnings were greater than estimated in the budgeted metric, and net income exceeded budget.
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