SASKENERGY 2018-19 ANNUAL REPORT
Commodity Fair Value Adjustments The fair value adjustments at March 31, 2019 increased the margin on commodity sales by $35 million as the $37 million unfavourable fair value position at March 31, 2018 improved to $2 million unfavourable at March 31, 2019. Entering into lower priced natural gas purchase contracts during the year increased the volume of contracts outstanding from 49 PJs at March 31, 2018 to 60 PJs at March 31, 2019, which was fully offset by the differential between the contract price and market prices decreasing during 2018-19 from $0.76 per GJ to $0.03 per GJ. 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, to help mitigate transportation constraints, SaskEnergy is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods while minimizing its exposure to price risk. In most cases, the purchases and sales are executed at the
SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS, such contracts are not required to be reported at market value. The volume of contracts identified and segregated for the purpose of expected commodity sales was 154 PJs, compared to 134 PJs at March 31, 2018. The increase is a result of the Corporation’s ability to enter into more purchase contracts at lower natural gas prices.
same time, thereby mitigating much of the price risk that would normally be associated with such transactions. During 2018-19, SaskEnergy’s asset optimization activities included the purchase of 117 PJs (93 PJs in 2017-18) of natural gas at an average price of $1.65 per GJ, the sale of 120 PJs (106 PJs in 2017-18) at an average price of $1.86 per GJ and a decrease to gas in storage of 7 PJs. The asset optimization margin, as reported in the consolidated financial statements, was as follows:
(millions)
March 31, 2019
March 31, 2018
Change
$
224 $
Asset optimization sales
249 $
(25)
213
Asset optimization purchases
223
10
11
Realized margin on asset optimization sales Impact of fair value adjustments Revaluation of natural gas in storage
26 48
(15) (70)
(22)
19
(12)
31
$
8
Margin on asset optimization sales
$
62 $
(54)
There were no effects of IFRS 15 on Asset Optimization sales.
The realized margin on asset optimization sales at March 31, 2019, which removes fair value adjustments on derivative instruments and the revaluation of natural gas in storage, was $11 million. This is $15 million lower than the $26 million margin for the period ending March 31, 2018. The Corporation increased its asset optimization activity in response to natural gas price
volatility, which resulted in the Corporation selling higher volumes of natural gas at lower margins compared to the same period in 2017-18. Some transportation capacity within Alberta was also secured through asset optimization contracts to meet customer obligations. These transportation contracts had an unfavourable effect on the 2018-19 asset optimization margin.
25
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