SASKENERGY 2018-19 ANNUAL REPORT
4. CAPITAL MANAGEMENT The Corporation’s objective when managing its capital is to maintain financial stability through the effective management of liquidity and capital structure. The Corporation finances its capital requirements through internally generated funds and injections of capital from the Province, typically in the form of debt. Throughout 2018-19, The SaskEnergy Act allowed the Corporation to borrow up to $1,700 million of debt upon approval of the Lieutenant Governor in Council (2018 - $1,700 million). Approval to change the act and revise the Corporation’s borrowing capacity to $2,500 million was granted subsequent to March 31, 2019, and the Corporation will have access to the increased borrowing limit in 2019-20. Within this limit, the Corporation may borrow up to $500 million in temporary loans (2018 - $500 million), including a $35 million uncommitted line of credit with Toronto-Dominion Bank (2018 - $35 million). As at March 31, 2019, the Corporation had $1,440 million of debt outstanding (2018 - $1,335 million), including $260 million in temporary loans (2018 - $254 million), leaving $240 million of remaining short-term borrowing capacity (2018 - $246 million). The Corporation’s short-term debt is unsecured, with an average interest rate of 1.8 per cent (2018 – 1.4 per cent). The Corporation borrows all its capital, with the exception of occasional overnight loans from the Toronto-Dominion Bank, from the Province. The Corporation’s borrowing requirements constitute a minor portion of the Province’s total borrowings, and given the Province’s strong credit rating, the Corporation was able to acquire all its funding requirements during the period. The Corporation does not have share capital. However, it has received advances from CIC, which reflect an equity investment in the Corporation, to form its equity capitalization. The Corporation monitors capital on the basis of the proportion of debt in the capital structure, with a long-term target range of 58.0 per cent to 63.0 per cent. The purpose of this strategy is to ensure the Corporation’s debt is self-supporting and does not adversely affect the Province’s access to capital markets. The debt ratio was calculated as net debt divided by total capital at the end of the fiscal year as follows:
(millions)
2019
2018
$
1,180 260 (121) (6) 1,313 72 1,024
Long-term debt Short-term debt Debt retirement funds Cash and cash equivalents
$
1,081 254 (106) 3 1,232 72 894 2,198 56.1%
Total net debt Equity advances Retained earnings
$
2,409 $
Total capital
54.5%
Debt ratio
The Corporation’s objectives, policies and processes for managing its capital were consistent with the prior period. The Corporation complied with all externally imposed requirements for its capital throughout the period, which include compliance with the approved borrowing limits for short-term and long-term debt, and the annual investment requirement to the debt retirement funds.
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