SaskEnergy Incorporated First Quarter Report notional point where producers, marketers and end-users can match supplies to demand) until it is delivered to the end-use customer. For the receipt and delivery services, the Corporation offers both firm and interruptible transportation. Under a firm service contract, the customer has a right to deliver or receive a specified quantity of gas on each day of the contract. Under an interruptible contract, the customer may deliver or receive gas only when there is available capacity on the system. With a firm contract, customers ay for the amount of capacity they have contracted for whether they use the capacity or not. With an interruptible contract, customers only pay receipt and delivery tolls when they deliver or receive gas. March 31, 2011 Transportation and storage revenue was $65 million for the six months and $33 million for the three months ending September 30, 2016, $5 million and $2 million above the same periods in 2015. Industrial customer load growth continues to increase demand for natural gas within the province and is driving higher transportation revenue. A 2.5 per cent transportation rate increase effective January 1, 2016, is also contributing to the higher transportation revenue year-over-year.
Customer Capital Contributions
The Corporation receives capital contributions from customers to partially offset the cost of constructing facilities to connect them to the transmission and distribution systems. Generally, contributions related to transmission system projects tend to be larger but less frequent than contributions related to the distribution system. The volume and magnitude of customer contribution revenue can vary significantly period-over-period as various factors influence their receipt and recognition as revenue. The contributions received, less potential refunds, are recognized as revenue once the related property, plant and equipment is available for use. Customers may earn a refund of some or all of the contributions they make depending on how much gas they flow. The amount of contributions expected to be refunded is estimated and recorded in deferred revenue until the eligible refund period expires or a refund is earned by the customer. Customer capital contribution revenue for the three months ended September 30, 2016 and for the six months year-to-date was $3 million below the same periods in 2015. The downturn in the provincial economy is translating into lower distribution customer connections.
Other Revenue
Other revenue approximates prior year and primarily consists of gas processing fees and natural gas liquid sales from two natural gas liquid extraction plants. Compression and gathering service revenue and royalty revenues comprise the remaining balance of other revenue. Royalty revenues are generated from a gross overriding royalty on several natural gas-producing properties in Saskatchewan and Alberta, which have diminished due to the continuing decline of conventional natural gas production, a result of low natural gas prices.
Other Expenses and Net Finance Expense (before FVA)
Three months ended
Six months ended September 30
September 30
(millions)
2016
2015 Change
2016
2015 Change
Employee benefits
$
20 31 24
$
21 29 22
$
(1)
$
41 61 47
$
44 58 43
$
(3)
Operating and maintenance Depreciation and amortization
2 2 1
3 4 1
Saskatchewan taxes
5
4
7
6
Other Expenses
$
80
$
76
$
4
$
156
$
151
$
5
Net finance expense (before FVA)
$
11
$
12
$
(1)
$
22
$
24
$
(2)
Increasing investment in safety and integrity, strong customer growth, and the need to import more natural gas from Alberta as Saskatchewan natural gas production declines are key factors contributing to increases in other expenses. Employee benefits expense of $41 million for the six months and $20 million for the three months ending September 30, 2016 are $3 million and $1 million lower, respectively, than prior year. The Corporation was able to manage vacant positions, through productivity and efficiency initiatives. Overtime was reduced through collaboration with other Crown corporations and third parties, actively managing/scheduling work to meet demands and an overall decline in the volume of work as the pace of the Provincial economy slows down. Operating and maintenance expense of $61 million year-to-date and $31 million for the quarter are $3 million and $2 million higher than the same periods in 2015, due to increasing third party transportation costs as additional cross border transportation capacity is required to import gas from Alberta. This was partially offset by an elevated focus on management of operating costs. Depreciation and amortization of $47 million for the six months and $24 million for the three months ending September 30, 2016 are $4 million and $2 million above prior year as capital additions increase the asset base and depreciation and amortization. Saskatchewan taxes approximate the prior year. Net finance expenses, before the impact of fair value adjustments, were $2 million lower year-to-date and $1 million lower for the quarter compared to the same periods in 2015. Lower interest rates allowed the Corporation to replace higher cost maturing long-term debt with lower cost long-term debt. There was a $4 million favourable fair value adjustment at September 30, 2016 on debt retirement funds during 2016, an outcome of lower interest rates on fixed-rate investments.
8
2016-17 SECOND QUARTER REPORT
Made with FlippingBook Ebook Creator