2004 Crown Investments Corporation of Saskatchewan Annual Report

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MANAGEMENT’S DISCUSSION AND ANALYSISCIC Consolidated: Analysis of Financial ResultsThe following analysis of CIC’s consolidated 2004 financial results should be read in conjunction with the auditedconsolidated financial statements. While this MD&A is as complete as possible, CIC is bound by confidentialityagreements with its investment partners. In some cases, these agreements limit the information that CIC canrelease. For purposes of the MD&A on CIC’s consolidated results, “CIC” refers to the consolidated entity.EarningsEarnings for the year were $312.1 million (2003 - $345.4 millionrestated). Excluding non-recurring income of $8.0 million (2003- losses of $15.8 million), income tax expense of $26.2 million(2003 - $0.5 million recovery), and public policy expendituresof $52.0 million (2003 - $Nil) earnings from ongoing operationswere $382.3 million (2003 - $360.7 million restated).Earnings Contribution by Corporation13.4%34.8%RevenuesRevenues were $4,082.6 million (2003 - $3,909.3 millionrestated), an increase of $173.3 million. The increase was due toa $117.8 million increase in operating revenues, an increase ininvestment income of $64.4 million offset by a decrease in otherrevenue of $8.9 million.Operating revenues were $3,975.0 million (2003 - $3,857.2million restated). The $117.8 million increase was mainly due tohigher utility sales, increased insurance premiums, an increasein world oil prices increasing revenue at NewGrade Energy Inc.(NewGrade) and general increasesin sales from other commoditybased investments. Utility sales were$2,954.8 million (2003 - $2,887.0million restated), an increase of $67.8million, primarily due to higher salesby SaskPower ($13.6 million), SaskTel($33.7 million) and SaskEnergy ($12.3million). SGI’s operating revenueincreased by $25.4 million due togrowth in Saskatchewan premiums.The corporation’s share of theoperating revenue from NewGradeincreased by $12.0 million whichreflects higher prices for NewGrade’sreconstituted crude oil product. Thecorporation also recorded revenueincreases in other commodity basedinvestments totalling $8.9 million.SaskTelSaskEnergySaskPowerSGIOtherInvestment revenues were $103.5 million (2003 - $39.1 million). The $64.4 million increase reflects improvedperformance of its equity accounted investments including Saskferco Products Inc., ML OSB Limited Partnership,and Big Sky Farms Inc. The corporation also experienced better results from SGI’s investment portfolio due tohigher realized gains on sale of investments.21.3%Crown Corporations Earnings ComparisonSaskPowerSaskTelSaskEnergySGIInvestment SaskatchewanISCSaskWaterSTCSOCOCIC (non-consolidated) and AdjustmentsOtherTotal30.3%0.2%$ Millions2004 2003$ 66.394.5108.741.719.38.3(1.5)$(0.1)6.1(32.4)1.2$312.1$187.283.041.021.27.5(5.8)(2.3)(2.1)(0.2)13.52.4345.4C I C42
MANAGEMENT’S DISCUSSION AND ANALYSISExpensesExpenses were $3,700.3 million (2003 - $3,548.6 million restated), an increase of $151.7 million. The primaryfactors for the increase were higher fuel and purchased power costs for SaskPower ($13.0 million), an increase inoperating costs at SaskTel ($46.9 million) reflecting higher expenses for growth initiatives, and increases in costsfor Investment Saskatchewan’s commodity based investments ($52.4 million). These increases were offset bydecreases at SaskEnergy ($50.5 million) due to lower average cost of gas and NewGrade ($25.5 million) due tolower cost for feedstock. Interest costs were $252.9 million (2003 - $122.4 million) an increase of $130.5 million.In 2003, foreign currency exchange gains of $150.0 million were recorded due to a strong appreciation in theCanadian currency against the U.S. dollar. In 2004, the corporation recorded foreign currency exchange gainson U.S. dollar denominated debt of $6.5 million. Amortization costs of $410.0 million decreased by $14.5 million,reflecting a small decrease in capital asset purchases.Public Policy ExpendituresIn 2003, the government committed that Saskatchewan families would receive the package of basic utilitiesincluding home electricity, home natural gas, basic telephone and auto insurance rates at a total annual cost thatis lower than the same package in any other province in Canada. During 2004, the corporation expended$52.0 million in meeting that commitment.Capital SpendingCIC spent $1,033.7 million (2003 - $997.5 million) on new investment and capital acquisitions. The $36.2 millionincrease reflects a $45.4 million increase in investment activity, mainly due to SGI turning over its investmentportfolio, offset by a decrease in capital spending of $9.2 million.Consolidated DebtDebt at December 31, 2004 of $3,361.1 million (2003 - $3,358.4 million), increased $2.7 million. Increases in debtat SaskPower ($239.7 million) and SaskWater ($2.8 million) were offset by decreases in debt at SOCO ($151.2million), SaskTel ($39.2 million), SaskEnergy ($18.4 million), NewGrade ($15.0 million), ISC ($11.9 million), InvestmentSaskatchewan ($4.0 million), and SDFC ($0.1 million).Operating, Investing and Financing ActivitiesCash from operations was $342.8million (2003 - $774.0 millionrestated). The $431.2 milliondecrease was primarily due tochanges in non-cash items fromoperations. During the year, currentassets increased mainly due toincreased short-term investmentsheld by Investment Saskatchewandue to collection of HAROdebentures, and SaskPower due todebt placements.Cash Flow HighlightsCash from OperationsCash used in investing activitiesDividends paidDebt proceeds receivedDebt repaidOther financing activitiesDecrease in cash$$ Millions2004 2003$ 342.8(391.9)(205.0)452.6(237.0)$29.4774.0(510.8)(300.0)257.1(203.7)(20.1)(9.1) $ (3.5)Cash used in investing activitieswas $391.9 million (2003 - $510.8 million). The $118.9 million decrease reflects significant asset sales including thecollection of HARO debentures.Cash provided by financing activities was $40.0 million (2003 cash used in financing activities - $266.7 million).The $306.7 million increase reflects higher proceeds from debt placements net of repayments ($162.2 million) andlower payments to the GRF ($95.0 million), and decreased use of cash for other financing activities ($49.5 million).43 C I C
Page 2 and 3: 2004 Financial HighlightsCrown Sect
Page 4 and 5: Table Of Contents2004 HighlightsLet
Page 6 and 7: Chair’s MessageSaskatchewan’s C
Page 8 and 9: Corporate ProfileCIC is the financi
Page 10 and 11: Corporate ProfileCIC ManagementThe
Page 12 and 13: Corporate ProfileFinancial and Publ
Page 14 and 15: Corporate ProfileCIC’s Holdings20
Page 16 and 17: Corporate ProfileSASKATCHEWAN GOVER
Page 18 and 19: Corporate ProfileSaskatchewan Telec
Page 21: Policy and ProgramsUtility Bundle C
Page 24 and 25: Policy and ProgramsCommitment to Gr
Page 26: Policy and ProgramsCommitment to Yo
Page 30: GovernanceFor the purposes of this
Page 33 and 34: Strategic Direction and Performance
Page 41 and 42: Management’s Discussion and Analy
Page 43 and 44: MANAGEMENT’S DISCUSSION AND ANALY
Page 45: MANAGEMENT’S DISCUSSION AND ANALY
Page 65: MANAGEMENT’S DISCUSSION AND ANALY
Page 68 and 69: Consolidated Statement of Financial
Page 70 and 71: Consolidated Statement of Cash Flow
Page 72 and 73: Notes to Consolidated Financial Sta
Page 96:
Notes to Consolidated Financial Sta
Page 99 and 100:
Non-Consolidated Statement of Finan
Page 101 and 102:
Non-Consolidated Statement of Cash
Page 103 and 104:
Notes to Non-Consolidated Financial
Page 105 and 106:
Page 107:
Page 110:
Pat AtkinsonMinisterPrinted in Sask
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2004 Crown Investments Corporation of Saskatchewan Annual Report

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