2004 Crown Investments Corporation of Saskatchewan Annual Report

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MANAGEMENT’S DISCUSSION AND ANALYSIS2004 ResultsEarnings were $108.7 million 1 (2003 - $40.9 million).Revenue of $317.4 million (2003 - $312.9 million) was higher due to increased transportation volumes.Operating expenses were $247.3 million (2003 - $244.6 million).SaskEnergy incurred a gain on commodity sales of $37.8 million (2003 - $27.3 million loss).Debt was $754.5 million (2003 - $772.9 million). The decline was primarily due to improved earnings whichallowed SaskEnergy to repay a portion of its short-term debt.Capital spending of $67.8 million (2003 - $79.1 million) was primarily for new customer connections,supporting pipeline and storage system expansion and pipeline integrity programs.SaskEnergy’s commodity rate to its customers was among the lowest of the provincial utilities.Net new customer additions to the distribution system were 2,082 (2003 - 1,783).The transmission pipeline system throughput increased by one per cent compared to 2003.Debt ratio of 68 per cent (2003 - 72 per cent).Rate of return on equity of 33 per cent (2002 - 14 per cent).Dividend declared to CIC of $70.0 million (2003 - $26.7 million).Earnings ($ millions)Debt ($ millions)Capital Spending ($ millions)1251007550250108.740.92004 20038006004002000754.5 772.92004 200310080604020067.8200479.120032005 OutlookThe outstanding balance of $25.1 million in the Gas Cost Variance Account at the end of 2004 will continue to berecovered in 2005.TransGas Ltd., SaskEnergy’s natural gas transmission subsidiary, implemented an average 3.4 per cent reductionto service rates for 2005.TransGas is developing a new storage project near Asquith which will serve the needs of a growing demand inthe Saskatoon area.SaskEnergy does not anticipate any change to distribution delivery rates in 2005. Rates for delivery service havenot changed since 1997.Key Factors Affecting PerformanceWeather: a one per cent change in winter temperature affects net income by approximately $0.7 million (warmerweather decreases revenue, colder weather increases revenue).Energy conservation efforts by customers are expected to continue to reduce consumption.Volatility of natural gas prices.Energy transported on the transmission system can be affected by the level of natural gas production inSaskatchewan and demand for natural gas within the province.1Changes in Accounting Policy: SaskEnergy adopted the new accounting standard for asset retirement obligations effective January 1, 2004which was required to be applied retroactively. Net impact was a $0.1 million decrease to earnings and a $0.9 million increase to closingequity in 2003. CIC adopted this policy effective January 1, 2003. As such, for consolidation purposes, CIC records SaskEnergy’s net income$0.9 million higher than SaskEnergy.C I C52
MANAGEMENT’S DISCUSSION AND ANALYSIS2004 ResultsSaskWater Operating loss was $1.9 million (2003 - $2.7 million loss) before SPUDCO related legal expenses andoperating grants.CIC provided operating grants of $9.2 million (2003 - $1.1 million) primarily related to the SPUDCOsettlement.Revenues were $16.7 million (2003 - $16.0 million).Expenses were $18.7 million (2003 - $18.7 million).Debt was $54.2 million (2003 - $51.4 million).Capital spending of $3.2 million (2003 - $3.2 million) was primarily to expand regional systems to serveSt. Louis, Edenwold, Agrium and Canada Salt.Total water sales decreased to 4.1 billion gallons (2003 - 4.2 billion gallons).SaskWater was not expected to declare a dividend to CIC in 2004.Debt ratio of 84 per cent (2003 - 81 per cent).0-1-2-3-4Earnings ($ millions)2004 2003-1.9-2.7605040Debt ($ millions)54.251.42004 2003Capital Spending ($ millions)65432103.220043.220032005 OutlookSaskWater expects to incur a loss.SaskWater expects to invest up to $4.2 million in municipal and industrial water supply and treatmentinfrastructure projects in the province.Net water sales revenues are expected to increase.Demand for SaskWater’s services as a solutions provider to the municipal market are expected to continue toincrease as enhanced regulation legislated by Saskatchewan Environment comes into full effect in 2005.Key Factors Affecting PerformanceForty per cent of revenue is dependant upon demand from the potash and fertilizer industries.Weather: drought increases water sales.Regulation: increased regulation creates more demand for services.53 C I C
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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 55: 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: Notes to Non-Consolidated Financial
Page 107:
Notes to Non-Consolidated Financial
Page 110:
Pat AtkinsonMinisterPrinted in Sask
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2004 Crown Investments Corporation of Saskatchewan Annual Report

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