NAVIGATING A CHANGING ENERGY LANDSCAPE 2018 -19 ON THE COVER Throughout the world, disruption and innovation are rapidly transforming the way we create, supply and use electricity. In Saskatchewan, SaskPower is responding by driving toward advancements that ensure a reliable, cost-effective, flexible and environmentally sustainable electricity system. To be successful, we’ll need to meet changing customer needs and expectations while focusing on our goal of reducing greenhouse gas emissions by 40% from 2005 levels by 2030. In 2018-19, we continued to take steps to further add low-emitting and renewable generating sources, strengthen our grid, and offer customers the opportunity to participate in our province’s electricity system. And as we look forward to navigating a changing energy landscape, we’ll continue to partner with our customers and the communities we serve to make sure we’re all well-positioned for a bright future. PICTURED: The new 20-megawatt (MW) Western Lily Wind Energy Facility is located near Grenfell. With the addition of Western Lily, Saskatchewan currently has 241 MW of capacity from six wind power projects. SaskPower is in the process of adding approximately 400 MW of wind power at locations near Assiniboia, Herbert and Riverhurst. CORPORATE PROFILE Established in 1929, SaskPower and other assets. Our company and NRGreen Kerrobert, Loreburn, is Saskatchewan’s leading operates five natural gas-fired Estlin and Alameda Heat Recovery stations, three coal-fired power Facilities. Our company’s total energy supplier. We are defined stations, seven hydroelectric stations, available generation capacity is by our commitment to support and two wind facilities. Combined, 4,531 MW. economic growth and enhance they generate 3,542 megawatts (MW) quality of life in our province. of electricity. We are responsible for serving nearly 538,000 customer accounts within Our corporate mission: ensuring SaskPower also buys power from Saskatchewan’s geographic area of reliable, sustainable and cost- various independent power approximately 652,000 square effective power for our producers (IPPs), including the North kilometres. About three customer customers and the communities Battleford Generating Station, Cory accounts are supplied per circuit we serve. Cogeneration Station, Meridian kilometre. We maintain nearly 157,000 Cogeneration Station, Spy Hill kilometres of power lines, 56 high SaskPower’s team is made up of over Generating Station, Red Lily Wind voltage switching stations and 197 3,100 permanent full-time employees. Energy Facility, SunBridge Wind Power distribution substations. Our company We manage over $11.8 billion in Facility, Western Lily Wind Energy also has interties at the Manitoba, generation, transmission, distribution Facility, Morse Wind Energy Facility Alberta and North Dakota borders. CONTENTS 2 Performance highlights 4 2018-19 year at a glance 5 Letter of transmittal 6 A message to our stakeholders 8 Management’s discussion and analysis 68 Consolidated financial statements and notes 114 Corporate governance 132 Five-year financial summary 133 Five-year revenue statistics 134 Five-year generating and operating statistics 135 Glossary 136 System map SaskPower's 2018-19 Annual Report reflects the fiscal period April 1, 2018, through March 31, 2019. OUR VISION CORPORATE PILLARS Powering Saskatchewan to a cleaner energy future through innovation, CUSTOMER EXPERIENCE performance and service. & STAKEHOLDER RELATIONS [p 15] OUR MISSION WORKFORCE EXCELLENCE [p 22] Ensuring reliable, sustainable and cost-effective power for our customers EFFICIENCY, QUALITY and the communities we serve. & COST MANAGEMENT [p 26] OUR VALUES SUSTAINABLE INFRASTRUCTURE Safety, openness, collaboration & RELIABILITY and accountability. [p 31] PERFORMANCE HIGHLIGHTS FINANCIAL INDICATORS (in millions) 2018-19 2017-18 Change Revenue $ 2,725 $ 2,586 $ 139 Expense 2,528 2,440 88 Net income 197 146 51 Capital expenditures 833 996 (163) Total debt 8,105 7, 876 229 Net cash from operating activities 671 708 (37) Return on equity1 7.9% 6.2% 1.7% Per cent debt ratio2 74.1% 74.9% (0.8%) 1. Return on equity = (net income)/(average equity), where equity = (retained earnings + equity advances). 2. Per cent debt ratio = (debt)/(debt + equity), where debt = (long-term debt + short-term advances + finance lease obligations – debt retirement funds – cash and cash equivalents) and equity = (retained earnings + equity advances). 90% $1,600 CAPITAL EXPENDITURES (Q1-Q4) 80% $1,200 70% $800 60% $400 50% $0 2014 2015-16 2016-17 2017-18 2018-19 2014 2015-16 2016-17 2017-18 2018-19 DEBT RATIO CAPITAL EXPENDITURES PER CENT DEBT RATIO CAPITAL EXPENDITURES (MILLIONS) LONG-TERM TARGET RANGE 2 SASKPOWER 2018-19 ANNUAL REPORT $833 MILLION CAPITAL INVESTMENT IN SASKATCHEWAN'S ELECTRICITY SYSTEM 1.2% YEAR-OVER-YEAR GROWTH IN SASKATCHEWAN ELECTRICITY SALES VOLUMES OPERATING STATISTICS 2018-19 2017-18 Change Saskatchewan electricity sales (millions) $ 2,583 $ 2,480 $ 103 Saskatchewan electricity sales (GWh)1 23,559 23,282 277 Fuel and purchased power (millions) $ 710 $ 660 $ 50 Gross electricity supplied (GWh)1 25,777 25,317 460 1. One gigawatt hour (GWh) is equivalent to the energy consumed by 125 typical households in one year. $2,800 24,000 $800 26,000 $2,100 23,000 $600 25,000 $1,400 22,000 $400 24,000 $700 21,000 $200 23,000 $0 20,000 $0 22,000 2014 2015-16 2016-17 2017-18 2018-19 2014 2015-16 2016-17 2017-18 2018-19 SASKATCHEWAN ELECTRICITY SALES FUEL AND PURCHASED POWER ELECTRICITY SALES (MILLIONS) FUEL AND PURCHASED POWER (MILLIONS) ELECTRICITY SALES (GWH) GROSS ELECTRICITY SUPPLIED (GWH) SASKPOWER 2018-19 ANNUAL REPORT 3 3,524 MW RECORD SUMMER PEAK POWER DEMAND FOR SASKATCHEWAN 25,777 GWH RECORD GROSS ELECTRICITY SUPPLIED ADDED new 20-megawatt (MW) Western Lily Wind Energy Facility, located near Grenfell. ANNOUNCED Potentia Renewables Inc. as the successful proponent for the province’s latest utility-scale wind power project — the 200-MW Golden South Wind Energy Facility located near Assiniboia. ANNOUNCED Saturn Power Inc. as the successful proponent for Saskatchewan’s first utility-scale solar project, a 10-MW installation located southeast of Swift Current. SIGNED a new term sheet with Manitoba Hydro that lays the groundwork for purchasing an additional 215 MW of reliable renewable hydroelectricity. SIGNED a First Nations Opportunity Agreement with the First Nations Power Authority to source 20 MW of flare gas power generation projects led by Indigenous communities and businesses. SELECTED Moose Jaw Industrial Park as the preferred site for the next 350-MW combined cycle natural gas facility. REACHED one million hours without a lost-time injury during construction of the 350-MW combined cycle natural gas-fired Chinook Power Station near Swift Current. CONTINUED construction of a $231-million, 200-kilometre double circuit 230/138 kilovolt transmission line — to move electricity from the new Chinook Power Station. CONTINUED work on a $300-million project to extend the life of E.B. Campbell Hydroelectric Station near Nipawin, ensuring that this renewable source of hydroelectric generation will be available for another 50 years. INSPECTED approximately 112,000 power poles as part of the Transmission and Distribution Wood Pole Remediation Programs. EXPANDED the non-residential smart meter pilot to 7,500 commercial and industrial customers. LAUNCHED a new Live Chat option for customers, allowing them to interact with agents over online chat technology instead of calling. YEAR AT A GLANCE AT YEAR LAUNCHED a new online outage map, giving customers an easy-to-use way to get the latest information on service interruptions across the province. RECEIVED the 2018 CEA President’s Award of Excellence for Employee Safety in Distribution, given to utilities that achieve the top ranking in Total Recordable Injury Frequency. 2018 -19 SELECTED as one of Canada’s Best Employers, one of Canada’s Best Diversity Employers, one of Canada’s Top Employers for Young People, and one of Saskatchewan’s Top Employers. INVESTED over $1.7 million in educational and community programming throughout Saskatchewan. 4 SASKPOWER 2018-19 ANNUAL REPORT LETTER OF TRANSMITTAL Regina July 2019 To His Honour The Honourable W. Thomas Molloy, O.C., S.O.M. Lieutenant Governor of Saskatchewan Province of Saskatchewan Sir: I have the honour to submit herewith the Annual Report of the Saskatchewan Power Corporation for the year ended March 31, 2019. The report includes the financial statements for the year in the form approved by the Treasury Board, duly certified by the auditors of the Saskatchewan Power Corporation, all in accordance with The Power Corporation Act. Respectfully submitted, Honourable Dustin Duncan Minister Responsible for Saskatchewan Power Corporation SASKPOWER 2018-19 ANNUAL REPORT 5 A MESSAGE TO OUR STAKEHOLDERS On December 4, 2018, our province experienced one of the largest power outages in 40 years. Rime ice — formed when water droplets in a cloud, fog or mist freeze onto a surface — built up on a number of power lines. In addition to causing many localized outages, this unique weather event resulted in our province’s entire coal-fired generating fleet tripping offline at the same time. The overall impact extended to nearly 200 communities. Our crews and contractors diligently worked to restore power to the remains a priority. We continue to offer a variety of Demand Side majority of affected customers within 13 hours. This extraordinary event Management (DSM) programs to all customer segments. Over the past revealed two foundational truths about SaskPower’s current operating year, these energy efficiency initiatives helped us reduce peak demand by environment: electricity continues to play a critical role in the lives of nearly 11.4 megawatts (MW). Since its initial launch in 2008, our DSM program 538,000 customer accounts, and coal-fired generation continues to hold has produced an associated reduction in carbon emissions equivalent to a pivotal position in Saskatchewan’s electricity system. Looking ahead, taking 95,000 cars off the road or planting 39 million new trees.