Winnipeg Free Press - PRINT EDITION

SaskPower: its value now and then

  • Print

Provincial or Crown ownership of public utilities is a very common feature of life in Canada, and, until recently, rarely questioned.

These very large companies are the monopoly providers of electricity, water and sometimes gas in all but a few Canadian provinces. This state of affairs rarely gets questioned despite continued and perpetual increases in the prices consumers, businesses and public or non-profit sector customers pay, even in years when inflation in other common goods and services is much less, or even negative in some cases, such as coal and natural gas used as feedstock for many power-generating stations.

In other nations, such as the United States, the United Kingdom, Germany, Spain and many more, electric-power producers are usually public corporations with private shareholders.

In some jurisdictions, these shareholder-owned firms even compete, as in Alberta, the Atlantic provinces (to some extent) and the U.S. states of Texas and Pennsylvania, lowering prices to consumers. Even where there is little competition, the market pressures of being subject to profit-and-loss discipline help keep prices to customers under control.

This is absent in most Canadian provinces, where monopoly utilities with little accountability to the public are subject to meddling provincial governments and politicians.

Recently, the Frontier Centre for Public Policy, an independent think-tank based in Winnipeg, commissioned a valuation analysis of SaskPower, the Crown utility owned by the citizens and taxpayers of Saskatchewan.

It found the firm's current potential public listing value could be $2.35 billion to $2.62 billion. The value to a possible strategic buyer could be even higher.

The research also found that while SaskPower usually has what appears to be adequate reported net income in most years, after capital expenditures the picture was much bleaker.

Indeed, the model projected only negative free cash flow after 2015, which would compel the company to take on more debt and lower its net worth.

Nearly all power utilities in North America show high capital investment spending, reducing free cash flow and taxes paid, as operating environments have been and are changing. This has become a risky business.

Some of these risks: 1. Low inflation, stable coal and natural gas prices are putting pressure on utilities to restrain unit price rises; 2. Current and forecast low interest rates, making public utility boards' calculation of permitted power prices lower than the companies would like; 3. Large consumers (even residential complexes) can produce their own power using natural gas or alternative energy; 4. Abundant, cheap Bakken shale gas, being rapidly developed in Saskatchewan and in neighbouring North Dakota and Montana; 5. Competitive interprovincial and international transmission and trading.

SaskPower is better off than many other utilities because the economy it operates in is prosperous and growing, as is its customer population. Yet its revenue is struggling to match its operating and capital expense growth and is projected to fall behind further.

Also, as interest rates will likely rise from currently low levels, its growing debt burden will generate much higher interest expense, putting severe pressure on its ability to finance itself without further power price increases.

SaskPower's relatively low cash operating cost, its gas and coal fleet, a robust regional economy and a growing population argue for selling the utility while it is still relatively healthy and valuable. Proceeds could reduce the province's debt and debt-servicing costs, freeing more money for improving services, enhancing infrastructure, lowering taxes, or all three.

Whatever public-policy reasons there might have been to own a power company are overshadowed by the dangers of keeping such a large amount of money locked into such a big investment. The risk of doing nothing could be as vast as the big skies of the Saskatchewan prairie.


Ian Madsen is a contributing analyst for the Frontier Centre for Public Policy ( and is the author of Valuation Analysis of SaskPower.

Republished from the Winnipeg Free Press print edition April 7, 2014 A9

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes


  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.


Make text: Larger | Smaller


Selinger addresses stadium lawsuit

View more like this

Photo Store Gallery

  • Winnipeg’s best friend the dragon fly takes a break at English Gardens in Assiniboine Park Wednesday- A dragon fly can eat  food equal to its own weight in 30 minutes-Standup photo- June 13, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • A group of Horese pose for the camera in the early evening light at Southcreek Stables in Stl Norbert Wednessday. Sept  14, 2011 (RUTH BONNEVILLE) / WINNIPEG FREE PRESS)

View More Gallery Photos


What do you think of the government's announcement that there will be no balanced provincial budget until 2018?

View Results

View Related Story

Ads by Google