Just Energy Group Inc. (“Just Energy” or “the Company”) (TSX:JE)
(NYSE:JE) announced today that it has executed a share purchase
agreement to sell the Company’s UK operations, Hudson Energy Supply
UK Limited (“Hudson UK”), to Shell Energy Retail Limited (“Shell
Energy Retail”) for up to £10.5 million (approximately C$17
million). In addition, the Company has identified an incremental
approximate C$20 million in annualized cost savings through its
ongoing optimization efforts.
“The sale of our UK operations is part of our broader strategy
to concentrate on our higher-margin North American operations,
while also improving our liquidity,” said Scott Gahn, President and
Chief Executive Officer of Just Energy. “As well as refocusing our
geographic footprint, we have undertaken an in-depth review of our
operations and identified ways to improve our business by boosting
efficiency and lowering costs.”
Sale of Hudson UKThe sale of Hudson UK advances
Just Energy’s plan to streamline its operations, allowing the
Company to narrow its geographic focus and concentrate on its core
operations. In addition, the sale improves Just Energy’s liquidity
position by eliminating significant capital investments in Hudson
UK that would otherwise have been required in the short term to
support the UK operations and to further grow the UK
business.
Pursuant to the share purchase agreement, Just Energy will
receive £2 million (approximately C$3.2 million) at closing and up
to £8.5 million (approximately C$13.8 million) to be paid depending
on whether the Office of Gas and Electricity Markets (Ofgem) or the
Department for Business, Energy and Industrial Strategy reinstate
the capacity market payments in the UK within a specified period of
time. Until completion, both companies will continue to operate
independently. Under the terms of the deal, on completion, Hudson
UK will operate as a wholly-owned subsidiary of Shell Energy Retail
Limited. Just Energy is committed to lowering leverage and expects
to apply the proceeds from the sale against its
indebtedness.
The Company is confident that Shell Energy Retail is a strong
partner for its UK-based customers, allowing them to benefit from
Shell Energy Retail’s extensive renewable energy offerings and
strong customer service. Hudson UK supplies around 200,000 UK
residential customers with gas and 100% renewable electricity
through its residential trading arm, Green Star Energy, as well as
providing bespoke gas and 100% renewable electricity contracts to
around 2,000 commercial customers.
The transaction is subject to customary closing conditions,
including merger control approval and is expected to close by the
end of 2019.
The Board of Directors received financial advice and an opinion
from its financial advisor, National Bank Financial Inc., that
as of the date of the opinion and subject to the assumptions,
limitations and qualifications set forth therein, the consideration
payable by Shell Energy Retail pursuant to the sale of Hudson
UK is fair, from a financial point of view, to the Company.
The accounting for the sale of Hudson UK is being finalized and
a non-cash impairment as a result of the expected sale will be
included in Just Energy’s second quarter financial statements under
discontinued operations.
Additional cost savings identifiedFollowing an
in-depth review of its business, Just Energy has identified several
opportunities to improve efficiency and profitability. Incremental
savings will be achieved by eliminating low-value activities in
non-selling costs, optimizing online commission spending to
eliminate low-return deals and through improved efficiency in our
customer care group.
These improvements are in addition to cost reductions of
approximately C$40 million identified at the end of fiscal
2019, bringing the total FY2020 cost savings to approximately C$60
million, net of costs associated with severance and Just Energy’s
strategic review process.
Strategic review processThe strategic review
process initiated in early June is ongoing and the board is
comfortable with the progress to date. Just Energy has not set a
specific timeframe for the conclusion of the strategic review. The
Company plans to provide an update when the Board has approved a
specific course of action.
While the process is ongoing, Just Energy is focused on
improving and optimizing the business. The Company continues to
implement measures designed to lower costs by eliminating
unnecessary overhead and low-return investments, improve the
quality of its customer base and fortify operational and financial
controls.
In addition to improvements to its operations, Just Energy has
strengthened and stabilized its leadership team with the recent
appointments of Mr. Gahn as Chief Executive Officer and Walter M.
Higgins III as a director. Each brings to Just Energy deep
expertise and extensive experience in the energy sector.
About Just Energy Group Inc.
Just Energy is a consumer company focused on essential
needs, including electricity and natural gas commodities; health
and well-being, such as water quality and filtration devices; and
utility conservation, bringing energy efficient solutions and
renewable energy options to consumers. Currently operating
in the United States and Canada, Just
Energy serves residential and commercial customers. Just
Energy is the parent company of Amigo Energy, EdgePower
Inc., Filter Group Inc., Green Star Energy, Hudson
Energy, Interactive Energy Group, Just Energy Advanced
Solutions, Tara Energy, and terrapass.
Visit https://investors.justenergy.com/ to learn more.
Also, find us on Facebook and follow us
on Twitter.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements
including statements regarding the Company’s financial outlook.
Forward-looking statements in this press release include, but are
not limited to, statements and information regarding the completion
of the sale of Hudson UK and the timing for completion thereof, the
satisfaction of closing conditions to the sale of Hudson UK, the
achievement of the contingent consideration in the sale of Hudson
UK, the improvement of the Company’s liquidity position as a result
of the sale of Hudson UK, the accounting treatment for the sale of
Hudson UK and the size of the non-cash impairment resulting from
the sale of Hudson UK, the Company’s ability to improve its
business by boosting efficiency and lowering costs, the success of
the Company’s cost reductions and optimization efforts, the ability
of the Company to reduce selling, marketing and general and
administrative expenses and the quantum of such reductions and the
impact thereof on the Company’s current fiscal year, the Company’s
ability to identify further opportunities to improve its cost
structure, and the results of the strategic review process. These
statements are based on current expectations and assumptions that
are believed to be reasonable, but that involve a number of risks
and uncertainties which could cause actual results to differ from
those anticipated. These risks include, but are not limited to,
general economic and market conditions, weather conditions, levels
of customer natural gas and electricity consumption, rates of
customer additions and renewals, rates of customer attrition,
fluctuations in natural gas and electricity prices, changes in
regulatory regimes, results of litigation and decisions by
regulatory authorities, competition and dependence on certain
suppliers. Additional information on these and other factors that
could affect Just Energy's operations, financial results
or dividend levels are included in Just Energy's annual
information form and other reports on file with Canadian securities
regulatory authorities which can be accessed through the SEDAR
website at www.sedar.com, on the U.S. Securities
Exchange Commission’s website at www.sec.gov or
through Just Energy's website
at www.justenergygroup.com. All of the forward-looking
statements in this press release are qualified by the foregoing
cautionary statements. Neither the Toronto Stock
Exchange nor the New York Stock Exchange has
approved nor disapproved of the information contained herein.
FOR FURTHER INFORMATION PLEASE CONTACT:
Scott Gahn Chief Executive Officer Phone: (713) 412-8314
sgahn@justenergy.com
or
Investors Michael Cummings Investor Relations Phone: (617)
982-0475 michael.cummings@alpha-ir.com
Media Boyd Erman Longview Communications Phone:
416-523-5885berman@longviewcomms.ca
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