Just Energy Group Inc. (“Just Energy” or the “Company”) (TSXV:JE;
OTC:JENGQ), a retail energy provider specializing in electricity
and natural gas commodities and bringing energy efficient solutions
and renewable energy options to customers, announced its fourth
quarter and year end results for fiscal year 2021 ended March 31,
2021.
Recent Developments
As previously released, in February 2021, the
State of Texas experienced extremely cold weather (“the Weather
Event”), which, combined with sustained high prices for
electricity, ultimately resulted in Just Energy receiving creditor
protection under the Companies’ Creditors Arrangement Act (“CCAA”)
from the Ontario Superior Court of Justice (Commercial List) (the
“Court”) and under Chapter 15 of the Bankruptcy Code in the United
States. Protection under the CCAA and Chapter 15 allows Just Energy
to continue to serve all its customers and operate the business
while it restructures its balance sheet.
As part of the CCAA filing, the Company entered
into a USD $125 million Debtor-In-Possession (“DIP Facility”) and
qualifying support agreements with its largest commodity supplier
and ISO services provider.
On June 16, 2021, Texas Governor Greg Abbot
signed House Bill 4492 (“HB 4492”), which provides a mechanism for
recovery of certain costs incurred by various parties, including
the Company, during the Weather Event. As previously announced, the
Company continues to evaluate the recovery mechanisms authorized in
HB 4492.
“We remain focused on our commitment to our customers,
employees, partners, and our pursuit of growth in key markets,”
said Scott Gahn, Just Energy’s President and Chief Executive
Officer. Mr. Gahn added, “We also continue to work with our valued
stakeholders to advance Just Energy towards a successful
restructuring.”
Key Developments
- Base EBITDA, which excludes the
financial impact to the Company of the Weather Event, decreased by
28% to $53.8 million in the fourth quarter of fiscal year 2021
compared to $74.6 million in the year ago period, primarily due to
lower Base gross margin, partially offset by lower bad debt and
lower expenses. Fiscal year 2021 Base EBITDA was $182.8 million, a
2% decrease from the prior fiscal year.
- Base gross margin, which excludes
the financial impact to the Company of the Weather Event, was
$130.7 million in the fourth quarter of fiscal year 2021, a 28%
decrease as compared to $180.4 million in the year ago period.
Fiscal year 2021 Base Gross Margin was $536.9 million, a decrease
of 12% from the prior fiscal year.
- Total Mass Markets RCE was
maintained at 1,187,000 during the fourth quarter of fiscal year
2021, which is the first time the count has remained flat since the
first quarter of fiscal year 2019.
- Bad debt expense decreased by 45%
to $7.3 million in the fourth quarter of fiscal year 2021 compared
to $13.2 million in the year ago period. Fiscal year 2021 bad debt
expense was $34.3 million, a decrease of 57% from the prior fiscal
year.
- The Company ended the year with
$247.5 million of total liquidity available, comprised of cash and
cash equivalents of $216.0 million and $31.5 million available
under the DIP Facility, which was drawn on April 6, 2021.
- Loss from continuing operations was
$402.8 million in fiscal year 2021, inclusive of the $418.4 million
(USD $330.3 million) loss from the Weather Event, the unrealized
gain of derivative instruments, and the impairment of goodwill and
intangible assets.
Fiscal
Fourth Quarter Financial Highlights: |
|
|
For the three months ended
March 31 |
|
|
|
$ in thousands, except
customer data |
Fiscal 2021 |
Fiscal 2020 |
Change |
Sales |
$689,064 |
$776,921 |
-11% |
Base gross margin1 |
$130,699 |
$180,420 |
-28% |
Base EBITDA2 |
$53,794 |
$74,632 |
-28% |
Total net Mass Markets (RCE)
additions |
0 |
(46,000) |
NMF3 |
Total net Commercial (RCE)
additions |
(19,000) |
(75,000) |
NMF3 |
Full Year
Financial Highlights: |
|
|
For the years ended March
31 |
|
|
|
$ in thousands, except
customer data |
Fiscal 2021 |
Fiscal 2020 |
Change |
Sales |
$2,740,037 |
3,153,652 |
-13% |
Base gross margin1 |
$536,858 |
$610,580 |
-12% |
Base EBITDA2 |
$182,831 |
$185,836 |
-2% |
Unlevered free cash flow2 |
$90,822 |
$103,345 |
-12% |
Total liquidity |
$247,489 |
$87,200 |
184% |
RCE Mass Markets count |
1,187,000 |
1,323,000 |
-10% |
RCE Commercial count |
1,757,000 |
2,065,000 |
-15% |
|
|
|
|
|
|
|
|
1 “Base gross margin” represents gross margin
adjusted to include the effect of applying IFRS Interpretation
Committee Agenda Decision 11, Physical Settlement of Contracts to
Buy or Sell a Non-Financial Item, for realized gains (losses) on
derivative instruments and other. Base gross margin is a key
measure used by management to assess performance and allocate
resources. Management believes that these realized gains (losses)
on derivative instruments reflect the long-term financial
performance of Just Energy and thus has included them in the Base
gross margin calculation.2See “Non-IFRS financial measures”3Not a
meaningful figure.
- Sales: Fourth
quarter decline was primarily driven by a decrease in the customer
base from the prior comparable quarter resulting from the shift in
focus to the Company’s strategy to increase the onboarding of high
quality of customers; a reduction in the Company’s customer base
due to regulatory restrictions in Ontario, New York and California;
selling constraints posed by the COVID-19 pandemic; and competitive
pressures on pricing in the United States
- Base gross margin:
Decrease in the fourth quarter, excluding the financial impact to
the Company of the Weather Event, was primarily driven by a decline
in the customer base.
- Base EBITDA:
Decrease in the fourth quarter, excluding the financial impact to
the Company of the Weather Event, was driven by lower Base gross
margin, partially offset by a current year reduction in bad debt
expense, as well as lower administrative, commission and selling
expenses.
- Unlevered free cash
flow: Fiscal 2021 decrease in the unlevered free cash flow
was primarily driven by payments to ERCOT associated with the
Winter Weather Event, partially offset by the stay of payables as
at March 9, 2021 related to the CCAA filing.
Fiscal
Fourth Quarter Expense
Detail: |
|
For the three
months ended March 31 |
|
|
|
($ thousands) |
Fiscal 2021 |
Fiscal 2020 |
Change |
Administrative
expenses1 |
$29,884 |
$46,051 |
-35% |
Selling commission
expenses |
$28,295 |
$36,983 |
-23% |
Selling
non-commission and marketing expense |
$14,086 |
$16,584 |
-15% |
Bad debt
expense |
$7,301 |
$13,197 |
-45% |
1 Includes $0.07 million and $6.1 million of
strategic review costs for the third quarter of fiscal 2021 and
2020, respectively.
- Administrative
expenses: Excluding expenses related to the strategic
review, administrative expenses decreased by 25% to $29.8 million
for the three months ended March 31, 2021, compared to $39.9
million for the three months ended March 31, 2020 due to lower
employee related costs and lower professional fees.
- Selling commission
expenses: Decrease was driven by lower commission expenses
from lower sales from direct in-person channels driven by the
COVID-19 pandemic and lower commercial segment driven by the
competitive price pressures and the impact of the COVID-19
pandemic.
- Selling non-commission and
marketing expenses: Decline was the result of cost
reductions from the shutdown of the internal door-to-door sales
channel and continued focus on cost containment, partially offset
by increased investment in digital marketing.
- Bad debt expense:
Decrease was a result of enhanced operating controls and
operational processes implemented in Fiscal 2020 and release of
previous credit reserves as the Company continues to see consistent
payment trends and minimal impact from the COVID-19 pandemic.
Mass Markets Segment Performance
Mass
Markets Operating Highlights: |
|
Fiscal 2021 |
Fiscal 2020 |
Change |
Mass Markets gross margin on
added/renewed (full year) |
$307/RCE |
$311/RCE |
-1% |
Embedded gross margin1 ($
millions) |
$1,026 |
$1,380 |
-26% |
Total gross (RCE)
additions |
66,000 |
48,000 |
38% |
Attrition (trailing 12
months) |
15% |
25% |
-40% |
Renewals (trailing 12
months) |
74% |
73% |
1% |
1See “Non-IFRS financial measures”
-
Average Mass Markets gross margin per RCE added or
renewed: The decrease in the average gross margin added
and renewed is primarily related to unfavourable foreign exchange
fluctuations.
-
Mass Markets embedded gross margin: The decline
resulted from the decline in the customer base and the unfavorable
foreign exchange fluctuations.
- Mass Markets gross RCE
additions: The increase was driven by
continued growth in the digital marketing channel as well improved
offerings.
-
Mass Markets attrition rate: The improvements in
attrition reflect the benefits of focus on sales to higher quality
customers and increased focus on the customer experience.
-
Mass Markets renewal rate: The increase in the
renewal rate was driven by improved retention offerings and
increased focus on the customer experience
Mass Markets RCE Summary:
MASS
MARKETS |
4/1/2020 |
Additions |
Attrition |
Failed torenew |
3/31/2021 |
Change |
Gas |
349,000 |
7,000 |
(46,000) |
(27,000) |
283,000 |
-19% |
Electricity |
974,000 |
159,000 |
(144,000) |
(85,000) |
904,000 |
-7% |
Total Mass Markets RCEs |
1,323,000 |
166,000 |
(190,000) |
(112,000) |
1,187,000 |
-10% |
Commercial Segment Performance
Commercial
Operating Highlights: |
|
Fiscal 2021 |
Fiscal 2020 |
Change |
Commercial gross
margin on added/renewed(full year) |
$72/RCE |
$91/RCE |
-21% |
Embedded gross
margin1($ millions) |
$366 |
$428 |
-14% |
Total gross
commercial (RCE) additions |
79,000 |
85,000 |
-7% |
Attrition
(trailing 12 months) |
12% |
11% |
9% |
Renewals (trailing
12 months) |
51% |
56% |
-9% |
1See “Non-IFRS financial measures
-
Average Commercial gross margin per RCE added or
renewed: The decrease resulted from a larger proportion of
Canadian Commercial RCEs signed on Index products
- Commercial embedded gross
margin: The decline resulted from the decrease in the
customer base and unfavourable exchange rate fluctuations.
- Commercial gross RCE additions: The increase
was driven by the easing of selling constraints posed by the
COVID-19 pandemic.
-
Commercial attrition rate: The increase reflects a
competitive pricing market for commercial customers.
-
Commercial renewal rate: The decrease reflects a
competitive market with competitors pricing aggressively and Just
Energy’s focus on retaining longer-term, profitable customers
rather than pursuing low margin sales.
Commercial RCE Summary:
COMMERCIAL |
4/1/2020 |
Additions |
Attrition |
Failed torenew |
3/31/2021 |
Change |
Gas |
397,000 |
52,000 |
(49,000) |
(27,000) |
373,000 |
-6% |
Electricity |
1,668,000 |
142,000 |
(197,000) |
(229,000) |
1,384,000 |
-17% |
Total Commercial RCEs |
2,065,000 |
194,000 |
(246,000) |
(256,000) |
1,757,000 |
-15% |
Further information regarding the CCAA
proceedings is available at the Monitor’s website
at http://cfcanada.fticonsulting.com/justenergy. Information
regarding the CCAA proceedings can also be obtained by calling the
Monitor’s hotline at 416-649-8127 or 1-844-669-6340 or by email
at justenergy@fticonsulting.com.
About Just Energy Group
Inc.
Just Energy is a retail energy provider
specializing in electricity and natural gas commodities and
bringing energy efficient solutions and renewable energy options to
customers. Currently operating in the United States and Canada,
Just Energy serves residential and commercial customers. Just
Energy is the parent company of Amigo Energy, Filter Group Inc.,
Hudson Energy, Interactive Energy Group, Tara Energy, and
terrapass. Visit https://investors.justenergy.com/ to learn
more.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking
statements, including, without limitation, statements with respect
to the implementation of HB 4492 by the Commission, the
establishment of financing mechanisms for the payment of the (i)
ancillary service charges above US $9,000/MWh during the extreme
weather event in Texas in February 2021 (the “Weather Event”); (ii)
reliability deployment price adders charged by the Electric
Reliability Council of Texas, Inc. (“ERCOT”) during the Weather
Event; and (iii) amounts owed to ERCOT due to defaults of
competitive market participants, which were subsequently
“short-paid” to market participants, including Just Energy,
(collectively, the “Costs”) incurred by load-serving entities, and
whether the Company may ultimately recover any amount of Costs.
These statements are based on current expectations that involve
several risks and uncertainties which could cause actual results to
differ from those anticipated. These risks include, but are not
limited to, risks with respect to: the Commission deciding against
establishing financing mechanisms to recover the Costs, Just Energy
failing to meet the requirements under any rules established by the
Commission with respect to financing mechanisms to recover the
Costs, and any litigation with respect to the financing mechanism
established by the Commission; the ability of the Company to
continue as a going concern; the outcome of proceedings under CCAA
proceedings with respect to the Company and similar legislation in
the United States; the impact of any recovery of the Costs on the
Company and/or its proceedings under CCAA and similar United States
legislation; the outcome of any legislative or regulatory actions;
the outcome of any invoice dispute with ERCOT; the outcome of
potential litigation in connection with the Weather Event; the
quantum of the financial loss to the Company from the Weather Event
and its impact on the Company’s liquidity; the Company’s
discussions with key stakeholders regarding the Weather Event and
the CCAA proceedings and the outcome thereof; the impact of the
evolving COVID-19 pandemic on the Company’s business, operations
and sales; reliance on suppliers; uncertainties relating to the
ultimate spread, severity and duration of COVID-19 and related
adverse effects on the economies and financial markets of countries
in which the Company operates; the ability of the Company to
successfully implement its business continuity plans with respect
to the COVID-19 pandemic; the Company’s ability to access
sufficient capital to provide liquidity to manage its cash flow
requirements; general economic, business and market conditions; the
ability of management to execute its business plan; levels of
customer natural gas and electricity consumption; extreme weather
conditions; rates of customer additions and renewals; customer
credit risk; rates of customer attrition; fluctuations in natural
gas and electricity prices; interest and exchange rates; actions
taken by governmental authorities including energy marketing
regulation; increases in taxes and changes in government
regulations and incentive programs; 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 or financial results 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
and Exchange Commission’s website at www.sec.gov or through Just
Energy’s website at www.investors.justenergy.com.
NON-IFRS MEASURES
The financial measures such as “EBITDA”, “Base
EBITDA, “Base gross margin”, “Free cash flow” “Unlevered free cash
flow” and “Embedded gross margin” do not have a standardized
meaning prescribed by International Financial Reporting Standards
(“IFRS”) and may not be comparable to similar measures presented by
other companies. This financial measure should not be considered as
an alternative to, or more meaningful than, net income (loss), cash
flow from operating activities and other measures of financial
performance as determined in accordance with IFRS, but the Company
believes that these measures are useful in providing relative
operational profitability of the Company’s business. Please refer
to “Key Terms” in the Just Energy Annual Fiscal 2021’s Management’s
Discussion and Analysis for the Company’s definition of “EBITDA”
and other non-IFRS measures.
Neither the TSX Venture Exchange nor its
Regulation Services Provider accepts responsibility for the
adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE
CONTACT: Michael
CarterChief Financial OfficerJust
Energymcarter@justenergy.com
or
InvestorsMichael CummingsAlpha
IRPhone: (617) 982-0475 JE@alpha-ir.com
MonitorFTI Consulting
Inc.Phone: 416-649-8127 or
1-844-669-6340justenergy@fticonsulting.com
MediaBoyd ErmanLongview
CommunicationsPhone: 416-523-5885berman@longviewcomms.ca
Source: Just Energy Group
Inc.
Supplemental Tables:
Financial
and operating highlights |
For the years
ended March 31. |
|
|
|
(thousands of
dollars, except where indicated and per share amounts) |
|
|
|
|
|
Fiscal 2021 |
|
|
Change |
|
|
|
Fiscal 2020 |
|
Sales |
$ |
2,740,037 |
|
|
(13 |
)% |
|
$ |
3,153,652 |
|
Base gross margin1 |
|
536,858 |
|
|
(12 |
)% |
|
|
610,580 |
|
Administrative expenses2 |
|
142,391 |
|
|
(15 |
)% |
|
|
167,936 |
|
Selling commission
expenses |
|
129,653 |
|
|
(9 |
)% |
|
|
142,682 |
|
Selling non-commission and
marketing expense |
|
49,868 |
|
|
(36 |
)% |
|
|
78,138 |
|
Bad debt expense |
|
34,260 |
|
|
(57 |
)% |
|
|
80,050 |
|
Finance costs |
|
86,620 |
|
|
(19 |
)% |
|
|
106,945 |
|
Profit (loss) from continuing
operations4 |
|
(402,756 |
) |
|
NMF3 |
|
|
|
(298,233 |
) |
Base EBITDA1 |
|
182,831 |
|
|
(2 |
)% |
|
|
185,836 |
|
Total gross mass markets (RCE)
additions |
|
166,000 |
|
|
(37 |
)% |
|
|
262,000 |
|
Total gross commercial (RCE)
additions |
|
194,000 |
|
|
(57 |
)% |
|
|
454,000 |
|
Total net mass markets (RCE)
additions |
|
(136,000 |
) |
|
NMF3 |
|
|
|
(227,000 |
) |
Total
net commercial (RCE) additions |
|
(308,000 |
) |
|
NMF3 |
|
|
|
(16,000 |
) |
See “Non-IFRS financial measures” on page 7 of the MD&A.2
Includes $3.7 million and $13.9 million of Strategic Review costs
for fiscal 2021 and 2020, respectively.3 Not a meaningful figure. 4
Profit (loss) includes the impact of unrealized gains (losses),
which represents the mark to market of future commodity supply
acquired to cover future customer demand as well as weather hedge
contracts entered into as part of the Company’s risk management
practice. The supply has been sold to customers at fixed prices,
minimizing any realizable impact of mark to market gains and
losses.
Balance sheet
(thousands of dollars) |
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
3/31/2021 |
|
|
3/31/2020 |
|
Assets: |
|
|
|
|
|
|
Cash |
$ |
215,989 |
|
$ |
26,093 |
|
Trade and other receivables,
net |
|
340,201 |
|
|
403,907 |
|
Total fair value of derivative
financial assets |
|
35,626 |
|
|
65,145 |
|
Other current assets |
|
163,405 |
|
|
203,270 |
|
Total assets |
|
1,091,806 |
|
|
1,215,833 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
Trade payables and other |
$ |
921,595 |
|
$ |
685,665 |
|
Total fair value of derivative
financial liabilities |
|
75,146 |
|
|
189,706 |
|
Total long-term debt |
|
655,740 |
|
|
782,003 |
|
Total
liabilities |
|
1,686,628 |
|
|
1,711,121 |
|
Summary of Cash
Flows |
|
|
|
|
|
|
|
For the years
ended March 31. |
|
|
|
|
|
|
(thousands of dollars) |
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2021 |
|
|
|
Fiscal 2020 |
|
Operating activities |
|
|
$ |
46,301 |
|
|
$ |
41,137 |
|
Investing activities |
|
|
|
(6,937 |
) |
|
|
(20,882 |
) |
Financing activities,
excluding dividends |
|
|
|
175,060 |
|
|
|
21,096 |
|
Effect of foreign currency
translation |
|
|
|
(24,527 |
) |
|
|
(1,026 |
) |
Increase in cash before
dividends |
|
|
|
189,896 |
|
|
|
42,377 |
|
Dividends (cash payments) |
|
|
|
- |
|
|
|
(26,172 |
) |
Increase (decrease) in
cash |
|
|
|
189,896 |
|
|
|
16,205 |
|
Cash and cash equivalents –
beginning of period |
|
|
|
26,093 |
|
|
|
9,888 |
|
Cash
and cash equivalents – end of period |
|
|
$ |
215,989 |
|
|
$ |
26,093 |
|
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