The following MD&A is a review of the financial condition and operating results
of Just Energy for the three months and six months ended September 30, 2022.
This MD&A should be read in conjunction with Just Energy's Interim Condensed
Consolidated Financial Statements for the three months and six months ended
September 30, 2022 and related notes (Part I, Item 1, "Interim Condensed
Consolidated Financial Statements And Notes") and (ii) Consolidated Financial
Statements for the year ended March 31, 2022 and related notes (Part II, Item 8,
"Financial Statements and Supplementary Data") of the Annual Report. The
financial information contained herein has been prepared in accordance with U.S.
GAAP. All dollar amounts are expressed in US dollars unless otherwise noted.
Quarterly reports, the Annual Report and supplementary information can be found
on Just Energy's corporate website at investors.justenergy.com. Additional
information can be found on SEDAR at www.sedar.com or on the SEC website
at www.sec.gov.
COMPANIES' CREDITORS ARRANGEMENT AND CHAPTER 15 PROCEEDINGS
In February 2021, the State of Texas experienced the Weather Event. The Weather
Event led to increased electricity demand and sustained high prices from
February 13, 2021 through February 20, 2021. As a result of the losses sustained
and without sufficient liquidity to pay the corresponding invoices from the
ERCOT when due, and accordingly, on March 9, 2021, Just Energy applied for and
received Court Orders under the CCAA from the Ontario Court and under Chapter 15
in the U.S. from the Houston Court. Protection under the Court Orders allows
Just Energy to operate while it restructures its capital structure.
As part of the CCAA filing, the Company entered into a $125.0 million DIP
Facility financing with certain affiliates of PIMCO (refer to Part I, Item 1,
"Interim Condensed Consolidated Financial Statements And Notes", Note 9(a)
Long-Term Debt and Financing). The Company also entered into qualifying support
agreements with its largest commodity supplier and ISO services provider. The
filings and associated DIP Facility arranged by the Company, enabled Just Energy
to continue all operations without interruption throughout the U.S. and Canada
and to continue making payments required by ERCOT and satisfy other regulatory
obligations.
On September 15, 2021, the Ontario Court approved the Company's request to
establish a claims process to identify and determine claims against the Company
and its subsidiaries that are subject to the ongoing Claims Procedure Order. On
August 18, 2022 the Ontario Court suspended the Claims Procedure Order with (i)
the barring of claims pursuant to the applicable provisions of such order
remaining in effect and (ii) the Company's ability, with the consent of the
Monitor, to refer claims for adjudication for the purposes of determining
entitlement to proceeds to be distributed in accordance with a transaction
completed pursuant to the SISP. As part of item (ii) above, Just Energy may
continue to review and determine which claims will be allowed, modified or
disallowed, which may result in additional liabilities subject to compromise
that are not currently reflected in the Interim Condensed Consolidated Financial
Statements (refer to Part I, Item 1, "Interim Condensed Consolidated Financial
Statements And Notes" Note 15(b) Commitments and Contingencies).
SALE AND INVESTMENT SOLICITATION PROCESS AND TRANSACTION
On August 4, 2022, the Company entered into the Transaction Agreement and the
SISP Support Agreement in connection with the SISP to facilitate its exit from
the CCAA proceedings as a going concern. On August 18, 2022, the Ontario Court
granted an order, among other things, authorizing the Company to conduct the
SISP. On October 17, 2022, the Company announced that the Transaction was the
successful bid pursuant to the SISP.
On November 3, 2022, the Ontario Court issued an order (the "Reverse Vesting
Order") that approved the Transaction contemplated by the Transaction Agreement.
The Just Energy Entities are seeking recognition of the Reverse Vesting Order in
their Chapter 15 case in the Bankruptcy Court of the Southern District of Texas,
Houston Division (the "Houston Court") on December 1, 2022.
Subject to the satisfaction or waiver of the other conditions to closing, upon
the closing of the Transaction, the Purchaser will own all of the outstanding
equity of Just Energy (U.S.) Corp., which will be the new parent company of all
of the Just Energy Entities (other than those excluded pursuant to the terms of
the Transaction Agreement), including the Company, and the Just Energy Entities
will continue their business and operations in the ordinary course. All
currently outstanding shares, options and other equity of Just Energy will be
cancelled or redeemed for no consideration and without any vote or other action
of the existing shareholders.
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Key terms of the Transaction include:
The purchase price payable pursuant to the Transaction is (i) $184.9 million in
cash, plus up to an additional CAD $10 million solely in the event that
additional amounts are required to make applicable payments pursuant to the
? Transaction Agreement; plus (ii) a credit bid of approximately $230 million
plus accrued interest of secured claims assigned to the Purchaser; plus (iii)
the assumption of Assumed Liabilities (as defined below), including up to CAD
$10 million owing under the Credit Facility (the "Credit Facility Remaining
Debt") to remain outstanding under an amended and restated credit agreement.
Applicable post-filing claims, the Credit Facility Remaining Debt, claims by
? energy regulators, and certain other liabilities enumerated in the Transaction
Agreement ("Assumed Liabilities") will continue to be liabilities of the Just
Energy Entities following consummation of the Transaction.
? Excluded liabilities and excluded assets of the Just Energy Entities will be
discharged from the Just Energy Entities pursuant to the Reverse Vesting Order.
The consummation of the Transaction is subject to satisfaction or waiver of a
number of conditions precedent set forth in the Transaction Agreement including,
among other things, receipt of all required regulatory approvals, and the
recognition of such Reverse Vesting Order by the Houston Court. The outside date
for completion of the Transaction is December 16, 2022, subject to extension in
certain circumstances set forth in the Transaction Agreement.
Under the Transaction, no amounts will be available for distribution to the Just
Energy Entities' general unsecured creditors, including the holders of Just
Energy's $205.9 million Term Loan and the holders of Just Energy's 7.0%
subordinated Notes Indenture, unless expressly classified as "Assumed
Liabilities" pursuant to the Transaction Agreement. Liabilities that will not be
retained, including the Term Loan and the Notes Indenture, will be transferred
to newly formed corporations (the "ResidualCos"), along with excluded assets,
under the Transaction Agreement. The Company expects that there will not be any
recoveries available from the ResidualCos.
On November 3, 2022, the Ontario Court extended the stay until January 31, 2023.
The stay extension allows the Company to continue to operate in the ordinary
course of business while pursuing its proposed restructuring.
COMMON SHARES
On May 19, 2022, the common shares of the Company were transferred from the TSX
Venture Exchange to the NEX and are trading under the symbol "JE.H.". The
Company's common shares continue to trade on the OTC Pink Market under the
symbol "JENGQ".
Implementation of the Transaction is subject to the condition that Just Energy,
and the other Just Energy Entities, will have ceased to be a reporting issuer
under any Canadian or U.S. securities laws, and that no Just Energy Entity will
become a reporting issuer under any Canadian or U.S. securities laws as a result
of completion of the Transaction. In connection with the completion of the
Transaction, the Company intends to: (i) apply for an order from Canadian
securities administrators that it will cease to be a reporting issuer under
Canadian securities laws immediately prior to the effective date of the
Transaction; and (ii) file to suspend its reporting obligations under U.S.
securities laws. Additionally, the Company intends to submit an application to
de-list its common shares from trading on the NEX on or before the closing of
the Transaction. Concurrent with the delisting from the NEX, the Company expects
that the common shares will cease trading on the OTC Pink Market.
WEATHER EVENT RELATED UPLIFT SECURITIZATION PROCEEDS
On June 16, 2021, HB 4492 became law in Texas. HB 4492 provides a mechanism for
recovery of certain Weather Event Costs, incurred by various parties, including
the Company, during the Weather Event, through certain securitization
structures.
On October 13, 2021, the PUCT approved the Final Order authorizing the
securitization of certain Weather Event Costs by ERCOT. On December 7, 2021,
ERCOT filed its calculation with the PUCT in accordance with the PUCT Final
Order implementing HB 4492. The Company received $147.5 million in June 2022.
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Forward-looking information
This MD&A may contain forward-looking statements, including, without limitation,
statements with respect to timing for court approvals, applications to cease to
be a reporting issuer and delist from exchanges and the anticipated timing to
close the Transaction. 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 consummation of the
Transaction and the anticipated results thereof; satisfaction of the conditions
precedent to consummation of the Transaction, including approval thereof by the
Houston Court and receipt of all required regulatory approvals; the ability of
the Just Energy Entities to continue as a going concern following consummation
of the Transaction; the outcome of any potential litigation with respect to the
February 2021 extreme weather event in Texas; the outcome of any invoice dispute
with the Electric Reliability Council of Texas, Inc.; the impact of the COVID-19
pandemic on the Company's business, operations and sales; 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 Form 10K and other
reports on file with the U.S. Securities and Exchange Commission which can be
accessed at www.sec.gov and with the Canadian securities regulatory authorities
which can be accessed through the SEDAR website at www.sedar.com or through Just
Energy's website at investors.justenergy.com.
Company overview
Just Energy is a retail energy provider specializing in electricity and natural
gas commodities, energy efficient solutions, carbon offsets and renewable energy
options. Operating in the U.S. and Canada, Just Energy serves both residential
and commercial customers, providing homes and businesses with a broad range of
energy solutions that deliver comfort, convenience and control. Just Energy is
the parent company of Amigo Energy, Filter Group, Hudson Energy, Interactive
Energy Group, Tara Energy and Terrapass.
[[Image Removed: Graphic]]
Operations overview
MASS MARKETS SEGMENT
The Mass Markets segment includes customers acquired and served under the Just
Energy, Tara Energy, Amigo Energy and Terrapass brands. Marketing of the energy
products of this segment is primarily done through the digital and retail sales
channels. Mass Market customers make up 72% of Just Energy's Base Gross Margin ,
which is currently focused on price-protected and flat-bill product offerings,
as well as JustGreen products. To the extent that certain markets are better
served by shorter-term or enhanced variable rate products, the Mass Markets
segment's sales channels offer these products.
Just Energy also provides home water filtration systems with its line of
consumer product and service offerings through Filter Group.
COMMERCIAL SEGMENT
The Commercial segment includes customers acquired and served under Hudson
Energy, as well as brokerage services managed by Interactive Energy Group.
Hudson Energy sales are made through three main channels: brokers, in-person
commercial independent contractors and inside commercial sales representatives.
Commercial customers make up 28% of Just Energy's Base Gross Margin. Products
offered to Commercial customers range from standard fixed-price offerings
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to "one off" offerings, tailored to meet the customer's specific needs. These
products can be fixed or floating rate or a blend of the two, and normally have
a term of less than five years. Base Gross Margin per RCE for this segment is
lower than it is for the Mass Markets segment, but customer acquisition costs
and ongoing customer care costs per RCE are lower as well. Commercial customers
also have significantly lower attrition rates than Mass Markets customers.
ABOUT JUST ENERGY'S PRODUCTS
Just Energy offers products and services to address customers' essential needs,
including electricity and natural gas commodities, energy efficient solutions,
carbon offsets and renewable energy options as well as water quality and
filtration devices.
Electricity
Just Energy services various states and territories in the U.S. and Canada with
electricity. A variety of electricity solutions are offered, including
fixed-price, flat-bill and variable-price products on both short-term and
longer-term contracts. Most of these products provide customers with
price-protection programs for the majority of their electricity requirements.
Just Energy uses historical usage data for enrolled customers to predict future
customer consumption and to help with long-term supply procurement decisions.
Flat-bill products offer customers the ability to pay a fixed amount per period
regardless of usage.
Just Energy purchases electricity supply from market counterparties for Mass
Markets and Commercial customers based on forecasted customer aggregation.
Electricity supply is generally purchased concurrently with the execution of a
contract for larger Commercial customers. Historical customer usage is obtained
from LDCs, which, when normalized to average weather, provides Just Energy with
expected normal customer consumption. Just Energy mitigates exposure to weather
variations through active management of the electricity portfolio and the
purchase of options, including weather derivatives. Just Energy's ability to
successfully mitigate weather effects is limited by the degree to which weather
conditions deviate from normal and the availability and costs of such options.
To the extent that balancing electricity purchases are outside the acceptable
forecast, Just Energy bears the financial responsibility for excess or short
supply caused by fluctuations in customer usage. Any supply balancing not fully
covered through customer pass-throughs, active management or the options
employed may increase or decrease Just Energy's Base Gross Margin depending upon
market conditions at the time of balancing.
Natural gas
Just Energy offers natural gas customers a variety of products ranging from
five-year fixed-price contracts to month-to-month variable-price contracts. Gas
supply is purchased from market counterparties based on forecasted consumption.
For larger Commercial customers, gas supply is generally purchased concurrently
with the execution of a contract. Variable rate products allow customers to
maintain flexibility while retaining the ability to lock into a fixed price at
their discretion. Flat-bill products offer customers the ability to pay a fixed
amount per period regardless of usage or changes in the price of the commodity.
The LDCs provide historical customer usage which, when normalized to average
weather, enables Just Energy to purchase the expected normal customer
consumption. Just Energy mitigates exposure to weather variations through active
management of the gas portfolio, which involves, but is not limited to, the
purchase of options, including weather derivatives. Just Energy's ability to
successfully mitigate weather effects is limited by the degree to which weather
conditions deviate from normal and the availability and costs of such options.
To the extent that balancing requirements are outside the forecasted purchase,
Just Energy bears the financial responsibility for fluctuations in customer
usage. To the extent that supply balancing is not fully covered through active
management or the options employed, Just Energy's Base Gross Margin may increase
or decrease depending upon market conditions at the time of balancing.
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Territory Gas delivery method
Manitoba, Ontario, Quebec The volumes delivered for a customer typically remain
and Michigan constant throughout the year. Revenues are not
recognized until the customer consumes the gas. During
the winter months, gas is consumed at a rate that is
greater than delivery, resulting in accrued gas
receivables, and, in the summer months, deliveries to
LDCs exceed customer consumption, resulting in gas
delivered in excess of consumption. Just Energy
receives cash from the LDCs as the gas is delivered.Alberta, British The volume of gas delivered is based on the estimated
Columbia, Saskatchewan, consumption and storage requirements for each month.
California, Illinois, The amount of gas delivered in the months of October
Indiana, Maryland, New to March is higher than in the months of April to
Jersey, New York, Ohio September. Cash flow received from most of these
and Pennsylvania markets is greatest during the fall and winter
quarters, as cash is normally received from the LDCs
in the same period as customer consumption.
JustGreen
Many customers have the ability to choose an appropriate JustGreen program to
supplement their electricity and natural gas, providing an effective method to
offset their carbon footprint associated with the respective commodity
consumption.
JustGreen's electricity products offer customers the option of having all or a
portion of the volume of their electricity usage sourced from renewable green
sources such as wind, solar, hydropower or biomass, via power purchase
agreements and renewable energy certificates. JustGreen programs for gas
customers involve the purchase of carbon offsets from carbon capture and
reduction projects. Additional green products allow customers to offset their
carbon footprint without buying energy commodity products and can be offered in
all states and provinces without being dependent on energy deregulation.
Just Energy currently sells JustGreen electricity and gas in eligible markets
across North America. Of all Mass Market customers who contracted with Just
Energy in the past year, 36% purchased JustGreen for some or all of their energy
needs. On average, these customers elected to offset 100% of their consumption
as green supply. For comparison, as reported for the trailing 12 months ended
September 30, 2021, 40% of Mass Market customers who contracted with Just Energy
chose to include JustGreen for an average of 73% of their consumption. As at
September 30, 2022, JustGreen makes up 24% of the Mass Market electricity
portfolio, compared to 25% in the year ago period. As at September 30, 2022,
JustGreen makes up 25% of the Mass Market gas portfolio, compared to 17% in
the year ago period.
Terrapass
Through Terrapass, customers can offset their environmental impact by purchasing
high quality environmental products. Terrapass supports projects throughout
North America and world-wide that destroy greenhouse gases, produce renewable
energy and restore freshwater ecosystems. Each project is made possible through
the purchase of carbon offsets, renewable energy credits and BEF Water
Restoration Certificates®. Terrapass offers various purchase options for Mass
Markets or Commercial customers, enabling businesses to incorporate seamless
carbon offset options by providing marketing and product integration solutions.
Non-U.S. GAAP financial measures
Just Energy's Interim Condensed Consolidated Financial Statements are prepared
in accordance with U.S. GAAP. The financial measures that are defined below do
not have a standardized meaning prescribed by U.S. GAAP and may not be
comparable to similar measures presented by other companies. These financial
measures 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 U.S. GAAP; however, the
Company believes that these measures are useful in providing relative
operational profitability of the Company's business.
BASE GROSS MARGIN
"Base Gross Margin" represents gross margin adjusted to exclude the effect of
unrealized gains (losses) on derivative instruments and the one-time impact of
the Weather Event. Base Gross Margin is a key measure used by management to
assess performance and allocate resources. Management believes that the realized
gains (losses) on derivative instruments reflect the long-term financial
performance of Just Energy and thus have included them in the Base Gross Margin
calculation.
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EBITDA
"EBITDA" refers to earnings before interest expense, income taxes, depreciation
and amortization with an adjustment for discontinued operations. EBITDA is a
non-U.S. GAAP measure that reflects the operational profitability of the
business.
BASE EBITDA
"Base EBITDA" refers to EBITDA adjusted to exclude the impact of unrealized mark
to market gains (losses) arising from U.S. GAAP requirements for derivative
instruments, Reorganization Costs, Weather Event, share-based compensation,
impairment of goodwill, intangible, inventory and others, gain on investment,
realized gains (losses) related to gas held in storage until gas is sold, and
non-controlling interest. This measure reflects operational profitability as the
impact of the gain on investment, impairment of inventory and Reorganization
Costs are one-time non-recurring events. Non-cash share-based compensation
expense is treated as an equity issuance for the purposes of this calculation as
it would be settled in Common Shares; and the unrealized mark to market gains
(losses) are associated with supply already sold in the future at fixed prices.
Just Energy tries to ensure that customer margins are protected by entering into
fixed-price supply contracts. Under U.S. GAAP, the customer contracts are not
marked to market; however, there is a requirement to mark to market the future
supply contracts. This creates unrealized and realized gains (losses) depending
upon current supply pricing. Management believes that the unrealized mark to
market gains (losses) do not impact the long-term financial performance of Just
Energy and has excluded them from the Base EBITDA calculation.
Just Energy uses derivative instruments to hedge the gas held in storage for
future delivery to customers. Under U.S. GAAP, the customer contracts are not
marked to market: however, there is a requirement to report the realized gains
(losses) in the current period instead of recognizing them as a cost of
inventory until delivery to the customer. Just Energy excludes the realized
gains (losses) to EBITDA during the injection season and includes them during
the withdrawal season in accordance with the customers receiving the gas.
Management believes that including the realized gains (losses) during the
withdrawal season when the customers receive the gas is more reflective of the
operations of the business.
Just Energy recognizes the incremental acquisition costs of obtaining a customer
contract as an asset since these costs would not have been incurred if the
contract was not obtained and are recovered through the consideration collected
from the contract. Commissions and incentives paid for commodity contracts and
value-added products contracts are capitalized and amortized over the term of
the contract. Amortization of these costs with respect to customer contracts is
included in the calculation of Base EBITDA (as selling commission expenses).
Amortization of incremental acquisition costs on value-added product contracts
is excluded from the Base EBITDA calculation as value-added products are
considered to be a lease asset akin to a fixed asset whereby amortization or
depreciation expenses are excluded from Base EBITDA.
FREE CASH FLOW AND UNLEVERED FREE CASH FLOW
Free cash flow represents cash flow from operations less maintenance capital
expenditures. Unlevered free cash flow represents free cash flows plus interest
expense excluding the non-cash portion.
EMBEDDED GROSS MARGIN ("EGM")
EGM is a rolling five-year measure of management's estimate of future contracted
energy and product gross margin. The commodity EGM is the difference between
existing energy customer contract prices and the cost of supply for the
remainder of the term, with appropriate assumptions for commodity RCE attrition
and renewals. The product gross margin is the difference between existing
value-added product customer contract prices and the cost of goods sold on a
five-year undiscounted basis for such customer contracts, with appropriate
assumptions for value-added product attrition and renewals. It is assumed that
expiring contracts will be renewed at target margin renewal rates.
EGM indicates the gross margin expected to be realized over the next five years
from existing customers. It is intended only as a directional measure for future
gross margin. It is neither discounted to present value nor is it intended to
consider administrative and other costs necessary to realize this margin.
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Financial and operating highlights
For the three months ended September 30.
(thousands of dollars, except where indicated and per share amounts)
% increase
Fiscal 2023 (decrease) Fiscal 2022
Revenue $ 684,968 22 % $ 559,382
Base Gross Margin1 113,569 23 % 92,442
Administrative expenses 29,934 0 % 29,816
Selling commission expenses 21,132 (4) % 22,102
Selling non-commission and marketing expense 14,111 5 % 13,436
Provision for expected credit loss 16,756 469 % 2,945
Reorganization Costs 26,951 83 % 14,746
Interest expense 8,921 15 % 7,754
Net Income (Loss) for the period (205,617) NMF 2 265,081
Base EBITDA1 32,143 31 % 24,459
RCE Mass Markets count 1,266,000 10 % 1,149,000
RCE Mass Markets net adds 27,000 200 % 9,000
RCE Commercial count 1,530,000 (8) % 1,661,000
1 See "Non-U.S. GAAP financial measures" above.
2 Not a meaningful figure.
Revenue increased by 22% to $685.0 million for the three months ended September
30, 2022 compared to $559.4 million for the three months ended September 30,
2021. The increase was primarily driven by an increase in the Texas mass market
customer base and warmer weather in Texas.
Base Gross Margin increased by 23% to $113.6 million for the three months ended
September 30, 2022 compared to $92.4 million for the three months ended
September 30, 2021. The increase was primarily driven by higher realized margins
and growth in mass markets customer base.
Base EBITDA increased by 31% to $32.1 million for the three months ended
September 30, 2022 compared to $24.5 million for the three months ended
September 30, 2021. The increase was primarily driven by higher Base Gross
Margin, partially offset by higher provision for expected credit loss.
Administrative expenses remained flat at $29.9 million for the three months
ended September 30, 2022 compared to $29.8 million for the three months ended
September 30, 2021.
Selling commission expenses decreased by 4% to $21.1 million for the three
months ended September 30, 2022 compared to $22.1 million for the three months
ended September 30, 2021. The decrease was primarily due to lower prepaid
commission amortization from lower sales in prior years.
Selling non-commission and marketing expenses increased by 5% to $14.1 million
for the three months ended September 30, 2022 compared to $13.4 million for the
three months ended September 30, 2021. The increase was driven by investment in
sales agent costs to drive customer additions and retention.
Provision for expected credit loss increased by 469% to $16.8 million for the
three months ended September 30, 2022 compared to $2.9 million for the three
months ended September 30, 2021. The increase was driven by regulatory
requirements due to extended hot weather in Texas, as well as higher sales in
Texas from an increase in the mass market customer base, and a release of
reserves in the prior year.
Reorganization Costs include professional and advisory costs of $16.3 million,
$0.5 million for the key employee retention plan and $10.1 million in
prepetition claims, contract terminations and other costs.
Net loss was $205.6 million for the three months ended September 30, 2022
compared to net income of $265.1 million for the three months ended September
30, 2021. The net loss was driven by an unrealized mark to market loss on
derivative instruments in the three months ended September 30, 2022. The net
income in the three months ended September 30, 2021 was primarily driven by an
unrealized mark to market gain on derivative instrument. The unrealized mark to
market gains
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and losses on derivative financial instruments relate to the supply the Company
has purchased to deliver in the future to existing customers at fixed
contractual prices.
Mass Markets RCE Net Adds for the three months ended September 30, 2022 was a
gain of 27,000 compared to a gain of 9,000 for the three months ended September
30, 2021 driven by the increase in customer additions.
Financial and operating highlights
For the six months ended September 30.
(thousands of dollars, except where indicated and per share amounts)
% increase
Fiscal 2023 (decrease) Fiscal 2022
Revenue $ 1,255,554 19 % $ 1,055,743
Base Gross Margin1 203,918 18 % 173,524
Administrative expenses 57,421 5 % 54,460
Selling commission expenses 40,223 (6) % 42,750
Selling non-commission and marketing expense 27,492 9 % 25,124
Provision for expected credit loss 27,206 202 % 9,018
Reorganization Costs 46,082 48 % 31,232
Interest expense 17,409 5 % 16,584
Net Income (Loss) for the period (45,003) NMF 2 488,915
Base EBITDA1 52,616 22 % 43,229
Unlevered free cash flow1 146,542 338 % 33,470
EGM Mass Market 872,000 6 % 826,000
EGM Commercial 237,000 (11) % 265,500
RCE Mass Markets net adds 65,000 NMF 2 3,000
1 See "Non-U.S. GAAP financial measures" above.
2 Not a meaningful figure.
Revenue increased by 19% to $1,255.6 million for the six months ended September
30, 2022 compared to $1,055.7 million for the six months ended September 30,
2021. The increase was primarily driven by an increase in the Texas mass market
customer base and warmer weather in Texas.
Base Gross Margin increased by 18% to $203.9 million for the six months ended
September 30, 2022 compared to $173.5 million for the six months ended September
30, 2021. The increase was primarily driven by higher realized margins and
growth in mass markets customer base.
Base EBITDA increased by 22% to $52.6 million for the six months ended September
30, 2022 compared to $43.2 million for the six months ended September 30, 2021.
The increase was primarily driven by higher Base Gross Margin offset by higher
provision for expected credit loss.
Administrative expenses increased by 5% to $57.4 million for the six months
ended September 30, 2022 compared to $54.5 million to the six months ended
September 30, 2021. The increase was primarily driven by higher employee costs
and higher support cost driven by an increase in the Texas mass market customer
base.
Selling commission expenses decreased by 6% to $40.2 million for the six months
ended September 30, 2022 compared to $42.8 million for the six months ended
September 30, 2021. The decrease was primarily due to lower prepaid commission
amortization from lower sales in prior years.
Selling non-commission and marketing expenses increased by 9% to $27.5 million
for the six months ended September 30, 2022 compared to $25.1 million for the
six months ended September 30, 2021. The increase was driven by investment in
sales agent costs to drive customer additions and retention.
Provision for expected credit loss increased by 202% to $27.2 million for the
six months ended September 30, 2022 compared to $9.0 million for the six months
ended September 30, 2021. The increase was driven by regulatory requirements due
to extended hot weather in Texas, as well as higher sales in Texas from an
increase in the mass market customer base, and a release of reserves in the
prior year.
Reorganization Costs include professional and advisory costs of $29.9 million,
$2.1 million for the key employee retention plan and $14.1 million in
prepetition claims, contract terminations and other costs.
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Interest expense increased by 5% to $17.4 million for the six months ended
September 30, 2022 compared to $16.6 million for the six months ended
September 30, 2021. The increase is due to higher interest rates on credit
facility debt.
Unlevered free cash flow increased by $113.1 million to an inflow of $146.5
million for the six months ended September 30, 2022 compared to an inflow of
$33.5 million for the six months ended September 30, 2021. The increase is
primarily due to the proceeds from HB 4492
Mass Markets EGM increased by 6% to $872.0 million as at September 30, 2022
compared to $826.0 million as at September 30, 2021. The increase is primarily
due to the increase in mass market customers.
Commercial EGM decreased by 11% to $237.0 million as at September 30, 2022
compared to $265.5 million as at September 30, 2021. The decline resulted from
the decline in the customer base.
Base Gross Margin
For the three months ended September 30.
(thousands of dollars)
Fiscal 2023 Fiscal 2022
Mass Mass
Market Commercial Total Market Commercial Total
Gas $ 4,849 $ 2,615 $ 7,464 $ 5,074 $ 463 $ 5,537
Electricity 74,972 31,133 106,105 63,567 23,338 86,905
$ 79,821 $ 33,748 $ 113,569 $ 68,641 $ 23,801 $ 92,442
Increase 16% 42% 23%
For the six months ended September 30.
(thousands of dollars)
Fiscal 2023 Fiscal 2022
Mass Mass
Market Commercial Total Market Commercial Total
Gas $ 15,485 $ 1,544 $ 17,029 $ 16,640 $ 1,997 $ 18,637
Electricity 132,242 54,647 186,889 113,066 41,821 154,887
$ 147,727 $ 56,191 $ 203,918 $ 129,706 $ 43,818 $ 173,524
Increase 14% 28% 18%
1 See "Non-U.S. GAAP financial measures" above.
Mass Markets
Mass Markets Base Gross Margin increased by 16% to $79.8 million for the three
months ended September 30, 2022 compared to $68.6 million for the three months
ended September 30, 2021. The increase was primarily driven by higher mass
market volumes due to increase in customer base.
Mass Markets Base Gross Margin increased by 14% to $147.7 million for the six
months ended September 30, 2022 compared to $129.7 million for the six months
ended September 30, 2021. The increase was primarily driven by higher mass
market volumes due to increase in customer base.
Commercial
Commercial Base Gross Margin increased by 42% to $33.8 million for the three
months ended September 30, 2022 compared to $23.8 million for the three months
ended September 30, 2021. The increase was primarily driven by higher realized
margins partially offset by lower customer base.
Commercial Base Gross Margin increased by 28% to $56.2 million for the six
months ended September 30, 2022 compared to $43.8 million for the six months
ended September 30, 2021. The increase was primarily driven by higher average
realized margins partially offset by lower customer base.
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Mass Markets average realized Base Gross Margin
For the trailing 12 months ended September 30.
Fiscal 2023 Fiscal 2022
Base GM/RCE % Change Base GM/RCE
Gas $ 184 (34) % $ 277
Electricity 221 (9) % 244
Total $ 214 (15) % $ 252
Mass Markets average realized Base Gross Margin for the trailing 12 months ended
September 30, 2022 decreased 15% to $214 compared to $252 for the trailing 12
months ended September 30, 2021. The decrease is primarily attributable to
higher supply costs and competitive market pricing to support customer growth
and retention.
Commercial average realized Base Gross Margin
For the trailing 12 months ended September 30.
Fiscal 2023 Fiscal 2022
Base GM/RCE % Change Base GM/RCE
Gas $ 51 (14) % $ 59
Electricity 101 28 % 79
Total $ 90 20 % $ 75
Commercial average realized Base Gross Margin for the trailing 12 months ended
September 30, 2022 increased 20% to $90 compared to $75 for the trailing 12
months ended September 30, 2021.
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