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Just Energy Adjusted Earnings Higher on Weather, Customer Growth

August  12, 2011
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Just Energy Group Inc. reported Adjusted EBITDA of $37.4 million for the three months ended June 30, 2011 (first fiscal quarter of 2012), up from $29.7 million a year ago, on a 17% increase in gross margin and lower administrative costs, offset by an increase in selling and marketing and bad debt expenses (all figures Canadian).

Net income for the three months ended June 30, 2011 was $51.1 million, versus $270.8 million a year ago, due to the change in fair value of derivative instruments year-over-year.

Gross margin was $94.3 million, versus $80.4 million in the year-ago quarter, from gains in the U.S. electric, U.S. gas, and Canadian gas businesses. The gas businesses benefited from colder weather, and the absence of year-ago losses due to the sale of excess gas due to unseasonable warmth. U.S. electric gross margins were higher on customer growth.

Just Energy added a net of 44,000 Residential Customer Equivalents (RCEs) from April 1, 2011 through June 30, 2011, with its June 30, 2011 customer count standing 3.358 million RCEs, versus 3.314 million as of April 1, 2011 and 3.069 million as of June 30, 2010.

For comparison, net growth from December 31, 2010 through March 31, 2011 was 73,000 RCEs.

Gross RCE additions from April 1, 2011 through June 30, 2011 were 227,000, down 13% from the 261,000 gross additions in the year-ago quarter. The gross RCE additions reflect 79,000 RCEs from residential and small commercial customers and 148,000 RCEs from large commercial customers. A single commercial account with 70,000 RCEs accounted for nearly half of the gross large commercial additions.

Mass market gross additions were lower as the number of Just Energy's independent contractors decreased throughout the quarter due to the closure of sales offices that were underperforming. Just Energy has since opened new sales offices and said that it expects gross mass market additions to rebound accordingly.

U.S. electric RCEs were 1.452 million as of June 30, 2011, versus 1.348 million as of April 1, 2011 [+104,000]. U.S. gas RCEs were 567,000 as of June 30, 2011, versus 574,000 as April 1, 2011 [-7,000].

U.S. electric trailing 12-month attrition as of June 30, 2011 was 15%, versus 14% a year ago. U.S. gas trailing 12-month attrition was 21%, versus 28% a year ago.

The trailing 12-month renewal rate in the U.S. as of June 30, 2011 was 67% for electric customers (down from 83% a year ago), and 72% for gas customers (up from 69%). For U.S. electricity, Just Energy said that strong renewals in Texas were offset by Illinois and New York.

The actual aggregation costs per customer for the three months ended June 30, 2011, for residential and commercial customers signed by independent representatives and commercial customers signed by brokers were as follows:

Residential customers
- U.S. Gas: $206/RCE
- U.S. Electricity: $201/RCE

Commercial customers
- U.S. Gas: $138/RCE
- U.S. Electricity: $80/RCE

Commercial broker customers
- U.S. Gas: $36/RCE
- U.S. Electricity: $34/RCE

Annual gross margin for customers added through marketing or renewed during the quarter were lower than the margins of customers lost through attrition or failure to renew, due to the competitive price environment.

Annual gross margin per customer added, renewed, or lost during the quarter ending June 30, 2011 was as follows (gross number of customers in parenthesis):

Residential and small commercial customers added in the quarter
- U.S. Gas: $186 (22,000)
- U.S. Electricity: $160 (33,000)

Residential and small commercial customers renewed in the quarter
- U.S. Gas: $206 (5,000)
- U.S. Electricity: $161 (5,000)

Residential and small commercial customers lost in the quarter
- U.S. Gas: $212 (29,000)
- U.S. Electricity: $226 (12,000)

- Large commercial customers added in the quarter: $84 (148,000)

- Large commercial customers lost in the quarter: $126 (78,000)

Bad debt expense for the three months ended June 30, 2011 was $6.8 million, versus $5.7 million a year ago, solely due to a 17% increase in total revenues for those markets where Just Energy bears bad debt risk. Bad debt as a percent of revenue remained flat versus the year-ago at 2.8%.

 

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