Updated:
Just Energy Receives Chapter 15 Bankruptcy Protection in U.S.; Judge Asserts Exclusive Jurisdiction Over Any Relief Sought By Governmental Entity Seeking To Take Action Against Just Energy Licenses Due To Bankruptcy Petition

Just Energy Seeks Bankruptcy Protection, Arranges $125 Million Debtor In Possession Financing

Utility Had Sought To Prohibit Just Energy From Enrolling New Customers; Court Stays Regulator's Authority To Grant Such Request

March 9, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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4:30 p.m., 3/9: Updated with additional details below:

Just Energy Group Inc. ('Just Energy' or the 'Company') announced, "that it has sought and received creditor protection via an Initial Order under the Companies’ Creditors Arrangement Act ('CCAA') from the Ontario Superior Court of Justice (Commercial List) and is seeking similar protection under Chapter 15 of the Bankruptcy Code in the United States."

Just Energy has also reached an agreement with one of its Term Loan lenders for a US$125 million DIP financing.

"The Company’s largest commodity suppliers have also agreed to continue to support the Company with commodity supply and ISO services," Just Energy said

"All Services to customers across Company’s North American operations continue without interruption [and] no impact on customers’ bills or daily operations [is] expected," Just Energy said

"The filings, and associated US$125 million DIP financing arranged by the Company, enable 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," Just Energy said

"Just Energy sought and received a Stay of Proceedings and other protections provided by the CCAA in order to provide the Company with breathing room to pursue alternatives that would allow it to emerge as a strong, stable business. The Stay of Proceedings in favour of Just Energy has an initial term of 10 days, subject to extension as the Court deems appropriate. The filings have no impact on customer bills," Just Energy said

"Today’s filings are the result of unprecedented cold weather in Texas in February (the 'Weather Event'), and corresponding charges from ERCOT currently totaling over US$250 million that Just Energy must pay in the near term. The total financial impact may change due to ERCOT resettlements, potential orders of the Public Utility Commission (the 'Commission') with respect to recommendations of the Independent Market Monitor ('IMM'), the outcome of the dispute resolution process initiated by the Company with ERCOT and potential litigation challenges. Since these disputes are still pending and not resolved, Just Energy is unable to pay the full amounts when due to ERCOT this week without the arrangement of the DIP financing received today," Just Energy said

"While Just Energy hedges weather risk based on historical scenarios, the Weather Event in Texas was colder than anything experienced in decades. A combination of customer usage and the Real Time Settlement Point Price being artificially set at the high offer cap of US$9,000 per megawatt hour contributed significantly to the negative financial impact to the Company. The Weather Event caused the ERCOT wholesale market to incur charges of approximately US$55 billion over a seven-day period, an amount equal to what it ordinarily incurs over four years. The total cost to Just Energy and other market participants is still subject to adjustment by ERCOT and may change," Just Energy said

"As previously announced, on March 3, 2021, the Company filed a petition with the Commission requesting an order that ERCOT deviate from the deadlines and timing in its Protocols and Market Guides related to settlements, collateral obligations, and invoice payments and suspend the execution or issuance of invoices or settlements for intervals during the dates of February 14, 2021 through February 19, 2021, until issues related to the catastrophic Weather Event raised by executive and legislative branches of the Texas authorities are investigated, addressed, and resolved. Alternatively, Just Energy requested that the Commission grant a waiver of certain ERCOT Protocols to allow Just Energy to delay payment of certain invoices related to the Weather Event while exercising its rights under the ERCOT Protocols to dispute the invoiced payment amounts. To date, Just Energy has not received this relief," Just Energy said

Update #1, 2:34 p.m., 3/9

Just Energy said in a Canadian court filing that it may be liable to ERCOT for an estimated US$250 million related to the recent weather event. Just Energy is disputing the amount, but the Company noted that invoices issued by ERCOT must be paid in full within two days, even if the energy provider is actively disputing the invoice.

On March 5, 2021, the Just Energy Group received three invoices for approximately USD $123.21 million from ERCOT, of which approximately USD $96.24 million must be paid by the end of the day on March 9, 2021.

Furthermore, on March 8, 2021, the Just Energy Group received from ERCOT (i) a notice that it must post approximately U.S. $25.7 million of additional collateral within two business days; and (ii) three invoices for approximately U.S. $ 25.46 million, of which approximately U.S. $18.86 million is due by March 10, 2021.53

In the Canadian court filing, Just Energy Group stated that it does not have the liquidity to satisfy these obligations without the support of DIP financing described above. "If it does not make such payment, ERCOT will almost immediately be in a position to suspend the Just Energy Group’s market participant status and transfer all of the Texas customers to a POLR, with devastating effects on the Applicants’ business," Just Energy said in a Canadian court filing

In addition, on March 22, 2021, Just Energy will owe approximately $270 million to counterparties under the certain wholesale credit, working capital and scheduling agreements. "This amount has increased significantly from normal levels, which is a direct result of the Texas weather event," Just Energy said in a Canadian court filing

Furthermore, "The Just Energy Group’s financial challenges arising from the weather event have caused ripple effects with other business partners and regulators. Certain of the Sureties [bonding agencies] demanded that the Just Energy Group provide more than $30 million in additional collateral (over $20 million has already been provided and the rest expected by March 17). The Sureties threatened or had already begun cancellation of the bonds already issued," Just Energy said in a Canadian court filing

The Just Energy Group has entered into Qualified Support Agreements with Shell and BP, its two most significant Secured Suppliers. "In these Qualified Support Agreements, among other things, Shell and BP have agreed to not exercise any termination rights and to supply and deliver services under their existing agreements consistent with historical practice and perform such other acts that are required to satisfy all of their obligations," Just Energy said in a Canadian court filing. However, Shell and BP’s obligation to continue supplying is conditional on the Court granting a court-ordered priority charge in an amount equal to the value of the amounts that are due and payable in connection with certain transactions with the Just Energy Entity

Just Energy further said in a Canadian court filing that, "At least two Provincial Regulators have initiated contact with the Just Energy Group to express concern about the Just Energy Group’s ongoing viability."

Additionally, "an incumbent utility in one of those jurisdictions has requested that the Provincial Regulator authorize the utility to no longer permit the Licence-holder to enrol new customers in Manitoba," Just Energy said in a Canadian court filing

As such, as part of its Canadian filing, Just Energy sought a regulatory stay to prohibit Canadian provincial regulators and Canadian ISO regulators, "from taking steps that could fundamentally undermine or even destroy the viability of the Applicants’ business -- and in particular, the downstream business involving the marketing and selling of gas or electricity to retail customers -- before the Applicants have had a reasonable opportunity to explore restructuring solutions," such as license revocation or prohibition from the ISO markets.

A Canadian court granted such an initial stay

Concerning hedging, Just Energy said in a Canadian court filing that, "In its planning for current winter season (November 2020 – March 2021), the Just Energy Group had positioned its portfolio under all known historical weather and commodity scarcity scenarios to not have its exposure exceed $10 million in the aggregate."

Just Energy further said in a Canadian court filing that, "For February 2021, the Just Energy Group had weather hedges in place to cover an incremental 50% increase in customer usage above normal February consumption. However, due to the extreme cold weather, customer usage increased significantly above the weather hedges for a sustained period."

A proposed monitor for Just Energy's Canadian filing said that, "the extreme Texas weather event meant energy use on February 14, 2021 was 200% higher than the week earlier, substantially above the hedge estimate."

Update #2, 4:30 pm ET

Just Energy Group Inc. ('Just Energy' or the 'Company') announced that it has received creditor protection under Chapter 15 of the Bankruptcy Code in the United States.

"The Chapter 15 order by Bankruptcy Judge Marvin Isgur in the Southern District of Texas recognizes the protection granted earlier via an Initial Order under the Companies’ Creditors Arrangement Act ('CCAA') from the Ontario Superior Court of Justice (Commercial List) so that the CCAA protections also apply to the Company’s’ assets and creditors located in the United States," Just Energy said

"In addition, Judge Isgur ruled that section 525 of the bankruptcy code would apply and he would retain 'exclusive' jurisdiction for any relief sought under such law (i.e. any act specified by section 525 purported to be taken by a 'governmental unit' in the United States against the Company in the United States must be heard by Judge Isgur; in general, section 525 prohibits a governmental unit from suspending or revoking a license based upon a party’s status as a debtor in a bankruptcy case or for nonpayment of certain debts). Finally, Judge Isgur ruled that any payments by the Company to ERCOT will be subject to Just Energy’s rights to contest such payments and to receive a refund or credit under applicable law," Just Energy said

"As announced this morning, the filings, and associated US$125 million DIP financing arranged by the Company, enable Just Energy to continue all operations without interruption throughout the United States and Canada and to continue making payments required by ERCOT and satisfy other regulatory obligations. The filings have no impact on customer bills," Just Energy said

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