Exhibit 99.1
JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars)
Notes | As at Sept. 30, 2018 (Unaudited) | As at March 31, 2018 (Audited) | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 17,225 | $ | 48,861 | ||||||||
Restricted cash | 3,537 | 3,515 | ||||||||||
Trade and other receivables | 6 | 694,479 | 697,307 | |||||||||
Gas in storage | 42,916 | 11,812 | ||||||||||
Fair value of derivative financial assets | 8 | 204,360 | 218,769 | |||||||||
Income tax recoverable | 16,508 | 5,617 | ||||||||||
Other current assets | 7 | 148,777 | 109,697 | |||||||||
1,127,802 | 1,095,578 | |||||||||||
Non-current assets | ||||||||||||
Investments | 8 | 36,329 | 36,314 | |||||||||
Property, plant and equipment | 19,775 | 18,893 | ||||||||||
Intangible assets | 414,006 | 401,926 | ||||||||||
Fair value of derivative financial assets | 8 | 23,427 | 64,662 | |||||||||
Deferred tax asset | 2,971 | 9,449 | ||||||||||
Other non-current assets | 7 | 45,670 | 19,987 | |||||||||
542,178 | 551,231 | |||||||||||
TOTAL ASSETS | $ | 1,669,980 | $ | 1,646,809 | ||||||||
LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Trade payables and other | $ | 637,405 | $ | 621,148 | ||||||||
Deferred revenue | 69,612 | 41,684 | ||||||||||
Income taxes payable | 6,616 | 7,304 | ||||||||||
Fair value of derivative financial liabilities | 8 | 40,835 | 86,288 | |||||||||
Current portion of long-term debt | 10 | 132,898 | 121,451 | |||||||||
887,366 | 877,875 | |||||||||||
Non-current liabilities | ||||||||||||
Long-term debt | 10 | 528,437 | 422,053 | |||||||||
Fair value of derivative financial liabilities | 8 | 53,944 | 51,871 | |||||||||
Deferred tax liability | 17,272 | 6,918 | ||||||||||
Other non-current liabilities | 46,658 | 57,349 | ||||||||||
646,311 | 538,191 | |||||||||||
TOTAL LIABILITIES | 1,533,677 | 1,416,066 | ||||||||||
SHAREHOLDERS' EQUITY | ||||||||||||
Shareholders’ capital | 12 | 1,232,975 | 1,215,826 | |||||||||
Equity component of convertible debentures | 13,029 | 13,029 | ||||||||||
Contributed deficit | (25,186 | ) | (22,693 | ) | ||||||||
Deficit | (1,153,574 | ) | (1,066,931 | ) | ||||||||
Accumulated other comprehensive income | 69,458 | 91,934 | ||||||||||
Non-controlling interest | (399 | ) | (422 | ) | ||||||||
TOTAL SHAREHOLDERS' EQUITY | 136,303 | 230,743 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,669,980 | $ | 1,646,809 |
Commitments and Guarantees (Note 17)
See accompanying notes to the interim condensed consolidated financial statements
1.
JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Notes | Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | ||||||||||||||
Sales | 13 | $ | 956,843 | $ | 851,927 | $ | 1,833,300 | $ | 1,699,633 | |||||||||
Cost of sales | 783,504 | 709,264 | 1,506,429 | 1,399,407 | ||||||||||||||
GROSS MARGIN | 173,339 | 142,663 | 326,871 | 300,226 | ||||||||||||||
EXPENSES | ||||||||||||||||||
Administrative | 58,508 | 46,806 | 114,190 | 95,437 | ||||||||||||||
Selling and marketing | 56,749 | 58,577 | 107,292 | 116,653 | ||||||||||||||
Other operating expenses | 14(a) | 31,833 | 20,795 | 59,651 | 55,771 | |||||||||||||
147,090 | 126,178 | 281,133 | 267,861 | |||||||||||||||
Operating profit before the following | 26,249 | 16,485 | 45,738 | 32,365 | ||||||||||||||
Finance costs | 10 | (20,123 | ) | (12,521 | ) | (36,463 | ) | (24,511 | ) | |||||||||
Change in fair value of derivative instruments and other | 8 | (23,932 | ) | (70,923 | ) | (60,488 | ) | 39,694 | ||||||||||
Other income | 2,768 | 203 | 2,713 | 1,802 | ||||||||||||||
Profit (loss) before income taxes | (15,038 | ) | (66,756 | ) | (48,500 | ) | 49,350 | |||||||||||
Provision for (recovery of) income taxes | 11 | 6,412 | (1,833 | ) | 14,373 | 4,964 | ||||||||||||
PROFIT (LOSS) FOR THE PERIOD | $ | (21,450 | ) | $ | (64,923 | ) | $ | (62,873 | ) | $ | 44,386 | |||||||
Attributable to: | ||||||||||||||||||
Shareholders of Just Energy | $ | (21,385 | ) | $ | (68,864 | ) | $ | (62,762 | ) | $ | 34,994 | |||||||
Non-controlling interest | (65 | ) | 3,941 | (111 | ) | 9,392 | ||||||||||||
PROFIT (LOSS) FOR THE PERIOD | $ | (21,450 | ) | $ | (64,923 | ) | $ | (62,873 | ) | $ | 44,386 | |||||||
Earnings (loss) per share available to shareholders | 15 | |||||||||||||||||
Basic | $ | (0.16 | ) | $ | (0.48 | ) | $ | (0.45 | ) | $ | 0.21 | |||||||
Diluted | $ | (0.16 | ) | $ | (0.48 | ) | $ | (0.45 | ) | $ | 0.17 |
See accompanying notes to the interim condensed consolidated financial statements
2.
JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited in thousands of Canadian dollars)
Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | |||||||||||||
PROFIT (LOSS) FOR THE PERIOD | $ | (21,450 | ) | $ | (64,923 | ) | $ | (62,873 | ) | $ | 44,386 | |||||
Other comprehensive loss to be reclassified to profit or loss in subsequent periods: Unrealized loss on translation of foreign operations | (8,363 | ) | (7,793 | ) | (4,613 | ) | (12,561 | ) | ||||||||
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX | $ | (29,813 | ) | $ | (72,716 | ) | $ | (67,486 | ) | $ | 31,825 | |||||
Total comprehensive income (loss) attributable to: | ||||||||||||||||
Shareholders of Just Energy | $ | (29,748 | ) | $ | (76,657 | ) | $ | (67,375 | ) | $ | 22,433 | |||||
Non-controlling interest | (65 | ) | 3,941 | (111 | ) | 9,392 | ||||||||||
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX | $ | (29,813 | ) | $ | (72,716 | ) | $ | (67,486 | ) | $ | 31,825 |
See accompanying notes to the interim condensed consolidated financial statements
3.
JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY (DEFICIENCY)
(unaudited in thousands of Canadian dollars)
Notes | Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | ||||||||||||||
ATTRIBUTABLE TO THE SHAREHOLDERS | ||||||||||||||||||
Accumulated earnings | ||||||||||||||||||
Accumulated earnings, beginning of period | $ | 748,181 | $ | 363,429 | $ | 768,847 | $ | 259,571 | ||||||||||
Adjustment for adoption of IFRS 9 and 15 | - | - | 20,711 | - | ||||||||||||||
Profit (loss) for the period, attributable to shareholders | (21,385 | ) | (68,864 | ) | (62,762 | ) | 34,994 | |||||||||||
Accumulated earnings, end of period | 726,796 | 294,565 | 726,796 | 294,565 | ||||||||||||||
DIVIDENDS AND DISTRIBUTIONS | ||||||||||||||||||
Dividends and distributions, beginning of period | (1,858,040 | ) | (1,771,254 | ) | (1,835,778 | ) | (1,749,471 | ) | ||||||||||
Dividends and distributions declared and paid | 16 | (22,330 | ) | (21,468 | ) | (44,592 | ) | (43,251 | ) | |||||||||
Dividends and distributions, end of period | (1,880,370 | ) | (1,792,722 | ) | (1,880,370 | ) | (1,792,722 | ) | ||||||||||
DEFICIT | $ | (1,153,574 | ) | $ | (1,498,157 | ) | $ | (1,153,574 | ) | $ | (1,498,157 | ) | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ||||||||||||||||||
Accumulated other comprehensive income, beginning of period | $ | 77,821 | $ | 65,593 | $ | 91,934 | $ | 70,361 | ||||||||||
Adjustment for adoption of IFRS 9 and 15 | - | - | (17,863 | ) | - | |||||||||||||
Other comprehensive loss | (8,363 | ) | (7,793 | ) | (4,613 | ) | (12,561 | ) | ||||||||||
Accumulated other comprehensive income, end of period | $ | 69,458 | $ | 57,800 | $ | 69,458 | $ | 57,800 | ||||||||||
SHAREHOLDERS’ CAPITAL | 12 | |||||||||||||||||
Common shares | ||||||||||||||||||
Common shares, beginning of period | $ | 1,084,034 | $ | 1,068,778 | $ | 1,079,055 | $ | 1,070,076 | ||||||||||
Share-based units exercised | 1,957 | 529 | 6,936 | 10,674 | ||||||||||||||
Repurchase and cancellation of shares | - | (498 | ) | - | (11,941 | ) | ||||||||||||
Common shares, end of period | $ | 1,085,991 | $ | 1,068,809 | $ | 1,085,991 | $ | 1,068,809 | ||||||||||
Preferred shares | ||||||||||||||||||
Preferred shares, beginning of period | $ | 146,983 | $ | 132,266 | $ | 136,771 | $ | 128,363 | ||||||||||
Shares issued | - | 834 | 10,447 | 5,195 | ||||||||||||||
Shares issuance costs | 1 | (192 | ) | (234 | ) | (650 | ) | |||||||||||
Preferred shares, end of period | 146,984 | 132,908 | 146,984 | 132,908 | ||||||||||||||
SHAREHOLDERS’ CAPITAL | $ | 1,232,975 | $ | 1,201,717 | $ | 1,232,975 | $ | 1,201,717 | ||||||||||
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES | ||||||||||||||||||
Balance, beginning of period | $ | 13,029 | $ | 13,508 | $ | 13,029 | $ | 13,508 | ||||||||||
Balance, end of period | $ | 13,029 | $ | 13,508 | $ | 13,029 | $ | 13,508 | ||||||||||
CONTRIBUTED SURPLUS (DEFICIT) | ||||||||||||||||||
Balance, beginning of period | $ | (24,590 | ) | $ | 57,861 | $ | (22,693 | ) | $ | 58,266 | ||||||||
Add: Share-based compensation expense | 14(a) | 1,494 | 1,716 | 3,269 | 16,963 | |||||||||||||
Non-cash deferred share grant distributions | 17 | 10 | 31 | 22 | ||||||||||||||
Less: Purchase of non-controlling interest | (150 | ) | (102,298 | ) | 1,416 | (102,298 | ) | |||||||||||
Share-based units exercised | 12 | (1,957 | ) | (529 | ) | (6,936 | ) | (10,674 | ) | |||||||||
Share-based compensation adjustment | - | 18 | (273 | ) | (5,501 | ) | ||||||||||||
Balance, end of period | $ | (25,186 | ) | $ | (43,222 | ) | $ | (25,186 | ) | $ | (43,222 | ) | ||||||
NON-CONTROLLING INTEREST | ||||||||||||||||||
Balance, beginning of period | $ | (408 | ) | $ | - | $ | (422 | ) | $ | - | ||||||||
Distributions to non-controlling shareholders | - | (3,941 | ) | - | (9,392 | ) | ||||||||||||
Foreign exchange impact on non-controlling interest | 74 | - | 134 | - | ||||||||||||||
Profit (loss) attributable to non-controlling interest | (65 | ) | 3,941 | (111 | ) | 9,392 | ||||||||||||
Balance, end of period | $ | (399 | ) | $ | - | $ | (399 | ) | $ | - | ||||||||
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY) | $ | 136,303 | $ | (268,354 | ) | $ | 136,303 | $ | (268,354 | ) |
See accompanying notes to the interim condensed consolidated financial statements
4.
JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited in thousands of Canadian dollars)
Net inflow (outflow) of cash related to following activities | Notes | Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | |||||||||||||||
OPERATING | ||||||||||||||||||||
Profit (loss) before income taxes | $ | (15,038 | ) | $ | (66,756 | ) | $ | (48,500 | ) | $ | 49,350 | |||||||||
Items not affecting cash | ||||||||||||||||||||
Amortization of intangible assets | 14(a) | 4,995 | 4,331 | 9,340 | 7,791 | |||||||||||||||
Depreciation of property, plant and equipment | 14(a) | 960 | 985 | 1,858 | 1,982 | |||||||||||||||
Amortization included in cost of sales | 730 | 769 | 1,512 | 1,546 | ||||||||||||||||
Share-based compensation | 14(a) | 1,494 | 1,716 | 3,269 | 16,963 | |||||||||||||||
Financing charges, non-cash portion | 5,978 | 2,585 | 9,445 | 5,188 | ||||||||||||||||
Other | (29 | ) | (92 | ) | (55 | ) | (184 | ) | ||||||||||||
Change in fair value of derivative instruments | 23,932 | 70,923 | 60,488 | (39,694 | ) | |||||||||||||||
Adjustment required to reflect net cash receipts from gas sales | 5,125 | 4,881 | 9,706 | 7,530 | ||||||||||||||||
Net change in working capital balances | (93,698 | ) | (5,442 | ) | (116,722 | ) | (4,886 | ) | ||||||||||||
Income taxes paid | (1,409 | ) | (4,714 | ) | (9,847 | ) | (15,791 | ) | ||||||||||||
Cash inflow (outflow) from operating activities | (66,960 | ) | 9,186 | (79,506 | ) | 29,795 | ||||||||||||||
INVESTING | ||||||||||||||||||||
Purchase of property, plant and equipment | (630 | ) | (1,768 | ) | (2,559 | ) | (2,959 | ) | ||||||||||||
Purchase of intangible assets | (10,937 | ) | (5,717 | ) | (18,863 | ) | (12,522 | ) | ||||||||||||
Acquisition of businesses | - | - | - | (2,546 | ) | |||||||||||||||
Short-term investments | - | (314 | ) | - | (185 | ) | ||||||||||||||
Cash outflow from investing activities | (11,567 | ) | (7,799 | ) | (21,422 | ) | (18,212 | ) | ||||||||||||
FINANCING | ||||||||||||||||||||
Dividends paid | (22,312 | ) | (21,458 | ) | (44,561 | ) | (43,229 | ) | ||||||||||||
Repayment of long-term debt | 10 | (59,573 | ) | - | (59,573 | ) | - | |||||||||||||
Issuance of long-term debt | 10 | 119,662 | - | 119,662 | - | |||||||||||||||
Share swap payout | 8 | (10,000 | ) | - | (10,000 | ) | - | |||||||||||||
Debt issuance costs | 10 | (481 | ) | - | (2,654 | ) | - | |||||||||||||
Credit facilities withdrawal | 10 | 26,070 | 24,612 | 57,280 | 49,262 | |||||||||||||||
Issuance of preferred shares | - | 834 | 10,447 | 5,195 | ||||||||||||||||
Preferred shares issuance costs | - | (215 | ) | (334 | ) | (1,676 | ) | |||||||||||||
Shares repurchase | - | (498 | ) | - | (11,941 | ) | ||||||||||||||
Distributions to non-controlling interest | - | (4,098 | ) | - | (9,603 | ) | ||||||||||||||
Cash inflow (outflow) from financing activities | 53,366 | (823 | ) | 70,267 | (11,992 | ) | ||||||||||||||
Effect of foreign currency translation on cash balances | 302 | 266 | (975 | ) | (1,017 | ) | ||||||||||||||
Net cash inflow (outflow) | (24,859 | ) | 830 | (31,636 | ) | (1,426 | ) | |||||||||||||
Cash and cash equivalents, beginning of period | 42,084 | 55,120 | 48,861 | 57,376 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 17,225 | $ | 55,950 | $ | 17,225 | $ | 55,950 | ||||||||||||
Supplemental cash flow information: | ||||||||||||||||||||
Interest paid | $ | 15,220 | $ | 11,575 | $ | 26,445 | $ | 18,896 | ||||||||||||
See accompanying notes to the interim condensed consolidated financial statements |
5.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
1. | ORGANIZATION |
Just Energy Group Inc. (“Just Energy”) is a corporation established under the laws of Canada to hold securities and to distribute the income of its directly or indirectly owned operating subsidiaries and affiliates. The registered office of Just Energy is First Canadian Place, 100 King Street West, Toronto, Ontario, Canada. The unaudited interim condensed consolidated financial statements (“Interim Financial Statements”) consist of Just Energy and its subsidiaries and affiliates. The Interim Financial Statements were approved by the Board of Directors on November 7, 2018.
2. | OPERATIONS |
Just Energy is a leading consumer company specializing in electricity and natural gas commodities, energy efficiency solutions and renewable energy options. With offices located across the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Germany, Ireland and Japan, Just Energy serves 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, EdgePower Inc., Green Star Energy, Hudson Energy, Interactive Energy Group, Just Energy Advanced Solutions, Tara Energy and terrapass.
By fixing the price of natural gas or electricity under its fixed-price or price-protected program contracts for a period of up to five years, Just Energy’s customers offset their exposure to changes in the price of these essential commodities. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion. Flat-bill products allow customers to pay a flat rate each month regardless of usage. Just Energy derives its margin or gross profit from the difference between the price at which it is able to sell the commodities to its customers and the related price at which it purchases the associated volumes from its suppliers.
In addition, Just Energy markets smart thermostats, offering the thermostats as a stand alone unit or bundled with certain commodity products. The smart thermostats are manufactured and distributed by ecobee Inc. (“ecobee”), a company in which Just Energy holds a 7.8% fully diluted equity interest. Just Energy also offers green products through its JustGreen program. The JustGreen electricity product offers customers the option of having all or a portion of their electricity sourced from renewable green sources such as wind, solar, hydropower or biomass. The JustGreen gas product offers carbon offset credits that allow customers to reduce or eliminate the carbon footprint of their homes or businesses. 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 also provides energy management solutions to both Consumer and Commercial customers in the form of value added products and services which include, but is not limited to, smart irrigation controllers, LED retro fits lighting and HVAC controls, as well as enterprise monitoring.
3. | FINANCIAL STATEMENT PREPARATION |
(a) | Statement of compliance with IFRS |
These Interim Financial Statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”), utilizing the accounting policies Just Energy outlined in its March 31, 2018 annual audited consolidated financial statements. Accordingly, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the IASB, have been omitted or condensed.
6.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
(b) | Basis of presentation and interim reporting |
These Interim Financial Statements should be read in conjunction with and follow the same accounting policies and methods of application as those used in the annual audited consolidated financial statements for the years ended March 31, 2018 and 2017.
The Interim Financial Statements are presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand, except where otherwise indicated. The Interim Financial Statements are prepared on a going concern basis under the historical cost convention, except for certain financial assets and liabilities which are stated at fair value.
The interim operating results are not necessarily indicative of the results that may be expected for the full year ending March 31, 2019, due to seasonal variations resulting in fluctuations in quarterly results. Gas consumption by customers is typically highest in October through March and lowest in April through September. Electricity consumption is typically highest in January through March and July through September. Electricity consumption is lowest in October through December and April through June.
(c) | Principles of consolidation |
The Interim Financial Statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries and affiliates as at September 30, 2018. Subsidiaries and affiliates are consolidated from the date of acquisition and control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries and affiliates are prepared for the same reporting period as Just Energy, using consistent accounting policies. All intercompany balances, sales, expenses and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.
4. | ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE |
IFRS 16, Leases (“IFRS 16”), was issued by the IASB in January 2016. This guidance brings most leases onto the balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting remains largely unchanged and the distinction between operating and finance leases is retained. Furthermore, per the standard, a lessee recognizes a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly, and the liability accrues interest. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease. Lessees are permitted to make an accounting policy election, by class of underlying asset, to apply a method like IAS 17’s operating lease accounting and not recognize lease assets and lease liabilities for leases with a lease term of 12 months or less, and on a lease-by-lease basis. IFRS 16 supersedes IAS 17, Leases, and its related interpretations, and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15, Revenue from Contracts with Customers (“IFRS 15”), has also been applied. Just Energy has not yet assessed the impact of this standard. Just Energy will adopt IFRS 16 beginning April 1, 2019.
IFRIC 23, Uncertainty over Income Tax Treatments, was issued by the IASB in June 2017. This interpretation provides guidance to be applied in the determination of taxable profit or loss, tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. The interpretation is effective for annual periods beginning on or after January 1, 2019. Just Energy has not yet assessed the impact of this standard.
7.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
5. | ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED |
IFRS 15 – Revenue from Contracts with Customers |
Just Energy has adopted IFRS 15, as issued by the IASB in July 2014, effective January 1, 2018. The new accounting policies have been applied from April 1, 2018 and, in accordance with the transitional provisions in IFRS 15, comparative figures have not been restated. Just Energy adopted IFRS 15 using the modified retrospective method, applying the practical expedient in paragraph C5(c) under which the aggregate effect of all modifications on the date of initial application is reflected. Accordingly, transition adjustments have been recognized through equity as at April 1, 2018.
IFRS 15 replaces the provisions of IAS 18, Revenue, that relates to all revenue from contracts from customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
Accounting policies
The following accounting policies are applicable to the accounting for all revenue arising from contracts with customers, unless those contracts are in the scope of other standards in the quarter ended April 1, 2018 and onwards. Please refer to the accounting policies outlined in the March 31, 2018 annual audited consolidated financial statements for details on accounting policies applicable to comparative amounts.
Gas and electricity
Sales
Just Energy historically recognized revenue based on consumption of the commodity by the customer. Often times, the billing cycles for customers do not coincide with the accounting periods used for financial reporting purposes. Gas and electricity that have been consumed by a customer, but not yet billed to that customer, are estimated on an accrual basis and included in revenue during the period in which they were consumed. These accrual amounts result in contract assets and are presented as unbilled revenues under IFRS 15. Unbilled revenues are assessed for impairment in accordance with IFRS 9.
Upon the adoption of IFRS 15, there is no change in the revenue recognition for gas and electricity sales. Just Energy has identified that the material performance obligation is the provision of gas and electricity to customers, which is satisfied over time throughout the contract term. Just Energy utilizes the output method to recognize revenue based on the units of gas and electricity delivered and billed to the customer each month. Just Energy has elected to adopt the practical expedient to recognize revenue in the amount to which the entity has a right to invoice, as the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance to date.
Expenses
Historically, North American residential sales commissions and incentives paid to brokers, employees or third parties for acquiring new contracts with customers were recognized as selling expenses as they were incurred.
8.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Upon the adoption of IFRS 15, incremental costs to obtain a contract with a customer are capitalized if expected to be recovered. As such, Just Energy commenced capitalizing all upfront sales commissions, incentives and third party verification costs that met the criteria for capitalization. These expenses are deferred and amortized over the average customer relationship period, which is estimated to be between two and five years, based on historical blended attrition rates, including expected renewal periods by region. Just Energy has elected under the practical expedient to recognize incremental costs of obtaining a contract as an expense when incurred if the contract length is one year or less.
Impact on financial statements
The cumulative effect of changes made to the April 1, 2018 interim condensed consolidated statement of financial position for the adoption of IFRS 15 was as follows, and had a deferred tax liability effect of $7,493:
Original IAS 18 | Carrying amount New IFRS 15 | |||||
Current assets | ||||||
Customer acquisition costs | $ | 31,852 | $ | 43,152 | ||
Non-current financial assets | ||||||
Customer acquisition costs | $ | 17,101 | $ | 34,162 |
The following table shows the effect of IFRS 15 adoption on the interim condensed consolidated statement of financial position as at September 30, 2018:
As at Sept. 30, 2018 (reported) | Balances without adoption of IFRS 15 | Effect of change higher (lower) | |||||||
Current assets | |||||||||
Customer acquisition costs | $ | 60,501 | $ | 36,765 | $ | 23,736 | |||
Non-current financial assets | |||||||||
Customer acquisition costs | $ | 41,117 | $ | 17,293 | $ | 23,824 |
9.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
The following table shows the effect of the adoption of IFRS 15 on the interim condensed consolidated statements of comprehensive income (loss) for the three and six months ended September 30, 2018:
| | For the three months ended Sept. 30, 2018 (reported) | | | Balances without adoption of IFRS 15 | | | Effect of change higher (lower) | | | For the six months ended Sept. 30, 2018 (reported) | | | Balances without adoption of IFRS 15 | | | Effect of change higher (lower) | | ||||||
Sales | $ | 956,843 | $ | 956,843 | $ | - | $ | 1,833,300 | $ | 1,833,300 | $ | - | ||||||||||||
Cost of sales | 783,504 | 783,504 | - | 1,506,429 | 1,506,429 | - | ||||||||||||||||||
Gross margin | 173,339 | 173,339 | - | 326,871 | 326,871 | - | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Administrative | 58,508 | 58,508 | - | 114,190 | 114,190 | - | ||||||||||||||||||
Selling and marketing | 56,749 | 66,861 | (10,112 | ) | 107,292 | 126,667 | (19,375 | ) | ||||||||||||||||
Other operating expenses | 31,833 | 31,833 | - | 59,651 | 59,651 | - | ||||||||||||||||||
147,090 | 157,202 | (10,112 | ) | 281,133 | 300,508 | (19,375 | ) | |||||||||||||||||
Operating profit before the following | 26,249 | 16,137 | 10,112 | 45,738 | 26,363 | 19,375 | ||||||||||||||||||
Finance costs | (20,123 | ) | (20,123 | ) | - | (36,463 | ) | (36,463 | ) | - | ||||||||||||||
Change in fair value of derivative instruments and other | (23,932 | ) | (23,932 | ) | - | (60,488 | ) | (60,488 | ) | - | ||||||||||||||
Other income | 2,768 | 2,768 | - | 2,713 | 2,713 | - | ||||||||||||||||||
Loss before income taxes | (15,038 | ) | (25,150 | ) | 10,112 | (48,500 | ) | (67,875 | ) | 19,375 | ||||||||||||||
Provision for income taxes | 6,412 | 6,412 | - | 14,373 | 14,373 | - | ||||||||||||||||||
Loss for the period | $ | (21,450 | ) | $ | (31,562 | ) | $ | 10,112 | $ | (62,873 | ) | $ | (82,248 | ) | $ | 19,375 | ||||||||
Attributable to: | ||||||||||||||||||||||||
Shareholders of Just Energy | $ | (21,385 | ) | $ | (31,497 | ) | $ | 10,112 | $ | (62,762 | ) | $ | (82,137 | ) | $ | 19,375 | ||||||||
Non-controlling interest | (65 | ) | (65 | ) | - | (111 | ) | (111 | ) | - | ||||||||||||||
Loss for the period | $ | (21,450 | ) | $ | (31,562 | ) | $ | 10,112 | $ | (62,873 | ) | $ | (82,248 | ) | 19,375 | |||||||||
Loss per share available to shareholders | ||||||||||||||||||||||||
Basic | $ | (0.16 | ) | $ | (0.23 | ) | $ | 0.07 | $ | (0.45 | ) | $ | (0.58 | ) | $ | 0.13 | ||||||||
Diluted | $ | (0.16 | ) | $ | (0.23 | ) | $ | 0.07 | $ | (0.45 | ) | $ | (0.58 | ) | $ | 0.13 |
IFRS 15 did not impact any revenue amounts related to historical or current revenue recognition. The key factors driving revenue segmentation are related to differentiation between the business divisions, which are disclosed in Note 13.
The majority of Just Energy’s customer contracts meet IFRS 15’s B16 practical expedient where Just Energy has the right to consideration from a customer in an amount that corresponds directly with the value to the customer of the performance completed to date. While there is no change in revenue recognition upon the adoption of IFRS 15 for flat-bill customer contracts, they do not meet the B16 practical expedient and therefore require the following disclosure for the contracts that have a duration of one year or more:
10.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
The aggregate of contractual amounts allocated to performance obligations related to flat-bill contracts that are unsatisfied as at September 30, 2018 is $90,844.
Just Energy expects to recognize revenue on these flat-bill contracts in the amounts of:
October 1, 2018 to March 31, 2019 | April 1, 2019 to March 31, 2020 | April 1, 2020 to March 31, 2021 | April 1, 2021 to March 31, 2022 | Years thereafter | Total | |||||||||||||||||||
Gas and electricity flat- bill contracts | $ | 15,565 | $ | 29,425 | $ | 21,614 | $ | 13,051 | $ | 11,189 | $ | 90,844 |
IFRS 9 – Financial Instruments
Just Energy has adopted IFRS 9, Financial Instruments (“IFRS 9”) as issued by the IASB in July 2014, effective April 1, 2018. The new accounting policies have been applied from April 1, 2018 and, in accordance with the transitional provisions in IFRS 9, comparative figures have not been restated. Just Energy has adopted IFRS 9 retrospectively, and accordingly, transition adjustments have been recognized through equity as at April 1, 2018.
IFRS 9 replaces the provisions of IAS 39, Financial Instruments Recognition and Measurement, that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7, Financial Instruments: Disclosures.
(a) | Accounting policy for financial instruments under IFRS 9 |
The following accounting policy is applicable to the accounting for financial instruments in the quarter ended April 1, 2018 and onwards. Please refer to the accounting policies Just Energy outlined in its March 31, 2018 annual audited consolidated financial statements for details on the financial instruments accounting policies applicable to comparative amounts.
Financial assets
(i) | Recognition and derecognition |
Regular purchases and sales of financial assets are recognized on the trade-date, being the date on which Just Energy commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and Just Energy has transferred substantially all the risks and rewards of ownership.
(ii) | Classification |
From April 1, 2018, Just Energy classified its financial assets in the following measurement categories:
· | Those to be measured subsequently at fair value (either through other comprehensive income (loss) (“OCI”) or through profit or loss); and |
· | Those to be measured at amortized cost. |
11.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
The measurement category classification of financial assets depends on Just Energy’s business objectives for managing the financial assets and whether contractual terms of the cash flow are considered solely payments of principal and interest. For assets measured at fair value, gains and losses will either be recorded in profit or loss or in other comprehensive income depending upon the business objective.
Just Energy reclassifies debt instruments when and only when its business objective for managing those assets changes.
(iii) | Measurement |
At initial recognition, Just Energy measures a financial asset at its fair value. In the case of a financial asset not categorized as fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to the acquisition of the financial asset are included in measurement at initial recognition. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.
Subsequent measurement of debt instruments depends on Just Energy’s business objective for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which Just Energy classifies its debt instruments:
Amortized cost: Assets held for collection of contractual cash flows that represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt instrument is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in “finance income” using the effective interest rate method. Cash and cash equivalents, restricted cash, trade and other receivables are included in this category.
Fair value through other comprehensive income (“FVOCI”): Assets held to achieve a particular business objective, by collecting contractual cash flows and selling financial assets, where the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses, which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in “finance income” using the effective interest rate method. Just Energy has not classified any investments in this category.
Fair value through profit or loss (“FVTPL”): Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL and is not part of a hedging relationship is recognized in profit or loss. Just Energy classifies its derivatives and its investments in equity securities at FVTPL due to the fact that they do not meet the criteria for classification at amortized cost as the contractual cash flows are not solely payments of principal and interest.
Just Energy’s equity instruments are carried at FVTPL, and gains and losses are recorded in profit or loss.
12.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
(iv) | Impairment |
Just Energy assesses on a forward-looking basis the expected credit losses (“ECL”) associated with its assets carried at amortized cost, including other receivables. For trade and other receivables only, Just Energy applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.
Trade receivables are reviewed qualitatively on a case-by-case basis to determine if they need to be written off.
ECL are measured as the difference in the present value of the contractual cash flows that are due to Just Energy under the contract, and the cash flows that Just Energy expects to receive. Just Energy assesses all information available, including past due status, credit ratings, the existence of third party insurance and forward-looking macroeconomic factors in the measurement of the ECL associated with its assets carried at amortized cost. Just Energy measures ECL by considering the risk of default over the contract period and incorporates forward-looking information into its measurement.
(b) | New classification categories of financial instruments on adoption of IFRS 9 |
As at April 1, 2018, the date of initial application, Just Energy’s financial instruments and new classification categories under IFRS 9 were as follows:
Classification category | ||||
Original IAS 39 | New IFRS 9 | |||
Current financial assets | ||||
Cash and cash equivalents | Loans and receivables | Amortized cost | ||
Restricted cash | Loans and receivables | Amortized cost | ||
Trade and other receivables | Loans and receivables | Amortized cost | ||
Derivative assets | FVTPL | FVTPL | ||
Non-current financial assets | ||||
Investments | FVOCI and FVTPL | FVTPL | ||
Derivative assets | FVTPL | FVTPL | ||
Current financial liabilities | ||||
Trade and other payables | Other financial liabilities | Amortized cost | ||
Derivative liabilities | FVTPL | FVTPL | ||
Current portion of long-term debt | Other financial liabilities | Amortized cost | ||
Non-current financial liabilities | ||||
Long-term debt | Other financial liabilities | Amortized cost | ||
Derivative liabilities | FVTPL | FVTPL |
Upon adoption of IFRS 9, the investment in ecobee is classified as FVTPL instead of available-for-sale, resulting in a movement of $17,863 relating to the unrealized gain on revaluation of investments, net of tax from OCI to accumulated earnings on April 1, 2018.
(c) | Reconciliation of lifetime expected credit loss balance from IAS 39 to IFRS 9 |
The following table reconciles the closing lifetime expected credit loss for financial assets and contract assets in accordance with IAS 39 as at March 31, 2018 to the opening allowance for credit losses as at April 1, 2018.
13.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Impairment allowance under IAS 39 as at March 31, 2018 | Remeasurement | Lifetime expected credit loss under IFRS 9 as at April 1, 2018 | |||||||
Trade and other receivables | $ | 60,121 | $ | 11,237 | $ | 71,358 | |||
Unbilled revenues | $ | - | $ | 12,399 | $ | 12,399 |
(d) | Impairment of financial assets |
Just Energy has two types of financial asset subject to IFRS 9’s new ECL model: (i) trade and other receivables and (ii) unbilled revenues. Just Energy was required to revise its impairment methodology under IFRS 9 for each of these classes of assets. For trade and other receivables, Just Energy applies the simplified approach to providing for ECL prescribed by IFRS 9, which requires the use of the lifetime expected loss provision for all trade receivables and unbilled revenues. Measurement of ECL resulted in an increase to the provision for trade receivables and unbilled revenues of $23,636, which was recorded as at April 1, 2018. This was before the tax impact of $5,616, which reduced the deferred tax liability, as at April 1, 2018.
(e) | Derivatives and hedging activities |
Just Energy did not apply hedge accounting under IAS 39, nor under IFRS 9.
6. | TRADE AND OTHER RECEIVABLES |
| As at Sept. 30, 2018 | | As at March 31, 2018 | |||
Trade account receivables, net | $ | 376,697 | $ | 332,083 | ||
Accrued gas receivables | 1,318 | 15,893 | ||||
Unbilled revenues | 250,536 | 301,577 | ||||
Other | 65,928 | 47,754 | ||||
$ | 694,479 | $ | 697,307 |
7. | OTHER CURRENT AND NON-CURRENT ASSETS |
(a) | Other current assets | As at Sept. 30, 2018 | As at March 31, 2018 | ||||
Prepaid expenses and deposits | $ | 40,694 | $ | 32,900 | |||
Customer acquisition costs | 60,501 | 31,852 | |||||
Green certificates | 37,234 | 42,230 | |||||
Gas delivered in excess of consumption | 10,348 | 2,715 | |||||
$ | 148,777 | $ | 109,697 | ||||
(b) | Other non-current assets | As at Sept. 30, 2018 | As at March 31, 2018 | ||||
Customer acquisition costs | $ | 41,117 | $ | 17,101 | |||
Other long-term assets | 4,553 | 2,886 | |||||
$ | 45,670 | $ | 19,987 |
14.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
8. | FINANCIAL INSTRUMENTS |
(a) | Fair value of derivative financial instruments and other |
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Management has estimated the value of financial swaps, physical forwards and option contracts for electricity, natural gas, carbon and renewable energy certificates, and generation and transmission capacity contracts using a discounted cash flow method, which employs market forward curves that are either directly sourced from third parties or are developed internally based on third party market data. These curves can be volatile, thus leading to volatility in the mark to market with no immediate impact to cash flows. Gas options have been valued using the Black option value model using the applicable market forward curves and the implied volatility from other market traded options. Management periodically uses non-exchange traded swap agreements based on cooling degree days (CDDs) and heating degree days (HDDs) measured in its utility service territories to reduce the impact of weather volatility on Just Energy’s electricity volumes commonly referred to as “weather derivatives”. The fair value of these swaps on a given measurement station indicated in the derivative contract are determined by calculating the difference between the agreed strike and expected variable observed at the same station.
The following table illustrates gains (losses) related to Just Energy’s derivative financial instruments classified as FVTPL and recorded on the interim condensed consolidated statements of financial position as fair value of derivative financial assets and fair value of derivative financial liabilities, with their offsetting values recorded in change in fair value of derivative instruments and other on the interim condensed consolidated statements of income (loss).
Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | |||||||||||||
Change in fair value of derivative instruments and other | ||||||||||||||||
Physical forward contracts and options (i) | $ | 41,108 | $ | (71,671 | ) | $ | (57,203 | ) | $ | 16,347 | ||||||
Financial swap contracts and options (ii) | (30,758 | ) | 12,330 | 38,046 | 16,024 | |||||||||||
Foreign exchange forward contracts | (1,437 | ) | (9,004 | ) | 867 | (2,065 | ) | |||||||||
Share swap | (2,298 | ) | 300 | (5,561 | ) | (1,807 | ) | |||||||||
Unrealized foreign exchange on 6.5% convertible bond and 8.75% loan | 3,784 | 7,313 | (213 | ) | 12,097 | |||||||||||
6.5% convertible bond conversion feature | 14 | (728 | ) | 246 | 4,900 | |||||||||||
Weather derivatives | (30,181 | ) | - | (30,181 | ) | - | ||||||||||
Other derivative options | (4,164 | ) | (9,463 | ) | (6,489 | ) | (5,802 | ) | ||||||||
Change in fair value of derivative instruments and other | $ | (23,932 | ) | $ | (70,923 | ) | $ | (60,488 | ) | $ | 39,694 |
15.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the interim condensed consolidated statement of financial position as at September 30, 2018:
Financial assets (current) | Financial assets (non-current) | Financial liabilities (current) | Financial liabilities (non-current) | |||||||||||||
Physical forward contracts and options (i) | $ | 162,194 | $ | 22,698 | $ | 20,037 | $ | 26,949 | ||||||||
Financial swap contracts and options (ii) | 22,900 | 646 | 6,570 | 25,342 | ||||||||||||
Foreign exchange forward contracts | - | - | 251 | 455 | ||||||||||||
Share swap | - | - | 13,961 | - | ||||||||||||
Weather derivative | 10,356 | - | - | - | ||||||||||||
Other derivative options | 8,910 | 83 | 16 | 1,198 | ||||||||||||
As at September 30, 2018 | $ | 204,360 | $ | 23,427 | $ | 40,835 | $ | 53,944 |
The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the interim condensed consolidated statement of financial position as at March 31, 2018:
Financial assets (current) | Financial assets (non-current) | Financial liabilities (current) | Financial liabilities (non-current) | |||||||||||||
Physical forward contracts and options | $ | 198,891 | $ | 60,550 | $ | 32,451 | $ | 29,003 | ||||||||
Financial swap contracts and options | 8,133 | 1,342 | 34,369 | 22,117 | ||||||||||||
Foreign exchange forward contracts | - | - | 1,068 | 505 | ||||||||||||
Share swap | - | - | 18,400 | - | ||||||||||||
6.5% convertible bond conversion feature | - | - | - | 246 | ||||||||||||
Other derivative options | 11,745 | 2,770 | - | - | ||||||||||||
As at March 31, 2018 | $ | 218,769 | $ | 64,662 | $ | 86,288 | $ | 51,871 |
Below is a summary of the financial instruments classified through profit or loss as at September 30, 2018, to which Just Energy has committed:
(i) Physical forward contracts and options consist of:
· | Electricity contracts with a total remaining volume of 35,362,864 MWh, a weighted average price of $47.90/MWh and expiry dates up to September 30, 2028. |
· | Natural gas contracts with a total remaining volume of 102,417,945 GJs, a weighted average price of $3.80/GJ and expiry dates up to December 31, 2024. |
· | Renewable energy certificates (“RECs”) and emission-reduction credit contracts with a total remaining volume of 3,971,389 MWh and 441,750 tonnes, respectively, a weighted average price of $27.01/REC and $2.75/tonne, respectively, and expiry dates up to December 31, 2028 and December 31, 2021. |
· | Electricity generation capacity contracts with a total remaining volume of 3,798 MWCap, a weighted average price of $6,612.89/MWCap and expiry dates up to October 31, 2022. |
16.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
· | Ancillary contracts with a total remaining volume of 1,376,191 MWh, a weighted average price of $16.24/MWh and expiry dates up to December 31, 2020. |
(ii) Financial swap contracts and options consist of:
· | Electricity contracts with a total remaining volume of 11,930,819 MWh, an average price of $37.43/MWh and expiry dates up to November 30, 2024. |
· | Natural gas contracts with a total remaining volume of 134,838,027 GJs, an average price of $3.53/GJ and expiry dates up to December 31, 2024. |
· | Electricity generation capacity contracts with a total remaining volume of 141 MWCap, a weighted average price of $70,972.67/MWCap and expiry dates up to October 31, 2020. |
· | Ancillary contracts with a total remaining volume of 1,242,514 MWh, a weighted average price of $18.33/MWh and expiry dates up to December 31, 2020. |
(iii) Weather derivatives consist of:
· | Weather swaps for cooling degree days with temperature strike values of 79.30–89.10 Fahrenheit and power strike prices of $24.00–$32.00/MWh and an expiry date of October 31, 2018. |
· | Weather swaps for heating degree days with temperature strike values of 25.00–30.00 Fahrenheit and power strike prices of $100.00/MWh and an expiry date of February 28, 2019. |
These derivative financial instruments create a credit risk for Just Energy since they have been transacted with a limited number of counterparties. Should any counterparty be unable to fulfil its obligations under the contracts, Just Energy may not be able to realize the financial assets’ balance recognized in the consolidated financial statements.
Share swap agreement
Just Energy has entered into a share swap agreement to manage the interim condensed consolidated statements of income (loss) volatility associated with the Company’s restricted share grant and deferred share grant plans. The value, on inception, of the 2,500,000 shares under this share swap agreement was approximately $33,803. On August 22, 2018, Just Energy reduced the notional value of the share swap to $23,803 through a payment of $10,000 and renewed the share swap agreement for an additional year. Net monthly settlements received under the share swap agreement are recorded in other income. Just Energy records the fair value of the share swap agreement in the non-current derivative financial liabilities on the interim condensed consolidated statements of financial position. Changes in the fair value of the share swap agreement are recorded through the interim condensed consolidated statements of income (loss) as a change in fair value of derivative instruments and other.
17.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Fair value (“FV”) hierarchy derivatives
Level 1
The fair value measurements are classified as Level 1 in the FV hierarchy if the fair value is determined using quoted unadjusted market prices.
Level 2
Fair value measurements that require observable inputs other than quoted prices in Level 1, either directly or indirectly, are classified as Level 2 in the FV hierarchy. This could include the use of statistical techniques to derive the FV curve from observable market prices. However, in order to be classified under Level 2, significant inputs must be directly or indirectly observable in the market. Just Energy values its New York Mercantile Exchange (“NYMEX”) financial gas fixed-for-floating swaps under Level 2.
Level 3
Fair value measurements that require unobservable market data or use statistical techniques to derive forward curves from observable market data and unobservable inputs are classified as Level 3 in the FV hierarchy. For the supply contracts, Just Energy uses quoted market prices as per available market forward data and applies a price-shaping profile to calculate the monthly prices from annual strips and hourly prices from block strips for the purposes of mark-to-market calculations. The profile is based on historical settlements with counterparties or with the system operator and is considered an unobservable input for the purposes of establishing the level in the FV hierarchy. For the natural gas supply contracts, Just Energy uses three different market observable curves: (i) Commodity (predominately NYMEX), (ii) Basis and (iii) Foreign exchange. NYMEX curves extend for over five years (thereby covering the length of Just Energy’s contracts); however, most basis curves extend only 12 to 15 months into the future. In order to calculate basis curves for the remaining years, Just Energy uses extrapolation, which leads natural gas supply contracts to be classified under Level 3.
Weather derivatives are non-exchange traded financial instruments used as part of a risk management strategy to mitigate the impact adverse weather conditions have on gross margin. The fair values of the derivatives are determined using an internally developed model that relies upon both observable inputs and significant unobservable inputs. Accordingly, the fair values of these derivatives are classified as Level 3. Observable market and contractual inputs to these models vary by contract type and would typically include notional amounts, reference weather stations, strike prices, temperature strike values, terms to expiration and historical weather data. Significant unobservable inputs would include expected weather curves and scenario probabilities. These are the most significant assumptions contributing to the determination of fair value estimates and changes in these inputs can result in a significantly higher or lower fair value measurement.
For the share swap, Just Energy uses a forward interest rate curve along with a volume weighted average share price.
Just Energy’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1, Level 2 or Level 3 during the three and six months ended September 30, 2018 or the year ended March 31, 2018.
18.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Fair value measurement input sensitivity
The main cause of changes in the fair value of derivative instruments is changes in the forward curve prices used for the fair value calculations. Just Energy provides a sensitivity analysis of these forward curves under the “Market risk” section of this note. Other inputs, including volatility and correlations, are driven off historical settlements.
The following table illustrates the classification of derivative financial assets (liabilities) in the FV hierarchy as at September 30, 2018:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative financial assets | $ | - | $ | - | $ | 227,787 | $ | 227,787 | ||||||||
Derivative financial liabilities | - | (13,731 | ) | (81,048 | ) | (94,779 | ) | |||||||||
Total net derivative assets (liabilities) | $ | - | $ | (13,731 | ) | $ | 146,739 | $ | 133,008 |
The following table illustrates the classification of derivative financial assets (liabilities) in the FV hierarchy as at March 31, 2018:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative financial assets | $ | - | $ | - | $ | 283,431 | $ | 283,431 | ||||||||
Derivative financial liabilities | - | (21,092 | ) | (117,067 | ) | (138,159 | ) | |||||||||
Total net derivative assets (liabilities) | $ | - | $ | (21,092 | ) | $ | 166,364 | $ | 145,272 |
A key assumption used when determining the significant unobservable inputs included in Level 3 of the FV hierarchy consists of up to 5% price extrapolation to calculate monthly prices that extend beyond the market observable 12- to 15-month forward curve.
The following table illustrates the changes in net fair value of financial assets (liabilities) classified as Level 3 in the FV hierarchy for the following periods:
Six months ended September 30, 2018 | Year ended March 31, 2018 | |||||||
Balance, beginning of period | $ | 166,364 | $ | (315,110 | ) | |||
Total gains | 103,200 | 105,709 | ||||||
Purchases | 145,704 | 207,531 | ||||||
Sales | (63,524 | ) | (64,464 | ) | ||||
Settlements | (205,005 | ) | 232,698 | |||||
Balance, end of period | $ | 146,739 | $ | 166,364 |
(b) | Classification of non-derivative financial assets and liabilities |
As at September 30, 2018 and March 31, 2018, the carrying value of cash and cash equivalents, restricted cash, current trade and other receivables, and trade and other payables approximates their fair value due to their short-term nature.
Long-term debt recorded at amortized cost has a fair value as at September 30, 2018 of $740.8 million (March 31, 2018 - $570.1 million) and the interest payable on outstanding amounts is at rates that vary with Bankers’ Acceptances, LIBOR, Canadian bank prime rate or U.S. prime rate, with the exceptions of 8.75% loan, 6.75% $100M convertible debentures, 6.75% $160M convertible debentures, 6.5% convertible bonds and 5.75% convertible debentures, which are fair valued based on market value. The 6.75% $100M convertible debentures, 6.75% $160M convertible debentures, 6.5% convertible bonds and 5.75% convertible debentures are classified as Level 1 in the FV hierarchy.
19.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Investments in equity instruments have a fair value as at September 30, 2018 of $36.3 million (March 31, 2018 - $36.3 million) and are measured based on Level 2 of the fair value hierarchy. Level 2 inputs for non-derivative financial assets include quoted prices for similar assets in active markets, and quoted prices for identical or similar assets that are not active.
No adjustments were made in the quarter in valuing the investment in ecobee or Energy Earth. Movements are related to foreign exchange revaluations.
The following table illustrates the classification of investments in the FV hierarchy as at September 30, 2018:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investment in ecobee | $ | - | $ | 32,445 | $ | - | $ | 32,445 | ||||||||
Investment in Energy Earth | - | 3,884 | - | 3,884 | ||||||||||||
Total investments | $ | - | $ | 36,329 | $ | - | $ | 36,329 |
The risks associated with Just Energy’s financial instruments are as follows:
(i) | Market risk |
Market risk is the potential loss that may be incurred as a result of changes in the market or fair value of a particular instrument or commodity. Components of market risk to which Just Energy is exposed are discussed below.
Foreign currency risk
Foreign currency risk is created by fluctuations in the fair value or cash flows of financial instruments due to changes in foreign exchange rates and exposure as a result of investments in U.S. and international operations.
The performance of the Canadian dollar relative to the U.S. dollar could positively or negatively affect Just Energy’s income, as a portion of Just Energy’s income is generated in U.S. dollars and is subject to currency fluctuations upon translation to Canadian dollars. Due to its growing operations in the U.S. and Europe, Just Energy expects to have a greater exposure to foreign currency fluctuations in the future than in prior years. Just Energy has economically hedged between 50% and 90% of forecasted cross-border cash flows that are expected to occur within the next 12 months and between 0% and 50% of certain forecasted cross-border cash flows that are expected to occur within the next 13 to 24 months. The level of economic hedging is dependent on the source of the cash flow and the time remaining until the cash repatriation occurs.
Just Energy may, from time to time, experience losses resulting from fluctuations in the values of its foreign currency transactions, which could adversely affect its operating results. Translation risk is not hedged.
20.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
With respect to translation exposure, if the Canadian dollar had been 5% stronger or weaker against the U.S. dollar for the period ended September 30, 2018, assuming that all the other variables had remained constant, loss for the period would have been $3.7 million lower/higher and OCI would have been $10.8 million lower/higher.
Interest rate risk
Just Energy is only exposed to interest rate fluctuations associated with its floating rate credit facility. Just Energy’s current exposure to interest rates does not economically warrant the use of derivative instruments. Just Energy’s exposure to interest rate risk is relatively immaterial and temporary in nature. Just Energy does not currently believe that its long-term debt exposes the Company to material interest rate risks but has set out parameters to actively manage this risk within its Risk Management Policy.
A 1% increase (decrease) in interest rates would have resulted in a decrease (increase) of approximately $434 in profit before income taxes for the three months ended September 30, 2018 (2017 - $300).
Commodity price risk
Just Energy is exposed to market risks associated with commodity prices and market volatility where estimated customer requirements do not match actual customer requirements. Management actively monitors these positions on a daily basis in accordance with its Risk Management Policy. This policy sets out a variety of limits, most importantly thresholds for open positions in the gas and electricity portfolios which also feed a Value at Risk limit. Should any of the limits be exceeded, they are closed expeditiously or express approval to continue to hold is obtained. Just Energy’s exposure to market risk is affected by a number of factors, including accuracy of estimation of customer commodity requirements, commodity prices, volatility and liquidity of markets. Just Energy enters into derivative instruments in order to manage exposures to changes in commodity prices. The derivative instruments that are used are designed to fix the price of supply for estimated customer commodity demand and thereby fix margins such that shareholder dividends can be appropriately established. Derivative instruments are generally transacted over the counter. The inability or failure of Just Energy to manage and monitor the above market risks could have a material adverse effect on the operations and cash flows of Just Energy. Just Energy mitigates the exposure to variances in customer requirements that are driven by changes in expected weather conditions through active management of the underlying portfolio, which involves, but is not limited to, the purchase of options including weather derivatives. Just Energy’s ability to mitigate weather effects is limited by the degree to which weather conditions deviate from normal.
Commodity price sensitivity – all derivative financial instruments
If all the energy prices associated with derivative financial instruments including natural gas, electricity, verified emission-reduction credits and renewable energy certificates had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit before income taxes for the three months ended September 30, 2018 would have increased (decreased) by $214,025 ($212,185), primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.
Commodity price sensitivity – Level 3 derivative financial instruments
If the energy prices associated with only Level 3 derivative financial instruments including natural gas, electricity, verified emission-reduction credits and renewable energy certificates had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit before income taxes for the three months ended September 30, 2018 would have increased (decreased) by $216,798 ($214,958), primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.
21.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
(ii) Credit risk
Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and causes financial loss to another party. Just Energy is exposed to credit risk in two specific areas: customer credit risk and counterparty credit risk.
Customer credit risk
In Alberta, Texas, Illinois, British Columbia, California, Michigan, Delaware, Ohio, Georgia and the U.K., Just Energy has customer credit risk and, therefore, credit review processes have been implemented to perform credit evaluations of customers and manage customer default. If a significant number of customers were to default on their payments, it could have a material adverse effect on the operations and cash flows of Just Energy. Management factors default from credit risk in its margin expectations for all the above markets.
The aging of the accounts receivable from the above markets was as follows:
Sept. 30, 2018 | March 31, 2018 | |||||||
Current | $ | 125,123 | $ | 113,786 | ||||
1 – 30 days | 42,050 | 44,374 | ||||||
31–60 days | 17,818 | 21,241 | ||||||
61–90 days | 13,372 | 12,686 | ||||||
Over 90 days | 60,413 | 69,207 | ||||||
$ | 258,776 | $ | 261,294 |
Changes in the expected lifetime credit loss were as follows:
Sept. 30, 2018 | March 31, 2018 | |||||||
Balance, beginning of period | $ | 60,121 | $ | 49,431 | ||||
Provision for doubtful accounts | 45,184 | 56,300 | ||||||
Bad debts written off | (38,902 | ) | (41,802 | ) | ||||
Adjustment from IFRS 9 adoption | 23,636 | - | ||||||
Foreign exchange | (3,744 | ) | (3,808 | ) | ||||
Balance, end of period | $ | 86,295 | $ | 60,121 |
In the remaining markets, the local distribution companies (“LDCs”) provide collection services and assume the risk of any bad debts owing from Just Energy’s customers for a fee. Management believes that the risk of the LDCs failing to deliver payment to Just Energy is minimal. There is no assurance that the LDCs providing these services will continue to do so in the future.
Counterparty credit risk
Counterparty credit risk represents the loss that Just Energy would incur if a counterparty fails to perform under its contractual obligations. This risk would manifest itself in Just Energy replacing contracted supply at prevailing market rates, thus impacting the related customer margin. Counterparty limits are established within the Risk Management Policy. Any exceptions to these limits require approval from the Board of Directors of Just Energy. The Risk Department and Risk Committee monitor current and potential credit exposure to individual counterparties and also monitor overall aggregate counterparty exposure. However, the failure of a counterparty to meet its contractual obligations could have a material adverse effect on the operations and cash flows of Just Energy.
22.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
As at September 30, 2018, the estimated counterparty credit risk exposure amounted to $227,787 (2017 - $24,228), representing the risk relating to Just Energy’s exposure to derivatives that are in an asset position.
(iii) Liquidity risk
Liquidity risk is the potential inability to meet financial obligations as they fall due. Just Energy manages this risk by monitoring detailed weekly cash flow forecasts covering a rolling six-week period, monthly cash forecasts for the next 12 months, and quarterly forecasts for the following two-year period to ensure adequate and efficient use of cash resources and credit facilities.
The following are the contractual maturities, excluding interest payments, reflecting undiscounted disbursements of Just Energy’s financial liabilities:
As at September 30, 2018:
Carrying amount | Contractual cash flows | Less than 1 year | 1–3 years | 4–5 years | More than 5 years | |||||||||||||||||||
Trade and other payables | $ | 636,767 | $ | 636,767 | $ | 636,767 | $ | - | $ | - | $ | - | ||||||||||||
Long-term debt1 | 661,335 | 706,386 | 135,146 | 179,395 | 391,845 | - | ||||||||||||||||||
Gas, electricity and non-commodity contracts | 94,779 | 3,200,110 | 1,026,658 | 1,747,709 | 326,348 | 99,395 | ||||||||||||||||||
$ | 1,392,881 | $ | 4,543,263 | $ | 1,798,571 | $ | 1,927,104 | $ | 718,193 | $ | 99,395 | |||||||||||||
As at March 31, 2018: | ||||||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1–3 years | 4–5 years | More than 5 years | |||||||||||||||||||
Trade and other payables | $ | 616,434 | $ | 616,434 | $ | 616,434 | $ | - | $ | - | $ | - | ||||||||||||
Long-term debt1 | 543,504 | 575,525 | 122,115 | 193,410 | 260,000 | - | ||||||||||||||||||
Gas, electricity and non-commodity contracts | 138,159 | 3,171,037 | 1,867,389 | 1,202,949 | 69,658 | 31,041 | ||||||||||||||||||
$ | 1,298,097 | $ | 4,362,996 | $ | 2,605,938 | $ | 1,396,359 | $ | 329,658 | $ | 31,041 |
1 Included in long-term debt are the 6.75% $100M convertible debentures, 6.75% $160M convertible debentures, 6.5% convertible bonds and 5.75% convertible debentures, which may be settled through the issuance of shares at the option of the holder or Just Energy upon maturity.
In addition to the amounts noted above, as at September 30, 2018, the contractual net interest payments over the term of the long-term debt with scheduled repayment terms are as follows:
Less than 1 year | 1–3 years | 4–5 years | More than 5 years | |||||||||||||
Interest payments | $ | 29,437 | $ | 68,061 | $ | 37,547 | $ | - |
23.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
(iv) | Supplier risk |
Just Energy purchases the majority of the gas and electricity delivered to its customers through long-term contracts entered into with various suppliers. Just Energy has an exposure to supplier risk as the ability to continue to deliver gas and electricity to its customers is reliant upon the ongoing operations of these suppliers and their ability to fulfil their contractual obligations. As at September 30, 2018, Just Energy has applied an adjustment factor to determine the fair value of its financial assets in the amount of $6,626 (2017 - $5,562) to accommodate for its counterparties’ risk of default.
9. | ACQUISITION OF BUSINESSES |
(a) | Acquisition of EdgePower, Inc. |
On February 28, 2018, Just Energy completed the acquisition of the issued and outstanding shares of EdgePower, Inc. (“EdgePower”), a privately held energy monitoring and management company operating out of Aspen, Colorado. EdgePower provides lighting and HVAC controls, as well as enterprise monitoring, in hundreds of commercial buildings in North America. Just Energy acquired 100% of the equity interests of EdgePower for the purposes of integrating their lighting and HVAC controls with the commercial business. The fair value of the total consideration transferred is US$14.9 million, of which US$7.5 million was paid in cash and US$7.4 million was settled through the issuance of 1,415,285 Just Energy common shares. The goodwill that was acquired as part of this acquisition relates primarily to the EdgePower workforce and synergies between Just Energy and EdgePower.
In addition, the former shareholders of EdgePower are entitled to a payment of up to a maximum of US$6.0 million, payable in cash, subject to continuing employment and the achievement of certain annual and cumulative performance thresholds of the EdgePower business. The payment is calculated as 20% of EBITDA for the EdgePower business for the years of 2019–2021 with minimum thresholds that must be met. As at the acquisition date, the amount recognized for management remuneration was $nil.
The following is the preliminary purchase price allocation for EdgePower:
NET ASSETS ACQUIRED | ||||
Working capital | $ | 993 | ||
Intangible assets | 14,198 | |||
Goodwill | 7,673 | |||
Deferred tax liabilities | (3,820 | ) | ||
Total consideration | $ | 19,044 | ||
Cash paid, net of working capital adjustment | $ | 9,534 | ||
Common shares issued | 9,510 | |||
Total consideration | $ | 19,044 |
24.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
(b) | Acquisition of Filter Group Inc. (“Filter Group”) |
On October 1, 2018, Just Energy announced the closing of the acquisition of Filter Group, a leading provider of subscription based, home water filtration systems to residential customers in Canada and the United States. Headquartered in Toronto, Ontario, Filter Group currently provides under counter and whole home water filtration solutions to residential markets in the provinces of Ontario and Manitoba and the states of Nevada, California, Arizona, Michigan and Illinois, with over 30,000 home water filtration systems installed to date.
Just Energy acquired all of the issued and outstanding shares of Filter Group and the shareholder loan owing by Filter Group. In addition to the assumption of approximately $22 million of third party Filter Group debt, the aggregate consideration payable by Just Energy under the Purchase Agreement is comprised of: (i) $15 million in cash, fully payable within 180 days of closing; and (ii) earn-out payments of up to 9.5 million Just Energy common shares (with up to an additional 2.4 million Just Energy common shares being issuable to satisfy dividends that otherwise would have been paid in cash on the Just Energy shares issuable pursuant to the earn-out payments (the “DRIP Shares”)), subject to customary closing adjustments. The earn-out payments are contingent on the achievement by Filter Group of certain performance-based milestones specified in the Purchase Agreement in each of the first three years following the closing of the acquisition. In addition, the earn-out payments may be paid 50% in cash and the DRIP Shares 100% in cash, at the option of Just Energy.
Daniel MacDonald, the CEO of Filter Group, is the son of the Executive Chair of Just Energy. The transaction was reviewed by Strategic Initiatives Committee and it received a fairness opinion on the transaction.
10. | LONG-TERM DEBT AND FINANCING |
| Maturity | | Sept. 30 2018 | | March 31, 2018 | |||||
Credit facility (a) | September 1, 2020 | $ | 179,395 | $ | 122,115 | |||||
Less: Debt issue costs (a) | (2,372 | ) | (664 | ) | ||||||
8.75% loan (b) | September 12, 2023 | 115,623 | - | |||||||
6.75% $100M convertible debentures (c) | March 31, 2023 | 86,276 | 85,760 | |||||||
6.75% $160M convertible debentures (d) | December 31, 2021 | 149,515 | 148,146 | |||||||
6.5% convertible bonds (e) | July 29, 2019 | 132,898 | 188,147 | |||||||
661,335 | 543,504 | |||||||||
Less: Current portion | (132,898 | ) | (121,451 | ) | ||||||
$ | 528,437 | $ | 422,053 |
25.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Future annual minimum repayments are as follows:
| Less than 1 year |
| 1–3 years | 4–5 years |
| More than 5 years |
| Total | ||||||||||||
Credit facility (a) | $ | - | $ | 179,395 | $ | - | $ | - | $ | 179,395 | ||||||||||
8.75% loan (b) | - | - | 131,845 | - | 131,845 | |||||||||||||||
6.75% $100M convertible debentures (c) | - | 100,000 | 100,000 | |||||||||||||||||
6.75% $160M convertible debentures (d) | - | - | 160,000 | - | 160,000 | |||||||||||||||
6.5% convertible bonds (e) | 135,146 | - | - | - | 135,146 | |||||||||||||||
$ | 135,146 | $ | 179,395 | $ | 391,845 | $ | - | $ | 706,386 |
The details for long-term debt are as follows:
As at April 1, 2018 | Cash inflows/ (outflows) | Foreign Exchange | Non- cash changes | As at Sept. 30, 2018 | ||||||||||||||||
Credit facility (a) | $ | 121,451 | $ | 54,909 | $ | - | $ | 663 | $ | 177,023 | ||||||||||
8.75% loan (b) | - | 119,380 | (393 | ) | (3,364 | ) | 115,623 | |||||||||||||
6.75% $100M convertible debentures (c) | 85,760 | - | - | 516 | 86,276 | |||||||||||||||
6.75% $160M convertible debentures (d) | 148,146 | - | - | 1,369 | 149,515 | |||||||||||||||
6.5% convertible bonds (e) | 188,147 | (59,574 | ) | 606 | 3,719 | 132,898 | ||||||||||||||
$ | 543,504 | $ | 114,715 | $ | 213 | $ | 2,903 | $ | 661,335 | |||||||||||
Less: Current portion | $ | (121,451 | ) | $ | - | $ | - | $ | - | $ | (132,898 | ) | ||||||||
$ | 422,053 | $ | 114,715 | $ | 213 | $ | 2,903 | $ | 528,437 |
As at April 1, 2017 | Cash inflows/ (outflows) | Foreign Exchange | Non- cash changes | As at March 31, 2018 | ||||||||||||||||
Credit facility (a) | $ | 66,001 | $ | 53,857 | $ | - | $ | 1,593 | $ | 121,451 | ||||||||||
6.75% $100M convertible debentures (c) | - | 95,869 | - | (10,109 | ) | 85,760 | ||||||||||||||
6.75% $160M convertible debentures (d) | 145,579 | - | - | 2,567 | 148,146 | |||||||||||||||
6.5% convertible bonds (e) | 190,486 | - | (6,101 | ) | 3,761 | 188,147 | ||||||||||||||
5.75% convertible debentures (f) | 96,022 | (100,000 | ) | - | 3,978 | - | ||||||||||||||
$ | 498,088 | $ | 49,726 | $ | (6,101 | ) | $ | 1,790 | $ | 543,504 | ||||||||||
Less: Current portion | $ | - | $ | - | $ | - | $ | - | $ | (121,451 | ) | |||||||||
$ | 498,088 | $ | 49,726 | $ | (6,101 | ) | $ | 1,790 | $ | 422,053 |
26.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Interest is expensed based on the effective interest rate. The following table details the finance costs for the indicated periods:
Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | |||||||||||||
Credit facility (a) | $ | 4,620 | $ | 2,932 | $ | 9,054 | $ | 5,570 | ||||||||
6.75% $100M convertible debentures (c) | 2,293 | - | 4,585 | - | ||||||||||||
6.75% $160M convertible debentures (d) | 3,399 | 3,342 | 6,769 | 6,062 | ||||||||||||
6.5% convertible debentures (e) | 5,629 | 3,687 | 9,776 | 7,741 | ||||||||||||
5.75% convertible debentures (f) | - | 2,072 | - | 4,145 | ||||||||||||
Collateral cost and other | 4,182 | 488 | 6,279 | 993 | ||||||||||||
$ | 20,123 | $ | 12,521 | $ | 36,463 | $ | 24,511 |
(a) | As of April 18, 2018, the Company has renegotiated an agreement with a syndicate of lenders that includes Canadian Imperial Bank of Commerce (“CIBC”), National Bank of Canada (“National”), HSBC Bank Canada, JPMorgan Chase Bank N.A., Alberta Treasury Branches, Canadian Western Bank and Morgan Stanley Senior Funding, Inc., a subsidiary of Morgan Stanley Bank N.A. The agreement extends Just Energy’s credit facility for an additional two years to September 1, 2020. The facility size was increased to $352.5 million from $342.5 million, with an accordion for Just Energy to draw up to $370 million. Certain principal amount outstanding under the letters of credit facility is guaranteed by Export Development Canada under its Account Performance Security Guarantee Program. |
Interest is payable on outstanding loans at rates that vary with Bankers’ Acceptance rates, LIBOR, Canadian bank prime rate or U.S. prime rate. Under the terms of the operating credit facility, Just Energy is able to make use of Bankers’ Acceptances and LIBOR advances at stamping fees of 3.400%. Prime rate advances are at a rate of bank prime (Canadian bank prime rate or U.S. prime rate) plus 2.400% and letters of credit are at a rate of 3.40%. Interest rates are adjusted quarterly based on certain financial performance indicators.
As at September 30, 2018, the Canadian prime rate was 3.7% and the U.S. prime rate was 5.25%. As at September 30, 2018, $179.40 million has been drawn against the facility and total letters of credit outstanding as of September 30, 2018, amounted to $89.38 million (June 30, 2018 - $103.85 million). As at September 30, 2018, Just Energy has $83.7 million of the facility remaining for future working capital and/or security requirements. Just Energy’s obligations under the credit facility are supported by guarantees of certain subsidiaries and affiliates and secured by a general security agreement and a pledge of the assets and securities of Just Energy and the majority of its operating subsidiaries and affiliates excluding, primarily, the U.K., Barbados, Ireland, Japan and Germany operations. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at September 30, 2018, the Company was compliant with all of these covenants.
(b) | On September 12, 2018, Just Energy entered into a US$250 million non-revolving multi-draw senior unsecured term loan facility (the “8.75% loan”) with Sagard Credit Partners, LP and certain funds managed by a leading U.S. based global fixed income asset manager. The 8.75% loan bears interest at 8.75% per annum payable semi-annually in arrears on June 30 and December 31 in each year, and will mature on September 12, 2023. Warrants totalling 7.5 million were issued to the counterparties at a strike price of $8.56 each, convertible to one Just Energy common stock. The value of these warrants has been assessed as nominal. As at September 30, 2018, US$97.0 million were drawn from the 8.75% loan. The 8.75% loan has three tranches. The first tranche is earmarked for general corporate purposes, including to pay down Just Energy's credit facility. The second tranche is earmarked towards the settlement of Just Energy's 6.5% convertible bonds. The third tranche is earmarked for investments and future acquisitions. |
27.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
(c) | On February 22, 2018, Just Energy issued $100 million of convertible unsecured senior subordinated debentures (the “6.75% $100 million convertible debentures”). The 6.75% $100 million convertible debentures bear interest at an annual rate of 6.75%, payable semi-annually in arrears on March 31 and September 30 in each year, and have a maturity date of March 31, 2023. |
(d) | On October 5, 2016, Just Energy issued $160 million of convertible unsecured senior subordinated debentures (the “6.75% $160 million convertible debentures”). The 6.75% $160 million convertible debentures bear interest at an annual rate of 6.75%, payable semi-annually in arrears on June 30 and December 31 in each year, and have a maturity date of December 31, 2021. |
(e) | On January 29, 2014, Just Energy issued US$150 million of European-focused senior unsecured convertible bonds (the “6.5% convertible bonds”). The 6.5% convertible bonds bear interest at an annual rate of 6.5%, payable semi-annually in arrears in equal installments on January 29 and July 29 in each year, and have a maturity date of July 29, 2019. The Company incurred transaction costs of $5,215 and has shown these costs net of the 6.5% convertible bonds. As at September 30, 2018, US$45.6 million were tendered and extinguished, resulting in a loss on redemption of $1.5 million. |
(f) | In September 2011, Just Energy issued $100 million of convertible unsecured subordinated debentures (the “5.75% convertible debentures”), which was used to fund an acquisition. The 5.75% convertible debentures bear interest at an annual rate of 5.75%, payable semi-annually on March 31 and September 30 in each year, and have a maturity date of September 30, 2018. The 5.75% convertible debentures were fully redeemed on March 27, 2018. |
11. | INCOME TAXES |
Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | |||||||||||||
Current income tax expense (recovery) | $ | (520 | ) | $ | 3,893 | $ | (3,032 | ) | $ | 4,484 | ||||||
Deferred tax expense (recovery) | 6,932 | (5,726 | ) | 17,405 | 480 | |||||||||||
Provision for (recovery of) income taxes | $ | 6,412 | $ | (1,833 | ) | $ | 14,373 | $ | 4,964 |
28.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
12. | SHAREHOLDERS’ CAPITAL |
Just Energy is authorized to issue an unlimited number of common shares and 50,000,000 preference shares issuable in series, both with no par value. Shares outstanding have no preferences, rights or restrictions attached to them.
Just Energy has the ability to make a normal course issuer bid (“NCIB”) to purchase for cancellation a portion of the outstanding 6.75% convertible debentures expiring December 31, 2021, as well as the renewal of Just Energy common shares, respectively. Under each NCIB, Just Energy could have purchased debentures and common shares representing 10% of the outstanding public float at close of business February 28, 2018 up to daily and total limits. These shares may be purchased during the year starting March 19, 2018 and ending March 15, 2019. For the three months ended September 30, 2018, Just Energy had purchased $nil of common shares through the NCIB program, compared to $nil purchased in the prior year.
Details of issued and outstanding shareholders’ capital are as follows:
Six months ended Sept. 30, 2018 | Year ended March 31, 2018 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Common shares: | ||||||||||||||||
Issued and outstanding | ||||||||||||||||
Balance, beginning of period | 148,394,152 | $ | 1,079,055 | 147,013,538 | $ | 1,070,076 | ||||||||||
Share-based awards exercised | 901,943 | 6,936 | 1,643,156 | 11,954 | ||||||||||||
Acquisition of subsidiary | - | - | 1,415,285 | 8,966 | ||||||||||||
Repurchase and cancellation of shares | - | - | (1,677,827 | ) | (11,941 | ) | ||||||||||
Balance, end of period | 149,296,095 | $ | 1,085,991 | 148,394,152 | $ | 1,079,055 | ||||||||||
Preferred shares: | ||||||||||||||||
Issued and outstanding | ||||||||||||||||
Balance, beginning of period | 4,323,300 | $ | 136,771 | 4,040,000 | $ | 128,363 | ||||||||||
Shares issued for cash | 338,865 | 10,447 | 283,300 | 9,260 | ||||||||||||
Preferred shares issuance cost | - | (234 | ) | - | (852 | ) | ||||||||||
Balance, end of period | 4,662,165 | $ | 146,984 | 4,323,300 | $ | 136,771 | ||||||||||
Shareholders' capital | 153,958,260 | $ | 1,232,975 | 152,717,452 | $ | 1,215,826 |
13. | REPORTABLE BUSINESS SEGMENTS |
Just Energy’s reportable segments include the following: Consumer Energy and Commercial Energy. Just Energy has aggregated the operating segments into these reportable segments on the basis that the operating segments share economic characteristics. These characteristics include the nature of the product and services sold, the distribution methods, and the type of customer class and regulatory environment.
Transactions between operating segments are in the normal course of operations and are recorded at the exchange amount. Allocations made between segments for shared assets or allocated expenses are based on the number of residential customer equivalents in the respective segments.
29.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Just Energy is not considered to have any key customers.
Corporate and shared services report the costs related to management oversight of the business units, public reporting and filings, corporate governance and other shared services functions.
For the three months ended September 30, 2018:
Consumer division | Commercial division | Corporate and shared services division | Consolidated | |||||||||||||
Sales | $ | 593,608 | $ | 363,235 | $ | - | $ | 956,843 | ||||||||
Gross margin | 125,246 | 48,093 | - | 173,339 | ||||||||||||
Administrative expenses | 23,254 | 11,659 | 23,595 | 58,508 | ||||||||||||
Selling and marketing expenses | 36,516 | 20,233 | - | 56,749 | ||||||||||||
Depreciation of property, plant and equipment | 904 | 56 | - | 960 | ||||||||||||
Amortization of intangible assets | 4,624 | 371 | - | 4,995 | ||||||||||||
Other operating expenses | 22,955 | 2,923 | - | 25,878 | ||||||||||||
Operating profit (loss) for the period | $ | 36,993 | $ | 12,851 | $ | (23,595 | ) | $ | 26,249 | |||||||
Finance costs | (20,123 | ) | ||||||||||||||
Change in fair value of derivative instruments and other | (23,932 | ) | ||||||||||||||
Other income | 2,768 | |||||||||||||||
Provision for income taxes | (6,412 | ) | ||||||||||||||
Loss for the period | $ | (21,450 | ) | |||||||||||||
Capital expenditures | $ | 10,381 | $ | 1,187 | $ | - | $ | 11,568 |
30.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
For the three months ended September 30, 2017:
Consumer division | Commercial division | Corporate and shared services division | Consolidated | ||||||||||||||
Sales | $ | 504,705 | $ | 347,222 | $ | - | $ | 851,927 | |||||||||
Gross margin | 107,387 | 35,276 | - | 142,663 | |||||||||||||
Administrative expenses | 18,073 | 10,446 | 18,287 | 46,806 | |||||||||||||
Selling and marketing expenses | 40,643 | 17,934 | - | 58,577 | |||||||||||||
Depreciation of property, plant and equipment | 909 | 76 | - | 985 | |||||||||||||
Amortization of intangible assets | 3,852 | 479 | - | 4,331 | |||||||||||||
Other operating expenses (recovery) | 16,033 | (554 | ) | - | 15,479 | ||||||||||||
Operating profit (loss) for the period | $ | 27,877 | $ | 6,895 | $ | (18,287 | ) | $ | 16,485 | ||||||||
Finance costs | (12,521 | ) | |||||||||||||||
Change in fair value of derivative instruments and other | (70,923 | ) | |||||||||||||||
Other income | 203 | ||||||||||||||||
Recovery of income taxes | 1,833 | ||||||||||||||||
Loss for the period | $ | (64,923 | ) | ||||||||||||||
Capital expenditures | $ | 5,015 | $ | 2,470 | $ | - | $ | 7,485 |
31.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
For the six months ended September 30, 2018:
| | Consumer division | | Commercial division | | Corporate and shared services division | | Consolidated | ||||||||
Sales | $ | 1,135,786 | $ | 697,514 | $ | - | $ | 1,833,300 | ||||||||
Gross margin | 244,011 | 82,860 | - | 326,871 | ||||||||||||
Depreciation of property, plant and equipment | 1,757 | 101 | - | 1,858 | ||||||||||||
Amortization of intangible assets | 8,627 | 713 | - | 9,340 | ||||||||||||
Administrative expenses | 43,400 | 21,171 | 49,619 | 114,190 | ||||||||||||
Selling and marketing expenses | 70,204 | 37,088 | - | 107,292 | ||||||||||||
Other operating expenses | 43,365 | 5,088 | - | 48,453 | ||||||||||||
Operating profit (loss) for the period | $ | 76,658 | $ | 18,699 | $ | (49,619 | ) | $ | 45,738 | |||||||
Finance costs | (36,463 | ) | ||||||||||||||
Change in fair value of derivative instruments and other | (60,488 | ) | ||||||||||||||
Other income | 2,713 | |||||||||||||||
Provision for income taxes | (14,373 | ) | ||||||||||||||
Loss for the period | $ | (62,873 | ) | |||||||||||||
Capital expenditures | $ | 19,563 | $ | 1,859 | $ | - | $ | 21,422 | ||||||||
As at September 30, 2018 | ||||||||||||||||
Total goodwill | $ | 148,462 | $ | 154,522 | $ | - | $ | 302,984 | ||||||||
Total assets | $ | 1,261,372 | $ | 408,608 | $ | - | $ | 1,669,980 | ||||||||
Total liabilities | $ | 1,250,519 | $ | 283,158 | $ | - | $ | 1,533,677 |
32.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
For the six months ended September 30, 2017:
| | Consumer division | | Commercial division | | Corporate and shared services division | | Consolidated | ||||||||
Sales | $ | 991,471 | $ | 708,162 | $ | - | $ | 1,699,633 | ||||||||
Gross margin | 222,892 | 77,334 | - | 300,226 | ||||||||||||
Depreciation of property, plant and equipment | 1,823 | 159 | - | 1,982 | ||||||||||||
Amortization of intangible assets | 6,808 | 983 | - | 7,791 | ||||||||||||
Administrative expenses | 33,316 | 18,411 | 43,710 | 95,437 | ||||||||||||
Selling and marketing expenses | 79,632 | 37,021 | - | 116,653 | ||||||||||||
Other operating expenses | 43,896 | 2,102 | - | 45,998 | ||||||||||||
Operating profit (loss) for the period | $ | 57,417 | $ | 18,658 | $ | (43,710 | ) | $ | 32,365 | |||||||
Finance costs | (24,511 | ) | ||||||||||||||
Change in fair value of derivative instruments and other | 39,694 | |||||||||||||||
Other income | 1,802 | |||||||||||||||
Provision for income taxes | (4,964 | ) | ||||||||||||||
Profit for the period | $ | 44,386 | ||||||||||||||
Capital expenditures | $ | 10,372 | $ | 5,109 | $ | - | $ | 15,481 | ||||||||
As at September 30, 2017 | ||||||||||||||||
Total goodwill | $ | 143,184 | $ | 148,441 | $ | - | $ | 291,625 | ||||||||
Total assets | $ | 848,423 | $ | 428,386 | $ | - | $ | 1,276,809 | ||||||||
Total liabilities | $ | 1,336,073 | $ | 209,090 | $ | - | $ | 1,545,163 |
Sales from external customers
The revenue is based on the location of the customer.
| | Three months ended Sept. 30, 2018 | | Three months ended Sept. 30, 2017 | | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | |||||||||
Canada | $ | 83,440 | $ | 77,312 | $ | 172,668 | $ | 160,691 | ||||||||
United States | 720,868 | 637,793 | 1,334,157 | 1,272,305 | ||||||||||||
International | 152,535 | 136,822 | 326,475 | 266,637 | ||||||||||||
Total | $ | 956,843 | $ | 851,927 | $ | 1,833,300 | $ | 1,699,633 |
33.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Non-current assets
Non-current assets by geographic segment consist of property, plant and equipment and intangible assets and are summarized as follows:
As at Sept. 30, 2018 | As at March 31, 2018 | |||||||
Canada | $ | 207,706 | $ | 201,985 | ||||
United States | 212,237 | 207,147 | ||||||
International | 13,838 | 11,687 | ||||||
Total | $ | 433,781 | $ | 420,819 |
14. | OTHER EXPENSES |
(a) | Other operating expenses |
Three months ended Sept. 30, 2018 | Three months ended Sept. 30, 2017 | Six months ended Sept. 30, 2018 | Six months ended Sept. 30, 2017 | |||||||||||||
Amortization of other intangible assets | $ | 4,995 | $ | 4,331 | $ | 9,340 | $ | 7,791 | ||||||||
Depreciation of property, plant and equipment | 960 | 985 | 1,858 | 1,982 | ||||||||||||
Bad debt expense | 24,384 | 13,763 | 45,184 | 29,035 | ||||||||||||
Share-based compensation | 1,494 | 1,716 | 3,269 | 16,963 | ||||||||||||
$ | 31,833 | $ | 20,795 | $ | 59,651 | $ | 55,771 |
(b) | Employee benefits expense |
| | Three months ended Sept. 30, 2018 | | Three months ended Sept. 30, 2017 | | Six months ended Sept. 30, 2018 | | Six months ended Sept. 30, 2017 | ||||||||
Wages, salaries and commissions | $ | 67,996 | $ | 56,447 | $ | 128,527 | $ | 112,618 | ||||||||
Benefits | 11,692 | 6,193 | 16,573 | 12,503 | ||||||||||||
$ | 79,688 | $ | 62,640 | $ | 145,100 | $ | 125,121 |
34.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
15. | EARNINGS (LOSS) PER SHARE |
| | Three months ended Sept. 30, 2018 | | Three months ended Sept. 30, 2017 | | Six months ended Sept. 30, 2018 | | Six months ended Sept. 30, 2017 | ||||||||
BASIC EARNINGS (LOSS) PER SHARE | ||||||||||||||||
Profit (loss) as per consolidated statement of income | $ | (21,385 | ) | $ | (68,864 | ) | $ | (62,762 | ) | $ | 34,994 | |||||
Dividend to preferred shareholders - net of tax | 2,374 | 2,062 | 4,717 | 4,275 | ||||||||||||
Earnings (loss) available to shareholders | (23,759 | ) | (70,926 | ) | (67,479 | ) | 30,719 | |||||||||
Basic weighted average shares outstanding | 149,247,715 | 146,821,112 | 148,862,333 | 146,941,860 | ||||||||||||
Basic earnings (loss) per share available to shareholders | $ | (0.16 | ) | $ | (0.48 | ) | $ | (0.45 | ) | $ | 0.21 | |||||
DILUTED EARNINGS (LOSS) PER SHARE | ||||||||||||||||
Earnings (loss) available to shareholders | $ | (23,759 | ) | $ | (70,926 | ) | $ | (67,479 | ) | $ | 30,719 | |||||
Adjustment for dilutive impact of convertible debentures | - | - | - | 2,088 | ||||||||||||
Adjusted earnings (loss) available to shareholders | $ | (23,759 | ) | $ | (70,926 | ) | $ | (67,479 | ) | $ | 32,807 | |||||
Basic weighted average shares outstanding | 149,247,715 | 146,821,112 | 148,862,333 | 146,941,860 | ||||||||||||
Dilutive effect of: | ||||||||||||||||
Restricted share grants | 2,377,279 | 2,884,809 | 2,704,346 | 2,866,591 | ||||||||||||
Deferred share grants | 136,508 | 101,294 | 125,905 | 97,465 | ||||||||||||
Convertible debentures | 39,574,831 | 38,804,494 | 39,574,831 | 38,804,494 | ||||||||||||
Shares outstanding on a diluted basis | 191,336,333 | 188,611,709 | 191,267,415 | 188,710,410 | ||||||||||||
Diluted earnings (loss) per share available to shareholders | $ | (0.16 | ) | $ | (0.48 | ) | $ | (0.45 | ) | $ | 0.17 |
16. | DIVIDENDS AND DISTRIBUTION |
For the three months ended September 30, 2018, a dividend of $0.125 (2017 - $0.125) per common share was declared by Just Energy. This dividend amounted to $18,657 (2017 - $18,349), which was approved by the Board of Directors and paid out during the period. For the six months ended September 30, 2018, dividends of $0.25 (2017 - $0.25) per common share were declared and paid by Just Energy. This amounted to $37,206 (2017 - $36,725), which was approved by the Board of Directors and paid out during the period.
For the three months ended September 30, 2018, a distribution of $0.125 (2017 - $0.125) per common share for share grants was declared by Just Energy. This distribution amounted to $443 (2017 - $313), which was approved by the Board of Directors and distributed during the period. For the six months ended September 30, 2018, distributions of $0.25 (2017 - $0.25) per common share for share grants were declared and paid by Just Energy. This amounted to $968 (2017 - $711), which was approved by the Board of Directors and distributed during the period.
35.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
For the three months ended September 30, 2018, a dividend of US$0.53125 (2017 - US$0.53125) per preferred share was declared by Just Energy. This dividend amounted to $3,230 (2017 - $2,806), which was approved by the Board of Directors and paid out during the period. For the six months ended September 30, 2018, dividends of US$1.0625 (2017 - US$1.0625) per preferred share were declared and paid by Just Energy. This amounted to $6,418 (2017 - $5,815), which was approved by the Board of Directors and paid out during the period.
17. | COMMITMENTS AND GUARANTEES |
Commitments for each of the next five years and thereafter are as follows:
As at September 30, 2018
| Less than 1 year |
| 1–3 years | 4–5 years | More than 5 years | Total | ||||||||||||||
Premises and equipment leasing | $ | 2,618 | $ | 7,773 | $ | 7,775 | $ | 7,700 | $ | 25,866 | ||||||||||
Gas, electricity and non-commodity contracts | 1,026,658 | 1,747,709 | 326,348 | 99,395 | 3,200,110 | |||||||||||||||
$ | 1,029,276 | $ | 1,755,482 | $ | 334,123 | $ | 107,095 | $ | 3,225,976 |
Just Energy has entered into leasing contracts for office buildings and administrative equipment. These leases have a leasing period of between one and eight years. No purchase options are included in any major leasing contracts. Just Energy is also committed under long-term contracts with customers to supply gas and electricity. These contracts have various expiry dates and renewal options.
On October 9, 2018, Just Energy announced that it has entered into a Multi-Year Contingent Business Interruption Insurance Agreement (the “Insurance”).
The Insurance primarily complements Just Energy’s robust risk management program and is intended to mitigate the impacts to the Company due to, among other things, natural disasters, such as Hurricane Harvey and the January 2018 winter freeze in Texas.
The Insurance provides up to US$25 million of insured limit per event, US$50 million per year and US$225 million of limit over an 80-month term, covering risks such as loss of income due to natural perils, sabotage, terrorism including cyber-attack, increased cost of supply from damage to supply and distribution infrastructure, interruption due to damage to customer property, losses in excess of Just Energy’s weather derivative program recoveries, and any unforeseen or unplanned weather related loss.
36.
JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended September 30, 2018
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)
Guarantees
Pursuant to separate arrangements with Westchester Fire Insurance Company, Travelers Casualty and Surety Company of America, Berkley Insurance Company and Charter Brokerage LLC, Just Energy has issued surety bonds to various counterparties including states, regulatory bodies, utilities and various other surety bond holders in return for a fee and/or meeting certain collateral posting requirements. Such surety bond postings are required in order to operate in certain states or markets. Total surety bonds issued as at September 30, 2018 amounted to $57.9 million.
As at September 30, 2018, Just Energy had total letters of credit outstanding in the amount of $89.4 million (Note 10(a)).
18. | COMPARATIVE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Certain figures in the comparative interim condensed consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the current year’s interim condensed consolidated financial statements.
37.