Just Energy (JENGQ) 6-K Just Energy Group Inc. 6-K

Exhibit 99.2

JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited in thousands of Canadian dollars)

			As at		As at
	Notes		December 31, 2014		March 31, 2014
ASSETS
Non-current assets
Property, plant and equipment			$	21,713	$	176,720
Intangible assets				343,711		404,928
Contract initiation costs				18,753		75,731
Other non-current financial assets		6		3,825		31,696
Non-current receivables				-		11,175
Investments				9,361		9,224
Deferred tax asset				20,559		1,676
				417,922		711,150
Current assets
Inventory				-		9,205
Gas delivered in excess of consumption				13,704		7
Gas in storage				27,730		2,387
Current trade and other receivables				379,128		426,971
Accrued gas receivables				15,498		48,634
Unbilled revenues				251,291		170,661
Prepaid expenses and deposits				30,244		21,699
Other current financial assets		6		8,032		103,502
Corporate tax recoverable				9,484		9,754
Restricted cash				10,336		12,017
Cash and cash equivalents				42,310		20,401
				787,757		825,238
Assets classified as held for sale		5		-		106,262
				787,757		931,500
TOTAL ASSETS			$	1,205,679	$	1,642,650

1

JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited in thousands of Canadian dollars)

DEFICIT AND LIABILITIES
Deficit attributable to equity holders of the parent
Deficit		$	(1,744,173	)	$	(1,294,987	)
Accumulated other comprehensive income	7		72,855			71,997
Shareholders’ capital	8		1,057,336			1,033,557
Equity component of convertible debentures			25,795			25,795
Contributed surplus			49,196			65,569
Shareholders’ deficit			(538,991	)		(98,069	)
Non-controlling interest			-			6,427
TOTAL DEFICIT			(538,991	)		(91,642	)
Non-current liabilities
Long-term debt	9		659,414			930,027
Provisions			4,200			3,760
Deferred lease inducements			655			813
Other non-current financial liabilities	6		172,966			56,297
Deferred tax liability			-			32,935
			837,235			1,023,832
Current liabilities
Trade and other payables			482,185			485,471
Accrued gas payable			4,920			34,589
Deferred revenue			21,215			82
Income taxes payable			9,873			6,280
Current portion of long-term debt	9		54			51,999
Provisions			4,903			3,052
Other current financial liabilities	6		384,285			77,135
			907,435			658,608
Liabilities relating to assets classified as held for sale	5		-			51,852
			907,435			710,460
TOTAL LIABILITIES			1,744,670			1,734,292
TOTAL DEFICIT AND LIABILITIES		$	1,205,679		$	1,642,650
Commitments and Guarantees (Note 15)
See accompanying notes to the interim condensed consolidated financial statements

2

JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

			Three months			Three months			Nine months			Nine months
			ended			ended			ended			ended
			December 31,			December 31,			December 31,			December 31,
	Notes		2014			2013			2014			2013
CONTINUING OPERATIONS
Sales		12	$	946,752		$	840,098		$	2,686,061		$	2,401,864
Cost of sales				796,654			691,482			2,280,058			2,033,799
GROSS MARGIN				150,098			148,616			406,003			368,065
EXPENSES
Administrative expenses				40,912			29,034			112,174			88,196
Selling and marketing expenses				52,968			45,373			161,263			143,020
Other operating expenses		11(a)		26,324			28,305			78,694			78,366
				120,204			102,712			352,131			309,582
Operating profit before the following				29,894			45,904			53,872			58,483
Finance costs		9		(19,525	)		(16,805	)		(56,996	)		(50,250	)
Change in fair value of derivative instruments		6		(405,303	)		152,746			(533,654	)		28,937
Other income (loss)				267			(239	)		(1,165	)		271
Profit (loss) before income taxes				(394,667	)		181,606			(537,943	)		37,441
Provision for (recovery of) income taxes		10		(23,264	)		14,529			(26,542	)		21,743
PROFIT (LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS			$	(371,403	)	$	167,077		$	(511,401	)	$	15,698
DISCONTINUED OPERATIONS
Income for the period from discontinued operations		5		165,210			12,531			131,138			11,866
PROFIT (LOSS) FOR THE PERIOD			$	(206,193	)	$	179,608		$	(380,263	)	$	27,564
Attributable to:
Shareholders of Just Energy			$	(208,654	)	$	178,738		$	(381,059	)	$	25,602
Non-controlling interest				2,461			870			796			1,962
PROFIT (LOSS) FOR THE PERIOD			$	(206,193	)	$	179,608		$	(380,263	)	$	27,564
Earnings (loss) per share from continuing operations available to shareholders		13
Basic			$	(2.56	)	$	1.15		$	(3.56	)	$	0.09
Diluted			$	(2.56	)	$	0.99		$	(3.56	)	$	0.09
Earnings per share from discontinued operations
Basic			$	1.14		$	0.08		$	0.91		$	0.08
Diluted			$	1.14		$	0.06		$	0.91		$	0.05
Earnings (loss) per share available to shareholders
Basic			$	(1.43	)	$	1.25		$	(2.63	)	$	0.18
Diluted			$	(1.43	)	$	1.07		$	(2.63	)	$	0.17
See accompanying notes to the interim condensed consolidated financial statements

3

JUST ENERGY GROUP INC.

   INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited in thousands of Canadian dollars)

			Three months			Three months			Nine months			Nine months
			ended			ended			ended			ended
			December 31,			December 31,			December 31,			December 31,
	Notes		2014			2013			2014			2013
Profit (loss) for the period			$	(206,193	)	$	179,608		$	(380,263	)	$	27,564
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:		7
Unrealized gain on translation of foreign operations from continuing operations				5,085			9,863			3,323			15,919
Unrealized loss on translation of foreign operations from discontinued operations				(888	)		(940	)		-			(1,071	)
Realized loss on translation of foreign operations sold				(2,465	)		-			(2,465	)		-
Amortization of deferred unrealized gain on discontinued
hedges net of income taxes of nil (2013 - $26) and
nil (2013 - $476) for the three and nine months ended December 31, 2014, respectively				-			(524	)		-			(4,922	)
Other comprehensive income to be reclassified to profit or loss in subsequent periods, net of tax				1,732			8,399			858			9,926
Total comprehensive income (loss) for the period, net of tax			$	(204,461	)	$	188,007		$	(379,405	)	$	37,490
Total comprehensive income (loss) attributable to:
Shareholders of Just Energy			$	(206,922	)	$	187,137		$	(380,201	)	$	35,528
Non-controlling interest				2,461			870			796			1,962
Total comprehensive income (loss) for the period, net of tax			$	(204,461	)	$	188,007		$	(379,405	)	$	37,490
See accompanying notes to the interim condensed consolidated financial statements

4

JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED DECEMBER 31

(unaudited in thousands of Canadian dollars)

	Notes		2014			2013
ATTRIBUTABLE TO THE SHAREHOLDERS
Accumulated earnings
Accumulated earnings, beginning of period			$	216,218		$	87,496
Income (loss) for the period, attributable to shareholders				(381,059	)		25,602
Accumulated earnings, end of period				(164,841	)		113,098
DIVIDENDS
Dividends, beginning of period				(1,511,205	)		(1,387,776	)
Dividends		14		(68,127	)		(92,497	)
Dividends, end of period				(1,579,332	)		(1,480,273	)
DEFICIT			$	(1,744,173	)	$	(1,367,175	)
ACCUMULATED OTHER COMPREHENSIVE INCOME		7
Accumulated other comprehensive income, beginning of period			$	71,997		$	47,155
Other comprehensive income				858			9,926
Accumulated other comprehensive income, end of period			$	72,855		$	57,081
SHAREHOLDERS’ CAPITAL		8
Shareholders’ capital, beginning of period			$	1,033,557		$	1,018,082
Share-based compensation awards exercised				20,186			7,240
Dividend reinvestment plan				3,593			6,864
Shareholders’ capital, end of period			$	1,057,336		$	1,032,186
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES
Balance, beginning of period			$	25,795		$	25,795
Balance, end of period			$	25,795		$	25,795
CONTRIBUTED SURPLUS
Balance, beginning of period			$	65,569		$	70,893
Reclassification on conversion				(2,443	)		-
Add:  Share-based compensation awards		11(a)		6,198			4,936
Non-cash deferred share grant distributions				58			89
Less: Share-based compensation awards exercised				(20,186	)		(7,240	)
Balance, end of period			$	49,196		$	68,678
NON-CONTROLLING INTEREST
Balance, beginning of period			$	6,427		$	(702	)
Disposal of non-controlling interest				(5,602	)		-
Reclassification of non-controlling interest				2,443			-
Investment by non-controlling shareholders				-			10,983
Foreign exchange impact on non-controlling interest				66			1,239
Payments to non-controlling shareholders				(4,130	)		(3,565	)
Income attributable to non-controlling interest				796			1,962
Balance, end of period			$	-		$	9,917
TOTAL DEFICIT			$	(538,991	)	$	(173,518	)
See accompanying notes to the interim condensed consolidated financial statements

5

JUST ENERGY GROUP INC.

           INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (unaudited in thousands of Canadian dollars)

			Three months			Three months			Nine months			Nine months
			ended			ended			ended			ended
Net inflow (outflow) of cash related to the following activities	Notes		December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
OPERATING
Income (loss) before income taxes			$	(394,667	)	$	181,606		$	(537,943	)	$	37,441
Items not affecting cash
Amortization of intangible assets
and related supply contracts				10,324			12,111			29,552			35,277
Amortization of contract initiation costs				9,145			3,651			24,790			12,251
Amortization of property, plant and equipment				723			1,030			2,544			3,087
Amortization included in cost of sales				275			2			787			2
Share-based compensation		11(a)		1,923			1,584			6,198			4,747
Financing charges, non-cash portion				5,052			3,162			12,548			9,559
Other				(51	)		(61	)		(163	)		(181	)
Change in fair value of derivative instruments				405,303			(152,746	)		533,654			(28,937	)
Cash inflow/(outflow) from operating activities of discontinued operations				7,720			(2,396	)		21,080			4,584
				440,414			(133,663	)		630,990			40,389
Adjustment required to reflect net cash receipts from gas sales				(8,619	)		(7,598	)		10,545			10,564
Net change in non-cash working capital balances				(21,680	)		(2,250	)		(72,104	)		(11,501	)
				15,448			38,095			31,488			76,893
Income taxes recovered (paid)				(1,258	)		649			(3,372	)		468
Cash inflow from operating activities				14,190			38,744			28,116			77,361
INVESTING
Purchase of property, plant and equipment				(451	)		(2,801	)		(2,702	)		(3,961	)
Purchase of intangible assets				(1,468	)		(2,290	)		(4,563	)		(5,103	)
Proceeds from sale of discontinued operations, net of costs				197,010			-			197,010			-
Contract initiation costs				(8,856	)		(6,013	)		(24,322	)		(16,995	)
Cash outflow from investing activities of discontinued operations				(9,152	)		(15,920	)		(18,819	)		(46,681	)
Cash inflow (outflow) from investing activities				177,083			(27,024	)		146,604			(72,740	)
FINANCING
Dividends paid				(17,278	)		(29,196	)		(64,476	)		(85,541	)
Issuance of long-term debt				12,801			136,457			228,578			378,653
Repayment of long-term debt				(173,700	)		(119,224	)		(298,200	)		(338,118	)
Debt issuance costs				-			(3,205	)		(370	)		(3,605	)
Distributions to minority shareholder				(1,959	)		(2,140	)		(4,130	)		(3,565	)
Cash inflow (outflow) from financing activities of discontinued operations				(1,942	)		16,340			(15,563	)		40,953
Cash outflow from financing activities				(182,078	)		(968	)		(154,161	)		(11,223	)
Effect of foreign currency translation on cash balances				3,294			(436	)		3,285			614
Net cash inflow (outflow)				12,489			10,316			23,844			(5,988	)
Cash and cash equivalents reclassified to assets held for sale				-			-			(1,935	)		-
Cash and cash equivalents, beginning of period				29,821			22,194			20,401			38,498
Cash and cash equivalents, end of period			$	42,310		$	32,510		$	42,310		$	32,510
Supplemental cash flow information:
Interest paid			$	17,366		$	21,222		$	47,130		$	48,826
See accompanying notes to the interim condensed consolidated financial statements

6

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

 (unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

1. ORGANIZATION

Just Energy Group Inc. (“JEGI”, “Just Energy” or the “Company”) 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 interim condensed consolidated financial statements consist of Just Energy and its subsidiaries and affiliates. The interim condensed consolidated financial statements were approved by the Board of Directors on February 12, 2015.

2. OPERATIONS

Just Energy’s business involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price, price-protected or variable-priced contracts. Just Energy markets its gas and electricity contracts in Canada, the United States and the United Kingdom under the following trade names: Just Energy, Hudson Energy, Commerce Energy, Amigo Energy, Tara Energy, Green Star Energy, TerraPass and Smart Prepaid Electric. 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.  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 in Ontario and Texas, offering the thermostats as a standalone unit or bundled with certain commodity products. Just Energy also offers green products through its JustGreen programs. 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, run of the river hydro 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. During the three months ended December 31, 2014, and further described in Note 5, Just Energy disposed of its Home Services and Solar divisions.

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These unaudited interim condensed consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Accordingly, certain informa­tion and footnote disclosures normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the IASB, have been omitted or condensed.

7

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

(b) Basis of presentation and interim reporting

These unaudited interim condensed consolidated financial statements should be read in conjunction with and follow the same accounting policies and methods of application as those used in the audited consolidated financial statements for the years ended March 31, 2014 and 2013, except for the adoption of new standards and interpretations effective April 1, 2014 as disclosed in Note 3(d).

The unaudited interim condensed consolidated financial statements are presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand.

The unaudited interim operating results are not necessarily indicative of the results that may be expected for the full year ending March 31, 2015, 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.  For the 12 months ended December 31, 2014, Just Energy reported gross margin of $543,469 (2013 - $509,902) and loss of $356,534 (2013 – profit of $214,849).

(c) Principles of consolidation

The unaudited interim condensed consolidated financial statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries and affiliates as at December 31, 2014. 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.

(d) New standard, interpretations and amendments adopted by the Company during the quarter

Effective April 1, 2014, Just Energy adopted IFRIC 21 Levies (“IFRIC 21”).  This standard provides guidance on when to recognize a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and those where the timing and amount of the levy is certain. IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation.  A liability is recognized progressively if the obligating event occurs over a period of time or, if an obligation is triggered on reaching a minimum threshold, the liability is recognized when that minimum threshold is reached. The adoption of this standard did not have a material impact on the unaudited interim condensed consolidated financial statements.

8

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

4. (i) SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the unaudited interim condensed consolidated financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, income, expenses and the disclosure of contingent liabilities. The estimates and related assumptions are based on previous experience and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Judgments made by management in the application of IFRS that have a significant impact on the unaudited interim condensed consolidated financial statements relate to the following:

Impairment of non-financial assets

Just Energy’s impairment test is based on value-in-use calculations that use a discounted cash flow model. The cash flows are derived from the budget for the next five years and are sensitive to the discount rate used as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

Deferred taxes

Significant management judgment is required to determine the amount of deferred tax assets and liabilities that can be recognized, based upon the likely timing and the level of future taxable income realized, including the usage of tax-planning strategies.

Useful life of key property, plant and equipment and intangible assets

The amortization method and useful lives reflect the pattern in which management expects the assets’ future economic benefits to be consumed by Just Energy.

Provisions for litigation

The State of California has filed a number of complaints with the Federal Energy Regulatory Commission (“FERC”) against many suppliers of electricity, including Commerce Energy Inc. (“CEI”), a subsidiary of the Company, with respect to events stemming from the 2001 energy crisis in California. The suppliers involved in the claim include entities which owned generation facilities and those that did not own generation facilities. Pursuant to the complaints, the State of California is challenging FERC’s enforcement of its market-based rate system. Although CEI did not own generation facilities, the State of California claims as to CEI, as well as other suppliers that also did not own generation facilities, include that CEI was unjustly enriched by the run-up in charges caused by the alleged market manipulation of other market participants. On March 18, 2010, the assigned Administrative Law Judge granted a motion to strike the claim for all parties in one of the complaints (in favour of the suppliers), holding that California did not prove that the reporting errors masked the accumulation of market power. California has appealed the decision. On June 13, 2012, FERC denied the plaintiff’s request for a rehearing, affirming its initial decision. California has appealed to the United States District Courts for the Ninth Circuit with oral arguments to be heard on February 26, 2015. CEI continues to vigorously contest this matter.

9

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

In December 2012, NHS was served with a statement of claim from the Ontario Superior Court Justice by Reliance Comfort Limited Partnership (“Reliance”) seeking damages in the amount of $60 million and related declaratory and injunctive relief, based on allegations that NHS engaged in unfair trade practices and misleading representations in its marketing and sale of water heaters. Reliance also made a formal complaint to the Competition Bureau in Canada with similar allegations. NHS believed the action and complaint were attempts by Reliance to deflect attention from allegations of anti-competitive conduct made against Reliance by the Commissioner of Competition (the “Commissioner”). On September 11, 2013, Reliance amended its claim and added the Company as a defendant. NHS and the Company counterclaimed for $60 million in damages for claims of misleading advertising, breaches of the Competition Act (Canada), breaches of the Consumer Protection Act and defamation. The claim and counterclaim were dismissed in conjunction with the sale of NHS to Reliance on November 24, 2014.  In response to the formal complaint by Reliance, the Commissioner commenced an inquiry with respect to NHS and its competitors for misleading advertising.  Immediately prior to the closing of the sale of NHS to Reliance, NHS and the Company entered into a Consent Agreement with the Competition Bureau to settle the Bureau’s investigation of door-to-door water heater sales in Ontario and Quebec, which included an administrative monetary penalty and costs of $5.5 million and restitution of $1.5 million.

In August 2013, Fulcrum Power Services L.P. (“FPS”) filed a lawsuit against the Company, Just Energy (US) Corp., and Fulcrum, for up to $20 million in connection with Fulcrum failing to achieve an earn-out target under the purchase and sales agreement dated August 24, 2011 for the purchase of Fulcrum from FPS. FPS alleges that the Company conducted itself in a manner that was intended to or reasonably likely to reduce or avoid the achievement of the earn-out target. In October 2013, the Company’s motion to compel arbitration was successful. The arbitration is scheduled to commence on June 1, 2015.  Just Energy will continue to vigorously defend itself against this claim through the arbitration process.

In March 2012, Davina Hurt and Dominic Hill filed a lawsuit against Commerce Energy Inc., Just Energy Marketing Corp., and the Company (collectively referred to as “Just Energy”) in the Ohio federal court claiming entitlement to payment of minimum wage and overtime under Ohio wage claim laws and the federal Fair Labor Standards Act (“FLSA”) on their own behalf and similarly situated door-to-door sales representatives who sold for Commerce in certain regions of the United States.  The Court granted the plaintiffs’ request to certify the lawsuit as a class action. Approximately 1,800 plaintiffs opted-in to the federal minimum wage and overtime claims, and approximately 8,000 plaintiffs were certified as part of the Ohio state overtime claims. A jury trial on the liability phase was completed on October 6, 2014. The jury reached a verdict that supports the plaintiffs’ class and collective action that certain individuals were not properly classified as outside salespeople in order to qualify for an exemption under the minimum wage and overtime requirements pursuant to the FLSA and Ohio wage and hour laws. Potential amounts owing have yet to be determined and will be subject to a separate proceeding. Just Energy disagrees with the result and is of the opinion that it is not supported by existing law and precedent. Just Energy strongly believes it complied with the law, continues to vigorously defend the claims and intends to appeal adverse findings.

On December 31, 2014, Just Energy voluntarily entered into a settlement with the Massachusetts Attorney General’s office (“AGO”), relating to an investigation of the Company’s telemarketing and door-to-door sales practices, as well as pricing of certain products to customers in Massachusetts dating back to 2011. Although the Company does not agree with the allegations made by the AGO and explicitly denied all wrongdoing, management determined that a settlement was in the best interests of the Company in order to focus the Company’s energy on building the business going forward. As part of the settlement, the Company agreed to a payment of US$4 million.

10

 

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

Trade receivables

Just Energy reviews its individually significant receivables at each reporting date to assess whether an impairment loss should be recorded in the unaudited interim condensed consolidated statements of loss. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, Just Energy makes judgments about the borrower’s financial situation and the net realizable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the interim condensed consolidated statements of financial position cannot be derived from active markets, they are determined using valuation techniques including discounted cash flow models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgment includes consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer to Note 6 for further details about the assumptions as well as a sensitivity analysis.

Subsidiaries

Subsidiaries that are not wholly owned by Just Energy require judgment determining the amount of control that Just Energy has over that entity and the appropriate accounting treatments.  In these unaudited interim condensed consolidated financial statements, management has determined that Just Energy controls Just Ventures and therefore, has treated the 50% that is not owned by Just Energy as a non-controlling interest.  Similarly, management has determined that Just Energy controls certain structures in its Solar division.  Some of these structures are owned primarily by the non-controlling interest; however, the structure contains an ownership “flip” at a later date.  In these instances, Just Energy has control as a result of these entities accomplishing a pre-determined directive.

(ii) ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the unaudited interim condensed consolidated financial statements are disclosed below.  Just Energy intends to adopt these standards, if applicable, when they become effective.

IFRS 9, Financial Instruments (“IFRS 9”) was issued by the IASB on July 24, 2014, and willreplace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Two measurement categories continue to exist to account for financial liabilities in IFRS 9, fair value through profit or loss (“FVTPL”) and amortized cost. Financial liabilities held for trading are measured at FVTPL, and all other financial liabilities are measured at amortized cost unless the fair value option is applied. The treatment of embedded derivatives under the new standard is consistent with IAS 39 and is applied to financial liabilities and non-derivative hosts not within the scope of the standard. IFRS 9 also uses a new model for hedge accounting aligning the accounting treatment with risk management activities. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Management is currently evaluating the impact of IFRS 9 on the consolidated financial statements.

11

 

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

IFRS 15, Revenue recognition (“IFRS 15”) establishes a five-step model that will apply to revenue earned from a contract with a customer, regardless of the type of revenue transaction or industry.  The standard will also provide guidance on the recognition and measurement of gains and losses on the sale of some non-financial assets that are not an output of the entity’s ordinary activities.  The standard also outlines increased disclosures that will be required, including disaggregation of total revenue, information about performance obligations; changes in contract asset and liability account balances between periods and key judgments and estimates made.  Management is currently evaluating the impact of IFRS 15 on the consolidated financial statements.

5. DISCONTINUED OPERATIONS

(i) NHS

On November 24, 2014, Just Energy closed the sale of 100% of its shares in NHS to Reliance Comfort Limited Partnership (“Reliance”). The purchase price was $505,000, reduced by the outstanding debt balances, early termination charges and the settlement of the royalty, and is subject to certain post-closing adjustments including working capital balances.

12

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The results of NHS are presented below:

	From Oct 1, 2014 to			For the three months ended			From April 1, 2014 to			For the nine months ended
	Nov 24, 2014			Dec 31, 2013			Nov 24, 2014			Dec 31, 2013
Sales	$	16,889		$	18,674		$	58,836		$	53,720
Cost of sales		4,436			4,136			11,259			11,915
Gross margin		12,453			14,538			47,577			41,805
Expenses
Administrative, selling and operating expenses		9,794			8,797			34,589			28,448
Operating income (loss)		2,659			5,741			12,988			13,357
Finance costs		(3,615	)		(5,112	)		(14,180	)		(14,969	)
Profit (loss) from discontinued operations before income taxes		(956	)		629			(1,192	)		(1,612	)
Other loss		(30	)		-			(30	)		-
Provision for income taxes		(13,880	)		(2,868	)		(22,029	)		(3,483	)
Gain on disposal of net assets		189,527			-			189,527			-
PROFIT (LOSS) FOR THE PERIOD FROM DISCONTINUED OPERATIONS	$	174,661		$	(2,239	)	$	166,276		$	(5,095	)
Earnings (loss) per share
Basic and diluted earnings (loss) per share from discontinued operations	$	1.20		$	(0.02	)	$	1.15		$	(0.04	)

13

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

(ii) Solar

On November 5, 2014, Just Energy announced that it had closed the sale of its shares of Hudson Solar Corp. (“HES”), its commercial solar development business, to SunEdison, Inc. and its subsidiary, TerraForm Power Inc. The sale of HES resulted in the assumption or repayment by the purchaser of approximately US$33,000 in outstanding debt.  Of the total sale price of US$22,900, Just Energy received approximately US$17,500 in cash, incurred approximately US$1,700 in costs and approximately US$5,000 is being held in escrow as indemnification to the buyer for certain liabilities.  In addition, Just Energy is entitled to other consideration of approximately US$2,000 related to cash grants that have been filed and additional contingent consideration based on the Solar Renewable Energy Credit (“SREC”) price and production of projects that were under construction as of the closing date.  The maximum amount of contingent consideration that can be earned is US$3,000.  As at closing, Just Energy recorded an amount of US$1,500 relating to this contingent consideration.  Changes in the fair value of the contingent consideration will be recorded in the unaudited interim condensed consolidated income statement as a change in fair value of derivative instruments.  As at December 31, 2014, the fair value of the contingent consideration was US$1,350 and is included in other non-current assets.

14

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The results of HES are presented below:

	From Oct 1, 2014 to			For the three months ended			From April 1, 2014 to			For the nine months ended
	Nov 5, 2014			Dec 31, 2013			Nov 5, 2014			Dec 31, 2013
Sales	$	777		$	195		$	4,355		$	2,519
Cost of sales		-			575			-			1,701
Gross margin		777			(380	)		4,355			818
Expenses
Administrative and operating expenses		484			1,429			8,729			2,454
Operating income (loss)		293			(1,809	)		(4,374	)		(1,636	)
Finance costs		(757	)		(1,087	)		(3,100	)		(2,631	)
Loss from discontinued operations before undernoted		(464	)		(2,896	)		(7,474	)		(4,267	)
Change in fair value of derivative instruments		(196	)		375			(225	)		3,241
Other loss		(413	)		-			(148	)		-
Provision for income taxes		-			-			(5	)		-
Realized foreign exchange gain on disposal		2,465						2,465
Loss on disposal of net assets, net of impairment loss previously recognized		(10,843	)		-			(29,751	)		-
LOSS FOR THE PERIOD FROM DISCONTINUED OPERATIONS	$	(9,451	)	$	(2,521	)	$	(35,138	)	$	(1,026	)
Loss per share
Basic and diluted loss per share from discontinued operations	$	(0.06	)	$	(0.02	)	$	(0.24	)	$	(0.01	)

(iii) Disposal of TGF

In March 2013, Just Energy formally commenced the process to dispose of Terra Grain Fuels, Inc. (“TGF”). The business of TGF had been operating in an unpredictable product environment, making it difficult for management to derive real growth and profitability from the segment. In addition, it had been viewed as a non-core business since it was acquired with the Universal Energy acquisition in 2009.  Effective December 24, 2013, Just Energy sold TGF for a nominal amount and was released from all of its obligations.  Previously, tax losses generated prior to the disposal were restricted by TGF’s lenders and were treated as unrecognized deferred tax assets.  In order to retain a portion of these tax losses and as part of the disposal, Just Energy transferred approximately $6,250 to TGF.  Just Energy expects to utilize the retained tax losses in future periods and has recognized a future tax recovery of $24,151 which has been recorded as part of the loss from discontinued operations.

15

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The results of TGF for the period up to the date of disposal are presented below:

	For the three months ended December 31,			For the nine months ended December 31,
	2013			2013
Sales	$	24,026		$	82,982
Cost of sales		19,024			70,280
Gross margin		5,002			12,702
Expenses
Administrative and operating expenses		1,243			5,131
Operating income		3,759			7,571
Finance costs		(1,395	)		(4,511	)
Loss on disposal of net assets		(8,653	)		(8,653	)
Future income tax recovery		24,151			24,151
Transaction costs		(571	)		(571	)
PROFIT FROM DISCONTINUED OPERATIONS	$	17,291		$	17,987
Earnings per share
Basic earnings per share from discontinued operations	$	0.12		$	0.13
Diluted earnings per share from discontinued operations	$	0.10		$	0.10

6. FINANCIAL INSTRUMENTS

(a) Fair value

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 electricity, unforced capacity, heat rates, heat rate options, renewable and gas swap and forward 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 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 gas options.

The following table illustrates gains (losses) related to Just Energy’s derivative financial instruments classified as fair value through profit or loss and recorded on the interim condensed consolidated statements of financial position as other assets and other liabilities, with their offsetting values recorded in change in fair value of derivative instruments.

16

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

	For the			For the			For the			For the
	three months ended			three months ended			nine months ended			nine months ended
	December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
Change in fair value of derivative instruments
Fixed-for-floating electricity swaps (i)	$	(94,827	)	$	39,850		$	(80,923	)	$	34,422
Renewable energy certificates (ii)		(4,374	)		2,147			(9,006	)		2,711
Verified emission-reduction credits (iii)		1,927			365			(372	)		1,233
Options (iv)		2,978			(2,808	)		2,956			(2,357	)
Physical gas forward contracts (v)		(25,690	)		22,248			(20,888	)		49,242
Physical electricity forward contracts (viii)		(192,493	)		69,361			(311,679	)		(49,439	)
Transportation forward contracts (vi)		(2,150	)		2,785			968			1,860
Fixed financial swaps (vii)		(83,985	)		25,013			(96,628	)		12,528
Unforced capacity forward contracts (ix)		1,360			461			(4,308	)		1,264
Unforced capacity physical contracts (x)		(6,620	)		(5,520	)		(12,878	)		(4,595	)
Heat rate swaps (xi)		109			349			(5,962	)		(12,558	)
Foreign exchange forward contracts (xii)		665			(369	)		1,058			(225	)
Amortization of deferred unrealized gains on discontinued hedges		-			550			-			5,398
Share swap		(946	)		2,431			(7,261	)		972
Amortization of derivative financial instruments related to acquisitions		(1,270	)		(3,685	)		(3,674	)		(10,987	)
Liability associated with exchangeable shares and equity-based compensation		(212	)		111			104			111
Other derivative options		225			(543	)		14,839			(643	)
Change in fair value of derivative instruments	$	(405,303	)	$	152,746		$	(533,654	)	$	28,937

17

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The following table summarizes certain aspects of the financial assets and liabilities recorded in the interim condensed consolidated statements of financial position as at December 31, 2014:

	Other financial assets (current)		Other financial assets (non-current)		Other financial liabilities (current)		Other financial liabilities (non-current)
Fixed-for-floating electricity swaps (i)	$	-	$	-	$	52,811	$	24,455
Renewable energy certificates (ii)		4,843		2,446		114		10,981
Verified emission-reduction credits (iii)		-		-		736		801
Options (iv)		-		-		2,324		-
Physical gas forward contracts (v)		1,384		648		32,481		13,768
Physical electricity forward contracts (viii)		-		-		200,062		82,892
Transportation forward contracts (vi)		-		302		293		-
Fixed financial swaps (vii)		-		-		66,154		32,588
Unforced capacity forward contracts (ix)		-		-		3,922		296
Unforced capacity physical contracts (x)		-		-		4,308		3,334
Heat rate swaps (xi)		1,805		272		-		-
Foreign exchange forward contracts (xii)		-		-		1,495		-
Share swap		-		-		19,440		-
Cash-out option on stock-based compensation		-		-		145		-
Other derivative options		-		157		-		3,851
As at December 31, 2014	$	8,032	$	3,825	$	384,285	$	172,966

18

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The following table summarizes certain aspects of the financial assets and liabilities recorded in the consolidated financial statements as at March 31, 2014:

		Other financial assets (current)		Other financial assets (non-current)		Other financial liabilities (current)			Other financial liabilities (non-current)
Fixed-for-floating electricity swaps (i)	$	29,989	$	4,013	$	15,966		$	12,947
Renewable energy certificates (ii)		2,316		5,072		1,809			2,017
Verified emission-reduction credits (iii)		179		1,212		913			667
Options (iv)		-		-		5,389			-
Physical gas forward contracts (v)		49		4		18,786			4,577
Transportation forward contracts (vi)		879		527		944			1,428
Fixed financial swaps (vii)		12,344		840		6,804			7,625
Physical electricity forward contracts(viii)		42,611		14,956		6,874			8,640
Unforced capacity forward contracts (ix)		-		-		(172	)		-
Unforced capacity physical contracts (x)		8,810		2,941		5,037			1,075
Heat rate swaps (xi)		6,325		1,888		-			-
Foreign exchange forward contracts (xii)		-		-		1,058			-
Share swap		-		-		12,179			-
Cash-out option on stock-based compensation		-		-		560			-
Other derivative options		-		243		988			17,321
As at March 31, 2014	$	103,502	$	31,696	$	77,135		$	56,297

19

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The following table summarizes financial instruments classified as fair value through profit or loss as at December 31, 2014, to which Just Energy has committed:

			Total			Fair value
			remaining			favourable/	Notional
	Contract type	Notional volume	volume	Maturity date	Fixed price	(unfavourable)	value
(i)	Fixed-for-floating	0.11 - 389.00	20,084,900	January 2, 2015	$0.0028-$91.00	($77,265)	$945,936
	electricity swaps	MWh	MWh	December 31, 2019
(ii)	Renewable energy	2,000-200,000	6,365,777	May 31, 2015	$0.58-$487.24	$5,612	$58,369
	certificates	MWh	MWh	December 31, 2023
(iii)	Verified emission-	2587-106,942	1,225,500	December 31, 2015	$1.33-$8.00	($1,537)	$3,976
	reduction credits	tonnes	tonnes	December 31, 2019
(iv)	Natural Gas Options	2,400,000 - 3,483,870.97	-	January 31, 2015	$4.93-$4.93	($2,324)	$3,954
		GJ	GJ	March 31, 2015
(v)	Physical gas forward	47.51-36,000.00	79,611,923	January 2, 2015	$0.0029-$11.00	($44,218)	$317,508
	contracts	GJ	GJ	December 31, 2018
(vi)	Transportation forward	132.9677-7,989	3,279,746	January 31, 2015	$0.05-$6.44	$9	$4,641
	contracts	GJ	GJ	October 31, 2017
(vii)	Fixed financial swaps	2,110.60-654,596	134,176,000	January 31, 2015	$0.012-$7.52	($98,743)	$563,928
		GJ	GJ	October 31, 2019
(viii)	Physical electricity	0.73-140.00	36,133,342	January 2, 2015	$3.13-$159.40	($282,954)	$1,934,275
	forward contracts	MWh	MWh	December 31, 2020
(ix)	Unforced capacity	5-11,160	54,730	January 31, 2015	$210.81-$610.99	($4,218)	$15,601
	forward contracts	MWCap	MWCap	April 30, 2018
(x)	Unforced capacity	0.97-215	7,158	January 31, 2015	$221.58-$14,617.26	($7,642)	$62,464
	physical contracts	MWCap	MWCap	April 30, 2018
(xi)	Heat rate swaps	1-7	306,487	January 31, 2015	$24.28-$48.54	$2,077	$10,528
		MWh	MWh	October 31, 2016
(xii)	Foreign exchange	US$1,000,000-	n/a	January 7, 2015	$1.10-$1.13	($1,495)	$27,500
	forward contracts	$5,000,000		July 7, 2015

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 fulfill its obligations under the contracts, Just Energy may not be able to realize the other assets’ balance recognized in the interim condensed consolidated financial statements.

Share swap agreement

The Company has entered into a share swap agreement to manage the risks 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.  Net monthly settlements received under the share swap agreement are recorded in other income.  The Company marks to market the fair value of the share swap agreement and has included that value as other current 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 loss as a change in fair value of derivative instruments.

20

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

Fair value (“FV”) hierarchy

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 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, 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 only extend 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.Fair value measurement input sensitivityThe main cause of changes in the fair value of derivative instruments are 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.

21

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The following table illustrates the classification of financial assets (liabilities) in the FV hierarchy as at December 31, 2014:

	Level 1			Level 2				Level 3				Total
Financial assets
Derivative financial assets		$	-		$	-			$	11,857			$	11,857
Financial liabilities
Derivative financial liabilities			-			(98,743	)			(458,508	)			(557,251	)
Total net derivative assets (liabilities)		$	-		$	(98,743	)		$	(446,651	)		$	(545,394	)

The following table illustrates the classification of financial assets (liabilities) in the FV hierarchy as at March 31, 2014:

	Level 1			Level 2				Level 3				Total
Financial assets
Derivative financial assets		$	-		$	-			$	135,198			$	135,198
Discontinued operations (Note 5)			-			-				106,262				106,262
Financial liabilities
Derivative financial liabilities			-			(10,990	)			(122,442	)			(133,432	)
Discontinued operations (Note 5)			-			-				(51,852	)			(51,852	)
Total net derivative assets (liabilities)		$	-		$	(10,990	)		$	67,166			$	56,176

Key assumptions used when determining the significant unobservable inputs included in Level 3 of the FV hierarchy consist of:

(i) discount/premium for lack of marketability up to 3%. Discount for lack of marketability represents the amounts that Just Energy has determined that market participants would take into account for these premiums and discount when pricing these derivative instruments,

(ii) discount for counterparty non-performance risk up to 5%, and

(iii) discount rate in the range of 6% to 8%.

The following table illustrates the changes in net fair value of financial assets (liabilities) classified as Level 3 in the FV hierarchy for the nine months ended December 31, 2014 and the year ended March 31, 2014:

	December 31, 2014				March 31, 2014
Balance, beginning of period		$	67,166		$	(148,646	)
Total gains			(272,218	)		37,799
Purchases			(249,936	)		49,006
Sales			40,290			(14,972	)
Settlements			(31,953	)		89,569
Discontinued operations			-			54,410
Balance, end of period		$	(446,651	)	$	67,166

22

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

(b) Classification of financial assets and liabilities

As at December 31, 2014 and March 31, 2014, the carrying value of cash and cash equivalents, restricted cash, current trade and other receivables, unbilled revenues 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 of December 31, 2014 of $614,180 (March 31, 2014 - $985,920).

The carrying value of long-term debt approximates its fair value as 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 following exceptions:

(i) the $330 million and $100 million convertible debentures, which are fair valued based on market value;

(ii) the fair value of the $105 million senior unsecured note and the US$150 million convertible bonds are based on discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities; and

The $330 million and $100 million convertible debentures are classified as Level 2 and the other above fair value measurements are classified as Level 3 of the FV hierarchy.

(c) Management of risks arising from financial instruments

            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. operations.

A portion of Just Energy’s income is generated in U.S. dollars and is subject to currency fluctuations. The performance of the Canadian dollar relative to the U.S. dollar could positively or negatively affect Just Energy’s income. Due to its growing operations in the U.S., Just Energy expects to have a greater exposure to U.S. fluctuations in the future than in prior years.  Just Energy has economically hedged between 0% and 50% of certain forecasted cross border cash flows that are expected to occur within the next 13 to 24 months and between 50% and 90% of forecasted cross border cash flows that are expected to occur within the next 12 months. The level of 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.

23

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(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 nine months ended December 31, 2014, assuming that all the other variables had remained constant, loss for the period would have been $24,000 higher/lower and other comprehensive loss would have been $24,700 lower/higher.

Interest rate risk

Just Energy is also 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. The Company’s exposure to interest rate risk is relatively immaterial and temporary in nature. Just Energy does not currently believe that long-term debt exposes it 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 $868 in income before income taxes for the nine months ended December 31, 2014.

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, income before income taxes for the nine months ended December 31, 2014 would have increased (decreased) by $253,601 ($251,822) 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, income before income taxes for the nine months ended December 31, 2014 would have increased (decreased) by $233,585 ($231,907) primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.

24

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(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, Massachusetts, California, Michigan, Delaware, Ohio and Georgia, 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:

	December 31, 2014		March 31, 2014
Current	$	113,056	$	104,297
1 – 30 days		33,039		36,236
31 – 60 days		6,608		10,405
61 – 90 days		6,673		6,809
Over 91 days		63,551		51,517
	$	222,927	$	209,264

Changes in the allowance for doubtful accounts were as follows:

	December 31, 2014			March 31, 2014
Balance, beginning of period	$	60,997		$	40,190
Allowance reclassified as held for sale		(1,282	)		-
Provision for doubtful accounts		40,400			47,161
Bad debts written off		(25,051	)		(25,845	)
Other		(4,129	)		(509	)
Balance, end of period	$	70,935		$	60,997

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.

25

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

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.

As at December 31, 2014, the estimated counterparty credit risk exposure amounted to $234,784 representing the risk relating to the Company’s derivative financial assets and accounts receivable.

(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 December 31, 2014:

			Contractual cash								More than 5
	Carrying amount		flows		Less than 1 year		1 to 3 years		4 to 5 years		years
Trade and other payables	$	482,185	$	482,185	$	482,185	$	-	$	-	$	-
Long-term debt*		659,468		709,069		54		330,000		379,015		-
Derivative instruments		557,251		3,921,181		2,040,422		1,572,045		301,428		7,286
	$	1,698,904	$	5,112,435	$	2,522,661	$	1,902,045	$	680,443	$	7,286

As at March 31, 2014:

			Contractual cash								More than 5
	Carrying amount		flows		Less than 1 year		1 to 3 years		4 to 5 years		years
Trade and other payables	$	485,471	$	485,471	$	485,471	$	-	$	-	$	-
Long-term debt*		982,026		1,043,061		51,999		166,276		605,103		219,683
Derivative instruments		133,432		3,112,996		1,668,975		1,183,717		257,893		2,411
	$	1,600,929	$	4,641,528	$	2,206,445	$	1,349,993	$	862,996	$	222,094

* Included in long-term debt are the $330,000 and $100,000 relating to convertible debentures and $150,000 relating to convertible bonds, 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, at December 31, 2014, 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 to 3 years			4 to 5 years			More than 5 years
Interest payments		$	47,100		$	110,626		$	17,061		$	-

26

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(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 fulfill their contractual obligations. Just Energy has discounted the fair value of its financial assets by $2,303 to accommodate for its counterparties’ risk of default.

7. ACCUMULATED OTHER COMPREHENSIVE INCOME

For the nine months ended December 31, 2014

	Foreign
	currency
	translation				Cash flow
	adjustments				hedges				Total
Balance, beginning of period		$	71,997			$	-			$	71,997
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:
Unrealized foreign currency translation adjustment			3,323				-				3,323
Realized loss on translation of foreign operations sold			(2,465	)			-				(2,465	)
Balance, end of period		$	72,855			$	-			$	72,855
For the nine months ended December 31, 2013
	Foreign
	currency
	translation				Cash flow
	adjustments				hedges				Total
Balance, beginning of period		$	34,726			$	12,429			$	47,155
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:
Unrealized foreign currency translation adjustment			14,848				-				14,848
Amortization of deferred unrealized gain on discontinued
hedges, net of income taxes of $476			-				(4,922	)			(4,922	)
Balance, end of period		$	49,574			$	7,507			$	57,081

27

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

8. 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. Details of issued and outstanding shareholders’ capital as at December 31, 2014, with comparatives as at March 31, 2014, are as follows:

	Nine months ended			Year ended
Issued and outstanding	December 31, 2014			March 31, 2014
	Shares	Amount		Shares	Amount
Balance, beginning of period	143,751,476	$	1,033,557	142,029,340	$	1,018,082
Share-based awards exercised	1,779,810		20,186	550,382		7,240
Dividend reinvestment plan	603,831		3,593	1,171,754		8,235
Balance, end of period	146,135,117	$	1,057,336	143,751,476	$	1,033,557

Dividend reinvestment plan

Under Just Energy’s dividend reinvestment plan (“DRIP”), Canadian shareholders holding a minimum of 100 common shares can elect to receive their dividends in common shares rather than cash at a 2% discount to the simple average closing price of the common shares for the five trading days preceding the applicable dividend payment date, providing that the common shares are issued from treasury, as was the case, and not purchased on the open market.

On December 1, 2014, Just Energy announced the suspension of the DRIP effective January 1, 2015.

9. LONG-TERM DEBT AND FINANCING

	December 31, 2014			March 31, 2014
Credit facility (a)	$	-		$	69,500
Less: Debt issue costs (a)		-			(2,449	)
$105 million senior unsecured note (b)		105,000			105,000
Less: Debt issue costs (b)		(5,364	)		(6,221	)
NHS financing		-			272,561
$330 million convertible debentures (c)		309,728			304,458
$100 million convertible debentures (d)		90,930			89,430
US$150 million convertible bonds (e)		159,120			149,572
Capital leases (f)		54			175
		659,468			982,026
Less: Current portion		(54	)		(51,999	)
	$	659,414		$	930,027

28

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(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 to 3 years		4 to 5 years		More than 5 years		Total
$105 million senior unsecured note (b)		-		-		105,000		-		105,000
$330 million convertible debentures (c)		-		330,000		-		-		330,000
$100 million convertible debentures (d)		-		-		100,000		-		100,000
US$150 million convertible bonds (e)		-		-		174,015		-		174,015
Capital leases (f)		54		-		-		-		54
	$	54	$	330,000	$	379,015	$	-	$	709,069

The following table details the finance costs for the three and nine months ended December 31. Interest is expensed at the effective interest rate.

	Three months		Three months			Nine months		Nine months
	ended		ended			ended		ended
	December 31, 2014		December 31, 2013			December 31, 2014		December 31, 2013
Credit facility (a)	$	4,481	$	3,777		$	12,332	$	10,575
$105 million senior unsecured note (b)		2,865		2,833			8,569		8,919
$90 million convertible debentures		-		1,764			-		5,264
$330 million convertible debentures (c)		6,728		6,581			20,120		19,685
$100 million convertible debentures (d)		1,952		1,910			5,813		5,691
US$150 million convertible bonds (e)		3,410		-			9,911		-
Capital lease interest (f)		1		12			7		46
Unwinding of discount on provisions		88		(72	)		244		70
	$	19,525	$	16,805		$	56,996	$	50,250

(a) During the three months ended December 31, 2014, the credit facility was reduced to $210 million from $290 million in conjunction with the sale of NHS. The syndicate of lenders includes Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canada, The Toronto-Dominion Bank, The Bank of Nova Scotia, HSBC Bank Canada and Alberta Treasury Branches.

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 that vary between 2.88% and 4.00%. Prime rate advances are at rates of interest that vary between bank prime plus 1.88% and 3.00% and letters of credit are at rates that vary between 2.88% and 4.00%.  Interest rates are adjusted quarterly based on certain financial performance indicators.

29

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

As at December 31, 2014, the Canadian prime rate was 3.0% and the U.S. prime rate was 3.25%. As at December 31, 2014, Just Energy had drawn $0  (March 31, 2014 - $69,500 ) against the facility and total letters of credit outstanding amounted to $125,111  (March 31, 2014 - $123,593).  As at December 31, 2014, the unamortized debt issue costs relating to the facility are $0  (March 31, 2014 - $2,449 ). As at December 31, 2014, Just Energy has $84,889  of the facility remaining for future working capital and 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. operations. Just Energy is required to meet a number of financial covenants under the credit facility agreement.  During the nine months ended December 31, 2014, the Company requested and received amendments with respect to covenants within the credit facility.  As at December 31, 2014, the Company was compliant with all of these covenants.  The proceeds from the NHS sale were used to pay down the credit facility. As a result, management has expensed the remaining debt issue costs associated with the credit facility.

(b) Just Energy issued $105 million in senior unsecured notes (“$105 million senior unsecured note”) bearing interest at 9.75% and maturing in June 2018.  As at December 31, 2014 unamortized debt issue costs are $5,364. These costs will be charged to operations as finance costs over the term of the debt. The $105 million senior unsecured note is subject to certain financial and other covenants.  As at December 31, 2014, all of these covenants have been met.

In conjunction with the covenant requirements associated with the issuance of the $105 million senior unsecured note, the following represents select financial disclosure for the “Restricted Subsidiaries” as defined within the Note Indenture, which excludes the U.K. operations.

	Three months ended December 31, 2014			Nine months ended  December 31, 2014
Sales	$	877,778		$	2,519,635
Gross margin		145,920			390,465
Finance costs		19,525			56,996
Loss for the period		(312,921	)		(463,683	)
Non-cash financing costs		5,141			12,548
Share-based compensation		1,921			6,191
Income tax paid		1,258			3,372

(c)   Just Energy issued $330 million of convertible extendible unsecured subordinated debentures (the “$330 million convertible debentures”).  The $330 million convertible debentures bear interest at a rate of 6% per annum payable semi-annually in arrears on June 30 and December 31, with a maturity date of June 30, 2017.  Each $1,000 principal amount of the $330 million convertible debentures is convertible at any time prior to maturity or on the date fixed for redemption, at the option of the holder, into approximately 55.6 common shares of the Company, representing a conversion price of $18 per share.  During the nine months ended December 31, 2014, interest expense amounted to $ 20,120 . Prior to June 30, 2015, the $330 million convertible debentures may be redeemed by the Company, in whole or in part, on not more than 60 days’ and not less than 30 days’ prior notice, at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest, provided that the current market price (as defined herein) on the date on which notice of redemption is given is not less than 125% of the conversion price ($22.50). On and after June 30, 2015, and prior to maturity, the $330 million convertible debentures may be redeemed by Just Energy, in whole or in part, at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest.

30

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The Company may, at its own option, on not more than 60 days’ and not less than 40 days’ prior notice, subject to applicable regulatory approval and provided that no event of default has occurred and is continuing, elect to satisfy its obligation to repay all or any portion of the principal amount of the $330 million convertible debentures that are to be redeemed or that are to mature, by issuing and delivering to the holders thereof that number of freely tradable common shares determined by dividing the principal amount of the $330 million convertible debentures being repaid by 95% of the current market price on the date of redemption or maturity, as applicable.

The conversion feature of the $330 million convertible debentures has been accounted for as a separate component of shareholders’ deficit in the amount of $33,914. Upon initial recognition of the convertible debentures, Just Energy recorded a deferred tax liability of $15,728 and reduced the value of the equity component of convertible debentures by this amount. The remainder of the net proceeds of the $330 million convertible debentures has been recorded as long-term debt, which is being accreted up to the face value of $330,000 over the term of the $330 million convertible debentures using an effective interest rate of 8.8%. If the $330 million convertible debentures are converted into common shares, the value of the conversion will be reclassified to share capital along with the principal amount converted.

(d) Just Energy issued $100 million of convertible unsecured subordinated debentures (the “$100 million convertible debentures”), which was used to fund an acquisition.  The $100 million 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.  Each $1,000 principal amount of the $100 million convertible debentures is convertible at the option of the holder at any time prior to the close of business on the earlier of the maturity date and the last business day immediately preceding the date fixed for redemption into 56.0 common shares of Just Energy, representing a conversion price of $17.85.  Prior to September 30, 2016, the $100 million convertible debentures may be redeemed by the Company, in whole or in part, on not more than 60 days’ and not less than 30 days’ prior notice, at a price equal to their principal amount plus accrued and unpaid interest, provided that the weighted average trading price of the common shares is at least 125% of the conversion price. On or after September 30, 2016, the $100 million convertible debentures may be redeemed in whole or in part from time to time at the option of the Company on not more than 60 days’ and not less than 30 days’ prior notice, at a price equal to their principal amount plus accrued and unpaid interest.

The Company may, at its option, on not more than 60 days' and not less than 30 days' prior notice, subject to applicable regulatory approval and provided no event of default has occurred and is continuing, elect to satisfy its obligation to repay all or any portion of the principal amount of the $100 million convertible debentures that are to be redeemed or that are to mature, by issuing and delivering to the holders thereof that number of freely tradable common shares determined by dividing the principal amount of the $100 million convertible debentures being repaid by 95% of the current market price on the date of redemption or maturity, as applicable.

31

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The conversion feature of the $100 million convertible debentures has been accounted for as a separate component of shareholders’ deficit in the amount of $10,188.  Upon initial recognition of the convertible debentures, Just Energy recorded a deferred tax liability of $2,579 and reduced the equity component of the convertible debenture by this amount.   The remainder of the net proceeds of the $100 million convertible debentures has been recorded as long-term debt, which is being accreted up to the face value of $100,000 over the term of the $100 million convertible debentures using an effective interest rate of 8.6%. If the $100 million convertible debentures are converted into common shares, the value of the conversion will be reclassified to share capital along with the principal amount converted.

(e) On January 29, 2014, Just Energy issued US$150 million of European-focused senior convertible unsecured convertible bonds (the “$150 million convertible bonds”). The $150 million 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 with a maturity date of July 29, 2019.  The Company incurred transaction costs of $6,350 and has shown these costs net of the $150 million convertible bonds.

A Conversion Right in respect of a bond may be exercised, at the option of the holder thereof, at any time from May 30, 2014 to July 7, 2019. The initial conversion price is US$9.3762 per common share (being C$10.2819) but is subject to adjustments.  In the event of the exercise of a conversion right, the Company may, at its option, subject to applicable regulatory approval and provided no event of default has occurred and is continuing, elect to satisfy its obligation in cash equal to the market value of the underlying shares to be received.

As a result of the debt being denominated in a different functional currency than that of Just Energy, the conversion feature is recorded as a financial liability instead of a component of equity.  Therefore, the conversion feature of the $150 million convertible bonds has been accounted for as a separate financial liability with an initial value of US$8,517.  The remainder of the net proceeds of the $150 million convertible bonds has been recorded as long-term debt, which is being accreted up to the face value of $150,000 over the term of the $150 million convertible bonds using an effective interest rate of 8.8%.  At each reporting period, the conversion feature is recorded at fair value with changes in fair value recorded through profit or loss.  As at December 31, 2014 the fair value of this conversion feature is US$3,320 and is included in other non-current financial liabilities.

(f) The Company, through its subsidiaries, leases certain computer and office equipment and software.  These financing arrangements bear interest at a rate of 9% and mature by January 31, 2015.

32

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

10. INCOME TAXES

	For the three			For the three			For the nine			For the nine
	months ended			months ended			months ended			months ended
	December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
Current income tax expense (recovery)	$	2,771		$	(695	)	$	6,482		$	(380	)
Deferred tax expense (recovery)		(26,035	)		15,224			(33,024	)		22,123
Provision for (recovery of) income taxes	$	(23,264	)	$	14,529		$	(26,542	)	$	21,743

11. OTHER INCOME, EXPENSES AND ADJUSTMENTS

(a) Other operating expenses

	For the three		For the three		For the nine		For the nine
	months ended		months ended		months ended		months ended
	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Amortization of gas contracts	$	-	$	2,060	$	-	$	6,179
Amortization of electricity contracts		1,829		1,687		5,292		4,963
Amortization of other intangible assets		8,495		8,364		24,260		24,135
Amortization of property, plant and equipment		723		1,030		2,544		3,087
Bad debt expense		13,354		13,580		40,400		35,255
Share-based compensation		1,923		1,584		6,198		4,747
	$	26,324	$	28,305	$	78,694	$	78,366

(b) Included in change in fair value of derivative instruments

	For the three		For the three		For the nine		For the nine
	months ended		months ended		months ended		months ended
	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Amortization of gas contracts	$	-	$	2,514	$	-	$	7,542
Amortization of electricity contracts		1,270		1,171		3,674		3,445

33

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

(c) Employee benefits expense

	For the three		For the three		For the nine		For the nine
	months ended		months ended		months ended		months ended
	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Wages, salaries and commissions	$	48,034	$	43,252	$	149,162	$	146,612
Benefits		6,307		4,458		19,923		14,258
	$	54,341	$	47,710	$	169,085	$	160,870

12. REPORTABLE BUSINESS SEGMENTS

Just Energy’s reportable segments include the following: Consumer Energy, Commercial Energy, Home Services (NHS) and Solar (HES).  During fiscal 2014, TGF was disposed of and HES was classified as available for sale (see Note 5).  In addition, during fiscal 2015, NHS was classified as held for sale and the sales of NHS and HES were finalized in November 2014 (see Note 5).

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.  Allocations made between segments for shared assets or allocated expenses are based on the number of customers in the respective segments.

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 interim condensed consolidated financial statements. Just Energy is not considered to have any key customers.

34

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

The following tables present Just Energy’s results by operating segments:

For the three months ended December 31, 2014

	Consumer			Commercial
	division			division			Ethanol		Home services		Solar			Consolidated
Sales	$	521,702		$	425,050		$	-	$	-	$	-		$	946,752
Gross margin		117,800			32,298			-		-		-			150,098
Amortization of property, plant
and equipment		666			57			-		-		-			723
Amortization of intangible assets		4,138			6,186			-		-		-			10,324
Administrative expenses		30,495			10,417			-		-		-			40,912
Selling and marketing expenses		29,888			23,080					-		-			52,968
Other operating expenses		14,073			1,204					-		-			15,277
Operating profit (loss) for the
period	$	38,540		$	(8,646	)	$	-	$	-	$	-		$	29,894
Finance costs		(9,667	)		(9,858	)		-		-		-			(19,525	)
Change in fair value of derivative
instruments		(377,103	)		(28,200	)		-		-		-			(405,303	)
Other income (loss)		(313	)		580			-		-		-			267
Recovery of income taxes		(17,202	)		(6,062	)		-		-		-			(23,264	)
Loss from continuing operations	$	(331,341	)	$	(40,062	)	$	-	$	-	$	-		$	(371,403	)
Discontinued operations		-			-			-		174,661		(9,451	)		165,210
Profit (loss) for the period	$	(331,341	)	$	(40,062	)	$	-	$	174,661	$	(9,451	)	$	(206,193	)
Capital expenditures	$	300		$	151		$	-	$	3,685	$	-		$	4,136

For the three months ended December 31, 2013

	Consumer			Commercial
	division			division			Ethanol		Home services			Solar			Consolidated
Sales	$	500,441		$	339,657		$	-	$	-		$	-		$	840,098
Gross margin		113,770			34,846			-		-			-			148,616
Amortization of property, plant
and equipment		770			260			-		-			-			1,030
Amortization of intangible assets		6,250			5,861			-		-			-			12,111
Administrative expenses		21,660			7,374			-		-			-			29,034
Selling and marketing expenses		29,934			15,439			-		-			-			45,373
Other operating expenses		12,082			3,082			-		-			-			15,164
Operating profit for the
period	$	43,074		$	2,830		$	-	$	-		$	-		$	45,904
Finance costs		(8,100	)		(8,705	)		-		-			-			(16,805	)
Change in fair value of derivative
instruments		128,624			24,122			-		-			-			152,746
Other income (loss)		(270	)		31			-		-			-			(239	)
Provision for income taxes		10,627			3,902			-		-			-			14,529
Profit from continuing operations		152,701			14,376			-		-			-			167,077
Discontinued operations		-			-			17,291		(2,239	)		(2,521	)		12,531
Profit (loss) for the period	$	152,701		$	14,376		$	17,291	$	(2,239	)	$	(2,521	)	$	179,608
Capital expenditures	$	1,512		$	1,289		$	-	$	6,445		$	4,089		$	13,335

35

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

For the nine months ended December 31, 2014

	Consumer			Commercial
	division			division			Ethanol		Home services		Solar			Consolidated
Sales	$	1,417,752		$	1,268,309		$	-	$	-	$	-		$	2,686,061
Gross margin		298,542			107,461			-		-		-			406,003
Amortization of property, plant
and equipment		2,378			166			-		-		-			2,544
Amortization of intangible assets		11,468			18,084			-		-		-			29,552
Administrative expenses		84,320			27,854			-		-		-			112,174
Selling and marketing expenses		94,317			66,946			-		-		-			161,263
Other operating expenses		39,323			7,275			-		-		-			46,598
Operating profit (loss) for the
period	$	66,736		$	(12,864	)	$	-	$	-	$	-		$	53,872
Finance costs		(26,742	)		(30,254	)		-		-		-			(56,996	)
Change in fair value of derivative
instruments		(504,977	)		(28,677	)		-		-		-			(533,654	)
Other loss		(181	)		(984	)		-		-		-			(1,165	)
Recovery of income taxes		(19,517	)		(7,025	)		-		-		-			(26,542	)
Profit (loss) from continuing operations	$	(445,647	)	$	(65,754	)	$	-	$	-	$	-		$	(511,401	)
Discontinued operations		-			-			-		166,276		(35,138	)		131,138
Profit (loss)for the period	$	(445,647	)	$	(65,754	)	$	-	$	166,276	$	(35,138	)	$	(380,263	)
Capital expenditures	$	1,801		$	901		$	-	$	11,843	$	8,334		$	22,879
Total goodwill	$	136,130		$	132,293		$	-	$	-	$	-		$	268,423
Total assets	$	703,064		$	502,615		$	-	$	-	$	-		$	1,205,679
Total liabilities	$	1,251,610		$	493,060		$	-	$	-	$	-		$	1,744,670

For the nine months ended December 31, 2013

	Consumer			Commercial
	division			division			Ethanol		Home services			Solar			Consolidated
Sales	$	1,347,633		$	1,054,231		$	-	$	-		$	-		$	2,401,864
Gross margin		264,851			103,214			-		-			-			368,065
Amortization of property, plant
and equipment		2,307			780			-		-			-			3,087
Amortization of intangible assets		17,274			18,003			-		-			-			35,277
Administrative expenses		65,613			22,583			-		-			-			88,196
Selling and marketing expenses		99,070			43,950			-		-			-			143,020
Other operating expenses		32,294			7,708			-		-			-			40,002
Operating profit for the
period	$	48,293		$	10,190		$	-	$	-		$	-		$	58,483
Finance costs		(21,363	)		(28,887	)		-		-			-			(50,250	)
Change in fair value of derivative
instruments		22,231			6,706			-		-			-			28,937
Other income (loss)		398			(127	)		-		-			-			271
Provision for income taxes		16,756			4,987			-		-			-			21,743
Profit (loss) from continuing operations		32,803			(17,105	)		-		-			-			15,698
Discontinued operations		-			-			17,987		(5,095	)		(1,026	)		11,866
Profit (loss) for the period	$	32,803		$	(17,105	)	$	17,987	$	(5,095	)	$	(1,026	)	$	27,564
Capital expenditures	$	2,093		$	1,868		$	-	$	23,809		$	9,663		$	37,433
As at March 31, 2014
Total goodwill	$	133,761		$	129,992		$	-	$	283		$	-		$	264,036
Total assets	$	876,164		$	363,125		$	-	$	297,098		$	106,263		$	1,642,650
Total liabilities	$	906,218		$	464,229		$	-	$	311,993		$	51,852		$	1,734,292

36

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

Geographic information

Sales from external customers

	For the three months ended December 31, 2014		For the three months ended December 31, 2013		For the nine months ended December 31, 2014		For the nine months ended December 31, 2013
Canada	$	189,528	$	196,123	$	454,581	$	470,218
United States		688,681		624,878		2,086,289		1,897,010
United Kingdom		68,543		19,097		145,191		34,636
Total sales per interim condensed consolidated statements of income	$	946,752	$	840,098	$	2,686,061	$	2,401,864

The sales are based on the location of the customer.

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 December 31, 2014		As at March 31, 2014
Canada	$	191,409	$	386,561
United States		173,239		194,346
United Kingdom		776		741
Total	$	365,424	$	581,648

37

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

13. EARNINGS (LOSS) PER SHARE

	For the three			For the three		For the nine			For the nine
	months ended			months ended		months ended			months ended
	December 31,			December 31,		December 31,			December 31,
	2014			2013		2014			2013
BASIC EARNINGS (LOSS) PER SHARE
Earnings (loss) from continuing operations available to shareholders	$	(373,363	)	$	165,164	$	(515,468	)	$	12,693
Earnings (loss) available to shareholders		(208,654	)		178,738		(381,059	)		25,602
Basic shares outstanding		145,645,557			143,411,457		144,960,281			142,848,233
Basic earnings (loss) per share from continuing operations available to shareholders	$	(2.56	)	$	1.15	$	(3.56	)	$	0.09
Basic earnings (loss) per share available to shareholders	$	(1.43	)	$	1.25	$	(2.63	)	$	0.18
DILUTED EARNINGS (LOSS) PER SHARE
Earnings (loss) from continuing operations available to shareholders	$	(373,363	)	$	165,164	$	(515,468	)	$	12,693
Earnings (loss) available to shareholders		(208,654	)		178,738		(381,059	)		25,602
Adjustment for dilutive impact of convertible debentures		8,910	1		7,590		16,034	1		22,656	1
Adjusted earnings (loss) from continuing operations available to shareholders	$	(364,453	)	$	172,754	$	(499,434	)	$	35,349
Adjusted earnings (loss)available to shareholders	$	(199,744	)	$	186,328	$	(365,025	)	$	48,258
Basic shares outstanding		145,645,557			143,411,457		144,960,281			142,848,233
Dilutive effect of:
Restricted share grants		3,321,664	1		3,559,322		3,209,516	1		3,841,027
Deferred share grants		157,439	1		164,146		165,075	1		162,663
Convertible debentures		39,933,526	1		27,757,230		39,933,526	1		27,757,230	1
Shares outstanding on a diluted basis		189,058,186			174,892,155		188,268,398			174,609,153
Diluted earnings (loss) per share from continuing operations available to shareholders	$	(2.56	)	$	0.99	$	(3.56	)	$	0.09
Diluted earnings (loss) per share available to shareholders	$	(1.43	)	$	1.07	$	(2.63	)	$	0.17

1The assumed conversion into shares results in an anti-dilutive position; therefore, this conversion has not been included in computation of diluted earnings (loss) per share.

14. DIVIDENDS PAID

For the three months ended December 31, 2014, a dividend of $0.125 (2013 - $0.21) per share was declared by Just Energy. This dividend amounted to $18,572 (2013 - $30,891), which was approved by the Board of Directors and paid out on December 31, 2014. For the nine months ended December 31, 2014, dividends of $0.460 (2013 - $0.63) per share were declared and paid by Just Energy. This amounted to $68,127 (2013 - $92,497), which was approved by the Board of Directors and paid out during the period.

38

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

15. COMMITMENTS AND GUARANTEES

Commitments for each of the next five years and thereafter are as follows:

As at December 31, 2014

	Less than 1 year			1 to 3 years			4 to 5 years			More than 5 years			Total
Premises and equipment leasing			6,180			8,622			6,025			11,144		31,971
Long-term gas and electricity contracts			2,040,422			1,572,045			301,428			7,286		3,921,181
		$	2,046,602		$	1,580,667		$	307,453		$	18,430	$	3,953,152

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.

Guarantees

Pursuant to separate arrangements with various entities, 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 December 31, 2014 amounted to $43,852.  

As at December 31, 2014, Just Energy had total letters of credit outstanding in the amount of $125,111 (Note 9(a)).

16. COMPARATIVE 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 period’s interim condensed consolidated financial statements.

39