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MXenergy Customer Growth Continues, Reverses Year-Ago Loss

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September 29, 2010

MXenergy posted its second consecutive quarter of customer growth in closing out fiscal 2010, which ended for MXenergy on June 30, 2010, as MXenergy also reversed a year-ago net loss for the fiscal year on the strength of higher electric volumes from new customers.

For the fiscal year ending June 30, 2010, MXenergy recorded net income of $11.5 million, compared with a net loss of $100.2 million for fiscal 2009.

Adjusted EBITDA, which excludes unrealized impacts from risk management activities, improved to $58.6 million for 2010, versus $43.5 million a year ago.

Gross profit, excluding unrealized impacts from risk management activities, improved to $126.1 million from $120.2 million a year ago.

Adjusted electricity gross profit was 2% higher at $22.8 million, versus $22.2 million a year ago, due to an 11% increase in the volume of MWh sold to customers related to customer growth, partially offset by an 8% reduction in the per-unit gross profit of electricity sold during the period, which resulted from competitive pricing environments in many of MXenergy's electricity markets, including MXenergy's new market in the PPL service area.

Adjusted gross profit per MWh sold during fiscal 2010 was $24.07, versus $26.14 a year ago.

Adjusted natural gas gross profit was $103.3 million overall, an improvement versus $98.0 million a year ago.  However, the gains were from benefits associated with economic hedging activity, and the gross profit amount attributable to natural gas delivered to customers was lower at $79.7 million versus $91.2 million year ago.  The decline was due primarily to a 19% reduction in the volumes of natural gas sold to customers, reflecting natural gas customer attrition.  

The per-unit gross profit for delivered natural gas improved to $1.73/MMbtu from $1.66/MMbtu a year ago due to colder-than-normal weather and a favorable pricing environment in many of MXenergy's natural gas markets.

As of June 30, 2010, MXenergy reported 606,000 Residential Customer Equivalents (excluding Standard Service Offer customers in Ohio), up from 568,000 as of March 31, 2010 and 562,000 a year ago.  The vast majority of growth came in the Northeast electric markets such as Connecticut and Pennsylvania, the latter of which accounted for 56,000 of the additional RCEs, which reflected entering the PPL territory.

Electric RCEs increased to 173,000 as of June 30, 2010 versus 130,000 as of March 31, 2010 and 82,000 as of June 30, 2009.

Natural gas RCEs, excluding customers served through the Ohio Standard Service Offer auction, were lower at 433,000 versus 438,000 as of March 31, 2010 and 473,000 as of June 30, 2009.  Gas attrition slowed in the final three quarters of 2010 as MXenergy completed its previously reported restructuring and was able to offer customers more flexible products when performing retention efforts.  

As of June 30, 2010, based upon estimates received directly from the LDC, MXenergy expects that the customers won in the Ohio SSO auction will consume approximately 9.7 million MMBtus of natural gas annually.

RCEs by geographic area, excluding the SSO Program, are summarized in this table.

Additional selected operating data including RCEs, sales, and volume data are summarized in this table

MXenergy said that its expansion into new service areas in fiscal 2011 will be driven by several factors, including billing rules and purchase of receivables.  MXenergy noted, as first reported in Matters in July, that it entered the Maryland electric mass market subsequent to the close of the fiscal year.

For fiscal 2010, 51% of total sales were within markets where LDCs do not guarantee customer accounts receivable, down from 55% a year ago.

MXenergy's customer renewal percentage improved to 93% in 2010 versus 84% a year ago.  The in-contract attrition percentage improved to 26% versus 34% in 2009.  Both turnarounds reflect the easing of restrictions that MXenergy was previously subject to regarding pricing, product type, and marketing expenditures while it was undergoing its restructuring through much of fiscal 2009.

MXenergy's total expenditures for acquiring customers, which includes amounts capitalized as customer acquisition costs and certain other marketing and advertising expenses, increased approximately 50% during fiscal year 2010, as compared with the prior fiscal year.  MXenergy's cost to acquire customers was approximately $100 per RCE for fiscal year 2010, which was consistent with the amount spent per RCE in the prior fiscal year.

As of June 30, 2010, approximately 42% of MXenergy's gas customers were on fixed rate contracts (with the balance on variable rates), versus 45% of customers on fixed rate contracts at the end of fiscal 2009.

As of June 30, 2010, approximately 70% of electric customers were on fixed rate contracts, nearly double the 36% which were on fixed rate contracts as of June 30, 2009.  As of June 30, 2010, MXenergy's contracts with fixed price electricity customers have an average remaining life of approximately six months.

Sales for fiscal 2010 were $561.2 million, ($457.9 million gas, $103.3 million electric), versus $789.8 million ($670.6 million gas, $119.2 million electric) in fiscal 2009.

   
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