Just Energy U.S. Electric Margin Lifts Adjusted EBITDA

Email This Story
November 10, 2010

Just Energy Income Fund reported higher Adjusted EBITDA of $39.4 million, versus $36.6 million a year ago (all figures Canadian), on higher gross margin from U.S. electric sales.

The net loss for the quarter, which reflects the change in fair value of derivative instruments, was $154.5 million, versus income of $110.7 million a year ago.

Just Energy's long-term customer count as of September 30, 2010 was 3.161 million Residential Customer Equivalents (RCEs), versus 3.069 million as of June 30, 2010 and 2.267 million a year ago.

Just Energy excludes from its long-term customer count 68,000 RCEs on variable products, which were largely acquired with Hudson Energy.

Net customer additions through marketing for the quarter ending September 30, 2010 were 92,000.  For the same quarter in 2009, there were 36,000 net customer additions through marketing.

Commercial customers currently account for 40% of Just Energy's customer base and the company expects that percentage to increase over time.

A walkthrough of customer additions and attrition since July 1, 2010 is provided in this chart.  Also provided are customer aggregation costs, as well as gross margin per signed and lost customer (on page 2).

Aside from expanding Hudson Energy into Pennsylvania, which Just Energy hopes to do this quarter (Hudson licenses are pending, Commerce is already active), Just Energy said that it did not anticipate entering any new states until the middle of the next fiscal year.  Instead, Just Energy will focus on expanding offerings to additional customers in its current territories, particularly where Hudson may only be serving large customers.  Just Energy also confirmed it is targeting residential customers as part of its previously reported Massachusetts expansion.

Revenue and gross margin detail by customer line are provided in the linked chart.

U.S. gas gross margin declined primarily due to final reconciliations against the prior warm winter.  In Michigan, one-time reconciliations with the utility and associated sales of surplus gas (which must be completed in the summer) resulted in a loss of $7.4 million in margin.

Average realized U.S. gas gross margin after all balancing costs for the three months ended September 30, 2010, was $33/RCE, a decrease of 88% over the prior year comparable period of $267/RCE.  This was due to sharply lower per customer consumption, utility reconciliations, losses on sale of excess gas, and the inclusion of lower margin commercial customers acquired with Hudson.

Total U.S. electric gross margins were higher on customer growth.  Average U.S. electric gross margin per customer decreased, however, to $156/RCE, compared to $282/RCE in the prior-year quarter, as a direct result of a lower U.S. dollar exchange rate and lower margins per RCE for the commercial customers added.

In the U.S., gas attrition for the trailing 12 months was 27%, below management's annual target of 30%.  This reflects a small continued improvement in the U.S. due to new product offerings and some strengthening in the U.S. economy.

Electricity attrition in the U.S. was 15% for the trailing 12 months, below management's target of 20%.

The trailing 12-month attrition in Canada for both electric and gas customers was 12%, above management's target of 10%.  See chart for attrition rates (page 2)

The trailing 12-month renewal rate for U.S. gas customers was 78%, above the target of 75%.  Contracts up for renewal were mostly in Illinois with a small number of Indiana and New York gas customers up for renewal.

The U.S. electricity renewal rate was 89%, well above the target rate of 75%.  During the quarter, Just Energy had both Texas and New York electricity customers up for renewal.

Canadian renewal rates for both gas and electricity were in the mid-60% range, under the target of 70%, due to low utility prices relative to Just Energy's fixed offerings.  On the electric side, Just Energy has introduced some enhanced variable-price offerings in Canada to improve renewal rates.  See chart for renewal rates (page 2)

Of all consumer customers who contracted with Just Energy in the quarter ending September 30, 2010, 38% took Just Energy's green product for some or all of their energy needs.  On average, these customers elected to purchase 91% of their consumption as green supply, which compared to 48% take-up, for an average of 89% of consumption, in the quarter ending June 30, 2010.

As of the quarter ended September 30, 2010, green supply makes up 11% of Just Energy's electricity portfolio, up from 4% in the same period last year.  Green supply makes up 3% of Just Energy's overall gas portfolio, up from 1% a year ago.  

General and administrative costs were $25.5 million for the three months ended September 30, 2010, consistent with such expenses during the year-ago quarter.

Marketing expenses, which consist of commissions paid to independent sales contractors, brokers and independent representatives for signing new customers, as well as corporate costs, were $37.0 million, an increase of 37% from $27.1 million in the year-ago quarter, reflecting higher gross customer additions offset partially by lower aggregation cost per customer.

Marketing expenses to maintain gross margin were $25.1 million for quarter, an increase of 56% from $16.1 million from the prior-year quarter, due to higher attrition from a larger customer base and an increase in the number of customers up for renewal in the current period.

Bad debt expense for the three months ended September 30, 2010 increased by 74% to $6.7 million versus $3.9 million in the prior comparable quarter.  The increase was entirely related to the 151% increase in total revenues for the quarter to $262.6 million in the markets where Just Energy assumes the risk for accounts receivable collection.

   
Email This Story

HOME

Copyright 2010 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.

 

Be Seen By Energy Professionals in Retail and Wholesale Marketing

Run Ads with Energy Choice Matters

Call Paul Ring

954-205-1738

 

 

 

 

 

Energy Choice
                            

Matters