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Higher Margins Lift Just Energy Base EBITDA
Just Energy reported increased Base EBITDA for the quarter ending September 30, 2015, as a result of higher margins.
Gross margin was $167.2 million for the quarter ending September 30, 2015, an increase of 26% from the prior comparable quarter (all $ Canadian). The mass market division contributed an increase of 33% while the commercial division increased by 10%, resulting from higher sales per customer earned as well as lower commodity costs experienced through effective hedging strategies as well as the positive impact from the foreign currency translation of U.S.-based sales.
Average realized gross margin for the mass market division after all balancing costs for the rolling 12 months ended September 30, 2015 was $219/RCE, representing a 24% increase from $176/RCE reported in the prior comparable quarter. For mass market electricity customers, gross margin was $106.6 million for the three months ended September 30, 2015, an increase of 40% from $75.9 million recorded in the prior comparable quarter. While the customer base remained consistent over the past year, gross margin was more favorably impacted by the greater capture of fee-based revenue related to the recovery of certain costs to serve, lower electricity balancing costs and the favorable impact from foreign currency translation on the division’s U.S. dollar denominated sales, Just Energy said.
For the three months ended September 30, 2015, the average gross margin per RCE for the customers added and renewed by the mass market division was $209/RCE, an increase from $188/RCE in the prior comparable quarter. The average gross margin per RCE for the mass market customers lost during three months ended September 30, 2015 was $188/RCE. Higher new customer margins reflect strong margins on new products including bundled offerings.
For the commercial division, average realized gross margin after all balancing costs for the rolling 12 months ended September 30, 2015 was $62/RCE, an increase from $61/RCE reported a year ago.
For the commercial division, the average gross margin per RCE for the customers signed during the three months ended September 30, 2015 was $84/RCE compared to $80/RCE in the prior comparable quarter. Customers lost through attrition and failure to renew during the three months ended September 30, 2015 were at an average gross margin of $64/RCE. As previously reported, Just Energy has pursued a plan where focus in the commercial market will be on higher margin segments while those with traditionally low margins are allowed to expire.
The aggregation costs per customer for mass market customers signed by independent representatives and commercial customers signed by brokers during the last 12 months were as follows:
Just Energy Base EBITDA was $45.7 million for the three months ended September 30, 2015, a 44% increase from $31.7 million in the prior comparable quarter. The increase in Base EBITDA reflected sharply higher margins partially offset by higher operating expenses.
The mass market division contributed $29.5 million to Base EBITDA for the three months ended September 30, 2015, an increase of 75%, and the commercial division contributed $16.2 million to Base EBITDA, a 9% increase from $14.9 million reported for the prior comparable period. Both the mass market and commercial divisions were able to increase gross margin year over year as a result of higher selling prices and lower commodity costs as well as a benefit of $5.3 million from the strengthening of the U.S. dollar. The gross margin reported for the commercial division also benefited from its focus on signing higher margin customers and not renewing low margin customers.
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November 13, 2015
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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
Mass Market Commercial
Natural gas $182/RCE $41/RCE
Electricity $152/RCE $38/RCE
Average $159/RCE $38/RCE
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