Crius Reports Only A Small Amount of Customer Base Subject To NY PSC Low-Income Ban
August 15, 2017 Email This Story Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
Crius Energy announced today that in July 2017 it acquired a 100% equity interest in Big Sky Gas, a natural gas marketing business with approximately 4,000 customers based in Montana.
The aggregate purchase price consisted of the conversion of a $0.5 million convertible term loan and the exercise of warrants held by Crius Energy for 81% ownership interest in Big Sky Gas. The remaining 19% ownership interest was acquired in exchange for an earn-out, based on future profitability targets agreed between the parties.
Crius reported that it saw net customer growth of 25,000 RCEs from March 31, 2017 to June 30, 2017, versus net growth of about 20,000 in recent quarters.
As of June 30, 2017, Crius Energy had 1,028,000 RCEs, up from 1,003,000 RCEs as of March 31, 2017 and 942,000 RCEs a year ago
The June 30, 2017 customer count does not include the impact of Crius's previously reported acquisition of U.S. Gas & Electric, which closed after the close of the second quarter. With USG&E, Crius is serving over 1.4 million RCEs.
Crius's gross customer additions during the three months ended June 30, 2017 were 172,000 RCEs
Gross customer drops in the second quarter of 147,000 RCEs were higher than the average in the prior four quarters of 91,000, primarily due to elevated non-renewals, specifically in the commercial segment as well as 40,000 default service customer non-renewals during the quarter.
The customer growth was, "driven by strong growth in the municipal aggregations, including a large municipal aggregation in the state of Massachusetts in which Crius Energy will serve approximately 90,000 residential customers under a three-year contract commencing in January 2018."
Crius also provided further details on a strategic partnership to offer community solar in Texas
Crius reported $3.4 million in revenue related to the aggregation of community solar customers under a new strategic partnership entered into with, "a leading developer of community based solar projects."
Under the agreement, which was entered into during the quarter, Crius Energy will offer a direct-to-consumer program that allows customers to purchase solar energy from community based solar installations backed by five-year power purchase agreements. Crius Energy receives a customer acquisition fee which is recognized as revenue based upon customer acquisition activity, which is primarily undertaken prior to the development of the solar farms, with the balance of the revenue being recognized over the life of the agreements, based on customer acquisition required to replace attrition experienced.
The initial agreement is related to solar farms in the Texas market with nameplate capacity of approximately 63 MW to be developed in 2017, which equates to approximately 32,000 community solar customers, of which approximately two-thirds were signed up in the second quarter of 2017. Crius Energy has the option to participate in a similar project in 2018 for additional developments of approximately 32 MW of installed capacity, which equates to approximately 16,000 community solar customers
Crius also reported the number of customers in New York it is serving which would be subject to a PSC prohibition on ESCO service (whose implementation has been temporarily stayed)
Crius said that, "The estimated number of customers on low-income assistance programs with their utility that Crius currently serves in the State of New York is less than 10,000, which includes the customer portfolio acquired from USG&E in July 2017. The NY PSC has also undertaken additional initiatives which might further restrict the operations of ESCOs in New York State, however, the outcome and potential impact of these initiatives remains uncertain."
Crius reported Adjusted EBITDA of $14.1 million in the second quarter of 2017, representing an increase from $13.6 million achieved in the second quarter of 2016. Adjusted EBITDA for the second quarter of 2017 has been adjusted for a legal reserve charge of $6.5 million, related to pending litigation and regulatory matters, and associated legal fees incurred in the second quarter of 2017 of $1.4 million. Crius said such legal proceedings are significantly closer to resolution and the company has entered into an agreement in principle to settle the matters.
Gross margin for the second quarter of 2017 was $37.2 million, an increase from $33.1 million of gross margin in the second quarter of 2016.