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Crius Discloses Purchase Price For Recent Customer Book Acquisition

Crius Sees Decline In Customer Count, Reports Earnings

March 15, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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In reporting fourth quarter and year-end earnings, Crius Energy Trust announced that, "In November 2018, the Company purchased the customer contracts and associated assets of approximately 10,000 residential electric customers in Massachusetts and New York from a New York-based energy retailer for an estimated purchase price of $0.7 million, subject to customary post-closing adjustments."

Specifically, Crius acquired the book from Utility Expense Reduction, LLC

Crius had previously reported the acquisition of the book, and at that time had described compensation for the 10,000 customers as, "Crius will pay up to $75 per customer successfully switched."

Crius' customer count stood at 1,204,000 RCEs as of December 31, 2018, versus 1,352,000 RCEs as of September 30, 2018 and 1,410,000 a year ago

The net loss of 148,000 RCE from September 30, 2018 to December 31, 2018 compares to a new loss of 35,000 RCEs from June 30, 2018 to September 30, 2018

Crius added a gross of 73,000 customers organically from sales and marketing channels from September 30, 2018 to December 31, 2018, plus the 10,000 from the book purchase described above, compared to average customer additions in the prior four quarters of 138,000, or 91,000 when excluding the customer additions from municipal aggregations.

Gross customer drops in the fourth quarter of 2018 were 231,000 customers, compared to the average in the prior four quarters of 169,000. Gross customer drops were elevated during the quarter primarily due to the non-renewal of 120,000 municipal aggregation customers as a result of the previously reported decision to no longer participate in the segment. Excluding the impact of municipal aggregation non-renewals, customer drops were 111,000 in the fourth quarter of 2018.

At December 31, 2018, Crius was serving 1,044,000 electric RCEs and 160,000 gas RCEs

"While our total customer count has declined year-over-year as a result of attrition of low-margin large commercial and municipal aggregations, we believe the quality of our portfolio has improved and will continue to improve," due to various previously-reported strategies to improve profitability (exiting municipal aggregations, focusing on margins, etc.), Crius said

For the three month period ended December 31, 2018, gross margin was $54.0 million, representing a decrease of 1.5% from $54.8 million for the three month period ended December 31, 2017. Gross margin for the three month period ended December 31, 2018 was 19.0% of total revenue, a decrease from 22.1% of total revenue for the three month period ended December 31, 2017

The period-over-period decrease in gross margin and gross margin as a percentage of revenue was driven by the negative impact on Crius' municipal aggregation portfolio of certain regulatory changes which resulted in significant incremental wholesale cost factors in New Jersey and Massachusetts, namely RTEP and RPS costs, which the company was not able to fully pass through to customers as a result of how the customer contracts are structured.

Electricity gross margin for the three month period ended December 31, 2018 was $38.7 million, representing a decrease of 5.7% from $41.1 million for the three month period ended December 31, 2017. For the three month period ended December 31, 2018, electricity gross margin per unit was $16.00/MWh, and electricity gross margin was 15.7% of electricity revenues, representing a decrease from $18.76/MWh and 19.3%, respectively, for the three month period ended December 31, 2017. Gross margins and gross margins per unit variances compared to the prior comparable quarter, were impacted by the increased mix of commercial and municipal aggregation customers in the portfolio, including the commencement of service of a large municipal aggregation in Massachusetts in January 2018. "Specifically, gross margins in the fourth quarter were negatively impacted by our municipal aggregation portfolio, which Crius intends to run-off, as regulatory changes resulted in significant incremental wholesale cost factors in New Jersey and Massachusetts, namely RTEP and RPS costs, which the Company was not able to fully pass through to customers as a result of how the customer contracts are structured," Crius said

For the three month period ended December 31, 2018, revenue was $284.8 million, representing an increase of 14.6% from $248.5 million for the three month period ended December 31, 2017, driven by increased customer usage and higher average customer retail rates.

Crius reported net income of $1.7 million in the fourth quarter of 2018, compared to a net income of $36.0 million in the fourth quarter of 2017.

Crius reported Adjusted EBITDA of $19.1 million in the fourth quarter of 2018, compared to $18.0 million achieved in the fourth quarter of 2017. During the quarter, the deregulated energy business contributed Adjusted EBITDA of $22.4 million after normalizing for $1.9 million in non-recurring costs and negative contribution of $1.4 million from the solar business (including $0.8 million in wind-down costs).

As of the end of 2018, Crius had substantially wound down its solar business, with the exception of the Verengo solar installation business which it is winding down in the first half of 2019.

As previously reported, Crius has entered into a definitive agreement to be acquired by Vistra Energy.

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