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Just Energy Announces Sale Price, Buyer For UK Operations

Identifies a Further C$20 Million of Cost Savings in North American Operations

October 8, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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Just Energy Group Inc. (the "Company") announced today that it has executed a share purchase agreement to sell the Company’s UK operations, Hudson Energy Supply UK Limited ("Hudson UK"), to Shell Energy Retail Limited ("Shell Energy Retail") for up to £10.5 million (approximately C$17 million).

In addition, the Company has identified an incremental approximate C$20 million in annualized cost savings through its ongoing optimization efforts.

"The sale of our UK operations is part of our broader strategy to concentrate on our higher-margin North American operations, while also improving our liquidity," said Scott Gahn, President and Chief Executive Officer of Just Energy. "As well as refocusing our geographic footprint, we have undertaken an in-depth review of our operations and identified ways to improve our business by boosting efficiency and lowering costs."

Sale of Hudson UK

"The sale of Hudson UK advances Just Energy’s plan to streamline its operations, allowing the Company to narrow its geographic focus and concentrate on its core operations. In addition, the sale improves Just Energy’s liquidity position by eliminating significant capital investments in Hudson UK that would otherwise have been required in the short term to support the UK operations and to further grow the UK business," the Company said

Pursuant to the share purchase agreement, Just Energy will receive £2 million (approximately C$3.2 million) at closing and up to £8.5 million (approximately C$13.8 million) to be paid depending on whether the Office of Gas and Electricity Markets (Ofgem) or the Department for Business, Energy and Industrial Strategy reinstate the capacity market payments in the UK within a specified period of time. Until completion, both companies will continue to operate independently. Under the terms of the deal, on completion, Hudson UK will operate as a wholly-owned subsidiary of Shell Energy Retail Limited. Just Energy is committed to lowering leverage and expects to apply the proceeds from the sale against its indebtedness.

"The Company is confident that Shell Energy Retail is a strong partner for its UK-based customers, allowing them to benefit from Shell Energy Retail’s extensive renewable energy offerings and strong customer service. Hudson UK supplies around 200,000 UK residential customers with gas and 100% renewable electricity through its residential trading arm, Green Star Energy, as well as providing bespoke gas and 100% renewable electricity contracts to around 2,000 commercial customers," the Company said

The transaction is subject to customary closing conditions, including merger control approval and is expected to close by the end of 2019.

"The Board of Directors received financial advice and an opinion from its financial advisor, National Bank Financial Inc., that as of the date of the opinion and subject to the assumptions, limitations and qualifications set forth therein, the consideration payable by Shell Energy Retail pursuant to the sale of Hudson UK is fair, from a financial point of view, to the Company," the Company said

"The accounting for the sale of Hudson UK is being finalized and a non-cash impairment as a result of the expected sale will be included in Just Energy’s second quarter financial statements under discontinued operations," the Company said

Additional Cost Savings Identified

"Following an in-depth review of its business, Just Energy has identified several opportunities to improve efficiency and profitability. Incremental savings will be achieved by eliminating low-value activities in non-selling costs, optimizing online commission spending to eliminate low-return deals and through improved efficiency in our customer care group," the Company said

These improvements are in addition to cost reductions of approximately C$40 million identified at the end of fiscal 2019, bringing the total FY2020 cost savings to approximately C$60 million, net of costs associated with severance and Just Energy’s strategic review process.

Strategic Review Process

"The strategic review process initiated in early June is ongoing and the board is comfortable with the progress to date. Just Energy has not set a specific timeframe for the conclusion of the strategic review. The Company plans to provide an update when the Board has approved a specific course of action," the Company said

"While the process is ongoing, Just Energy is focused on improving and optimizing the business. The Company continues to implement measures designed to lower costs by eliminating unnecessary overhead and low-return investments, improve the quality of its customer base and fortify operational and financial controls," the Company said

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