Superior Plus Reports Lower Gross Profit due to Residential Market Exits

Superior Plus' fixed-price energy services business generated gross profit of $7.9 million for the fourth quarter of 2010, down from $8.4 million a year ago, on lower natural gas gross profits due to reduced sales as a result of exiting the direct residential natural gas markets in Ontario and British Columbia, offset in party by increased gross profits from commercial natural gas sales and the electricity markets (all figures Canadian).

For the year 2010, fixed-price energy services gross profit was $29.1 million, versus $31.6 million a year ago.

Superior Plus said that the financial benefit from entering the retail electricity and natural gas markets in the northeast U.S. in 2011 is expected to be offset by reduced customer counts due to the exit from the British Columbia residential natural gas market in 2010 and the difficult natural gas markets.

For the fourth quarter of 2010, natural gas gross profit was $6.5 million, a decrease of $1.0 million from the prior year quarter as higher margins were more than offset by lower volumes. Gross profit per unit was $1.032 per gigajoule (GJ), an increase of 9.4 cents per GJ (10%) from the prior year quarter.

The increase in natural gas gross margin was due to the contribution of liquidated damages offset in part by higher risk reserve funding requirements. Excluding liquidated damages, natural gas gross margin was 81.2 cents per GJ due to a higher proportion of lower-margin commercial volumes and an increase in risk reserve funding requirements, due to the historically low natural gas prices and warm weather, of approximately $2.3 million.

Quarterly sales volumes of natural gas were 6.3 million GJ, which was 1.7 million GJ (21%) lower than the prior year quarter as reduced residential volumes were partially offset by higher commercial volumes. Natural gas sales volumes declined due to the decision to exit the Ontario and B.C. direct residential natural markets over the last 24 months, offset in part by continued marketing focus on commercial volumes. Superior made the determination to exit the Ontario based direct residential natural gas and electricity markets in the first quarter of 2009 and the B.C. market in the third quarter of 2010.

Superior is now focused on developing its customer base in the Ontario commercial natural gas and electricity markets. "The change in fixed-price energy's strategy has improved the cost structure and the business remains scalable if additional market opportunities develop," Superior Plus said.

Electricity gross profit in the fourth quarter of 2010 was $1.4 million, an increase of $0.5 million or 56% percent from the prior year quarter due to the aggregation of additional commercial customers over the past year, and higher volumes.

Fourth-quarter electric volumes were 133 GWh, versus 68 GWh a year ago. Fourth-quarter electric gross profit per unit was $10.5/MWh, versus $13.2/MWh a year ago.