Just Energy Sees Flat Gross Margin for Retail Supply Business

Just Energy Group Inc. reported Adjusted EBITDA of $47.9 million for the three months ended September 30, 2011 (second fiscal quarter of 2012), up from $37.5 million a year ago, largely driven by increased gross margin from Just Energy's home services and ethanol businesses (all figures Canadian).

On a GAAP basis, Just Energy reported a net loss for the three months ended September 30, 2011 of $3.5 million, versus the year-ago loss of $133.4 million, due to the change in fair value of derivative instruments year-over-year.

Gross margin from retail commodity sales was flat versus the year-ago quarter at $88 million. Gains in the U.S. electric, U.S. gas, and Canadian gas businesses were offset by reduced gross margin from Canadian electric marketing. The gas businesses benefited from the absence of year-ago losses due to the sale of excess gas due to unseasonable warmth. U.S. electric gross margins were higher on customer growth.

Just Energy's customer growth during the quarter was first addressed by Matters yesterday (click here)

Just Energy's trailing 12-month renewal rate in the U.S. as of June 30, 2011 was 68% for electric customers (down from 89% a year ago), and 78% for gas customers (even with the year ago). For U.S. electricity, Just Energy said that strong renewals in Texas were offset by Illinois and New York.

The actual aggregation costs per customer for the six months ended September 30, 2011, for residential and commercial customers signed by independent representatives and commercial customers signed by brokers were as follows:

Residential customers
- U.S. Gas: $210/RCE
- U.S. Electricity: $197/RCE

Commercial customers
- U.S. Gas: $101/RCE
- U.S. Electricity: $94/RCE

Commercial broker customers
- U.S. Gas: $27/RCE
- U.S. Electricity: $34/RCE

Annual gross margin per customer added, renewed, or lost during the quarter ending September 30, 2011 was as follows (gross number of customers in parenthesis):

Residential and small commercial customers added in the quarter
- U.S. Gas: $189 (26,000)
- U.S. Electricity: $157 (39,000)

Residential and small commercial customers renewed in the quarter
- U.S. Gas: $190 (12,000)
- U.S. Electricity: $158 (4,000)

Residential and small commercial customers lost in the quarter
- U.S. Gas: $212 (30,000)
- U.S. Electricity: $180 (40,000)

- Large commercial customers added in the quarter: $85 (154,000)

- Large commercial customers lost in the quarter: $125 (53,000)

Bad debt expense for the three months ended September 30, 2011 was $6.5 million, down 4% from $6.7 million expensed for the three months ended September 30, 2010.

For the six months ended September 30, 2011, the bad debt expense of $13.3 million represents approximately 2.5% of revenue, slightly lower than the 2.6% reported for the prior comparable period with $12.4 million of bad debt expense.