IDT Energy to Enter Five New States; Customer Growth Slows

IDT Energy continued to experience net customer growth in the three months ended December 31, 2011, but at a much slower pace than seen earlier in the year.

IDT Energy was serving 438,000 meters as of December 31, 2011, versus 430,000 as of September 30, 2011 and 368,000 a year ago.

The net growth of 8,000 meters from September 30, 2011 to December 31, 2011 is a slower growth rate than the growth of 34,000 meters seen from June 30, 2011 to September 30, 2011, and the growth of 19,000 meters seen from March 31, 2011 to June 30, 2011.

Electricity meters as of December 31, 2011 were 254,000, versus 247,000 as of September 30, 2011 and 208,000 a year ago.

Natural gas meters were 184,000 as of December 31, 2011, versus 183,000 as of September 30, 2011 and 160,000 a year ago.

IDT Energy's residential customer equivalents (RCEs) increased by 17.8% during calendar 2011 to 248,000 as of December 31, 2011. Electric RCEs as of December 31, 2011 were 153,000, and natural gas RCEs were 95,000.

New markets for IDT Energy during the latter half of 2011 included, as previously reported, Met-Ed and Penelec, as well as New Jersey Natural Gas. After the close of the fiscal year, IDT Energy also entered the Duquesne Light territory, as only reported by Matters.

Executives said that IDT Energy is pursuing supplier licenses in Maryland, Massachusetts, Illinois, Connecticut, and the District of Columbia.

Monthly churn over the five month transition period of August 1, 2011 to December 31, 2011 (as parent Genie Energy transitions to a fiscal year starting January 1, 2012), averaged 6.4%, compared to 6.1% in the three months ended October 31, 2011 and 4.7% in the same period a year ago. The increase in churn reflects, in part, an increase in the rate of gross customer acquisitions, as new customers tend to have higher initial churn rates, as well as intensified competition in some key markets.

Additionally, IDT Energy said that it encountered unusually high rates of churn in New Jersey's largest utility territory, due to the nature of the POR mechanism in place there. IDT Energy reduced its marketing in this service area in response to such churn.

IDT Energy has also increased rewards and promotions to incent longer-term customer relationships.

IDT Energy reported that the churn rate improved slightly in December, and that it expects that the churn rate will maintain its current level for at least the first half of calendar 2012, reflecting the expected continued expansion of meter acquisitions.

IDT Energy gross profit during the five months ended December 31, 2011 was $24.3 million, up from $21.5 million a year ago, on higher electric margins driven by retail price declines which lagged wholesale price declines. These higher electric margins offset decreased gas margins driven by warmer than normal weather.

IDT Energy generated $8.9 million in EBITDA and income from operations during the five months ended December 31, 2011, versus $11.7 million a year ago, on higher SG&A expense related to customer acquisitions, and the aforementioned lower gas margin.