Preliminary Prospectus for Crius Energy Trust IPO Discusses New Markets, Acquisition Strategy for Retail Suppliers

Crius Energy Trust yesterday filed a preliminary prospectus with the securities regulatory authorities in all provinces and territories of Canada in connection with a proposed initial public offering of its trust units.

The majority of the net proceeds of the offering will be used, indirectly, to purchase an interest in Crius Energy, LLC, one of the largest independent energy retailers that markets and sells electricity and natural gas to residential and small to medium-size commercial customers in the United States, with approximately 515,000 residential customer equivalents.

Details of a series of related Crius transactions were first reported by Matters

Crius Energy, LLC was recently formed to acquire Regional Energy Holdings, Inc. (parent of Viridian and other suppliers) and Public Power, LLC. Crius Energy, LLC serves residential and small to medium-size commercial customers in the United States and markets its products through a variety of sales channels and brand names, and currently sells electricity in 10 states and the District of Columbia and natural gas in four states.

A portion of the net proceeds will be used for general corporate purposes and to fund future acquisitions.

The preliminary prospectus states, "We believe that organic growth will be driven by the Company's multi-channel marketing platform, continued geographic expansion and increased focus on the commercial market segment and natural gas products."

The preliminary prospectus lists expected future operations as including natural gas service in Illinois, Michigan, California, Indiana, and Virginia.

Furthermore, the preliminary prospectus notes that there, "may be opportunity to enter several additional states in the future, including the electricity markets in California (commercial only) and Rhode Island and the natural gas markets in the District of Columbia, Maryland and Massachusetts; however, the Company has no definitive plans at this time."

Regarding commercial sales, Crius Energy expects to leverage a commercial platform currently in use by Public Power to launch, "a more comprehensive commercial platform that utilizes the commercial platform under the Viridian Energy, Cincinnati Bell Energy, FairPoint Energy and FTR Energy Service brands in 2013."

"Management anticipates that the commercial platform positions the Company to be more competitive in the commercial segments in which we currently serve (small- to medium-size commercial customers) while also providing the Company the opportunity to expand into the large commercial and industrial segment," the preliminary prospectus states.

Crius Energy, "intends to grow through strategic acquisitions of small Energy Retailers (fewer than 200,000 customers)."

"Management believes there is a significant opportunity to participate in the consolidation of smaller market participants. The retail energy industry in the United States is fragmented and the vast majority of residential Energy Retailers are smaller participants. Management believes that small Energy Retailers generally have limited access to credit and lack exit alternatives to monetize their investment. Management believes a lack of competition in pursuing small Energy Retailers exists and this dynamic creates an attractive opportunity for the Company to acquire small Energy Retailers at accretive valuations," the preliminary prospectus states.

Crius Energy reports its customer count by state as of August 31, 2012 as follows:

                        Electric     Gas
Connecticut            163,999       ---
District of Columbia     6,750       ---
Illinois                27,375       ---
Maine                      901       ---
Maryland                65,465       ---
Massachusetts           16,577       ---
New Hampshire              509       ---
New Jersey             122,174    23,139
New York                24,530     6,363
Ohio                    19,456     2,588
Pennsylvania            35,117       687
Total                  482,853    32,777

The preliminary prospectus also confirms, as the name suggests, that retail supplier FTR Energy Services, LLC, which has been applying for licenses in several states, has a marketing agreement in place with Frontier Communications Corporation (NASDAQ: FTR), and expects to begin marketing electricity and natural gas, as applicable, in Indiana, Michigan, New York and Ohio starting in the fourth quarter of 2012 and in California, Illinois and Pennsylvania in the first quarter of 2013.

Operating in 27 states, Frontier is the largest communications services provider in the United States that focuses on rural areas and small and medium-sized towns and cities. Frontier had 3.3 million residential access lines, 2.0 million business access lines, 1.8 million high speed internet subscribers and 558,000 video subscribers as at December 31, 2011.

The preliminary prospectus reports Crius Energy, LLC revenue as $313 million for 2011, and $367 million for the last twelve months ended June 30, 2012.

Adjusted EBITDA is listed as $25.8 million for 2011 and $53.6 million for the last twelve months ended June 30, 2012.

During the twelve months ending June 30, 2012, Crius Energy sold 3.8 million MWh of electricity in Connecticut, the District of Columbia, Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio and Pennsylvania.

During the twelve months ending June 30, 2012, Crius sold 0.2 million Mmbtu/m3 of natural gas in New Jersey, New York, Ohio and Pennsylvania.

The offering is being made through a syndicate of underwriters co-led by Scotiabank, RBC Capital Markets and UBS Securities Canada Inc. and including National Bank Financial Inc.

The preliminary prospectus has not yet become final for the purpose of a distribution to the public and there shall not be any sale or any acceptance of an offer to buy these securities in any province or territory of Canada prior to the time a receipt for the final prospectus or other authorization is obtained from the securities regulatory authority in such province or territory.