Retail Supplier Sees M&A, Margin Opportunities Resulting from Challenging Market Conditions

In an investor call concerning its distribution cut and announcement of expanded working capital facility, Crius Energy CEO Michael Fallquist said that he sees three key opportunities arising from today's challenging market conditions

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Crius More Than Doubles Working Capital Facility

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"First, we expect utility rates will increase in the short-to-medium term, as a result of the market conditions experienced in the first quarter," Fallquist said. While, in general, utility rates will initially lag the wholesale price increases, "ultimately the higher costs will be reflected in retail rates charged to customers, creating increased margin opportunity for energy retailers," Fallquist said. Though not cited by Fallquist specifically, the volatility is expected to increase the load following premium assigned to default service rates.

"Second, we expect increased customer shopping in the short term, as a result of the higher rates charged to variable rate customers. Retail rates charged to variable rate customers have increased by up to 100% as a result of the market conditions over the past two months. The higher rates, combined with increased winter usage, should result in customer shopping, which creates an opportunity for us to attract new customers," Fallquist said.

"Third, we expect increased merger and acquisition activity as a result of the first quarter market conditions. Many smaller competitors do not have the risk management expertise or the balance sheet to withstand the market conditions experienced over the past month," Fallquist said.

Fallquist said that the expansion of Crius' working capital facility (click here for related story today), "strengthens our ability to take advantage of these opportunities."

Crius Energy serves approximately 610,000 residential customer equivalents through various retail energy brands, including Viridian, Public Power, Fairpoint Energy, Cincinnati Bell Energy, and FTR Energy.