Citing "Intense Pressure" On Solar Margins, Retail Supplier Removes Guidance For Contribution From Solar Unit

Just Energy has removed from its guidance for fiscal 2017 Base EBITDA any contributions from its solar unit.

In fiscal 2017, Just Energy had initially estimated that Solar/TerraPass would contribute $10 million dollars (all $ Canadian) towards the double-digit percentage Base EBITDA target.

"Given the secular challenges facing the solar industry today, we deem it prudent to remove these specific expectations for the current fiscal year," said Just Energy CFO Pat McCullough

"However, I want to be very clear that the performance of the core North American and UK businesses are tracking well ahead of full-year guidance more than offsetting any short term RCE or Solar weaknesses," McCullough stressed

Indeed, Just Energy re-affirmed overall fiscal 2017 Base EBITDA guidance of $223 million to $233 million, as management expects any shortfall to previous Base EBITDA Solar contribution estimates will be fully absorbed by the ongoing outperformance of its core energy business for the remainder of the fiscal year

Regarding solar, McCullough said, "There is pretty intense pressure on everyone’s margins right now. If you look at what’s happened to SunEdison, SolarCity, there is quite a bit of, let’s say, lowered expectation for the tax equity and the sponsor equity returns on solar projects. Because of that, there is a great deal of pressure on originators like us, but also fulfillment partners to push margins down."

"The harder it is to make money in this space, the more creative we have to be, with lower cost commercialization strategies. So door-to-door is a more expensive channel than digital, lead generation, telemarketing. So we’re working on the nuances of how we go to market to ensure that we like the returns within solar. But fundamentally everyone’s margin is under incredible pressure right now. That was the main reason that we thought we should remove that guidance," McCullough said

Co-CEO Deb Merril also said that Just Energy is not pulling back from solar offerings as a result of the margin pressure, and is actually continuing to expand the business line geographically, including looking at Texas

"We continue to believe that this is a good product for us to have for our customers. It’s going to be short-term challenged and compressed a little bit from a margin standpoint. But from an offering standpoint, we believe [in] that the markets were in -- New York, New Jersey. We’re moving into Massachusetts shortly as well as actually looking at Texas. So we still believe that there is a lot of opportunity here for us to grow the business, it just won’t be at the level, and the thought that we had before, but we're going to continue to expand that," Merril said