EX-99.1 2 exh_991p.htm EXHIBIT 99.1

Exhibit 99.1

 

 

JUST ENERGY GROUP INC.

RESTATED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands of Canadian dollars)

 

 

       As at     
   Notes   Dec. 31, 2018   As at 
       (Unaudited)   March 31, 2018 
       (Restated – Note 4)   (Audited) 
ASSETS              
Current assets              
Cash and cash equivalents      $8,900   $48,861 
Restricted cash       4,361    3,515 
Trade and other receivables  7    

706,558

    

658,844

 
Gas in storage       

26,988

    

2,342

 
Fair value of derivative financial assets  9    

197,202

    218,769 
Income taxes recoverable       17,775    5,617 
Other current assets  8    

154,876

    

112,214

 
        

1,116,660

    

1,050,162

 
Non-current assets              
Investments  9    36,981    36,314 
Property, plant and equipment       25,114    18,893 
Intangible assets       488,775    401,926 
Fair value of derivative financial assets  9    52,119    64,662 
Deferred tax asset       

7,513

    9,449 
Other non-current assets  8    51,839    19,987 
        

662,341

    551,231 
TOTAL ASSETS      $

1,779,001

   $

1,601,393

 
               
LIABILITIES              
               
Current liabilities              
Trade and other payables      $

760,659

   $

594,732

 
Deferred revenue       

73,888

    

38,710

 
Income taxes payable       

7,122

    

5,486

 
Fair value of derivative financial liabilities  9    51,375    86,288 
Current portion of long-term debt  11    150,050    121,451 
        

1,043,094

    846,667 
Non-current liabilities              
Long-term debt  11    566,083    422,053 
Fair value of derivative financial liabilities  9    39,862    51,871 
Deferred tax liability       9,970    6,918 
Other non-current liabilities       47,985    57,349 
        663,900    538,191 
TOTAL LIABILITIES       1,706,994    1,384,858 
SHAREHOLDERS' EQUITY (DEFICIT)              
Shareholders’ capital  13    1,234,491    1,215,826 
Equity component of convertible debentures       13,029    13,029 
Contributed deficit       (25,994)   (22,693)
Deficit       (1,236,767)   (1,081,139)
Accumulated other comprehensive income       87,663    91,934 
Non-controlling interest       (415)   (422)
TOTAL SHAREHOLDERS' EQUITY       72,007    216,535 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $1,779,001   $1,601,393 

 

Commitments and Guarantees (Note 18)

See accompanying notes to the interim condensed consolidated financial statements

 

Approved on behalf of Just Energy Group Inc.

       
/s/ Rebecca MacDonald   /s/ H. Clark Hollands  
Rebecca MacDonald   H. Clark Hollands  
Executive Chair   Corporate Director  

1.

 

 

JUST ENERGY GROUP INC.

RESTATED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

 

        Three months       Nine months     
        ended   Three months   ended   Nine months 
        Dec. 31,   ended   Dec. 31,   ended 
        2018   Dec. 31,   2018   Dec. 31, 
   Notes    (Restated – Note 4)   2017   (Restated – Note 4)   2017 
                      
                      
Sales  14    $966,653   $912,203   $2,799,953   $2,611,836 
Cost of sales        778,140    740,898    2,284,569    2,140,305 
GROSS MARGIN        188,513    171,305    515,384    471,531 
EXPENSES                         
Administrative        56,031    50,389    170,221    145,826 
Selling and marketing        57,255    55,547    164,547    172,200 
Other operating expenses  15(a)     104,730    21,201    164,381    76,972 
         218,016    127,137    499,149    394,998 
Operating profit before the following        (29,503)   44,168    16,235    76,533 
Finance costs  11     (22,762)   (13,266)   (59,225)   (37,777)
Change in fair value of derivative instruments and other  9     (1,515)   183,759    (62,003)   223,453 
Change in fair value of Filter Group contingent consideration        (5,462)   -    (5,462)   - 
Other income (loss)        2,569    (633)   5,282    1,169 
Profit (loss) before income taxes        (56,673)   214,028    (105,173)   263,378 
Provision for (recovery of) income taxes  12     (9,088)   5,613    5,285    10,577 
PROFIT (LOSS) FOR THE PERIOD       $(47,585)  $208,415   $(110,458)  $252,801 
                          
Attributable to:                         
Shareholders of Just Energy       $(47,551)  $208,455   $(110,313)  $243,449 
Non-controlling interest        (34)   (40)   (145)   9,352 
PROFIT (LOSS) FOR THE PERIOD       $(47,585)  $208,415   $(110,458)  $252,801 
                          
                          
Earnings (loss) per share available to shareholders  16                      
Basic       $(0.33)  $1.40   $(0.78)  $1.60 
Diluted       $(0.33)  $1.06   $(0.78)  $1.32 

 

See accompanying notes to the interim condensed consolidated financial statements

 

2.

 

 

JUST ENERGY GROUP INC.
RESTATED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited in thousands of Canadian dollars)

 

 

   Three months       Nine months     
   ended   Three months   ended   Nine months 
   Dec. 31,   ended   Dec. 31,   ended 
   2018   Dec. 31,   2018   Dec. 31, 
   (Restated – Note 4)   2017   (Restated – Note 4)   2017 
PROFIT (LOSS) FOR THE PERIOD  $(47,585)  $208,415   $(110,458)  $252,801 
                     
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:
Unrealized loss (gain) on translation of foreign operations
   18,205    4,507    13,592    (8,054)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX  $(29,380)  $212,922   $(96,866)  $244,747 
                     
Total comprehensive income (loss) attributable to:                    
Shareholders of Just Energy  $(29,346)  $212,962   $(96,721)  $235,395 
Non-controlling interest   (34)   (40)   (145)   9,352 
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX  $(29,380)  $212,922   $(96,866)  $244,747 

 

See accompanying notes to the interim condensed consolidated financial statements

 

 

 

 

3.

 

 

JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY)

(unaudited in thousands of Canadian dollars)

 

 

       Three months       Nine months     
       ended   Three months   ended   Nine months 
       Dec. 31,   ended   Dec. 31,   ended 
       2018   Dec. 31,   2018   Dec. 31, 
   Notes   (Restated – Note 4)   2017   (Restated – Note 4)   2017 
ATTRIBUTABLE TO THE SHAREHOLDERS                        
Accumulated earnings                        
Accumulated earnings, beginning of period      $712,588   $280,357   $754,639   $259,571 
Adjustment for revision  4    -      -      -      (14,208)
Adjustment for adoption of IFRS 9 and IFRS 15       -      -      20,712    -   
Profit (loss) for the period, attributable to shareholders       (47,551)   208,455    (110,313)   243,449 
Accumulated earnings, end of period       665,037    488,812    665,038    488,812 
                         
DIVIDENDS AND DISTRIBUTIONS                        
Dividends and distributions, beginning of period       (1,880,370)   (1,792,722)   (1,835,778)   (1,749,471)
Dividends and distributions declared and paid  17    (21,434)   (21,501)   (66,026)   (64,752)
Dividends and distributions, end of period       (1,901,804)   (1,814,223)   (1,901,804)   (1,814,223)
DEFICIT      $(1,236,767)  $(1,325,411)  $(1,236,767)  $(1,325,411)
                         
ACCUMULATED OTHER COMPREHENSIVE INCOME                        
Accumulated other comprehensive income, beginning of period      $69,458   $57,800   $91,934   $70,361 
Adjustment for adoption of IFRS 9 and IFRS 15       -      -      (17,863)   -   
Other comprehensive income (loss)       18,205    4,507    13,592    (8,054)
Accumulated other comprehensive income, end of period      $87,663   $62,307   $87,663   $62,307 
                         
SHAREHOLDERS’ CAPITAL  13                     
Common shares                        
Common shares, beginning of period      $1,085,991   $1,068,809   $1,079,055   $1,070,076 
Share-based units exercised       1,535    341    8,471    11,015 
Repurchase and cancellation of shares       -      -      -      (11,941)
Common shares, end of period      $1,087,526   $1,069,150   $1,087,526   $1,069,150 
                         
Preferred shares                        
Preferred shares, beginning of period      $146,984   $132,908   $136,771   $128,363 
Shares issued       -      -      10,447    5,195 
Shares issuance costs       (19)   -      (253)   (650)
Preferred shares, end of period       146,965    132,908    146,965    132,908 
SHAREHOLDERS’ CAPITAL      $1,234,491   $1,202,058   $1,234,491   $1,202,058 
                         
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES                        
Balance, beginning of period      $13,029   $13,508   $13,029   $13,508 
Balance, end of period      $13,029   $13,508   $13,029   $13,508 
                         
CONTRIBUTED SURPLUS (DEFICIT)                        
Balance, beginning of period      $(25,186)  $(43,222)  $(22,693)  $58,266 
Add:Share-based compensation expense  15(a)    1,437    1,665    4,706    18,628 
Non-cash deferred share grant distributions       20    11    51    33 
Less: Purchase of non-controlling interest       77    (495)   1,493    (102,793)
Share-based units exercised       (1,535)   (341)   (8,471)   (11,015)
Share-based compensation adjustment       (807)   (3)   (1,080)   (5,504)
Balance, end of period      $(25,994)  $(42,385)  $(25,994)  $(42,385)
                         
NON-CONTROLLING INTEREST                        
Balance, beginning of period      $(399)  $-     $(422)  $-   
Distributions to non-controlling shareholders       -      40    -      (9,352)
Foreign exchange impact on non-controlling interest       18    -      152    -   
Profit (loss) attributable to non-controlling interest       (34)   (40)   (145)   9,352 
Balance, end of period      $(415)  $-     $(415)  $-   
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)      $72,007   $(89,923)  $72,007   $(89,923)

 

See accompanying notes to the interim condensed consolidated financial statements

 

4.

 

 

JUST ENERGY GROUP INC.

RESETATED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited in thousands of Canadian dollars)

 

       Three months       Nine months     
       ended   Three months   ended   Nine months 
       Dec. 31,   ended   Dec. 31,   ended 
Net inflow (outflow) of cash related to following activities      2018   Dec. 31,   2018   Dec. 31, 
   Notes   (Restated – Note 4)   2017   (Restated – Note 4)   2017 
OPERATING                    
Profit (loss) before income taxes      $(56,673)  $214,028   $(105,173)  $263,378 
                         
Items not affecting cash                        
Amortization of intangible assets  15(a)    7,307    5,439    16,647    13,230 
Depreciation of property, plant and equipment  15(a)    1,171    1,041    3,029    3,023 
Amortization included in cost of sales       591    787    2,103    2,333 
Share-based compensation  15(a)    1,437    1,665    4,706    18,628 
Financing charges, non-cash portion       4,393    2,647    13,838    7,835 
Other       (29)   (93)   (83)   (277)
Change in fair value of derivative instruments  9    1,515    (183,759)   62,003    (223,453)
Adjustment required to reflect net cash receipts from gas sales       (1,236)   (2,780)   8,470    4,750 
Net change in working capital balances       62,365    (7,538)   (54,357)   (12,424)
Income taxes paid       (3,705)   (2,778)   (13,553)   (18,569)
Cash inflow (outflow) from operating activities       17,136    28,659    (62,370)   58,454 
                         
INVESTING                        
Purchase of property, plant and equipment       (1,548)   (951)   (4,107)   (3,910)
Purchase of intangible assets       (13,716)   (11,250)   (32,579)   (23,772)
Acquisition of businesses       (3,000)   -      (3,000)   (2,546)
Short-term investments       -      25,717    -      25,532 
Cash inflow (outflow) from investing activities       (18,264)   13,516    (39,686)   (4,696)
                         
FINANCING                        
Dividends paid       (21,414)   (21,490)   (65,975)   (64,719)
Repayment of long-term debt  11    (2,221)   -      (61,794)   -   
Issuance of long-term debt  11    -      -      119,662    -   
Share swap payout  9    -      -      (10,000)   -   
Debt issuance costs  11    (3,575)   -      (6,229)   -   
Credit facilities withdrawal  11    18,985    20,768    76,265    70,030 
Issuance of preferred shares       -      -      10,447    5,195 
Preferred shares issuance costs       (19)   -      (352)   (1,676)
Shares repurchase       -      -      -      (11,941)
Distributions to non-controlling interest       -      -      -      (9,603)
Cash inflow (outflow) from financing activities       (8,244)   (722)   62,024    (12,714)
                         
Effect of foreign currency translation on cash balances       1,047    1,390    71    373 
                         
Net cash inflow (outflow)       (8,325)   42,843    (39,961)   41,417 
Cash and cash equivalents, beginning of period       17,225    55,950    48,861    57,376 
                         
Cash and cash equivalents, end of period      $8,900   $98,793   $8,900   $98,793 
                         
Supplemental cash flow information:                        
Interest paid      $12,428   $7,938   $38,873   $26,833 

 

See accompanying notes to the interim condensed consolidated financial statements

 

5.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

1.ORGANIZATION

 

Just Energy Group Inc. (“Just Energy”) is a corporation established under the laws of Canada to hold securities and to distribute the income of its directly or indirectly owned operating subsidiaries and affiliates. The registered office of Just Energy is First Canadian Place, 100 King Street West, Toronto, Ontario, Canada. The unaudited interim condensed consolidated financial statements (“Interim Financial Statements”) consist of Just Energy and its subsidiaries and affiliates. The Interim Financial Statements were approved by the Board of Directors on August 14, 2019.

 

2.OPERATIONS

 

Just Energy is a leading consumer company focused on essential needs, including electricity and natural gas commodities; on health and well-being, through products such as water quality and filtration devices; and on utility conservation, bringing energy efficient solutions and renewable energy options to consumers. Currently operating in the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Germany, Ireland and Japan, Just Energy serves residential and commercial customers. Just Energy is the parent company of Amigo Energy, EdgePower Inc., Filter Group Inc., Green Star Energy, Hudson Energy, Interactive Energy Group, Just Energy Advanced Solutions, Tara Energy and TerraPass.

 

By fixing the price of natural gas or electricity under its fixed-price or price-protected program contracts for a period of up to five years, Just Energy’s customers offset their exposure to changes in the price of these essential commodities. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion. Flat-bill products allow customers to pay a flat rate each month regardless of usage. Just Energy derives its margin or gross profit from the difference between the price at which it is able to sell the commodities to its customers and the related price at which it purchases the associated volumes from its suppliers.

 

Through the Filter Group business acquired by Just Energy on October 1, 2018, Just Energy provides subscription-based, home water filtration systems to residential customers, including under-counter and whole-home water filtration solutions. In addition, Just Energy markets smart thermostats, offering the thermostats as a stand-alone unit or bundled with certain commodity products. The smart thermostats are manufactured and distributed by ecobee Inc. (“ecobee”), a company in which Just Energy holds a 7.9% fully diluted equity interest. Just Energy also offers green products through its JustGreen program. The JustGreen electricity product offers customers the option of having all or a portion of their electricity sourced from renewable green sources such as wind, solar, hydropower or biomass. The JustGreen gas product offers carbon offset credits that allow customers to reduce or eliminate the carbon footprint of their homes or businesses. Additional green products allow customers to offset their carbon footprint without buying energy commodity products and can be offered in all states and provinces without being dependent on energy deregulation. Just Energy also provides energy management solutions to both Consumer and Commercial customers in the form of value-added products and services which include, but are not limited to, smart irrigation controllers, LED retrofit lighting and HVAC controls, as well as enterprise monitoring.

 

6.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

3.FINANCIAL STATEMENT PREPARATION

 

(a)Statement of compliance with IFRS

 

These Interim Financial Statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”), utilizing the accounting policies Just Energy outlined in its March 31, 2018 annual audited consolidated financial statements. Accordingly, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the IASB, have been omitted or condensed.

 

(b)Basis of presentation and interim reporting

 

These Interim Financial Statements should be read in conjunction with and follow the same accounting policies and methods of application as those used in the annual audited consolidated financial statements for the years ended March 31, 2018 and 2017 except for the adoption of IFRS 9 and 15 as discussed in Note 6.

 

The Interim Financial Statements are presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand, except where otherwise indicated. The Interim Financial Statements are prepared on a going concern basis under the historical cost convention, except for certain financial assets and liabilities which are stated at fair value.

 

The interim operating results are not necessarily indicative of the results that may be expected for the full year ending March 31, 2019, due to seasonal variations resulting in fluctuations in quarterly results. Gas consumption by customers is typically highest in October through March and lowest in April through September. Electricity consumption is typically highest in January through March and July through September. Electricity consumption is lowest in October through December and April through June.

 

(c)Principles of consolidation

 

The Interim Financial Statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries and affiliates as at December 31, 2018. Subsidiaries and affiliates are consolidated from the date of acquisition and control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries and affiliates are prepared for the same reporting period as Just Energy, using consistent accounting policies. All intercompany balances, sales, expenses and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.

 

4.RESTATEMENT AND REVISION OF FINANCIAL STATEMENTS

 

(a)Restatement of financial statements

 

Management identified operational issues in customer enrolment and non-payment in the Texas residential market. Management revisited the allowance for doubtful accounts as at December 31, 2018 and determined that additional reserves of $34.5 million were required at December 31, 2018. Management also identified collection issues in the United Kingdom (“U.K.”) market and determined that additional reserves of $40.1 million were required at December 31, 2018. Management determined that the understatement was material, and as a result the interim condensed consolidated financial statements for the period ended December 31, 2018 should be restated. Accordingly, in compliance with IAS 10, Events after the balance sheet date, the authorization date of these financial statements has been updated to August 14, 2019, and the financial statements reflect all subsequent events up to this date.

 

7.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The following tables summarize the effects of the adjustment described above.  

 

Line items on the restated consolidated statement of financial position and restated consolidated statements of changes in shareholders’ equity (deficit)

 

   As at Dec. 31, 2018       As at Dec. 31, 2018 
   (As revised Note 4(b))   Adjustment   (Restated) 
Trade and other receivables  $781,168   $(74,610)  $706,558 
Current assets  $1,191,270   $(74,610)  $1,116,660 
Total assets  $1,853,611   $(74,610)  $1,779,001 
Deficit  $(1,162,156)  $(74,610)  $(1,236,767)
Total shareholders’ equity  $146,617   $(74,610)  $72,007 
Total liabilities and shareholders’ equity  $1,853,611   $(74,610)  $1,779,001 

 

Line items on the restated interim condensed consolidated statements of income (loss)

 

   Three months       Three months   Nine months       Nine months 
   ended       ended   ended       ended 
   Dec. 31, 2018       Dec. 31, 2018   Dec. 31, 2018       Dec. 31, 2018 
   (As revised Note 4(b))   Adjustment   (Restated)   (As revised Note 4(b))   Adjustment   (Restated) 
Other operating expenses  $30,120   $74,610   $104,730   $89,771   $74,610   $164,381 
Total expenses  $143,406   $74,610   $218,016   $424,539   $74,610   $499,149 
Operating profit before: finance costs, change in fair value of derivative instruments and other income, net  $45,107   $(74,610)  $(29,503)  $90,845   $(74,610)  $16,235 
Profit (loss) before income taxes  $17,937   $(74,610)  $(56,673)  $(30,563)  $(74,610)  $(105,173)
Profit (loss) for the period  $27,025   $(74,610)  $(47,585)  $(35,848)  $(74,610)  $(110,458)
Profit (loss) for the year attributable to:                              
Shareholders of Just Energy  $27,059   $(74,610)  $(47,551)  $(35,703)  $(74,610)  $(110,313)
Earnings (loss) per share available to shareholders                              
Basic   $0.17   $(0.50)  $(0.33)  $(0.28)  $(0.50)  $(0.78)
Diluted   $0.16   $(0.49)  $(0.33)  $(0.28)  $(0.50)  $(0.78)

 

8.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Line items on the restated interim condensed consolidated statements of comprehensive income (loss)

 

   Three months       Three months   Nine months       Nine months 
   ended       ended   ended       ended 
   Dec. 31, 2018       Dec. 31, 2018   Dec. 31, 2018       Dec. 31, 2018 
   (As revised Note 4(b))   Adjustment   (Restated)   (As revised Note 4(b))   Adjustment   (Restated) 
                         
Profit (loss) for the period  $27,025   $(74,610)  $(47,585)  $(35,848)  $(74,610)  $(110,458)
Total comprehensive income (loss) for the period, net of tax  $45,230   $(74,610)  $(29,380)  $(22,256)  $(74,610)  $(96,866)
Total comprehensive income (loss) attributable to:                              
Shareholders of Just Energy   $45,264   $(74,610)  $(29,346)  $(22,111)  $(74,610)  $(96,721)

 

Line items on the restated interim condensed consolidated statement of cash flows

 

   Three months       Three months   Nine months       Nine months 
   ended       ended   ended       ended 
   Dec. 31, 2018       Dec. 31, 2018   Dec. 31, 2018       Dec. 31, 2018 
   (As revised Note 4(b))   Adjustment   (Restated)   (As revised Note 4(b))   Adjustment   (Restated) 
Profit (loss) before income taxes  $17,937   $(74,610)  $(56,673)  $(30,563)  $(74,610)  $(105,173)
Net change in working capital balances  $(12,245)  $74,610   $62,365   $(128,967)  $74,610   $(54,357)

 

(b)Revision of financial statements

 

During the fourth quarter ended March 31, 2019, management identified immaterial errors in certain balance sheet accounts related to flat delivery gas markets. These errors relate to fiscal years ended March 31, 2017 and earlier.

 

In accordance with accounting guidance in IAS 8, Accounting Policies, Accounting Estimates and Errors, as well as guidance found in Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 99, Materiality, and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, the Company assessed the materiality of the errors and concluded that they were not material to any of the Company’s previously issued financial statements. The Company assessed that correcting these historical errors in the current period would be material to the current period. The Company revised its opening retained earnings at the beginning of the earliest period presented to correct the effect of the matters. The revision does not have an impact on the interim condensed consolidated statements of income (loss) for fiscal 2018 and 2019.

 

The errors occurred before the earliest period presented in the interim financial statements, and as a result the net effect on opening balances of assets, liabilities and equity of $14.2 million was recorded as an adjustment to opening retained earnings. The following table presents the effect of the correction on the interim condensed consolidated statement of financial position as at December 31, 2018.

 

9.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

   As previously
reported
   Adjustment   As revised 
Trade and other receivables  $786,852   $(5,684)  $781,168 
Gas in storage   36,458    (9,470)   26,988 
Other current assets   152,359    2,517    154,876 
Trade and other payables   (754,296)   (6,363)   (760,659)
Deferred revenue   (76,862)   2,974    (73,888)
Income tax payable   (8,940)   1,818    (7,122)
Deficit  $(1,147,949)  $(14,207)  $(1,162,156)

 

5. ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

 

IFRS 16, Leases (“IFRS 16”), was issued by the IASB in January 2016. This guidance brings most leases onto the balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting remains largely unchanged and the distinction between operating and finance leases is retained. Furthermore, per the standard, a lessee recognizes a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly, and the liability accrues interest. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease. Lessees are permitted to make an accounting policy election, by class of underlying asset, to apply a method like IAS 17’s operating lease accounting and not recognize lease assets and lease liabilities for leases with a lease term of 12 months or less, and on a lease-by-lease basis. IFRS 16 supersedes IAS 17, Leases, and its related interpretations, and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15, Revenue from Contracts with Customers (“IFRS 15”), has also been applied. Just Energy has not yet assessed the impact of this standard. Just Energy will adopt IFRS 16 beginning April 1, 2019.

 

IFRIC 23, Uncertainty over Income Tax Treatments, was issued by the IASB in June 2017. This interpretation provides guidance to be applied in the determination of taxable profit or loss, tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. The interpretation is effective for annual periods beginning on or after January 1, 2019. Just Energy has not yet assessed the impact of this standard.

 

6.ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED

 

IFRS 15, Revenue from Contracts with Customers

 

Just Energy has adopted IFRS 15, as issued by the IASB in July 2014, effective January 1, 2018. The new accounting policies have been applied from April 1, 2018 and, in accordance with the transitional provisions in IFRS 15, comparative figures have not been restated. Just Energy adopted IFRS 15 using the modified retrospective method, applying the practical expedient in paragraph C5(c) under which the aggregate effect of all modifications on the date of initial application is reflected. Accordingly, transition adjustments have been recognized through equity as at April 1, 2018.

 

10.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

IFRS 15 replaces the provisions of IAS 18, Revenue, that relates to all revenue from contracts from customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

 

Accounting policies

 

The following accounting policies are applicable to the accounting for all revenue arising from contracts with customers, unless those contracts are in the scope of other standards in the quarter ended April 1, 2018 and onwards. Please refer to the accounting policies outlined in the March 31, 2018 annual audited consolidated financial statements for details on accounting policies applicable to comparative amounts.

 

Gas and electricity

 

Sales

 

Just Energy historically recognized revenue based on consumption of the commodity by the customer. Often times, the billing cycles for customers do not coincide with the accounting periods used for financial reporting purposes. Gas and electricity that have been consumed by a customer, but not yet billed to that customer, are estimated on an accrual basis and included in revenue during the period in which they were consumed. These accrual amounts result in contract assets and are presented as unbilled revenues under IFRS 15. Unbilled revenues are assessed for impairment in accordance with IFRS 9.

 

Upon the adoption of IFRS 15, there is no change in the revenue recognition for gas and electricity sales. Just Energy has identified that the material performance obligation is the provision of gas and electricity to customers, which is satisfied over time throughout the contract term. Just Energy utilizes the output method to recognize revenue based on the units of gas and electricity delivered and billed to the customer each month. Just Energy has elected to adopt the practical expedient to recognize revenue in the amount to which the entity has a right to invoice, as the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance to date.

 

Expenses

 

Historically, North American residential sales commissions and incentives paid to brokers, employees or third parties for acquiring new contracts with customers were recognized as selling expenses as they were incurred.

 

Upon the adoption of IFRS 15, incremental costs to obtain a contract with a customer are capitalized if expected to be recovered. As such, Just Energy commenced capitalizing all upfront sales commissions, incentives and third-party verification costs that meet the criteria for capitalization. These expenses are deferred and amortized over the average customer relationship period, which is estimated to be between two and five years, based on historical blended attrition rates, including expected renewal periods by region. Just Energy has elected under the practical expedient to recognize incremental costs of obtaining a contract as an expense when incurred if the contract length is one year or less.

 

11.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Impact on financial statements

 

The cumulative effect of changes made to the April 1, 2018 interim condensed consolidated statement of financial position for the adoption of IFRS 15 was as follows, and had a deferred tax liability effect of $7,493:

 

   Original IAS 18   Carrying amount
New IFRS 15
 
Current assets          
Customer acquisition costs  $31,852   $43,152 
Non-current financial assets          
Customer acquisition costs   $17,101   $34,162 

 

The following table shows the effect of IFRS 15 adoption on the interim condensed consolidated statement of financial position as at December 31, 2018:

 

  

As at
Dec. 31, 2018

(reported)

  

Balances without

adoption of

IFRS 15

  

Effect of

change higher

(lower)

 
Current assets               
Customer acquisition costs  $69,012   $30,996   $38,016 
Non-current financial assets               
Customer acquisition costs  $44,212   $18,128   $26,084 

 

 

 

 

 

 

 

 

 

12.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The following table shows the effect of the adoption of IFRS 15 on the interim condensed consolidated statements of comprehensive income (loss) for the three and nine months ended December 31, 2018:

 

   For the three   Balances   Effect of   For the nine   Balances   Effect of 
   months ended   without   change   months ended   without   change 
   Dec. 31, 2018   adoption   higher   Dec. 31, 2018   adoption   higher 
   (reported)   of IFRS 15   (lower)   (reported)   of IFRS 15   (lower) 
Sales  $966,653   $966,653   $-   $2,799,953   $2,799,953   $- 
Cost of sales   778,140    778,140    -    2,284,569    2,284,569    - 
Gross margin   188,513    188,513    -    515,384    515,384    - 
Expenses                              
Administrative   56,031    56,031    -    170,221    170,221    - 
Selling and marketing   57,255    64,769    (7,514)   164,547    191,436    (26,889)
Other operating expenses   104,730    104,730    -    164,381    159,114    - 
    218,016    225,530    (7,514)   499,149    526,038    (26,889)
Operating profit before the following   (29,503)   (37,017)   7,514    16,235    (10,654)   26,889 
Finance costs   (22,762)   (22,762)   -    (59,225)   (59,225)   - 
Change in fair value of derivative instruments and other   (1,515)   (1,515)   -    (62,003)   (62,003)   - 
Change in fair value of Filter Group contingent consideration   (5,462)   (5,462)   -    (5,462)   (5,462)   - 
Other income   2,569    2,569    -    5,282    5,282    - 
Profit (loss) before income taxes   (56,673)   (64,187)   7,514    (105,173)   (153,684)   26,889 
Provision for (recovery of) income taxes   (9,088)   (9,088)   -    5,285    5,285    - 
Profit (loss) for the period  $(47,585)  $(55,099)  $7,514   $(110,458)  $(137,347)  $26,889 
Attributable to:                              
Shareholders of Just Energy  $(47,551)  $(55,065)  $7,514   $(110,313)  $(137,202)  $26,889 
Non-controlling interest   (34)   (34)   -    (145)   (145)   - 
Profit (loss) for the period  $(47,585)  $(55,099)  $7,514   $(110,458)  $(137,347)  $26,889 
Profit (loss) per share available to shareholders                              
Basic  $(0.33)  $(0.38)  $0.05   $(0.78)  $(0.60)  $0.18 
Diluted  $(0.33)  $(0.38)  $0.05   $(0.78)  $(0.60)  $0.18 

 

IFRS 15 did not impact any revenue amounts related to historical or current revenue recognition. The key factors driving revenue segmentation are related to differentiation between the business divisions, which are disclosed in Note 14.

 

The majority of Just Energy’s customer contracts meet IFRS 15’s B16 practical expedient where Just Energy has the right to consideration from a customer in an amount that corresponds directly with the value to the customer of the performance completed to date. While there is no change in revenue recognition upon the adoption of IFRS 15 for flat-bill customer contracts, they do not meet the B16 practical expedient and therefore require the following disclosure for the contracts that have a duration of one year or more:

 

13.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The aggregate of contractual amounts allocated to performance obligations related to flat-bill contracts that are unsatisfied as at December 31, 2018 is $97,938.

 

Just Energy expects to recognize revenue on these flat-bill contracts in the amounts of:

 

  

January 1,

2019 to

March 31,

2019

  

April 1,

2019 to

March 31,

2020

  

April 1,

2020 to

March 31,

2021

  

April 1,

2021 to

March 31,

2022

  

Years

thereafter

   Total 
Gas and electricity flat- bill contracts  $8,698   $34,205   $25,780   $15,259   $13,996   $97,938 

 

IFRS 9, Financial Instruments

 

Just Energy has adopted IFRS 9, Financial Instruments (“IFRS 9”), as issued by the IASB in July 2014, effective April 1, 2018. The new accounting policies have been applied from April 1, 2018 and, in accordance with the transitional provisions in IFRS 9, comparative figures have not been restated. Just Energy has adopted IFRS 9 retrospectively, and accordingly, transition adjustments have been recognized through equity as at April 1, 2018.

 

IFRS 9 replaces the provisions of IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”), that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7, Financial Instruments: Disclosures.

 

(a)Accounting policy for financial instruments under IFRS 9

 

The following accounting policy is applicable to the accounting for financial instruments in the quarter ended April 1, 2018 and onwards. Please refer to the accounting policies Just Energy outlined in its March 31, 2018 annual audited consolidated financial statements for details on the financial instruments accounting policies applicable to comparative amounts.

 

Financial assets

 

(i)Recognition and derecognition

 

Regular purchases and sales of financial assets are recognized on the trade date, being the date on which Just Energy commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and Just Energy has transferred substantially all the risks and rewards of ownership.

 

14.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

(ii)Classification

 

From April 1, 2018, Just Energy classified its financial assets in the following measurement categories:

 

·Those to be measured subsequently at fair value (either through other comprehensive income (loss) (“OCI”) or through profit or loss); and
·Those to be measured at amortized cost.

 

The measurement category classification of financial assets depends on Just Energy’s business objectives for managing the financial assets and whether contractual terms of the cash flow are considered solely payments of principal and interest. For assets measured at fair value, gains and losses will be recorded either in profit or loss or in other comprehensive income (loss) depending upon the business objective.

 

Just Energy reclassifies debt instruments when and only when its business objective for managing those assets changes.

 

(iii)Measurement

 

At initial recognition, Just Energy measures a financial asset at its fair value. In the case of a financial asset not categorized as fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to the acquisition of the financial asset are included in measurement at initial recognition. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.

 

Subsequent measurement of debt instruments depends on Just Energy’s business objective for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which Just Energy classifies its debt instruments:

 

Amortized cost: Assets held for collection of contractual cash flows that represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt instrument is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in “finance income” using the effective interest rate method. Cash and cash equivalents, restricted cash, trade and other receivables are included in this category.

 

Fair value through other comprehensive income (“FVOCI”): Assets held to achieve a particular business objective, by collecting contractual cash flows and selling financial assets, where the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses, which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in “finance income” using the effective interest rate method. Just Energy has not classified any investments in this category.

 

15.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Fair value through profit or loss (“FVTPL”): Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL and is not part of a hedging relationship is recognized in profit or loss. Just Energy classifies its derivatives and its investments in equity securities at FVTPL due to the fact that they do not meet the criteria for classification at amortized cost as the contractual cash flows are not solely payments of principal and interest.

 

Just Energy’s equity instruments are carried at FVTPL, and gains and losses are recorded in profit or loss.

 

(iv)Impairment

 

Just Energy assesses on a forward-looking basis the expected credit losses (“ECL”) associated with its assets carried at amortized cost, including other receivables. For trade and other receivables only, Just Energy applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

 

Trade receivables are reviewed qualitatively on a case-by-case basis to determine if they need to be written off.

 

ECL are measured as the difference in the present value of the contractual cash flows that are due to Just Energy under the contract, and the cash flows that Just Energy expects to receive. Just Energy assesses all information available, including past due status, credit ratings, the existence of third-party insurance and forward-looking macroeconomic factors in the measurement of the ECL associated with its assets carried at amortized cost. Just Energy measures ECL by considering the risk of default over the contract period and incorporates forward-looking information into its measurement.

 

(b)New classification categories of financial instruments on adoption of IFRS 9

 

As at April 1, 2018, the date of initial application, Just Energy’s financial instruments and new classification categories under IFRS 9 were as follows:

 

   Classification category
   Original IAS 39  New IFRS 9
Current financial assets      
Cash and cash equivalents  Loans and receivables  Amortized cost
Restricted cash  Loans and receivables  Amortized cost
Trade and other receivables  Loans and receivables  Amortized cost
Derivative assets  FVTPL  FVTPL
Non-current financial assets      
Investments  FVOCI and FVTPL  FVTPL
Derivative assets  FVTPL  FVTPL
Current financial liabilities      
Trade and other payables  Other financial liabilities  Amortized cost
Derivative liabilities  FVTPL  FVTPL
Current portion of long-term debt  Other financial liabilities  Amortized cost
Non-current financial liabilities      
Long-term debt  Other financial liabilities  Amortized cost
Derivative liabilities  FVTPL  FVTPL

 

16.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Upon adoption of IFRS 9, the investment in ecobee is classified as FVTPL instead of available-for-sale, resulting in a movement of $17,863 relating to the unrealized gain on revaluation of investments, net of tax from OCI to accumulated earnings on April 1, 2018.

 

(c)Reconciliation of lifetime expected credit loss balance from IAS 39 to IFRS 9

 

The following table reconciles the closing lifetime expected credit loss for financial assets and contract assets in accordance with IAS 39 as at March 31, 2018 to the opening allowance for credit losses as at April 1, 2018.

 

  

Impairment allowance

under IAS 39 as at

March 31, 2018

   Remeasurement  

Lifetime expected

credit loss under

IFRS 9 as at

April 1, 2018

 
Trade and other receivables  $60,121   $11,237   $71,358 
Unbilled revenues  $-     $12,399   $12,399 

 

(d)Impairment of financial assets

 

Just Energy has two types of financial assets subject to IFRS 9’s new ECL model: (i) trade and other receivables and (ii) unbilled revenues. Just Energy was required to revise its impairment methodology under IFRS 9 for each of these classes of assets. For trade and other receivables, Just Energy applies the simplified approach to providing for ECL prescribed by IFRS 9, which requires the use of the lifetime expected loss provision for all trade receivables and unbilled revenues. Measurement of ECL resulted in an increase to the provision for trade receivables and unbilled revenues of $23,636, which was recorded as at April 1, 2018. This was before the tax impact of $5,616, which reduced the deferred tax liability, as at April 1, 2018.

 

(e)Derivatives and hedging activities

 

Just Energy did not apply hedge accounting under IAS 39, nor under IFRS 9.

 

7. TRADE AND OTHER RECEIVABLES

 

   As at     
  

Dec. 31,

2018

   As at 
  

(Restated –

Note 4)

  

March 31,

2018

 
Trade account receivables, net  $342,218   $326,399 
Accrued gas receivables   5,519    15,893 
Unbilled revenues   323,000    301,577 
Other   35,821    14,975 
   $706,558   $658,844 

 

17.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

8.OTHER CURRENT AND NON-CURRENT ASSETS

 

     As at   As at 
(a) Other current assets 

Dec. 31,

2018

  

March 31,

2018

 
  Prepaid expenses and deposits  $39,673   $35,078 
  Customer acquisition costs   69,012    31,852 
  Green certificates   33,746    42,230 
  Gas delivered in excess of consumption   9,895    2,715 
  Inventory   2,550    339 
     $154,876   $112,214 

 

     As at   As at 
(b) Other non-current assets 

Dec. 31,

2018

  

March 31,

2018

 
  Customer acquisition costs  $44,212   $17,101 
  Income taxes recoverable   4,009    2,336 
  Other long-term assets   3,618    550 
     $51,839   $19,987 

 

9.FINANCIAL INSTRUMENTS

 

(a)

Fair value of derivative financial instruments and other

 

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Management has estimated the value of financial swaps, physical forwards and option contracts for electricity, natural gas, carbon and renewable energy certificates, and generation and transmission capacity contracts using a discounted cash flow method, which employs market forward curves that are either directly sourced from third parties or developed internally based on third-party market data. These curves can be volatile, thus leading to volatility in the mark to market with no immediate impact to cash flows. Gas options have been valued using the Black option value model using the applicable market forward curves and the implied volatility from other market traded options. Management periodically uses non-exchange traded swap agreements based on cooling degree days (“CDDs”) and heating degree days (“HDDs”) measured in its utility service territories to reduce the impact of weather volatility on Just Energy’s electricity volumes commonly referred to as “weather derivatives”. The fair value of these swaps on a given measurement station indicated in the derivative contract are determined by calculating the difference between the agreed strike and expected variable observed at the same station.

 

The following table illustrates gains (losses) related to Just Energy’s derivative financial instruments classified as FVTPL and recorded on the interim condensed consolidated statements of financial position as fair value of derivative financial assets and fair value of derivative financial liabilities, with their offsetting values recorded in change in fair value of derivative instruments and other on the interim condensed consolidated statements of income (loss).

 

18.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

   Three months   Three months   Nine months   Nine months 
   ended   ended   ended   ended 
   Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31, 
   2018   2017   2018   2017 
Change in fair value of derivative instruments and other                    
                     
Physical forward contracts and options (i)  $(13,989)  $143,575   $(71,192)  $159,922 
Financial swap contracts and options (ii)   9,160    36,847    47,206    52,871 
Foreign exchange forward contracts   3,843    (689)   4,710    (2,754)
Share swap   3,073    (3,957)   (2,488)   (5,764)
Unrealized foreign exchange on 6.5% convertible bond and 8.75% loan   (15,487)   (898)   (15,700)   11,199 
6.5% convertible bond conversion feature   -      2,840    247    7,740 
Weather derivatives (iii)   (4,224)   -      (34,405)   -   
Other derivative options   16,109    6,041    9,619    239 
Change in fair value of derivative instruments and other  $(1,515)  $183,759   $(62,003)  $223,453 

 

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the interim condensed consolidated statement of financial position as at December 31, 2018:

 

  

Financial assets

(current)

  

Financial
assets

(non-current)

  

Financial liabilities

(current)

  

Financial liabilities

(non-current)

 
Physical forward contracts and options (i)  $145,955   $34,831   $25,206   $25,068 
Financial swap contracts and options (ii)   25,984    6,372    13,710    14,141 
Foreign exchange forward contracts   (94)   3,232    -      -   
Share swap   -      -      10,888    -   
Weather derivatives (iii)   9,430    -      -      -   
Other derivative options   15,927    7,684    1,571    653 
As at December 31, 2018  $197,202   $52,119   $51,375   $39,862 

 

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the interim condensed consolidated statement of financial position as at March 31, 2018:

 

  

Financial assets

(current)

  

Financial assets

(non-current)

  

Financial liabilities

(current)

  

Financial liabilities

(non-current)

 
Physical forward contracts and options  $198,891   $60,550   $32,451   $29,003 
Financial swap contracts and options   8,133    1,342    34,369    22,117 
Foreign exchange forward contracts   -      -      1,068    505 
Share swap   -      -      18,400    -   
6.5% convertible bond conversion feature   -      -      -      246 
Other derivative options   11,745    2,770    -      -   
As at March 31, 2018  $218,769   $64,662   $86,288   $51,871 

 

 

19.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Below is a summary of the financial instruments classified through profit or loss as at December 31, 2018, to which Just Energy has committed:

 

(i) Physical forward contracts and options consist of:

 

·Electricity contracts with a total remaining volume of 37,553,624 MWh, a weighted average price of $51.20/MWh and expiry dates up to September 30, 2028.

 

·Natural gas contracts with a total remaining volume of 99,308,364 GJs, a weighted average price of $3.85/GJ and expiry dates up to December 31, 2024.

 

·Renewable energy certificates (“RECs”) and emission-reduction credit contracts with a total remaining volume of 3,561,521 MWh and 196,200 tonnes, respectively, a weighted average price of $29.12/REC and $3.28/tonne, respectively, and expiry dates up to December 31, 2028 and December 31, 2021.

 

·Electricity generation capacity contracts with a total remaining volume of 4,352 MWCap, a weighted average price of $4,924.08/MWCap and expiry dates up to October 31, 2022.

 

·Ancillary contracts with a total remaining volume of 857,880 MWh, a weighted average price of $23.29/MWh and expiry dates up to December 31, 2020.

 

·Heat rate contracts with a total remaining volume of 12,400 MWh, a weighted average price of $28.02/MWh and expiry dates up to January 31, 2019.

 

(ii) Financial swap contracts and options consist of:

 

·Electricity contracts with a total remaining volume of 12,427,564 MWh, an average price of $47.99/MWh and expiry dates up to November 30, 2024.

 

·Natural gas contracts with a total remaining volume of 132,840,923 GJs, an average price of $3.73/GJ and expiry dates up to December 31, 2024.

 

·Electricity generation capacity contracts with a total remaining volume of 99 MWCap, a weighted average price of $162,000.44/MWCap and expiry dates up to October 31, 2020.

 

·Ancillary contracts with a total remaining volume of 1,468,080 MWh, a weighted average price of $21.98/MWh and expiry dates up to December 31, 2020.

 

(iii) Weather derivatives consist of:

 

·Weather swaps for HDDs with temperature strike values of 25.00-30.00 Fahrenheit and power strike prices of $100.00/MWh and an expiry date of February 28, 2019.

 

·HDD collar options with put strike values ranging from 943 to 4,919 HDD and call strike values ranging from 1,143 to 5,119 HDD.

 

·HDD natural gas swaps with strike prices based on certain natural gas futures contracts in accordance with the Intercontinental Exchange and strike values ranging from 130 to 1,255 HDD.

 

·HDD natural gas swaps with strike prices ranging from $1.47 to $9.05/MmBTU and strike values ranging from 273 to 1,255 HDD.

 

20.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

These derivative financial instruments create a credit risk for Just Energy since they have been transacted with a limited number of counterparties. Should any counterparty be unable to fulfil its obligations under the contracts, Just Energy may not be able to realize the financial assets’ balance recognized in the consolidated financial statements.

 

Share swap agreement

 

Just Energy has entered into a share swap agreement to manage the interim condensed consolidated statements of income (loss) volatility associated with the Company’s restricted share grant and deferred share grant plans. The value, on inception, of the 2,500,000 shares under this share swap agreement was approximately $33,803. On August 22, 2018, Just Energy reduced the notional value of the share swap to $23,803 through a payment of $10,000 and renewed the share swap agreement for an additional year. Net monthly settlements received under the share swap agreement are recorded in other income. Just Energy records the fair value of the share swap agreement in the non-current derivative financial liabilities on the interim condensed consolidated statements of financial position. Changes in the fair value of the share swap agreement are recorded through the interim condensed consolidated statements of income (loss) as a change in fair value of derivative instruments and other.

 

Fair value (“FV”) hierarchy derivatives

 

Level 1

 

The fair value measurements are classified as Level 1 in the FV hierarchy if the fair value is determined using quoted unadjusted market prices.

 

Level 2

 

Fair value measurements that require observable inputs other than quoted prices in Level 1, either directly or indirectly, are classified as Level 2 in the FV hierarchy. This could include the use of statistical techniques to derive the FV curve from observable market prices. However, in order to be classified under Level 2, significant inputs must be directly or indirectly observable in the market. Just Energy values its New York Mercantile Exchange (“NYMEX”) financial gas fixed-for-floating swaps under Level 2.

 

Level 3

 

Fair value measurements that require unobservable market data or use statistical techniques to derive forward curves from observable market data and unobservable inputs are classified as Level 3 in the FV hierarchy. For the supply contracts, Just Energy uses quoted market prices as per available market forward data and applies a price-shaping profile to calculate the monthly prices from annual strips and hourly prices from block strips for the purposes of mark-to-market calculations. The profile is based on historical settlements with counterparties or with the system operator and is considered an unobservable input for the purposes of establishing the level in the FV hierarchy. For the natural gas supply contracts, Just Energy uses three different market observable curves: (i) Commodity (predominately NYMEX), (ii) Basis and (iii) Foreign exchange. NYMEX curves extend for over five years (thereby covering the length of Just Energy’s contracts); however, most basis curves extend only 12 to 15 months into the future. In order to calculate basis curves for the remaining years, Just Energy uses extrapolation, which leads natural gas supply contracts to be classified under Level 3.

 

21.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Weather derivatives are non-exchange traded financial instruments used as part of a risk management strategy to mitigate the impact adverse weather conditions have on gross margin. The fair values of the derivatives are determined using an internally developed model that relies upon both observable inputs and significant unobservable inputs. Accordingly, the fair values of these derivatives are classified as Level 3. Market and contractual inputs to these models vary by contract type and would typically include notional amounts, reference weather stations, strike prices, temperature strike values, terms to expiration, historical weather data and historical commodity prices. The historical weather data and commodity prices were utilized to value the expected payouts with respect to weather derivatives and, as a result, are the most significant assumptions contributing to the determination of fair value estimates, and changes in these inputs can result in a significantly higher or lower fair value measurement.

 

For the share swap, Just Energy uses a forward interest rate curve along with a volume weighted average share price.

 

Just Energy’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1, Level 2 or Level 3 during the three and nine months ended December 31, 2018 or the year ended March 31, 2018.

 

Fair value measurement input sensitivity

 

The main cause of changes in the fair value of derivative instruments is changes in the forward curve prices used for the fair value calculations. Just Energy provides a sensitivity analysis of these forward curves under the “Market risk” section of this note. Other inputs, including volatility and correlations, are driven off historical settlements.

 

The following table illustrates the classification of derivative financial assets (liabilities) in the FV hierarchy as at December 31, 2018:

 

   Level 1   Level 2   Level 3   Total 
Derivative financial assets  $-     $-     $249,321   $249,321 
Derivative financial liabilities   -      (11,261)   (79,976)   (91,237)
Total net derivative assets (liabilities)  $-     $(11,261)  $169,345   $158,084 

 

The following table illustrates the classification of derivative financial assets (liabilities) in the FV hierarchy as at March 31, 2018:

 

   Level 1   Level 2   Level 3   Total 
Derivative financial assets  $-     $-     $283,431   $283,431 
Derivative financial liabilities   -      (21,092)   (117,067)   (138,159)
Total net derivative assets (liabilities)  $-     $(21,092)  $166,364   $145,272 

 

22.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

A key assumption used when determining the significant unobservable inputs included in Level 3 of the FV hierarchy consists of up to 5% price extrapolation to calculate monthly prices that extend beyond the market observable 12- to 15-month forward curve.

 

The following table illustrates the changes in net fair value of financial assets (liabilities) classified as Level 3 in the FV hierarchy for the following periods:

 

   Nine months ended   Year ended 
  

Dec. 31,

2018

  

March 31,

2018

 
Balance, beginning of period  $166,364   $(315,110)
Total gains   96,401    105,709 
Purchases   137,420    207,531 
Sales   (71,012)   (64,464)
Settlements   (159,828)   232,698 
Balance, end of period  $169,345   $166,364 

 

(b)Classification of non-derivative financial assets and liabilities

 

As at December 31, 2018 and March 31, 2018, the carrying value of cash and cash equivalents, restricted cash, current trade and other receivables, and trade and other payables approximates their fair value due to their short-term nature.

 

Long-term debt recorded at amortized cost has a fair value as at December 31, 2018 of $696.7 million (March 31, 2018 - $570.1 million) and the interest payable on outstanding amounts is at rates that vary with Bankers’ Acceptances, LIBOR, Canadian bank prime rate or U.S. prime rate, with the exceptions of the 8.75% loan, 6.75% $100M convertible debentures, 6.75% $160M convertible debentures, 6.5% convertible bonds and 5.75% convertible debentures, which are fair valued based on market value. The 6.75% $100M convertible debentures, 6.75% $160M convertible debentures, 6.5% convertible bonds and 5.75% convertible debentures are classified as Level 1 in the FV hierarchy.

 

Investments in equity instruments have a fair value as at December 31, 2018 of $37.0 million (March 31, 2018 - $36.3 million) and are measured based on Level 2 of the fair value hierarchy. Level 2 inputs for non-derivative financial assets include quoted prices for similar assets in active markets, and quoted prices for identical or similar assets that are not active.

 

No adjustments were made in the quarter in valuing the investment in ecobee or Energy Earth. Movements are related to foreign exchange revaluations.

 

The following table illustrates the classification of investments in the FV hierarchy as at December 31, 2018:

 

   Level 1   Level 2   Level 3   Total 
Investment in ecobee  $-     $32,889   $-     $32,889 
Investment in Energy Earth   -      4,092    -      4,092 
Total investments  $-     $36,981   $-     $36,981 

 

23.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The risks associated with Just Energy’s financial instruments are as follows:

 

(i)Market risk

 

Market risk is the potential loss that may be incurred as a result of changes in the market or fair value of a particular instrument or commodity. Components of market risk to which Just Energy is exposed are discussed below.

 

Foreign currency risk

 

Foreign currency risk is created by fluctuations in the fair value or cash flows of financial instruments due to changes in foreign exchange rates and exposure as a result of investments in U.S. and international operations.

 

The performance of the Canadian dollar relative to the U.S. dollar could positively or negatively affect Just Energy’s income, as a portion of Just Energy’s income is generated in U.S. dollars and is subject to currency fluctuations upon translation to Canadian dollars. Due to its growing operations in the U.S. and Europe, Just Energy expects to have a greater exposure to foreign currency fluctuations in the future than in prior years. Just Energy has economically hedged between 50% and 90% of forecasted cross-border cash flows that are expected to occur within the next 12 months and between 0% and 50% of certain forecasted cross-border cash flows that are expected to occur within the following 13 to 24 months. The level of economic hedging is dependent on the source of the cash flow and the time remaining until the cash repatriation occurs.

 

Just Energy may, from time to time, experience losses resulting from fluctuations in the values of its foreign currency transactions, which could adversely affect its operating results. Translation risk is not hedged.

 

With respect to translation exposure, if the Canadian dollar had been 5% stronger or weaker against the U.S. dollar for the period ended December 31, 2018, assuming that all the other variables had remained constant, loss for the period would have been $3.2 million lower/higher and OCI would have been $17.7 million lower/higher.

 

Interest rate risk

 

Just Energy is only exposed to interest rate fluctuations associated with its floating rate credit facility. Just Energy’s current exposure to interest rates does not economically warrant the use of derivative instruments. Just Energy’s exposure to interest rate risk is relatively immaterial and temporary in nature. Just Energy does not currently believe that its long-term debt exposes the Company to material interest rate risks but has set out parameters to actively manage this risk within its Risk Management Policy.

 

A 1% increase (decrease) in interest rates would have resulted in a decrease (increase) of approximately $630 in profit before income taxes for the three months ended December 31, 2018 (2017 - $496).

 

24.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Commodity price risk

 

Just Energy is exposed to market risks associated with commodity prices and market volatility where estimated customer requirements do not match actual customer requirements. Management actively monitors these positions on a daily basis in accordance with its Risk Management Policy. This policy sets out a variety of limits, most importantly thresholds for open positions in the gas and electricity portfolios which also feed a Value at Risk limit. Should any of the limits be exceeded, they are closed expeditiously or express approval to continue to hold is obtained. Just Energy’s exposure to market risk is affected by a number of factors, including accuracy of estimation of customer commodity requirements, commodity prices, volatility and liquidity of markets. Just Energy enters into derivative instruments in order to manage exposures to changes in commodity prices. The derivative instruments that are used are designed to fix the price of supply for estimated customer commodity demand and thereby fix margins such that shareholder dividends can be appropriately established. Derivative instruments are generally transacted over the counter. The inability or failure of Just Energy to manage and monitor the above market risks could have a material adverse effect on the operations and cash flows of Just Energy. Just Energy mitigates the exposure to variances in customer requirements that are driven by changes in expected weather conditions through active management of the underlying portfolio, which involves, but is not limited to, the purchase of options including weather derivatives. Just Energy’s ability to mitigate weather effects is limited by the degree to which weather conditions deviate from normal.

 

Commodity price sensitivity – all derivative financial instruments

 

If all the energy prices associated with derivative financial instruments including natural gas, electricity, verified emission-reduction credits and renewable energy certificates had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit before income taxes for the three months ended December 31, 2018 would have increased (decreased) by $252,121 ($250,095), primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.

 

Commodity price sensitivity – Level 3 derivative financial instruments

 

If the energy prices associated with only Level 3 derivative financial instruments including natural gas, electricity, verified emission-reduction credits and renewable energy certificates had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit before income taxes for the three months ended December 31, 2018 would have increased (decreased) by $254,391 ($252,372), primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.

 

(ii)Credit risk

 

Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and causes financial loss to another party. Just Energy is exposed to credit risk in two specific areas: customer credit risk and counterparty credit risk.

 

Customer credit risk

 

In Alberta, Texas, Illinois, California, Delaware, Ohio, Georgia, the U.K. and Ireland, as well as for Interactive Energy Group and JustGreen U.S., Just Energy has customer credit risk and, therefore, credit review processes have been implemented to perform credit evaluations of customers and manage customer default. If a significant number of customers were to default on their payments, it could have a material adverse effect on the operations and cash flows of Just Energy. Management factors default from credit risk in its margin expectations for all the above markets.

 

25.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The aging of the accounts receivable from the above markets was as follows:

 

  

Dec. 31,

2018

  

March 31,

2018

 
         
Current  $104,685   $113,786 
1–30 days   42,416    44,374 
31–60 days   19,007    21,241 
61–90 days   19,310    12,686 
Over 90 days   113,668    69,207 
   $299,086   $261,294 

 

Changes in the expected lifetime credit loss were as follows:

 

  

Dec. 31,

2018

     
  

(Restated –

Note 4)

  

March 31,

2018

 
         
Balance, beginning of period  $60,121   $49,431 
Provision for doubtful accounts   139,999    56,300 
Bad debts written off   (40,958)   (41,802)
Adjustment from IFRS 9 adoption   23,636    -   
Foreign exchange   421    (3,808)
Balance, end of period  $183,219   $60,121 

 

In the remaining markets, the local distribution companies (“LDCs”) provide collection services and assume the risk of any bad debts owing from Just Energy’s customers for a fee. Management believes that the risk of the LDCs failing to deliver payment to Just Energy is minimal. There is no assurance that the LDCs providing these services will continue to do so in the future.

 

Counterparty credit risk

 

Counterparty credit risk represents the loss that Just Energy would incur if a counterparty fails to perform under its contractual obligations. This risk would manifest itself in Just Energy replacing contracted supply at prevailing market rates, thus impacting the related customer margin. Counterparty limits are established within the Risk Management Policy. Any exceptions to these limits require approval from the Board of Directors of Just Energy. The Risk Department and Risk Committee monitor current and potential credit exposure to individual counterparties and also monitor overall aggregate counterparty exposure. However, the failure of a counterparty to meet its contractual obligations could have a material adverse effect on the operations and cash flows of Just Energy.

 

As at December 31, 2018, the estimated counterparty credit risk exposure amounted to $249,321 (2017 - $38,605), representing the risk relating to Just Energy’s exposure to derivatives that are in an asset position.

 

26.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

(iii)Liquidity risk

 

Liquidity risk is the potential inability to meet financial obligations as they fall due. Just Energy manages this risk by monitoring detailed weekly cash flow forecasts covering a rolling six-week period, monthly cash forecasts for the next 12 months, and quarterly forecasts for the following two-year period to ensure adequate and efficient use of cash resources and credit facilities.

 

The following are the contractual maturities, excluding interest payments, reflecting undiscounted disbursements of Just Energy’s financial liabilities:

As at December 31, 2018:

 

   Carrying   Contractual   Less than           More than 
   amount   cash flows   1 year   1–3 years   4–5 years   5 years 
Trade and other payables  $760,659   $760,659   $760,659   $-     $-     $-   
Long-term debt1   716,133    -      -      -      -      -   
Gas, electricity and non-commodity contracts   91,237    3,596,873    633,606    2,388,039    448,570    126,658 
   $1,568,029   $4,357,532   $1,394,265   $2,388,039   $448,570   $126,658 

 

As at March 31, 2018:

 

   Carrying   Contractual   Less than           More than 
   amount   cash flows   1 year   1–3 years   4–5 years   5 years 
Trade and other payables  $621,148   $621,148   $621,148   $-     $-     $-   
Long-term debt1   543,504    575,525    122,115    193,410    260,000    -   
Gas, electricity and non-commodity contracts   138,159    3,171,037    1,867,389    1,202,949    69,658    31,041 
   $1,302,811   $4,367,710   $2,610,652   $1,396,359   $329,658   $31,041 

 

1 Included in long-term debt are the 6.75% $100M convertible debentures, 6.75% $160M convertible debentures, 6.5% convertible bonds and 5.75% convertible debentures, which may be settled through the issuance of shares at the option of the holder or Just Energy upon maturity.

 

In addition to the amounts noted above, as at December 31, 2018, the contractual net interest payments over the term of the long-term debt with scheduled repayment terms are as follows:

 

  

Less than

1 year

   1–3 years   4–5 years  

More than

5 years

 
Interest payments  $30,077   $69,836   $33,152   $-   

 

(iv)Supplier risk

 

Just Energy purchases the majority of the gas and electricity delivered to its customers through long-term contracts entered into with various suppliers. Just Energy has an exposure to supplier risk as the ability to continue to deliver gas and electricity to its customers is reliant upon the ongoing operations of these suppliers and their ability to fulfil their contractual obligations. As at December 31, 2018, Just Energy has applied an adjustment factor to determine the fair value of its financial instruments in the amount of $10,183 (2017 - $3,109) to accommodate for its counterparties’ risk of default.

 

27.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

10.ACQUISITION OF BUSINESSES

 

(a)Acquisition of EdgePower, Inc.

 

On February 28, 2018, Just Energy completed the acquisition of the issued and outstanding shares of EdgePower, Inc. (“EdgePower”), a privately held energy monitoring and management company operating out of Aspen, Colorado. EdgePower provides lighting and HVAC controls, as well as enterprise monitoring, in hundreds of commercial buildings in North America. Just Energy acquired 100% of the equity interests of EdgePower for the purposes of integrating their lighting and HVAC controls with the commercial business. The fair value of the total consideration transferred is US$14.9 million, of which US$7.5 million was paid in cash and US$7.4 million was settled through the issuance of 1,415,285 Just Energy common shares. The goodwill that was acquired as part of this acquisition relates primarily to the EdgePower workforce and synergies between Just Energy and EdgePower.

 

In addition, the former shareholders of EdgePower are entitled to a payment of up to a maximum of US$6.0 million, payable in cash, subject to continuing employment and the achievement of certain annual and cumulative performance thresholds of the EdgePower business. The payment is calculated as 20% of EBITDA for the EdgePower business for the years of 2019–2021 with minimum thresholds that must be met. As at the acquisition date, the amount recognized for management remuneration was $nil.

 

The following is the preliminary purchase price allocation for EdgePower:

 

NET ASSETS ACQUIRED

 

Working capital  $993 
Intangible assets   14,198 
Goodwill   7,673 
Deferred tax liabilities   (3,820)
Total consideration  $19,044 
      
Cash paid, net of working capital adjustment  $9,534 
Common shares issued   9,510 
Total consideration  $19,044 

 

(b)Acquisition of Filter Group Inc. (“Filter Group”)

 

On October 1, 2018, Just Energy acquired Filter Group, a leading provider of subscription-based home water filtration systems to residential customers in Canada and the United States. Headquartered in Toronto, Ontario, Filter Group currently provides under-counter and whole-home water filtration solutions to residential markets in the provinces of Ontario and Manitoba and the states of Nevada, California, Arizona, Michigan and Illinois.

 

28.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Just Energy acquired all of the issued and outstanding shares of Filter Group and the shareholder loan owing by Filter Group. In addition, Filter Group had approximately $22 million of third-party Filter Group debt. The aggregate consideration payable by Just Energy under the Purchase Agreement is comprised of: (i) $15 million in cash, fully payable within 180 days of closing; and (ii) earn-out payments of up to 9.5 million Just Energy common shares (with up to an additional 2.4 million Just Energy common shares being issuable to satisfy dividends that otherwise would have been paid in cash on the Just Energy shares issuable pursuant to the earn-out payments (the “DRIP Shares”)), subject to customary closing adjustments. The earn-out payments are contingent on the achievement by Filter Group of certain performance-based milestones specified in the Purchase Agreement in each of the first three years following the closing of the acquisition. In addition, the earn-out payments may be paid 50% in cash and the DRIP Shares 100% in cash, at the option of Just Energy.

 

The contingent consideration relating to the potential earn-out payments over the next three years was valued at approximately $28 million on October 1, 2018. As it does not meet the definition of equity, it is carried at fair value through profit or loss and is revalued at each reporting period. Significant assumptions affecting the measurement of contingent consideration each quarter include the Just Energy share price and the performance of Filter Group.

 

The goodwill was calculated as the difference between the fair value of consideration transferred and the preliminary fair value of the assets acquired and liabilities assumed. The goodwill acquired as part of the acquisition primarily represents Filter Group’s workforce, operational and strategic management processes and synergies between Just Energy and Filter Group. Goodwill is not amortized for accounting; however, it is deductible for tax purposes.

 

As of December 31, 2018, Filter Group revenues of $3.1 million and loss of $0.4 million were included in the interim condensed consolidated statements of comprehensive income since October 1, 2018. On a pro-forma basis, Just Energy’s consolidated revenues and earnings for the period ended December 31, 2018 would have been higher by approximately $5.0 million and lower by $1.3 million, respectively, had the Filter Group acquisition occurred on April 1, 2018. The contingent consideration relating to the Filter Group acquisition was revalued as at December 31, 2018 to be $33.3 million, an increase in the provision of $5.5 million for the October 1, 2018 to December 31, 2018 period.

 

For the period ended December 31, 2018, Just Energy recorded $1.2 million of administration expenses associated with the Filter Group acquisition, primarily related to diligence and professional fee expenditures.

 

The CEO of Filter Group, is the son of the Executive Chair of Just Energy. As such, this is a related party transaction. The transaction was reviewed by the Strategic Initiatives Committee and it received a fairness opinion from National Bank Financial on the transaction.

 

Of the $15.0 million cash consideration for the acquisition of Filter Group, $2.0 million relates to the purchase of the shares of Filter Group. The remaining $13.0 million is for the assumption of a shareholder debt owed to a related party, of which $3.0 million was already paid on the closing date of October 1, 2018. Therefore, as at December 31, 2018, $12.0 million of the overall cash consideration payable is included in current trade payables and other of the interim condensed consolidated statements of financial position, of which $11.8 million is for a related party.

 

29.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The following is the preliminary purchase price allocation for Filter Group:

 

NET ASSETS ACQUIRED

 

Working capital  $927 
Property, plant and equipment   6,154 
Intangible assets   16,049 
Goodwill   40,621 
Long-term debt   (21,611)
Total consideration  $42,140 
      
Cash consideration  $3,000 
Payable to shareholders   11,314 
Contingent consideration   27,826 
Total consideration  $42,140 

 

11. LONG-TERM DEBT AND FINANCING

 

      Dec. 31,   March 31, 
   Maturity  2018   2018 
Credit facility (a)  September 1, 2020  $198,380   $122,115 
Less: Debt issue costs (a)      (2,584)   (664)
Filter Group Financing (b)      19,390    -   
8.75% loan (c)  September 12, 2023   123,002    -   
6.75% $100M convertible debentures (d)  March 31, 2023   86,898    85,760 
6.75% $160M convertible debentures (e)  December 31, 2021   150,215    148,146 
6.5% convertible bonds (f)  July 29, 2019   140,832    188,147 
       716,133    543,504 
Less: Current portion      (150,050)   (121,451)
      $566,083   $422,053 

 

Future annual minimum repayments are as follows:

 

  

Less than

1 year

   1–3 years   4–5 years  

More than

5 years

   Total 
Credit facility (a)  $-     $198,380   $-     $-     $198,380 
Filter Group Financing (b)   9,217    8,987    1,186    -      19,390 
8.75% loan (c)   -      -      138,944    -      138,944 
6.75% $100M convertible debentures (d)   -      -      100,000    -      100,000 
6.75% $160M convertible debentures (e)   -      -      160,000    -      160,000 
6.5% convertible bonds (f)   142,422    -      -      -      142,422 
   $151,639   $207,367   $400,130   $-     $759,186 

 

 

30.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The details for long-term debt are as follows:

 

  

As at

April 1,

2018

  

Cash inflows/

(outflows)

  

Foreign

Exchange

  

Non-cash

changes

  

As at
Dec. 1,

2018

 
Credit facility (a)  $121,451   $73,681   $-     $664   $195,796 
Filter Group Financing (b)   -      (2,221)   -      21,611    19,390 
8.75% loan (c)   -      116,016    6,376    610    123,002 
6.75% $100M convertible debentures (d)   85,760    -      -      1,138    86,898 
6.75% $160M convertible debentures (e)   148,146    -      -      2,069    150,215 
6.5% convertible bonds (f)   188,147    (59,574)   7,751    4,508    140,832 
   $543,504   $127,902   $14,127   $30,600   $716,133 
Less: Current portion   (121,451)  $-     $-     $-     $(150,050)
   $422,053   $127,902   $14,127   $30,600   $566,083 

 

  

As at

April 1,

2017

  

Cash inflows/

(outflows)

  

Foreign

Exchange

  

Non-cash

changes

  

As at

March 31,

2018

 
                     
Credit facility (a)  $66,001   $53,857   $-     $1,593   $121,451 
6.75% $100M convertible debentures (d)   -      95,869    -      (10,109)   85,760 
6.75% $160M convertible debentures (e)   145,579    -      -      2,567    148,146 
6.5% convertible bonds (f)   190,486    -      (6,101)   3,761    188,147 
5.75% convertible debentures (g)   96,022    (100,000)   -      3,978    -   
   $498,088   $49,726   $(6,101)  $1,790   $543,504 
Less: Current portion   -     $-     $-     $-     $(121,451)
   $498,088   $49,726   $(6,101)  $1,790   $422,053 

 

Interest is expensed based on the effective interest rate. The following table details the finance costs for the indicated periods:

 

   Three months   Three months   Nine months   Nine months 
   ended   ended   ended   ended 
   Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31, 
   2018   2017   2018   2017 
Credit facility (a)  $5,469   $3,402   $14,523   $8,972 
Filter Group Financing (b)   459    -      459    -   
8.75% loan (c)   4,318    -      4,318    -   
6.75% $100M convertible debentures (d)   1,925    -      6,510    -   
6.75% $160M convertible debentures (e)   3,399    3,342    10,168    9,404 
6.5% convertible bonds (f)   3,714    4,043    13,490    11,784 
5.75% convertible debentures (g)   -      2,101    -      6,246 
Collateral cost and other   3,478    378    9,757    1,371 
   $22,762   $13,266   $59,225   $37,777 

 

31.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

(a)As of April 18, 2018, the Company has renegotiated an agreement with a syndicate of lenders that includes Canadian Imperial Bank of Commerce (“CIBC”), National Bank of Canada (“National”), HSBC Bank Canada, JPMorgan Chase Bank N.A., Alberta Treasury Branches, Canadian Western Bank and Morgan Stanley Senior Funding, Inc., a subsidiary of Morgan Stanley Bank N.A. The agreement extends Just Energy’s credit facility for an additional two years to September 1, 2020. The facility size was increased to $352.5 million from $342.5 million, with an accordion for Just Energy to draw up to $370 million. A certain principal amount outstanding under the credit facility is guaranteed by Export Development Canada under its Account Performance Security Guarantee Program.

 

Interest is payable on outstanding loans at rates that vary with Bankers’ Acceptance rates, LIBOR, Canadian bank prime rate or U.S. prime rate. Under the terms of the operating credit facility, Just Energy is able to make use of Bankers’ Acceptances and LIBOR advances at stamping fees of 3.750%. Prime rate advances are at a rate of bank prime (Canadian bank prime rate or U.S. prime rate) plus 2.750% and letters of credit are at a rate of 3.750%. Interest rates are adjusted quarterly based on certain financial performance indicators.

 

As at December 31, 2018, the Canadian prime rate was 3.95% and the U.S. prime rate was 5.5%. As at December 31, 2018, $198.4 million has been drawn against the facility and total letters of credit outstanding as of December 31, 2018 amounted to $95.7 million (September 30, 2018 - $89.4 million). As at December 31, 2018, Just Energy has $58.4 million of the facility remaining for future working capital and/or security requirements. Just Energy’s obligations under the credit facility are supported by guarantees of certain subsidiaries and affiliates and secured by a general security agreement and a pledge of the assets and securities of Just Energy and the majority of its operating subsidiaries and affiliates excluding, primarily, the U.K., Barbados, Ireland, Japan and Germany operations. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at December 31, 2018, the Company was compliant with all of these covenants.

 

(b)Filter Group, which was acquired on October 1, 2018, has an outstanding loan payable to Home Trust Company (“HTC”). The loan is a result of factoring receivables to finance the cost of rental equipment over a period of three to five years with HTC and bears interest at 8.99% per annum. Principal and interest are repayable on a monthly basis.

 

(c)On September 12, 2018, Just Energy entered into a US$250 million non-revolving multi-draw senior unsecured term loan facility (the “8.75% loan”) with Sagard Credit Partners, LP and certain funds managed by a leading U.S.-based global fixed income asset manager. The 8.75% loan bears interest at 8.75% per annum payable semi-annually in arrears on June 30 and December 31 in each year plus fees, and will mature on September 12, 2023. Warrants totalling 7.5 million were issued to the counterparties at a strike price of $8.56 each, convertible to one Just Energy common stock. The value of these warrants has been assessed as nominal. As at December 31, 2018, US$97.0 million was drawn from the 8.75% loan. The 8.75% loan has three tranches. The first tranche is earmarked for general corporate purposes, including to pay down Just Energy's credit facility. The second tranche is earmarked towards the settlement of Just Energy's 6.5% convertible bonds. The third tranche is earmarked for investments and future acquisitions.

 

 

32.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

(d)On February 22, 2018, Just Energy issued $100 million of convertible unsecured senior subordinated debentures (the “6.75% $100 million convertible debentures”). The 6.75% $100 million convertible debentures bear interest at an annual rate of 6.75%, payable semi-annually in arrears on March 31 and September 30 in each year, and have a maturity date of March 31, 2023.

 

(e)On October 5, 2016, Just Energy issued $160 million of convertible unsecured senior subordinated debentures (the “6.75% $160 million convertible debentures”). The 6.75% $160 million convertible debentures bear interest at an annual rate of 6.75%, payable semi-annually in arrears on June 30 and December 31 in each year, and have a maturity date of December 31, 2021.

 

(f)On January 29, 2014, Just Energy issued US$150 million of European-focused senior unsecured convertible bonds (the “6.5% convertible bonds”). The 6.5% convertible bonds bear interest at an annual rate of 6.5%, payable semi-annually in arrears in equal installments on January 29 and July 29 in each year, and have a maturity date of July 29, 2019. The Company incurred transaction costs of $5,215 and has shown these costs net of the 6.5% convertible bonds. US$45.6 million were tendered and extinguished in September 2018, resulting in a loss on redemption of $1.5 million.

 

(g)In September 2011, Just Energy issued $100 million of convertible unsecured subordinated debentures (the “5.75% convertible debentures”), which was used to fund an acquisition. The 5.75% convertible debentures bear interest at an annual rate of 5.75%, payable semi-annually on March 31 and September 30 in each year, and have a maturity date of December 31, 2018. The 5.75% convertible debentures were fully redeemed on March 27, 2018.

 

12.INCOME TAXES

 

   Three months   Three months   Nine months   Nine months 
   ended   ended   ended   ended 
  

Dec. 31,

2018

  

Dec. 31,

2017

  

Dec. 31,

2018

  

Dec. 31,

2017

 
Current income tax expense (recovery)  $4,540   $(4,105)  $1,508   $379 
Deferred tax expense (recovery)   (13,628)   9,718    3,777    10,198 
Provision for (recovery of) income taxes  $(9,088)  $5,613   $5,285   $10,577 

 

13.SHAREHOLDERS’ CAPITAL

 

Just Energy is authorized to issue an unlimited number of common shares and 50,000,000 preference shares issuable in series, both with no par value. Shares outstanding have no preferences, rights or restrictions attached to them.

 

Just Energy has the ability to make a normal course issuer bid (“NCIB”) to purchase for cancellation a portion of the outstanding 6.75% convertible debentures expiring December 31, 2021, as well as the renewal of Just Energy common shares, respectively. Under each NCIB, Just Energy could have purchased debentures and common shares representing 10% of the outstanding public float at close of business February 28, 2018 up to daily and total limits. These shares may be purchased during the year starting March 19, 2018 and ending March 15, 2019. For the three months ended December 31, 2018, Just Energy had purchased $nil of common shares and the 6.75% debentures through the NCIB program, consistent with the prior comparable period.

 

33.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Details of issued and outstanding shareholders’ capital are as follows:

 

   Nine months ended   Year ended 
   Dec. 31, 2018   March 31, 2018 
   Shares   Amount   Shares   Amount 
Common shares:                
                 
Issued and outstanding                    
Balance, beginning of period   148,394,152   $1,079,055    147,013,538   $1,070,076 
Share-based awards exercised   1,118,144    8,471    1,643,156    11,954 
Acquisition of subsidiary   -      -      1,415,285    8,966 
Repurchase and cancellation of shares   -      -      (1,677,827)   (11,941)
Balance, end of period   149,512,296   $1,087,526    148,394,152   $1,079,055 
                     
Preferred shares:                    
                     
Issued and outstanding                    
Balance, beginning of period   4,323,300   $136,771    4,040,000   $128,363 
Shares issued for cash   338,865    10,447    283,300    9,260 
Preferred shares issuance cost   -      (253)   -      (852)
Balance, end of period   4,662,165   $146,965    4,323,300   $136,771 
                     
Shareholders' capital   154,174,461   $1,234,491    152,717,452   $1,215,826 

 

14.REPORTABLE BUSINESS SEGMENTS

 

Just Energy’s reportable segments include the following: Consumer Energy and Commercial Energy. Just Energy has aggregated the operating segments into these reportable segments on the basis that the operating segments share economic characteristics. These characteristics include the nature of the product and services sold, the distribution methods, and the type of customer class and regulatory environment.

 

Transactions between operating segments are in the normal course of operations and are recorded at the exchange amount. Allocations made between segments for shared assets or allocated expenses are based on the number of residential customer equivalents in the respective segments.

 

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Just Energy is not considered to have any key customers.

 

Corporate and shared services report the costs related to management oversight of the business units, public reporting and filings, corporate governance and other shared services functions.

 

34.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the three months ended December 31, 2018:

 

   Consumer           
   division      Corporate and   Consolidated 
  

(Restated –

Note 4)

  

Commercial

division

  

shared services

division

  

(Restated –

Note 4)

 
                 
Sales  $615,997   $350,656   $-     $966,653 
Gross margin   145,867    42,646    -      188,513 
Administrative expenses   21,817    10,565    23,649    56,031 
Selling and marketing expenses   39,106    18,149    -      57,255 
Depreciation of property, plant and equipment   1,120    51    -      1,171 
Amortization of intangible assets   6,441    866    -      7,307 
Other operating expenses   94,318    1,934    -      96,252 
Operating profit (loss) for the period  $(16,935)  $11,081   $(23,649)  $(29,503)
Finance costs                  (22,762)
Change in fair value of derivative instruments and other                  (1,515)
Change in fair value of Filter Group contingent consideration                  (5,462)
Other income                  2,569 
Recovery for income taxes                  (9,088)
Profit for the period                 $(47,585)
Capital expenditures  $13,894   $1,370   $-     $15,264 

 

35.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the three months ended December 31, 2017:

 

   Consumer   Commercial  

Corporate and

shared services

    
   division   division   division   Consolidated 
                 
Sales  $579,968   $332,235   $-     $912,203 
Gross margin   132,807    38,498    -      171,305 
Administrative expenses   18,765    8,373    23,251    50,389 
Selling and marketing expenses   39,127    16,420    -      55,547 
Depreciation of property, plant and equipment   956    85    -      1,041 
Amortization of intangible assets   4,954    485    -      5,439 
Other operating expenses   13,662    1,059    -      14,721 
Operating profit (loss) for the period  $55,343   $12,076   $(23,251)  $44,168 
Finance costs                  (13,266)
Change in fair value of derivative instruments and other                  183,759 
Other expense                  (633)
Recovery of income taxes                  (5,613)
Profit for the period                 $208,415 
Capital expenditures  $8,175   $4,026   $-     $12,201 

 

36.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the nine months ended December 31, 2018:

 

   Consumer           
   division      Corporate and   Consolidated 
  

(Restated –

Note 4)

  

Commercial

division

  

shared services

division

  

(Restated –

Note 4)

 
                 
Sales  $1,751,783   $1,048,170   $-     $2,799,953 
Gross margin   389,878    125,506    -      515,384 
Depreciation of property, plant and equipment   2,876    153    -      3,029 
Amortization of intangible assets   15,068    1,579    -      16,647 
Administrative expenses   65,218    31,737    73,266    170,221 
Selling and marketing expenses   109,310    55,237    -      164,547 
Other operating expenses   137,684    7,021    -      144,705 
Operating profit (loss) for the period  $59,722   $29,779   $(73,266)   16,235 
Finance costs                  (59,225)
Change in fair value of derivative instruments and other                  (62,003)
Change in fair value of Filter Group contingent consideration                  (5,462)
Other income                  5,282 
Provision for income taxes                  (5,285)
Loss for the period                 $(110,458)
Capital expenditures  $33,457   $3,229   $-     $36,686 

 

As at December 31, 2018

 

Total goodwill  $194,021   $156,164   $-     $350,185 
Total assets  $1,326,855   $452,146   $-     $1,779,001 
Total liabilities  $1,488,133   $218,862   $-     $1,706,994 

 

37.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the nine months ended December 31, 2017:

 

   Consumer   Commercial  

Corporate and

shared services

    
   division   division   division   Consolidated 
                 
Sales  $1,571,439   $1,040,397   $-     $2,611,836 
Gross margin   355,699    115,832    -      471,531 
Depreciation of property, plant and equipment   2,779    244    -      3,023 
Amortization of intangible assets   11,761    1,469    -      13,230 
Administrative expenses   52,081    26,784    66,961    145,826 
Selling and marketing expenses   118,759    53,441    -      172,200 
Other operating expenses   58,531    2,188    -      60,719 
Operating profit (loss) for the period  $111,788   $31,706   $(66,961)   76,533 
Finance costs                  (37,777)
Change in fair value of derivative instruments and other                  223,453 
Other income                  1,169 
Provision for income taxes                  (10,577)
Profit for the period                 $252,801 
Capital expenditures  $18,547   $9,135   $-     $27,682 

 

As at December 31, 2017

 

Total goodwill  $148,661   $142,831   $-     $291,492 
Total assets  $858,087   $529,442   $-     $1,387,529 
Total liabilities  $1,173,471   $289,773   $-     $1,463,244 

 

Sales from external customers

 

The revenue is based on the location of the customer.

 

   Three months   Three months   Nine months   Nine months 
   ended   ended   ended   ended 
  

Dec. 31,

2018

  

Dec. 31,

2017

  

Dec. 31,

2018

  

Dec. 31,

2017

 
Canada  $110,853   $115,966   $283,521   $276,658 
United States   623,351    580,238    1,957,508    1,852,542 
International   232,449    215,999    558,924    482,636 
Total  $966,653   $912,203   $2,799,953   $2,611,836 

 

 

38.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Non-current assets

 

Non-current assets by geographic segment consist of property, plant and equipment and intangible assets and are summarized as follows:

 

  

As at

Dec. 31,

2018

  

As at

March 31,

2018

 
Canada  $271,375   $201,985 
United States   227,212    207,147 
International   15,302    11,687 
Total  $513,889   $420,819 

 

15.OTHER EXPENSES

 

(a)Other operating expenses

 

   Three months      Nine months    
   ended      ended    
   Dec. 31,   Three months   Dec. 31,   Nine months 
   2018   ended   2018   ended 
  

(Restated –

Note 4)

  

Dec. 31,

2017

  

(Restated –

Note 4)

  

Dec. 31,

2017

 
Amortization of other intangible assets  $7,307   $5,439   $16,647   $13,230 
Depreciation of property, plant and equipment   1,171    1,041    3,029    3,023 
Bad debt expense   94,815    13,056    139,999    42,091 
Share-based compensation   1,437    1,665    4,706    18,628 
   $104,730   $21,201   $164,381   $76,972 

 

(b)Employee benefits expense

 

   Three months   Three months   Nine months   Nine months 
   ended   ended   ended   ended 
   Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31, 
   2018   2017   2018   2017 
Wages, salaries and commissions  $67,925   $58,838   $196,452   $171,456 
Benefits   3,726    7,708    20,299    20,211 
   $71,651   $66,546   $216,751   $191,667 

 

39.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

16.EARNINGS (LOSS) PER SHARE

 

   Three months   Three months   Nine months   Nine months 
   ended   ended   ended   ended 
   Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31, 
   2018   2017   2018   2017 
BASIC EARNINGS (LOSS) PER SHARE                    
Profit (loss) as per consolidated statement of income  $(47,551)  $208,455   $(110,313)  $243,449 
Dividend to preferred shareholders - net of tax   1,821    2,842    6,538    8,658 
Earnings (loss) available to shareholders   (49,372)   205,613    (116,851)   234,791 
Basic weighted average shares outstanding   149,309,905    146,859,332    149,012,066    146,914,251 
Basic earnings (loss) per share available to shareholders  $(0.33)  $1.40   $(0.78)  $1.60 
                     
DILUTED EARNINGS (LOSS) PER SHARE                    
Earnings (loss) available to shareholders  $(49,372)  $205,613   $(116,851)  $234,791 
Adjustment for dilutive impact of convertible debentures   -    4,884    -    14,474 
Adjusted earnings (loss) available to shareholders  $(49,372)  $210,497   $(116,851)  $249,265 
Basic weighted average shares outstanding   149,309,905    146,859,332    149,012,066    146,914,251 
Dilutive effect of:                    
Restricted share grants   2,238,518    2,807,661    2,548,7511   2,761,033 
Deferred share grants   151,472    89,210    134,4581   94,347 
Convertible debentures   28,440,256    38,804,494    39,574,8311   38,804,494 
Shares outstanding on a diluted basis   180,140,151    188,560,697    191,270,106    188,574,125 
Diluted earnings (loss) per share available to shareholders  $(0.33)  $1.12   $(0.78)  $1.32 

 

1The assumed conversion into shares results in an anti-dilutive position; therefore, these items have not been included in the computation of diluted earnings (loss) per share.

 

 

17.DIVIDENDS AND DISTRIBUTIONS

 

For the three months ended December 31, 2018, a dividend of $0.125 (2017 - $0.125) per common share was declared by Just Energy. This dividend amounted to $18,662 (2017 - $18,357), which was approved by the Board of Directors and paid out during the period. For the nine months ended December 31, 2018, dividends of $0.375 (2017 - $0.375) per common share were declared and paid by Just Energy. This amounted to $55,868 (2017 - $55,081), which was approved by the Board of Directors and paid out during the period.

 

For the three months ended December 31, 2018, a distribution of $0.125 (2017 - $0.125) per common share for share grants was declared by Just Energy. This distribution amounted to $295 (2017 - $302), which was approved by the Board of Directors and distributed during the period. For the nine months ended December 31, 2018, distributions of $0.375 (2017 - $0.375) per common share for share grants were declared and paid by Just Energy. This amounted to $1,263 (2017 - $1,013), which was approved by the Board of Directors and distributed during the period.

 

40.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the three months ended December 31, 2018, a dividend of US$0.53125 (2017 - US$0.53125) per preferred share was declared by Just Energy. This dividend amounted to $2,477 (2017 - $2,842), which was approved by the Board of Directors and paid out during the period. For the nine months ended December 31, 2018, dividends of US$1.0625 (2017 - US$1.59375) per preferred share were declared and paid by Just Energy. This amounted to $8,895 (2017 - $8,658), which was approved by the Board of Directors and paid out during the period.

 

18.COMMITMENTS AND GUARANTEES

 

Commitments for each of the next five years and thereafter are as follows:

 

As at December 31, 2018

 

  

Less than

1 year

   1–3 years   4–5 years  

More than

5 years

   Total 
Premises and equipment leasing  $1,543   $7,669   $6,825   $7,171   $23,208 
Gas, electricity and non-commodity contracts   633,606    2,388,039    448,570    126,658    3,596,873 
   $635,149   $2,395,708   $455,395   $133,829   $3,620,081 

 

Just Energy has entered into leasing contracts for office buildings and administrative equipment. These leases have a leasing period of between one and eight years. No purchase options are included in any major leasing contracts. Just Energy is also committed under long-term contracts with customers to supply gas and electricity. These contracts have various expiry dates and renewal options.

 

On October 9, 2018, Just Energy announced that it has entered into a Multi-Year Contingent Business Interruption Insurance Agreement (the “Insurance”).

 

The Insurance primarily complements Just Energy’s robust risk management program and is intended to mitigate the impacts to the Company due to, among other things, natural disasters, such as Hurricane Harvey and the January 2018 winter freeze in Texas.

 

The Insurance provides up to US$25 million of insured limit per event, US$50 million per year and US$225 million of limit over an 80-month term, covering risks such as loss of income due to natural perils, sabotage, terrorism including cyber-attack, increased cost of supply from damage to supply and distribution infrastructure, interruption due to damage to customer property, losses in excess of Just Energy’s weather derivative program recoveries, and any unforeseen or unplanned weather related loss.

 

Guarantees

 

Pursuant to separate arrangements with Westchester Fire Insurance Company, Travelers Casualty and Surety Company of America, Berkley Insurance Company and Charter Brokerage LLC, Just Energy has issued surety bonds to various counterparties including states, regulatory bodies, utilities and various other surety bond holders in return for a fee and/or meeting certain collateral posting requirements. Such surety bond postings are required in order to operate in certain states or markets. Total surety bonds issued as at December 31, 2018 amounted to $70.3 million.

 

41.

JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended December 31, 2018

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

As at December 31, 2018, Just Energy had total letters of credit outstanding in the amount of $95.7 million (Note 11(a)).

 

19.COMPARATIVE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Certain figures in the comparative interim condensed consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the current year’s interim condensed consolidated financial statements.

 

 

 

 

 

 

 

42.