EX-99.1 2 exh_991p.htm EXHIBIT 99.1

Exhibit 99.1

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands of Canadian dollars)

 

 

        As at      As at  
   Notes    June 30, 2018      March 31, 2018  
ASSETS             
Current assets             
Cash and cash equivalents     $42,084   $48,861 
Restricted cash      3,593    3,515 
Trade and other receivables  6   677,233    697,307 
Gas in storage      23,912    11,812 
Other current assets  7   141,971    109,697 
Fair value of derivative financial assets  8   126,480    218,769 
Corporate tax recoverable      10,312    5,617 
       1,025,585    1,095,578 
Non-current assets             
Investments      36,396    36,314 
Property, plant and equipment      23,395    18,893 
Intangible assets      411,955    401,926 
Other non-current assets  7   41,001    19,987 
Fair value of derivative financial assets  8   86,788    64,662 
Deferred tax asset      1,680    9,449 
       601,215    551,231 
TOTAL ASSETS     $1,626,800   $1,646,809 
              
LIABILITIES             
              
Current liabilities             
Trade and other payables     $638,420   $616,434 
Deferred revenue      52,567    41,684 
Income taxes payable      1,454    7,304 
Fair value of derivative financial liabilities  8   48,789    86,288 
Provisions      5,721    4,714 
Current portion of long-term debt  11   -    121,451 
       746,951    877,875 
Non-current liabilities             
Long-term debt  11   578,862    422,053 
Deferred lease inducements      746    773 
Fair value of derivative financial liabilities  8   50,918    51,871 
Other non-current liabilities      52,630    56,576 
Deferred tax liability      9,683    6,918 
       692,839    538,191 
TOTAL LIABILITIES      1,439,790    1,416,066 
SHAREHOLDERS' EQUITY              
Shareholders’ capital  13   1,231,017    1,215,826 
Equity component of convertible debentures      13,029    13,029 
Contributed deficit      (24,590)   (22,693)
Deficit      (1,109,859)   (1,066,931)
Accumulated other comprehensive income      77,821    91,934 
Non-controlling interest      (408)   (422)
TOTAL SHAREHOLDERS' EQUITY      187,010    230,743 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $1,626,800   $1,646,809 

 

Commitments and Guarantees (Note 18)

See accompanying notes to the interim condensed consolidated financial statements

 

1.

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

 

   Notes    2019      2018  
OPERATIONS             
Sales  14  $876,457   $847,706 
Cost of sales      722,925    690,143 
GROSS MARGIN      153,532    157,563 
EXPENSES             
Administrative      55,682    48,631 
Selling and marketing      50,543    58,076 
Other operating expenses  15(a)   27,818    34,976 
       134,043    141,683 
Operating profit before the following      19,489    15,880 
Finance costs  11   (16,340)   (11,990)
Change in fair value of derivative instruments and other  8   (36,556)   110,617 
Other income (loss)      (55)   1,599 
Profit (loss) before income taxes      (33,462)   116,106 
Provision for income taxes  12   7,961    6,797 
PROFIT (LOSS) FOR THE PERIOD     $(41,423)  $109,309 
              
Attributable to:             
Shareholders of Just Energy     $(41,377)  $103,858 
Non-controlling interest      (46)   5,451 
PROFIT (LOSS) FOR THE PERIOD     $(41,423)  $109,309 
              
              
Earnings (loss) per share available to shareholders  16          
Basic     $(0.29)  $0.69 
Diluted     $(0.29)  $0.52 

 

See accompanying notes to the interim condensed consolidated financial statements

 

2.

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED JUNE 30
(unaudited in thousands of Canadian dollars)

 

 

     2018      2017  
PROFIT (LOSS) FOR THE PERIOD  $(41,423)  $109,309 
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:          
Unrealized gain (loss) on translation of foreign operations   3,750    (4,768)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX  $(37,673)  $104,541 
           
Total comprehensive income (loss) attributable to:          
Shareholders of Just Energy  $(37,627)  $99,090 
Non-controlling interest   (46)   5,451 
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX  $(37,673)  $104,541 

 

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)

FOR THE THREE MONTHS ENDED JUNE 30
(unaudited in thousands of Canadian dollars)

 

 

   Notes    2018      2017  
ATTRIBUTABLE TO THE SHAREHOLDERS             
Accumulated earnings             
Accumulated earnings, beginning of period     $768,847   $259,571 
Adjustment for adoption of IFRS 15 and 9      20,711    - 
Profit (loss) for the period, attributable to shareholders      (41,377)   103,858 
Accumulated earnings, end of period      

748,181

    363,429 
              
DIVIDENDS             
Dividends, beginning of period      (1,835,778)   (1,749,471)
Dividends declared and paid      (22,262)   (21,783)
Dividends, end of period      (1,858,040)   (1,771,254)
DEFICIT     $(1,109,859)  $(1,407,825)
              
ACCUMULATED OTHER COMPREHENSIVE INCOME             
Accumulated other comprehensive income, beginning of period     $91,934   $70,361 
Adjustment for adoption of IFRS 15 and 9      

(17,863

)   - 
Other comprehensive income (loss)      3,750    (4,768)
Accumulated other comprehensive income, end of period     $

77,821

   $65,593 
              
SHAREHOLDERS’ CAPITAL  13          
Common shares             
Common shares, beginning of period     $1,079,055   $1,070,076 
Share-based units exercised      4,979    10,145 
Repurchase and cancellation of shares      -    (11,443)
Common shares, end of period      1,084,034    1,068,778 
              
Preferred shares             
Preferred shares, beginning of period     $136,771   $128,363 
Shares issued      10,447    4,361 
Shares issuance costs      (235)   (458)
Preferred shares, end of period      146,983    132,266 
SHAREHOLDERS’ CAPITAL     $1,231,017   $1,201,044 
              
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES             
Balance, beginning of period     $13,029   $13,508 
Balance, end of period     $13,029   $13,508 
              
CONTRIBUTED SURPLUS (DEFICIT)             
Balance, beginning of period     $(22,722)  $58,266 
Add: Share-based compensation expense  15(a)   1,775    15,247 
Non-cash deferred share grant distributions      14    12 
Less: Purchase of non-controlling interest      1,566    - 
Share-based units exercised  13   (4,979)   (10,145)
Share-based compensation adjustment      (244)   (5,519)
Balance, end of period     $(24,590)  $57,861 
              
NON-CONTROLLING INTEREST             
Balance, beginning of period     $(422)  $- 
Distributions to non-controlling shareholders      -    (5,451)
Foreign exchange impact on non-controlling interest      60    - 
Profit (loss) attributable to non-controlling interest      (46)   5,451 
Balance, end of period     $(408)  $- 
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)     $187,010   $(69,819)

 

See accompanying notes to the interim condensed consolidated financial statements

 

4.

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30

(unaudited in thousands of Canadian dollars)

 

 

Net inflow (outflow) of cash related to the following activities  Notes    2018      2017  
OPERATING             
Profit (loss) before income taxes     $(33,462)  $116,106 
              
Items not affecting cash             
Amortization of intangible assets  15(a)   4,345    3,460 
Depreciation of property, plant and equipment  15(a)   

898

    997 
Amortization included in cost of sales      782    777 
Share-based compensation  15(a)   1,775    15,247 
Financing charges, non-cash portion      3,467    2,603 
Other      (27)   (92)
Change in fair value of derivative instruments and other  8   36,556    (110,617)
Adjustment required to reflect net cash receipts from gas sales      4,581    2,649 
Net change in non-cash working capital balances      (23,024)   556 
Income taxes paid      (8,437)   (11,077)
Cash inflow (outflow) from operating activities      (12,546)   20,609 
              
INVESTING             
Purchase of property, plant and equipment      (1,929)   (1,191)
Purchase of intangible assets      (7,926)   (6,805)
Acquisition of businesses      -    (2,546)
Short-term investments      -    129 
Cash outflow from investing activities      (9,855)   (10,413)
              
FINANCING             
Dividends paid      (22,249)   (21,771)
Debt issuance costs      (2,173)   - 
Credit facilities withdrawal      31,210    24,650 
Issuance of preferred shares      10,447    4,361 
Preferred shares issuance costs      (334)   (1,461)
Shares repurchase      -    (11,443)
Distributions to non-controlling interest      -    (5,505)
Cash inflow (outflow) from financing activities      16,901    (11,169)
              
Effect of foreign currency translation on cash balances      (1,277)   (1,283)
              
Net cash outflow      (6,777)   (2,256)
Cash and cash equivalents, beginning of period      48,861    57,376 
              
Cash and cash equivalents, end of period     $42,084   $55,120 
              
Supplemental cash flow information:             
Interest paid     $11,225   $7,321 

 

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 three months ended June 30, 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 8, 2018.

 

2.OPERATIONS

 

Just Energy is a leading consumer company specializing in electricity and natural gas commodities, energy efficiency solutions and renewable energy options. With offices located across the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Germany, Ireland and Japan, Just Energy serves residential and commercial customers, providing homes and businesses with a broad range of energy solutions that deliver comfort, convenience and control. Just Energy is the parent company of Amigo Energy, Green Star Energy, Hudson Energy, Interactive Energy Group, Just Energy Advanced Solutions, Tara Energy, terrapass and EdgePower Inc.

 

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. 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.

 

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 7.8% 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.

 

Just Energy markets its product offerings through a number of sales channels including door-to-door marketing, broker, retail and affinity relationships, and online marketing. Prior to August 1, 2017, the online marketing of gas and electricity contracts was primarily conducted through Just Ventures LLC and Just Ventures L.P. (collectively, “Just Ventures”), a joint venture in which Just Energy held a 50% equity interest. This exclusive relationship ended on July 31, 2017.

 

3.FINANCIAL STATEMENT PREPARATION

 

(a)

Statement of compliance with IFRS

 

These Interim Financial Statements of Just Energy and its subsidiaries 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 financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the IASB, have been omitted or condensed.

 

6.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

(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.

 

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. For the 12 months ended June 30, 2018, Just Energy reported gross margin of $636,896 (2017 - $690,862) and profit of $367,842 (2017 – $97,522).

 

(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 June 30, 2018. Subsidiaries and affiliates are consolidated from the date of acquisition of 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. 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, to apply a method similar to current operating lease accounting to leases for which the underlying asset is of low value. 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 has also been applied. Just Energy has not yet assessed the impact of this standard.

 

7.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

5. ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED

 

Changes in accounting policies

 

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

 

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 Just Energy outlined in its 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. Gas and electricity sales are billed based upon information received from distribution companies. Oftentimes, 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. Just Energy assesses the unbilled revenues 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. Just Energy satisfies its performance obligation to the customer over time, which is to provide continuous gas and electricity service over the contract term. Just Energy utilizes the output method and recognizes 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

 

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

 

8.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

Upon the adoption of IFRS 15, incremental costs to obtain a contract with a customer are capitalized if these costs are expected to be recovered. As such, Just Energy commenced capitalizing all upfront sales commissions, incentives and third party verification costs paid based on customer acquisition that met the criteria for capitalization. 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. 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.

 

Impact on financial statements

 

The cumulative effect of changes made to Just Energy’s April 1, 2018 interim condensed consolidated statement of financial position for the adoption of IFRS 15 – Revenue from Contract with Customers was as follows, and had a deferred tax liability effect of $7,493:

 

   Carrying amount 
   Original IAS 18  New IFRS 15 
Current Assets      
Customer acquisition costs  $31,852  $43,152 
Non-current financial assets      
Customer acquisition costs  $7,367  $24,428 

 

The following table shows the effect of the adoption of IFRS 15 on Just Energy’s interim condensed consolidated statements of financial position as at June 30, 2018:

 

   As at June 30, 2018 (reported)  Balances without adoption of IFRS 15  Effect of change higher (lower)
Current Assets         
Customer acquisition costs  $53,877  $36,693  $17,184
Non-current financial assets         
Customer acquisition costs  $38,114  $17,284  $20,830

 

9.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 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 Just Energy’s interim condensed consolidated statements of comprehensive income (loss) for the three months ended June 30, 2018:

 

   For the three
months ended
June 30, 2018
(reported)		   Balances
without
adoption of
IFRS 15		   Effect of
change
higher
(lower)		 
Sales  $876,457   $876,457   $- 
Cost of sales   722,925    722,925    - 
Gross margin   153,532    153,532    - 
Expenses             - 
Administrative   55,682    55,682    - 
Selling and marketing   50,543    59,806    (9,263)
Other operating expenses   27,818    27,818    - 
    134,043    143,306    (9,263)
Operating profit before the following   19,489    10,226    9,263 
Finance costs   (16,340)   (16,340)   - 
Change in fair value of derivative instruments and other   (36,556)   (36,556)   - 
Other income   (55)   (55)   - 
Loss before income taxes   (33,462)   (42,725)   9,263 
Provision for income taxes   7,961    7,961    - 
Loss for the period   (41,423)   (50,686)   9,263 
Attributable to:               
Shareholders of Just Energy   (41,377)   (50,640)   9,263 
Non-controlling interest   (46)   (46)   - 
Loss for the period   (41,423)   (50,686)   9,263 
Loss per share available to shareholders               
Basic   (0.29)   (0.35)   0.06 
Diluted   (0.29)   (0.35)   0.06 

 

Just Energy’s revenue sources are mostly related to electricity and gas contracts. IFRS 15 did not have any impact on any of the revenue amounts related to historical or current revenue recognition. The key factors driving revenue segmentation are related to differentiation between the business divisions which is disclosed in the segment note.

 

For the majority of contracts with customers, Just Energy has met the B16 expedient in IFRS 15 where Just Energy has the right to consideration from a customer in an amount that corresponds directly with the value to the customer of Just Energy’s performance completed to date. For contracts with customers that have an equal billing per month, while there is no change in revenue recognition upon the adoption of IFRS 15, Just Energy does not meet the practical B16 expedient in IFRS 15 and therefore is required to disclose the following for flat bill contracts that have a duration of one year or more:

 

The aggregate amount of transaction price allocated to performance obligations related to flat bill contracts that are unsatisfied as at June 30, 2018 is $84,470.

 

10.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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

 

   July 1, 2018 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 billed contracts  $24,750 $28,227  $17,674  $8,076  $5,743  $84,470

 

Change in accounting policies

 

Just Energy has adopted IFRS 9, “Financial Instruments” (“IFRS 9”) as issued by the International Accounting Standards Board (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” 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.

 

(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 or through profit or loss); and
·Those to be measured at amortized cost.

 

11.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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 either be recorded in profit or loss or other comprehensive income 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 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 other comprehensive income (OCI), except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses, which are recognized in profit and 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.

 

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 net income.

 

(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.

 

12.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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.

 

Impairment of cash and cash equivalents and restricted cash are evaluated by reference to the credit quality of the underlying financial institution or investee, but the provision is not material in the current reporting period.

 

 

 

 

 

13.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

(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 asset       
Cash and cash equivalents  Loans and receivables  Amortized cost 
Restricted cash  Loans and receivables  Amortized cost 
Trade receivables  Loans and receivables  Amortized cost 
Derivative asset  FVTPL  FVTPL 
Non-current financial assets       
Investments 

FVOCI and FVTPL

  FVTPL 
Derivative asset  FVTPL  FVTPL 
Current financial liabilities       
Trade and other payables  Other financial liabilities  Amortized cost 
Derivative liability  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 liability  FVTPL  FVTPL 

 

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 other comprehensive income 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

  Re-measurement 

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 

 

14.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

(d)Impairment of financial assets

 

Just Energy has two types of financial asset 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.

 

6. TRADE AND OTHER RECEIVABLES

 

       As at      As at  
       June 30, 2018      March 31, 2018  
  Trade account receivables, net  $331,593   $332,083 
  Accrued gas receivables   8,334    15,893 
  Unbilled revenues   292,698    301,577 
  Other   44,608    47,754 
     $677,233   $697,307 

 

7. OTHER CURRENT AND NON-CURRENT ASSETS

 

       As at      As at  
(a) Other Current Assets    June 30, 2018      March 31, 2018  
  Prepaid expenses and deposits  $40,364   $32,900 
  Customer acquisition costs   53,877    31,852 
  Green certificates   44,268    42,230 
  Gas delivered in excess of consumption   3,462    2,715 
     $141,971   $109,697 

 

       As at      As at  
(b) Other Non-Current Assets    June 30, 2018      March 31, 2018  
  Customer acquisition costs  $38,114   $7,367 
  Other long-term assets   2,887    12,620 
     $41,001   $19,987 

 

15.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

8.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 are 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.

 

The following table illustrates gains (losses) related to Just Energy’s derivative financial instruments classified as fair value through profit or loss and recorded on the 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 consolidated statements of income.

 

     For the three
months ended
June 30, 2018		      For the three
months ended
June 30, 2017		  
Change in fair value of derivative instruments and other          
           
Physical forward contracts and options (i)  $(98,311)  $88,018 
Financial swap contracts and options (ii)   68,804    3,694 
Foreign exchange forward contracts   2,304    6,939 
Share swap   (3,263)   (2,107)
6.5% convertible bond conversion feature   232    4,784 
Unrealized foreign exchange on 6.5% convertible bond   (3,997)   5,628 
Other derivative options   (2,325)   3,661 
Change in fair value of derivative instruments and other  $(36,556)  $110,617 

 

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the consolidated statement of financial position as at June 30, 2018:

 

  

Financial assets

(current)

 

Financial assets

(non-current)

 

Financial liabilities

(current)

 

Financial liabilities

(non-current)

                     
Physical forward contracts and options (i)  $66,015   $72,233   $18,347   $20,173 
Financial swap contracts and options (ii)   56,034    4,696    8,246    29,754 
Foreign exchange forward contracts   185    899    353    - 
Share swap   -    -    21,663    - 
6.5% convertible bond conversion feature   -    -    -    15 
Other derivative options   4,246    8,960    180    976 
As at June 30, 2018  $126,480   $86,788   $48,789   $50,918 

 

16.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the 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 

 

Below is a summary of the financial instruments classified through profit or loss as at June 30, 2018, to which Just Energy has committed:

 

(i) Physical forward contracts and options consist of:

 

·Electricity contracts with a total remaining volume of 34,655,472 MWh, a weighted average price of $49.68/MWh and expiry dates up to December 31, 2027.

 

·Natural gas contracts with a total remaining volume of 101,401,994 GJs, a weighted average price of $3.60/GJ and expiry dates up to December 31, 2024.

 

·Renewable energy certificates (“RECs”) and emission-reduction credit contracts with a total remaining volume of 3,136,707 MWh and 427,550 tonnes, respectively, a weighted average price of $32.39/REC and $2.61/tonne, respectively, and expiry dates up to December 31, 2028 and December 31, 2021.

 

·Electricity generation capacity contracts with a total remaining volume of 4,826 MWCap, a weighted average price of $6,813.04/MWCap and expiry dates up to October 31, 2022.

 

·Ancillary contracts with a total remaining volume of 848,863 MWh, a weighted average price of $20.23/MWh and expiry dates up to December 31, 2020.

 

(ii) Financial swap contracts and options consist of:

 

·Electricity contracts with a total remaining volume of 15,227,331 MWh, an average price of $39.94/MWh and expiry dates up to November 30, 2024.

 

·Natural gas contracts with a total remaining volume of 125,752,042 GJs, an average price of $3.57/GJ and expiry dates up to December 31, 2024.

 

·Electricity generation capacity contracts with a total remaining volume of 207 MWCap, a weighted average price of $24,104.57/MWCap and expiry dates up to October 31, 2020.

 

·Ancillary contracts with a total remaining volume of 1,388,842 MWh, a weighted average price of $17.96/MWh and expiry dates up to December 31, 2020.

 

17.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 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 fulfill 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 consolidated statement of income 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. 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 consolidated statements of financial position. Changes in the fair value of the share swap agreement are recorded through the consolidated statements of income 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.

 

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

 

18.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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 months ended June 30, 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 June 30, 2018:

 

   Level 1  Level 2  Level 3  Total
Derivative financial assets  $-   $-   $213,268   $213,268 
Derivative financial liabilities   -    (15,392)   (84,315)   (99,707)
Total net derivative assets (liabilities)  $-   $(15,392)  $128,953   $113,561 

 

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 

 

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:

             

 
 		  
 		   Three months ended
June 30, 2018		    
 		   Year ended
March 31, 2018		  
Balance, beginning of period  $166,364   $(315,110)
Total gains (losses)   (219,196)   105,709 
Purchases   (9,939)   207,531 
Sales   4,933    (64,464)
Settlements   42,446    232,698 
Balance, end of period  $(15,392)  $166,364 

 

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

 

As at June 30, 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.

 

19.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

Long-term debt recorded at amortized cost has a fair value as at June 30, 2018 of $594.4 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 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 June 30, 2018 of $36.4 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 June 30, 2018:

 

   Level 1  Level 2  Level 3  Total
Investment in ecobee  $-   $32,446   $-   $32,446 
Investment in Energy Earth   -    3,950    -    3,950 
Total investments  $-   $36,396   $-   $36,396 

 

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 next 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 June 30, 2018, assuming that all the other variables had remained constant, loss for the period would have been $3.2 million lower/higher and other comprehensive income would have been $17.2 million lower/higher.

 

20.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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 $361 in profit before income taxes for the three months ended June 30, 2018 (2017 - $103).

 

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 June 30, 2018 would have increased (decreased) by $235,411 ($233,137), 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 June 30, 2018 would have increased (decreased) by $238,581 ($236,350), 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.

 

21.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

Customer credit risk

 

In Alberta, Texas, Illinois, British Columbia, California, Michigan, Delaware, Ohio, Georgia and the U.K., 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.

 

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

 

     June 30, 2018      March 31, 2018  
       
Current  $124,703   $113,786 
1– 30 days   33,958    

44,374

 
31 – 60 days   12,447    

21,241

 
61 – 90 days   9,680    

12,686

 
Over 90 days   48,486    

69,207

 
   $229,274   $

261,294

 

 

Changes in the expected lifetime credit loss were as follows:

 

     June 30, 2018      March 31, 2018  
       
Balance, beginning of period  $60,121   $49,431 
Provision for doubtful accounts   20,800    56,300 
Bad debts written off   (37,867)   (41,802)
Adjustment from IFRS 9 adoption   23,636    - 
Other   (1,469)   (3,808)
Balance, end of period  $65,221   $60,121 

 

In the remaining markets, the 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.

 

22.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

As at June 30, 2018, the estimated counterparty credit risk exposure amounted to $213,268 (2017 - $35,451), representing the risk relating to Just Energy’s exposure to derivatives that are in an asset position.

 

  (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 June 30, 2018:

 

   Carrying
amount		  Contractual
cash flows		  Less than
1 year		   
1-3 years		   
4-5 years		  More than
5 years
Trade and other payables  $638,420   $638,420   $638,420   $-   $-   $- 
Long-term debt1   578,862    610,845    

-

    

350,845

    260,000    - 
Gas, electricity and non-commodity contracts   99,707    3,332,923    1,606,528    1,391,632    256,316    78,447 
   $1,316,989   $4,582,188   $2,244,948   $1,742,477   $516,316   $78,447 

 

As at March 31, 2018:

 

   Carrying
amount		  Contractual
cash flows		  Less than
1 year		   
1-3 years		   
4-5 years		  More than
5 years
Trade and other payables  $616,434   $616,434   $616,434   $-   $-   $- 
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 
   $1,298,097   $4,362,996   $2,605,938   $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 June 30, 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  $30,389   $35,100   $18,900   $- 

 

(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 fulfill their contractual obligations. As at June 30, 2018, Just Energy has applied an adjustment factor to determine the fair value of its financial assets in the amount of $4,999 (2017 - $4,714) to accommodate for its counterparties’ risk of default.

 

23.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

9. ACQUISITION OF BUSINESSES

 

(a)Acquisition of Intell Enercare Solutions Inc.

 

On June 6, 2017, Just Energy completed the acquisition of 100% of the issued and outstanding shares of Intell Enercare Solutions Inc., a complete service provider for supply, design and installation of energy saving technologies, for up to $11.0 million, subject to closing adjustments. The purchase price consideration included cash consideration of $2.2 million. There is contingent consideration where Just Energy will pay up to $9.0 million to the sellers over three years provided that certain EBITDA targets are satisfied. The EBITDA target with respect to the contingent consideration for 2018 is $3.5 million. For the 2019 and 2020 years, it is $3.0 million and $2.5 million, respectively. The fair value of the contingent consideration at acquisition was estimated to be $7.8 million based on the three-year forecast and was subsequently reduced to $1.3 million. The acquisition of Intell Enercare Solutions Inc. was accounted for using the purchase method of accounting. Just Energy allocated the final purchase price to the identified assets and liabilities acquired based on their fair values at the time of acquisition as follows:

 

NET ASSETS ACQUIRED   
    
Intangible assets  $877 
Goodwill   9,979 
Working capital   (637)
Deferred tax   (232)
Total consideration  $9,987 
      
Cash paid, net of estimated working capital adjustment  $2,199 
Contingent consideration   7,788 
Total consideration  $9,987 

 

The transaction costs related to the acquisition have been expensed and are included in other operating expenses in the consolidated statements of income. The goodwill represents the synergies and potential for cross-selling energy saving technologies to Just Energy customers.

 

(b)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.

 

24.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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 

 

10.NON-CONTROLLING INTEREST

 

Just Energy owns 95% of the issued and outstanding shares of Just Energy Deutschland GmbH and 51% of the issued and outstanding shares of db SWPro GmbH (“SWPro”), and therefore, has treated the 5% and 49%, respectively, that is not owned by Just Energy as a non-controlling interest.

 

11.LONG-TERM DEBT AND FINANCING

 

   Maturity   June 30,
2018		   March 31,
2018		 
Credit facility (a)  September 1, 2020   $153,325   $122,115 
Less: Debt issue costs (a)       (2,439)   (664)
6.75% $100M convertible debentures (b)  March 31, 2023    86,018    85,760 
6.75% $160M convertible debentures (c)  December 31, 2021    148,816    148,146 
6.5% convertible bonds (d)  July 29, 2019    193,142    188,147 
5.75% convertible debentures (e)  September 30, 2018    -    - 
        578,862    543,504 
Less: Current portion       -    (121,451)
       $578,862   $422,053 

 

25.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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)  $-   $

153,325

   $-   $-   $153,325 
6.75% $100M convertible debentures (b)   -         100,000         100,000 
6.75% $160M convertible debentures (c)   -    -    160,000    -    160,000 
6.5% convertible bonds (d)   -    197,520    -    -    197,520 
   $-   $

350,845

   $260,000   $-   $610,845 

 

The details for long-term debt is as follows:

 

   As at April 1, 2018   Cash inflows / (outflows)   FX   Non-cash changes   As at June 30, 2018 
                     
Credit facility (a)  $121,451   $29,037   $-   $398   $150,886 
6.75% $100M convertible debentures (b)   85,760    -    -    258    86,018 
6.75% $160M convertible debentures (c)   148,146    -    -    670    148,816 
6.5% convertible bonds (d)   188,147    -    3,995    1,000    193,142 
    543,504    29,037    3,995    2,326    578,862 
Less: Current portion   (121,451)   -    -    -    - 
    422,053    29,037    3,995    2,326    578,862 

 

   As at April 1, 2017   Cash inflows / (outflows)   FX   Non-cash changes   As at March 31, 2018 
                     
Credit facility (a)  $66,001   $53,857   $-   $1,593   $121,451 
6.75% $100M convertible debentures (b)   -    95,869    -    (10,109)   85,760 
6.75% $160M convertible debentures (c)   145,579    -    -    2,567    148,146 
6.5% convertible bonds (d)   190,486    -    (6,101)   3,761    188,147 
5.75% convertible debentures (e)   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

 

 

26.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

The following table details the finance costs for the quarter ended June 30. Interest is expensed  based on the effective interest rate.

 

   2018   2017 
Credit facility (a)  $4,434   $2,638 
6.75% $100M convertible debentures (b)   2,292    - 
6.75% $160M convertible debentures (c)   3,370    2,720 
6.5% convertible bonds (d)   4,147    4,054 
5.75% convertible debentures (e)   -    2,073 
Unwinding of discount and other   2,097    505 
   $16,340   $11,990 

 

(a)As at June 30, 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 LC 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 3.40%. Prime rate advances are at a rate of bank prime (Canadian bank prime rate or U.S. prime rate) plus 2.40% and letters of credit are at a rate of 3.40%. Interest rates are adjusted quarterly based on certain financial performance indicators.

 

As at June 30, 2018, the Canadian prime rate was 3.45% and the U.S. prime rate was 5.00%. As at June 30, 2018, $153.32 million has been drawn against the facility and total letters of credit outstanding as of June 30, 2018, amounted to $103.9 million (March 31, 2018 - $113.4 million). As at June 30, 2018, Just Energy has $95.3 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 German operations. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at June 30, 2018, the Company was compliant with all of these covenants.

 

(b)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.

 

 (c)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.

 

27.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

(d)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.

 

(e)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 September 30, 2018.

 

12.INCOME TAXES

 

   For the three
months ended
June 30, 2018		   For the three
months ended
June 30, 2017		 
Current income tax expense (recovery)  $(2,512)  $591 
Deferred income tax expense   10,473    6,206 
Provision for income taxes  $7,961   $6,797 

 

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 had 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 expiring March 16, 2018, 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 June 30, 2018, Just Energy had purchased $nil of common shares through the NCIB program, compared to $nil, purchased in the prior year.

 

28.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

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

 

   Three months ended
June 30, 2018		   Year ended
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   630,425    4,979    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   149,024,577   $1,084,034    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   -    (235)   -    (852)
Balance, end of period   4,662,165   $146,983    4,323,300   $136,771 
                     
Shareholders' capital   153,686,742   $1,231,017    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. The Consumer Energy segment includes cash and cash equivalents, as well as the long-term debt.

 

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 customers 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.

 

29.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

For the three months ended June 30, 2018

 

  

Consumer

division

  

Commercial

division

   Corporate and shared services division   Consolidated 
                 
Sales  $542,178   $334,279   $-   $876,457 
Gross margin   118,765    34,767    -    153,532 
Administrative expenses   

20,147

    

9,511

    

26,024

    55,682 
Selling and marketing expenses   

33,689

    

16,85

    -    50,543 
Depreciation of property, plant and equipment   853    45    -    898 
Amortization of intangible assets   4,003    342    -    4,345 
Other operating expenses   20,409    2,166    -    22,575 
Operating profit (loss) for the period  $

39,664

   $

5,849

   $

(26,024

)   19,489 
Finance costs                  (16,340)
Change in fair value of derivative instruments and other                  (36,556)
Other expenses                  (55)
Provision for income taxes                  (7,961)
Loss for the period            $-    (41,423)
Capital expenditures  $9,181   $674   $-    9,855 
Total goodwill  $148,375   $157,018   $-    305,393 
Total assets  $1,222,492   $404,308   $-    1,626,800 
Total liabilities  $1,216,190   $223,600   $-    1,439,790 

 

For the three months ended June 30, 2017

 

  

Consumer

division

  

Commercial

division

   Corporate and shared services division   Consolidated 
                 
Sales  $486,766   $360,940   $-    847,706 
Gross margin   115,507    42,056    -    157,563 
Administrative expenses   

15,244

    7,965    

25,422

    48,631 
Selling and marketing expenses   

38,989

    

19,087

    -    58,076 
Depreciation of property, plant and equipment   949    48    -    997 
Amortization of intangible assets   3,273    187    -    3,460 
Other operating expenses   27,863    2,656    -    30,519 
Operating profit (loss) for the period  $29,189   $

12,113

   $

(25,422

)   15,880 
Finance costs                  (11,990)
Change in fair value of derivative instruments and other                  110,617 
Other income                  1,599 
Provision for income taxes                  (6,797)
Profit for the period            $-    109,309 
Capital expenditures  $5,357   $2,639   $-    7,996 
Total goodwill  $145,177   $150,507   $-    295,684 
Total assets  $968,470   $302,566   $-    1,271,036 
Total liabilities  $1,089,751   $251,104   $-    1,340,855 

 

30.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

Sales from external customers

 

The revenue is based on the location of the customer.

 

   For the
three months
June 30, 2018		   For the
three months
June 30, 2017		 
Canada  $89,228   $83,379 
United States   613,289    634,512 
International   

173,940

    129,815 
Total  $

876,457

   $847,706 

 

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 June 30, 2018   As at March 31, 2018 
Canada  $207,036   $201,985 
United States   214,359    207,147 
International   13,955    11,687 
Total  $435,350   $420,819 

 

15.OTHER EXPENSES

 

(a)Other operating expenses

 

   For the three
months ended
June 30, 2018		   For the three
months ended
June 30, 2017		 
Amortization of intangible assets  $4,345   $3,460 
Depreciation of property, plant and equipment   

898

    997 
Bad debts expense   20,800    15,272 
Share-based compensation   1,775    15,247 
   $27,818   $34,976 

 

(b)Employee benefits expense

 

   For the three
months ended
June 30, 2018		   For the three
months ended
June 30, 2017		 
Wages, salaries and commissions  $61,508   $56,171 
Benefits   4,881    6,310 
   $66,389   $62,481 

 

31.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

16.EARNINGS PER SHARE

 

   For the three
months ended
June 30, 2018		   For the three
months ended
June 30, 2017		 
BASIC EARNINGS (LOSS) PER SHARE          
Profit (loss) as per consolidated statement of income  $(41,377)  $103,858 
Dividend to preferred shareholders - net of tax   2,343    2,212 
Earnings (loss) available to shareholders  $(43,720)  $101,646 
Basic weighted average shares outstanding   148,472,715    147,063,935 
Basic earnings (loss) per share available to shareholders  $(0.29)  $0.69 
           
DILUTED EARNINGS (LOSS) PER SHARE          
Earnings (loss) available to shareholders  $(43,720)   101,646 
Adjustment for dilutive impact of convertible debentures   -    2,366 
Adjusted earnings (loss) available to shareholders  $(43,720)  $99,280 
Basic weighted average shares outstanding   148,472,715    147,063,935 
Dilutive effect of:          
Restricted share and performance bonus grants   3,034,501    3,252,330 
Deferred share grants   115,184    93,593 
Convertible debentures   44,438,208    38,804,494 
Shares outstanding on a diluted basis   196,060,609    189,214,352 
Diluted earnings (loss) per share available to shareholders  $(0.29)  $0.52 

 

17.DIVIDENDS PAID

 

For the quarter ended June 30, 2018, dividends of $0.125 (2017 - $0.125) per common share were declared by Just Energy. These dividends amounted to $19,074 (2017 - $18,773), and were approved by the Board of Directors and were paid out during the year.

 

For the quarter ended June 30, 2018, dividends of US$0.53125 (2017 - $0.53125) per preferred share were declared by Just Energy. These dividends amounted to $3,188 (2017 - $3,010), and were approved by the Board of Directors and were paid out during the year.

 

32.

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2018

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

 

18.COMMITMENTS AND GUARANTEES

 

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

 

As at June 30, 2018

 

   Less than 1 year   1-3 years   4-5 years   More than 5 years   Total 
Premises and equipment leasing  $3,676   $7,959   $7,659   $7,581   $26,875 
Gas, electricity and non-commodity contracts   1,606,528    1,391,632    256,316    78,447    3,332,923 
   $1,610,204   $1,399,591   $263,975   $86,028   $3,359,798 

 

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.

 

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 June 30, 2018 amounted to $58.6 million.  

 

As at June 30, 2018, Just Energy had total letters of credit outstanding in the amount of $103.9 million (Note 11(a)).

 

19.COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

 

 

33.