UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

________________________________________

 

FORM 6-K/A

(Amendment No. 1)

________________________________________

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

For the month of May 2019

 

Commission File Number 001-35400

________________________________________

 

 Just Energy Group Inc.

(Translation of registrant's name into English)

________________________________________

 

6345 Dixie Road, Suite 200, Mississauga, Ontario, Canada, L5T 2E6
(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40F:

 

Form 20-F            Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 

Explanatory Note

 

On May 22, 2019, Just Energy Group Inc. (the “Registrant”) filed a Report of Foreign Private Issuer on Form 6-K (the “Initial 6-K”). The Initial 6-K inadvertently omitted the following reports: (i) Management's responsibility for financial reporting; (ii) Management's report on internal control over financial reporting; and (iii) Reports of independent registered public accounting firm, each dated May 15, 2019, to be included in the Initial 6-K as part of Exhibit 99.1 – Financial Statements. These reports are being filed herewith, together with the Audited Consolidated Financial Statements for the year ended March 31, 2019.

 

DOCUMENTS INCLUDED AS PART OF THIS REPORT

 

Exhibit  
   
99.1** Financial Statements
   
99.2* Management Discussion and Analysis

 

 

* Previously filed

** Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  JUST ENERGY GROUP INC.  
  (Registrant)  
       
Date: May 31, 2019 By: /s/ JONAH T. DAVIDS  
  Name: Jonah T. Davids  
  Title: EVP, General Counsel and Corporate Secretary
       
       

 

 

 

 

 

 

 

 

 

Exhibit 99.1

 

 

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

 

The accompanying consolidated financial statements of Just Energy Group Inc. and all the information in this annual report are the responsibility of management and have been approved by the Board of Directors.

 

The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The consolidated financial statements include some amounts that are based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to ensure that the consolidated financial statements are presented fairly, in all material respects. Financial information presented elsewhere in this annual report has been prepared on a consistent basis with that in the consolidated financial statements.

 

Just Energy Group Inc. maintains systems of internal accounting and administrative controls. These systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Company assets are properly accounted for and adequately safeguarded.

 

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out this responsibility principally through its Audit Committee.

 

The Audit Committee is appointed by the Board of Directors and is composed entirely of non-management directors. The Audit Committee meets periodically with management and the external auditors, to discuss auditing, internal controls, accounting policy and financial reporting matters. The committee reviews the consolidated financial statements with both management and the external auditors and reports its findings to the Board of Directors before such statements are approved by the Board.

 

The consolidated financial statements have been audited by Ernst & Young LLP, the external auditors, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) on behalf of the shareholders. The external auditors have full and free access to the Audit Committee, with and without the presence of management, to discuss their audit and their findings as to the integrity of the financial reporting and the effectiveness of the system of internal controls.

 

On behalf of Just Energy Group Inc.

 

 

/s/ Pat McCullough  /s/ Jim Brown
    
Pat McCullough  Jim Brown
    
Chief Executive Officer  Chief Financial Officer

 

 

Toronto, Canada

 

May 15, 2019

 

 

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 

The management of Just Energy Group Inc. (“the Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, and has designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Management has used “Internal Control – Integrated Framework” to evaluate the effectiveness of internal control over financial reporting, which is a recognized and suitable framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has evaluated the design and operation of the Company’s internal control over financial reporting as of March 31, 2019, and has concluded that such internal control over financial reporting is effective.

 

Ernst & Young LLP, the independent auditors appointed by the shareholders of the Company who have audited the consolidated financial statements, have also audited internal control over financial reporting and have issued their report on the following page of this annual report.

 

 

/s/ Pat McCullough  /s/ Jim Brown
    
Pat McCullough  Jim Brown
    
Chief Executive Officer  Chief Financial Officer

 

 

Toronto, Canada

 

May 15, 2019

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and the Board of Directors of Just Energy Group Inc.

 

Opinion on Internal Control over Financial Reporting

 

We have audited Just Energy Group Inc.’s internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO criteria”). In our opinion, Just Energy Group Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2019, based on the COSO criteria.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial position as of March 31, 2019 and 2018, and the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended and the related notes and our report dated May 15, 2019 expressed an unqualified opinion thereon.

 

Basis for Opinion

 

Just Energy Group Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Discussion and Analysis. Our responsibility is to express an opinion on Just Energy Group Inc.’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Just Energy Group Inc. in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

 

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control Over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

 

 

Toronto, Canada

 

May 15, 2019

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and the Board of Directors of Just Energy Group Inc.

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated statements of financial position of Just Energy Group Inc. as of March 31, 2019 and 2018, and the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the two years in the period ended March 31, 2019 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Just Energy Group Inc. at March 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended, in conformity with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board.

 

Adoption of New Accounting Standards

 

As discussed in Note 7 to the consolidated financial statements, Just Energy Group Inc. changed its method of accounting for Revenue and Financial Instruments in 2019 due to the adoption of IFRS 15, Revenue from Contracts with Customers and IFRS 9, Financial Instruments.

 

Report on Internal Control over Financial Reporting

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), Just Energy Group Inc.’s internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”) and our report dated May 15, 2019 expressed an unqualified opinion on the effectiveness of Just Energy Group Inc.’s internal control over financial reporting.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of Just Energy Group Inc.’s management. Our responsibility is to express an opinion on Just Energy Group Inc.’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Just Energy Group Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

We have served as Just Energy Group Inc.’s auditor since 2011

 

Toronto, Canada

 

May 15, 2019

 

 

 

JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at March 31 (in thousands of Canadian dollars)

 

   Notes  2019   2018 
ASSETS             
Current assets             
Cash and cash equivalents     $9,927   $48,861 
Restricted cash      4,048    3,515 
Trade and other receivables  9   783,780    658,844 
Gas in storage      2,943    2,342 
Fair value of derivative financial assets  14   144,512    218,769 
Income taxes recoverable      18,973    5,617 
Other current assets  10   169,240    112,214 
       1,133,423    1,050,162 
Non-current assets             
Investments  11   36,897    36,314 
Property and equipment, net  12   25,862    18,893 
Intangible assets, net  13   472,656    401,926 
Fair value of derivative financial assets  14   9,255    64,662 
Deferred income tax assets  21   9,492    9,449 
Other non-current assets  10   49,512    19,987 
       603,674    551,231 
Assets classified as held for sale  18   8,971    - 
       612,645    551,231 
TOTAL ASSETS     $1,746,068   $1,601,393 
              
LIABILITIES             
              
Current liabilities             
Trade and other payables  15  $714,110   $590,018 
Deferred revenue  16   43,228    38,710 
Income taxes payable      11,895    5,486 
Fair value of derivative financial liabilities  14   79,387    86,288 
Provisions  20   7,205    4,714 
Current portion of long-term debt  19   37,429    121,451 
       893,254    846,667 
Non-current liabilities             
Long-term debt  19   687,943    422,053 
Fair value of derivative financial liabilities  14   63,658    51,871 
Deferred income tax liabilities  21   4,124    6,918 
Other non-current liabilities      61,339    57,349 
       817,064    538,191 
Liabilities relating to assets classified as held for sale  18   5,200    - 
       822,264    538,191 
TOTAL LIABILITIES      1,715,518    1,384,858 
SHAREHOLDERS' EQUITY             
Shareholders’ capital  22   1,235,503    1,215,826 
Equity component of convertible debentures      13,029    13,029 
Contributed deficit      (25,540)   (22,693)
Accumulated deficit      (1,271,136)   (1,081,139)
Accumulated other comprehensive income      79,093    91,934 
Non-controlling interest      (399)   (422)
TOTAL SHAREHOLDERS' EQUITY      30,550    216,535 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $1,746,068   $1,601,393 

 

Commitments and Guarantees (Note 31)

 

See accompanying notes to the 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.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED MARCH 31
(in thousands of Canadian dollars, except where indicated and per share amounts)

 

   Notes  2019   2018 
CONTINUING OPERATIONS             
Sales  24  $3,812,470   $3,623,558 
Cost of sales      3,100,255    2,983,047 
GROSS MARGIN      712,215    640,511 
EXPENSES             
Administrative      206,820    187,250 
Selling and marketing      232,030    232,228 
Other operating expenses  25(a)   115,016    95,304 
Restructuring costs  20   16,078    - 
       569,944    514,782 
Operating profit before the following      142,271    125,729 
Finance costs  19   (88,072)   (55,972)
Change in fair value of derivative instruments and other  14   (153,226)   474,393 
Other income, net  17   1,365    1,040 
Profit (loss) before income taxes      (97,662)   545,190 
Provision for income taxes  21   2,829    20,671 
PROFIT (LOSS) FROM CONTINUING OPERATIONS     $(100,491)  $524,519 
              
DISCONTINUED OPERATIONS             
Loss from discontinued operations  18   (22,379)   (5,945)
PROFIT (LOSS) FOR THE YEAR     $(122,870)  $518,574 
              
Attributable to:             
Shareholders of Just Energy     $(122,678)  $509,276 
Non-controlling interest      (192)   9,298 
PROFIT (LOSS) FOR THE YEAR     $(122,870)  $518,574 
              
              
Earnings (loss) per share from continuing operations  27          
Basic     $(0.73)  $3.45 
Diluted     $(0.73)  $2.65 
Loss per share from discontinued operations  18          
Basic     $(0.15)  $(0.03)
Diluted     $(0.15)  $(0.03)
Earnings (loss) per share available to shareholders  27          
Basic     $(0.88)  $3.42 
Diluted     $(0.88)  $2.62 

 

See accompanying notes to the consolidated financial statements

 

  2.

 

JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED MARCH 31
(in thousands of Canadian dollars)

 

   2019   2018 
PROFIT (LOSS) FOR THE YEAR  $(122,870)  $518,574 
Other comprehensive income to be reclassified to profit or loss in subsequent years:          
Unrealized gain on translation of foreign operations from continuing operations   4,217    2,843 
Unrealized gain on translation of foreign operations from discontinued operations   805    867 
Unrealized gain on revaluation of investment, net of tax   -    17,863 
    5,022    21,573 
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR, NET OF TAX  $(117,848)  $540,147 
           
Total comprehensive income (loss) attributable to:          
Shareholders of Just Energy  $(117,656)  $530,849 
Non-controlling interest   (192)   9,298 
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR, NET OF TAX  $(117,848)  $540,147 

 

See accompanying notes to the consolidated financial statements

                 

  3.

 

JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED MARCH 31
(in thousands of Canadian dollars)

 

   Notes  2019   2018 
ATTRIBUTABLE TO THE SHAREHOLDERS             
Accumulated earnings             
Accumulated earnings, beginning of year     $754,639   $259,571 
Adjustment for revision  5   -    (14,208)
Adjustment for adoption of recent accounting pronouncements  7   20,711    - 
Profit (loss) for the period, attributable to shareholders      (122,678)   509,276 
Accumulated earnings, end of year      652,672    754,639 
              
DIVIDENDS AND DISTRIBUTIONS             
Dividends and distributions, beginning of year      (1,835,778)   (1,749,471)
Dividends and distributions declared and paid  30   (88,030)   (86,307)
Dividends and distributions, end of year      (1,923,808)   (1,835,778)
DEFICIT     $(1,271,136)  $(1,081,139)
              
ACCUMULATED OTHER COMPREHENSIVE INCOME             
Accumulated other comprehensive income, beginning of year     $91,934   $70,361 
Adjustment for adoption of recent accounting pronouncements  7   (17,863)   - 
Other comprehensive income      5,022    21,573 
Accumulated other comprehensive income, end of year     $79,093   $91,934 
              
SHAREHOLDERS’ CAPITAL  22          
Common shares             
Common shares, beginning of year     $1,079,055   $1,070,076 
Share-based units exercised      9,483    11,954 
Acquisition of businesses  17   -    8,966 
Repurchase and cancellation of shares      -    (11,941)
Common shares, end of year     $1,088,538   $1,079,055 
              
Preferred shares             
Preferred shares, beginning of year     $136,771   $128,363 
Shares issued  22   10,447    9,260 
Shares issuance costs      (253)   (852)
Preferred shares, end of year      146,965    136,771 
SHAREHOLDERS’ CAPITAL     $1,235,503   $1,215,826 
              
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES             
Balance, beginning of year     $13,029   $13,508 
Add: Issuance of convertible debentures  19(d)   -    7,130 
Less: Redemption of convertible debentures  19(g)   -    (7,609)
Balance, end of year     $13,029   $13,029 
              
CONTRIBUTED SURPLUS (DEFICIT)             
Balance, beginning of year     $(22,693)  $58,266 
Add:    Share-based compensation expense  25(a)   6,133    18,353 
Redemption of convertible debentures  19(e)   -    7,126 
Non-cash deferred share grant distributions      72    45 
Less:    Purchase of non-controlling interest      1,462    (89,010)
Share-based units exercised      (9,483)   (11,954)
Share-based compensation adjustment      (1,031)   (5,519)
Balance, end of year     $(25,540)  $(22,693)
              
NON-CONTROLLING INTEREST             
Balance, beginning of year     $(422)  $- 
Distributions to non-controlling shareholders      -    (9,603)
Foreign exchange impact on non-controlling interest      215    (117)
Profit (loss) attributable to non-controlling interest      (192)   9,298 
Balance, end of year     $(399)  $(422)
TOTAL SHAREHOLDERS' EQUITY     $30,550   $216,535 

 

See accompanying notes to the consolidated financial statements                    

  4.

 

JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31

(in thousands of Canadian dollars)

 

Net inflow (outflow) of cash related to the following activities  Notes  2019   2018 
OPERATING             
Profit (loss) from continuing operations before income taxes     $(97,662)  $545,190 
Loss from discontinued operations before income taxes  18   (22,375)   (5,942)
Profit (loss) before income taxes      (120,037)   539,248 
              
Items not affecting cash             
 Amortization of intangible assets  25(a)   22,655    16,547 
 Depreciation of property and equipment  25(a)   4,771    4,073 
 Amortization included in cost of sales      2,666    3,116 
 Share-based compensation  25(a)   6,133    18,353 
 Financing charges, non-cash portion      18,223    14,547 
 Other      (110)   (369)
 Change in fair value of investments      -    1,289 
 Change in fair value of derivative instruments and other  14   153,226    (474,393)
 Adjustment required to reflect net cash receipts from gas sales  32(a)   4,186    (2,876)
 Net change in working capital balances  32(b)   (124,138)   (36,425)
 Adjustment for non-cash discontinued operations      405    231 
 Income taxes paid      (12,435)   (21,319)
Cash inflow (outflow) from operating activities      (44,455)   62,022 
              
INVESTING             
 Purchase of property and equipment      (5,159)   (4,838)
 Purchase of intangible assets      (38,383)   (30,938)
 Acquisition of businesses      (4,281)   (10,832)
 Short-term investments      -    25,532 
Cash outflow from investing activities      (47,823)   (21,076)
              
FINANCING             
 Dividends paid  30   (87,959)   (86,261)
 Repayment of long-term debt      (173,366)   (100,000)
 Issuance of long-term debt      253,242    100,000 
 Share swap payout      (10,000)   - 
 Debt issuance costs      (18,132)   (4,115)
 Credit facilities withdrawal      79,462    53,857 
 Issuance of preferred shares      10,447    9,260 
 Preferred shares issuance costs      (352)   (2,114)
 Shares repurchase      -    (11,941)
 Distributions to non-controlling interest      -    (9,603)
Cash inflow (outflow) from financing activities      53,342    (50,917)
              
Effect of foreign currency translation on cash balances      2    1,456 
              
Net cash outflow      (38,934)   (8,515)
Cash and cash equivalents, beginning of year      48,861    57,376 
              
Cash and cash equivalents, end of year     $9,927   $48,861 
              
Supplemental cash flow information:             
Interest paid     $52,836   $38,551 

 

See accompanying notes to the consolidated financial statements                    

 

  5.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

1.ORGANIZATION

 

Just Energy Group Inc. (“JEGI”, “Just Energy” or the “Company”) 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 consolidated financial statements consist of Just Energy and its subsidiaries and affiliates. The consolidated financial statements were approved by the Board of Directors on May 15, 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 and the United Kingdom (“U.K.”), 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.

 

Just Energy’s current commodity product offerings include fixed, variable, index and flat rate options. 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 currently manufactured and distributed by ecobee Inc. (“ecobee”), a company in which Just Energy holds a 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 which include, but are not limited to, LED retrofit lighting and HVAC controls, as well as enterprise monitoring.

 

Just Energy markets its product offerings through several sales channels including brokers, online marketing, retail and affinity relationships, and door-to-door.

 

In March 2019, Just Energy formally approved and commenced a process to dispose of its businesses in Germany, Ireland and Japan. The decision was part of a strategic transition to focus on the core business in North America and the U.K. The disposal of the operations is expected to be completed within the next 12 months. At March 31, 2019, these operations were classified as a disposal group held for sale and as a discontinued operation. Previously, these operations were reported within the Consumer segment.

 

  6.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

3.BASIS OF PRESENTATION

 

(a)Compliance with IFRS

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The policies applied in these consolidated financial statements were based on IFRS issued and outstanding as at March 31, 2019.

 

The consolidated financial statements are presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand, except where indicated. The Company’s consolidated financial statements are prepared on the historical cost basis of accounting, except as disclosed in the accounting policies set out below.

 

(b)Principles of consolidation

 

The consolidated financial statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries as at March 31, 2019. Subsidiaries are consolidated from the date of acquisition and control, and continue to be consolidated until the date that such control ceases. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect these returns through its power over the investee. The financial statements of the subsidiaries are prepared for the same reporting period as Just Energy, using consistent accounting policies. All intercompany balances, income, expenses, and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.

 

(c)Comparative consolidated financial statements

 

Certain figures in the comparative consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the current year’s consolidated financial statements. This includes consolidating the unbilled revenues with trade receivables and separating out the discontinued operations’ results from prior fiscal years. The changes were made to consolidate line items that are alike in nature and for comparability of results.

 

4.SIGNIFICANT ACCOUNTING POLICIES

 

Cash and cash equivalents and restricted cash

 

All highly liquid temporary cash investments with an original maturity of three months or less when purchased are considered to be cash equivalents. For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

 

Restricted cash includes cash and cash equivalents, where the availability of funds is restricted by debt arrangements or held in escrow as part of prior acquisition agreements.

 

  7.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Accrued gas receivable/accrued gas payable or gas delivered in excess of consumption/deferred revenue

 

Accrued gas receivable from Just Energy’s customers is stated at fair value and results from customers consuming more gas than has been delivered by Just Energy to local distribution companies (“LDCs”). Accrued gas payable represents Just Energy’s obligation to the LDCs for the customers’ excess consumption, over what was delivered to the LDCs.

 

Gas delivered to LDCs in excess of consumption by customers is stated at the lower of cost and net realizable value. Collections from customers in advance of their consumption of gas result in deferred revenue.

 

Assuming normal weather and consumption patterns, during the winter months, customers will have consumed more than was delivered, resulting in the recognition of accrued gas receivable/accrued gas payable. In the summer months, customers will have consumed less than what was delivered, resulting in the recognition of gas delivered in excess of consumption/deferred revenue.

 

These adjustments are applicable solely to the Ontario, Manitoba, Quebec, Saskatchewan and Michigan gas markets.

 

Gas in storage

 

Gas in storage represents the gas delivered to the LDCs in Illinois, Indiana, New York, Ohio, Georgia, Maryland, California and Alberta. The balance will fluctuate as gas is injected into or withdrawn from storage.

 

Gas in storage is valued at the lower of cost and net realizable value, with cost being determined on a weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business.

 

Property and equipment (“P&E”)

 

Property and equipment are stated at cost, net of any accumulated depreciation and impairment losses. Cost includes the purchase price and, where relevant, any costs directly attributable to bringing the asset to the location and condition necessary and/or the present value of all dismantling and removal costs. Where major components of property and equipment have different useful lives, the components are recognized and depreciated separately. Just Energy recognizes, in the carrying amount, the cost of replacing part of an item when the cost is incurred and if it is probable that the future economic benefits embodied in the item can be reliably measured. When significant parts of property and equipment are required to be replaced at intervals, Just Energy recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the consolidated statements of income (loss) as a general and administrative expense when incurred. Depreciation is provided over the estimated useful lives of the assets as follows:

 

 

  8.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Asset category Depreciation method Rate/useful life
Furniture and fixtures Declining balance 20%
Office equipment Declining balance 20%
Computer equipment Declining balance 30%
Leasehold improvements Straight-line Term of lease
Thermostats Straight-line 5 years
Installed assets (water filtration) Straight-line 4-7 years

 

An item of property and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the consolidated statements of income (loss).

 

The useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively, if appropriate.

 

Business combinations

 

All identifiable assets acquired and liabilities assumed are measured at the acquisition date at fair value. The Company records all identifiable intangible assets including identifiable assets that had not been recognized by the acquiree before the business combination. Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period (which is within one year from the acquisition date), Just Energy may adjust the amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. Adjustments related to facts and circumstances that did not exist as at the consolidated statement of financial position dates are taken to the consolidated statements of income (loss). The Company records acquisition-related costs as expenses in the periods in which the costs are incurred with the exception of certain costs relating to registering and issuing debt or equity securities which are accounted for as part of the financing. Non-controlling interest is recognized at its proportionate share of the fair value of identifiable assets and liabilities, unless otherwise indicated.

 

Goodwill

 

Goodwill is initially measured at cost, which is the excess of the cost of the business combination over Just Energy’s share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Any negative difference is recognized directly in the consolidated statements of income (loss).

 

After initial recognition, goodwill is measured at cost, less impairment losses. For the purpose of impairment testing, goodwill is allocated to each of Just Energy’s operating segments that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the acquiree are assigned to those segments.

 

Intangible assets

 

Intangible assets acquired outside of a business combination are measured at cost on initial recognition. Intangible assets acquired in a business combination are recorded at fair value on the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and/or accumulated impairment losses.

  9.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Intangible assets with finite useful lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and amortization period of an intangible asset with a finite useful life are reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense related to intangible assets with finite lives is recognized in the consolidated statements of income (loss) in the expense category associated with the function of the intangible assets. Intangible assets consist of gas customer contracts, electricity customer contracts, sales network, brand and goodwill, acquired through business combinations and asset purchases, as well as software, commodity billing and settlement systems and information technology system development.

 

Internally generated intangible assets are capitalized when the product or process is technically and commercially feasible, the future economic benefit is measurable, Just Energy can demonstrate how the asset will generate future economic benefits and Just Energy has sufficient resources to complete development. The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management.

 

The goodwill and certain brands are considered to have indefinite lives and are not amortized, rather tested annually for impairment. The assessment of indefinite life is reviewed annually. The Filter Group brand is treated as a finite life asset and amortized due to its history of rebranding.

 

Gains or losses arising from disposal of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in the consolidated statements of income (loss) when the asset is derecognized.

 

Intangible asset category Amortization method Rate/useful life
Customer contracts Straight-line Term of contract
Contract relationships Straight-line Term of contract
Commodity billing and settlement system Straight-line 5 years
Sales network and affinity relationships Straight-line 5-8 years
Information technology system development Straight-line 3-5 years
Software Straight-line 1 year
Technology Straight-line 15 years
Brand (Filter Group) Straight-line 10 years

 

Impairment of non-financial assets

 

Just Energy assesses whether there is an indication that an asset may be impaired at each reporting date. If such an indication exists or when annual testing for an asset is required, Just Energy estimates the asset's recoverable amount. The recoverable amounts of goodwill and intangible assets with an indefinite useful life are tested annually. The recoverable amount is the higher of an asset's or cash-generating unit's (“CGU”) fair value less costs to sell and its value-in-use. Value-in-use is determined by discounting estimated future pre-tax cash flows using a pre-tax discount rate that reflects the current market assessment of the time value of money and the specific risks of the asset. The recoverable amount of assets that do not generate independent cash flows is determined based on the CGU to which the asset belongs.

  10.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

An impairment loss is recognized if an asset's carrying amount or that of the CGU to which it is allocated is higher than its recoverable amount. Impairment losses of CGUs are first charged against the value of assets in proportion to their carrying amount.

 

In the consolidated statements of income (loss), an impairment loss is recognized in the expense category associated with the function of the impaired asset.

 

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, Just Energy estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the asset in prior years. Such a reversal is recognized in the consolidated statements of income (loss).

 

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Goodwill is tested at the segment level as that is the lowest level at which goodwill is monitored. Impairment is determined for goodwill by assessing the recoverable amount of each segment to which the goodwill relates. Where the recoverable amount of the segment is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

 

Leases

 

A lease is an arrangement whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Where Just Energy determines that the contractual provisions of a contract contain, or are, a lease and result in the customer assuming the principal risks and rewards of ownership of the asset, the arrangement is a finance lease. Assets subject to finance leases are not reflected as property and equipment and the net investment in the lease, represented by the present value of the amounts due from the lessee, is recorded as a financial asset, classified as a finance lease receivable. The payments considered to be part of the leasing arrangement are apportioned between a reduction in the lease receivable and finance lease income. The finance lease income element of the payments is recognized using a method that results in a constant rate of return on the net investment in each period and is reflected in financing income.

 

IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) requires the estimation of total consideration over the contract term and the allocation of that consideration to all performance obligations in the contract based on their relative stand-alone selling prices. As such, consideration is allocated towards the performance obligation related to the finance lease and commodity revenue if a customer has a contract with Just Energy for a thermostat and electricity and/or power that was entered into at the same time.

 

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at the inception date and whether fulfillment of the arrangement is dependent on the use of a specific asset or assets, or the arrangement conveys a right to use the asset.

 

Just Energy as a lessee

 

Operating lease payments are recognized as an expense in the consolidated statements of income (loss) on a straight-line basis over the lease term.

  11.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Just Energy as a lessor

 

Leases where Just Energy does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income.

 

Just Energy considers itself to be a dealer lessor with respect to its lease arrangements for thermostats as it has given the customer the choice of either buying or leasing the thermostat. A finance lease of an asset by a dealer lessor gives rise to profit or loss equivalent to that resulting from an outright sale of the underlying asset, at normal selling prices. Just Energy recognizes revenue based on the fair value of the thermostat at the time of completed installation of the thermostat, at which point in time Just Energy has transferred control of the thermostat to the customer. Just Energy also recognizes the cost of sale on the thermostat through cost of goods sold.

 

Financial instruments

 

For comparability purposes, the accounting policies below discuss the previous financial instruments treatment under IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”). IAS 39 was applied in fiscal 2018. For fiscal 2019, the Company adopted IFRS 9, Financial Instruments (“IFRS 9”), as discussed in Note 7, “Accounting Policies and New Standards Adopted”.

 

Financial assets and liabilities

 

Just Energy classifies its financial assets as either (i) financial assets at fair value through profit or loss, (ii) loans and receivables, (iii) other financial assets, or (iv) available for sale, and its financial liabilities as either (i) financial liabilities at fair value through profit or loss or (ii) other financial liabilities. Appropriate classification of financial assets and liabilities is determined at the time of initial recognition or when reclassified in the consolidated statements of financial position.

 

Financial instruments are recognized on the trade date, which is the date on which Just Energy commits to purchase or sell the asset.

 

Financial assets at fair value through profit or loss

 

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as fair value through profit or loss if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Included in this class are primarily physical delivered energy contracts, for which the own-use exemption could not be applied, financially settled energy contracts and foreign currency forward contracts.

 

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 14. Related realized and unrealized gains and losses are included in the consolidated statements of income (loss).

  12.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Loans and receivables

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognized at fair value net of transaction costs. They are subsequently measured at amortized cost using the effective interest rate method less any impairment. The effective interest amortization is included in finance costs in the consolidated statements of income (loss).

 

Financial assets classified as available for sale

 

Available for sale financial assets are held at fair value with gains and losses included in other comprehensive income. Just Energy uses this classification for assets that are not derivatives and are not held for trading purposes or otherwise designated at fair value through profit or loss, or at amortized cost.

 

Derecognition

 

A financial asset is derecognized when the rights to receive cash flows from the asset have expired or when Just Energy has transferred its rights to receive cash flows from the asset.

 

Impairment of financial assets

 

Just Energy assesses whether there is objective evidence that a financial asset is impaired at each reporting date. A financial asset is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows that can be reliably estimated.

 

For significant individual financial assets carried at amortized cost, Just Energy assesses if impairment significantly exists. Insignificant financial assets are assessed collectively. If Just Energy determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

 

If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

 

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of other income in the consolidated statements of income (loss).

 

Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to other operating costs in the consolidated statements of income (loss).

  13.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Financial liabilities at fair value through profit or loss

 

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

 

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by Just Energy that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Included in this class are primarily physically delivered energy contracts, for which the own-use exemption could not be applied, financially settled energy contracts and foreign currency forward contracts.

 

Gains or losses on liabilities held for trading are recognized in the consolidated statements of income (loss).

 

Other financial liabilities

 

Other financial liabilities are measured at amortized cost using the effective interest rate method. Financial liabilities include long-term debt issued and are initially measured at fair value. Fair value is the consideration received, net of transaction costs incurred, trade and other payables and bank indebtedness. Transaction costs related to the long-term debt instruments are included in the value of the instruments and amortized using the effective interest rate method. The effective interest expense is included in finance costs in the consolidated statements of income (loss).

 

Derecognition

 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated statements of income (loss).

 

Derivative instruments

 

Just Energy enters into fixed-term contracts with customers to provide electricity and gas at fixed prices. These customer contracts expose Just Energy to changes in consumption as well as changes in the market prices of gas and electricity. To reduce its exposure to movements in commodity prices, Just Energy enters into contracts with suppliers that expose the Company to changes in prices for the purchase and sale of power and natural gas. These contracts are treated as derivatives as they do not meet the own-use criteria under IAS 32, Financial Instruments: Presentation (“IAS 32”). The primary factors affecting the fair value of derivative instruments at any point in time are the volume of open derivative positions and the changes of commodity market prices. Prices for power and natural gas are volatile, which can result in material changes in the fair value measurements reported in Just Energy’s consolidated financial statements in the future.

 

Just Energy analyzes all its contracts, of both a financial and non-financial nature, to identify the existence of any “embedded” derivatives. Embedded derivatives are accounted for separately from the underlying contract at the inception date when their economic characteristics are not closely related to those of the host contract and the host contract is not carried as held for trading or designated as fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss.

  14.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

All derivatives are recognized at fair value on the date on which the derivative is entered into and are remeasured to fair value at each reporting date. Derivatives are carried in the consolidated statements of financial position as other financial assets when the fair value is positive and as other financial liabilities when the fair value is negative. Just Energy does not utilize hedge accounting; therefore, changes in the fair value of these derivatives are recorded directly to the consolidated statements of income (loss) and are included within change in fair value of derivative instruments and other.

 

Offsetting of financial instruments

 

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statements of financial position if, and only if, there is currently an enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

 

Fair value of financial instruments

 

Fair value 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). The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs.

 

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques that are recognized by market participants. Such techniques may include using recent arm’s-length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis, or other valuation models. An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 14.

 

Revenue recognition

 

For comparability purposes, the accounting policy below discusses the previous revenue recognition treatment under IAS 18, Revenue (“IAS 18”). The fiscal 2018 financial statements were prepared using IAS 18. For fiscal 2019, the Company adopted IFRS 15 as discussed in Note 7, “Accounting Policies and New Standards Adopted”.

 

Revenue is recognized when significant risks and rewards of ownership are transferred to the customer. In the case of gas and electricity, transfer of risks and rewards is upon consumption of the commodity. Just Energy recognizes revenue from thermostat leases, based on rental rates over the term commencing from the installation date.

 

Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and sales taxes.

 

The Company assumes credit risk for all customers in Alberta, Texas, Illinois, California, Michigan, Delaware, Ohio, Georgia and the U.K. On all value-added products sold on the market, Just Energy also assumes the credit risk. In these markets, the Company ensures that credit review processes are in place prior to the commodity flowing to the customer.

  15.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Foreign currency translation

 

Functional and presentation currency

 

Items included in the consolidated financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). For U.S.-based subsidiaries, this is U.S. dollars (“USD”), for subsidiaries based in the U.K. it is British pounds, and for subsidiaries based in Germany and Ireland it is euros. The consolidated financial statements are presented in Canadian dollars, which is the parent Company’s presentation and functional currency.

 

Transactions

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of income (loss).

 

Translation of foreign operations

 

The results and consolidated financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

·assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate as at the date of that consolidated statement of financial position; and

 

·income and expenses for each consolidated statement of income (loss) are translated at the exchange rates prevailing at the dates of the transactions.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are recorded in other comprehensive income (“OCI”).

 

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in accumulated other comprehensive income are recognized in the consolidated statements of income (loss) as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

 

Earnings (loss) per share amounts

 

The computation of earnings (loss) per share is based on the weighted average number of shares outstanding during the year. Diluted earnings (loss) per share are computed in a similar way to basic earnings (loss) per share except that the weighted average number of shares outstanding is increased to include additional shares assuming the exercise of stock options, restricted share grants (“RSGs”), performance bonus incentive grants (“PBGs”), deferred share grants (“DSGs”) and convertible debentures, if dilutive.

  16.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Share-based compensation plans

 

Equity-based compensation liability

 

Share-based compensation plans are equity-settled transactions. The cost of share-based compensation is measured by reference to the fair value at the date on which it was granted. Awards are valued at the grant date and are not adjusted for changes in the prices of the underlying shares and other measurement assumptions. The cost of equity-settled transactions is recognized, together with the corresponding increase in equity, over the period in which the performance or service conditions are fulfilled, ending on the date on which the relevant grantee becomes fully entitled to the award. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting period reflects the extent to which the vesting period has expired and Just Energy’s best estimate of the number of the shares that will ultimately vest. The expense or credit recognized for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

 

When options, RSGs, PBGs and DSGs are exercised or exchanged, the amounts previously credited to contributed deficit are reversed and credited to shareholders' capital.

 

Employee future benefits

 

In Canada, Just Energy offers a long-term wealth accumulation plan (the "Canadian Plan") for all permanent full-time and permanent part-time employees (working more than 26 hours per week). The Canadian Plan consists of two components, a Deferred Profit Sharing Plan ("DPSP") and an Employee Profit Sharing Plan ("EPSP"). For participants of the DPSP, Just Energy contributes an amount equal to a maximum of 2% per annum of an employee's base earnings. For the EPSP, Just Energy contributes an amount up to a maximum of 2% per annum of an employee's base earnings towards the purchase of shares of Just Energy, on a matching one-for-one basis.

 

For U.S. employees, Just Energy has established a long-term savings plan (the "U.S. Plan") for all permanent full-time and part-time employees (working more than 30 hours per week) of its subsidiaries. The U.S. Plan consists of two components, a 401(k) and an Employee Unit Purchase Plan ("EUPP"). For participants who are enrolled only in the EUPP, Just Energy contributes an amount up to a maximum of 3% per annum of an employee's base earnings towards the purchase of Just Energy shares, on a matching one-for-one basis. For participants who are enrolled only in the 401(k), Just Energy contributes an amount up to a maximum of 4% per annum of an employee's base earnings, on a matching one-for-one basis. In the event an employee participates in both the EUPP and 401(k), the maximum Just Energy will contribute is 5% total, consisting of 3% to the EUPP and 2% to the 401(k).

 

Participation in the plans in Canada or the U.S. is voluntary. For the 401(k), there is a two-year vesting period beginning from the date of hire, and for the EUPP, there is a six-month vesting period from the employee's enrollment date in the plan.

 

Obligations for contributions to the Canadian and U.S. Plans are recognized as an expense in the consolidated statements of income (loss) when the employee makes a contribution.

 

  17.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Income taxes

 

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where Just Energy operates and generates taxable income.

 

Current income taxes relating to items recognized directly in OCI or equity are recognized in OCI or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations where applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

 

Just Energy follows the liability method of accounting for deferred income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to the temporary differences between the carrying value of the assets and liabilities in the consolidated financial statements and their respective tax bases.

 

Deferred income tax liabilities are recognized for all taxable temporary differences except:

 

·where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

 

·in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled by the parent and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred income tax assets are recognized for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses, can be utilized except:

 

·where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

 

·in respect of deductible temporary differences associated with investments in subsidiaries, deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

 

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profits will allow the deferred income tax asset to be recovered.

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

  18.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Deferred income taxes relating to items recognized in cumulative translation adjustment or equity is recognized in cumulative translation adjustment or equity and not in profit or loss.

 

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

 

Provisions and restructuring

 

Provisions are recognized when Just Energy has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where Just Energy expects some or all provisions to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated statements of income (loss), net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability.

 

Restructuring provisions comprise activities including termination or relocation of a business, management structural reorganization and employee-related costs. Incremental costs directly associated with the restructuring are included in the restructuring provision. Costs associated with ongoing activities, including training or relocating continuing staff, are excluded from the provision. Measurement of the provision is at the best estimate of the anticipated costs to be incurred.

 

Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost in the consolidated statements of income (loss).

 

Selling and marketing expenses

 

Commissions and various other costs related to obtaining and renewing customer contracts are charged to income in the period incurred except as disclosed below:

 

Commissions related to obtaining and renewing Commercial customer contracts are paid in one of the following ways: all or partially up front or as a residual payment over the term of the contract. If the commission is paid all or partially up front, it is recorded as a customer acquisition cost in other current assets and expensed in selling and marketing expenses over the term for which the associated revenue is earned. If the commission is paid as a residual payment, the amount is expensed as earned.

 

Just Energy recognizes the incremental acquisition costs of obtaining a customer contract as an asset as these costs would not have been incurred if the contract had not been obtained and these costs are recovered through the consideration collected from the contract. Commissions and incentives paid for commodity contracts and value-added products are capitalized and amortized over the term of the contract. When the term of the contract is one year or less, the incremental costs incurred to obtain the customer contracts are expensed when incurred.

 

  19.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Green provision and certificates

 

Just Energy is a retailer of green energy and records a provision to its regulators as green energy sales are recognized. A corresponding cost is included in cost of sales. Just Energy measures its provision based on the extent of green certificates that it holds or has committed to purchase and has recorded this obligation net of its green certificates. Any provision balance in excess of the green certificates held or that Just Energy has committed to purchase is measured at fair value. Green certificates are purchased by Just Energy to settle its obligation with the regulators. Any green energy-related derivatives are forward contracts and are recognized in accordance with the accounting policy discussed under financial instruments above.

 

Non-current assets held for sale and discontinued operations

 

Just Energy classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for the held for sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the consolidated statements of income (loss). Property and equipment and intangible assets are not depreciated or amortized once classified as held for sale.

 

5.REVISION OF PRIOR PERIOD FINANCIAL STATEMENT

 

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 it was 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 consolidated statements of income (loss) for fiscal 2018 and 2019.

 

The errors occurred before the earliest period presented in the 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 consolidated statement of financial position as at March 31, 2018.

 

 

  20.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

   As previously reported   Adjustment   As revised 
Trade and other receivables  $664,528   $(5,684)  $658,844 
Gas in storage   11,812    (9,470)   2,342 
Other current assets   109,697    2,517    112,214 
Trade and other payables   (583,655)   (6,363)   (590,018)
Deferred revenue   (41,684)   2,974    (38,710)
Income tax payable   (7,304)   1,818    (5,486)
Deficit  $(1,066,931)  $(14,208)  $(1,081,139)

 

6.SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

 

The preparation of the consolidated financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. The estimates and related assumptions are based on previous experience and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about carrying values of assets and liabilities that are not readily apparent from other sources.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Judgments made by management in the application of IFRS that have a significant impact on the consolidated financial statements relate to the following:

 

Allowance for doubtful accounts

 

The measurement of the expected credit loss allowance for accounts receivable requires the use of management judgment in estimation techniques, building models, selecting key inputs and making significant assumptions about future economic conditions and credit behaviour of the customers, including the likelihood of customers defaulting and the resulting losses. At each reporting period, Just Energy is required to evaluate the change in credit quality since initial recognition, which also requires significant judgment.

 

Business combinations

 

In accounting for business combinations, judgment is required in estimating the acquisition date fair values of the identifiable assets acquired (including intangible assets) and liabilities assumed (including contingent liabilities). The necessary measurements are based on information available on the acquisition date and expectations and assumptions that have been deemed reasonable by management. During the measurement period (which is within one year from the acquisition date), Just Energy must adjust the amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date.

 

Deferred income taxes

 

Significant management judgment is required to determine the amount of deferred income tax assets and liabilities that can be recognized, based upon the likely timing and the level of future taxable income realized, including the usage of tax-planning strategies. Determining the tax treatment on certain transactions also involves management’s judgment.

 

Discontinued operations

 

Management used judgment in concluding on the discontinued operations classification as a major separate geographical area of operations, as part of a single coordinated disposal plan to resell the business in the new fiscal year. There is also a high level of judgment involved in estimating the fair value less cost to sell of the disposal group and the significant carrying amounts of the assets and liabilities related to assets held for sale. Refer to Note 18 for further details.

 

  21.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Fair value of financial instruments

 

Where the fair values of financial assets and financial liabilities recorded in the consolidated statements of financial position cannot be derived from active markets, they are determined using valuation techniques including discounted cash flow models or transacted/quoted prices of identical assets that are not active. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgment includes consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer to Note 14 for further details about the assumptions as well as a sensitivity analysis.

 

Impairment of non-financial assets

 

Just Energy’s impairment test is based on the fair value less cost to sell calculation and uses an EBITDA multiple approach model. Management is required to exercise judgment in identifying the CGUs in which to allocate goodwill, working capital and related assets and liabilities. The EBITDA is derived from actual figures and the EBITDA-multiple is sourced from external sources of information, including analyst reports and competitor benchmarks. Judgment is further applied to determine which transactions or companies are considered comparable for use. Refer to Note 26 for further information.

 

7.ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED

 

IFRS 15

 

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.

 

IFRS 15 replaces the provisions of IAS 18, that relate 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.

 

 

 

 

  22.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(in thousands of Canadian dollars, except where indicated and per share 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 revenue under IFRS 15. Unbilled revenue is 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 varies from two to five years depending on the market where the customer resides. 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.

 

Impact on consolidated financial statements

 

The cumulative effect of changes made to the April 1, 2018 consolidated statement of financial position for the adoption of IFRS 15 was as follows, and had a deferred income 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 

 

 

 

 

 

  23.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

The following table shows the effect of IFRS 15 adoption on the consolidated statement of financial position as at March 31, 2019:

 

  

As at

March 31,
2019
(reported)

   Balances
without
adoption of
IFRS 15
   Effect of
change higher
 
Current assets               
Customer acquisition costs  $75,707   $31,865   $43,842 
Non-current financial assets               
Customer acquisition costs  $46,416   $17,830   $28,586 

 

The following table shows the movement of customer acquisition costs after the implementation of IFRS 15:

 

 

  

 

Current assets

  

 

Non-current assets

 
Opening balance  $41,704   $34,106 
Capitalization   98,483    39,552 
Amortization   (64,480)   (27,242)
Closing balance   $75,707   $46,416 

 

 

 

 

 

 

 

 

 

 

  24.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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 consolidated statement of comprehensive income (loss) for the year ended March 31, 2019:

 

   For the
year ended
Mar. 31, 2019
(reported)
   Balances
without
adoption
of IFRS 15
   Effect of
change
higher
(lower)
 
Sales  $3,812,470   $3,812,470   $- 
Cost of sales   3,100,255    3,100,255    - 
Gross margin   712,215    712,215    - 
Expenses               
Administrative   206,820    206,820    - 
Selling and marketing   232,030    264,558    (32,528)
Other operating expenses   115,016    115,016    - 
Restructuring costs   16,078    16,078    - 
    569,944    602,472    (32,528)
Operating profit before the following   142,271    109,743    32,528 
Finance costs   (88,072)   (88,072)   - 
Change in fair value of derivative instruments and other   (153,226)   (153,226)   - 
Other income -net   1,365    1,365    - 
Loss before income taxes   (97,662)   (130,190)   32,528 
Provision for income taxes   2,829    2,829    - 
Profit (loss) from continuing operations   (100,491)   (133,019)   32,528 
Loss from discontinued operations   (22,379)   (22,379)   - 
Loss for the period  $(122,870)  $(155,398)  $32,528 
Attributable to:               
Shareholders of Just Energy  $(122,678)  $(155,206)  $32,528 
Non-controlling interest   (192)   (192)   - 
Loss for the period  $(122,870)  $(155,398)  $32,528 
Loss per share available to shareholders               
Basic  $(0.73)  $(1.26)  $0.53 
Diluted  $(0.73)  $(1.26)  $0.53 

 

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 24.

 

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 contracts that have a duration of one year or more.

 

  25.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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 March 31, 2019 is $75,636.

 

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

 

   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  $29,122   $22,564   $12,998   $10,952   $75,636 

 

IFRS 9

 

Just Energy has adopted 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 IAS 39 with respect 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.

 

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

 

  26.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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 flows 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 OCI depending upon the business objective.

 

Just Energy reclassified 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.

 

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.

 

  27.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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.

 

(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

 

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 income taxes from OCI to accumulated earnings on April 1, 2018.

 

 

  28.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

(c)Reconciliation of lifetime ECL balance from IAS 39 to IFRS 9

 

The following table reconciles the closing lifetime ECL 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 revenue  $-   $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 revenue. 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 revenue. Measurement of ECL resulted in an increase to the provision for trade receivables and unbilled revenue of $23,636, which was recorded as at April 1, 2018. This was before the income tax impact of $5,616, which reduced the deferred income 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.

 

8.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. IFRS 16 supersedes IAS 17, Leases (“IAS 17”), and its related interpretations, and is effective for periods beginning on or after January 1, 2019. The standard is required to be adopted either retrospectively or using a modified retrospective approach.

 

Just Energy will adopt IFRS 16 beginning April 1, 2019, and has elected to apply the modified retrospective approach. On initial adoption, Just Energy will use the following practical expedients permitted by the standard, where applicable:

 

·Exemption for short-term leases with a remaining term of 12 months or less as at April 1, 2019 and low value leases, which will be accounted for as operating leases;
·Using a single discount rate on a portfolio of leases with reasonably similar characteristics;
·Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application;
·Using historical information in determining the lease term where contracts contain options to extend or terminate the lease;
  29.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

·Adjusting the right-of-use asset amounts for any onerous contract provisions immediately before the date of initial application; and
·Measuring the right-of-use assets at an amount equal to the lease liability, adjusted for any prepaid or accrued lease payments relating to that lease immediately before the date of initial application.

 

Just Energy began its assessment of existing operating leases, which primarily consist of buildings, office equipment, and vehicles. Upon implementation, Just Energy will record the right-of-use lease assets and related lease liabilities for existing operating leases.

 

Adopting IFRS 16 is expected to increase Just Energy's assets and liabilities, depreciation and amortization, and finance costs, while reducing operating costs. Just Energy is in the final stages of establishing the amounts of the right-of-use asset and lease liability and overall financial statement impact of adopting IFRS 16, which will be completed and disclosed in the June 30, 2019 interim condensed consolidated financial statements.

 

IFRS Interpretations Committee (“IFRIC”) 23, Uncertainty over Income Tax Treatments (“IFRIC 23”), 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, Income Taxes (“IAS 12”). IFRIC 23 was issued by the IASB in June 2017 and is effective for annual periods beginning on or after January 1, 2019. Just Energy does not expect the interpretation to have a material impact on the consolidated financial statements when it implements IFRIC 23 beginning April 1, 2019.

 

IFRIC Agenda Paper 11, Physical Settlement of Contracts to Buy or Sell a Non-Financial Item (“Agenda Paper 11), the IFRS Interpretations Committee (“IFRIC”) reached a decision on Agenda Paper 11 during its meeting on March 5 - 6, 2019. The decision was in respect to a request about how an entity applies IFRS 9 to particular contracts to buy or sell a non-financial item at a fixed price.

 

The Company has reviewed the agenda decision and determined that a change is required in its accounting policy related to contracts to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging financial instruments. These are contracts the Company enters into which are accounted for as derivatives at fair value through profit or loss but physically settled by the underlying non-financial item. The IFRIC concluded that IFRS 9 neither permits or requires an entity to reverse the accumulated gain or loss previously recognized on the derivative and recognize a corresponding adjustment to cost of goods sold or inventory when the contract is physically settled.

 

In its December 2018 meeting, the International Accounting Standards Board (IASB) confirmed its view that it expects companies to be entitled to sufficient time to implement changes in accounting policy that result from agenda decisions of the IFRIC. The Company is currently evaluating the impact of implementing the agenda decision on its financial statements, systems and processes. Given the nature of its current systems and processes and the volume of transactions affected, the Company determined it was not possible to affect the accounting change in time for its March 31, 2019 reporting. The Company expects to implement the change retrospectively in the first half of its fiscal 2020 year. While the impact has not been quantified, the Company expects there will be material movements between cost of sales and change in fair value of derivative instruments and other in Just Energy’s consolidated statement of operations and the value of gas in storage on the statement of financial position. There is no impact on the net income of the Company.

 

 

 

  30.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

9.TRADE AND OTHER RECEIVABLES

 

   As at   As at 
   March 31, 2019   March 31, 2018 
Trade account receivables, net  $476,173   $326,399 
Accrued gas receivable   13,637    15,893 
Unbilled revenue   277,556    301,577 
Other   16,414    14,975 
   $783,780   $658,844 

 

10.OTHER CURRENT AND NON-CURRENT ASSETS

 

(a)Other current assets

 

   As at
March 31, 2019
   As at
March 31, 2018
 
Prepaid expenses and deposits  $45,709   $35,078 
Customer acquisition costs   75,707    31,852 
Green certificates   39,749    42,230 
Gas delivered in excess of consumption   3,121    2,715 
Inventory   4,954    339 
   $169,240   $112,214 

 

(b)Other non-current assets

 

   As at
March 31, 2019
   As at
March 31, 2018
 
Customer acquisition costs  $46,416   $17,101 
Income taxes recoverable   3,096    2,336 
Other long-term assets   -    550 
   $49,512   $19,987 

 

11.INVESTMENTS

 

On August 10, 2012, Just Energy, through a subsidiary, acquired an interest in ecobee, a private company that designs, manufactures and distributes smart thermostats, for an amount of $6.4 million. During the fiscal year 2017 and 2018, Just Energy further increased its investment in the company by $5.4 million and $0.4 million, respectively. Company markets these smart thermostats in all its core markets, bundling the thermostats with commodity and home service products. As at March 31, 2019, Just Energy owns approximately 8% of ecobee. This investment is measured at and classified as fair value through profit or loss. The fair value of the investment has been determined directly from transacted/quoted prices of identical assets that are not active (Level 3 measurement). As at March 31, 2019, the fair value of the investment is $32.9 million (2018 – $32.4 million).

 

 

 

 

 

  31.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

12.PROPERTY AND EQUIPMENT

 

As at March 31, 2019                            
   Computer equipment   Furniture
and
fixtures
   Installed
assets
   Office
equipment
   Thermo-
stats
   Leasehold
improve-
ments
   Total 
Cost:                                   
Opening balance - April 1, 2018  $22,173   $6,861   $-   $15,209   $13,238   $4,894   $62,375 
Additions   7,468    58    707    311    -    114    8,658 
Acquisition   -    -    4,827    773    -    554    6,154 
Assets held for sale   (5)   (4)   -    (60)   -    -    (69)
Retirements   -    (309)   -    -    (192)   (1,078)   (1,579)
Exchange differences   340    95    15    32    131    312    925 
Ending balance, March 31, 2019   29,976    6,701    5,549    16,265    13,177    4,796    76,464 
                                    
Accumulated depreciation:                                   
Opening balance - April 1, 2018   (13,984)   (4,995)   -    (10,776)   (10,555)   (3,172)   (43,482)
Depreciation charge to cost of sales   -    -    -    -    (2,666)   -    (2,666)
Depreciation charge for the year   (2,835)   (178)   (707)   (623)   -    (428)   (4,771)
Assets held for sale   2    -    -    (4)   -    (49)   (51)
Retirements   -    127    -    -    202    322    651 
Exchange differences   (138)   (61)   -    (61)   (64)   41    (283)
Ending balance, March 31, 2019   (16,955)   (5,107)   (707)   (11,464)   (13,083)   (3,286)   (50,602)
Net book value, March 31, 2019  $13,021   $1,594   $4,842   $4,801   $94   $1,510   $25,862 

 

As at March 31, 2018                        
   Computer
equipment
   Furniture
and
fixtures
   Office
equipment
   Thermo-
stats
   Leasehold
improve-
ments
   Total 
Cost:                              
Opening balance - April 1, 2017  $18,672   $6,774   $14,947   $13,471   $4,517   $58,381 
Additions   3,561    147    352    387    391    4,838 
Retirements   -    -    -    (517)   -    (517)
Exchange differences   (60)   (60)   (90)   (103)   (14)   (327)
Ending balance, March 31, 2018   22,173    6,861    15,209    13,238    4,894    62,375 
                               
Accumulated depreciation:                              
Opening balance - April 1, 2017   (11,600)   (4,776)   (10,095)   (7,713)   (2,515)   (36,699)
Depreciation charge to cost of sales   -    -    -    (3,116)   -    (3,116)
Depreciation charge for the year   (2,431)   (262)   (745)   -    (677)   (4,115)
Retirements   -    -    -    208    -    208 
Exchange differences   47    43    64    66    20    240 
Ending balance, March 31, 2018   (13,984)   (4,995)   (10,776)   (10,555)   (3,172)   (43,482)
                               
Net book value, March 31, 2018  $8,189   $1,866   $4,433   $2,683   $1,722   $18,893 

 

  32.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

13.INTANGIBLE ASSETS

 

 

As at March 31, 2019                            
   Goodwill   Brand   Technology1   Customer
relationships
   Sales
networks and
affinity
relationships
   Other   Total 
Cost:                                   
Opening balance - April 1, 2018  $300,673   $30,205   $80,401   $18,027   $51,963   $495   $481,764 
Acquisition   40,630    3,000    -    12,600    -    -    56,230 
Assets held for sale   -    -    (2,453)   -    -    (3)   (2,456)
Additions   -    -    38,383    -    -    -    38,383 
Exchange differences   (1,382)   1,100    1,332    623    1,890    (439)   3,124 
Ending balance, March 31, 2019   339,921    34,305    117,663    31,250    53,853    53    577,045 
                                    
Accumulated amortization:                                   
Opening balance - April 1, 2018   -    -    (36,309)   (1,309)   (42,220)   -    (79,838)
Assets held for sale   -    -    18    -    -    2    20 
Amortization charge for the year   -    (100)   (14,927)   (1,018)   (6,610)   -    (22,655)
Exchange differences   -    -    1,883    (2,142)   (1,657)   -    (1,916)
Ending balance, March 31, 2019   -    (100)   (49,335)   (4,469)   (50,487)   2    (104,389)
                                    
Net book value, March 31, 2019  $339,921   $34,205   $68,328   $26,781   $3,366   $55   $472,656 

1 Technology includes work in progress IT projects of $27.3 million

 

 

As at March 31, 2018                            
   Goodwill   Brand   Technology   Customer
relationship
   Sales network
and affinity
relationships
   Other   Total 
Cost:                                   
Opening balance - April 1, 2017  $289,201   $31,154   $48,525   $-   $53,595   $-   $422,475 
Acquisition of a subsidiary   14,699    -    1,409    17,387    -    347    33,842 
Additions   -    -    30,938    -    -    -    30,938 
Exchange differences   (3,227)   (949)   (471)   640    (1,632)   148    (5,491)
Ending balance, March 31, 2018   300,673    30,205    80,401    18,027    51,963    495    481,764 
                                    
Accumulated amortization:                                   
Opening balance - April 1, 2017   -    -    (27,641)   -    (36,847)   -    (64,488)
Amortization charge for the year   -    -    (8,924)   (1,309)   (6,466)   -    (16,699)
Exchange differences   -    -    256    -    1,093    -    1,349 
Ending balance, March 31, 2018   -    -    (36,309)   (1,309)   (42,220)   -    (79,838)
Net book value, March 31, 2018  $300,673   $30,205   $44,092   $16,718   $9,743   $495   $401,926 

 

  33.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

The capitalized internally developed costs relate to the development of new customer billing and analysis software solutions for the different energy markets of Just Energy. All research costs and development costs, not eligible for capitalization, have been expensed and are recognized in administrative expenses.

 

14.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 pricing 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 and heating degree days 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 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 (loss).

 

   For the
year ended
March 31, 2019
   For the
year ended
March 31, 2018
 
Change in fair value of derivative instruments and other          
           
Physical forward contracts and options (i)  $(182,117)  $400,583 
Financial swap contracts and options (ii)   39,832    59,710 
Foreign exchange forward contracts   72    (1,842)
Share swap (iii)   (3,507)   (4,484)
6.5% convertible bond conversion feature   247    7,764 
Unrealized foreign exchange on 6.5% convertible bond   (8,061)   6,101 
Weather derivatives   7,796    - 
Other derivative options   (7,488)   6,561 
Change in fair value of derivative instruments and other  $(153,226)  $474,393 

 

  34.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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, 2019:

 

   Financial
assets
(current)
   Financial
assets
(non-current)
   Financial
liabilities
(current)
   Financial
liabilities
(non-current)
 
                 
Physical forward contracts and options (i)  $115,483   $7,237   $49,601   $50,174 
Financial swap contracts and options (ii)   18,212    1,876    16,142    8,583 
Foreign exchange forward contracts   -    56    1,555    - 
Share swap (iii)   -    -    11,907    - 
Other derivative options   10,817    86    182    4,901 
As at March 31, 2019  $144,512   $9,255   $79,387   $63,658 

 

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 March 31, 2019, to which Just Energy has committed:

 

(i)Physical forward contracts and options consist of:

 

·Electricity contracts with a total remaining volume of 38,759,196 MWh, a weighted average price of $51.29/MWh and expiry dates up to March 31, 2029.

 

·Natural gas contracts with a total remaining volume of 92,885,570 GJs, a weighted average price of $3.67/GJ and expiry dates up to December 31, 2024.

 

·Renewable energy certificates (“RECs”) and emission-reduction credit contracts with a total remaining volume of 4,184,687 MWh and 177,000 tonnes, respectively, a weighted average price of $32.50/REC and $2.68/tonne, respectively, and expiry dates up to December 31, 2028 and December 31, 2021.

 

·Electricity generation capacity contracts with a total remaining volume of 4,362 MWCap, a weighted average price of $5,226.42/MWCap and expiry dates up to May 31, 2023.

 

  35.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

·Ancillary contracts with a total remaining volume of 738,532 MWh, a weighted average price of $23.06/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 10,333,347 MWh, an average price of $45.19/MWh and expiry dates up to November 30, 2024.

 

·Natural gas contracts with a total remaining volume of 134,711,738 GJs, an average price of $3.53/GJ and expiry dates up to December 31, 2024.

 

·Electricity generation capacity contracts with a total remaining volume of 69 MWCap, a weighted average price of $304,787.72/MWCap and expiry dates up to October 31, 2020.

 

·Ancillary contracts with a total remaining volume of 1,220,145 MWh, a weighted average price of $21.52/MWh and expiry dates up to December 31, 2020.

 

(iii)Share swap agreement

 

Just Energy has entered into a share swap agreement to manage the consolidated statements of income (loss) volatility associated with the Company’s RSG and DSG 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 consolidated statements of financial position. Changes in the fair value of the share swap agreement are recorded through the consolidated statements of income (loss) as a change in fair value of derivative instruments and other.

 

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.

 

Fair value (“FV”) hierarchy of 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.

 

  36.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

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 power 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.

 

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. There were no weather derivatives held as at March 31, 2019.

 

For the share swap, Just Energy uses a forward interest rate curve along with a volume weighted average share price to model out its value. As the inputs have no observable market, it is classified as Level 3.

 

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. The fair value inputs into the investment of ecobee transferred from Level 2 to Level 3 in fiscal 2019.

 

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 March 31, 2019:

 

   Level 1   Level 2   Level 3   Total 
Derivative financial assets  $-   $-   $153,766   $153,766 
Derivative financial liabilities   -    (6,588)   (136,456)   (143,044)
Total net derivative assets (liabilities)  $-   $(6,588)  $17,310   $10,722 

 

  37.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

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 

 

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 RECs had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit (loss) before income taxes for the year ended March 31, 2019 would have increased (decreased) by $241,661 ($239,419), primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.

 

Key assumptions used when determining the significant unobservable inputs for all commodity supply contracts included in Level 3 of the FV hierarchy consist 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:

 

   Year ended
March 31, 2019
   Year ended
March 31, 2018
 
Balance, beginning of year  $166,364   $(315,110)
Total gains   19,644    105,709 
Purchases   11,502    207,531 
Sales   (25,575)   (64,464)
Settlements   (154,625)   232,698 
Balance, end of year  $17,310   $166,364 

 

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

 

As at March 31, 2019 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 March 31, 2019 of $740.6 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 March 31, 2019 of $36.9 million (March 31, 2018 - $36.3 million) and are measured based on Level 2 of the fair value hierarchy for the investment in Energy Earth and Level 3 of the fair value hierarchy for the investment in ecobee.

 

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

 

 

  38.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

The following table illustrates the classification of investments in the FV hierarchy as at March 31, 2019:

 

   Level 1   Level 2   Level 3   Total 
Investment in ecobee  $-   $-   $32,888   $32,888 
Investment in Energy Earth   -    4,009    -    4,009 
Total investments  $-   $4,009   $

32,888

   $36,897 

 

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 USD 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 flows 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 year ended March 31, 2019, assuming that all the other variables had remained constant, loss for the year would have been $3.8 million lower/higher and OCI would have been $14.2 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 $1,939 in profit before income taxes for the year ended March 31, 2019 (2018 - $758).

  39.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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 RECs had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit before income taxes for the year ended March 31, 2019 would have increased (decreased) by $240,332 ($238,089), 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 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.

 

  40.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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:

 

   March 31, 2019   March 31, 2018 
         
Current  $116,892   $113,786 
1–30 days   42,562    44,374 
31–60 days   22,317    21,241 
61–90 days   16,352    12,686 
Over 90 days   100,580    69,207 
   $298,703   $261,294 

 

Changes in the allowance for doubtful accounts related to the balances in the table above were as follows:

 

   March 31, 2019   March 31, 2018 
         
Balance, beginning of year  $60,121   $49,431 
Provision for doubtful accounts   81,037    56,300 
Bad debts written off   (90,231)   (41,802)
Adjustment from IFRS 9 adoption   23,636    - 
Foreign exchange   

(3,363

)   (3,808)
Balance, end of year  $71,200   $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.

 

As at March 31, 2019, the estimated counterparty credit risk exposure amounted to $153,767 (2018 - $283,431), 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 daily cash flow forecasts covering a rolling 13-week period, 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.

 

  41.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

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

 

As at March 31, 2019:

 

   Carrying
amount
   Contractual
cash flows
   Less than
1 year
   1–3 years   4–5 years   More than
5 years
 
Trade and other payables  $714,110   $714,110   $714,110   $-   $-   $- 
Long-term debt1   725,372    781,701    39,150    210,564    531,987    - 
Gas, electricity and non-commodity contracts   143,045    3,500,493    1,899,713    1,439,479    119,212    42,089 
   $1,582,527   $4,996,304   $2,652,973   $1,650,043   $651,199   $42,089 

 

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  $622,797   $622,797   $622,797   $-   $-   $- 
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 
   $1,304,460   $4,369,359   $2,612,301   $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 March 31, 2019, 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  $40,765   $80,234   $40,600   $- 

 

(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 March 31, 2019, Just Energy has applied an adjustment factor to determine the fair value of its financial instruments in the amount of $8,307 (2018 - $4,737) to accommodate for its counterparties’ risk of default.

 

  42.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

15.TRADE AND OTHER PAYABLES

 

   As at
March 31, 2019
   As at
March 31, 2018
 
Commodity suppliers' payables  $189,554   $176,831 
Accrued liabilities   112,039    135,733 
Green provisions   151,992    152,542 
Sales tax payable   22,969    15,794 
Trade accounts payable   184,257    45,887 
Payable for former JV partner    22,625    26,375 
Accrued gas payable   12,937    18,624 
Other payables   17,737    18,232 
   $714,110   $590,018 

 

16.DEFERRED REVENUE

 

   Fiscal 2019   Fiscal 2018 
Balance, beginning of year  $38,710   $17,546 
Additions to deferred revenue   569,880    553,050 
Revenue recognized during the year   (563,922)   (534,265)
Foreign Exchange impact   (1,440)   2,379 
Balance, end of year  $43,228   $38,710 

 

17.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. As at March 2019, the acquisition accounting for EdgePower has been finalized and closed.

 

 

  43.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

The following is the final 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  $10,078 
Common shares issued   8,966 
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 U.S. 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.

 

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 composed of: (i) $14.3 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.

  44.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

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 $14.3 million cash consideration for the acquisition of Filter Group, $1.3 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 March 31, 2019, $11.3 million of the overall cash consideration payable is included in current trade and other payables of the consolidated statements of financial position, of which $11.1 million is for a related party. The outstanding balance accrued interest at a rate of 1% per month, beginning October 1, 2018, which resulted in $0.7 million of interest accrued as at March 31, 2019, of which $0.6 million is for a related party.

 

The contingent consideration relating to the potential earn-out payments over the next three years was valued at approximately $24.9 million on October 1, 2018, which is the mid-point of the calculated range of $23.1 million to $26.8 million. 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.

 

Each quarter the contingent consideration related to the Filter Group acquisition is revalued. To estimate the number of Just Energy common shares that are exchanged in each period, a Monte Carlo simulation model was used where the trailing 12-month adjusted EBITDA for each period is forecasted based on a Geometric Brownian Motion process. Inputs used in the Monte Carlo simulation model are as follows:

 

·Adjusted trailing 12-months EBITDA as at each quarter-end date;
·Average EBITDA forecasts for new periods;
·Implied asset volatility;
·Equity volatility of Just Energy;
·Underlying asset price of Just Energy common shares;
·Dividend yield; and
·Risk-free rate.

 

Based on the foregoing, the value of the contingent consideration as at March 31, 2019 is in the range of $27.1 million to $31.2 million, with a mid-point of $29.1 million. The change in fair value of the contingent consideration at October 1, 2018 of $24.9 million to the fair value at March 31, 2019 of $29.1 million results in a change of $4.2 million reported in other income (net), in the consolidated statements of income (loss).

 

  45.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

The following is the purchase price allocation for Filter Group:

 

NET ASSETS ACQUIRED     
      
Working capital  $898 
Property and equipment   6,154 
Intangible assets   15,600 
Goodwill   38,217 
Long-term debt   (21,611)
Total consideration  $39,258 
      
Cash consideration  $3,000 
Payable to shareholders   11,314 
Contingent consideration   24,944 
Total consideration  $39,258 

 

The goodwill was calculated as the difference between the fair value of consideration transferred and the 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.

 

For the year ended March 31, 2019, Just Energy recorded $1.2 million of administration expenses associated with the Filter Group acquisition, primarily related to due diligence and professional fee expenditures.

 

As at March 31, 2019, Filter Group revenues of $6.3 million and profit of $0.3 million were included in the consolidated statements of profit (loss) since October 1, 2018. On a pro forma basis, Just Energy’s consolidated revenue and earnings for the year ended March 31, 2019 would have been higher by approximately $11.3 million and lower by $4.8 million, respectively, had the Filter Group acquisition occurred on April 1, 2018.

 

As of March 31, 2019, the acquisition accounting for Filter Group has been finalized and closed.

 

18.DISCONTINUED OPERATIONS

 

In March 2019, Just Energy formally approved and commenced a process to dispose of its businesses in Germany, Ireland and Japan. The decision was part of a strategic transition to focus on the core business in North America and the U.K. The disposal of the operations is expected to be completed within the next 12 months. At March 31, 2019 these operations were classified as a disposal group held for sale and as a discontinued operation. Previously, these operations were reported within the Consumer segment. The tax impact on the discontinued operations is minimal.

 

The results of the discontinued operations are presented below:

 

   2019   2018 
Sales  $19,729   $3,012 
Cost of sales   19,347    2,596 
Gross margin   382    416 
Expenses          
Administrative, selling and operating expenses   12,079    8,455 
Operating loss   (11,697)   (8,039)
Change in fair value of derivative instruments and other   -    (37)
Other income (loss)   (199)   2,134 
Loss from discontinued operations before the undernoted   (11,896)   (5,942)
Provision for income tax expense   4    3 
Impairment loss recognized on the remeasurement to estimate fair value less costs to sell   10,479    - 
LOSS FROM DISCONTINUED OPERATIONS  $(22,379)  $(5,945)
           
           
           
Cash flows used in operating activities  $(13,194)   (9,259)
Cash flows used in investing activities  $(1,316)  $(2,252)
Cash flows from financing activities  $13,856   $12,236 

 

  46.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

Assets and liabilities of the discontinued operations classified as held for sale as at March 31, 2019 were:

 

ASSETS    
Current assets     
Cash and cash equivalents  $628 
Current trade and other receivables   3,007 
Income taxes recoverable   50 
Other current assets   3,087 
      
Non-current assets     
Property and equipment   42 
Intangible assets   2,157 
ASSETS CLASSIFIED AS HELD FOR SALE  $8,971 
      
Liabilities     
Trade and other payables  $4,902 
Deferred revenue   298 
LIABILITIES RELATING TO ASSETS CLASSIFIED AS HELD FOR SALE  $5,200 

 

The $5.1 million goodwill associated with German operations was fully impaired in fiscal 2019 following the formal decision to commence the disposal of the business.

 

19.LONG-TERM DEBT AND FINANCING

 

   Maturity  March 31, 2019   March 31, 2018 
Credit facility (a)  September 1, 2020  $201,577   $122,115 
Less: Debt issue costs (a)      (1,824)   (664)
Filter Group financing (b)      17,577    - 
8.75% loan (c)  September 12, 2023   240,094    - 
6.75% $100M convertible debentures (d)  March 31, 2023   87,520    85,760 
6.75% $160M convertible debentures (e)  December 31, 2021   150,945    148,146 
6.5% convertible bonds (f)  July 29, 2019   29,483    188,147 
       725,372    543,504 
Less: Current portion      (37,429)   (121,451)
      $687,943   $422,053 

 

 

  47.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

(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)  $-   $201,577   $-   $-   $201,577 
Filter Group financing (b)   9,217    8,987    1,186    -    19,390 
8.75% loan (c)   -    -    

270,801

    -    

270,801

 
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)   29,933    -    -    -    29,933 
   $39,150   $210,564   $

531,987

   $-   $

781,701

 

 

The details for long-term debt are as follows:

 

   As at
April 1,
2018
   Cash
inflows/
(outflows)
   Foreign
Exchange
   Non-cash
changes
   As at
March 31,
2019
 
                     
Credit facility (a)  $121,451   $77,638   $-   $664   $199,753 
Filter Group financing (b)   -    17,577    -    

-

    17,577 
8.75% loan (c)   -    236,934    4,553    (1,393)   240,094 
6.75% $100M convertible debentures (d)   85,760    -    -    1,760    87,520 
6.75% $160M convertible debentures (e)   148,146    -    -    2,799    150,945 
6.5% convertible bonds (f)   188,147    (169,333)   3,508    7,161    29,483 
   $543,504   $162,816   $8,061   $10,991   $725,372 
Less: Current portion   (121,451)   -    -    -    (37,429)
   $422,053   $162,816   $8,061   $10,991   $687,943 

 

   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)   3,762    188,147 
5.75% convertible debentures (g)   96,022    (100,000)   -    3,978    - 
   $498,088   $49,726   $(6,101)  $1,791   $543,504 
Less: Current portion   -    -    -    -    (121,451)
   $498,088   $49,726   $(6,101)  $1,791   $422,053 

 

  48.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

The following table details the finance costs for the year ended March 31. Interest is expensed based on the effective interest rate.

 

   2019   2018 
Credit facility (a)  $20,715   $12,883 
Filter Group financing (b)   875    - 
8.75% loan (c)   8,999    - 
6.75% $100M convertible debentures (d)   8,819    497 
6.75% $160M convertible debentures (e)   13,598    12,773 
6.5% convertible bonds (f)   18,387    15,753 
5.75% convertible debentures (g)   -    9,173 
Collateral management and others (h)   16,679    4,893 
   $88,072   $55,972 

 

(a)As of April 18, 2018, the Company has renegotiated an agreement with a syndicate of lenders that includes Canadian Imperial Bank of Commerce, National Bank of Canada, 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 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 March 31, 2019, the Canadian prime rate was 3.95% and the U.S. prime rate was 5.5%. As at March 31, 2019, $201.6 million has been drawn against the facility and total letters of credit outstanding as at March 31, 2019 amounted to $94.0 million (March 31, 2018 - $113.4 million). As at March 31, 2019, Just Energy has $56.9 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. and other international operations. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at March 31, 2019, 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.

 

  49.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

(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. Counterparties were issued 7.5 million warrants 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. The 8.75% loan has three tranches. The first tranche of US$50 million is earmarked for general corporate purposes, including to pay down Just Energy's credit facility. The second tranche of US$150 million is earmarked towards the settlement of Just Energy's 6.5% convertible bonds. The third tranche of US$50 million is earmarked for investments and future acquisitions. As at March 31, 2019, US$193.0 million was drawn from the 8.75% loan.

 

(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. Each $1,000 principal amount of the 6.75% $100 million convertible debentures is convertible at the option of the holder at any time prior to the close of business on the earlier of the maturity date and the last business day immediately preceding the date fixed for redemption into 112.3596 common shares of Just Energy, representing a conversion price of $8.90, subject to certain anti-dilution provisions. Holders who convert their debentures will receive accrued and unpaid interest for the period from and including the date of the latest interest payment up to, but excluding, the date of conversion.

 

The 6.75% $100 million convertible debentures will not be redeemable at the option of the Company on or before March 31, 2021. After March 31, 2021 and prior to March 31, 2022, the 6.75% $100 million convertible debentures may be redeemed in whole or in part from time to time at the option of the Company on not more than 60 days’ and not less than 30 days’ prior notice, at a price equal to their principal amount plus accrued and unpaid interest, provided that the weighted average trading price of the common shares of Just Energy on the Toronto Stock Exchange (the “TSX”) for the 20 consecutive trading days ending five trading days preceding the date on which the notice of redemption is given is at least 125% of the conversion price. On or after March 31, 2022, the 6.75% $100 million convertible debentures may be redeemed in whole or in part from time to time at the option of the Company on not more than 60 days’ and not less than 30 days’ prior notice, at a price equal to their principal amount plus accrued and unpaid interest.

 

The conversion feature of the 6.75% $100 million convertible debentures has been accounted for as a separate component of shareholders’ equity in the amount of $9.7 million. Upon initial recognition of the convertible debentures, Just Energy recorded a deferred income tax liability of $2.6 million and reduced the equity component of the convertible debentures by this amount. The remainder of the net proceeds of the 6.75% $100 million convertible debentures has been recorded as long-term debt, which is being accreted up to the face value of $100 million over the term of the 6.75% $100 million convertible debentures using an effective interest rate of 10.7%. If the 6.75% $100 million convertible debentures are converted into common shares, the value of the conversion will be reclassified to share capital along with the principal amount converted. No amounts of the 6.75% $100 million convertible debentures have been converted or redeemed as at March 31, 2019.

 

(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. Each $1,000 principal amount of the 6.75% $160 million convertible debentures is convertible at the option of the holder at any time prior to the close of business on the earlier of the maturity date and the last business day immediately preceding the date fixed for redemption into 107.5269 common shares of Just Energy, representing a conversion price of $9.30, subject to certain anti-dilution provisions. Holders who convert their debentures will receive accrued and unpaid interest for the period from and including the date of the latest interest payment up to, but excluding, the date of conversion.

 

  50.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

The 6.75% $160 million convertible debentures will not be redeemable at the option of the Company on or before December 31, 2019. After December 31, 2019 and prior to December 31, 2020, the 6.75% $160 million convertible debentures may be redeemed in whole or in part from time to time at the option of the Company on not more than 60 days’ and not less than 30 days’ prior notice, at a price equal to their principal amount plus accrued and unpaid interest, provided that the weighted average trading price of the common shares of Just Energy on the TSX for the 20 consecutive trading days ending five trading days preceding the date on which the notice of redemption is given is at least 125% of the conversion price. On or after December 31, 2020, the 6.75% $160 million convertible debentures may be redeemed in whole or in part from time to time at the option of the Company on not more than 60 days’ and not less than 30 days’ prior notice, at a price equal to their principal amount plus accrued and unpaid interest.

 

The conversion feature of the 6.75% $160 million convertible debentures has been accounted for as a separate component of shareholders’ equity in the amount of $8.0 million. Upon initial recognition of the convertible debentures, Just Energy recorded a deferred income tax liability of $2.1 million and reduced the equity component of the convertible debentures by this amount. The remainder of the net proceeds of the 6.75% $160 million convertible debentures has been recorded as long-term debt, which is being accreted up to the face value of $160 million over the term of the 6.75% $160 million convertible debentures using an effective interest rate of 9.1%. If the 6.75% $160 million convertible debentures are converted into common shares, the value of the conversion will be reclassified to share capital along with the principal amount converted. No amounts of the 6.75% $160 million convertible debentures have been converted or redeemed as at March 31, 2019.

 

(f)On January 29, 2014, Just Energy issued US$150 million of European-focused senior convertible 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.

 

A conversion right in respect of a bond may be exercised, at the option of the holder thereof, at any time from May 30, 2014 to July 7, 2019. The initial conversion price is US$9.3762 per common share (being C$10.2819) but is subject to adjustments. In the event of the exercise of a conversion right, the Company may, at its option, subject to applicable regulatory approval and provided no event of default has occurred and is continuing, elect to satisfy its obligation in cash equal to the market value of the underlying shares to be received.

 

As a result of the debt being denominated in a different functional currency than that of Just Energy, the conversion feature is recorded as a financial liability instead of a component of equity. Therefore, the conversion feature of the 6.5% convertible bonds has been accounted for as a separate financial liability with an initial value of US$8,517. The remainder of the net proceeds of the 6.5% convertible bonds has been recorded as long-term debt, which is being accreted up to the face value of $150.0 million over the term of the 6.5% convertible bonds using an effective interest rate of 8.8%. At each reporting period, the conversion feature is recorded at fair value with changes in fair value recorded through profit or loss. As at March 31, 2019, the fair value of this conversion feature is US$0.2 million and is included in other non-current financial liabilities. During the year, Just Energy redeemed US$127.6 million of the outstanding balance.

 

  51.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

(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 September 30, 2018. Each $1,000 principal amount of the 5.75% convertible debentures is convertible at the option of the holder at any time prior to the close of business on the earlier of the maturity date and the last business day immediately preceding the date fixed for redemption into 56.0 common shares of Just Energy, representing a conversion price of $17.85. On or after September 30, 2016, the 5.75% convertible debentures may be redeemed in whole or in part from time to time at the option of the Company on not more than 60 days’ and not less than 30 days’ prior notice, at a price equal to their principal amount plus accrued and unpaid interest.

 

The Company may, at its option, on not more than 60 days' and not less than 30 days' prior notice, subject to applicable regulatory approval and provided no event of default has occurred and is continuing, elect to satisfy its obligation to repay all or any portion of the principal amount of the 5.75% convertible debentures that are to be redeemed or that are to mature, by issuing and delivering to the holders thereof that number of freely tradable common shares determined by dividing the principal amount of the 5.75% convertible debentures being repaid by 95% of the current market price on the date of redemption or maturity, as applicable.

 

On March 27, 2018, Just Energy redeemed the 5.75% convertible debentures. Of the amount paid, $99.5 million was recorded as a reduction in the liability component of the 5.75% convertible debentures, a non-cash loss on early redemption of $0.5 million was classified as finance costs, and $7.1 million was recorded as an increase in contributed deficit.

 

(h)The collateral management and others include primarily collateral management costs of $5.1 million, a supplier credit term extension charge of $4.8 million and accretion costs relating to the acquisition of RV of $5.1 million. High electricity prices in the forward markets along with fundamental change in the Electric Reliability Council of Texas’s credit exposure calculations in February 2018 led to an increase in collateral requirements for market participants during fiscal 2019.

 

 

 

 

 

  52.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

20.PROVISIONS

 

Restructuring

 

During fiscal 2019, Just Energy’s management team approved several restructuring actions including targeted workforce reductions. These actions include the elimination of over 200 positions. The actions are in direct alignment with Just Energy’s ongoing transition to a consumer-focused company and are expected to generate future cost savings.

 

Amounts related to restructuring during fiscal 2019 are as follows:

 

Employee-related  $8,706 
Facilities   1,987 
Transition agreements   3,187 
Other non-headcount related   2,198 
Total restructuring costs   16,078 
      
Expended in the year   9,462 
Provision at end of the year   6,616 
Total restructuring costs  $16,078 

 

The remaining provision balance relate to other contingent liabilities.

 

21.INCOME TAXES

 

(a)Tax expense

 

   2019   2018 
Current tax expense  $6,329   $2,552 
Deferred tax expense (benefit)          
Origination and reversal of temporary differences  $(30,110)  $129,177 
Benefit arising from previously unrecognized tax loss or temporary difference   26,610    (111,058)
Deferred tax (benefit) expense   (3,500)   18,119 
Provision for income taxes  $2,829   $20,671 

 

  53.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

(b)Reconciliation of the effective tax rate

 

The provision for income taxes represents an effective rate different than the Canadian corporate statutory rate of 26.50% (2018 – 26.50%).

 

   2019   2018 
Income before income taxes  $(120,035)  $539,248 
Combined statutory Canadian federal and provincial income tax rate   26.50%   26.50%
Income tax expense based on statutory rate  $(31,809)  $142,901 
Increase (decrease) in income taxes resulting from:          
Expense (benefit) of mark to market loss and other temporary differences not recognized  $26,610   $(111,058)
Variance between combined Canadian tax rate and the tax rate applicable to foreign earnings   1,993    1,000 
Other permanent items   6,035    (12,172)
Total provision for income taxes  $2,829   $20,671 

 

(c)Recognized deferred income tax assets and liabilities

 

Recognized deferred income tax assets and liabilities are attributed to the following:

 

   2019   2018 
Mark to market losses on derivative instruments  $10,336   $17,580 
Tax losses and excess of tax basis over book basis   99,218    78,825 
Total deferred income tax assets   109,554    96,405 
Offset of deferred income taxes   (104,186)   (93,873)
Net deferred tax assets  $5,368   $2,532 
           
Partnership income deferred for tax purposes  $(3,542)  $(6,249)
Mark to market gains on derivative instruments   (20,683)   (54,158)
Book to tax differences on other assets   (73,889)   (30,480)
Convertible debentures   (6,073)   (2,986)
Total deferred income tax liabilities   (104,187)   (93,873)
Offset of deferred income taxes   104,187    93,873 
Net deferred income tax liabilities  $-   $- 

 

  54.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

(d)Movement in deferred income tax balances

 

   Balance
April 1,
2018
   Recognized
in profit or
loss
   Recognized
in OCI
   Other   Balance
March 31,
2019
 
Partnership income deferred for tax  $(6,249)  $2,707   $-   $-   $(3,542)
Book to tax differences   48,345    (22,351)   (638)   (26)   25,330 
Mark to market (gains) losses on derivative instruments   (36,578)   26,231    -    -    (10,347)
Convertible debentures   (2,986)   (3,087)   -    -    (6,073)
   $2,532   $3,500   $(638)  $(26)  $5,368 

 

   Balance
April 1,
2017
   Recognized
in profit or
loss
   Recognized
in OCI
   Other   Balance
March 31,
2018
 
Partnership income deferred for tax  $(8,281)  $2,032   $-   $-   $(6,249)
Book to tax differences   4,269    51,864    (7,788)   -    48,345 
Mark to market (gains) losses on derivative instruments   29,424    (66,002)   -    -    (36,578)
Convertible debentures   (4,144)   1,158    -    -    (2,986)
   $21,268   $(10,948)  $(7,788)  $-   $2,532 

 

(e)Unrecognized deferred income tax assets

 

Deferred income tax assets not reflected as at March 31 are as follows:

 

   2019   2018 
Excess of tax over book basis   16,903    15,824 

 

Losses available for carryforward (recognized and unrecognized) are set to expire as follows:

 

   2019 
2030  $136,763 
2031   - 
Total  $136,763 

 

  55.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

22.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.

 

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

 

   Year ended
March 31, 2019
   Year ended
March 31, 2018
 
   Shares   Amount   Shares   Amount 
Common shares:                
                 
Issued and outstanding                    
Balance, beginning of year   148,394,152   $1,079,055    147,013,538   $1,070,076 
Share-based awards exercised   1,201,800    9,483    1,643,156    11,954 
Acquisition   -    -    1,415,285    8,966 
Repurchase and cancellation of shares   -    -    (1,677,827)   (11,941)
Balance, end of year   149,595,952   $1,088,538    148,394,152   $1,079,055 
                     
Preferred shares:                    
                     
Issued and outstanding                    
Balance, beginning of year   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 year   4,662,165   $146,965    4,323,300   $136,771 
                     
Shareholders' capital   154,258,117   $1,235,503    152,717,452   $1,215,826 

 

23.SHARE-BASED COMPENSATION PLANS

 

(a)Stock option plan

 

Just Energy may grant awards under its 2010 share option plan (formerly the 2001 Unit Option Plan) to directors, officers, full-time employees and service providers (non-employees) of Just Energy and its subsidiaries and affiliates. In accordance with the share option plan, Just Energy may grant options to a maximum of 11,300,000 shares. As at March 31, 2019, there were 814,166 options still available for grant under the plan. Of the options issued, 500,000 options remain outstanding as at March 31, 2019 with an exercise price of $7.88. The exercise price of the share options equals the closing market price of the Company’s shares on the last business day preceding the grant date. The share options vest over periods ranging from three to five years from the grant date and expire after five or ten years from the grant date. There were no new grants during fiscal 2019.

 

(b)Restricted share grants

 

Just Energy grants awards under the 2010 RSGs Plan (formerly the 2004 unit appreciation rights) in the form of fully paid RSGs to senior officers, employees and service providers of its subsidiaries and affiliates. As at March 31, 2019, there were 2,717,774 RSGs (2018 - 3,004,624) still available for grant under the plan. Of the RSGs issued, 1,473,989 remain outstanding as at March 31, 2019 (2018 - 1,635,882). Except as otherwise provided, (i) the RSGs vest from one to five years from the grant date providing, in most cases, on the applicable vesting date the RSG grantee continues as a senior officer, employee or service provider of Just Energy or any affiliate thereof; (ii) the RSGs expire no later than ten years from the grant date; (iii) a holder of RSGs is entitled to payments at the same rate as dividends paid to JEGI shareholders; and (iv) when vested, the holder of an RSG may exchange one RSG for one common share.

 

  56.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

There are 40,000 RSGs granted to senior management that do not receive dividend payments. In addition to a continued employment condition for vesting, there are certain share price targets that must be met.

 

RSGs available for grant

 

   2019   2018 
Balance, beginning of year   3,004,624    4,107,830 
Less: Granted   (788,211)   (1,716,743)
Add: Cancelled/forfeited   

501,361

    613,537 
Balance, end of year   2,717,774    3,004,624 

 

The average grant date fair value of RSGs granted in the year was $5.00 (2018 - $6.94).

 

(c)Performance bonus grants

 

Just Energy grants awards under the 2013 performance bonus incentive plan (the “PBG Plan”) in the form of fully paid PBGs to senior officers, employees, consultants and service providers of its subsidiaries and affiliates. As at March 31, 2019, there were 2,182,302 (2018 - 2,270,480) PBGs still available for grant under the PBG Plan. Of the PBGs issued, 385,214 remain outstanding as at March 31, 2019 (2018 -1,050,094). Except as otherwise provided, (i) the PBGs will entitle the holder to be paid in three equal installments as one-third on each of the first, second and third anniversaries of the grant date providing, in most cases, on the applicable vesting date the PBG grantee continues as a senior officer, employee, consultant or service provider of Just Energy or any affiliate thereof; (ii) the PBGs expire no later than three years from the grant date; (iii) a holder of PBGs is entitled to payments at the same rate as dividends paid to JEGI shareholders; and (iv) when vested, Just Energy, at its sole discretion, shall have the option of settling payment for the PBGs, to which the holder is entitled in the form of either cash or in common shares.

 

PBGs available for grant

   2019   2018 
Balance, beginning of year   2,270,480    2,650,513 
Less: Granted   (331,196)   (812,787)
Add: Cancelled/forfeited   243,018    432,754 
Balance, end of year   2,182,302    2,270,480 

 

The average grant date fair value of PBGs granted in the year was $5.01 (2018 - $7.08).

 

(d)Deferred share grants

 

Just Energy grants awards under its 2010 Directors’ Compensation Plan (formerly the 2004 Directors’ deferred unit grants, “DUGs”) to all independent directors on the basis that each director is required to annually receive 15% of their compensation entitlement in DSGs and may elect to receive all or any portion of the balance of their annual compensation in DSGs. The holders of DSGs and/or common shares are also granted additional DSGs on a quarterly basis equal to the monthly dividends paid to the shareholders of Just Energy. The DSGs vest on the earlier of the date of the director's resignation or three years following the date of grant and expire ten years following the date of grant. As at March 31, 2019, there were nil DSGs (2018 - 69,481) available for grant under the plan. In fiscal 2019, with the consent of the TSX 37,123 DSGs have been granted to directors, subject to shareholder approval. The Company will be requesting shareholder approval at its Annual and Special meeting on June 26, 2019. Of the DSGs issued, 184,430 DSGs (2018 - 114,949) remain outstanding as at March 31, 2019.

  57.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

DSGs available for grant

 

   2019   2018 
Balance, beginning of year   

69,481

    

110,012

 
Less: Granted   (69,481)   (40,531)
Balance, end of year   

-

    

69,481

 

 

The weighted average grant date fair value of DSGs granted in the year was $4.48 (2018 - $6.32).

 

24.REPORTABLE BUSINESS SEGMENTS

 

Just Energy’s reportable segments are 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 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 does not 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.

 

  58.

JUST ENERGY GROUP INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2019

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

 

For the year ended March 31, 2019:

 

   Consumer
segment
   Commercial
segment
  

Corporate and

shared services  

   Consolidated 
                 
Sales  $2,395,624   $1,416,846   $-   $3,812,470 
Gross margin   535,711    176,504    -    712,215 
Depreciation of property, plant and equipment   4,567    204    -    4,771 
Amortization of intangible assets   20,440    2,215    -    22,655 
Administrative expenses   76,709    40,693    89,418    206,820 
Selling and marketing expenses   158,770    73,260    -    232,030 
Restructuring costs   

3,173

    

4,069

    8,836    16,078 
Other operating expenses   78,460