UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2021

Commission File Number: 001-35400

JUST ENERGY GROUP INC.

(Translation of registrant’s name into English)

100 King Street West, Suite 2630

Toronto, Ontario M5X 1E1

(Address of principal executive office)

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

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):

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):


DOCUMENTS INCLUDED AS PART OF THIS REPORT

Exhibit

99.1

    

Interim Condensed Consolidated Financial Statements (Unaudited) for the three months ended June 30, 2021 and 2020.

99.2

Management’s Discussion and Analysis for the three months ended June 30, 2021.


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)

Dated: August 16, 2021

By:

/s/ Michael Carter

Name:

Michael Carter

Title:

Chief Financial Officer


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Exhibit 99.1

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands of Canadian dollars)

    

    

As at

    

As at

June 30, 2021

March 31, 2021

    

Notes

    

(Unaudited)

    

(Audited)

ASSETS

 

  

 

  

 

  

Current assets

 

  

 

  

 

  

Cash and cash equivalents

 

$

184,271

$

215,989

Restricted cash

 

  

 

3,309

 

1,139

Trade and other receivables, net

 

4(a)

 

365,766

 

340,201

Gas in storage

 

  

 

8,820

 

2,993

Fair value of derivative financial assets

 

6

 

215,769

 

25,026

Income taxes recoverable

 

  

 

10,229

 

8,238

Other current assets

 

5(a)

 

148,826

 

163,405

 

936,990

 

756,991

Non-current assets

 

  

 

 

  

Investments

 

  

 

32,889

 

32,889

Property and equipment, net

 

  

 

16,125

 

17,827

Intangible assets, net

 

  

 

68,147

 

70,723

Goodwill

 

  

 

163,447

 

163,770

Fair value of derivative financial assets

 

6

 

54,986

 

10,600

Deferred income tax assets

 

  

 

3,599

 

3,744

Other non-current assets

 

5(b)

 

35,095

 

35,262

 

374,288

 

334,815

TOTAL ASSETS

 

  

$

1,311,278

$

1,091,806

LIABILITIES

 

  

 

  

 

  

Current liabilities

 

  

 

  

 

  

Trade and other payables

 

7

$

945,977

$

921,595

Deferred revenue

 

  

 

2,876

 

1,408

Income taxes payable

 

  

 

3,750

 

4,126

Fair value of derivative financial liabilities

 

6

 

9,888

 

13,977

Provisions

 

 

7,895

 

6,786

Current portion of long-term debt

 

8

 

622,227

 

654,180

 

1,592,613

 

1,602,072

Non-current liabilities

 

  

 

 

  

Long-term debt

 

8

 

959

 

1,560

Fair value of derivative financial liabilities

 

6

 

9,450

 

61,169

Deferred income tax liabilities

 

  

 

2,773

 

2,749

Other non-current liabilities

 

  

 

17,020

 

19,078

 

30,202

 

84,556

TOTAL LIABILITIES

 

  

$

1,622,815

$

1,686,628

SHAREHOLDERS’ DEFICIT

 

  

 

 

  

Shareholders’ capital

 

11

$

1,537,863

$

1,537,863

Contributed deficit

 

  

 

(11,024)

 

(11,634)

Accumulated deficit

 

  

 

(1,936,366)

 

(2,211,728)

Accumulated other comprehensive income

 

  

 

98,381

 

91,069

Non-controlling interest

 

  

 

(391)

 

(392)

TOTAL SHAREHOLDERS’ DEFICIT

 

  

 

(311,537)

 

(594,822)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

 

  

$

1,311,278

$

1,091,806

Basis of presentation (Note 3)

Commitments and guarantees (Note 15)

See accompanying notes to the Interim Condensed Consolidated Financial Statements

Scott Gahn

    

Stephen Schaefer

Chief Executive Officer and President

Corporate Director

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-1.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED JUNE 30

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

    

Notes

    

2021

    

2020

CONTINUING OPERATIONS

 

  

 

  

 

  

Sales

 

9

$

608,672

$

685,964

Cost of goods sold

 

 

528,363

 

416,827

GROSS MARGIN

 

  

 

80,309

 

269,137

INCOMES (EXPENSES)

 

  

 

 

Administrative

 

  

 

(29,770)

 

(39,953)

Selling and marketing

 

  

 

(39,672)

 

(46,959)

Other operating expenses

 

12(a)

 

(12,474)

 

(19,911)

Finance costs

 

8

 

(12,913)

 

(21,853)

Reorganization costs

 

13

 

(20,009)

 

Unrealized gain of derivative instruments and other

 

6

 

292,137

 

77,349

Realized gain (loss) of derivative instruments

 

 

17,213

 

(134,446)

Other expenses, net

 

  

 

(489)

 

(632)

Profit from continuing operations before income taxes

 

  

 

274,332

 

82,732

Provision (recovery) for income taxes

 

10

 

(967)

 

634

PROFIT FROM CONTINUING OPERATIONS

 

  

$

275,299

$

82,098

DISCONTINUED OPERATIONS

 

  

 

 

Loss after tax from discontinued operations

 

 

 

(2,948)

PROFIT FOR THE PERIOD

 

  

$

275,299

$

79,150

Attributable to:

 

  

 

 

Shareholders of Just Energy

 

  

$

275,362

$

79,147

Non-controlling interest

 

  

 

(63)

 

3

PROFIT FOR THE PERIOD

 

  

$

275,299

$

79,150

Earnings per share from continuing operations

 

14

 

 

Basic

 

  

$

5.73

$

7.96

Diluted

 

  

$

5.63

$

7.90

Loss per share from discontinued operations

 

 

 

Basic

 

  

$

$

(0.30)

Diluted

 

  

$

$

(0.30)

Earnings per share available to shareholders

 

14

 

 

Basic

 

  

$

5.73

$

7.66

Diluted

 

  

$

5.63

$

7.60

See accompanying notes to the Interim Condensed Consolidated Financial Statements

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-2.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

    

Notes

    

2021

    

2020

PROFIT FOR THE PERIOD

 

  

$

275,299

$

79,150

Other comprehensive profit (loss) to be reclassified to profit or loss in subsequent periods:

Unrealized gain on translation of foreign operations

 

  

 

7,312

 

1,143

Unrealized gain on translation of foreign operations from discontinued operations

 

  

 

 

426

Gain on translation of foreign operations disposed and reclassified to Consolidated Statements of Income

 

 

 

833

 

7,312

 

2,402

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX

 

  

$

282,611

$

81,552

Total comprehensive income attributable to:

 

  

 

 

Shareholders of Just Energy

 

  

$

282,674

$

81,549

Non-controlling interest

 

  

 

(63)

 

3

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX

 

  

$

282,611

$

81,552

See accompanying notes to the Interim Condensed Consolidated Financial Statements

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-3.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED JUNE 30

(unaudited in thousands of Canadian dollars)

    

Notes

    

2021

    

2020

ATTRIBUTABLE TO THE SHAREHOLDERS

 

  

 

  

 

  

Accumulated earnings

Accumulated earnings, beginning of period

 

  

$

(261,702)

$

140,446

Profit for the period as reported, attributable to shareholders

 

  

 

275,362

 

79,147

Accumulated earnings, end of period

 

  

$

13,660

$

219,593

DIVIDENDS AND DISTRIBUTIONS

 

  

 

 

Dividends and distributions, beginning of period

 

  

 

(1,950,026)

 

(1,950,003)

Dividends and distributions declared and paid

 

11(b)

 

-

 

(23)

Dividends and distributions, end of period

 

  

$

(1,950,026)

$

(1,950,026)

ACCUMULATED DEFICIT

 

  

$

(1,936,366)

$

(1,730,433)

ACCUMULATED OTHER COMPREHENSIVE INCOME

 

  

 

 

Accumulated other comprehensive income, beginning of period

 

  

$

91,069

$

84,651

Other comprehensive income

 

  

 

7,312

 

2,402

Accumulated other comprehensive income, end of period

 

  

$

98,381

$

87,053

SHAREHOLDERS’ CAPITAL

 

 

 

Common shares

 

  

 

 

Common shares, beginning of period

 

11

$

1,537,863

$

1,099,864

Share-based units exercised

 

 

 

162

Common shares, end of period

 

  

$

1,537,863

$

1,100,026

Preferred shares

 

 

 

Preferred shares, beginning of period

 

11

$

$

146,965

Preferred shares, end of period

 

  

$

$

146,965

SHAREHOLDERS’ CAPITAL

 

  

$

1,537,863

$

1,246,991

EQUITY COMPONENT OF CONVERTIBLE DEBENTURES

 

  

 

 

Balance, beginning of period

 

  

$

$

13,029

Balance, end of period

 

  

$

$

13,029

CONTRIBUTED DEFICIT

 

  

 

 

Balance, beginning of period

 

  

$

(11,634)

$

(29,826)

Add: Share-based compensation expense

 

12(a)

 

610

 

692

Less: Share-based units exercised

(162)

Non-cash deferred share grants

 

  

 

 

23

Balance, end of period

 

  

$

(11,024)

$

(29,273)

NON-CONTROLLING INTEREST

 

  

 

 

Balance, beginning of period

 

  

$

(392)

$

(414)

Foreign exchange impact on non-controlling interest

 

  

 

64

 

4

Gain (loss) attributable to non-controlling interest

 

  

 

(63)

 

3

Balance, end of period

 

  

$

(391)

$

(407)

TOTAL SHAREHOLDERS’ DEFICIT

 

  

$

(311,537)

$

(413,040)

See accompanying notes to the Interim Condensed Consolidated Financial Statements

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-4.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30

(unaudited in thousands of Canadian dollars)

    

Notes

    

2021

    

2020

Net inflow (outflow) of cash related to the following activities

OPERATING

 

  

 

  

 

  

Profit from continuing operations before income taxes

 

  

$

274,332

$

82,732

Loss from discontinued operations before income taxes

 

  

 

 

(2,948)

Profit before income taxes

 

  

 

274,332

 

79,784

Items not affecting cash

 

  

 

 

Amortization and depreciation

 

12(a)

 

4,487

 

7,352

Share-based compensation expense

 

12(a)

 

610

 

692

Financing charges, non-cash portion

 

  

 

2,180

 

5,561

Unrealized gain in fair value of derivative instruments and other

 

6

 

(292,137)

 

(77,349)

Net change in working capital balances

 

  

 

26,468

 

(8,641)

Liabilities subject to compromise

1

(15,801)

Adjustment for discontinued operations, net

 

  

 

 

3,920

Income taxes paid

 

  

 

(1,453)

 

(670)

Cash inflow (outflow) from operating activities

 

  

 

(1,314)

 

10,649

INVESTING

 

  

 

 

Purchase of property and equipment

 

  

 

(71)

 

(16)

Purchase of intangible assets

 

  

 

(1,738)

 

(1,670)

Cash outflow from investing activities

 

  

 

(1,809)

 

(1,686)

FINANCING

 

  

 

 

Proceeds from DIP Facility

 

8

 

31,425

 

Repayment of long-term debt

 

8

 

(796)

 

(1,651)

Credit facilities withdrawal (payments)

 

8

 

(56,143)

 

9,867

Share swap payout

 

  

 

 

(21,488)

Leased asset payments

 

 

(720)

 

(1,081)

Cash outflow from financing activities

 

  

 

(26,234)

 

(14,353)

Effect of foreign currency translation on cash balances

 

  

 

(2,361)

 

(697)

Net cash inflow (outflow)

 

  

 

(31,718)

 

(6,087)

Cash and cash equivalents, beginning of period

 

  

 

215,989

 

26,093

Cash and cash equivalents, end of period

 

  

$

184,271

$

20,006

Supplemental cash flow information:

 

  

 

 

Interest paid

 

  

$

10,733

$

12,934

See accompanying notes to the Interim Condensed Consolidated Financial Statements

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-5.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

1.   ORGANIZATION

Just Energy Group Inc. (“Just Energy” or the “Company”) is a corporation established under the laws of Canada to hold securities 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 Interim Condensed Consolidated Financial Statements consist of Just Energy and its subsidiaries and affiliates. The Interim Condensed Consolidated Financial Statements were approved by the Board of Directors on August 13, 2021.

In February 2021, the State of Texas experienced extremely cold weather (the “Weather Event”). The Weather Event led to increased electricity demand and sustained high prices from February 13, 2021 through February 20, 2021. As a result of the losses sustained and without sufficient liquidity to pay the corresponding invoices from the Electric Reliability Council of Texas, Inc. (“ERCOT”) when due, and accordingly, on March 9, 2021, Just Energy applied for and received creditor protection under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) from the Ontario Superior Court of Justice (Commercial List) (the “Ontario Court”) and under Chapter 15 (“Chapter 15”) of the Bankruptcy Code in the United States from the Bankruptcy Court of the Southern District of Texas, Houston Division (the “Court Orders”). Protection under the Court Orders allows Just Energy to operate while it restructures its capital structure.

As part of the CCAA filing, the Company entered into a USD$125 million Debtor-In-Possession (“DIP Facility”) financing with certain affiliates of Pacific Investment Management Company (“PIMCO). The Company entered into Qualifying Support Agreements with its largest commodity supplier and ISO services provider. The Company entered a Lender Support Agreement with the lenders under its Credit Facility (refer to Note 8(c)). The filings and associated USD$125 million DIP Facility arranged by the Company, enabled Just Energy to continue all operations without interruption throughout the U.S. and Canada and to continue making payments required by ERCOT and satisfy other regulatory obligations.

On May 26, 2021, the stay period was extended by the Ontario Court to September 30, 2021.

As at June 30, 2021, in connection with the CCAA proceedings, the Company identified the following obligations that are subject to compromise:

    

Amounts in 000's

Trade and other payables

$

516,910

Other non-current liabilities

 

11,730

Current portion of long-term debt

 

468,586

Total liabilities subject to compromise

$

997,226

The common shares of the Company are listed on the TSX Venture Exchange, under the symbol “JE” and on the OTC Pink Market under the symbol “JENGQ”.

On June 16, 2021 Texas House Bill 4492 (“HB 4492”), which provides a mechanism for recovery of certain costs incurred by various parties, including the Company, during the Weather Event through certain securitization structures, became law in Texas. HB 4492 addresses securitization of (i) ancillary service charges above USD $9,000/MWh during the Weather Event; (ii) reliability deployment price adders charged by the ERCOT during the Weather Event; and (iii) amounts owed to ERCOT due to defaults of competitive market participants, which were subsequently “short-paid” to market participants, including Just Energy, (collectively, the “Costs”).

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-6.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

HB 4492 provides that ERCOT request that the Public Utility Commission of Texas (the “Commission”) establish financing mechanisms for the payment of the Costs incurred by load-serving entities, including Just Energy. On July 16, 2021, ERCOT filed the request with the commission (PUC Docket No. 52322). The Company continues to evaluate HB 4492. Based on current information, if the Commission approves the financing provided for in HB 4492, Just Energy anticipates that it will recover up to approximately USD $100 million of Costs. The total amount that the Company may recover through the mechanisms authorized in HB 4492 may change materially based on a number of factors, including the details of an established financing order issued by the Commission, additional ERCOT resettlements, the aggregate amount of funds applied for under HB 4492 by participants, the outcome of the dispute resolution process initiated by the Company with ERCOT, and any potential challenges to the Commission’s order or orders. There is no assurance that the Company will be able to recover all of the Costs.

2.   OPERATIONS

Just Energy is a retail energy provider specializing in electricity and natural gas commodities and bringing energy efficient solutions, carbon offsets and renewable energy options to customers. Operating in the United States (“U.S.”) and Canada, Just Energy serves both residential and commercial customers, providing homes and businesses with a broad range of energy solutions that deliver comfort, convenience and control. Just Energy is the parent company of Amigo Energy, Filter Group Inc. (“Filter Group”), Hudson Energy, Interactive Energy Group, Tara Energy and terrapass.

Just Energy’s current commodity product offerings include fixed, variable, index and flat rate options. By fixing the price of electricity or natural gas 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 gross margin 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.

Just Energy offers green products through terrapass and its JustGreen program. Green products offered through terrapass 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. 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, via power purchase agreements and renewable energy certificates. The JustGreen gas product offers carbon offset credits that allow customers to reduce or eliminate the carbon footprint of their homes or businesses. Through the Filter Group, Just Energy provides subscription-based home water filtration systems to residential customers, including under-counter and whole-home water filtration solutions. Just Energy markets its product offerings through multiple sales channels including digital, retail, door-to-door, brokers and affinity relationships.

3.    FINANCIAL STATEMENT PRESENTATION

(a)  Compliance with IFRS

These Interim Financial Statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”), utilizing the accounting policies Just Energy outlined in its March 31, 2021 annual audited consolidated financial statements, except the adoption of new International Financial Reporting

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-7.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

Standards (“IFRS”). Accordingly, certain informa­tion and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with IFRS, as issued by the IASB, have been omitted or condensed.

(b)  Basis of presentation and interim reporting

These Interim Condensed Consolidated Financial Statements should be read in conjunction with and follow the same accounting policies and methods of application as those used in the annual audited consolidated financial statements for the fiscal year ended March 31, 2021.

The comparative Interim Condensed Consolidated Financial Statements have been corrected from the interim statements previously presented to conform to the presentation of the current Interim Condensed Consolidated Financial Statements.

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

The interim operating results are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2022, due to seasonal variations resulting in fluctuations in quarterly results. Gas consumption by customers is typically highest in October through March and lowest in April through September. Electricity consumption is typically highest in January through March and July through September and lowest in October through December and April through June.

Principles of consolidation

The Interim Condensed Consolidated Financial Statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries and affiliates as at June 30, 2021. Subsidiaries and affiliates are consolidated from the date of acquisition and control and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries and affiliates are prepared for the same reporting period as Just Energy using consistent accounting policies. All intercompany balances, sales, expenses and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.

Going Concern

Due to the Weather Event and associated CCAA filing, the Company’s ability to continue as a going concern for the next 12 months is dependent on the Company emerging from CCAA protection, maintain liquidity and complying with DIP Facility covenants. The material uncertainties arising from the CCAA filings cast substantial doubt upon the Company's ability to continue as a going concern and, accordingly the ultimate appropriateness of the use of accounting principles applicable to a going concern. These Interim Condensed Consolidated Financial Statements do not reflect the adjustments to carrying values of assets and liabilities and the reported expenses and Interim Condensed Consolidated Statements of Financial Position classifications that would be necessary if the going concern assumption was deemed inappropriate. These adjustments could be material. There can be no assurance that the Company will be successful in emerging from CCAA as a going concern.

(c)  Significant accounting judgments, estimates, and assumptions

The preparation of the Interim Condensed Consolidated Financial Statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-8.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

amount of assets, liabilities, income and expenses. The estimates and related assumptions based on previous experience and other factors are 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. There have been no material changes from the disclosures from the Company’s Audited Consolidated Financial Statements and Notes to the Consolidated Financial Statements for the year ended March 31, 2021 with respect to significant accounting judgments, estimates and assumptions.

4.   TRADE AND OTHER RECEIVABLES, NET

(a)  Trade and other receivables, net

As at

As at

    

June 30, 2021

    

March 31, 2021

Trade account receivables, net

$

160,582

$

189,250

Unbilled revenue, net

 

124,389

 

103,986

Accrued gas receivable

 

226

 

833

Other

 

80,569

 

46,132

$

365,766

$

340,201

(b)  Aging of accounts receivable

Customer credit risk

The lifetime expected credit loss reflects Just Energy’s best estimate of losses on the accounts receivable and unbilled revenue balances. Just Energy determines the lifetime ECL by using historical loss rates and forward-looking factors, if applicable. Just Energy is exposed to customer credit risk on its continuing operations in Alberta, Texas, Illinois (gas), California (gas) and Ohio (electricity). 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 of the above markets.

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 that is recorded in cost of goods sold. Although there is no assurance that the LDCs providing these services will continue to do so in the future, management believes that the risk of the LDCs failing to deliver payment to Just Energy is minimal.

The aging of the trade accounts receivable from the markets where the Company bears customer credit risk was as follows:

As at

As at

    

June 30, 2021

    

March 31, 2021

Current

$

74,406

$

58,737

1–30 days

 

28,141

 

19,415

31–60 days

 

5,098

 

3,794

61–90 days

 

2,245

 

2,144

Over 90 days

 

9,424

 

10,446

$

119,314

$

94,536

The unbilled revenue subject to customer credit risk is $115.2 million as at June 30, 2021 (March 31, 2021 - $87.1 million).

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-9.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

(c)  Allowance for doubtful accounts

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

    

As at

    

As at

June 30, 2021

March 31, 2021

Balance, beginning of period

$

23,363

$

45,832

Provision for doubtful accounts

 

7,418

 

34,260

Bad debts written off

 

(11,027)

 

(62,529)

Foreign exchange

 

2,306

 

5,800

Balance, end of period

$

22,060

$

23,363

5.   OTHER CURRENT AND NON-CURRENT ASSETS

    

As at

As at

(a)

Other current assets

    

June 30, 2021

    

March 31, 2021

Prepaid expenses and deposits

$

66,050

$

52,216

Customer acquisition costs

 

43,617

 

45,681

Green certificates assets

 

35,570

 

61,467

Gas delivered in excess of consumption

 

1,644

 

649

Inventory

 

1,945

 

3,392

$

148,826

$

163,405

    

As at

As at

(b)

Other non-current assets

    

June 30, 2021

    

March 31, 2021

Customer acquisition costs

$

27,086

$

27,318

Other long-term assets

 

8,009

 

7,944

$

35,095

$

35,262

6.   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 offsets and renewable energy certificates ("RECs"), 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 and green power 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 (“CDDs”) and heating degree days (“HDDs”) measured in its utility service territories to reduce the impact of weather volatility on Just Energy’s electricity and natural gas volumes, commonly referred to as “weather derivatives”. The fair value of these swaps on a given measurement station indicated in the derivative contract is determined by calculating the difference between the agreed strike and expected variable observed at the same station.

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-10.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

The following table illustrates unrealized gains (losses) related to Just Energy’s derivative financial instruments classified as fair value through profit or loss and recorded on the Interim Condensed Consolidated Statements of Financial Position as fair value of derivative financial assets and fair value of derivative financial liabilities, with their offsetting values recorded in unrealized gain (loss) in fair value of derivative instruments and other on the Interim Condensed Consolidated Statements of Income.

For the three months

For the three months

ended

ended

    

June 30, 2021

    

June 30, 2020

Physical forward contracts and options (i)

$

225,307

$

48,380

Financial swap contracts and options (ii)

 

66,394

 

28,121

Foreign exchange forward contracts

 

1,105

 

(6,051)

6.5% convertible bond conversion feature

 

 

12,218

Unrealized foreign exchange on Term Loan

4,147

Weather derivatives (iii)

 

(1,704)

 

(2,381)

Other derivative options

 

(3,112)

 

(2,938)

Unrealized gain of derivative instruments and other

$

292,137

$

77,349

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the Interim Condensed Consolidated Statements of Financial Position as at June 30, 2021:

Financial 

Financial 

Financial 

Financial 

assets 

assets 

liabilities 

liabilities 

    

(current)

    

(non-current)

    

(current)

    

(non-current)

Physical forward contracts and options (i)

$

155,295

$

40,198

$

6,062

$

8,414

Financial swap contracts and options (ii)

 

55,702

 

14,715

 

2,004

 

1,031

Foreign exchange forward contracts

 

834

 

 

 

Weather derivatives (iii)

 

1,883

 

 

1,721

 

Other derivative options

 

2,055

 

73

 

101

 

5

As at June 30, 2021

$

215,769

$

54,986

$

9,888

$

9,450

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the Consolidated Statements of Financial Position as at March 31, 2021:

Financial 

Financial 

Financial 

Financial 

assets 

assets 

liabilities 

liabilities 

    

(current)

    

(non-current)

    

(current)

    

(non-current)

Physical forward contracts and options (i)

$

12,513

$

6,713

$

10,157

$

56,122

Financial swap contracts and options (ii)

 

6,942

 

2,634

 

3,548

 

5,047

Foreign exchange forward contracts

 

 

 

272

 

Weather derivatives (iii)

 

1,911

 

 

 

Other derivative options

 

3,660

 

1,253

 

 

As at March 31, 2021

$

25,026

$

10,600

$

13,977

$

61,169

Individual derivative asset and liability transactions are offset, and the net amount reported in the Interim Condensed 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. Individual derivative transactions are typically offset at the legal entity and counterparty level.

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-11.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

Below is a summary of the financial instruments classified through profit or loss as at June 30, 2021, to which Just Energy has committed:

(i)Physical forward contracts and options consist of:
Electricity contracts with a total remaining volume of 28,121,312 MWh, a weighted average price of $44.94/MWh and expiry dates up to December 31, 2029.
Natural gas contracts with a total remaining volume of 65,297,406 GJs, a weighted average price of $3.69/GJ and expiry dates up to October 31, 2025.
RECs with a total remaining volume of 2,041,751 MWh, a weighted average price of $45.09/REC and expiry dates up to December 31, 2029.
Green gas certificates with a total remaining volume of 500,000 tonnes, a weighted average price of $3.92/tonne and expiry dates up to December 31, 2021.
Electricity generation capacity contracts with a total remaining volume of 2,579 MWCap, a weighted average price of $4,700.15/MWCap and expiry dates up to December 31, 2023.
Ancillary contracts with a total remaining volume of 658,300 MWh, a weighted average price of $16.93/MWh and expiry dates up to December 31, 2022.
(ii)Financial swap contracts and options consist of:
Electricity contracts with a total remaining volume of 17,672,286 MWh, a weighted average price of $49.62/MWh and expiry dates up to December 31, 2024.
Natural gas contracts with a total remaining volume of 93,174,950 GJs, a weighted average price of $3.26/GJ and expiry dates up to October 31, 2025.
(iii)Weather derivatives consist of:
HDD natural gas swaps with price strikes to be set on futures index and temperature strikes from 1,813F to 4,985F HDD and an expiry date of March 31, 2022.
HDD natural gas swaps with price strikes to be set on futures index and temperature strikes from 3,439C to 4,985F HDD and an expiry date of March 31, 2023.
CDD Puts with temperature strikes from 656F to 3399F CDD and an expiry date of October 31, 2021.
Temperature Contingent Power Call Options with price strikes at various temperature strikes and an expiry date of October 31, 2021.
Temperature and Power Price Contingent Call Option with an expiry date of August 31, 2021.

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 Interim Condensed 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. Currently there are no derivatives carried in this level.

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

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-12.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

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

techniques to derive the FV curve from observable market prices. However, in order to be classified under Level 2, significant inputs must be directly or indirectly observable in the market. Just Energy values its New York Mercantile Exchange (“NYMEX”) financial gas fixed-for-floating swaps under Level 2.

Level 3

Fair value measurements that require unobservable market data or use statistical techniques to derive forward curves from observable market data and unobservable inputs are classified as Level 3 in the FV hierarchy. For the electricity 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.

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.

Fair value measurement input sensitivity

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

The following table illustrates the classification of derivative financial assets (liabilities) in the FV hierarchy as at June 30, 2021:

    

Level 1

    

Level 2

    

Level 3

    

Total

Derivative financial assets

 

$

$

37,472

$

233,283

$

270,755

Derivative financial liabilities

 

 

(19,338)

(19,338)

Total net derivative financial assets

$

$

37,472

$

213,945

$

251,417

2021 FIRST QUARTER REPORT TO SHAREHOLDERS | JUST ENERGY

F-13.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2021

(unaudited 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, 2021:

    

Level 1

    

Level 2

    

Level 3

    

Total

Derivative financial assets

 

$

$

682

$

34,944

$

35,626

Derivative financial liabilities

 

 

 

(75,146)