UNITED STATES

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 5, 2022

Just Energy Group Inc.

(Exact name of registrant as specified in its charter)

Canada

001-35400

Not Applicable

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

100 King Street West, Suite 2630

Toronto, Ontario, M5X 1E1

(Address of principal executive offices)

(905) 795-4206

Registrant’s telephone number, including area code

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 


Item 2.02Results if Operations and Financials Conditions

The information in Item 7.01 below is incorporated herein by reference.

The information in this Item 2.02 shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 7.01Regulation FD Disclosure

As of September 30, 2021, the last business day of the second fiscal quarter of Just Energy Group Inc. (the “Company”), the Company determined that it no longer qualified as a “foreign private issuer” as such term is defined in Rule 405 under the Securities Act. As a result, effective April 1, 2022, the Company has been required to comply with all of the periodic disclosure requirements of the Exchange Act applicable to U.S. domestic issuers, such as Forms 10-K, 10-Q and 8-K, rather than the forms the Company has filed with the Securities and Exchange Commission (“SEC”) in the past as a foreign private issuer, such as Forms 40-F and 6-K, among other requirements.

Accordingly, the Company is now required to prepare its financial statements filed with the SEC in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). As required pursuant to section 4.3(4) of Ontario Securities Commission National Instrument 51-102 – Continuous Disclosure Obligations, the Company must restate its interim financial reports for the fiscal year ended March 31, 2022 (the “Original Interim Financial Statements”) in accordance with U.S. GAAP. As such interim financial reports have previously been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The restated unaudited consolidated interim financial statements for (i) the three months ended June 30, 2021 and 2020; (ii) the three and six months ended September 30, 2021 and 2020; and (iii) the three and nine months ended December 31, 2021 and 2020 (collectively, the “Restated Interim Financial Statements”) have been prepared in accordance with U.S. GAAP.

The Original Interim Financial Statements, which were prepared in accordance with IFRS, were filed with the SEC on Form 6-K on August 13, 2021, November 9, 2021 and February 16, 2022, respectively. Copies of the Restated Interim Financial Statements are attached as Exhibit 99.1, Exhibit 99.4 and Exhibit 99.7, respectively, to and are incorporated by reference in this Current Report on Form 8-K. Related certifications are attached as Exhibit 99.2, Exhibit 99.3, Exhibit 99.5, Exhibit 99.6, Exhibit 99.8 and Exhibit 99.9, respectively, to and are incorporated by reference in this Current Report on Form 8-K.

The information in this Item 7.01, including the exhibits attached hereto, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01Financial Statements and Exhibits

Exhibit Number

    

Description

99.1

Interim Condensed Consolidated Financial Statements for three months ended June 30, 2021 and 2020 dated July 26, 2022

99.2

Form 52-109F2R Certification of Refiled Interim Filings Full Certificate - Chief Executive Officer dated July 26, 2022, for the interim period ended June 30, 2021

99.3

Form 52-109F2R Certification of Refiled Interim Filings Full Certificate - Chief Financial Officer dated July 26, 2022, for the interim period ended June 30, 2021

99.4

Interim Condensed Consolidated Financial Statements for three and six months ended September 30, 2021 and 2020 dated July 26, 2022

99.5

Form 52-109F2R Certification of Refiled Interim Filings Full Certificate - Chief Executive Officer dated July 26, 2022, for the interim period ended September 30, 2021

99.6

Form 52-109F2R Certification of Refiled Interim Filings Full Certificate - Chief Financial Officer dated July 26, 2022, for the interim period ended September 30, 2021

99.7

Interim Condensed Consolidated Financial Statements for three and nine months ended December 31, 2021 and 2020 dated July 26, 2022

99.8

Form 52-109F2R Certification of Refiled Interim Filings Full Certificate - Chief Executive Officer dated July 26, 2022, for the interim period ended December 31, 2021

99.9

Form 52-109F2R Certification of Refiled Interim Filings Full Certificate - Chief Financial Officer dated July 26, 2022, for the interim period ended December 31, 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 hereunto duly authorized.

Date: August 5, 2022

Just Energy Group Inc

By: 

/s/ Michael Carter

Michael Carter

Chief Financial Officer


JUST ENERGY GROUP INC.

NOTICE TO READER

As of March 31, 2022, based on a calculation made as of September 30, 2021, being the last business day of the second quarter, Just Energy Group Inc. (the “Company”) is considered a domestic filer in the United States instead of a foreign private issuer, as such term is defined in Rule 405 under the United States Securities Act of 1933, as amended.

Accordingly, the Company is now required to prepare its financial statements filed with the Securities and Exchange Commission (“SEC”) in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) instead of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. As required pursuant to section 4.3(4) of National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian Securities Administrators, the Company must restate its interim financial reports for the fiscal year ended March 31, 2022 in accordance with U.S. GAAP as such interim financial reports having previously been prepared in accordance with IFRS.

Accordingly, the attached interim condensed consolidated financial statements (the “Financial Statements”) for the three months ended June 30, 2021 and 2020 have been prepared in accordance with U.S. GAAP, are current as of August 13, 2021 and provide financial information for the three months ended June 30, 2021, as restated on August 5, 2022. Other than as expressly set forth in Note 1 and Note 15 (b), the Financial Statements do not, and do not purport to, update or restate the information in the original Financial Statements.

The Company’s Annual Report for the fiscal year ended March 31, 2022 on Form 10-K (the “Annual Report”) dated August 5, 2022 is available under the Company’s profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Readers are cautioned that these Financial Statements should be read in conjunction with the Annual Report, including the audited consolidated financial statements and the related notes thereto included in Item 8 thereof.

1


JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET

(unaudited in thousands of U.S. dollars)

    

    

As at

    

As at

 

June 30, 2021

March 31, 2021

 

    

Notes

    

(Unaudited)

    

(Audited)

 

ASSETS

 

  

 

  

 

  

Current assets

 

  

 

  

 

  

Cash and cash equivalents

 

$

148,677

$

171,761

Restricted cash

 

  

 

2,670

 

905

Trade and other receivables, net

 

4(a)

 

295,115

 

270,538

Gas in storage

 

  

 

7,116

 

2,379

Derivative instruments

 

6

 

172,572

 

18,382

Income taxes recoverable

 

  

 

8,253

 

6,551

Other current assets

 

5(a)

 

120,078

 

129,944

Total current assets

 

754,481

 

600,460

Non-current assets

 

  

 

 

  

Investments

 

 

26,536

 

26,154

Property and equipment, net

 

  

 

13,011

 

14,177

Intangible assets, net

 

  

 

54,983

 

56,240

Goodwill

 

  

 

131,876

 

130,235

Derivative instruments

 

6

 

44,365

 

8,429

Deferred income taxes

 

  

 

2,904

 

2,977

Other non-current assets

 

5(b)

 

28,316

 

28,042

Total non-current assets

 

301,991

 

266,254

TOTAL ASSETS

 

  

$

1,056,472

$

866,714

LIABILITIES

 

  

 

  

 

  

Current liabilities

 

  

 

  

 

  

Trade and other payables

 

7

$

346,189

$

310,114

Deferred revenue

 

  

 

2,321

 

1,119

Income taxes payable

 

  

 

3,025

 

3,281

Derivative instruments

 

6

 

6,589

 

11,115

Provisions

 

 

6,370

 

5,396

Current portion of long-term debt

 

9

 

127,310

 

103,215

Total current liabilities

491,804

434,240

Liabilities subject to compromise

7,8,9

804,604

854,984

Non-current liabilities

 

  

 

 

  

Long-term debt

 

9

 

773

 

1,240

Derivative instruments

 

6

 

7,624

 

48,643

Deferred income taxes

 

  

 

2,237

 

2,186

Other non-current liabilities

 

  

 

4,271

 

4,978

 

14,905

 

57,047

TOTAL LIABILITIES

 

  

$

1,311,313

$

1,346,271

Commitments and contingencies

15

SHAREHOLDERS’ DEFICIT

 

  

 

 

  

Common shares, no par value; unlimited shares authorized at June 30, 2021 and March 31, 2021; 48,078,637 shares issued and outstanding at June 30, 2021; 48,078,637 shares issued and outstanding at March 31, 2021

 

12

$

1,168,162

$

1,168,162

Contributed deficit

 

  

 

(13,066)

 

(13,558)

Accumulated deficit

 

  

 

(1,542,760)

 

(1,766,646)

Accumulated other comprehensive income

 

  

 

133,138

 

132,797

Non-controlling interest

 

  

 

(315)

 

(312)

TOTAL SHAREHOLDERS’ DEFICIT

 

  

 

(254,841)

 

(479,557)

TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT

 

  

$

1,056,472

$

866,714

See accompanying notes to the Interim Condensed Consolidated Financial Statements

Scott Gahn

    

Stephen Schaefer

Chief Executive Officer and President

Corporate Director

F-2.


JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

    

For the three months ended June 30, 

Notes

    

2021

    

2020

CONTINUING OPERATIONS

 

  

 

  

 

  

Revenue

 

10

$

496,361

$

495,372

Cost of goods sold

 

 

431,011

 

301,130

GROSS MARGIN

 

  

 

65,350

 

194,242

INCOMES (EXPENSES)

 

  

 

 

Administrative

 

  

 

(24,643)

 

(29,402)

Selling and marketing

 

  

 

(32,336)

 

(33,903)

Provision for expected credit loss

(6,073)

(8,639)

Depreciation and amortization

(3,645)

(5,285)

Interest expense

 

9

 

(8,831)

 

(15,846)

Reorganization costs

 

13

 

(16,486)

 

Unrealized gain on derivative instruments and other

 

6

 

236,055

 

48,429

Realized gain (loss) on derivative instruments

 

 

14,017

 

(97,008)

Other expenses, net

 

  

 

(367)

 

(379)

Income from continuing operations before income taxes

 

  

 

223,041

 

52,209

Income tax expense (recovery)

 

11

 

(793)

 

462

INCOME FROM CONTINUING OPERATIONS

 

  

$

223,834

$

51,747

Loss after tax from discontinued operations, net of income tax

 

 

 

(36)

NET INCOME FOR THE PERIOD

 

  

$

223,834

$

51,711

Less: Net income (loss) attributable to non-controlling interest

 

  

 

(52)

 

2

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

  

$

223,886

$

51,709

Earnings per share from continuing operations

 

14

 

 

Basic

 

  

$

4.66

$

4.97

Diluted

 

  

$

4.58

$

4.94

Earnings per share available to shareholders

 

14

 

 

Basic

 

  

$

4.66

$

4.97

Diluted

 

  

$

4.58

$

4.94

Weighted average shares outstanding

Basic

48,078,637

9,895,058

Diluted

 

  

48,919,620

9,968,566

See accompanying notes to the Interim Condensed Consolidated Financial Statements

3


JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited in thousands of U.S. dollars)

    

For the three months ended June 30, 

2021

    

2020

NET INCOME FOR THE PERIOD

 

  

$

223,834

$

51,711

Other comprehensive income (loss), net of income tax:

Unrealized gain (loss) on translation of foreign operations, net of income tax

 

  

 

341

 

(2,355)

Unrealized loss on translation of foreign operations from discontinued operations, net of income tax

 

  

 

 

(602)

Gain on translation of foreign operations disposed and reclassified to Interim Condensed Consolidated Statements of Operations, net of income tax

 

 

 

127

Other comprehensive income (loss), net of income tax

 

341

 

(2,830)

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF INCOME TAX

 

  

$

224,175

$

48,881

Net income (loss) attributable to non-controlling interest

 

  

 

(52)

 

2

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS, NET OF INCOME TAX

 

  

$

224,227

$

48,879

See accompanying notes to the Interim Condensed Consolidated Financial Statements

4


JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited in thousands of U.S. dollars)

    

For the three months ended June 30, 

2021

    

2020

ATTRIBUTABLE TO THE SHAREHOLDERS

 

  

 

  

 

  

Accumulated earnings (loss)

Accumulated earnings (loss), beginning of period

 

  

$

(231,208)

$

109,462

Net income for the period as reported, attributable to shareholders

 

  

 

223,886

 

51,709

Accumulated earnings (loss), end of period

 

  

$

(7,322)

$

161,171

DIVIDENDS AND DISTRIBUTIONS

 

  

 

 

Dividends and distributions, beginning of period

 

  

$

(1,535,438)

$

(1,535,421)

Dividends and distributions declared and paid

 

 

-

 

(17)

Dividends and distributions, end of period

 

  

$

(1,535,438)

$

(1,535,438)

ACCUMULATED DEFICIT

 

  

$

(1,542,760)

$

(1,374,267)

ACCUMULATED OTHER COMPREHENSIVE INCOME

 

  

 

 

Accumulated other comprehensive income, beginning of period

 

  

$

132,797

$

143,071

Other comprehensive income (loss)

 

  

 

341

 

(2,830)

Accumulated other comprehensive income, end of period

 

  

$

133,138

$

140,241

SHAREHOLDERS’ CAPITAL

 

 

 

Common shares

 

  

 

 

Common shares, beginning of period

 

12

$

1,168,162

$

839,778

Share-based units exercised

 

 

 

119

Common shares, end of period

 

  

$

1,168,162

$

839,897

Preferred shares

 

 

 

Preferred shares, beginning of period

 

12

$

$

111,948

Preferred shares, end of period

 

  

$

$

111,948

SHAREHOLDERS’ CAPITAL

 

  

$

1,168,162

$

951,845

EQUITY COMPONENT OF CONVERTIBLE DEBENTURES

 

  

 

 

Balance, beginning of period

 

  

$

$

9,911

Balance, end of period

 

  

$

$

9,911

CONTRIBUTED DEFICIT

 

  

 

 

Balance, beginning of period

 

  

$

(13,558)

$

(27,382)

Add: Share-based compensation expense

 

 

492

 

502

Non-cash deferred share grant distribution

17

Share-based compensation adjustment

(119)

Non-cash deferred share grants

 

  

 

 

(332)

Balance, end of period

 

  

$

(13,066)

$

(27,314)

NON-CONTROLLING INTEREST

 

  

 

 

Balance, beginning of period

 

  

$

(312)

$

(414)

Foreign exchange impact on non-controlling interest

 

  

 

49

 

113

Income (loss) attributable to non-controlling interest

 

  

 

(52)

 

2

Balance, end of period

 

  

$

(315)

$

(299)

TOTAL SHAREHOLDERS’ DEFICIT

 

  

$

(254,841)

$

(299,883)

See accompanying notes to the Interim Condensed Consolidated Financial Statements

5


JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited in thousands of U.S. dollars)

    

Three months ended June 30, 

Notes

2021

    

2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

  

Net income from continuing operations

 

  

$

223,834

$

51,747

Net loss from discontinued operations

 

  

 

 

(36)

Net income

 

  

 

223,834

 

51,711

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

 

  

 

 

Depreciation and amortization

 

 

3,678

 

5,337

Share-based compensation expense

 

 

492

 

502

Interest expense, non-cash portion

 

  

 

 

4,038

Reorganization items (non-cash)

4,032

Unrealized gain on derivative instruments and other

 

6

 

(236,055)

 

(48,429)

Operating leased asset payments

(562)

(751)

Net change in working capital balances

 

  

 

19,477

 

(17,070)

Liabilities subject to compromise

(10,459)

Income and deferred income taxes

(1,834)

(109)

Adjustment for discontinued operations, net

 

  

 

 

1,383

Net cash provided (used) by operating activities

 

  

 

2,603

 

(3,388)

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

 

Purchase of property and equipment

 

  

 

(57)

 

(32)

Purchase of intangible assets

 

  

 

(1,403)

 

(1,512)

Net cash used by investing activities

 

  

 

(1,460)

 

(1,544)

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

 

Proceeds from DIP Facility

 

9

 

25,000

 

Debt issuance costs

(1,293)

Repayment of long-term debt

 

9

 

(648)

 

(932)

Finance leased asset payments

 

 

(24)

 

(29)

Share swap payout

(15,858)

Credit facilities receipts (payments)

 

9

 

(45,718)

 

15,234

Net cash used by financing activities

 

  

 

(22,683)

 

(1,585)

Effect of foreign currency translation on cash balances

 

  

 

221

 

46

Net increase (decrease) in cash and cash equivalents and restricted cash

 

  

 

(21,319)

 

(6,471)

Cash and cash equivalents and restricted cash, beginning of period

 

  

 

172,666

 

21,452

Cash and cash equivalents and restricted cash, end of period

 

  

$

151,347

$

14,981

Supplemental cash flow information:

 

  

 

 

Interest paid

8,831

11,745

Income tax paid

 

  

$

1,051

$

608

See accompanying notes to the Interim Condensed Consolidated Financial Statements

6


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

1.ORGANIZATION – Updated as at August 5, 2022

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 4, 2022.

Companies’ creditors arrangement and Chapter 15 proceedings

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, 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” or “CCAA Proceedings”). 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 $125.0 million Debtor-In-Possession (“DIP Facility”) financing with certain affiliates of Pacific Investment Management Company (“PIMCO”) (refer to Note 9(a)). The Company also entered into qualifying support agreements with its largest commodity supplier and ISO services provider. The filings and associated DIP Facility arranged by the Company enabled Just Energy to continue all operations without interruption throughout the United States of America (“U.S.”) and Canada and to continue making payments required by ERCOT and satisfy other regulatory obligations.

On September 15, 2021, the Ontario Court approved the Company’s request to establish a claims process to identify and determine claims against the Company and its subsidiaries that are subject to the ongoing CCAA Proceedings (“Claims Procedure Order”). As part of the CCAA proceedings and in accordance with the Claims Procedure Order, Just Energy continues to review and determine which claims will be allowed, modified or disallowed, which may result in additional liabilities subject to compromise that are not currently reflected in the Consolidated Financial Statements (refer to Note 15(b)).

Plan Support Agreement

As previously disclosed, in connection with the CCAA filing, on May 12, 2022, the Company, the Stalking Horse Purchaser and certain other parties thereto, entered into a plan support agreement (the “Plan Support Agreement”). Upon the execution of the SISP Support Agreement (defined below), the Plan Support Agreement and the transactions contemplated thereunder were automatically terminated pursuant to its terms.

The Plan Support Agreement contemplated the implementation of a recapitalization and financial restructuring of the Just Energy Entities through: (i) a reorganization of the Just Energy Entities, (ii) a rights offering for the issuance of approximately $192.5 million of new common equity which would be backstopped by the Stalking Horse Purchaser pursuant to the Backstop Commitment Letter, (iii) the issuance of new preferred equity, which would be owned entirely by the Stalking Horse Purchaser, and new common equity, (iv) the cancellation for no consideration of all outstanding shares of the Company and (v) the entry into the new credit agreement and the new intercreditor agreement.

The Plan Support Agreement contained certain covenants on the part of the parties thereto, as well as certain conditions to the obligations of such parties and for termination upon the occurrence of certain events, including, without

7


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

limitation, the failure to achieve certain milestones and certain breaches by the parties under the Plan Support Agreement.

Backstop Commitment Letter

Also as previously disclosed, in connection with the Plan Support Agreement, on May 12, 2022, the Stalking Horse Purchaser entered into a Backstop Commitment Letter (the “Backstop Commitment Letter”) with Just Energy (U.S.) Corp., pursuant to which the Stalking Horse Purchaser (the “Backstop Parties”) agreed to backstop the approximately $192.5 million rights offering contemplated by the Plan Support Agreement. Upon the execution of the SISP Support Agreement (defined below), the Backstop Commitment Letter and the transactions contemplated thereunder were automatically terminated pursuant to its terms.

Under the Backstop Commitment Letter, the Backstop Parties agreed, subject to the terms and conditions of the Backstop Commitment Letter, to (i) purchase new common equity of the new parent company of the Just Energy Entities, (ii) subscribe for and receive its pro rata share of any unsubscribed new common equity in the rights offering and (iii) subscribe for and receive its pro rata share of new common equity in the rights offering upon the failure by another participant to fulfill its subscription obligations by the participation deadline. The issuance of the new common equity under the rights offering will represent in the aggregate 80% of the new common equity of the new parent company of the Just Energy Entities.

Under the Backstop Commitment Letter, Just Energy (U.S.) Corp. agreed to issue and deliver 10% of the outstanding new common shares on the effective date, which would have constituted backstop commitment fee shares. In addition, Just Energy (U.S.) Corp. agreed to pay a termination fee of $15 million to the Backstop Parties if the Plan Support Agreement is terminated under certain circumstances. Pursuant to the Backstop Commitment Letter, the term loan lenders of the Just Energy Entities were entitled to participate in the rights offering as backstop parties for their pro rata shares of new common equity. The Backstop Parties’ commitments to backstop the rights offering and the other transactions contemplated by the Backstop Commitment Letter were conditioned upon the satisfaction of all applicable conditions set forth in the Backstop Commitment Letter.

Sale and Solicitation Process and Stalking Horse Transaction

On August 4, 2022, the Company entered into a stalking horse transaction agreement (the “Stalking Horse Transaction Agreement”) with the Stalking Horse Purchaser and a support agreement (the “SISP Support Agreement”) in connection with the SISP that is intended to facilitate its exit from the Company’s ongoing insolvency proceedings as a going concern.

Under the SISP, interested parties are invited to participate in accordance with the approved SISP procedures. If one or more qualified bids (other than the transaction contemplated by the Stalking Horse Transaction) are received by September 29, 2022, then Just Energy intends to proceed with an auction to determine the successful bid(s), subject to the terms of the approved SISP procedures. If the Stalking Horse Purchaser is determined to be the successful bidder at the conclusion of the SISP and is subsequently approved by the Court, the Stalking Horse Purchaser will become the sole shareholder of Just Energy (U.S.) Corp., which will be the new parent company of all of the Just Energy Entities, including the Company, and the Just Energy Entities will continue their business and operations as a going concern.

The SISP Support Agreement further contemplates the entry into the Stalking Horse Transaction pursuant to the Stalking Horse Transaction Agreement, under which, among other things, (A) the Stalking Horse Purchaser agreed to act as a “stalking horse” bidder with respect to the SISP, (B) the existing common shares and all other equity interests of the Company would be cancelled or redeemed for no consideration, (C) the issuance of new common equity and new preferred equity of the new parent company of the Just Energy Entities, which will be owned entirely by certain affiliates of the Stalking Horse Purchaser, and (v) the entry into a new credit agreement and a new intercreditor agreement on the terms set forth in the term sheets appended to the SISP Support Agreement.

8


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

The SISP Support Agreement contains certain covenants on the part of the parties thereto, as well as certain termination rights upon the occurrence of certain events, including, without limitation, (i) the failure to achieve certain milestones and certain breaches by the parties under the SISP Support Agreement and (ii) the Stalking Horse Purchaser not being the successful bidder under the SISP procedures. Additionally, upon the execution of the SISP Support Agreement, each of the Plan Support Agreement, the Backstop Commitment Letter and the transactions contemplated thereunder were automatically terminated.

Key terms of the Stalking Horse Transaction include:

The Stalking Horse Purchaser will become the sole shareholder of Just Energy (U.S.) Corp., which will be the new parent company of all of the Just Energy Entities, including the Company, and the Just Energy Entities will continue their business and operations as a going concern.
The purchase price payable pursuant to the Stalking Horse Transaction is (i) $184.9 million in cash; plus (ii) a credit bid of approximately $230 million plus accrued interest of secured claims assigned to the Stalking Horse Purchaser; plus (iii) the assumption of Assumed Liabilities (as defined below), including up to CAD$10 million owing under the Company’s first lien credit facility (the “Credit Facility Remaining Debt”) to remain outstanding under an amended and restated credit agreement.
Post-filing claims, the Credit Facility Remaining Debt, claims by energy regulators, and certain other liabilities enumerated in the Stalking Horse Transaction Agreement (“Assumed Liabilities”) will continue to be liabilities of the Just Energy Entities following consummation of the Stalking Horse Transaction. Excluded liabilities and assets of the Just Energy Entities will be discharged from the Just Energy Entities pursuant to an Approval and Vesting Order to be sought subject to the Stalking Horse Transaction being the successful bid in the SISP.
No amounts will be available for distribution to the Just Energy Entities’ general unsecured creditors, including the Term Loan lenders.
All currently outstanding shares, options and other equity of Just Energy will be cancelled or redeemed for no consideration and without any vote of the existing shareholders.
A break-up fee of $14.7 million to be paid to the Stalking Horse Purchaser upon the consummation of an Alternative Restructuring Proposal (as defined in the Transaction Agreement) in the event of termination of the Transaction Agreement in certain specified circumstances.

The parties’ obligations under the Stalking Horse Transaction Agreement are conditioned upon the satisfaction or waiver of all applicable conditions set forth in the Stalking Horse Transaction Agreement, including, among others, the entry by the Court of the SISP Order and the Vesting Order, the completion of the Implementation Steps by the Just Energy Entities, the receipt of all required Transaction Regulatory Approvals (as defined in the Transaction Agreement) and that upon the consummation of the Transaction, no Just Energy Entity will be a reporting issuer (or equivalent) under any United States or Canadian securities laws.

The foregoing description of the SISP Support Agreement and the Stalking Horse Transaction Agreement are not, and do not purport to be, complete and is qualified by reference to the full text of the SISP Support Agreement and the Stalking Horse Transaction Agreement, respectively, copies of which are filed herewith as Exhibit 10.9 and 10.10 and are incorporated herein by reference.

On June 7, 2022, the Ontario Court extended the stay until August 19, 2022. The stay extension allows the Company to continue to operate in the ordinary course of business while pursuing its proposed restructuring plan.

9


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

On May 19, 2022, the common shares of the Company were transferred from the TSX Venture Exchange to the NEX and are trading under the symbol “JE.H.”.  The Company’s common shares continue to trade on the OTC Pink Market under the symbol “JENGQ”.

Weather-event related uplift securitization proceeds

On June 16, 2021, HB 4492 became law in Texas. HB 4492 provides a mechanism for recovery 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 “Weather Event Costs”), incurred by various parties, including the Company, during the Weather Event, through certain securitization structures.

On October 13, 2021, the Power Utility Commission of Texas (“PUCT”) approved the financing order (“Final Order”) authorizing the securitization of certain Weather Event costs by ERCOT. On December 7, 2021, ERCOT filed its calculation with the PUCT in accordance with the PUCT final order implementing HB 4492. The Company received the Weather Event Cost Recovery in June 2022.

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 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 flexibility 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 U.S. GAAP

These Interim Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, ASC 270, Interim Reporting, as issued by the Financial Accounting Standards Board (“FASB”). In the opinion of

10


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

management, the unaudited interim consolidated financial statements include all adjustments that are of a recurring nature and necessary for a fair presentation of the results of interim operations.

(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 most recent March 31, 2022 annual audited Consolidated Financial Statements under U.S GAAP.

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

Effective April 1, 2021, the Company elected to change its reporting currency from CAD to USD. The comparative periods in these Interim Condensed Consolidated Financial Statements have been reported using U.S. dollar reporting currency to conform with the current year's presentation. The Company's subsidiaries operating in the U.S. have a USD functional currency, and those operating in Canada have a CAD functional currency. Monetary assets and liabilities denominated in Canadian dollars are retranslated into the reporting currency at the spot exchange rate on the Interim Condensed Consolidated Balance Sheet date. Any resulting exchange differences are included in the Interim Condensed Consolidated Statement of Operations. Non-monetary assets and liabilities, other than those measured at fair value, are translated at the exchange rate on the date of the initial transaction. Interim Condensed Consolidated Statement of Operations items are translated at the average exchange rate for each period presented.

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. As such, Just Energy applies the guidance of ASC 810, Consolidations, to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a VIE, should be consolidated.

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, complying with DIP Facility covenants and extending the DIP Facility maturity. 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 Balance Sheet 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.

11


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

(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 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 most recent March 31, 2022 annual audited Consolidated Financial Statements and notes to the March 31, 2022 annual audited Consolidated Financial Statements 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

$

129,564

$

150,499

Unbilled revenue, net

 

100,362

 

82,693

Accrued gas receivable

 

182

 

663

Other

 

65,007

 

36,683

Total trade and other receivables, net

$

295,115

$

270,538

(b)  Aging of accounts receivable

Customer credit risk

The lifetime expected credit loss (“ECL”) reflects Just Energy’s best estimate of losses on the accounts receivable and unbilled revenue balances. Just Energy determines the 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) and for certain Commercial customers in dual-billing markets including Illinois (power), Pennsylvania (power), Massachusetts (power), New York and New Jersey. 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 local distribution companies (“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.

12


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

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

$

60,034

$

46,710

1–30 days

 

22,705

 

15,439

31–60 days

 

4,113

 

3,017

61–90 days

 

1,811

 

1,705

Over 90 days

 

7,604

 

8,307

Total trade receivables

$

96,267

$

75,178

The unbilled revenue subject to customer credit risk is $92.9 million as at June 30, 2021 (March 31, 2021 - $69.3 million).

(c)  Provision for expected credit losses

Changes in the provision for expected credit losses 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

$

18,578

$

32,305

Provision for expected credit losses

 

6,073

 

25,712

Bad debts written off

 

(8,897)

 

(49,725)

Recoveries

 

1,841

 

3,850

Foreign exchange

204

6,436

Balance, end of period

$

17,799

$

18,578

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

$

53,293

$

41,524

Customer acquisition costs

 

35,192

 

36,327

Green certificates assets

 

28,699

 

48,880

Gas delivered in excess of consumption

 

1,326

 

516

Inventory

 

1,568

 

2,697

Total other current assets

$

120,078

$

129,944

    

As at

As at

(b)

Other non-current assets

    

June 30, 2021

    

March 31, 2021

Customer acquisition costs

$

21,854

$

21,724

Other long-term assets

 

6,462

 

6,318

Total other non-current assets

$

28,316

$

28,042

6.   DERIVATIVE INSTRUMENTS

(a)  Fair value of derivative instruments and other

The fair value of derivative 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

13


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

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.

The following table illustrates unrealized gains (losses) related to Just Energy’s derivative instruments classified as fair value through Consolidated Statement of Operations and recorded on the Interim Condensed Consolidated Balance Sheets as fair value of derivative assets and fair value of derivative liabilities, with their offsetting values recorded in unrealized gain (loss) in fair value of derivative instruments and other on the Interim Condensed Consolidated Statement of Operations.

For the three months ended June 30, 

2021

    

2020

Physical forward contracts and options (i)

$

183,590

$

35,021

Financial swap contracts and options (ii)

 

54,101

 

20,356

Foreign exchange forward contracts

 

900

 

(4,380)

Other derivative options

 

(2,536)

 

(2,568)

Unrealized gain (loss) of derivative instruments and other

$

236,055

$

48,429

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

Derivative

Derivative

Derivative

Derivative

instrument

instrument

instrument

instrument

assets 

assets 

liabilities 

liabilities 

    

(current)

    

(non-current)

    

(current)

    

(non-current)

Physical forward contracts and options (i)

$

125,299

$

32,433

$

4,891

$

6,789

Financial swap contracts and options (ii)

 

44,943

 

11,873

 

1,617

 

832

Foreign exchange forward contracts

 

673

 

 

 

Other derivative options

 

1,657

 

59

 

81

 

3

As at June 30, 2021

$

172,572

$

44,365

$

6,589

$

7,624

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

14


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

Derivative

Derivative

Derivative

Derivative

instrument

instrument

instrument

instrument

assets 

assets 

liabilities 

liabilities 

    

(current)

    

(non-current)

    

(current)

    

(non-current)

Physical forward contracts and options (i)

$

9,951

$

5,338

$

8,078

$

44,629

Financial swap contracts and options (ii)

 

5,520

 

2,095

 

2,821

 

4,014

Foreign exchange forward contracts

 

 

 

216

 

Other derivative options

 

2,911

 

996

 

 

As at March 31, 2021

$

18,382

$

8,429

$

11,115

$

48,643

Individual derivative asset and liability transactions are offset, and the net amount reported in the Interim Condensed Consolidated Balance Sheets 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.

Below is a summary of the derivative instruments classified through the Consolidated Statement of Operations 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 $36.33/MWh and expiry dates up to December 31, 2029.
Natural gas contracts with a total remaining volume of 65,211,514 GJs, a weighted average price of $2.98/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 $36.03/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 $3.15/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 $3,776.21/MWCap and expiry dates up to December 31,2022.
Ancillary contracts with a total remaining volume of 658,300 MWh, a weighted average price of $13.61/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 $39.87/MWh and expiry dates up to December 31, 2024.
Natural gas contracts with a total remaining volume of 88,312,800 GJs, a weighted average price of $2.78/GJ and expiry dates up to December 31, 2026.
(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 1,652F to 4,871F HDD and an expiry date of March 31, 2023.
HDD natural gas swaps with price strikes to be set on futures index and temperature strikes from 3,408C to 4,985F HDD and an expiry date of March 31, 2024.
CDD puts with temperature strikes from 2,612F to 3,399F 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.

15


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

These derivative 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 derivative instrument 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 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 derivative 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.

16


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

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 assets (liabilities) in the FV hierarchy as at June 30, 2021:

    

Level 1

    

Level 2

    

Level 3

    

Total

Physical forward contracts and options

$

$

$

146,052

$

146,052

Financial swap contracts and options

30,203

24,164

54,367

Foreign exchange forward contracts

673

673

Other derivative options

1,632

1,632

Total net derivative assets

$

$

30,203

$

172,521

$

202,724

The following table illustrates the classification of derivative assets (liabilities) in the FV hierarchy as at March 31, 2021:

    

Level 1

    

Level 2

    

Level 3

    

Total

Physical forward contracts and options

 

$

$

$

(37,418)

$

(37,418)

Financial swap contracts and options

542

 

238

780

Foreign exchange forward contracts

(216)

(216)

Other derivative options

 

 

3,907

 

3,907

Total net derivative assets (liabilities)

$

$

542

$

(33,489)

$

(32,947)

Commodity price sensitivity – Level 3 derivative instruments

If the energy prices associated with only Level 3 derivative instruments including natural gas, electricity, and RECs had risen (fallen) by 10%, assuming that all of the other variables had remained constant, income from continuing operations before income taxes for the quarter ended June 30, 2021 would have increased (decreased) by $222.3 million ($116.5 million), primarily as a result of the change in fair value of Just Energy’s derivative 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 derivative instrument assets (liabilities) classified as Level 3 in the FV hierarchy for the following periods:

Three months ended

Year ended

    

June 30, 2021

    

March 31, 2021

    

Balance, beginning of period

$

(33,489)

$

(60,538)

Total gains (losses)

 

140,352

 

(7,080)

Purchases

 

49,189

 

(3,211)

Sales

 

(7,321)

 

(1,329)

Settlements

 

23,790

 

38,669

Balance, end of period

$

172,521

$

(33,489)

(b)  Classification of non-derivative assets and liabilities

As at June 30, 2021 and March 31, 2021, the carrying value of cash and cash equivalents, restricted cash, trade and other receivables, and trade and other payables approximates their fair value due to their short-term nature.

17


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

The risks associated with Just Energy’s derivative 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 derivative instruments due to changes in foreign exchange rates and exposure as a result of investments in Canadian operations.

The performance of the U.S. dollar relative to the Canadian dollar could positively or negatively affect Just Energy’s Interim Condensed Consolidated Statement of Operations, as some portion of Just Energy’s income or loss is generated in Canadian dollars and is subject to currency fluctuations upon translation to U.S. dollars. Just Energy has a policy to economically hedge between 50% and 100% 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.

Interest rate risk

A 1% increase (decrease) in interest rates would have resulted in an (decrease) increase of approximately $0.5 million in income from continuing operations before income taxes in the Interim Condensed Consolidated Statements of Operations for the three months ended June 30, 2021

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 gross margins. 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 instruments

If all the energy prices associated with derivative instruments including natural gas, electricity and RECs had risen (fallen) by 10%, assuming that all of the other variables had remained constant, income from continuing operations before income taxes for the three months ended June 30, 2021 would have increased (decreased) by $228.9 million ($122.1 million), primarily as a result of the change in fair value of Just Energy’s derivative instruments.

18


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

(ii)Physical supplier risk

Just Energy purchases the majority of the gas and electricity delivered to its customers through long-term contracts entered into with various suppliers. Just Energy has an exposure to supplier risk as the ability to continue to deliver gas and electricity to its customers is reliant upon the ongoing operations of these suppliers and their ability to fulfill their contractual obligations. 

(iii)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 Risk Committee of the Board of Directors of Just Energy. The risk department and Risk Committee of the Board of Directors 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 June 30, 2021, Just Energy has applied an adjustment factor to determine the fair value of its derivative instruments in the amount of $0.4 million (March 31, 2021 – $0.9 million) to accommodate for its counterparties’ risk of default.

As at June 30, 2021, the estimated net counterparty credit risk exposure amounted to $208.5 million (March 31, 2021 – $28.3 million), representing the risk relating to Just Energy’s exposure to derivatives that are in an asset position.

Under the guidance of ASC 815, entities may choose to offset cash collateral posted or received against the fair value of derivative positions executed with the same counterparties under the same master netting agreements. The Company has chosen not to offset positions as defined in ASC 815. As at June 30, 2021, the Company recorded $19.3 million of cash collateral posted on its Consolidated Balance Sheet.

7.   TRADE AND OTHER PAYABLES

As at

As at

    

June 30, 2021

    

March 31, 2021

    

Commodity suppliers' accruals and payables

$

226,661

$

162,921

Green provisions and repurchase obligations

 

43,506

 

61,934

Sales tax payable

 

21,813

 

21,864

Non-commodity trade accruals and accounts payable

 

41,167

 

54,156

Accrued gas payable

 

 

433

Other payables

 

13,042

 

8,806

Total trade and other payables

$

346,189

$

310,114

8. LIABILITIES SUBJECT TO COMPROMISE

    

As at June 30, 2022

As at March 31, 2021

Commodity suppliers' accruals and payables

$

396,720

$

403,395

Non-commodity trade accruals and accounts payable

20,345

19,370

Other non-current liabilities

 

9,464

 

10,191

19


JUST ENERGY GROUP INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited in thousands of U.S. dollars, except where indicated and per share amounts)

Debts and financings

 

378,075

 

422,028

Total liabilities subject to compromise

$

804,604

$

854,984

9.   LONG-TERM DEBT AND FINANCING

As at

As at

June 30, 2021

March 31, 2021

DIP Facility (a)

$

125,000

$

100,784

Filter Group financing (b)

 

3,083

 

3,671

 

128,083

104,455

Less: Current portion

 

(127,310)

 

(103,215)

Total long-term debt

$

773

$

1,240

Future annual minimum principal repayments are as follows:

Less than

    

    

    

    

More than

    

1 year

    

1–3 years

    

4–5 years

    

5 years

    

Total

DIP Facility (a)

$

125,000

$

$

$

$

125,000

Filter Group financing (b)

 

2,310

773

3,083

Total principal repayment

$

127,310

$

773

$

$

$

128,083

The following table details the interest expense for the period ended June 30. Interest is expensed based on the effective interest rate.