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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the three months ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Transition Period FromTo

Commission file number: 001-35400

Just Energy Group Inc.

(Exact name of registrant as specified in its charter)

Canada

Not Applicable

(State of Other Jurisdiction of incorporation or Organization)

(I.R.S. Employer Identification No.)

100 King Street West, Suite 2630

Toronto, Ontario, M5X 1E1

(Address of principal executive offices)

Registrant's telephone number, including area code: (905) 795-4206

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

Securities registered pursuant to Section 12(g) of the Act:

Name Of Each Exchange

Title of Each Class

Trading Symbol(s)

On Which Registered

Common Stock, No Par Value per Share

JENGQ

N/A

* Just Energy Group Inc.’s common stock currently trades on the OTC Pink Market under the symbol “JENGQ”.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes No

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically; every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company  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.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes   No  

Based on the closing price as reported on the OTC Pink Market, the aggregate market value of the registrant's Common Stock held by non-affiliates on September 30, 2021 (the last business day of the registrant's most recently completed second fiscal quarter) was approximately $38,462,910.  Shares of Common Stock held by each executive officer and director and by each shareholder affiliated with a director or an executive officer or the registrant have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of outstanding shares of the registrant's Common Stock as of August 29, 2022 was 48,078,637.

Table of Contents

TABLE OF CONTENTS

Cautionary Note Concerning Forward-Looking Statements

2

Glossary of key terms

3

PART I FINANCIAL INFORMATION

6

Item 1.

Condensed Consolidated Financial Statements and Notes 

6

Item 2.

Management's Discussion And Analysis Of Financial Condition And Results Of Operations

7

Item 3.

Quantitative And Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART II OTHER INFORMATION

31

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosure

31

Item 5.

Other Information

31

Item 6.

Exhibits 

32

Signatures

1

Table of Contents

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 may contain forward-looking statements, including, without limitation, statements with respect to the CCAA proceedings. These statements are based on current expectations that involve several risks and uncertainties which could cause actual results to differ from those anticipated, which risks are described in Part1A “Risk Factors” of the Company’s Annual Report. These risks include, but are not limited to, risks with respect to the ability of the Company to continue as a going concern; the outcome of proceedings under the CCAA and similar proceedings in the United States, including the SISP; the outcome of any potential litigation with respect to the Weather Event, the outcome of any invoice dispute with ERCOT; the Company’s discussions with key stakeholders regarding the CCAA proceedings; the impact of the evolving COVID-19 pandemic on the Company’s business, operations and sales; uncertainties relating to the ultimate spread, severity and duration of COVID-19 and related adverse effects on the economies and financial markets of countries in which the Company operates; the ability of the Company to successfully implement its business continuity plans with respect to the COVID-19 pandemic; the Company’s ability to access sufficient capital to provide liquidity to manage its cash flow requirements; general economic, business and market conditions; the ability of management to execute its business plan; levels of customer natural gas and electricity consumption; extreme weather conditions; rates of customer additions and renewals; customer credit risk; rates of customer attrition; fluctuations in natural gas and electricity prices; interest and exchange rates; actions taken by governmental authorities including energy marketing regulation; increases in taxes and changes in government regulations and incentive programs; changes in regulatory regimes; results of litigation and decisions by regulatory authorities; competition; and dependence on certain suppliers. Additional information on these and other factors that could affect Just Energy’s operations or financial results are included in Just Energy’s Annual Report and other reports on file with the SEC’s website at www.sec.gov or Canadian securities regulatory authorities which can be accessed through the SEDAR website at www.sedar.com or through Just Energy’s website at investors.justenergy.com.

2

Table of Contents

GLOSSARY OF KEY TERMS

Annual Report

Annual report on Form 10-K

ASC

Accounting Standards Codification

Base EBITDA

Base Earnings Before Interest, Tax, Depreciation and Amortization adjusted for various items as defined in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

Base Gross Margin

The gross margin adjusted for the effect of various items as defined in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

Base Gross Margin per RCE

Base Gross Margin realized on Just Energy’s RCE customer base, including gains (losses) from the sale of excess commodity supply excluding the impacts of the Weather Event or Reorganization Costs

BP Claim

Certain pre-filing secured claims in the aggregate principal amounts of approximately $229.5 million and CAD 0.2 million, plus accrued and unpaid interest

CAD

Canadian dollars

CCAA

Companies' Creditors Arrangement Act

Chapter 15

Chapter 15 of the U.S. Bankruptcy Code

Claims Procedure Order

Order of Ontario Court dated September 15, 2021 establishing the process to identify and determine claims against the Company under the CCAA proceedings

Commodity RCE attrition

Percentage of energy customers whose contracts were terminated prior to the end of the term either at the option of the customer or by Just Energy

Company

Just Energy Group Inc. and/or its consolidated subsidiaries depending on context

Court Orders

Orders approved by the Ontario Court under CCAA and the Houston Court under Chapter 15 in the U.S. Bankruptcy Code that provide creditor protection

COVID-19

Coronavirus pandemic

Credit Facility

Just Energy’s credit facility as described in Part I, Item 1, “Condensed Consolidated Financial Statements and Notes”, Note 9(c), Long Term Debt and Financing

Customer count

Number of customers with a distinct address rather than RCEs

DIP Facility

$125 million Debtor-in-possession facility entered into March 9, 2021 between PIMCO and the Company

EBITDA

Earnings Before Interest, Tax, Depreciation and Amortization and is non-U.S. GAAP measure that reflects the operational profitability of the business

ECL

Expected credit losses

Embedded Gross Margin

Embedded Gross Margin (“EGM”) represents the gross margin based on management's estimates for the future as defined in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

ERCOT

Electric Reliability Council of Texas, Inc

ERCOT Lawsuit

Litigation initiated against ERCOT and the PUCT in the Houston Bankruptcy Court on November 12, 2021

FASB

Financial Accounting Standards Board

Failed to renew

Customers who did not renew expiring contracts at the end of their term

Filter Group

Filter Group Inc.

Final Order

Financing order issued by the PUCT in October 2021 authorizing the securitization of these costs by ERCOT under HB 4492

Free Cash Flow

Cash flow from operations less maintenance capital expenditures as defined in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

HB 4492

Texas House Bill 4492 which provides a mechanism for recovery of the costs, incurred by various parties, including the Company, during the Weather Event, through certain securitization structures

Houston Court

Bankruptcy Court of the Southern District of Texas, Houston Division

HTC

Home Trust Company

ICFR

Internal Control over Financial Reporting

3

Table of Contents

Interim Condensed Consolidated Financial Statements

Interim Condensed Consolidated Balance Sheets for the years ended June 30, 2022 and Audited Consolidated Balance Sheets for the years ended March 31, 2021, the related Interim Condensed Consolidated Statements of Operations, Interim Condensed Statements of Comprehensive Loss, Interim Condensed Consolidated Statements of Cash Flows, and Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity, for the three months ended June 30, 2022 and 2021, and related notes

ISO

Independent System Operator

Just Energy

Just Energy Group Inc. and/or its consolidated subsidiaries depending on context

Just Energy Entities

Just Energy and certain subsidiaries that filed under the CCAA

Just Energy Parties

Just Energy Texas LP, Just Energy Texas I, Corp., Fulcrum Retail Energy LLC, and Hudson Energy Services LLC

KERP

Key employee retention plan

LC Facility

Letter of credit facility described in Part I, Item 1, "Condensed Consolidated Financial Statements and Notes", Note 9(c), Long Term Debt and Financing

LDC

A local distribution company; the natural gas or electricity distributor for a regulatory or governmentally defined geographic area

Lender Support Agreement

Accommodation and support agreement entered into with Lenders of the Credit Facility

Liquidity

Cash and cash equivalents

MD&A

Management Discussion and Analysis of Financial Condition and Results of Operations

NEX

Board of the TSX Venture Exchange

Non-U.S. GAAP financial measures

All measures defined in Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note Indenture

CAD 15.0 million principal amount of 7.0% subordinated notes to holders of the subordinated convertible debentures, which has a six-year maturity

NYMEX

New York Mercantile Exchange

Ontario Court

Ontario Superior Court of Justice (Commercial List)

PIMCO

Pacific Investment Management Company

PUCT

Public Utility Commission of Texas

RCE

Residential customer equivalent, which is a unit of measurement equivalent to a customer using 2,815 m3 (or 106 GJs or 1,000 Therms or 1,025 CCFs) of natural gas on an annual basis or 10 MWh (or 10,000 kWh) of electricity on an annual basis

REC

Renewable energy certificates

Reorganization Costs

The amounts incurred related to the filings under the CCAA Proceedings. These costs include professional and advisory costs, key employee retention plan, contract terminations, prepetition claims, and other costs

SEC

U.S. Securities and Exchange Commission

Selling commission

Expenses customer acquisition costs amortized under ASC 606, “Revenue from contracts with customers”, or directly expensed within the current period and consist of commissions paid to independent sales contractors, brokers and sales agents and is reflected on the Consolidated Statements of Operations as part of selling and marketing expenses

Selling non-commission and marketing expenses

The cost of selling overhead, including digital marketing cost not directly associated with the costs of direct customer acquisition costs within the current period and is reflected on the Consolidated Statements of Operations as part of selling and marketing expenses

September 2020 Recapitalization

The recapitalization transaction that the Company completed on September 28, 2020

SISP

Proposed Sale and Investment Solicitation Process announced on August 4, 2022

SISP Order

An order of the Ontario Court approving the SISP

SISP Support Agreement

An agreement between the Just Energy Entities, the Stalking Horse Purchaser and certain other parties under which the parties agree to support the Stalking Horse Transaction and the SISP process

4

Table of Contents

Stalking Horse Purchaser

Collectively, the lenders under the Company’s debtor-in-possession financing facility, one of their affiliates and the holder of the BP Claim

Stalking Horse Transaction

The transaction contemplated by the stalking horse transaction agreement under which the Stalking Horse Purchaser will become the sole owner of the Just Energy Entities

Stalking Horse Transaction Agreement

The agreement between the Stalking Horse Purchaser and the Just Energy Entities under which the Stalking Horse Purchaser will become the sole owner of the Just Energy Entities with the key terms described in Part I, Item I, Business Overview

Strategic Review

The Company’s formal review announced on June 6, 2019 to evaluate strategic alternatives available to the Company. The Company finalized the Strategic Review with the completed September 2020 Recapitalization

Term Loan

The $206 million senior unsecured 10.25% term loan facility entered into on September 28, 2020 pursuant to the September 2020 Recapitalization, which has a maturity date of March 31, 2024

Unlevered Free Cash Flow

Free cash flow plus interest expense excluding the non-cash portion as defined in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

U.S.

United States of America

U.S. GAAP

U.S. Generally Accepted Accounting Principles

Vesting Order

An order of the Ontario Court approving the Stalking Horse Transaction

Weather Event

The extreme weather event in Texas in February 2021

Weather Event Costs

(i) ancillary service charges above $9,000/MWh during the Weather Event; (ii) reliability deployment price adders charged by 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

5

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

INDEX TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Interim Condensed Consolidated Balance Sheets

F-1

Interim Condensed Consolidated Statements of Operations

F-2

Interim Condensed Consolidated Statements of Comprehensive Income

F-3

Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

F-4

Interim Condensed Consolidated Statements of Cash Flows

F-5

Notes to the Interim Condensed Consolidated Financial Statements

F-6

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Table of Contents

Interim Condensed Consolidated Balance Sheets

As at June 30

(in thousands of U.S. dollars)

    

    

As at

    

As at

 

June 30, 2022

March 31, 2022

 

    

Notes

    

(Unaudited)

    

(Audited)

 

ASSETS

 

  

 

  

 

  

Current assets

 

  

 

  

 

  

Cash and cash equivalents

 

$

220,962

$

125,755

Restricted cash

 

  

 

2,630

 

2,736

Trade and other receivables, net

 

4(a)

 

356,059

 

308,941

Securitization proceeds receivable from ERCOT

147,500

Gas in storage

 

  

 

23,333

 

3,313

Derivative instruments

 

6

 

727,447

 

538,700

Income taxes recoverable

 

  

 

10,724

 

11,774

Other current assets

 

5(a)

 

175,581

 

131,570

Total current assets

1,516,736

1,270,289

Non-current assets

 

  

 

 

  

Property and equipment, net

 

 

5,846

 

6,505

Intangible assets, net

 

 

44,434

 

43,815

Goodwill

 

 

127,522

 

130,945

Derivative instruments

 

6

 

171,835

 

133,014

Deferred income taxes

 

 

148

 

198

Other non-current assets

 

5(b)

 

44,850

 

39,048

Total non-current assets

 

394,635

 

353,525

TOTAL ASSETS

 

  

$

1,911,371

$

1,623,814

LIABILITIES

 

  

 

  

 

  

Current liabilities

 

  

 

  

 

  

Trade and other payables

 

7

$

385,391

$

349,923

Deferred revenue

 

  

 

1,528

 

695

Income taxes payable

 

  

 

2,169

 

2,370

Derivative instruments

 

6

 

11,953

 

13,170

Current portion of long-term debt

 

9

 

125,854

 

126,289

Total current liabilities

526,895

492,447

Liabilities subject to compromise

7, 8, 9

847,239

845,890

Non-current liabilities

 

  

 

 

Long-term debt

 

9

 

39

 

130

Derivative instruments

 

6

 

22,627

 

12,916

Deferred income taxes

 

 

140,422

 

75,792

Other non-current liabilities

 

  

 

16,742

 

2,438

Total non-current liabilities

 

179,830

 

91,276

TOTAL LIABILITIES

 

  

$

1,553,964

$

1,429,613

Commitments and contingencies

15

SHAREHOLDERS’ EQUITY

 

  

 

 

  

Common shares, no par value; unlimited shares authorized at June 30, 2022 and March 31, 2022; 48,078,637 shares issued and outstanding at June 30, 2022; 48,078,637 shares issued and outstanding at March 31, 2022

 

12

$

1,168,162

$

1,168,162

Contributed deficit

 

  

 

(11,908)

 

(12,073)

Accumulated deficit

 

  

 

(927,493)

 

(1,088,119)

Accumulated other comprehensive income

 

  

 

128,925

 

126,527

Non-controlling interest

 

  

 

(279)

 

(296)

TOTAL SHAREHOLDERS’ EQUITY

 

  

 

357,407

 

194,201

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

$

1,911,371

$

1,623,814

See accompanying notes to the Interim Condensed Consolidated Financial Statements

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Interim Condensed Consolidated Statements of Operations

For the three months ended June 30

(in thousands of U.S. dollars, except per share amounts)

    

Three months ended June 30, 

Notes

    

2022

    

2021

Revenue

 

10

$

570,586

$

496,361

Cost of goods sold

 

 

663,212

 

431,011

GROSS MARGIN

 

  

 

(92,626)

 

65,350

INCOMES (EXPENSES)

 

  

 

 

Administrative

 

  

 

(27,487)

 

(24,643)

Selling and marketing

 

  

 

(32,472)

 

(32,336)

Provision for expected credit loss

 

 

(10,450)

 

(6,073)

Depreciation and amortization

(2,917)

(3,645)

Interest expense

 

9

 

(8,488)

 

(8,831)

Reorganization costs

 

13

 

(19,131)

 

(16,486)

Unrealized gain on derivative instruments

 

6

 

222,439

 

236,055

Realized gain on derivative instruments

 

 

197,078

 

14,017

Other income (expenses), net

 

  

 

232

 

(367)

Income from operations before income taxes

 

  

 

226,178

 

223,041

Income tax expense (benefit)

 

11

 

65,564

 

(793)

NET INCOME

 

  

$

160,614

$

223,834

Less: Net loss attributable to non-controlling interest

 

  

 

(12)

 

(52)

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

  

$

160,626

$

223,886

 

Earnings per share

14

Basic

$

3.34

$

4.66

Diluted

$

3.28

$

4.58

Weighted average shares outstanding

 

 

Basic

 

  

48,078,637

48,078,637

Diluted

 

  

48,919,620

48,919,620

See accompanying notes to the Interim Condensed Consolidated Financial Statements

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Interim Condensed Consolidated Statements of Comprehensive Income

For the three months ended June 30

(in thousands of U.S. dollars)

    

Three months ended June 30, 

2022

2021

NET INCOME

 

  

$

160,614

$

223,834

Other comprehensive income, net of income tax:

Unrealized gain on translation of foreign operations, net of income tax

 

2,398

 

341

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF INCOME TAX

 

  

$

163,012

$

224,175

Total comprehensive loss attributable to:

 

  

 

 

Less: Net loss attributable to non-controlling interest

 

  

 

(12)

 

(52)

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

 

  

$

163,024

$

224,227

See accompanying notes to the Interim Condensed Consolidated Financial Statements

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Interim Condensed Consolidated Statements of Shareholders’ Equity

For the three months ended June 30

(in thousands of U.S. dollars)

    

For the three months ended June 30, 

Notes

2022

    

2021

    

ATTRIBUTABLE TO THE SHAREHOLDERS

 

  

 

  

 

  

Accumulated earnings (loss)

Accumulated earnings (loss), beginning of period

 

  

$

447,319

$

(231,208)

Net income for the period as reported, attributable to shareholders

 

  

 

160,626

 

223,886

Accumulated earnings (loss), end of period

 

  

$

607,945

$

(7,322)

DIVIDENDS AND DISTRIBUTIONS

 

  

 

 

Dividends and distributions, end of period

 

  

$

(1,535,438)

$

(1,535,438)

ACCUMULATED DEFICIT

 

  

$

(927,493)

$

(1,542,760)

ACCUMULATED OTHER COMPREHENSIVE INCOME

 

  

 

 

Accumulated other comprehensive income, beginning of period

 

  

$

126,527

$

132,797

Other comprehensive income

 

  

 

2,398

 

341

Accumulated other comprehensive income, end of period

 

  

$

128,925

$

133,138

SHAREHOLDERS’ CAPITAL

 

 

 

Common shares, end of period

 

12(a)

$

1,168,162

$

1,168,162

CONTRIBUTED DEFICIT

 

  

 

 

Balance, beginning of period

 

  

$

(12,073)

$

(13,558)

Add: Share-based compensation expense

 

 

165

 

492

Balance, end of period

 

  

$

(11,908)

$

(13,066)

NON-CONTROLLING INTEREST

 

  

 

 

Balance, beginning of period

 

  

$

(296)

$

(312)

Foreign exchange impact on non-controlling interest

 

  

 

29

 

49

Loss attributable to non-controlling interest

 

  

 

(12)

 

(52)

Balance, end of period

 

  

$

(279)

$

(315)

TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)

 

  

$

357,407

$

(254,841)

See accompanying notes to the Interim Condensed Consolidated Financial Statements

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Interim Condensed Consolidated Statements of Cash Flows

For the three months ended June 30

(in thousands of U.S. dollars)

    

For the three months ended June 30, 

Notes

2022

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

  

Net income

 

  

 

160,614

 

223,834

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

 

  

 

 

Depreciation and amortization

 

 

3,040

 

3,678

Share-based compensation expense

 

 

165

 

492

Interest expense, non-cash portion

 

  

 

1,360

 

Reorganization items (non-cash)

4,016

4,032

Unrealized gain on derivative instruments

 

6

 

(222,439)

 

(236,055)

Operating leased asset payments

(506)

(562)

Net change in working capital balances

 

 

(61,203)

 

19,477

Securitization proceeds receivable from ERCOT

147,500

Liabilities subject to compromise

3,996

(10,459)

Income and deferred income taxes

65,529

(1,834)

Net cash provided by operating activities

 

  

 

102,072

 

2,603

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

 

Purchase of property and equipment

 

  

 

(86)

 

(57)

Purchase of intangible assets

 

  

 

(3,376)

 

(1,403)

Net cash used in investing activities

 

  

 

(3,462)

 

(1,460)

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

 

Proceeds from DIP Facility

 

9

 

 

25,000

Debt issuance costs

(1,293)

Repayment of long-term debt

 

9

 

(487)

 

(648)

Finance leased asset payments

 

 

(3)

 

(24)

Credit Facility payments

 

 

(1,167)

 

(45,718)

Net cash used in financing activities

 

  

 

(1,657)

 

(22,683)

Effect of foreign currency translation on cash balances

 

  

 

(1,852)

 

221

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

 

  

 

95,101

 

(21,319)

Cash and cash equivalents and restricted cash, beginning of period

  

 

128,491

 

172,666

Cash and cash equivalents and restricted cash, end of period

 

  

$

223,592

$

151,347

Supplemental cash flow information:

 

  

 

 

Interest paid

 

  

$

7,128

$

8,831

Income taxes paid

 

  

562

1,051

See accompanying notes to the Interim Condensed Consolidated Financial Statements

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Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended June 30, 2022

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

1.ORGANIZATION

Just Energy is a corporation established under the laws of Canada to hold securities of its directly or indirectly owned operating subsidiaries. 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. The Interim Condensed Consolidated Financial Statements were approved by the Board of Directors on August 29, 2022.

Companies’ creditors arrangement and Chapter 15 proceedings

In February 2021, the State of Texas experienced 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 ERCOT when due, and accordingly, on March 9, 2021, Just Energy applied for and received Court Orders under the CCAA from the Ontario Court and under Chapter 15 in the U.S. from the Houston Court. 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 DIP Facility financing with certain affiliates of PIMCO (refer to Part I, Item 1, “Interim Condensed Consolidated Financial Statements And Notes”, Note 9(a) Long-Term Debt and Financing). 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 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 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 Interim Condensed Consolidated Financial Statements (refer to Part I, Item 1, “Interim Condensed Consolidated Financial Statements And Notes” Note 15(b) Commitments and Contingencies). On August 18, 2022 the Ontario Court suspended the Claims Procedure Order with (i) the barring of claims pursuant to the applicable provisions of such order remaining in effect and (ii) the Company’s ability, with the consent of the Monitor, to refer claims for adjudication for the purposes of determining entitlement to proceeds to be distributed in accordance with a transaction completed pursuant to the SISP.

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 (as described 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.

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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 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 (as described below), the Backstop Commitment Letter and the transactions contemplated thereunder were automatically terminated pursuant to its terms without payment of the termination fee described below.

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 represented 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 was 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 the Stalking Horse Transaction Agreement with the Stalking Horse Purchaser and 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 Ontario Court and recognized by the Houston 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 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 Just Energy (U.S.) Corp, the new parent company of the Just Energy Entities, which will be owned entirely by 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.

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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 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 a 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 Stalking Horse 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 Ontario Court and recognition by the Houston 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 Stalking Horse Transaction Agreement).

On August 18, 2022, the Ontario Court extended the stay until October 31, 2022. The stay extension allows the Company to continue to operate in the ordinary course of business while pursuing its proposed restructuring.

Common shares transfer to NEX

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”.

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Weather-event related uplift securitization proceeds

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

On October 13, 2021, the PUCT approved the 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 $147.5 million 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 offset 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, 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 has two business segments: the mass markets segment and the commercial segment. The mass markets segment includes customers acquired and served under the Just Energy, Tara Energy, Amigo Energy and Terrapass brands. Marketing of the energy products of this segment is primarily done through digital and retail sales channels. The commercial segment includes customers acquired and served under Hudson Energy, as well as brokerage services managed by Interactive Energy Group. Hudson Energy sales are made through three main channels: brokers, door-to-door commercial independent contractors and inside commercial sales representatives.

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 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.

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3.BASIS OF 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 FASB. In the opinion of management, the unaudited Interim Condensed 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 interim operating results are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2023, 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.

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 and maintaining liquidity. 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 Sheets 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 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.

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4.TRADE AND OTHER RECEIVABLES, NET

(a)Trade and other receivables, net

As at June 30,

As at March 31,

    

2022

2022

Trade accounts receivable, net

$

147,709

$

147,063

Unbilled revenue, net

 

109,939

 

82,946

Accrued gas receivable

 

767

 

1,414

Commodity receivables

 

97,644

 

77,518

Total trade and other receivables, net

$

356,059

$

308,941

(b)Aging of accounts receivable

Customer credit risk

The lifetime ECL 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. The Company accrues an allowance for current ECL based on (i) estimates of uncollectable revenues by analyzing accounts receivable aging and current and reasonable forecasts of expected economic factors including weather-related events; and (ii) historical collections and delinquencies.

Just Energy is exposed to customer credit risk on its continuing operations in Alberta, Texas, Illinois (gas), California 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.

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, excluding the provision for expected credit losses, from the markets where the Company bears customer credit risk was as follows:

As at June 30,

As at March 31,

    

2022

2022

Current

$

73,188

$

57,766

1–30 days

 

12,276

 

16,061

31–60 days

 

2,305

 

4,470

61–90 days

 

2,841

 

1,220

Over 90 days

 

2,754

 

5,106

Total trade receivables

$

93,364

$

84,623

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(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 June 30,

As at March 31,

2022

2022

Balance, beginning of period

$

14,037

$

18,578

Provision for expected credit losses

 

10,450

 

24,242

Bad debts written off

 

(8,260)

 

(34,504)

Recoveries

936

5,148

Foreign exchange

(437)

 

573

Balance, end of period

$

16,726

$

14,037

The unbilled revenue subject to customer credit risk is $102.2 million as at June 30, 2022 (March 31, 2022 $71.2 million).

(d)Securitization proceeds receivable from ERCOT

The Company expected to receive the proceeds of $147.5 million from ERCOT the first half of calendar year 2022 and concluded that the threshold for recognizing a receivable was met in December 2021 as the amounts to be received were determinable and ERCOT was directed by its governing body, the PUCT, to take all actions required to effectuate the funding approved in the Final Order. The associated Weather Event Cost Recovery is reflected in cost of goods sold within the Interim Condensed Consolidated Statements of Operations as that is where the initial costs, which are being compensated for, were recorded. The Company received the proceeds of $147.5 million from ERCOT in June 2022.

5.OTHER CURRENT AND NON-CURRENT ASSETS

(a)Other current assets

    

As at June 30,

As at March 31,

    

2022

2022

Prepaid expenses and deposits

$

92,980

$

40,347

Customer acquisition costs

 

38,441

 

35,680

Green certificates assets

 

41,088

 

53,824

Gas delivered in excess of consumption

 

2,142

 

793

Inventory

 

930

 

926

Total other current assets

$

175,581

$

131,570

(b)Other non-current assets

    

As at June 30,

As at March 31,

    

2022

2022

Customer acquisition costs

$

33,296

$

30,273

Other long-term assets

 

11,554

 

8,775

Total other non-current assets

$

44,850

$

39,048

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6.DERIVATIVE INSTRUMENTS

(a)Fair value of derivative instruments

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 estimated the value of financial swaps, physical forwards and option contracts for electricity, natural gas, carbon offsets and RECs, 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 applicable market forward curves and the implied volatility from other market traded options.

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

For the three months ended June 30,

2022

2021

Physical forward contracts and options (i)

$

184,550

$

183,590

Financial swap contracts and options (ii)

 

36,237

 

54,101

Foreign exchange forward contracts

 

1,652

 

900

Other derivative options

 

 

(2,536)

Unrealized gain on derivative instruments

$

222,439

$

236,055

The following table summarizes certain aspects of the derivative instrument assets and liabilities recorded in the Interim Condensed Consolidated Balance Sheet as at June 30, 2022:

Derivative

Derivative

Derivative

Derivative

instrument

instrument

instrument

instrument

assets 

assets 

liabilities 

liabilities 

    

(current)

    

(non-current)

    

(current)

    

(non-current)

Physical forward contracts and options (i)

$

552,912

$

103,006

$

11,953

$

20,536

Financial swap contracts and options (ii)

 

172,012

 

67,635

 

 

2,074

Foreign exchange forward contracts

 

476

 

163

 

 

Other derivative options

 

2,047

 

1,031

 

 

17

As at June 30, 2022

$

727,447

$

171,835

$

11,953

$

22,627

The following tables summarize certain aspects of the derivative instrument assets and liabilities recorded in the Interim Condensed Consolidated Balance Sheet as at March 31, 2022:

Derivative

Derivative

Derivative

Derivative

instrument

instrument

instrument

instrument

assets 

assets 

liabilities 

liabilities 

    

(current)

    

(non-current)

    

(current)

    

(non-current)

Physical forward contracts and options (i)

$

373,268

$

81,392

$

10,195

$

5,865

Financial swap contracts and options (ii)

 

161,838

 

51,161

 

2,134

 

6,856

Foreign exchange forward contracts

 

 

 

841

 

195

Other derivative options

 

3,594

 

461

 

 

As at March 31, 2022

$

538,700

$

133,014

$

13,170

$

12,916

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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. The impact of netting derivative assets and liabilities is presented in the table below.

    

Gross basis amount

    

Netting impact

    

Net basis amount

Derivative instrument assets

 

$

1,386,800

$

(487,518)

$

899,282

Derivative instrument liabilities

 

(521,038)

 

486,458

 

(34,580)

As at June 30, 2022

$

865,762

$

(1,060)

$

864,702

    

Gross basis amount

    

Netting impact

    

Net basis amount

Derivative instrument assets

 

$

910,174

$

(238,460)

$

671,714

Derivative instrument liabilities

 

(265,011)

 

238,925

 

(26,086)

As at March 31, 2022

$

645,163

$

465

$

645,628

Below is a summary of the derivative instruments classified through the Interim Condensed Consolidated Statement of Operations as at June 30, 2022, to which Just Energy has committed:

Total remaining volume

Weighted average price

Expiry date

(i)

Physical forward contracts and options

Electricity contracts

30,091,003

MWh

$46.02

/MWh

December 31, 2029

Natural gas contracts

91,734,956

MMBtu

$4.83

/MMBtu

March 31, 2027

RECs

4,373,759

MWh

$13.53

/REC

December 31, 2029

Green Gas Certificates

408,000

tonnes

$7.08

/tonnes

June 1, 2023

Electricity generation capacity contracts

1,570

MWCap

$3,992.64

/MWCap

May 31, 2026

Ancillary contracts

1,055,000

MWh

$20.08

/MWh

December 31, 2025

(ii)

Financial swap contracts and options

Electricity contracts

22,819,077

MWh

$66.34

/MWh

December 31, 2026

Natural gas contracts

110,579,100

MMBtu

$3.63

/MMBtu

March 31, 2027

Ancillary contracts

2,046,082

MWh

$20.65

/MWh

December 31, 2025

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 asset balance recognized in the Interim Condensed Consolidated Financial Statements.

Fair value hierarchy of derivatives

Level 1

The fair value measurements are classified as Level 1 in the fair value 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 fair value hierarchy. This could include the use of statistical techniques to derive the fair value 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 NYMEX financial gas fixed-for-floating swaps un