NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In March 2019, Just Energy formally
approved and commenced a process to dispose of its businesses in Germany, Ireland and Japan. In June 2019, Just Energy also
formally approved and commenced a process to dispose of its business in the United Kingdom (“U.K.”), as part of the Company’s
strategic review. The decision was part of a strategic transition to focus on the core business in North America. The U.K. and Ireland
businesses were disposed of during the year ended March 31, 2020 as described in Note 25. The disposal of operations in Japan was
completed in April 2020. In March 2021, the Company commenced insolvency proceedings for its German operations and expects to
liquidate the German businesses within the next 12 months.
As at March 31, 2021, the German business
operations were classified as a discontinued operation. Previously, these operations were reported within the Mass Market segment, while
a portion of the U.K. business was allocated to the Commercial segment. On November 30, 2020, the Company sold EdgePower. The disposal
of these operations was reclassified and presented in discontinued operations and were previously reported as a Commercial segment.
On September 28, 2020, the Company
completed a recapitalization plan (the “September Recapitalization”). The September Recapitalization was undertaken
through a plan of arrangement under the Canada Business Corporations Act (“CBCA”). See further discussion in Note 15 and Note
18.
The Consolidated Financial Statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board. The policies applied in these Consolidated Financial Statements were based on IFRS issued and effective as at March 31,
2021.
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|
(b)
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Basis of presentation
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The Consolidated Financial Statements are
presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand, except where
otherwise indicated. The Consolidated Financial Statements are prepared on a going concern basis under the historical cost convention,
except for certain financial assets and liabilities that are stated at fair value.
Principles of consolidation
The Consolidated Financial Statements include
the accounts of Just Energy and its directly or indirectly owned subsidiaries as at March 31, 2021. Subsidiaries are consolidated
from the date of acquisition and control and continue to be consolidated until the date that such control ceases. Control is achieved
when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect these
returns through its power over the investee. The financial statements of the subsidiaries are prepared for the same reporting period as
Just Energy, using consistent accounting policies. All intercompany balances, income, expenses, and unrealized gains and losses resulting
from intercompany transactions are eliminated on consolidation.
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, meeting the liquidity challenges and complying with DIP Facility covenants. The material
uncertainties arising from the CCAA filings cast substantial doubt upon the Company’s ability to continue as a going concern
and, accordingly the ultimate appropriateness of the use of accounting principles applicable to a going concern. These Consolidated
Financial Statements do not reflect the adjustments to carrying values of assets and liabilities and the reported expenses and
Consolidated Statements of Financial Position classifications that would be necessary if the going concern assumption was deemed
inappropriate. These adjustments could be material. There can be no assurance that the Company will be successful in emerging from
CCAA as a going concern.
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4.
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SIGNIFICANT ACCOUNTING POLICIES
|
Cash and cash equivalents and restricted
cash
All highly liquid temporary cash investments
with an original maturity of three months or less when purchased are cash equivalents. For the Consolidated Statements of Cash Flows,
cash and cash equivalents consist of cash and cash equivalents as defined above.
Restricted cash includes cash and cash equivalents,
where the availability of cash to be exchanged or used to settle a liability is restricted by debt arrangements.
Accrued gas receivable/accrued gas payable
or gas delivered in excess of consumption/deferred revenue
Accrued gas receivable from Just Energy’s
customers is stated at fair value and results from customers consuming more gas than has been delivered by Just Energy to local distribution
companies (“LDCs”). Accrued gas payable represents Just Energy’s obligation to the LDCs for the customers’ excess
consumption, over what was delivered to the LDCs.
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F-11
|
|
JUST ENERGY | ANNUAL REPORT 2021
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Gas delivered to LDCs in excess of consumption
by customers is stated at the lower of cost and net realizable value. Collections from customers in advance of their consumption of gas
result in deferred revenue.
Assuming normal weather and consumption
patterns, during the winter months, customers will have consumed more than was delivered, resulting in the recognition of accrued gas
receivable/accrued gas payable. In the summer months, customers will have consumed less than what was delivered, resulting in the recognition
of gas delivered in excess of consumption/deferred revenue.
Gas in storage
Gas in storage represents the gas delivered
to the LDCs. The balance will fluctuate as gas is injected into or withdrawn from storage.
Gas in storage is valued at the lower of
cost and net realizable value, with cost being determined based on market cost on a weighted average basis. Net realizable value is the
estimated selling price in the ordinary course of business.
Property and equipment
Property and equipment are stated at cost,
net of any accumulated depreciation and impairment losses. Cost includes the purchase price and, where relevant, any costs directly attributable
to bringing the asset to the location and condition necessary for its intended use and the present value of all dismantling and removal
costs. Where major components of property and equipment have different useful lives, the components are recognized and depreciated separately.
Just Energy recognizes, in the carrying amount, the cost of replacing part of an item when the cost is incurred and if it is probable
that the future economic benefits embodied in the item can be reliably measured. Depreciation is provided over the estimated useful lives
of the assets as follows:
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Asset category
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Depreciation method
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Rate/useful life
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Furniture and fixtures
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Declining balance
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|
20%
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Office equipment
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Declining balance
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20%
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Computer equipment
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Declining balance
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30%
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Leasehold improvements
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Straight-line
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Shorter of useful life and lease term
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Premise assets
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Straight-line
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4-7 years
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An item of property and equipment and any
significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset is included in the Consolidated Statements of Loss.
The useful lives and methods of depreciation
are reviewed at each financial year-end and adjusted prospectively, if appropriate.
Business combinations
All identifiable assets acquired and liabilities
assumed are measured at the acquisition date at fair value. The Company records all identifiable intangible assets including identifiable
assets that had not been recognized by the acquiree before the business combination. Any excess of the cost of acquisition over the Company’s
share of the net fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement
period (which is within one year from the acquisition date), Just Energy may adjust the amounts recognized at the acquisition date to
reflect new information obtained about facts and circumstances that existed as of the acquisition date. Adjustments related to facts and
circumstances that did not exist as at the Consolidated Statements of Financial Position dates are taken to the Consolidated Statements
of Loss. The Company records acquisition-related costs as expenses in the periods in which the costs are incurred with the exception of
certain costs relating to registering and issuing debt or equity securities which are accounted for as part of the financing.
Non-controlling interest is recognized at
its proportionate share of the fair value of identifiable assets and liabilities, unless otherwise indicated.
Goodwill
Goodwill is initially measured at cost,
which is the excess of the cost of the business combination over Just Energy’s share in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities.
After initial recognition, goodwill is measured
at cost, less impairment losses. For the purpose of impairment testing, goodwill is allocated to each of Just Energy’s operating
segments that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the
acquiree are assigned to those segments.
Intangible assets
Intangible assets acquired outside of a
business combination are measured at cost on initial recognition. Following initial recognition, intangible assets are carried at cost
less any accumulated amortization and/or accumulated impairment losses.
Intangible assets with finite useful lives
are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may
be impaired. The amortization method and amortization period of an intangible asset with a finite useful life are reviewed at least annually.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted
for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization
expense related to intangible assets with finite lives is recognized in the Consolidated Statements of Loss.
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ANNUAL REPORT 2021 | JUST ENERGY
|
F-12
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Internally developed intangible assets
are capitalized when the product or process is technically and commercially feasible, the future economic benefit is measurable,
Just Energy can demonstrate how the asset will generate future economic benefits and Just Energy has sufficient resources to
complete development. The cost of an internally developed intangible asset comprises all directly attributable costs necessary to
create, produce and prepare the asset to be capable of operating in the manner intended by management.
Gains or losses arising from disposal of
an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized
in the Consolidated Statements of Loss when the asset is derecognized.
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Intangible asset category
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Amortization method
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Rate/useful life
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Customer relationships
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Straight-line
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10 years
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Technology
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Straight-line
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3-5 years
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Brand (finite life)
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Straight-line
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10 years
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Impairment of non-financial assets
Just Energy assesses whether there is an
indication that an asset may be impaired at each reporting date. If such an indication exists or when annual testing for an asset is required,
Just Energy estimates the asset’s recoverable amount. The recoverable amounts of goodwill and intangible assets with an indefinite
useful life are tested at least annually. The recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”)
or group of CGUs’ fair value less costs to sell and its value-in-use. Value-in- use is determined by discounting estimated future
pre-tax cash flows using a pre-tax discount rate that reflects the current market assessment of the time value of money and the specific
risks of the asset. The recoverable amount of assets that do not generate independent cash flows is determined based on the CGU or group
of CGUs to which the asset belongs.
The goodwill and certain brands are considered
to have indefinite lives and are not amortized, but rather tested annually for impairment or when there are indications that these assets
may be impaired. The assessment of indefinite life is reviewed annually.
An impairment loss is recognized if an asset’s
carrying amount or that of the CGU or groups of CGUs to which it is allocated is higher than its recoverable amount. Impairment losses
of individual CGUs or group of CGUs are charged against the goodwill, then indefinite-life intangibles and if any value is left, then
to the assets in proportion to their carrying amount.
For assets excluding goodwill, an assessment
is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist
or may have decreased. If such an indication exists, Just Energy estimates the asset’s or CGU’s or group of CGUs’ recoverable
amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s
recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does
not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no impairment
loss been recognized for the asset in prior years. Such a reversal is recognized in the Consolidated Statements of Loss.
Goodwill is tested for impairment annually
and when circumstances indicate that the carrying value may be impaired. Goodwill is tested at the operating segment level, representing
a group of CGUs, as that is the lowest level at which goodwill is monitored. Impairment is determined for goodwill by assessing the recoverable
amount of each operating segment to which the goodwill relates. Where the recoverable amount of the operating segment is less than its
carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.
Leases
A lease is an arrangement whereby the
lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time.
Right-of-use (“ROU“) assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of ROU assets includes the amount of lease liabilities recognized, initial
direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. ROU assets are
depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, within a range
of two years to six years.
The determination of whether an arrangement
is or contains a lease is based on the substance of the arrangement at the inception date and whether fulfillment of the arrangement is
dependent on the use of a specific asset or assets, or the arrangement conveys a right to use the asset.
Lease liabilities
At the commencement date of the lease, Just
Energy recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments
include fixed payments (including in-substance fixed payments) less any lease incentives receivable. The lease payments also include payments
of penalties for terminating the lease, if the lease term reflects the exercising of the option to terminate. Lease liabilities are grouped
into other liabilities on the Consolidated Statements of Financial Position.
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F-13
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|
JUST ENERGY | ANNUAL REPORT 2021
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In calculating the present value of lease
payments, Just Energy uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease
is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification,
a change in the lease term, or a change in the lease.
Just Energy as a lessee
Just Energy applies the short-term
lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12
months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets
recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and
leases of low-value assets are recognized as expense on a straight-line basis over the lease term.
Financial instruments
A financial instrument is any contract that
gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Regular purchases and
sales of financial assets are recognized on the trade date, being the date on which Just Energy commits to purchase or sell the asset.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
Just Energy classified its financial assets
and liabilities in the following measurement categories:
Financial assets at fair value through
profit or loss
Financial assets at fair value through profit
or loss include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit
or loss. This category includes derivative financial instruments entered into that are not designated as hedging instruments in hedge
relationships as defined by IFRS 9, Financial Instruments (“IFRS 9”). Included
in this class are primarily physical delivered
energy contracts, for which the own-use exemption could not be applied, financially settled energy contracts and foreign currency forward
contracts.
An analysis of fair values of financial
instruments and further details as to how they are measured are provided in Note 12. Related realized and unrealized gains and losses
are included in the Consolidated Statements of Loss.
Financial assets classified at fair value
through other comprehensive income (“OCI”)
Financial assets at fair value through OCI
are equity instruments that Just Energy has elected to recognize the changes in fair value through OCI. They were recognized initially
at fair value in the Consolidated Statements of Financial Position and were remeasured subsequently at fair value with gains and losses
arising from changes in fair value recognized directly in equity and presented in OCI.
Amortized cost
Assets held for collection of contractual
cash flows that represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a financial asset
is recognized in the Consolidated Statements of Loss when the asset is derecognized or impaired. Trade and other receivables and trade
and other payables are included in this category.
Financial liabilities at fair value through
profit or loss
Financial liabilities at fair value through
profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair
value through profit or loss.
Financial liabilities are classified as
held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments
entered into by Just Energy that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Included in this
class are primarily physically delivered energy contracts, for which the own-use exemption could not be applied, financially settled energy
contracts and foreign currency forward contracts.
Gains or losses on liabilities held for
trading are recognized in the Consolidated Statements of Loss.
Other financial liabilities at amortized
cost
Other financial liabilities are measured
at amortized cost using the effective interest rate method. Financial liabilities include long-term debt issued and are initially measured
at fair value. Transaction costs related to the long-term debt instruments are included in the value of the instruments and amortized
using the effective interest rate method. The effective interest expense is included in finance costs in the Consolidated Statements of
Loss.
At initial recognition, Just Energy
measures a financial asset at its fair value. In the case of a financial asset not categorized as fair value through profit or loss
transaction costs that are directly attributable to the acquisition of the financial asset are included in measurement at initial
recognition. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Consolidated
Statements of Loss.
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ANNUAL REPORT 2021 | JUST ENERGY
|
F-14
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All financial liabilities are recognized
initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement of financial assets
depends on Just Energy’s business objective for managing the asset and the cash flow characteristics of the asset.
Derivative instruments
Just Energy enters into fixed-term contracts
with customers to provide electricity and natural gas at fixed prices. These customer contracts expose Just Energy to changes in consumption
as well as changes in the market prices of electricity and natural gas. To reduce its exposure to movements in commodity prices, Just
Energy enters into contracts with suppliers that expose the Company to changes in prices for the purchase and sale of electricity and
natural gas. These contracts are treated as derivatives as they do not meet the own-use criteria under International Accounting Standards
(“IAS”) 32, Financial Instruments: Presentation. The primary factors affecting the fair value of derivative instruments
at any point in time are the volume of open derivative positions and the changes of commodity market prices. Prices for electricity and
natural gas are volatile, which can result in material changes in the fair value measurements reported in Just Energy’s Consolidated
Financial Statements in the future.
Just Energy analyzes all its contracts,
of both a financial and non-financial nature, to identify the existence of any “embedded” derivatives. Embedded derivatives
are accounted for separately from the underlying contract at the inception date when their economic characteristics are not closely related
to those of the host contract and the host contract is not carried as held for trading or designated as fair value through profit or loss.
These embedded derivatives are measured at fair value with changes in fair value recognized in Consolidated Statements of Loss.
All derivatives are recognized at fair value
on the date on which the derivative is entered into and are remeasured to fair value at each reporting date. Derivatives are carried in
the Consolidated Statements of Financial Position as fair value of derivative financial assets when the fair value is positive and as
fair value of derivative financial liabilities when the fair value is negative. Just Energy does not utilize hedge accounting; therefore,
changes in the fair value of these derivatives are recorded directly to the Consolidated Statements of Loss and are included within unrealized
gain (loss) on derivative instruments.
The contracts to buy or sell a non-financial
item that can be settled net in cash or another financial instrument, or by exchanging financial instruments, are accounted for as derivatives
at fair value through profit or loss. These contracts are physically settled by the underlying non-financial item. These are recognized
as a corresponding adjustment to cost of goods sold or inventory when the contract is physically settled. These realized gains and losses
on financial swap contracts are recorded in the line item realized gain (loss) on derivative instruments in the Consolidated Statements
of Loss.
A financial asset is derecognized when the
rights to receive cash flows from the asset have expired or when Just Energy has transferred its rights to receive cash flows from the
asset.
A financial liability is derecognized when
the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another
from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in
the respective carrying amounts is recognized in the Consolidated Statements of Loss.
Just Energy assesses on a forward-looking
basis the expected credit loss (“ECL”) associated with its assets carried at amortized cost. For trade receivables, other
receivables and unbilled revenue only, Just Energy applies the simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognized from initial recognition of the receivables.
Trade receivables are reviewed qualitatively
to determine if they need to be written off.
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(vi)
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Offsetting of financial instruments
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Financial assets and financial liabilities
are offset and the net amount reported in the Consolidated Statements of Financial Position if, and only if, there is currently an enforceable
legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the
liabilities simultaneously.
Fair value of financial instruments
Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e.,
an exit price). The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference
to quoted market prices, without any deduction for transaction costs.
For financial instruments not traded
in an active market, the fair value is determined using appropriate valuation techniques that are recognized by market participants.
Such techniques may include using recent arm’s-length market transactions, reference to the current fair value of another
instrument that is substantially the same, discounted cash flow analysis, or other valuation models. An analysis of fair values of
financial instruments and further details as to how they are measured are provided in Note 12.
Revenue recognition
Just Energy has identified that the material
performance obligation is the provision of electricity and natural gas to customers, which is satisfied over time throughout the contract
term. Just Energy utilizes the output method to recognize revenue based on the units of electricity and natural gas
delivered and billed to the customer each month and Just Energy has elected to adopt the practical expedient to recognize revenue in the
amount to which the entity has a right to invoice, as the entity has a right to consideration from a customer in an amount that corresponds
directly with the value to the customer of the entity’s performance to date.
|
F-15
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|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue is measured at the fair value of
the consideration received, excluding discounts, rebates and sales taxes.
Just Energy accounts for Transmission and
Distribution Service Provider (“TDSP”) charges charged to electricity customers on a gross basis whereby TDSP charges to the
customer and payments to the service provider are presented in sales and cost of goods sold, respectively.
In Alberta, Texas, Illinois, California
(gas), and Ohio, Just Energy assumes the credit risk associated with the collection of customer accounts. Credit review processes have
been established to manage the customer default rate. Management factors default from credit risk into its margin expectations for all
of the above-noted markets.
Foreign currency translation
Functional and presentation currency
Items included in the Consolidated
Financial Statements of each of the Company’s entities are measured using the currency of the primary economic environment in
which the entity operates (the “functional currency”). For U.S.-based subsidiaries, this is U.S. dollars. The
Consolidated Financial Statements are presented in Canadian dollars, which is the parent Company’s presentation and functional
currency.
Transactions
Foreign currency transactions are translated
into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognized in the Consolidated Statements of Loss.
Translation of foreign operations
The consolidated results and Consolidated
Statements of Financial Position of all the group entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
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|
•
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Assets and liabilities for each Consolidated Statements of Financial Position presented are translated at the closing rate as at the
date of that Consolidated Statements of Financial Position; and
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|
|
•
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Income and expenses for each Consolidated Statements of Loss are translated at the exchange rates prevailing at the dates of the transactions.
|
On consolidation, exchange differences arising
from the translation of the net investment in foreign operations are recorded in OCI.
When a foreign operation is partially disposed
of or sold, exchange differences that were recorded in accumulated other comprehensive income are recognized in the Consolidated Statements
of Loss as part of the gain or loss on sale.
Goodwill and fair value adjustments arising
on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Earnings (loss) per share amounts
The computation of earnings (loss) per share
is based on the weighted average number of shares outstanding during the year. Diluted earnings (loss) per share is computed in a similar
way to basic earnings (loss) per share except that the weighted average number of shares outstanding is increased to include additional
shares introduced after the equity compensation plans described in Note 19 assuming the exercise of stock options, restricted share units
(“RSUs”), performance share units (“PSUs”) and deferred share units (“DSUs”). These outstanding shares
are also adjusted for any pre-September Recapitalization restricted share grants (“RSGs”), performance bonus incentive
grants (“PBGs”), deferred share grants (“DSGs”) and convertible debentures, if dilutive.
Share-based compensation plans
Equity-based compensation liability
Share-based compensation plans are equity-settled
transactions. The cost of share-based compensation is measured by reference to the fair value at the date on which it was granted. Awards
are valued at the grant date and are not adjusted for changes in the prices of the underlying shares and other measurement assumptions.
The cost of equity-settled transactions is recognized, together with the corresponding increase in equity, over the period in which the
performance or service conditions are fulfilled, ending on the date on which the relevant grantee becomes fully entitled to the award.
The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting period reflects the extent
to which the vesting period has expired and Just Energy’s best estimate of the number of the shares that will ultimately vest. The
expense or credit recognized for a period represents the movement in cumulative expense recognized as at the beginning and end of that
period.
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|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-16
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
When units are exercised or exchanged, the
amounts previously credited to contributed deficit are reversed and credited to shareholders’ capital.
Employee future benefits
In Canada, Just Energy offers a long-term
wealth accumulation plan (the “Canadian Plan”) for all permanent full-time and permanent part-time employees (working more
than 26 hours per week).
For U.S. employees, Just Energy has established
a long-term savings plan (the “U.S. Plan”) for all permanent full-time and part-time employees (working more than 30 hours
per week) of its subsidiaries.
Participation in the plans in Canada or
the U.S. is voluntary. Obligations for contributions to the Canadian and U.S. Plans are recognized as an expense in the Consolidated Statements
of Loss when the contribution is made by the Company.
Income taxes
Current income tax assets and liabilities
for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the taxation authorities. The
tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries
where Just Energy operates and generates taxable income.
Current income taxes relating to items recognized
directly in OCI or equity are recognized in OCI or equity and not in the Consolidated Statements of Loss. Management periodically evaluates
positions taken in the tax returns with respect to situations where applicable tax regulations are subject to interpretation and establishes
provisions where appropriate.
Just Energy follows the liability method
of accounting for deferred income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated
tax consequences attributable to the temporary differences between the carrying value of the assets and liabilities in the Consolidated
Financial Statements and their respective tax bases.
Deferred income tax liabilities are recognized
for all taxable temporary differences except:
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|
•
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Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit or loss nor taxable profit
or loss; and
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|
|
•
|
In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary
differences can be controlled by the parent and it is probable that the temporary differences will not reverse in the foreseeable future.
|
Deferred income tax assets are recognized
for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and
unused tax losses, can be utilized except:
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|
•
|
Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss; and
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|
|
•
|
In respect of deductible temporary differences associated with investments in subsidiaries, deferred income tax assets are recognized
only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilized.
|
The carrying amount of deferred income tax
assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets
are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profits
will allow the deferred income tax asset to be recovered.
Deferred income tax assets and liabilities
are measured at the tax rates that are expected to apply to the year when the asset is realized, or the liability is settled, based on
tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred income taxes relating to items
recognized in cumulative translation adjustment or equity are recognized in OCI or equity and not in the Consolidated Statements of Loss.
Deferred income tax assets and deferred
income tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax
liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Provisions and restructuring
Provisions are recognized when Just Energy
has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where
Just Energy expects some or all provisions to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement
is virtually certain. The expense relating to any provision is presented in the Consolidated Statements of Loss, net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate,
the risks specific to the liability. If there are uncertainties
on the timing and amounts of the obligation, the provisions are not discounted and presented in full based on the best estimate.
|
F-17
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Restructuring provisions comprise activities
including termination or relocation of a business, management structural reorganization and employee-related costs. Incremental costs
directly associated with the restructuring are included in the restructuring provision. Costs associated with ongoing activities, including
training or relocating continuing staff, are excluded from the provision. Measurement of the provision is at the best estimate of the
anticipated costs to be incurred.
Where discounting is used, the increase
in the provision due to the passage of time is recognized as a finance cost in the Consolidated Statements of Loss.
Selling and marketing expenses
Commissions and various other costs related
to obtaining and renewing customer contracts are charged to expense in the Consolidated Statements of Loss in the period incurred except
as disclosed below:
Commissions related to obtaining and renewing
customer contracts are paid in one of the following ways: all or partially up front or as a residual payment over the term of the contract.
If the commission is paid all or partially up front, it is recorded as a customer acquisition cost in other current or non-current assets
in the Consolidated Statements of Financial Position and expensed in selling and marketing expenses over the term for which the associated
revenue is earned. If the commission is paid as a residual payment, the amount is expensed as earned.
Just Energy capitalizes the incremental
acquisition costs of obtaining a customer contract as an asset as these costs would not have been incurred if the contract had not been
obtained and these costs are amortized in selling and marketing expense over the life of the contract. When the term of the contract is
one year or less, the incremental costs incurred to obtain the customer contracts are expensed when incurred.
Just Energy expenses advertising costs as
incurred.
Green provision and certificates
Just Energy is a retailer of green energy
and records a provision to its regulators as green energy sales are recognized. A corresponding cost is included in cost of goods sold.
Just Energy measures its provision based on the compliance requirements of different jurisdictions in which it has operations or where
the customers voluntarily subscribed for green energy.
Green certificates are purchased by Just
Energy to settle its obligation with the regulators or for trading in the normal course of business. Green certificates are held at cost
and presented at the gross amount in the Consolidated Statements of Financial Position. These certificates are only netted against the
obligation when the liability is retired as per the regulations of the respective jurisdiction. Any provision balance in excess of the
green certificates held or that Just Energy has committed to purchase is measured at fair value.
Any green energy-related derivatives are
forward contracts and are recognized in accordance with the accounting policy discussed under “Financial Instruments” above.
Non-current assets held for sale and
discontinued operations
Just Energy classifies non-current assets
and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through
continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount
and fair value less costs to sell. The criteria for the held for sale classification is regarded as met only when the sale is highly probable,
and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which
should be expected to qualify for recognition as a completed sale within one year from the date of classification. Discontinued operations
are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued
operations in the Consolidated Statements of Loss. Property and equipment and intangible assets are not depreciated or amortized once
classified as held for sale.
|
|
5.
|
CORRECTION OF PRIOR PERIOD FINANCIAL STATEMENTS
|
The Company determined that the TDSP charges
charged to electricity customers were accounted for on a gross basis in certain markets and net in other markets. Under the gross basis,
TDSP charges to the customer and payments to the service provider are presented gross within sales and cost of goods sold, respectively.
Under the net method, TDSP charges to the customer and payments to the service provider are presented net within cost of goods sold.
Management analyzed the appropriate accounting
treatment under IFRS 15, Revenue from Contracts with Customers, based on accounting standards and guidance, terms of the contract,
commercial understanding and industry practice. Based on the analysis performed, it was determined that the Company undertakes to deliver
the commodity to the customer at their location across various markets and contract offers. Arranging delivery to the customer’s
meter is a part of the activities the Company performs to fulfill its obligation to customers and, as such, the Company is the primary
obligor to deliver the commodity to the customer. The Company determined that TDSP charges should be accounted for consistently on a gross
basis for the relevant markets where the nature and contractual terms of TDSP charges were similar. As a result, prior years amounts on
the Consolidated Statements of Loss with respect
to sales and cost of goods sold were corrected to reflect the gross basis of presentation. Amounts reflected for the year ended March 31,
2021 are presented gross.
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-18
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Year ended
March 31, 2020,
as originally
reported
|
|
|
Correction
|
|
|
Year ended
March 31, 2020
(Re-presented)
|
|
|
Sales
|
|
$
|
2,772,809
|
|
|
$
|
380,843
|
|
|
$
|
3,153,652
|
|
|
Cost of goods sold
|
|
|
2,136,456
|
|
|
|
380,843
|
|
|
|
2,517,299
|
|
|
Gross margin
|
|
$
|
636,353
|
|
|
$
|
–
|
|
|
$
|
636,353
|
|
|
|
|
Year ended
March 31, 2019,
as originally
reported
|
|
|
Correction
|
|
|
Year ended
March 31, 2019
(Re-presented)
|
|
|
Sales
|
|
$
|
3,038,438
|
|
|
$
|
402,954
|
|
|
$
|
3,441,392
|
|
|
Cost of goods sold
|
|
|
2,359,867
|
|
|
|
402,954
|
|
|
|
2,762,821
|
|
|
Gross margin
|
|
$
|
678,571
|
|
|
$
|
–
|
|
|
$
|
678,571
|
|
Management assessed the materiality of the
correction described above on prior period financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99,
Materiality and concluded that these corrections were not material to any prior annual or interim periods. Accordingly, in accordance
with SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements, the Consolidated Financial Statements for the years ended March 31, 2020 and 2019, which are presented herein, have
been re-presented after correction of such immaterial adjustments solely for comparability purposes.
|
|
6.
|
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
|
The preparation of the Consolidated Financial
Statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts
of assets, liabilities, income and expenses. The estimates and related assumptions are based on previous experience and other factors
considered reasonable under the circumstances, the results of which form the basis for making the assumptions about carrying values of
assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions
are reviewed on an ongoing basis. In its review, the Company has considered the on-going impact of the coronavirus disease (“COVID-19”)
pandemic. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Judgments made by management
in the application of IFRS that have a significant impact on the Consolidated Financial Statements relate to the following:
Allowance for doubtful accounts
The measurement of the ECL allowance for
trade accounts receivable requires the use of management’s judgment in estimation techniques, building models, selecting key inputs
and making significant assumptions about future economic conditions and credit behaviour of the customers, including the likelihood of
customers defaulting and the resulting losses. The Company’s current significant estimates include the historical collection rates
as a percentage of revenue and the use of the Company’s historical rates of recovery across aging buckets and the consideration
of forward-looking information. All of these inputs are sensitive to the number of months or years of history included in the analysis,
which is a key input and judgment made by management.
Deferred income taxes
Significant management judgment is required
to determine the amount of deferred income tax assets and liabilities that can be recognized, based upon the likely timing and the level
of future taxable income realized, including the usage of tax-planning strategies. Determining the tax treatment on certain transactions
also involves management’s judgment.
Fair value of financial instruments
Where the fair values of financial assets
and financial liabilities recorded in the Consolidated Statements of Financial Position cannot be derived from active markets, they are
determined using valuation techniques including discounted cash flow models or transacted/quoted prices of identical assets that are not
active. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment
is required in establishing fair values. The judgment includes consideration of inputs such as liquidity risk, credit risk and volatility.
Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer to Note 12 for further
details about the assumptions as well as a sensitivity analysis.
|
F-19
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
Impairment of non-financial assets
Just Energy’s impairment test is based
on the estimated value-in-use and uses a discounted cash flow approach model. Management is required to exercise judgment in identifying
the CGUs or group of CGUs to which to allocate goodwill, working capital and related assets and liabilities. Judgment is applied in the
determination of perspective financial information that includes the weighted cost of capital, forecasted growth rates, and expected margin.
Refer to Note 11 for further information.
|
|
7.
|
TRADE AND OTHER RECEIVABLES, NET
|
|
|
(a)
|
Trade and other receivables, net
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
Trade account receivables, net
|
|
$
|
189,250
|
|
|
$
|
241,969
|
|
|
Unbilled revenue, net
|
|
|
103,986
|
|
|
|
121,993
|
|
|
Accrued gas receivable
|
|
|
833
|
|
|
|
7,224
|
|
|
Other
|
|
|
46,132
|
|
|
|
32,721
|
|
|
|
|
$
|
340,201
|
|
|
$
|
403,907
|
|
|
|
(b)
|
Aging of accounts receivable
|
Customer credit risk
The lifetime expected credit loss reflects
Just Energy’s best estimate of losses on the accounts receivable and unbilled revenue balances. Just Energy determines the lifetime
ECL by using historical loss rates and forward-looking factors, if applicable.
Just Energy is exposed to customer credit
risk on its continuing operations in Alberta, Texas, Illinois (gas), California (gas) and Ohio (electricity). Credit review processes
have been implemented to perform credit evaluations of customers and manage customer default. If a significant number of customers were
to default on their payments, it could have a material adverse effect on the operations and cash flows of Just Energy. Management factors
default from credit risk in its margin expectations for all of the above markets.
In the remaining markets, the LDCs provide
collection services and assume the risk of any bad debts owing from Just Energy’s customers for a fee that is recorded in cost of
goods sold. Although there is no assurance that the LDCs providing these services will continue to do so in the future, management believes
that the risk of the LDCs failing to deliver payment to Just Energy is minimal.
The aging of the trade accounts receivable,
excluding the allowance for doubtful accounts, from the markets where the Company bears customer credit risk was as follows:
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
Current
|
|
$
|
58,737
|
|
|
$
|
83,431
|
|
|
1-30 days
|
|
|
19,415
|
|
|
|
26,678
|
|
|
31-60 days
|
|
|
3,794
|
|
|
|
6,513
|
|
|
61-90 days
|
|
|
2,144
|
|
|
|
5,505
|
|
|
Over 90 days
|
|
|
10,446
|
|
|
|
35,252
|
|
|
|
|
$
|
94,536
|
|
|
$
|
157,379
|
|
|
|
(c)
|
Allowance for doubtful accounts
|
Changes in the
allowance for doubtful accounts related to the balances in the table above were as follows:
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
Balance, beginning of year
|
|
$
|
45,832
|
|
|
$
|
182,365
|
|
|
Provision for doubtful accounts
|
|
|
34,260
|
|
|
|
80,050
|
|
|
Bad debts written off
|
|
|
(62,529
|
)
|
|
|
(138,514
|
)
|
|
Foreign exchange
|
|
|
5,800
|
|
|
|
3,124
|
|
|
Assets classified as held for sale/sold
|
|
|
—
|
|
|
|
(81,193
|
)
|
|
Balance, end of year
|
|
$
|
23,363
|
|
|
$
|
45,832
|
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-20
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
8.
|
OTHER CURRENT AND NON-CURRENT ASSETS
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
Prepaid expenses and deposits
|
|
$
|
52,216
|
|
|
$
|
55,972
|
|
|
Customer acquisition costs (a)
|
|
|
45,681
|
|
|
|
77,939
|
|
|
Green certificates
|
|
|
61,467
|
|
|
|
63,728
|
|
|
Gas delivered in excess of consumption
|
|
|
650
|
|
|
|
2,393
|
|
|
Inventory
|
|
|
3,391
|
|
|
|
3,238
|
|
|
|
|
$
|
163,405
|
|
|
$
|
203,270
|
|
|
|
(b)
|
Other non-current assets
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
Customer acquisition costs (a)
|
|
$
|
27,318
|
|
|
$
|
43,686
|
|
|
Other long-term assets
|
|
|
7,944
|
|
|
|
12,764
|
|
|
|
|
$
|
35,262
|
|
|
$
|
56,450
|
|
|
|
(a)
|
Amortization of $88.5 million is charged to selling and marketing expense in the Consolidated Statements of Loss.
|
As at March 31, 2021, Just Energy owns
approximately 8% (on a fully diluted basis) of ecobee, a private company that designs, manufactures and sells smart thermostats. This
investment is measured at and classified as fair value through profit or loss. The fair value of the investment has been determined directly
from transacted/quoted prices of similar assets that are not active (Level 3 measurement). As at March 31, 2021, the fair value of
the ecobee investment is $32.9 million (2020 — $32.9 million).
|
10.
|
PROPERTY AND EQUIPMENT
|
|
|
|
As at March 31, 2021
|
|
|
As at March 31, 2020
|
|
|
|
|
Cost
|
|
|
Accumulated
depreciation
|
|
|
Net book
value
|
|
|
Cost
|
|
|
Accumulated
depreciation
|
|
|
Net book
value
|
|
|
Premise and ROU assets
|
|
$
|
31,167
|
|
|
$
|
(20,397
|
)
|
|
$
|
10,770
|
|
|
$
|
35,899
|
|
|
$
|
(19,729
|
)
|
|
$
|
16,170
|
|
|
Computer equipment
|
|
|
25,646
|
|
|
|
(20,788
|
)
|
|
|
4,858
|
|
|
|
27,959
|
|
|
|
(19,548
|
)
|
|
|
8,411
|
|
|
Others1
|
|
|
26,806
|
|
|
|
(24,607
|
)
|
|
|
2,199
|
|
|
|
27,777
|
|
|
|
(23,564
|
)
|
|
|
4,213
|
|
|
Total
|
|
$
|
83,619
|
|
|
$
|
(65,792
|
)
|
|
$
|
17,827
|
|
|
$
|
91,635
|
|
|
$
|
(62,841
|
)
|
|
$
|
28,794
|
|
1 Others
include office equipment, furniture and fixture and leasehold improvements.
|
|
|
As at March 31, 2021
|
|
|
As at March 31, 2020
|
|
|
|
|
Cost
|
|
|
Accumulated
amortization
|
|
|
Impairment
|
|
|
Net book
value
|
|
|
Cost
|
|
|
Accumulated
amortization
|
|
|
Net book
value
|
|
|
Technology1
|
|
$
|
122,763
|
|
|
$
|
(70,655
|
)
|
|
$
|
(1,116
|
)
|
|
$
|
50,992
|
|
|
$
|
121,382
|
|
|
$
|
(61,531
|
)
|
|
$
|
59,851
|
|
|
Brand2
|
|
|
32,459
|
|
|
|
(700
|
)
|
|
|
(13,864
|
)
|
|
|
17,895
|
|
|
|
36,235
|
|
|
|
(400
|
)
|
|
|
35,835
|
|
|
Others3
|
|
|
55,610
|
|
|
|
(53,774
|
)
|
|
|
—
|
|
|
|
1,836
|
|
|
|
65,800
|
|
|
|
(63,220
|
)
|
|
|
2,580
|
|
|
Total
|
|
$
|
210,832
|
|
|
$
|
(125,129
|
)
|
|
$
|
(14,980
|
)
|
|
$
|
70,723
|
|
|
$
|
223,417
|
|
|
$
|
(125,151
|
)
|
|
$
|
98,266
|
|
|
|
1
|
Technology includes work in progress projects of $5.2 million, which are not being amortized until completion.
|
|
|
2
|
This includes an indefinite-lived brand of $15.6 million.
|
|
|
3
|
This includes sales networks and customer relationships.
|
The capitalized internally developed costs
relate to the development of a new customer relationship management software for the different energy markets of Just Energy. All research
costs and development costs, not eligible for capitalization have been expensed and are recognized in administrative expenses.
|
F-21
|
JUST
ENERGY | ANNUAL REPORT 2021
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
|
|
(b)
|
Impairment testing of goodwill and intangible assets with indefinite lives
|
Goodwill acquired through business combinations
and intangible assets with indefinite lives have been allocated to one of two operating segments. These segments are Mass Market and Commercial.
Goodwill and indefinite-life intangible
assets
Goodwill is tested annually for impairment
at the level of the two operating segments. Goodwill is also tested for impairment whenever events or circumstances occur that could potentially
reduce the recoverable amount of one or more of the operating segments below its carrying value. For the year ended March 31, 2021,
an impairment loss was recognized for the full remaining balance of the goodwill of the Commercial segment in the amount of $100.0 million
(2020 — $61.4 million) as the carrying value exceeded the recoverable amount. An impairment was also recognized for an indefinite-life
intangible in the amount of $13.9 million for the full remaining balance of the Commercial brand. The impairment amount was included in
the Consolidated Statements of Loss. An impairment loss was not recognized for the Mass Market segment as its recoverable value exceeded
its carrying value.
The recoverable amount for purposes of impairment
testing for the Commercial segment represented the estimated value-in- use. The value-in-use was calculated using the present value of
estimated future cash flows applying an appropriate risk-adjusted rate to internal operating forecasts. Management believes that the forecasted
cash flows generated based on operating forecasts is the appropriate basis upon which to assess goodwill and individual assets for impairment.
The value-in-use calculation has been prepared solely for the purposes of determining whether the goodwill balance was impaired. Estimated
future cash flows were prepared based on certain assumptions prevailing at the time of the test. The actual outcomes may differ from the
assumptions made.
The period included in the estimated future
cash flows for the Commercial segment includes five years of the operating plans plus an estimated terminal value beyond the five years
driven by historical and forecasted trends. Discount rates were derived using a capital asset pricing model and by analyzing published
rates for industries relevant to the Company’s reporting units. The key assumptions used in determining the value-in-use of the
Commercial segment include historical rates of attrition and renewal.
The underlying growth rate is driven by
sales forecast, consistent with recent historical performance and taking into consideration sales channels and strategies in place today.
Customer acquisition costs included in the forecast are consistent with current trends considering today’s competitive environment.
Cost to operate represents management’s best estimate of future cost to operate. Sensitivities to different variables have been
estimated using certain simplifying assumptions and did not have a significant impact on the results of the impairment test.
Intangible assets
Impairment losses were recognized on definite-lived
intangible assets for certain technology projects in the amount of $1.1 million. The impairment amount is included in the Consolidated
Statements of Loss. The impairment on certain technology projects was recorded to the Mass Market segment. Intangible assets are reviewed
annually for any indicators of impairment.
Indicators of impairment were evident for
the specific IT projects given the use of the software.
In 2020, impairment losses were recognized
on definite-lived intangible assets for Filter Group Inc., EdgePower Inc. and certain technology projects in the amounts of $8.5 million,
$14.7 million and $3.9 million, respectively. The impairment amounts were included in the Consolidated Statements of Loss for that period.
|
|
12.
|
FINANCIAL INSTRUMENTS
|
|
|
(a)
|
Fair value of derivative financial instruments and other
|
The fair value of financial instruments
is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (i.e., an exit price). Management has estimated the value of financial swaps, physical forwards and option contracts
for electricity, natural gas, carbon offsets and renewable energy certificates (“RECs”), and generation and transmission capacity
contracts using a discounted cash flow method, which employs market forward curves that are either directly sourced from third parties
or developed internally based on third-party market data. These curves can be volatile, thus leading to volatility in the mark to market
with no immediate impact to cash flows. Gas options and green power options have been valued using the Black option pricing model using
the applicable market forward curves and the implied volatility from other market traded options. Management periodically uses non-exchange-traded
swap agreements based on cooling degree days (“CDDs”) and heating degree days (“HDDs”) measured in its utility
service territories to reduce the impact of weather volatility on Just Energy’s electricity and natural gas volumes, commonly referred
to as “weather derivatives”. The fair value of these swaps on a given measurement station indicated in the derivative contract
is determined by calculating the difference between the agreed strike and expected variable observed at the same station.
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-22
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table illustrates unrealized
gains (losses) related to Just Energy’s derivative financial instruments classified as fair value through profit or loss and recorded
on the Consolidated Statements of Financial Position as fair value of derivative financial assets and fair value of derivative financial
liabilities, with their offsetting values recorded in unrealized gain (loss) in fair value of derivative instruments and other on the
Consolidated Statements of Loss.
|
|
|
As at
March 31,
2021
|
|
|
As at
March 31,
2020
|
|
|
As at
March 31,
2019
|
|
|
Physical forward contracts and options (i)
|
|
$
|
5,250
|
|
|
$
|
(130,182
|
)
|
|
$
|
(116,350
|
)
|
|
Financial swap contracts and options (ii)
|
|
|
68,944
|
|
|
|
(62,612
|
)
|
|
|
39,832
|
|
|
Foreign exchange forward contracts
|
|
|
(7,826
|
)
|
|
|
9,055
|
|
|
|
72
|
|
|
Share swap
|
|
|
—
|
|
|
|
(9,581
|
)
|
|
|
(3,507
|
)
|
|
6.5% convertible bond conversion feature
|
|
|
—
|
|
|
|
—
|
|
|
|
247
|
|
|
Unrealized foreign exchange on Term Loan
|
|
|
17,077
|
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange on the 6.5% convertible bond and 8.75%
loan transferred to realized foreign exchange resulting from the
September Recapitalization
|
|
|
—
|
|
|
|
(18,132
|
)
|
|
|
(8,061
|
)
|
|
Weather derivatives (iii)
|
|
|
2,242
|
|
|
|
(229
|
)
|
|
|
7,796
|
|
|
Other derivative options
|
|
|
(2,188
|
)
|
|
|
(1,736
|
)
|
|
|
(7,488
|
)
|
|
Unrealized gain (loss) of derivative instruments and other
|
|
$
|
83,499
|
|
|
$
|
(213,417
|
)
|
|
$
|
(87,459
|
)
|
The following table summarizes certain aspects
of the fair value of derivative financial assets and liabilities recorded in the Consolidated Statements of Financial Position as at March 31,
2021:
|
|
|
Financial
assets
(current)
|
|
|
Financial
assets
(non-current)
|
|
|
Financial
liabilities
(current)
|
|
|
Financial
liabilities
(non-current)
|
|
|
Physical forward contracts and options (i)
|
|
$
|
12,513
|
|
|
$
|
6,713
|
|
|
$
|
10,157
|
|
|
$
|
56,122
|
|
|
Financial swap contracts and options (ii)
|
|
|
6,942
|
|
|
|
2,634
|
|
|
|
3,548
|
|
|
|
5,047
|
|
|
Foreign exchange forward contracts
|
|
|
—
|
|
|
|
—
|
|
|
|
272
|
|
|
|
—
|
|
|
Weather derivatives (iii)
|
|
|
1,911
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other derivative options
|
|
|
3,660
|
|
|
|
1,253
|
|
|
|
—
|
|
|
|
—
|
|
|
As at March 31, 2021
|
|
$
|
25,026
|
|
|
$
|
10,600
|
|
|
$
|
13,977
|
|
|
$
|
61,169
|
|
The following table summarizes certain aspects
of the fair value of derivative financial assets and liabilities recorded in the Consolidated Statements of Financial Position as at March 31,
2020:
|
|
|
Financial
assets
(current)
|
|
|
Financial
assets
(non-current)
|
|
|
Financial
liabilities
(current)
|
|
|
Financial
liabilities
(non-current)
|
|
|
Physical forward contracts and options (i)
|
|
$
|
24,549
|
|
|
$
|
17,673
|
|
|
$
|
57,461
|
|
|
$
|
51,836
|
|
|
Financial swap contracts and options (ii)
|
|
|
6,915
|
|
|
|
1,492
|
|
|
|
53,917
|
|
|
|
24,432
|
|
|
Foreign exchange forward contracts
|
|
|
4,519
|
|
|
|
3,036
|
|
|
|
—
|
|
|
|
—
|
|
|
Weather derivatives (iii)
|
|
|
—
|
|
|
|
—
|
|
|
|
280
|
|
|
|
—
|
|
|
Other derivative options
|
|
|
370
|
|
|
|
6,591
|
|
|
|
1,780
|
|
|
|
—
|
|
|
As at March 31, 2020
|
|
$
|
36,353
|
|
|
$
|
28,792
|
|
|
$
|
113,438
|
|
|
$
|
76,268
|
|
Individual derivative asset and liability
transactions are offset, and the net amount reported in the Consolidated Statements of Financial Position if, and only if, there is currently
an enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets
and settle the liabilities simultaneously. Individual derivative transactions are typically offset at the legal entity and counterparty
level. The gross amount for the financial assets and financial liabilities are $569.6 million (2020 — $1.0 billion) and $609.1 million
(2020 — $1.1 billion), respectively.
|
F-23
|
JUST ENERGY | ANNUAL REPORT 2021
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
Below is a summary of the financial instruments
classified through profit or loss as at March 31, 2021, to which Just Energy has committed:
|
|
(i)
|
Physical forward contracts and options consist of:
|
|
|
•
|
Electricity contracts with a total remaining volume of 26,364,660 MWh, a weighted average price of $45.50/MWh and expiry dates up to December 31, 2029.
|
|
|
•
|
Natural gas contracts with a total remaining volume of 85,702,596 GJs, a weighted average price of $2.89/GJ and expiry dates up to October 31, 2025.
|
|
|
•
|
RECs with a total remaining volume of 2,469,441 MWh, a weighted average price of $38.02/REC and expiry dates up to December 31, 2029.
|
|
|
•
|
Electricity generation capacity contracts with a total remaining volume of 2,855 MWCap, a weighted average price of $4,737.46/MWCap and expiry dates up to May 31, 2025.
|
|
|
•
|
Ancillary contracts with a total remaining volume of 681,070 MWh, a weighted average price of $16.13/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 15,526,415 MWh, a weighted average price of $42.91/MWh and expiry dates up to December 31, 2024.
|
|
|
•
|
Natural gas contracts with a total remaining volume of 96,373,985 GJs, a weighted average price of $3.11/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 3,439C to 4,985F HDD and an expiry date of March 31, 2023.
|
These derivative financial instruments create
a credit risk for Just Energy since they have been transacted with a limited number of counterparties. Should any counterparty be unable
to fulfill its obligations under the contracts, Just Energy may not be able to realize the financial assets’ balance recognized
in the Consolidated Financial Statements.
Share swap agreement
Just Energy had entered into a share swap
agreement to manage the volatility associated with the Company’s restricted share grants and deferred share grants plans under the
old equity compensation plan described in Note 19. The value on inception of the 2,500,000 shares under this share swap agreement was
approximately $33.8 million. On August 22, 2018, Just Energy reduced the notional value of the share swap to $23.8 million through
a payment of $10.0 million and renewed the share swap agreement. On March 31, 2020, the share swap agreement expired and settled.
Net monthly settlements received (paid) under the share swap agreement were recorded in other income (expense) in the Consolidated Statements
of Loss.
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.
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-24
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Weather derivatives are non-exchange-traded
financial instruments used as part of a risk management strategy to mitigate the impact adverse weather conditions have on gross margin.
The fair values of the derivatives are determined using an internally developed model that relies upon both observable inputs and significant
unobservable inputs. Accordingly, the fair values of these derivatives are classified as Level 3. Market and contractual inputs to these
models vary by contract type and would typically include notional amounts, reference weather stations, strike prices, temperature strike
values, terms to expiration, historical weather data and historical commodity prices. The historical weather data and commodity prices
were utilized to value the expected payouts with respect to weather derivatives and, as a result, are the most significant assumptions
contributing to the determination of fair value estimates, and changes in these inputs can result in a significantly higher or lower fair
value measurement.
For the share swap agreement, Just Energy
used a forward interest rate curve along with a volume weighted average share price to model out its value. As the inputs had no observable
market, it was classified as Level 3.
Just Energy’s accounting policy is
to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the
transfer.
Fair value measurement input sensitivity
The main cause of changes in the fair value
of derivative instruments is changes in the forward curve prices used for the fair value calculations. Just Energy provides a sensitivity
analysis of these forward curves under the “Market risk” section of this note. Other inputs, including volatility and correlations,
are driven off historical settlements.
The following table illustrates
the classification of derivative financial assets (liabilities) in the FV hierarchy as at March 31, 2021:
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative financial assets
|
|
$
|
—
|
|
|
$
|
682
|
|
|
$
|
34,944
|
|
|
$
|
35,626
|
|
|
Derivative financial liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
(75,146
|
)
|
|
|
(75,146
|
)
|
|
Total net derivative financial assets (liabilities)
|
|
$
|
—
|
|
|
$
|
682
|
|
|
$
|
(40,202
|
)
|
|
$
|
(39,520
|
)
|
The following table illustrates
the classification of derivative financial assets (liabilities) in the FV hierarchy as at March 31, 2020:
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative financial assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
65,145
|
|
|
$
|
65,145
|
|
|
Derivative financial liabilities
|
|
|
—
|
|
|
|
(38,676
|
)
|
|
|
(151,030
|
)
|
|
|
(189,706
|
)
|
|
Total net derivative financial liabilities
|
|
$
|
—
|
|
|
$
|
(38,676
|
)
|
|
$
|
(85,885
|
)
|
|
$
|
(124,561
|
)
|
Commodity price sensitivity — Level
3 derivative financial instruments
If the energy prices associated with only
Level 3 derivative financial instruments including natural gas, electricity, and RECs had risen (fallen) by 10%, assuming that all of
the other variables had remained constant, loss from continuing operations before income taxes for the year ended March 31, 2021
would have increased (decreased) by $139.2 million ($136.6 million), primarily as a result of the change in fair value of Just Energy’s
derivative financial instruments.
Key assumptions used when determining the
significant unobservable inputs for all commodity supply contracts included in Level 3 of the FV hierarchy consist of up to 5% price extrapolation
to calculate monthly prices that extend beyond the market observable 12- to 15-month forward curve.
The following table illustrates the changes
in net fair value of financial assets (liabilities) classified as Level 3 in the FV hierarchy for the following periods:
|
|
|
Year ended
March 31,
2021
|
|
|
Year ended
March 31,
2020
|
|
|
Balance, beginning of year
|
|
$
|
(85,885
|
)
|
|
$
|
17,310
|
|
|
Total gains
|
|
|
(2,900
|
)
|
|
|
(3,822
|
)
|
|
Purchases
|
|
|
(4,059
|
)
|
|
|
(43,663
|
)
|
|
Sales
|
|
|
(1,670
|
)
|
|
|
14,549
|
|
|
Settlements
|
|
|
54,312
|
|
|
|
(70,259
|
)
|
|
Balance, end of year
|
|
$
|
(40,202
|
)
|
|
$
|
(85,885
|
)
|
|
F-25
|
JUST ENERGY | ANNUAL REPORT 2021
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
|
|
(b)
|
Classification of non-derivative financial assets and liabilities
|
As at March 31, 2021 and March 31,
2020, 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.
Prior to the exchange under the September Recapitalization,
the 8.75% loan, 6.75% $100M convertible debentures, 6.75% $160M convertible debentures and 6.5% convertible bonds were fair valued based
on market value. The 6.75% $100M convertible debentures, 6.75% $160M convertible debentures and 6.5% convertible bonds were classified
as Level 1 in the FV hierarchy.
The risks associated with Just Energy’s
financial instruments are as follows:
Market risk is the potential loss that may
be incurred as a result of changes in the market or fair value of a particular instrument or commodity. Components of market risk to which
Just Energy is exposed are discussed below.
Foreign currency risk
Foreign currency risk is created by fluctuations
in the fair value or cash flows of financial instruments due to changes in foreign exchange rates and exposure as a result of investments
in U.S. operations.
The performance of the Canadian dollar relative
to the U.S. dollars could positively or negatively affect Just Energy’s Consolidated Statements of Loss, as a significant portion
of Just Energy’s profit or loss is generated in U.S. dollars and is subject to currency fluctuations upon translation to Canadian
dollars. Due to its growing operations in the U.S., Just Energy expects to have a greater exposure to foreign currency fluctuations in
the future than in prior years. 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.
With respect to translation exposure, if
the Canadian dollar had been 5% stronger or weaker against the U.S. dollar for the year ended March 31, 2021, assuming that all the
other variables had remained constant, the net loss for the year ended March 31, 2021 would have been $6.6 million lower/higher and
other comprehensive loss would have been $26.9 million lower/higher.
Interest rate risk
Just Energy is only exposed to interest
rate fluctuations associated with its floating rate Credit Facility. Just Energy’s current exposure to interest rates does not economically
warrant the use of derivative instruments. Just Energy’s exposure to interest rate risk is relatively immaterial and temporary in
nature. Just Energy does not currently believe that its long-term debt exposes the Company to material interest rate risks but has set
out parameters to actively manage this risk within its risk management policy.
A 1% increase (decrease) in interest rates
would have resulted in an increase (decrease) of approximately $1.8 million in loss from continuing operations before income taxes in
the Consolidated Statements of Loss for the year ended March 31, 2021 (2020 — $2.4 million).
Commodity price risk
Just Energy is exposed to market risks associated
with commodity prices and market volatility where estimated customer requirements do not match actual customer requirements. Management
actively monitors these positions on a daily basis in accordance with its risk management policy. This policy sets out a variety of limits,
most importantly thresholds for open positions in the gas and electricity portfolios, which also feed a value at risk limit. Should any
of the limits be exceeded, they are closed expeditiously or express approval to continue to hold is obtained. Just Energy’s exposure
to market risk is affected by a number of factors, including accuracy of estimation of customer commodity requirements, commodity prices,
volatility and liquidity of markets. Just Energy enters into derivative instruments in order to manage exposures to changes in commodity
prices. The derivative instruments that are used are designed to fix the price of supply for estimated customer commodity demand and thereby
fix margins. Derivative instruments are generally transacted over the counter. The inability or failure of Just Energy to manage and monitor
the above market risks could have a material adverse effect on the operations and cash flows of Just Energy. Just Energy mitigates the
exposure to variances in customer requirements that are driven by changes in expected weather conditions through active management of
the underlying portfolio, which involves, but is not limited to, the purchase of options including weather derivatives. Just Energy’s
ability to mitigate weather effects is limited by the degree to which weather conditions deviate from normal.
Commodity price sensitivity — all
derivative financial instruments
If all the energy prices associated with
derivative financial instruments including natural gas, electricity and RECs had risen (fallen) by 10%, assuming that all of the other
variables had remained constant, loss from continuing operations before income taxes for the year ended March 31, 2021 would have
increased (decreased) by $138.8 million ($136.2 million), primarily as a result of the change in fair value of Just Energy’s derivative
financial instruments.
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-26
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Credit risk adjustment — sensitivity
For valuation of derivative
instruments that are in liability position, the Company applied a credit risk adjustment in valuation of these instruments. If this
rate is increased (decreased) by 1% assuming that all other variables remained constant, there would be $1.4 million impact on loss
from continuing operations before income taxes for the year ended March 31, 2021.
|
|
(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.
As at March 31, 2021, Just Energy has
applied an adjustment factor to determine the fair value of its financial instruments in the amount of $1.1 million (2020 — $23.8
million) to accommodate for its counterparties’ risk of default.
|
|
(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 March 31, 2021, the estimated
counterparty credit risk exposure amounted to $35.6 million (2020 — $65.1 million), representing the risk relating to Just Energy’s
exposure to derivatives that are in an asset position.
|
|
13.
|
TRADE AND OTHER PAYABLES
|
|
|
|
As at
March 31,
2021
|
|
|
As at
March 31,
2020
|
|
|
Commodity suppliers’ accruals and payables (a)
|
|
$
|
712,144
|
|
|
$
|
414,581
|
|
|
Green provisions and repurchase obligations
|
|
|
77,882
|
|
|
|
103,245
|
|
|
Sales tax payable
|
|
|
27,684
|
|
|
|
19,706
|
|
|
Non-commodity trade accruals and accounts payable (b)
|
|
|
80,573
|
|
|
|
117,473
|
|
|
Current portion of payable to former joint venture partner (c)
|
|
|
11,467
|
|
|
|
18,194
|
|
|
Accrued gas payable
|
|
|
544
|
|
|
|
3,295
|
|
|
Other payables
|
|
|
11,301
|
|
|
|
9,171
|
|
|
|
|
$
|
921,595
|
|
|
$
|
685,665
|
|
|
|
(a)
|
Includes $507.3 million, that is subject to compromise depending on the outcome of the CCAA proceedings.
|
|
|
(b)
|
Includes $12.9 million, that is subject to compromise depending on the outcome of the CCAA proceedings.
|
|
|
(c)
|
The amount due to the former joint venture partner is subject to compromise depending on the outcome of the CCAA proceedings.
|
|
|
|
As at
March 31,
2021
|
|
|
As at
March 31,
2020
|
|
|
Balance, beginning of year
|
|
$
|
852
|
|
|
$
|
43,228
|
|
|
Additions to deferred revenue
|
|
|
10,963
|
|
|
|
7,499
|
|
|
Revenue recognized during the year
|
|
|
(10,312
|
)
|
|
|
(10,726
|
)
|
|
Foreign exchange impact
|
|
|
(95
|
)
|
|
|
352
|
|
|
Liabilities classified as held for sale/sold
|
|
|
-
|
|
|
|
(39,501
|
)
|
|
Balance, end of year
|
|
$
|
1,408
|
|
|
$
|
852
|
|
U.K. operations recorded substantially all
of its revenue within deferred revenue. The change for 2020 was substantially related to operations sold during the year.
|
F-27
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
15.
|
LONG-TERM DEBT AND FINANCING
|
|
|
|
As at
March 31,
2021
|
|
|
As at
March 31,
2020
|
|
|
DIP Facility (a)
|
|
$
|
126,735
|
|
|
$
|
—
|
|
|
Less: Debt issue costs (a)
|
|
|
(6,312
|
)
|
|
|
—
|
|
|
Filter Group financing (b)
|
|
|
4,617
|
|
|
|
9,690
|
|
|
Credit facility — subject to compromise (c)
|
|
|
227,189
|
|
|
|
236,389
|
|
|
Less: Debt issue costs (c)
|
|
|
—
|
|
|
|
(1,644
|
)
|
|
Term Loan — subject to compromise (d)
|
|
|
289,904
|
|
|
|
—
|
|
|
Note Indenture — subject to compromise (e)
|
|
|
13,607
|
|
|
|
—
|
|
|
8.75% loan (f)
|
|
|
—
|
|
|
|
280,535
|
|
|
6.75% $100M convertible debentures (g)
|
|
|
—
|
|
|
|
90,187
|
|
|
6.75% $160M convertible debentures (h)
|
|
|
—
|
|
|
|
153,995
|
|
|
6.5% convertible bonds (i)
|
|
|
—
|
|
|
|
12,851
|
|
|
|
|
|
655,740
|
|
|
|
782,003
|
|
|
Less: Current portion
|
|
|
(654,180
|
)
|
|
|
(253,485
|
)
|
|
|
|
$
|
1,560
|
|
|
$
|
528,518
|
|
Future annual minimum principal repayments
are as follows:
|
|
|
Less than
1 year
|
|
|
1-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
Total
|
|
|
DIP Facility (a)
|
|
$
|
126,735
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
126,735
|
|
|
Less: Debt issue costs (a)
|
|
|
(6,312
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,312
|
)
|
|
Filter Group financing (b)
|
|
|
3,057
|
|
|
|
1,560
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,617
|
|
|
Credit facility — subject to compromise (c)
|
|
|
227,189
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
227,189
|
|
|
Term
Loan — subject to compromise (d)
|
|
|
289,904
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
289,904
|
|
|
Note Indenture — subject to compromise (e)
|
|
|
13,607
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,607
|
|
|
|
|
$
|
654,180
|
|
|
$
|
1,560
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
655,740
|
|
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-28
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The details for long-term debt are as follows:
|
|
|
As at
April 1,
2020
|
|
|
Cash
inflows
(outflows)
|
|
|
Foreign
exchange
|
|
|
Payment
in kind
(“PIK“)
|
|
|
Non-cash
changes
|
|
|
(Gain)
loss on
September
Recapital-
ization
|
|
|
As at
March 31,
2021
|
|
|
DIP Facility (a)
|
|
$
|
—
|
|
|
$
|
120,423
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
120,423
|
|
|
Filter Group financing (b)
|
|
|
9,690
|
|
|
|
(5,073
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,617
|
|
|
Credit facility (c)
|
|
|
234,745
|
|
|
|
(13,826
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
6,270
|
|
|
|
—
|
|
|
|
227,189
|
|
|
Term Loan (d)
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,077
|
)
|
|
|
15,123
|
|
|
|
291,858
|
|
|
|
—
|
|
|
|
289,904
|
|
|
Note Indenture (e)
|
|
|
—
|
|
|
|
(2,000
|
)
|
|
|
—
|
|
|
|
428
|
|
|
|
15,179
|
|
|
|
—
|
|
|
|
13,607
|
|
|
8.75% term loan (f)
|
|
|
280,535
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(281,632
|
)
|
|
|
1,097
|
|
|
|
—
|
|
|
6.75% $100M convertible debentures (g)
|
|
|
90,187
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(74,544
|
)
|
|
|
(15,643
|
)
|
|
|
—
|
|
|
6.75% $160M convertible debentures (h)
|
|
|
153,995
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(101,955
|
)
|
|
|
(52,040
|
)
|
|
|
—
|
|
|
6.5% convertible bonds (i)
|
|
|
12,851
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(643
|
)
|
|
|
(12,208
|
)
|
|
|
—
|
|
|
|
|
$
|
782,003
|
|
|
$
|
99,524
|
|
|
$
|
(17,077
|
)
|
|
$
|
15,551
|
|
|
$
|
(145,467
|
)
|
|
|
(78,794
|
)
|
|
$
|
655,740
|
|
|
Less: Current portion
|
|
|
(253,485
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(654,180
|
)
|
|
|
|
$
|
528,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,560
|
|
|
|
|
As at
April 1,
2019
|
|
|
Cash
inflows
(outflows)
|
|
|
Foreign
exchange
|
|
|
PIK
|
|
|
Non-cash
changes
|
|
|
(Gain)
loss on
September
Recapital-
ization
|
|
|
As at
March 31,
2020
|
|
|
Filter Group financing (b)
|
|
$
|
17,577
|
|
|
$
|
(7,887
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,690
|
|
|
Credit facility (c)
|
|
|
199,753
|
|
|
|
34,812
|
|
|
|
—
|
|
|
|
—
|
|
|
|
180
|
|
|
|
—
|
|
|
|
234,745
|
|
|
8.75% term loan (f)
|
|
|
240,094
|
|
|
|
17,163
|
|
|
|
17,613
|
|
|
|
—
|
|
|
|
5,665
|
|
|
|
—
|
|
|
|
280,535
|
|
|
6.75% $100M convertible debentures (g)
|
|
|
87,520
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,667
|
|
|
|
—
|
|
|
|
90,187
|
|
|
6.75% $160M convertible debentures (h)
|
|
|
150,945
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,050
|
|
|
|
—
|
|
|
|
153,995
|
|
|
6.5% convertible bonds (i)
|
|
|
29,483
|
|
|
|
(17,370
|
)
|
|
|
518
|
|
|
|
—
|
|
|
|
220
|
|
|
|
—
|
|
|
|
12,851
|
|
|
|
|
$
|
725,372
|
|
|
$
|
26,718
|
|
|
$
|
18,131
|
|
|
$
|
—
|
|
|
$
|
11,782
|
|
|
$
|
—
|
|
|
$
|
782,003
|
|
|
Less: Current portion
|
|
|
(479,101
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(253,485
|
)
|
|
|
|
$
|
246,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
528,518
|
|
|
F-29
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table details the finance
costs for the year ended March 31. Interest is expensed based on the effective interest rate.
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
DIP Facility (a)
|
|
$
|
1,490
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Filter Group financing (b)
|
|
|
627
|
|
|
|
1,793
|
|
|
|
875
|
|
|
Credit facility (c)
|
|
|
20,544
|
|
|
|
23,736
|
|
|
|
20,715
|
|
|
Term Loan (d)
|
|
|
14,785
|
|
|
|
—
|
|
|
|
—
|
|
|
Note Indenture (e)
|
|
|
557
|
|
|
|
—
|
|
|
|
—
|
|
|
8.75% term loan (f)
|
|
|
18,055
|
|
|
|
35,089
|
|
|
|
8,999
|
|
|
6.75% $100M convertible debentures (g)
|
|
|
4,762
|
|
|
|
9,417
|
|
|
|
8,819
|
|
|
6.75% $160M convertible debentures (h)
|
|
|
6,948
|
|
|
|
13,850
|
|
|
|
13,598
|
|
|
6.5% convertible bonds (i)
|
|
|
539
|
|
|
|
2,746
|
|
|
|
18,387
|
|
|
Supplier finance and others (j)
|
|
|
18,313
|
|
|
|
20,314
|
|
|
|
16,386
|
|
|
|
|
$
|
86,620
|
|
|
$
|
106,945
|
|
|
$
|
87,779
|
|
|
|
(a)
|
As discussed in Note 1, Just Energy filed and received the Court Order under the CCAA on March 9, 2021. In conjunction with the
CCAA filing, the Company entered into the DIP Facility for USD$125 million. Just Energy Ontario L.P., Just Energy Group Inc. and Just
Energy (U.S.) Corp. are the borrowers under the DIP Facility and are supported by guarantees of certain subsidiaries and affiliates and
secured by a super-priority charge against and attaching to the property that secures the obligations arising under the Credit Facility,
created by the Court Order. The DIP Facility has an interest rate of 13%, paid quarterly in arrears. The DIP Facility terminates at the
earlier of: (a) December 31, 2021, (b) the implementation date of the CCAA plan, (c) the lifting of the stay in the
CCAA proceedings or (d) the termination of the CCAA proceedings. On March 9, 2021, the Company borrowed USD$100 million and
borrowed the remaining USD$25 million on April 6, 2021. For consideration for making the DIP Facility available, Just Energy paid
a 1% origination fee and a 1% commitment fee.
|
|
|
(b)
|
Filter Group has a $4.6 million outstanding loan payable to Home Trust Company (“HTC”). The loan is a result of factoring
receivables to finance the cost of rental equipment over a period of three to five years with HTC and bears interest at 8.99% per annum.
Principal and interest are payable monthly. Filter Group did not file under the CCAA and accordingly, the stay does not apply to Filter
Group and any amounts outstanding under the loan payable to Home Trust Company.
|
|
|
(c)
|
On March 18, 2021, Just Energy Ontario L.P, Just Energy (U.S.) Corp. and Just Energy Group Inc. entered into an Accommodation
and Support Agreement (the “Lender Support Agreement”) with the lenders under the Credit Facility. Under the Lender Support
Agreement, the lenders agreed to allow issuance or renewals of Letters of Credit under the Credit Facility during the pendency of the
CCAA proceedings within certain restrictions. In return, the Company has agreed to continue paying interest and fees at the non-default
rate on the outstanding advances and Letters of Credit under the Credit Facility. The amount of Letters of Credit that may be issued is
limited to the lesser of $46.1 million (excluding the Letters of Credit guaranteed by Export Development Canada under its Account Performance
Security Guarantee Program), plus any amount the Company has repaid and $125 million.
|
As part of the
September Recapitalization, Just Energy extended the Credit Facility to December 2023; it was previously scheduled to
mature in December 2020. Certain principal amounts outstanding under the letter of Credit Facility (“LC Facility”)
are guaranteed by Export Development Canada under its Account Performance Security Guarantee Program. Just Energy’s
obligations under the Credit Facility are supported by guarantees of certain subsidiaries and affiliates and secured by a general
security agreement and a pledge of the assets and securities of Just Energy and the majority of its operating subsidiaries and
affiliates excluding, primarily the Filter Group. Just Energy has also entered into an inter-creditor agreement in which certain
commodity and hedge providers are also secured by the same collateral. As a result of the CCAA filing, the borrowers are in default
under the Credit Facility. However, any potential actions by the lenders have been stayed pursuant to the Court Order. As at
March 31, 2021, the Company had Letter of Credit capacity of $4.5 million available.
The outstanding Advances are all Prime rate
advances at a rate of bank prime (Canadian bank prime rate or U.S. prime rate) plus 4.25% and letters of credit are at a rate of 5.25%.
As at March 31, 2021, the Canadian
prime rate was 2.45% and the U.S. prime rate was 3.25%. As at March 31, 2021, $227.2 million has been drawn against the
facility, $41.7 million of letters of credit outstanding have been issued under the Canadian and U.S. facilities and $57.7 million
of Letters of Credit are outstanding under the LC Facility.
As a result of the CCAA filing, the Credit
Facility has been reclassified to short-term reflecting the potential acceleration of the debt allowed under the Credit Facility. Additionally,
all deferred debt issue costs have been accelerated in the year ended March 31, 2021 to reflect the current classification and presented
in reorganization costs in the Consolidated Statement of Loss.
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-30
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
(d)
|
As part of the September Recapitalization, Just Energy issued a USD $205.9 million principal note (the “Term
Loan”) maturing on March 31, 2024. The note bears interest at 10.25%. The balance at March 31, 2021 includes an
accrual of $13.9 million for interest payable on the
notes. As a result of the CCAA filing, the Company is in default under the Term Loan, as described below. However, any potential
actions by the lenders under the Term Loan have been stayed pursuant to the Court Order, and the Company is not issuing additional
notes equal to the capitalized interest. Given this acceleration option, the Term Loan has been classified as current. As a result,
the prepayment fee has been accelerated and accrued and is presented in the Reorganization cost on the Consolidated Statements of Loss.
|
|
|
(e)
|
As part of the September Recapitalization, Just Energy issued $15 million principal amount of 7.0% subordinated notes (“Note
Indenture”) to holders of the subordinated convertible debentures, which has a six-year maturity. The Note Indenture bears an annual
interest rate of 7.0% payable in kind. The balance at March 31, 2021 includes an accrual of $0.4 million for interest payable on
the notes. The Note Indenture had a principal amount of $15 million as at September 28, 2020, which was reduced to $13.2 million
through a tender offer for no consideration on October 19, 2020. As a result of the CCAA filing, the Company is in default under
the Note Indenture’s Trust Indenture agreement. However, any potential actions by the lenders under the Note Indenture have been
stayed pursuant to the Court Order and the Company is not issuing additional notes equal to the capitalized interest. Given this acceleration
option, the Note Indenture has been classified as current. Additionally, all deferred debt issue costs have been accelerated to the year
ended March 31, 2021 to reflect the current classification and presented in reorganization costs in the Consolidated Statements of
Loss.
|
|
|
(f)
|
As part of the September Recapitalization, the 8.75% loan was exchanged for its pro-rata share of the Term Loan and 786,982
common shares. At the time of the September Recapitalization, the 8.75% loan had USD$207.0 million outstanding plus accrued
interest.
|
|
|
(g)
|
As part of the September Recapitalization, the 6.75% $100M convertible debentures were exchanged for 3,592,069 common shares
along with its pro-rata share of the Note Indenture and the payment of accrued interest.
|
|
|
(h)
|
As part of the September Recapitalization, the 6.75% $160M convertible debentures were exchanged for 5,747,310 common shares
along with its pro-rata share of the Note Indenture and the payment of accrued interest.
|
|
|
(i)
|
As part of the September Recapitalization, the 6.5% convertible bonds were exchanged for its pro-rata share of the Term
Loan and 35,737 common shares. At the time of the September Recapitalization, $9.2 million of the 6.5% convertible bonds were
outstanding plus accrued interest.
|
|
|
(j)
|
Supplier finance and other costs for the year ended March 31, 2021 primarily consist of charges for extended payment terms. An
amount of $3.0 million was accrued but not paid as at March 31, 2021 (March 31, 2020 — $0.7 million).
|
|
|
16.
|
REPORTABLE BUSINESS SEGMENTS
|
Just Energy’s reportable segments
are the Mass Market (formerly called Consumer) and the Commercial segments.
The chief operating decision-maker monitors
the operational results of the Mass Market and Commercial segments for the purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on certain non-IFRS measures such as Base EBITDA, Base gross margin and Embedded gross
margin as defined in the Company’s Management Discussion and Analysis.
Transactions between segments are in the
normal course of operations and are recorded at the exchange amount.
Corporate and shared services report the
costs related to management oversight of the business units, public reporting and filings, corporate governance and other shared services
functions such as Human Resources, Finance and Information Technology.
|
F-31
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ended March 31, 2021:
|
|
|
Mass Market
|
|
|
Commercial
|
|
|
Corporate
and shared
services
|
|
|
Consolidated
|
|
|
Sales
|
|
$
|
1,530,617
|
|
|
$
|
1,209,420
|
|
|
$
|
—
|
|
|
$
|
2,740,037
|
|
|
Cost of goods sold
|
|
|
2,915,079
|
|
|
|
1,597,087
|
|
|
|
—
|
|
|
|
4,512,166
|
|
|
Gross margin
|
|
|
(1,384,462
|
)
|
|
|
(387,667
|
)
|
|
|
—
|
|
|
|
(1,772,129
|
)
|
|
Depreciation and amortization
|
|
|
20,342
|
|
|
|
3,587
|
|
|
|
—
|
|
|
|
23,929
|
|
|
Administrative expenses
|
|
|
35,403
|
|
|
|
16,673
|
|
|
|
90,315
|
|
|
|
142,391
|
|
|
Selling and marketing expenses
|
|
|
107,932
|
|
|
|
71,589
|
|
|
|
—
|
|
|
|
179,521
|
|
|
Other operating expenses
|
|
|
29,898
|
|
|
|
10,854
|
|
|
|
—
|
|
|
|
40,752
|
|
|
Segment loss
|
|
$
|
(1,578,037
|
)
|
|
$
|
(490,370
|
)
|
|
$
|
(90,315
|
)
|
|
$
|
(2,158,722
|
)
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,620
|
)
|
|
Restructuring costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,118
|
)
|
|
Gain on September Recapitalization transaction, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,360
|
|
|
Unrealized gain on derivative instruments and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,499
|
|
|
Realized gain on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,877,339
|
|
|
Impairment of goodwill, intangible assets and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(114,990
|
)
|
|
Other expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,951
|
)
|
|
Reorganization costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,245
|
)
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,308
|
)
|
|
Loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(402,756
|
)
|
|
Profit from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
468
|
|
|
Loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(402,288
|
)
|
|
Capital expenditures
|
|
$
|
10,382
|
|
|
$
|
1,173
|
|
|
$
|
—
|
|
|
$
|
11,555
|
|
|
As at March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill
|
|
$
|
163,770
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
163,770
|
|
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-32
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended March 31, 2020:
|
|
|
Mass Market
|
|
|
Commercial
|
|
|
Corporate
and shared services
|
|
|
Consolidated
|
|
|
Sales
|
|
$
|
1,757,245
|
|
|
$
|
1,396,407
|
|
|
$
|
—
|
|
|
$
|
3,153,652
|
|
|
Cost of goods sold
|
|
|
1,285,122
|
|
|
|
1,232,177
|
|
|
|
—
|
|
|
|
2,517,299
|
|
|
Gross margin
|
|
|
472,123
|
|
|
|
164,230
|
|
|
|
—
|
|
|
|
636,353
|
|
|
Depreciation and amortization
|
|
|
38,224
|
|
|
|
3,424
|
|
|
|
—
|
|
|
|
41,648
|
|
|
Administrative expenses
|
|
|
37,780
|
|
|
|
20,262
|
|
|
|
109,894
|
|
|
|
167,936
|
|
|
Selling and marketing expenses
|
|
|
141,548
|
|
|
|
79,272
|
|
|
|
—
|
|
|
|
220,820
|
|
|
Other operating expenses
|
|
|
84,271
|
|
|
|
8,029
|
|
|
|
—
|
|
|
|
92,300
|
|
|
Segment profit (loss)
|
|
$
|
170,300
|
|
|
$
|
53,243
|
|
|
$
|
(109,894
|
)
|
|
$
|
113,649
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(106,945
|
)
|
|
Unrealized loss of derivative instruments and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(213,417
|
)
|
|
Realized gain of derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,386
|
)
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,660
|
|
|
Impairment of goodwill, intangible assets and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(92,401
|
)
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,393
|
)
|
|
Loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(298,233
|
)
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,426
|
)
|
|
Loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(309,659
|
)
|
|
Capital expenditures
|
|
$
|
12,881
|
|
|
$
|
1,171
|
|
|
$
|
—
|
|
|
$
|
14,052
|
|
|
As at March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill
|
|
$
|
172,429
|
|
|
$
|
100,263
|
|
|
$
|
—
|
|
|
$
|
272,692
|
|
For the
year ended March 31, 2019
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
Mass Market
|
|
|
Commercial
|
|
|
and shared services
|
|
|
Consolidated
|
|
|
Sales
|
|
$
|
2,010,054
|
|
|
$
|
1,431,338
|
|
|
$
|
—
|
|
|
$
|
3,441,392
|
|
|
Cost of goods sold
|
|
|
1,523,090
|
|
|
|
1,239,731
|
|
|
|
—
|
|
|
|
2,762,821
|
|
|
Gross margin
|
|
|
486,964
|
|
|
|
191,607
|
|
|
|
—
|
|
|
|
678,571
|
|
|
Depreciation and amortization
|
|
|
24,906
|
|
|
|
2,289
|
|
|
|
—
|
|
|
|
27,195
|
|
|
Administrative expenses
|
|
|
42,573
|
|
|
|
32,377
|
|
|
|
90,378
|
|
|
|
165,328
|
|
|
Selling and marketing expenses
|
|
|
142,560
|
|
|
|
69,178
|
|
|
|
—
|
|
|
|
211,738
|
|
|
Restructuring costs
|
|
|
2,741
|
|
|
|
3,289
|
|
|
|
8,814
|
|
|
|
14,844
|
|
|
Other operating expenses
|
|
|
123,798
|
|
|
|
5,406
|
|
|
|
—
|
|
|
|
129,204
|
|
|
Segment profit (loss)
|
|
$
|
150,386
|
|
|
$
|
79,068
|
|
|
$
|
(99,192
|
)
|
|
$
|
130,262
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,779
|
)
|
|
Unrealized loss on derivative instruments and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,459
|
)
|
|
Realized loss on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83,776
|
)
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,312
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,832
|
)
|
|
Loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(138,272
|
)
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(128,259
|
)
|
|
Loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(266,531
|
)
|
|
Capital expenditures
|
|
$
|
39,474
|
|
|
$
|
4,068
|
|
|
$
|
—
|
|
|
$
|
43,542
|
|
|
As at March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill
|
|
$
|
181,358
|
|
|
$
|
158,563
|
|
|
$
|
—
|
|
|
$
|
339,921
|
|
|
F-33
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Sales from external
customers
The revenue is based on
the location of the customer.
|
|
|
For the
year ended
March 31, 2021
|
|
|
For the
year ended
March 31, 2020
|
|
|
For the
year ended
March 31, 2019
|
|
|
Canada
|
|
$
|
303,666
|
|
|
$
|
509,910
|
|
|
$
|
613,944
|
|
|
U.S.
|
|
|
2,436,371
|
|
|
|
2,643,742
|
|
|
|
2,827,448
|
|
|
Total
|
|
$
|
2,740,037
|
|
|
$
|
3,153,652
|
|
|
$
|
3,441,392
|
|
Non-current assets
Non-current assets by
geographic segment consist of property and equipment, goodwill and intangible assets and are summarized as follows:
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
Canada
|
|
$
|
178,802
|
|
|
$
|
233,678
|
|
|
U.S.
|
|
|
73,518
|
|
|
|
166,074
|
|
|
Total
|
|
$
|
252,320
|
|
|
$
|
399,752
|
|
|
|
|
For the
year ended
March 31, 2021
|
|
|
For the
year ended
March 31, 2020
|
|
|
For the
year ended
March 31, 2019
|
|
|
Current tax expense
|
|
$
|
2,688
|
|
|
$
|
7,047
|
|
|
$
|
7,622
|
|
|
Deferred tax expense (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of temporary differences
|
|
$
|
(102,712
|
)
|
|
$
|
(90,459
|
)
|
|
$
|
(35,825
|
)
|
Expense arising from previously unrecognized tax loss or temporary
difference
|
|
|
102,332
|
|
|
|
90,805
|
|
|
|
40,035
|
|
|
Deferred (benefit) tax expense
|
|
|
(380
|
)
|
|
|
346
|
|
|
|
4,210
|
|
|
Provision for income taxes
|
|
$
|
2,308
|
|
|
$
|
7,393
|
|
|
$
|
11,832
|
|
|
|
(b)
|
Reconciliation of the effective tax rate
|
|
|
|
For the
year ended
March 31, 2021
|
|
|
For the
year ended
March 31, 2020
|
|
|
For the
year ended
March 31, 2019
|
|
|
Loss before income taxes
|
|
$
|
(400,448
|
)
|
|
$
|
(290,840
|
)
|
|
$
|
(126,440
|
)
|
|
Combined statutory Canadian federal and provincial income tax rate
|
|
|
26.50
|
%
|
|
|
26.50
|
%
|
|
|
26.50
|
%
|
|
Income tax recovery based on statutory rate
|
|
$
|
(106,119
|
)
|
|
$
|
(77,073
|
)
|
|
$
|
(33,507
|
)
|
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense of mark to market loss and other temporary differences not
recognized
|
|
$
|
102,332
|
|
|
$
|
90,805
|
|
|
$
|
40,035
|
|
|
Variance between combined Canadian tax rate and the tax rate applicable to foreign earnings
|
|
|
(5,589
|
)
|
|
|
(5,554
|
)
|
|
|
(3,841
|
)
|
|
Other permanent items
|
|
|
11,684
|
|
|
|
(785
|
)
|
|
|
9,145
|
|
|
Total provision for income taxes
|
|
$
|
2,308
|
|
|
$
|
7,393
|
|
|
$
|
11,832
|
|
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-34
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
(c)
|
Recognized net deferred income tax assets and liabilities
|
Recognized net deferred income tax assets
and liabilities are attributed to the following:
|
|
|
As at
March 31,
2021
|
|
|
As at
March 31,
2020
|
|
|
Tax losses and excess of tax basis over book basis
|
|
$
|
15,005
|
|
|
$
|
23,191
|
|
|
Total deferred income tax assets
|
|
|
15,005
|
|
|
|
23,191
|
|
|
Offset of deferred income taxes
|
|
|
(14,010
|
)
|
|
|
(22,550
|
)
|
|
Net deferred income tax assets
|
|
$
|
995
|
|
|
$
|
641
|
|
|
Book to tax differences on other assets
|
|
|
(14,010
|
)
|
|
|
(18,367
|
)
|
|
Convertible debentures
|
|
|
—
|
|
|
|
(4,183
|
)
|
|
Total deferred income tax liabilities
|
|
|
(14,010
|
)
|
|
|
(22,550
|
)
|
|
Offset of deferred income taxes
|
|
|
14,010
|
|
|
|
22,550
|
|
|
Net deferred income tax liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
(d)
|
Movement in deferred income tax balances
|
|
|
|
As at
April 1, 2020
|
|
|
Recognized in
Consolidated
Statements of
Loss
|
|
|
Recognized
in OCI
|
|
|
As at
March 31, 2021
|
|
|
Book to tax differences
|
|
$
|
4,824
|
|
|
$
|
(3,803
|
)
|
|
|
(26
|
)
|
|
$
|
995
|
|
|
Convertible debentures
|
|
|
(4,183
|
)
|
|
|
4,183
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
$
|
641
|
|
|
$
|
380
|
|
|
$
|
(26
|
)
|
|
$
|
995
|
|
|
|
|
As at
April 1, 2019
|
|
|
Recognized in
Consolidated
Statements of
Loss
|
|
|
Recognized in
OCI
|
|
|
As at
March 31, 2020
|
|
|
Partnership income deferred for tax
|
|
$
|
(3,542
|
)
|
|
$
|
3,542
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Book to tax differences
|
|
|
27,316
|
|
|
|
(23,364
|
)
|
|
|
872
|
|
|
|
4,824
|
|
|
Mark to market (gains) losses on derivative instruments
|
|
|
(17,586
|
)
|
|
|
17,586
|
|
|
|
—
|
|
|
|
—
|
|
|
Convertible debentures
|
|
|
(6,073
|
)
|
|
|
1,890
|
|
|
|
—
|
|
|
|
(4,183
|
)
|
|
|
|
$
|
115
|
|
|
$
|
(346
|
)
|
|
$
|
872
|
|
|
$
|
641
|
|
|
|
(e)
|
Unrecognized deferred income tax assets
|
Deferred income tax assets not reflected
as at March 31 are as follows:
|
|
|
2021
|
|
|
2020
|
|
|
Mark to market losses on derivative instruments
|
|
$
|
13,088
|
|
|
$
|
31,897
|
|
|
Excess of tax over book basis
|
|
|
71,954
|
|
|
|
47,038
|
|
The Company has tax losses of $697.3 million
(2020 — $381 million) available for carryforward (recognized and unrecognized), which are set to expire starting 2028 until 2041.
Certain U.S. tax losses are subject to annual limitation under Section 382. To the extent there is insufficient taxable income during
the carryforward periods, such losses may expire unused.
|
F-35
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
18.
|
SHAREHOLDERS’ CAPITAL
|
Just Energy is authorized to issue an unlimited
number of common shares with no par value. Shares outstanding have no preferences, rights or restrictions attached to them.
|
|
(a)
|
Details of issued and outstanding shareholders’ capital are as follows:
|
|
|
|
As at March 31, 2021
|
|
|
As at March 31, 2020
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
4,594,371
|
|
|
$
|
1,099,864
|
|
|
|
4,533,211
|
|
|
$
|
1,088,538
|
|
|
Share-based awards exercised
|
|
|
91,854
|
|
|
|
929
|
|
|
|
61,160
|
|
|
|
11,326
|
|
|
Issuance of shares due to September Recapitalization
|
|
|
43,392,412
|
|
|
|
438,642
|
|
|
|
—
|
|
|
|
—
|
|
|
Issuance cost
|
|
|
—
|
|
|
|
(1,572
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Balance, end of year
|
|
|
48,078,637
|
|
|
$
|
1,537,863
|
|
|
|
4,594,371
|
|
|
$
|
1,099,864
|
|
|
Preferred shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
4,662,165
|
|
|
$
|
146,965
|
|
|
|
4,662,165
|
|
|
$
|
146,965
|
|
|
Exchanged to common shares
|
|
|
(4,662,165
|
)
|
|
|
(146,965
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Balance, end of year
|
|
|
—
|
|
|
$
|
—
|
|
|
|
4,662,165
|
|
|
$
|
146,965
|
|
|
Shareholders’ capital
|
|
|
48,078,637
|
|
|
$
|
1,537,863
|
|
|
|
9,256,536
|
|
|
$
|
1,246,829
|
|
Just Energy defines capital as shareholders’
equity (excluding accumulated other comprehensive income) and long-term debt. Just Energy’s objectives when managing capital are
to maintain flexibility by:
|
|
(i)
|
Enabling it to operate efficiently; and
|
|
|
(ii)
|
Providing liquidity and access to capital for growth opportunities;
|
Just Energy manages the capital structure
and adjusts to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Board of Directors
does not establish quantitative return on capital criteria for management, but rather promotes year-over-year sustainable and profitable
growth. Just Energy is not subject to any externally imposed capital requirements other than financial covenants in its long-term debts.
However, due to the CCAA filing, these covenants have been stayed as at March 31, 2021.
In the second quarter of fiscal 2020, the
Company made the decision to suspend its dividend on common shares. For the year ended March 31, 2021, dividends of $nil (2020 —
$0.125) per common share were declared by Just Energy. These dividends amounted to $18.7 million for the year ended March 31, 2020.
Because of the dividend suspension, distributions related to the dividends also ceased.
As a result of the September Recapitalization,
the preferred shares were exchanged for common shares and there were no dividends for the year ended March 31, 2021. For the year
ended March 31, 2020, dividends of USD$1.0625 per preferred share were declared by Just Energy in the amount of $6.6 million.
|
|
(c)
|
September Recapitalization
|
On September 28, 2020, the Company
completed the September Recapitalization. The September Recapitalization was undertaken through a plan of arrangement under
the CBCA and included:
|
|
•
|
The consolidation of the Company’s common shares on a 1-for-33 basis;
|
|
|
•
|
Exchange of the 6.75% $100M convertible debentures and the 6.75% $160M convertible debentures for common shares and the Note Indenture, as described in note 15(e), 15(g) and 15(h). The Note Indenture had a principal amount of $15 million as at September 28, 2020, which was reduced to $13.2 million through a tender offer for no consideration on October 19, 2020;
|
|
|
•
|
Extension of $335 million of the Company’s senior secured credit facilities to December 2023, with revised covenants and a schedule of commitment reductions throughout the term;
|
|
|
•
|
Existing 8.75% loan and the remaining convertible bonds due December 31, 2020 were exchanged for the Term Loan and common
shares as described in note 15(f), with interest on the new Term Loan to be initially paid in kind until certain financial measures
are achieved;
|
|
|
•
|
Exchange of all of the 8.50%, fixed-to-floating rate, cumulative, redeemable, perpetual preferred shares for 1,556,563 common shares;
|
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-36
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
•
|
Accrued and unpaid interest paid in cash on the subordinated convertible
debentures until September 28, 2020;
|
|
|
•
|
The payment of certain expenses of the ad hoc group of convertible
debenture holders;
|
|
|
•
|
The entitlement of holders of Just Energy’s existing 8.75%
loan, 6.5% convertible bonds, the subordinated convertible debentures, preferred shares and
common shares as of July 23, 2020 to subscribe for post-consolidation common shares
at a price per share of $3.412, with subscriptions totaling 15,174,950 common shares resulting
in cash proceeds for Just Energy of approximately $51.8 million;
|
|
|
•
|
Pursuant to the previously announced backstop commitments, the
acquisition of 14,137,580 common shares by the backstop parties, on a post-consolidation
basis resulting in cash proceeds for Just Energy of approximately $48.2 million, for total
aggregate proceeds from the equity subscription option of approximately $100.0 million;
|
|
|
•
|
The issuance of 1,075,615 of common shares amounting to $3.67
million by way of an additional private placement to the Company’s 8.75% term loan
lenders at the same subscription price available to all securityholders pursuant to the new
equity subscription offering;
|
|
|
•
|
The settlement of litigation related to the 2018 acquisition of
Filter Group Inc. pursuant to which shareholders of the Filter Group received an aggregate
of $1.8 million in cash and 429,958 common shares; and
|
|
|
•
|
The implementation of a new management equity incentive plan as
described in Note 19.
|
The September Recapitalization resulted
in total net gain of $51.4 million for the year ended March 31, 2021. The net gain reported in the Consolidated Statements of Loss
is made up of the gain of $78.8 million related to reduction in debt, partially offset by $27.4 million of expense incurred in relation
to the September Recapitalization.
The September Recapitalization did
not result in tax expense or cash taxes since any debt forgiveness resulting from the exchange of the convertible debentures was fully
reduced by operating and capital losses previously not used.
|
|
19.
|
SHARE-BASED COMPENSATION PLANS
|
On September 28, 2020, the Board of
Directors of Just Energy approved a new compensation plan referred to as the Just Energy Group Inc., 2020 Equity Compensation Plan (“Equity
Plan”). The Equity Plan includes options, RSUs, DSUs and PSUs.
“Under the Equity Plan, the Company is required to reserve a certain number of (i) options issuable and (ii) other securities issuable
under the Plan. The Equity Plan includes a 5% cap on the total number of equity-based securities that can be issued (5% of the issued
and outstanding common shares). Accordingly, there is a separate record for options and a separate record for all the other securities
(RSUs, DSUs, PSUs) for TSX purposes. Amounts reserved for the various security types can be amended at any time. The 2020 Equity Compensation
Plan was amended on June 25, 2021 to comply with the requirements of the TSX Venture Exchange. In addition to a number of non-material
changes, the maximum number of common shares that may be issued pursuant to Awards (as defined in the 2020 Equity Compensation Plan) under
the Plan that are not options is limited to a maximum of 2,403,931 common shares.”
Under the Equity Plan, 650,000 options
were issued to management on October 12, 2020 with an exercise price of $8.46. The exercise price was based on the higher of the
closing price on October 9, 2020 or the five-day volume weighted trading price as of October 9, 2020. The estimated market
price of the options was $5.70 based on the Black-Scholes option pricing model.
The options vest over a three-year period
and the option value is being amortized as share-based compensation over the vesting period of the options.
|
|
(b)
|
Restricted Share Units
|
Under the Equity Plan, 23,513 RSUs were
granted to one employee based on the five-day volume weighted trading price as of October 9, 2020 of $8.37 with vesting date of
December 1, 2020. All 23,513 RSU’s vested and 16,541 shares were issued and the remaining 6,972 RSU’s were canceled
for tax withholding.
Under the Equity Plan, 190,983 DSUs were
granted to company directors in lieu of materially all their annual cash retainers based on the 5-day volume weighted trading price as
of October 9, 2020 of $8.37. These units were vested immediately on October 12, 2020 and expensed in the current year. There
were an additional 4,054 DSUs issued on February 3, 2021.
|
|
(d)
|
Performance Share Units
|
The Equity Plan also includes the issuance
of PSUs. The Board of Directors, in its sole discretion, determines the performance period applicable to each grant of PSUs at the time
of such grant. Unless otherwise specified by the Board of Directors, the performance period applicable to a grant of a period is 36 months
starting on the first day and ending on the last day of the Company’s fiscal year.
As at March 31, 2021, no PSUs were
granted to any employees.
|
F-37
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
Pre-September Recapitalization
stock-based compensation plan
Just Energy granted awards under its
2010 share option plan (formerly the 2001 Unit Option Plan) to directors, officers, full- time employees and service providers
(non-employees) of Just Energy and its subsidiaries and affiliates. The Company’s previous stock-based compensation plan
grants awarded under the 2010 RSGs Plan (formerly the 2004 unit appreciation rights) were in the form of fully paid RSGs to senior
officers, employees and service providers of its subsidiaries and affiliates. The previous plan also granted awards under the 2013
performance bonus incentive plan in the form of fully paid performance bonus grants to senior officers, employees, consultants and
service providers of its subsidiaries and affiliates. Additionally, the previous plan granted awards under its 2010 Directors’
Compensation Plan (formerly the 2004 Directors’ deferred unit grants) to all independent directors on the basis that each
director was required to annually receive 15% of their compensation entitlement in deferred share grants.. As a result of the
September Recapitalization, all existing restricted share grants, performance bonus grants, and deferred share grants have been
exercised and/or cancelled.
|
|
(a)
|
Other operating expenses
|
|
|
|
Year ended
March 31, 2021
|
|
|
Year ended
March 31, 2020
|
|
|
Year ended
March 31, 2019
|
|
|
Amortization of intangible assets
|
|
$
|
16,166
|
|
|
$
|
27,997
|
|
|
$
|
22,680
|
|
|
Depreciation of property and equipment
|
|
|
7,763
|
|
|
|
13,651
|
|
|
|
4,515
|
|
|
Bad debt expense
|
|
|
34,260
|
|
|
|
80,050
|
|
|
|
123,288
|
|
|
Share-based compensation
|
|
|
6,492
|
|
|
|
12,250
|
|
|
|
5,916
|
|
|
|
|
$
|
64,681
|
|
|
$
|
133,948
|
|
|
$
|
156,399
|
|
|
|
|
Year ended
March 31, 2021
|
|
|
Year ended
March 31, 2020
|
|
|
Year ended
March 31, 2019
|
|
|
Wages, salaries and commissions
|
|
$
|
159,386
|
|
|
$
|
211,457
|
|
|
$
|
233,575
|
|
|
Benefits
|
|
|
14,652
|
|
|
|
22,218
|
|
|
|
22,315
|
|
|
|
|
$
|
174,038
|
|
|
$
|
233,675
|
|
|
$
|
255,890
|
|
Employee expenses of $64.2 million and
$109.8 million are included in administrative expense and selling and marketing expenses, respectively, in the fiscal 2021 Consolidated
Statements of Loss. Corresponding amounts of $80.3 million and $153.4 million, respectively, are reflected in the comparable year in
fiscal 2020 and $93.8 million and $162.1 million, respectively, are reflected in the comparable year in fiscal 2019.
|
|
|
Year ended
March 31, 2021
|
|
|
Year ended
March 31, 2020
|
|
|
Balance, beginning of the year
|
|
$
|
1,529
|
|
|
$
|
7,205
|
|
|
Provisions recorded
|
|
|
6,643
|
|
|
|
950
|
|
|
Provisions utilized
|
|
|
(1,867
|
)
|
|
|
(6,038
|
)
|
|
Liabilities related to assets held for sale
|
|
|
—
|
|
|
|
(195
|
)
|
|
Foreign exchange impact
|
|
|
481
|
|
|
|
(393
|
)
|
|
Balance, end of the year
|
|
$
|
6,786
|
|
|
$
|
1,529
|
|
For the year ended March 31, 2021,
the Company incurred $7.1 million in restructuring costs in relation to the September 2020 restructuring of its senior management.
These costs include management costs, structural reorganization and employee- related costs. Approximately $2.5 million of this remains
unpaid as at March 31, 2021 which is subject to compromise as described in Note 1.
For the year ended March 31, 2021,
the Company incurred reorganization costs related to CCAA and Bankruptcy under Chapter 15 proceedings. These costs include legal and
professional charges of $9.3 million incurred to obtain professional services for the proceedings. In addition, $33.9 million in the
charges associated with early termination of certain agreeements allowed by the CCAA filing and the acceleration of deferred financing
costs and other fees for the long-term debt subject to compromise and certain other related costs.
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-38
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Year ended
March 31, 2021
|
|
|
Year ended
March 31, 2020
|
|
|
Year ended
March 31, 2019
|
|
|
BASIC LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations available to shareholders
|
|
$
|
(402,756
|
)
|
|
$
|
(298,233
|
)
|
|
$
|
(138,272
|
)
|
|
Loss for the year available to shareholders
|
|
|
(402,288
|
)
|
|
|
(309,659
|
)
|
|
|
(138,272
|
)
|
|
Basic weighted average shares outstanding2
|
|
|
34,125,199
|
|
|
|
9,856,639
|
|
|
|
9,732,966
|
|
|
Basic
loss per share from continuing operations available to shareholders
|
|
$
|
(11.80
|
)
|
|
$
|
(30.26
|
)
|
|
$
|
(14.21
|
)
|
|
Basic loss per share available
to shareholders
|
|
$
|
(11.79
|
)
|
|
$
|
(31.42
|
)
|
|
$
|
(27.39
|
)
|
|
DILUTED LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to shareholders
|
|
$
|
(402,756
|
)
|
|
$
|
(298,233
|
)
|
|
$
|
(138,272
|
)
|
|
Adjusted loss for the year available
to shareholders
|
|
$
|
(402,288
|
)
|
|
$
|
(298,233
|
)
|
|
$
|
(138,272
|
)
|
|
Basic weighted average shares outstanding
|
|
|
34,125,199
|
|
|
|
9,856,639
|
|
|
|
9,732,966
|
|
|
Dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share and performance bonus grants
|
|
|
38,990
|
1
|
|
|
80,761
|
1
|
|
|
73,030
|
1
|
|
Deferred share grants
|
|
|
6,437
|
1
|
|
|
8,841
|
1
|
|
|
4,331
|
1
|
|
Restricted share units
|
|
|
4,252
|
1
|
|
|
—
|
|
|
|
—
|
|
|
Deferred share units
|
|
|
87,926
|
1
|
|
|
—
|
|
|
|
—
|
|
|
Options
|
|
|
305,357
|
1
|
|
|
—
|
|
|
|
—
|
|
|
Shares outstanding on a diluted basis
|
|
|
34,568,161
|
1
|
|
|
9,946,241
|
|
|
|
9,810,327
|
|
|
Diluted
loss from continuing operations per share available to shareholders
|
|
$
|
(11.80
|
)
|
|
$
|
(30.26
|
)
|
|
$
|
(14.21
|
)
|
|
Diluted loss per share available
to shareholders
|
|
$
|
(11.79
|
)
|
|
$
|
(31.42
|
)
|
|
$
|
(27.39
|
)
|
|
|
1
|
The assumed settlement of shares results in an anti-dilutive position;
therefore, these items have not been included in the computation of diluted loss per share.
|
|
|
2
|
The shares have been adjusted to reflect the share consolidation due
to the September Recapitalization.
|
|
|
25.
|
DISCONTINUED OPERATIONS
|
In March 2019, Just Energy formally
approved and commenced the process to dispose of its businesses in Germany, Ireland and Japan. In June 2019, the U.K. was added
to the disposal group. The decision was part of a strategic transition to focus on the core business in North America. In November 2019,
Just Energy closed its previously announced sale of Hudson U.K. to Shell Energy Retail Limited and completed the Ireland sale in February 2020.
In April 2020, the Company announced that it has sold all of the shares of Just Energy Japan KK to Astmax Trading, Inc. The
purchase price was nominal. As at March 31, 2021, the remaining operations were classified as discontinued operations.
In March 2021, the Company commenced
insolvency proceedings for its German operations and is expected to be liquidated within the next 12 months. The tax impact on the discontinued
operations is minimal.
In November 2020, Just Energy sold
EdgePower Inc., resulting in a gain of $1.5 million and the results of which have been included in profit (loss) after tax from discontinued
operations in the Consolidated Statements of Loss.
|
F-39
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
Assets, and liabilities associated with
assets, classified as held for sale were as follows:
|
|
|
As
at
March 31,
2021
|
|
|
As at
March 31,
2020
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
898
|
|
|
Current trade and other receivables, net
|
|
|
—
|
|
|
|
4,978
|
|
|
Income taxes recoverable
|
|
|
—
|
|
|
|
12
|
|
|
Other current assets
|
|
|
—
|
|
|
|
1,140
|
|
|
|
|
|
—
|
|
|
|
7,028
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
—
|
|
|
|
38
|
|
|
Intangible assets
|
|
|
—
|
|
|
|
545
|
|
|
ASSETS CLASSIFIED AS HELD FOR
SALE
|
|
$
|
—
|
|
|
$
|
7,611
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
$
|
—
|
|
|
$
|
4,823
|
|
|
Deferred revenue
|
|
|
—
|
|
|
|
83
|
|
|
LIABILITIES ASSOCIATED WITH ASSETS
CLASSIFIED AS HELD FOR SALE
|
|
$
|
—
|
|
|
$
|
4,906
|
|
|
|
26.
|
COMMITMENTS AND CONTINGENCIES
|
Commitments for each of the next five years
and thereafter are as follows:
As at March 31, 2021
|
|
|
Less than
1 year
|
|
|
1-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
Total
|
|
|
Gas,
electricity and non-commodity contracts
|
|
$
|
1,339,637
|
|
|
$
|
960,907
|
|
|
$
|
183,269
|
|
|
$
|
48,057
|
|
|
$
|
2,531,870
|
|
Just Energy has entered into leasing contracts
for office buildings and administrative equipment. These leases have a leasing period of between one and six years. Eight office leases,
with a net balance of $1.3 million, were terminated subsequent to the CCAA in April 2021. No purchase options are included in any
major leasing contracts. Just Energy is also committed under long-term contracts with customers to supply gas and electricity. These
contracts have various expiry dates and renewal options.
|
|
(a)
|
Surety bonds and letters of credit
|
Pursuant to separate arrangements with
various insurance companies. Just Energy has issued surety bonds to various counterparties including states, regulatory bodies, utilities
and various other surety bond holders in return for a fee and/or meeting certain collateral posting requirements. Such surety bond postings
are required in order to operate in certain states or markets. Total surety bonds issued as at March 31, 2021 were $46.3 million.
As at March 31, 2021, $46.1 million were backed by either cash collateral or letters of credit, which are included below.
As at March 31, 2021, Just Energy
had total letters of credit outstanding in the amount of $99.4 million (Note 15(c)).
|
|
(b)
|
Officers and directors
|
Corporate indemnities have been provided
by Just Energy to all directors and certain officers of its subsidiaries and affiliates for various items including, but not limited
to, all costs to settle suits or actions due to their association with Just Energy and its subsidiaries and/or affiliates, subject to
certain restrictions. Just Energy has purchased directors’ and officers’ liability insurance to mitigate the cost of any
potential future suits or actions and is entitled to a Priority Charge under the Court Order in CCAA proceedings. Each indemnity, subject
to certain exceptions, applies for so long as the indemnified person is a director or officer of one of Just Energy’s subsidiaries
and/or affiliates. The maximum amount of any potential future payment cannot be reasonably estimated.
|
|
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ANNUAL REPORT 2021 | JUST ENERGY
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F-40
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In the normal course of business, Just
Energy and/or Just Energy’s subsidiaries and affiliates have entered into agreements that include guarantees in favour of third
parties, such as purchase and sale agreements, leasing agreements and transportation agreements. These guarantees may require Just Energy
and/or its subsidiaries to compensate counterparties for losses incurred by the counterparties as a result of breaches in representation
and regulation or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of
the transaction. The maximum payable under these guarantees is estimated to be $77.6 million and are subject to compromise under the
CCAA.
Just Energy’s subsidiaries are party
to a number of legal proceedings. Other than as set out below, Just Energy believes that each proceeding constitutes legal matters that
are incidental to the business conducted by Just Energy and that the ultimate disposition of the proceedings will not have a material
adverse effect on its consolidated earnings, cash flows or financial position.
On March 9, 2021, Just Energy filed
for and received creditor protection pursuant to the Court Order under the CCAA and similar protection under Chapter 15
of the Bankruptcy Code in the United States in connection with the material adverse financial impact of the Weather Event.
In March 2012, Davina Hurt and Dominic
Hill filed a lawsuit against Commerce Energy Inc. (“Commerce”), Just Energy Marketing Corp. and the Company in the Ohio Federal
Court (the “Ohio Court”) claiming entitlement to payment of minimum wage and overtime under Ohio wage claim laws and the
Federal Fair Labor Standards Act (“FLSA”) on their own behalf and similarly situated door-to-door sales representatives who
sold for Commerce in certain regions of the United States. The Ohio Court granted the plaintiffs’ request to certify the lawsuit
as a class action. Approximately 1,800 plaintiffs opted into the federal minimum wage and overtime claims, and approximately 8,000 plaintiffs
were certified as part of the Ohio state overtime claims. On October 6, 2014, the jury refused to find a willful violation but concluded
that certain individuals were not properly classified as outside salespeople in order to qualify for an exemption under the minimum wage
and overtime requirements. On September 28, 2018, the Ohio Court issued a final judgment, opinion and order. Just Energy filed its
appeal to the Court of Appeals for the Sixth Circuit on October 25, 2018 and provided a bond to the Ohio Court to cover the potential
damages. On August 31, 2020, the Appeals Court denied the appeal in a 2-1 decision. On February 2, 2021, Just Energy filed
a petition for certiorari seeking the United States Supreme Court (the “Supreme Court”) review to resolve the newly created
circuit split with the Court of Appeals for the Second Circuit unanimous decision in Flood v. Just Energy, 904 F.3d 219 (2d Cir. 2018)
and with the inconsistency with the Supreme Court’s recent decision in Encino Motorcars, LLC v Navarro, 138 S. Ct. 1134, 1142 (2018),
with broad, national, unsustainable implications for all employers who have outside sales employees. On June 7, 2021, the Supreme
Court denied Just Energy’s petition for certiorari. The Company accrued approximately $5.7 million in the last quarter of fiscal
2021 in connection with this matter and expects to make this payment promptly.
In May 2015, Kia Kordestani, a former
door-to-door independent contractor sales representative for Just Energy Corp., filed a lawsuit against Just Energy Corp., Just Energy
Ontario L.P. and the Company (collectively referred to as “Just Energy”) in the Superior Court of Justice, Ontario, claiming
status as an employee and seeking benefits and protections of the Employment Standards Act, 2000, such as minimum wage, overtime pay,
and vacation and public holiday pay on his own behalf and similarly situated door-to-door sales representatives who sold in Ontario.
On Just Energy’s request, Mr. Kordestani was removed as a plaintiff but replaced with Haidar Omarali, also a former door-to-door
sales representative. On July 27, 2016, the Court granted Omarali’s request for certification, but refused to certify Omarali’s
request for damages on an aggregate basis, and refused to certify Omarali’s request for punitive damages. Omarali’s motion
for summary judgment was dismissed in its entirety on June 21, 2019. The matter is currently set for trial in November 2021.
Pursuant to the CCAA proceedings, these proceedings have been stayed. Just Energy denies the allegations and will vigorously defend against
these claims.
On July 23, 2019, Just Energy announced
that, as part of its Strategic Review process, management identified customer enrolment and non-payment issues, primarily in Texas. In
response to this announcement, and in some cases in response to this and other subsequent related announcements, putative class action
lawsuits were filed in the United States District Court for the Southern District of New York, in the United States District Court for
the Southern District of Texas and in the Ontario Superior Court of Justice, on behalf of investors that purchased Just Energy Group
Inc. securities during various periods, ranging from November 9, 2017 through August 19, 2019. The U.S. lawsuits have been
consolidated in the United States District Court for the Southern District of Texas with one lead plaintiff and the Ontario lawsuits
have been consolidated with one lead plaintiff. The U.S. lawsuit seeks damages allegedly arising from violations of the United States
Securities Exchange Act. The Ontario lawsuit seeks damages allegedly arising from violations of Canadian securities legislation and of
common law. The Ontario lawsuit was subsequently amended to, among other things, extend the period to July 7, 2020. On September 2,
2020, pursuant to Just Energy’s plan of arrangement, the Superior Court of Justice (Ontario) ordered that all existing equity class
action claimants shall be irrevocably and forever limited solely to recovery from the proceeds of the insurance policies payable on behalf
of Just Energy or its directors and officers in respect of any such existing equity class action claims, and such existing equity class
action claimants shall have no right to, and shall not, directly or indirectly, make any claim or seek any recoveries from any of the
released parties or any of their respective current or former officers and directors in respect of any existing equity class action claims,
other than enforcing their rights to be paid by the applicable insurer(s) from the proceeds of the applicable insurance policies.
Pursuant to the CCAA proceedings, these proceedings have been stayed. Just Energy denies the allegations and will vigorously defend against
these claims.
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F-41
|
|
JUST ENERGY | ANNUAL REPORT 2021
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
|
|
27.
|
RELATED PARTY TRANSACTIONS
|
Parties are considered to be related if
one party has the ability to control the other party or exercise influence over the other party in making financial or operating decisions.
The definition includes subsidiaries and other persons.
Pacific Investment Management Company (“PIMCO”),
through certain affiliates, became a 28.9% shareholder of the Company as part of the September Recapitalization. On March 9,
2021, certain PIMCO affiliates entered into a term sheet (the “DIP Agreement”) with the Company to make the DIP Facility
for USD $125 million as described in note 15(a).
Key management personnel are defined as
those individuals having authority and responsibility for planning, directing and controlling the activities of Just Energy and consist
of the Executive Chair, the Chief Executive Officer and the Chief Financial Officers.
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
Salaries and benefits
|
|
$
|
3,817
|
|
|
$
|
2,334
|
|
|
$
|
2,493
|
|
|
Share-based compensation expense, net
|
|
|
1,539
|
|
|
|
625
|
|
|
|
1,163
|
|
|
|
|
$
|
5,356
|
|
|
$
|
2,959
|
|
|
$
|
3,656
|
|
|
|
28.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
(a) Net change in working capital
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31,
2020
|
|
|
As at
March 31,
2019
|
|
|
Accounts receivable and unbilled revenue, net
|
|
$
|
120,870
|
|
|
$
|
33,839
|
|
|
$
|
(35,427
|
)
|
|
Gas in storage
|
|
|
3,185
|
|
|
|
(3,234
|
)
|
|
|
(601
|
)
|
|
Prepaid expenses and deposits
|
|
|
56,585
|
|
|
|
(89,087
|
)
|
|
|
(128,911
|
)
|
|
Provisions
|
|
|
6,145
|
|
|
|
(4,607
|
)
|
|
|
4,309
|
|
|
Trade and other payables
|
|
|
(289,543
|
)
|
|
|
107,083
|
|
|
|
179,144
|
|
|
|
|
$
|
(102,758
|
)
|
|
$
|
43,994
|
|
|
$
|
18,514
|
|
On June 16, 2021 Texas House Bill
4492 (“HB 4492”), which provides a mechanism for recovery of certain costs incurred by various parties, including the
Company, during the Weather Event through certain securitization structures, became law in Texas. HB 4492 addresses securitization
of (i) ancillary service charges above USD$9,000/MWh during the Weather Event; (ii) reliability deployment price adders
charged by the ERCOT during the Weather Event; and (iii) amounts owed to ERCOT due to defaults of competitive market
participants, which were subsequently “short-paid” to market participants, including Just Energy (collectively, the
“Costs”).
HB 4492 provides that ERCOT request that the Public Utility Commission
of Texas (the “Commission”) establish financing mechanisms for the payment of the Costs incurred by load-serving entities,
including Just Energy. The timing of any such request by ERCOT, the details of the financing mechanism and the process to apply for recovery
of the Costs are undetermined at the time of this filing. The Company continues to evaluate HB 4492. Based on current information, if
the Commission approves the financing provided for in HB 4492, Just Energy anticipates that it will recover approximately USD $100 million
of Costs. The total amount that the Company may recover through the mechanisms authorized in HB 4492 may change materially based on a
number of factors, including the details of an established financing order issued by the Commission, additional ERCOT resettlements, the
aggregate amount of funds applied for under HB 4492 by participants, the outcome of the dispute resolution process initiated by the Company
with ERCOT, and any potential challenges to the Commission’s order or orders. There is no assurance that the Company will be able
to recover all of the Costs.
|
|
|
ANNUAL REPORT 2021 | JUST ENERGY
|
F-42
|