Just Energy (JE) Files for Relief Under CCAA in Canada and Chapter 15 in U.S. and Has Arranged US$125 Million Debtor in Possession Financing
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Just Energy Group Inc. (“Just Energy” or the “Company”) (TSX:JE; NYSE: JE), a retail energy provider specializing in electricity and natural gas commodities and bringing energy efficient solutions and renewable energy options to customers, today announced that it has sought and received creditor protection via an Initial Order under the Companies’ Creditors Arrangement Act (“CCAA”) from the Ontario Superior Court of Justice (Commercial List) and is seeking similar protection under Chapter 15 of the Bankruptcy Code in the United States. Just Energy has also reached an agreement with one of its Term Loan lenders for a US$125 million DIP financing. The Company’s largest commodity suppliers have also agreed to continue to support the Company with commodity supply and ISO services.
The filings, and associated US$125 million DIP financing arranged by the Company, enable Just Energy to continue all operations without interruption throughout the U.S. and Canada and to continue making payments required by ERCOT and satisfy other regulatory obligations. Just Energy sought and received a Stay of Proceedings and other protections provided by the CCAA in order to provide the Company with breathing room to pursue alternatives that would allow it to emerge as a strong, stable business. The Stay of Proceedings in favour of Just Energy has an initial term of 10 days, subject to extension as the Court deems appropriate. The filings have no impact on customer bills.
Today’s filings are the result of unprecedented cold weather in Texas in February (the “Weather Event”), and corresponding charges from ERCOT currently totaling over US$250 million that Just Energy must pay in the near term. The total financial impact may change due to ERCOT resettlements, potential orders of the Public Utility Commission (the “Commission”) with respect to recommendations of the Independent Market Monitor (“IMM”), the outcome of the dispute resolution process initiated by the Company with ERCOT and potential litigation challenges. Since these disputes are still pending and not resolved, Just Energy is unable to pay the full amounts when due to ERCOT this week without the arrangement of the DIP financing received today.
While Just Energy hedges weather risk based on historical scenarios, the Weather Event in Texas was colder than anything experienced in decades. A combination of customer usage and the Real Time Settlement Point Price being artificially set at the high offer cap of US$9,000 per megawatt hour contributed significantly to the negative financial impact to the Company. The Weather Event caused the ERCOT wholesale market to incur charges of approximately US$55 billion over a seven-day period, an amount equal to what it ordinarily incurs over four years. The total cost to Just Energy and other market participants is still subject to adjustment by ERCOT and may change.
As previously announced, on March 3, 2021, the Company filed a petition with the Commission requesting an order that ERCOT deviate from the deadlines and timing in its Protocols and Market Guides related to settlements, collateral obligations, and invoice payments and suspend the execution or issuance of invoices or settlements for intervals during the dates of February 14, 2021 through February 19, 2021, until issues related to the catastrophic Weather Event raised by executive and legislative branches of the Texas authorities are investigated, addressed, and resolved. Alternatively, Just Energy requested that the Commission grant a waiver of certain ERCOT Protocols to allow Just Energy to delay payment of certain invoices related to the Weather Event while exercising its rights under the ERCOT Protocols to dispute the invoiced payment amounts. To date, Just Energy has not received this relief.
BMO Capital Markets has been engaged as financial advisor, Osler, Hoskin & Harcourt LLP and Fasken Martineau DuMoulin LLP are legal advisors in Canada, Kirkland & Ellis LLP and Jackson Walker LLP are legal advisors in the United States and FTI Consulting Canada Inc. has consented to act as the Monitor under the CCAA.
Just Energy will provide further updates as developments warrant. A copy of the CCAA Initial Order and other information regarding the CCAA proceedings will be available at the Monitor’s website http://cfcanada.fticonsulting.com/justenergy. Information regarding CCAA proceedings can also be obtained by calling the Monitor’s hotline at 416-649-8127 or 1-844-669-6340 or by email at email@example.com.
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