Just Energy Seeks Bankruptcy After Texas Loss

Mar 9, 2021

(Bloomberg) Just Energy Group Inc. filed for court protection in Canada and bankruptcy in the U.S. after suffering crushing losses in the Texas blackouts that plunged millions of people into darkness and the region’s power sector into chaos.The Canadian retail energy seller, which specializes in electricity and natural gas, is at least the second company to seek court protection in the wake of the crisis. It recently emerged from a recapitalization plan and a board shakeup. Pacific Investment Management Co. is the largest shareholder with a 28.9% stake, according to data compiled by Bloomberg.

The unprecedented Texas outages left four million homes and businesses without heat, light and in some cases water as a rare and powerful winter storm gripped the region, causing as much as $129 billion in economic losses. Dozens of people died in the cold. The impact on individual corporations is only starting to emerge. The state’s power market faces a $2.4 billion shortfall as companies face sky-high energy bills.

Just Energy requested court protection through the Companies’ Creditors Arrangement Act in Canada, which will allow the company to continue operating, and sought similar protection under Chapter 15 of the U.S. Bankruptcy Code. FTI Consulting Inc. was appointed as the monitor in the Canadian proceedings.

The company arranged a $125 million debtor-in-possession loan with one of its term loan lenders to meet its North American obligations including payments to the Electric Reliability Council of Texas, which total more than $250 million in the near term, it said in a statement. Just Energy would be unable to pay the full amounts to Ercot without the DIP financing, it said.

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Weather Hedges

“While Just Energy hedges weather risk based on historical scenarios, the weather event in Texas was colder than anything experienced in decades,” it said in the statement. “The weather event caused the ERCOT wholesale market to incur charges of approximately $55 billion over a seven-day period, an amount equal to what it ordinarily incurs over four years.”

The filing is a hit to big-name investors including Pimco and Great Pacific Capital Corp., an investment company controlled by Vancouver billionaire Jim Pattison, which owns about 1.5%, according to data compiled by Bloomberg.

Amid high debt levels and looming maturities, Just Energy had just emerged from a recapitalization plan which included a new equity commitment of C$100 million and converting C$420 million of preferred shares and convertible debentures into new equity. Management said at the time that the move would reduce overall debt by about C$275 million.

In February, the Mississauga, Ontario-based company said it couldn’t finalize earnings for the calendar fourth quarter, which is its fiscal third quarter, while it reviewed the impact of the Texas crisis, during which market prices for electricity soared to $9,000 a megawatt-hour.