(Bloomberg) — Just Energy Group Inc. filed for court protection in Canada and the U.S. after revealing a big loss from the Texas power crisis.
The Canadian retail energy seller that specializes in electricity and natural gas only recently emerged from a recapitalization plan and a board shakeup after concluding a strategic review to remain independent.
Just Energy requested court protection through the Companies’ Creditors Arrangement Act in Canada, and is seeking 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 has 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. The company would be unable to pay the full amounts to ERCOT without the DIP financing, it said.
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 hit big-name investors including Pacific Investment Management Co., the largest shareholder with a 28.9% stake acquired during the recapitalization last year. Great Pacific Capital Corp., an investment company controlled by Vancouver billionaire Jim Pattison, owns about 1.5%, according to data compiled by Bloomberg.
Amid high debt levels and looming maturities, the company 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. The company 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.
(Updates to add context starting in fourth paragraph)
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