Just Energy streamlines their Operation
This is a picture of a number of demand curves.This is the kernel of the problem with Just Energy as with all utilities.Just Energy provides essential services such as electricity and natural gas.The number of customers that join their system with their set (regulated) price gives them their demand or total revenues.But Just Energy has a further problem called attrition(or churn) whereby customers leave their system.Their attrition rate has been dropping and in 2017 was only 15%.However revenues for 2017 were $3.8 billion versus $4.10 billion in 2016.While base EBITDA (Earnings before Interest,Taxes,Depreciation and Amortization) of $225 million increased by 8% over 2016.
Operational Efficiency
Base EBITDA had a slight increase while base funds from operations decreased by 8% to $128 million from $138 million in 2016.Also cash flow decreased by almost 35% to $84 million from $128 million in 2016.However this was principally caused by a redemption in long term debt.As long term debt decreased from $661 million to $498 million.This is the big improvement over 2016;as Just Energy met it's target debt ratio of 1.8 times adjusted EBITDA from 2.6 times in 2016.As the Just Energy CEO said "Just Energy transformed it's profitability profile while repairing our balance sheet".
Outlook for 2017
Just Energy only started business in 1997 and had a loose relationship with it's customers;it was not recognized as a "bona fide" utility.It expanded quickly into the USA and Europe (chiefly U.K.).Most other Canadian utilities were situated in chiefly one area and had more consistent service.Lately all the other utilities have moved into foreign and non-contiguous jurisdictions also.The distinction between them and Just Energy has started to disappear.Attrition both at home and away from the home area was a problem,especially for JE.But Just Energy partly cured this problem by improving their quality of service and a better reputation with it's customers.In 2017 revenue growth has leveled off but earnings have been used to manage the balance sheet with no new acquisitions.Long term debt has been reduced from $661 million to $498 million.This blog expects further reductions to the $460 to $470 million area in the rest of 2017.Adjusted EBITDA is expected to be about $220 million for 2018 and this blog expects $250 million for 2019.This means that e.p.s should be about $1.50 to $1.60 per share in 2018.Just Energy is still fairly priced up to $7.25 - $7.50 per share but has room to climb back to the $8.00 to$8.25 area.
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