Just Energy seeks creditor protection after Texas losses
Just Energy Group Inc. filed for court protection in Canada and will seek bankruptcy in the U.S. after suffering crushing losses in the Texas blackouts that left millions of people in the dark and plunged the region's power sector into chaos.
The retail energy seller, which specializes in electricity and natural gas with operations in Canada and the U.S., 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-per-cent 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 US$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 US$2.4-billion shortfall as companies face sky-high energy bills.
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 US$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 US$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 debtor-in-possession financing, it said.
“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 US$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 per cent, according to data compiled by Bloomberg.
Amid high debt levels and looming maturities, the company had just emerged from a recapitalization plan that included a new equity commitment of $100 million and converting $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 $275 million.