Just Energy Group Inc. announced on Tuesday that it has executed a share purchase agreement to sell the Company’s UK operations, Hudson Energy Supply UK Limited (“Hudson UK”), to Shell Energy Retail Limited (“Shell Energy Retail”) for up to £10.5 million.
“The sale of our UK operations is part of our broader strategy to concentrate on our higher-margin North American operations, while also improving our liquidity,” said Scott Gahn, President and Chief Executive Officer of Just Energy. “As well as refocusing our geographic footprint, we have undertaken an in-depth review of our operations and identified ways to improve our business by boosting efficiency and lowering costs.”
Under the purchase agreement, Just Energy will receive £2 million at closing and up to £8.5 million to be paid depending on whether the UK Office of Gas and Electricity Markets (Ofgem) or reinstates the capacity market payments in the UK within a specified period of time. Until completion, both companies will continue to operate independently. Under the terms of the deal, Hudson UK will operate as a wholly owned subsidiary of Shell Energy Retail Limited.
Hudson UK supplies ~200,000 UK residential customers with gas and 100% renewable electricity through its residential trading arm, Green Star Energy, as well as providing bespoke gas and 100% renewable electricity contracts to ~2,000 commercial customers.
The transaction is subject to customary closing conditions and is expected to close by the end of 2019.
Optimizing North American Operations
Following an in-depth review of its business, Just Energy has identified several opportunities to improve efficiency and profitability. Incremental savings will be achieved by eliminating low-value activities in non-selling costs, optimizing online commission spending to eliminate low-return deals and through improved efficiency in our customer care group.
Approximately C$20 million of additional identified cost savings bring total annualized cost savings initiatives announced so far in fiscal 2020 to approximately C$60 million.
Strategic Review Process…It’s a Pager-Turner
The strategic review process has been contentious, with “a frank exchange of views” between Rob Snyder, whose trust has 8.3% stake in Just Energy’s common stock, and Just Energy board members and officers, who have different views on board’s leadership and specifically regarding accounts receivable strategies.
In addition to improvements to its operations, Just Energy announced changes to its leadership team with the recent appointments of Mr. Gahn as Chief Executive Ofﬁcer and Walter M. Higgins III as a director.
The strategic review process initiated in early June is ongoing. While Just Energy has not set a speciﬁc timeframe for the conclusion of the strategic review, they will provide an update when the Board has approved a speciﬁc course of action.
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