Just Energy 2013 Qe report for December 31, 2012 - part 1 of 2
Here are the interesting points I find in the Just Energy 2013 Q3 report, ending December 31, 2012:
All amounts in are Canadian dollars.
1: Shareholder equity is negative. After all of the time they have been in business, their assets do not even cover all of their liabilities. To me, it looks like that they have borrowed a number of times to cover large cash operating losses in the past. Things did improve in the recent Q3, since the shareholder equity deficit improved from $501 million to $247 million over the prior comparative period. What I do not understand is why anyone would want to invest in a company where there is no equity and if something did happen, the vendors would probably take about a 25% haircut on getting paid. I am assuming that debt holders would be in line ahead of vendors on getting paid since the deficient of $247 million would get taken out of the current liabilities of $847 first for a 29.1% haircut. I have no idea why any vendor would extend Just Energy any terms since there is only enough assets to cover about 70% of any vendor billings.
2: Just Energy pays out most or more, of their net income as dividends. Considering that shareholder equity is negative, this makes no sense. In Q3, Just Energy reports shareholder income of $37.5 million and dividend payments of $44.6 million. I am amazed that their debt borrowings would even allow that payment of dividends while equity is negative. Most debt covenants would prohibit dividend payments in that situation. The only good thing for the company paying dividends in this situation, that I can see, is that it acts as a damper on short sellers, since any stock sold short would have to have the dividend paid for shares held short by the short seller. The downside is that the company is worse off since it paid out more than it earned.