/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE
Growth in Customers and Diversification highlight first full year of
TORONTO, March 26, 2014 /CNW/ - Crius Energy Trust (TSX: KWH.UN) ("Crius
Energy" or the "Trust"), today announced fourth quarter and year-end
financial results for the three- and twelve-month periods ended
December 31, 2013. The Trust commenced operations on November 13, 2012
with the acquisition of a 26.8% ownership interest in Crius Energy, LLC
(the "Company") by the Trust's wholly-owned subsidiary. All figures are
in U.S. dollars unless otherwise noted.
"Our first full year of operations was highlighted by continued customer
growth and diversification of our business," stated Michael Fallquist,
Chief Executive Officer of the Trust. "I'm extremely pleased with the
net customer growth, driven by new sales and customer retention, in our
network marketing and strategic marketing partnership channels. While
I expect all channels to contribute to growth in 2014, I expect our
partnership with Frontier Communications to be a leading contributor as
a result of the expanded inbound sales team which now features up to
400 customer service representatives selling our natural gas and
electricity products. The number of agents, size of the Frontier
subscriber base and the success we've had in similar campaigns with
other partners make me very optimistic about the growth potential."
"Our Adjusted EBITDA performance in the fourth quarter, normalized for
the year-end adjustment to bad debt reserves, was in line with
management expectations given the seasonally low electricity usage in
the period. Our Adjusted EBITDA highlights the increased
diversification of our business as natural gas delivered a strong
contribution to our fourth quarter results. Unitholders can expect
natural gas as well as our newly established solar business to provide
increased diversity going forward."
15.1% year-over-year growth in electricity and natural gas customers to
615,373, up from 534,564 as at December 31, 2012, representing 80,809
net customers added. The strong growth was led by our Network Marketing
and Strategic Marketing Partnership channels, up 23% and 161% in the
Sold 5.1 million MWh of electricity, 4.7 million MMBtu of natural gas
and solar systems with total generation capacity of 2,200 KW
Revenue of $507.1 million
Gross margin of $103.4 million, representing 20.4% of revenue
Adjusted EBITDA of $32.2 million, representing 6.3% of revenue
Total distributions of $37.3 million paid, normalized for distributions
related to the 2012 stub period
Total cash and availability of $27.5 million, consisting of $15.3
million in cash and $12.2 million available under our credit facility
Product suite expanded to include residential solar energy products and
services through marketing relationship with SolarCity
Expanded electricity and natural gas service offerings under multiple
Viridian Energy entered two new electric utility service areas, five new
natural gas utility service areas and three new states
FTR Energy Service entered three new electric utility service areas and
one new state
Public Power entered five new electric utility service areas and three
new natural gas utility service areas
Acquired a portfolio of residential and small commercial customer
accounts in New Hampshire from PNE Energy Supply LLC
Strengthened the management team through the appointments of Chaitu
Parikh as Chief Operating Officer, Seth Zuckerman as Senior Vice
President of Finance, and Pradeep Tiwari as Vice President of
Information Technology. In addition, Meredith Berkich was promoted to
President of Viridian Energy and Cami Boehme was promoted to the newly
created position of Chief Strategy Officer.
Q4 2014 Highlights
Sold 1.2 million MWh of electricity, 1.9 million MMBtu of natural gas
and solar systems with total generation capacity of 2,000 KW
0.8% quarter-over-quarter growth in electricity and natural gas
customers to 615,373, up from 610,459 as at September 30, 2013,
representing 4,914 net customers added
Revenue of $128.6 million
Gross margin of $24.9 million, representing 19.4% of revenue
Adjusted EBITDA of $6.1 million, representing 4.7% of revenue. Adjusted
EBITDA was impacted by a non-cash adjustment at year-end of $2.6
million relating to a change in estimate of the uncollectibility of
customer accounts receivable balances in markets where we are subject
to credit risk. Normalizing for this impact, Adjusted EBITDA was $8.7
million in the quarter.
Highlights Subsequent to 2013
Expanded working capital facility with Macquarie Energy from $25.0
million to $60.0 million of availability. As at December 31, 2013, on a
pro-forma basis, total cash and cash availability would have more than
doubled from $27.5 million to $63.6 million.
Added new distribution channel for solar energy products through
expansion of existing partnership with Frontier Communications.
Starting in April 2014, Frontier Communications will begin selling
solar energy products to their existing subscriber base in California,
the largest solar market in the United States, through multiple inbound
customer care facilities across their regions. This offering is
expected to be extended to include Frontier Communications subscribers
in Arizona, Oregon, Colorado and New York.
Expanded the strategic marketing partnership with Frontier
Communications as the Company gained access to multiple inbound
customer care facilities to sell natural gas and electricity to
Frontier Communications subscribers in California, Illinois, Indiana,
New York and Ohio under the FTR Energy Services brand name.
Continued to strengthen the management team through the following
Christian McArthur was appointed to the position of Executive Vice
President of Energy Supply and Pricing. Mr. McArthur has over 10 years
of experience in the retail energy industry, most recently serving as
Senior Vice President for Just Energy where he was responsible for
energy supply operations for all North American businesses.
Barbara Clay was promoted to position of General Counsel of the Company.
In her role, Ms. Clay oversees the legal and regulatory functions of
the Company. Prior to her promotion, Ms. Clay had day-to-day
responsibility for the regulatory affairs of the Company. Ms. Clay was
also appointed an Officer of the Trust.
Martin Phillips was appointed to the position of Vice President of Human
Resources. Mr Phillips has approximately 20 years practicing HR in a
number of different industries, most recently with ConEdison Solutions,
the deregulated energy business of ConEdison. Prior to ConEdison
Solutions, he spent ten years as Senior Manager, HR with Philips
Electronics and as a corporate HR manager with William M. Mercer
Consulting and a division of Navigant.
Review of Financial Results
Total revenue for 2013 was $507.1 million driven by our strong customer
growth and higher average retail prices paid by customers. Electricity
revenue was $475.4 million, natural gas revenue was $26.6 million, fee
revenue from independent contractors was $4.1 million and solar revenue
was $1.0 million. Revenue growth was highlighted by the strong
contribution by our Network Marketing channel which generated $266.9
million of revenue in 2013.
Gross margin was $103.4 million, or 20.4% of total revenues, which is at
the low end of the Company's pro-forma historical range of
approximately 20% to 30% of revenue.
Gross margin varied by quarter from a high of 24.2% in the second
quarter of 2013 to a low of 17.5% in the first quarter. Gross margin
was lower than the prior five year average due to volatile weather
conditions encountered in certain quarters during the year and
supply-side natural gas constraints in ISO-New England. In addition,
new customer acquisition was highly competitive resulting in
introductory rates offered at gross margins lower than historical
averages driving down the average gross margin per customer across our
entire customer portfolio in 2013.
Adjusted EBITDA for 2013 was $32.2 million, or 6.3% of revenue. Adjusted
EBITDA for our first full year of operation was affected by higher
expenses and lower gross margins from our electric customers, balanced
by growing contributions from our natural gas customer base as well as
the launch of the new solar product at the end of the third quarter.
The Company has cash and availability of $27.5 million as of December
31, 2013, which consisted of $15.3 million in cash, no long-term debt
and availability of $12.2 million under the Company's working capital
facility with Macquarie Energy. On a pro-forma basis, adjusting for
the expanded working capital facility, total cash and cash availability
would have more than doubled from $27.5 million to $63.6 million.
In this first full year of operations the Company focused on growing its
customer base, strengthening its distribution channels, diversification
of revenues and investment in technology and human capital. The
Company grew 15.1% year-over-year in electricity and natural gas
customers to 615,373, up from 534,564 as at December 31, 2012. This
growth represented 80,809 net customers added in the period.
Customer growth was driven by the Network Marketing and Strategic
Marketing Partnership channels, with 23% and 161% growth respectively.
The Company's Network Marketing and Strategic Marketing Partnership
channels, known as "warm" marketing channels due to the existing
relationship between the customer and the sales agent, are typically
more successful in highly competitive market conditions due to their
lower attrition rates and ability to solicit customers not accessible
through more traditional marketing tactics (eg telemarketing and
door-to-door). In addition, customers acquired through our Network
Marketing and Strategic Marketing Partnership channels typically have a
greater customer lifetime value as a result of higher energy usage
and/or longer retention.
Net customer growth in the Direct Marketing channel was negative in
2013, representing a 7% net decline in customers year-over-year. This
channel is known as a "cold" marketing channel due to the lack of
relationship between the customer and the sales agent. In highly
competitive markets, the use of mainstream "cold" marketing tactics
such as telemarketing and door-to-door are typically less successful as
the same customers are targeted by multiple companies. Management
continue to invest in the Direct Marketing channel as it is an
important part of our multi-channel distribution platform. Although
historically, the Company has primarily used telemarketing and
door-to-door sales tactics in the Direct Marketing channel, management
is currently exploring plans to implement other direct marketing
methodologies in this channel that may improve customer acquisition,
increase customer retention and drive future performance.
The net customer growth in the period resulted in continued
diversification of our business which management believes will result
in more stable quarterly earnings going forward by mitigating exposure
to risks including, but not limited to, weather variation impacting
customer consumption (volumetric risk). In particular, the Company saw
positive trends in diversification of commodity (electricity, natural
gas), product (fixed, variable, solar), geography and segment
Management also made significant investments in technology and human
capital during 2013 which increased overall expenses and reduced
earnings. Management believe the investments in technology are
important as the Company competes in an increasingly competitive and
dynamic market where cost to serve each customer will become an
important driver of success. While additional investment will be
required going forward, the Company expects to start benefiting from
the investment made in 2013 by generating cost savings from automation,
improving sales and billing processes and promoting organic growth.
Financial Statements and MD&A
The Trust's consolidated financial statements for the year ended
December 31, 2013 and accompanying management's discussion and analysis
("MD&A") have been filed with the securities regulators and are
available via SEDAR at www.sedar.com and are available on the Trust's website at www.criusenergytrust.ca.
Conference Call Notice
The Trust will hold a conference call to discuss its fourth quarter and
year-end 2013 financial results today, March 26, 2014 at 10:00 a.m.
To access the conference call by telephone, dial 647-427-7450 or
1-888-231-8191. Please connect approximately 15 minutes prior to the
beginning of the call to ensure participation.
A live audio webcast of the conference call will be available at www.cnw.ca. Please connect at least 15 minutes prior to the conference call to
ensure adequate time for any software download that may be required to
join the webcast. The webcast will be archived at the above web site
for 30 days.
A taped rebroadcast will be available to listeners until 12 a.m. ET on
April 2, 2014. To access the rebroadcast, please dial 416-849-0833 or
1-855-859-2056 and enter passcode 8453006, followed by the number sign.
About Crius Energy Trust
Crius Energy Trust has been established to provide investors with a
distribution-producing investment through the acquisition of a 26.8%
ownership interest in Crius Energy. With over 610,000 residential
customer equivalents, Crius Energy is a comprehensive energy solutions
partner that provides electricity, natural gas and solar products to
residential and commercial customers. Crius Energy connects with energy
customers through an innovative family-of-brands strategy and
multi-channel marketing approach. This unique combination creates
multiple access points to a broad suite of energy products and services
that make it easier for consumers to make informed decisions about
their energy needs. With headquarters in Stamford, Connecticut, Crius
Energy currently sells electricity, natural gas and/or solar power in
19 states and the District of Columbia. More information is available
The Trust intends to qualify as a "mutual fund trust" under the Income
Tax Act (Canada) (the "Tax Act"). The Trust will not be a "SIFT trust"
(as defined in the Tax Act), provided that the Trust complies at all
times with its investment restriction which precludes the Trust from
holding any "non-portfolio property" (as defined in the Tax Act).
Material information pertaining to the Trust may be found on www.sedar.com or www.criusenergytrust.ca.
This news release contains forward-looking information that involves
substantial known and unknown risks and uncertainties, most of which
are beyond the control of Crius Energy, including, without limitation,
those listed under "Risk Factors" and "Forward-Looking Statements" in
the Trust's Annual Information Form dated March 28, 2013
(collectively, "forward-looking information"). Forward-looking
information in this news release includes, but is not limited to, the
Trust's objectives and status as a mutual fund trust and not a SIFT
trust and the results of operations of the Company. Crius Energy
cautions investors of Crius Energy's securities about important factors
that could cause Crius Energy's actual results to differ materially
from those projected in any forward-looking statements included in this
news release. Any statements that express, or involve discussions as to
expectations, beliefs, plans, objectives, assumptions or future events
or performance are not historical facts and may be forward-looking and
may involve estimates, assumptions and uncertainties which could cause
actual results or outcomes to differ materially from those expressed in
such forward-looking statements. No assurance can be given that the
expectations set out in this news release will prove to be correct and
accordingly, prospective investors should not place undue reliance on
these forward-looking statements. These statements speak only as of the
date of this news release and Crius Energy does not assume any
obligation to update or revise them to reflect new events or
SOURCE: Crius Energy Trust
For further information:
Chief Executive Officer
Chief Financial Officer
(416) 815-0700 ext. 233