TORONTO, Dec. 14, 2015 /CNW/ – Crius Energy Trust (TSX: KWH.UN) (“Crius” or “the Trust”) today announced that Crius Energy, LLC (“Crius Energy” or “Company”) has entered into an asset purchase agreement with Iron Energy LLC d/b/a Kona Energy, a Texas based energy retailer, to acquire customer contracts and associated assets for approximately 75,000 electricity Residential Customer Equivalents (“RCEs”) (the “Acquisition”) in Illinois, New York, Ohio, and Texas for US$7.0 million. The Acquisition will increase Crius Energy’s RCEs by more than 9% to approximately 875,000 RCEs.
Crius Energy expects annual gross margin of between US$70 and US$90 per RCE and the Acquisition is expected to be accretive to distributable cash per unit in 2016. Additionally, Crius Energy expects to enhance the value of the Acquisition by cross-selling natural gas products to the customers.
The Acquisition is expected to strengthen the Company’s geographic footprint across four of the 20 states where Crius Energy already operates and adds to the Company’s growing portfolio of longer-term, fixed rate commercial accounts. The portfolio consists of approximately 96% commercial customers and approximately 98% fixed rate contracts, which is expected to increase the percentage of commercial customers and fixed rate contracts in the Company’s portfolio to 40% and 75%, respectively.
“We are very pleased to announce another accretive acquisition in 2015 through the purchase of this portfolio of electricity customers,” said Michael Fallquist, Chief Executive Officer of both the Trust and Crius Energy. “This Acquisition is consistent with our growth strategy to acquire assets that diversify the business by strengthening our geographic footprint, increasing our longer-term commercial customer base, and adding to our proportion of fixed rate contracts. Through both organic growth and acquisitions, we continue to focus on growing the business in an accretive manner in order to provide enhanced unitholder value.”
The Acquisition is expected to close in January 2016, and will be funded by cash and availability under the Company’s credit facility with Macquarie Energy, LLC (“Macquarie Energy”). Concurrent with the execution of the Acquisition documents and effective upon closing, Macquarie Energy will reduce its energy supply fees under the Company’s Credit Facility. The reduction will lower interest costs charged to the Company by US$5.0 million over the next four years.
Customers that will be added through this acquisition will not experience any change to their service and will be seamlessly transitioned to an established Crius Energy brand, based on their location and the type of service they receive.
About Crius Energy
Crius Energy Trust was established to provide investors with a distribution-producing investment through its 43.1% ownership interest in Crius Energy, LLC. With approximately 800,000 residential customer equivalents, Crius Energy, LLC is a comprehensive energy solutions partner that provides electricity, natural gas and solar products to residential and commercial customers. Crius Energy, LLC 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. Crius Energy, LLC currently sells energy products in 20 states and the District of Columbia with plans to continue expanding its geographic reach.
The Trust intends to continue 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 http://www.sedar.com or www.criusenergytrust.ca.
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements and forward-looking information (collectively, “Forward-Looking Statements”) that involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Crius, including, without limitation, those risks described in the Annual Information Form of the Trust dated March 25, 2015 (under the headings “Risk Factors” and “Forward-Looking Statements”) and in the MD&A of the Trust for the period ended September 30, 2015. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words of phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection” and “outlook”) are not historical facts and may be Forward-Looking Statements which involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such Forward-Looking Statements. These statements relate to future events or future performance and reflect current assumptions, expectations and estimates of management, including relating to: the business and operations of Kona Energy, LLC; the portfolio of assets expected to be acquired under the Acquisition; the expected closing date of the Acquisition; that the Acquisition will be completed; the number and percentage of commercial and fixed-rate accounts being acquired; the expected annual gross margin of the portfolio of RCEs to be acquired; the location of the RCEs to be acquired; the retail energy market in Illinois, New York, Ohio and Texas, generally; growth, results of operations, performance, business prospects and opportunities relating to Crius Energy; Canadian economic environment; Crius Energy’s ability to attract and retain customers; customer revenues and margins; customer additions and renewals; customer attrition; geographical expansion; customer consumption levels; treatment under governmental regulatory regimes; Distributable Cash; growth of the business of Crius Energy; growth initiatives of Crius Energy; the Canada–United States dollar exchange rate; and Crius Energy’s expectations and estimates regarding the impact the Acquisition discussed herein. Crius Energy cautions investors in the Trust’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. 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 circumstances, except as required by law.
Non-IFRS Financial Measures
Statements in this news release make reference to Distributable Cash, which is a non-IFRS financial measure commonly used by financial analysts in evaluating the financial performance of companies, including companies in the energy industry. Accordingly, Management believes Distributable Cash may be a useful metric for evaluating the Trust’s financial performance as it is a measure that Management uses internally to assess performance, in addition to IFRS measures. As there is no generally accepted method of calculating Distributable Cash, the term as used herein is not necessarily comparable to similarly titled measures of other companies. Distributable Cash has limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, net (loss) income or other data prepared in accordance with IFRS. See the MD&A of the Trust for the period ended September 30, 2015 (under the heading “Distributable Cash and Payout Ratio”) for a reconciliation of Distributable Cash to cash flows provided by (used in) operating activities as calculated under IFRS, the most directly comparable measure in the consolidated financial statements of the Trust. Other financial data has been prepared in accordance with IFRS.
