Pimco Gets Burned as Just Energy Craters After Texas Loss

(Bloomberg) -- Canadian energy retailer Just Energy Group Inc. revealed a big loss from the Texas crisis and said it may have trouble continuing as a going concern after last week’s freezing weather cost it about $250 million.

Just Energy plunged 31% to $3.96 in New York. The decline hit big-name investors including Pacific Investment Management Co., the largest shareholder with a 28.9% stake acquired during a recapitalization last year. Great Pacific Capital Corp., an investment company controlled by Vancouver billionaire Jim Pattison, owns 1.5%, according to data compiled by Bloomberg.

Just Energy can’t finalize earnings for the calendar fourth quarter, which is its fiscal third quarter, while it reviews the impact of last week’s events, during which market prices for electricity soared to $9,000 a megawatt-hour for much of the week, the Mississauga, Ontario-based company said in a statement Monday.

Holger Klotz, a spokesperson for Pimco parent Allianz SE, declined to comment. “As a matter of principle we do not comment on single investments,” Klotz said in a message.

“We honestly haven’t looked at it,” Pattison said by phone, adding that it’s a small investment for his group.

Capital Injection

“The losses exceed current liquidity and will likely require a capital injection to get JE through this abnormal event,” CIBC analyst Mark Jarvi said in a note to investors.

Extreme gyrations in regional U.S. gas and electricity prices because of the cold weather in Texas have affected the finances of other companies as well. Atmos Energy Corp., one of the largest independent suppliers of gas in the U.S., revealed Friday that it’s looking to raise cash after committing to spend as much as $3.5 billion to secure fuel during the freeze.

Existing lenders and shareholders in Just Energy might provide financial help, but at a cost to equity value, Jarvi said in cutting his target price to C$1 from C$10. National Bank Financial’s Endri Leno also slashed his target, to C$1.75 from C$10, saying it was “impossible” to accurately incorporate the losses into forecasts.

Just Energy said the impact could change as more information becomes available. “Accordingly, the financial impact of the weather event on the company once known, could be materially adverse to the company’s liquidity and its ability to continue as a going concern.”

Recapitalization

Just Energy, a retail energy seller that specializes in electricity and natural gas, only recently emerged from a recapitalization plan and a board shakeup after concluding a strategic review to remain independent. The changes saw founder and longtime executive Rebecca MacDonald announce her retirement last July.

Amid high debt levels and looming maturities, the recapitalization plan included a new equity commitment of C$100 million ($79 million) and converting C$420 million of preferred shares and convertible debentures into new equity. The company said the move would reduce overall debt by about C$275 million.

Just Energy also replaced its chief executive officer in 2019, appointing Scott Gahn, who served on the Electric Reliability Council of Texas board from 2005 to 2008. Multiple U.S. power generators bid for the company, but no sale was completed.

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