Just Energy Income Fund
TSX : JE.UN

Just Energy Income Fund

February 11, 2010 10:25 ET

Just Energy Income Fund: Third Quarter Results for 3 Months and 9 Months Ended December 31, 2009

QUARTERLY OPERATING RESULTS IN LINE WITH GUIDANCE JUST ENERGY INCOME FUND TO CONVERT TO CORPORATION MAINTAINING CURRENT PAYOUT

TORONTO, ONTARIO--(Marketwire - Feb. 11, 2010) - Just Energy Income Fund (TSX:JE.UN) -

Highlights for the third quarter ended December 31, 2009 included:

- Record Operating Results

-- Sales (seasonally adjusted) - Up 7% per unit

-- Gross Margin (seasonally adjusted) - Up 17% per unit

-- Average margin per customer - Up 11%

-- Distributable Cash after Gross Margin Replacement - Up 2% per unit

-- Distributable Cash after Marketing Expense - Up 7% per unit

-- 37% of all new customer volumes choose our Just Green program

-- $0.20 Special Distribution

- Customer Additions

-- 137,000 gross customers added; 13,000 net customers

- Management Reaffirms Published Financial Guidance for F2010

-- Gross margin growth expected to exceed 5% to 10% target range per unit

-- Trending to lower end of 5% to 10% per unit target range for distributable cash growth

- Unitholders to Vote on Conversion to Corporation at Annual Meeting

-- Conversion targeted for the fourth quarter of calendar 2010

-- Initial annual dividend policy will be $1.24 ($0.1033 paid monthly), equal to current distribution

Just Energy Third Quarter Results

Just Energy is an Income Fund and it reports in the attached Management's Discussion and Analysis a detailed calculation of distributable cash both before and after marketing expenditures to expand the Fund's customer base.

Just Energy Income Fund announced its results for the three and nine months ended December 31, 2009.



----------------------------------------------------------------------------
Three months ended December 31, F2010 Per unit(2) F2009 Per unit
($ millions except per Unit)
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Sales(1) $654.7 $510.8
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Gross Margin(1) 121.7 87.6 .
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Distributable Cash(1)
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- After Gross Margin Replacement 69.5 $0.52 57.5 $0.51
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- After Marketing Expenses 61.2 $0.46 48.2 $0.43
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Net Income 97.4 $0.73 (49.1) $(0.44)
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Adjusted Net Income 44.2 $0.33 46.7 $0.42
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Regular Distributions 41.3 $0.31 34.9 $0.31
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Special Distribution 26.7 $0.20 18.6 $0.165
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Long Term Customers 2,280,000 1,775,000
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Nine months ended December 31, F2010 Per unit F2009 Per unit
($ millions except per Unit)
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Sales(1) $1,649.4 $1,298.6
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Gross Margin(1) 304.0 209.1
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Distributable Cash(1)
----------------------------------------------------------------------------
- After Gross Margin Replacement 164.0 $1.25 123.3 $1.11
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- After Marketing Expenses 138.7 $1.06 106.8 $0.96
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Net Income 310.7 $2.37 (938.9) $(8.52)
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Adjusted Net Income 59.1 $0.45 81.2 $0.73
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Regular Distribution 119.2 $0.91 103.2 $0.93
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Special Distribution 26.7 $0.20 18.6 $0.165
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Annual Distribution per unit $1.24 $1.24
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(1) Seasonally adjusted (Non GAAP measure)
(2) The per unit calculation reflects a fully diluted basis


For the third quarter of fiscal 2010 versus the comparable quarter of fiscal 2009, seasonally adjusted sales increased by 7% per unit, gross margin by 17% per unit, distributable cash after gross margin replacement increased by 2% per unit and distributable cash after all marketing expenses increased by 7% per unit. Adjusted net income (excluding non-cash mark to market on future supply positions) was $0.33 per unit, down 21% from $0.42 per unit a year prior.

The acquisition of Universal Energy resulted in substantial increases in operating results for the third quarter. The combination of the two companies resulted in a significant growth in customer base and a stronger sales force. In the second full quarter of joint operation, customer additions again exceeded previous record levels with 137,000 additions up 46% from a year prior, the second highest quarterly total in Just Energy's history.

Net customer additions were 13,000 reflecting continued high recession-related attrition in the United States.



Beginning Ending Ending
Sept 30, Failed Dec 31, Dec 31,
RCEs 2009 Additions Attrition To Renew 2009 2008
----------------------------------------------------------------------------
Natural Gas
Canada 791,000 14,000 (21,000) (25,000) 759,000 756,000
United
States 385,000 44,000 (35,000) (1,000) 393,000 238,000
----------------------------------------------------------------------------
Total gas 1,176,000 58,000 (56,000) (26,000) 1,152,000 994,000
----------------------------------------------------------------------------

Electricity
Canada 785,000 18,000 (24,000) (2,000) 777,000 581,000
United
States 306,000 61,000 (16,000) - 351,000 200,000
----------------------------------------------------------------------------
Total
electricity 1,091,000 79,000 (40,000) (2,000) 1,128,000 781,000
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Combined 2,267,000 137,000 (96,000) (28,000) 2,280,000 1,775,000
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While the customer base was up 28% year over year due both to the Universal acquisition and record new customer additions, gross margin was up 39%. This was due to an 11% increase in average margin per customer. Just Energy has been steadily adding new customers at higher margins over past quarters with increasing sales of Just Green (formerly "Green Energy Option") electricity and gas contributing to this growth. The improvement in gross margin is even greater, as a 14% year over year decline in the U.S. versus Canadian dollar reduced reported gross margins for the quarter.

Sales of Just Energy's innovative Just Green products remain strong. During the quarter, 43% of all customers signed contracted for Just Green supply taking on average 86% of their commodity needs from green sources. Accordingly, 37% of all new customer volumes choose green supply. Just Green is still a small proportion of the overall customer base with 5% of electricity customers and 3% of gas customers. However, Just Green electricity sales more than tripled year over year and Just Green gas sales were up six-fold.

Higher customer numbers and improved margins were offset by increased general and administrative costs for the quarter. Management anticipated general and administrative synergies of $10 million from the Universal acquisition. This target will be exceeded by the end of the fourth quarter. Not all of these savings were in place in the third quarter and there were substantial one-time expenses related to the Fund's conversion plan and other corporate development activities. In addition, general and administrative costs for the start-up phases of National Home Services' water heater sales and rental business and Terra Grain Fuels ethanol plant were not offset by revenues. Both businesses are expected to generate distributable cash in fiscal 2011.

Higher general and administrative costs combined with an increase in bad debt expense and taxes from Universal operations resulted in distributable cash after gross margin replacement of $69.5 million for the three months ended December 31, 2009, up 21% from last year and up 2% on a per unit basis. Management is confident that Universal is an accretive acquisition and that the growth will be clearly seen once the merger of operations is completed in the coming year.

The Fund has provided guidance that both gross margin and distributable cash after gross margin replacement would be up 5% to 10% per unit for fiscal 2010. After nine months, gross margin is up 23% per unit while distributable cash after margin replacement is up 13% per unit.

As was discussed in the last quarterly release, the fourth quarter should see a slowing of gross margin growth for several reasons. The U.S. dollar is likely to be down sharply year over year against the Canadian dollar reducing margins in U.S. markets. As well, there were 145,000 customers acquired from Universal who were not expected to renew their contracts because they were either in markets Just Energy does not currently intend to pursue, or had contract terms which made renewal unlikely. These customers generated margins of approximately $9.5 million per quarter and the majority of them will no longer be flowing in the fourth quarter. In the last quarter of fiscal 2009, the Fund benefitted from extremely cold weather and it is unlikely that the margin on weather related excess consumption will be repeated this year. With the impact of all of these factors, management expects gross margin growth of more than the 5% to 10% per unit guidance but less than 20% for fiscal 2010.

Distributable cash after gross margin replacement growth is expected to be negative on a per unit basis in the fourth quarter. Higher general and administrative costs will remain in place for another quarter and the company continues to pay tax in the United States and on Universal's Canadian operations while relatively little tax was paid in fiscal 2009. The result is currently expected to be distributable cash growth for fiscal 2010 at the lower end of the 5% to 10% per unit guidance range.

The Fund paid not only its regular monthly distribution of $0.1033 per month during the quarter but Canadian operating performance for calendar 2009 resulted in a Special Distribution of $0.20 over and above the base $1.24 annual payout.

Just Energy has announced its intention to reorganize its income trust structure into a high dividend paying corporation. Unitholders will be asked to approve, by way of a plan of arrangement, the reorganization at the Fund's annual and special meeting of Unitholders scheduled for June 29, 2010. Upon completion of the reorganization, Just Energy intends to pay monthly dividends equal to the $0.1033 distribution currently paid ($1.24 per year). It is expected that the reorganization will be completed in the fourth quarter of calendar 2010.

Executive Chair Rebecca MacDonald noted: "As we move toward life as a corporation following our reorganization this coming fall, I am very pleased with our progress in absorbing the Universal acquisition. The merger of the two operations is right on schedule and the $10 million per year in administrative synergy we expected to realize will be exceeded. We still have one-time costs coming through in Q4 as well as the final cleanup of their customer book. As I stated last quarter, fiscal 2011 will show the benefits of this acquisition."

"I am pleased that we have been able to grow our business sufficiently to allow us to maintain our current payout as dividend following conversion this fall. We are one of very few trusts to be able to maintain its payout and we have done so without having to resort to purchasing tax losses. I have always described Just Energy as a unique growth trust and this is another example of that description being borne out. Our $0.20 Special Distribution out of our Canadian profits is further evidence of our solid operating performance so far this year."

CEO Ken Hartwick stated: "This was a solid quarter in the face of continued challenges due to very weak economic conditions in many of our US markets. Our near record level of customer additions was overshadowed by continued high attrition in the US as customer non-payment of utility bills and shut offs remain at unprecedented levels. We continue to be optimistic that the eventual economic turnaround will result in even greater growth of our customer base. While customer additions in Canada remain slow, it is important to note that independent contractors redeployed into our National Home Services water heater business have generated the equivalent of 45,000 gas or electricity customers in the early stages of that business."

"I am particularly pleased with our success in marketing Just Green electricity and gas. This is an important product for a number of reasons. It builds a firmer relationship with our customers who have willingly paid a premium for their commodity to benefit the environment. It is a popular product with governments and regulators who view it as an innovative approach to aiding one of their key public policy objectives. Lastly, it has allowed us to increase our margins at a time when attrition and merger costs might otherwise curtail our growth. Just Energy has again proven to be a resilient engine of growth and income regardless of economic conditions. The fourth quarter of fiscal 2010 will see us continue to build a strong base for fiscal 2011 and beyond."

The Fund

Just Energy's business involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price and price-protected contracts. By fixing the price of natural gas or electricity under its fixed-price or price-protected program contracts for a period of up to five years, Just Energy's customers offset their exposure to changes in the price of these essential commodities. Just Energy, which commenced business in 1997, derives its margin or gross profit from the difference between the fixed price at which it is able to sell the commodities to its customers and the fixed price at which it purchases the associated volumes from its suppliers.

The Fund also offers "green" products through its Just Green program. The electricity Just Green product offers the customer the option of having all or a portion of his or her electricity sourced from renewable green sources such as wind, run of the river hydro or biomass. The gas Just Green product offers carbon offset credits which will allow the customer to reduce or eliminate the carbon footprint for their home or business. Management believes that these products will not only add to profits, but also increase sales receptivity and improve renewal rates.

In addition, through National Home Services, the Fund sells and rents high efficiency and tankless water heaters and produces and sells wheat-based ethanol through its subsidiary Terra Grain Fuels.

Non GAAP Measures

Adjusted net income (loss) represents the net income (loss) excluding the impact of mark-to-market gains (losses) arising from Canadian GAAP requirements for derivative financial instruments on our future supply positions. Just Energy ensures that customer margins are protected by entering into fixed-price supply contracts. In accordance with GAAP, the customer margins are not marked-to-market but there is a requirement to mark-to-market the future supply contracts. This creates unrealized gains (losses) depending upon current supply pricing volatility. Management believes that these short-term mark-to-market non-cash gains (losses) do not impact the long-term financial performance of the Fund.

Management also believes the best basis for analyzing both the Fund's operating results and the amount available for distribution is to focus on amounts actually received ("seasonally adjusted"). Seasonally adjusted analysis applies solely to the Canadian gas market (excluding Alberta and B.C.). Just Energy receives payment from the LDCs upon delivery of the commodity not when the customer actually consumes the gas. Seasonally adjusted analysis eliminates seasonal commodity consumption variances and recognizes amount available for distribution based on cash received from the LDCs.

Forward-Looking Statements

The Fund's press releases may contain forward-looking statements including statements pertaining to customer revenues and margins, customer additions and renewals, customer attrition, customer consumption levels, distributable cash and treatment under governmental regulatory regimes. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated. These risks include, but are not limited to, levels of customer natural gas and electricity consumption, rates of customer additions and renewals, rates of customer attrition, fluctuations in natural gas and electricity prices, changes in regulatory regimes and decisions by regulatory authorities, competition and dependence on certain suppliers. Additional information on these and other factors that could affect the Fund's operations, financial results or distribution levels are included in the Fund's annual information form and other reports on file with Canadian securities regulatory authorities which can be accessed through the SEDAR website at www.sedar.com or through the Fund's website at www.justenergy.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A") - February 10, 2010

Overview

The following discussion and analysis is a review of the financial condition and results of operations of Just Energy Income Fund ("Just Energy" or the "Fund") for the three and nine months ended December 31, 2009 and has been prepared with all information available up to and including February 10, 2010. This analysis should be read in conjunction with the unaudited interim consolidated financial statements for the three and nine months ended December 31, 2009, as well as the audited consolidated financial statements and related MD&A for the year ended March 31, 2009, contained in the Fund's 2009 Annual Report. The financial information contained herein has been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). All dollar amounts are expressed in Canadian dollars. Quarterly reports, the annual report and supplementary information can be found under "reports and filings" on our corporate website at www.justenergy.com. Additional information can be found on SEDAR at www.sedar.com.

Just Energy is an open-ended, limited-purpose trust established under the laws of the Province of Ontario to hold securities and to distribute the income of its directly or indirectly owned operating subsidiaries and affiliates: Just Energy Ontario L.P., Just Energy Manitoba L.P., Just Energy Quebec L.P., Just Energy (B.C.) Limited Partnership, Just Energy Alberta L.P. ("JE Alberta"), Alberta Energy Savings L.P. ("AESLP"), Just Energy Illinois Corp. ("JEIC"), Just Energy New York Corp. ("JENYC"), Just Energy Indiana Corp., Just Energy Texas L.P., Just Energy Exchange Corp. ("JEEC"), Universal Energy Corp., Universal Gas and Electric Corp., Commerce Energy, Inc. ("Commerce"), National Energy Corp. ("NEC") operating under the trade name of National Home Services ("NHS"), and Terra Grain Fuels Inc. ("TGF"), collectively, the "Just Energy Group".

Just Energy's business involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price and price-protected contracts. By fixing the price of natural gas or electricity under its fixed-price or price-protected program contracts for a period of up to five years, Just Energy's customers offset their exposure to changes in the price of these essential commodities. Just Energy, which commenced business in 1997, derives its margin or gross profit from the difference between the fixed price at which it is able to sell the commodities to its customers and the fixed price at which it purchases the associated volumes from its suppliers. In addition, through NHS, the Fund sells and rents high efficiency and tankless water heaters. TGF, an ethanol producer, operates an ethanol facility in Belle Plaine, Saskatchewan.

The Fund also offers green products through its Just Green program formerly known as the Green Energy Option or "GEO". The electricity Just Green product offers the customers the option of having all or a portion of their electricity sourced from renewable green sources such as wind, run of the river hydro or biomass. The gas Just Green product offers carbon offset credits, which will allow the customer to reduce or eliminate the carbon footprint of their homes or business. Management believes that these new products will not only add to profits but also increase sales receptivity and improve renewal rates.

Forward-looking information

This MD&A contains certain forward-looking information pertaining to customer additions and renewals, customer consumption levels, distributable cash and treatment under governmental regulatory regimes. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated. These risks include, but are not limited to, levels of customer natural gas and electricity consumption, rates of customer additions and renewals, fluctuations in natural gas and electricity prices, changes in regulatory regimes and decisions by regulatory authorities, competition and dependence on certain suppliers. Additional information on these and other factors that could affect the Fund's operations, financial results or distribution levels are included in the Fund's annual information form and other reports on file with Canadian security regulatory authorities, which can be accessed on our corporate website at www.justenergy.com or on SEDAR website at www.sedar.com.

Policy Change

Effective July 1, 2008, the Fund changed its practice from treating future supply hedging positions to hedges for accounting purposes. Accordingly, all mark to market adjustments for supply contracts are reflected in the consolidated statements of operations. In the view of management, the previous practice offered no greater clarity for the financial statement user and was very labour-intensive and costly to produce. The new accounting practice consolidates all the unrealized, non-cash changes in value of future supply into a single line on the consolidated statements of operations. The Fund's MD&A reports the adjusted net income excluding all non-cash mark to market adjustments for all supply-related derivative instruments and the related tax effect. The expected future net margin is set based on the derivative instruments and is effectively unchanged with commodity market movements. Given commodity volatility and the size of the Fund, the annual swings in mark to market on these positions can be in the hundreds of millions of dollars.

Just Energy believes that the result of this practice change and the associated MD&A disclosure is that actual period operating results will be more transparent for investors.

Key terms

"Attrition" means customers whose contracts were terminated primarily due to relocation or death, or cancelled by Just Energy due to delinquent accounts.

"Delivered volume" represents the actual volume of gas and electricity provided on behalf of customers to the LDCs for the period.

"Failed to renew" means customers who did not renew expiring contracts at the end of their term.

"Gross margin per RCE" represents the gross margin realized on Just Energy's customer base, including both low margin customers acquired through various acquisitions and gains/losses from sales of excess commodity supply.

"LDC" means a local distribution company, the natural gas or electricity distributor for a regulatory or governmentally defined geographic area.

"RCE" means residential customer equivalent or the "customer", which is a unit of measurement equivalent to a customer using, as regards natural gas, 2,815 m3 (or 106 GJs or 1,000 Therms or 1,025 CCFs) of natural gas on an annual basis and, as regards electricity, 10 MWh (or 10,000 kWh) of electricity on an annual basis, which represents the approximate amount of gas and electricity, respectively, used by a typical household in Ontario.

Non-GAAP financial measures

All non-GAAP financial measures do not have standardized meanings prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.

Seasonally adjusted sales and seasonally adjusted gross margin

Management believes the best basis for analyzing both the Fund's results and the amount available for distribution is to focus on amounts actually received ("seasonally adjusted") because this figure provides the margin earned on all deliveries to the utilities. Seasonally adjusted sales and gross margin are not defined performance measures under Canadian GAAP. Seasonally adjusted analysis applies solely to the gas markets and specifically to Ontario, Quebec, Manitoba and Michigan.

No seasonal adjustment is required for electricity as the supply is balanced daily. In the other gas markets, payments for supply by the LDCs are aligned with customer consumption.

Cash Available for Distribution

"Distributable cash after marketing expense" refers to the net cash available for distribution to Unitholders. Seasonally adjusted gross margin is the principal contributor to Cash Available for Distribution. Distributable cash is calculated by the Fund as seasonally adjusted gross margin, adjusted for cash items including general and administrative expenses, marketing expenses, bad debt expense, interest expense, corporate taxes, capital taxes and other items. This non-GAAP measure may not be comparable to other income funds.

"Distributable cash after gross margin replacement" represents the net cash available for distribution to Unitholders as defined above. However, only the marketing expenses associated with maintaining the Fund's gross margin at a stable level equal to that in place at the beginning of the period are deducted. Management believes that this is more representative of the ongoing operating performance of the Fund because it includes all expenditures necessary for the retention of existing customers and the addition of new margin to replace those of customers that have not been renewed. This non-GAAP measure may not be comparable to other income funds.

For reconciliation to cash from operating activities, please refer to the "Cash Available for Distribution and distributions" analysis on page 7.

Adjusted net income (loss)

"Adjusted net income (loss)" represents the net income (loss) excluding the impact of mark to market gains (losses) arising from derivative financial instruments on our future supply. Just Energy ensures that customer margins are protected by entering into fixed-price supply contracts. In accordance with GAAP, the associated customer contracts are not marked to market, but there is a requirement to mark to market the future supply contracts. This creates unrealized gains (losses) that are not offset by the related customer gains (losses).

Management believes that these short-term mark to market non-cash gains (losses) do not impact the long-term financial performance of the Fund. The related future supply has been sold under long-term customer contracts at fixed prices; therefore, the annual movement in the theoretical value of this future supply is not an appropriate measure of current or future operating performance.

Standardized Distributable Cash

Standardized Distributable Cash is a non-GAAP measure developed to provide a consistent and comparable measurement of distributable cash across entities and is defined as cash flows from operating activities, as reported in accordance with GAAP, less an adjustment for total capital expenditures as reported in accordance with GAAP and restrictions on distributions arising from compliance with financial covenants restrictive at the date of the calculation of Standardized Distributable Cash.

For reconciliation to cash from operating activities, please refer to the "Standardized Distributable Cash and Cash Available for Distribution" analysis on page 11.



Financial highlights
For the three months ended December 31
(thousands of dollars except where indicated and per unit amounts)

Fiscal 2010 Fiscal 2009
Per Per Unit Per
$ unit(5) Change(5) $ unit(5)

Sales 626,966 $4.68 2% 513,608 $4.57
Net income (loss)(1) 97,390 $0.73 NMF(6) (49,094) $(0.44)
Adjusted net income(2) 44,242 $0.33 (21)% 46,682 $0.42
Gross margin (seasonally
adjusted)(3) 121,722 $0.91 17% 87,554 $0.78
General and administrative 24,767 $0.18 38% 14,753 $0.13
Distributable cash
- After gross margin
replacement 69,455 $0.52 2% 57,475 $0.51
- After marketing expense 61,242 $0.46 7% 48,162 $0.43
Distributions (including
Special Distribution(7)) 68,017 $0.51 6% 53,434 $0.48
Distributions (excluding
Special Distribution) 41,321 $0.31 - 34,860 $0.31
Distributable cash payout
ratio(7) (including
Special Distribution)
- After gross margin
replacement 98% 93%
- After marketing expense 111% 111%
Distributable cash payout
ratio(4) (excluding
Special Distribution)
- After gross margin
replacement 60% 61%
- After marketing expense 67% 72%



For the nine months ended December 31
(thousands of dollars except where indicated and per unit amounts)

Fiscal 2010 Fiscal 2009
Per Per Unit Per
$ unit(5) Change(5) $ unit(5)

Sales 1,460,635 $11.13 5% 1,185,640 $10.65
Net income (loss)(1) 310,707 $2.37 NMF(6) (938,852) $(8.52)
Adjusted net income(2) 59,112 $0.61 (16)% 81,185 $0.73
Gross margin (seasonally
adjusted)(3) 304,010 $2.32 23% 209,050 $1.88
General and administrative 66,018 $0.50 35% 41,436 $0.37
Distributable cash
- After gross margin
replacement 163,977 $1.25 13% 123,276 $1.11
- After marketing expense 138,674 $1.06 10% 106,838 $0.96
Distributions (including
Special Distribution(7)) 145,870 $1.11 2% 121,724 $1.09
Distributions (excluding
Special Distribution) 119,174 $0.91 (2)% 103,150 $0.93
Distributable cash payout
ratio(7) (including
Special Distribution)
- After gross margin
replacement 89% 99%
- After marketing expense 105% 114%
Distributable cash payout
ratio(4) (excluding
Special Distribution)
- After gross margin
replacement 73% 84%
- After marketing expense 86% 97%



(1) Net income (loss) includes the impact of unrealized gains (losses),
which represent the mark to market of future commodity supply acquired
to cover future customer demand. The supply has been sold to customers
at fixed prices minimizing any impact of quarter-end mark to market
gains and losses.
(2) Adjusted net income is a more appropriate measure of the performance of
the Fund since the underlying supply is held to its maturity, and
therefore, mark to market gains and losses do not impact the long-term
financial performance of the Fund.
(3) See discussion of non-GAAP financial measures on page 2.
(4) Management targets an annual payout ratio after all marketing expenses,
excluding any Special Distribution, of less than 100%.
(5) The per unit calculation reflects a fully diluted basis. Year over year
change is calculated on a per unit basis.
(6) Not a meaningful number.
(7) In calendar 2009 and 2008, the Fund under-distributed its taxable income
and the Board of Directors concluded that a Special Distribution would
be paid to ensure that all taxable income would be distributed. Refer to
"Special Distribution" on page 23 for further information.



Reconciliation of For the three For the three For the nine For the nine
net income (loss) months ended months ended months ended months ended
to adjusted net December 31, December 31, December 31, December 31,
income Fiscal 2010 Fiscal 2009 Fiscal 2010 Fiscal 2009
(thousands of ----------- ----------- ----------- -----------
dollars)

Net income (loss) $97,390 $(49,094) $310,707 $(938,852)
Change in fair
value of
derivative
instruments (50,853) 81,345 (277,248) 1,092,859
Tax impact on
change in fair
value of
derivative
instruments (2,295) 14,431 25,653 (72,822)
-------------------------------------------------------
Adjusted net
income $44,242 $46,682 $59,112 $81,185
-------------------------------------------------------


Acquisition of Universal Energy Group

On July 1, 2009, Just Energy completed the acquisition of all of the outstanding common shares of Universal Energy Group Ltd. ("UEG" or "Universal") pursuant to a plan of arrangement (the "Arrangement"). Under the Arrangement, UEG shareholders received 0.58 of an exchangeable share ("Exchangeable Share") of JEEC, a subsidiary of Just Energy, for each UEG common share held. In aggregate, 21,271,804 Exchangeable Shares were issued pursuant to the Arrangement. Each Exchangeable Share is exchangeable for a trust unit on a one-for-one basis at any time at the option of the holder and entitles the holder to a monthly dividend equal to 66 2/3% of the monthly distribution and /or Special Distribution paid by Just Energy on a Trust unit. JEEC also assumed all the covenants and obligations of UEG in respect of the UEG's outstanding 6% convertible unsecured subordinated debentures (the "Debentures"). On conversion of the Debentures, holders will be entitled to receive 0.58 of an Exchangeable Share in lieu of each UEG common share that the holder was previously entitled to receive on conversion.

The acquisition of UEG was accounted for using the purchase method of accounting. The Fund allocated the purchase price to the identified assets and liabilities acquired based on their fair values at the time of acquisition as follows (thousands of dollars):



Net assets acquired:
Working capital (including cash of $10,319) $ 75,391
Electricity contracts and customer relationships 230,963
Gas contracts and customer relationships 247,189
Water heater contracts and customer relationships 22,700
Other intangible assets 2,721
Goodwill 59,294
Property, plant and equipment 171,918
Future tax liabilities (51,971)
Other liabilities - current (164,148)
Other liabilities - long-term (140,857)
Long-term debt (180,440)
Non-controlling interest (22,697)
-----------
$ 250,063
-----------
-----------

Consideration:
Transaction costs $ 10,117
Exchangeable shares 239,946
-----------
$ 250,063
-----------
-----------


All contracts, customer relationships and intangible assets are amortized over the average remaining life at the time of acquisition. The gas and electricity contracts acquired are amortized over periods ranging from eight to 57 months. The water heater contracts and customer relationships are amortized over 174 months and the intangible assets are amortized over six months. The purchase price allocation is considered preliminary and as a result may be adjusted during the year.

Operations

Gas

In each of the markets that Just Energy operates, it is required to deliver gas to the LDCs for its customers throughout the year. Gas customers are charged a fixed price for the full term of their contract. Just Energy purchases gas supply in advance of marketing for residential customers and generally concurrently with the execution of a contract for commercial customers. The LDC provides historical customer usage to enable Just Energy to purchase an approximation of estimated supply. Furthermore, in many markets, Just Energy mitigates exposure to customer usage by purchasing options that cover potential differences in customer consumption due to weather variations. The cost of this strategy is incorporated in the price to the customer. To the extent that balancing requirements are outside the options purchased, Just Energy bears the financial responsibility for fluctuations in customer usage. Volume variances may result in either excess or short supply. Excess supply is sold in the spot market resulting in either a gain or loss compared to the weighted average cost of supply. In the case of greater than expected gas consumption, Just Energy must purchase the short supply at the market price, which may reduce or increase the customer gross margin typically realized. Under some commercial contract terms, this balancing may be passed through to the customer.

Ontario, Quebec, British Columbia and Michigan

In Ontario, Quebec, British Columbia and Michigan, the volumes delivered for a customer typically remain constant throughout the year. Just Energy does not recognize sales until the customer actually consumes the gas. During the winter months, gas is consumed at a rate which is greater than delivery, and in the summer months, deliveries to LDCs exceed customer consumption. Just Energy receives cash from the LDCs as the gas is delivered, which is even throughout the year.

Manitoba and Alberta

In Manitoba and Alberta, the volume of gas delivered is based on the estimated consumption for each month. Therefore, the amount of gas delivered in winter months is higher than in the spring and summer months. Consequently, cash received from customers and LDCs will be higher in the winter months.

New York, Illinois, Indiana, Ohio and California

In New York, Illinois, Indiana, Ohio and California, the volume of gas delivered is based on the estimated consumption and storage requirements for each month. Therefore the amount of gas delivered in winter months is higher than in the spring and summer months. Consequently, cash flow received from these states' is greatest during the third and fourth (winter) quarters, as normally, cash is received from the LDCs in the same period as customer consumption.

Electricity

Ontario, Alberta, New York, Texas, Pennsylvania, New Jersey, Maryland, Michigan and California

Just Energy does not bear the risk for variations in residential customer consumption in any of the electricity markets in which it operates other than for certain customers in Texas and Alberta and the customers acquired in the Universal acquisition (customers located in Pennsylvania, New Jersey, Maryland, Michigan and California). In Ontario and New York, Just Energy provides customers with price protection for the majority of their electricity requirements. The customers experience either a small balancing charge or credit on each bill due to fluctuations in prices applicable to their volume requirements not covered by a fixed price. To the extent possible given the competitive nature and market knowledge of customers, future offerings for Texas customers will be a load balanced product and Just Energy will not bear the risk for variations in customer consumption.

Cash flow from electricity operations is greatest during the second and fourth quarters (summer and winter), as electricity consumption is typically highest during these periods.

Water heaters

NEC began operations in April 2008 and operates under the trade name of National Home Services ("NHS"). Newten Home Comfort L.P. ("NHCLP") a partnership between Just Energy and Newten Home Comfort Inc., an arm's length third party holding 20% of the partnership commenced providing Ontario residential customers with a long term water heater rental program in the summer of 2008, offering high efficiency conventional and power vented tanks and tankless water heaters. On July 2, 2009, NEC, a wholly owned home services subsidiary of UEG, acquired Newten Home Comfort Inc. Accordingly, NHCLP became a wholly owned subsidiary of Just Energy. On September 30, 2009, NEC acquired substantially all of the assets of NHCLP, including all of NHCLP's customer water heater rental agreements. NHCLP and Newten Home Comfort Inc. were subsequently wound up. See page 20 for additional information on NEC.

Ethanol division

Just Energy also owns a 66.7% interest in TGF, a 150-million-litre capacity wheat-based ethanol plant located in Belle Plaine, Saskatchewan. The plant produces ethanol and high protein distillers dried grain ("DDG") from the wheat supply. See page 21 for additional information on TGF.



Cash Available for Distribution and distributions
For the three months ended December 31
(thousands of dollars except per unit amounts)

Fiscal 2010 Fiscal 2009
----------- -----------
Per unit Per unit
-------- --------
Reconciliation to statements of
cash flow
Cash inflow from operations $4,418 $15,962

Add:
Increase in non-cash working capital 55,938 31,297
Tax impact on distributions to
Class A preference shareholders 886 903
----------- --------
Cash available for distribution $61,242 $48,162
----------- --------

Cash available for distribution
Gross margin per financial statements $111,947 $0.83 $89,826 $0.80
Adjustments required to reflect net
cash receipts from gas sales 9,775 (2,272)
----------- --------
Seasonally adjusted gross margin $121,722 $0.91 $87,554 $0.78
----------- --------

Less:
General and administrative (24,767) (14,753)
Capital tax recovery (expense) (209) (198)
Bad debt expense (5,130) (4,224)
Income tax provision (2,269) (1,896)
Interest expense (5,143) (1,121)
Other items 3,584 1,579
----------- --------
(33,934) (20,613)
----------- --------

Distributable cash before marketing
expenses 87,788 $0.65 66,941 $0.60

Marketing expenses to maintain gross
margin (18,333) (9,466)
----------- --------
Distributable cash after gross margin
replacement 69,455 $0.52 57,475 $0.51

Marketing expenses to add new gross
margin (8,213) (9,313)
----------- --------
Cash available for distribution $61,242 $0.46 $48,162 $0.43
----------- --------
----------- --------

Distributions (includes Special
Distribution)
Unitholder distributions $64,580 $50,426
Class A preference share distributions 2,685 2,500
Unit appreciation rights and deferred
unit grant distributions 752 508
----------- --------
Total distributions $68,017 $0.51 $53,434 $0.48
----------- --------
----------- --------
Distributions (excludes Special
Distribution)
Unitholder distributions $39,233 $32,899
Class A preference share distributions 1,632 1,631
Unit appreciation rights and deferred
unit grant distributions 456 330
----------- --------
Total distributions $41,321 $0.31 $34,860 $0.31
----------- --------
----------- --------

Diluted average number of units
outstanding 134.1m 112.4m




Cash Available for Distribution and distributions
For the nine months ended December 31
(thousands of dollars except per unit amounts)


Fiscal 2010 Fiscal 2009
----------- -----------
Per unit Per unit
-------- --------
Reconciliation to statements of
cash flow
Cash inflow from operations $66,920 $78,967
Add:
Decrease in non-cash working capital 69,791 25,694
Tax impact on distributions to
Class A preference shareholders 1,963 2,177
----------- --------
Cash available for distribution $138,674 $106,838
----------- --------
----------- --------

Cash available for distribution
Gross margin per financial statements $259,518 $1.98 $189,173 $1.70
Adjustments required to reflect net
cash receipts from gas sales 44,492 19,877
----------- --------
Seasonally adjusted gross margin $304,010 $2.32 $209,050 $1.88
----------- --------

Less:
General and administrative (66,018) (41,436)
Capital tax expense (337) (198)
Bad debt expense (12,815) (7,749)
Income tax provision (8,335) (2,654)
Interest expense (10,569) (2,977)
Other items 5,776 2,421
----------- --------
(92,298) (52,593)
----------- --------

Distributable cash before marketing
expenses 211,712 $1.61 156,457 $1.41
Marketing expenses to maintain gross
margin (47,735) (33,181)
----------- --------

Distributable cash after gross margin
replacement 163,977 $1.25 123,276 $1.11
Marketing expenses to add new gross
margin (25,303) (16,438)
----------- --------

Cash available for distribution $138,674 $1.06 $106,838 $0.96
----------- --------
----------- --------

Distributions (includes Special
Distribution)
Unitholder distributions $138,275 $114,526
Class A preference share distributions 5,948 6,028
Unit appreciation rights and deferred
unit grant distributions 1,647 1,170
----------- --------
Total distributions $145,870 $1.11 $121,724 $1.09
----------- --------
----------- --------
Distributions (excludes Special
Distribution)
Unitholder distributions $112,928 $96,999
Class A preference share distributions 4,895 5,159
Unit appreciation rights and deferred
unit grant distributions 1,351 992
----------- --------
Total distributions $119,174 $0.91 $103,150 $0.93
----------- --------
----------- --------

Diluted average number of units
outstanding 131.2m 111.3m


Distributable cash

Distributable cash after gross margin replacement for the current quarter ended December 31, 2009 was $69.5 million ($0.52 per unit), up 21% from $57.5 million ($0.51 per unit) in fiscal 2009. The growth reflects a 39% increase in seasonally adjusted gross margin. Factors contributing to margin growth include a 28% year over year increase in total customers, of which 24% related to the 430,000 acquired customers from Universal. The new Universal customers, higher margin per customer due to opportunistic pricing and continued strong acceptance of the Just Green product as well as improved supply management, particularly in Texas, resulted in increased distributable cash, offsetting a significant decline in the U.S. dollar. On a per unit basis (reflecting the units issued to acquire Universal), distributable cash after gross margin replacement was up 2% and gross margin increased by 17% reflecting higher gross margin per customer, offset by an anticipated drop off in margin from customers acquired from Universal that were not expected to renew. The largest factor in the disparity between distributable cash and gross margin growth was an increase in general and administrative costs versus the comparable quarter of fiscal 2009.

General and administrative costs were up 68% over the prior year comparable quarter. This was primarily due to the administrative costs incurred at NHS and TGF as well as the addition of a portion of Universal's energy marketing administrative costs. Overall, energy marketing related general and administrative costs were up 44% in the third quarter of fiscal 2010 versus the same period last year versus a 28% increase in total customers. Just Energy currently has general and administrative cost level that does not yet reflect the full synergies that will be realized in the Universal acquisition. Management has estimated that these savings would be $10 million per year and the current expectation is that the savings will be greater than this. The benefit will be reflected in lower general and administrative cost growth in future years.

The higher increase in general and administrative costs was largely due to staffing costs to support future growth, increased collection costs and professional fee expenditures on the Fund's conversion plan, International Financial Reporting Standards ("IFRS") and other corporate development activities. Both NHS and TGF are in the start-up phase and management is confident that they will offset their start-up costs with distributable cash in future periods. Bad debt expense increased in the third quarter of fiscal 2010 compared to 2009, primarily due to the increased volumes in those markets where the Fund bears the credit risk as well as continued weak economic conditions in the U.S. markets. In order to ensure bad debt is managed during the upcoming heavy heating season aggressive customer cut offs were done prior to the season increasing attrition but lessening the impact of bad debt in future quarters.

Just Energy spent $18.3 million in marketing expenses to maintain its current level of gross margin, which represents 69% of the total marketing expense for the quarter. A further $8.2 million was spent to increase future gross margin resulting in the 13,000 net RCE additions and higher margins per new customer for the quarter. Management's estimate of the future contracted gross margin decreased to $1,139.4 million from $1,213.8 million at the end of the second quarter of fiscal 2010 due to a small decline in the Canadian customer base and a less than proportional growth in future U.S. margins due to a lower U.S. dollar spot price on which all future U.S. margins are valued. As at December 31, 2009, the Canadian future contracted gross margin is $749.9 million and the U.S. margin is US$376.9 million.

Distributable cash after all marketing expenses amounted to $61.2 million ($0.46 per unit) for the third quarter of fiscal 2010, an increase of 7% per unit from $48.2 million ($0.43 per unit) in the prior year comparable quarter. The increase is due to accretion from the Universal purchase and net customer additions offset by increased expenditures noted above. Excluding the Special Distribution, the payout ratio after deduction of all marketing expenses for the current quarter was 67% versus 72% in fiscal 2009.

Distributable cash after gross margin replacement for the nine months ended December 31, 2009 was $164.0 million ($1.25 per unit), an increase of 13% per unit from $123.3 million ($1.11 per unit) in the prior year comparable period. Distributable cash after marketing expenses was $138.7 million ($1.06 per unit) for the first nine months of fiscal 2010, an increase of 10% per unit from $106.8 million ($0.96 per unit) for the same period last year. The payout ratio after all marketing expenses excluding the Special Distribution for the nine-month period of fiscal 2010 was 86% versus 97% for the nine months ended December 31, 2009. As Just Energy has grown, its distribution rate has been maintained at $1.24 per year in anticipation of the need to convert to a corporation prior to 2011 (see "Outlook" on page 31). The result has been a declining payout ratio excluding Special Distributions.

For further information on the changes in the gross margin, please refer to "Sales and gross margin - Seasonally adjusted" on page 15 and "General and administrative expenses", "Marketing expenses", "Bad debt expense" and "Interest expense" are further clarified on pages 21 and 22.

Adjusted net income

Adjusted net income was $44.2 million for the quarter ($0.33 per unit) down from adjusted net income of $46.7 million ($0.42 per unit) in the third quarter of fiscal 2009. Positive results from the energy marketing portion of the business were partially offset by losses from NHS and TGF as both businesses are in start-up phases. For the nine months ended December 31, 2009, adjusted net income was $59.1 million ($0.45 per unit) as compared to $81.2 million or $0.73 per unit in the same period last year. Adjusted net income was negatively impacted by the amortization of the Universal acquired customer contracts and the increased general and administrative costs incurred for Universal, which will be reduced as Just Energy works towards consolidating various processes. Synergies from the consolidation are expected to exceed management's expectations.



Discussion of Distributions
(thousands of dollars)

For the three For the three For the nine For the nine
months ended months ended months ended months ended
December 31, December 31, December 31, December 31,
Fiscal 2010 Fiscal 2009 Fiscal 2010 Fiscal 2009
-------------- -------------- ------------- -------------
Cash flow from
operations(1)(A) $4,418 $15,962 $66,920 $78,967

Net income (loss)(B) $97,390 $(49,094) $310,707 $(938,852)

Total
distributions(2)(C) $68,017 $53,434 $145,870 $121,724

Shortfall of cash
flows from
operating
activities over
distributions paid
(A-C) $(63,599) $(37,472) $(78,950) $(42,757)

Excess (shortfall)
of net income
(loss) over
distributions paid
(B-C) $29,373 $(102,528) $164,837 $(1,060,576)

(1) Includes non-cash working capital balances
(2) Includes a one-time Special Distribution of $26,696 in fiscal 2010 and
$18,574 in fiscal 2009.


Net income (loss) includes non-cash gains and losses associated with the changes in the current market value of Just Energy's derivative instruments. These instruments form part of the Fund's requirement to purchase commodity according to estimated demand and, as such, changes in value do not impact the distribution policy or the long-term financial performance of the Fund. Effective July 1, 2008, Just Energy elected to discontinue the practice of hedge accounting and all gains and losses on derivative instruments have been recorded in the change in fair value of derivative instruments.

The change in fair value associated with these derivatives included in the net income for the third quarter of fiscal 2010 was a gain of $50.9 million versus a loss of $81.3 million for the quarter ended December 31, 2008.

The Fund has, in the past, paid out distributions that were higher than both financial statement net income and operating cash flow. In the view of management, the non-GAAP measure, distributable cash, is an appropriate measure of the Fund's ability to distribute funds, as the cost of carrying incremental working capital necessary for the growth of the business has been deducted in the distributable cash calculation. Further, investment in the addition of new customers intended to increase cash flow is expensed in the financial statements while the original customer base was capitalized. NEC has reached a new agreement with Home Trust Company to separately finance their water heaters. See the "Outlook" section on page 31 for further discussion on this financing. In addition, the capital expenditures for TGF are funded through their credit facility and debt instruments. Management believes that the current level of distributions is sustainable in the foreseeable future.

The timing differences between distributions and cash flow from operations created by the cost of carrying incremental working capital due to business seasonality and expansion are funded by the operating credit facility.



Standardized Distributable Cash and Cash Available for Distribution
(thousands of dollars except per unit amounts)


For the three months For the nine months
ended December 31, ended December 31,
Fiscal 2010 Fiscal 2009 Fiscal 2010 Fiscal 2009
----------- ----------- ----------- -----------
Reconciliation to
statements of cash
flow
Cash inflow from
operations $4,418 $15,962 $66,920 $78,967
Capital expenditures(1) (11,034) (1,667) (30,917) (2,993)
---------------------------------------------------
Standardized
Distributable Cash $(6,616) $14,295 $36,003 $75,974
---------------------------------------------------

Adjustments to
Standardized
Distributable Cash

Change in non-cash
working capital(2) $55,938 $31,297 $69,791 $25,694

Tax impact on
distributions to
Class A preference
shareholders(3) 886 903 1,963 2,177

Capital expenditures(1) 11,034 1,667 30,917 2,993
---------------------------------------------------

Cash available for
distribution $61,242 $48,162 $138,674 $106,838
---------------------------------------------------

Standardized
Distributable Cash -
per unit basic (0.05) 0.13 0.28 0.69
Standardized
Distributable Cash -
per unit diluted (0.05) 0.13 0.27 0.68
Payout Ratio based
on Standardized
Distributable Cash
(includes Special
Distribution(4)) NMF(5) 374% 405% 160%
Payout Ratio based on
Standardized
Distributable Cash
(excludes Special
Distribution) NMF(5) 244% 331% 136%

(1) Capital expenditures incurred in the quarter were effectively funded out
of the credit facility. The vast majority of capital expenditures in the
current quarter related to the purchase of water heaters for subsequent
rental. These expenditures expand the productive capacity of the
business. In future periods, water heater capital purchases will be
financed through a separate financing secured by the water heaters and
associated contracts.
(2) Change in non-cash working capital is excluded from the calculation of
Cash Available for Distribution as the Fund has a $250.0 million credit
facility which is available for use to fund working capital
requirements. This eliminates the potential impact of timing distortions
relating to the respective items.
(3) Payments to the holders of Class A preference shares are equivalent to
distributions. The number of Class A preference shares outstanding is
included in the denominator of any per unit calculation.
(4) The Special Distribution relating to calendar 2009 and 2008 has
increased the payout ratios for both comparable periods. Refer to
"Special Distribution" on page 23 for further details.
(5) Not a meaningful number


In accordance with the Canadian Institute of Chartered Accountants ("CICA") July 2007 interpretive release, Standardized Distributable Cash in Income Trusts and other Flow-Through Entities, the Fund has presented the distributable cash calculation to conform to this guidance. In summary, for the purposes of the Fund, Standardized Distributable Cash is defined as the periodic cash flows from operating activities, including the effects of changes in non-cash working capital less total capital expenditures as reported in the GAAP financial statements.

Financing Strategy

The Fund's $250.0 million credit facility will be sufficient to meet the Fund's short-term working capital and capital expenditure requirements for the gas and electricity business. As part of the acquisition of Universal, additional credit facilities and debt were recorded and are explained further on page 27. Working capital requirements can vary widely due to seasonal fluctuations and planned U.S.-related growth. In the long-term, the Fund may be required to access the equity or debt markets in order to fund significant acquisitions. NEC has reached a new agreement with Home Trust Company to separately finance their water heaters. See the "Outlook" section on page 31 for further discussion on this financing.

Productive Capacity

Just Energy's business involves the sale of natural gas and/or electricity to residential and commercial customers under long-term, fixed-price contracts. As such, the Fund's productive capacity is determined by the gross margin earned from the contract price and the related supply cost.

The productive capacity of Just Energy is achieved through the retention of existing customers and the addition of new customers to replace those that have not been renewed. The productive capacity is maintained and grows through independent contractors, call centre renewal efforts, Internet marketing and various mail campaigns.

Effectively all of the marketing costs related to customer contracts are expensed immediately but fall into two categories. The first represents marketing expenses to maintain gross margin at pre-existing levels and by definition maintain productive capacity. The second category is marketing expenditures to add new margin, which therefore expands productive capacity. As noted above, capital expenditures by the Fund are utilized to expand the productive capacity of the business.

The vast majority of capital expenditures incurred by Just Energy relate to the purchase of water heaters, which are subsequently rented on a long-term basis under customer contracts. These capital expenditures are funded by non-recourse borrowings that have as security the water heaters and contracts. As such, these capital expenditures increase the productive capacity of the Fund.



Summary of quarterly results
(thousands of dollars except
per unit amounts) F2010 F2010 F2010 F2009
Q3 Q2 Q1 Q4
-- -- -- --
Sales per financial statements $626,966 $434,659 $399,010 $713,573
Gross margin (seasonally adjusted) 121,722 107,519 74,769 106,143
General and administrative expense 24,767 25,634 15,617 18,150
Net income (loss) 97,390 110,690 102,627 (168,621)
Net income (loss) per unit - basic 0.73 0.83 0.92 (1.57)
Net income (loss) per unit - diluted 0.73 0.82 0.91 (1.57)
Adjusted net income (loss) 44,242 (9,682) 24,552 88,744
Adjusted net income per unit - basic 0.33 (0.07) 0.22 0.81
Adjusted net income per unit -
diluted 0.33 (0.07) 0.22 0.79
Amount available for distribution
After gross margin replacement 69,455 52,303 42,219 72,244
After marketing expense 61,242 41,345 36,087 62,515
Payout ratio
After gross margin replacement 98%(1) 82% 83% 48%
After marketing expense 111%(1) 104% 97% 56%

(1) Includes the Special Distribution related to calendar 2009. If the
Special Distribution figure of $26,696 is removed, the payout ratios
would be 60% after gross margin replacement and 67% after marketing
expense.



F2009 F2009 F2009 F2008
Q3 Q2 Q1 Q4
-- -- -- --
Sales per financial statements $513,608 $294,122 $377,910 $652,617
Gross margin (seasonally adjusted) 87,554 61,793 59,703 87,960
General and administrative expense 14,753 13,236 13,447 17,138
Net income (loss) (49,094) (923,990) 34,232 94,025
Net income (loss) per unit - basic (0.44) (8.33) 0.31 0.87
Net income (loss) per unit - diluted (0.44) (8.33) 0.31 0.87
Adjusted net income 46,682 6,872 27,631 87,663
Adjusted net income per unit - basic 0.42 0.06 0.25 0.81
Adjusted net income per unit -
diluted 0.42 0.06 0.25 0.80
Amount available for distribution
After gross margin/customer
replacement 57,475 34,755 31,046 54,334
After marketing expense 48,162 28,394 30,282 53,992
Payout ratio
After gross margin/customer
replacement 93%(1) 100% 108% 61%
After marketing expense 111%(1) 122% 111% 61%

(1) Includes the Special Distribution related to calendar 2008. If the
Special Distribution figure of $18,573 is removed, the payout ratios
would be 61% after gross margin replacement and 72% after marketing
expense.


The Fund's results reflect seasonality as consumption is greatest during the third and fourth quarters (winter quarters). While year over year quarterly comparisons are relevant, sequential quarters will vary materially. The main impact of this will be higher distributable cash with a lower payout ratio in the third and fourth quarters and lower distributable cash with a higher payout ratio in the first and second quarters excluding any Special Distribution.

Analysis of the third quarter

Sales are typically higher in the third quarter because gas and electricity consumption is highest during this period. The overall customer base is currently 51% gas and 49% electricity. The 22% increase in sales compared to the prior comparable quarter is primarily attributable to the acquisition of Universal and strong U.S. growth in our existing markets. The adjusted net income was $44.2 million for the three months ended December 31, 2009. Increased adjusted net income was attributable to margin growth offset by amortization recorded on the acquired Universal contracts in the quarter.

The distributable cash after customer gross margin replacement was $69.5 million up 21% from $57.5 million in the prior comparable quarter. The increase in gross margin was due to the margin earned on the acquired customers from Universal, net customer additions through marketing and higher per customer margins.

Distributable cash after marketing expenses was $61.2 million, an increase of 27% from $48.2 million in the prior comparable quarter. Distributions, including the Special Distribution, for the quarter were $68.0 million, up 27% over the same period last year reflecting a 6% per unit increase quarter over quarter. The payout ratio after all marketing expenses was 111% unchanged from the third quarter of fiscal 2009.



Gas and Electricity Marketing
Financial Statement Analysis

Sales and gross margin - Per financial statements
For the three months ended December 31
(thousands of dollars)

Fiscal 2010 Fiscal 2009
----------- -----------

United United
Sales Canada States Total Canada States Total
-----

Gas $207,499 $134,251 $341,750 $212,875 $112,563 $325,438
Electricity 171,896 91,263 263,159 130,227 57,943 188,170
---------------------------------------------------------------------
$379,395 $225,514 $604,909 $343,102 $170,506 $513,608
---------------------------------------------------------------------
Increase 11% 32% 18%

United United
Gross Margin Canada States Total Canada States Total
------------

Gas $32,165 $25,478 $57,643 $35,775 $25,190 $60,965
Electricity 29,265 21,090 50,355 20,354 8,507 28,861
---------------------------------------------------------------------
$61,430 $46,568 $107,998 $56,129 $33,697 $89,826
---------------------------------------------------------------------
Increase 9% 38% 20%



For the nine months ended December 31
(thousands of dollars)

Fiscal 2010 Fiscal 2009
----------- -----------

United United
Sales Canada States Total Canada States Total
-----

Gas $448,832 $222,409 $671,241 $459,420 $175,873 $635,293
Electricity 469,844 278,570 748,414 389,246 161,101 550,347
-------------------------------------------------------------------------
$918,676 $500,979 $1,419,655 $848,666 $336,974 $1,185,640
-------------------------------------------------------------------------
Increase 8% 49% 20%

United United
Gross Margin Canada States Total Canada States Total
------------

Gas $61,375 $44,967 $106,342 $80,740 $34,344 $115,084
Electricity 80,645 64,401 145,046 59,574 14,515 74,089
-------------------------------------------------------------------------
$142,020 $109,368 $251,388 $140,314 $48,859 $189,173
-------------------------------------------------------------------------
Increase 1% 124% 33%


Canada

Sales and gross margin for the three months ended December 31, 2009, were $379.4 million and $61.4 million, an increase of 11% and 9%, respectively, from the prior year comparative period. Total sales and gross margin for the nine month period of fiscal 2010 were $918.7 million and $142.0 million, respectively.

United States

Sales and gross margin in the U.S. were $225.5 million and $46.6 million for the third quarter, an increase of 32% and 38%, respectively, from the same period last year. Total sales and gross margin for the nine months ended December 31, 2009 were $501.0 million and $109.4 million, respectively.

For additional information, see "Sales and gross margin - Seasonally adjusted" below.



Sales and gross margin - Seasonally adjusted(1)
For the three months ended December 31
(thousands of dollars)

Fiscal 2010 Fiscal 2009
----------- -----------

United United
Sales Canada States Total Canada States Total
-----

Gas $207,499 $134,251 $341,750 $212,875 $112,563 $325,438
Adjustments(1) 23,743 3,977 27,720 (2,807) - (2,807)
------------------------------------------------------------------------
$231,242 $138,228 $369,470 $210,068 $112,563 $322,631
Electricity 171,896 91,263 263,159 130,227 57,943 188,170
------------------------------------------------------------------------
$403,138 $229,491 $632,629 $340,295 $170,506 $510,801
------------------------------------------------------------------------
Increase 18% 35% 24%

United United
Gross Margin Canada States Total Canada States Total
------------

Gas $32,165 $25,478 $57,643 $35,775 $25,190 $60,965
Adjustments(1) 9,350 425 9,775 (2,272) - (2,272)
------------------------------------------------------------------------
$41,515 $25,903 $67,418 $33,503 $25,190 $58,693
Electricity 29,265 21,090 50,355 20,354 8,507 28,861
------------------------------------------------------------------------
$70,780 $ 46,993 $117,773 $53,857 $33,697 $87,554
------------------------------------------------------------------------
Increase 31% 39% 35%

(1) For Ontario, Manitoba, Quebec and Michigan gas markets.

Sales and gross margin - Seasonally adjusted(1)
For the nine months ended December 31
(thousands of dollars)

Fiscal 2010 Fiscal 2009
----------- -----------

United United
Sales Canada States Total Canada States Total
-----

Gas $448,832 $222,409 $671,241 $459,420 $175,873 $635,293
Adjustments(1) 160,985 27,764 188,749 113,145 - 113,145
----------------------------------------------------------------------------
$609,817 $250,173 $859,990 $572,565 $175,873 $748,438
Electricity 469,844 278,570 748,414 389,246 161,101 550,347
----------------------------------------------------------------------------
$1,079,661 $528,743 $1,608,404 $961,811 $336,974 $1,298,785
----------------------------------------------------------------------------
Increase 12% 57% 24%

United United
Gross Margin Canada States Total Canada States Total
------------

Gas $61,375 $44,967 $106,342 $80,740 $34,344 $115,084
Adjustments(1) 41,804 2,688 44,492 19,877 - 19,877
----------------------------------------------------------------------------
$103,179 $47,655 $150,834 $100,617 $ 34,344 $134,961
Electricity 80,645 64,401 145,046 59,574 14,515 74,089
----------------------------------------------------------------------------
$183,824 $112,056 $295,880 $160,191 $48,859 $209,050
----------------------------------------------------------------------------
Increase 15% 129% 42%

(1) For Ontario, Manitoba, Quebec and Michigan gas markets.


On a seasonally adjusted basis, sales and gross margin increased by 24% and 35%, respectively, to $632.6 million and $117.8 million for the three months ended December 31, 2009 over the third quarter of fiscal 2009. The 18% increase in sales was due to a 28% increase in customers (24% of which were acquired with Universal) offset by a 14% decline in the U.S. dollar and some unfavourable weather-based consumption in all significant provinces and states. Gross margin increased at a greater rate than sales due to higher realized margin per customer, particularly in the U.S.

Total sales and gross margin for the first nine months of fiscal 2010 totalled $1.6 billion and $295.9 million versus $1.3 billion and $209.1 million for the same period last year.

Canada

Seasonally adjusted sales were $403.1 million for the quarter, up 18% from $340.3 million for the comparable quarter in fiscal 2009. Seasonally adjusted gross margins were $70.8 million in the third quarter of fiscal 2010, an increase of 31% from $53.9 million in the same quarter last year.

Gas

Gas sales increased by 10% to $231.2 million and gross margin increased by 24% to $41.5 million, versus the third quarter of fiscal 2009. Customer consumption increased due to a 4% increase in number of customers (including Universal) and slightly colder temperatures in Alberta offset by warmer weather in Ontario. Gross margin growth was greater than that of sales due to higher realized margin per customer related to steady increases in new customer contract margins in past periods and improved supply management processes. For the nine months ended December 31, 2009, sales and gross margins were $609.8 million and $103.2 million, an increase of 7% and 3%, respectively, over the prior year comparable period.

After allowance for balancing and inclusive of acquisitions, average gross margin per customer ("GM/RCE") for the three months ended December 31, 2009 amounted to $214/RCE, up 20% compared to $179/RCE from the prior year comparable period. The GM/RCE value includes an appropriate allowance for the bad debt expense in Alberta.

Electricity

Electricity sales were $171.9 million for the quarter, an increase of 31% from the third quarter of fiscal 2009. The increased sales are attributable to a 34% increase in customers. Gross margin increased by 44% from the prior year comparable quarter to $29.3 million due to the increase in customers and increased margin per customer, which resulted from steady increases in new customer contract margins in past periods and the fact that the electricity customers acquired from Universal had generally higher margins than those of Just Energy. As well, new customers under the higher margin Just Green program are making up a higher proportion of the overall electricity book.

For the nine months ended December 31, 2009, sales and gross margins were $469.8 million and $80.6 million, an increase of 21% and 35%, respectively, over the same period last year.

Average gross margin per customer after all balancing and including acquisitions for the quarter ended December 31, 2009 in Canada amounted to $151/RCE compared to $136/RCE from the prior comparable quarter. The GM/RCE value includes an appropriate allowance for the bad debt expense in Alberta.

United States

Sales for the third quarter of fiscal 2010 were $229.5 million, an increase of 35% from $170.5 million in the prior year comparable quarter. Seasonally adjusted gross margin was $47.0 million, up 39% from $34.0 million from the same quarter last year.

Gas

Gas sales in the U.S. increased by 23% from $112.6 million to $138.2 million for the third quarter ended December 31, 2009. This increase reflects the addition of 120,000 customers acquired as part of the Universal transaction and net customer growth through marketing offset by a 14% decline in the U.S. dollar and lower selling prices. Gas margin increased 3% for the third quarter of fiscal 2010 to $25.9 million from $25.2 million. U.S. gas margins per customer were down for three reasons: the customers acquired from Universal were at lower margins that those of Just Energy; there was a 14% decline in the U.S. dollar and warmer than normal weather in the northern U.S. which required the sale of excess supply into a low price spot market. In addition, there were Universal customers which were not expected to renew (and therefore not included in long term customer numbers) which expired during the quarter. The expected negative impact of this lost margin on the third and fourth quarters was disclosed at the time of the Universal acquisition in the second quarter. Sales and gross margins for the nine months ended December 31, 2009 totaled $250.2 million and $47.7 million, respectively.

Average gross margin after all balancing costs for the three months ended December 31, 2009 was $207/RCE, down from $231/RCE noted in the prior year comparable period. The GM/RCE value includes an appropriate allowance for bad debt expense in Illinois.

Electricity

Electricity sales and gross margin for the quarter were $91.3 million and $21.1 million, respectively, versus the comparable period of fiscal 2009 in which, sales and gross margin amounted to $57.9 million and $8.5 million, respectively. Electricity customers increased by 76%, driving the 58% sales growth. Sales growth was less than customer growth due to a 14% decline in the U.S. dollar. Unlike other markets, the Universal acquisition contributed only 2,000 of the 127,000 year over year net additions. Customer additions added through marketing have been the largest contributor to U.S. electricity growth.

The gross margin increase of 148% reflected the growth in customers and higher margins per customer. U.S. electricity is where the major impact of the growing consumption of Just Green is noted. Since the overall book is relatively small, high take-up of Just Green at higher margins has a greater impact on the overall margin per customer. In addition, Texas benefitted from high consumption supplied with low cost commodity while New York profitability rose due to continued improvements in our supply management.

For the nine months ended December 31, 2009, the sales and gross margins were $278.6 million and $64.4 million, respectively.

Average gross margin per customer for electricity during the current quarter was $213/RCE compared to $181/RCE from the prior year comparable period. The GM/RCE value for Texas includes an appropriate allowance for the bad debt expense.



Customer aggregation
Long-term customers

September Failed December
30, to 31, %Increase
2009 Additions Attrition renew 2009 (Decrease)
----------------------------------------------------------------------------
Natural gas
Canada 791,000 14,000 (21,000) (25,000) 759,000 (4)%
United
States 385,000 44,000 (35,000) (1,000) 393,000 2%
----------------------------------------------------------------------------
Total gas 1,176,000 58,000 (56,000) (26,000) 1,152,000 (2)%
----------------------------------------------------------------------------

Electricity
Canada 785,000 18,000 (24,000) (2,000) 777,000 (1)%
United
States 306,000 61,000 (16,000) - 351,000 15%
----------------------------------------------------------------------------
Total
electricity 1,091,000 79,000 (40,000) (2,000) 1,128,000 3%
----------------------------------------------------------------------------

Combined 2,267,000 137,000 (96,000) (28,000) 2,280,000 1%
----------------------------------------------------------------------------


Gross customer additions through marketing for the third quarter were 137,000, up 46% from the 94,000 customers added in the third quarter of fiscal 2009. Total net customer additions for the quarter were 13,000 down from the 23,000 net customer additions in the same period last year due to higher attrition noted on the larger customer base. Overall, there was a 28% increase in total customers at December 31, 2009 versus December 31, 2008. As part of the Universal acquisition, Just Energy also gained a further 145,000 customers that were unlikely to renew as they were variable in nature or located in regions that are not in Just Energy's current expansion plans. As at December 31, 2009, 70,000 of these customers remain.

In addition the sales organization in Ontario added 12,000 water heater units in the third quarter which have a residential customer equivalent of 8,000.

Just Energy's major marketing challenge remains the Canadian markets where the disparity between spot prices and the five year prices continues to impact sales. This has hurt both new customer additions and renewals. Under these conditions, Just Energy's marketing force has concentrated on the sale of Just Green and related products. Acceptance of these products was strong but combining their premium price with a continued generally weak economy, sales were insufficient to offset attrition in Canadian gas and electricity. Customer additions in the United States remained ahead of target resulting in total additions for all markets of 137,000, the second highest quarterly total in Just Energy history. Solid customer additions were seen across the U.S. with Texas and New York electricity being particularly strong.

Take-up of Just Green remains strong in those markets where it is offered. Overall, green supply now makes up 3% of our overall gas portfolio, up from 1% a year ago. Just Green supply makes up 5% of our electricity portfolio, up from 2% from the same period last year. For this reason, the margins on new customer additions continued to exceed target levels despite certain focused price discounts to stimulate sales in markets with very low utility prices resulting in high five year premiums.

Delivered volumes in the quarter

Delivered volumes details the change in the actual growth of volumes delivered to customers. This measure tracks our actual financial results and reflects weather and other volume variances in markets where the utility does not establish flat delivery requirements.

The following table shows the actual delivered volumes for the third quarter of fiscal 2010 and the prior year comparable quarter:



For the three months
ended December 31 Fiscal 2010 Fiscal 2009 % Increase
----------- ----------- ----------
Natural gas (GJ)
Canada 20,394,404 19,520,757 4%
United States 12,498,352 7,631,322 64%
----------------------------------------------------------
Total gas(1) 32,892,756 27,152,079 21%
----------------------------------------------------------

Electricity (MWh)
Canada 1,920,850 1,454,369 32%
United States 856,390 418,940 104%
----------------------------------------------------------
Total electricity(2) 2,777,240 1,873,309 48%
----------------------------------------------------------

(1) Includes 834,000 GJs of Just Green gas in fiscal 2010 versus 137,000 GJs
in the third quarter of last year.

(2) A total of 149,000 MWh of Just Green electricity was delivered in the
third quarter of fiscal 2010 versus 45,000 MWh of electricity delivered
for the same period last year.


Gas deliveries increased by 21% in the three months ended December 31, 2009 over the same period last year due to a 16% increase in customers mainly as a result of the Universal acquisition. Electricity volumes increased by 48% over the prior year comparable quarter due to strong customer additions in Texas and New York and acquired Universal customers, resulting in 44% growth of the customer base.

Just Green

Sales of the Just Green products continue to support and reaffirm the strong demand for the green energy products in all markets. The Just Green program allows customers to choose to purchase units of green energy in the form of renewable energy or carbon offsets, in an effort to reduce greenhouse gas emissions. When a customer purchases a unit of green energy, it creates a contractual obligation for Just Energy to purchase a supply of green energy at least equal to the demand created by the customer's purchase. A review was conducted by Grant Thornton LLP of Just Energy's Renewable Energy and Carbon Offsets Sales and Purchases report for the period from January 1, 2007 through December 31, 2008 validating the Fund's renewables and carbon offset purchases. An audit for the 2009 calendar period is scheduled for the fourth quarter.

The Fund sells Just Green gas in Ontario, British Columbia, New York and Illinois currently and Just Green electricity in Ontario, Alberta, New York and Texas. Just Green sales are expanding into the remaining markets over the coming quarters. Of all customers who contracted with Just Energy in the last quarter, 43% took Just Green for some or all of their energy needs. On average, these customers elected to purchase 86% of their consumption as green supply. Accordingly, 37% of all new customer volumes choose Just Green supply.

Attrition

Natural gas

The trailing 12-month natural gas attrition in Canada was 9% for the quarter, below management's target of 10%. In the U.S., gas attrition for the trailing 12 months was 31%, above management's annual target of 20%. High U.S. gas attrition is a residual effect of the North American recession and the aggressive customer cut off or forced return to default services policies utilized by the company.

Electricity

The trailing 12-month electricity attrition rate in Canada for the year was 11%, slightly above management's target of 10%. Electricity attrition in the United States was 17% over the last twelve months, below management's target of 20%.

Failed to renew

The Just Energy renewal process is a multi-faceted program and aims to maximize the number of customers who choose to sign a new contract prior to the end of their existing contract term. Efforts begin up to 15 months in advance allowing a customer to re-contract for an additional four or five years.

The trailing 12-month renewal rate for all Canadian gas customers was 60%. In the Ontario gas market, customers who do not positively elect to renew or terminate their contract receive a one-year fixed price for the ensuing year. A total of 75,000 gas customers were renewed in the last twelve months and, of these, 24,800 were renewed for a one-year term. Canadian gas was the only market in which renewals lagged the 2010 target. This was due to the spread between the Just Energy five year price and the utility spot price. Management has increased focus on improving renewal techniques which should result in an improvement in renewal rates to target levels.

The electricity renewal rate for Canadian customers was 71% for the trailing 12 months. In the Ontario electricity market, there is no opportunity to renew a residential or small volume customer for a one-year term should the customer fail to positively renew or terminate his or her contract. There has been solid take-up of Just Green products within Canadian electricity renewals leading to higher than target renewal rates. Management targets a renewal rate for electricity customers of 65%.

In the U.S. markets, Just Energy currently only has Illinois gas and Texas electricity customers up for renewal. Gas renewals for the U.S. were 56%, above our target of 50% on a very small number of renewals. The Texas electricity renewal rate was 79%, significantly better than our target rate of 60% based on over 44,600 customers.

The table below shows actual renewal rates for the last twelve months versus target:




F2010 Target F2010
----- ------------
Natural gas
Canada 60% 70%
United States 56% 50%

Electricity
Canada 71% 65%
United States 79% 60%


Gas and electricity contract renewals

This table shows the percentage of customers up for renewal in each of the following years:



Canada - Canada - U.S. - U.S. -
gas electricity Gas electricity
------------------------------------------------
Remainder of 2010 6% 1% 3% 2%
2011 27% 19% 13% 9%
2012 20% 25% 18% 9%
2013 20% 28% 29% 13%
2014 15% 17% 15% 28%
Beyond 2014 12% 10% 22% 39%
------------------------------------------------
Total 100% 100% 100% 100%


Just Energy continuously monitors its customer renewal rates and continues to modify its offering to existing customers in order to maximize the number of customers who renew their contracts.

Gross margin earned through new marketing efforts

Annual gross margin per customer for new and renewed customers (includes Just Green impact)

In the third quarter of fiscal 2010, the Fund continued to see the positive impact of continued efforts to maintain strong margin per customer during challenging marketing periods. Overall, average gross margin per RCE increased by 11% quarter over quarter primarily due to the compound impact of higher per customer margins on new contracts in past quarters offset by a lower U.S. dollar reducing the margin on existing U.S. contracts. These higher margins on past contracts have been a function of strong Just Green sales, opportunistic pricing in a falling market and improved supply management.

The table below depicts the annual margins on contracts of customers signed in the quarter. This table reflects only the margins on "brown" energy purchased by customers. To the extent that customers elected green electricity, margins per customer are significantly higher. Sales of the Just Green products have been very strong with approximately 43% of all customers added in the past year taking some or all green energy supply. Those who purchased the green products elect on average to purchase 86% of their consumption as green supply.



Annual
Annual gross margin per customer(1) Target
Fiscal 2010 Fiscal 2010
------------------------

Customers added in the quarter
- Canada - gas $174 $170
- Canada - electricity $148 $143
- United States - gas $200 $170
- United States - electricity $230 $143
Customers lost in the quarter
- Canada - gas $190
- Canada - electricity $119
- United States - gas $247
- United States - electricity $125

(1) Customer sales price less cost of associated supply and allowance for
bad debt and U.S. working capital.


Annual margin on new customers added in the quarter including the impact of Just Green was $211 and margin earned on renewing customers was $159.

National Home Services Division

NHS was acquired on July 1, 2009 as part of the Universal acquisition. On July 2, 2009, NHS acquired Newten Home Comfort Inc. and on September 30, 2009, acquired substantially all of the assets of NHCLP (see Page 6 for additional information). NHS provides Ontario residential customers long-term water heater rental programs offering conventional tanks, power vented tanks and tankless water heaters in a variety of sizes, furnaces and air conditioners. The combined installed water heater base on July 1, 2009 was 37,687. NHS continues to ramp up its operations and, as at December 31, 2009, had a cumulative installed base of 67,461 water heaters in residential homes. NHS has commenced earning revenue from its installed base.

Because NHS is a high growth, relatively capital intensive business, Just Energy's management has been examining opportunities to separately finance water heater installations and a new agreement has been reached with Home Trust Company. (See the "Outlook" section on page 31 for additional information.) Accordingly, capital required for this business will not impact distributable cash generated by the core natural gas and electricity business.



Selected financial information
(thousands of dollars)

Three months ended Nine months ended
December 31, 2009 December 31, 2009
----------------- -----------------
Sales per financial statements $2,597 $5,071
Cost of Sales 379 538
------------------------------------
Gross Margin 2,218 4,533

Selling expenses 375 1,487
General and administrative expense 1,045 3,199
Capital expenditures 4,841 19,993
Amortization 450 1,475
Total water heaters installed 11,997 29,774


Results of Operations

For the three months ended December 31, 2009 NHS had sales of $2.6 million, gross margin of $2.2 million and net income of $0.7 million. The cost of sales for the quarter was $0.4 million and represents the amortization of the installed water heaters for the customer contracts signed to date. Selling expenses for the quarter were $0.4 million and include the amortization of commission costs paid to the independent agents, automobile fleet costs, advertising and promotion and telecom and office supplies expenses. General and administrative costs, which relate primarily to staff compensation and warehouse expenses, amounted to $1.0 million for the quarter ended December 31, 2009. Capital expenditures, including installation costs, amounted to $4.8 million. Amortization costs were $0.5 million for the quarter and include the depreciation on fixed assets and the amortization of the water heaters contracts acquired in the purchase from Universal and Newten Home Comfort Inc.

Just Energy has owned NHS since July 1, 2009 and therefore results reflect only the six months of operations to December 31, 2009. Sales totaled $5.1 million and NHS earned gross margins of $4.5 million during this period. A total of $20.0 million has been spent to date on capital items for NHS operations.

The growth of National Home Services has been substantial and, combined with the Home Trust Company financing, will be self sustaining on a cash flow basis. A large number of independent sales contractors previously marketing gas and electricity have been redeployed to water heaters resulting in lower customer additions in energy marketing. Overall, management believes this is the best utilization of the sales force.

Ethanol Division (TGF)

TGF continues to improve plant production and run time of the Belle Plaine, Saskatchewan, wheat based ethanol facility. For the quarter ended December 31, 2009, the plant had achieved an average production capacity of 63% with capacity expected to rise upon completion of the grain milling upgrade discussed below.

The ethanol division has separate non-recourse financing in place such that capital requirements and possible operating losses will not impact distributable cash from Just Energy's core business.



Selected financial information
(thousands of dollars)

Three months ended Nine months ended
December 31, 2009 December 31, 2009
----------------- -----------------

Sales per financial statements $19,460 $35,909
Cost of sales 17,729 32,312
Gross margin 1,731 3,597

General and administrative expense 2,440 6,259
Interest expense 1,671 3,514
Capital Expenditures 1,263 1,363
Amortization 222 843


Results of Operations

For the three months ended December 31, 2009 TGF had sales of $19.5 million, realized gross margin of $1.7 million and a net loss of $1.4 million. During the quarter the plant produced 23.5 million litres of ethanol and 23,690 metric tonnes of Distillers dried grain. For the three months ended December 31, 2009 TGF incurred $2.4 million in general and administrative expenses and $1.7 million in interest charges. Production levels continue to be below the 150.0 million litres annual plant design capacity as a result of production challenges in grain milling. New grain milling equipment is being installed by year end to address this production bottleneck and enable production to achieve the design capacity. Capital expenditures, including installation costs, for the quarter amounted to $1.2 million and include the assets related to the grain milling project noted above. This project is on schedule and on budget. TGF is expected to realize net income once the milling equipment installation is complete.

Year to date, TGF has gross margin of $3.6 million on sales of $35.9 million. Overall, the plant has realized a loss before interest, taxes and amortization of $2.7 million for the six month period.

TGF receives a federal subsidy related to an agreement signed on February 17, 2009, based on the volume of ethanol produced. During the nine month ended December 31, 2009 and through fiscal 2011, this subsidy is 10 cents per litre on ethanol produced. This amount declines through time to 5 cents per litre of ethanol produced in fiscal 2015, the last year of the agreement.

Overall Consolidated Results

General and administrative expenses

General and administrative costs were $24.8 million for the three months ended December 31, 2009, representing a 68% increase from $14.8 million in the third quarter of fiscal 2009. This was primarily due to the administrative costs for NHS and TGF as well as the addition of a portion of Universal's energy marketing administrative costs.



General and administrative expenses Fiscal 2010 Fiscal 2009 Variance
----------- ----------- --------
Energy marketing $21,282 $14,753 $6,529
NHS 1,045 - 1,045
TGF 2,440 - 2,440
----------- ----------- --------
Total 24,767 14,753 10,014


Overall, energy marketing general and administrative costs were up 44% in the third quarter of fiscal 2010 versus the same period last year versus a 28% increase in total customers. The higher increase is largely due to staffing costs to support future growth, increased collection costs and professional fee expenditures on the Fund's conversion plan, IFRS and other corporate development activities. While operating headcount increased significantly due to the Universal acquisition, management expects that after continued future administrative consolidation, total corporate headcount will have increased by 20% to a total of 874 full-time employees. Both NHS and TGF are in the start-up phase and management is confident that they will offset their start-up costs with distributable cash in future periods. Overall, management expected to reduce combined general and administrative costs by $10 million per year on an ongoing basis. This target has been exceeded and the rate of growth in general and administrative costs will slow significantly in fiscal 2011.

Expenditures for general and administrative costs for the nine months ended December 31, 2009 were $66.0 million, an increase of 59% from $41.4 million in the prior comparable period as a result of the additional costs noted above.

Marketing expenses

Marketing expenses, which consist of commissions paid to independent sales contractors for signing new customers, expenses to operate the regional sales offices and an allocation of corporate marketing costs, were $26.5 million, an increase of 41% from $18.8 million in the third quarter of fiscal 2009. Total gross customer additions were up by 46% in the current quarter versus the same period last year.

For the nine months ended December 31, 2009, marketing expenses were $73.0 million, an increase of 47% from the $49.6 million reported in the same period last year. This reflects increased customer additions versus the same period last year and increased recruiting costs resulting in 50% more active independent sales contractors. In addition, higher sales office expenses resulting from expansion and further development of the commercial product offerings increased the costs in fiscal 2010.

Marketing expenses to maintain gross margin are allocated based on the ratio of gross margin lost from attrition as compared to the gross margin signed from new and renewed customers during the period. Marketing expenses to maintain gross margin increased by 94% to $18.3 million, as compared to $9.5 million in the third quarter of fiscal 2009. The increase resulted from higher customer attrition and a greater number of renewals and associated costs versus the comparable quarter.

Marketing expenses to add new gross margin are allocated based on the ratio of net new gross margin earned on the customers signed, less attrition, as compared to the gross margin signed from new and renewed customers during the period. Marketing expenses to add new gross margin in the third quarter totaled $8.2 million, a decrease of 12% from $9.3 million in the prior year comparable quarter. The decrease is consistent with the drop in the net customer additions of 13,000 in the third quarter of fiscal 2010 versus 23,000 net customers during fiscal 2009. The actual aggregation costs per customer added were as follows:



Nine months ended Nine months ended
December 31, December 31,
Fiscal 2010 Fiscal 2009
Natural gas
Canada $220/RCE
United States $183/RCE
Total gas $192/RCE $176/RCE

Electricity
Canada $182/RCE
United States $165/RCE
Total electricity $170/RCE $150/RCE


Actual total aggregation costs for gas and electricity customers to date for fiscal 2010 were $192 per customer for gas and $170 per customer for electricity. For the nine months ended December 31, 2008, the gas and electricity aggregation costs were $176 and $150 per customer, respectively. The main contributor to higher costs in the US was the 14% decline in the US dollar versus the Canadian dollar year over year. The increase in per customer aggregation cost in Canada is due to two reasons, a Just Green customer generates a higher commission commensurate with a higher margin, and secondly, increased commission rates to stimulate sales in heavily penetrated Canadian markets.

Unit based compensation

Compensation in the form of units (non-cash) granted by the Fund to the directors, officers, full-time employees and service providers of its subsidiaries and affiliates pursuant to the 2001 unit option plan, the 2004 unit appreciation rights plan and the directors' deferred compensation plan for the third quarter amounted to $1.0 million, effectively unchanged from the $1.1 million paid in the prior comparable quarter. Total costs for the nine months ended December 31, 2009 totaled $2.6 million, compared to $2.9 million for the same period last year.

Bad debt expense

In Illinois, Alberta, Texas, Pennsylvania, Maryland and California, Just Energy assumes the credit risk associated with the collection of all customer accounts. In addition, for large direct billed accounts in B.C. and Ontario, the Fund is responsible for the bad debt risk. Credit review processes have been established to manage the customer default rate. Management factors default from credit risk into its margin expectations for all of the above noted markets.

Bad debt expense for the third quarter of fiscal 2010 was $5.1 million up from $4.2 million expensed in the same quarter of last year, an increase of 21%. The bad debt expense increase was mainly due to the 16% increase in total revenues from $338.2 million to $393.2 million for the quarter in the markets where Just Energy assumes the risk for accounts receivable collections and higher percentage losses in the Texas market. Management integrates its default rate for bad debts within its margin targets and continuously reviews and monitors the credit approval process to mitigate customer delinquency.

For the nine months ended December 31, 2009, the bad debt expense was $12.8 million, representing approximately 3.3% of $393.6 million in revenues. In fiscal 2009, the total bad debt expense was $7.7 million or 2.3% of $338.2 million in revenue for the nine-month period. Following billing for the high electricity consumption period in Texas, bad debt losses have exceeded 4% in that market reflecting the effects of recessionary economic conditions not previously seen. With continued weakness in other markets, overall bad debt losses are slightly above the target range of 2% - 3%. This level is expected to continue for the fourth quarter.

Overall, bad debt expense is expected to remain at or be slightly above the upper end of the 2% to 3% target until there is a sustained residential real estate recovery in the U.S. As discussed earlier management has taken an aggressive position with regards to returning customers to utility default services or disconnects to ensure that bad debt expense is managed through the heavy heating season.

For each of Just Energy's other markets, the LDCs provide collection services and assume the risk of any bad debt owing from Just Energy's customers for a fee.

Interest expense

Total interest expense for the three months ended December 31, 2009 amounted to $5.1 million up from $1.1 million in the prior year comparable period. The large increase noted in the third quarter primarily relates to the $1.8 million in interest expense on the Universal convertible debenture and interest payments of $1.7 million made on debt held by TGF. For the nine-month period of fiscal 2010, the total interest cost was $10.6 million versus $3.0 million paid in fiscal 2009.

Foreign exchange

Just Energy has an exposure to U.S. dollar exchange rates as a result of its U.S. operations and any changes in the applicable exchange rate may result in a decrease or increase in other comprehensive income (Loss) for fiscal 2010. For the quarter, a foreign exchange unrealized loss of $0.2 million was reported in Other Comprehensive Income (Loss) versus a $2.3 million unrealized loss reported in the prior year comparable period. For the nine months ended December 31, 2009, the foreign exchange unrealized gain was $24.8 million versus a gain of $5.8 million for the same period in fiscal 2009. In fiscal 2010 to date, a total of $23.0 million in U.S. funds was repatriated back to Canada. It is expected that future monies earned in the U.S. will be redeployed in the U.S. to fund continued growth, therefore the Fund is not hedging our U.S. currency at this time.

Overall, a weak U.S. dollar decreases sales and gross margin but this is partially offset by lower operating costs denominated in U.S. dollars. While there can be quarterly fluctuations because of relative inflows and outflows, the overall annual impact on adjusted net income should not be material, given the high growth of the U.S. markets.

Class A preference share distributions

The remaining holder of the Just Energy Corp. ("JEC") Class A preference shares (which are exchangeable into units on a 1:1 basis) is entitled to receive, on a quarterly basis, a payment equal to the amount paid or payable to a Unitholder on an equal number of units. The total amount paid for the three and nine months ended December 31, 2009 including tax and the Special Distribution amounted to $2.6 million and $5.9 million, respectively. In fiscal 2009, the distribution paid for the three and nine month periods were $2.5 million and $6.0 million, respectively. These distributions on the Class A preference shares are reflected in the Statement of Unitholders' Equity of the Fund's consolidated financial statements, net of tax.

Special Distribution

The Fund under-distributed its taxable income in calendar 2009 and 2008 and would have been subject to tax at 46% for any undistributed taxable income. In order to ensure that all of the taxable income is distributed to its Unitholders, the Board of Directors concluded that it would be preferable to pay out a Special Distribution to effectively allocate all of the taxable income to the Unitholders. The Special Distribution is $26.7 million ($0.20 per unit) and will be paid as 100% cash to the holders of units, Unit Appreciation Rights ("UARs"), Deferred Unit Grants ("DUGs"), Class A preference shares and JEEC Exchangeable Shares. The amount will be funded by operating cash flow and the Fund's credit facility and will be paid on January 30, 2010. In fiscal 2009, a Special Distribution of $18.6 million ($0.165 per unit) was declared in the third quarter.



Provision for (recovery of) income tax
(thousands of dollars)

For the three months For the nine months
ended December 31, ended December 31,
Fiscal 2010 Fiscal 2009 Fiscal 2010 Fiscal 2009
Current income tax
expense $ 2,269 $ 1,896 $8,335 $2,654
Amount credited to
Unitholders' equity 886 903 1,963 2,177
Future tax provision
(recovery) (20,165) 14,431 8,781 (77,335)
------ ------ ----- ------
Provision for (recovery
of) income tax $(17,010) $17,230 $19,079 $(72,504)


The Fund recorded a current income tax expense of $2.3 million versus a tax expense of $1.9 million in the same period last year. A tax provision of $8.3 million has been recorded for the nine month period of fiscal 2010 versus a provision of $2.7 million for the same period last year. The change is mainly due to additional income tax expense incurred by the newly acquired Universal entities and state income taxes that our U.S. entities paid. Also included in the income tax provision is an amount relating to the tax impact of the distributions paid to the Class A preference shareholders of JEC. In accordance with EIC 151, Exchangeable Securities Issued by Subsidiaries of Income Trusts, all Class A preference shares are included as part of Unitholders' equity and the distributions paid to the shareholders are included as distributions on the Statement of Unitholders' equity, net of tax. For the three and nine months ended December 31, 2009, the tax impact of these distributions, based on a tax rate of 32.25%, amounted to $0.9 million and $2.0 million, respectively. In addition, future tax recovery of $20.2 million and future tax expense of $8.8 million were recorded for the three and nine months ended December 31, 2009 respectively. These future tax provisions primarily resulted from the change in fair value of derivative instruments.

Effective January 1, 2011, the Fund will be taxed as a Specified Investment Flow-Through ("SIFT") trust on Canadian income that has not been subject to a Canadian corporate income tax in the Canadian operating entities. Therefore, the future tax asset or liability associated with Canadian assets recorded on the balance sheet as at that date will be realized over time as the temporary differences between the carrying value of assets in the consolidated financial statements and their respective tax bases are realized. Current Canadian income taxes will be accrued at that time to the extent that there is taxable income in the Fund or its underlying operating entities.

The U.S. based corporate subsidiaries are subject to U.S. income taxes on their taxable income determined under U.S. income tax rules and regulations. The U.S. subsidiaries (other than the newly acquired Commerce) had combined operating losses for tax purposes at December 31, 2009, no provision for current U.S. federal income tax has been made by those U.S. entities. On the other hand, Commerce had no operating losses carried forward and generated taxable income during the period and as a result, an income tax expense of $2.6 million was recorded during the period, which has been included in the current income tax expense amounts as noted above.

The Fund follows the liability method of accounting for income taxes. Under this method, income tax liabilities and assets are recognized for the estimated tax consequences attributable to the temporary differences between the carrying value of the assets and liabilities on the consolidated financial statements and their respective tax bases, using substantively enacted income tax rates. A valuation allowance is recorded against a future income tax asset if it is not anticipated that the asset will be realized in the foreseeable future. The effect of a change in the income tax rates used in calculating future income tax liabilities and assets is recognized in income during the period that the change occurs.



Liquidity and Capital Resources
(thousands of dollars)

For the three months For the nine months
ended December 31, ended December 31,
----------------------------------------------------------------------------
Fiscal 2010 Fiscal 2009 Fiscal 2010 Fiscal 2009
Operating activities $4,418 $15,962 $66,920 $78,967
Investing activities (12,556) (1,667) (25,051) (5,335)
Financing activities,
excluding distributions 47,456 19,050 41,869 34,624
Gain (loss) on foreign
exchange 5,519 (1,473) (1,408) (1,003)
----------------------------------------------------------------------------
Increase in cash before
distributions 44,837 31,872 82,330 107,253
Distributions (cash
payments) (34,670) (29,326) (101,577) (82,851)
----------------------------------------------------------------------------
Increase (Decrease) in cash 10,167 2,546 (19,247) 24,402
Cash - beginning of
period 29,680 49,166 59,094 27,310
----------------------------------------------------------------------------
Cash - end of period $39,847 $51,712 $39,847 $51,712
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Operating activities

Cash flow from operating activities for the three and nine months ended December 31, 2009 was $4.4 million and $66.9 million, respectively, as compared to $16.0 million and $79.0 million, respectively, for the same periods last year. The decrease for the current quarter resulted from increased net income that was partially offset by higher amortization on the acquired customer contracts from Universal and unrealized income related to the financial instruments recorded in the quarter.

Investing activities

The Fund purchased capital and recorded intangible assets totaling $12.6 million during the quarter, an increase from $1.7 million in the prior year comparable quarter. Capital asset purchases and intangibles amounted to $34.8 million for the nine months ended December 31, 2009, compared with $3.0 million in the same period last year. During the quarter a total of $4.8 million was spent on water heater purchases for NEC. For the period ended September 30, 2009, the Fund completed the acquisition of Universal in consideration for JEEC exchangeable shares valued at $239.9 million. For further information on the acquisition see page 4. On July 2, 2009, NEC acquired Newten Home Comfort Inc., an arm's length third party that held a 20% interest of NHCLP. Accordingly, NHCLP became a wholly owned subsidiary of Just Energy. NEC, which began operations in April 2008, operates under the trade name of National Home Services. In the second quarter of fiscal 2009, Just Energy purchased substantially all of the commercial and residential customer contracts of CEG in British Columbia for $1.8 million. CEG was a western Canadian marketer of natural gas wholly owned by SemCanada Energy Company, both of which filed for creditor protection under the Companies' Creditors Arrangement Act on July 30, 2008. As well, in fiscal 2009 the Fund entered into a limited partnership to form NHCLP for an investment of $0.5 million.

Financing activities

Financing activities excluding distributions relate primarily to the drawdown of the operating line for working capital requirements. During the three months ended December 31, 2009, Just Energy had net borrowings of $36.0 million against long-term debt versus $23.8 million drawn in the third quarter of fiscal 2009. See page 26 for an additional discussion on Long term debt and financing.

The Fund's liquidity requirements are driven by the delay from the time that a customer contract is signed until cash flow is generated. Approximately 50% of an independent sales contractor's commission payment is made following reaffirmation or verbal verification of the customer contract with most of the remaining 50% being paid after the energy commodity begins flowing to the customer.

The elapsed period between the times when a customer is signed to when the first payment is received from the customer varies with each market. The time delays per market are approximately two to nine months. These periods reflect the time required by the various LDCs to enroll, flow the commodity, bill the customer and remit the first payment to Just Energy. In Alberta and Texas, Just Energy receives payment directly from the customer.

Distributions (cash payments)

Investors should note that due to the institution of a distribution reinvestment plan ("DRIP") on December 20, 2007, a portion of dividends declared are not paid in cash. Under the plan, Unitholders can elect to receive their distributions in units at a 2% discount to the prevailing market price rather than the cash equivalent.

During the quarter, the Fund made cash distributions to its Unitholders in the amount of $34.7 million, compared to $29.3 million in the prior year comparable period, an increase of 18%. The increase in distributions is a result of the JEEC exchangeable shares that were converted into units during the last two quarters. For the nine months ended December 31, 2009, cash distributions totaled $101.6 million compared to $82.9 million in the same period during fiscal 2009.

Just Energy will continue to utilize its cash resources for expansion into new markets, growth in its existing customer base as well as distributions to its Unitholders.

At the end of the quarter, the annual rate for distributions per unit was $1.24. The Fund intends to make distributions to its Unitholders, based upon cash receipts of the Fund, excluding proceeds from the issuance of additional Fund units, adjusted for costs and expenses of the Fund. The Fund's intention is for Unitholders of record on the 15th day of each month to receive distributions at the end of the month.

Balance Sheet as at December 31, 2009 compared to March 31, 2009

Cash decreased from $59.1 million as at March 31, 2009 to $39.8 million at December 31, 2009. Long term debt has increased to $231.7 million from $76.5 million as a result of the Universal acquisition and is detailed on page 27. The Just Energy original credit facility increased to $117.0 million as a result of normal injection of gas into storage, water heater funding and various other working capital requirements. Working capital requirements in the U.S. and Alberta result from the timing difference between customer consumption and cash receipts. For electricity, working capital is required to fund the lag between settlements with the suppliers and settlement with the LDCs. Restricted cash has increased to $20.1 million from $7.6 million as at March 31, 2009 due to additional cash collateral postings related to supply procurement for the Universal, Commerce and TGF entities.

The increase in accounts receivable from $249.5 million to $330.4 million is primarily attributable to the increase in sales during the period as a result of the Universal acquisition. Accounts payable and accrued liabilities has also increased from $165.4 million to $213.5 million relating to added consumption as a result of the 430,000 Universal customers acquired on July 1, 2009.

Gas in storage has increased from $6.7 million to $36.3 million for the third quarter of fiscal 2010. The increased balance reflects injections into storage for the expanding Illinois, New York and Indiana customer base, which occurs from April to November.

At the end of the quarter, Just Energy had delivered more gas to the LDCs in Ontario and Quebec than customers had consumed. Since Just Energy is paid for this gas when delivered yet recognizes revenue when the gas is consumed by the customer, the balance sheet includes deferred revenue of $130.6 million and gas delivered in excess of consumption of $102.5 million. At March 31, 2009, customers had consumed more than had been delivered to the LDCs, thereby resulting in unbilled revenues amounting to $57.8 million and accrued gas accounts payable of $41.4 million.

Prepaid expenses have increased from $2.0 million to $28.7 million for the third quarter of fiscal 2010. The increased balance relates to tax, rent and various prepayments from the Commerce, Universal, TGF and NEC entities.



Long term debt and financing
As at December 31
-----------------
(thousands of dollars)
--------------------

Fiscal 2010 Fiscal 2009
----------- -----------

Original Credit facility 117,045 76,500
TGF Credit facility 41,699 -
TGF Debentures 38,000 -
TGF Term Loan 10,000 -
JEEC convertible debentures 80,686 -


Original Credit Facility

On July 1, 2009, in connection with the acquisition of UEG, Just Energy increased its credit facility from $170.0 million to $250.0 million. As part of the increase in the credit facility, Societe Generale and Alberta Treasury Branches joined Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canada and Bank of Nova Scotia as the syndicate of the lenders thereunder. Under the new terms of the credit facility, effective July 1, 2009, Just Energy is able to make use of Bankers' Acceptances and LIBOR advances at stamping fees of 4.0%, prime rate advances at Canadian and U.S. prime plus 3.0% and letters of credit at 4.0%. Just Energy's obligations under the credit facility are supported by guarantees of certain subsidiaries and affiliates and secured by a pledge of the assets of Just Energy and the majority of its operating subsidiaries and affiliates. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at December 31, 2009 and 2008, all of these covenants have been met.

TGF Credit facility

A credit facility of up to $50.0 million was established with a syndicate of Canadian lenders led by Conexus Credit Union was arranged to finance the construction of the ethanol plant in 2007. The facility was further revised on March 18, 2009, and was converted to a fixed repayment term of 10 years commencing March 1, 2009 which includes interest costs at a rate of prime plus 2%, with principal repayments commencing on March 1, 2010. The credit facility is secured by a demand debenture agreement, a first priority security interest on all assets and undertakings of TGF and a general security interest on all other current and acquired assets of TGF. The credit facility includes certain financial covenants the more significant of which relate to current ratio, debt to equity ratio, debt service coverage and minimum shareholder's equity. For the period ended December 31, 2009, TGF was in compliance with all of the covenants other than the current ratio and the debt service coverage covenant which were subsequently waived on January 25, 2010. The lenders also deferred compliance with the financial covenants until April 1, 2011.

TGF Debentures

A debenture purchase agreement with a number of private parties providing for the issuance of up to $40.0 million aggregate principal amount of debentures was entered into in 2006. The interest rate is 10.5% per annum, compounded annually and payable quarterly. Interest is to be paid quarterly with quarterly principal payments commencing October 1, 2009 in the amount of $1.0 million per quarter. The agreement includes certain financial covenants the more significant of which relate to current ratio, debt to capitalization ratio, debt service coverage, debt to EBITDA and minimum shareholder's equity. For the period ended December 31, 2009, TGF was in compliance with all of the covenants other than the current ratio, the debt service coverage and debt to EBITDA covenant which were subsequently waived on January 25, 2010. The lender also deferred compliance with the financial covenants until April 1, 2011.

TGF Term/Operating Facilities

TGF also maintains a working capital facility for $10.0 million with a third party lender bearing interest at prime plus 1% due in full on December 31, 2010. This facility is secured by liquid investments on deposit with the lender. In addition, TGF has a working capital operating line of $7,000 bearing interest at a prime plus 1% of which $3,903 was drawn via overdraft and $1,600 of letters of credit and is included in bank indebtedness.

JEEC Convertible debentures

In conjunction with the acquisition of UEG on July 1, 2009, JEEC also acquired the obligations of the convertible unsecured subordinated debentures issued by Universal in October 2007 which have a face value of $90 million. The debentures mature on September 30, 2014 unless converted prior to that date and bear interest at an annual rate of 6% payable semi-annually on March 31 and September 30 of each year. Each $1,000 principal amount of the debentures is convertible at any time prior to maturity or on the date fixed for redemption, at the option of the holder, into approximately 27.3 units of the Fund representing a conversion price of $36.63 per exchangeable share.

The debentures are not redeemable prior to October 1, 2010. On and after October 1, 2010, but prior to September 30, 2012, the debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at the Fund's sole option on not more than 60 days and not less than 30 days prior notice, provided that the current market price on the date on which notice of redemption is given is not less than 125% of the conversion price. On and after September 30, 2012, but prior to the maturity date, the debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at the Fund's sole option on not more than 60 days and not less than 30 days prior notice.

Contractual Obligations

In the normal course of business, the Fund is obligated to make future payments for contracts and other commitments that are known and non-cancellable.



Payments due by
period
(thousands of Less than 1 - 3 4 - 5 After 5
dollars) Total 1 year years years years
----------------------------------------------------------------------------

Property and
equipment lease
agreements $27,425 $2,228 $13,228 $6,214 $5,755
EPCOR billing,
collections and
supply Commitments 24,204 3,157 21,047 - -
Grain production
contracts 19,521 7,941 10,379 1,183 -
Gas and electricity
supply purchase
commitments 3,836,206 458,742 2,435,322 878,019 64,123
----------------------------------------------------------------------------
$3,907,356 $ 472,068 $2,479,976 $885,416 $69,878
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Other obligations

The Fund is also subject to certain contingent obligations that become payable only if certain events or rulings were to occur. The inherent uncertainty surrounding the timing and financial impact of these events or rulings prevents any meaningful measurement, which is necessary to assess any material impact on future liquidity. Such obligations include potential judgments, settlements, fines and other penalties resulting from actions, claims or proceedings. In the opinion of management, the Fund has no material pending actions, claims or proceedings that have not been either included in its accrued liabilities or in the financial statements.

Transactions with Related Parties

The Fund does not have any material transactions with any individuals or companies that are not considered independent to the Fund or any of its subsidiaries and/or affiliates.

Critical Accounting Estimates

The consolidated financial statements of the Fund have been prepared in accordance with Canadian GAAP. Certain accounting policies require management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, cost of sales, marketing and general and administrative expenses. Estimates are based on historical experience, current information and various other assumptions that are believed to be reasonable under the circumstances. The emergence of new information and changed circumstances may result in actual results or changes to estimated amounts that differ materially from current estimates.

The following assessment of critical accounting estimates is not meant to be exhaustive. The Fund might realize different results from the application of new accounting standards promulgated, from time to time, by various rule-making bodies.

Unbilled revenues/Accrued gas accounts payable

Unbilled revenues result when customers consume more gas than has been delivered by Just Energy to the LDCs. These estimates are stated at net realizable value. Accrued gas accounts payable represents Just Energy's obligation to the LDC with respect to gas consumed by customers in excess of that delivered. This obligation is also valued at net realizable value. This estimate is required for the gas business unit only, since electricity is consumed at the same time as delivery. Management uses the current average customer contract price and the current average supply cost as a basis for the valuation.

Gas delivered in excess of consumption/Deferred revenues

Gas delivered to LDCs in excess of consumption by customers is valued at the lower of cost and net realizable value. Collections from LDCs in advance of their consumption results in deferred revenues which are valued at net realizable value. This estimate is required for the gas business unit only since electricity is consumed at the same time as delivery. Management uses the current average customer contract price and the current average supply cost as a basis for the valuation.

Allowance for doubtful accounts

Just Energy assumes the credit risk associated with the collection of customers' accounts in Alberta, Illinois, Texas, Pennsylvania, Maryland and California. In addition, for large direct billed accounts in B.C. and Ontario the Fund is responsible for the bad debt risk. Management estimates the allowance for doubtful accounts in these markets based on the financial conditions of each jurisdiction, the aging of the receivables, customer and industry concentrations, the current business environment and historical experience.

Goodwill

In assessing the value of goodwill for potential impairment, assumptions are made regarding Just Energy' future cash flow. If the estimates change in the future, the Fund may be required to record impairment charges related to goodwill. An impairment review of goodwill was performed during fiscal 2009 and as a result of the review, it was determined that no impairment of goodwill existed at March 31, 2009. There were no events during the quarter which triggered the requirement of an impairment test to be performed as at December 31, 2009.

Fair Value of Derivative Financial Instruments and Risk Management

The Fund has entered into a variety of derivative financial instruments effectively all related to future supply contracts as part of the business of purchasing and selling gas, electricity and Just Green option. Just Energy enters into contracts with customers to provide electricity and gas at fixed prices and provide comfort to certain customers that a specified amount of energy will be derived from green generation. These customer contracts expose Just Energy to changes in market prices to supply these commodities. To reduce the exposure to the commodity market price changes, Just Energy uses derivative financial and physical contracts to secure fixed price commodity supply matching its delivery or green commitment obligations.

The Fund's business model objective is to minimize commodity risk other than consumption changes, usually attributable to weather. Accordingly, it is Just Energy' policy to hedge the estimated requirements of its customers with offsetting hedges of natural gas and electricity at fixed prices for terms equal to those of the customer contracts. The cash flow from these supply contracts is expected to be effective in offsetting the Fund's price exposure and serves to fix acquisition costs of gas and electricity to be delivered under the fixed price or price protected customer contracts. Just Energy' policy is not to use derivative instruments for speculative purposes.

The financial statements are in compliance with Section 3855 of the CICA Handbook, which requires a determination of fair value for all derivative financial instruments. Up to June 30, 2008, the financial statements also applied Section 3865 of the CICA Handbook, which permitted a further calculation for qualified and designated accounting hedges to determine the effective and ineffective portion of the hedge. This calculation permitted the change in fair value to be predominantly accounted for in the Statement of other comprehensive income. As of July 1, 2008, management decided that the increasing complexity and costs of maintaining this treatment outweigh the benefits. This fair value (and when it was applicable, the ineffectiveness) is determined using market information at the end of each quarter. Management believes the Fund remains economically hedged operationally across all jurisdictions.

Preference shares of JEC and Trust units

As at February 10, 2010, there were 5,263,728 Class A preference shares of JEC outstanding and 123,431,022 units of the Fund outstanding.

JEEC Exchangeable Shares

A total of 21,271,804 exchangeable shares of JEEC were issued on July 1 for the purchase of Universal. JEEC shareholders have voting rights equivalent to fund Unitholders and their shares are exchangeable on a 1:1 basis. As at February 10, 2010, 15,982,284 shares had been converted and there were 5,289,520 exchangeable shares outstanding.

Taxability of distributions

Cash and unit distributions received in calendar 2009 were allocated as 100% other income. Additional information can be found on our website at www.justenergy.com. Management estimates the distributions for calendar 2010 to be allocated in a similar manner to that of 2009.

Adoption of new accounting policies

As of April 1, 2009, the Fund adopted a new accounting standard, CICA Handbook Section 3064, Goodwill and Intangible Assets, which establishes revised standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. Just Energy adopted this standard retroactively as required by the standards.

Recently issued accounting standards

The following are new standards, not yet in effect, which are required to be adopted by the Fund on the effective date.

Business combinations

In October 2008, the CICA issued Handbook Section 1582, Business Combinations ("CICA 1582"), concurrently with CICA Handbook Section 1601, Consolidated Financial Statements ("CICA 1601"), and CICA Handbook Section 1602, Non-controlling Interest ("CICA 1602"). CICA 1582, which replaces CICA Handbook Section 1581, Business Combinations, establishes standards for the measurement of a business combination and the recognition and measurement of assets acquired and liabilities assumed. CICA 1601, which replaces CICA Handbook Section 1600, carries forward the existing Canadian guidance on aspects of the preparation of consolidated financial statements subsequent to acquisition other than non-controlling interests. CICA 1602 establishes guidance for the treatment of non-controlling interests subsequent to acquisition through a business combination. These new standards are effective for fiscal years beginning on or after January 1, 2011. The Fund has not yet determined the impact of these standards on its consolidated financial statements.

Financial Instruments Disclosure

In June 2009, the CICA amended Handbook Section 3862, Financial Instruments - Disclosures, to adopt the amendments recently made by the International Accounting Standards Board ("IASB") to IFRS 7, Financial Instruments - Disclosures. The amendments require enhanced disclosure requirements about the fair value measurement, including the relative reliability of the inputs used in those measurements, and about the liquidity risk of financial instruments. The amendments are effective for annual financial statements relating to fiscal years ending after September 30, 2009. Just Energy will reflect the additional disclosures in its 2010 annual audited financial statements.

International Financial Reporting Standards

In February 2008, CICA announced that GAAP for publicly accountable enterprises will be replaced by International Financial Reporting Standards ("IFRS") for fiscal years beginning on or after January 1, 2011.

Just Energy will transition to IFRS effective April 1, 2011, and intends to issue its first interim financial statements under IFRS for the three-month period ending June 30, 2011, and a complete set of financial statements under IFRS for the year ending March 31, 2012.

Based on the initial assessment of the differences between Canadian GAAP and IFRS relevant to the Fund, a project team was assembled and a conversion plan was developed in March 2009 to manage the transition to IFRS. Key personnel received professional training on IFRS and training will continue to be provided to staff throughout and beyond the transition process. We have also engaged an external advisor.

Our project consists of three phases: IFRS diagnostic assessment, solution development, and implementation. Having completed the diagnostic phase, we assessed that property, plant and equipment, impairment of assets, accounting for income taxes, financial instruments as well as the first time adoption of IFRS ("IFRS 1") are likely to have a significant impact on the Fund. The Fund is in the process of finalizing phase 2, the solution development phase. The IFRS project team is focusing on documenting issues, generating options and making recommendations, resolving first-time application issues and carrying on ongoing discussions with our external auditors. Just Energy has also commenced analysis of IFRS financial statement presentation and disclosure requirements. These assessments will need to be further analyzed and evaluated throughout the implementation phase of the Fund's project.

It is expected that several transitional adjustments and changes in accounting policies will be made on the transition to IFRS. The transitional adjustments and subsequent accounting may result in other business impacts such as impacts on the debt covenants and capital requirements disclosure. The Fund is currently determining the direction of changes and quantifying the adjustments.

Based on the work completed to date, the transition is expected to have minimal impact on information technology and internal controls over financial reporting of the Fund.

Management will continue to monitor changes planned by the IASB to ensure that any impact is appropriately reflected in our transition plan.

Legal Proceedings

On March 3, 2008, the Citizen's Utility Board, AARP and Citizen Action/Illinois filed a complaint before the Illinois Commerce Commission ("ICC") alleging that independent sales agents used deceptive practices in the sale of Just Energy contracts to Illinois customers. On October 14, 2009, the complaint proceeded to a hearing by the ICC. A final decision is expected during the fourth quarter.

The State of California has filed a number of complaints to the Federal Regulatory Energy Commission ("FREC") against many suppliers of electricity, including Commerce, a subsidiary of the Fund, with respect to events stemming from the 2001 energy crises in California. Pursuant to the complaints, the State of California is challenging the FREC's enforcement of its market-based rate system. Although Commerce did not own generation, the State of California is claiming that Commerce was unjustly enriched by the run-up caused by the alleged market manipulation by other market participants. The proceedings are currently ongoing.

Just Energy will resolve or vigorously contest the claims in these matters and in any other non-material litigation matters. Management believes that the pending legal actions against JEIC and Commerce are not expected to have a material impact on the financial condition of the Fund at this time.

Controls and Procedures

Except for the limitations on scope of design as noted below, during the most recent interim period, there have been no changes in the Fund's policies and procedures that comprise its internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Fund's internal control over financial reporting.

Limitation on Scope of Design

Section 3.3(1) of National Instrument 52-109, Certification of Disclosure in Issuer's Annual and Interim Filings, states that the Fund may limit its design of disclosure controls and procedures and internal controls over financial reporting for a business that it acquired not more than 365 days before the end of the financial period to which the certificate relates. Under this section, the Fund's CEO and CFO have limited the scope of the design, and subsequent evaluation, of disclosure controls and procedures and internal controls over financial reporting to exclude controls, policies and procedures of the subsidiaries TGF and NHS acquired on July 1, 2009 as part of the UEG acquisition.

Summary financial information pertaining to the UEG acquisition that was included in the consolidated financial statements of the Fund as at December 31, 2009 is as follows:



(thousands of dollars)
TGF NHS Total
------- ------ -------
Revenue(i) $35,909 $5,071 $40,980
Net loss(i) (4,318) (823) (5,141)
Current assets(ii) 11,649 6,407 11,102
Non-current assets(ii) 149,886 72,387 222,273
Current liabilities(ii) 64,493 856 65,349
Non-current liabilities(ii) 34,410 3,236 37,646
(i) Results from July 2, 2009 to December 31, 2009
(ii) Balance Sheet as at December 31, 2009


Corporate governance

Just Energy is committed to transparency in our operations and our approach to governance meets all recommended standards. Full disclosure of our compliance with existing corporate governance rules is available on our website at www.justenergy.com and is included in the Fund's May 15, 2009 management proxy circular. Just Energy actively monitors the corporate governance and disclosure environment to ensure timely compliance with current and future requirements.

Outlook

Just Energy Income Fund has announced that it plans to reorganize its income trust structure into a high dividend paying corporation. Unitholders will be asked to approve, by way of a plan of arrangement (the "Arrangement"), the reorganization at the Fund's annual and special meeting of Unitholders scheduled for June 29, 2010.

Upon completion of the reorganization, the Board intends to implement a dividend policy where monthly dividends will be initially set at $0.1033 per share ($1.24 annually), equal to the current distributions paid to Just Energy Unitholders.

The federal government's announcement on October 31, 2006 of the pending imposition of a tax on income trusts effective January 1, 2011 caused Just Energy to analyze options which would maximize Unitholder value for the long term. The conclusion of the analysis was that conversion to a high dividend corporation was the optimal option available to the Fund. The proposed reorganization offers a number of benefits:

- The conversion to a corporation will result in a lower overall tax burden versus payment of the trust tax after January 1, 2011.

- The unique nature of Just Energy as a growth company with high return on invested capital allows it to pay both a substantial yield and continue to grow. This remains true regardless of whether Just Energy is an income fund or a corporation.

- The receipt of $1.24 per year in dividends will result in a substantially higher after tax cash yield to shareholders than that of $1.24 in distributions for most taxable Canadian Unitholders.

- As a corporation, Just Energy will have greater access to capital markets to the extent that issuance of equity should be required for growth through acquisition.

- Limitations under the proposed tax on undue expansion of trusts and foreign ownership limitations on trusts will no longer apply to Just Energy.

- The high dividend yield as a corporation combined with Just Energy's growth prospects will focus market attention on the value of Just Energy shares.

In anticipation of the need for conversion, the Fund has not increased its rate of distribution since early 2008 despite substantial growth in its business. Distributions have been maintained by Just Energy at $0.1033 per month ($1.24 annually) supplemented by an annual Special Distributions ($0.20 payable January 31, 2010 being the most recent.) The decision not to continue distribution increases and the continued growth of Just Energy have given the Fund the flexibility to continue to pay a dividend equal to the current monthly distributions following the reorganization. This ability makes full allowance for the payment of tax by Just Energy and does not rely on a merger with tax loss bearing companies.

The other major near-term activity of management is the continued consolidation of the Universal operations into Just Energy. To date, the transition has proceeded smoothly with significant accretion seen to the consolidated financial results on a per unit basis. Management continues to rationalize overlap and has identified certain Universal customers who will either not be renewed or who are unlikely to elect renewal. Further, there are remaining non-recurring merger costs which are expected to occur in the fourth quarter of fiscal 2010. Accordingly, the rate of growth per unit for gross margin and distributable cash will not be sustained during the fourth quarter.

Management has provided guidance that gross margin and distributable cash after gross margin replacement per unit are expected to grow by approximately 5% to 10% on a per unit basis in fiscal 2010. After three quarters, gross margin has increased by 31% per unit and distributable cash by 18% per unit. The fourth quarter should see a slowing of margin growth for several reasons. The US dollar is expected to be down substantially year over year against the Canadian dollar reducing margins in the U.S. markets. The majority of customers purchased with Universal, which were not expected to renew (see "Customer aggregation" on page 17), will have ceased receiving their commodity from Just Energy in the fourth quarter. These customers generated approximately $9.5 million per quarter of margin. Finally, fiscal 2009 benefitted from extremely cold weather in the fourth quarter, it is unlikely that margins from excess gas consumption will be replicated this year. Management's current expectation is that per unit margin growth for the year will be higher than the 5% to 10% previously guided but less than 20% for the year. Distributable cash growth is expected to be negative in the fourth quarter as it was in this quarter. This is due to higher growth in general and administrative costs than growth in margin as well as higher interest expense and taxes associated with the acquired Universal operations. The current expectation is that distributable cash after margin replacement will increase at the lower end of the 5% to 10% per unit range indicated in previous guidance.

The financial positions of the Fund's commodity suppliers remain sound based on analysis by management as are those of the banks participating in the credit facility. Management does not believe that weakness in the global credit markets will have any near term impact on either existing business or the Fund's ability to grow in the future.

Sales of the Just Green products have been very strong with approximately 43% of all customers added in the last quarter using 86% of the green energy supply. Continued sales of Just Green products at these levels will alter the economics of Just Energy as green customers generate much higher per customer margins than the past five year fixed rate customers. As these new green customers become a higher and higher percentage of the overall Just Energy customer base, the results should be higher margins per customer and improved renewal rates.

The economies of Just Energy's markets remain in a continued recession. The very weak North American economic conditions and the turmoil in the credit and financial markets have not affected Just Energy's growth rates or its ability to realize high margin per customer. The major impact of the recession has been higher customer attrition in the United States due to high levels of utility shutoff following the increased volume billing periods. Following billing for the high electricity consumption period in Texas, bad debt losses have exceeded 4% in that market reflecting the effects of recessionary economic conditions not previously seen. With continued weakness in other markets, overall bad debt losses are slightly above the target range of 2% - 3%. This level is expected to continue for the fourth quarter. The Fund does not bear bad debt risk in Ontario, Quebec, Manitoba, British Columbia (excluding large volume customers), New York, Indiana, Michigan, Ohio and New Jersey. These markets contain approximately 76% of Just Energy's customers.

The Fund intends to continue its geographic expansion into new markets in the United States both through organic growth and focused acquisitions. The Fund intends to enter Massachusetts in the first quarter of fiscal 2011 and Pennsylvania in third quarter of next year. The Fund is actively reviewing a number of further possible acquisitions. Just Energy continues to monitor the progress of the deregulated markets in various jurisdictions. In addition, Just Energy is pursuing the development of alternative sales channels to enhance its continued growth in customer additions.

Changes made to the Income Tax Act require certain income trusts, including Just Energy, to pay taxes after 2010, similar to those paid by taxable Canadian corporations. The payment of such taxes will, in the future, reduce the cash flow of the Fund, thereby reducing the amount available for distributions to Unitholders. Just Energy is analyzing potential restructuring options in preparation for conversion from a trust to a corporation on or before 2011.

On January 18, 2010 Just Energy entered into a long term financing agreement with Home Trust Company for the funding of the water heaters for National Home Services. Under the agreement NHS will receive an amount equal to the five year cash flow of the water heater contract discounted at an agreed upon rate. Home Trust Company will then in return receive the customer payments on the water heaters for the next five years. The initial funding will be for approximately $45.0 million and total funding is expected to be approximately $90.0 million over the next year.




JUST ENERGY INCOME FUND
CONSOLIDATED BALANCE SHEETS
(Unaudited - thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


DECEMBER 31, 2009 MARCH 31, 2009
ASSETS

CURRENT
Cash $ 39,847 $ 59,094
Restricted cash 20,111 7,609
Accounts receivable 330,437 249,480
Gas delivered in excess of consumption 102,544 -
Gas in storage 36,332 6,690
Inventory 8,672 257
Unbilled revenues 112 57,779
Prepaid expenses and deposits 28,728 2,020
Corporate taxes recoverable 2,323 -
Current portion of future tax 20,611 -
Other assets - current (Note 9a) 2,786 5,544
----------------------------------------------------------------------------

592,503 388,473

INTANGIBLE ASSETS (Note 6) 398,485 5,097

FUTURE INCOME TAX ASSETS 7,194 -
GOODWILL 171,376 117,061
PROPERTY PLANT AND EQUIPMENT (less
accumulated amortization - $25,022; March
31, 2009 - $19,790) 212,558 19,971
OTHER ASSETS - LONG TERM (Note 9a) 4,939 5,153
----------------------------------------------------------------------------

$ 1,387,055 $ 535,755
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES

CURRENT
Bank indebtedness $ 6,954 $ -
Accounts payable and accrued liabilities 213,450 165,431
Customer rebates payable 6,993 7,309
Management incentive program payable 1,423 1,093
Unit distribution payable 38,443 10,977
Corporate taxes payable 4,269 1,906
Deferred revenue 130,618 -
Accrued gas accounts payable 87 41,379
Current portion of long-term debt (Note 7) 55,697 -
Other liabilities - current (Note 9a) 521,531 519,352
----------------------------------------------------------------------------
----------------------------------------------------------------------------

979,465 747,447
LONG TERM DEBT (Note 7) 231,733 76,500
DEFERRED LEASE INDUCEMENTS 2,079 2,382
FUTURE INCOME TAX LIABILITIES 61,510 -
OTHER LIABILITIES - LONG TERM (Note 9a) 468,797 401,720
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1,743,584 1,228,049
----------------------------------------------------------------------------
NON CONTROLLING INTEREST 21,339 292
----------------------------------------------------------------------------
UNITHOLDERS' EQUITY (DEFICIENCY)
Deficit $ (1,303,477) $ (1,470,277)
Accumulated other comprehensive income 256,399 364,566
----------------------------------------------------------------------------
(1,047,078) (1,105,711)
Unitholders' capital 652,423 398,454
Contributed surplus 16,787 14,671
----------------------------------------------------------------------------
Unitholders' deficit (377,868) (692,586)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

$ 1,387,055 $ 535,755
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements

Commitments (Note 12)




JUST ENERGY INCOME FUND
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED DECEMBER 31
(Unaudited - thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2009 2008

ACCUMULATED EARNINGS (DEFICIT)
Accumulated earnings (deficit), beginning of
period $ (712,427) $ 392,082
Net income (loss) 310,707 (938,852)
----------------------------------------------------------------------------
Accumulated earnings (deficit), end of period (401,720) (546,770)
----------------------------------------------------------------------------

DISTRIBUTIONS
Distributions, beginning of period (757,850) (604,013)
Distributions and dividends (139,922) (115,695)
Class A preference share distributions - net of
income taxes of $1,963 (2008 - $2,177) (3,985) (3,851)
----------------------------------------------------------------------------
Distributions, end of period (901,757) (723,559)
----------------------------------------------------------------------------

DEFICIT (1,303,477) (1,270,329)
----------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income, beginning
of period 364,566 40,789
Other comprehensive income (loss) (108,167) 392,855
----------------------------------------------------------------------------
Accumulated other comprehensive income, end of
period 256,399 433,644
----------------------------------------------------------------------------

UNITHOLDERS' CAPITAL (Note 8)
Unitholders' capital, beginning of period 398,454 358,103
Trust units exchanged 179,385 3,606
Trust units issued on exercise/exchange of unit
compensation (Note 8b) 574 4,981
Trust units issued 13,449 40,204
Exchangeable shares issued 239,946 -
Exchangeable shares exchanged (179,385) -
Repurchase and cancellation of units - (4,639)
Class A preference shares exchanged - (3,606)
----------------------------------------------------------------------------
Unitholders' capital, end of period 652,423 398,649
----------------------------------------------------------------------------

CONTRIBUTED SURPLUS (Note 8b) 16,787 14,226
----------------------------------------------------------------------------
Unitholders' deficit, end of period $ (377,868) $ (423,810)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements



JUST ENERGY INCOME FUND
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - thousands of dollars except per unit amount)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31

2009 2008 2009 2008

SALES $ 626,966 $ 513,608 $ 1,460,635 $ 1,185,640

COST OF SALES 515,019 423,782 1,201,117 996,467
----------------------------------------------------------------------------

GROSS MARGIN 111,947 89,826 259,518 189,173
----------------------------------------------------------------------------

EXPENSES

General and
administrative expenses 24,767 14,753 66,018 41,436
Capital tax expense 209 198 337 198
Marketing expenses 26,546 18,779 73,038 49,619
Unit based compensation 993 1,119 2,626 2,873
Bad debt expense 5,130 4,224 12,815 7,749
Amortization of
intangible assets and
related supply contracts 20,309 599 41,390 2,967
Amortization of property,
plant and equipment 1,935 1,245 5,656 3,586
----------------------------------------------------------------------------

79,889 40,917 201,880 108,428
----------------------------------------------------------------------------

INCOME BEFORE THE
UNDERNOTED 32,058 48,909 57,638 80,745

INTEREST EXPENSE 5,143 1,121 10,569 2,977

CHANGE IN FAIR VALUE OF
DERIVATIVE
INSTRUMENTS (Note 9a) (50,853) 81,345 (277,248) 1,092,859

OTHER INCOME (1,441) (1,665) (2,755) (3,707)
----------------------------------------------------------------------------

INCOME (LOSS) BEFORE
INCOME TAX 79,209 (31,892) 327,072 (1,011,384)

PROVISION FOR (RECOVERY
OF) INCOME TAX (17,010) 17,230 19,079 (72,504)

NON-CONTROLLING INTEREST (1,171) (28) (2,714) (28)
----------------------------------------------------------------------------

NET INCOME (LOSS) $ 97,390 $ (49,094) $ 310,707 $ (938,852)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements

Income (loss) per unit
(Note 10)

Basic $ 0.73 $ (0.44) $ 2.39 $ (8.52)

Diluted $ 0.73 $ (0.44) $ 2.37 $ (8.52)



JUST ENERGY INCOME FUND
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited - thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31

2009 2008 2009 2008

NET INCOME (LOSS) $ 97,390 $ (49,094) $ 310,707 (938,852)
----------------------------------------------------------------------------

Unrealized gain (loss) on
translation of self sustaining
operations (176) (2,252) 24,845 5,846

Unrealized and realized gain on
derivative instruments
designated as cash flow hedges
prior to July 1, 2008 net
of income taxes of $89,256
(Note 9a) - - - 498,654

Amortization of deferred
unrealized gain of discontinued
hedges net of income taxes of
$7,787 (2008 -$14,431)
and $25,511 (2008 - $25,558) for
the three and nine
months respectively (Note 9a) (43,386) (64,145) (133,012) (111,645)
----------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME (LOSS) (43,562) (66,397) (108,167) 392,855
----------------------------------------------------------------------------

COMPREHENSIVE INCOME (LOSS) $ 53,828 $ (115,491) $ 202,540 (545,997)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements



JUST ENERGY INCOME FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31

Net inflow (outflow) of
cash related to the
following activities 2009 2008 2009 2008

OPERATING
Net income (loss) $ 97,390 $ (49,094) $ 310,707 $ (938,852)
----------------------------------------------------------------------------

Items not affecting cash
Amortization of
intangible assets and
related supply contracts 20,309 599 41,390 2,967
Amortization of property,
plant and equipment 1,935 1,245 5,656 3,586
Unit based compensation 993 1,119 2,626 2,873
Non controlling interest (1,171) (28) (2,714) (28)
Future income taxes (20,165) 14,431 8,781 (77,335)
Financing charges,
non-cash portion 414 - 810 -
Other 1,729 (86) 2,211 (1,286)
Change in fair value of
derivative instruments (50,853) 81,345 (277,248) 1,092,859
----------------------------------------------------------------------------
(46,809) 98,625 (218,488) 1,023,636
----------------------------------------------------------------------------
Adjustments required to
reflect net cash receipts
from gas sales 9,775 (2,272) 44,492 19,877
----------------------------------------------------------------------------
Changes in non-cash
working capital (55,938) (31,297) (69,791) (25,694)
----------------------------------------------------------------------------
Cash inflow from
operations 4,418 15,962 66,920 78,967
----------------------------------------------------------------------------
FINANCING
Exercise of trust unit
options (Note 8a) - - - 4,293
Distributions and
dividends paid to
Unitholders and
holders of Exchangeable
shares (33,924) (28,597) (98,645) (79,068)
Distributions to Class A
preference shareholders (1,632) (1,632) (4,895) (5,960)
Tax impact on
distributions to Class A
preference shareholders 886 903 1,963 2,177
Units purchased for
cancellation - (4,639) - (4,639)
Increase in bank
Indebtedness 6,954 - 6,954 -

Issuance of long-term
Debt 120,118 39,628 140,362 63,226

Repayment of long-term
debt and bank
indebtedness (84,085) (15,841) (109,085) (28,149)
Funding from minority
Interest holder of TGF 1,302 - 1,302 -
Restricted cash 3,167 (98) 2,336 (107)
----------------------------------------------------------------------------
12,786 (10,276) (59,708) (48,227)
----------------------------------------------------------------------------
INVESTING
Purchase of capital
assets (11,034) (1,667) (30,917) (2,993)
Water heater customer
acquisition costs and
other intangible assets (1,522) - (3,933) -
Acquisitions (Note 5) - - 9,799 (2,342)
----------------------------------------------------------------------------

(12,556) (1,667) (25,051) (5,335)
----------------------------------------------------------------------------
Effect of foreign
currency translation on
cash balances 5,519 (1,473) (1,408) (1,003)
----------------------------------------------------------------------------
NET CASH INFLOW (OUTFLOW) 10,167 2,546 (19,247) 24,402
CASH, BEGINNING OF PERIOD 29,680 49,166 59,094 27,310
----------------------------------------------------------------------------

CASH, END OF PERIOD $ 39,847 $ 51,712 $ 39,847 $ 51,712
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental information

Interest paid $ 4,691 $ 1,134 $ 8,900 $ 3,049
Income taxes paid $ 13,300 $ 22 $ 20,536 $ 154
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements



JUST ENERGY INCOME FUND
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2009
(thousands of dollars except where indicated and per unit amounts)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


1. INTERIM FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements do not conform in all respects to the requirements of Canadian Generally Accepted Accounting Principles ("GAAP") for annual financial statements and should therefore be read in conjunction with the audited consolidated financial statements and notes thereto included in the Fund's annual report for fiscal 2009. The unaudited interim consolidated financial statements have been prepared by management in accordance with Canadian GAAP applicable to interim consolidated financial statements and follow the same accounting policies and methods in their applications as the most recent annual financial statements, except as described in Note 3.

2. ORGANIZATION

Just Energy Income Fund ("Just Energy" or the "Fund"), formerly known as Energy Savings Income Fund, changed its name effective June 1, 2009.

Just Energy is an open-ended, limited-purpose trust established under the laws of the Province of Ontario to hold securities and to distribute the income of its directly or indirectly owned operating subsidiaries and affiliates: Just Energy Ontario L.P. ("JE Ontario"), Just Energy Manitoba L.P. ("JE Manitoba"), Just Energy Quebec L.P. ("JE Quebec"), Just Energy (B.C.) Limited Partnership ("JE BC"), Alberta Energy Savings L.P. ("AESLP"), Just Energy Alberta L.P. ("JE Alberta"), Just Energy Illinois Corp. ("JEIC"), Just Energy New York Corp. ("JENYC"), Just Energy Indiana Corp. ("JEINC"), Just Energy Texas L.P. ("JETLP"), Just Energy Exchange Corp. ("JEEC"), Universal Energy Corporation ("UEC"), Universal Gas and Electric Corp. ("UGEC"), Commerce Energy Inc. ("CEI"), National Energy Corp. ("NEC") (operating under the trade name of National Home Services ("NHS")) and Terra Grain Fuels Inc. ("TGF") (collectively the "Just Energy Group").

3. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

(A) ADOPTION OF NEW ACCOUNTING STANDARDS

On April 1, 2009, the Fund adopted a new accounting standard that was issued by the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3064, Goodwill and Intangible Assets, which establishes revised standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. Just Energy adopted this standard retroactively as required by the standards with no impact on the financial statements.

(B) RECENTLY ISSUED ACCOUNTING STANDARDS

The following are the new standards, not yet in effect, which are required to be adopted by the Fund on the effective date:

Business combinations

In October 2008, the CICA issued Handbook Section 1582, Business Combinations ("CICA 1582"), concurrently with CICA Handbook Section 1601, Consolidated Financial Statements ("CICA 1601"), and CICA Handbook Section 1602, Non-controlling Interest ("CICA 1602"). CICA 1582, which replaces CICA Handbook Section 1581, Business Combinations, establishes standards for the measurement of a business combination and the recognition and measurement of assets acquired and liabilities assumed. CICA 1601, which replaces CICA Handbook Section 1600, carries forward the existing Canadian guidance on aspects of the preparation of consolidated financial statements subsequent to acquisition other than non-controlling interests. CICA 1602 establishes guidance for the treatment of non-controlling interests subsequent to acquisition through a business combination. These new standards are effective for fiscal years beginning on or after January 1, 2011. The Fund has not yet determined the impact of these standards on its consolidated financial statements.

International Financial Reporting Standards

In February 2008, CICA announced that GAAP for publicly accountable enterprises will be replaced by International Financial Reporting Standards ("IFRS") for fiscal years beginning on or after January 1, 2011.

Just Energy will transition to IFRS effective April 1, 2011, and intends to issue its first interim consolidated financial statement under IFRS for the three-month period ending June 30, 2011, and a complete set of consolidated financial statements under IFRS for the year ending March 31, 2012.

Just Energy has identified differences between Canadian GAAP and IFRS relevant to the Fund and an initial assessment has been made of the impact of the required changes to accounting systems, business processes and requirements for personnel training and development. A conversion plan was developed in March 2009 to manage the transition to IFRS.

As part of the conversion plan, the Fund is in the process of analyzing the detailed impacts of these identified differences and developing solutions to bridge these differences. Just Energy is currently on target with its conversion plan.

(C) ACCOUNTING POLICIES ADOPTED UPON ACQUISITION OF UNIVERSAL ENERGY GROUP LTD.

(Note 5)

(i) Inventory

Ethanol, ethanol in process and grain inventory are valued at the lower of cost and net realizable value with cost being determined on a weighted average basis.

(ii) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated amortization. Amortization for property, plant and equipment related to the Fund's ethanol plant is provided over estimated useful lives of 15 to 25 years using the straight line method.

(iii) Water heater contracts

Water heater contracts represent the fair value of rental contracts on the acquisition of various water heater contracts. These contracts are amortized over their average estimated remaining life. The Fund regularly evaluates these water heater contracts including the estimates of useful lives.

4. SEASONALITY OF OPERATIONS

Just Energy's operations are seasonal. Gas consumption by customers is typically highest in October through March and lowest in April through September. Electricity consumption is typically highest in January through March and July through September. Electricity consumption is lowest in October through December and April through June.

5. ACQUISITIONS

(a) Acquisition of Universal Energy Group Ltd.

On July 1, 2009, Just Energy completed the acquisition of all of the outstanding common shares of Universal Energy Group Ltd. ("UEG") pursuant to a plan of arrangement (the "Arrangement"). Under the Arrangement, UEG shareholders received 0.58 of an exchangeable share ("Exchangeable Share") of JEEC, a subsidiary of Just Energy, for each UEG common share held. In aggregate, 21,271,804 Exchangeable Shares were issued pursuant to the Arrangement. Each Exchangeable Share is exchangeable for a Trust Unit on a one-for-one basis at any time at the option of the holder and entitles the holder to a monthly dividend equal to 66 2/3% of the monthly distribution paid by Just Energy on a trust unit. JEEC also assumed all the covenants and obligations of UEG in respect of UEG's outstanding 6% convertible unsecured subordinated debentures (the "Debentures"). On conversion of the Debentures, holders will be entitled to receive 0.58 of an Exchangeable Share in lieu of each UEG common share that the holder was previously entitled to receive on conversion.

The acquisition of UEG was accounted for using the purchase method of accounting. The Fund allocated the purchase price to the identified assets and liabilities acquired based on their fair values at the time of acquisition as follows:



CAD$
Net assets acquired:
Working capital (including cash of $10,319) $ 75,391
Electricity contracts and customer relationships 230,963
Gas contracts and customer relationships 247,189
Water heater contracts and customer relationships 22,700
Other intangible assets 2,721
Goodwill 59,294
Property, plant and equipment 171,918
Future tax liabilities (51,971)
Other liabilities - current (164,148)
Other liabilities - long-term (140,857)
Long-term debt (180,440)
Non-controlling interest (22,697)
-----------

$ 250,063
-----------
-----------
Consideration:
Transaction costs $ 10,117
Exchangeable shares 239,946
-----------

$ 250,063
-----------
-----------


All contracts and intangible assets are amortized over the average remaining life at the time of acquisition. The gas and electricity contracts and customer relationships are amortized over periods ranging from 8 to 57 months. The water heater contracts and customer relationships are amortized over 174 months and the intangible assets are amortized over six months. The purchase price allocation is considered preliminary and as a result it may be adjusted during the year.

(b) Newten Home Comfort Inc.

On July 2, 2009, NEC, a wholly owned subsidiary of the Fund, acquired Newten Home Comfort Inc., an arm's length third party that held a 20% interest in Newten Home Comfort L.P. for $3.2 million, of which $520 was paid in cash and determined to be the purchase price consideration. The purchase price consideration excludes contingent payments to the 20% interest holders that will become payable in July 2012 based on completed water heater installations. Any contingent payments made will result in an increase to the balance of goodwill generated by the acquisition.

(c) Acquisition of CEG's natural gas customers

During the prior fiscal year, Just Energy purchased substantially all of the commercial and residential customer contracts of CEG Energy Options Inc. ("CEG") in British Columbia. CEG was a Western Canada marketer of natural gas wholly owned by SemCanada Energy Company, both of which filed for creditor protection under the Companies' Creditors Arrangement Act on July 30, 2008. The customer contracts had annualized volumes of approximately 4.9 million GJs.

The purchase price was allocated as follows:



The purchase price was allocated as follows:

Net assets acquired:
Gas contracts $ 1,842
-------
-------
Consideration:
Cash $ 1,842
-------
-------


The gas contracts are being amortized over the average remaining life of the contracts, which at the time of the acquisition was 20 months.

6. INTANGIBLE ASSETS



Accumulated Net Book
As at December 31, 2009 Cost Amortization Value
----------------------------------------------------------------------------

Gas contracts and customer relationships $ 236,801 $ 44,121 $ 192,680
Electricity contracts and customer
relationships 247,607 67,913 179,694
Water heater contracts and customer
relationships 23,081 821 22,260
Other intangible assets 6,392 2,541 3,851
----------------------------------------------------------------------------
$ 513,881 $ 115,396 $ 398,485
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated Net Book
As at March 31, 2009 Cost Amortization Value
----------------------------------------------------------------------------

Gas contracts and customer relationships $ 2,223 $ 710 $ 1,513
Electricity contracts and customer
relationships 14,379 10,795 3,584
----------------------------------------------------------------------------
$ 16,602 $ 11,505 $ 5,097
----------------------------------------------------------------------------
----------------------------------------------------------------------------



7. LONG TERM DEBT AND FINANCING


December 31, March 31,
2009 2009

Credit facility (a) $117,045 $76,500
TGF Credit facility (b)(i) 41,699 -
TGF Debentures (b)(ii) 38,000 -
TGF Operating facilities (b)(iii) 10,000 -
JEEC Convertible debentures (c) 80,686 -

----------------------------------------------------------

287,430 76,500

Less: current portion (55,697) -
----------------------------------------------------------

$231,733 $76,500
----------------------------------------------------------
----------------------------------------------------------


The following table details the interest expense for the three and nine months ended December 31, 2009. Interest is expensed at the effective interest rate.



For the three For the three For the nine For the nine
months ended months ended months ended months ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008

----------------------------------------------------------------------------
Credit facility (a) $ 1,708 $ 1,121 $ 3,545 $ 2,977
TGF Credit
facility (b)(i) 447 - 1,065 -
TGF Debentures
(b)(ii) 1,005 - 2,133 -
TGF Wheat
production
financing - - 10 -
TGF Operating
facilities
(b)(iii) 219 - 306 -
JEEC Convertible
debentures (c) 1,764 - 3,510 -

----------------------------------------------------------------------------

$ 5,143 $ 1,121 $ 10,569 $ 2,977
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(a) On July 1, 2009, in connection with the acquisition of UEG, Just Energy increased its credit facility from $170 million to $250 million. The credit facility is available to Just Energy to meet working capital requirements. As part of the increase in the credit facility, Societe Generale and Alberta Treasury Branches joined Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canada and Bank of Nova Scotia as the syndicate of lenders thereunder. The repayment of the facility is due on October 29, 2011.

Interest is payable on outstanding loans at rates that vary with Bankers' Acceptance, LIBOR, Canadian bank prime rate or U.S. prime rate. Under the terms of the operating credit facility, Just Energy is able to make use of Bankers' Acceptances and LIBOR advances at stamping fees of 4.0%, prime rate advances at bank prime plus 3.0%, and letters of credit at 4.0%. As at December 31, 2009, the Canadian prime rate was 2.25% and the U.S. prime rate was 3.25%. As at December 31, 2009, Just Energy had drawn $117,045 (March 31, 2009 - $76,500) against the facility and total letters of credit outstanding amounted to $34,428 (March 31, 2009 - $8,459). Just Energy has $98,527 of the facility remaining for future working capital and security requirements. Just Energy's obligations under the credit facility are supported by guarantees of certain subsidiaries and affiliates and secured by a pledge of the assets of Just Energy and the majority of its operating subsidiaries and affiliates. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at December 31, 2009 and 2008, all of these covenants have been met.

(b) In connection with the acquisition of UEG on July 1, 2009, the Fund acquired the debt obligations of TGF, which consists currently of three separate facilities, outlined below.

(i) TGF Credit Facility

A credit facility of up to $50,000 was established with a syndicate of Canadian lenders led by Conexus Credit Union was arranged to finance the construction of the ethanol plant in 2007. The facility was further revised on March 18, 2009, and was converted to a fixed repayment term of ten years commencing March 1, 2009 which includes interest costs at a rate of prime plus 2%, with principal repayments commencing on March 1, 2010. As at December 31, 2009, $5,000 of principal has been repaid. The credit facility is secured by a demand debenture agreement, a first priority security interest on all assets and undertakings of TGF, and a general security interest on all other current and acquired assets of TGF. The credit facility includes certain financial covenants the more significant of which relate to current ratio, debt to equity ratio, debt service coverage and minimum shareholders' equity. For the period ended December 31, 2009, TGF was in compliance with all of the covenants other than the current ratio and the debt service coverage covenant which were subsequently waived on January 25, 2010. The lenders also deferred compliance with the financial covenants until April 1, 2011. As at December 31, 2009 the amount owing under this facility amounted to $41,699.

(ii) TGF Debentures

A debenture purchase agreement with a number of private parties providing for the issuance of up to $40,000 aggregate principal amount of debentures was entered into in 2006. The interest rate is 10.5% per annum, compounded annually and payable quarterly. Interest is to be paid quarterly with quarterly principal payments commencing October 1, 2009 in the amount of $1,000 per quarter. The agreement includes certain financial covenants the more significant of which relate to current ratio, debt to capitalization ratio, debt service coverage, debt to EBITDA and minimum shareholders' equity. On January 1, 2009, TGF entered into an agreement with the holders of the debenture to defer the compliance with the financial covenants and the scheduled principal payments owing under the Debenture until October 1, 2009. For the period ended December 31, 2009, TGF was in compliance with all of the covenants other than the current ratio, the debt service coverage, and debt to EBITDA covenant which were subsequently waived on January 25, 2010. The lender also deferred compliance with the financial covenants until April 1, 2011. As a result, the debentures are classified as a long-term obligation. As at December 31, 2009, the amount owing under this debenture agreement amounted to $38,000.

(iii) TGF Operating Facilities

TGF also maintains a term loan for $10,000 with a third party lender bearing interest at prime plus 1% due in full on December 31, 2010. This facility is secured by liquid investments on deposit with the lender. In addition, TGF has a working capital operating line of $7,000 bearing interest at prime plus 1% of which $3,900 was drawn via overdraft and $1,600 of letters of credit.

(c) In conjunction with the acquisition of UEG on July 1, 2009, JEEC also acquired the obligations of the convertible unsecured subordinated debentures issued by UEG in October 2007. These instruments have a face value of $90,000 and mature on September 30, 2014 unless converted prior to that date and bear interest at an annual rate of 6% payable semi-annually on March 31 and September 30 of each year. Each $1,000 principal amount of the debentures is convertible at any time prior to maturity or on the date fixed for redemption, at the option of the holder, into approximately 27.3 Exchangeable Shares of Just Energy Exchange Corp. representing a conversion price of $36.63 per Exchangeable Share. During the three and six months ended December 31, 2009, interest expense amounted to $1,764 and $3,510, respectively.

The debentures are not redeemable prior to October 1, 2010. On and after October 1, 2010, but prior to September 30, 2012, the debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at the Fund's sole option on not more than 60 days and not less than 30 days prior notice, provided that the current market price on the date on which notice of redemption is given is not less than 125% of the conversion price. On and after September 30, 2012, but prior to the maturity date, the debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at the Fund's sole option on not more than 60 days and not less than 30 days prior notice.

8. UNITHOLDERS' CAPITAL

(a) Trust units of the Fund

An unlimited number of units may be issued. Each unit is transferable, voting and represents an equal undivided beneficial interest in any distributions from the Fund whether of net income, net realized capital gains or other amounts, and in the net assets of the Fund in the event of termination or winding-up of the Fund.

The Fund intends to make distributions to its Unitholders based on the cash receipts of the Fund, excluding proceeds from the issuance of additional Fund units, adjusted for costs and expense of the Fund, the amount which may be paid by the Fund in connection with any cash redemptions or repurchases of units and any other amount that the Board of Directors considers necessary to provide for the payment of any costs which have been or will be incurred in the activities and operations of the Fund. The Fund's intention is for Unitholders of record on the 15th day of each month to receive distributions at the end of the month, excluding any special distributions.

Class A preference shares of Just Energy Corp.

The terms of the unlimited Class A preference shares of JEC are non-voting, non-cumulative and exchangeable into trust units in accordance with the JEC shareholders' agreement as restated and amended, with no priority on dissolution. Pursuant to the amended and restated Declaration of Trust which governs the Fund, the holders of Class A preference shares are entitled to vote in all votes of Unitholders as if they were the holders of the number of units that they would receive if they exercised their shareholder exchange rights. Class A preference shareholders have equal entitlement to distributions from the Fund as Unitholders.

Exchangeable shares of JEEC

On July 1, 2009, Just Energy completed the acquisition of all of the outstanding common shares of Universal Energy Group Ltd. ("UEG") pursuant to a plan of arrangement (the "Arrangement"). Under the Arrangement, UEG shareholders received 0.58 of an exchangeable share ("Exchangeable Share") of Just Energy Exchange Corp. ("JEEC"), a subsidiary of Just Energy, for each UEG common share held. In aggregate, 21,271,804 Exchangeable Shares were issued pursuant to the Arrangement. Each Exchangeable Share is exchangeable for a Trust Unit on a one-for-one basis at any time at the option of the holder and entitles the holder to a monthly dividend equal to 66 2/3% of the monthly distribution paid by Just Energy on a Trust Unit.



2009 2008
Issued and Outstanding Units/Shares Units/Shares

Trust units
-----------

Balance, beginning of
period 106,138,523 $ 385,294 102,152,194 $ 341,337

Options exercised - - 355,000 4,840

Unit appreciation rights
exchanged 39,482 555 9,788 141

Deferred unit grants
exchanged 1,712 19 - -

Distribution
reinvestment plan 1,073,105 13,449 1,604,484 17,891

Units issued - - 1,336,115 22,313

Units cancelled - - (677,700) (4,639)

Exchanged from
Exchangeable shares 15,902,969 179,385 - -

Exchanged from Class A
preference shares - - 1,442,484 3,606
--------------------------------------------------

Balance, end of period 123,155,791 578,702 106,222,365 385,489
--------------------------------------------------

Class A preference
shares
------------------

Balance, beginning of
period 5,263,728 13,160 6,706,212 16,766

Exchanged into units - - (1,442,484) (3,606)
--------------------------------------------------

Balance, end of period 5,263,728 13,160 5,263,728 13,160
--------------------------------------------------

Exchangeable shares
-------------------

Balance, beginning of
period - - - -

Exchangeable shares
issued 21,271,804 239,946 - -

Exchanged into units (15,902,969) (179,385) - -
--------------------------------------------------

Balance, end of period 5,368,835 60,561 - -
--------------------------------------------------

Unitholders' capital,
end of period 133,788,354 $ 652,423 111,486,093 $ 398,649
--------------------------------------------------
--------------------------------------------------


Distribution reinvestment plan

Under the Fund's distribution reinvestment plan ("DRIP"), Unitholders holding a minimum of 100 units can elect to receive their distributions (both regular and special) in units rather than cash at a 2% discount to the simple average closing price of the units for five trading days preceding the applicable distribution payment date, providing the units are issued from treasury and not purchased on the open market.

Units cancelled

During the prior fiscal year, the Fund obtained approval from its Board of Directors to make a normal course issuer bid to purchase up to 9,000,000 units for the 12-month period commencing November 21, 2008 and ending November 20, 2009. A maximum of 44,754 units can be purchased during any trading day. No units were purchased and cancelled during the period.

Units issued

During the nine months ended December 31, 2009, the Fund issued 15,902,969 units relating to the exchange of exchangeable shares. The exchangeable shares were issued pursuant to Just Energy's acquisition of Universal Energy Group Ltd.

During the prior comparable period, the Fund issued 1,336,115 units relating to a portion of the special distribution declared on December 31, 2007, payable in units.

(b) Contributed surplus

Amounts credited to contributed surplus include unit based compensation awards, unit appreciation rights ("UARs") and deferred unit grants ("DUGs"). Amounts charged to contributed surplus are awards exercised during the period.



Contributed Surplus 2009 2008
----- -----

Balance, beginning of period $ 14,671 $ 12,004
Add: unit based compensation awards 2,626 2,873
non-cash deferred unit grants distributions 64 38
Less: unit based awards exercised (574) (689)
--------- ---------

Balance, end of period $ 16,787 $ 14,226
--------- ---------
--------- ---------


Total amounts credited to Unitholders' capital in respect of unit options and deferred unit grants exercised or exchanged during the three and nine months ended December 31, 2009 amounted to $38 (2008 - nil) and $574 (2008 - $4,981).

Cash received from options exercised for the three and nine months ended December 31, 2009 amounted to $nil (2008 - nil) and $nil (2008 - $4,293).

9. FINANCIAL INSTRUMENTS

(a) Fair value

The Fund has a variety of gas and electricity supply contracts that are captured under CICA Handbook section 3855, Financial Instruments - Measurement and Recognition. Fair value is the estimated amount that Just Energy would pay or receive to dispose of these supply contracts in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act. Management has estimated the value of electricity, renewable and gas swap and forward contracts using a discounted cash flow method which employs market forward curves that are either directly sourced from third parties or are developed internally based on third party market data. These curves can be volatile thus leading to volatility in the mark to market with no impact to cash flows. Gas options have been valued using the Black option value model using the applicable market forward curves and the implied volatility from other market traded gas options.

Effective July 1, 2008, the Fund ceased the utilization of hedge accounting. Accordingly, all the mark to market changes on the Fund's derivative instruments are recorded on a single line on the consolidated statements of operations. Due to the commodity volatility and size of the Fund, the quarterly swings in mark to market on these positions will increase the volatility in the Fund's earnings.

The following tables illustrate (gains)/losses related to the Fund's derivative financial instruments classified as held-for-trading recorded against other assets and other liabilities with their offsetting values recorded in change in fair value derivative instruments for the three and nine months ended December 31, 2009.



Change In Fair Value of Derivative Instruments
For the three For the three For the three For the three
months ended months ended months ended months ended
December 31, December 31, December 31, December 31,
2009 2009 (USD) 2008 2008 (USD)
Canada
Fixed-for-
floating
electricity
swaps (i) $ (55,615) n/a $ (31,802) n/a
Renewable energy
certificates
(ii) 1,362 n/a (272) n/a
Verified
emission-
reduction
credits (iii) (9) n/a - n/a
Options (iv) (634) n/a (1,650) n/a
Physical gas
forward
contracts (v) (214) n/a 51,386 n/a
Transportation
forward
contracts (vi) 13,191 n/a (11,121) n/a
United States
Fixed-for-
floating
electricity
swaps (vii) 185 176 26,614 21,559
Physical
electricity
forwards (viii) 4,061 3,852 30,098 24,381
Unforced
capacity forward
contracts (ix) 733 695 2,237 1,812
Unforced
capacity
physical
contracts (x) (327) (311) - -
Renewable energy
certificates
(xi) (655) (621) (323) (262)
Verified
emission-reduc-
tion credits (xii) 189 179 122 100
Options (xiii) 388 368 (871) (706)
Physical gas
forward
contracts (xiv) (120) (114) 90,191 73,059
Transportation
forward
contracts (xv) 929 881 4,202 3,404
Heat rate swaps
(xvi) (2,344) (2,223) 315 255
Fixed financial
swaps (xvii) 8,732 8,282 - -
Foreign exchange
forward
contracts
(xviii) 824 n/a 795 n/a
Other
Amortization of
deferred
unrealized gains
of discontinued
hedges (51,174) n/a (78,576) n/a
Amortization of
derivative
financial
instruments
related to
Universal
acquisition 29,645 n/a - n/a
----------------------------------------------------------------------------
Change In Fair
Value of
Derivative
Instruments $ (50,853) $ 81,345
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Change In Fair Value of Derivative Instruments
For the nine For the nine For the nine For the nine
months ended months ended months ended months ended
December 31, December 31, December 31, December 31,
2009 2009 (USD) 2008 2008 (USD)
Canada
Fixed-for-
floating
electricity
swaps (i) $ (41,462) n/a $ 122,073 n/a
Renewable energy
certificates
(ii) (477) n/a $ 448 n/a
Verified
emission-
reduction
credits (iii) (9) n/a - n/a
Options (iv) 326 n/a $ (1,259) n/a
Physical gas
forward
contracts (v) (54,327) n/a $ 621,147 n/a
Transportation
forward
contracts (vi) 20,680 n/a $ (7,086) n/a
United States
Fixed-for-
floating
electricity
swaps (vii) (10,987) (10,021) 79,520 71,445
Physical
electricity
forwards (viii) (29,093) (25,983) 108,037 98,027
Unforced
capacity forward
contracts (ix) (458) (309) 5,725 5,106
Unforced
capacity
physical
contracts (x) (26) (32) - -
Renewable energy
certificates
(xi) 731 645 (206) (149)
Verified
emission-
reduction
credits (xii) 405 371 63 43
Options (xiii) 2,653 2,414 4,307 3,851
Physical gas
forward
contracts (xiv) (70,434) (64,148) 294,024 265,663
Transportation
forward
contracts (xv) 223 231 3,370 2,617
Heat rate
swaps (xvi) (3,882) (3,591) 87 39
Fixed financial
swaps (xvii) 5,393 5,209 - -
Foreign exchange
forward
contracts
(xviii) 2,494 n/a 121 n/a
Other
Amortization of
deferred
unrealized gains
of discontinued
hedges (158,523) n/a (137,203) n/a
Amortization of
derivative
financial
instruments
related to
Universal
acquisition $ 59,525 n/a - n/a
----------------------------------------------------------------------------
Change In Fair
Value of
Derivative
Instruments $ (277,248) $ 1,093,168
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The following table illustrates (gains)/losses representing the ineffective portion of the Fund's designated hedges prior to July 1, 2008, recorded against other assets and other liabilities with their offsetting values recorded in change in fair value of derivative instruments.



Change In Fair Value of Derivative Instruments
For the nine For the nine For the nine For the nine
months ended months ended months ended months ended
December 31, December 31, December 31, December 31,
2009 2009 (USD) 2008 2008 (USD)
Canada
Fixed-for-
floating
electricity
swaps (i) $ - n/a $ (476) n/a
United States
Fixed-for-
floating
electricity
swaps (vii) - - 167 164
----------------------------------------------------------------------------
Change In Fair
Value of
Derivative
Instruments $ - - $ (309) -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Total Change In
Fair value of
Derivative
Instruments $ (277,248) $ 1,092,859
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The following table illustrates (gains)/losses to the Fund's designated hedges prior to July 1, 2008, recorded against other assets and other liabilities with their offsetting values recorded in other comprehensive income.




Other Comprehensive Income
For the nine For the nine
months ended months ended
December 31, December 31,
2008 2008 (USD)
Canada
Fixed-for-floating electricity swaps (i) $ (75,354) n/a
Renewable energy certificates (ii) - n/a
Verified emission-reduction credits (iii) - n/a
Options (iv) - n/a
Physical gas forward contracts (v) (313,071) n/a
Transportation forward contracts (vi) (5,958) n/a
United States
Fixed-for-floating electricity swaps (vii) (40,473) (39,808)
Physical electricity forwards (viii) (30,573) (30,071)
Unforced capacity forward contracts (ix) (4,743) (4,665)
Renewable energy certificates (xi) - -
Verified emission-reduction credits (xii) - -
Options (xiii) - -
Physical gas forward contracts (xiv) (124,760) (122,711)
Transportation forward contracts (xv) 7,022 6,907
Heat rate swaps (xvi) - -
Fixed financial swaps (xvii) - -
Foreign exchange forward contracts (xviii) - -
Amortization of deferred unrealized gains of
discontinued hedges (4,550) -
--------------------------------------------------------------------------
Other Comprehensive Income $ (592,460)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


The following table summarizes certain aspects of the financial assets and liabilities recorded in the financial statements as at December 31, 2009.



Other Other
Other assets Other assets liabilities liabilities
(current) (long term) (current) (long term)
Canada
Fixed-for-floating
electricity
swaps (i) $ - $ - $ 220,401 $ 190,578
Renewable energy
certificates (ii) 349 618 30 137
Verified
emission-reduction
credits (iii) 2 7 - -
Options (iv) - - 263 482
Physical gas
forward
contracts (v) - - 162,155 153,184
Transportation
forward
contracts (vi) - - 10,373 8,453
United States
Fixed-for-floating
electricity
swaps (vii) - - 22,372 18,630
Physical
electricity
forwards (viii) 95 389 21,305 26,614
Unforced capacity
forward
contracts (ix) 186 146 120 -
Unforced capacity
physical
contracts (x) 34 - - -
Renewable energy
certificates (xi) 81 95 162 542
Verified
emission-reduction
credits (xii) - - 92 298
Options (xiii) - - 1,960 1,543
Physical gas
forward
contracts (xiv) - - 73,412 63,855
Transportation
forward
contracts (xv) 84 - 1,233 1,390
Heat rate
swaps (xvi) 784 3,665 434 -
Fixed financial
swaps (xvii) 67 19 7,219 3,091
Foreign exchange
forward
contracts (xviii) 1,104 - - -
----------------------------------------------------------------------------
As at December 31,
2009 $ 2,786 $ 4,939 $ 521,531 $ 468,797
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The following table summarizes certain aspects of the financial assets and liabilities recorded in the financial statements as at March 31, 2009.



Other Other
Other assets Other assets liabilities liabilities
(current) (long term) (current) (long term)
Canada
Fixed-for-floating
electricity
swaps (i) $ - $ - $ 149,476 $ 158,289
Renewable energy
certificates (ii) 94 251 - 23
Verified
emission-reduction
credits (iii) - - - -
Options (iv) 792 23 237 997
Physical gas
forward
contracts (v) - - 198,329 103,734
Transportation
forward
contracts (vi) 787 2,160 927 163
United States
Fixed-for-floating
electricity
swaps (vii) - - 34,997 24,577
Physical
electricity
forwards (viii) - - 48,242 41,456
Unforced capacity
forward
contracts (ix) 19 213 366 -
Unforced capacity
physical
contracts (x) - - - -
Renewable energy
certificates (xi) 57 191 19 48
Verified
emission-reduction
credits (xii) - - - -
Options (xiii) 395 - 204 1,349
Physical gas
forward
contracts (xiv) - - 84,010 69,627
Transportation
forward
contracts (xv) 4 - 961 1,457
Heat rate
swaps (xvi) 72 1,171 956 -
Fixed financial
swaps (xvii) - 869 628 -
Foreign exchange
forward
contracts (xviii) 3,324 275 - -
----------------------------------------------------------------------------
As at March 31,
2009 $ 5,544 $ 5,153 $ 519,352 $ 401,720
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The following table summarizes financial instruments classified as held for trading as at December 31, 2009 to which the Fund has committed.




Total
Contract Type Notional Remaining Maturity Date
Volume Volume
Canada
----------------------------------------------------------------------------
(i) Fixed-for-floating 0.0001-50 14,414,619 January 31, 2010 -
electricity swaps MWh MWh August 18, 2016
(i)
----------------------------------------------------------------------------
(ii) Renewable energy 10-90,000 1,210,017 January 31, 2010 -
certificates MWh MWh December 31, 2014
----------------------------------------------------------------------------
(iii) Verified emission 2,000-55,000 505,000 January 31, 2010 -
reduction credits Tonnes Tonnes December 31, 2014
----------------------------------------------------------------------------
(iv) Options 46-40,500 6,664,483 January 31, 2010 -
GJ/month GJ February 28, 2014
----------------------------------------------------------------------------
(v) Physical gas forward 5-14,705 161,580,980 January 31, 2010 -
contracts GJ/day GJ June 30, 2015
----------------------------------------------------------------------------
(vi) Transportation 45-39,914 67,886,718 January 31, 2010 -
forward contracts GJ/day GJ October 31, 2013
----------------------------------------------------------------------------

United States
----------------------------------------------------------------------------
(vii) Fixed-for-floating 0.10-28 2,364,640 January 31, 2010 -
electricity swaps MW/h MWh December 31, 2014
(i)
----------------------------------------------------------------------------
(viii) Physical electricity 1-42 4,557,149 January 2, 2010 -
forwards MW/h MWh September 30, 2014
----------------------------------------------------------------------------
(ix) Unforced capacity 5-35 1,485 January 31, 2010 -
forward contracts MWCap MWCap November 30, 2012
----------------------------------------------------------------------------
(x) Unforced capacity 3-18 156 January 31, 2010 -
physical contracts MWCap MWCap September 30, 2010
----------------------------------------------------------------------------
(xi) Renewable energy 2,200-110,000 1,515,265 January 31, 2010 -
certificates MWh MWh December 31, 2014
----------------------------------------------------------------------------
(xii) Verified emission 10,000-50,000 390,000 January 31, 2010 -
reduction credits Tonnes Tonnes December 31, 2014
----------------------------------------------------------------------------
(xiii) Options 5-170,000 8,119,980 January 31, 2010 -
mmBTU/month mmBTU December 31, 2014
----------------------------------------------------------------------------
(xiv) Physical gas forward 5-5,500 61,243,695 January 4, 2010 -
contracts mmBTU/day mmBTU July 31, 2014
----------------------------------------------------------------------------
(xv) Transportation 35-90,000 36,144,020 January 4, 2010 -
forward mmBTU/day mmBTU January 31, 2013
contracts
----------------------------------------------------------------------------
(xvi) Heat rate swaps 1-30 2,707,119 January 31, 2010 -
MWh MWh November 30, 2014
----------------------------------------------------------------------------
(xvii) Fixed financial swap 100-238,700 29,517,406 January 31, 2010 -
mmBTU/month mmBTU November 30, 2014
----------------------------------------------------------------------------
(xviii) Foreign exchange $1,981-$2,258 N/A January 8, 2010 -
forward (US $2,000) April 7, 2010
contracts (ii)
----------------------------------------------------------------------------


Fair Value Notional
Contract Type Fixed Price Favourable/ Value
(Unfavourable)
Canada
----------------------------------------------------------------------------
(i) Fixed-for-floating $36.55-$128.13 ($410,979) $1,052,008
electricity swaps
(i)
----------------------------------------------------------------------------
(ii) Renewable energy $3.00-$26.00 $800 $7,604
certificates
----------------------------------------------------------------------------
(iii) Verified emission $9.34-$11.50 $9 $5,236
reduction credits
----------------------------------------------------------------------------
(iv) Options $6.35-$12.40 ($745) $12,088
----------------------------------------------------------------------------
(v) Physical gas forward $4.99-$10.00 ($315,339) $1,264,729
contracts
----------------------------------------------------------------------------
(vi) Transportation $0.01-$1.85 ($18,826) $54,910
forward
contracts
----------------------------------------------------------------------------

United States
----------------------------------------------------------------------------
(vii) Fixed-for-floating $39.15-$143.72 ($41,002) $202,700
electricity swaps (US$37.25-$136.75) (US($39,012)) (US$192,864)
(i)
----------------------------------------------------------------------------
(viii) Physical electricity $41.88-$115.87 ($47,435) $297,741
forwards (US$39.85-$110.25) (US($45,133)) (US$283,293)
----------------------------------------------------------------------------
(ix) Unforced capacity $3,153-$8,408 $212 $8,256
forward contracts (US$3,000-$8,000) (US$202) (US$7,855)
----------------------------------------------------------------------------
(x) Unforced capacity $998-$1,839 $34 $230
physical contracts (US$950-$1,750) (US$32) (US$219)
----------------------------------------------------------------------------
(xi) Renewable energy $1.68-$23.65 ($528) $11,989
certificates (US$1.60-$22.50) (US($502)) (US$11,407)
----------------------------------------------------------------------------
(xii) Verified emission $7.78-$8.93 ($390) $3,309
reduction credits (US$7.40-$8.50) (US$(371)) (US$3,148)
----------------------------------------------------------------------------
(xiii) Options $6.73-$14.50 ($3,503) $13,294
(US$6.40-$13.80) (US($3,333)) (US$12,649)
----------------------------------------------------------------------------
(xiv) Physical gas forward $4.97-$12.49 ($137,267) $547,897
contracts (US$4.73-$11.88) (US($130,606)) (US$521,310)
----------------------------------------------------------------------------
(xv) Transportation $0.01-$0.63 ($2,539) ($10,663)
forward (US$0.01-$0.60) (US($2,416)) (US$10,146)
contracts
----------------------------------------------------------------------------
(xvi) Heat rate swaps $39.72-$88.32 $4,015 $146,233
(US$37.79-$84.03) (US$3,820) (US$139,137)
----------------------------------------------------------------------------
(xvii) Fixed financial swap $5.49-$8.73 ($10,224) $206,505
(US$5.22-$8.31) (US($9,728)) (US$196,484)
----------------------------------------------------------------------------
(xviii) Foreign exchange $0.9905-$1.1289 $1,104 $16,816
forward (US$16,000)
contracts (ii)
----------------------------------------------------------------------------


(i) The electricity fixed-for-floating contracts related to the Province of Alberta are predominantly load-following as well as some contracts in Ontario, wherein the quantity of electricity contained in the supply contract "follows" the usage of customers designated by the supply contract. Notional volumes associated with these contracts are estimates and subject to change with customer usage requirements. There are also load shaped fixed-for-floating contracts in Ontario, New York and Texas, wherein the quantity of electricity is established but varies throughout the term of the contracts.

(ii) Hedge accounting was applied to most of these forwards up to September 30, 2006. However, the hedge was de-designated and a loss of $195 for the year ended March 31, 2007 was recorded in other liabilities. As the required hedge accounting effectiveness was achieved for certain quarters of fiscal 2007, a $1,933 gain was deferred and recorded in accumulated other comprehensive income and is being recognized in the Statement of Operations over the remaining term of each hedging relationship.

The following table summarizes the nature of financial assets and liabilities recorded in the financial statements for the nine months ended December 31, 2009.




December 31, 2009 December 31, 2008
Loss on cash Loss on cash
flow hedges flow hedges
transferred Unrealized transferred Unrealized
from Other gain from Other gain
Comprehensive recorded in Comprehensive recorded in
Income to the Other Income to the Other
Statement of Comprehensive Statement of Comprehensive
Operations Income Operations Income
Canada
Fixed-for-
floating
electricity
swaps (i) $ - $ - $ (19,208) $ 94,562
Physical gas
forward
contracts and
transportation
forward
contracts (v) - - (135,808) 454,838
United States
Fixed-for-
floating
electricity
swaps (vii) - - (13,826) 54,299
Physical
electricity
contracts
(viii) - - (30,659) 61,232
Unforced
capacity
forward
contracts (ix) - - - 4,743
Physical gas
forward
contracts and
transportation
forward
contracts
(xiii) - - (26,184) 143,922
Amortization
of deferred
unrealized
gains of
discontinued
hedges (158,522) - (137,203) -
----------------------------------------------------------------------------
Total realized
and unrealized
gains/(losses) $ (158,522) $ - $ (362,888) $ 813,596
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The estimated amortization of deferred gains and losses reported in accumulated other comprehensive income that is expected to be amortized to net income within the next 12 months is a gain of $139,727.

These derivative financial instruments create a credit risk for Just Energy since they have been transacted with a limited number of counterparties. Should any counterparty be unable to fulfill its obligations under the contracts, Just Energy may not be able to realize the other asset balance recognized in the financial statements.

In Illinois, Texas and Alberta, Just Energy assumes the credit risk associated with cash collection from its customers. Credit review processes have been put in place for these markets where Just Energy has credit risk to manage the customer default rate. If a significant number of customers were to default on their payments, it could have a material adverse effect on Just Energy's operations and cash flow. Management factors default from credit risk in its margin expectations for Illinois, Texas and Alberta.

(b) Classification of Financial Assets and Liabilities

The following table represents the fair values and carrying amounts of financial assets and liabilities measured at fair value or amortized cost.



As at December 31, 2009 Carrying amount Fair value

Cash and cash equivalents and restricted cash $ 59,958 $ 59,958
Accounts receivable $ 330,437 $ 330,437
Bank indebtedness, accounts payable and accrued liabilities,
customer rebates payable, management incentive
program payable and unit distribution payable $ 267,263 $ 267,263
Long-term debt $ 287,430 $ 296,744



For the three For the three
months ended months ended
December 31, 2009 December 31, 2008

Interest expense on financial
liabilities not held for trading $ 5,143 $ 1,109



For the nine For the nine
months ended months ended
December 31, 2009 December 31, 2008
Interest expense on financial
liabilities not held for trading $ 10,569 $ 2,953


The carrying value of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities, management incentive program payable and unit distribution payable approximates their fair value due to their short term liquidity.

The carrying value of the long-term debt approximates its fair value as the interest payable on outstanding amounts at rates that vary with Bankers' Acceptances, LIBOR, Canadian bank prime rate or U.S. prime rate.

(c) Management of risks arising from financial instruments

The risks associated with the Fund's financial instruments are as follows:

(i) Market risk

Market risk is the potential loss that may be incurred as a result of changes in the market or fair value of a particular instrument or commodity. Components of market risk to which the Fund is exposed are discussed below:

Foreign currency risk

Foreign currency risk is created by fluctuations in the fair value or cash flows of financial instruments due to changes in foreign exchange rates and exposure as a result of investment in U.S. operations.

A portion of Just Energy's earnings is generated in U.S. dollars and is subject to currency fluctuations. The performance of the Canadian dollar relative to the U.S. dollar could positively or negatively affect Just Energy's earnings. Due to its growing operations in the U.S. and recent acquisition of UEG, Just Energy expects to have a greater exposure in the future to U.S. fluctuations than in prior years.

The Fund may, from time to time, experience losses resulting from fluctuations in the values of its foreign currency, which could adversely affect operating results.

With respect to translation exposure, as at December 31, 2009, if the Canadian dollar had been 5% stronger or weaker against the U.S. dollar, assuming that all the other variables had remained constant, net income for the three months ended December 31, 2009 would have been $2,112 lower/higher and other comprehensive income would have been $1,814 lower/higher.

Interest rate risk

Just Energy is also exposed to interest rate fluctuations associated with its floating rate credit facility. Just Energy's current exposure to interest rates does not economically warrant the use of derivative instruments. The Fund's exposure to interest rate risk is relatively immaterial and temporary in nature. As such, the Fund does not believe that this long-term debt exposes it to material financial risks and has determined that there is no need to set out parameters to actively manage this risk.

A 1% increase (decrease) in interest rates would have resulted in a decrease (increase) in income before taxes for the three and nine months ended December 31, 2009 of approximately $416 (2008 - $249) and $774 (2008 - $601), respectively.

Commodity price risk

Just Energy is exposed to market risks associated with commodity prices and market volatility where estimated customer requirements do not match actual customer requirements. Just Energy's exposure to market risk is affected by a number of factors, including accuracy of estimation of customer commodity requirements, commodity prices, volatility and liquidity of markets. Just Energy enters into derivative instruments in order to manage exposures to changes in commodity prices. The derivative instruments that are used are designed to fix the price of supply for estimated customer commodity demand in Canadian dollars and thereby fix margins such that Unitholder distributions can be appropriately established. Derivative instruments are generally transacted over-the-counter. The inability or failure of Just Energy to manage and monitor the above market risks could have a material adverse effect on the operations and cash flow of Just Energy.

As at December 31, 2009, if the energy prices including natural gas, electricity, carbon offset gas credits and renewable energy certificates, had risen (fallen) by 10%, assuming that all the other variables had remained constant, income before taxes for the three month period ended December 31, 2009 would have increased (decreased) by $248,627 ($247,786) primarily as a result of the change in the fair value of the Fund's derivative instruments.

Changes in energy prices will not significantly impact the Fund's gross margin.

(ii) Credit risk

Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and causes financial loss to another party. Just Energy is exposed to credit risk in two specific areas: Customer Credit Risk and Counterparty Credit Risk.

Customer Credit Risk

In Alberta, Texas, Illinois, Pennsylvania, California and Maryland, Just Energy has customer credit risk and therefore, credit review processes have been implemented to perform credit evaluations of customers and manage customer default. If a significant number of customers were to default on their payments, it could have a material adverse effect on the operations and cash flow of Just Energy. Management factors default from credit risk in its margin expectations for all the above markets.

As at December 31, 2009, accounts receivables from the above markets with a carrying value of $16,186 (March 31, 2009 - $17,022) were past due but not doubtful. As at December 31, 2009 the aging of the accounts receivables from the above markets was as follows:



Current $ 38,387
1 - 30 days 8,770
31 - 60 days 2,324
61 - 90 days 1,571
Over 90 days 22,447
--------
$ 73,499
--------


For the nine months ended December 31, 2009, changes in the allowance for doubtful accounts were as follows:



Balance, beginning of period $ 28,457
Provision for doubtful accounts 12,815
Bad debts written off (10,792)
Others (3,473)
----------
Balance, end of period $ 27,007
----------


For the remaining markets, the LDCs provide collection services and assume the risk of any bad debts owing from Just Energy's customers for a fee. Management believes that the risk of the LDCs failing to deliver payment to Just Energy is minimal. There is no assurance that the LDCs that provide these services will continue to do so in the future.

Counterparty Credit Risk

Counterparty credit risk represents the loss that Just Energy would incur if a counterparty fails to perform under its contractual obligations. This risk would manifest itself in Just Energy replacing contracted supply at prevailing market rates thus impacting the related customer margin or replacing contracted foreign exchange at prevailing market rates impacting the related Canadian dollar denominated distributions. Counterparty limits are established within the Risk Management Policy. Any exception to these limits requires approval from the Board of Directors of JEC. The Risk Office and Risk Committee monitor current and potential credit exposure to individual counterparties and also monitor overall aggregate counterparty exposure. However, the failure of a counterparty to meet its contractual obligations could have a material adverse effect on the operations and cash flows of Just Energy.

As at December 31, 2009, the maximum credit risk exposure amounted to $3,909,704, representing the notional value of its derivative financial instruments and accounts receivable.

(iii) Liquidity risk

Liquidity risk is the potential inability to meet financial obligations as they fall due. The Fund manages this risk by monitoring detailed weekly cash flow forecasts covering a rolling six-week period, monthly cash forecasts for the next 12 months, and quarterly forecasts for the following two-year period to ensure adequate and efficient use of cash resources and credit facilities.

(iv) Supplier risk

Just Energy purchases the majority of the gas and electricity delivered to its customers through long term contracts entered into with various suppliers. Just Energy has an exposure to supplier risk as the ability to continue to deliver gas and electricity to its customers is reliant upon the ongoing operations of these suppliers and their ability to fulfill their contractual obligations. Just Energy has discounted the fair value of its financial assets by $684 to accommodate for its counterparties' risk of default.

10. INCOME (LOSS) PER UNIT



Three months ended Nine months ended
December 31 December 31

2009 2008 2009 2008
Basic income (loss) per unit
----------------------------
Net income (loss) available to
Unitholders $ 97,390 $ (49,094) $ 310,707 $ (938,852)
-------- ---------- --------- -----------
Weighted average number of units
outstanding 122,562 106,049 115,735 104,439
Weighted average number of Class A
preference shares 5,264 5,264 5,264 5,741
Weighted average number of
Exchangeable shares 5,679 - 8,779 -
-------- ---------- --------- -----------
Basic units and shares outstanding 133,505 111,313 129,778 110,180
-------- ---------- --------- -----------
Basic income (loss) per unit $ 0.73 $ (0.44) $ 2.39 $ (8.52)
-------- ---------- --------- -----------
-------- ---------- --------- -----------

Diluted income (loss) per unit
------------------------------
Net income (loss) available to
Unitholders $ 97,390 $ (49,094) $ 310,707 $ (938,852)
-------- ---------- --------- -----------
Basic units and shares outstanding 133,505 111,313 129,778 110,180
Dilutive effect of:
Unit options - - - -
Unit appreciation rights 543 - 1,385 -
Deferred unit grants 74 - 69 -
-------- ---------- --------- -----------
Units outstanding on a diluted
basis 134,122 111,313 131,232 110,180
-------- ---------- --------- -----------
Diluted income (loss) per unit $ 0.73 $ (0.44) $ 2.37 $ (8.52)
-------- ---------- --------- -----------
-------- ---------- --------- -----------


11. REPORTABLE BUSINESS SEGMENTS

Just Energy operates in two reportable geographic segments, Canada and the United States. Reporting by geographic region is in line with Just Energy's performance measurement parameters. Both the Canadian and the U.S. operations have gas and electricity business segments.

Just Energy evaluates segment performance based on gross margin.

The following tables present Just Energy's results by geographic segment and operating segments.



Three months ended December 31, 2009

Gas and Electricity Marketing TGF NHS
----------------------------- ------- --------
Canada United States Canada Canada Consolidated
Sales gas $ 207,499 $ 134,251 $ - $ - $ 341,750
Sales
electricity 171,896 91,263 - - 263,159
Ethanol - - 19,460 - 19,460
Home Service - - - 2,597 2,597
----------------------------------------------------------------------------
Sales $ 379,395 $ 225,514 $ 19,460 $ 2,597 $ 626,966
----------------------------------------------------------------------------

Gross margin $ 61,430 $ 46,568 $ 1,731 $ 2,218 $ 111,947

Amortization of
property, plant
and equipment (1,608) (53) (222) (52) (1,935)
Amortization of
intangible
assets (11,914) (7,997) - (398) (20,309)
Other operating
expenses (13,120) (40,605) (2,440) (1,480) (57,645)
----------------------------------------------------------------------------
Income (loss)
before the
undernoted 34,788 (2,087) (931) 288 32,058

Interest expense (3,193) (279) (1,671) - (5,143)

Change in fair
value of
derivative
instruments 50,926 (73) - - 50,853
Other income (7,248) 8,616 73 - 1,441
Non-controlling
interest - - 1,171 - 1,171
Recovery of
income tax 13,485 3,155 - 370 17,010
----------------------------------------------------------------------------
Net income (loss)$ 88,758 $ 9,332 $ (1,358) $ 658 $ 97,390
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Additions to
capital assets $ 4,882 $ 48 $ 1,263 $ 4,841 $ 11,034
----------------------------------------------------------------------------



Three months ended December 31, 2008

Gas and Electricity Marketing
-----------------------------
Canada United States Consolidated
------ ------------- -------------
Sales gas $ 212,875 $ 112,563 $ 325,438
Sales electricity 130,227 57,943 188,170
----------------------------------------------------------------------------
Sales $ 343,102 $ 170,506 $ 513,608
----------------------------------------------------------------------------
Gross margin $ 56,129 $ 33,697 $ 89,826
Amortization of electricity
contracts - (323) (323)
Amortization of gas contracts (276) - (276)
Amortization of capital assets (1,150) (95) (1,245)
Other operating expenses (21,569) (17,504) (39,073)
----------------------------------------------------------------------------
Income before the undernoted 33,134 15,775 48,909
Interest expense (634) (487) (1,121)
Change in fair value of derivative
instruments 34,337 (115,682) (81,345)
Other income 1,926 (261) 1,665
Non-controlling interest 28 - 28
Provision for income tax (2,752) (14,478) (17,230)
----------------------------------------------------------------------------
Net income (loss) $ 66,039 $ (115,133) $ (49,094)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Additions to capital assets $ 1,602 $ 65 $ 1,667
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Nine months ended December 31, 2009


Gas and Electricity Marketing TGF NHS
----------------------------- ------- --------
Canada United States Canada Canada Consolidated
Sales gas $ 448,832 $ 222,409 $ - $ - $ 671,241
Sales
electricity 469,844 278,570 - - 748,414
Ethanol - - 35,909 - 35,909
Home Service - - - 5,071 5,071
---------------------------------------------------------------------------
Sales $ 918,676 $ 500,979 $ 35,909 $ 5,071 $ 1,460,635
---------------------------------------------------------------------------

Gross margin $ 142,020 $ 109,368 $ 3,597 $ 4,533 $ 259,518

Amortization of
property, plant
and equipment (3,966) (174) (843) (673) (5,656)
Amortization of
intangible
assets (24,089) (16,499) - (802) (41,390)
Other operating
expenses (77,448) (66,364) (6,259) (4,763) (154,834)
---------------------------------------------------------------------------
Income (loss)
before the
undernoted 36,517 26,331 (3,505) (1,705) 57,638

Interest
expense (6,298) (757) (3,514) - (10,569)

Change in fair
value of
derivative
instruments 126,953 150,295 - - 277,248
Other income 2,688 25 42 - 2,755
Non-controlling
interest - - 2,659 55 2,714
Recovery of
(provision)
for income tax 4,264 (24,170) - 827 (19,079)
---------------------------------------------------------------------------
Net income $ 164,124 $ 151,724 $ (4,318) $ (823) $ 310,707
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Additions to
capital assets $ 9,380 $ 181 $ 1,363 $ 19,993 $ 30,917
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Total goodwill $ 135,461 $ 32,935 $ - $ 2,980 $ 171,376
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total assets $ 762,920 $ 383,806 $ 161,535 $ 78,794 $ 1,387,055
---------------------------------------------------------------------------



Nine months ended December 31, 2008

Gas and Electricity Marketing
-----------------------------
Canada United States Consolidated
------ ------------- ------------
Sales gas $ 459,420 $ 175,873 $ 635,293
Sales electricity 389,246 161,101 550,347
----------------------------------------------------------------------------

Sales $ 848,666 $ 336,974 $ 1,185,640
----------------------------------------------------------------------------

Gross margin $ 140,314 $ 48,859 $ 189,173
Amortization of electricity
contracts (178) (2,375) (2,553)
Amortization of gas contracts (414) - (414)
Amortization of capital assets (3,252) (334) (3,586)
Other operating expenses (54,715) (47,160) (101,875)
----------------------------------------------------------------------------
Income (loss) before the
undernoted 81,755 (1,010) 80,745
Interest expense (1,908) (1,069) (2,977)
Change in fair value of derivative
instruments (662,467) (430,392) (1,092,859)
Other income (expense) 3,973 (266) 3,707
Non-controlling interest 28 - 28
Recovery of income tax 2,543 69,961 72,504
----------------------------------------------------------------------------
Net loss $ (576,076) $ (362,776) $ (938,852)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Additions to capital assets $ 2,839 $ 154 $ 2,993
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total goodwill $ 94,957 $ 21,713 $ 116,670
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total assets $ 371,600 $ 180,224 $ 551,824
----------------------------------------------------------------------------
----------------------------------------------------------------------------


12. COMMITMENTS

Commitments for each of the next five years and thereafter are as follows:



Premises and Grain Master Services Long-term gas and
equipment production agreement with electricity contracts
leasing contracts EPCOR with various suppliers

2010 $ 2,228 $ 7,941 $ 3,157 $ 458,742
2011 7,393 8,578 12,628 1,464,412
2012 5,835 1,819 8,419 970,910
2013 3,946 1,183 - 592,292
2014 2,268 - - 285,727
Thereafter 5,755 - - 64,122
------------ ------------ --------------- ----------------------
$ 27,425 $ 19,521 $ 24,204 $ 3,836,205
------------ ------------ --------------- ----------------------
------------ ------------ --------------- ----------------------


Just Energy is also committed under long-term contracts with customers to supply gas and electricity. These contracts have various expiry dates and renewal options.

13. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

Certain figures from the comparative financial statements have been reclassified from statements previously presented to conform to the presentation of the current year's consolidated financial statements.

The Toronto Stock Exchange has neither approved nor disapproved of the contents of this release.

Contact Information

  • Just Energy Income Fund
    Ms. Rebecca MacDonald
    Executive Chair
    (416) 367-2872
    or
    Just Energy Income Fund
    Mr. Ken Hartwick, C.A.
    Chief Executive Officer & President
    (905) 795-3557
    or
    Just Energy Income Fund
    Ms. Beth Summers, C.A.
    Chief Financial Officer
    (905) 795-4206