Just Energy Income Fund
TSX : JE.UN

Just Energy Income Fund

August 06, 2009 10:05 ET

Just Energy Reports First Quarter Results-Sales of Green Energy Drive Strong Results, Gross Margin up 25%, Distributable Cash after Margin Replacement up 36%

TORONTO, ONTARIO--(Marketwire - Aug. 6, 2009) - Just Energy Income Fund (TSX:JE.UN) -

Highlights for the three months ended June 30, 2009 included:

- Sales (seasonally adjusted) up 8% year over year reaching $432.6 million.

- Gross margin (seasonally adjusted) of $74.8 million, up 25%.

- Distributable cash after gross margin replacement of $42.2 million, up 36%.

- Distributable cash of $36.1 million after all marketing expenses up 19%.

- Adjusted net income of $24.6 million, down from $27.6 million year over year.

- Total customers up 6% year over year.

- Margin per customer up 14% year over year driven by growing Green Energy Option sales. In the last twelve months, 39% of all customers took GEO and on average elected to consume 71% of GEO supply.

- Acquisition effective July 1, 2009 of Universal Energy Group, an active competitor with more than 570,000 customers.

Just Energy First Quarter Fiscal 2010 Results

Just Energy Income Fund announced its results for the three months ended June 30, 2009.



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Three months ended June 30,
($ millions except per unit) F2010 Per unit F2009 Per unit
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Sales(1) $432.6 $401.8
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Gross margin(1) 74.8 $0.66 59.7 $0.54
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Distributable cash
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- After margin replacement 42.2 $0.37 31.0 $0.28
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- After all marketing expense 36.1 $0.32 30.3 $0.27
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Adjusted net income 24.6 $0.22 27.6 $0.25
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Payout ratio 97% 111%
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(1) Seasonally adjusted


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 gross margin from the Fund's customer base.

Faced with a continued recession, Just Energy turned out strong results in the first quarter. Gross margin increased 25% year over year reflecting both the continued solid profitability and growth of Just Energy's customer base. Distributable cash after margin replacement grew by 36% year over year. These are the two financial measures on which Just Energy provides guidance.

On July 1, 2009, Just Energy completed the acquisition of Toronto-based Universal Energy Group. Management expects that the combined operation will allow Just Energy to maintain its record of profitable growth going forward. The guidance for fiscal 2010 has been 5% to 10% growth per unit in both measures. Management does not intend on updating guidance until the integration of Universal is complete.

Sales for the first quarter grew 8% tracking the 6% year over year growth in customers. Q1 saw 97,000 gross customer additions, up 14% from the 85,000 added in Q4 and up 39% from the 70,000 customers marketed a year earlier. Net additions for the quarter were 11,000 which reflect continued high attrition in the United States driven by economy driven high foreclosures and utility cut-offs.

Customer additions in Canada lagged behind expectations while additions in the U.S. were very strong. Attrition in Ontario Gas, Ontario Electricity and United States Electricity were all in line with or below expectations. Attrition in U.S. Gas was 31% over the last 12 months, down from 34% three months earlier, but still higher than the target rate. Renewals were generally in line with targets.

The 8% increase in sales resulted in a 25% increase in gross margin primarily due to a 14% increase in margin per customer. This was achieved in a number of ways. Firstly, Q1 fiscal 2009 saw a loss in the Texas electricity of $5 million due to balancing at high peak prices from warmer than normal weather. Excluding this loss, our margin would have been up 16% year over year.

The primary driver of this increase was continued customer receptivity toward the Green Energy Option "GEO" products. In the last twelve months, 39% of new customers contracted to take an average of 71% of their energy from green sources. And the percentage choosing GEO is increasing steadily. This drives higher margin per customer. For example, a new Ontario electricity customer taking 100% "brown" electricity generates an annual $121 in margin. The same customer taking 100% GEO would generate margins of approximately $200 per year.

The 25% increase in gross margin translated into a 36% increase in distributable cash after margin replacement because general and administrative costs, bad debt expense and marketing expenditures did not increase as quickly as gross margin. Because many of these costs are fixed, the high growth in new customers and associated growth in margin reflect the operating leverage inherent in Just Energy's business.

Distributable cash after all marketing was up 19% year over year. This reflected 11,000 net customer additions for the quarter versus the first quarter of fiscal 2009 when there were no net customer additions through marketing. Of total marketing expenditures, $6.1 million went toward growth in customer base while $0.8 million was spent on this growth in fiscal 2009.



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Customers by Market Q1 F2010 Q1 F2009 % Increase
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Canada - Gas 727,000 741,000
United States - Gas 238,000 213,000
Total Gas 965,000 954,000 1%
Canada - Electricity 574,000 588,000
United States - Electricity 262,000 155,000
Total Electricity 836,000 743,000 13%
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Total Customers 1,801,000 1,697,000 6%
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Adjusted net income was $24.6 million down from $27.6 million last year, contrary to the growth in both margin and distributable cash. This is due to two factors. First, fiscal 2010 had an increase in the non-cash $4.3 million tax provision adjustment as compared to the same quarter last year. As a Trust, future Canadian taxes do not impact distributable cash or Just Energy's ability to pay and sustain distributions. The second factor is that a $4.2 million increase in gross margin collected in the current quarter is shown as part of seasonally adjusted gross margin but is not included in adjusted net income. This margin will be reflected in adjusted net income in future periods.

Distributions were $0.31 per unit in what is seasonally the slowest quarter but strong results meant that Q1 payout ratio was lower than 100% for the first time in the history of the Fund.

In regards to the first quarter, CEO Ken Hartwick noted: "In the midst of a significant recession, we are very pleased to announce a 25% increase in gross margin and a 36% increase in distributable cash. This has been driven by 6% year over year customer growth and a 14% increase in margin per customer. The source of this higher margin is our very successful Green Energy Option program."

"We expect GEO additions to continue to increase as a percentage of new customers and that the longer term impact will be continued increases in margin per customer. This should help offset any ongoing adverse effect of very low commodity prices currently seen in North America."

Mr. Hartwick added: "The acquisition of Universal Energy is the other highlight of note. Universal had been our most active competitor in door-to-door marketing and they had built a customer base of more than 570,000 customer equivalents. Merging our two salesforces will allow us to deploy talented independent contractors into a number of new markets in the United States over the next few years. This should add to our internal growth but we believe that this acquisition will be accretive to Unitholders in fiscal 2010.

Chair Rebecca MacDonald added: "As we move toward 2011 and the possible imposition of the trust tax, we at Just Energy are well positioned to protect our Unitholders. As one can see from our strong quarter, we remain the growth company we have always been. As you are aware, we have deliberately chosen not to continue increasing our rate of distribution despite generating the cash flow to do so. The intent is to grow our cash flow by the tax imposition date with the expectation that a converted Just Energy would be able to pay $1.24 in dividends replacing the more heavily taxed $1.24 distribution. While there can be no assurance that future results will enable us to do so, our existing growth combined with the potential benefits from the Universal acquisition make this a realistic expectation."

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 Green Energy Option (GEO) program. The electricity GEO 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 GEO 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 waterheaters 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") - August 5, 2009

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 quarter ended June 30, 2009 and has been prepared with all information available up to and including August 5, 2009. This analysis should be read in conjunction with the unaudited interim consolidated financial statements for the first quarter ended June 30, 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. ("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 Illinois Corp. ("JEIC"), New York Energy Savings Corp. ("NYESC"), Just Energy Indiana Corp. ("JEINC"), Just Energy Texas L.P. ("JETLP") and Newten Home Comfort L.P. ("NHCLP"), 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 NHCLP, the Fund sells and rents high efficiency and tankless waterheaters.

The Fund also offers "green" products through its Green Energy Option (GEO) program. The electricity GEO product offers the customer 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 GEO 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 new products will not only add to profits, but also increase sales receptivity and improve renewal rates.

On July 1, 2009 Just Energy completed the purchase of all of the outstanding common shares of the Universal Energy Group Ltd. ("UEG"), a TSX listed marketer of deregulated natural gas and electricity. The agreement provided for a share exchange through which each outstanding share of UEG would be exchanged for 0.58 of a share (the "Exchangeable Shares") of a subsidiary of the Fund. Each Exchangeable Share is exchangeable into one Just Energy trust unit at any time at the option of the holder for no additional consideration. The transaction resulted in the issuance of 21.3 million Exchangeable Shares increasing the equivalent units of the Fund to 132.9 million.

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, customer attrition, fluctuations in natural gas and electricity prices, changes in regulatory regimes, decisions by regulatory authorities and 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 through the SEDAR website at www.sedar.com.

Practice change

Effective July 1, 2008, the Fund changed its practice from treating future supply hedging positions as 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

"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.

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

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

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

"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.

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 actual customer consumption. Seasonally adjusted sales and gross margin are not defined performance measures under Canadian GAAP. Seasonally adjusted analysis applies solely to the Canadian gas market and specifically to Ontario, Quebec and Manitoba.

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.

Adjusted net income

"Adjusted net income" 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) depending upon current 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. 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.

"Standardized Distributable Cash" 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.



Financial highlights
For the three months ended June 30
(thousands of dollars except where indicated and per unit amounts)


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

Sales 399,010 $3.53 6% 377,910 $3.43
Net income (1) 102,627 $0.91 200% 34,232 $0.31
Adjusted net income (2) 24,552 $0.22 (11)% 27,631 $0.25
Gross margin (seasonally
adjusted) (3) 74,769 $0.66 25% 59,703 $0.54
Distributable cash
- After gross margin
replacement 42,219 $0.37 36% 31,046 $0.28
- After marketing expense 36,087 $0.32 19% 30,282 $0.27
Distributions 35,014 $0.31 4% 33,681 $0.31
General and administrative 15,617 $0.14 16% 13,447 $0.12
Distributable cash payout
ratio(4)
- After gross margin
replacement 83% 108%
- After marketing expense 97% 111%

(1)Net income 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 measures.
(4)Management targets an annual payout ratio after all marketing expenses,
excluding any Special Distribution, of less than 100%.
(5)The per unit calculation is done on a fully diluted basis.

Reconciliation of net income to adjusted
net income Fiscal 2010 Fiscal 2009
Net income $102,627 $34,232
Change in fair value of derivative instruments (87,880) (11,115)
Tax impact on change in fair value of derivative
instruments 9,805 4,514
-------------------------
Adjusted net income $24,552 $27,631
-------------------------


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. The LDC provides historical customer usage to enable Just Energy to purchase an approximation of matched 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.

Ontario, Quebec and British Columbia

In Ontario, Quebec and British Columbia, 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.

Alberta's regulatory environment is different from the other Canadian provincial markets. In Alberta, Just Energy is required to invoice and receive payments directly from customers. Just Energy entered into an agreement with EPCOR Utilities Inc. ("EPCOR") for the provision of billing and collection services in Alberta which was amended and extended in December 2008. Pursuant to the amended agreement, EPCOR will continue to provide billing and collection services for AESLP until November 30, 2011 with respect to AESLP's existing customers. In the early fall of 2009, Just Energy intends to begin billing and collection services directly for all new customers signed and renewed customers.

New York, Illinois and Indiana

In New York, Illinois and Indiana, 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 from the New York, Illinois and Indiana operations 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 and Texas

Just Energy does not bear the risk for variations in customer consumption in any of the electricity markets in which it operates other than for certain customers in Texas. 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. In Alberta, Just Energy offers a load-following product for which it has acquired load-following supply and therefore does not have exposure to variances in customer consumption. 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

NHCLP commenced providing Ontario residential customers with a long term water heater rental program in the summer of 2008, offering tankless water heaters, high efficiency conventional and power vented tanks. As at June 30, 2009, Just Energy had installed over 5,400 water heaters in residential homes and is earning revenue from its installed base of customers. Currently this represents less than 1% of consolidated sales for the quarter.



Cash Available for Distribution and distributions
For the three months ended June 30
(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 $37,795 $45,262
Add:
Decrease in non-cash working capital (2,246) (15,665)
Tax impact on distributions to Class A
preference shareholders 538 685
-------- --------
Cash available for distribution $36,087 $30,282
-------- --------
-------- --------

Cash available for distribution

Gross margin per financial statements $66,075 $0.59 $55,221 $0.50
Adjustments required to reflect net
cash receipts from gas sales 8,694 4,482
-------- --------
Seasonally adjusted gross margin $74,769 $0.66 $59,703 $0.54
-------- --------
Less:
General and administrative (15,617) (13,447)
Capital tax expense (80) (66)
Bad debt expense (3,829) (1,063)
Income tax recovery (expense) 40 (143)
Interest expense (480) (891)
Other items 669 (223)
-------- --------
(19,297) (15,833)
-------- --------

Distributable cash before marketing
expenses 55,472 $0.49 43,870 $0.40

Marketing expenses to maintain gross
margin (13,253) (12,824)
-------- --------

Distributable cash after gross margin
replacement 42,219 $0.37 31,046 $0.28

Marketing expenses to add new gross
margin (6,132) (764)
-------- --------

Cash available for distribution $36,087 $0.32 $30,282 $0.27
-------- --------
-------- --------

Distributions
Unitholder distributions $32,935 $31,461
Class A preference share distributions 1,631 1,896
Unit appreciation rights and deferred
unit grants distributions 448 324
-------- --------
Total distributions $35,014 $0.31 $33,681 $0.31
-------- --------
-------- --------
Diluted average number of units
outstanding 112.9m(1) 110.2m

(1)The increase in the diluted unit is due to a combination of the
Distribution Reinvestment and Unit Purchase Plan, Unit appreciation rights
and Director deferred unit grants.


Distributable cash

Distributable cash after gross margin replacement for the current quarter ended June 30, 2009 was $42.2 million ($0.37 per unit), up 36% from $31.0 million ($0.28 per unit) in fiscal 2009. The growth reflects a 25% increase in seasonally adjusted gross margin. Factors which aided margin growth included a 6% year over year increase in total customers, higher margin per customer due to opportunistic pricing and continued strong acceptance of the GEO product, as well as, favourable U.S. exchange rates. Also, in the first quarter of fiscal 2009, a $5.0 million dollar loss in Texas was recorded, related to the warmer than normal Texas weather which resulted in high peak prices for the customers balanced by Just Energy.

The higher gross margins in the year were offset by increased general and administrative costs and bad debt expenses. Increased general and administrative costs of 16%, over the prior year comparable quarter, were primarily due to staffing costs in our corporate office to support our current and future growth, U.S. exchange rate impact on U.S. dollar denominated costs and an increase in collection costs. Bad debt expense increased in the first quarter of fiscal 2010 compared to 2009, due to the increased volumes in those markets where the Fund bears the credit risk and the weak economic conditions in the U.S. markets.

Just Energy spent $13.3 million in marketing expenses to maintain its current level of gross margin, which represents 68% of the total marketing expense for the quarter. A further $6.1 million was spent to increase future gross margin reflecting the 11,000 net RCE additions to date for fiscal 2010. Management's estimate of the future contracted gross margin decreased slightly to $1003.2 million from $1,020.3 million in the fourth quarter of fiscal 2009 due to the increased cost of retention initiatives put in place to maintain customers in a period of very low utility pricing.

Distributable cash after all marketing expenses amounted to $36.1 million ($0.32 per unit) for the first quarter of fiscal 2010, an increase of 19% from $30.3 million ($0.27 per unit) in the prior year comparable quarter. The increase is due to the higher gross margin offset by increased expenditures noted above. The lower rate of increase for distributable cash was due to the higher marketing costs associated with the significant increase in net customer additions year over year. The payout ratio after deduction of all marketing expenses for the current quarter was 97%, versus 111% in fiscal 2009. This is the first time in the Fund's history that the first quarter payout ratio was less than 100%.

For further information on the changes in the gross margin, please refer to "Sales and gross margin - Seasonally adjusted" and "General and administrative expenses", "Marketing expenses", "Bad debt expense" and "Interest expense" are further clarified in their respective sections below.

Adjusted net income

Adjusted net income was $24.6 million for the quarter ($0.22 per unit) down from $27.6 million ($0.25 per unit) in the first quarter of fiscal 2009. Adjusted net income was down largely because there was an increase in the non-cash tax provision adjustment of over $4.3 million in the first quarter, as compared to the same period last year. In addition a $4.2 million increase in gross margin which was collected in the first quarter is shown in seasonally adjusted margin but is not included in adjusted net income. This margin will be reflected in adjusted net income in future periods.



Discussion of Distributions
For the three ended June 30
(in thousands of dollars)

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

Cash flow from operations (1) (A) 37,795 45,262

Net income (B) 102,627 34,232

Total distributions (C) 35,014 33,681

Excess of cash flows from operating
activities over distributions paid (A-C) 2,781 11,581

Excess of net income over distributions paid (B-C) 67,613 551
(1)Includes non-cash working capital balances


Net income 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 Change in fair value of derivative instruments.

The change in fair value associated with these derivatives included in the net income for the first quarter of fiscal 2010 was a gain of $87.9 million. For the same quarter last year, Just Energy used hedge accounting during this time thus booked the changes in fair value predominantly to Other Comprehensive Income. The total change in fair value for the quarter in fiscal 2009 was a gain of $514.2 million of which $503.1 million was booked to Other Comprehensive Income, net of taxes of $89.3 million.

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. 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
For the three months ended June 30
(thousands of dollars except per unit amounts)

Fiscal 2010 Fiscal 2009
----------- -----------
Reconciliation to statements of cash flow
Cash inflow from operations $37,795 $45,262
Capital expenditures(1) (7,406) (208)
-------------------------
Standardized Distributable Cash $30,389 $45,054
-------------------------

Adjustments to Standardized Distributable Cash

Change in non-cash working capital(2) $(2,246) $(15,665)
Tax impact on distributions to Class A preference
shareholders(3) 538 685
Capital expenditures(1) 7,406 208
-------------------------
Cash available for distribution $36,087 $30,282
-------------------------
Standardized Distributable Cash - per unit basic 0.27 0.41
Standardized Distributable Cash - per unit
diluted 0.27 0.41
Payout Ratio based on Standardized Distributable
Cash 115% 75%

(1)Capital expenditures are effectively funded out of the credit facility.
The 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.
(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, effective July 1, 2009, 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.


In accordance with the 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. 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.

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 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.



Financial Statement Analysis

Sales and gross margin - per financial statements
For the three months ended June 30
(thousands of dollars)

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

United United
Sales Canada States Total Canada States Total
-----
Gas $149,697 $50,434 $200,131 $159,493 $39,963 $199,456
Electricity 123,491 75,388 198,879 130,822 47,632 178,454
----------------------------------------------------------------------------
$273,188 $125,822 $399,010 $290,315 $87,595 $377,910
----------------------------------------------------------------------------
Increase/
(decrease) (6)% 44% 6%

United United
Gross Margin Canada States Total Canada States Total
------------
Gas $22,714 $10,694 $33,408 $30,149 $5,980 $36,129
Electricity $19,639 $13,028 $32,667 19,574 (482) 19,092
----------------------------------------------------------------------------
$42,353 $23,722 $66,075 $49,723 $5,498 $55,221
----------------------------------------------------------------------------
Increase/
(decrease) (15)% 331% 20%


Canada

Sales were $273.2 million for the three months ended June 30, 2009, a decrease of 6% from the prior comparable period. Gross margin was $42.4 million for the first quarter, down 15% from the first quarter of fiscal 2009.

United States

Sales and gross margin in the U.S. were $125.8 million and $23.7 million for the first quarter, an increase of 44% and 331%, respectively, from the same period last year.

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



Seasonally Adjusted Analysis

Sales and gross margin - Seasonally adjusted(1)
For the three months ended June 30
(thousands of dollars)


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

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

Gas $149,697 $50,434 $200,131 $159,493 $39,963 $199,456
Adjustments
(1) 33,555 - 33,555 23,916 - 23,916
----------------------------------------------------------------------------
$183,252 $50,434 $233,686 $183,409 $39,963 $223,372
Electricity 123,491 75,388 198,879 130,822 47,632 178,454
----------------------------------------------------------------------------
$306,743 $125,822 $432,565 $314,231 $87,595 $401,826
----------------------------------------------------------------------------
Increase/
(decrease) (2)% 44% 8%

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

Gas $22,714 $10,694 $33,408 $30,149 $5,980 $36,129
Adjustments
(1) 8,694 - 8,694 4,482 - 4,482
----------------------------------------------------------------------------
$31,408 $10,694 $42,102 $34,631 $5,980 $40,611
Electricity $19,639 $13,028 $32,667 19,574 (482) 19,092
----------------------------------------------------------------------------
$51,047 $23,722 $74,769 $54,205 $5,498 $59,703
----------------------------------------------------------------------------
Increase/
(decrease) (6)% 331% 25%
(1) For Ontario, Manitoba and Quebec gas markets.



Gross margin analysis
For the three months ended June 30
(thousands of dollars)

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

United United
Canada States Total Canada States Total
Gas
Customer
margin $36,957 $12,291 $49,248 $34,513 $4,900 $39,413
Gain (loss)
from
dispositions
of excess
supply and
financial
reconcil-
iations(1) (5,549) (1,597) (7,146) 118 1,080 1,198
----------------------------------------------------------------------------
Gas margin $31,408 $10,694 $42,102 $34,631 $5,980 $40,611
----------------------------------------------------------------------------
Electricity
Customer
margin $19,700 $13,608 $33,308 $20,276 $(482) $19,794
Gain (loss)
from
dispositions
of excess
supply(2) (61) (580) (641) (702) 0 (702)
----------------------------------------------------------------------------
Electricity
margin 19,639 13,028 32,667 $19,574 $(482) $19,092
----------------------------------------------------------------------------
Total $51,047 $23,722 $74,769 $54,205 $5,498 $59,703
Increase/
(decrease) (6)% 331% 25%

(1)Results from the sale of excess supply due to variances in customer
demand and associated utility reconciliations of excess delivered supply.
(2)Results from the sale of excess supply purchased in advance of customer
usage or fluctuations in customer usage attributable to the remaining
customers on load-following contracts.


On a seasonally adjusted basis, sales increased by 8% in the first quarter of fiscal 2010 to $432.6 million as compared to $401.8 million in fiscal 2009. Gross margins were $74.8 million for the three months ended June 30, 2009, up 25% from the prior year comparable quarter.

Canada

Seasonally adjusted sales were $306.7 million for the quarter, down 2% from $314.2 million in fiscal 2009. Seasonally adjusted gross margins were $51.0 million in the first quarter of fiscal 2010, a decrease of 6% from $54.2 million in the same period last year.

Gas

Canadian gas sales remained unchanged at $183.3 million in the first quarter as compared to $183.4 million in fiscal 2009. In the first quarter of fiscal 2010, total customer delivered volumes were flat and there was a 2% decline in the customer base. However, despite the drop in the customer base, customer revenue grew by 7% due to an increase in the contract price for new customers signed compared to those customers lost through attrition. Gross margin totaled $31.4 million, down 9% from the first quarter of fiscal 2009 reflecting lower margins earned on CEG acquired customers and losses on the sale of excess gas at lower spot prices. Excess volumes sold during the quarter at a loss of $5.5 million were partially offset by the gas balancing purchases at low spot prices reflected in the customer gross margin. The $5.5 million loss was a result of delivery requirements established by the utilities and their customer consumption estimates which were much higher than actual consumption. Therefore, Just Energy was required to first purchase and deliver excess supply to the utilities and then sell the excess supply not needed for customers at very low spot prices.

After allowance for balancing and inclusive of acquisitions, average gross margin per customer ("GM/RCE") for the three months ended June 30, 2009 amounted to $195/RCE, compared to $216/RCE from the prior comparable quarter. The GM/RCE value includes an appropriate allowance for the bad debt expense in Alberta.

Electricity

Electricity sales were $123.5 million for the quarter, a decrease of 6% from the first quarter of fiscal 2009. The reduced sales are attributable to a 7% decrease in total consumption partially attributable to a 2% decline in the number of customers, quarter over quarter and Alberta unfavourable weather. Despite lower consumption, gross margin remained flat at $19.6 million, as compared to the same quarter last year due to higher contract prices for the new customers signed and a strong increase in the Green Energy Option ("GEO") customers.

During the quarter, a small amount of excess volume was sold and the balancing losses for the quarter totaled $0.1 million, reduced from a $0.7 million loss in the prior year comparable quarter.

Average gross margin per customer after all balancing and including acquisitions for the quarter ended June 30, 2009 in Canada amounted to $141/RCE, up 8% compared to $131/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 first three months of fiscal 2010 were $125.8 million, an increase of 44% from $87.6 million in the prior year comparable quarter. Seasonally adjusted gross margin was $23.7 million, up 331% from $5.5 million from the same quarter last year.

Gas

Gas sales and gross margin in the U.S. for the first quarter of fiscal 2010 totaled $50.4 million and $10.7 million, respectively, versus $40.0 million and $6.0 million in fiscal 2009. The sales increase of 26% relates primarily to higher average prices, a 14% increase in customer consumption reflecting a 12% increase in customers and the impact of colder weather. Sales and margins also benefited from an increase in the U.S. dollar exchange rate over the same period last year. The U.S. gas gross margin increased by 79% during the three months ended June 30, 2009. The increase in gross margin for the quarter resulted from increased customers, increased margin per customer driven by strong GEO sales, higher weather related consumption, lower commodity costs and higher exchange rates.

Average gross margin after all balancing costs for the three months ended June 30, 2009 was $274/RCE, an increase of 53% over the prior year comparable period of $179/RCE. The GM/RCE value includes an appropriate allowance for bad debt expense in Illinois.

Electricity

U.S. electricity seasonally adjusted sales and gross margin for the year were $75.4 million and $13.0 million, respectively, versus the prior comparable quarter of fiscal 2009 in which sales and gross margin amounted to $47.6 million and $(0.5) million. Sales and margins increased due to a 69% increase in customers quarter over quarter as well as GEO sales at higher margins, improved supply management and a reduction in load following customers in Texas. In the first quarter of fiscal 2009 gross margins were negatively impacted by the warmer than normal Texas weather in May and June which resulted in high peak prices balanced at Just Energy's expense for certain load following customers. Management estimated this loss at approximately $5.0 million.

Average gross margin per customer for electricity during the current quarter increased dramatically, to $176/RCE compared to $(18)/RCE in the prior year comparable period as a direct result of improved management of supply required to balance load following customers. The GM/RCE value for Texas includes an appropriate allowance for the bad debt expense.



Summary of quarterly results
(thousands of dollars
except per unit amounts)
Fiscal 2010 Fiscal 2009 Fiscal 2009 Fiscal 2009
----------- ----------- ----------- -----------
Q1 Q4 Q3 Q2
-- -- -- --
Sales per financial
statements $399,010 $713,573 $513,608 $294,122
Gross margin (seasonally
adjusted) 74,769 106,143 87,554 61,793
General and
administrative expense 15,617 18,150 14,753 13,236
Net income (loss) 102,627 (168,621) (49,094) (923,990)
Net income (loss) per
unit - basic 0.92 (1.57) (0.44) (8.33)
Net income (loss) per
unit - diluted 0.91 (1.57) (0.44) (8.31)
Adjusted net income 24,552 88,744 46,682 6,872
Adjusted net income per
unit - basic 0.22 0.81 0.42 0.06
Adjusted net income per
unit - diluted 0.22 0.79 0.42 0.06
Amount available for
distribution
After gross
margin/customer
replacement 42,219 72,244 57,475 34,755
After marketing expense 36,087 62,515 48,162 28,394
Payout ratio(1)
After gross
margin/customer
replacement 83% 48% 93% 100%
After marketing expense 97% 56% 111% 122%



Fiscal 2009 Fiscal 2008 Fiscal 2008 Fiscal 2008
----------- ----------- ----------- -----------
Q1 Q4 Q3 Q2
-- -- -- --
Sales per financial
statements $377,910 $652,617 $449,673 $283,531
Gross margin (seasonally
adjusted) 59,703 87,960 71,247 57,664
General and
administrative expense 13,447 17,138 12,416 11,142
Net income 34,232 94,025 28,064 4,754
Net income per unit -
basic 0.31 0.87 0.26 0.05
Net income per unit -
diluted 0.31 0.87 0.26 0.04
Adjusted net income 27,631 87,663 34,890 8,393
Adjusted net income per
unit - basic 0.25 0.81 0.32 0.08
Adjusted net income per
unit - diluted 0.25 0.80 0.32 0.08
Amount available for
distribution
After gross margin
replacement 31,046 54,334 47,242 37,589
After marketing expense 30,282 53,992 42,462 29,690
Payout ratio(1)
After gross margin
replacement 108% 61% 164% 86%
After marketing expense 111% 61% 183% 109%

(1) Includes a one-time Special Distribution of $18.6 million in Q3, fiscal
2009 and $44.7 million in Q3, fiscal 2008.


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 first quarter

Sales are typically lower in the first quarter because gas consumption is highest during the winter months and approximately 54% of the current customer base is gas customers. The 6% increase in sales compared to the prior year comparable quarter is attributable to a 6% increase in the customer base (growth concentrated in the U.S.), weather related consumption increases and favourable U.S. exchange rates during this time period. Adjusted net income which excludes the impact of the change in fair value of the Fund's derivative instruments decreased by 11% to $24.6 million for the three months ended June 30, 2009.

Gross margin increased by 25% in the first quarter of fiscal 2010 to $74.8 million from $59.7 million in the same period last year. Increased customer additions, higher margin per customer driven in part by increased GEO sales, the favourable change in the U.S. exchange rate and higher per customer consumption accounted for this increase. General and administration costs were $15.6 million for the quarter, an increase of 16% over $13.4 million last year.

The distributable cash after customer gross margin replacement was $42.2 million, up 36% from $31.0 million in the prior comparable quarter. The increase in gross margin was due to an increased number of customers, favourable exchange rates and improved per unit margins quarter over quarter.

After the deduction of all marketing expenses, distributable cash totaled $36.1 million, up 19% from $30.3 million in the first quarter of fiscal 2009. Distributions for the quarter were $35.0 million, an increase of 4% over the same period last year. The payout ratio after payment of all marketing costs for the first quarter of fiscal 2010 was 97% versus 111% for the same period last year.



Customer aggregation

Long-term customers

April 1, Failed to June 30, %Increase
2009 Additions Attrition renew 2009 (Decrease)
----------------------------------------------------------------------------
Natural
gas
Canada 743,000 9,000 (17,000) (8,000) 727,000 (2)%
United
States 235,000 27,000 (22,000) (2,000) 238,000 1%
----------------------------------------------------------------------------
Total gas 978,000 36,000 (39,000) (10,000) 965,000 (1)%
----------------------------------------------------------------------------

Electricity
Canada 578,000 15,000 (15,000) (4,000) 574,000 (1)%
United
States 234,000 46,000 (11,000) (7,000) 262,000 12%
----------------------------------------------------------------------------
Total
electricity 812,000 61,000 (26,000) (11,000) 836,000 3%
----------------------------------------------------------------------------

Combined 1,790,000 97,000 (65,000) (21,000) 1,801,000 1%
----------------------------------------------------------------------------


Gross customer additions for the quarter were 97,000, up 14% from the 85,000 customers added in the fourth quarter of fiscal 2009. Total net customer additions for the quarter were 11,000 slightly below the 15,000 net customer additions in the last quarter. Gross additions were up 39% from the 70,000 customers signed by our salesforce in the first quarter of fiscal 2009. Overall, there was a 1% increase in total customers.

For the three month period ended June 30, 2009, total gas customer numbers declined by 1% as compared to last year which reflects customer additions above targeted levels in the U.S. offset by higher than expected attrition and weaker than expected additions in Canada. U.S. gas customers increased by 1% due to growth in New York.

Total electricity customers were up 3% for the first quarter of fiscal 2010. All customer growth was in the United States with Canada lagging due to high relative five-year prices in Ontario. All electricity purchase contracts entered into by the Province of Ontario since deregulation have been at prices far higher than the current regulated rate and management believes that, over time, regulated prices should move toward that of our five-year offering. In the interim, the Fund has modified its electricity offering to focus on GEO supply. The take-up of the GEO product has been strong despite a significantly higher cost of green electricity to the customer. U.S. electricity volumes were up 12% with strong growth in both New York and Texas.

Delivered volumes in the quarter

Delivered volumes details the change in the actual growth of volumes delivered to customers for the first quarter of fiscal 2010 as compared to fiscal 2009. This measure tracks our actual financial results and reflects weather and other volume variances.

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



For the three months % Increase
ended June 30 Fiscal 2010 Fiscal 2009 (Decrease)
Natural gas (GJ)
Canada 16,913,915 16,898,440 -
United States 3,347,478 2,948,535 14%
----------------------------------------------------------------------------
Total gas(1) 20,261,393 19,846,975 2%
----------------------------------------------------------------------------

Electricity (MWh)
Canada 1,374,021 1,483,863 (7)%
United States 601,409 429,006 40%
----------------------------------------------------------------------------
Total electricity(1) 1,975,430 1,912,869 3%
----------------------------------------------------------------------------

(1)Includes 230,000 GJs of Green Energy Option ("GEO") gas and 80,000 MWh
of GEO electricity delivered in the first quarter of fiscal 2010.


Gas deliveries increased by 2% in the three months ended June 30, 2009 due to the increased U.S. customer base and colder weather conditions noted during the quarter. Electricity volumes increased by 3% over the prior year comparable quarter due to strong customer additions in Texas and New York.

Green Energy Option ("GEO")

Sales of the GEO product continue to support and reaffirm the strong demand for the GEO product in all markets. The GEO 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. Of all customers who contracted with Just Energy in the last twelve months, 39% took GEO for some or all of their energy needs. On average, these customers elected to consume 71% of GEO 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% but decreased from the 34% noted in the fourth quarter of fiscal 2009. High U.S. gas attrition is a residual effect of the North American recession. While the rate of foreclosures has slowed, the first quarter is a period where customers who have not paid their heavy winter gas bills are cut off by the utility. The level of cut-off was the highest seen in the Fund's history and caused increased attrition.

Electricity

The trailing 12-month electricity attrition rate in Canada for the year was 10%, consistent with 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 72%. 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 60,400 gas customers were renewed in the last twelve months and 25,500 renewed for a one-year term.

Electricity renewals for Canadian customers in Ontario and Alberta were 68%. 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. Management targets a renewal rate for electricity customers of 60%. For the fiscal year ended March 31, 2009, 67% of all expiring electricity customer volumes were successfully renewed.

In the U.S. markets, Just Energy currently only has Illinois gas and Texas electricity customers up for renewal. Renewing Illinois gas customers approximated only 1,000 customers and the results were not representative of our annual renewal rates. The Texas electricity renewal rate was 73%, significantly better than our target rate of 60% based on over 38,000 customers.

The table below shows actual renewal rates versus target:



YTD F2010 Target F2010
Natural gas
Canada 72% 70%
United States - 50%

Electricity
Canada 68% 65%
United States 73% 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. -
Fiscal period gas electricity gas electricity
---------------------------------------------------------
Remainder of 2010 19% 4% 9% 1%
2011 26% 21% 14% 5%
2012 21% 22% 11% 10%
2013 15% 29% 25% 13%
2014 14% 19% 25% 46%
Beyond 2014 5% 5% 16% 25%
---------------------------------------------------------
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 (excludes GEO impact)

In the first 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, margin per customer was up 14% quarter over quarter. 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 materially higher. Sales of the GEO products have been very strong with approximately 39% of all customers added in the past year taking some of all green energy supply. Those who purchased the GEO product elect on average 71% of their consumption. A 100% GEO electricity customer in Ontario generates annual margins of approximately $200, much higher than the "brown" margins realized.



Annual
Annual gross margin per customer(1) target
Fiscal 2010 Fiscal 2010
-------------------------------
Customers added in the quarter
- Canada - gas $169 $170
- Canada - electricity $121 $143
- United States - gas $160 $170
- United States -- electricity $216 $143
Customers lost in the quarter
- Canada - gas $195
- Canada -- electricity $115
- United States - gas $259
- United States -- electricity $102

(1) Customer sales price less cost of associated supply and allowance for
bad debt and U.S. working capital. This table excludes the margin impact
of the sale of GEO products.


General and administrative expenses

General and administrative costs were $15.6 million for the three months ended June 30, 2009, representing a 16% increase from $13.4 million in the first quarter of fiscal 2009. The expenses increased primarily due to staffing costs in our corporate office to support our current and future growth, U.S. exchange rate impact on U.S. dollar denominated costs and an increase in collection costs. Corporate headcount increased by 27 to a total of 712 fulltime employees primarily to enable Operations to prepare for the new Alberta customers to be billed internally, for sales support for our commercial expansion, and for Customer Service and IT to service our expanding customer base. Collection costs were up slightly in the first quarter of fiscal 2010 largely reflecting collection efforts related to the Texas growth.

Marketing expenses

Marketing expenses, which consist of commissions paid to independent sales contractors for signing new customers as well as an allocation of corporate costs, were $19.4 million, an increase of 43% from $13.6 million in the first quarter of fiscal 2009. New customers signed by our marketing sales force were 97,000 in the first quarter of fiscal 2010, up 39% compared to 70,000 customers added through our sales offices in Q1 of fiscal 2009. Last year during the first quarter, 32,000 short-term Texas customers were reclassified as long-term customers based on the renewal experience to date. The increase in the current quarter expense reflects the growth in customer additions and the impact of the higher U.S. dollar on our U.S. based marketing costs.

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 fiscal year. Marketing expenses to maintain gross margin were $13.3 million, an increase of 3% from $12.8 million from the prior year 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 first quarter totaled $6.1 million, an increase from $0.8 million in the prior year comparable period. The large increase is consistent with the increase in the net customer additions of 11,000 in fiscal 2010 versus a negative 22,000 net customers added through our sales offices during the first quarter of fiscal 2009. All marketing costs related to the GEO product offerings are allocated against new margin and there has been a substantial increase in the sale of GEO products in the current quarter.

The quarterly actual aggregation costs per customer added were as follows:



Fiscal 2010 Fiscal 2009
Natural gas
Canada $209/RCE
United States $199/RCE
Total gas $202/RCE $208/RCE
Electricity
Canada $162/RCE
United States $161/RCE
Total electricity $161/RCE $172/RCE


Actual total aggregation costs for gas and electricity customers to date for fiscal 2010 were $202 per customer for gas and $161 per customer for electricity. For the first quarter of fiscal 2009 the aggregation costs were $208 per customer for gas and $172 per customer for electricity.

In the first quarter of fiscal 2010 customer additions were above targeted levels and therefore, lower corporate, marketing and customer service costs were allocated to each new customer. Approximately 40% of the total marketing expense relates to the costs associated with corporate, marketing and customer service overhead. The reduction in the aggregation cost per customer reflects the leveraging of the fixed marketing costs as customer additions increase.

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 amounted to $0.7 million for the first quarter of fiscal 2010, a decrease from the $0.9 million paid in Q1 of fiscal 2009.

Bad debt expense

In Illinois, Alberta and Texas, Just Energy assumes the credit risk associated with the collection of all customer accounts. In addition, for commercial 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 three months ended June 30, 2009 was $3.8 million versus $1.1 million expensed in the prior year comparable quarter. The bad debt expense increase was partially due to the 22% increase in total revenues for the quarter in the markets where Just Energy assumes the risk for accounts receivable collections. The increased expenses are due to the higher U.S. exchange rate and increased default rates noted in the U.S. markets due to the recessionary conditions. 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 first quarter, the bad debt expense represents 3.4% of $112.4 million in revenues, slightly above the Fund's 2-3% target range. Higher credit losses should be expected with the current North American recession. In particular, two factors caused losses to be higher in our first quarter, the increased number of utility cut-offs following heavy winter bills and the inability to cut-off Texas electricity customers, as a result of regulation during extreme weather, which eliminates our ability to mitigate our credit losses. Management continues to target bad debt expense of approximately 2-3% during fiscal 2010 and believes that the upper end of the range will be adequate even during a severe and extended recession.

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 regulated fee.

Interest expense

Total interest expense for the three months ended June 30, 2009 amounted to $0.5 million, a decrease from $0.9 million in fiscal 2009. The decrease is due to reduced U.S. direct borrowing costs under the credit facility agreement. The U.S. line was completely repaid at the end of fiscal 2009. Just Energy is required to meet a number of financial covenants under the credit facility agreement and as at June 30, 2009, all of these covenants were met.

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 the quarter, a foreign exchange unrealized gain of $18.2 million was reported in Other Comprehensive Income (Loss) versus an unrealized loss of $0.3 million reported in the same period last year.

Overall, the high U.S. dollar increases sales and gross margin but this is partially offset by higher 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 is currently not material, given the high growth of the U.S. markets.

Class A Preference share distributions

The remaining holder of the Just Energy Corp. ("JEC") (formerly Ontario Energy Savings Corp.) 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 months ended June 30, 2009 including tax amounted to $1.6 million versus $1.9 million paid in fiscal 2009. The decrease in the preference share distributions resulted from the exchange of 1,442,484 shares into units during fiscal 2009. The 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.



Provision for (recovery of) income tax
For the three months ended June 30
(thousands of dollars)

Fiscal 2010 Fiscal 2009
-----------------------------------
Current income tax expense (recovery) $ (40) $143
Amount credited to Unitholders' equity 538 685
Future tax expense (recovery) 9,805 (1,014)
-----------------------------------
Provision for (recovery of) income tax $10,303 $(186)
-----------------------------------
-----------------------------------


The Fund recorded a current income tax recovery of $0.04 million for the first quarter versus a tax expense of $0.1 million in the same period last year. The change is mainly attributable to state income taxes that our U.S. entities paid, Canadian income tax expense and a small portion of U.S. withholding tax remitted. Also included in the income tax provision, is an amount relating to the tax impact of the distributions paid to the Class A preference shareholder 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 shareholder are included as distributions on the Statement of Unitholders' equity, net of tax. For the three months ended June 30, 2009, the tax impact of these distributions, based on an estimated tax rate of 33%, amounted to $0.5 million as compared to $0.7 million in fiscal 2009. A future tax expense of $9.8 million has been recorded for the first quarter on the change in fair value of derivative instruments with a corresponding tax recovery being recorded in Other Comprehensive Income.

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. As the U.S. subsidiaries had combined operating losses for tax purposes at June 30 2009, no provision for current U.S. income tax has been made by those U.S. entities.

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
Summary of cash flows
For the three months ended June 30
(thousands of dollars)
Fiscal 2010 Fiscal 2009

Operating activities 37,795 $45,262
Investing activities (7,406) (208)
Financing activities, excluding
distributions (11,196) (4,725)
Gain on foreign exchange (1,099) (22)
----------------------------------------------------------------------------
Increase in cash before distributions 18,094 40,307
Distributions (cash payments) (31,977) (26,573)
----------------------------------------------------------------------------
Increase (decrease) in cash (13,883) 13,734
Cash -- beginning of period 59,094 27,310
----------------------------------------------------------------------------
Cash -- end of period $45,211 $41,044
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Operating activities

Cash flow from operating activities for the three months ended June 30, 2009 was $37.8 million, a decrease from $45.3 million in the prior year comparable quarter. The decrease is primarily attributable to an increase in net income offset by unrealized income related to the financial instruments recorded in the quarter.

Investing activities

The Fund purchased capital assets totaling $7.4 million during the quarter, an increase from $0.2 million in the same period last year. In fiscal 2010, Just Energy's capital spending related to the water heater business and purchases of office equipment and IT software.

Financing activities

Financing activities excluding distributions relate primarily to a decrease of the operating line for working capital requirements. During the three months ended June 30, 2009, Just Energy repaid a total of $11.5 million against the credit facility versus $5.1 million repaid in the first quarter of fiscal 2009. On July 1, 2009, in connection with the acquisition of UEG, Just Energy increased its credit facility from $170 million to $250 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 lenders thereunder. As Just Energy continues to expand in the United States markets, the need to fund working capital and security requirements will increase, driven primarily by the number of customers aggregated, and to a lesser extent by the number of new markets. Based on the markets in which Just Energy currently operates and others that management expects to enter, funding requirements will be supported through the credit facility.

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 program ("DRIP") on December 20, 2007, a portion of distributions declared are not paid in cash. This program was suspended on December 1, 2008 with the commencement of the normal course issuer bid and was re-instituted on March 31, 2009. Under the program, Unitholders can elect to receive their distributions in units at a 2% (formerly 5%) discount to the prevailing market price rather than the cash equivalent. During the first quarter, the Fund made cash distributions to its Unitholders and Class A preference shareholder in the amount of $32.0 million, compared to $26.6 million in fiscal 2009.

Just Energy will continue to utilize its cash resources for expansion into new markets, growth in its existing energy marketing customer base, GEO products and waterheaters business and also to make accretive acquisitions of customers 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 June 30, 2009 compared to March 31, 2009

Cash decreased from $59.1 million as at March 31, 2009 to $45.2 million. The utilization of the credit facility decreased from $76.5 million to $65.1 million as a result of higher cash receipts from the winter billings (higher customer consumption). 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. 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%.

The decrease in accounts receivable from $249.5 million to $189.1 million is primarily attributable to the decrease in revenue associated with the period of lower gas consumption in the first quarter in comparison to the fourth quarter. Accounts payable and accrued liabilities has also decreased from $165.4 million to $137.7 million relating to decreased customer consumption associated with the seasonality of the Fund.

Gas in storage has increased from $6.7 million to $23.4 million for the first quarter of fiscal 2010. The increased balance reflects injections into storage for the expanding U.S. customer base, which occur from April to November.

At the end of the first quarter, customers in Ontario, Manitoba and Quebec had consumed more gas than was supplied to the LDCs for their use. Since Just Energy is paid for this gas when delivered yet recognizes revenue when the gas is consumed by the customer, the result on the balance sheet is the unbilled revenue amount of $24.2 million and accrued gas accounts payable of $16.5 million. At March 31, 2009, Just Energy had 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 $9.8 million for the first quarter of fiscal 2010. The increased balance includes $7.2 million of expenditures related to the acquisition of UEG on July 1, 2009.

Effective July 1, 2008, Just Energy elected to discontinue the practice of hedge accounting. Previously, the Fund had elected to use hedge accounting and thus was able to book the changes in fair value predominantly to Other Comprehensive Income. The mark to market gains and losses can result in significant changes in net income and accordingly Unitholders' equity from quarter to quarter due to commodity price volatility. Given that the Fund has purchased this supply to cover future customer usage at fixed prices, management believes that these non-cash quarterly changes are not meaningful.

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-cancelable.



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 $25,199 $5,394 $9,017 $4,999 $5,789
EPCOR billing and
collections 29,083 7,989 21,094 - -
Gas and
electricity
supply purchase
commitments 3,394,100 1,012,461 1,733,225 625,131 23,283
----------------------------------------------------------------------------
$3,448,382 $1,025,844 $1,763,336 $ 630,130 $ 29,072
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Other obligations

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. In the normal course of business the Fund could be subject to certain contingent obligations that become payable only if certain events were to occur. The inherent uncertainty surrounding the timing and financial impact of any events 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.

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' 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 and Texas. 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's 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.

Fair Value of Derivative Financial Instruments and Risk Management

The Fund has entered into a variety of derivative financial instruments as part of the business of purchasing and selling gas, electricity and the green energy 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 to cover its estimated 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's 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 Funds' 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's policy is not to use derivative instruments for speculative purposes.

Just Energy's expansion in the U.S. has introduced foreign exchange related risks. Just Energy has entered into foreign exchange forwards in order to hedge the exposure to fluctuations in cross border cash flows.

The financial statements are in compliance with Section 3855 of the CICA Handbook, which require 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 accounted for predominately in the Statement of Other Comprehensive Income. As of July 1, 2008, management decided that the increasing complexity and costs of maintaining this accounting treatment outweighed 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 August 5, 2009 there were 5,263,728 Class A Preference Shares of JEC outstanding and 116,986,831 units of the Fund outstanding. Also outstanding were 10,797,072 units of Just Energy Exchange Corp.

Taxability of distributions

Cash and unit distributions received in calendar 2008 were allocated 100% to other income. Additional information can be found on our website at www.justenergy.com. Management estimates the distributions for calendar 2009 to be allocated in a similar manner to that of 2008.

Adoption of new accounting policies

On April 1, 2009, the Fund adopted a new accounting standard that were 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.

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.

International Financial Reporting Standards

In February 2008, the 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 statement 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.

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.

Legal Proceedings

On February 7, 2008, the Attorney General for Illinois filed a complaint against JEIC (the "Illinois AG Complaint"). The Illinois AG Complaint alleged that independent sales agents used deceptive practices in their sale of Just Energy Contracts to Illinois customers. On May 12, 2009, a settlement of the action was reached. The settlement was approved by the Circuit Court, Cook Country, on May 15, 2009. Under the settlement, JEIC will comply with several consumer safeguards, many of which JEIC has practiced for more than a year. In addition, up to $1.0 million has been made available to be paid to a limited number of customers in settlement of claims. Any unused portion of the $1.0 million will be paid to the Illinois Department of the Attorney General. On March 3, 2008, the Citizen's Utility Board (the "CUB"), AARP and Citizen Action/Illinois filed a complaint before the Illinois Commerce Commission alleging claims very similar to those in the Illinois AG Complaint. Just Energy has commenced discussion with CUB to address and defend the allegations and intends to seek a constructive resolution to the matter.

On March 20, 2008, an Indiana resident filed a proposed consumer class action against JEIC in Illinois also based on allegations similar to those made by the Illinois Attorney General. The court dismissed the action and ordered the plaintiff to refile in the proper jurisdiction. The action has been restricted to Indiana plaintiffs on a limited basis.

On April 4, 2008 NYESC was served with a complaint initiated by a commercial customer in New York that proposes a class action against NYESC, the Fund and the LDC (Consolidated Edison) on behalf of residents of New York City. On December 16, 2008, the court dismissed the complaint against the Fund and the complaint against NYESC was referred to arbitration. The plaintiff's representative filed an appeal but has not yet, under state court rules, perfected it. It has until September 15, 2009 to perfect its rights. Just Energy will resolve or vigorously contest the claims in these matters. Management believes that the pending legal actions against JEIC and NYESC are not expected to have a material impact on the financial condition of the Fund at this time.

Controls and Procedures

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.

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 29, 2009 management proxy circular. Just Energy actively monitors the corporate governance and disclosure environment to ensure timely compliance with current and future requirements.

Outlook

On July 1, 2009 Just Energy completed the purchase of all of the outstanding common shares of the Universal Energy Group Ltd. ("UEG"), a TSX listed marketer of deregulated natural gas and electricity. The agreement provided for a share exchange through which each outstanding share of UEG would be exchanged for 0.58 of a share (the "Exchangeable Shares") of a subsidiary of the Fund. Each Exchangeable Share is exchangeable into one Just Energy trust unit at any time at the option of the holder for no additional consideration. The transaction resulted in the issuance of 21.3 million Exchangeable Shares increasing the equivalent units of the Fund to 132.9 million.

As part of the acquisition of UEG, the Fund has entered into support agreements (the "Support Agreements") with holders of 51% of the outstanding shares of UEG that among other things resulted in an escrow agreement at closing under which 60% of the holder's Exchangeable Shares were escrowed as of closing and released as to 50% on the first anniversary of the closing date and as to 50% on the second anniversary of the closing date.

Management believes that the acquisition of UEG will be accretive in fiscal 2010 to both gross margin and distributable cash per unit despite the transition costs of merging the operations. The full benefit of the acquisition will not be seen until fiscal 2011 when the savings from elimination of administrative overlap are expected to be fully realized.

The UEG acquisition brings a total of 14 U.S. state marketing licenses which will provide an option for accelerated entry into attractive American markets. UEG currently supplies over 570,000 RCEs in Ontario, British Columbia, Michigan, California, Ohio, Pennsylvania, Maryland and New Jersey.

On July 2, 2009, National Energy Corporation ("NEC"), a wholly owned home services subsidiary of UEG, acquired Newten Home Comfort Inc., an arm's length third party that held a 20% interest of NHCLP, Just Energy's recently established water heater business. Accordingly, NHCLP became a wholly owned subsidiary of Just Energy. NEC operates a very successful home services business renting and selling water heaters and related products and management believes the growth of this business will accelerate significantly. UEG also owns a 66.7% interest in Terra Grain Fuels, a 150 million litre capacity wheat based ethanol plant located in Belle Plaine, Saskatchewan. The plant is currently making repairs to its facility to move to full capacity production.

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.

Management's best estimation is that Just Energy will again grow its key operating measures during fiscal 2010. Gross margin and distributable cash after gross margin replacement per unit are expected to grow by approximately 5 to 10%, including the acquisition from UEG. Distributable cash after marketing expenses is expected to grow at a slightly lower rate due to increased marketing expenses associated with the forecasted RCE additions and GEO product growth. Total RCEs are expected to grow after all attrition and failure to renew. However, management is not in a position to provide guidance on the level of customer growth pending the integration of the UEG sales force into Just Energy. Investors will be updated in future quarters on the customer growth expectations. After the first quarter, Just Energy is on pace required to meet these targets. As the UEG acquisition will only impact the final three quarter of the year, management expects to update guidance following the full merger of operations.

Sales of the GEO products have been very strong with approximately 39% of all customers added in the trailing 12 months taking some or all green energy supply. Continued sales of GEO at these levels will alter the economics of Just Energy as GEO customers are much more profitable than past five year fixed rate customers. For example, GEO electricity customers in Ontario generate annual margins of approximately $200, much higher than regular Just Energy customer targets. Management sees no slowing of demand for GEO energy.

The economies of Just Energy's markets are currently in the midst of a significant recession. These 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 winter billing period. These shutoffs not only maintained attrition at a high level but combined with a mandated moratorium on Texas electricity cut-offs, increased bad debt losses above the target range of 2-3%. Management is confident that bad debt loss will be in the target range for the year as a whole. The Fund does not bear bad debt risk in Ontario, Quebec, Manitoba, British Columbia (excluding large volume customers), New York and Indiana. These markets contain approximately 73% 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 is actively reviewing a number of further possible acquisitions. Just Energy continues to actively monitor the progress of the deregulated markets in various jurisdictions.

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 actively analyzing potential restructuring options in preparation for conversion from a trust to a corporation on or before 2011.



JUST ENERGY INCOME FUND

CONSOLIDATED BALANCE SHEETS
(Unaudited - thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

JUNE 30, 2009 MARCH 31, 2009
ASSETS

CURRENT
Cash and cash equivalents $ 45,211 $ 59,094
Restricted cash 7,009 7,609
Accounts receivable 189,075 249,480
Gas in storage 23,458 6,690
Inventory 684 257
Unbilled revenues 24,224 57,779
Prepaid expenses and deposits 9,761 2,020
Corporate taxes recoverable 183 -
Other assets - current (Note 6a) 5,618 5,544
----------------------------------------------------------------------------

305,223 388,473

GAS CONTRACTS (less accumulated
amortization - $993; March 31, 2009 -
$710) 1,231 1,513

ELECTRICITY CONTRACTS (less accumulated
amortization - $36,684; March 31, 2009 -
$37,216) 2,995 3,584
GOODWILL 115,308 117,061
CAPITAL ASSETS (less accumulated
amortization - $20,733; March 31, 2009 -
$19,790) 25,290 19,971
OTHER ASSETS - LONG TERM (Note 6a) 7,664 5,153
----------------------------------------------------------------------------

$ 457,711 $ 535,755
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES

CURRENT
Accounts payable and accrued
liabilities $ 137,709 $ 165,431
Customer rebates payable 7,021 7,309
Management incentive program payable 576 1,093
Unit distribution payable 10,992 10,977
Corporate taxes payable 401 1,906
Accrued gas accounts payable 16,518 41,379
Other liabilities - current (Note 6a) 501,638 519,352
----------------------------------------------------------------------------

674,855 747,447
LONG TERM DEBT 65,060 76,500
DEFERRED LEASE INDUCEMENTS 2,277 2,382
OTHER LIABILITIES - LONG TERM (Note 6a) 367,660 401,720
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1,109,852 1,228,049
----------------------------------------------------------------------------

NON CONTROLLING INTEREST 237 292
----------------------------------------------------------------------------

EQUITY (DEFICIT)
Deficit $ (1,402,126) $ (1,470,277)
Accumulated other comprehensive income 333,482 364,566
----------------------------------------------------------------------------
(1,068,644) (1,105,711)
Unitholders' capital 401,115 398,454
Contributed surplus 15,151 14,671
----------------------------------------------------------------------------
Unitholders' deficit (652,378) (692,586)
----------------------------------------------------------------------------

$ 457,711 $ 535,755
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Commitments (Note 9)

See accompanying notes to consolidated financial statements



JUST ENERGY INCOME FUND

CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED JUNE 30
(Unaudited - thousands of dollars)

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

2009 2008

ACCUMULATED EARNINGS (DEFICIT)
Accumulated earnings, beginning of period $ (712,427) $ 392,082
Net income 102,627 34,232
----------------------------------------------------------------------------
Accumulated earnings (deficit), end of period (609,800) 426,314
----------------------------------------------------------------------------

DISTRIBUTIONS
Distributions, beginning of period (757,850) (604,013)
Distributions (33,383) (31,785)
Class A preference share distributions - net of
income taxes of $538 (2008 - $685) (1,093) (1,211)
----------------------------------------------------------------------------
Distributions, end of period (792,326) (637,009)
----------------------------------------------------------------------------

DEFICIT (1,402,126) (210,695)
----------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income, beginning
of period 364,566 40,789
Other comprehensive income (loss) (31,084) 502,828
----------------------------------------------------------------------------
Accumulated other comprehensive income, end of
period 333,482 543,617
----------------------------------------------------------------------------

UNITHOLDERS' CAPITAL (Note 5)

Unitholders' capital, beginning of period 398,454 358,103

Trust units exchanged - 3,606

Trust units issued on exercise/exchange of unit
compensation (Note 5b) 197 468

Trust units issued 2,464 13,235

Class A preference shares exchanged - (3,606)
----------------------------------------------------------------------------
Unitholders' capital, end of period 401,115 371,806
----------------------------------------------------------------------------

CONTRIBUTED SURPLUS (Note 5b) 15,151 12,742
----------------------------------------------------------------------------

Unitholders' equity (deficit), end of period $ (652,378) $ 717,470
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements



JUST ENERGY INCOME FUND

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30
Unaudited - thousands of dollars except per unit amounts)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2009 2008

SALES $ 399,010 $ 377,910

COST OF SALES 332,935 322,689
----------------------------------------------------------------------------

GROSS MARGIN 66,075 55,221
----------------------------------------------------------------------------

EXPENSES
General and administrative expenses 15,617 13,447
Capital tax 80 66
Marketing expenses 19,385 13,588
Unit based compensation (Note 5b) 657 857
Bad debt expense 3,829 1,063
Amortization of gas contracts 283 -
Amortization of electricity contracts 311 1,967
Amortization of capital assets 1,194 1,216
----------------------------------------------------------------------------

41,356 32,204
----------------------------------------------------------------------------

INCOME BEFORE THE UNDERNOTED 24,719 23,017

INTEREST EXPENSE 480 891

CHANGE IN FAIR VALUE OF DERIVATIVE INSTRUMENTS
(Note 6a) (87,880) (11,115)

OTHER INCOME (756) (805)
----------------------------------------------------------------------------

INCOME BEFORE INCOME TAX 112,875 34,046

PROVISION FOR (RECOVERY OF) INCOME TAX 10,303 (186)

NON CONTROLLING INTEREST (55) -
----------------------------------------------------------------------------

NET INCOME $ 102,627 $ 34,232
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to consolidated financial statements

Income per unit (Note 7)

Basic $ 0.92 $ 0.31

Diluted $ 0.91 $ 0.31



JUST ENERGY INCOME FUND

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED JUNE 30
(Unaudited - thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2009 2008

NET INCOME $ 102,627 $ 34,232
----------------------------------------------------------------------------

Unrealized gain (loss) on translation of self
sustaining operations 18,246 (288)

Unrealized and realized gain on derivative
instruments designated as cash flow hedges prior
to July 1, 2008, net of income taxes of $89,344
(Note 6a) - 503,116

Amortization of deferred unrealized gain on
discontinued hedges after July 1, 2008,
net of income taxes of $9,805 (Note 6a) (49,330) -
----------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME (LOSS) (31,084) 502,828
----------------------------------------------------------------------------

COMPREHENSIVE INCOME $ 71,543 $ 537,060
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to consolidated financial statements



JUST ENERGY INCOME FUND

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30
(Unaudited - thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

OPERATING
Net income $ 102,627 $ 34,232
----------------------------------------------------------------------------

Items not affecting cash
Amortization of gas contracts 283 -
Amortization of electricity contracts 311 1,967
Amortization of capital assets 1,194 1,216
Unit based compensation 657 857
Non controlling interest (55) -
Future income taxes 9,805 (1,014)
Other (87) (1,028)
Change in fair value of derivative instruments (87,880) (11,115)
----------------------------------------------------------------------------
(75,772) (9,117)
----------------------------------------------------------------------------
Adjustments required to reflect net cash receipts
from gas sales 8,694 4,482
----------------------------------------------------------------------------
Changes in non-cash working capital 2,246 15,665
----------------------------------------------------------------------------
Cash inflow from operations 37,795 45,262
----------------------------------------------------------------------------

FINANCING
Exercise of trust unit options (Note 5b) - 338
Distributions paid to Unitholders (30,884) (24,826)
Distributions on Class A preference shares (1,631) (2,432)
Tax impact on distributions to Class A preference
shareholders 538 685
Issuance of long-term debt and increase in bank
indebtedness 7,526 2,500
Repayment of long-term debt and bank indebtedness (19,000) (7,554)
Restricted cash 278 (9)
----------------------------------------------------------------------------

(43,173) (31,298)
----------------------------------------------------------------------------
INVESTING
Purchase of capital assets (7,406) (208)
Effect of foreign currency translation on cash
balances (1,099) (22)
----------------------------------------------------------------------------
NET CASH INFLOW (OUTLOW) (13,883) 13,734
CASH, BEGINNING OF PERIOD 59,094 27,310
----------------------------------------------------------------------------

CASH, END OF PERIOD $ 45,211 $ 41,044
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental Information
Interest paid $ 439 $ 941
Income taxes paid $ 977 $ 66

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

See accompanying notes to consolidated financial statements



JUST ENERGY INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 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 Illinois Corp. ("JEIC"), New York Energy Savings Corp. ("NYESC"), Just Energy Indiana Corp. ("JEINC"), Just Energy Texas Corp. ("JETLP") and Newten Home Comfort L.P. ("NHCLP") (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 financial statement 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.

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.

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. 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, 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. ("JEC")

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.



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 - - 30,000 378
Unit appreciation
rights exchanged 14,590 197 6,336 89
Distribution
reinvestment plan 221,775 2,464 485,568 6,440
Units issued - - 406,917 6,796
Exchanged from Class A
preference shares - - 1,442,484 3,606
--------------------------------------------------
Balance, end of period 106,374,888 387,955 104,523,499 358,646
--------------------------------------------------
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
--------------------------------------------------
Unitholders' capital,
end of period 111,638,616 $ 401,115 109,787,227 $ 371,806
--------------------------------------------------
--------------------------------------------------


Distribution reinvestment plan

Under the Fund's distribution reinvestment program ("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 three months ended June 30, 2009.

Units issued

On June 30, 2008, the Fund issued 406,917 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 year.



Contributed Surplus 2009 2008
----- -----
Balance, beginning of period $ 14,671 $ 12,004
Add: unit based compensation awards 657 857
non-cash deferred unit grants distributions 20 11
Less: unit based awards exercised (197) (130)
--------- --------

Balance, end of period $ 15,151 $ 12,742
--------- --------
--------- --------


Total amounts credited to Unitholders' capital in respect of unit options and deferred unit grants exercised or exchanged during the three months ended June 30, 2009 amounted to $197 (2008 - $468).

Cash received from options exercised for the three months ended June 30, 2009 amounted to $nil (2008 - $338).

6. 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 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 values, but results in 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 price 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 table illustrates the (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 of Derivative Instruments:



Change In Fair Value of Derivative Instruments

For the For the For the For the
three three three three
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2009 2009(USD) 2008 2008(USD)

Canada
Fixed-for-floating electricity
swaps (i) $ 31,147 n/a $ (110) n/a
Renewable energy certificates (ii) (254) n/a 472 n/a
Verified emission-reduction
certificates (iii) - n/a - n/a
Options (iv) 792 n/a (2,494) n/a
Physical gas forward contracts (v) (9,811) n/a - n/a
Transportation forward contracts
(vi) 3,256 n/a - n/a
United States
Fixed-for-floating electricity
swaps (vii) (3,601) (3,197) (2,704) (2,660)
Physical electricity forwards (viii) (22,180) (19,689) - -
Unforced capacity forward contracts
(ix) (2,640) (2,344) (56) (55)
Renewable energy certificates (x) 412 366 58 57
Verified emission-reduction
certificates (xi) 209 186 - -
Options (xii) 1,303 1,156 (8,713) (8,570)
Physical gas forward contracts
(xiii) (26,286) (23,333) - -
Transportation forward contracts
(xiv) (83) (74) - -
Heat rate swaps (xv) (1,464) (1,299) 2 2
Fixed financial swaps (xvi) (399) (355) - -
Foreign exchange forward contracts
(xvii) 854 n/a (1,507) n/a
Other - n/a (304) n/a
Amortization of deferred unrealized
gains of discontinued hedges (59,135) 4,550
----------------------------------------------------------------------------
Change In Fair Value of Derivative
Instruments $ (87,880) $ (10,806)
----------------------------------------------------------------------------


The following table illustrates the (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 For the For the For the
three three three three
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
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 $ (87,880) $ (11,115)
----------------------------------------------------------------------------


The following table illustrates the (gains)/losses related 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 For the For the For the
three three three three
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2009 2009(USD) 2008 2008(USD)
Canada
Fixed-for-floating electricity
swaps (i) $ - n/a $ (75,354) n/a
Renewable energy certificates (ii) - n/a - n/a
Verified emission-reduction
certificates (iii) - n/a - n/a
Options (iv) - n/a - n/a
Physical gas forward contracts (v) - n/a (313,071) n/a
Transportation forward contracts
(vi) - n/a (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 (x) - - - -
Verified emission-reduction
certificates (xi) - - - -
Options (xii) - - - -
Physical gas forward contracts (xiii) - - (124,760) (122,711)
Transportation forward contracts (xiv) - - 7,022 6,907
Heat rate swaps (xv) - - - -
Fixed financial swaps (xvi) - - - -
Foreign exchange forward contracts
(xvii) - - - -
Amortization of deferred unrealized
gains of discontinued hedges - (4,550)
----------------------------------------------------------------------------
Other Comprehensive Income $ - $ (592,460)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The following table summarizes the nature of the financial assets and liabilities recorded in the financial statements as at June 30, 2009:



Other Other Other Other
assets assets liabilities liabilities
(current) (long term) (current) (long term)
Canada
Fixed-for-floating
electricity swaps (i) $ - $ - $ 177,279 $ 161,634
Renewable energy
certificates (ii) 157 420 - -
Verified emission-reduction
certificates (iii) - - - -
Options (iv) 656 - 392 1,475
Physical gas forward
contracts (v) - - 188,838 103,410
Transportation forward
contracts (vi) 5 1,745 1,429 1,724
United States
Fixed-for-floating
electricity swaps (vii) - - 30,468 20,745
Physical electricity
forwards (viii) - 697 31,909 28,597
Unforced capacity forward
contracts (ix) 1,163 1,440 - -
Renewable energy
certificates (x) 38 92 90 298
Verified emission-reduction
certificates (xi) - - 75 141
Options (xii) - - 847 1,567
Physical gas forward
contracts (xiii) - - 65,669 46,537
Transportation forward
contracts (xiv) 10 - 839 1,312
Heat rate swaps (xv) 844 1,605 673 -
Fixed financial swaps (xvi) - 1,665 3,130 220
Foreign exchange forward
contracts (xvii) 2,745 - - -
----------------------------------------------------------------------------
As at June 30, 2009 $ 5,618 $ 7,664 $ 501,638 $ 367,660
----------------------------------------------------------------------------


The following tables summarize the nature of the financial assets and liabilities recorded in the financial statements as at March 31, 2009:



Other Other Other Other
assets 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
Options (iii) $ 792 $ 23 $ 237 $ 997
Physical gas forward
contracts (iv) $ - $ - $ 198,329 $ 103,734
Transportation foward
contracts (v) $ 787 $ 2,160 $ 927 $ 163
United States
Fixed-for-floating
electricity swaps (vi) $ - $ - $ 34,997 $ 24,577
Physical electricity
forwards (vii) $ - $ - $ 48,242 $ 41,456
Unforced capacity foward
contracts (viii) $ 19 $ 213 $ 366 $ -
Renewable energy
certificates (ix) $ 57 $ 191 $ 19 $ 48
Verified emission reduction
certificates (x) $ - $ - $ - $ -
Options (xi) $ 395 $ - $ 204 $ 1,349
Physical gas forward
contracts (xii) $ - $ - $ 84,010 $ 69,627
Transportation forward
contracts (xiii) $ 4 $ - $ 961 $ 1,457
Fixed financial swaps (xiv) $ - $ 869 $ 628 $ -
Heat rate swaps (xv) $ 72 $ 1,171 $ 956 $ -
Foreign exchange forward
contracts (xvi) $ 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 June 30, 2009 to which the Fund is committed:



Total
Contract Notional Remaining
Type Volume Volume Maturity Date

Canada
----------------------------------------------------------------------------
(i) Fixed-for-floating 0.0001-35 12,692,641 July 1, 2009 -
electricity swaps(i) MW/h MWh December 2, 2015
----------------------------------------------------------------------------
(ii) Renewable energy 10-26,100 589,922 December 31, 2009 -
certificates MWh MWh December 31, 2014
----------------------------------------------------------------------------
(iii) Verified emission 50,000 250,000 December 31, 2009 -
reduction certificates Tonnes Tonnes December 31, 2013
----------------------------------------------------------------------------
(iv) Options 46-40,500 7,830,133 July 31, 2009 -
GJ/month GJ February 28, 2014
----------------------------------------------------------------------------
(v) Physical gas forward 0.14-4,656 149,197,781 July 31, 2009 -
contracts GJ/day GJ April 30, 2015
----------------------------------------------------------------------------
(vi) Transportation forward 13-50,820 71,523,946 July 1, 2009 -
contracts GJ/day GJ October 31, 2013
----------------------------------------------------------------------------


Fair Value
Contract Favourable/ Notional
Type Fixed Price (Unfavourable) Value

Canada
----------------------------------------------------------------------------
(i) Fixed-for-floating
electricity swaps(i) $ 41.50-$128.13 ($338,913) $ 945,805
----------------------------------------------------------------------------
(ii) Renewable energy
certificates $3.00-$26.00 $577 $3,084
----------------------------------------------------------------------------
(iii) Verified emission
reduction certificates $11.50 $- $2,875
----------------------------------------------------------------------------
(iv) Options $5.50-$13.20 ($1,211) $13,912
----------------------------------------------------------------------------
(v) Physical gas forward
contracts $2.82-$10.00 ($292,248) $ 1,184,055
----------------------------------------------------------------------------
(vi) Transportation forward
contracts $0.01-$1.68 ($1,403) $68,372
----------------------------------------------------------------------------


Total
Contract Notional Remaining
Type Volume Volume Maturity Date

United States
----------------------------------------------------------------------------
(vii) Fixed-for-floating 0.10-14.70 2,096,375 July 31, 2009 -
electricity swaps(i) MW/h MWh August 31, 2014
----------------------------------------------------------------------------
(viii) Physical electricity 1-33 4,681,249 July 1, 2009 -
forwards MW/h MWh June 30, 2014
----------------------------------------------------------------------------
(ix) Unforced capacity 2-119.3 212 July 31, 2009 -
forward contracts MWCap MWCap July 31, 2009
----------------------------------------------------------------------------
(ix) Unforced capacity 5-40 1,940 July 31, 2009 -
forward contracts MWCap MWCap November 30, 2012
----------------------------------------------------------------------------
(x) Renewable energy 2,000-47,500 836,424 December 31, 2009 -
certificates MWh MWh December 31, 2013
----------------------------------------------------------------------------
(xi) Verified emission 10,000 60,000 December 31, 2009 -
reduction certificates Tonnes Tonnes December 31, 2012
----------------------------------------------------------------------------
(xii) Options 5-59,000 6,579,610 July 31, 2009 -
mmBTU/month mmBTU May 31, 2013
----------------------------------------------------------------------------
(xiii) Physical gas forward 5-2,358 40,055,471 July 1, 2009 -
contracts mmBTU/day mmBTU July 31, 2014
----------------------------------------------------------------------------
(xiv) Transportation forward 219-9,000 32,749,579 July 1, 2009 -
contracts mmBTU/day mmBTU January 31, 2013
----------------------------------------------------------------------------
(xv) Heat rate swaps 1-15 1,580,203 July 31, 2009 -
MWh MWh May 31, 2014
----------------------------------------------------------------------------
(xvi) Fixed financial swap 100-2,236 12,920,874 August 31, 2009 -
mmBTU/day mmBTU June 30, 2014
----------------------------------------------------------------------------
(xvii) Foreign exchange forward $ 1,982-
contracts(ii) $2,258 July 8, 2009 -
(US $2,000) N/A April 7, 2010
----------------------------------------------------------------------------


Fair Value
Contract Favourable/ Notional
Type Fixed Price (Unfavourable) Value

United States
----------------------------------------------------------------------------
(vii) Fixed-for-floating $50.01-$159.04 ($51,213) $216,130
electricity swaps(i) (US$43.00-$136.75) (US($44,036)) (US$185,839)
----------------------------------------------------------------------------
(viii) Physical electricity $27.04-$197.71 ($59,809) $348,463
forwards (US$23.25-$170.00) (US($51,427)) (US$299,624)
----------------------------------------------------------------------------
(ix) Unforced capacity $4,780-$10,130 $1 $1,651
forward contracts (US$4,110-$8,710) (US$1) (US$1,419)
----------------------------------------------------------------------------
(ix) Unforced capacity $3,489-$9,304 $2,602 $11,973
forward contracts (US$3,000-$8,000) (US$2,237) (US$10,295)
----------------------------------------------------------------------------
(x) Renewable energy $5.35-$26.17 ($258) $9,572
certificates (US$4.60-$22.50) (US($223)) (US$8,231)
----------------------------------------------------------------------------
(xi) Verified emission $9.59 ($216) $576
reduction certificates (US$8.25) (US$(186)) (US$495)
----------------------------------------------------------------------------
(xii) Options $7.09-$16.05 ($2,414) $14,161
(US$6.10-$13.80) (US($2,075)) (US$12,176)
----------------------------------------------------------------------------
(xiii) Physical gas forward $3.95-$13.82 ($112,206) $399,645
contracts (US$3.40-$11.88) (US($96,480)) (US$343,633)
----------------------------------------------------------------------------
(xiv) Transportation forward $0.01-$0.70 ($2,141) $6,232
contracts (US$0.01-$0.60) (US($1,841)) (US$5,358)
----------------------------------------------------------------------------
(xv) Heat rate swaps $34.45-$77.71 $1,776 $95,266
(US$29.62-$66.82) (US$1,527) (US$81,914)
----------------------------------------------------------------------------
(xvi) Fixed financial swap $4.70-$8.90 ($1,685) $101,775
(US$4.04-$7.65) (US$1,449) (US$87,511)
----------------------------------------------------------------------------
(xvii) Foreign exchange forward $46,535
contracts(ii) $0.99-$1.13 $2,745 (US$40,000)
----------------------------------------------------------------------------

(i) The electricity fixed-for-floating contracts related to the Province of
Alberta are predominantly load-following, 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 AOCI 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:



June 30, 2009 June 30, 2008
Loss on cash Loss on cash
flow hedges Unrealized flow hedges Unrealized
transferred gain transferred gain
from Other recorded from Other recorded
Comprehensive in Other Comprehensive in Other
Income to the Compre- Income to the Compre-
Statement of hensive Statement of hensive
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) 454,837
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 (59,135) - 4,550 -
----------------------------------------------------------------------------
Total realized and
unrealized
gains/(losses) $ (59,135) $ - $ (221,135) $ 813,595
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The estimated amortization of deferred gains and losses reported in AOCI that is expected to be amortized to net income within the next 12 months is a gain of $184,530.

(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 June 30, 2009 Carrying amount Fair value

Cash and cash equivalents and restricted cash $ 52,220 $ 52,220
Accounts receivable $ 189,075 $ 189,075
Accounts payable and accrued liabilities,
customer rebates payable, management
incentive program payable and unit
distribution payable $ 156,298 $ 156,298
Long-term debt $ 65,060 $ 65,060



For the three For the three
months ended months ended
June 30, 2009 June 30, 2008

Gain on accounts payable and accrued liabilities $ - $ 304
Interest expense on financial liabilities not
held for trading $ 480 $ 879


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' Acceptance, 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., 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 June 30, 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 June 30, 2009 would have been $3,280 lower/higher and other comprehensive income would have been $15,453 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 months ended June 30, 2009 of approximately $162.

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 the 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. 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. 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 flows of Just Energy.

Other assets and Other liabilities on the Consolidated Balance Sheets represent the fair value of the derivative instruments. As a result of commodity volatility and the size of the Fund, annual swings in the mark to market on the Fund's positions could have a significant impact on these balances.

As at June 30, 2009, if the electricity prices had risen (fallen) by 10%, assuming that all the other variables had remained constant, income before taxes for the three months ended June 30, 2009 would have increased (decreased) by $99,087 ($98,898) primarily as a result of the change in the fair value of the Fund's derivative instruments.

As at June 30, 2009, if the natural gas prices had risen (fallen) by 10%, assuming that all the other variables had remained constant, income before taxes for the three months ended June 30, 2009 would have increased (decreased) by $123,065 ($122,647) primarily as a result of the change in the fair value of the Fund's derivative instruments.

Changes in gas and electricity prices will not significantly impact the Fund's gross margin percentage due to its fixed-price contracts with its customers.

(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 and Illinois, 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 Illinois, Texas and Alberta.

As at June 30, 2009, accounts receivables from Alberta, Texas and Illinois with a carrying value of $20,967 (March 31, 2009 - $17,022) were past due but not doubtful. As at June 30, 2009 the aging of the accounts receivables from Alberta, Texas and Illinois was as follows:



Current $ 28,785
1 - 30 days 8,853
31 - 60 days 4,962
61 - 90 days 3,161
Over 90 days 3,991
------------
$ 49,752
------------


For the three months ended June 30, 2009, changes in the allowance for doubtful accounts were as follows:



Balance, beginning of period $ 8,657
Provision for doubtful accounts 3,829
Bad debts written off (4,051)
Others (746)
------------
Balance, end of period $ 7,689
------------


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 June 30, 2009, the maximum credit risk exposure amounted to $3,443,852, 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 $378 to accommodate for its counterparties' risk of default. A significant portion of these gas and electricity purchases is from Shell Energy North America and its affiliates.



7. INCOME PER UNIT

2009 2008
Basic income per unit
---------------------
Net income available to Unitholders $ 102,627 $ 34,232
------------- ------------
Weighted average number of units outstanding 106,198,000 102,410,000
Weighted average number of Class A preference
shares 5,264,000 6,690,000
------------- ------------
Basic units and shares outstanding 111,462,000 109,100,000
------------- ------------
Basic income per unit $ 0.92 $ 0.31
------------- ------------
------------- ------------

Diluted income per unit
-----------------------
Net income available to Unitholders $ 102,627 $ 34,232
------------- ------------
Basic units and shares outstanding 111,462,000 109,100,000
Dilutive effect of:

Unit options - 40,000
Unit appreciation rights 1,382,000 1,026,000
Deferred unit grants 63,000 38,000
------------- ------------
Units outstanding on a diluted basis 112,907,000 110,204,000
------------- ------------
Diluted income per unit $ 0.91 $ 0.31
------------- ------------
------------- ------------


8. 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:



United
2009 Canada States Consolidated
------ ------ ------------

Sales gas $ 149,697 $ 50,434 $ 200,131
Sales electricity 123,491 75,388 198,879
----------------------------------------------------------------------------
Sales $ 273,188 $ 125,822 $ 399,010
----------------------------------------------------------------------------

Gross margin $ 42,353 $ 23,722 $ 66,075
Amortization of gas contracts 283 - 283
Amortization of electricity
contracts - 311 311
Amortization of capital assets 1,126 68 1,194
Other operating expenses 22,045 17,523 39,568
----------------------------------------------------------------------------
Income before the undernoted 18,899 5,820 24,719
Interest expense 416 64 480
Change in fair value of
derivative instruments (8,275) (79,605) (87,880)
Other income (745) (11) (756)
Non-controlling interest (55) - (55)
Provision for income tax 287 10,016 10,303
----------------------------------------------------------------------------
Net income $ 27,271 $ 75,356 $ 102,627
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Additions to capital assets $ 7,307 $ 99 $ 7,406
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total goodwill $ 94,576 $ 20,732 $ 115,308
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total assets $ 313,888 $ 143,823 $ 457,711
----------------------------------------------------------------------------
----------------------------------------------------------------------------



United
2008 Canada States Consolidated
------ ------ ------------

Sales gas $ 159,493 $ 39,963 $ 199,456
Sales electricity 130,822 47,632 178,454
----------------------------------------------------------------------------
Sales $ 290,315 $ 87,595 $ 377,910
----------------------------------------------------------------------------

Gross margin $ 49,723 $ 5,498 $ 55,221
Amortization of electricity
contracts 178 1,789 1,967
Amortization of capital assets 1,053 163 1,216
Other operating expenses 16,290 12,731 29,021
----------------------------------------------------------------------------
Income (loss) before the undernoted 32,202 (9,185) 23,017
Interest expense 631 260 891
Change in fair value of derivative
instruments 452 (11,263) (10,811)
Other income (1,572) 463 (1,109)
Provision for (Recovery of) income
tax (748) 562 (186)
----------------------------------------------------------------------------
Net income $ 33,439 $ 793 $ 34,232
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Additions to capital assets $ 178 $ 30 $ 208
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total goodwill $ 94,576 $ 18,178 $ 112,754
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total assets $ 799,946 $ 381,582 $ 1,161,528
----------------------------------------------------------------------------
----------------------------------------------------------------------------



9. COMMITMENTS

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


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

2010 $ 5,394 $ 7,989 $ 1,012,461
2011 4,800 13,233 1,048,180
2012 4,217 7,861 685,045
2013 2,899 - 424,609
2014 2,100 - 200,522
Thereafter 5,789 - 23,283
------------ -------------- ---------------
$ 25,199 $ 29,083 $ 3,394,100
------------ -------------- ---------------
------------ -------------- ---------------


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.

10. 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.

11. SUBSEQUENT EVENTS

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. 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.

On July 1, 2009, in connection with the acquisition of UEG, Just Energy increased its credit facility from $170 million to $250 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 lenders thereunder.

On July 2, 2009, National Energy Corporation ("NEC"), a wholly owned subsidiary of UEG, acquired Newten Home Comfort Inc., an arm's length third party that held a 20% interest of Newten Home Comfort L.P. for an amount of $3.2 million, subject to adjustments based on completed installations. Accordingly, Newten Home Comfort L.P. became a wholly owned subsidiary of Just Energy. NEC carries on the business of renting and selling water heaters.

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
    www.justenergy.com