Energy Savings Income Fund
TSX : SIF.UN

Energy Savings Income Fund

April 13, 2009 06:00 ET

Energy Savings Announces Discussions to Acquire Universal Energy

TORONTO, ONTARIO--(Marketwire - April 13, 2009) -

Energy Savings Income Fund ("ESIF") (TSX:SIF.UN) announces that on March 20, 2009 it entered into a letter of intent (the "LOI") with Universal Energy Group, Ltd ("UEG") with respect to a potential acquisition of UEG by ESIF.

The LOI is non-binding, including in respect of all proposed transaction terms, except for a 30-day "exclusivity period" which expires on April 19, 2009 and certain non-material matters.

The potential transaction contemplates the acquisition of the UEG common shares in exchange for trust units of ESIF at a mutually agreed exchange ratio of 0.58 of an ESIF Unit for each UEG share for an approximate value of $7.05 per share based on the $12.16 closing price of ESIF trust units on April 9, 2009. If a definitive agreement is reached, the parties would expect to propose to UEG shareholders an exchange of their UEG common shares for shares of a subsidiary of ESIF exchangeable for ESIF trust units to provide a tax deferral for Canadian UEG shareholders. Any such transaction would, if completed, result in a corresponding adjustment to the conversion feature of UEG's outstanding 6% convertible debentures (TSX:UEG.DB) in accordance with their terms.

Without limitation of the non-binding nature of the LOI, each party's obligation to proceed with the transaction is subject to satisfaction or waiver of the following conditions by 5:00 pm (Toronto time) on April 19, 2009: (a) negotiation of a mutually satisfactory definitive agreement including lock-up agreements with key UEG shareholders; (b) each party completing and being satisfied, in its sole discretion with its due diligence review of the other party; (c) approval of the transaction and definitive agreement by the parties' respective boards of directors; and (d) receipt of necessary regulatory and other third party approvals.

Energy Savings cautions that no definitive agreement has been entered into and accordingly no assurance can be given that the process contemplated by the LOI will lead to a definitive agreement relating to the acquisition of UEG on the terms contemplated by the LOI or otherwise or any other transaction.

Ken Hartwick, CEO of Energy Savings, stated, "While no transaction has yet been finalized, market events have necessitated the release of the existence of our non-binding letter of intent. If proceeded with, the transaction as proposed would offer significant benefits to the public holders of both companies. The merger of two independent contractor sales forces in Canada as well as United States customer bases which do not overlap should be positive for growth going forward. In addition, the fact that each company has a substantial general and administrative structure which performs identical services should lead to operating synergies which will make the transaction accretive to Energy Savings distributable cash per unit."

Energy Savings does not intend to make any further announcements or communications regarding this potential transaction until either a definitive agreement has been reached or discussions are terminated without such an agreement being reached.

The Fund

Energy Savings' 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, Energy Savings' customers offset their exposure to changes in the price of these essential commodities. Energy Savings, 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. A new partnership was entered into on July 18, 2008 which involves the marketing, leasing, sale and installation of tankless and high efficiency water heaters.

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. Energy Savings 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.). Energy Savings 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. Specific forward-looking statements contained in this press release include, among others, statements regarding the potential acquisition and the proposed terms of thereof, and potential benefits to the Fund from the completion thereof. 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.esif.ca.

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

Contact Information

  • Energy Savings Income Fund
    Ms. Rebecca MacDonald
    Executive Chair
    (416) 367-2872
    or
    Energy Savings Income Fund
    Mr. Ken Hartwick, C.A.
    Chief Executive Officer
    (905) 795-3557
    or
    Energy Savings Income Fund
    Ms. Beth Summers, C.A.
    Chief Financial Officer
    (905) 795-4206
    Website: www.esif.ca