Just Energy Group Inc.
TSX : JE

Just Energy Group Inc.

August 11, 2011 10:08 ET

Just Energy Reports First Quarter Results

- Ahead of 5% Published Growth Target

- 227,000 Gross and 44,000 Net Customer Additions. Customer Base Up 9% from a Year Prior

- Gross Margin Up 14% Per Share

- Administrative Costs Down 5% Per Share

- Adjusted EBITDA Up 23% Per Share

TORONTO, ONTARIO--(Marketwire - Aug. 11, 2011) - Just Energy Group Inc. (TSX:JE) -

Highlights for the three months ended June 30, 2011 included:


--  Gross customer additions through marketing of 227,000 and net additions
    of 44,000 compared to 232,000 and 73,000 in the fourth quarter and
    261,000 and 116,000 in first quarter of fiscal 2011. 

--  Just Energy exited the quarter with 3.4 million customers, up 9% from a
    year earlier. 

--  National Home Services installed base up 50% year over year to 131,600
    with gross margin up 120% to $6.2 million. 

--  Gross margin of $94.3 million, up 17% (14% per share). 

--  Administrative costs down despite the 9% increase in customer base. 

--  Adjusted EBITDA of $37.4 million, up 26% (23% per share) reflecting
    earnings before growth marketing expenditures. 

--  Base EBITDA of $29.9 million, up 36% (34% per share) reflecting earnings
    after all marketing. 

--  Payout ratio on Adjusted EBITDA was 116% for the quarter, versus 142%
    for the three months ended June 30, 2010. First quarter results exceed
    published guidance of 5% growth in gross margin and adjusted EBITDA. 

Just Energy First Quarter Fiscal 2012 Results

Just Energy Group Inc. announced its results for the three months ended June 30, 2011.

Just Energy is a TSX listed corporation and it reports in the attached Management's Discussion and Analysis, a detailed review of its operating results as measured by gross margin, Adjusted EBITDA and Base EBITDA. Just Energy also reports the profit for the period but Management believes that the inclusion of non-cash mark to market on future supply positions makes this measure less valuable in measuring performance as this future supply has been sold at fixed prices.


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Three months ended June 30,                                                 
($ millions except per unit and                                             
 customers)                            F2012  Per share      F2011  Per unit
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Sales                                 $626.2      $4.46     $609.7     $4.44
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Gross margin                            94.3       0.67       80.4      0.59
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General and administrative              28.3       0.20       28.8      0.21
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Financing costs                         13.8       0.10        9.9(1)   0.07
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Profit                                  51.1       0.36     270.80      1.97
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Adjusted EBITDA                         37.4       0.27       29.7      0.22
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Base EBITDA                             29.9       0.21       21.8      0.16
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Dividends/distributions                 43.6       0.31       42.1      0.31
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Payout ratio - Adjusted EBITDA          116%                  142%          
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Long Term Customers                3,358,000             3,069,000          
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(1) Excludes distributions paid to holders of exchangeable shares prior to 
the Conversion included as finance costs under IFRS.

The first quarter of fiscal 2012 displayed positive impacts in several areas from Just Energy's diversification efforts over the last two years. First, the Hudson acquisition allowed expansion of Just Energy's presence in the commercial gas and electricity markets. This commercial expansion has allowed the Company to match and exceed its past customer growth. Higher customer additions have allowed Just Energy to offset a difficult price environment and resultant weak renewals, maintaining its gross margin and EBITDA.

A second diversification was the move into green commodity supply through the JustGreen and, now, JustClean programs. Over the past 12-months, green takeup was 32% for new residential customers, who purchased an average of 91% green supply. Our overall green book is now 9% of the Company's natural gas needs (up from 3% a year ago) and 10% for electricity (up from 6%). The Green products are popular with residential customers strengthening long-term margins, building a stronger customer relationship and allowing employees to be proud of their contribution to a cleaner environment.

National Home Services water heater rental and sales operation has been a success with installations growing 50% from 88,000 units to 131,600 year over year. Margin from this business was up 120% year over year.

The Momentis network marketing channel is now seeing encouraging results. Network marketing does not overlap traditional sales channels and tends to generate sales to customers who would not otherwise buy from a door-to-door salesperson.

These expansions were seen both in continued marketing success in the first quarter and operating results which currently exceed published growth targets for the year. Management has set targets of 5% per share growth for both gross margin and Adjusted EBITDA for fiscal 2012.

In the first quarter, gross margin was $94.3 million up 14% per share year over year. Administrative costs have been kept under tight control and are beginning to show the impact of the decreased cost to serve commercial customers declining 5% per share to $28.3 million despite a 9% growth in customer base. Higher margins and lower operating costs resulted in growth in Adjusted EBITDA to $37.4 million, up 23% per share.

Other aspects of operations such as bad debt were also well under control. Losses were 2.8% on the 40% of our sales where we bear this risk, unchanged from a year earlier. Attrition rates were in line with management's expectations and down significantly from the first quarter of fiscal 2011. U.S. natural gas attrition (the market most affected by the housing crisis) was down to 21% from 28% over the past year.

Renewal rates were soft, averaging under 70%. The current stable low commodity price environment is the worst for Just Energy's core products however the Company has focused on renewals by giving the customer a range of options including Blend and Extend pricing and our new JustClean products.

The Terra Grain ethanol plant has seen better pricing and improved operating results with positive margin for the quarter.

The 227,000 customers added were a continuation of the positive results we have seen since the Hudson acquisition. As can be seen in the chart below, both gross and net additions continue far above historical levels and the reason is commercial additions.

To view the Quarterly Customer Additions, please visit the following link: http://media3.marketwire.com/docs/QCA811.jpg.

Commercial additions made up 148,000 of the 227,000 quarterly additions. These customers have lower annual margins but their aggregation cost and annual customer service costs are commensurately lower as well. Overall, as can be seen below, the Just Energy customer base is up 9% year over year. This is entirely growth through marketing with no acquired customers in the total.


                              April 1,                            Failed to 
                                  2011   Additions   Attrition        renew 
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Natural gas                                                                 
Canada                         656,000      15,000     (15,000)     (21,000)
United States                  574,000      27,000     (29,000)      (5,000)
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Total gas                    1,230,000      42,000     (44,000)     (26,000)
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Electricity                                                                 
Canada                         736,000      19,000     (20,000)     (31,000)
United States                1,348,000     166,000     (42,000)     (20,000)
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Total electricity            2,084,000     185,000     (62,000)     (51,000)
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Combined                     3,314,000     227,000    (106,000)     (77,000)
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                              June 30,    June 30,             
                                  2011        2010             
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Natural gas                                                    
Canada                         635,000     709,000        (10%)
United States                  567,000     564,000          1% 
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Total gas                    1,202,000   1,273,000         (6%)
---------------------------------------------------------------
Electricity                                                    
Canada                         704,000     757,000         (7%)
United States                1,452,000   1,039,000         40% 
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Total electricity            2,156,000   1,796,000         20% 
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Combined                     3,358,000   3,069,000          9% 
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Company management is maintaining the current guidance of 5% per share growth for the year for both gross margin and Adjusted EBITDA. While operating results are far ahead of that level to date, the first quarter seasonally is the lowest quarter for sales and gross margin. The comparable quarter in fiscal 2011 reflected the impact of a record warm winter with resultant weak operating results. Further, the adverse impact of the decline of the U.S. dollar versus the Canadian dollar during and subsequent to the quarter provide grounds for caution in any forecast. Management intends to update on targets as the year progresses.

Dividends were $0.31 per share, equal to unit distributions paid in the prior comparable quarter. Payout ratio on Adjusted EBITDA was 116% down from 142% a year ago in what is seasonally the weakest quarter of the year. Management's expectation is that the payout ratio will be below 100% for fiscal 2012 and allow us to comfortably pay out interest, income tax and dividends.

Executive Chair Rebecca MacDonald stated, "I am very pleased with the double digit growth seen in our operating results for the first quarter. Just Energy has been and remains a growth company. While there are always uncertainties at the end of the first quarter, we are off to a solid start in meeting our expectations."

CEO Ken Hartwick added, "We have had a two year plan to diversify our business while remaining within the deregulated energy sector. The success of the plan can be seen in this quarter where our commercial expansion has bolstered our Energy Marketing segment. Our success with National Home Services and our Green Products have also given us new sources of revenue moving forward."

"At the same time, management has focused on controlling costs both in the administration of our business and through bad debt where we are exposed. Controlling costs has helped us deliver results even during a period which, for Just Energy, is one of slower growth."

"We plan to continue to review other opportunities for diversification and intend to maintain Just Energy as a unique income/growth vehicle moving forward. I want to thank our team for their efforts this quarter."

About Just Energy Group Inc.

Just Energy's business primarily involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price, price-protected or variable-priced contracts and green energy products. 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. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion. Just Energy, which commenced business in 1997, derives its margin or gross profit from the difference between the price at which it is able to sell the commodities to its customers and the related price at which it purchases the associated volumes from its suppliers. Just Energy also offers "green" products through its JustGreen and JustClean programs. The electricity JustGreen 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 JustGreen product offers carbon offset credits which will allow the customer to reduce or eliminate the carbon footprint of their home or business.

JustClean products allow customers in certain jurisdictions to offset their carbon footprint without purchasing commodity from Just Energy. JustClean can be offered in all states and provinces and is not dependent on energy deregulation. Management believes that the JustGreen and JustClean products will not only add to profits, but also increase sales receptivity and improve renewal rates.

In addition, through National Home Services, Just Energy sells and rents high efficiency and tankless water heaters, air conditioners and furnaces to Ontario residents. Through its subsidiary Terra Grain Fuels, Just Energy produces and sells wheat-based ethanol. Just Energy has also launched, Hudson Solar, a solar project development platform in New Jersey.

Forward-Looking Statements

Just Energy'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, administrative expenses, Base EBITDA, adjusted EBITDA 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 Just Energy's operations, financial results or dividends are included in Just Energy'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 Just Energy's website at www.justenergygroup.com.


      MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A") - August 10, 2011       
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Overview

The following discussion and analysis is a review of the financial condition and results of operations of Just Energy Group Inc. ("JEGI" or "Just Energy" or the "Company") (formerly Just Energy Income Fund (the "Fund")) for the three months ended June 30, 2011, and has been prepared with all information available up to and including August 10, 2011. This analysis should be read in conjunction with the unaudited consolidated financial statements for the three months ended June 30, 2011. The financial information contained herein has been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. Just Energy's date of transition to IFRS was April 1, 2010. All dollar amounts are expressed in Canadian dollars. Quarterly reports, the annual report and supplementary information can be found on Just Energy's corporate website at www.justenergygroup.com. Additional information can be found on SEDAR at www.sedar.com.

Effective January 1, 2011, Just Energy completed the conversion from the Fund to Just Energy (the "Conversion"). As part of the Conversion, Just Energy Exchange Corp. ("JEEC") was amalgamated with JEGI and, like the unitholders of the Fund, the holders of JEEC's Exchangeable Shares received common shares of JEGI on a one for one basis. JEGI also assumed all of the obligations under the $90m convertible debentures and $330m convertible debentures.

Just Energy is a corporation established under the laws of Canada and holds securities and distributes the income of its directly or indirectly owned operating subsidiaries and affiliates: Just Energy Ontario L.P., Just Energy Manitoba L.P., Just Energy Quebec L.P., Just Energy (B.C.) Limited Partnership, Just Energy Alberta L.P., Alberta Energy Savings L.P. ("AESLP"), Just Energy Illinois Corp., Just Energy New York Corp., Just Energy Indiana Corp., Just Energy Texas L.P., Just Energy Massachusetts Corp., Just Energy Michigan Corp., Just Energy Pennsylvania Corp., Universal Energy Corporation, Commerce Energy Inc. ("Commerce" or "CEI"), National Energy Corp. (which operates under the trade name of National Home Services ("NHS")), Hudson Energy Services, LLC and Hudson Energy Canada Corp. (collectively "Hudson" or "HES"), Momentis Canada Corp. and Momentis U.S. Corp. (collectively, "Momentis"), Terra Grain Fuels, Inc. ("TGF"), and Hudson Energy Solar Corp.

Just Energy's business primarily involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price, price-protected or variable-priced contracts and green energy products. 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. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion. Just Energy, which commenced business in 1997, derives its margin or gross profit from the difference between the price at which it is able to sell the commodities to its customers and the fixed term price at which it purchases the associated volumes from its suppliers.

Just Energy also offers "green" products through its JustGreen and JustClean programs. The electricity JustGreen 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 JustGreen product offers carbon offset credits, which will allow the customer to reduce or eliminate the carbon footprint of their home or business. JustClean products allow customers in certain jurisdictions to offset their carbon footprint without purchasing commodity from Just Energy. JustClean can be offered in all states and provinces and is not dependent on energy deregulation. Management believes that the JustGreen and JustCLean products will not only add to profits, but also increase sales receptivity and improve renewal rates.

In addition, through National Home Services, Just Energy sells and rents high efficiency and tankless water heaters, air conditioners and furnaces to Ontario residents. Through its subsidiary Terra Grain Fuels, Just Energy produces and sells wheat-based ethanol. Just Energy has also launched Hudson Solar, a solar project development platform in New Jersey.

Forward-looking information

This MD&A contains certain forward-looking information pertaining to customer additions and renewals, customer consumption levels, EBITDA, Base EBITDA, Adjusted EBITDA 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, extreme weather conditions, 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 Just Energy's operations, financial results or distribution levels are included in the Annual Information Form and other reports on file with Canadian security regulatory authorities, which can be accessed on our corporate website at www.justenergygroup.com or through the SEDAR website at www.sedar.com.

Key terms

"Attrition" means customers whose contracts were terminated early 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.

"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 the sale of excess commodity supply.

"$90m convertible debentures" represents the $90 million in convertible debentures issued by Universal Energy Group Ltd. ("Universal") in October 2007. JEEC assumed the obligations of the debentures as part of the UEG acquisition on July 1, 2009. Just Energy assumed the obligations of the debentures as part of the Conversion. See "Long-term debt and financing" on page 21 for further details.

"$330m convertible debentures" represents the $330 million in convertible debentures issued by the Fund to finance the purchase of Hudson, effective May 1, 2010. Just Energy assumed the obligations of the debentures as part of the Conversion. See "Long-term debt and financing" on page 21 for further details.

"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.

"Large commercial customer" means customers representing more than 15 RCEs.

Non-GAAP financial measures

Just Energy's financial statements are prepared in compliance with IFRS. All non-GAAP financial measures do not have standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

Just Energy converted from an income trust to a corporation on January 1, 2011. Under the corporate structure, management believes that Adjusted EBITDA is the best basis for analyzing the financial results of Just Energy.

EBITDA

"EBITDA" represents earnings before finance costs, taxes, depreciation and amortization. This is a non-GAAP measure which reflects the pre-tax profitability of the business.

Base EBITDA

"Base EBITDA" represents EBITDA adjusted to exclude the impact of mark to market gains (losses) arising from IFRS requirements for derivative financial instruments on future supply positions. This measure reflects operating profitability as mark to market gains (losses) are associated with supply already sold at future fixed prices.

Just Energy ensures that customer margins are protected by entering into fixed-price supply contracts. Under IFRS, 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 Just Energy and have therefore excluded it from the Base EBITDA calculation.

Adjusted EBITDA

"Adjusted EBITDA" represents Base EBITDA adjusted to deduct selling and marketing costs sufficient to maintain existing levels of gross margin and maintenance capital expenditures necessary to sustain existing operations. This adjustment results in the exclusion of the marketing that Just Energy carried out and the capital expenditures that it had made to add to its future productive capacity. Management believes this is a useful measure of operating performance for investors.

Embedded gross margin

"Embedded gross margin" is a rolling five-year measure of management's estimate of future contracted gross margin. It is the difference between existing customer contract prices and the cost of supply for the remainder of term, with appropriate assumptions for customer attrition and renewals. It is assumed that expiring contracts will be renewed at target margin and renewal rates.


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

                             Fiscal 2012     Per unit/       Fiscal 2011    
                                                 share                      
                                   Per share    change              Per unit
                        ----------------------------------------------------

Sales                     $626,200     $4.46         -    $609,684     $4.44
Gross margin                94,261      0.67        14%     80,355      0.59
Administrative expenses     28,284      0.20        (5)%    28,841      0.21
Finance costs               13,792      0.10        43%   9,937(3)      0.07
Net income(1)               51,132      0.36       (82)%   270,789      1.97
Dividends/distributions     43,605      0.31         -      42,070      0.31
Base EBITDA(2)              29,867      0.21        34%     21,798      0.16
Adjusted EBITDA(2)          37,431      0.27        23%     29,726      0.22
Payout ratio on Base                                                        
 EBITDA                        146%                            193%         
Payout ratio on Adjusted                                                    
 EBITDA                        116%                            142%         

(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 realizable impact of mark to market gains  
    and losses.                                                             
(2) See discussion of non-GAAP financial measures on page 2.
(3) Excludes distributions paid to holders of exchangeable shares prior to
    the Conversion included as finance costs under IFRS.


International financial reporting standards

Just Energy has adopted IFRS as the basis for reporting its financial results commencing with the interim financial statements for the three months ended June 30, 2011 and using April 1, 2010 as the transition date. The comparative figures for fiscal 2011 have been restated in accordance with the Company's IFRS accounting policies. The adoption of IFRS did not change Just Energy's business activities or actual cash flow; however, it has resulted in adjustments to its financial statements.

In order to allow the users of the financial statements to better understand the impact of the change to IFRS, the Company's Canadian GAAP consolidated balance sheets at April 1, 2010, June 30, 2010 and March 31, 2011, the Company's consolidated statements of earnings (loss) and comprehensive income (loss) for the three months ended June 30, 2010 and year ended March 31, 2011 have been reconciled to IFRS, with the resulting differences explained. These reconciliations are provided in note 24 of the interim financial statements.

The following summarizes the significant financial effects on Just Energy's consolidated financial statements resulting from the conversion to IFRS and summarizes the significant accounting policies adopted in preparing the IFRS consolidated financial statements:

IFRS 1: First-time adoption IFRS

The interim unaudited consolidated financial statements and notes for the three months ended June 30, 2011 contain the accounting policies adopted under IFRS as well as reconciliations of the impact on the consolidated financial statements on transition. IFRS 1 provides guidance for the initial adoption of IFRS and allows first-time adopters certain exemptions from the general requirements contained in IFRS. The following are the exemptions that are relevant to Just Energy and have been applied in preparation of its first financial statements under IFRS.

Business Combinations

IFRS 1 states that a first-time adopter may elect not to apply IFRS 3, Business Combinations, retrospectively to business combinations that occurred before the date of transition to IFRS. Just Energy has elected to apply IFRS to business acquisitions prospectively, from the date of transition.

Borrowing Costs

Just Energy has elected not to capitalize any borrowing costs on a retrospective basis for qualifying assets acquired prior to April 1, 2010, the date of transition to IFRS as it was determined to be not material.

Share-based payments

IFRS 1 states that a first-time adopter may elect not to apply IFRS 2, Share-based payments, retrospectively to equity instruments that were granted on or before November 7, 2002, or which are vested before the Company's date of transition to IFRS.

Cumulative translation differences

IFRS 1 allows cumulative translation differences for all foreign operations to be deemed zero at the date of transition to IFRS, with future gains or losses on subsequent disposal of any foreign operations to exclude translation differences arising from periods prior to the date of transition to IFRS. Just Energy has elected not to apply this exemption.

IFRS 2: Share-based payments

Just Energy amended its accounting policy related to the recognition and measurement of share based compensation to conform with IFRS. Under IFRS, when stock option awards vest gradually, each tranche is to be considered as a separate award with its own vesting period and grant date value. Just Energy assessed the impact of the recognition and measurement criteria under IFRS.

IAS 12: Income taxes

For the comparative nine month period ended December 31, 2010 when Just Energy operated under an income trust structure, deferred income taxes were originally measured at 27%. As a result of adopting IFRS, deferred income taxes were re-measured at the tax rate of approximately 46.4% applicable to undistributed profits. The deferred taxes were subsequently re-measured at the applicable corporate rates on January 1, 2011, the date Just Energy converted to a corporation.

As a result of additional financial liabilities existing under IFRS, as discussed below, there was an increase to Just Energy's future tax assets as at April 1, 2010. Upon conversion to a corporation on January 1, 2011, this future tax asset has reversed as a result of the financial liability being settled in shares.

IAS 32: Financial Instruments: Presentation

As at Just Energy's transition date, there were JEEC exchangeable shares, Class A preference shares of Just Energy Corp. ("JEC") and unit-based awards outstanding that did not meet the definition of an equity instrument in accordance with IAS 32, and therefore, were classified as financial liabilities. These financial liabilities were recorded at redemption value at the transition date and subsequently adjusted to reflect the redemption value at each reporting date with the resulting change recorded as a change in fair value of derivative instruments. All distributions and dividends attributed to these financial liabilities were recorded as finance costs. As a result of the Conversion, the JEEC exchangeable shares and Class A preference shares of JEC were exchanged on a one-for-one basis into common shares of JEGI.

IAS 37: Provisions, contingent liabilities and contingent assets

Provisions are measured at the discounted present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the liability.

IAS 39: Financial instruments: Recognition and measurement

Just Energy enters into fixed-term contracts with customers to provide electricity and gas at fixed prices. These customer contracts expose the Company to changes in market prices of electricity and gas consumption. To reduce the exposure to movements in commodity prices arising from the acquisition of electricity and gas at floating rates, the Company routinely enters into derivative contracts. Under Canadian GAAP, all supply contracts are re-measured at fair value at each reporting date. The requirements for normal purchase and normal sale exemption (own-use exemption) are similar under Canadian GAAP and IFRS; however, several small differences exist. There is no specific guidance either in Canadian GAAP or IFRS with respect to eligibility of the own-use exemption of energy supply contracts entered into by energy retailers. The Company nevertheless concluded that the own-use exemption does not apply and the amounts will continue to be marked to market.

IAS 39 also requires that transaction costs incurred upon initial acquisition of a financial instrument be deferred and amortized into profit and loss over the life of the instrument. Initial application of IAS 39 resulted in an opening balance sheet adjustment to reduce long-term debt on the date of transition. This adjustment was offset through opening retained earnings.

Acquisition of Hudson Energy Services, LLC

In May 2010, Just Energy completed the acquisition of all of the equity interests of Hudson Parent Holdings, LLC, and all of the common shares of Hudson Energy Corp., thereby indirectly acquiring Hudson, with an effective date of May 1, 2010.

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


                                                   Fair value recognized on 
                                                                acquisition 
Current assets (including cash of $24,003)                         $ 88,696 
Electricity contracts and customer relationships                    200,653 
Gas contracts and customer relationships                             26,225 
Broker network                                                       84,400 
Brand                                                                11,200 
Information technology system development                            17,954 
Contract initiation costs                                            20,288 
Other intangible assets                                               6,545 
Property, plant and equipment                                         1,648 
Software                                                                911 
Unbilled revenue                                                     15,092 
Notes receivable - long term                                          1,312 
Security deposits - long term                                         3,544 
Other assets - current                                                  124 
Other assets - long term                                                100 
                                                  --------------------------
                                                                    478,692 

Current liabilities                                                (107,817)
Other liabilities - current                                         (74,683)
Other liabilities - long term                                       (40,719)
                                                  --------------------------
                                                                   (223,219)

Total identifiable net assets acquired                              255,473 

Goodwill arising on acquisition                                      32,317 
                                                  --------------------------
Total consideration                                               $ 287,790 
                                                  --------------------------

Cash outflow on acquisition:                                                
Cash paid                                                         $ 287,790 
Net cash acquired with the subsidiary                               (24,003)
Holdback                                                             (9,345)
                                                  --------------------------
Net cash outflow                                                  $ 254,442 
                                                  --------------------------

All contracts and intangible assets, excluding brand, are amortized over the average remaining life at the time of acquisition. The gas and electricity contracts and customer relationships are amortized over 30 months and 35 months, respectively. Other intangible assets, excluding brand, are amortized over periods of three to five years. The brand value is considered to be indefinite and, therefore, not subject to amortization. The purchase price allocation is considered final and, as a result, no further adjustments will be made.

Operations

Natural gas

Just Energy offers natural gas customers a variety of products ranging from month-to-month variable-price offerings to five-year fixed-price contracts. For fixed-price contracts, Just Energy purchases gas supply through physical or financial transactions with market counterparts in advance of marketing, based on forecast customer aggregation for residential and small commercial customers. For larger commercial customers, gas supply is generally purchased concurrently with the execution of a contract.

The LDC provides historical customer usage which, when normalized to average weather, enables Just Energy to purchase the expected normal customer load. Furthermore, Just Energy mitigates exposure to weather variations through active management of the gas portfolio, which involves, but is not limited to, the purchase of options including weather derivatives. Just Energy's ability to mitigate weather effects is limited by the severity of weather from normal. To the extent that balancing requirements are outside the forecast purchase, Just Energy bears the financial responsibility for fluctuations in customer usage. Volume variances may result in either excess or short supply. In the case of under consumption by the customer, excess supply is sold in the spot market resulting in either a gain or loss compared to the weighted average cost of supply. Further, customer margin is lowered proportionately to the decrease in consumption. In the case of greater than expected gas consumption, Just Energy must purchase the short supply in the spot market resulting in either a gain or loss compared to the weighted average cost of supply. Consequently, customer margin increases proportionately to the increase in consumption. To the extent that supply balancing is not fully covered through active management or the options employed, Just Energy's customer gross margin may be reduced or increased depending upon market conditions at the time of balancing. Under some commercial contract terms, this balancing may be passed onto the customer.

Ontario, Quebec, British Columbia and Michigan

In Ontario, Quebec, British Columbia and Michigan, the volumes delivered for a customer typically remain constant throughout the year. Just Energy does not recognize sales until the customer actually consumes the gas. During the winter months, gas is consumed at a rate that 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, Alberta and Saskatchewan

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

New York, Illinois, Indiana, Ohio, California and Pennsylvania

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

Electricity

In Ontario, Alberta, New York, Texas, Illinois, Pennsylvania, New Jersey, Maryland, Michigan, California and Massachusetts, Just Energy offers a variety of solutions to its electricity customers, including fixed-price and variable-price products on both short-term and longer-term electricity contracts. Some of these products provide customers with price-protection programs for the majority of their electricity requirements. The customers experience either a small balancing charge or credit (pass-through) on each bill due to fluctuations in prices applicable to their volume requirements not covered by a fixed price. Just Energy uses historical usage data for all enrolled customers to predict future customer consumption and to help with long-term supply procurement decisions.

Just Energy purchases power supply through physical or financial transactions with market counterparties in advance of marketing for residential and small commercial customers based on forecast customer aggregation. Power supply is generally purchased concurrently with the execution of a contract for larger commercial customers. The LDC provides historical customer usage which, when normalized to average weather, enables Just Energy to purchase to expected normal customer load. Furthermore, Just Energy mitigates exposure to weather variations through active management of the power portfolio. The expected cost of this strategy is incorporated into the price to the customer. Our ability to mitigate weather effects is limited by the severity of weather from normal. To the extent that balancing requirements are outside the forecast purchase, Just Energy bears the financial responsibility for excess or short supply caused by fluctuations in customer usage. In the case of under consumption by the customer, excess supply is sold in the spot market resulting in either a gain or loss in relation to the original cost of supply. Further, customer margin is lowered proportionately to the decrease in consumption. In the case of greater than expected power consumption, Just Energy must purchase the short supply in the spot market resulting in either a gain or loss in relation to the fixed cost of supply. Customer margin generally increases proportionately to the increase in consumption. To the extent that supply balancing is not fully covered through customer pass-throughs or active management or the options employed, Just Energy's customer gross margin may be impacted depending upon market conditions at the time of balancing.

JustGreen

Customers have the ability to choose an appropriate JustGreen program to supplement their electricity and natural gas contracts, providing an effective method to offset their carbon footprint associated with the respective commodity consumption.

JustGreen programs for electricity customers involve the purchase of power from green generators (such as wind, solar, run of the river hydro or biomass) via power purchase agreements and renewable energy certificates. JustGreen programs for gas customers involve the purchase of carbon offsets from carbon capture and reduction projects.

JustClean

In addition to its traditional commodity marketing business, Just Energy allows customers to effectively manage their carbon footprint without buying energy commodity products by signing a JustClean contract. The JustClean products are essentially carbon offsets from carbon capture and reduction projects as well as green power renewable energy certificates from green generators. This product can be offered in all states and provinces and is not dependent on energy deregulation.

Blend and Extend program

As part of Just Energy's retention efforts, electricity and natural gas customers may be contacted for early renewal of their contracts under a Blend and Extend offer. These customers are offered a lower rate, compared to their current contracted rate, but the term of their contract is extended up to five more years. Consequently, Just Energy may experience a reduction in margins in the short term but will gain additional future margins.

Consumer (Residential) Energy division

The sale of gas and electricity to customers of 15 RCEs and less is undertaken by the Consumer Energy division. The marketing of energy products of this division is primarily done door-to-door through 750 independent contractors, the Momentis network marketing operation and Internet-based and telephone marketing efforts. The total number of independent contractors declined during the quarter as a result of Just Energy's decision to close or restructure sales offices that were not performing well. Since quarter end, a number of new offices were opened and management anticipates that the number of independent contractors will increase and, by the end of Q2, return to levels similar to the beginning of the fiscal year. Approximately 58% of Just Energy's customer base resides within the Consumer Energy division, which is currently focused on longer-term price-protected offerings of commodity products, JustGreen and JustClean. To the extent that certain markets are better served by shorter-term or enhanced variable rate products, the Consumer Energy independent contractors also offer these products.

Commercial Energy division

Customers with annual consumption over 15 RCEs are served by the Commercial Energy division. These sales are made through three main channels: door-to-door commercial independent contractors; inside commercial sales representatives; and sales through the broker channel using the commercial platform acquired with the Hudson purchase. Commercial customers make up about 42% of Just Energy's customer base. Products offered to commercial customers can range from standard fixed price offerings to "one off" offerings, which are tailored to meet the customer's specific needs. These products can be either fixed or floating rate or a blend of the two, and normally have terms of less than five years. Margin per RCE for this division is lower than residential margins but customer aggregation costs and ongoing customer care costs are lower as well on a per RCE basis. Commercial customers tend to have combined attrition and failed-to-renew rates which are lower than those of residential customers.

Home Services division

NHS began operations in April 2008 and provides Ontario residential customers with a long-term water heater, furnace and air conditioning rental, offering high efficiency conventional and power vented tanks and tankless water heaters and high efficiency furnaces and air conditioners. NHS markets through approximately 235 independent contractors in Ontario. See page 15 for additional information.

Ethanol division

Just Energy owns and operates TGF, a 150-million-litre capacity wheat-based ethanol plant located in Belle Plaine, Saskatchewan. The plant produces wheat-based ethanol and high protein distillers' dried grain ("DDG"). On January 4, 2011, Just Energy acquired the 33.3% interest in TGF that was previously owned by EllisDon Design Build Inc. ("EllisDon") pursuant to a put option exercised by EllisDon. See page 16 for additional information on TGF.


Adjusted EBITDA                                                             
(thousands of dollars)                                                      

                                    Fiscal 2012            Fiscal 2011      
                              ----------------------------------------------
                                            Per share               Per unit
Reconciliation to income                                                    
 statement                                                                  
Profit attributable to                                                      
 shareholders of Just Energy      $51,132       $0.36   $273,409       $1.99
Add:                                                                        
Finance costs                      13,792                 12,755            
Provision for income tax                                                    
 expense                            7,221                 37,458            
Capital tax                             -                    133            
Amortization                       37,419                 33,590            
                              ----------------------------------------------
EBITDA                           $109,564       $0.78   $357,345        2.60
Subtract:                                                                   
Change in fair value of                                                     
 derivative instruments           (79,697)              (335,547)           
                              ----------------------------------------------
Base EBITDA                        29,867       $0.21     21,798       $0.16
Add (subtract):                                                             
Selling and marketing expenses                                              
 to add gross margin               10,131                  9,381            
Maintenance capital                                                         
 expenditures                      (2,567)                (1,453)           
                              ----------------------------------------------
Adjusted EBITDA                   $37,431       $0.27    $29,726       $0.22
                              ----------------------------------------------
                              ----------------------------------------------

Adjusted EBITDA                                                             
Gross margin per financial                                                  
 statements                       $94,261       $0.67    $80,355       $0.59
Add (subtract):                                                             
Administrative expenses           (28,284)               (28,841)           
Selling and marketing expenses    (34,554)               (29,758)           
Bad debt expense                   (6,814)                (5,749)           
Stock based compensation           (1,681)                (2,010)           
Amortization included in cost                                               
 of sales/selling and                                                       
 marketing expenses                 6,774                  4,498            
Other                                 165                  3,303            
                              ----------------------------------------------
Base EBITDA                        29,867       $0.21     21,798       $0.16
Selling and marketing expenses                                              
 to add gross margin               10,131                  9,381            
Maintenance capital                                                         
 expenditures                      (2,567)                (1,453)           
                              ----------------------------------------------
Adjusted EBITDA                   $37,431       $0.27    $29,726       $0.22
                              ----------------------------------------------
                              ----------------------------------------------
Cash dividends/distributions                                                
Distributions and dividends       $42,520                $39,592            
Class A preference share                                                    
 distributions                          -                  1,632            
Restricted share grants/unit                                                
 appreciation rights and                                                    
 deferred share grant/deferred                                              
 unit grant distributions           1,085                    846            
                              ----------------------------------------------
Total dividends/distributions     $43,605       $0.31    $42,070       $0.31
                              ----------------------------------------------
                              ----------------------------------------------
Adjusted fully diluted average                                              
 number of units/shares                                                     
 outstanding(1)                                140.4m                 137.2m

(1) The per share/unit amounts are calculated on an adjusted fully diluted  
    basis, removing the impact of the $330m convertible debentures and $90m 
    convertible debentures as both will be anti-dilutive by fiscal year-end.

Base EBITDA differs from EBITDA in that the impact of the mark to market gains (losses) from the financial instruments is removed as management believes that these short-term mark to market non-cash gains (losses) do not impact the long-term financial performance. For Adjusted EBITDA, selling and marketing expenses used for increasing gross margin are also removed along with maintenance capital expenditures being deducted. With the conversion from an income trust to a corporation effective January 1, 2011, management believes that Adjusted EBITDA is the best measure of operating performance.

Adjusted EBITDA amounted to $37.4 million ($0.27 per share) in the first quarter of fiscal 2012, an increase of 23% per share/unit from $29.7 million ($0.22 per unit) in the prior comparable quarter. This increase is attributable to the 17% increase in gross margin, primarily attributable to the 9% increase in customer base year over year. The increase in gross margin was higher than the increase in customer base due to lower losses on sale of excess gas than that experienced in the prior comparative quarter and higher margin contribution from NHS and TGF.

Administrative expenses decreased by 2% to $28.3 million, despite the inclusion of a full quarter of expenses related to Hudson, as a result of synergies achieved since the Universal and Hudson acquisitions and lower per RCE costs to serve the growing commercial customer base. Selling and marketing expenses for the three months ended June 30, 2011 were $34.6 million, an increase from $29.8 million reported in the prior comparative quarter due to higher residual payments paid in the current quarter to Hudson commercial brokers. Bad debt expense increased by 18% to $6.8 million for the three months ended June 30, 2011 as a result of the 17% increase in revenues in markets where Just Energy bears the credit risk.

Dividends and distributions paid for the three months ended June 30, 2011 were $43.6 million, an increase of 4% from the prior comparative quarter as a result of the dividends paid to JEEC shareholders being only 66.67% of that which was paid to JEGI shareholders. The payout ratio on Base EBITDA was 146% for the three months ended June 30, 2011, versus 193% in the prior comparative quarter. For the three months ended June 30, 2011, the payout ratio on Adjusted EBITDA was 116%, versus 142% in the prior comparative quarter.

For further information on the changes in the gross margin, please refer to "Gas and electricity marketing" on page 11 and "Administrative expenses", "Selling and marketing expenses", "Bad debt expense" and "Finance costs", which are further clarified on pages 17 and 18.

Future embedded gross margin

Management's estimate of the future embedded gross margin is as follows:


                                       June 11 vs.             June 11 vs.  
(millions of    As at June As at March    March 11  As at June     June 10  
 dollars)         30, 2011    31, 2011    Variance    30, 2010    Variance  
                ------------------------------------------------------------
Canada (CAD$)       $622.1      $632.6          (2)%    $757.5         (18)%
United States       $851.3      $835.6           2%     $698.5          22% 
 (US$)                                                                      
Total (CAD$)      $1,443.1    $1,442.8           -    $1,501.1          (4)%

Management's estimate of the future contracted gross margin amounted to $1,443.1 million at as June 30, 2011, effectively unchanged during the quarter. The future embedded gross margin for Canada decreased by 2% from $632.6 million at March 31, 2011 to $622.1 million at June 30, 2011. The embedded margins in Canada declined over the three months due to a challenging price environment for renewals and new customer additions. This decline was offset by the 2% growth in U.S future embedded gross margin from $835.6 million to $851.3 million. The decline in the U.S. dollar versus the Canadian dollar in the quarter resulted in a further $4.3 million decline in total future embedded gross margin. The growth in embedded margins is less than Just Energy's growth in customer base because commercial customers, which make up a growing percentage of new additions, have lower margins and shorter contract terms than residential customers. This is offset by lower customer aggregation cost and lower annual customer servicing cost.

Total future embedded gross margin decreased by 4% from $1,501.1 million in the past year. Canadian future embedded gross margin decreased by 18% due to the challenging price environment while the U.S future embedded gross margin increased by 22% due to strong customer additions.


Summary of quarterly results                                                
(thousands of dollars, except per unit/share amounts)                       

                           Fiscal 2012 Fiscal 2011  Fiscal 2011 Fiscal 2011 
                                    Q1          Q4           Q3          Q2 
                          --------------------------------------------------
Sales                         $626,200    $941,334     $744,296    $657,878 
Gross margin                    94,261     172,599      132,084      96,719 
Administrative expenses         28,284      28,367       26,299      25,963 
Finance costs                   13,792      13,646    15,679(2)   12,823(2) 
Net income (loss)               51,132      (8,454)     216,833    (110,839)
Net income (loss) per                                                       
 unit/share - basic               0.37       (0.10)        1.72       (0.97)
Net income (loss) per                                                       
 unit/share - diluted             0.35       (0.10)        1.40       (0.97)
Dividends/distributions                                                     
 paid                           43,605      43,208       42,450      42,276 
Base EBITDA                     29,867     106,991       67,266      22,116 
Adjusted EBITDA                 37,431     112,640       75,244      28,174 
Payout ratio on Base                                                        
 EBITDA                           146%         40%          63%        191% 
Payout ratio on Adjusted                                                    
 EBITDA                           116%         38%          56%        150% 

                           Fiscal 2011 Fiscal 2010  Fiscal 2010 Fiscal 2010 
                                    Q1       Q4(1)        Q3(1)       Q2(1) 
                          --------------------------------------------------
Sales                         $609,684    $838,596     $629,966    $434,659 
Gross margin                    80,355     155,815      111,947      81,496 
Administrative expenses         28,841      22,405       24,767      25,634 
Finance costs                 9,937(2)       5,565        5,143       4,946 
Net income (loss)              270,789     (79,211)      97,390     110,690 
Net income (loss) per unit                                                  
 - basic                          2.19       (0.59)        0.73        0.83 
Net income (loss) per unit                                                  
 - diluted                        1.78       (0.59)        0.73        0.82 
Distributions paid              42,070   68,161(3)       41,248      40,801 
Base EBITDA                     21,798     107,036       58,543      27,023 
Adjusted EBITDA                 29,726     108,962       60,564      36,600 
Payout ratio on Base                                                        
 EBITDA                           193%         64%          70%        151% 
Payout ratio on Adjusted                                                    
 EBITDA                           142%         63%          68%        111% 

(1) Quarterly information prepared using Canadian GAAP as prior to IFRS     
    transition date.                                                        
(2) Excludes distributions paid to holders of exchangeable shares prior to
    the Conversion included as finance costs under IFRS.              
(3) Includes special distribution of $26.7 million paid in January 2010.    

Just Energy'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 Base and Adjusted EBITDA and lower payout ratios in the third and fourth quarters, and lower Base and Adjusted EBITDA and higher payout ratios in the first and second quarters.

Analysis of the first quarter

The 3% increase in sales compared to the prior comparable quarter is attributable primarily to the increase in sales for NHS and TGF as the increase in flowing gas and electricity customers was offset by lower product price points on new business. Gross margin increased by 17% quarter over quarter due to a 9% increase in customer base, higher consumption per customer and lower losses on sale of excess gas than that experienced in the prior comparative quarter. Improved sales and gross margin from NHS (TGF was also a significant contributor to the growth quarter over quarter).

Net income for the three months ended June 30, 2011 was $51.1 million, representing earnings per share of $0.37 and $0.35 on a basic and diluted basis, respectively. For the prior comparative quarter, net income was $270.8 million, representing $2.19 and $1.78 on a basic and diluted per unit basis, respectively. The change in fair value of derivative instruments was a gain of $79.7 million for the current quarter, in comparison with a gain of $335.5 million in the first quarter of the prior fiscal year. The fair value of derivative instruments represents the mark to market of future commodity supply acquired to cover future customer demand. The supply has been sold to customers at future fixed prices, minimizing any realizable impact of mark to market gains and losses.

Adjusted EBITDA increased by 26% to $37.4 million for the three months ended June 30, 2011. This increase is attributable to the 17% increase in gross margin and lower administrative costs, offset by the increase in selling and marketing and bad debt expenses. Base EBITDA (after all selling and marketing costs) increased by 37% per share to $29.9 million for the three months ended June 30, 2011 up from $21.8 million in the prior comparable quarter.

Dividends/distributions paid were $43.6 million, a 4% increase from $42.1 million paid in the prior comparative quarter. The increase is due to the increase in outstanding shares as the annual dividend/distribution rate was unchanged at $1.24 per year. In the prior year, JEEC exchangeable shares were paid dividends equal to 66.67% of the Fund's distributions. These shares have now been exchanged for JEGI common shares and receive the $1.24 annual dividends. Payout ratio on Adjusted EBITDA was 116% for the three months ended June 30, 2011, compared with 142% in the prior comparable quarter.


Gas and electricity marketing
For the three months ended June 30
(thousands of dollars) 


                            Fiscal 2012                  Fiscal 2011        
                                United                       United         
Sales                Canada     States     Total    Canada   States    Total

Gas                $123,278    $79,172  $202,450  $129,715  $73,048 $202,763
Electricity         120,049    265,298   385,347   160,629  224,914  385,543
----------------------------------------------------------------------------
                   $243,327   $344,470  $587,797  $290,344 $297,962 $588,306
----------------------------------------------------------------------------
Increase                                                                    
 (decrease)             (16)%       16%        -                            

                                United                       United         
Gross Margin         Canada     States     Total    Canada   States    Total

Gas                 $16,847     $8,258   $25,105   $12,131   $5,284  $17,415
Electricity          18,470     41,547    60,017    25,996   36,770   62,766
----------------------------------------------------------------------------
                    $35,317    $49,805   $85,122   $38,127  $42,054  $80,181
----------------------------------------------------------------------------
Increase                                                                    
 (decrease)              (7)%       18%        6%                           

Sales for the three months ended June 30, 2011 were $587.8 million, in line with the prior comparative quarter. Gross margins were $85.1 million for the quarter, up 6% from $80.2 million earned during the three months ended June 30, 2010. Sales growth was flat due to lower price points on recently signed contracts. The 6% margin increase was less than the 9% year over year increase in customers due to the increase in the number of commercial and variable rate customers in the past year, which are replacing higher-margin customers lost through attrition and failure to renew.

Canada

Sales were $243.3 million for the three months ended June 30, 2011, down 16% from $290.3 million in the prior comparable quarter. Gross margins were $35.3 million in the first quarter, a decrease of 7% from $38.1 million in the prior comparable period.

Gas

Canadian gas sales were $123.3 million, a decrease of 5% from $129.7 million in the three months ended June 30, 2010. The Canadian gas customer base declined by 11% year over year. Temperatures were 5% colder during the current quarter in comparison with the prior comparable quarter and resulted in higher consumption and margin per customer. Gross margin totalled $16.8 million, up 39% from the prior comparative quarter despite the customer decline. Customer consumption was far higher due to relatively colder weather. The prior comparable quarter results also had significant losses on the sale of excess gas at low spot prices from the warm winter experienced in fiscal 2010.

After allowance for balancing and inclusive of acquisitions, realized average gross margin per customer ("GM/RCE") for the rolling 12-months ended June 30, 2011, amounted to $165/RCE compared to $180/RCE for the prior comparable quarter. GM/RCE has been restated for the prior comparable quarter to remove the seasonal adjustment from gross margin and is now calculated on a rolling 12-month basis. The GM/RCE value includes an appropriate allowance for the bad debt expense in Alberta.

Electricity

Electricity sales were $120.0 million for the three months ended June 30, 2011, a decrease of 25% from the prior comparable quarter due to a 7% decline in RCEs as well as recent product offerings being at lower prices in order to remain competitive in the current market. Gross margin decreased by 29% quarter over quarter to $18.5 million versus $26.0 million in the prior three-month period. The decrease was also a result of expiring higher margin customers are replaced with new lower margin customers due to competitive pressures from low utility prices in Ontario.

Realized average gross margin per customer in Canada after all balancing and including acquisitions for the rolling 12-months ended June 30, 2011, amounted to $121/RCE, a decrease from $148/RCE in the prior comparative period due to the cumulative effect of new lower margin contracts necessary to compete against the very low utility price in the Ontario market. JustGreen sales had a positive impact on margins per customer but this was more than offset by pricing required to compete against the regulated utility floating rate in Ontario. In addition, commercial customers added during the three months generate lower margins than the previous predominantly residential customer base. The GM/RCE value includes an appropriate allowance for the bad debt expense in Alberta.

United States

Sales for the first quarter of fiscal 2012 were $344.5 million, an increase of 16% from $298.0 million in the three months ended June 30, 2010. Gross margin was $49.8 million, up 18% from $42.1 million in the prior comparable period.

Gas

For the three months ended June 30, 2011, gas sales and gross margin in the U.S. totalled $79.2 million and $8.3 million, respectively, versus $73.0 million and $5.3 million, respectively, in the prior comparable quarter. The sales increase of 8% was due to increased consumption quarter over quarter.

Gross margin increased by 18% quarter over quarter despite the number of long-term customers remaining relatively flat year over year. In the prior comparable quarter, the U.S gas markets experienced a sharp decline in consumption due the record warm winter of 2009/2010 and high third party losses on the sale of the excess gas.

Average realized gross margin after all balancing costs for the rolling 12-months ended June 30, 2011, was $140/RCE, a decrease from 191/RCE. This is due to the inclusion of lower margin commercial customers offsetting the lower losss on sale of excess gas. GM/RCE has been restated for the prior comparable quarter to remove the seasonal adjustment from gross margin and is now calculated on a rolling 12-month basis. The GM/RCE value includes an appropriate allowance for bad debt expense in Illinois and California.

Electricity

U.S. electricity sales and gross margin for the three months ended June 30, 2011 were $265.3 million and $41.5 million, respectively, versus $224.9 million and $36.8 million, in the first quarter of fiscal 2011. Sales increased 18% due to a 40% increase in long-term customers year over year, attributable to the strong marketing growth. Sales increased by more than gross margin due to the lower margins on largely commercial customers added. Gross margins were up 13% over the prior comparable period.

Average gross margin per customer for electricity during the current quarter decreased to $138/RCE, compared to $205/RCE in the prior comparable quarter, as a result of lower margins per RCE for commercial customers added. The GM/RCE value for Texas, Pennsylvania, Massachusetts and California includes an appropriate allowance for the bad debt expense.


Customer aggregation                                                        

Long-term customers                                                         

               April 1,                       Failed   June 30, % increase  
                   2011 Additions Attrition to renew       2011 (decrease)  
----------------------------------------------------------------------------
Natural gas                                                                 
Canada          656,000    15,000   (15,000) (21,000)   635,000         (3)%
United                                                                      
 States         574,000    27,000   (29,000)  (5,000)   567,000         (1)%
----------------------------------------------------------------------------
Total gas     1,230,000    42,000   (44,000) (26,000) 1,202,000         (2)%
----------------------------------------------------------------------------
Electricity                                                                 
Canada          736,000    19,000   (20,000) (31,000)   704,000         (4)%
United                                                                      
 States       1,348,000   166,000   (42,000) (20,000) 1,452,000          8% 
----------------------------------------------------------------------------
Total                                                                       
 electricity  2,084,000   185,000   (62,000) (51,000) 2,156,000          3% 
----------------------------------------------------------------------------
Combined      3,314,000   227,000  (106,000) (77,000) 3,358,000          1% 
----------------------------------------------------------------------------

Gross customer additions for the quarter were 227,000, down 13% from the 261,000 customers added through marketing in the prior comparable quarter. Net additions were 44,000 for the quarter, resulting in a 1% growth in the customer base for the first quarter.

Consumer customer additions amounted to 79,000, a 9% decrease from the 87,000 customer additions in the prior comparable quarter. Consumer customer additions were lower than expected in the quarter. The number of independent contractors decreased throughout the quarter due to the closure of sales offices that were underperforming. Management is optimistic that Consumer customer additions will increase in future quarters as new sales offices have opened and the number of independent contractors is expected to increase accordingly. In addition, further sales channel diversification is underway through network, telephone and Internet-based marketing efforts.

Commercial additions were 148,000 for the quarter, a 15% decrease from the additions recorded in the first quarter of fiscal 2011. Commercial additions, which consists of customers representing 15 RCEs or higher, will fluctuate quarterly depending on the size of customers signed. During the first quarter of the prior fiscal year, commercial additions were at a record high partially due to a single large 70,000 RCE customer being signed, whereas no customer of comparable size was signed during the current quarter. Over the past 12-month period, commercial customer additions have averaged 136,000 RCEs per quarter.

Total gas customers excluding acquired customers decreased by 2% during the last three months, reflecting a difficult price environment with a large disparity between utility spot prices and the five-year prices. The extended period of low, stable gas prices has reduced the customer appetite for the stability of higher priced long-term fixed contracts. This continues to impact new customer additions and renewals. To respond, profitable new variable rate contracts are being sold while spot market prices remain stable.

Total electricity customers were up 3% during the quarter, with a strong 8% growth in the U.S. markets and a 4% decrease in customers in the Canadian markets. The Canadian electricity market, particularly in Ontario, continues to face competitive challenges due to low utility pricing.

JustGreen and JustClean

Sales of the JustGreen products remain strong despite premium pricing in a low-price environment. The JustGreen 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, 2010, through December 31, 2010, validating the match of Just Energy's renewable energy and carbon offset purchases against customer contracts. Just Energy is a participant in over 25 carbon offset and renewable energy projects across North America and is actively pursuing new projects to meet our growing demand for green energy alternatives. Just Energy purchases carbon offsets and renewable energy credits for the current and future use of our customers. Our purchases help developers finance their projects.

The Company currently sells JustGreen gas in the eligible markets of Ontario, Quebec, British Columbia, Alberta, Michigan, New York, Ohio, Illinois and Pennsylvania. JustGreen electricity is sold in Ontario, Alberta, New York, Texas and Pennsylvania. Of all consumer customers who contracted with Just Energy in the past year, 32% took JustGreen for some or all of their energy needs. On average, these customers elected to purchase 91% of their consumption as green supply. Overall, JustGreen supply now makes up 9% of the overall gas portfolio, up from 3% a year ago. JustGreen supply makes up 10% of the electricity portfolio, up from 6% as at June 30, 2010.

In addition, JustClean products are being offered in Ontario and Florida. JustClean products are essentially carbon offsets from carbon capture and reduction projects as well as green power renewable energy certificates from green generators. The JustClean product can be offered in all states and provinces and is not dependent on energy deregulation.


Attrition                                                                  

                             Trailing 12-month            Trailing 12-month
                     Attrition - June 30, 2011    Attrition - June 30, 2010
Natural gas                                                                
Canada                                     10%                          11%
United States                              21%                          28%

Electricity                                                                
Canada                                     10%                          13%
United States                              15%                          14%

The past year saw an improvement in attrition rates across all markets with the exception of a slight increase in U.S. electricity attrition rates from 14% to 15%. The primary contributing factor is that most customers signed in the past three years are on prices consistent with current market prices. The attrition from these customers and eventual renewal of the customer will benefit from this pricing. In addition, improved economic conditions and diligent credit reviews have resulted in lower attrition rates in Canada and U.S gas markets.

Natural gas

The annual natural gas attrition in Canada was 10% for the trailing 12-months, slightly lower than the attrition rate reported in the prior comparable quarter. In the U.S., annual gas attrition was 21%, a decrease from 28% experienced a year prior due to new product offerings and greater economic stability within the U.S customer base.

Electricity

The annual electricity attrition rate in Canada was 10%, slightly lower than the 13% reported in the prior comparable quarter. Electricity attrition in the U.S. was 15% for the trailing 12-months, in line with management's ongoing expectations.


Failed to renew                                                             
                               Trailing 12-month           Trailing 12-month
                        Renewals - June 30, 2011    Renewals - June 30, 2010
Natural gas                                                                 
Canada                                       67%                         62%
United States                                72%                         69%

Electricity                                                                 
Canada                                       62%                         70%
United States                                67%                         83%

The Just Energy renewal process is a multifaceted program that aims to maximize the number of customers who choose to renew their contract prior to the end of their existing contract term. Efforts begin up to 15 months in advance, allowing a customer to renew for an additional four or five years. Management's targeted renewal rates are to be in the range of 70% overall, assuming commodity price volatility remains low. The combined renewal rate for all gas and electricity markets was 66% for the trailing 12-month period.

Natural gas

The current trailing annual renewal rate for all Canadian gas customers was 67%, an increase from the prior comparable quarter's trailing 12-month renewal rate of 62%. 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. Of the total Canadian gas customer renewals during quarter, 30% were renewed for a one-year term. The Canadian gas market continues to be challenged in renewals largely due to the current high spread between the Just Energy five-year price and the utility spot price. The long period of stable low gas prices has reduced customer interest in renewing at higher fixed prices. Management will continue to focus on increasing renewals, and should a return to rising market pricing occur, this would likely result in an improvement in Canadian gas renewal rates, closer to target levels. Also, Just Energy has introduced some enhanced variable-price offerings and products like JustGreen and JustClean to improve renewal rates.

In the U.S. markets, Just Energy had primarily Illinois and New York gas customers up for renewal. Gas renewals for the U.S. were 72%.

Electricity

The electricity renewal rate for Canadian customers was 62% for the trailing 12 months. There continues to be solid demand for JustGreen products, supporting renewals in Canadian electricity but, due to the disparity between the spot and five-year prices and low volatility in the spot prices, customers have been reluctant to again lock into fixed-priced products. Just Energy has introduced some enhanced variable-price electricity offerings and JustClean to improve renewal rates.

During the three months ended June 30, 2011, Just Energy had Texas, Illinois and New York electricity customers up for renewal. The electricity renewal rate was 67%, with strong renewals in Texas being offset by Illinois and New York. In each of these markets, our green product is being developed for renewing customers, which should strengthen the profitability and the proclivity to renew.

Gas and electricity contract renewals

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


                                        Canada -                      U.S. -
                     Canada - gas    electricity   U.S. - gas    electricity
                    --------------------------------------------------------
2012                          20%            22%          33%            31%
2013                          29%            32%          21%            11%
2014                          18%            16%          10%            13%
2015                          15%             9%          13%            20%
Beyond 2015                   18%            21%          23%            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. To the extent there is continued customer take-up on blend and extend offers, some renewals scheduled for 2012 and 2013 will move to 2015 and beyond.

Gross margin earned through new marketing efforts

Annual gross margin per customer for new and renewed customers

The table below depicts the annual margins on contracts of residential and commercial customers signed during the quarter. This table reflects all margin earned on new additions and renewals including both the brown commodity and JustGreen. Customers added through marketing or renewed were lower than the margins of customers lost through attrition or failure to renew due to the competitive price environment. However, JustGreen is being aggressively marketed for renewals, with the expectation that rates similar to those for new customers can be achieved. Sales of the JustGreen products remained very strong, with approximately 32% of all residential customers added in the past 12-months taking some or all green energy supply. Customers that have purchased the JustGreen product elected, on average, to take 91% of their consumption in green supply. For large commercial customers, the average gross margin for new customers added was $84/RCE. The aggregation cost of these customers is commensurately lower per RCE than a residential customer.


Annual gross margin per customer(1)                                Number of
                                               Q1 fiscal 2012      customers
                                              ------------------------------
                                              ------------------------------
Residential and small commercial customers                                  
 added in the quarter                                                       
- Canada - gas                                           $136         11,000
- Canada - electricity                                    135         13,000
- United States - gas                                     186         22,000
- United States - electricity                             160         33,000
Average annual margin                                     160               

Residential and small commercial customers                                  
 renewed in the quarter                                                     
- Canada - gas                                           $136         19,000
- Canada - electricity                                    104         18,000
- United States - gas                                     206          5,000
- United States - electricity                             161          5,000
Average annual margin                                     134               

Residential and small commercial customers                                  
 lost in the quarter                                                        
- Canada - gas                                           $192         26,000
- Canada - electricity                                    148         39,000
- United States - gas                                     212         29,000
- United States - electricity                             226         12,000
Average annual margin                                     185               

Large commercial customers added in the                                     
 quarter                                                  $84        148,000

Large commercial customers lost in the quarter           $126         78,000
(1) Customer sales price less cost of associated supply and allowance for   
    bad debt.                                                               

Home Services division (NHS)

NHS provides Ontario residential customers with long-term water heater rental programs that offer conventional tanks, power vented tanks and tankless water heaters in a variety of sizes as well as high efficiency furnaces and air conditioners. NHS had continued strong customer growth and with installations for the quarter amounting to 13,000 water heaters, air conditioners and furnaces, a 25% increase from 10,400 units installed in the prior comparable quarter. As of June 30, 2011, the cumulative installed customer base was 131,600 units, an increase of 50% from one year prior. Management is confident that NHS will continue to contribute to the long-term profitability of Just Energy. NHS currently markets through approximately 235 independent contractors.

As NHS is a high growth, relatively capital-intensive business, Just Energy's management believes that, in order to maintain stability of dividends, separate non-recourse financing of this capital is appropriate. NHS entered into a long-term financing agreement with Home Trust Company ("HTC") for the funding of the water heaters, furnaces and air conditioners in the Enbridge Gas (January 2010) and Union Gas (July 2010) distribution territories. Under the HTC agreements, NHS receives funds equal to the amount of the five-, seven- or ten-year cash flow (at its option) of the water heater, furnace and air conditioner contracts discounted at the contracted rate, which is currently 7.99%. HTC is then paid an amount which is equal to the customer rental payments on the water heaters for the next five, seven or ten years as applicable. The funding received from HTC up to June 30, 2011, was $113.1 million.

Management's strategy for NHS is to self-fund the business through its growth phase, building value within the customer base. This way, NHS will not require significant cash from Just Energy's core operations nor will Just Energy rely on NHS's cash flow to fund dividends. The result should be a valuable asset, which will generate strong cash returns following repayment of the HTC financing.


Selected financial information                                              
For the three months ended June 30                                          
(thousands of dollars, except where indicated)                              

                                                    Fiscal 2012  Fiscal 2011

Sales per financial statements                           $7,807       $4,441
Cost of sales                                             1,575        1,609
                                                  --------------------------
Gross margin                                              6,232        2,832

Selling and marketing expenses                            1,300          814
Administrative expenses                                   2,763        2,885
Finance costs                                             2,151        1,341

Capital expenditures                                      9,526        8,154
Amortization                                                437          521
Total number of water heaters, furnaces and air                             
 conditioners installed                                 131,600       88,000

Results of operations

For the three months ended June 30, 2011, NHS had sales of $7.8 million for the quarter, up 76% from $4.4 million reported for the first quarter of fiscal 2011. Gross margin amounted to $6.2 million for the three months ended June 30, 2011, up 120% from $2.8 million reported in the comparable period. The cost of sales for the three months ended June 30, 2011 was $1.6 million, of which $1.5 million represents the non-cash amortization of the installed water heaters for the customer contracts signed to date. Selling and marketing expenses for the three months ended June 30, 2011 were $1.3 million, a 60% increase from the prior comparable quarter and includes the amortization of commission costs paid to the independent agents, sales-related automotive fleet costs, advertising and promotion, and telecom and office supplies expenses. Administrative costs, which relate primarily to administrative staff compensation and warehouse expenses, were $2.8 million for the three months ended June 30, 2011, consistent with the prior comparable quarter.

Finance costs amounted to $2.2 million as a result of the financing arrangement with HTC. Capital expenditures, including installation costs, amounted to $9.5 million for the three months ended June 30, 2011.

The growth of NHS has been rapid and, combined with the HTC financing, is expected to be self-sustaining on a cash flow basis.

Ethanol division (TGF)

TGF continues to remain focused on improving the plant production and run time of the Belle Plaine, Saskatchewan, wheat-based ethanol facility. For the three months ended June 30, 2011, the plant achieved an average production capacity of 67%, an increase from average production capacity of 62% in the prior comparative period. In the first quarter of fiscal 2012, the plant completed scheduled maintenance, resulting in production downtime and also experienced wheat shortages requiring production slowdowns as a result of unusually wet conditions in Saskatchewan.

Ethanol prices were, on average, $0.68 per litre for the three months and wheat prices averaged $216 per metric tonne for the three months. For the prior comparable quarter, ethanol prices averaged $0.57 per litre and wheat prices were $168 per metric tonne. As at June 30, 2011, ethanol was priced at $0.67 per litre. The Ethanol division has separate non-recourse financing in place such that capital requirements and operating losses will not impact Just Energy's core business and its ability to pay dividends.


Selected financial information                                              
For the three months ended June 30                                          
(thousands of dollars, except where indicated)                              

                                                   Fiscal 2012  Fiscal 2011 

Sales per financial statements                         $30,192      $16,806 
Cost of sales                                           27,647       19,594 
                                                 ---------------------------
Gross margin                                             2,545       (2,788)

Administrative expenses                                  2,672        2,467 
Finance costs                                            1,687        1,707 

Capital expenditures                                        27          114 
Amortization                                               298          296 

Results of operations

For the first quarter of fiscal 2012, TGF had sales of $30.2 million, an 80% increase from $16.8 million in the prior comparable quarter. Cost of sales amounted to $27.6 million, an increase of 41% from $19.6 million in the three months ended June 30, 2010. During the quarter, the plant produced 25.2 million litres of ethanol and 23,869 metric tonnes of DDG, an increase of 9% from the production in the prior comparable quarter. For the three months ended June 30, 2011, TGF incurred $2.7 million in administrative expenses and $1.7 million in finance costs.

TGF receives a federal subsidy related to the ecoEnergy for Biofuels Agreement signed on February 17, 2009, as amended from time to time, based on the volume of ethanol produced. The subsidy is $0.08 per litre for fiscal 2012. The subsidy amount declines through time to $0.05 per litre of ethanol produced in fiscal 2015, the last year of the agreement.

Overall consolidated results - Just Energy

Administrative expenses

Administrative costs were $28.3 million for the three months ended June 30, 2011, representing a 2% decrease from $28.8 million in the first quarter of the prior fiscal year.


For the three months ended June 30                 

                                 Fiscal 2012    Fiscal 2011     % Increase
                             -----------------------------------------------
Energy marketing                     $22,849        $23,489             (3)%
NHS                                    2,763          2,885             (4)%
TGF                                    2,672          2,467              8% 
                             -----------------------------------------------
Total administrative expenses        $28,284        $28,841             (2)%

Energy marketing administrative costs were $22.8 million in the first quarter of fiscal 2012, a decrease of 4% from $23.5 million for the three months ended June 30, 2010. This decrease is primarily related to lower operating costs associated with servicing commercial customers. During the past year, the majority of the customer additions have been from the Commercial division whereas the majority of the customers lost through attrition and failure to renew have been customers signed by the Consumer division.

Selling and marketing expenses

Selling and marketing expenses, which consist of commissions paid to independent sales contractors, brokers and independent representatives for signing new customers, as well as sales-related corporate costs, were $34.6 million, an increase of 16% from $29.8 million in the first quarter of fiscal 2011. New customers signed by our sales force were 227,000 during the first quarter of fiscal 2012, down 13% compared to 261,000 customers added through our sales offices in the prior comparable quarter. The Hudson acquisition was effective May 1, 2010 and therefore, the prior comparable quarter included only two months of Hudson related expenses. The marketing expenses relating to Hudson include residual payments on commercial broker customers, which increased quarter over quarter along with the amortization expense included.

Commissions related to obtaining and renewing Hudson commercial contracts are paid all or partially upfront or as residual payments over the life of the contract. If the commission is paid all or partially upfront, the amortization is included in selling and marketing expenses as the associated revenue is earned. If the commission is paid as a residual payment, the amount is expensed as earned. Of the current total commercial customer base, approximately 60% are commercial broker customers and approximately 60% of these commercial brokers are being paid recurring residual payments.

During the three months ended June 30, 2011, $3.1 million in commission-related expenses were capitalized to contract initiation costs. Of the capitalized commissions, $0.6 million represents commissions paid to maintain gross margin and therefore, is included in the maintenance capital deducted in the Adjusted EBITDA calculation.

Selling and marketing expenses to maintain gross margin are allocated based on the ratio of gross margin lost from attrition as compared to the gross margin signed from new and renewed customers during the period. Selling and marketing expenses to maintain gross margin were $20.6 million for the three months ended June 30, 2011, an increase of 12% from $18.3 million in the first quarter of fiscal 2011.

Selling and 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 customers during the period. Selling and marketing expenses to add new gross margin in the three months ended June 30, 2011, totalled $10.1 million, an 8% increase from $9.4 million in the first quarter of fiscal 2011.

Selling and marketing expenses included in Base EBITDA exclude amortization related to the contract initiation costs for Hudson and NHS. For the three months ended June 30, 2011, the amortization amounted to $3.9 million, an increase of 85% from $2.1 million reported in the prior comparable quarter due to inclusion of three months of amortization versus two months in the first quarter of fiscal 2011.

The actual aggregation costs per customer for the three months ended June 30, 2011, for residential and commercial customers signed by independent representatives and commercial customers signed by brokers were as follows:


                              Residential     Commercial   Commercial broker
                                customers      customers           customers
Natural gas                                                                 
Canada                           $283/RCE       $173/RCE             $66/RCE
United States                    $206/RCE       $138/RCE             $36/RCE

Electricity                                                                 
Canada                           $208/RCE       $168/RCE             $48/RCE
United States                    $201/RCE        $80/RCE             $34/RCE

Total aggregation costs          $215/RCE       $137/RCE             $35/RCE

The actual aggregation per customer added for all energy marketing for the three months ended June 30, 2011, was $107. The $35 average aggregation cost for the commercial broker customers is based on the expected average annual cost for the respective customer contracts. It should be noted that commercial broker contracts are paid further commissions averaging $35 per year for each additional year that the customer flows. Assuming an average life of 2.8 years, this would add approximately $63 (1.8 X $35) to the quarter's $35 average aggregation cost for commercial broker customers reported above.

For the prior comparable three months, aggregation costs per customer (both consumer and commercial combined) in the Canadian and U.S. gas markets were $158/RCE and $75/RCE, respectively, with a combined cost of $84/RCE. In the Canadian and U.S. electricity markets, the aggregation costs per customer amounted to $124/RCE and $118/RCE, respectively, with the combined cost amounting to $95/RCE.

Bad debt expense

In Illinois, Alberta, Texas, Pennsylvania, California and Massachusetts, Just Energy assumes the credit risk associated with the collection of customer accounts. In addition, for commercial direct-billed accounts in British Columbia, New York and Ontario, Just Energy is responsible for the bad debt risk. NHS has also assumed credit risk for customer account collection for certain territories within Ontario. 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. During the three months ended June 30, 2011, Just Energy was exposed to the risk of bad debt on approximately 40% of its sales.

Bad debt expense is included in the consolidated income statement under other operating expenses. Bad debt expense for the three months ended June 30, 2011 was $6.8 million, up 18% from $5.7 million expensed for the three months ended June 30, 2010. The bad debt expense increase was entirely related to the 17% increase in total revenues for the current three-month period to $242.5 million, in the markets where Just Energy assumes the risk for accounts receivable collections. These markets also now include incremental commercial customers. 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 three months ended June 30, 2011, the bad debt expense of $6.8 million represents approximately 2.8% of revenue, the same percentage as the prior comparable quarter.

Management expects that bad debt expense will remain in the range of 2% to 3% for the fiscal year assuming that the housing market in the U.S. continues to show signs of improvement. 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.

Finance costs

Total finance costs for the three months ended June 30, 2011, amounted to $13.8 million, an 8% increase from $12.8 million in the first quarter of fiscal 2011. The increase in costs primarily relates to the interest expense for the $330m convertible debentures associated with the Hudson acquisition against the prior comparable quarter which included only two months of expense, as well as higher finance costs associated with the growing NHS financing.

In the prior comparable quarter, $2.8 million of dividend payments made to holders of Just Energy Exchange Corp.'s shares were classified as finance costs under IFRS.

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. For the three months ended June 30, 2011, a foreign exchange unrealized gain of $5.6 million was reported in other comprehensive income (loss) versus a $14.9 million gain reported in the prior fiscal year.

Overall, a weaker U.S. dollar decreases the value of sales and gross margin in Canadian dollars but this is partially offset by lower operating costs denominated in U.S. dollars. Just Energy retains sufficient funds in the U.S. to support ongoing growth and surplus cash is repatriated to Canada. U.S. cross border cash flow is forecasted annually, and hedges for cross border cash flow are entered into. Just Energy hedges between 25% and 90% of the next 12 months' cross border cash flows depending on the level of certainty of the cash flow.


Provision for income tax                                                    
For the three months ended June 30                                          
(thousands of dollars)                          Fiscal 2012     Fiscal 2011 
                                            --------------------------------
Current income tax recovery                         $(2,238)        $(1,002)
Future tax expense                                    9,459          38,460 
                                            --------------------------------
Provision for income tax                             $7,221         $37,458 
                                            --------------------------------
                                            --------------------------------

Just Energy recorded a current income tax recovery of $2.2 million for the three months versus $1.0 million of recovery in the same period of fiscal 2011. The change is mainly attributable to higher US income tax recovery generated by operating losses incurred by the U.S. entities in this quarter.

During the first three months of this fiscal year, the mark to market losses from financial instruments further declined as a result of a change in fair value of these derivative instruments during this period and, as a result, a deferred tax expense of $9.5 million has been recorded for this three-month period. During the same period of fiscal 2011, a deferred tax expense of 30.3 million was recorded, which is a combined result of a significant decline in mark to market losses from financial instruments during that period and additional deferred taxes arising from adopting IFRS.

After the Conversion on January 1, 2011, Just Energy has been taxed as a taxable Canadian corporation. Therefore, the deferred tax asset or liability associated with Canadian liabilities and assets recorded on the consolidated balance sheets 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 are accrued to the extent that there is taxable income in Just Energy and its underlying corporations. Canadian corporations under Just Energy are subject to a tax rate of approximately 28% after the Conversion.

Under IFRS, Just Energy recognized income tax liabilities and assets based on 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 deferred tax asset will not be recognized 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 deferred income tax liabilities and assets is recognized in income during the period in which the change occurs.


Liquidity and capital resources                                             
Summary of cash flows                                                       
For the three months ended June 30                                     
(thousands of dollars)                          Fiscal 2012     Fiscal 2011 
                                            --------------------------------
Operating activities                                $15,694         $22,876 
Investing activities                                (22,538)       (263,586)
Financing activities, excluding                                             
 distributions/dividends                             19,174         299,428 
Effect of foreign currency translation                  342           4,701 
                                            --------------------------------
Increase in cash before                                                     
 distributions/dividends                             12,672          63,419 
Distributions/dividends (cash payments)             (34,897)        (33,243)
                                            --------------------------------
Increase (decrease) in cash                         (22,225)         30,176 
Cash - beginning of period                           98,466          78,782 
                                            --------------------------------
Cash - end of period                                $76,241        $108,958 
                                            --------------------------------
                                            --------------------------------

Operating activities

Cash flow from operating activities for the three months ended June 30, 2011, was $31.1 million, a 6% increase from $29.4 million in the prior comparative quarter. The increase is a result of the increase in gross margin.

Investing activities

Just Energy purchased capital assets totalling $11.6 million during the first quarter of the fiscal year, a 21% increase from $9.6 million in the first quarter of the prior fiscal year. Just Energy's capital spending related primarily to the home services business and costs related to purchases of office equipment and IT software. Contract initiation costs relating to Hudson and NHS amounted to $6.9 million for the three months ended June 30, 2011, an increase over $3.7 million recorded in the prior comparable quarter due to the inclusion of three months of activity for Hudson and increased commissions paid by NHS on water heater and HVAC installations.

Financing activities

Financing activities, excluding distributions/dividends, relates primarily to the issuance and repayment of long-term debt. Long-term debt issued during the three months ended June 30, 2011 was $68.9 million with repayments for the same period amounting to $53.7 million, resulting in a net increase in long-term debt of $15.2 million. The net increase is primarily related to the credit facility and NHS financing. In the prior comparable quarter, $349.2 million was issued in long-term debt, primarily relating to the Hudson acquisition, while $49.4 million was repaid.

As of June 30, 2011, Just Energy had a credit facility of $350 million. In connection with the Conversion on January 1, 2011, Just Energy increased its credit facility with the term of the facility expiring on December 31, 2013. The syndicate of lenders now includes the Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canada, Societe Generale, Bank of Nova Scotia, Toronto-Dominion Bank and Alberta Treasury Branches.

As Just Energy continues to expand in the U.S. markets, the need to fund working capital and collateral posting 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 the Company to enter, funding requirements will be fully supported through the credit facility.

Just Energy's liquidity requirements are driven by the delay from the time that a customer contract is signed until cash flow is generated. For residential customers, approximately 60% of an independent sales contractor's commission payment is made following reaffirmation or verbal verification of the customer contract, with most of the remaining 40% being paid after the energy commodity begins flowing to the customer. For commercial customers, commissions are paid either as the energy commodity flows throughout the contract or partially upfront once the customer begins to flow.

The elapsed period between the time 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.

Dividends/distributions (Cash payments)

During the three months ended June 30, 2011, Just Energy made cash distributions/dividends to its shareholders and holders of restricted share grants or deferred share grants in the amount of $34.9 million, compared to $33.2 million in the prior comparable period.

Just Energy maintains its annual dividend rate at $1.24 per share, the same rate that was previously paid for distributions. Investors should note that due to the dividend reinvestment plan ("DRIP"), a portion of dividends (and prior to January 1, 2011, distributions) declared are not paid in cash. Under the program, shareholders can elect to receive their dividends in shares at a 2% discount to the prevailing market price rather than the cash equivalent. For the three months ended June 30, 2011, $8.7 million of the dividends were paid in shares under the DRIP.

Just Energy will continue to utilize its cash resources for expansion into new markets, growth in its existing energy marketing customer base, JustGreen and JustClean products, Solar and Home Services division, and also to make accretive acquisitions of customers as well as dividends to its shareholders.

At the end of the quarter, the annual rate for dividends per share was $1.24. The current dividend policy provides that shareholders of record on the 15th of each month receive dividends at the end of the month.

Balance sheet as at June 30, 2011, compared to March 31, 2011

Cash decreased from $98.5 million as at March 31, 2011, to $76.2 million. The utilization of the credit facility increased from $53.0 million to $63.0 million as a result of normal seasonal working capital requirements. Working capital requirements in the U.S. and Alberta are a result of 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.

As at June 30, 2011, accounts receivable and unbilled revenue amounted to $256.7 million and $103.5 million, respectively, compared to three months earlier when the accounts receivable and unbilled revenue amounted to $281.7 million and $112.1 million, respectively. Accounts payable and accrued liabilities have decreased from $275.5 million to $252.5 million in the past three months. Both decreases in accounts receivable and payable are related to the seasonality of energy marketing, with consumption being higher during January through March as opposed to April through June.

As at June 30, 2011, Just Energy had delivered less gas to the LDCs than had been consumed by customers in Ontario, Manitoba, Quebec and Michigan, resulting in accrued gas receivable and payable balances of $4.4 million and $10.4 million, respectively. At March 31, 2011, Just Energy had accrued gas receivable and payable amounting to $26.5 million and $19.4 million, respectively. In addition, gas in storage increased from $6.1 million as at March 31, 2011 to $26.7 million as at June 30, 2011 due to the seasonality of the customer gas consumption.

Other assets and other liabilities relate entirely to the fair value of the financial derivatives. The mark to market gains and losses can result in significant changes in net income and, accordingly, shareholders' equity from quarter to quarter due to commodity price volatility. Given that Just Energy has purchased this supply to cover future customer usage at fixed prices, management believes that these non-cash quarterly changes are not meaningful.

Intangible assets include the goodwill, acquired customer contracts as well as other intangibles such as brand, broker network and information technology systems, primarily related to the Hudson and Universal purchases. The total intangible asset balance decreased to $574.1 million, from $640.5 million as at March 31, 2011, primarily as a result of amortization.

Long-term debt (excluding the current portion) has increased from $454.5 million to $509.2 million in the three months ended June 30, 2011, and is detailed below.


Long-term debt and financing                                                
(thousands of dollars)                                                      

                                              As at June 30  As at March 31 
                                                Fiscal 2012     Fiscal 2011 
                                            --------------------------------
Just Energy credit facility                         $63,000         $53,000 
  less: debt issue costs                             (1,772)         (1,965)
TGF credit facility                                  35,521          36,680 
TGF debentures                                       36,002          37,001 
NHS financing                                       113,109         105,716 
$90m convertible debentures                          85,046          84,706 
$330m convertible debentures                        287,762         286,439 

Just Energy credit facility

Just Energy holds a $350 million credit facility to meet working capital requirements. The syndicate of lenders includes Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canada, Societe Generale, Bank of Nova Scotia, Alberta Treasury Branches and Toronto Dominion Bank. Under the terms of the credit facility, Just Energy was able to make use of Bankers' Acceptances and LIBOR advances at stamping fees that vary between 3.25% and 3.75%, prime rate advances at rates of interest that vary between bank prime plus 2.25% and 2.75%, and letters of credit at rates that vary between 3.25% and 3.75%. Just Energy's obligations under the credit facility are supported by guarantees of certain subsidiaries and affiliates, excluding among others, TGF and NHS, and secured by a pledge of the assets of Just Energy and the majority of its operating subsidiaries and affiliates. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at June 30, 2011 and 2010, all of these covenants had been met.

TGF credit facility

A credit facility of up to $50 million was established with a syndicate of Canadian lenders led by Conexus Credit Union and was arranged to finance the construction of the ethanol plant in 2007. The facility was revised on March 18, 2009, and was converted to a fixed repayment term of ten years commencing March 1, 2009, which includes interest costs at a rate of prime plus 3%, with principal repayments commencing on March 1, 2010. The facility was further revised on June 30, 2010, postponing the principal payments due for April 1, 2010 to June 1, 2010, and to amortize them over the six-month period commencing October 1, 2010, and ending March 31, 2011. The credit facility is secured by a demand debenture agreement, a first priority security interest on all assets and undertakings of TGF, and a general security interest on all other current and acquired assets of TGF, all of which have no recourse to the Company or any other Just Energy entity. The credit facility includes certain financial covenants, the more significant of which relate to current ratio, debt to equity ratio, debt service coverage and minimum shareholders' equity. The covenants will be measured as of March 31, 2012, and non-attainment may result in a non-compliance fee up to 0.25% of the loan balance as of March 31, 2012.

TGF debentures

A debenture purchase agreement with a number of private parties providing for the issuance of up to $40 million aggregate principal amount of debentures was entered into in 2006. TGF was in recent negotiations with the lender and adjusted the covenant levels. In addition the interest rate was increased to 12% and quarterly blended principal and interest payments of $1.1 million were established. The agreement includes certain financial covenants, the more significant of which relate to current ratio, debt to capitalization ratio, debt service coverage, debt to EBITDA and minimum shareholders' equity. Compliance with the new covenants, which are more favourable than the original covenants, will be measured annually beginning with the fiscal 2012 year end. The maturity date was extended to May 15, 2014, with a call right any time after April 1, 2012. The debenture holders have no recourse to the Company or any other Just Energy entity.

NHS financing

In fiscal 2010, NHS entered into a long-term financing agreement with HTC for the funding of new and existing rental water heater and HVAC contracts in the Enbridge Gas distribution territory. In July, 2010, the financing arrangement was expanded to the Union Gas territory. Pursuant to the agreement, NHS will receive financing of an amount equal to the net present value of the first five, seven or ten years (at its option) of monthly rental income, discounted at the agreed upon financing rate of 7.99%, and is required to remit an amount equivalent to the rental stream from customers on the water heater and HVAC contracts for the first five, seven or ten years, respectively. Under the agreement, up to one third of rental agreements may be financed for each of the seven- or ten-year terms. As at June 30, 2011, the average term of the HTC funding was 5.5 years.

The financing agreement is subject to a holdback provision, whereby 3% in the Enbridge territory and 5% in the Union Gas territory of the outstanding balance of the funded amount is deducted and deposited to a reserve account in the event of default. Once all of the obligations of NHS are satisfied or expired, the remaining funds in the reserve account will immediately be released to NHS. HTC holds security over the contracts and equipment it has financed. NHS is required to meet a number of covenants under the agreement and, as at June 30, 2011, all of these covenants have been met.

$90m convertible debentures

In conjunction with the acquisition of Universal on July 1, 2009, Just Energy assumed the obligations of the convertible unsecured subordinated debentures issued by Universal in October 2007, which have a face value of $90 million. The fair value of the convertible debenture was estimated by discounting the remaining contractual payments at the time of acquisition. This discount will be accreted using an effective interest rate of 8%. These instruments mature on September 30, 2014, unless converted prior to that date, and bear interest at an annual rate of 6%, payable semi-annually on June 30 and September 30 of each year. As at June 30, 2011, each $1,000 principal amount of the $90m convertible debentures is convertible at any time prior to maturity or on the date fixed for redemption, at the option of the holder, into approximately 31.53 JEGI shares, representing a conversion price of $31.72 per share. Pursuant to the $90m convertible debentures, if JEGI fixes a record date for the making of a dividend on its shares, the conversion price shall be adjusted in accordance therewith.

On and after October 1, 2010, but prior to September 30, 2012, the $90m convertible debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at Just Energy's sole option on not more than 60 days' and not less than 30 days' prior notice, provided that the current market price on the date on which notice of redemption is given is not less than 125% of the conversion price. On and after September 30, 2012, but prior to the maturity date, the $90m convertible debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at Just Energy's sole option on not more than 60 days' and not less than 30 days' prior notice.

$330m convertible debentures

To fund the acquisition of Hudson, Just Energy entered into an agreement with a syndicate of underwriters for $330 million of convertible extendible unsecured subordinated debentures issued on May 5, 2010. The $330m convertible debentures bear an interest rate of 6.0% per annum payable semi-annually in arrears on June 30 and December 31 of each three months, with maturity on June 30, 2017. Each $1,000 of principal amount of the $330m convertible debentures is convertible at any time prior to maturity or on the date fixed for redemption, at the option of the holder, into approximately 55.6 shares of JEGI, representing a conversion price of $18 per share.

The $330m convertible debentures are not redeemable prior to June 30, 2013, except under certain conditions after a change of control has occurred. On or after June 30, 2013, but prior to June 30, 2015, the debentures may be redeemed by JEGI, in whole or in part, on not more than 60 days' and not less than 30 days' prior notice, at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest, provided that the current market price on the date on which notice of redemption is given is not less than 125% of the conversion price. On or after June 30, 2015, and prior to the maturity date, the debentures may be redeemed by JEGI, in whole or in part, at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest.

Contractual obligations

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


Payments due by period                                                      
(thousands of dollars)                                                      

                                Less than 1                  4 - 5   After 5
                         Total         year  1 - 3 years     years     years
----------------------------------------------------------------------------
Accounts payable and                                                        
 accrued liabilities  $252,497     $252,497           $-        $-        $-
Bank indebtedness        6,253        6,253            -         -         -
Long-term debt                                                              
 (contractual cash                                                          
 flow)                 667,632       93,718      113,065   117,532   343,317
Interest payments      248,781       39,759       72,901    56,349    79,772
Property and                                                                
 equipment lease                                                            
 agreements             31,073        8,333       11,435     6,837     4,468
EPCOR billing,                                                              
 collections and                                                            
 supply commitments      2,588        2,588            -         -         -
Grain production                                                            
 contracts               5,116        3,849        1,267         -         -
Commodity supply                                                            
 purchase                                                                   
 commitments         2,981,790    1,397,500    1,330,010   251,040     3,240
----------------------------------------------------------------------------
                    $4,195,730   $1,804,497   $1,528,678  $431,758  $430,797
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Other obligations

In the opinion of management, Just Energy has no material pending actions, claims or proceedings that have not been included in either its accrued liabilities or in the financial statements. In the normal course of business, Just Energy 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

Just Energy does not have any material transactions with any individuals or companies that are not considered independent of Just Energy or any of its subsidiaries and/or affiliates.

Critical accounting estimates

The consolidated financial statements of Just Energy have been prepared in accordance with IFRS. Certain accounting policies require management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, cost of sales, selling and marketing, 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. Just Energy might realize different results from the application of new accounting standards promulgated, from time to time, by various rule-making bodies.

Unbilled revenues/Accrued gas accounts payable

Unbilled revenues result when customers consume more gas than has been delivered by Just Energy to the LDCs. These estimates are stated at net realizable value. Accrued gas accounts payable represents Just Energy's obligation to the LDC with respect to gas consumed by customers in excess of that delivered and 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 all customers' accounts in Alberta, Illinois, Texas, Pennsylvania, California and Massachusetts. In addition, for large direct-billed accounts in B.C., New York and Ontario, Just Energy is responsible for the bad debt risk. NHS has also assumed credit risk for customer accounts within certain territories in Ontario. 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, Just Energy may be required to record impairment charges related to goodwill. An impairment review of goodwill was performed as at June 30, 2011, and as a result of the review, it was determined that no impairment of goodwill existed.

Fair value of derivative financial instruments and risk management

Just Energy has entered into a variety of derivative financial instruments as part of the business of purchasing and selling gas, electricity and JustGreen supply. 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 fixed-price delivery or green commitment.

Just Energy's 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 fixed-price 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 Just Energy's price exposure and serves to fix acquisition costs of gas and electricity to be delivered under the fixed-price or price-protected customer contracts. Just Energy'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 enters into foreign exchange forwards in order to hedge its exposure to fluctuations in cross border cash flows.

The financial statements are in compliance with IAS 32, Financial instruments: Presentation, IAS 39, Financial instruments: Recognition and measurement and IFRS 7, Financial Instruments: Disclosure. 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 portions of the hedge. This calculation permitted the change in fair value to be accounted for predominantly in the consolidated statements of 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) was determined using market information at the end of each quarter. Management believes Just Energy remains economically hedged operationally across all jurisdictions.

JEGI common shares

As at August 10, 2011, there were 137,813,064 common shares of JEGI outstanding.

Recently issued accounting standards

New accounting pronouncements adopted

The three months ended June 30, 2011 is Just Energy's first reporting period under IFRS. Accounting standards effective for annual reporting periods ended on March 31, 2011 have been adopted as part of the transition to IFRS.

Recent pronouncements issued

IFRS 9 Financial Instruments

As of April 1, 2015, Just Energy will be required to adopt IFRS 9, "Financial Instruments", which is the result of the first phase of the IASB's project to replace IAS 39, "Financial Instruments: Recognition and Measurement". The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The Company has not yet assessed the impact of this standard or determined whether it will adopt the standard early.

IFRS 10 Consolidated Financial Statements

As of April 1, 2013, IFRS 10, "Consolidated Financial Statements" will replace portions of IAS 27 "Consolidated and Separate Financial Statements" and interpretation SIC-12, "Consolidation - Special Purpose Entities". The new standard requires consolidated financial statements to include all controlled entities under a single control model. The Company will be considered to control an investee when it is exposed, or has rights to variable returns from its involvement with the investee and has the current ability to affect those returns through its power over the investee.

As required by this standard, control is reassessed as facts and circumstances change. All facts and circumstances must be considered to make a judgment about whether the Company controls another entity; there are no 'bright lines'. Additional guidance is given on how to evaluate whether certain relationships give the Company the current ability to affect its returns, including how to consider options and convertible instruments, holding less than a majority of voting rights, how to consider protective rights, and principal-agency relationships (including removal rights), all of which may differ from current practice. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 11 Joint Arrangements

On April 1, 2013, Just Energy will be required to adopt IFRS 11, "Joint Arrangements", which applies to accounting for interests in joint arrangements where there is joint control. The standard requires the joint arrangements to be classified as either joint operations or joint ventures. The structure of the joint arrangement would no longer be the most significant factor when classifying the joint arrangement as either a joint operation or a joint venture. In addition, the option to account for joint ventures (previously called jointly controlled entities) using proportionate consolidation will be removed and replaced by equity accounting.

Due to the adoption of this new section, the Company will transition the accounting for joint ventures from the proportionate consolidation method to the equity method by aggregating the carrying values of the proportionately consolidated assets and liabilities into a single line item. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 12 Disclosure of Interests in Other Entities

On April 1, 2013, Just Energy will be required to adopt IFRS 12, "Disclosure of interests in Other Entities", which includes disclosure requirements about subsidiaries, joint ventures, and associates, as well as unconsolidated structured entities and replaces existing disclosure requirements. Due to this new section, the Company will be required to disclose the following: judgements and assumptions made when deciding how to classify involvement with another entity, interests that non-controlling interests have in consolidated entities, and nature of the risks associated with interests in other entities. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 13 Fair Value Measurement

On April 1, 2013, Just Energy will be required to adopt IFRS 13, "Fair Value Measurement". The new standard will generally converge the IFRS and CGAAP requirements for how to measure fair value and the related disclosures. IFRS 13 establishes a single source of guidance for fair value measurements, when fair value is required or permitted by IFRS. Upon adoption, the Company will provide a single framework for measuring fair value while requiring enhanced disclosures when fair value is applied. In addition, fair value will be defined as the 'exit price' and concepts of 'highest and best use' and 'valuation premise' would be relevant only for non-financial assets and liabilities. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IAS 27 Separate Financial Statements

On April 1, 2013 Just Energy will be required to adopt IAS 27, "Separate Financial Statements". As a result of the issue of the new consolidation suite of standards, IAS 27 has been reissued to reflect the change as the consolidation guidance has recently been included in IFRS 10.

In addition, IAS 27 will now only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when the Company prepares separate financial statements. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IAS 28 Investments in Associates and Joint Ventures

On April 1, 2013, Just Energy will be required to adopt IAS 28, "Investments in Associates and Joint Ventures".

As a consequence of the issue of IFRS 10, IFRS 11 and IFRS 12, IAS 28 has been amended and will further provide the accounting guidance for investments in associates and will set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

This standard will be applied by the Company when there is joint control, or significant influence over an investee.

Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not include control or joint control of those policy decisions. When determined that the Company has an interest in a joint venture, the Company will recognize an investment and will account for it using the equity method in accordance with IAS 28. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

Legal proceedings

Just Energy's subsidiaries are party to a number of legal proceedings. Just Energy believes that each proceeding constitutes a routine legal matter incidental to the business conducted by Just Energy and that the ultimate disposition of the proceedings will not have a material adverse effect on its consolidated earnings, cash flows or financial position.

In addition to the routine legal proceedings of Just Energy, the State of California has filed a number of complaints to the Federal Energy Regulatory Commission ("FERC") against many suppliers of electricity, including Commerce with respect to events stemming from the 2001 energy crisis in California. Pursuant to the complaints, the State of California is challenging the FERC's enforcement of its market-based rate system. Although CEI did not own generation facilities, the State of California is claiming that CEI was unjustly enriched by the run-up in charges caused by the alleged market manipulation of other market participants. On March 18, 2010, the Administrative Law Judge in the matter granted a motion to strike the claim for all parties in one of the complaints, holding that California did not prove that the reporting errors masked the accumulation of market power. California has appealed the decision. CEI continues to vigorously contest this matter which is not expected to have a material impact on the financial condition of the Company.

Controls and procedures

At June 30, 2011, the Chief Executive Officer and Chief Financial Officer of the Company, along with the assistance of senior management, have designed disclosure controls and procedures to provide reasonable assurance that material information relating to Just Energy is made known to the CEO and CFO, and have designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. During the interim period, there have been no changes in Just Energy's policies and procedures that comprise its internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company'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.justenergygroup.com and is included in Just Energy's May 20, 2011, management information circular. Just Energy actively monitors the corporate governance and disclosure environment to ensure timely compliance with current and future requirements.

Outlook

Just Energy is in the process of an ongoing diversification beyond its core business of five-year fixed-price residential gas and electricity contracts. Sales to this core customer group have faced difficult market conditions during the recent past, with stable low commodity prices limiting the attraction of a fixed-rate product both for new customers and renewals. As this situation became clear, Just Energy's management took a number of steps intended to use new products and markets to provide growth that would not otherwise be available.

Foremost among these diversifications is the expansion of Just Energy's commercial offerings through the acquisition of Hudson and the expansion of the Company's in-house commercial sales capability. The result is continued strong gross and net new customer additions with the majority of these coming from the Commercial division. Going forward, the Company will continue to broaden its product offering with more flexible terms for both residential and commercial customers. The availability of shorter-term contracts and variable-price and/or fixed-price blended options added to existing JustGreen offerings will broaden the base of potential customers for Just Energy and ease renewals at contract end. A third diversification is the establishment of the Home Services division which rents and sells water heaters, furnaces and air conditioners.

The first quarter of fiscal 2012 showed the compound impact of past diversifications and solid customer growth combined with normal weather conditions. While commercial customers generate lower margins, the addition of large numbers of RCEs is a net benefit to the Company, both in terms of higher gross margin and lower per customer administrative costs. Overall, gross margin was up 17% (14% per share) versus the prior comparable quarter. Adjusted EBITDA, which management believes is the best measure of operating performance, was up 26% (23% per share). This reflects the business profit after maintenance capital and before selling and marketing costs to grow future embedded gross margin. Base EBITDA (after all selling and marketing costs) was up 37% (31% per share).

Higher gross margin was a result of margin growth in the energy marketing business driven by growth in the U.S. tied to commercial customer additions. The Home Services division also contributed to margin growth. EBITDA growth exceeded margin growth as administrative expenses were lower quarter over quarter due to the lower costs of servicing commercial customers with the majority of the growth in the past year from the Commercial division. Overall operating results were strong on every measure, particularly compared to the weather related weak performance from first quarter of fiscal 2011. Payout ratio on Adjusted EBITDA was 116% versus 142% in the prior comparable period. Management anticipates that the payout ratio for the fiscal year will be under 100% and will allow Just Energy to comfortably pay out interest, income tax and dividends.

Just Energy has published targets of 5% per share growth in gross margin and Adjusted EBITDA for fiscal 2012. The Company is well ahead of these targets after the first quarter. It should be noted that the first quarter is the least significant in terms of generating annual margin and EBITDA for Just Energy. As well, as noted above, the comparable first quarter of fiscal 2011 was adversely impacted by a record warm winter. Also, the decline in the U.S. dollar both during and subsequent to the quarter will likely have an adverse impact on fiscal 2012's financial performance. In consideration of these factors, management believes that it is premature to change its published targets for the year.

The 227,000 customers added in the quarter was consistent with the additions seen in the fourth quarter of fiscal 2011 but down 13% from the level seen in the first quarter of that year. This disparity is due to a single 70,000 RCE commercial customer added in the prior comparative quarter. Management believes that the current levels of gross additions are sustainable for the future and that both gross and net additions should continue to exceed levels seen before the acquisition of Hudson. Commercial customers are currently approximately 42% of Just Energy's base, and management expects this to increase to 50% over time. Commercial customers are typically subject to less weather volatility than residential customers. This may translate into more predictable results from the natural gas book. Also, commercial customers do not ordinarily move, reducing overall attrition, and making balancing of the supply book less complex.

New product offerings and further geographic expansion will also contribute to growth in the coming years. A major product will be the JustClean offering, which results in comparable margins per RCE to traditional residential customer contracts, can be offered in all states and provinces and is not dependent on energy deregulation. Product rollout across North America is underway.

Just Energy has partnered on a power-purchase-agreement basis with a number of green energy projects and plans to enter into more such partnerships concentrated in jurisdictions where the Company has an established customer base. The Company continues to actively monitor possible acquisition opportunities within its current business segments.

Geographic expansion continues with potential new markets under review. Equally important will be an expansion of the very successful Hudson broker network. Broadening this commercial footprint to existing Just Energy markets will be a major contributor to growth in fiscal 2012. Recently developed telemarketing and internet sales as well as the Momentis network marketing unit are further diversifications of the Company's sales platform, which should also contribute to growth.


                                                     JUST ENERGY GROUP INC. 

                     INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 
                                                       AS AT JUNE 30, 2011 
                                            (thousands of Canadian dollars) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                       June 30,     March 31,      April 1, 
                             Notes         2011          2011          2010 
                           -------------------------------------------------
ASSETS                                                                      
Non-current assets                                                          
 Property, plant and                                                        
  equipment                      8 $    241,353  $    233,002  $    216,676 
 Intangible assets               9      573,821       640,219       528,854 
 Contract initiation costs               32,570        29,654         5,587 
 Other non-current                                                          
  financial assets              10        4,381         5,384         5,027 
 Non-current receivables                  4,827         4,569         2,014 
 Deferred tax asset                     100,570       121,785       265,107 
                                  ------------------------------------------
                                        957,522     1,035,613     1,023,265 
Current assets                                                              
 Inventories                       $      5,634  $      6,906  $      6,323 
 Gas delivered in excess of                                                 
  consumption                             9,451         3,481         7,410 
 Gas in storage                          26,743         6,133         4,058 
 Current trade and other                                                    
  receivables                           256,667       281,685       232,579 
 Accrued gas receivable                  14,387        26,535        20,793 
 Unbilled revenues                      103,463       112,147        61,070 
 Prepaid expenses and                                                       
  deposits                                6,010         6,079        20,038 
 Other current assets           10        8,139         3,846         2,703 
 Corporate tax recoverable                7,231         9,135             - 
 Cash and cash equivalents       6       76,241        98,466        78,782 
                                  ------------------------------------------
                                        513,966       554,413       433,756 
                                  ------------------------------------------
TOTAL ASSETS                       $  1,471,488  $  1,590,026  $  1,457,021 
                                  ------------------------------------------

DEFICIT AND LIABILITIES                                                     
Deficit attributable to                                                     
 equity holders of the                                                      
 parent                                                                     
 Deficit                           $ (1,342,401) $ (1,349,928) $ (1,556,669)
 Accumulated other                                                          
  comprehensive income          11      107,157       123,919       221,969 
 Unitholders' capital                         -             -       777,856 
 Shareholders' capital          12      973,245       963,982             - 
 Equity component of                                                        
  convertible debenture      (13e)       18,186        18,186             - 
 Contributed surplus            12       53,849        52,723             - 
                                  ------------------------------------------
Shareholders' deficit                  (189,964)     (191,118)     (556,844)

Non-controlling interest                      -             -        20,421 
                                  ------------------------------------------
TOTAL DEFICIT                          (189,964)     (191,118)     (536,423)
                                  ------------------------------------------

Non-current liabilities                                                     
 Long-term debt                 13      524,950       507,460       231,837 
 Provisions                     14        3,293         3,244         3,124 
 Deferred lease inducements               1,537         1,622         1,984 
 Other non-current                                                          
  financial liabilities         10      310,512       355,412       590,572 
 Deferred tax liability                   7,505        22,919         6,776 
 Liability associated with                                                  
  exchangeable shares and                                                   
  Equity-based compensation     19            -             -       181,128 
                                  ------------------------------------------
                                        847,797       890,657     1,015,421
Current liabilities                                                         
 Bank indebtedness                        6,253         2,314         8,236 
 Trade and other payables               252,497       275,503       177,368 
 Accrued gas payable                     10,420        19,353        15,093 
 Deferred revenue                         7,205             -         7,202 
 Unit distribution payable                    -             -        13,182 
 Income taxes payable                     3,803         9,788         6,410 
 Current portion of long-                                                   
  term debt                     13       93,718        94,117        61,448 
 Provisions                     14        4,061         4,006         3,884 
 Other current financial                                                    
  liabilities                   10      435,698       485,406       685,200 
                                  ------------------------------------------
                                        813,655       890,487       978,023 
                                  ------------------------------------------
TOTAL LIABILITIES                     1,661,452     1,781,144     1,993,444 
                                  ------------------------------------------
TOTAL DEFICIT AND                                                           
 LIABILITIES                       $  1,471,488  $  1,590,026  $  1,457,021 
                                  ------------------------------------------

Commitments (Note 21)                                                       

See accompanying notes to the interim consolidated financial statements     


                                                     JUST ENERGY GROUP INC. 

                                     INTERIM CONSOLIDATED INCOME STATEMENTS 
                                   FOR THE THREE MONTHS ENDED JUNE 30, 2011 
                                            (thousands of Canadian dollars) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                   Notes    June 30, 2011     June 30, 2010 
                                   -----------------------------------------
SALES                                 15        $ 626,200         $ 609,684 
COST OF SALES                      16(b)          531,939           529,329 
                                        ------------------------------------
GROSS MARGIN                                       94,261            80,355 
                                        ------------------------------------
EXPENSES                                                                    
  Administrative expenses                          28,284            28,841 
  Selling and marketing expenses                   34,554            29,758 
  Other operating expenses         16(a)           39,140            38,083 
                                        ------------------------------------
                                                  101,978            96,682 
                                        ------------------------------------
Operating loss                                     (7,717)          (16,327)
Finance costs                         13          (13,792)          (12,755)
Change in fair value of derivative                                          
 instruments                          10           79,697           335,547 
Other income                                          165             1,782 
                                        ------------------------------------
Income before income tax                           58,353           308,247 
Provision for income tax expense      17            7,221            37,458 
                                        ------------------------------------
PROFIT FOR THE PERIOD                            $ 51,132         $ 270,789 
                                        ------------------------------------

Attributable to:                                                            
Shareholders/Unitholders of Just                                            
 Energy                                          $ 51,132         $ 273,409 
Non-controlling interests                               -            (2,620)
                                        ------------------------------------
PROFIT FOR THE PERIOD                            $ 51,132         $ 270,789 
                                        ------------------------------------

See accompanying notes to the interim consolidated financial statements     

Income per share/unit                 18                                    
Basic                                               $0.37             $2.19 
Diluted                                             $0.35             $1.78 


                                                     JUST ENERGY GROUP INC. 

                    INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
                                       FOR THREE MONTHS ENDED JUNE 30, 2011 
                                            (thousands of Canadian dollars) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                   Notes             2011              2010 
                                 -------------------------------------------
Profit for the period                            $ 51,132         $ 270,789 
Other comprehensive income            11                                    
Unrealized gain on translation of                                           
 foreign operations                                (3,745)           14,881 
Amortization of deferred                                                    
 unrealized gain of discontinued                                            
 hedges net of income taxes of                                              
 $7,375 (2010 - $5,850)                           (13,017)          (28,723)
                                        ------------------------------------
Other comprehensive loss for the                                            
 period, net of tax                               (16,762)          (13,842)
                                        ------------------------------------
Total comprehensive income for                                              
 the period, net of tax                          $ 34,370         $ 256,947 
                                        ------------------------------------

Total comprehensive income                                                  
 attributable to:                                                           
Shareholders/Unitholders of Just                                            
 Energy                                          $ 34,370         $ 259,567 
Non-controlling interest                                -            (2,620)
                                        ------------------------------------
Total comprehensive income for                                              
 the period, net of tax                          $ 34,370         $ 256,947 
                                        ------------------------------------

See accompanying notes to the interim consolidated financial statements     


                                                     JUST ENERGY GROUP INC. 

          INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) 
                                       FOR THREE MONTHS ENDED JUNE 30, 2011 
                                            (thousands of Canadian dollars) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                   Notes             2011              2010 
                                 -------------------------------------------
ATTRIBUTABLE TO THE SHAREHOLDERS                                            

Accumulated deficit                                                         
Accumulated deficit, beginning of                                           
 period                                        $ (315,934)       $ (671,010)
Profit for the period,                                                      
 attributable to the                                                        
 Shareholders/Unitholders                          51,132           273,409 
                                        ------------------------------------
Accumulated deficit, end of                                                 
 period                                          (264,802)         (397,601)
                                        ------------------------------------
DISTRIBUTIONS/DIVIDENDS                                                     
Distributions and dividends,                                                
 beginning of period                           (1,033,994)         (885,659)
Distributions and dividends                       (43,605)          (39,459)
                                        ------------------------------------
Distributions and dividends, end                                            
 of period                                     (1,077,599)         (925,118)
                                        ------------------------------------
DEFICIT                                      $ (1,342,401)     $ (1,322,719)
                                        ------------------------------------
ACCUMULATED OTHER COMPREHENSIVE                                             
 INCOME                               11                                    
Accumulated other comprehensive                                             
 income, beginning of period                    $ 123,919         $ 221,969 
Other comprehensive loss                          (16,762)          (13,842)
                                        ------------------------------------
Accumulated other comprehensive                                             
 income, end of period                          $ 107,157         $ 208,127 
                                        ------------------------------------
SHAREHOLDERS'/UNITHOLDERS'                                                  
 CAPITAL                                                                    
Shareholders'/Unitholders'                                                  
 capital, beginning of period                   $ 963,982         $ 777,856 
Share units exchanged                                   -             5,903 
Share units issued on                                                       
 exercise/exchange of unit                                                  
 compensation                                         587                 - 
Dividend reinvestment plan                          8,676             5,599 
                                        ------------------------------------
Shareholders'/Unitholders'                                                  
 capital, end of period                         $ 973,245         $ 789,358 
                                        ------------------------------------
CONTRIBUTED SURPLUS                   12                                    
Balance, beginning of period                     $ 52,723               $ - 
Add: share-based compensation                                               
 awards                                             1,681                 - 
  non-cash deferred share grant                                             
   distributions                                       32                 - 
Less: share-based awards                                                    
 exercised                                           (587)                - 
                                        ------------------------------------
Balance, end of period                           $ 53,849               $ - 
                                        ------------------------------------

See accompanying notes to the interim consolidated financial statements     


                                                     JUST ENERGY GROUP INC. 

                              INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 
                                       FOR THREE MONTHS ENDED JUNE 30, 2011 
                                            (thousands of Canadian dollars) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net inflow (outflow) of cash                                                
 related to the following                                                   
 activities                        Notes    June 30, 2011     June 30, 2010 
                                 -------------------------------------------
OPERATING                                                                   
Income before income tax                         $ 58,353         $ 308,247 
                                        ------------------------------------
Items not affecting cash                                                    
  Amortization of intangible                                                
   assets and related supply                                                
   contracts                                       29,304            27,172 
  Amortization of contract                                                  
   initiation costs                                 3,871             2,088 
  Amortization included in cost                                             
   of goods sold                                    2,903             2,410 
  Amortization of property, plant                                           
   and equipment                                    1,341             1,920 
  Share-based compensation                          1,681             2,010 
  Financing charges, non-cash                                               
   portion                                          1,923             1,481 
  Transaction costs                                     -             1,099 
  Other                                               (85)              (88)
  Change in fair value of                                                   
   derivative instruments                         (79,697)         (335,547)
                                        ------------------------------------
                                                  (38,759)         (297,455)
                                        ------------------------------------
  Adjustment required to reflect                                            
   net cash receipts from gas                                               
   sales                              22            3,108             8,436 
                                        ------------------------------------
  Changes in non-cash working                                               
   capital                            23           (4,049)            6,104 
                                        ------------------------------------
                                                   18,653            25,332 
  Income tax paid                                  (2,959)           (2,456)
                                        ------------------------------------
Cash inflow from operating                                                  
 activities                                        15,694            22,876 
                                        ------------------------------------

INVESTING                                                                   
Purchase of property, plant and                                             
 equipment                                        (11,595)           (9,607)
Purchase of intangible assets                      (1,597)             (362)
Acquisitions of a subsidiary, net                                           
 of cash acquired                      7           (2,223)         (251,972)
Transaction costs on acquisitions                       -            (1,099)
Proceeds of long-term receivable                     (261)            3,128 
Contract initiation costs                          (6,862)           (3,674)
                                        ------------------------------------
Cash outflow from investing                                                 
 activities                                       (22,538)         (263,586)
                                        ------------------------------------

FINANCING                                                                   
Dividends paid                                    (34,897)          (33,243)
Increase (decrease) in bank                                                 
 indebtedness                                       3,939              (383)
Issuance of long-term debt                         68,941           349,197 
Repayment of long-term debt                       (53,706)          (49,386)
                                        ------------------------------------
Cash inflow (outflow) from                                                  
 financing activities                             (15,723)          266,185 
                                        ------------------------------------
Effect of foreign currency                                                  
 translation on cash balances                         342             4,701 
                                        ------------------------------------
Net cash inflow (outflow)                         (22,225)           30,176 
Cash, beginning of period                          98,466            78,782 
                                        ------------------------------------
Cash, end of period                              $ 76,241         $ 108,958 
                                        ------------------------------------

See accompanying notes to the interim consolidated financial statements     


                                                      JUST ENERGY GROUP INC.

                      NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                    FOR THE THREE MONTHS ENDED JUNE 30, 2011
    (thousands of Canadian dollars except where indicated and per unit/share
                                                                    amounts)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1. ORGANIZATION

Effective January 1, 2011, Just Energy completed the conversion from an income trust, Just Energy Income Fund (the "Fund"), to a corporation (the "Conversion"). The plan of arrangement was approved by Unitholders on June 29, 2010, and by the Alberta Court of the Queen's Bench on June 30, 2010 and going forward from January 1, 2011, operates under the name, Just Energy Group Inc. ("JEGI", "Just Energy" or "the Company"). JEGI was a newly incorporated entity for the purpose of acquiring the outstanding units of the Fund, exchangeable shares of Just Energy Exchange Corp. ("JEEC") and the Class A preference shares of Just Energy Corp. ("JEC") on a one-for-one basis for common shares of JEGI. There was no change in the ownership of the business and therefore, there is no impact to the consolidated financial statements except for the elimination of unitholders' equity and the recording of shareholders' equity in the same amount.

Just Energy is a corporation established under the laws of Canada to hold securities and to distribute the income of its directly or indirectly owned operating subsidiaries and affiliates: Just Energy Ontario L.P., Just Energy Manitoba L.P., Just Energy Quebec L.P., Just Energy (B.C.) Limited Partnership, Just Energy Alberta L.P., Alberta Energy Savings L.P. ("AESLP"), Just Energy Illinois Corp., Just Energy New York Corp., Just Energy Indiana Corp., Just Energy Texas L.P., Just Energy Massachusetts Corp., Just Energy Michigan Corp., Just Energy Pennsylvania Corp., Universal Energy Corporation, Commerce Energy Inc. ("Commerce" or "CEI"), National Energy Corp. (which operates under the trade name of National Home Services ("NHS")), Hudson Energy Services, LLC and Hudson Energy Canada Corp. (collectively "Hudson" or "HES"), Momentis Canada Corp. and Momentis U.S. Corp. (collectively, "Momentis"), Terra Grain Fuels Inc. ("TGF"), Hudson Energy Solar Corp. and Just Energy Limited ("JEL").

The registered office of Just Energy is First Canadian Place, 100 King Street West, Toronto, Ontario, Canada. The consolidated financial statements consist of Just Energy, its subsidiaries and affiliates. The financial statements were approved by the Board of Directors on August 11, 2011.

2. OPERATIONS

Just Energy's business primarily involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price, price-protected or variable-priced contracts and green energy products. 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. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion. Just Energy, which commenced business in 1997, derives its margin or gross profit from the difference between the price at which it is able to sell the commodities to its customers and the related price at which it purchases the associated volumes from its suppliers. Just Energy also offers green products through its JustGreen and JustClean programs. The electricity JustGreen 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 JustGreen product offers carbon offset credits which will allow the customer to reduce or eliminate the carbon footprint of their home or business. JustClean products allow customers in certain jurisdictions to offset their carbon footprint without purchasing commodity from Just Energy. JustClean can be offered in all states and provinces and is not dependent on energy deregulation. Management believes that the JustGreen and JustClean products will not only add to profits, but also increase sales receptivity and improve renewal rates.

In addition, through National Home Services, Just Energy sells and rents high efficiency and tankless water heaters, air conditioners and furnaces to Ontario residents. Through its subsidiary Terra Grain Fuels, Just Energy produces and sells wheat-based ethanol. Just Energy has also launched, Hudson Solar, a solar project development platform in New Jersey.

3. BASIS OF PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

In 2010, the Canadian Institute of Chartered Accountants ("CICA Handbook") was revised to incorporate International Financial Reporting Standards ("IFRS") and requires publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly, the Company has commenced reporting on this basis in these consolidated financial statements. In the consolidated financial statements, the term "CGAAP" refers to Canadian Generally Accepted Accounting Principles before the adoption of IFRS.

These consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34, Interim Financial Reporting, and IFRS 1, First-time Adoption of International Financial Reporting Standards. Subject to certain transition elections, the Company has consistently applied the same accounting policies in its opening IFRS consolidated balance sheet at April 1, 2010 and throughout all periods presented, as if these policies had always been in effect. Note 24 discloses the impact of the transition to IFRS on the Company's reported financial position, financial performance and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company's audited annual consolidated financial statements for the year ended March 31, 2011 prepared under CGAAP.

The policies applied in these consolidated financial statements are based on IFRS issued and outstanding as of June 30, 2011. Any subsequent changes to IFRS pertaining to the Company's annual consolidated financial statements for the year ending March 31, 2012 could result in a restatement of these consolidated financial statements, including the transition adjustments recognized on changeover to IFRS.

The consolidated financial statements should be read in conjunction with the Company's CGAAP audited annual consolidated financial statements for the year ended March 31, 2011. Notes 19 and 24 disclose IFRS information for the year ended March 31, 2011 not provided for in the 2011 annual consolidated financial statements.

(a) Basis of presentation

The consolidated financial statements are presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand. The statements are prepared on an historical cost basis except for the derivative financial instruments, which are stated at fair value.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening IFRS consolidated statement of financial position as at April 1, 2010, for the purposes of the transition.

(b) Principles of consolidation

The consolidated financial statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries and affiliates as at June 30, 2011. Subsidiaries and affiliates are consolidated from the date of acquisition and control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries and affiliates are prepared for the same reporting period as Just Energy, using consistent accounting policies. All intercompany balances, income, expenses, and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.

(c) Cash and cash equivalents

All highly liquid temporary cash investments with an original maturity of three months or less when purchased are considered to be cash equivalents. For the purpose of the consolidated statement of cashflows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(d) Accrued gas receivables/accrued gas accounts payable or gas delivered in excess of consumption/deferred revenues

Accrued gas receivables are stated at estimated realizable value and result when customers consume more gas than has been delivered by Just Energy to local distribution companies ("LDCs"). Accrued gas accounts payable represents the obligation to the LDCs with respect to gas consumed by customers in excess of that delivered to the LDCs.

Gas delivered to LDCs in excess of consumption by customers is stated at the lower of cost and net realizable value. Collections from customers in advance of their consumption of gas result in deferred revenues.

Due to the seasonality of operations, during the winter months, customers will have consumed more than what was delivered resulting in the recognition of unbilled revenues/accrued gas accounts payable; however, in the summer months, customers will have consumed less than what was delivered, resulting in the recognition of gas delivered in excess of consumption/deferred revenues.

These adjustments are applicable solely to the Ontario, Manitoba, Quebec and Michigan gas markets.

(e) Inventory

Inventory consists of water heaters, furnaces and air conditioners for selling purposes, gas in storage, ethanol, ethanol in process and grain inventory. Water heaters, furnaces and air conditioners are stated at the lower of cost and net realizable value with cost being determined on a weighted average basis.

Gas in storage represents the gas delivered to the LDCs. The balance will fluctuate as gas is injected or withdrawn from storage.

Gas in storage, ethanol, ethanol in process and grain inventory are valued at the lower of cost and net realizable value with cost being determined on a weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the first-in first-out principle and includes expenditures incurred in acquiring the inventories and delivering to its existing location and condition.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost, net of any accumulated depreciation and impairment losses. Cost includes the purchase price and, where relevant, any costs directly attributable to bringing the asset to the location and condition necessary and/or the present value of all dismantling and removal costs. Where major components of property, plant and equipment have different useful lives, the components are recognized and depreciated separately. Just Energy recognizes in the carrying amount, the cost of replacing part of an item when the cost is incurred and if it is probable that the future economic benefits embodied with the item can be reliably measured. All other repair and maintenance costs are recognized in the consolidated income statement as an expense when incurred. Depreciation is provided over the estimated useful lives of the assets as follows:


----------------------------------------------------------------------------
Asset category                       Depreciation method    Rate/useful life
----------------------------------------------------------------------------
Furniture and fixtures                 Declining balance                 20%
Office equipment                       Declining balance                 20%
Computer equipment                     Declining balance                 30%
Buildings and ethanol plant                Straight line         15-35 years
Water heaters                              Straight line            15 years
Furnaces and air conditioners              Straight line            15 years
Leasehold improvements                     Straight line       Term of lease
Vehicles                                   Straight line             5 years
Solar equipment                            Straight line         15-20 years
----------------------------------------------------------------------------

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement when the asset is derecognized.

The useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate.

(g) Business combinations and goodwill

Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments and liabilities incurred or assumed at the date of exchange. Acquisition costs for business combinations incurred subsequent to April 1, 2010, are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values on the date of acquisition, irrespective of the extent of any non-controlling interest.

Goodwill is initially measured at cost, which is the excess of the cost of the business combination over Just Energy's share in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities. Any negative difference is recognized directly in the consolidated income statement. If the fair values of the assets, liabilities and contingent liabilities can only be calculated on a provisional basis, the business combination is recognized using provisional values. Any adjustments resulting from the completion of the measurement process are recognized within 12 months of the date of acquisition.

After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of Just Energy's operating segments that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the acquiree are assigned to those segments.

On first-time adoption of the IFRS, Just Energy elected to not apply IFRS 3, Business Combinations, to transactions that occurred prior to the transition date. Accordingly, the goodwill associated with acquisitions carried out prior to April 1, 2010, is carried at the amount reported in the last consolidated financial statements prepared under CGAAP as at March 31, 2010.

(h) Intangible assets

Intangible assets acquired outside of a business combination are measured at cost on initial recognition. Intangible assets acquired in a business combination are recorded at fair value on the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and/or accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite useful lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and amortization period of an intangible asset with a finite useful life is reviewed at least once annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense related to intangible assets with finite lives is recognized in the income statement in the expense category associated with the function of the intangible assets.

Intangible assets consist of gas customer contracts, electricity customer contracts, water heaters, furnaces and air conditioners, customer contracts, broker network and brand, all acquired through business combinations, as well as software, commodity billing and settlement systems and information technology system development.

Internally-generated intangible assets are capitalized when the product or process is technically and commercially feasible and Just Energy has sufficient resources to complete development. The cost of an internally-generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management.

The brand is considered to have an indefinite useful life and is not amortized, but rather tested annually for impairment. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in the consolidated income statement when the asset is derecognized.

A summary of the policies applied to Just Energy's intangible assets is as follows:


----------------------------------------------------------------------------
Asset category                       Amortization method                Rate
----------------------------------------------------------------------------
Customer contracts                         Straight line    Term of contract
Contract initiation costs                  Straight line    Term of contract
Commodity billing and settlement                                            
 systems                                   Straight line             5 years
Broker network                             Straight line             5 years
Information technology system                                               
 development                               Straight line             5 years
Software                               Declining balance                100%
Brand                                    No amortization          Indefinite
Other intangible assets                    Straight line             5 years

(i) Impairment of non-financial assets

Just Energy assesses whether there is an indication that an asset may be impaired at each reporting date. If such an indication exists or when annual testing for an asset is required, Just Energy estimates the asset's recoverable amount. The recoverable amount of goodwill and intangible assets with an indefinite useful life, if any, as well as intangible assets not yet available for use, are estimated at least annually. The recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell and its value in use. Value in use is determined by discounting estimated future cash flows using a pre-tax discount rate that reflects the current market assessment of the time value of money and the specific risks of the asset. In determining fair value less costs to sell, an appropriate valuation model has to be used. The recoverable amount of assets that do not generate independent cash flows is determined based on the cash-generating unit to which the asset belongs.

An impairment loss is recognized in the consolidated income statement if an asset's carrying amount or that of the cash-generating unit to which it is allocated is higher than its recoverable amount. Impairment losses of cash-generating units are first charged against the value of assets, in proportion to their carrying amount.

In the consolidated income statement, an impairment loss is recognized in the expense category associated with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, Just Energy estimates the asset's or cash-generating unit's recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the asset in prior years. Such a reversal is recognized in the consolidated income statement.

Goodwill is tested for impairment annually as at March 31 and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each segment to which the goodwill relates. Where the recoverable amount of the segment is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

(j) Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date and whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Just Energy as a lessee

Operating lease payments are recognized as an expense in the consolidated income statement on a straight-line basis over the lease term.

Just Energy as a lessor

Leases where Just Energy does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income.

(k) Financial instruments

Financial assets and liabilities:

Just Energy classifies its financial instruments as either (i) financial assets at fair value through profit or loss instruments, or (ii) loans and receivables, and its financial liabilities as either (a) financial liabilities at fair value through profit or loss or (b) other financial liabilities. Appropriate classification of financial assets and liabilities is determined at the time of initial recognition or when reclassified in the consolidated statement of financial position.

Financial instruments are recognized on the trade date, which is the date on which Just Energy commits to purchase or sell the asset.

Financial assets at fair value through profit or loss:

Financial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into that are not designated as hedging instruments in hedge relationships as defined by IAS 39, Financial Instruments: Recognition and Measurement ("IAS 39"). Included in this class are primarily physical delivered energy contracts, for which the own-use exemption could not be applied, financially settled energy contracts and foreign currency forward contracts.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 10. Related realized and unrealized gains and losses are included in the consolidated income statement.

Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets in this category include receivables. Loans and receivables are initially recognized at fair value plus transaction costs. They are subsequently measured at amortized cost using the effective interest method less any impairment. The effective interest amortization is included in finance costs in the consolidated income statement.

Derecognition:

A financial asset is derecognized when the rights to receive cash flows from the asset have expired or when Just Energy has transferred its rights to receive cash flows from the asset.

Impairment of financial assets:

Just Energy assesses whether there is objective evidence that a financial asset is impaired at each reporting date. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the fund of financial assets that can be reliably estimated.

For financial assets carried at amortized cost, Just Energy first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If Just Energy determines that no objective evidence of impairment exists for an individually-assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial asset's original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of other income in the consolidated income statement.

Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to other operating costs in the consolidated income statement.

Financial liabilities at fair value through profit or loss:

Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by Just Energy that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Included in this class are primarily physically- delivered energy contracts, for which the own use exemption could be not applied, financially-settled energy contracts and foreign currency forward contracts.

Gains or losses on liabilities held-for-trading are recognized in the consolidated income statement.

Other financial liabilities:

Other financial liabilities are measured at amortized cost using the effective interest rate method. Financial liabilities include long-term debt issued, which is initially measured at fair value, which is the consideration received, net of transaction costs incurred, trade and other payables and bank indebtedness. Transaction costs related to the long-term debt instruments are included in the value of the instruments and amortized using the effective interest rate method. The effective interest expense is included in finance costs in the consolidated income statement.

Derecognition:

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated income statement.

(l) Derivative instruments

Just Energy enters into fixed-term contracts with customers to provide electricity and gas at fixed prices. These customer contracts expose Just Energy to changes in consumption as well as changes in the market prices of gas and electricity. To reduce its exposure to movements in commodity prices, Just Energy enters into derivative contracts.

Just Energy analyzes all its contracts, of both a financial and non-financial nature, to identify the existence of any "embedded" derivatives. Embedded derivatives are accounted for separately from the host contract at inception date when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not carried at fair value.

All derivatives are recognized at fair value on the date on which the derivative is entered into and are re-measured to fair value at each reporting date. Derivatives are carried in the consolidated statement of financial position as other financial assets when the fair value is positive and as other financial liabilities when the fair value is negative. Just Energy does not utilize hedge accounting. Therefore, changes in the fair value of these derivatives are taken directly to the consolidated income statement and are included within change in fair value of derivative instruments.

(m) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is currently an enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(n) Fair value of financial instruments

Fair value is the estimated amount that Just Energy would pay or receive to dispose of these contracts in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act. The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques that are recognized by market participants. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models. An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 10.

(o) Revenue recognition

Revenue is recognized when significant risks and rewards of ownership are transferred to the customer. In the case of gas and electricity, transfer of risk and rewards generally coincides with consumption. Ethanol and dried distillery grain sales are recognized when the risk and reward of ownership passes, which is typically on delivery. Revenue from sales of water heaters and HVAC products is recognized upon installation. Just Energy recognizes revenue from water heater and HVAC leases, based on rental rates over the term commencing from the installation date.

Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and sales taxes.

The Company assumes credit risk for all customers in Illinois, Texas, Pennsylvania, Maryland, Massachusetts and California and for large-volume customers in British Columbia and Ontario. In these markets, the Company ensures that credit review processes are in place prior to commodity flowing to the customer.

(p) Foreign currency translation

Functional and presentation currency

Items included in the consolidated financial statements of each of the Company's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in Canadian dollars, which is the parent company's presentation and functional currency.

Transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated income statement, except when deferred in other comprehensive income (loss) as qualifying net investment hedges.

Translation of foreign operations

The results and consolidated financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:


--  assets and liabilities for each consolidated statement of financial
    position presented are translated at the closing rate at the date of
    that consolidated statement of financial position; and 
--  income and expenses for each consolidated income statement are
    translated at the exchange rates prevailing at the dates of the
    transactions. 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income (loss).

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in accumulated other comprehensive income (loss) are recognized in the consolidated income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(q) Per unit/share amounts

The computation of income per unit/share is based on the weighted average number of units/shares outstanding during the period. Diluted earnings per unit/share is computed in a similar way to basic earnings per unit/share except that the weighted average units/shares outstanding are increased to include additional units/shares assuming the exercise of stock options, restricted share grants ("RSGs"), deferred share grants ("DSGs") and convertible debentures, if dilutive.

(r) Share-based compensation plans

Equity-based compensation liability:

Prior to the Conversion to a corporation on January 1, 2011, Just Energy's equity-based compensation plans entitled the holders to receive trust units which under IFRS, were considered puttable financial instruments, and thus the awards were classified as liability-based awards. The liability was measured at the redemption value of the instruments and remeasured at each reporting date with the gain or loss associated with the remeasurement recorded within profit. When the awards were converted into trust units, the conversions were recorded as an extinguishment of the liability and accordingly, the remeasured amount at the date of conversion was then reclassified to equity.

Subsequent to the Conversion, Just Energy accounted for its share-based compensation as equity-settled transactions as a result of the stock-based plans that were no longer convertible into a puttable financial liability. The cost of a share-based compensation is measured by reference to the fair value at the date on which it was granted. Awards are valued at the grant date and are not adjusted for changes in the prices of the underlying shares and other measurement assumptions. The cost of equity-settled transactions is recognized, together with the corresponding increase in equity, over the period in which the performance or service conditions are fulfilled, ending on the date on which the relevant grantee becomes fully entitled to the award. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting period reflects the extent to which the vesting period has expired and Just Energy's best estimate of the number of the shares that will ultimately vest. The expense or credit recognized for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

When options, RSGs and DSGs are exercised or exchanged, the amounts credited to contributed surplus are reversed and credited to shareholders' capital.

(s) Employee future benefits

Just Energy established a long-term incentive plan (the "Plan") for all permanent full-time and part-time Canadian employees of its subsidiaries (working more than 20 hours per week). The Plan consists of two components, a Deferred Profit Sharing Plan ("DPSP") and an Employee Profit Sharing Plan ("EPSP"). For participants of the DPSP, Just Energy contributes an amount equal to a maximum of 2% per annum of an employee's base earnings. For the EPSP, Just Energy contributes an amount up to a maximum of 2% per annum of an employee's base earnings towards the purchase of shares of Just Energy, on a matching one-for-one basis.

For the U.S. employees, Just Energy has established a 401(k) plan to provide employees the potential for future financial security for retirement. Employees may participate in the 401(k) plan subject to all the terms and conditions of the plan. They may join the plan on the first day of any month, once they have completed six months of employment. The 401(k) savings plan is an employer matching plan. Just Energy will match an amount up to 4% of their base earnings. Employees may contribute from 1% to 25% of their total salary with Just Energy on a beforehand basis with a 2011 calendar year maximum of $17.

Participation in the plans in Canada or the U.S is voluntary. The plans have a two-year vesting period beginning from the later of the plan's effective date and the employee's starting date. During the period, Just Energy contributed $466 (2010 - $373) to the plans, which was paid in full during the period.

Obligation for contributions to the plan are recognized as an expense in the consolidated income statement as incurred.

(t) Trust units of the Fund

Prior to the Conversion which occurred on January 1, 2011, the Fund's outstanding equity instruments consisted of publicly traded trust units of the Fund, Class A preference shares of JEC and exchangeable shares of JEEC. Pursuant to applicable legislation, those trust units included a redemption feature which required Just Energy to assess the appropriate presentation of those units under IFRS.

Generally, IFRS requires that financial instruments which include a redemption feature, making the instruments puttable, should be presented as a financial liability rather than equity. However, an exception to this requirement is available if the financial instrument meets certain criteria. Just Energy determined that its trust units met the requirements for this exception and accordingly, the trust units are presented as equity for the periods prior to the Conversion.

Liabilities associated with the Class A preference shares of JEC and the exchangeable shares of JEEC (collectively the "Exchangeable Shares"):

Prior to the Conversion, the outstanding Exchangeable Shares did not meet the criteria to be recorded as equity because the Exchangeable Shares were ultimately required to be exchanged for Trust units, which were considered puttable financial instruments. Accordingly, the Exchangeable Shares were recorded as a liability until exchanged for trust units. The liability was measured at the redemption value of the instruments and remeasured at each reporting date with the gain or loss associated with the remeasurement recorded within profit. When the Exchangeable Shares were converted into trust units, the conversions were recorded as an extinguishment of the liability, and accordingly, the remeasured amount at the date of conversion was then reclassified to equity.

Transaction costs

Transaction costs incurred by Just Energy in issuing, acquiring or selling its own equity instruments are accounted for as a deduction from equity to the extent that they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

(u) Income taxes

Just Energy follows the liability method of accounting for deferred 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.

Deferred tax assets/liabilities are recognized for all taxable temporary differences, except:


--  Where the deferred tax asset/liability arises from the initial
    recognition of goodwill or of an asset or liability in a transaction
    that is not a business combination and, at the time of the transaction,
    affects neither the accounting profit nor taxable profit or loss; and 
--  In respect of taxable temporary differences associated with investments
    in subsidiaries, where the timing of the reversal of the temporary
    differences can be controlled and it is probable that the temporary
    differences will not reverse in the foreseeable future. 

Deferred tax assets are recognized for all carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses, can be utilized except:


--  Where the deferred tax asset relating to the deductible temporary
    difference arises from the initial recognition of an asset or liability
    in a transaction that is not a business combination and, at the time of
    the transaction, affects neither the accounting profit nor taxable
    profit or loss; and 
--  In respect of deductible temporary differences associated with
    investments in subsidiaries, deferred tax assets are recognized only to
    the extent that it is probable that the temporary differences will
    reverse in the foreseeable future and taxable profit will be available
    against which the temporary differences can be utilized. 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(v) Provisions

Provisions are recognized when Just Energy has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where Just Energy expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated income statement, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost in the consolidated income statement.

(w) Selling and marketing expenses and contract initiation costs

Commissions and various other costs related to obtaining and renewing customer contracts are charged to income in the period incurred except as disclosed below:

Commissions related to obtaining and renewing Hudson customer contracts are paid in one of the following ways: all or partially upfront or as a residual payment over the life of the contract. If the commission is paid all or partially upfront, it is recorded as contract initiation costs and amortized in selling and marketing expenses over the term for which the associated revenue is earned. If the commission is paid as a residual payment, the amount is expensed as earned.

In addition, commissions related to obtaining customer contracts signed under NHS are recorded as contract initiation costs and amortized in selling and marketing expenses over the remaining life of the contract.

4. (i) SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the consolidated financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, income, expenses and the disclosure of contingent liabilities. The estimates and related assumptions are based on previous experience and other factors considered reasonable under the circumstances, the results of which form the basis of making the assumptions about carrying values of assets and liabilities that are not readily apparent from other sources.

Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable income realized, including the usage of tax-planning strategies.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Judgments made by management in the application of IFRS that have significant impact on the consolidated financial statements relate to the following:

Impairment of non-financial assets

Just Energy's impairment test is based on value-in-use calculations that use a discounted cash flow model. The cash flows are derived from the budget for the next five years and are sensitive to the discount rate used as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

Development costs

Development costs are capitalized in accordance with the accounting policy in Note 3 (i). Initial capitalization of costs is based on management's judgment that technical and economical feasibility is confirmed, usually when a project has reached a defined milestone according to an established project management model. At June 30, 2011, the carrying amount of capitalized development costs was $15,635 (June 30, 2010: $19,090). This amount includes primarily costs for the internal development of software tools for the customer billing and analysis in the various operating jurisdictions. These software tools are developed by the internal information technology and operations department, for the specific regional market requirements.

Useful life of key property, plant and equipment and intangible assets

The amortization method and useful lives reflect the pattern in which management expects the asset's future economic benefits to be consumed by Just Energy. Refer to notes 3 (g) and (i) for the estimated useful lives.

Provisions for litigation

The State of California has filed a number of complaints to the Federal Energy Regulatory Commission ("FERC") against many suppliers of electricity, including Commerce, a subsidiary of Just Energy, with respect to events stemming from the 2001 energy crises in California. Pursuant to the complaints, the State of California is challenging the FERC's enforcement of its market-based rate system. At this time, the likelihood of damages or recoveries and the ultimate amounts, if any, with respect to this litigation are not certain; however, an estimated amount has been recorded in these consolidated financial statements as at June 30, 2011. Refer to Note 14 for further details.

Trade receivables

Just Energy reviews its individually significant receivables at each reporting date to assess whether an impairment loss should be recorded in the consolidated income statement. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, Just Energy makes judgments about the borrower's financial situation and the net realizable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the consolidated statement of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flow models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgment includes consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer to Note 10 for further details about the assumptions as well as sensitivity analysis.

Share-based payments

Just Energy measures the cost of equity-settled transactions by reference to the fair value of equity instruments at the date at which they are granted. Estimating fair value for share-based payments requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield. Refer to Note 19 for further details.

Acquisition accounting

For acquisition accounting purposes, all identifiable assets, liabilities and contingent liabilities acquired in a business combination are recognized at fair value on the date of acquisition. Estimates are used to calculate the fair value of these assets and liabilities as at the date of acquisition.

(ii) CHANGES TO ACCOUNTING PRONOUNCEMENTS

(a) New accounting pronouncements adopted

The three months ended June 30, 2011 is Just Energy's first reporting period under IFRS. Accounting standards effective for annual reporting periods ended on March 31, 2011 have been adopted as part of the transition to IFRS.

(b) Recent pronouncements issued

IFRS 9 Financial Instruments

As of April 1, 2013, Just Energy will be required to adopt IFRS 9, "Financial Instruments", which is the result of the first phase of the IASB's project to replace IAS 39, "Financial Instruments: Recognition and Measurement". The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 10 Consolidated Financial Statements

As of April 1, 2013, IFRS 10, "Consolidated Financial Statements" will replace portions of IAS 27 "Consolidated and Separate Financial Statements" and interpretation SIC-12, "Consolidation - Special Purpose Entities". The new standard requires consolidated financial statements to include all controlled entities under a single control model. The Company will be considered to control an investee when it is exposed, or has rights to variable returns from its involvement with the investee and has the current ability to affect those returns through its power over the investee.

As required by this standard, control is reassessed as facts and circumstances change. All facts and circumstances must be considered to make a judgment about whether the Company controls another entity; there are no 'bright lines'. Additional guidance is given on how to evaluate whether certain relationships give the Company the current ability to affect its returns, including how to consider options and convertible instruments, holding less than a majority of voting rights, how to consider protective rights, and principal-agency relationships (including removal rights), all of which may differ from current practice. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 11 Joint Arrangements

On April 1, 2013, Just Energy will be required to adopt IFRS 11, "Joint Arrangements", which applies to accounting for interests in joint arrangements where there is joint control. The standard requires the joint arrangements to be classified as either joint operations or joint ventures. The structure of the joint arrangement would no longer be the most significant factor when classifying the joint arrangement as either a joint operation or a joint venture. In addition, the option to account for joint ventures (previously called jointly controlled entities) using proportionate consolidation will be removed and replaced by equity accounting.

Due to the adoption of this new section, the Company will transition the accounting for joint ventures from the proportionate consolidation method to the equity method by aggregating the carrying values of the proportionately consolidated assets and liabilities into a single line item. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 12 Disclosure of Interests in Other Entities

On April 1, 2013, Just Energy will be required to adopt IFRS 12, "Disclosure of interests in Other Entities", which includes disclosure requirements about subsidiaries, joint ventures, and associates, as well as unconsolidated structured entities and replaces existing disclosure requirements. Due to this new section, the Company will be required to disclose the following: judgements and assumptions made when deciding how to classify involvement with another entity, interests that non-controlling interests have in consolidated entities, and nature of the risks associated with interests in other entities. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 13 Fair Value Measurement

On April 1, 2013, Just Energy will be required to adopt IFRS 13, "Fair Value Measurement." The new standard will generally converge the IFRS and CGAAP requirements for how to measure fair value and the related disclosures. IFRS 13 establishes a single source of guidance for fair value measurements, when fair value is required or permitted by IFRS. Upon adoption, the Company will provide a single framework for measuring fair value while requiring enhanced disclosures when fair value is applied. In addition, fair value will be defined as the 'exit price' and concepts of 'highest and best use' and 'valuation premise' would be relevant only for non-financial assets and liabilities. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IAS 27 Separate Financial Statements

On April 1, 2013 Just Energy will be required to adopt IAS 27, "Separate Financial Statements." As a result of the issue of the new consolidation suite of standards, IAS 27 has been reissued to reflect the change as the consolidation guidance has recently been included in IFRS 10.

In addition, IAS 27 will now only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when the Company prepares separate financial statements. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IAS 28 Investments in Associates and Joint Ventures

On April 1, 2013, Just Energy will be required to adopt IAS 28, "Investments in Associates and Joint Ventures." As a consequence of the issue of IFRS 10, IFRS 11 and IFRS 12, IAS 28 has been amended and will further provide the accounting guidance for investments in associates and will set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

This standard will be applied by the Company when there is joint control, or significant influence over an investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not include control or joint control of those policy decisions. When determined that the Company has an interest in a joint venture, the Company will recognize an investment and will account for it using the equity method in accordance with IAS 28. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

5. SEASONALITY OF OPERATIONS

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.

6. RESTRICTED CASH

As part of the acquisition of Newten Home Comfort Inc. in 2009, the Company was required to transfer cash into a trust account, in trust for the vendors, as part of the contingent consideration. The contingent consideration payments, which will become payable in July 2012 are based on the number of completed water heater installations. Any contingent payments made will result in an increase to the balance of goodwill generated by the acquisition. As of June 30, 2011 the amount of restricted cash is $827.

7. ACQUISITIONS

(a) Acquisition of Hudson Energy Services, LLC

On May 7, 2010, Just Energy completed the acquisition of all of the equity interests of Hudson Parent Holdings, LLC and all the common shares of Hudson Energy Corp., thereby indirectly acquiring Hudson Energy Services, LLC with an

effective date of May 1, 2010. The acquisition was funded by an issuance of $330 million in convertible debentures issued on May 5, 2010 (Note 13(e)). There is no contingent consideration involved in the business acquisition.

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


                                                   Fair value recognized on 
                                                                acquisition 
Current assets (including cash of                                           
 $24,003)                                                          $ 88,696 
Property, plant and equipment                                         1,648 
Software                                                                911 
Electricity contracts and customer                                          
 relationships                                                      200,653 
Gas contracts and customer relationships                             26,225 
Broker network                                                       84,400 
Brand                                                                11,200 
Information technology system                                               
 development                                                         17,954 
Contract initiation costs                                            20,288 
Other intangible assets                                               6,545 
Unbilled revenue                                                     15,092 
Notes receivable - long-term                                          1,312 
Security deposits - long-term                                         3,544 
Other assets - current                                                  124 
Other assets - long-term                                                100 
                                        ------------------------------------
                                                                    478,692 

Current liabilities                                                (107,817)
Other liabilities - current                                         (74,683)
Other liabilities - long-term                                       (40,719)
                                        ------------------------------------
                                                                   (223,219)

Total identifiable net assets acquired                              255,473 
Goodwill arising on acquisition                                      32,317 
                                        ------------------------------------
Total consideration                                               $ 287,790 
                                        ------------------------------------

Cash outflow on acquisition:                                                
Cash paid                                                         $ 287,790 
Net cash acquired with the subsidiary                               (24,003)
Holdback                                                             (9,345)
                                        ------------------------------------
Net cash outflow                                                  $ 254,442 
                                        ------------------------------------

The transaction costs related to the acquisition of Hudson have been expensed and are included in other operating expenses in the consolidated income statement. The transaction costs related to the issuance of the convertible debentures have been capitalized and were allocated to the equity and liability component of the convertible debt in relation to the fair value of both the components. Goodwill of $32,317 comprises the value of expected synergies from the acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes. Goodwill associated with the Hudson acquisition is part of the U.S. gas and electricity marketing segments. As of June 30, 2011, all holdbacks have been paid in full.

The fair value of the trade receivables amounted to $62,022 at the date of acquisition. The gross amount of trade receivables is $67,526. None of the trade receivables have been impaired and it is expected that the full contractual amount can be collected.

All contracts and intangible assets, excluding brand, are amortized over the average remaining life at the time of acquisition. The gas and electricity contracts and customer relationships are amortized over periods of 30 months and 35 months, respectively. Other intangible assets, excluding brand, are amortized over periods ranging from three to five years. The brand value is considered to be indefinite and, therefore, not subject to amortization.

From the date of acquisition, Hudson has contributed $117,477 of revenue and $13,743 to the net profit before tax of Just Energy for the period ended June 30, 2010. If the combination had taken place at the beginning of the fiscal year, revenue from continuing operations would have been $156,636 and the profit from continuing operations for Just Energy would have been $18,324.

8. PROPERTY, PLANT AND EQUIPMENT


As at June 30, 2011                                                         

                                                        Furniture           
                       Computer  Buildings and                and           
                      equipment  ethanol plant    Land   fixtures  Vehicles 
                     -------------------------------------------------------
Cost:                                                                       
Opening balance -                                                           
 April 1, 2011          $ 7,750      $ 158,482   $ 299    $ 6,090     $ 215 
Additions/(Disposals)       882              -       -         33       (23)
Exchange differences         (6)            (3)      -         (6)        - 
                     -------------------------------------------------------
Ending balance, June                                                        
 30, 2011                 8,626        158,479     299      6,117       192 
                     -------------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance -                                                           
 April 1, 2011           (4,958)       (17,425)      -     (3,561)      (88)
                                                     -                      
Amortization charge                                                         
 to COGS                      -         (1,438)      -          -         - 
Amortization charge                                                         
 for the period            (246)          (267)      -       (136)      (11)
Disposals                     -              -       -          -        16 
Exchange differences          2              -       -          2         - 
                     -------------------------------------------------------
Ending balance, June                                                        
 30, 2011                (5,202)       (19,130)      -     (3,695)      (83)
                     -------------------------------------------------------

Net book value, June                                                        
 30, 2011               $ 3,424      $ 139,349   $ 299    $ 2,422     $ 109 
                     -------------------------------------------------------

                                Furnaces and                Solar      
                Office    Water          air    Leasehold  Equip-           
             equipment  heaters conditioners improvements    ment     Total
           -----------------------------------------------------------------
Cost:                                                                       
Opening
 balance -                                                           
 April
 1, 2011      $ 17,976 $ 78,223      $ 3,813      $ 8,567    $283 $ 281,698 
Additions/
 (Disposals)     1,101    7,411        2,093           21      77    11,595 
Exchange
 differences        (6)       -            -           (2)     (1)     (24)
           -----------------------------------------------------------------
Ending
 balance,
 June 30,
 2011           19,071   85,634        5,906        8,586     359  293,629 
           -----------------------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening
 balance -                                                           
 April
 1, 2011        (9,521)  (6,887)        (179)      (5,077)      -  (47,696)

Amortization
 charge                                                         
 to COGS             -   (1,339)        (126)           -       -   (2,903)
Amortization
 charge for
 the period       (436)       -            -         (245)      -   (1,341)
Disposals            -        -            -            -       -       16 
Exchange
 differences         2        -            -            2       -        8 
           -----------------------------------------------------------------
Ending
 balance,
 June 30,
 2011           (9,955)  (8,226)        (305)      (5,320)      -  (51,916)
           -----------------------------------------------------------------

Net book
 value,
 June 30,
 2011          $ 9,116 $ 77,408      $ 5,601      $ 3,266    $359 $241,353 
           -----------------------------------------------------------------



As at March 31, 2011                                                        

                                                        Furniture           
                       Computer  Buildings and                and           
                      equipment  ethanol plant    Land   fixtures  Vehicles 
                     -------------------------------------------------------
Cost:                                                                       
Opening balance -                                                           
 April 1, 2010          $ 6,417      $ 159,500   $ 299    $ 5,581     $ 197 
Additions/(Disposals)     1,137         (1,658)      -        468        18 
Acquisition of                                                              
 subsidiary                 233            670       -         94         - 
Exchange differences        (37)           (30)      -        (53)        - 
                     -------------------------------------------------------
Ending balance, March                                                       
 31, 2011                 7,750        158,482     299      6,090       215 
                     -------------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance -                                                           
 April 1, 2010           (3,763)       (10,601)      -     (2,972)      (46)
                              -                                             
Amortization charge                                                         
 to COGS                   (127)        (5,730)      -          -         - 
Amortization charge                                                         
 for the period          (1,086)        (1,095)      -       (606)      (42)
Exchange differences         18              1       -         17         - 
                     -------------------------------------------------------
Ending balance, March                                                       
 31, 2011                (4,958)       (17,425)      -     (3,561)      (88)
                     -------------------------------------------------------

Net book value, March                                                       
 31, 2011               $ 2,792      $ 141,057   $ 299    $ 2,529     $ 127 
                     -------------------------------------------------------

                                Furnaces and                Solar      
                Office    Water          air    Leasehold  Equip-           
             equipment  heaters conditioners improvements    ment     Total
           -----------------------------------------------------------------
Cost:                                                                       
Opening
 balance -                                                           
 April 1,
 2010        $ 14,810 $ 51,059        $ 317      $ 8,409      $ - $ 246,589 
Additions/
 (Disposals)    2,598   27,164        3,496          148        -    33,371 
Acquisition
 of                                                              
 subsidiary       621        -            -           30      297     1,945 
Exchange
 differences      (53)       -            -          (20)     (14)     (207)
           -----------------------------------------------------------------
Ending
 balance,
 March                                                       
 31, 2011      17,976   78,223        3,813        8,567      283   281,698 
           -----------------------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening
 balance -                                                           
 April
 1, 2010       (5,930)  (2,481)          (4)      (4,116)       -   (29,913)

Amortization
 charge                                                         
 to COGS       (1,691)  (4,406)        (175)           -        -   (12,129)
Amortization
 charge                                                         
 for the
 period        (1,917)       -            -         (975)       -    (5,721)
Exchange
 differences       17        -            -           14        -        67 
           -----------------------------------------------------------------
Ending
 balance,
 March                                                       
 31, 2011      (9,521)  (6,887)        (179)      (5,077)       -   (47,696)
           -----------------------------------------------------------------

Net book
 value,
 March                                                       
 31, 2011     $ 8,455 $ 71,336      $ 3,634      $ 3,490    $ 283 $ 234,002 
           -----------------------------------------------------------------



9. INTANGIBLE ASSETS                                                        

As at June 30, 2011                                                         

                                              Electricity      Water heater 
                           Gas contracts        contracts         contracts 
                        ----------------------------------------------------
Cost:                                                                       
Opening balance, April                                                      
 1, 2011                       $ 248,828        $ 436,339          $ 23,164 

Write-down of fully                                                         
 amortized assets                 (1,842)               -                 - 
Additions - Internal                                                        
 development                           -                -                 - 
Exchange differences                (687)          (1,096)                - 
                        ----------------------------------------------------
Ending balance, June 30,                                                    
 2011                            246,299          435,243            23,164 
                        ----------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance, April                                                      
 1, 2011                        (144,568)        (248,673)           (2,813)
Write-down of fully                                                         
 amortized assets                  1,842                -                 - 
Amortization charge for                                                     
 the period                       (6,740)         (16,166)             (399)
Amortization in mark to                                                     
 market                          (12,811)         (24,323)                - 
Exchange differences                 569              457                 - 
                        ----------------------------------------------------
Ending balance, June 30,                                                    
 2011                           (161,708)        (288,705)           (3,212)
                        ----------------------------------------------------

Net book value, June 30,                                                    
 2011                           $ 84,591        $ 146,538          $ 19,952 
                        ----------------------------------------------------

                                           Broker                           
                            Goodwill      network        Brand     Software 
                        ----------------------------------------------------
Cost:                                                                       
Opening balance, April                                                      
 1, 2011                   $ 227,467     $ 80,561     $ 10,692      $ 9,540 

Write-down of fully                                                         
 amortized assets                  -            -            -            - 
Additions - Internal                                                        
 development                       -            -            -        1,113 
Exchange differences            (306)        (424)         (56)         (17)
                        ----------------------------------------------------
Ending balance, June 30,                                                    
 2011                        227,161       80,137       10,636       10,636 
                        ----------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance, April                                                      
 1, 2011                           -      (14,770)           -       (6,616)
Write-down of fully                                                         
 amortized assets                  -            -            -            - 
Amortization charge for                                                     
 the period                        -       (4,020)           -         (438)
Amortization in mark to                                                     
 market                            -            -            -            - 
Exchange differences               -           91            -            5 
                        ----------------------------------------------------
Ending balance, June 30,                                                    
 2011                              -      (18,699)           -       (7,049)
                        ----------------------------------------------------

Net book value, June 30,                                                    
 2011                      $ 227,161     $ 61,438     $ 10,636      $ 3,587 
                        ----------------------------------------------------

                           Commodity                                        
                         billing and                                        
                          settlement    IT system                           
                             systems  development        Other        Total 
                        ----------------------------------------------------
Cost:                                                                       
Opening balance, April                                                      
 1, 2011                     $ 6,515     $ 19,691      $ 9,006  $ 1,071,803 

Write-down of fully                                                         
 amortized assets                  -            -            -       (1,842)
Additions - Internal                                                        
 development                      13          417           54        1,597 
Exchange differences             (10)         (90)         (46)      (2,732)
                        ----------------------------------------------------
Ending balance, June 30,                                                    
 2011                          6,518       20,018        9,014    1,068,826 
                        ----------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance, April                                                      
 1, 2011                      (6,453)      (3,478)      (4,213)    (431,584)
Write-down of fully                                                         
 amortized assets                  -            -            -        1,842 
Amortization charge for                                                     
 the period                       (5)        (993)        (543)     (29,304)
Amortization in mark to                                                     
 market                            -            -            -      (37,134)
Exchange differences               9           19           25        1,175 
                        ----------------------------------------------------
Ending balance, June 30,                                                    
 2011                         (6,449)      (4,452)      (4,731)    (495,005)
                        ----------------------------------------------------

Net book value, June 30,                                                    
 2011                           $ 69     $ 15,566      $ 4,283    $ 573,821 
                        ----------------------------------------------------


As at March 
 31, 2011   

                                              Electricity      Water heater 
                           Gas contracts        contracts         contracts 
                        ----------------------------------------------------
Cost:                                                                       
Opening balance - April                                                     
 1, 2010                       $ 472,756        $ 266,700          $ 23,081 

Acquisition of a                                                            
 subsidiary                       26,225          200,653                 - 
Write-down of fully                                                         
 amortized assets               (243,929)         (21,083)                - 
Adjustments to goodwill                -                -                 - 
Additions - Internal                                                        
 development                           -                -                83 
Exchange differences              (6,224)          (9,931)                - 
                        ----------------------------------------------------
Ending balance, March                                                       
 31, 2011                        248,828          436,339            23,164 
                        ----------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance, April                                                      
 1, 2010                        (307,413)        (113,862)           (1,218)

Write-down of fully                                                         
 amortized assets                243,929           21,083                 - 
Amortization charge for                                                     
 the period                      (31,841)         (63,642)           (1,595)
Amortization in mark to                                                     
 market                          (53,757)         (96,064)                - 
Exchange differences               4,514            3,812                 - 
                        ----------------------------------------------------
Ending balance, March                                                       
 31, 2011                       (144,568)        (248,673)           (2,813)
                        ----------------------------------------------------

Net book value, March                                                       
 31, 2011                      $ 104,260        $ 187,666          $ 20,351 
                        ----------------------------------------------------


                                           Broker                           
                            Goodwill      network        Brand     Software 
                        ----------------------------------------------------
Cost:                                                                       
Opening balance - April                                                     
 1, 2010                   $ 186,832          $ -          $ -      $ 5,562 

Acquisition of a                                                            
 subsidiary                   32,317       84,400       11,200          911 
Write-down of fully                                                         
 amortized assets                  -            -            -            - 
Adjustments to goodwill        9,877            -            -            - 
Additions - Internal                                                        
 development                       -            -            -        3,208 
Exchange differences          (1,559)      (3,839)        (508)        (141)
                        ----------------------------------------------------
Ending balance, March                                                       
 31, 2011                    227,467       80,561       10,692        9,540 
                        ----------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance, April                                                      
 1, 2010                           -            -            -       (4,198)

Write-down of fully                                                         
 amortized assets                  -            -            -            - 
Amortization charge for                                                     
 the period                        -      (15,511)           -       (2,576)
Amortization in mark to                                                     
 market                            -            -            -            - 
Exchange differences               -          741            -          158 
                        ----------------------------------------------------
Ending balance, March                                                       
 31, 2011                          -      (14,770)           -       (6,616)
                        ----------------------------------------------------

Net book value, March                                                       
 31, 2011                  $ 227,467     $ 65,791     $ 10,692      $ 2,924 
                        ----------------------------------------------------


                           Commodity                                        
                         billing and                                        
                          settlement    IT system                           
                             systems  development        Other        Total 
                        ----------------------------------------------------
Cost:                                                                       
Opening balance - April                                                     
 1, 2010                     $ 6,545        $ 605      $ 2,377     $964,458 

Acquisition of a                                                            
 subsidiary                        -       17,954        6,545      380,205 
Write-down of fully                                                         
 amortized assets                  -            -            -     (265,012)
Adjustments to goodwill            -            -            -        9,877 
Additions - Internal                                                        
 development                      54        1,949          490        5,784 
Exchange differences             (84)        (817)        (406)     (23,509)
                        ----------------------------------------------------
Ending balance, March                                                       
 31, 2011                      6,515       19,691        9,006    1,071,803 
                        ----------------------------------------------------

Accumulated                                                                 
 Amortization:                                                              
Opening balance, April                                                      
 1, 2010                      (6,515)         (21)      (2,377)    (435,604)

Write-down of fully                                                         
 amortized assets                  -            -            -      265,012 
Amortization charge for                                                     
 the period                      (22)      (3,614)      (2,040)    (120,841)
Amortization in mark to                                                     
 market                            -            -            -     (149,821)
Exchange differences              84          157          204        9,670 
                        ----------------------------------------------------
Ending balance, March                                                       
 31, 2011                     (6,453)      (3,478)      (4,213)    (431,584)
                        ----------------------------------------------------

Net book value, March                                                       
 31, 2011                       $ 62     $ 16,213      $ 4,793     $640,219 
                        ----------------------------------------------------

The capitalized internally-developed costs relate to the development of new customer billing and analysis software solutions for the different energy markets of Just Energy. All research costs and development costs not eligible for capitalization have been expensed and are recognized in administrative expenses.

10. FINANCIAL INSTRUMENTS

(a) Fair value

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, unforced capacity, heat rates, heat rate options, renewable and gas swap and forward contracts using a discounted cash flow method which employs market forward curves that are either directly sourced from third parties or are developed internally based on third party market data. These curves can be volatile thus leading to volatility in the mark to market with no impact to cash flows. Gas options have been valued using the Black option value model using the applicable market forward curves and the implied volatility from other market traded gas options.

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

The following tables illustrate gains/(losses) related to Just Energy's derivative financial instruments classified as held-for-trading recorded against other assets and other liabilities with their offsetting values recorded in change in fair value derivative instruments for the three months ended June 30, 2011:


                           Change in Fair Value of Derivative Instruments   
                             For the      For the      For the      For the 
                        three months three months three months three months 
                          ended June   ended June   ended June   ended June 
                            30, 2011     30, 2011     30, 2010     30, 2010 
                                            (USD)                     (USD) 
Canada                                                                      
  Fixed-for-floating                                                        
   electricity swaps (i)    $ 40,089          n/a    $ 138,841          n/a 
  Renewable energy                                                          
   certificates (ii)             554          n/a         (143)         n/a 
  Verified emission-                                                        
   reduction credits                                                        
   (iii)                         (19)         n/a            -          n/a 
  Options (iv)                 4,324          n/a         (837)         n/a 
  Physical gas forward                                                      
   contracts (v)              28,502          n/a       83,628          n/a 
  Transportation forward                                                    
   contracts (vi)                661          n/a       13,349          n/a 
  Fixed financial swaps                                                     
   (vii)                      (2,172)         n/a            -          n/a 
United States                                                               
  Fixed-for-floating                                                        
   electricity swaps                                                        
   (viii)                     15,504       16,023       24,244       23,518 
  Physical electricity                                                      
   forwards (ix)                (563)        (582)      22,682       21,962 
  Unforced capacity                                                         
   forward contracts (x)      (1,340)      (1,384)        (160)        (155)
  Unforced capacity                                                         
   physical contracts                                                       
   (xi)                          104          108         (643)        (626)
  Renewable energy                                                          
   certificates (xii)            833          861         (680)        (661)
  Verified emission-                                                        
   reduction credits                                                        
   (xiii)                       (324)        (335)          (2)          (2)
  Options (xiv)                  647          669          180          175 
  Physical gas forward                                                      
   contracts (xv)              5,845        6,040       30,634       29,811 
  Transportation forward                                                    
   contracts (xvi)               250          258          156          152 
  Heat rate swaps (xvii)      (1,055)      (1,091)      (3,058)      (2,975)
  Fixed financial swaps                                                     
   (xviii)                     5,193        5,367        7,366        7,161 
Foreign exchange forward                                                    
 contracts (xix)                (549)         n/a         (277)         n/a 
Ethanol physical forward                                                    
 contracts (xx)                  (45)                        -              
Amortization of deferred                                                    
 unrealized gains on                                                        
 discontinued hedges          20,392          n/a       34,573          n/a 
Amortization of                                                             
 derivative financial                                                       
 instruments related to                                                     
 acquisitions                (37,134)         n/a      (35,477)         n/a 
Liability associated                                                        
 with exchangeable                                                          
 shares & equity based                                                      
 compensation                      -           $-       21,171          n/a 
----------------------------------------------------------------------------
Change in Fair Value of                                                     
 Derivative Instruments     $ 79,697                 $ 335,547              
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The following table summarizes certain aspects of the financial assets and liabilities recorded in the consolidated financial statements as at June 30, 2011:


                                   Other       Other       Other       Other
                                  assets      assets liabilities liabilities
                               (current) (long term)   (current) (long term)
Canada                                                                      
  Fixed-for-floating                                                        
   electricity swaps (i)              $-          $-    $110,410     $74,178
  Renewable energy                                                          
   certificates (ii)                 760         199         160         428
  Verified emission-                                                        
   reduction credits (iii)             -           -         311         655
  Options (iv)                       845         582           -           -
  Physical gas forward                                                      
   contracts (v)                       -           -     152,783     120,195
  Transportation forward                                                    
   contracts (vi)                      -           -       4,962       2,511
  Fixed financial swaps                                                     
   (vii)                               -           -       2,040       1,349
United States                                                               
  Fixed-for-floating                                                        
   electricity swaps (viii)        1,402       1,698      23,470      18,465
  Physical electricity                                                      
   forwards (ix)                      95          72      55,595      37,418
  Unforced capacity forward                                                 
   contracts (x)                   2,511           3         469       3,593
  Unforced capacity physical                                                
   contracts (xi)                    482           -       1,514       1,229
  Renewable energy                                                          
   certificates (xii)                913          50       1,182       1,492
  Verified emission-                                                        
   reduction credits (xiii)           19           -         359         697
  Options (xiv)                        5           5         484          95
  Physical gas forward                                                      
   contracts (xv)                     11           -      31,054      15,053
  Transportation forward                                                    
   contracts (xvi)                     -           -       1,625         918
  Heat rate swaps (xvii)             151       1,772         213          40
  Fixed financial swaps                                                     
   (xviii)                            12           -      49,067      32,196
Foreign exchange forward                                                    
 contracts (xix)                     843           -           -           -
Ethanol physical forward                                                    
 contracts (xx)                       90           -           -           -
----------------------------------------------------------------------------
As at June 30, 2011               $8,139      $4,381    $435,698    $310,512
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The following table summarizes certain aspects of the financial assets and liabilities recorded in the consolidated financial statements as at March 31, 2011:


                                                           Other       Other
                           Other assets Other assets liabilities liabilities
                              (current)  (long term)   (current) (long term)
Canada                                                                      
  Fixed-for-floating                                                        
   electricity swaps (i)            $ -          $ -   $ 131,279    $ 93,397
  Renewable energy                                                          
   certificates (ii)                194          196         158         417
  Verified emission-                                                        
   reduction credits (iii)            -            -         315         628
  Options (iv)                      815          692       4,403           -
  Physical gas forward                                                      
   contracts (v)                      -            -     166,634     134,847
  Transportation forward                                                    
   contracts (vi)                     -           24       5,301       2,858
  Fixed financial swaps                                                     
   (vii)                              -        1,037       2,235          19
United States                                                               
  Fixed-for-floating                                                        
   electricity swaps (viii)         125           45      29,028      25,719
  Physical electricity                                                      
   forwards (ix)                      -          310      55,548      37,535
  Unforced capacity forward                                                 
   contracts (x)                    309          177         581         118
  Unforced capacity                                                         
   physical contracts (xi)          100          410       1,606       1,280
  Renewable energy                                                          
   certificates (xii)                44           49       1,037       1,610
  Verified emission-                                                        
   reduction credits (xiii)          13           36         275         491
  Options (xiv)                       1            -       1,056         165
  Physical gas forward                                                      
   contracts (xv)                    40            -      32,883      19,354
  Transportation forward                                                    
   contracts (xvi)                    -            -       1,526       1,281
  Heat rate swaps (xvii)            639        2,408         180         131
  Fixed financial swaps                                                     
   (xviii)                           40            -      51,361      35,562
Foreign exchange forward                                                    
 contracts (xix)                  1,391            -           -           -
Ethanol physical forward                                                    
 contracts (xx)                     135            -           -           -
----------------------------------------------------------------------------
As at March 31, 2011            $ 3,846      $ 5,384   $ 485,406   $ 355,412
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The following table summarizes financial instruments classified as held for trading as at June 30, 2011 to which Just Energy has committed:


                                          Total remaining                   
        Contract type     Notional volume volume           Maturity date    

        Canada                                                              
----------------------------------------------------------------------------
(i)     Fixed-for-        0.0001-85 MWh   9,005,282 MWh    July 31, 2011 -  
         floating                                          August 01, 2017  
         electricity                                                        
         swaps (i)                                                          
----------------------------------------------------------------------------
(ii)    Renewable energy  10-90,000 MWh   1,133,558 MWh    December 31, 2011
         certificates                                      - December 31,   
                                                           2015             
----------------------------------------------------------------------------
(iii)   Verified emission 6,000-55,000    567,667 Tonnes   December 31, 2011
         reduction        Tonnes                           - December 31,   
         credits                                           2014             
----------------------------------------------------------------------------
(iv)    Options           46-28,500       2,637,154 GJ     July 31, 2011 -  
                          GJ/month                         February 28, 2014
----------------------------------------------------------------------------
(v)     Physical gas      1-16,379 GJ/day 94,950,536 GJ    July 31, 2011 -  
         forward                                           March 31, 2016   
         contracts                                                          
----------------------------------------------------------------------------
(vi)    Transportation    40-20,000       35,831,082 GJ    July 31, 2011 -  
         forward          GJ/day                           May 31, 2015     
         contracts                                                          
----------------------------------------------------------------------------
(vii)   Fixed financial   14,500-139,500  12,335,000 GJ    July 31, 2011 -  
         swaps            GJ/month                         August 31, 2016  
----------------------------------------------------------------------------
        United States                                                       
----------------------------------------------------------------------------
(viii)  Fixed-for-        0.10-80 MWh     8,567,591 MWh    July 31, 2011 -  
         floating                                          September 30,    
         electricity                                       2016             
         swaps (i)                                                          
----------------------------------------------------------------------------
(ix)    Physical          1-129 MWh       9,590,977 MWh    July 31, 2011 -  
         electricity                                       May 31, 2016     
         forwards                                                           
----------------------------------------------------------------------------
(x)     Unforced capacity 5-150 MWCap     160,300 MWCap    July 31, 2011 -  
         forward                                           May 31, 2014     
         contracts                                                          
----------------------------------------------------------------------------
(xi)    Unforced capacity 2-45 MWCap      2,076 MWCap      July 31, 2011 -  
         physical                                          May 31, 2014     
         contracts                                                          
----------------------------------------------------------------------------
(xii)   Renewable energy  300-160,000 MWh 2,676,696 MWh    December 31, 2011
         certificates                                      - December 31,   
                                                           2016             
----------------------------------------------------------------------------
(xiii)  Verified          8,000-50,000    720,948 Tonnes   December 31, 2011
         emission-        Tonnes                           - December 31,   
         reduction                                         2016             
         credits                                                            
----------------------------------------------------------------------------
(xiv)   Options           5-90,000        2,808,620 mmBTU  July 01, 2011 -  
                          mmBTU/month                      December 31, 2014
----------------------------------------------------------------------------
(xiv)   Heat-rate options 1,600 MWh       294,400 MWh      July 01, 2011 -  
                                                           September 30,    
                                                           2011             
----------------------------------------------------------------------------
(xv)    Physical gas      1-4,300         14,324,801 mmBTU July 31, 2011 -  
         forward          mmBTU/day                        July 31, 2014    
         contracts                                                          
----------------------------------------------------------------------------
(xvi)   Transportation    3-15,000        31,727,390 mmBTU July 31, 2011 -  
         forward          mmBTU/day                        August 31, 2015  
         contracts                                                          
----------------------------------------------------------------------------
(xvii)  Heat rate swaps   1-25 MWh        3,636,356 MWh    July 31, 2011 -  
                                                           April 30, 2016   
----------------------------------------------------------------------------
(xviii) Fixed financial   930-380,000     54,992,072 mmBTU July 31, 2011 -  
         swaps            mmBTU/month                      May 31, 2017     
----------------------------------------------------------------------------
(xix)   Foreign exchange  ($485-$4,183)   n/a              July 06, 2011 -  
         forward          (US$500-$4,000)                  April 02, 2012   
         contracts                                                          
----------------------------------------------------------------------------
(xx)    Ethanol forward   396,258 Gallons 4,755,097        July 01, 2011 -  
         physical                         Gallons          December 01, 2011
         contracts                                                          
----------------------------------------------------------------------------

                                         Fair value                         
                                         favourable/                        
        Contract type     Fixed price    (unfavourable)    Notional value   

        Canada                                                              
----------------------------------------------------------------------------
(i)     Fixed-for-        $28.75-$128.13 ($184,588)        $561,536         
         floating                                                           
         electricity                                                        
         swaps (i)                                                          
----------------------------------------------------------------------------
(ii)    Renewable energy  $3.00-$26.00   $371              $7,284           
         certificates                                                       
----------------------------------------------------------------------------
(iii)   Verified emission $6.00-$11.50   ($966)            $5,208           
         reduction                                                          
         credits                                                            
----------------------------------------------------------------------------
(iv)    Options           $7.16-$12.39   $1,427            $4,904           
----------------------------------------------------------------------------
(v)     Physical gas      $3.19-$10.00   ($272,978)        $672,966         
         forward                                                            
         contracts                                                          
----------------------------------------------------------------------------
(vi)    Transportation    $0.0025-$1.57  ($7,473)          $31,924          
         forward                                                            
         contracts                                                          
----------------------------------------------------------------------------
(vii)   Fixed financial   $4.47-$8.79    ($3,389)          $58,066          
         swaps                                                              
----------------------------------------------------------------------------
        United States                                                       
----------------------------------------------------------------------------
(viii)  Fixed-for-        $23.44-$131.90 ($38,835)         $462,720         
         floating         (US$24.30-     (US($40,264))     (US$479,751)     
         electricity      $136.75)                                          
         swaps (i)                                                          
----------------------------------------------------------------------------
(ix)    Physical          $18.33-$106.34 ($92,846)         $462,923         
         electricity      (US$19.00-     (US($96,263))     (US$479,962)     
         forwards         $110.25)                                          
----------------------------------------------------------------------------
(x)     Unforced capacity $1,752-$7,716  ($1,548)          $11,294          
         forward          (US$1,817-     ((US$1,605))      (US$11,710)      
         contracts        $8,000)                                           
----------------------------------------------------------------------------
(xi)    Unforced capacity $965-$8,439    ($2,261)          $9,752           
         physical         (US$1,000-     ((US$2,344))      (US$10,111)      
         contracts        $8,750)                                           
----------------------------------------------------------------------------
(xii)   Renewable energy  $0.940-$23.87  ($1,711)          $14,584          
         certificates     (US$0.975-     (US($1,774))      (US$15,121)      
                          $24.75)                                           
----------------------------------------------------------------------------
(xiii)  Verified          $2.89-$8.44    ($1,037)          $4,636 (US$4,807)
         emission-        (US$3.00-$8.75)(US$(1,075))                       
         reduction                                                          
         credits                                                            
----------------------------------------------------------------------------
(xiv)   Options           $7.47-$13.31   ($534) (US($554)) $3,649 (US$3,783)
                          (US$7.75-                                         
                          $13.80)                                           
----------------------------------------------------------------------------
(xiv)   Heat-rate options $63.28-$84.74  ($35) (US($36))   $723 (US$750)    
                          (US$65.61-                                        
                          $87.86)                                           
----------------------------------------------------------------------------
(xv)    Physical gas      $4.24-$11.46   ($46,096)         $114,985         
         forward          (US$4.40-      (US($47,793))     (US$119,217)     
         contracts        $11.88)                                           
----------------------------------------------------------------------------
(xvi)   Transportation    $0.0048-$1.4500($2,543)          ($61,164)        
         forward          (US$0.0050-    (US($2,637))      (US$63,415)      
         contracts        $1.5000)                                          
----------------------------------------------------------------------------
(xvii)  Heat rate swaps   $18.69-$81.99  $1,670 (US$1,731) $148,056         
                          (US$19.38-                       (US$153,505)     
                          $85.01)                                           
----------------------------------------------------------------------------
(xviii) Fixed financial   $3.91-$9.07    ($81,251)         $372,087         
         swaps            (US$4.05-$9.40)(US($84,242))     (US$358,878)     
----------------------------------------------------------------------------
(xix)   Foreign exchange  $0.955-$1.0457 $843              $27,301          
         forward                                           (US$27,170)      
         contracts                                                          
----------------------------------------------------------------------------
(xx)    Ethanol forward   $2.13-$2.55    $90               $10,934          
         physical                                                           
         contracts                                                          
----------------------------------------------------------------------------

(i) Some of the electricity fixed-for-floating contracts related to the Province of Alberta and Ontario are 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 these and the rest of Just Energy's electricity markets wherein the quantity of electricity is established but varies throughout the term of the contracts.

The estimated amortization of deferred gains and losses reported in accumulated other comprehensive income that is expected to be amortized to net income within the next 12 months is a gain of $59,287.

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 consolidated financial statements.

Fair value ("FV") hierarchy

Level 1

The fair value measurements are classified as Level 1 in the FV Hierarchy if the fair value is determined using quoted, unadjusted market prices. Just Energy values its cash and cash equivalent, accounts receivable, unbilled revenue, bank indebtedness, accounts payable and accrued liabilities, unit distributions payable, and long-term debt under Level 1.

Level 2

Fair value measurements which require inputs other than quoted prices in Level 1, either directly or indirectly are classified as Level 2 in the FV hierarchy. This could include the use of statistical techniques to derive the FV curve from observable market prices. However, in order to be classified under Level 2, inputs must be substantially observable in the market. Just Energy values its New York Mercantile Exchange ("NYMEX") financial gas fixed for floating swaps under Level 2.

Level 3

Fair value measurements which require unobservable market data or use statistical techniques to derive forward curves from observable market data and unobservable inputs are classified as Level 3 in the FV hierarchy. For the electricity supply contracts, Just Energy uses quoted market prices as per available market forward data and applies a price shaping profile to calculate the monthly prices from annual strips and hourly prices from block strips for the purposes of mark to market calculations. The profile is based on historical settlements with counterparties or with the system operator and is considered an unobservable input for the purposes of establishing the level in the hierarchy. For the natural gas supply contracts, Just Energy uses three different market observable curves: 1) Commodity (predominately NYMEX), 2) Basis and 3) Foreign Exchange. NYMEX curves extend for over five years (thereby covering the length of Just Energy's contracts); however, most basis curves only extend 12 to 15 months into the future. In order to calculate basis curves for remaining years, Just Energy uses extrapolation which leads to natural gas supply contracts to be classified under Level 3.

Fair value measurement input sensitivity

The main cause of changes in the fair value of derivative instruments are changes in the forward curve prices used for the fair value calculations. Just Energy provides a sensitivity analysis of these forward curves under the commodity price risk section of this note. Other inputs, including volatility and correlations, are driven off historical settlements.

The following table illustrates the classification of financial assets/(liabilities) in the FV hierarchy as at June 30, 2011:


                                            June 30, 2011                   
                              Level 1     Level 2     Level 3         Total 
Financial assets                                                            
  Cash and short term                                                       
   deposits                  $ 76,241         $ -         $ -      $ 76,241 
  Loans and receivable        364,957           -           -       364,597 
  Derivative financial                                                      
   assets                           -          12      12,508        12,520 
Financial liabilities                                                       
  Derivative financial                                                      
   liabilities                      -     (84,652)   (661,558)     (746,210)
  Other financial                                                           
   liabilities               (877,418)          -           -      (877,418)
----------------------------------------------------------------------------
Total net derivative                                                        
 liabilities               $ (436,220)  $ (84,640) $ (649,050) $ (1,169,910)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The following table illustrates the changes in net fair value of financial assets/(liabilities) classified as Level 3 in the FV hierarchy for the three months ended June 30, 2011:


                                                               June 30, 2011
Opening balance, April 1, 2011                                   $ (743,488)

Total gain/(losses) - Profit for the period                         (54,058)
Purchases                                                            (7,572)
Sales                                                                  1,039
Settlements                                                          155,029
Transfer out of Level 3                                                    -
----------------------------------------------------------------------------

Closing Balance, June 30, 2011                                   $ (649,050)
----------------------------------------------------------------------------

(b) Classification of financial assets and liabilities

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


As at June 30, 2011                      Carrying amount          Fair value

Cash and cash equivalents                       $ 76,241            $ 76,241
Current trade and other receivables            $ 256,667           $ 256,667
Unbilled revenues                              $ 103,463           $ 103,463
Non-current receivables                          $ 4,827             $ 4,827
Other assets                                    $ 12,520            $ 12,520
Bank indebtedness, trade and other                                          
 payables                                      $ 258,750           $ 258,750
Long-term debt                                 $ 618,668           $ 666,396
Other liabilities                              $ 746,210           $ 746,210

For the periods ended June 30                                               
                                                    2011                2010
Interest expense on financial                                               
 liabilities not held-for-trading               $ 13,792            $ 12,755

The carrying value of cash and cash equivalents, current trade and other receivables, unbilled revenues and trade and other payables approximates their fair value due to their short-term liquidity.

The carrying value of long-term debt approximates its fair value as the interest payable on outstanding amounts is at rates that vary with bankers' acceptances, LIBOR, Canadian bank prime rate or U.S. prime rate, with the exception of the $90 million and $330 million convertible debentures, which are fair valued, based on market value.

(c) Management of risks arising from financial instruments

The risks associated with Just Energy'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 Just Energy 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 income 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 income. Due to its growing operations in the U.S., Just Energy expects to have a greater exposure to U.S. fluctuations in the future than in prior years. Just Energy has hedged between 25% and 90% of certain forecasted cross-border cash flows that are expected to occur within the next year. The level of hedging is dependent on the source of the cash flow and the time remaining until the cash repatriation occurs.

Just Energy may, from time to time, experience losses resulting from fluctuations in the values of its foreign currency transactions, which could adversely affect its operating results. Translation risk is not hedged.

With respect to translation exposure, as at June 30, 2011, if the Canadian dollar had been 5% stronger or weaker against the U.S. dollar, assuming that all the other variables had remained constant, profit for the period would have been $20 higher/lower and other comprehensive income would have been $580 higher/lower.

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. Just Energy's exposure to interest rate risk is relatively immaterial and temporary in nature. Just Energy does not currently believe that this long-term debt exposes it to material financial risks but has set out parameters to actively manage this risk within its Risk Management Policy.

A 1% increase (decrease) in interest rates would have resulted in a decrease (increase) in income before income taxes for the period ended June 30, 2011 of approximately $225.

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. Management actively monitors these positions on a daily basis in accordance with its Risk Management Policy. This policy sets out a variety of limits, most importantly thresholds for open positions in the gas and electricity portfolios which also feed a Value at Risk limit; should any of the limits be exceeded, they are closed expeditiously or express approval to continue to hold is obtained. Just Energy's exposure to market risk is affected by a number of factors, including accuracy of estimation of customer commodity requirements, commodity prices, volatility and liquidity of markets. Just Energy enters into derivative instruments in order to manage exposures to changes in commodity prices. The derivative instruments that are used are designed to fix the price of supply for estimated customer commodity demand and thereby fix margins such that Shareholder dividends can be appropriately established. Derivative instruments are generally transacted over-the-counter. The inability or failure of Just Energy to manage and monitor the above market risks could have a material adverse effect on the operations and cash flow of Just Energy.

Commodity price sensitivity - all derivative financial instruments

As at June 30, 2011, if the energy prices including natural gas, electricity, verified emission-reduction credits, and renewable energy certificates, had risen (fallen) by 10%, assuming that all the other variables had remained constant, income before taxes for the quarter ended June 30, 2011 would have increased (decreased) by $187,308 ($186,315) primarily as a result of the change in the fair value of Just Energy's derivative instruments.

Commodity price sensitivity - Level 3 derivative financial instruments

As at June 30, 2011, if the energy prices including natural gas, electricity, verified emission-reduction credits, and renewable energy certificates, had risen (fallen) by 10%, assuming that all the other variables had remained constant, income before taxes for the quarter ended June 30, 2011 would have increased (decreased) by $161,751 ($160,998) primarily as a result of the change in the fair value of Just Energy's derivative instruments.

(ii) Credit risk

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

Customer credit risk

In Alberta, Texas, Illinois, Pennsylvania, California, Maryland, New York and New Jersey, 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 flows of Just Energy. Management factors default from credit risk in its margin expectations for all the above markets.

The aging of the accounts receivable from the above markets was as follows:


                                          June 30, 2011       March 31, 2011
Current                                         $61,092              $61,695
1 - 30 days                                      14,885               15,088
31 - 60 days                                      5,162                5,533
61 - 90 days                                      3,105                5,652
Over 91 days                                     10,419               10,322
                                   -----------------------------------------

                                                $94,663              $98,290
                                   -------------------- --------------------
                                   -------------------- --------------------

For the period ended June 30, 2011, changes in the allowance for doubtful accounts were as follows:


Balance, beginning of period                   $ 25,115 
Provision for doubtful accounts                   6,814 
Bad debts written off                            (5,448)
Other                                              (388)
                                   ---------------------
Balance, end of period                         $ 26,093 
                                   ---------------------
                                   ---------------------

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. Counterparty limits are established within the Risk Management Policy. Any exceptions to these limits require approval from the Board of Directors of JEGI. The Risk Department 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, 2011, the maximum counterparty credit risk exposure amounted to $107,183, representing the risk relating to its derivative financial assets and accounts receivable.

(iii) Liquidity risk

Liquidity risk is the potential inability to meet financial obligations as they fall due. Just Energy 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.

The following are the contractual maturities, excluding interest payments, reflecting undiscounted disbursements of Just Energy's financial liabilities as at June 30, 2011.


                                                  Contractual    Less than 1
                               Carrying amount     cash flows           year
Trade and other payables             $ 252,497      $ 252,497      $ 252,497
Bank indebtedness                        6,253          6,253          6,253
Long-term debt (i)                     618,668        667,632         93,718
Derivative instruments                 746,210      2,981,790      1,397,500
----------------------------------------------------------------------------
                                   $ 1,623,628    $ 3,908,172    $ 1,749,968
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                                                 More than 5
                                  1 to 3 years   4 to 5 years          years
Trade and other payables                   $ -            $ -            $ -
Bank indebtedness                            -              -              -
Long-term debt (i)                     113,065        117,532        343,317
Derivative instruments               1,330,010        251,040          3,240
----------------------------------------------------------------------------
                                   $ 1,443,075      $ 368,572      $ 346,557
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(i) Included in long-term debt is $330,000 and $90,000 relating to          
    convertible debentures, which may be settled through the issuance of    
    shares at the option of the holder.                                     

In addition to the amounts noted above, at June 30, 2011, net interest payments over the life of the long-term debt and bank credit facility are as follows:


                          Less than 1                            More than 5
                                 year 1 to 3 years 4 to 5 years        years
----------------------------------------------------------------------------
Interest payments            $ 39,759     $ 72,901     $ 56,349     $ 79,772
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(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 $1,091 to accommodate for its counterparties' risk of default.

11. ACCUMULATED OTHER COMPREHENSIVE INCOME


For the three months ended June 30,                                         
 2011                                                                       
                                         Foreign                            
                                        currency                            
                                     translation    Cash flow               
                                      adjustment       hedges         Total 
Balance, beginning of period            $ 29,033     $ 94,886     $ 123,919 
Unrealized foreign currency                                                 
 translation adjustment                   (3,745)          -         (3,745)
Amortization of deferred unrealized                                         
 gain on discontinued hedges net of                                         
 income taxes of $7,375                        -      (13,017)      (13,017)
                                   -----------------------------------------
                                        $ 25,288     $ 81,869     $ 107,157 
                                   -----------------------------------------


For the three months ended June 30,                                         
 2010                                                                       
                                         Foreign                            
                                        currency                            
                                     translation    Cash flow               
                                      adjustment       hedges         Total 
Balance, beginning of period            $ 28,584    $ 193,385     $ 221,969 
Unrealized foreign currency                                                 
 translation adjustment                   14,881            -        14,881 
Amortization of deferred unrealized                                         
 gain on discontinued hedges net of                                         
 income taxes of $6,259                        -      (28,723)      (28,723)
                                   -----------------------------------------
                                        $ 43,465    $ 164,662     $ 208,127 
                                   -----------------------------------------

12. SHAREHOLDERS' CAPITAL AND CONTRIBUTED SURPLUS

Prior to the Conversion

Effective January 1, 2011, Just Energy completed the Conversion from an income trust to a corporation. As a result of the Conversion Just Energy's trust units, along with the issued exchangeable and Class A preference shares, were exchanged on a one-for-one basis into shares of JEGI.

Prior to the Conversion, the trust units were redeemable at the option of the Fund's Unitholders. The redemption price was calculated as the lower of the closing price on the day the units were tendered for redemption and 90% of the market price of the units for the ten days after redemption. The Fund had no redemptions for the period for which the trust units were outstanding.

IFRS requires financial instruments which include a redemption feature, making the instruments puttable, to be presented as a financial liability rather than equity. However, an exception to that requirement is available if the financial instrument meets certain criteria. Just Energy determined that the Fund's units met the requirements for this exception and accordingly, the trust units are presented as equity for the periods prior to the Conversion.

Details of issued unitholders' capital are as follows for the year ended March 31, 2011:


Issued and outstanding                           Units               Amount 

Balance, beginning of year                 124,325,307            $ 777,856 
Unit based awards exercised                     38,989                  462 

Distribution reinvestment plan               1,324,834               17,935 
Exchanged from Exchangeable Shares             894,018               12,595 

Units exchanged pursuant to                                                 
 Conversion                               (126,583,148)            (808,848)
                                  ------------------------------------------
Balance, end of year                                 -                  $ - 
                                  ------------------------------------------

Subsequent to the Conversion

On January 1, 2011 Just Energy issued common shares in exchange for the outstanding trust units of the Fund. The exchange of the trust units of the Fund was accounted for as an exchange of equity instruments at carrying value. The exchange of Exchangeable Shares for common shares was accounted for as an extinguishment of the liability associated with Exchangeable Shares, at the redemption value measured on the date of the exchange.

Details of issued shareholders' capital are as follows for the three months ended June 30, 2011 with comparatives for the year ended March 31, 2011:


                              Three months ended              Year ended   
                                June 30, 2011               March 31, 2011
Issued and outstanding        Shares       Amount        Shares       Amount

Balance, beginning of                                                       
 period                  136,963,726    $ 963,982             -            -
Shares issued pursuant                                                      
 to Conversion                                                              
  Trust units                      -            -   126,583,148      808,848
  Class A preference                                                        
   shares (Note 19)                -            -     5,263,728       78,798
  Exchangeable shares                                                       
   (Note 19)                       -            -     3,794,154       56,799
Shares issued to                                                            
 minority shareholder                                                       
 in exchange for                                                            
 interest in TGF (i)               -            -       689,940       10,328
Share-based awards                                                          
 exercised                    39,042          587        86,374        1,097

Dividend reinvestment                                                       
 plan (ii)                   604,162        8,676       546,382        8,112
                       -----------------------------------------------------

Balance, end of period   137,606,930    $ 973,245   136,963,726    $ 963,982
                       -----------------------------------------------------

(i) Shares issued

During the year ended March 31, 2011, Just Energy issued 689,940 shares to acquire the interest held by the minority shareholder of TGF pursuant to the exercise of the minority holders put right. The shares were valued at $10,328 and the difference between $18,285 representing the value of the minority interest of TGF at the time of issuance, and the value of the shares has been recorded as an increase to contributed surplus.

(ii) Dividend reinvestment plan

Under Just Energy's dividend reinvestment plan ("DRIP"), shareholders holding a minimum of 100 common shares can elect to receive their dividends in common shares rather than cash at a 2% discount to the simple average closing price of the common shares for five trading days preceding the applicable dividend payment date, providing the common shares are issued from treasury and not purchased on the open market.

Contributed surplus is as follows for the three months ended June 30, 2011 with comparatives for the year ended March 31, 2011:


                                    Three months ended           Year ended 
Issued and outstanding                   June 30, 2011       March 31, 2011 

Balance, beginning of period                  $ 52,723                    - 
Reclassification resulting from                                             
 Conversion (Note 19)                                -               43,147 
Add: Gain on acquisition of                                                 
 minority interest                                   -                7,957 
Share-based compensation                         1,681                2,683 
Non-cash deferred share grant                                               
 distribution                                       32                   33 
Less: Share-based awards exercised                (587)              (1,097)
                                  ------------------------------------------
Balance, end of period                        $ 53,849             $ 52,723 
                                  ------------------------------------------



13. LONG-TERM DEBT AND FINANCING                                            

                                         June 30, 2011       March 31, 2011 
Credit facility (a)                           $ 63,000             $ 53,000 
 Less: Debt issue costs (a)                     (1,772)              (1,965)
TGF credit facility (b)(i)                      35,521               36,680 
TGF debentures (b)(ii)                          36,002               37,001 
NHS financing (c)                              113,109              105,716 
$90 million convertible debentures                                          
 (d)                                            85,046               84,706 
$330 million convertible                                                    
 debentures (e)                                287,762              286,439 
                                  ------------------------------------------
                                               618,668              601,577 
Less: current portion                          (93,718)             (94,117)
                                  ------------------------------------------
                                             $ 524,950            $ 507,460 
                                  ------------------------------------------

Future annual minimum principal repayments are as follows:                  


                    Less than 1     1 to 3     4 to 5 More than 5           
                           year      years      years       years      Total
Credit facility (a)          $-    $63,000         $-          $-    $63,000
TGF credit facility                                                         
 (b)(i)                  35,521          -          -           -     35,521
TGF debentures                                                              
 (b)(ii)                 36,002          -          -           -     36,002
NHS HTC financing                                                           
 (c)                     22,195     50,065     27,532      13,317    113,109
$90 million                                                                 
 convertible                                                                
 debentures (d)               -          -     90,000           -     90,000
$330 million                                                                
 convertible                                                                
 debentures (e)               -          -          -     330,000    330,000
                    --------------------------------------------------------
                        $93,718   $113,065   $117,532    $343,317   $667,632
                    --------------------------------------------------------
                    --------------------------------------------------------

The following table details the finance costs for the three months ended June 30. Interest is expensed at the effective interest rate.


                                           June 30, 2011       June 30, 2010
Credit facility (a)                              $ 1,946             $ 1,359
TGF credit facility (b)(i)                           537                 447
TGF debentures (b)(ii)                             1,130                 950
TGF term/operating facilities                                               
 (b)(iii)                                              -                 311
NHS financing (c)                                  2,149               1,341
$90 million convertible debentures                                          
 (d)                                               1,690               1,664
$330 million convertible debentures                                         
 (e)                                               6,273               3,800
Provisions (Note 14)                                  67                  65
Dividend classified as interest                                             
 (Note 24)                                             -               2,818
                                    ----------------------------------------
                                                $ 13,792            $ 12,755
                                    ----------------------------------------

(a) As at June 30, 2011, Just Energy has a $350 million credit facility to meet working capital requirements. The syndicate of lenders includes Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canada, Societe Generale, Bank of Nova Scotia, The Toronto-Dominion Bank and Alberta Treasury Branches. The term of the facility expires on December 31, 2013.

Interest is payable on outstanding loans at rates that vary with bankers' acceptances, LIBOR, Canadian bank prime rate or U.S. prime rate. Under the terms of the operating credit facility, Just Energy is able to make use of bankers' acceptances and LIBOR advances at stamping fees that vary between 3.25% and 3.75%. Prime rate advances are at rates of interest that vary between bank prime plus 2.25% and 2.75% and letters of credit are at rates that vary between 3.25% and 3.75%. Interest rates are adjusted quarterly based on certain financial performance indicators.

As at June 30, 2011, the Canadian prime rate was 3.0% and the U.S. prime rate was 3.25%. As at June 30, 2011, Just Energy had drawn $63,000 (March 31, 2011 - $53,000) against the facility and total letters of credit outstanding amounted to $80,671 (March 31, 2011 - $78,209). As at June 31, 2011, debt issue costs relating to the facility are $1,772 (March 31, 2011 - $1,965). As at June 30, 2011, Just Energy has $206,329 of the facility remaining for future working capital and security requirements. Just Energy's obligations under the credit facility are supported by guarantees of certain subsidiaries and affiliates and secured by a general security agreement and a pledge of the assets and securities of Just Energy and the majority of its operating subsidiaries and affiliates excluding, among others, NHS and TGF. Just Energy is required to meet a number of financial covenants under the credit facility agreement. As at June 30, 2011 and 2010, all of these covenants had been met.

(b) In connection with the acquisition of Universal Energy Group Ltd. ("Universal") on July 1, 2009, Just Energy acquired the debt obligations of TGF, which currently comprise the following separate facilities:

(i) TGF credit facility

A credit facility of up to $50,000 was established with a syndicate of Canadian lenders led by Conexus Credit Union and was arranged to finance the construction of the ethanol plant in 2007. The facility was revised on March 18, 2009 and was converted to a fixed repayment term of ten years, commencing March 1, 2009, which includes interest costs at a rate of prime plus 3% with principal repayments scheduled to commence on March 1, 2010. The credit facility is secured by a demand debenture agreement, a first priority security interest on all assets and undertakings of TGF, and a general security interest on all other current and acquired assets of TGF. As a result, the facility is fully classified as a current obligation. The facility was further revised on April 5, 2010 to postpone the principal payments due for April 1, 2010 to June 1, 2010, and to amortize them over the six-month period commencing October 1, 2010 and ending March 1, 2011. The credit facility includes certain financial covenants, the most significant of which relate to current ratio, debt to equity ratio, debt service coverage and minimum shareholders' capital. The lenders deferred compliance with the financial covenants until April 1, 2011. The covenants will be measured as of March 31, 2012, and non-attainment may result in a non-compliance fee up to 0.25% of the loan balance as of March 31, 2012. As at June 30, 2011, the amount owing under this facility amounted to $35,521.

(ii) TGF debentures

A debenture purchase agreement with a number of private parties providing for the issuance of up to $40,000 aggregate principal amount of debentures was entered into in 2006. TGF was in recent negotiations with the lender and adjusted the covenant levels. In addition the interest rate was increased to 12% and quarterly blended principal and interest payments of $1,100 were established. The agreement includes certain financial covenants, the more significant of which relate to current ratio, debt to capitalization ratio, debt service coverage, debt to EBITDA and minimum shareholders' equity. Compliance with the new covenants will be measured annually beginning with the fiscal 2012 year end. The maturity date was extended to May 15, 2014, with a call right any time after April 1, 2012. The debenture holders have no recourse to the Company or any other Just Energy entity. As of June 30, 2011, the amount owing under this debenture agreement amounted to $36,002.

(iii) TGF has a working capital operating line of $7,000 bearing interest at a rate of prime plus 2%. In addition, total letters of credit issued amounted to $250.

(c) In fiscal 2010, NHS entered into a long-term financing agreement for the funding of new and existing rental water heater and HVAC contracts in the Enbridge gas distribution territory. On July 16, 2010, NHS expanded this facility to cover the Union Gas territory. Pursuant to the agreement, NHS receives financing of an amount equal to the present value of the first five, seven or ten years of monthly rental income, discounted at the agreed upon financing rate of 7.99% and, as settlement, is required to remit an amount equivalent to the rental stream from customers on the water heater and HVAC contracts for the first five, seven or 10 years. As security for performance of the obligation, NHS has pledged the water heaters, HVAC equipment and rental contracts, subject to the financed rental agreement, as collateral.

The financing agreement is subject to a holdback provision, whereby 3% in the Enbridge territory and 5% in the Union Gas territory of the outstanding balance of the funded amount is deducted and deposited into a reserve account in the event of default. Once all obligations of NHS are satisfied or expired, the remaining funds in the reserve account will immediately be released to NHS.

NHS has $113,109 owing under this agreement, including $4,398 relating to the holdback provision, recorded in non- current receivables, as at June 30, 2011. NHS is required to meet a number of covenants under the agreement. As at June 30, 2011, all of these covenants have been met.

(d) In conjunction with a previous, the Company also acquired the obligations of a convertible unsecured subordinated debentures (the "$90 million convertible debentures") issued in October 2007. The fair value of the $90 million convertible debentures was estimated by discounting the remaining contractual payments at the time of acquisition. This discount will be accreted using an effective interest rate of 8%. These instruments have a face value of $90,000 and mature on September 30, 2014, unless converted prior to that date, and bear interest at an annual rate of 6% payable semi-annually on March 31 and September 30 of each year. Each $1,000 principal amount of the $90 million convertible debentures is convertible at any time prior to maturity or on the date fixed for redemption, at the option of the holder, into approximately 31.53 shares, representing a conversion price of $31.72 per common share as at June 30, 2011. Pursuant to the $90 million convertible debentures, if the Company fixes a record date for the payment of a dividend, the conversion price shall be adjusted in accordance therewith. During the period, interest expense amounted to $1,690.

On and after October 1, 2010, but prior to September 30, 2012, the $90 million convertible debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at Just Energy's sole option on not more than 60 days' and not less than 30 days' prior notice, provided that the current market price on the date on which notice of redemption is given is not less than 125% of the conversion price. On and after September 30, 2012, but prior to the maturity date, the $90 million convertible debentures are redeemable, in whole or in part, at a price equal to the principal amount thereof, plus accrued and unpaid interest, at Just Energy's sole option on not more than 60 days' and not less than 30 days' prior notice. On January 1, 2011, as part of the Conversion, JEGI assumed all of the obligations under the $90 million convertible debentures.

(e) In order to fund the acquisition of Hudson, on May 5, 2010, Just Energy issued $330 million of convertible extendible unsecured subordinated debentures (the "$330 million convertible debentures"). The $330 million convertible debentures bear interest at a rate of 6.0% per annum payable semi-annually in arrears on June 30 and December 31, with a maturity date of June 30, 2017. Each $1,000 principal amount of the $330 million convertible debentures is convertible at any time prior to maturity or on the date fixed for redemption, at the option of the holder, into approximately 55.6 shares of the Company, representing a conversion price of $18 per share. During the period, interest expense amounted to $6,273. The $330 million convertible debentures are not redeemable prior to June 30, 2013, except under certain conditions after a change of control has occurred. On or after June 30, 2013, but prior to June 30, 2015, the $330 million convertible debentures may be redeemed by the Company, in whole or in part, on not more than 60 days' and not less than 30 days' prior notice, at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest, provided that the current market price (as defined herein) on the date on which notice of redemption is given is not less than 125% of the conversion price. On and after June 30, 2015, and prior to maturity, the $330 million convertible debentures may be redeemed by Just Energy, in whole or in part, at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest.

The Company may, at its own option, on not more than 60 days' and not less than 40 days' prior notice, subject to applicable regulatory approval and provided that no event of default has occurred and is continuing, elect to satisfy its obligation to repay all or any portion of the principal amount of the $330 million convertible debentures that are to be redeemed or that are to mature, by issuing and delivering to the holders thereof that number of freely tradable units determined by dividing the principal amount of the $330 million convertible debentures being repaid by 95% of the current market price on the date of redemption or maturity, as applicable.

The conversion feature of the $330 million convertible debentures has been accounted for as a separate component of shareholders' deficit in the amount of $33,914. The remainder of the net proceeds of the $330 million convertible debentures has been recorded as long-term debt, which will be accreted up to the face value of $330,000 over the term of the $330 million convertible debentures using an effective interest rate of 8.8%. If the $330 million convertible debentures are converted into common shares, the value of the conversion will be reclassified to share capital along with the principal amount converted. On January 1, 2011, as part of the Conversion, JEGI assumed all of the obligations under the $330 million convertible debentures.

As a result of adopting IFRS, Just Energy has recorded a future tax liability of $15,728 on its convertible debentures and reduced the value of the equity component of convertible debentures by this amount.

14. PROVISIONS


                                         June 30, 2011       March 31, 2011 
Cost:                                                                       

Opening balance for the period                 $ 7,250              $ 7,008 
Provisions made during the period                  134                2,853 
Provisions reversed and used                                                
 during the period                                 (67)              (2,808)
Unwinding of discount                               67                  462 
Foreign exchange                                   (30)                (265)

                                  ------------------------------------------
Ending balance for the period                  $ 7,354              $ 7,250 
                                  ------------------------------------------

Current                                        $ 4,061              $ 4,006 
Non-current                                      3,293                3,244 
                                  ------------------------------------------
                                               $ 7,354              $ 7,250 
                                  ------------------------------------------

Legal issues

The provision for legal issues shown above include the expected cash outflows from major claims and for several smaller litigation matters.

Just Energy's subsidiaries are party to a number of legal proceedings. Just Energy believes that each proceeding constitutes a routine legal matter incidental to the business conducted by Just Energy and that the ultimate disposition of the proceedings will not have a material adverse effect on its consolidated earnings, cash flows or financial position.

In addition to the routine legal proceedings of Just Energy, the State of California has filed a number of complaints to the FERC against any suppliers of electricity, including Commerce, a subsidiary of Just Energy, with respect to events stemming from the 2001 energy crisis in California. Pursuant to the complaints, the State of California is challenging the FERC's enforcement of its market-based rate system. Although Commerce did not own generation, the State of California is claiming that Commerce was unjustly enriched by the run-up caused by the alleged market manipulation by other market participants. The proceedings are currently ongoing. On March 18, 2010, the Administrative Law Judge granted the motion to strike for all parties in one of the complaints holding that California did not prove that the reporting errors masked the accumulation of market power. California has appealed the decision.

At this time, the likelihood of damages or recoveries and the ultimate amounts, if any, with respect to this litigation are not determinable.

15. REPORTABLE BUSINESS SEGMENTS

Just Energy operates in four reportable segments: gas marketing, electricity marketing, ethanol and home services. Reporting by products and services is in line with Just Energy's performance measurement parameters.

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Just Energy is not considered to have any key customers.


The following tables present Just Energy's results by operating segments:   

For the three                                                               
 months ended                                                               
 June 30, 2011                                                              

                         Gas  Electricity                Home               
                   marketing    marketing   Ethanol  services  Consolidated 
                 -----------------------------------------------------------
Revenue            $ 202,457    $ 385,744  $ 30,192  $  7,807    $  626,200 
Gross margin          25,112       60,372     2,545     6,232        94,261 
Amortization of                                                             
 property, plant                                                            
 and equipment           337          673       293        38         1,341 
Amortization of                                                             
 intangible                                                                 
 assets                8,878       20,022         5       399        29,304 
Other operating                                                             
 expenses             19,948       44,130     2,765     4,490        71,333 
                 -----------------------------------------------------------
Operating profit                                                            
 (loss) for the
 period            $  (4,051)   $  (4,453) $   (518) $  1,305    $   (7,717)
Finance costs         (3,512)      (6,442)   (1,687)   (2,151)      (13,792)
Change in fair                                                              
 value of                                                                   
 derivative                                                                 
 instruments          51,582       28,160       (45)        -        79,697 
Other income              40          125         -         -           165 
Provision for                                                               
 income tax                                                                 
 expense               2,635        4,586         -         -         7,221 
                 -----------------------------------------------------------
Profit for the                                                              
 period            $  41,424    $  12,804  $ (2,250) $   (846)   $    51,132
                 -----------------------------------------------------------
Capital                                                                     
 expenditures      $     687    $   1,355  $     27  $  9,526    $    11,595
                 -----------------------------------------------------------
Total goodwill     $ 129,517    $  97,361  $      -  $    283    $   227,161
                 -----------------------------------------------------------
Total assets       $ 506,644    $ 659,648  $163,203  $ 141,993   $ 1,471,488
                 -----------------------------------------------------------
Total liabilities  $ 702,551    $ 743,385  $ 95,660  $ 119,856   $ 1,661,452
                 -----------------------------------------------------------


For the three                                                               
 months ended                                                               
 June 30, 2010                                                              

                         Gas  Electricity                Home               
                   marketing    marketing   Ethanol  services  Consolidated 
                 -----------------------------------------------------------
Revenue            $ 202,763    $ 385,674  $ 16,806   $ 4,441     $ 609,684 
Gross margin          17,415       62,896    (2,788)    2,832        80,355 
Amortization of                                                             
 property, plant                                                            
 and equipment           612          944       296        68         1,920 
Amortization of                                                             
 intangible                                                                 
 assets               10,454       16,320         -       398        27,172 
Other operating                                                             
 expenses             21,695       39,193     2,473     4,229        67,590 
                 -----------------------------------------------------------
Operating profit 
(loss) for 
the period         $ (15,346)     $ 6,439    (5,557) $ (1,863)    $ (16,327)
Finance costs         (3,948)      (5,759)   (1,707)   (1,341)      (12,755)
Change in fair                                                              
 value of                                                                   
 derivative                                                                 
 instruments         157,682      177,865         -         -       335,547 
Other income                                                                
 (expense)             2,635         (859)        6         -         1,782 
Provision for                                                               
 income tax                                                                 
 expense              16,959       21,317         -      (818)       37,458 
                 -----------------------------------------------------------
Profit for the                                                              
 period            $ 124,064    $ 156,369  $ (7,258) $ (2,386)    $ 270,789 
                 -----------------------------------------------------------
Capital                                                                     
 expenditures          $ 523        $ 816     $ 114   $ 8,154       $ 9,607 
                 -----------------------------------------------------------
Total goodwill     $ 141,643     $ 88,657       $ -     $ 283     $ 230,583 
                 -----------------------------------------------------------
Total assets       $ 742,930    $ 912,639 $ 156,102  $ 94,981   $ 1,906,652 
                 -----------------------------------------------------------
Total liabilities  $ 959,622  $ 1,061,968 $ 100,595  $ 73,714   $ 2,195,899 
                 -----------------------------------------------------------


Geographic information                                                      

Revenues from external customers                                            

                                 For the three months   For the three months
                                  ended June 30, 2011    ended June 30, 2010
Canada                                      $ 281,415              $ 307,281
United States                                 344,785                302,403
                              ----------------------------------------------
Total revenue per consolidated                                              
 income statement                           $ 626,200              $ 609,684
                              ----------------------------------------------

The revenue above is based on the location of the customer.                 

Non-current assets

Non-current assets for this purpose consist of property, plant and equipment and intangible assets and are summarized as follows:


                                As at June 30, 2011      As at June 30, 2010
Canada                                    $ 520,930                $ 627,785
United States                               294,244                  473,265
                          --------------------------------------------------
Total                                     $ 815,174              $ 1,101,050
                          --------------------------------------------------

16. OTHER INCOME, EXPENSES AND ADJUSTMENTS

For the three months ended June 30

(a) Other operating expenses


                                                         2011           2010
Amortization of gas contracts                         $ 6,740        $ 8,882
Amortization of electricity contracts                  16,166         14,027
Amortization of water heaters                             399            398
Amortization of other intangible assets                 5,999          3,865
Amortization of property, plant and equipment           1,341          1,920
Bad debt expense                                        6,814          5,749
Transaction costs                                           -          1,099
Capital tax                                                 -            133
Share-based compensation                                1,681          2,010
                                              ------------------------------
                                                     $ 39,140       $ 38,083
                                              ------------------------------

(b) Amortization and cost of inventories included in the consolidated income
statement                                                                   

Included in cost of sales:                                                  
                                                         2011           2010
Amortization                                          $ 2,903        $ 2,410
Costs of inventories recognized as an expense         529,036        526,919
                                              ------------------------------
                                                    $ 531,939      $ 529,329
                                              ------------------------------

(c) Included in change of fair value of derivative instruments:             

                                                         2011           2010
Amortization of gas contracts                        $ 12,765       $ 12,729
Amortization of electricity contracts                  24,323         22,748

(d) Employee benefit expense                                                

                                                         2011           2010
Wages, salaries and commissions                      $ 38,203       $ 30,145
Benefits                                                5,250          4,788
                                              ------------------------------
                                                     $ 43,453       $ 34,933
                                              ------------------------------

17. INCOME TAXES                                                            

                                                       2011            2010 
                                            --------------------------------
Current income tax recovery                        $ (2,238)       $ (1,002)
Future tax expense                                    9,459          38,460 
                                            --------------------------------
Provision for income tax                           $  7,221        $ 37,458 
                                            --------------------------------
                                            --------------------------------

Just Energy's previous income trust structure required certain temporary differences to be measured at higher deferred tax rates under IFRS. When Just Energy converted to a corporation on January 1, 2011, Just Energy re-measured its deferred tax balances in accordance with IFRS Standing Interpretations Committee ("SIC") Standards - 25 "Changes in Tax Structure of an Entity" using the tax rates applicable to a corporation.

18. INCOME PER UNIT/SHARE


                                                       2011            2010 
Basic income per unit/share                                                 
Net income available to shareholders               $ 51,132        $273,409 
                                            --------------------------------
Basic units and shares outstanding              137,180,059     124,818,132 
                                            --------------------------------
Basic income per share/unit                          $ 0.37           $2.19 
                                            --------------- ----------------
                                            --------------- ----------------

Diluted income per unit/share                                               
Net income available to shareholders                 51,132        $273,409 
Adjusted net income for dilutive impact of                                  
 convertible debentures                               6,017           3,925 
Adjusted net income for financial                                           
 liabilities                                              -          (8,614)
                                            --------------------------------
Adjusted net income                                  57,149         268,720 
                                            --------------------------------
Basic units and shares outstanding              137,180,059     124,818,132 
Dilutive effect of:                                                         
Weighted average number of Class A                                          
 preference shares                                        -       5,263,728 
Weighted average number of Exchangeable                                     
 Shares                                                   -       4,340,387 
Restricted share grants                           3,076,129       2,701,377 
Deferred share grants                               108,335          84,211 
Convertible debentures                           21,188,081      13,940,519 
                                            --------------------------------
Shares outstanding on a diluted basis           161,552,604     151,148,354 
                                            --------------------------------
Diluted income per share/unit                        $ 0.35           $1.78 
                                            --------------- ----------------
                                            --------------- ----------------

19. LIABILITY ASSOCIATED WITH EXCHANGEABLE SHARES AND EQUITY-BASED COMPENSATION PLANS

Liability associated with Exchangeable Shares

Since 2001 and up to and including January 1, 2011, Just Energy had Exchangeable Shares and unit-based awards outstanding. These shares did not meet the definition of an equity instrument in accordance with IAS 32, "Financial Instruments: Presentation" and accordingly, were classified as financial liabilities. The Exchangeable Shares were recorded upon transition to IFRS at redemption value and subsequent to transition were adjusted to reflect the redemption value at each reporting date. The resulting change from carrying value to redemption value was recorded at transition and at each reporting period to retained earnings and earnings respectively as a change in fair value of derivative instruments. All dividends attributable to exchangeable shareholders were recorded as interest expense in the reporting period for which the dividends were declared.

As a result of the Conversion, the Exchangeable Shares were exchanged on a one for one basis into common shares of JEGI. There were no Exchangeable Shares outstanding following the Conversion.

Equity-based compensation plans

As the award holders were entitled to receive Fund units which under IFRS were considered puttable financial instruments, the awards were classified as liability-based awards. The fair value of awards was estimated at each reporting period using the fair market value of the Fund units at the reporting date. The resulting measurements of the liability were recorded as change in fair value of derivative financial instruments.

As a result of the Conversion, Just Energy's equity-based compensation plan awards are now settled in non-redeemable common shares resulting in equity plan accounting under IFRS. Accordingly, the fair value of the vested portion of outstanding awards was reclassified from liability to contributed surplus on January 1, 2011.

The following table summarizes the changes in the liability associated with the Exchangeable Shares and the equity-based compensation:


                               Exchangeable Shares       Class A preference 
                                           of JEEC            shares of JEC 
                         ---------------------------------------------------
                               Shares      $-Value       Shares     $-Value 

Opening balance April 1,                                                    
 2010                       4,688,172       66,947    5,263,728      75,166 
Exchanged                    (422,673)      (5,903)           -           - 
Issued/forfeited                    -            -            -           - 
Non-cash deferred unit                                                      
 grant                              -            -            -           - 
Unit-based compensation             -            -            -           - 
Change in fair value                -       (7,043)           -      (8,527)
                         ---------------------------------------------------

Balance June 30, 2010       4,265,499       54,001    5,263,728      66,639 
Exchanged                    (217,716)      (2,981)           -           - 
Issued/forfeited                    -            -            -           - 
Non-cash deferred unit                                                      
 grant                              -            -            -           - 
Unit-based compensation             -            -            -           - 
Change in fair value                -        8,240            -      10,422 
                         ---------------------------------------------------

Balance September 30,                                                       
 2010                       4,047,783       59,260    5,263,728      77,061 
Exchanged                    (253,629)      (3,711)           -           - 
Issued/forfeited                    -            -            -           - 
Non-cash deferred unit                                                      
 grant                              -            -            -           - 
Unit-based compensation             -            -            -           - 
Change in fair value                -        1,250            -       1,737 
                         ---------------------------------------------------

Balance December 31, 2010   3,794,154       56,799    5,263,728      78,798 

Reclassified to share                                                       
 capital on conversion to                                                   
 corporation               (3,794,154)     (56,799)  (5,263,728)    (78,798)
Reclassified to                                                             
 contributed surplus on                                                     
 conversion to                                                              
 corporation                        -                                       
                         ---------------------------------------------------
                                    -            -            -           - 
                         ---------------------------------------------------


                                      Unit-based awards               Total 
                         ---------------------------------------------------
                           Options     DDUGS       UARs   $-Value   $-Value 

Opening balance April 1,                                                    
 2010                      352,500    84,138  2,640,723    39,015   181,128 
Exchanged                        -         -          -         -    (5,903)
Issued/forfeited          (217,500)    6,602     65,448         -         - 
Non-cash deferred unit                                                      
 grant                           -         -          -        26        26 
Unit-based compensation          -         -          -     2,010     2,010 
Change in fair value             -         -          -    (5,601)  (21,171)
                         ---------------------------------------------------

Balance June 30, 2010      135,000    90,740  2,706,171    35,450   156,090 
Exchanged                        -         -    (38,989)     (461)   (3,442)
Issued/forfeited                 -     5,823     88,480         -         - 
Non-cash deferred unit                                                      
 grant                           -         -          -        28        28 
Unit-based compensation          -         -          -     2,573     2,573 
Change in fair value             -         -          -     4,220    22,882 
                         ---------------------------------------------------

Balance September 30,                                                       
 2010                      135,000    96,563  2,755,662    41,810   178,131 
Exchanged                        -         -          -         -    (3,711)
Issued/forfeited                 -     5,937     21,323         -         - 
Non-cash deferred unit                                                      
 grant                           -         -          -        33        33 
Unit-based compensation          -         -          -     2,648     2,648 
Change in fair value             -         -          -    (1,344)    1,643 
                         ---------------------------------------------------

Balance December 31, 2010  135,000   102,500  2,776,985    43,147   178,744 

Reclassified to share                                                       
 capital on conversion to                                                   
 corporation                     -         -          -         -  (135,597)
Reclassified to                                                             
 contributed surplus on                                                     
 conversion to                                                              
 corporation              (135,000) (102,500)(2,776,985)  (43,147)  (43,147)
                         ---------------------------------------------------
                                 -         -          -         -         - 
                         ---------------------------------------------------

20. DISTRIBUTIONS AND DIVIDENDS PAID AND PROPOSED

For the three months ended June 30, 2011, dividends of $0.31 (2010 - $0.31) per unit/share were proposed and paid by Just Energy. This amounted to $43,605 (2010 - $39,459) which was approved throughout the period by the Board of Directors and was paid out during the quarter.

Declared dividends subsequent to quarter end

On July 5, 2011, the Board of Directors of Just Energy declared a dividend in the amount of $0.10333 per common share ($1.24 annually). The dividend will be paid on July 31, 2011 to shareholders of record at the close of business on July 15, 2011.

On August 3, 2011, the Board of Directors of Just Energy declared a dividend in the amount of $0.10333 per common share ($1.24 annually). The dividend will be paid on August 31, 2011 to shareholders of record at the close of business on August 15, 2011.

21. COMMITMENTS

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


As at June 30, 2011                                                         

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

Less than 1 year              $ 8,333      $ 3,849      $ 2,588  $ 1,397,500
One to three years             11,435        1,267            -    1,330,010
Four to five years              6,837            -            -      251,040
Exceeding five years            4,468            -            -        3,240
                         ------------ ------------ ------------ ------------
                             $ 31,073      $ 5,116      $ 2,588  $ 2,981,790
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------


As at June 30, 2010                                                         



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

Less than 1 year              $ 8,256     $ 44,212      $ 8,653  $ 1,712,415
One to three years             11,741        8,254        7,692    1,798,491
Four to five years              6,138            -            -      417,250
Exceeding five years            5,021            -            -        8,143
                         ------------ ------------ ------------ ------------
                             $ 31,156     $ 52,466     $ 16,345  $ 3,936,299
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------

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. Just Energy has entered into leasing contracts for office buildings and administrative equipment. These leases have a leasing period between one and eight years. For the main office building of Just Energy, there is a renewal option for an additional five years. No purchase options are included in any major leasing contracts.

22. ADJUSTMENTS REQUIRED TO REFLECT NET CASH RECEIPTS FROM GAS SALES


Changes in:                                            2011            2010 
Accrued gas receivable                             $ 12,146        $ 17,971 
Gas delivered in excess of consumption               (7,794)        (12,551)
Accrued gas accounts payable                         (8,932)        (12,567)
Deferred revenue                                      7,688          15,583 
                                            --------------------------------

                                                    $ 3,108         $ 8,436 
                                            --------------------------------
                                            --------------------------------

23. CHANGES IN NON-CASH WORKING CAPITAL                                     

                                                       2011            2010 
Accounts receivable and unbilled revenues          $ 32,537        $ 91,232 
Gas in storage                                      (20,686)        (33,545)
Prepaid expenses                                         55          (1,329)
Inventory                                             2,973           1,687 
Trade and other payables                            (18,965)        (51,477)
Provisions                                               37            (464)
                                            --------------------------------

                                                   $ (4,049)        $ 6,104 
                                            --------------------------------
                                            --------------------------------

24. EXPLANATION OF TRANSITION TO IFRS

For all periods up to and including the year ended March 31, 2011, Just Energy prepared its financial statements in accordance with Canadian GAAP. These financial statements, for the three months ended June 30, 2011, are the first financial statements that Just Energy has prepared in accordance with IFRS.

Accordingly, Just Energy has prepared financial statements which comply with IFRS for periods beginning on or after April 1, 2011, as described in the accounting policies set out in Note 3. In preparing these financial statements, Just Energy's opening consolidated statement of financial position was prepared as at April 1, 2010 (Just Energy's date of transition).

In preparing the opening IFRS consolidated statement of financial position, Just Energy has adjusted amounts previously reported in consolidated financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected Just Energy's financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.

(a) Elective exemptions from full retrospective application

In preparing these consolidated financial statements in accordance with IFRS 1, "First-time adoption of International Financial Reporting Standards" ("IFRS 1"), Just Energy has applied certain optional exemptions from full retrospective application of IFRS. The optional exemptions are described below.

(i) Business combinations

Just Energy has applied the business combinations exemption in IFRS 1 to not apply IFRS 3, "Business Combinations" retrospectively. Accordingly, Just Energy has not restated business combinations that took place prior to the transition date.

(ii) Share-based payment transactions

Just Energy has elected to apply IFRS 2, "Share-based Payments" to equity instruments granted on or before November 7, 2002, or which are vested by the transition date.

(iii) Borrowing costs

IAS 23, "Borrowing Costs", requires that Just Energy capitalize the borrowing costs related to all qualifying assets for which the commencement date for capitalization is on or after April 1, 2010. Just Energy elected not to early adopt this policy and has, therefore, expensed all borrowing costs prior to transition.

(b) Mandatory exemptions to retrospective application

In preparing these consolidated financial statements in accordance with IFRS 1, Just Energy has applied certain mandatory exemptions from full retrospective application of IFRS. The mandatory exceptions applied from full retrospective application of IFRS are described below.

(i) Estimates

Hindsight was not used to create or revise estimates and accordingly, the estimates previously made by Just Energy under Canadian GAAP are consistent with their application under IFRS.

(ii) Hedge accounting

Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in IAS 39 at that date. Hedging relationships cannot be designated retrospectively and the supporting documentation cannot be created prospectively. Just Energy has not applied any hedge accounting at or after the transition date.

Prior to July 1, 2008, Just Energy utilized hedge accounting for its customer contracts and formally documented the relationship between hedging instruments and the hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. Effective July 1, 2008, Just Energy ceased the utilization of hedge accounting. The balance still remaining in accumulated other comprehensive income relates to the effective portion of the hedges that are still expected to occur as of the transition date.


Reconciliation of Financial Position and Equity at April 1, 2010:           
----------------------------------------------------------------------------
                      Canadian                                              
Canadian GAAP             GAAP         IFRS               IFRS              
 accounts             balances  adjustments  reclassifications IFRS balance 
----------------------------------------------------------------------------
ASSETS                                                                      
Non-current assets                                                          
 Property, plant                                                            
  and equipment      $ 217,223       $ (547)               $ -    $ 216,676 
 Intangible assets     342,022            -            186,832      528,854 
 Goodwill              190,862       (4,030)          (186,832)           - 
 Other assets                                                               
  long-term              5,027            -                  -        5,027 
 Long-term                                                                  
  receivables            2,014            -                  -        2,014 
 Contract                                                                   
  initiation costs       5,587                                        5,587 
 Future income tax                                                          
  assets                85,197      150,771             29,139      265,107 
                  ----------------------------------------------------------
                       847,932      146,194             29,139    1,023,265 
Current assets                                                              
 Inventory               6,323            -                  -        6,323 
 Gas in storage          4,058            -                  -        4,058 
 Gas delivered in                                                           
  excess of                                                                 
  consumption            7,410            -                  -        7,410 
 Accounts                                                                   
  receivable           232,579            -                  -      232,579 
 Accrued gas                                                                
  receivable            20,793            -                  -       20,793 
 Unbilled revenues      61,070            -                  -       61,070 
 Prepaid expenses                                                           
  and deposits          20,038            -                  -       20,038 
 Other assets -                                                             
  current                2,703            -                  -        2,703 
 Current portion                                                            
  of future income                                                          
  tax assets            29,139            -            (29,139)           - 
 Cash                   60,132            -             18,650       78,782 
 Restricted cash        18,650            -            (18,650)           - 
                  ----------------------------------------------------------
                       462,895            -            (29,139)     433,756 
                  ----------------------------------------------------------
TOTAL ASSETS       $ 1,310,827    $ 146,194                $ -  $ 1,457,021 
                  ----------------------------------------------------------
EQUITY AND                                                                  
 LIABILITIES                                                                
Unitholders'                                                                
 deficiency                                                                 
 Deficit          $ (1,423,698)  $ (132,971)               $ - $ (1,556,669)
 Accumulated other                                                          
  comprehensive                                                             
  income               221,969            -                  -      221,969 
 Unitholders'                                                               
  capital              659,118      118,738                  -      777,856 
 Contributed                                                                
  surplus               18,832      (18,832)                 -            - 
                  ----------------------------------------------------------
Unitholders'                                                                
 deficiency           (523,779)     (33,065)                 -     (556,844)
Non-controlling                                                             
 interest               20,603         (182)                 -       20,421 
                  ----------------------------------------------------------
Total equity          (503,176)     (33,247)                 -     (536,423)
Liabilities                                                                 
Non-current                                                                 
 liabilities                                                                
 Long-term debt        231,837            -                  -      231,837 
 Provisions                  -        3,270               (146)       3,124 
 Deferred lease                                                             
  inducements            1,984            -                  -        1,984 
 Other liabilities                                                          
  - long-term          590,572            -                  -      590,572 
 Future income                                                              
  taxes                      -            -              6,776        6,776 
 Liability                                                                  
  associated with                                                           
  exchangeable                                                              
  shares and                                                                
  equity-based                                                              
  compensation                      181,128                         181,128 
                  ----------------------------------------------------------
                       824,393      184,398             (6,630)   1,015,421
Current                                                                     
 liabilities                                                                
 Bank indebtedness       8,236            -                  -        8,236 
 Accounts payable                                                           
  and accrued                                                               
  liabilities          184,682       (7,460)               146      177,368 
 Accrued gas                                                                
  accounts payable      15,093            -                  -       15,093 
 Deferred revenue        7,202            -                  -        7,202 
 Unit distribution                                                          
  payable               13,182            -                  -       13,182 
 Corporate taxes                                                            
  payable                6,410            -                  -        6,410 
 Current portion                                                            
  of long-term                                                              
  debt                  62,829       (1,381)                 -       61,448 
 Provisions                  -        3,884                  -        3,884 
 Current portion                                                            
  future income                                                             
  tax liabilities        6,776            -             (6,776)          - 
 Other liabilities                                                          
  - current            685,200            -                  -      685,200 
                  ----------------------------------------------------------
                       989,610       (4,957)            (6,630)     978,023 
                  ----------------------------------------------------------
TOTAL LIABILITIES  $ 1,814,003    $ 179,441                $ -  $ 1,993,444 
                  ----------------------------------------------------------
TOTAL EQUITY AND                                                            
 LIABILITIES       $ 1,310,827    $ 146,194                $ -  $ 1,457,021 
                  ----------------------------------------------------------

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

Canadian GAAP                                                               
 accounts          IFRS accounts                                            
----------------------------------------------------------------------------
ASSETS             ASSETS                                                   
Non-current assets Non-current assets                                       
 Property, plant   Property, plant and equipment                            
  and equipment                                                             
 Intangible assets Intangible assets                                        
 Goodwill                                                                   
 Other assets      Other non-current financial assets                       
  long-term                                                                 
 Long-term         Non-current receivables                                  
  receivables                                                               
 Contract          Contract initiation costs                                
  initiation costs                                                          
 Future income tax Deferred tax asset                                       
  assets                                                                    


Current assets     Current assets                                           
 Inventory         Inventories                                              
 Gas in storage                                                             
 Gas delivered in  Gas delivered in excess of consumption                   
  excess of                                                                 
  consumption                                                               
 Accounts          Current trade and other receivables                      
  receivable                                                                
 Accrued gas       Accrued gas receivable                                   
  receivable                                                                
 Unbilled revenues Unbilled revenues                                        
 Prepaid expenses  Prepaid expenses and deposits                            
  and deposits                                                              
 Other assets -    Other current assets                                     
  current                                                                   
 Current portion                                                            
  of future income                                                          
  tax assets                                                                
 Cash              Cash and cash equivalents                                
 Restricted cash                                                            



TOTAL ASSETS       TOTAL ASSETS                                             

EQUITY AND         EQUITY AND LIABILITIES                                   
 LIABILITIES                                                                
Unitholders'       Equity attributable to equity holders of the parent      
 deficiency                                                                 
 Deficit           Deficit                                                  
 Accumulated other Accumulated other comprehensive income                   
  comprehensive                                                             
  income                                                                    
 Unitholders'      Unitholders' capital                                     
  capital                                                                   
 Contributed       Contributed surplus                                      
  surplus                                                                   

Unitholders'       Unitholders' deficiency                                  
 deficiency                                                                 
Non-controlling    Non-controlling interest                                 
 interest                                                                   

Total equity       Total equity                                             
Liabilities        LIABILITIES                                              
Non-current        Non-current liabilities                                  
 liabilities                                                                
 Long-term debt    Long-term debt                                           
 Provisions        Provisions                                               
 Deferred lease    Deferred lease inducements                               
  inducements                                                               
 Other liabilities Other non-current financial liabilities                  
  - long-term                                                               
 Future income     Deferred tax liability                                   
  taxes                                                                     
 Liability         Liability associated with exchangeable shares and equity-
  associated with  based compensation                                       
  exchangeable                                                              
  shares and                                                                
  equity-based                                                              
  compensation                                                              


Current            Current liabilities                                      
 liabilities                                                                
 Bank indebtedness Bank indebtedness                                        
 Accounts payable  Trade and other payables                                 
  and accrued                                                               
  liabilities                                                               
 Accrued gas       Accrued gas accounts payable                             
  accounts payable                                                          
 Deferred revenue  Deferred revenue                                         
 Unit distribution Unit distribution payable                                
  payable                                                                   
 Corporate taxes   Income taxes payable                                     
  payable                                                                   
 Current portion   Current portion of long-term debt                        
  of long-term                                                              
  debt                                                                      
 Provisions        Provisions                                               
 Current portion                                                            
  future income                                                             
  tax liabilities                                                           
 Other liabilities Other current financial liabilities                      
  - current                                                                 



TOTAL LIABILITIES  TOTAL LIABILITIES                                        

TOTAL EQUITY AND   TOTAL EQUITY & LIABILITIES                               
 LIABILITIES                                                                


Reconciliation of Consolidated Income Statement for the three months ended  
June 30, 2010                                                               

----------------------------------------------------------------------------
Canadian GAAP        Canadian         IFRS                IFRS              
 accounts                GAAP   Adjustment   Reclassifications         IFRS 
----------------------------------------------------------------------------
SALES               $ 609,684          $ -                 $ -    $ 609,684 
COST OF SALES         529,187          142                   -      529,329 
                 -----------------------------------------------------------
GROSS MARGIN           80,497         (142)                  -       80,355 
EXPENSES                                                                    
General and                                                                 
 administrative        29,272         (431)                  -       28,841 
Marketing                                                                   
 expenses              29,758            -                   -       29,758 
Other operating                                                             
 expenses                   -        1,099              36,984       38,083 
Bad debt expense        5,749            -              (5,749)           - 
Amortization of                                                             
 intangible                                                                 
 assets and                                                                 
 related supply                                                             
 contracts             27,172            -             (27,172)           - 
Amortization of                                                             
 property, plant                                                            
 and equipment          1,920            -              (1,920)           - 
Unit-based                                                                  
 compensation           1,075          935              (2,010)           - 
Capital tax               133            -                (133)           - 
                 -----------------------------------------------------------
                     $ 95,079      $ 1,603                 $ -     $ 96,682 
                 -----------------------------------------------------------
Income (loss)                                                               
 before the                                                                 
 undernoted           (14,582)      (1,745)                  -      (16,327)
Interest expense        9,480        3,275                   -       12,755 
Change in fair                                                              
 value of                                                                   
 derivative                                                                 
 instruments         (314,376)     (21,171)                  -     (335,547)
Other income           (1,782)           -                   -       (1,782)
                 -----------------------------------------------------------
Income before                                                               
 income tax           292,096       16,151                   -      308,247 
Provision for                                                               
 income tax                                                                 
 expense               19,360       18,098                   -       37,458 
                 -----------------------------------------------------------
NET INCOME (LOSS)                                                           
 FOR THE PERIOD     $ 272,736     $ (1,947)                  -    $ 270,789 
                 -----------------------------------------------------------

Attributable to:                                                            
Unitholders of                                                              
 Just Energy        $ 275,309     $ (1,900)                  -    $ 273,409 
Non-controlling                                                             
 interests             (2,573)         (47)                  -       (2,620)
                 -----------------------------------------------------------
NET INCOME (LOSS)                                                           
 FOR THE PERIOD     $ 272,736     $ (1,947)                $ -    $ 270,789 
                 -----------------------------------------------------------

---------------------------------------------------------------------------
Canadian GAAP                                                              
 accounts         IFRS accounts                                            
---------------------------------------------------------------------------
SALES             SALES                                                    
COST OF SALES     COST OF SALES                                            

GROSS MARGIN      GROSS MARGIN                                             
EXPENSES          EXPENSES                                                 
General and                                                                
 administrative   Administrative expenses                                  
Marketing                                                                  
 expenses         Selling and marketing expenses                           
Other operating                                                            
 expenses         Other operating expenses                                 
Bad debt expense                                                           
Amortization of                                                            
 intangible                                                                
 assets and                                                                
 related supply                                                            
 contracts                                                                 
Amortization of                                                            
 property, plant                                                           
 and equipment                                                             
Unit-based                                                                 
 compensation                                                              
Capital tax                                                                



Income (loss)                                                              
 before the                                                                
 undernoted       Operating profit                                         
Interest expense  Finance costs                                            
Change in fair                                                             
 value of                                                                  
 derivative                                                                
 instruments      Change in fair value of derivative instruments           
Other income      Other income                                             

Income before                                                              
 income tax       Income before income tax                                 
Provision for                                                              
 income tax                                                                
 expense          Provision for income tax expense                         

NET INCOME (LOSS)                                                          
 FOR THE PERIOD   PROFIT FOR THE PERIOD                                    


Attributable to:  Attributable to:                                         
Unitholders of                                                             
 Just Energy      Unitholders of Just Energy                               
Non-controlling                                                            
 interests        Non-controlling interests                                

NET INCOME (LOSS)                                                          
 FOR THE PERIOD   PROFIT FOR THE PERIOD                                    


Reconciliation of Consolidated Statement of Comprehensive Income for the    
three months ended June 30, 2010:                                           

----------------------------------------------------------------------------
Canadian GAAP         Canadian         IFRS                IFRS             
 accounts                 GAAP   Adjustment   Reclassifications        IFRS 
----------------------------------------------------------------------------
NET INCOME           $ 272,736     $ (1,947)                $ -   $ 270,789 
Unrealized gain on                                                          
 translation of                                                             
 self-sustaining                                                            
 operations             14,876            5                   -      14,881 
Amortization of                                                             
 deferred                                                                   
 unrealized gain                                                            
 on discontinued                                                            
 hedges - net of                                                            
 income taxes of                                                            
 $5,850                (28,723)           -                   -     (28,723)
                  ----------------------------------------------------------
OTHER                                                                       
 COMPREHENSIVE                                                              
 LOSS                  (13,847)           5                   -     (13,842)

                  ----------------------------------------------------------
COMPREHENSIVE                                                               
 INCOME              $ 258,889     $ (1,942)                $ -   $ 256,947 
                  ----------------------------------------------------------

Attributable to:                                                            
Unitholders of                                                              
 Just Energy         $ 261,462     $ (1,895)                $ -   $ 259,567 
Non-controlling                                                             
 interests              (2,573)         (47)                         (2,620)
                  ----------------------------------------------------------
                     $ 258,889     $ (1,942)                $ -   $ 256,947 
                  ----------------------------------------------------------

----------------------------------------------------------------------------
Canadian GAAP                                                               
 accounts          IFRS accounts                                            
----------------------------------------------------------------------------
NET INCOME         NET INCOME                                               
Unrealized gain on                                                          
 translation of                                                             
 self-sustaining   Unrealized gain on translation of self-sustaining        
 operations        operations                                               
Amortization of                                                             
 deferred                                                                   
 unrealized gain                                                            
 on discontinued                                                            
 hedges - net of                                                            
 income taxes of   Amortization of deferred unrealized gain on discontinued 
 $5,850            hedges - net of income taxes of $5,850                   

OTHER                                                                       
 COMPREHENSIVE                                                              
 LOSS              OTHER COMPREHENSIVE LOSS                                 


COMPREHENSIVE                                                               
 INCOME            OTHER COMPREHENSIVE INCOME                               


Attributable to:   Attributable to:                                         
Unitholders of                                                              
 Just Energy       Unitholders of Just Energy                               
Non-controlling                                                             
 interests         Non-controlling interests                                


Reconciliation of Financial Position and Equity at June 30, 2010:           

----------------------------------------------------------------------------
                      Canadian                                              
Canadian GAAP             GAAP         IFRS               IFRS              
 accounts             balances  adjustments  reclassifications IFRS balance 
----------------------------------------------------------------------------
ASSETS                                                                      
Non-current assets                                                          
 Property, plant                                                            
  and equipment      $ 226,593       $ (688)            $ (991)   $ 224,914 
 Intangible assets     644,562            -            231,574      876,136 
 Goodwill              235,740       (5,157)          (230,583)           - 
 Other assets                                                               
  long-term              4,674            -                  -        4,674 
 Contract                                                                   
  initiation costs      28,330            -                  -       28,330 
 Long-term                                                                  
  receivable             3,898            -                  -        3,898 
 Future income tax                                                          
  assets                88,484      131,913             14,940      235,337 
                  ----------------------------------------------------------
                     1,232,281      126,068             14,940    1,373,289 
Current assets                                                              
 Inventory               4,636            -                  -        4,636 
 Gas in storage         38,386            -                  -       38,386 
 Gas delivered in                                                           
  excess of                                                                 
  consumption           21,325            -                  -       21,325 
 Accounts                                                                   
  receivable           312,900            -                  -      312,900 
 Unbilled revenues      20,978            -                  -       20,978 
 Prepaid expenses                                                           
  and deposits          24,543            -                  -       24,543 
 Other assets -                                                             
  current                1,637            -                  -        1,637 
 Current portion                                                            
  of future income                                                          
  tax assets            14,940            -            (14,940)           - 
 Cash                   94,428            -             14,530      108,958 
 Restricted cash        14,530            -            (14,530)           - 
                  ----------------------------------------------------------
                       548,303            -            (14,940)     533,363 
                  ----------------------------------------------------------
TOTAL ASSETS       $ 1,780,584    $ 126,068                $ -  $ 1,906,652 
                  ----------------------------------------------------------
EQUITY AND                                                                  
 LIABILITIES                                                                
Unitholders'                                                                
 deficiency                                                                 
 Deficit          $ (1,190,128)  $ (132,591)               $ - $ (1,322,719)
 Accumulated other                                                          
  comprehensive                                                             
  income               208,122            5                  -      208,127 
Unitholders'                                                                
 capital               664,717      124,641                  -      789,358 
Equity component        33,914      (15,728)                 -       18,186 
Contributed                                                                 
 surplus                19,933      (19,933)                 -            - 
                  ----------------------------------------------------------
                      (263,442)     (43,606)                 -     (307,048)
Non-controlling                                                             
 interest               18,030         (229)                 -       17,801 
                  ----------------------------------------------------------
Total equity        $ (245,412)   $ (43,835)               $ -   $ (289,247)
                  ----------------------------------------------------------
Liabilities                                                                 
Non-current                                                                 
 liabilities                                                                
 Long-term debt      $ 496,478          $ -                $ -    $ 496,478 
 Future income                                                              
  taxes                      -       15,506              9,513       25,019 
 Deferred lease                                                             
  inducements            1,898            -                  -        1,898 
 Other liabilities                                                          
  - long-term          496,292            -                  -      496,292 
 Provisions                  -        8,492             (5,151)       3,341 
 Liability                                                                  
  associated with                                                           
  exchangeable                                                              
  shares and                                                                
  equity-based                                                              
  compensation               -      156,090                  -      156,090 
                  ----------------------------------------------------------
                       994,668      180,088              4,362    1,179,118 
Current                                                                     
 liabilities                                                                
 Bank indebtedness       7,853            -                  -        7,853 
 Accounts payable                                                           
  and accrued                                                               
  liabilities          308,412       (9,196)                 -      299,216 
 Accrued gas                                                                
  accounts payable       1,414            -                  -        1,414 
 Deferred revenue       25,202            -                  -       25,202 
 Unit distribution                                                          
  payable               13,235            -                  -       13,235 
 Corporate taxes                                                            
  payable                2,838            -                  -        2,838 
 Current portion                                                            
  of long-term                                                              
  debt                  65,108         (989)                 -       64,119 
 Provisions                  -        5,151                  -        5,151 
 Current portion                                                            
  future income                                                             
  tax liabilities        9,513            -             (9,513)           - 
 Other liabilities                                                          
  - current            597,753            -                  -      597,753 
                  ----------------------------------------------------------
                     1,031,328       (5,034)            (9,513)   1,016,781 
                  ----------------------------------------------------------
TOTAL LIABILITIES  $ 2,025,996    $ 175,054           $ (5,151) $ 2,195,899 
                  ----------------------------------------------------------
TOTAL EQUITY AND                                                            
 LIABILITIES       $ 1,780,584    $ 131,219           $ (5,151) $ 1,906,652 
                  ----------------------------------------------------------

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

Canadian GAAP                                                               
 accounts          IFRS accounts                                            
----------------------------------------------------------------------------
ASSETS             ASSETS                                                   
Non-current assets Non-current assets                                       
 Property, plant                                                            
  and equipment    Property, plant and equipment                            
 Intangible assets Intangible assets                                        
 Goodwill                                                                   
 Other assets                                                               
  long-term        Other non-current financial assets                       
 Contract                                                                   
  initiation costs Contract initiation costs                                
 Long-term                                                                  
  receivable       Non-current receivables                                  
 Future income tax                                                          
  assets           Deferred tax asset                                       


Current assets     Current assets                                           
 Inventory         Inventories                                              
 Gas in storage                                                             
 Gas delivered in                                                           
  excess of                                                                 
  consumption      Gas delivered in excess of consumption                   
 Accounts                                                                   
  receivable       Current trade and other receivables                      
 Unbilled revenues Unbilled revenues                                        
 Prepaid expenses                                                           
  and deposits     Prepaid expenses and deposits                            
 Other assets -                                                             
  current          Other current assets                                     
 Current portion                                                            
  of future income                                                          
  tax assets                                                                
 Cash              Cash and cash equivalents                                
 Restricted cash                                                            



TOTAL ASSETS       TOTAL ASSETS                                             

EQUITY AND                                                                  
 LIABILITIES       EQUITY AND LIABILITIES                                   
Unitholders'                                                                
 deficiency        Equity attributable to equity holders of the parent      
 Deficit           Deficit                                                  
 Accumulated other                                                          
  comprehensive                                                             
  income           Accumulated other comprehensive income                   
Unitholders'                                                                
 capital           Unitholders' capital                                     
Equity component                                                            
Contributed                                                                 
 surplus           Contributed surplus                                      


Non-controlling                                                             
 interest          Non-controlling interest                                 

Total equity       Total equity                                             

Liabilities        LIABILITIES                                              
Non-current                                                                 
 liabilities       Non-current liabilities                                  
 Long-term debt    Long-term debt                                           
 Future income                                                              
  taxes            Provisions                                               
 Deferred lease                                                             
  inducements      Deferred lease inducements                               
 Other liabilities                                                          
  - long-term      Other non-current financial liabilities                  
 Provisions        Deferred tax liability                                   
 Liability                                                                  
  associated with                                                           
  exchangeable                                                              
  shares and                                                                
  equity-based     Liability associated with exchangeable shares and equity-
  compensation     based compensation                                       


Current                                                                     
 liabilities       Current liabilities                                      
 Bank indebtedness Bank indebtedness                                        
 Accounts payable                                                           
  and accrued                                                               
  liabilities      Trade and other payables                                 
 Accrued gas                                                                
  accounts payable Accrued gas accounts payable                             
 Deferred revenue  Deferred revenue                                         
 Unit distribution                                                          
  payable          Unit distribution payable                                
 Corporate taxes                                                            
  payable          Income taxes payable                                     
 Current portion                                                            
  of long-term                                                              
  debt             Current portion of long-term debt                        
 Provisions        Provisions                                               
 Current portion                                                            
  future income                                                             
  tax liabilities                                                           
 Other liabilities                                                          
  - current        Other current financial liabilities                      



TOTAL LIABILITIES  TOTAL LIABILITIES                                        

TOTAL EQUITY AND                                                            
 LIABILITIES       TOTAL EQUITY AND LIABILITIES                             


Reconciliation of Consolidated Income Statement for the year ended March 31,
2011:                                                                       

Canadian GAAP         Canadian         IFRS               IFRS              
 accounts                 GAAP   Adjustment  Reclassifications         IFRS 

SALES              $ 2,953,192          $ -                $ -  $ 2,953,192 

COST OF SALES        2,470,989          641                  -    2,471,630 
                  ----------------------------------------------------------

GROSS MARGIN           482,203         (641)                 -      481,562 

EXPENSES                                                                    

General and                                                                 
 administrative        109,407           (7)                 -      109,400 
Marketing expenses     133,607            -                  -      133,607 
Other operating                                                             
 expenses                    -        1,284            164,291      165,575 
Bad debt expense        27,650            -            (27,650)           - 
Amortization of                                                             
 intangible assets                                                          
 and related                                                                
 supply contracts      120,841            -           (120,841)           - 
Amortization of                                                             
 property, plant                                                            
 and equipment           5,698            -             (5,698)           - 
Unit-based                                                                  
 compensation            5,509        4,405             (9,914)           - 
Capital tax                188                            (188)           - 
                  ----------------------------------------------------------
                       402,900        5,682                  -      408,582 
                  ----------------------------------------------------------
Income (loss)                                                               
 before the                                                                 
 undernoted             79,303       (6,323)                 -       72,980 
Interest expense        50,437        9,446                  -       59,883 
Change in fair                                                              
 value of                                                                   
 derivative                                                                 
 instruments          (509,401)       3,354                  -     (506,047)
Other income            (7,235)           -                  -       (7,235)
                  ----------------------------------------------------------
Income before                                                               
 income tax            545,502      (19,123)                 -      526,379 
Provision for                                                               
 income tax                                                                 
 expense                32,142      141,297                  -      173,439 
                  ----------------------------------------------------------
NET INCOME FOR THE                                                          
 PERIOD              $ 513,360   $ (160,420)               $ -    $ 352,940 
                  ----------------------------------------------------------

Attributable to:                                                            

Shareholders of                                                             
 Just Energy         $ 515,347   $ (160,271)               $ -    $ 355,076 

Non-controlling                                                             
 interests              (1,987)        (149)                 -       (2,136)
                  ----------------------------------------------------------
                     $ 513,360   $ (160,420)               $ -    $ 352,940 

Canadian GAAP                                                               
 accounts          IFRS accounts                                            

SALES              SALES                                                    

COST OF SALES      COST OF SALES                                            


GROSS MARGIN       GROSS MARGIN                                             

EXPENSES           EXPENSES                                                 

General and                                                                 
 administrative    Administrative expenses                                  
Marketing expenses Selling and marketing expenses                           
Other operating                                                             
 expenses          Other operating expenses                                 
Bad debt expense   Bad debt expense                                         
Amortization of                                                             
 intangible assets                                                          
 and related       Amortization of intangible assets and related supply     
 supply contracts  contracts                                                
Amortization of                                                             
 property, plant                                                            
 and equipment     Amortization of property, plant and equipment            
Unit-based                                                                  
 compensation      Unit-based compensation                                  
Capital tax        Capital tax                                              



Income (loss)                                                               
 before the                                                                 
 undernoted        Operating profit                                         
Interest expense   Finance costs                                            
Change in fair                                                              
 value of                                                                   
 derivative                                                                 
 instruments       Change in fair value of derivative instruments           
Other income       Other income                                             

Income before                                                               
 income tax        Income before income tax                                 
Provision for                                                               
 income tax                                                                 
 expense           Provision for income tax expense                         

NET INCOME FOR THE                                                          
 PERIOD            PROFIT FOR THE PERIOD                                    


Attributable to:   Attributable to:                                         

Shareholders of                                                             
 Just Energy       Shareholders of Just Energy                              

Non-controlling                                                             
 interests         Non-controlling interests                                



Reconciliation of consolidated statement of comprehensive income for the    
year ended March 31, 2011:                                                  

                       Canadian         IFRS               IFRS             
                           GAAP   Adjustment  Reclassifications        IFRS 

NET INCOME            $ 513,360   $ (160,420)               $ -   $ 352,940 
Unrealized gain on                                                          
 translation of                                                             
 self-sustaining                                                            
 operations                 334          115                  -         449 
Amortization of                                                             
 deferred                                                                   
 unrealized gain on                                                         
 discontinued                                                               
 hedges - net of                                                            
 income taxes of                                                            
 $21,384                (98,499)           -                  -     (98,499)
                   ---------------------------------------------------------
OTHER COMPREHENSIVE                                                         
 LOSS                   (98,165)         115                  -     (98,050)

                   ---------------------------------------------------------
COMPREHENSIVE                                                               
 INCOME               $ 415,195   $ (160,305)               $ -   $ 254,890 
                   ---------------------------------------------------------

Attributable to:                                                            
Shareholders of                                                             
 Just Energy          $ 417,182   $ (160,156)               $ -   $ 257,026 
Non-controlling                                                             
 interests               (1,987)        (149)                 -      (2,136)
                   ---------------------------------------------------------
                      $ 415,195   $ (160,305)               $ -   $ 254,890 



NET INCOME          NET INCOME                                              
Unrealized gain on  Unrealized gain on translation of self-sustaining       
 translation of     operations                                              
 self-sustaining                                                            
 operations                                                                 
Amortization of     Amortization of deferred unrealized gain on discontinued
 deferred           hedges - net of income taxes of $21,384                 
 unrealized gain on                                                         
 discontinued                                                               
 hedges - net of                                                            
 income taxes of                                                            
 $21,384                                                                    

OTHER COMPREHENSIVE OTHER COMPREHENSIVE LOSS                                
 LOSS                                                                       


COMPREHENSIVE       OTHER COMPREHENSIVE INCOME                              
 INCOME                                                                     


Attributable to:    Attributable to:                                        
Shareholders of     Shareholders of Just Energy                             
 Just Energy                                                                
Non-controlling     Non-controlling interests                               
 interests                                                                  



Reconciliation of Financial Position and Equity at March 31, 2011:          

----------------------------------------------------------------------------
                       Canadian                                             
Canadian GAAP              GAAP         IFRS              IFRS              
 accounts              balances  adjustments reclassifications IFRS balance 
----------------------------------------------------------------------------
ASSETS                                                                      
Non-current assets                                                          
 Property, plant                                                            
  and equipment       $ 235,189     $ (1,187)              $ -    $ 234,002 
 Intangible assets      412,752            -           227,467      640,219 
 Goodwill               224,409        3,058          (227,467)           - 
 Other assets long-                                                         
  term                    5,384            -                 -        5,384 
 Contract                                                                   
  initiation costs       29,654            -                 -       29,654 
 Long-term                                                                  
  receivable              4,569            -                 -        4,569 
 Future income tax                                                          
  assets                 85,899         (489)           36,375      121,785 
                   ---------------------------------------------------------
                        997,856        1,382            36,375    1,035,613 
Current assets                                                              
 Inventory                6,906            -                 -        6,906 
 Gas in storage           6,133            -                 -        6,133 
 Gas delivered in                                                           
  excess of                                                                 
  consumption             3,481            -                 -        3,481 
 Accounts                                                                   
  receivable            281,685            -                 -      281,685 
 Unbilled revenues      112,147            -                 -      112,147 
 Accrued gas                                                                
  receivable             26,535                                      26,535 
 Prepaid expenses                                                           
  and deposits            6,079            -                 -        6,079 
 Other assets -                                                             
  current                 3,846            -                 -        3,846 
 Corporate tax                                                              
  recoverable             9,135                              -        9,135 
 Current portion of                                                         
  future income tax                                                         
  assets                 36,375            -           (36,375)           - 
 Cash                    97,633            -               833       98,466 
 Restricted cash            833            -              (833)           - 
                   ---------------------------------------------------------
                        590,788            -           (36,375)     554,413 
                   ---------------------------------------------------------
TOTAL ASSETS        $ 1,588,644      $ 1,382               $ -  $ 1,590,026 
                   ---------------------------------------------------------

EQUITY AND                                                                  
 LIABILITIES                                                                
Shareholders'                                                               
 deficiency                                                                 
 Deficit           $ (1,063,179)  $ (286,749)              $ -  $(1,349,928)
 Accumulated other                                                          
  comprehensive                                                             
  income                123,804          115                 -      123,919 
Shareholders'                                                               
 capital                697,052      266,930                 -      963,982 
Equity component of                                                         
 convertible debt        33,914      (15,728)                -       18,186 
Contributed surplus      22,903       29,820                 -       52,723 
                   ---------------------------------------------------------
Total equity         $ (185,506)    $ (5,612)              $ -   $ (191,118)
                   ---------------------------------------------------------

Liabilities                                                                 
Non-current                                                                 
 liabilities                                                                
 Long-term debt       $ 507,460          $ -               $ -    $ 507,460 
 Future income                                                              
  taxes                   2,657        7,046            13,216       22,919 
 Deferred lease                                                             
  inducements             1,622            -                 -        1,622 
 Other liabilities                                                          
  - long-term           355,412            -                 -      355,412 
 Provisions                   -        3,244                 -        3,244 
                   ---------------------------------------------------------
                        867,151       10,290            13,216      890,657
Current liabilities                                                         
 Bank indebtedness        2,314            -                 -        2,314 
 Accounts payable                                                           
  and accrued                                                               
  liabilities           282,805       (7,302)                -      275,503 
 Accrued gas                                                                
  accounts payable       19,353            -                 -       19,353 
 Corporate taxes                                                            
  payable                 9,788            -                 -        9,788 
 Current portion of                                                         
  long-term debt         94,117            -                 -      147,117 
 Provisions                            4,006                 -        4,006 
 Current portion                                                            
  future income tax                                                         
  liabilities            13,216            -           (13,216)           - 
 Other liabilities                                                          
  - current             485,406            -                 -      485,406 
                   ---------------------------------------------------------
                        906,999       (3,296)          (13,216)     890,487
                   ---------------------------------------------------------
TOTAL LIABILITIES   $ 1,774,150      $ 6,994               $ -  $ 1,781,144 
                   ---------------------------------------------------------
TOTAL EQUITY AND                                                            
 LIABILITIES        $ 1,588,644      $ 1,382               $ -  $ 1,590,026 
                   ---------------------------------------------------------

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

Canadian GAAP       IFRS accounts                                           
 accounts                                                                   
----------------------------------------------------------------------------
ASSETS              ASSETS                                                  
Non-current assets  Non-current assets                                      
 Property, plant    Property, plant and equipment                           
  and equipment                                                             
 Intangible assets  Intangible assets                                       
 Goodwill                                                                   
 Other assets long- Other non-current financial assets                      
  term                                                                      
 Contract           Contract initiation costs                               
  initiation costs                                                          
 Long-term          Non-current receivables                                 
  receivable                                                                
 Future income tax  Deferred tax asset                                      
  assets                                                                    


Current assets      Current assets                                          
 Inventory          Inventories                                             
 Gas in storage     Gas in storage                                          
 Gas delivered in   Gas delivered in excess of consumption                  
  excess of                                                                 
  consumption                                                               
 Accounts           Current trade and other receivables                     
  receivable                                                                
 Unbilled revenues  Unbilled revenues                                       
 Accrued gas        Accrued gas receivable                                  
  receivable                                                                
 Prepaid expenses   Prepaid expenses and deposits                           
  and deposits                                                              
 Other assets -     Other current assets                                    
  current                                                                   
 Corporate tax      Corporate tax recoverable                               
  recoverable                                                               
 Current portion of                                                         
  future income tax                                                         
  assets                                                                    
 Cash               Cash and cash equivalents                               
 Restricted cash                                                            



TOTAL ASSETS        TOTAL ASSETS                                            


EQUITY AND          EQUITY AND LIABILITIES                                  
 LIABILITIES                                                                
Shareholders'       Equity attributable to equity holders of the parent     
 deficiency                                                                 
 Deficit            Deficit                                                 
 Accumulated other  Accumulated other comprehensive income                  
  comprehensive                                                             
  income                                                                    
Shareholders'       Shareholders' capital                                   
 capital                                                                    
Equity component of Equity component of convertible debt                    
 convertible debt                                                           
Contributed surplus Contributed surplus                                     

Total equity        Total equity                                            


Liabilities         LIABILITIES                                             
Non-current         Non-current liabilities                                 
 liabilities                                                                
 Long-term debt     Long-term debt                                          
 Future income      Provisions                                              
  taxes                                                                     
 Deferred lease     Deferred lease inducements                              
  inducements                                                               
 Other liabilities  Other non-current financial liabilities                 
  - long-term                                                               
 Provisions         Provisions                                              


Current liabilities Current liabilities                                     
 Bank indebtedness  Bank indebtedness                                       
 Accounts payable   Trade and other payables                                
  and accrued                                                               
  liabilities                                                               
 Accrued gas        Accrued gas accounts payable                            
  accounts payable                                                          
 Corporate taxes    Income taxes payable                                    
  payable                                                                   
 Current portion of Current portion of long-term debt                       
  long-term debt                                                            
 Provisions         Provisions                                              
 Current portion                                                            
  future income tax                                                         
  liabilities                                                               
 Other liabilities  Other current financial liabilities                     
  - current                                                                 



TOTAL LIABILITIES   TOTAL LIABILITIES                                       

TOTAL EQUITY AND    TOTAL EQUITY AND LIABILITIES                            
 LIABILITIES                                                                

Notes to the reconciliation of equity as at June 30, 2011.

A Property, plant and equipment

Canadian GAAP - Component accounting required but typically not practiced in Canada.

IFRS - Where an item of plant and equipment comprises major components with different useful lives, the components are accounted for as separate items. Management has re-assessed the significant parts of the ethanol plant which has resulted in a decrease in amortization of the ethanol plant.

B Transaction costs

Canadian GAAP - The cost of the purchase includes the direct costs of the business combination.

IFRS - Transaction costs of the business combination are expensed as incurred.

Transaction costs relating to the acquisition of Hudson have been expensed under IFRS. In addition, and in accordance with IAS 39, management has allocated transaction costs directly attributable to the credit facility which were previously included as part of a business combination, to the related long-term debt. These costs are now expensed using the effective interest rate method over the life of the related debt.

C Stock-based compensation and contributed surplus

Canadian GAAP - For grants of share-based awards with graded vesting, the total fair value of the award is recognized on a straight-line basis over the employment period necessary to vest the award.

IFRS - Each tranche in an award; graded vesting is considered a separate grant with a different vesting date and fair value. Each grant is accounted for on that basis. As a result, Just Energy adjusted its expense for share-based awards to reflect this difference in recognition.

D Provisions

Canadian GAAP - Accounts payable, accrued liabilities and provisions are disclosed on the consolidated statement of financial position as a single line item.

IFRS - Provisions are disclosed separately from liabilities and accrued liabilities and require additional disclosure. Under IFRS, provisions are also measured at the present value of the expenditures expected to be required to settle the obligation using a discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. This has resulted in an adjustment to Just Energy.

E Deferred tax asset/liability

Canadian GAAP - Deferred taxes are split between current and non-current components on the basis of either: (1) the underlying asset or liability or (2) the expected reversal of items not related to an asset or liability.

IFRS - All deferred tax assets and liabilities are classified as non-current.

F Impairment

Canadian GAAP - A recoverability test is performed by first comparing the undiscounted expected future cash flows to be derived from the asset to its carrying amount. If the asset does not recover its carrying value, an impairment loss is calculated as the excess of the asset's carrying amount over its fair value.

IFRS - The impairment loss is calculated as the excess of the asset's carrying amount over its recoverable amount, where recoverable amount is defined as the higher of the asset's fair value less costs to sell and its value-in-use. Under the value-in-use calculation, the expected future cash flows from the asset are discounted to their net present value. The change in measurement methodology did not result in additional impairment to Just Energy under IFRS.

G Exchangeable shares and equity-based compensation

Canadian GAAP - The Class A preference shares and exchangeable shares issued by a subsidiary of an income fund are presented on the consolidated balance sheets of the income fund as part of unitholders' capital if certain criteria were met.

Just Energy had met the criteria and the Class A preference shares and exchangeable shares were recorded as part of unitholders' capital.

IFRS - As a result of the Class A preference shares, exchangeable shares and equity-based compensation being exchangeable into a puttable liability, the shares and equity-based compensation did not meet the definition of an equity instrument in accordance with IAS 32 "Financial Instruments: Presentation" and accordingly, were classified as financial liabilities. The Exchangeable Shares and equity-based compensation were recorded upon transition to IFRS at redemption value and subsequent to transition were adjusted to reflect the redemption value at each reporting date. The resulting change from carrying value to redemption value was recorded at transition and at each reporting period to retained earnings and earnings respectively as a change in fair value of derivative instruments. All distributions were recorded as interest expense in the reporting period for which the dividends were declared.

H Deferred taxes

Canadian GAAP - There was an exemption that allowed issuers of convertible debentures to treat the difference in the convertible debentures as a permanent difference between tax and accounting. This exemption does not exist under IFRS.

Under CGAAP, Just Energy's deferred tax balances were calculated using the enacted or substantively enacted tax rates that were expected to apply to the reporting period(s) when the temporary differences were expected to reverse.

IFRS - The discount on the convertible debentures has been included in assessing the Company's future tax position. IAS 12 "Income Taxes" requires the application of an "undistributed tax rate" in the calculation of deferred taxes, whereby deferred tax balances are measured at the tax rate applicable to Just Energy's undistributed profits during the periods when Just Energy was an income trust.

Deferred taxes have been recalculated on the revised accounting values for the adjustments A - G.

I Acquisition of minority interest

Canadian GAAP - The gain on the acquisition of minority interest which occurred on January 1, 2011, was treated as a reduction to goodwill on the original acquisition.

IFRS - The gain was reallocated to contributed surplus as this is considered an equity transaction under IFRS.

J Cash flow statements

Cash flow statements prepared under IAS 7 "Statement of Cash Flows" present cash flows in the same manner as under previous GAAP. Other than the adjustments noted above, reclassifications between net earnings and the adjustments to compute cash flows from operating activities there were no material changes to the statement of cash flows.

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

Contact Information

  • Just Energy Group Inc.
    Ms. Rebecca MacDonald
    Executive Chair
    (416) 367-2872

    Just Energy Group Inc.
    Mr. Ken Hartwick, C.A.
    Chief Executive Officer & President
    (905) 795-3557

    Just Energy Group Inc.
    Ms. Beth Summers, C.A.
    Chief Financial Officer
    (905) 795-4206
    www.justenergygroup.com