Texas Winter Storm and Just Energy Group Inc. Companies’ Creditors Arrangement Act/Chapter 15 Filing Updates*
1. Why did Just Energy file for protection under CCAA?
As a result of the unprecedented storm that recently hit Texas, charges from the Electric Reliability Council of Texas (ERCOT) have created a liquidity challenge for Just Energy. For that reason, Just Energy has sought and received protection under the Companies’ Creditors Arrangement Act (CCAA). CCAA is Canadian legislation that allows businesses to restructure under a process that permits them to continue to operate. The Company’s largest commodity suppliers have also agreed to continue to support the Company with commodity supply and ISO services. As a result, our day-to-day operations across Canada and the U.S. are unaffected by the CCAA filing.
2. What is the CCAA?
The CCAA is a federal law in Canada that provides insolvent companies with debts in excess of $5 million an orderly and supervised means to restructure their businesses.
Once a company has been granted CCAA protection, the Court enters an Initial Order establishing what is known as a ‘Stay of Proceedings’, which prevents creditors from taking action against the company, its directors and officers, and its assets for an initial period of 10 days (which can be further extended as the court deems appropriate) allowing the company to continue to manage the day-to-day operations of the business while it addresses its restructuring objectives in an orderly and efficient manner.
CCAA protection provides companies with the time and “breathing room” necessary to emerge as a successful, going concern business and to position the business as a stronger, more competitive company.
3. How long will the CCAA process take?
The Court granted CCAA protection for an initial period of 10 days, and on March 19, 2021 the CCAA protection was extended to June 4, 2021. The Company will work to complete its restructuring in a timely fashion, though there is no standard timeframe for the duration of CCAA proceedings.
4. Is Just Energy bankrupt?
No. While a company filing for CCAA is insolvent, meaning that it has insufficient liquidity to continue to fund its obligations as they become due and/or its liabilities are greater than the assets that are available to satisfy those liabilities, the company is not considered to be bankrupt. In Canada, ‘bankruptcy’ refers to proceedings commenced under the Bankruptcy and Insolvency Act, which is different than the CCAA.
In fact, the Stay of Proceedings under the CCAA prevents creditors from forcing the company into bankruptcy. For this reason, CCAA is sometimes referred to as ‘Bankruptcy Protection’.
We continue to proudly provide a vital service to our customers while meeting our regulatory obligations to ERCOT and regulators in the other jurisdictions in which we operate.
5. Is CCAA the same as declaring bankruptcy in the US?
CCAA would be most similar to a Chapter 11 reorganization in the US. We have also received an order from the US Court under Chapter 15 of the US Bankruptcy Code, which recognizes the Canadian process, as is customary in these matters.
6. Is Just Energy at risk of a POLR event?
Other retail energy providers in Texas whose customers were shifted to a POLR (Provider of Last Resort) were not paying ERCOT. We continue to pay ERCOT, and in fact we pursued this course of action because it was the best path to ensure we could continue to pay ERCOT.
* Just Energy Group Inc. is the parent company of Hudson Energy Services, LLC.