Just Energy (JE) - Get Report said Tuesday that it was restructuring for court protection in Canada and would seek similar protection in the United States after last month's freezing weather in Texas knocked out power to millions of residents.
The Toronto-based power company said it was restructuring under the Companies' Creditors Arrangement Act in Canada and plans to file for Chapter 15 bankruptcy in the United States following last month's freezing weather in Texas.
The move is among the first in what is expected to become a wave of bankruptcies tied to the storm.
Just Energy reached an agreement with one of its lenders for a $125 million debtor-in-possession financing to meet its regulatory obligations in North America, including payments required by the Electric Reliability Council of Texas.
The unprecedented Texas outages left four million homes and businesses without heat, light and in some cases water last month as a rare and powerful winter storm gripped the region, according to Bloomberg, causing as much as $129 billion in economic losses.
The state’s power market faces a $2.4 billion shortfall as companies face sky-high energy bills.
At least 80 people died a result of the storm and its effects, although officials said that it would be weeks or months before the total human cost could be determined.
"Today’s filings are the result of unprecedented cold weather in Texas in February (the 'Weather Event'), and corresponding charges from ERCOT currently totaling over $250 million that Just Energy must pay in the near term," the company said in a statement.
The company said that a combination of customer usage and the Real Time Settlement Point Price being artificially set at the high offer cap of $9,000 per megawatt hour "contributed significantly" to Just Energy's troubles.
The extreme weather caused the ERCOT wholesale market to incur charges of about $55 billion over a seven-day period, an amount equal to what it ordinarily incurs over four years.
"While Just Energy hedges weather risk based on historical scenarios, the Weather Event in Texas was colder than anything experienced in decades," the company said.
Last month Just Energy warned that the extreme weather in Texas could affect the group's ability to continue as a going concern and forecast a $250 million hit from the winter storms that swept across the state.