Crius Energy Trust Tr Unit CRIUF

RBC

[retiredcf]

Crius Energy

Outperform, Speculative Risk ($10 one-year price target)
Third-quarter earnings and ACFFO (release date: November 14)

We expect that Crius Energy’s adjusted EBITDA will increase to US$22 million in Q3/18 fromUS$18 million in Q3/17, which is primarily attributable to a full quarter of contribution from the acquisition of US Gas & Electric (closed in July 2017), the positive impact from accounting changes with respect to commission and capacity costs, and more favourable weather conditions. We expect Q3/18 ACFFO/unit (diluted) to remain flat at US$0.23 as the higher Adjusted EBITDA is offset by higher cash taxes and financing costs, and slightly higher units outstanding.

We note that during the quarter there were 49% more cooling-degree days in the U.S. Northeast versus Q3/17 (+42% vs. long-term-average) and 7% more cooling-degree days in Texas (+6% vs. long-term-average). The Y/Y increase in cooling-degree days is likely to lead to higher volumes and margins, but may be partially offset (or more than offset) by an increase in hedging costs.

We expect investors will focus on net customers added or attrition, gross margin trend, as well as any updates on the potential exit (divestiture or wind-down) of the solar business.

The FactSet mean EBITDA estimate for Q3/18 is US$23 million (three estimates ranging from US$22 million to US$25 million).