Lots of fine numbers at
Energy Savings -- but...

Rebecca MacDonald built what’s been at times Canada’s fastest growing firm.
        She started an earnings call by apologizing for the firm’s lower unit price.
        The price of a share fell 30% from recent highs, she noted.
        The truth is that like all fast-growing firms, sooner or later they face growing pains, MacDonald replied.
        Her Energy Savings Income Fund (ESIF) had all kinds of solid numbers.
        Seasonally adjusted sales were up 27%. Seasonally-adjusted gross sales margin was up 19%.
        Distributable cash after marketing, was up 37% and net income up 7%.
        New customers?
        They expected more and that’s a major problem, said MacDonald.
        In the second quarter they sold contracts (usually the five- year kind) to 93,000 new customers but in the final quarter ended Dec 31 new additions went to only 65,000.
        What’s the outlook?
        The job markets in the US and Canada are ESIF’s major problem.         Agents are hard to find.
        The firm believes it pays them well but some get disappointed by income levels and leave.
        True, ESIF is held back by depleted sales staffs in the US and Canada.
        What happened in the past three years to explain the weak unit performance, she asked.
        The cash payout rate is up over 37% in three years, MacDonald said, and they haven’t missed a payout.
        The customer base has risen from 1 million customers three years ago to 1.65 million at the end of last year.
        That’s up 65%, MacDonald added.
        Improved operating performance hasn’t been the problem in her view.  Three years ago ESIF was in two provinces -- Ontario and Manitoba.
        The firm runs in five provinces and five US states while market share is growing in all.
        She likes the firm as bigger, more profitable and geographically more diverse.
        She carries the title of executive chair. Brenan Mulcahy is CEO. McDonald turned the mike over to him.
        Mulcahy found the year to year growth to be on track but was disappointed with the 65,000 new customers.
        He’s disappointed with New York. ESIF hoped to add 20% to its customer roles.
        It expected to add 190,000 customers but in all US states they picked up less than half of the expected new customers.
        Asked about the outlook of Gov Eliot Spitzer’s Administration, the firm said the outlook is unknown.
        Mulcahy is pleased with the settlement work out in Consolidated Edison’s footprint and that the result will be a net gain for ESIF.
        Did the move into the US go well?
        The job market in Canada made it tough to replace those sales agents who had been sent to the US to kick-start markets, Mulcahy replied.
        But the margins were good -- 43% higher on new contracts, he said.
        Those contracts tend to be for five years and Mulcahy sees them strengthening cash flow for years to come.
        Getting new agents in the door “fuels our growth,” he explained.
        That’s why ESIF is trying new ways to find and train new sales agents.
        The Alberta job market is especially tough, MacDonald reminded.

Market	Published Target	F2007 Q3 Additions	F2007 Q3 YTD Additions	% of Target	F2006 Q3 Additions
Ontario - Gas	50000	3000	26000	52%	44000
Other provinces - Gas	60000	10000	50000	83%	67000
Eletricity - Canada	175000	23000	131000	75%	126000
United States - Gas	100000	18000	55000	55%	58000
United States - Electricity	90000	11000	24000	27%	17000
Total	475000	65000	286000	60%	312000

        Originally published in Restructuring Today on February 9, 2007