UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-35327
GENIE ENERGY LTD.
(Exact Name of Registrant as Specified in its Charter)
Delaware
45-2069276
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
520 Broad Street, Newark, New Jersey
07102
(Address of principal executive offices)
(Zip Code)
(973) 438-3500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b)-2 of the Exchange Act:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒
As of August 7, 2024, the registrant had the following shares outstanding:
Class A common stock, $0.01 par value:
1,574,326 shares
Class B common stock, $0.01 par value:
25,318,782 shares (excluding 3,587,203 treasury shares)
GENIE ENERGY LTD.TABLE OF CONTENTS
(in thousands, except per share amounts)
June 30,2024
December 31,2023
(Unaudited)
(Note 1)
Assets
Current assets:
Cash and cash equivalents
$
122,342
107,609
Trade accounts receivable, net of allowance for doubtful accounts of $7,349 and $6,574 at June 30, 2024 and December 31, 2023, respectively
54,228
61,909
Inventory
5,637
14,598
Prepaid expenses
11,743
16,222
Other current assets
5,576
5,475
Total current assets
216,128
229,833
Goodwill
12,658
9,998
Other intangibles, net
2,551
2,735
Deferred income tax assets, net
5,209
5,200
Other assets
15,308
15,247
Total assets
322,783
330,555
Liabilities and equity
Current liabilities:
Trade accounts payable
26,585
27,881
Accrued expenses
36,288
49,389
Income taxes payable
9,062
6,699
Due to IDT Corporation, net
150
145
Other current liabilities
6,505
9,280
Total current liabilities
83,380
98,252
Other liabilities
2,771
2,212
Total liabilities
133,229
146,047
Commitments and contingencies
—
Equity:
Genie Energy Ltd. stockholders’ equity:
Preferred stock, $0.01 par value; authorized shares—10,000:
Additional paid-in capital
158,007
156,101
Retained earnings
73,779
60,196
Total Genie Energy Ltd. stockholders’ equity
202,078
197,239
Noncontrolling interests
(12,524
(12,731
Total equity
189,554
184,508
Total liabilities and equity
See accompanying notes to consolidated financial statements.
(in thousands, except per share data)
Revenues:
Electricity
Natural gas
Other
Total revenues
Cost of revenues
Gross profit
Operating expenses:
Selling, general and administrative (i)
Income from operations
Interest income
Interest expense
Other income, net
Income before income taxes
Provision for income taxes
Net income from continuing operations
Net (loss) income attributable to noncontrolling interests, net
Net income attributable to Genie Energy Ltd.
Dividends on preferred stock
Net income attributable to Genie Energy Ltd. common stockholders
Earnings (loss) per share attributable to Genie Energy Ltd. common stockholders:
Earnings per share attributable to Genie Energy Ltd. common stockholders
Weighted-average number of shares used in calculation of earnings per share:
Basic
Diluted
Dividends declared per common share
(i) Stock-based compensation included in selling, general and administrative expenses
Net income
Other comprehensive loss:
Foreign currency translation adjustments
Comprehensive income
Comprehensive loss attributable to noncontrolling interests
Comprehensive income attributable to Genie Energy Ltd.
Genie Energy Ltd. Stockholders
Preferred
Class A
Class B
Additional
Accumulated Other
Non
Stock
Common Stock
Paid-In
Treasury
Comprehensive
Retained
controlling
Total
Shares
Amount
Capital
Income
Earnings
Interests
Equity
GENIE ENERGY LTD.CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except dividend per share) — (Continued)
5
Six Months EndedJune 30,
2024
2023
(in thousands)
Operating activities
17,525
29,730
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
415
191
Provision for doubtful accounts receivable
1,210
1,372
Stock-based compensation
1,207
1,648
Changes in assets and liabilities:
Trade accounts receivable
6,565
(4,468
6,616
(2,472
4,479
(1,971
Other current assets and other assets
1,919
941
Trade accounts payable, accrued expenses and other liabilities
(18,156
(2,430
4
(21
2,362
(11,581
Net cash provided by operating activities
33,335
20,240
Investing activities
Capital expenditures
(1,562
(561
)
Repayment of notes receivable
19
Net cash used in investing activities
(7,148
(1,563
Financing activities
Dividends paid
(4,152
(4,763
Repurchases of Class B common stock from employees
(1,508
(1,475
Net cash used in financing activities
(12,325
(9,597
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(140
(37
Net increase in cash, cash equivalents, and restricted cash
13,722
9,043
Cash, cash equivalents, and restricted cash (including cash held at discontinued operations) at beginning of period
165,479
106,080
Cash, cash equivalents, and restricted cash (excluding cash held at discontinued operations) at end of period
177,920
114,658
Note 1—Basis of Presentation and Business Changes and Development
The accompanying unaudited consolidated financial statements of Genie Energy Ltd. and its subsidiaries (the “Company” or “Genie”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The balance sheet at December 31, 2023 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
The Company owns 100% of Genie Retail Energy (“GRE”) and varied interests in entities that comprise the Genie Renewables segment.
GRE owns and operates retail energy providers (“REPs”), including IDT Energy (“IDT Energy”), Residents Energy (“Residents Energy”), Town Square Energy and Town Square Energy East (collectively, "TSE"), Southern Federal Power ("Southern Federal") and Mirabito Natural Gas (“Mirabito”). The majority of GRE's REP customers are located in the Eastern and Midwestern United States and Texas. Mirabito supplies natural gas to commercial customers in Florida.
Genie Renewables consists of a 95.5% interest in Genie Solar, an integrated solar energy company, a 92.8% interest in CityCom Solar, a marketer of community solar and other sales solutions and a 91.5% interest in Diversegy, an energy broker.
In addition to being a solar energy developer and operator, Genie Solar owns a 60.0% interest in Prism Solar Technology ("Prism") which designs and manufactures specialized solar panels.
Impairment of Assets
In the second quarter of 2024, the Company discontinued several projects of Genie Solar as a result of lack of viability. The Company recognized an impairment of assets of $0.1 million related to costs previously capitalized in the property and equipment accounts in the consolidated balance sheets.
One-Time Tax Credit
In the first quarter of 2023, the Company received $3.1 million in respect of a one-time tax credit related to payroll taxes incurred in prior years, which the Company recognized as a gain included in other income, net in the accompanying consolidated statements of operations for the six months ended June 30, 2024.
Discontinued Operations in Finland and Sweden
Prior to the third quarter of 2022, the Company had a third segment, Genie Retail Energy International, or GRE International, which supplied electricity to residential and small business customers in Scandinavia. However, as a result of volatility in the energy market in Europe, in the third quarter of 2022, the Company decided to discontinue the operations of Lumo Energia Oyj ("Lumo Finland") and Lumo Energi AB ("Lumo Sweden").
The Company determined that the discontinuation of the operations of Lumo Finland and Lumo Sweden represented a strategic shift that would have a major effect on the Company's operations and financial statements. The Company accounts for these businesses as discontinued operations, and accordingly, presents the results of operations and related cash flows as discontinued operations. The results of operations and related cash flows are presented as discontinued operations for all periods. Any remaining assets and liabilities of the discontinued operations are presented separately and reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of June 30, 2024 and December 31, 2023. Lumo Sweden are continuing to liquidate their remaining receivables and settle any remaining liabilities.
In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to an administrator (the "Lumo Administrators"). All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its equity ownership interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effective November 9, 2022.
Following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to be a segment and the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate.
Discontinued Operations in the United Kingdom
In October 2021, as part of the orderly exit process from the U. K. market, Orbit Energy Limited ("Orbit"), a REP owed by the Company that used to operate in United Kingdom, and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transferred the administration of Orbit to an administrator (the" Orbit Administrators") effective December 1, 2021.
The Company determined that the discontinued operations of Orbit represented a strategic shift that would have a major effect on the Company's operations and financial statements. Since the appointment of the Orbit Administrators, the Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. Since the Company lost control of the management of Orbit in favor of the Orbit Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021.
On November 21, 2023, the Court issued an order to cease the administration and revert the control of Orbit from the Orbit Administrators to the Company effective November 28, 2023. Following the Company regaining control of the management of Orbit, the accounts of Orbit are consolidated effective November 28, 2023.
Seasonality and Weather; Climate Change and Volatility in Pricing
The weather and the seasons, among other things, affect GRE’s revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters or summers have the opposite effect. Unseasonable temperatures in other periods may also impact demand levels. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 48.1% and 39.7% of GRE’s natural gas revenues for the relevant years were generated in the first quarters 2023 and 2022, respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 32.5% and 30.5% of GRE’s electricity revenues were generated in the third quarters of 2023 and 2022, respectively. GRE’s REPs’ revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.
In addition to the direct physical impact that climate change may have on the Company's business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.
Note 2—Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet and the corresponding amounts reported in the consolidated statements of cash flows:
June 30,
December 31,
Restricted cash—short-term
9,178
10,442
Total cash, cash equivalents, and restricted cash
162,996
Restricted cash—short-term includes amounts set aside in accordance with GRE's Amended and Restated Preferred Supplier Agreement with BP Energy Company (“BP”) (see Note 19), Credit Agreement with JPMorgan Chase (see Note 20) and restricted for use in order to secure the current portion of the insured liability program (see Note 19).
Restricted cash—long-term consists of cash of a wholly-owned captive insurance subsidiary (the "Captive"), which is restricted for use to secure the noncurrent portion of the insured liability program (see Note 19).
Included in the cash and cash equivalents as of June 30, 2024 and December 31, 2023 is cash received from Lumo Sweden (see Note 5).
Note 3—Inventories
Inventories consisted of the following:
737
1,309
Renewable credits
4,827
12,105
Solar panels, net of a valuation allowance of $nil million and $0.8 million at June 30, 2024 and December 31, 2023, respectively
73
1,184
Totals
In the six months ended June 30, 2024, the Company recorded an inventory valuation allowance of $0.4 million to the cost of revenues to write down the carrying value of solar panel inventories to the estimated net realizable value. There is no inventory valuation allowance recorded for the three months ended June 30, 2024. The solar panel inventories are transferred to ongoing solar projects of Genie Solar together with the inventory valuation allowance in the prepaid assets and property and equipment accounts in the balance sheet.
Note 4—Revenue Recognition
Revenue from the single performance obligation to deliver a unit of electricity and/or natural gas is recognized as the customer simultaneously receives and consumes the benefit. Variable quantities in requirements contracts are considered to be options for additional goods and services because the customer has a current contractual right to choose the amount of additional distinct goods to purchase. GRE records unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on available per day usage data, the number of unbilled days in the period and historical trends.
Incumbent utility companies in most of the service territories in which GRE's REPs operate offer purchase of receivables, or POR, and GRE’s REPs participate in POR programs for a majority of their receivables. The Company estimates variable consideration related to its rebate programs using the expected value method and a portfolio approach. The Company’s estimates related to rebate programs are based on the terms of the rebate program, the customer’s historical electricity and natural gas consumption, the customer’s rate plan, and a churn factor. Taxes that are imposed on the Company’s sales and collected from customers are excluded from the transaction price.
Revenue from sales of solar panels are recognized at a point in time following the transfer of control of the solar panels to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For sales contracts that contain multiple performance obligations, such as the shipment or delivery of solar modules, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenues from sales of solar panels are included in other revenues in the consolidated statements of operations.
Genie Solar enters into contracts to identify, develop, and in some cases operate solar generation sites to provide solar electricity to its customers. Obligations under solar project contracts consist of a series of tasks and components and accordingly are accounted for as multiple performance obligations. Because the Company’s performance creates and enhances assets that are controlled by and specific to customers, the Company recognizes construction services revenue over time. Revenue for these performance obligations is recognized using the input method based on the cost incurred as a percentage of total estimated contract costs. Due to the significance of the costs associated with solar panels to the total project, our judgment on when such costs should be included in the measure of progress has a material impact on revenue recognition. Contract costs include all direct material and labor costs related to contract performance. Revenues from sales of solar panels and solar panel projects are included under the Other Revenues in the consolidated statements of operations.
Energy generation revenue is earned from both the sale of electricity generated from operating solar projects and the sale of Solar Energy Credits ("SRECs") which are included in the Other Revenues in the consolidated statement of operations.
Revenue from energy generation is recognized when the Company satisfies the performance obligation, which occurs at the time of the delivery of electricity at the contractual rates.
The Company applies for and receives SRECs in certain jurisdictions for power generated by solar energy systems it owns. There are no direct costs allocated to SRECs upon generation. The Company typically sells SRECs to different customers from those purchasing the energy. The sale of each SREC is a distinct performance obligation satisfied at a point in time and that the performance obligation related to each SREC is satisfied when each SREC is delivered to the customer.
Revenues from commissions from selling third-party products to customers, entry and other fees from the energy brokerage are recognized at the time the performance obligation is met. The Company's contacts with customers for commission revenue contain a single performance obligation and are satisfied at a point in time.
The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, the Company applies a practical expedient to expense costs as incurred for sales commissions to acquire customers as the period would have been one year or less.
Disaggregated Revenues
The following table shows the Company’s revenues disaggregated by pricing plans offered to customers:
Natural Gas
Three Months Ended June 30, 2024
Fixed rate
47,207
3,295
50,502
Variable rate
31,094
5,119
36,213
3,981
78,301
8,414
90,696
Three Months Ended June 30, 2023
47,625
2,983
50,608
32,574
5,992
38,566
4,289
80,199
8,975
93,463
Fixed and variable rate revenues are from GRE. Other revenues are revenues from Genie Renewables which includes revenues from solar panels, solar projects and energy generation by Genie Solar, commissions from marketing energy solutions by CityCom Solar and Diversegy.
The following table shows the Company’s revenues disaggregated by non-commercial and commercial channels:
Non-Commercial Channel
72,759
2,784
75,543
Commercial Channel
5,542
5,630
11,172
65,332
5,939
71,271
14,867
3,036
17,903
Contract liabilities
Certain revenue generating contracts at Renewables include provisions that require advance payment from customers. These advance payments are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in future periods is recognized as a contract liability. Contract liabilities are included in other current liabilities account in the consolidated balance sheet.
The table below reconciles the change in the carrying amount of contract liabilities:
Contract liability, beginning
5,582
1,759
The change in the allowance for doubtful accounts was as follows:
Allowance for doubtful accounts, beginning
6,574
4,826
Note 5—Acquisitions and Discontinued Operations
Consolidation of Roded
In December 2022, the Company, entered into an investment agreement with Roded Recycling Industries Ltd. ("Roded") and its current owners to acquire a 45.0% noncontrolling interest in Roded for New Israel Shekel ("NIS")5.0 million (equivalent to $1.5 million at the date of the transaction). Roded is engaged in developing a process to recycle used plastic materials into usable industrial products. The Company accounts for its ownership interest in Roded using the equity method.
From December 2022 to April 2024, the Company contributed an aggregate of $0.4 million gradually increasing its interest in Roded to a 51.2% controlling interest on April 12, 2024. Prior to April 12, 2024, the net book value of the Company's investment in Roded was $1.3 million. Following the transaction, the Company has control over the activities of Roded.
The Company recorded a minimal revenue for Roded in its consolidated statements of operations and comprehensive income for three and six months ended June 30, 2024. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations.
The Company conducted a preliminary assessment of assets and liabilities related to the acquisition of Roded. The impact of the acquisition's purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred were as follows (amounts in thousands):
Cash and other current liabilities
200
Goodwill was allocated to the Renewables segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.
Acquisition of Solar System Facilities
On November 3, 2023, the Company acquired ten special-purpose entities that own and operate solar system facilities in Ohio and Michigan. The Company paid a total of $7.5 million, including $1.0 million held in escrow which was released in June 2024.
The acquisition has been accounted for as asset acquisition and the Company recorded $7.7 million in total purchase price, including $0.2 million of direct transaction costs allocated to solar array assets included in the property and equipment account in the consolidated balance sheet with estimated useful lives of 14 to 30 years.
On November 3, 2023, the Company also signed an agreement to purchase from the sellers another special purpose entity that owned and operated a solar system facility in Indiana, for $1.3 million, subject to the satisfaction of certain closing conditions. In February 2024, the purchase of the solar system facility in Indiana was completed. The acquisition has been accounted for as asset acquisition and the Company recorded $1.3 million to solar array assets included in the property and equipment account in the consolidated balance sheet with estimated useful lives of 30 years.
The acquired assets are allocated to the Renewables segment.
Lumo Finland and Lumo Sweden Operations
As a result of the sustained volatility of the energy market in Europe, in the third quarter of 2022, the Company decided to discontinue the operations of Lumo Finland and Lumo Sweden. From July 13, 2022 to July 19, 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden. The sale price has been fixed and is expected to continue to be settled monthly based on the monthly commodity volume specified in the instruments from September 2022 to March 2025.
The Company determined that the discontinuation of operations of Lumo Finland and Lumo Sweden represented a strategic shift that would have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations are presented separately and reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of June 30, 2024 and December 31, 2023. Lumo Sweden is continuing to liquidate its remaining receivables and to settle any remaining liabilities.
In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to the Lumo Administrators. All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its equity ownership interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effective November 9, 2022.
The following table represents summarized balance sheet information of assets and liabilities of the discontinued operations of Lumo Sweden:
December 31, 2023
Cash
1,281
2,483
Receivables from the settlement of derivative contract—current
5,799
10,699
Current assets of discontinued operations
7,080
13,182
Liabilities
Accounts payable and other current liabilities
31
Current liabilities of discontinued operations
2,070
1,490
The summary of the results of operations of the discontinued operations of Lumo Sweden were as follows:
Net loss from discontinued operations, net of taxes
The following table presents a summary of cash flows of the discontinued operations of Lumo Sweden:
Net (loss) income
Non-cash items
Changes in assets and liabilities
Cash flows provided by operating activities of discontinued operations
Prior to being treated as discontinued operations or being deconsolidated, the assets and liabilities of Lumo Finland and Lumo Sweden were included in GRE International segment.
On November 8, 2023, the Lumo Administrators, acting on behalf of the Bankruptcy Estate, filed a claim in the District Court of Helsinki against Genie Nordic, a wholly owned subsidiary of the Company and the parent company of Lumo Finland, its directors, officers and affiliates, in which it alleges that the gain from the sale of swap instruments owned by Lumo Sweden amounting to €35.2 million (equivalent to $37.8 million as of June 30, 2024) belongs to the Bankruptcy Estate. The Bankruptcy Estate filed an additional claim with the District Court on May 27, 2024 against Lumo Sweden for €4.8 million (equivalent to $5.2 million as of June 30, 2024), also alleging that the gain from the sale of the swap instruments belongs to the Bankruptcy Estate, bringing the aggregate sum of claims related to the gain from sale of swap instruments to €40.0 million (equivalent to $43.0 million as of June 30, 2024). The Company believes that the Lumo Administrators' position is without merit, and it intends to vigorously defend its position.
Genie was also notified that the Lumo Administrators filed a claim against one of Lumo Finland’s suppliers, seeking to recover payments made by Lumo Finland amounting to €4.2 million (equivalent to $4.5 million as of June 30, 2024) prior to the bankruptcy. Related to such payment, the Lumo Administrators have filed a recovery claim jointly against the Company and the supplier for €1.6 million (equivalent to $1.7 million as of June 30, 2024) alleging that a portion of the payment by Lumo Finland effectively reduced the Company's liability under the terms of a previously supplied parental guarantee (this €1.6 million is included within and not additive to the €4.2 million). The Lumo Administrators allege that the payments represented preferential payments and therefore belong to the bankruptcy estate which are recoverable under the laws of Finland. The Company intends to challenge the Lumo Administrators' claims. Should the Lumo Administrators succeed in clawing back the funds from the supplier, it is possible that the supplier may seek to recover its losses against the Company, under terms of the parental guarantee. At this time, there is insufficient basis to assess an amount of any probable loss.
U.K. Operations
In the third quarter of 2021, the natural gas and energy market in the United Kingdom deteriorated which prompted the Company to start the process of orderly withdrawal from the United Kingdom. In October 2021, as part of the orderly exit process, Orbit and Shell agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transfer the administration of Orbit to Orbit Administrators effective December 1, 2021, which transfer was effective December 1, 2021. All assets and liabilities of Orbit, including cash and receivables remained with Orbit and the management and control of which was transferred to Orbit Administrators. As a result of loss of control, the Company deconsolidated Orbit effective December 1, 2021 and estimated the remaining liability related to its ownership of Orbit.
The Company determined that the discontinued operations of Orbit represented a strategic shift that would have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations effective December 1, 2021.
On November 21, 2023, the Court issued an order to cease the administration and revert the control of Orbit from the Orbit Administrators to the Company effective November 28, 2023. Following the Company regaining control of the management of Orbit, the accounts of Orbit were reconsolidated effective November 28, 2023. In 2023, the Orbit Administrators paid the Company a return of its interest in Orbit of £18.8 million (equivalent to $23.7 million on the dates of transfer).
There was no income or loss from discontinued operations recognized in the three and six months ended June 30, 2024. In the three and six months ended June 30, 2023, the Company recognized income from discontinued operation, net of taxes of $2.6 million and $5.4 million, respectively, mainly from the increases in the estimated value of our investments in Orbit due to a change in estimated net assets of Orbit after the expected settlement of the liabilities by the Orbit Administrators.
Prior to being treated as discontinued operations and deconsolidation, the assets and liabilities of Orbit were included in the Company's former GRE International segment.
Note 6—Fair Value Measurements
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis:
Level 1 (1)
Level 2 (2)
Level 3 (3)
June 30, 2024
Assets:
Derivative contracts
750
Liabilities:
592
673
1,724
(1) – quoted prices in active markets for identical assets or liabilities
(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities
(3) – no observable pricing inputs in the market
The Company’s derivative contracts consist of natural gas and electricity put and call options and swaps. The underlying asset in the Company’s put and call options is a forward contract. The Company’s swaps are agreements whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period.
The Company did not have any transfers of assets or liabilities between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the three months ended June 30, 2024 or 2023.
Fair Value of Other Financial Instruments
The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
Restricted cash—short-term, trade receivables, due to IDT Corporation, other current assets and other current liabilities. At June 30, 2024 and December 31, 2023, the carrying amounts of these assets and liabilities approximated fair value. The fair value estimate for restricted cash—short-term was classified as Level 1. The carrying value of other current assets, due to IDT Corporation, and other current liabilities approximated fair value.
Other assets. At June 30, 2024 and December 31, 2023, other assets included notes receivable. At June 30, 2024, the carrying amount of the notes receivable approximated fair value. The fair values were estimated based on the Company’s assumptions, and were classified as Level 3 of the fair value hierarchy.
The primary non-recurring fair value estimates typically are in the context of goodwill impairment testing, which involves Level 3 inputs, and asset impairments (Note 10) which utilize Level 3 inputs.
Concentration of Credit Risks
The Company holds cash, cash equivalents, and restricted cash at several major financial institutions, which may exceed Federal Deposit Insurance Corporation insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.
The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed 10.0% of consolidated net trade receivables at June 30, 2024 and December 31, 2023 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as June 30, 2024 or December 31, 2023):
Customer A
20.7
%
21.4
The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated revenues for the three and six months ended June 30, 2024 and 2023 (no other single customer accounted for 10.0% or greater of our consolidated revenues in these periods):
na—less than 10.0% of consolidated revenue in the period
Note 7—Derivative Instruments
The primary risk managed by the Company using derivative instruments is commodity price risk, which is accounted for in accordance with Accounting Standards Codification 815 — Derivatives and Hedging. Natural gas and electricity put and call options and swaps are entered into as hedges against unfavorable fluctuations in market prices of natural gas and electricity. The Company does not apply hedge accounting to these options or swaps, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties. At June 30, 2024, GRE’s swaps and options were traded on the Intercontinental Exchange.
The summarized volume of GRE’s outstanding contracts and options at June 30, 2024 was as follows (MWh – Megawatt hour and Dth – Decatherm):
Settlement Dates
Volume
Electricity (in MWH)
Gas (in Dth)
The fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:
Asset Derivatives
Balance Sheet Location
Derivatives not designated or not qualifying as hedging instruments:
Total derivatives not designated or not qualifying as hedging instruments — Assets
Liability Derivatives
Total derivatives not designated or not qualifying as hedging instruments — Liabilities
(1) The Company classifies derivative assets and liabilities as current based on the cash flows expected to be incurred within the following 12 months.
The effects of derivative instruments on the consolidated statements of operations was as follows:
Derivatives not designated or not qualifying as
Location of Gain Recognized
hedging instruments
on Derivatives
Energy contracts and options
Other assets consisted of the following:
Security deposit
7,282
7,950
Right-of-use assets, net of amortization
1,828
2,138
2,057
2,202
Location in Balance Sheet
Measurement
Rafael Holdings, Inc.
Quoted market price
PRI Fuel Supply Ltd.
324
Roded (see Note 4)
1,268
Balance, beginning of period
4,835
Purchase
3,025
Distribution
(582
Balance, end of period
Note 10—Goodwill and Other Intangible Assets
The table below reconciles the change in the carrying amount of goodwill for the period from January 1, 2024 to June 30, 2024:
GRE
Balance at January 1, 2024
Balance at June 30, 2024
The table below presents information on the Company’s other intangible assets:
Weighted Average Amortization Period
Gross Carrying Amount
Accumulated Amortization
Net Balance
Patents and trademarks
3,510
(1,481
2,029
Customer relationships
9.0 years
1,100
(835
265
Licenses
10.0 years
479
(222
257
5,089
(2,538
Patent and trademark
18.1 years
(1,383
2,127
(774
326
(198
281
(2,355
2,734
Amortization expense of intangible assets was $0.1 million and $0.2 million in the three and six months ended June 30, 2024, respectively. Amortization expense of intangible assets was $0.1 million and $0.2 million in the three and six months ended June 30, 2023. The Company estimates that amortization expense of intangible assets will be $0.2 million, $0.4 million, $0.3 million, $0.3 million, $0.2 million and $1.2 million for the remainder of 2024, and for 2025, 2026, 2027, 2028 and thereafter, respectively.
Note 11—Accrued Expenses and Other Current Liabilities
Accrued expenses consisted of the following:
Renewable energy
20,793
31,662
Liability to customers related to promotions and retention incentives
7,159
9,493
Other accrued expenses
5,315
3,139
Total accrued expenses
35,288
Other current liabilities consisted of the following:
4,007
Others
1,357
1,530
Total other current liabilities
ROU Assets
Current portion of operating lease liabilities
185
1,743
1,928
Remainder of 2024
172
2025
306
Total future lease payments
3,638
Less imputed interest
1,710
Total operating lease liabilities
Note 13—Equity
Dividend Payments
The following table summarizes the quarterly dividends declared and paid by the Company on its Class A and Class B common stock during the six months ended June 30, 2024 (in thousands, except per share amounts):
Declaration Date
Dividend Per Share
Aggregate Dividend Amount
Record Date
Payment Date
On August 1, 2024, the Company’s Board of Directors declared a quarterly dividend of $0.0750 per share on its Class A common stock and Class B common stock for the first quarter of 2024. The dividend will be paid on or about August 21, 2024 to stockholders of record as of the close of business on August 14, 2024.
Stock Repurchases and Redemption; Treasury Shares
On March 11, 2013, the Board of Directors of the Company approved a program for the repurchase of up to an aggregate of 7.0 million shares of the Company’s Class B common stock. In the three months ended June 30, 2024, the Company acquired 118,758 Class B common stock under the stock purchase program for an aggregate amount of $1.8 million. In the six months ended June 30, 2024, the Company acquired 368,758 Class B common stock under the stock purchase program for an aggregate amount of $5.9 million. There were no purchases under this program in the three and six months ended June 30, 2023. At June 30, 2024, 4.3 million shares of Class B common stock remained available for repurchase under the stock repurchase program.
As of June 30, 2024 and December 31, 2023, there were 3.5 million and 2.9 million outstanding shares of Class B common stock held in the Company's treasury, respectively, with a cost basis of $31.8 million and $22.7 million, respectively, at a weighted average cost per share of $9.18 and $7.75, respectively.
On February 7, 2022, the Board of Directors of the Company authorized a program to redeem, beginning, in the second quarter of 2033, up to $1.0 million per quarter of the Company's Preferred Stock at the liquidation preference of $8.50 per share. In 2023 and 2022, the Company redeemed and aggregate of 2,322,726 shares of Preferred Stock at the liquidation preference of $8.50 for an aggregate amount of $19.8 million. Following the redemption, there are no shares of Preferred Stock outstanding, all rights of Preferred Stockholders have terminated, and the Preferred Stock’s ticker symbol, "GNEPRA", has been retired.
Exercise of Stock Options
In February 2024, Howard S. Jonas exercised options to purchase 126,176 shares of Class B common stock through a cashless exercise and the Company issued 49,632 Class B common stock to Howard S. Jonas with the remaining 76,544 Class B common stock used for payment of the exercise price or retained by the Company to satisfy withholding tax obligations in connection to the exercise of the options.
In May 2023, Howard S. Jonas exercised options to purchase 256,818 shares of Class B common stock through a cashless exercise and the Company issued 98,709 Class B common stock to Howard S. Jonas with the remaining 158,109 Class B common stock used for payment of the exercise price or retained by the Company to satisfy withholding tax obligations in connection to the exercise of the options.
At June 30, 2024, There were no outstanding options to purchase the Company's common stock.
Warrants to Purchase Class B Common Stock
On June 8, 2018, the Company sold to Howard S. Jonas, the Chairman of the Company’s Board of Directors and the beneficial holder of the controlling portion of the Company's common stock, shares of the Company’s Class B common stock and warrants to purchase an additional 1,048,218 shares of the Company’s Class B common stock at an exercise price of $4.77 per share for an aggregate exercise price of $5.0 million. In June 2023, the holders of these warrants exercised the warrants to purchase 1,048,218 shares of Class B common stock warrants for $5.0 million.
As of June 30, 2024, there were no outstanding warrants to purchase shares of the Company's common stock.
Purchase of Equity of Subsidiaries
In February 2024, the Company purchased from a certain investor a 0.5% equity interest in Genie Energy International Corporation ("GEIC"), which holds the Company's interest in its operating subsidiaries for $1.2 million. Following this transaction, GEIC is a wholly owned subsidiary of the Company.
Stock-Based Compensation
On March 8, 2021, the Board of Directors adopted the Company's 2021 Stock Option and Incentive Plan (the "2021 Plan"), subject to the approval of the Company's stockholders. In May 2021, the 2021 Plan became effective and replaced the Company's 2011 Stock Option and Incentive Plan. The 2021 Plan provides incentives to executives, employees, directors and consultants of the Company. Incentives available under the 2021 Plan provide for grants of stock options, stock appreciation rights, limited stock appreciation rights, deferred stock units, and restricted stock. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. The maximum number of shares reserved for the grant of awards under the 2021 Plan upon adoption was 1.0 million shares of Class B Common Stock. On May 10, 2023, the Company's stockholders approved an amendment to the 2021 Plan that, among other things, increased the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by 0.5 million shares of Class B Common Stock.
In February 2022, the Company granted certain employees and members of its Board of Directors an aggregate of 290,000 deferred stock units which were eligible to vest in two tranches contingent upon the achievement of a specified thirty-day average closing price of the Company's Class B common stock within a specified period of time (the "2022 market conditions") and the satisfaction of service-based vesting conditions. Each deferred stock unit entitled the recipient to receive, upon vesting, up to two shares of Class B common stock of the Company depending on market conditions. The Company used a Monte Carlo simulation model to estimate the grant-date fair value of the awards. Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility based on a combination of the Company’s historical stock volatility. In the second quarter of 2022, the 2022 market conditions were partially achieved and the Company issued 290,000 shares of its restricted Class B common stock. In February 2023, the remaining portion of the 2022 market conditions was achieved and the Company issued an additional 290,000 restricted shares of its Class B common stock in May 2023. The restricted shares issued are subject to service-based vesting conditions as described above.
As of June 30, 2024, there were approximately $0.4 million of total unrecognized stock-based compensation costs related to outstanding and unvested equity-based grants. These costs are expected to be recognized over a weighted-average period of approximately 0.9 years.
Note 14—Variable Interest Entity
Citizens Choice Energy, LLC (“CCE”) is a REP that resells electricity and natural gas to residential and small business customers in the State of New York. The Company does not own any interest in CCE. Since 2011, the Company has provided CCE with substantially all of the cash required to fund its operations. The Company determined that it has the power to direct the activities of CCE that most significantly impact its economic performance and it has the obligation to absorb losses of CCE that could potentially be significant to CCE on a stand-alone basis. The Company therefore determined that it is the primary beneficiary of CCE, and as a result, the Company consolidates CCE within its GRE segment. The net income or loss incurred by CCE was attributed to noncontrolling interests in the accompanying consolidated statements of operations.
Net loss related to CCE and aggregate net funding provided by the Company were as follows:
Three Months Ended June 30,
Net income (loss)
Aggregate funding (provided by) paid to the Company, net
113
Summarized combined balance sheet amounts related to CCE was as follows:
Cash, cash equivalents and restricted cash
396
202
275
Prepaid expenses and other current assets
323
362
360
1,283
1,223
Liabilities and noncontrolling interests
Current liabilities
589
611
Due to IDT Energy
4,822
4,893
(4,128
(4,281
Total liabilities and noncontrolling interests
The assets of CCE may only be used to settle obligations of CCE, and may not be used for other consolidated entities. The liabilities of CCE are non-recourse to the general credit of the Company’s other consolidated entities.
Note 15—Income Taxes
The following table provides a summary of Company's effective tax rate:
Reported tax rate
26.7
24.1
The reported tax rates for the three and six months ended June 30, 2024 decreased compared to the same period in 2023. The decreases are mainly from the change in the mix of tax rates in the jurisdictions where the Company earned taxable income.
Note 16—Earnings Per Share
Basic earnings per share is computed by dividing net income or loss attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increases is anti-dilutive.
The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following:
26,569
25,708
Non-vested restricted Class B common stock
464
555
27,033
26,321
Unissued vested deferred stock units in three and six months ended June 30, 2023 pertain to the weighted average of restricted shares of the company's Class B common stock that the Company expected, at that time, to issue related to satisfaction of 2022 market conditions (see Note 13 — Equity) to the vesting of certain then outstanding deferred stock units.
There were no other instruments excluded from the computation of diluted earnings per share for each of the three and six months ended June 30, 2024 and 2023.
Note 17—Related Party Transactions
On November 2, 2023, the Company made a charitable donation to the Genie Energy Charitable Foundation (the "Genie Foundation") by issuing 50,000 shares of Class B common stock from its treasury with on the date of the donation of approximately $1.0 million. On April 17, 2024, the Company repurchased the 50,000 shares of Class B common stock from the Genie Foundation for $0.8 million. The Company is the sole member of the Genie Foundation and the Company's Chief Executive Officer and Chief Financial Officer serve as members of the board of directors of the Genie Foundation.
On December 7, 2020, the Company invested $5.0 million to purchase 218,245 shares of Class B common stock of Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company, is also a related party. Rafael is a former subsidiary of IDT that was spun off from IDT in March 2018. Howard S. Jonas is the Executive Chairman and Chairman of the Board of Directors of Rafael. In connection with the purchase, Rafael issued to the Company warrants to purchase an additional 43,649 shares of Rafael's Class B common stock with an exercise price of $22.91 per share. The warrants had a term expiring on June 6, 2022. The Company exercised the warrants in full on March 31, 2021 for a total exercise price of $1.0 million. In March 2023, the Company sold 195,501 shares of Class B common stock of Rafael for $0.3 million. In the second quarter of 2023, the Company acquired 150,000 Class B common stock of Rafael for $0.3 million. For the three and six months ended June 30, 2024 and 2023 the Company recognized a loss of minimal amount and $0.1 million, respectively, in connection with the investment. At June 30, 2024, the Company holds 0 Class B common stock of Rafael with a carrying value of $0.3 million. The Company does not exercise significant influence over the operating or financial policies of Rafael.
The Company was formerly a subsidiary of IDT Corporation (“IDT”). On October 28, 2011, the Company was spun-off by IDT. The Company entered into various agreements with IDT prior to the spin-off including an agreement for certain services to be performed by the Company and IDT. The Company also provides specified administrative services to certain of IDT’s foreign subsidiaries. Howard Jonas is the Chairman of the Board of IDT.
The charges for services provided by IDT to the Company, net of the charges for the services provided by the Company to IDT, are included in “Selling, general and administrative” expense in the consolidated statements of operations.
Amount IDT charged the Company
304
310
Amount the Company charged IDT
30
The following table presents the balance of receivables and payables to IDT:
Due to IDT
170
165
Due from IDT
20
The Company obtains insurance policies from several insurance brokers, one of which is IGM Brokerage Corp. (“IGM”). IGM is owned by the mother of Howard S. Jonas and Joyce Mason, who is a Director and Corporate Secretary of the Company. Jonathan Mason, husband of Joyce Mason and brother-in-law of Howard S. Jonas, provides insurance brokerage services via IGM. Based on information the Company received from IGM, the Company believes that IGM received commissions and fees from payments made by the Company (including payments from third party brokers). The Company paid IGM a total of $0.4 million in 2023 related to premium of various insurance policies that were brokered by IGM. There was no outstanding payable to IGM as of June 30, 2024. Neither Howard S. Jonas nor Joyce Mason has any ownership or other interest in IGM other than via the familial relationships with their mother and Jonathan Mason.
Investments in Atid 613
In September 2018, the Company divested a majority interest in Atid Drilling Ltd. in exchange for a 37.5% interest in a contracting drilling company in Israel ("Atid 613") which the Company accounted for using equity method of accounting. In March 2023, the Company received $0.1 million from Atid 613 for the full settlement of its investments in Atid 613. The Company recognized a minimal gain from settlement of investment included in other income (loss), net in its consolidated statements of operations for the three months ended June 30, 2024. The Company did not recognize any equity in net loss from Atid 613 for the three months ended June 30, 2023.
The Company has two reportable business segments: GRE and Genie Renewables. GRE owns and operates REPs, including IDT Energy, Residents Energy, TSE, Southern Federal and Mirabito. Its REP businesses resell electricity and natural gas to residential and small business customers in the Eastern and Midwestern United States and Texas. Genie Renewables develops, constructs and operates solar energy projects, distributes solar panels, offers energy brokerage and advisory services and also sells third-party products to customers. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expenses and other corporate-related general and administrative expenses. Corporate does not generate any revenues, nor does it incur any cost of revenues.
The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision-maker.
The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on income (loss) from operations. There are no significant asymmetrical allocations to segments.
Operating results for the business segments of the Company were as follows:
Genie Renewables
Corporate
199,183
Total assets for the business segments of the Company were as follows
Total assets:
207,940
34,815
80,028
The total assets of corporate segment includes total assets of discontinued operations of Lumo Finland and Lumo Sweden with aggregate net book value of $11.4 million and $20.6 million at June 30, 2024 and December 31, 2023, respectively.
Note 19 — Commitments and Contingencies
Legal Proceedings
On September 29, 2023, the Attorney General of the State of Illinois filed a complaint against Residents Energy in the Circuit Court of Cook County, Illinois, Chancery Division. The Complaint alleges several counts of violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq., and the Illinois Telephone Solicitations Act, 815 ILCS 413/1 et seq., in connection with Residents Energy’s marketing practices, and seeks monetary damages to redress any resulting losses alleged to have been incurred by customers, civil penalties for certain alleged violations in the amount of $50.0 thousand per violation, and other forms of injunctive and equitable relief to prevent future violations. The Company denies these allegations and intends to vigorously defend itself against any and all claims. As of March 31, 2024, there is insufficient basis to deem any loss probable or to assess the amount of any possible loss. For the three and six months ended June 30, 2024, Resident Energy’s gross revenues from sales in Illinois were $8.2 million and $20.7 million, respectively. For the three and six months ended June 30, 2023, Resident Energy’s gross revenues from sales in Illinois was $10.4 million and $24.0 million, respectively
The Company may from time to time be subject to legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.
Refer to Note 5—Acquisitions and Discontinued Operations, for discussion related to the administration of Lumo Finland.
Agency and Regulatory Proceedings
From time to time, the Company receives inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and the Company responds to those inquiries or requests. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made.
Other Commitments
Purchase Commitments
The Company had future purchase commitments of $140.5 million at June 30, 2024, of which $126.3 million was for future purchase of electricity. The purchase commitments outstanding as of June 30, 2024 are expected to be paid as follows:
76,313
53,645
2026
9,505
Thereafter
Total payments
140,483
In the three months ended June 30, 2024, the Company purchased $19.9 million and $8.1 million of electricity and renewable energy credits, respectively, under these purchase commitments. In the six months ended June 30, 2024, the Company purchased $44.5 million and $9.9 million of electricity and renewable energy credits, respectively, under these purchase commitments. In the three months ended June 30, 2023, the Company purchased $15.2 million and $5.7 million of electricity and renewable energy credits, respectively, under these purchase commitments. In the six months ended June 30, 2023, the Company purchased $24.3 million and $12.2 million of electricity and renewable energy credits, respectively, under these purchase commitments.
Renewable Energy Credits
GRE must obtain a certain percentage or amount of its power supply from renewable energy sources in order to meet the requirements of renewable portfolio standards in the states in which it operates. This requirement may be met by obtaining renewable energy credits that provide evidence that electricity has been generated by a qualifying renewable facility or resource. At June 30, 2024, GRE had commitments to purchase renewable energy credits of $14.2 million.
Captive Insurance Subsidiary
In December 2023, the Company established the Captive insurance company with the primary purpose of enhancing the Company's risk financing strategies. The Captive insures the Company against certain risks unique to the operations of the Company and its subsidiaries for which insurance may not be currently available or economically feasible in today's insurance marketplace. The covered risks are both current and related to historical business activities.
The Company, with input from external experts, estimated the expected ultimate cost of: 1) claims defense cost, settlements and penalties resulting from insured risk, and 2) stranded risk which includes economic losses due to regulatory restrictions or unanticipated reduction of demand, as well as the level cost associated with contesting such restrictions. The amount of the expected loss liability for each risk is based on an analysis performed by a third-party actuary which assumed historical patterns. The key assumptions used in developing these estimates are subject to variability.
In December 2023, the Company paid a $51.2 million premium to the Captive, which is, recognized as restricted cash in the consolidated balance sheet. At June 30, 2024, the balance of short-term and long-term restricted cash and cash equivalents of the Captive are $5.1 million and $46.4 million, respectively. The Captive must maintain a sufficient level of cash to fund future reserve payments and secure the insurer's liabilities, particularly those related to insured risks. The Captive has restricted investments in equity securities included in other current assets and other assets in the consolidated balance sheets (see Note 9). The Company also recognized a $0.6 million and $1.7 million provision for captive insurance liability for the three and six months ended June 30, 2024, respectively, related to the Captive's exposure for the insured risks. At June 30, 2024, the current portion of the captive insurance liability of $0.4 million is included in other current liabilities on the consolidated balance sheet.
The table below reconciles the change in the current and noncurrent captive insurance liabilities for six months ended June 30, 2024 (in thousands):
Current and noncurrent captive insurance liabilities, beginning
45,088
The captive insurance liability outstanding at June 30, 2024 is expected to be paid as follows (in thousands).
182
907
2,038
2027
3,072
2028
3,709
36,856
46,764
Performance Bonds and Unused Letters of Credit
GRE has performance bonds issued through a third party for certain utility companies and for the benefit of various states in order to comply with the states’ financial requirements for REPs. At June 30, 2024, GRE had aggregate performance bonds of $21.4 million outstanding and minimal amount of unused letters of credit.
BP Energy Company Preferred Supplier Agreement
Certain of GRE’s REPs are party to an Amended and Restated Preferred Supplier Agreement with BP, which is to be in effect through November 30, 2026. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REPs’ customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At June 30, 2024, the Company was in compliance with such covenants. At June 30, 2024, restricted cash—short-term of $0.8 million and trade accounts receivable of $59.1 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $20.1 million at June 30, 2024.
Note 20—Debt
On December 13, 2018, the Company entered into a Credit Agreement with JPMorgan Chase Bank (the “Credit Agreement”). On February 14, 2024, the Company entered into the fourth amendment of the existing Credit Agreement to extend the maturity date to December 31, 2024. The aggregate available borrowing amount was reduced to $3.0 million credit line facility (the “Credit Line”). The Company pays a commitment fee of 0.1% per annum on the unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. The Company agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $3.1 million. As of June 30, 2024, there are no letters of credit issued by JP Morgan Chase Bank. At June 30, 2024, the cash collateral of $4.5 million was included in restricted cash—short-term in the consolidated balance sheet.
Note 21—Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 will require public entities to disclose on an annual basis a tabular reconciliation using both percentages and amounts, broken out into specific categories with certain reconciling items at or above 5% of the statutory (i.e. expected) tax further broken out by nature and/or jurisdiction. The new provisions require all entities to disclose on an annual basis the amount of income taxes paid (net of refunds received), disaggregated between federal (national), state/local and foreign, and amounts paid to an individual jurisdiction when 5% or more of the total income taxes paid. The new provisions are required to be applied on a prospective basis; retrospective application is permitted. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. Although the new standard only requires additional disclosures, the Company is in the process of determining the impact of this guidance to its income tax disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 amends Accounting Standards Codification 280, Segment Reporting (“ASC 280”) to require public entities to disclose significant segment expenses and other segment items that are regularly provided to the chief operating decision maker (“CODM”) and included in each reported measure of a reportable segment’s profit or loss, on an annual and interim basis, and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The new provisions permit entities to report multiple measures of a reportable segment’s profit or loss if the CODM uses those measures to allocate resources and assess performance. The new standard is required to be applied retrospectively to all periods presented in the financial statements, unless impracticable. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is also permitted. Although the new standards only require additional disclosures, the Company is in the process of determining the impact of this guidance to its segment disclosures.
The following information should be read in conjunction with the accompanying consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (or SEC).
As used below, unless the context otherwise requires, the terms “the Company,” “Genie,” “we,” “us,” and “our” refer to Genie Energy Ltd., a Delaware corporation, and its subsidiaries, collectively.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed below under Part II, Item IA and under Item 1A to Part I “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Annual Report on Form 10-K for the year ended December 31, 2023.
Overview
We are comprised of Genie Retail Energy ("GRE") and Genie Renewables.
GRE owns and operates retail energy providers ("REPs"), including IDT Energy, Residents Energy, Town Square Energy ("TSE"), Southern Federal and Mirabito Natural Gas. GRE's REPs' businesses resell electricity and natural gas primarily to residential and small business customers, with the majority of the customers in the Eastern and Midwestern United States and Texas.
Genie Renewables holds our 95.5% interest in Genie Solar, an integrated solar energy company, our 92.8% interest in CityCom Solar, a marketer of community solar and other sales solutions and our 96.0% interest in Diversegy, an energy broker.
In addition to being a solar developer and operator, Genie Solar holds our 60.0% interest in Prism Solar Technology ("Prism") which designs and manufactures specialized solar panels.
As part of our ongoing business development efforts, we seek out new opportunities, which may include complementary operations or businesses that reflect horizontal or vertical expansion from our current operations. Some of these potential opportunities are considered briefly and others are examined in further depth. In particular, we seek out acquisitions to expand the geographic scope and size of our REP businesses.
As a result of volatility in the energy market in Europe, in the third quarter of 2022, we decided to discontinue the operations of Lumo Energia Oyj ("Lumo Finland") and Lumo Energi AB ("Lumo Sweden"). In July 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden. The sale price is to be settled monthly based on the monthly commodity volume specified in the instruments from September 2022 to March 2025. The Company also entered into a series of transactions to transfer the customers of Lumo Finland and Lumo Sweden to other suppliers.
We determined that the discontinuance of operations of Lumo Finland and Lumo Sweden represented a strategic shift that would have a major effect on our operations and financial statements. We account for these businesses as discontinued operations and accordingly, present the results of operations and related cash flows as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations are presented separately and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of June 30, 2024 and December 31, 2023. Lumo Sweden are continuing to liquidate its remaining receivables and to settle any remaining liabilities.
On November 7, 2022, Lumo Finland filed a petition for bankruptcy, which was approved by the Helsinki District Court on November 9, 2022. The administration of Lumo Finland was transferred to the Lumo Administrators. All assets and liabilities of Lumo Finland remain with Lumo Finland, in which we retain our equity ownership interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effective November 9, 2022.
Net loss from discontinued operations of Lumo Finland and Lumo Sweden, net of taxes was $0.1 million and $0.6 million for the three months ended June 30, 2024 and 2023, respectively. Net loss from discontinued operations of Lumo Finland and Lumo Sweden, net of taxes was $0.4 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively.
On November 8, 2023, the Lumo Administrators, acting on behalf of the Bankruptcy Estate, filed a claim in the District Court of Helsinki against Genie Nordic, its directors, officers and affiliates, in which it alleges that the gain from the sale of swap instruments owned by Lumo Sweden amounting to €35.2 million (equivalent to $37.8 million as of June 30, 2024) belongs to the Bankruptcy Estate. The Bankruptcy Estate filed an additional claim with the District Court on May 27, 2024 against Lumo Sweden for €4.8million (equivalent to $5.2 million as of June 30, 2024), also alleging that the gain from the sale of the swap instruments belongs to the Bankruptcy Estate, bringing the aggregate sum of claims related to the gain from sale of swap instruments to €40.0 million (equivalent to $43.0 million as of June 30, 2024). The Company believes that the Lumo Administrators' position is without merit, and it intends to vigorously defend its position.
We are also notified that the Lumo Administrators filed a claim against one of Lumo Finland’s suppliers, seeking to recover payments made by Lumo Finland amounting to €4.2 million (equivalent to $4.5 million as of June 30, 2024) prior to the bankruptcy. Related to such payment, the Lumo Administrators have filed a recovery claim jointly against us and the supplier for €1.6 million (equivalent to $1.7 million as of June 30, 2024) alleging that a portion of the payment by Lumo Finland effectively reduced our liability under the terms of a previously supplied parental guarantee (this €1.6 is included within and not additive to the €4.2 million). The Lumo Administrators allege that the payments represented preferential payments and therefore belong to the bankruptcy estate which are recoverable under the laws of Finland. We intend to challenge the Lumo Administrators' claims. Nevertheless, should the Lumo Administrators succeed in clawing back the funds from the supplier, it is possible that the supplier will seek to recover its losses against us, under terms of the parental guarantee. At this time there is insufficient basis to assess an amount of any probable loss.
On November 29, 2021 Orbit Energy Limited ("Orbit"), which operated in United Kingdom was declared and its customers were transferred to a “supplier of last resort.” Effective December 1, 2021, the administration of Orbit was transferred to a third party Administrators (the "Orbit Administrators"). The accounts of Orbit were deconsolidated from those of the Company effective December 1, 2021.
We determined that the discontinued operations of Orbit represented a strategic shift that would have a major effect on our operations and the financial statements. Since the appointment of the Orbit Administrators, we accounted their businesses as discontinued operations and accordingly, have presented the results of operations and related cash flows as discontinued operations. Any remaining assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of December 31, 2022. Since the Company lost control of the management of Orbit in favor of the Orbit Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021.
On November 28, 2023, the administration of Orbit ceased and the control of Orbit reverted back to the Company from the Orbit Administrators. The accounts of Orbit were reconsolidated with those of the Company effective November 28, 2023.
There were no income or loss from discontinued operations recognized in the three and six months ended June 30, 2024. In the three and six months ended June 30, 2023, the Company recognized income from discontinued operation, net of taxes of $2.6. and $5.4 million, respectively, mainly from the increase in the estimated value of our investments in Orbit due to a change in estimated net assets of Orbit after the Orbit Administrators settle the liabilities.
Genie Retail Energy
GRE operates REPs that resell electricity and/or natural gas to residential and small business customers in Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 95.6% and 94.7% of our consolidated revenues in the three and six months ended June 30, 2024, respectively and 96.0% and 96.2% of our consolidated revenues in the three and six months ended June 30, 2023, respectively.
The weather and the seasons, among other things, affect GRE’s REPs' revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters and/or summers have the opposite effects. Unseasonable temperatures in other periods may also impact demand levels. Potential changes in global climate may produce, among other possible conditions, unusual variations in temperature and weather patterns, resulting in unusual weather conditions, more intense, frequent and extreme weather events and other natural disasters. Some climatologists believe that these extreme weather events will become more common and more extreme, which will have a greater impact on our operations. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 48.1% and 39.7% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 2023 and 2022 respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 32.5% and 30.5% of GRE’s electricity revenues for 2023 and 2022 respectively, were generated in the third quarters of those years. GRE's REP's revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.
In addition to the direct physical impact that climate change may have on our business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.
Purchase of Receivables and Concentration of Credit Risk
Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which GRE operates. GRE’s REPs reduce their customer credit risk by participating in POR programs for a majority of their receivables. In addition to providing billing and collection services, utility companies purchase those REPs’ receivables and assume all credit risk without recourse to those REPs. GRE’s REPs’ primary credit risk is therefore nonpayment by the utility companies. In the three and six months ended June 30, 2024 the associated cost was approximately 1.0% of GRE revenue and approximately 0.9% for the three months ended June 30, 2023, respectively. At June 30, 2024, 83.8% of GRE’s net accounts receivable were under a POR program. Certain of the utility companies represent significant portions of our consolidated revenues and consolidated gross trade accounts receivable balance during certain periods, and such concentrations increase our risk associated with nonpayment by those utility companies.
The following table summarizes the percentage of consolidated trade receivables by customers that equal or exceed 10.0% of consolidated net trade receivables at June 30, 2024 and December 31, 2023 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as of June 30, 2024 or December 31, 2023).
na—less than10.0% of consolidated net trade receivables at the relevant date
The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated revenues for the three months ended June 30, 2024 or 2023 (no other single customer accounted for 10.0% or greater of our consolidated revenues for the three months ended June 30, 2024 or 2023):
Although GRE endeavors to maintain best sales and marketing practices, such practices have been the subject of class action lawsuits in the past.
See Note 19, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference.
From time to time, the Company responds to inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made. See Note 19, Commitments and Contingencies, in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which is incorporated by reference, for further detail on agency and regulatory proceedings.
Critical Accounting Policies
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require the application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to revenue recognition, allowance for doubtful accounts, acquisitions, goodwill, and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 21—Recently Issued Accounting Standards, to the current period’s consolidated financial statements.
Results of Operations
We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.
Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023
Genie Retail Energy Segment
Three months ended June 30,
Change
(amounts in thousands)
(1,898
(2.4)
(6.3
86,718
89,733
(3,015
(3.4
54,449
52,257
2,192
4.2
32,269
37,476
(5,207
(13.9
Selling, general and administrative expenses
17,658
19,059
(1,401
(7.4
14,611
18,417
(3,806
(20.7
nm—not meaningful
Revenues. Electricity revenues decreased by 2.4% in the three months ended June 30, 2024 compared to the same period in 2023. The decrease was due to a decline in the average price per kilowatt hour charged to customers in the three months ended June 30, 2024 compared to the same period in 2023. Electricity consumption by GRE’s REPs' customers slightly decreased by 0.1% in the three months ended June 30, 2024, compared to the same period in 2023, reflecting a 3.8% decrease in the average number of meters served, substantially offset by a 3.9% increase in average consumption per meter. The decrease in meters served was due to reduced level of the customer acquisitions in the three months ended June 30, 2024 compared to the same period in 2023. The increase in per meter consumption in the three months ended June 30, 2024 compared to the same period in 2023 was due to standard fluctuations in customer consumption patterns. The average rate per kilowatt hour sold decreased 2.3% in the three months ended June 30, 2024 compared to the same period in 2023 due to general market conditions.
Electricity revenuesincreased by 8.4% in the six months ended June 30, 2024 compared to the same period in 2023. The increase was due to an increase in electricity consumption partially offset by a decrease in the average price per kilowatt hour charged to customers in the six months ended June 30, 2024 compared to the same period in 2023. Electricity consumption by GRE’s REPs' customers increased by 15.1% in the six months ended June 30, 2024, compared to the same period in 2023 reflecting a 6.0% increase in the average number of meters served and an 8.5% increase in average consumption per meter. The increase in meters served was driven by strong customer acquisition during 2023. Electricity consumption per meter increased in the six months ended June 30, 2024 compared to the same period in 2023 due to standard fluctuations in customer consumption patterns. The average rate per kilowatt hour sold decreased by 5.8% in the six months ended June 30, 2024 compared to the same period in 2023 due to general market conditions.
GRE’s natural gas revenues decreased by 6.3% in the three months ended June 30, 2024 compared to the same period in 2023. The decrease was a result of a decrease in average revenue per therm sold partially offset by an increase in natural gas consumption per meter in the three months ended June 30, 2024 compared to the same period in 2023. Natural gas consumption by GRE’s REPs’ customers increased by 5.9% in the three months ended June 30, 2024 compared to the same period in 2023, reflecting a 6.6% increase in average meters served, partially offset by a 0.7% decrease in average consumption per meter. The increase in meters served was due to higher levels of customer acquisitions in the three months ended June 30, 2024 compared to the same period in 2023. The average revenue per therm sold decreased by 11.5% in the three months ended June 30, 2024, compared to the same period in 2023 due to general market conditions.
GRE’s natural gas revenues decreased by 14.2% in the six months ended June 30, 2024 compared to the same period in 2023. The decrease in natural gas revenues in the six months ended June 30, 2024 compared to the same period in 2023 was a result of a decrease in average revenue per therm sold partially offset by an increase in natural gas consumption. Natural gas consumption by GRE’s REPs’ customers increased by 7.1% in the six months ended June 30, 2024compared to the same period in 2023, reflecting increases in average meters served and average consumption per meter of 6.3% and 0.7%, respectively, in the six months ended June 30, 2024 compared to the same period in 2023. The increase in meters served was driven by strong customer acquisition efforts during 2023 and continued through 2024. The increase in meters served was due to higher levels of customer acquisitions in the six months ended June 30, 2024 compared to the same period in 2023. The average revenue per therm sold decreased by 11.5% in the six months ended June 30, 2024, compared to the same period in 2023 due general market conditions.
Other revenues in the three and six months ended June 30, 2024 and 2023 included revenues from the sale of petroleum products in Israel.
The customer base for GRE’s REPs as measured by meters served consisted of the following:
March 31, 2024
September 30, 2023
June 30, 2023
Meters at end of quarter:
Electricity customers
279
301
Natural gas customers
83
82
81
80
Total meters
364
361
385
381
Gross meter acquisitions in the three months ended June 30, 2024, were 53,000 compared to 75,000 for the same period in 2023. Gross meter acquisitions in the six months ended June 30, 2024, were 123,000 compared to 204,000 for the same period in 2023. In the first quarter of 2023, we resumed customer acquisition activities using a variety of new and existing channels after a "strategic pause" implemented from the fourth quarter of 2021 through 2022. The gross meter acquisitions for the three and six months ended June 30, 2024 decreased compared to the same periods in 2023 as customer acquisition efforts returned to a normal level.
Meters served decreased by 2,000 between March 31, 2024 to June 30, 2024. Meters served increased by 1,000 meters from December 31, 2023 to June 30, 2024. The slight fluctuations in the number of meters served at June 30, 2024 compared to March 31, 2024 and December 31, 2023.
In the three months ended June 30, 2024, average monthly churn increased to 4.6% compared to 4.3% for same period in 2023. In the six months ended June 30, 2024, the average monthly churn increased to 5.1% compared to 4.3% for same period in 2023, as a result of higher churn rate related to newly acquired customers.
The average rates of annualized energy consumption, as measured by RCEs, are presented in the chart below. An RCE represents a natural gas customer with annual consumption of 100 mmbtu or an electricity customer with annual consumption of 10 MWh. Because different customers have different rates of energy consumption, RCEs are an industry standard metric for evaluating the consumption profile of a given retail customer base.
RCEs at end of quarter:
267
272
298
78
77
76
Total RCEs
348
350
375
380
RCEs at June 30, 2024 decreased 0.9% compared to March 31, 2024. The decrease is due to customer acquisition efforts returning to normal level in 2024 as discussed above.
Cost of Revenues and Gross Margin Percentage. GRE’s cost of revenues and gross margin percentage were as follows:
Cost of revenues for electricity increased in the three months ended June 30, 2024 compared to the same period in 2023 primarily because of an increase in the average unit cost of electricity partially offset by slight decrease in electricity consumption by GRE’s REPs’ customers. The average unit cost of electricity increased 7.6% in the three months ended June 30, 2024 compared to the same period in 2023 due to an increase in the average wholesale price of electricity. The gross margin on electricity sales decreased in the three months ended June 30, 2024 compared to the same period in 2023 because the average unit cost of electricity increased while the average rate charged to customers decreased. The decrease in gross margin is due to the change in the mix type of customers in the three months ended June 30, 2024 compared to the same periods in 2023.
Cost of revenues for electricity increased in the six months ended June 30, 2024 compared to the same period in 2023 primarily because of increases in electricity consumption by GRE’s REPs’ customers and the average unit cost of electricity. The average unit cost of electricity increased 9.2% in the six months ended June 30, 2024 compared to the same period in 2023. The significant increase is due to a rise in the wholesale price of electricity during the six months ended June 30, 2024 compared to the same period in 2023. Gross margin on electricity sales decreased in the six months ended June 30, 2024 compared to the same period in 2023 because the average unit cost of electricity increased while the average rate charged to customers decreased. The decrease in gross margin is due to the change in the mix type of customers in the six months ended June 30, 2024 compared to the same periods in 2023.
Cost of revenues for natural gas decreased in the three months ended June 30, 2024 compared to the same period in 2023 primarily because of a decrease in the average unit cost of natural gas partially offset by an increase in the natural gas consumption by GRE's REPs' customers. The average unit cost of natural gas decreased by 16.1% per therm in the three months ended June 30, 2024 compared to the same period in 2023 due to a decrease in the wholesale price of natural gas. Gross margin on natural gas sales increased in the three months ended June 30, 2024 compared to the same period in 2023 because the average rate charged to customers decreased while the average unit cost of natural gas increased.
Cost of revenues for natural gas increased in the six months ended June 30, 2024 compared to the same period in 2023 primarily because of an increase in the average unit cost of natural gas partially offset by a decrease in natural gas consumption by GRE's REPs' customers. The average unit cost of natural gas decreased 38.0% in the six months ended June 30, 2024 compared to the same period in 2023. The significant decrease is due to a decrease in the wholesale price of electricity during the six months ended June 30, 2024 compared to the same period in 2023, particularly in the first quarter of 2023. Gross margin on natural gas sales decreased in the six months ended June 30, 2024 compared to the same period in 2023 because the average rate charged to customers increased less than the increase in the average unit cost of natural gas.
Selling, General and Administrative. Selling, general and administrative expenses decreased by 7.4% in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to decreases in marketing and customer acquisition costs, employee-related costs and provision for doubtful accounts partially offset by increases in POR program fees and processing fees. Marketing and customer acquisition expenses decreased by $1.5 million in the three months ended June 30, 2024 compared to the same period in 2023 as a result of a decrease in the number of meters acquired during 2024 period. Employee-related expenses decreased by $0.1 million in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to a decrease in bonus accrual. Provision for doubtful accounts decreased by $0.3 million in the three months ended June 30, 2024 compared to the same period in 2023 as a result of continued increase in collection efforts. POR program fees increased by $0.2 million in the three months ended June 30, 2024 compared to the same period in 2023 as a result of changes in rates implemented by several utilities. Processing fees increased by $0.3 million in the three months ended June 30, 2024 compared to the same period in 2023 as a result of an increase in meters with billing fees incurred by GRE. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 21.2% in the three months ended June 30, 2023 to 20.4% in the three months ended June 30, 2024.
Selling, general and administrative expenses increased by 1.3% in the six months ended June 30, 2024 compared to the same period in 2023. The increase in selling, general and administrative expense in the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to increases POR program fees, processing fees, and employee-related costs partially offset by decreases in marketing and customer acquisition cost and provision for doubtful accounts. POR processing fees increased by $0.5 million in the six months ended June 30, 2024 compared to the same period in 2023 as a result of changes in rates implemented by several utilities. Processing fees increased by $0.6 million in the six months ended June 30, 2024 compared to the same period in 2023 as a result of an increase in meters with billing fees. Employee-related expenses increased by $0.2 million in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to an increase in commissions paid to employees. Marketing and customer acquisition expenses decreased by $0.8 million in the six months ended June 30, 2024 compared to the same period in 2023 as a result of a decrease in the number of meters acquired. Provision for doubtful accounts decreased by $0.2 million in the six months ended June 30, 2024 compared to the same period in 2023 as a result of a continued increase in collection efforts. As a percentage of GRE’s total revenues, selling, general and administrative expense decreased from 18.4%% in the six months ended June 30, 2023 to 17.9%% in the six months ended June 30, 2024.
Genie Renewables Segment
The Genie Renewables (formerly GES) segment is composed of Genie Solar, CityCom Solar and Diversegy. Genie Solar is an integrated solar energy company that develops, constructs and operates solar energy projects for commercial and industrial customers as well as its own portfolio. CityCom Solar is a marketer of alternative products and services complementary to our energy offerings. Diversegy provides energy brokerage and advisory services to commercial and industrial customers.
On November 3, 2023, Genie Solar acquired ten special-purpose entities that own and operate solar system facilities in Ohio and Michigan for an aggregate purchase price of $7.5 million. The acquisition has been accounted for as an asset acquisition with a total purchase price of $7.7 million, including $0.2 million of direct transaction cost allocated to solar arrays assets included in the property and equipment account in our consolidated balance sheet.
Revenues
Cost of revenue
Loss from operations
Revenue. Genie Renewables' revenues increased in the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase in revenues were the result of increases from Diversegy that includes commissions, entry fees and other fees from our energy brokerage and marketing services businesses and revenue contributions from the portfolio of operating solar projects at Genie Solar, partially offset by decreases in revenues from the development of solar projects for customers from Genie Solar, revenues from commissions from selling third-party products to customers by CityCom Solar and sale of solar panels by Prism.
Cost of Revenues. The variations in the cost of revenues for the three and six months ended June 30, 2024 compared to the same periods in 2023 are due to changes in the mix of products from which the revenues were generated during the periods. In the first quarter of 2024, we recorded a $0.4 million charge to the cost of revenues of Genie Solar to write down the carrying value of solar panel inventories to the estimated net realizable value.
Selling, General and Administrative. Selling, general and administrative expenses increased in the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to increases in headcount in Genie Solar and Diversegy, consulting fees, warehousing costs at Genie Solar and depreciation from the solar arrays acquired by Genie Solar in the last six months.
Impairment of assets. The impairment of assets recorded in the three and six months ended June 30, 2024 relates to capitalized cost at Genie Solar related to solar projects that were discontinued in the second quarter of 2024.
As discussed above, the remaining accounts of GRE International were transferred to corporate starting in the third quarter of 2022. Entities under corporate do not generate any revenues, nor does it incur any cost of revenues. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expense and other corporate-related general and administrative expenses.
General and administrative expenses and loss from operations
Corporate general and administrative expenses decreased in the three months ended June 30, 2024 compared to the same period in 2023 and increased in the six months ended June 30, 2024 compared to the same period in 2023 primarily because of decreases in employee-related cost and professional and consulting fees. As a percentage of our consolidated revenues, Corporate general and administrative decreased to 2.2% in the three months ended June 30, 2024 from 2.3% in the three months ended June 30, 2023 and decreased to 2.3% in the six months ended June 30, 2024 from 3.1% in the six months ended June 30, 2023.
In December 2023, we established a wholly-owned captive insurance subsidiary (the "Captive") with the primary purpose of enhancing our risk financing strategies. In December 2023, we paid $51.2 million premiums to Captive, which amount is included in restricted cash in our consolidated balance sheet as of December 31, 2023. The Captive must maintain a sufficient level of cash to fund future reserve payment and secure the insurer's liabilities, particularly those related to the insured risks. We also recognized $0.6 and $ $1.7 million provision for captive insurance liability for the three and six months ended June 30, 2024 related to Captive's exposure for the insured risks.
Consolidated
Selling, general and administrative expenses. Stock-based compensation expense included in consolidated selling, general and administrative expenses was $0.5 million and $0.8 million in the three months ended June 30, 2024 and 2023 respectively, and $1.2 million and $1.6 million for the six months ended June 30, 2024 and 2023. At June 30, 2024, the aggregate unrecognized compensation cost related to non-vested stock-based compensation was $0.4 million. The unrecognized compensation cost is recognized over the expected service period.
The following is a discussion of our consolidated income and expense line items below income from operations:
Interest income. Interest income increased in the three and six months ended June 30, 2024, compared to the same period in 2023 primarily due to increase in average balances of cash and cash equivalents and restricted cash during the period.
Other Income, net. Other income, net in the three months ended June 30, 2024 and 2023 and in the six months ended June 30, 2024 and 2023 consisted primarily of foreign currency transactions and equity in net loss in equity method investees. Other income (loss) income, net, in the three months ended June 30, 2023 consisted primarily of a one-time tax credit related to payroll taxes incurred in prior years.
Provision for Income Taxes. The change in the reported tax rate for the three and six months ended June 30, 2024 compared to the same periods in 2023 is the result of changes in the mix of jurisdictions in which taxable income was earned.
Net Loss Attributable to Noncontrolling Interests. The decreases in net loss attributable to noncontrolling interests in the three and six months ended June 30, 2024 compared to the same periods in 2023 was primarily due to the share of noncontrolling interest in the operations of Citizens Choice Energy.
Gain on Marketable Equity Securities and Investments. The gain on marketable equity securities and investment for the three and six months ended June 30, 2024 pertains to the change in fair value of the Company's investments in common stock of Rafael which the Company acquired in December 2020 and various investments in equity of several entities.
(Loss) income from Discontinued Operations, net of tax. Loss from discontinued operations, net of tax in the three and six months ended June 30, 2024 is mainly related to foreign exchange differences in Lumo Sweden during the period. Gain from discontinued operations, net of tax in the three and six months ended June 30, 2023 is mainly from an increase in the estimated value of our investments in Orbit and foreign exchange differences in Lumo Sweden.
Liquidity and Capital Resources
General
We currently expect that our cash flow from operations and the $122.3 million balance of unrestricted cash and cash equivalents that we held at June 30, 2024 will be sufficient to meet our anticipated cash requirements for at least the period to August 8, 2025.
At June 30, 2024, we had working capital (current assets less current liabilities) of $132.7 million.
Cash flows provided by (used in):
26,324
4,569
Net increase in cash, cash equivalents and restricted cash
Operating Activities
Cash, cash equivalents and restricted cash provided by operating activities of continuing operations was $2.4 million in the six months ended June 30, 2024 compared to net cash used in operating activities of continuing operations of $4.6 million in the six months ended June 30, 2023. The decrease is primarily the fluctuation in the results of operations in the six months ended June 30, 2024 compared to the same period in 2023.
Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Changes in assets and liabilities decreased cash flows by $25.8 million for the three months ended June 30, 2024, compared to the same period in 2023.
Certain of GRE's REPs are party to an Amended and Restated Preferred Supplier Agreement with BP Energy Company, or BP, which is to be in effect through November 30, 2023. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REP’s customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At June 30, 2024, we were in compliance with such covenants. At June 30, 2024, restricted cash—short-term of $0.8 million and trade accounts receivable of $59.1 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $20.1 million at June 30, 2024.
We had purchase commitments of $140.5 million at June 30, 2024, of which $126.3 million was for purchases of electricity.
As discussed above, in December 2023, we established the Captive insurance subsidiary. At June 30, 2024, the balance of short-term and long-term restricted cash and cash equivalents of the Captive are $5.1 million and $46.4 million, respectively. We also recognized $1.7 million provision for captive insurance liability for the three months ended June 30, 2024, related to Captive's exposure for the insured risks. At June 30, 2024, the current captive insurance liability of $0.4 million is included in other current liabilities in the consolidated balance sheet. The amount of the expected loss liability for each risk is based on an analysis performed by a third-party actuary which assumed historical patterns. The key assumptions used in developing these estimates are subject to variability.
We are a lessee under operating lease agreements primarily for office space in locations where we operate and for our solar development projects with lease periods expiring between 2024 and 2052. Our future lease payments under the operating leases as of June 30, 2024 were $3.6 million.
GRE has performance bonds issued through a third party for the benefit of certain utility companies and for various states in order to comply with the states’ financial requirements for retail energy providers. At June 30, 2024, we had outstanding aggregate performance bonds of $21.4 million and a minimal amount of unused letters of credit.
Investing Activities
Our capital expenditures increased $1.0 million to $1.6 million for the six months ended June 30, 2024 compared to the same period in 2023. The capital expenditures are mainly for the construction of solar projects at Genie Solar. In the six months ended June 30, 2024, we transferred $1.9 million worth of solar panels that are intended to be used in Genie Solar projects from inventories to construction in progress related to solar panels expected to be used in the solar project by Genie Solar. We currently anticipate that our total capital expenditures in the twelve months ending December 31, 2024 will be between $6.0 million to $10.00 million mostly related to the solar projects of Genie Renewables.
On November 3, 2023, we acquired ten special-purpose entities that own and operate solar system facilities in Ohio and Michigan for an aggregate purchase price of $7.5 million. The acquisition has been accounted for as an asset acquisition with a total purchase price of $7.7 million, including $0.2 million of direct transaction cost allocated to solar arrays assets included in the property and equipment account in our consolidated balance sheet.
On November 3, 2023, we also signed an agreement to purchase from the sellers another special purpose entity that owned and operated a solar system facility in Indiana, for $1.3 million, subject to the satisfaction of certain closing conditions. In February 2024, the purchase of the solar system facility in Indiana was completed after the closing conditions were met. The acquisition has been accounted for as asset acquisition and we recorded $1.3 million to solar arrays assets included in the property and equipment account in the consolidated balance sheet.
In February 2024, we purchased from a certain investor 0.5% interest in Genie Energy International Corporation ("GEIC"), which holds our interest in our operating subsidiaries for $1.2 million. Following this transaction, GEIC is a wholly owned subsidiary of the Company.
In the six months ended June 30, 2024 and 2023, we acquired minimal interests in various ventures for an aggregate amount of investments of $3.0 million and $6.3 million, respectively.
In 2020 and 2021, we invested an aggregate of $6.0 million for 261,984 shares of Class B common stock of Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company and a related party. In the three months ended March 31, 2023, we sold 195,501 shares of our Class B common stock of Rafael for $0.3 million. In the second quarter of 2023, we acquired 150,001 shares of our Class B common stock of Rafael for $0.3 million. We do not exercise significant influence over the operating or financial policies of Rafael. At June 30, 2024, the carrying value of the remaining investments in the Class B common stock of Rafael was $0.3 million.
In the three months ended March 31, 2023, we invested $4.6 million to purchase the common stock of a publicly traded company which we sold for $3.9 million in the second quarter of 2023.
In March 2023, the Company received $0.1 million from Atid 613 Drilling Ltd. ("Atid 613") for the full settlement of its investment in Atid 613. The Company recognized a minimal gain from settlement of investment included in other income (loss), net in its consolidated statements of operations for the three months ended March 31, 2023.
On November 29, 2021, Orbit, which operated in the United Kingdon, was declared insolvent and its customers were transferred to the “supplier of last resort.” Effective December 1, 2021, the administration of Orbit was transferred to Orbit Administrators. The accounts of Orbit were deconsolidated from those of the Company effective December 1, 2021. In 2022, we transferred $49.7 million to the Orbit Administrators as part of the administration process. On November 28, 2023, the administration of Orbit ceased and the control of Orbit reverted back to the Company from the Administrators. The accounts of Orbit were reconsolidated with those of the Company effective November 28, 2023. In 2023, the Orbit Administrators paid us a return of our interest in Orbit of £18.8 million (equivalent to $23.7 million on the dates of transfer).
Financing Activities
In the six months ended June 30, 2024 and 2023, we paid dividends of $0.150 per share to stockholders of our Class A common stock and Class B common stock, or aggregate dividends of $4.2 million and $3.9 million in the six months ended June 30, 2024 and 2023, respectively. On August 1, 2024 our Board of Directors declared a quarterly dividend of $0.075 per share on our Class A common stock and Class B common stock. The dividend will be paid on or about August 31, 2024 to stockholders of record as of the close of business on August 14, 2024.
In the six months ended June 30, 2023, we paid Base Dividends of $0.1594 per share of our 2012-A Preferred Stock or Preferred Stock in an aggregate amount of $0.2 million.
On March 11, 2013, our Board of Directors approved a program for the repurchase of up to an aggregate of 7.0 million shares of our Class B common stock. In the six months ended June 30, 2024, we acquired 368,758 Class B common stock under the stock purchase program for an aggregate amount of $5.9 million. There are no repurchases under this program in the three months ended June 30, 2023. At June 30, 2024, 4.3 million shares of Class B common stock remained available for repurchase under the stock repurchase program.
On November 2, 2023, we made a charitable donation to the Genie Energy Charitable Foundation (the "Genie Foundation") by issuing 50,000 shares of Class B common stock from its treasury with value of on the date of the donation of approximately $1.0 million. On April 17, 2024, we repurchased 50,000 shares of Class B common stock from the Genie Foundation for $0.8 million. The Company is the sole member of the Genie Foundation and the Company's Chief Executive Officer and Chief Financial Officer serve as members of the board of directors of the Genie Foundation.
On February 7, 2022, our Board of Directors authorized a program to redeem up to $1.0 million per quarter of our Preferred Stock at the liquidation preference of $8.50 per share beginning in the second quarter of 2022. In the six months ended June 30, 2024, the Company redeemed 117,647 shares of Preferred Stock under the stock purchase program for an aggregate amount of $1.0 million.
On May 16, 2023, our Board of Directors approved the redemption of all outstanding Preferred Stock on June 16, 2023 (the "Redemption Date") at the liquidation preference of $8.50 per share, together with an amount equal to all dividends accrued and unpaid up to, but not including, the Redemption Date. On the Redemption Date, we completed the redemption of 748,064 shares of Preferred Stock for an aggregate amount of $6.5 million and the related accrued dividends of $0.1349 per share equivalent to $0.1 million. Following the redemption, there are no shares of Preferred Stock outstanding, all rights of Preferred Stockholders have terminated, and the Preferred Stock’s ticker symbol, "GNEPRA", has been retired.
In each of the six months ended June 30, 2024 and 2023, we paid $1.5 million, to repurchase our Class B common stock of our Class B common stock tendered by our employees (including one officer) to satisfy tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock and exercise of stock options. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.
On December 13, 2018, we entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On February 14, 2024, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date of December 31, 2024. The aggregate principal amount was reduced to $3.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on the unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. We agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $3.1 million. As of June 30, 2024, there is no issued letter of credit from the Credit Line. At June 30, 2024, the cash collateral of $4.5 million was included in restricted cash—short-term in the consolidated balance sheet.
Cash flows from discontinued operations
Cash provided by operating activities of discontinued operations was $7.0 million in the six months ended June 30, 2024 compared to $15.7 million in the same period in 2023. The cash provided by operating activities of discontinued operations in the three months ended June 30, 2024 and 2023 pertains to the proceeds from the settlement of hedges of Lumo Sweden.
Our primary market risk exposure is the price applicable to our natural gas and electricity purchases and sales. The sales price of our natural gas and electricity is primarily driven by the prevailing market price. Hypothetically, for our GRE segment, if our gross profit per unit in the three months ended June 30, 2024 had remained the same as in the three months ended June 30, 2023, our gross profit from electricity would have increased by 6.7 million and our gross profit from natural gas would have decreased $0.8 million. Hypothetically, for our GRE segment, if our gross profit per unit in the six months ended June 30, 2024 had remained the same as in the six months ended June 30, 2023, our gross profit from electricity and natural gas sales would have increased by $21.3 million and our gross profit from natural gas would have decreased $5.2 million.
The energy markets have historically been very volatile, and we can reasonably expect that electricity and natural gas prices will be subject to fluctuations in the future. In an effort to reduce the effects of the volatility of the price of electricity and natural gas on our operations, we have adopted a policy of hedging electricity and natural gas prices from time to time, at relatively lower volumes, primarily through the use of put and call options and swaps. While the use of these hedging arrangements limits the downside risk of adverse price movements, it also limits future gains from favorable movements. We do not apply hedge accounting to these options or swaps, therefore the mark-to-market change in fair value is recognized in cost of revenue in our consolidated statements of operations. We recognized losses from derivative instruments of $8.4 million and $13.9 million in the three and six months ended June 30, 2024, respectively, and losses of $6.0 million and $17.1 million for the three and six months ended June 30, 2023 from our derivative instruments. Refer to Note 7 – Derivative Instruments, for details of the hedging activities.
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2024.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Legal proceedings in which we are involved are more fully described in Note 19 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
There are no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The following table provides information with respect to purchases by us of shares of our Class B common stock during the second quarter of 2024:
TotalNumber of SharesPurchased
AveragePriceper Share
Total Number of SharesPurchased as part ofPublicly AnnouncedPlans or Programs
Maximum Number of Shares that May Yet BePurchasedUnder the Plans orPrograms (1)
April 1–30, 2024
4,411,417
May 1–31, 2024
168,758
(2)
15.20
118,758
4,292,659
June 1–30, 2024
(1)
Under our existing stock repurchase program, approved by our Board of Directors on March 11, 2013, we were authorized to repurchase up to an aggregate of 7.0 million shares of our Class B common stock.
None
Not applicable
ExhibitNumber
Description
31.1*
Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
101.INS*
*
Filed or furnished herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Genie Energy Ltd.
August 8, 2024
By:
/s/ Michael M. Stein
Michael M. Stein
Chief Executive Officer
/s/ Avi Goldin
Avi Goldin
Chief Financial Officer