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Kevin Van Paassen/The Globe and Mail

Just moments after Just Energy Group Inc. Thursday night unleashed some rough results and slashed its dividend by almost a third, management instituted a shareholder rights plan to protect itself in a moment of weakness.

Just Energy's shares slumped 14 per cent early Friday as shocked investors dumped the stock. Not only had management promised for so long that the dividend was safe, but the latest earnings came in below estimates and forward guidance took a hit because the natural gas market, Just Energy's bread and butter, is in rough shape.

The company sells natural gas and electricity to residential and commercial customers.

Perhaps sensing vulnerability to a takeover suitor, management adopted a rights plan. But to prevent anyone from thinking overly drastic thoughts, the company said the action is not "in response to, or in anticipation of, any known takeover bid."

For some, the latest news serves as sweet vindication after expressing caution about Just Energy's results and dividend for months. Last July, Kevin Chu at Accountability Research, noted that "the low natural gas price environment is putting downward pressure on Just Energy's revenues, margins, and renewal rates in its Canadian gas marketing business," adding that there was a looming risk of a dividend cut.

As Mr. Chu pointed out, the company's renewal rate for its Canadian gas business fell to 63 per cent last year, from 82 per cent in 2008.

With a smaller dividend liability, the good news is that Just Energy has more money to pay down its debt burden. But that can't help the burden of low natural gas prices, which affects clients who renew contracts at reduced prices and hurts the company's margins. (Hence the rough forward guidance.)

The task ahead of management is to rebuild trust with investors, but that could prove difficult in such a weak macro environment.

(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)

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