Note 7—Investment in Shoreditch Energy Limited

On July 17, 2017, the Company’s subsidiary, Genie Energy UK Ltd. (“GEUK”), entered into a definitive agreement with Energy Global Investments Pty Ltd (“EGC”) to launch Shoreditch Energy Limited (“Shoreditch”), a joint venture to offer electricity and natural gas service to residential and small business customers in the United Kingdom, using the trade name Orbit Energy (the “JV Agreement”). In August 2018, the parties confirmed that the relevant conditions described in the JV Agreement were satisfied, triggering additional funding obligations, albeit at a lower level than in the JV Agreement due to the revised budgets and forecasts. In September 2018, the Company contributed $0.7 million to Shoreditch, which increased GEUK’s total contribution to $4.7 million as of September 30, 2018. In January 2019, GEUK is obligated to contribute an additional £0.5 million ($0.7 million at September 30, 2018) and EGC is obligated to contribute £0.4 million ($0.5 million at September 30, 2018), to Shoreditch in January 2019. In connection with the revised contributions and obligations, the GEUK’s ownership of Shoreditch increased from 65% to 67% and EGC’s ownership reduced from 35% to 33% as of September 30, 2018.

EGC has several significant participation rights in the management of Shoreditch that limits GEUK’s ability to direct the activities that most significantly impact Shoreditch’s economic performance. GEUK, therefore, accounts for its ownership interest in Shoreditch using the equity method since GEUK has the ability to exercise significant influence over its operating and financial matters, although it does not control Shoreditch. Shoreditch is a variable interest entity, however, the Company has determined that it is not the primary beneficiary, as the Company does not have the power to direct the activities of Shoreditch that most significantly impact Shoreditch’s economic performance.

On September 17, 2018, the Company extended a $0.1 million loan to EGC (“EGC Loan”), in connection with EGC’s contribution to Shoreditch. The EGC Loan, which is secured by EGC’s interest in Shoreditch, bears a fixed annual interest rate of 2% and is due, together with the principal amount on September 17, 2023. As of September 30, 2018, the outstanding balance, including accrued interest, of the EGC Loan was $0.1 million.

At September 30, 2018, the Company’s maximum exposure to loss as a result of its involvement with Shoreditch was its net book value of investments of $2.0 million, since there were no other arrangements, events or circumstances that could expose the Company to additional loss.

Summarized unaudited statements of operations of Shoreditch are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Revenues	$	437		$	—		$	766		$	—
Operating expenses:
Cost of revenues		455			—			825			—
Selling, general and administrative		1,152			244			2,916			244
Loss from operations		(1,170	)		(244			(2,975	)		(244	)
Other		—			—			—			—
Net loss	$	(1,170	)	$	(244	)	$	(2,975	)	$	(244	)
Genie’s equity in net loss	$	(767	)	$	(159	)	$	(1,988	)	$	(159	)