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Spark Energy Discloses Purchase Price for Two Recent Customer Book Acquisitions, Sees More M&A Opportunities

November 13, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

In announcing quarterly earnings, Spark Energy has disclosed the purchase price for Connecticut books of customers it has agreed to acquire from Discount Power, Inc. and Town Square Energy, LLC.

Both acquisitions were first reported by EnergyChoiceMatters.com (see prior stories on Discount Power and Town Square).

Spark reported that the purchase price for a book of 14,000 Discount Power customers in Connecticut was $2.4 million.

Spark reported that the purchase price for a book of 4,100 Town Square Energy customers in Connecticut was $375,000. Spark noted that the acquisition of the Town Square Energy book remains subject to regulatory approval (click here for related story today).

Spark Energy also reported that it increased its customer count by 18% through organic marketing efforts during the third quarter, ending the third quarter with over 300,000 customers

"The third quarter was a transitional quarter for us, having closed on our IPO on August 1, and then shifting our focus from the rapid growth we pursued as a private company to longer term sustainable growth supporting our targeted dividend. Unfortunately, we had several challenges in the third quarter. Most significantly, our recent growth in the Southwest Region gas business has resulted in us falling short of our Adjusted EBITDA expectations. As we proceed into the fourth quarter, we plan on continuing to improve the economics of our Southwest Region gas business and integrating the Discount Power and Town Square Energy customer acquisitions. We continue to see organic growth potential and I'm very excited about the breadth of M&A opportunities as we predicted back at the time of our IPO," said Nathan Kroeker, Spark Energy, Inc.'s President and Chief Executive Officer.

Regarding its Southern California gas market acquisition campaign, Spark said that the campaign was, "extremely successful in terms of customer count," but reported that, "the campaign has faced challenges that have negatively impacted our third quarter results."

"These impacts include lower than expected consumption and higher than estimated customer attrition and bad debt expense. We have restructured the campaign to improve the economics; however, we anticipate these negative effects to continue for the next several quarters," Spark said.

Spark also reported that it added nearly three times the number of new residential electric customers in New England as it did in 2Q and that it has seen an 18% increase in small commercial sales margin quarter over quarter.

For the quarter ended September 30, 2014, Spark reported Adjusted EBITDA of $(4.4) million compared to Adjusted EBITDA of $(1.5) million for the third quarter ended September 30, 2013. This decrease of $2.9 million is primarily attributable to increased customer acquisition costs.

For the third quarter ended September 30, 2014, Spark reported Retail Gross Margin of $14.6 million compared to Retail Gross Margin of $8.6 million for the third quarter ended September 30, 2013. This increase of $6.0 million is primarily attributable to increased unit margins across both of our commodities.

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