Spark Reports "Significant" Increase In Electric Unit Margins Year-Over-Year
Adjusted EBITDA Lower On Mild Weather, Customer Acquisition
RCE Count Down
August 7, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
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Spark Energy reported results for the second quarter of 2019
Spark Energy reported a total RCE count of 818,000 as of June 30, 2019. That compares to a total RCE count of 865,000 as of March 31, 2019 and 908,000 as of December 31, 2018. As of the year-ago quarter ending June 30, 2018, Spark's RCE count had been listed as 1,049,000 RCEs
Spark reported that its average monthly attrition for the second quarter of 2019 was 3.8%, a 30% improvement from the first quarter
For the quarter ended June 30, 2019, Spark reported Adjusted EBITDA of $13.6 million compared to Adjusted EBITDA of $16.1 million for the quarter ended June 30, 2018. This decrease of $2.5 million was driven by mild temperatures across much of Spark's footprint, as well as increased customer acquisition spending.
For the quarter ended June 30, 2019, Spark reported Retail Gross Margin of $41.7 million compared to Retail Gross Margin of $43.4 million for the quarter ended June 30, 2018. This decrease of $1.7 million was primarily attributable to decreased electricity and natural gas volumes, partially offset by increased electricity and gas unit margins.
"Electricity unit margins increased significantly year over year due to lower capacity costs and the continued attrition of our low margin C&I customers," Spark said
For the second quarter, Retail Gross Margin for electricity was $22.17 per MWh, versus $15.54 per MWh a year ago
For the second quarter, Retail Gross Margin for natural gas was $3.94 per MMBtu, versus $3.80 per MMBtu a year ago
Spark's net loss (reflecting mark to market impacts) for the quarter ended June 30, 2019, was $25.5 million compared to net income of $23.9 million for the quarter ended June 30, 2018. The decrease in performance compared to the prior year was primarily the result of the decrease in the non-cash mark to market position of Spark's hedge portfolio of $22.7 million compared with the increase in the non-cash mark to market position of Spark's hedge portfolio of $25.4 million in the second quarter of 2018, as well as $10.8 million of non-recurring general and administrative costs associated with the settlement of significant litigation. These impacts were partially offset by an income tax benefit of $4.6 million in the quarter ended June 30, 2019, compared with an income tax expense of $3.3 million in the quarter ended June 30, 2018.
Spark's total revenues for the second quarter were $178 million, versus $232 million a year ago
Retail electric volumes were 1,516,139 MWh for the quarter, versus 2,100,007 MWh a year ago
Retail natural gas volumes were 2,057,121 MMBtus for the quarter, versus 2,840,721 MMBtus a year ago
Spark also listed quarter highlights as:
• Settled several significant legacy litigation items
• Amended and extended Senior Credit Facility and Subordinated Debt Facility; current liquidity of $108 million
• Terminated Tax Receivable Agreement ("TRA"), which will result in an increase in stockholders equity and a reduction in future cash payments
"We had a strong second quarter despite some milder than normal weather in a few of our geographies as we saw our unit margins continue to expand. We are nearing the end of our brand and system consolidation efforts and are on track to deliver over $22 million in run-rate G&A savings by year-end," said Nathan Kroeker, Spark Energy's President and Chief Executive Officer. "We terminated our Tax Receivable Agreement on very favorable terms. Additionally, we resolved four significant cases that represented the majority of our ongoing litigation exposure. Collectively, these initiatives will enable us to reduce future costs and streamline our story."
Kroeker added, "Based on all our work consolidating our brands and systems, settling outstanding litigation and regulatory matters, the termination of the TRA, and our healthy unit margins, we expect a very strong second half of 2019.”
Spark also announced corporate governance changes
Spark announced the formation of a Nominating and Corporate Governance Committee consisting solely of independent directors, and a change in the composition of the Compensation Committee resulting in it consisting solely of independent directors. The Nominating and Corporate Governance Committee consists of Kenneth M. Hartwick and Nick W. Evans, Jr., with Mr. Evans serving as Chair, and the Compensation Committee now consists of Mr. Hartwick and Mr. Evans, with Mr. Hartwick serving as Chair. Mr. Hartwick now also serves as the Chair of the Audit Committee.
"All of the actions announced today reflect the Board’s thoughtful and deliberate efforts to strengthen corporate governance. The decisions were well thought through considering feedback from the Company’s shareholders and other stakeholders, and reflect our commitment to continued evaluation of governance practices," said Mr. Kroeker.