Spark: Seeing "Number" Of Acquisition Opportunities

During an earnings call on Friday, Nathan Kroeker, Spark Energy's President and Chief Executive Officer, said in discussing M&A that, "we're seeing a number of different M&A opportunities."

Spark saw "upwards of half a dozen" opportunities in the last few months, Kroeker said, similar in size to the recent Starion book (60,000 RCEs)

Of those opportunities out there, Kroeker said that most everything needs to be evaluated as a book purchase, where the transaction does not bring value other than the value of the customers, and needs to be valued on a per customer basis

"If we can buy that book for significantly less than what the discounted cash flow [DCF] model is telling us it's going to produce, we're looking at doing acquisitions like that," Kroeker said

Kroeker said that the recent Starion book purchase was essentially the "perfect" acquisition for the company, as it checked all the boxes: it's in the right markets, it has a mature customer base, it has a good mix of fixed and variable, and was bought at a significant discount to what the DCF model says it's going to produce over the next several years

In contrast, Kroeker said that acquisitions that include new markets, new products, or new sales channels justify an EBITDA-multiple valuation approach and purchase price.

While Spark remains interested in M&A, as previously reported earlier this year, it has turned its attention to organic growth and ramping up such organic efforts (see story here)

Spark also provided an update on its marketing in Japan (under a JV), where it has 120,000 customers. Spark, in discussing Q2 earnings in August, had reported Japan customers as 107,000 currently on flow