HOUSTON, TX — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), announced today that it has entered into a TRA Termination and Release Agreement (the “Release Agreement”), and agreed to pay $11.2 million to terminate and settle all present and future obligations under the Tax Receivable Agreement (“TRA”) that was established at the time of Spark’s initial public offering in 2014. At March 31, 2019, Spark carried a TRA liability of $27.6 million. This settlement will result in a $16.4 million pre-tax benefit that will result in an increase in stockholders equity.
“We are extremely pleased to be able to settle our obligations at a significant discount to the calculated early termination payment under the TRA. This settlement allows us to remove a significant future cash outflow, reduce general and administrative costs and reporting complexities currently required by the TRA, and take full advantage of the step-up in tax basis associated with future conversions. We would like to thank Mr. Maxwell, once again, for his continued commitment to bringing shareholder value to Spark. We believe this simplifies Spark’s structure as we continue to tell our story to investors and potential strategic partners.” Said Nathan Kroeker, Spark’s President and Chief Executive Officer.
A special committee of the Board of Directors, consisting solely of independent directors, has approved this transaction. Absent the Release Agreement, Spark anticipated making TRA payments totaling $68.7 million, undiscounted, over the life of the TRA. The terms of the Release Agreement waive the early termination payment Spark would otherwise be required to make for an early termination of the TRA, which would have been approximately $49.3 million using June 24, 2019 as a hypothetical early settlement date.
Under the Release Agreement, Spark will retain the existing tax asset created by previous conversions of Class B shares (together with an equal number of Spark Holdco units) by Mr. Maxwell. In the event of any future conversions by Mr. Maxwell, Spark will retain 100% of the associated tax benefit. Investors are encouraged to read the full text of the Release Agreement, which will be filed on a Current Report on Form 8-K.
Source: Spark Energy, Inc.
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