OAKVILLE, ON / ACCESSWIRE / February 25, 2022 / Spark Power Group Inc. (TSX:SPG), parent company of Spark Power Corp. ("Spark Power" or the "Company"), announced today an update to its liquidity position, the operating and financial outlook provided in its Q3 MD&A, (as defined below), and potential covenant breaches.
As previously reported on January 31, 2022, the Company completed a $39.6M equity financing, (the "Equity Financing"), used to extinguish $13.0M of subordinated secured vendor debt, and to inject meaningful capital to support the Company's revitalization, deepen and strengthen its Balance Sheet, and enhance its ability to execute on its 2022 strategic priorities. As a result, and despite the challenges referenced below, Management reports that the Company currently has a good working capital position and ample liquidity to fund ongoing operations in the normal course.
As a result of impacts caused by the ongoing global COVID-19 pandemic, (including operational impacts from the Omicron variant and rapidly accelerating inflationary cost pressures), performance challenges in certain segments of the business and spillover effects of the change in approach to how the Company accounts for project revenues and gross margins related to the Q3 Change in Estimate adjustment that was previously identified, the Company is advising of negative impacts on the Company's results for the financial period ended December 31, 2021 and the first part of fiscal year 2022. Specifically, while generally revenues are expected to be in line with expectations, operational gross margin realizations have been directly and indirectly negatively impacted by the items noted above. Further details on these impacts will be provided as part of the 2021 Q4 and year-end financial disclosures.
"These are unprecedented and challenging times. We continue to work hard to adapt to the rapidly changing macro-economic events around us and we are making significant strides in improving the Company's financial accounting and reporting processes and systems", said Richard Perri, CFO of Spark Power. "Thanks to the recent founder-led equity investment, our prudent approach to capital deployment and recent improvements in the Company's working capital position, the Company is in a position to continue to execute on its business plan."
As a function of the challenges noted above and related impacts, and financial information derived from preliminary work in relation to preparation of its fourth quarter and year end audited financial results as at and for the year ended December 31, 2021, the Company expects that, as at December 31, 2021, it is in breach of certain covenants under its existing secured credit facility (the "Facility") with its senior lender (the "Lender"). The Company's subsidiaries Spark Power Corp. and Spark Power Services (USA) Corp. are borrowers under the Facility, with the Company and its other subsidiaries being guarantors under the Facility. A copy of the Facility agreement is available under the Company's profile on SEDAR at www.sedar.com.
The Facility requires that the Company be in compliance with certain financial covenants (the "Facility Covenants") that include a senior funded debt to EBITDA ratio (Debt:EBITDA), a Debt Service Coverage Ratio and a total funded debt to EBITDA ratio. Based on preliminary financial information currently available to the Company, it is expected that, as of December 31, 2021, the Facility Covenants will not have been complied with. The Lender has been advised of the expected covenant breaches and the Company is working constructively with the Lender to address the situation. The Company will be seeking that the Lender provide a waiver of these covenant breaches, but there can be no assurances that such waiver will be forthcoming. The Company will provide an update regarding discussions with the Lender as additional details are available.
About Spark Power Group Inc.
Spark Power is a leading independent provider of end-to-end electrical contracting, operations and maintenance services, and energy sustainability solutions to the industrial, commercial, utility, and renewable asset markets in North America. We work to earn the right to be our customers' Trusted Partner in Power™. Our highly skilled and dedicated people, located in the communities we serve, combined with our knowledge of the power industry, technology expertise, and commitment to safety, ensures we deliver the right solutions that keep our customers' operations up and running today and better equipped for tomorrow. Learn more at www.sparkpowercorp.com.
Kim Samlall, Director, Marketing Communications
+1 (905) 829-3336 x185
Richard Perri, Executive Vice President and Chief Financial Officer
+1 (416) 388-4546
This news release contains forward-looking information and future oriented financial information within the meaning of applicable Canadian securities laws ("forward-looking information"). All information other than statements of current and historical fact contained in this news release is forward-looking information and reflect management's expectations regarding the prospects, results of operations, performance and business of the Company based on information currently available to the Company. Forward-looking information is provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements use forward-looking words, such as "anticipate", "continue", "could", "expect", "may", "will", "intend", "estimate", "plan", "believe" or other similar words but the absence of these words does not mean that a statement is not forward-looking. Forward-looking information in this new release includes, but is not limited to, information relating to Spark Power's future financial and business operations outlook, statements regarding the Company's business, future development, discussions with the Lender regarding a waiver of the covenant breaches, future financial position, our ability to secure a waiver of the covenant, the success and profitability of the business, general business and economic conditions, stabilization of COVID-19 business affects and recovery to pre-COVID-19 pandemic business levels, our gross margin realization, and improvements in liquidity. In developing the forward-looking information in this news release, we have applied several material assumptions, as set out herein, and including those under the section "Outlook" in our management's discussion and analysis for the three and nine months ended September 30, 2021 and 2020 (the "Q3 MD&A"), and those related to general business and economic conditions. By their nature, forward-looking information is inherently uncertain, is subject to risk and is based on numerous assumptions, including those regarding present and future business strategies, the environment in which the Company will operate in the future, expected revenues, financing plans, expansion plans and the Company's ability to achieve its goals. Although management of the Company believes that the expectations represented in such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. The future outcomes that relate to forward-looking information may be influenced by many factors that could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information, including, but not limited to, risk in default of its Facility with the Bank of Montreal, as well as those described in the Q3 MD&A and in "Risk Factors" in the Company's annual information form for the year ended December 31, 2020, filed on March 31, 2021 and available on SEDAR at www.sedar.com. Spark Power cautions that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and future oriented financial information and the inherent uncertainty of forward-looking information and future oriented financial information and are cautioned not to place undue reliance on such information. Actual results may differ materially from those indicated or underlying forward-looking information as a result of various factors. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Forward-looking information is provided as of the date of this news release or such other date specified herein, and the Company assumes no obligation to update or revise such forward-looking information to reflect new events or circumstances except as required under applicable Canadian securities laws.
SOURCE: Spark Power Group Inc.