OAKVILLE, ON/ACCESSWIRE/February 25, 2022/ Spark Power Group Inc. (TSX: SPG, Financial), parent company of Spark Power Corp. (“Spark power“or the”Company“), today announced an update on its liquidity position, the operating and financial outlook provided in its third quarter MD&A (as defined below) and potential covenant breaches.
As previously announced on January 31, 2022, the Company completed a $39.6 million equity financing (the “Equity financing“), used to extinguish $13.0 million of subordinated secured seller debt and to inject significant capital to support the company’s revitalization, deepen and strengthen its balance sheet, and improve its ability to execute its 2022 strategic priorities. Accordingly, and despite the challenges noted below, management reports that the Company currently has good working capital and sufficient liquidity to fund ongoing operations in the normal course.
Due to impacts caused by the ongoing global COVID-19 pandemic (including operational impacts of the Omicron variant and rapidly accelerating inflationary cost pressures), performance issues in certain segments of the business and the ripple effects of the change in approach on how the Company accounts for project revenues and gross margins related to the third quarter estimate change adjustment that was previously identified, the Company advises of the impacts negative on the Company’s results for the financial period ended December 31, 2021 and the first part of fiscal 2022. Specifically, while revenues are generally expected to be in line with expectations, gross operating margin achievements were directly and indirectly adversely affected by the above items. Further details on these impacts will be provided as part of the fourth quarter 2021 and year-end financial information.
“We are living in unprecedented and difficult times. We continue to work hard to adapt to the rapidly changing macroeconomic events around us and we are making significant progress in improving the company’s financial accounting and reporting processes and systems,” said Richard Perri, Chief Financial Officer of Spark Power. “With the recent founder-led equity investment, our cautious approach to capital deployment, and recent improvements in the company’s working capital position, the company is positioned to continue to execute on its business plan. “
Based on the above challenges and related impacts, and financial information derived from preliminary work related to the preparation of its audited financial results for the fourth quarter and year ended December 31, 2021 and for the year ended December 31, 2021, the Company expects that, as of December 31, 2021, it will be in breach of certain covenants under its existing secured credit facility (the “Establishment“) 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 The Facility Agreement is available under the Company’s profile on SEDAR at www.sedar.com.
The Facility requires the Company to comply with certain financial covenants (the “Facilities commitments“) which include a ratio of senior financial debt to EBITDA (debt:EBITDA), a debt service coverage ratio and a ratio of total financial debt to EBITDA. Based on the information preliminary financial statements currently available to the Company, it is expected that as of December 31, 2021, the covenants of the facility will not have been satisfied The lender has been advised of the breaches of the covenants and the Company is working constructively with the lender to remedy the situation. The Company will require the lender to provide a waiver of such defaults, but there can be no assurance that such waiver will be granted. The Company will provide an update regarding discussions with the lender as and when as further details become available.
About Spark Power Group Inc.
Spark Power is a leading independent provider of end-to-end power contracts, operations and maintenance services, and energy sustainability solutions for the industrial, commercial, utility, and renewable energy asset markets in North America. North. We work to earn the right to be our customers’ Trusted Partner in Power™. Our highly trained and dedicated staff, located in the communities we serve, combined with our knowledge of the energy industry, our technological expertise and our commitment to safety, ensures that we provide the right solutions that maintain the operations of our customers operational today and better equipped. for tomorrow. To learn more, visit www.sparkpowercorp.com.
Kim Samlall, Director, Marketing Communications
+1 (905) 829-3336 ext. 185
Richard Perri, Executive Vice President and Chief Financial Officer
+1 (416) 388-4546
This press release contains forward-looking information and forward-looking financial information within the meaning of applicable Canadian securities laws (“forward-looking information”). All information other than statements of current and historical facts contained in this press release is forward-looking information and reflects 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 regarding the future, and readers are cautioned that such statements may not be appropriate for other purposes. These statements use forward-looking terms, 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 contained in this new release includes, but is not limited to, information relating to Spark Power’s future financial and business prospects, statements regarding the company’s business, future development, discussions with the lender regarding a waiver of covenant violations, future financial condition, our ability to obtain a covenant waiver, business success and profitability, general business and economic conditions, stabilization of the business effects of COVID-19 and the recovery to pre-COVID-19 pandemic business levels, achieving our gross margin, and improving liquidity. In preparing the forward-looking information contained in this press release, we applied several important assumptions, as set forth herein, and including those in the “Outlook” section in our MD&A for the three and nine months ended September 30, 2021. and 2020 (the “Q3 Management Report“), and those relating to general business and economic conditions. By its nature, forward-looking information is inherently uncertain, is subject to risks and is based on many assumptions, including those regarding present and future business strategies, environment in which the company will operate in the future, expected revenues, financing plans, plans for expansion and the company’s ability to achieve its objectives. Although management of the company believes that the expectations represented in such forward-looking information is reasonable, there can be no assurance that such Future results related to the forward-looking information may be influenced by numerous factors that could cause actual future results, conditions, actions or events to differ materially from the objectives, expectations, estimates or intentions expressed in the forward-looking information, including, but not limited to, the risk of default of its facility with Bank of Montreal, as well as those described in the Q3 MD&A and in the “Risk Factors” section of the Company’s Annual Information Form for the fiscal 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 that other factors could also adversely affect results. Readers are urged to carefully consider the risks, uncertainties and assumptions when evaluating forward-looking information and forward-looking financial information and the inherent uncertainty of forward-looking information and forward-looking financial information and are cautioned not to place undue reliance on this information. Actual results may differ materially from those indicated or the underlying forward-looking information due to a variety of 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 press release or any other date specified herein, and the Company undertakes no obligation to update or revise such forward-looking information to reflect new events or circumstances, except if required by applicable Canadian securities laws. .
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