Just a note to point out that Spark Energy (SPKE) which retails energy throughout the country should be watched closely.
SPKE has a high coupon (8.75%) fixed to floating preferred outstanding (SPKEP) which is now trading at $25.50–right near the highest level of the last year.
SPKE is not an energy generator–just a retailer. The company purchases and resells electricity and natural gas–but mainly electricity.
They have stated that they ‘hedge’ energy purchases for normal weather conditions–obviously not what we have had lately. The potential problem I see is that they likely had to buy energy on the ‘spot’ market during the last week and it is an unknown as to whether they were adequately hedged. This latest cold snap has the potential to be disastrous to the company.
Obviously I have no knowledge of the company’s hedging–but if I was a holder I would lighten up here at the most recent price and await further news–better safe than sorry.
I don’t follow them, but I took a look at their Texas page. Texas is deregulated, so residents essentially buy from a “retailer.” Spark offers fixed and variable plans. I am guessing they take a hit on their fixed plan portfolio if they are not fully hedged and need to cover in the spot market. On the month-to-month variable plans, if prices bump up, I think they end up losing some unhappy customers who may move elsewhere, human nature being what it is and changing retailers being rather easy.
Since this winter’s weather is getting pretty wild, I’d have to wonder whether they have unhedged exposure in any other of their 15+ markets. The other markets are different than Texas., which is a more or less free standing grid. Mid-Atlantic appears to have more stand-by generating capacity. Colder areas have better winterized wind turbines and power plants. So their spot risk may not be as high outside Texas.
From their website:
“The local electric company is the utility – that’s the company that owns the infrastructure, including the poles and power lines that deliver electricity to your home. They are who you call if your power goes out or there’s an emergency. But in almost every city in Texas, you must choose another company to supply that energy, called a Retail Electric Provider (REP). These REPs, like Spark Energy, allow you to choose electricity plans that offer competitive prices and plans to meet your needs.
How does that work? Spark Energy buys electricity and competes in the market for the best price — a competition that ultimately drives prices down and allows us to deliver more value for your money. In Texas, switching to a different electricity provider is kind of like changing to a different long distance company. When you switch to Spark Energy, the utility will continue to deliver electricity to your home but Spark Energy will handle all the billing, including the utility’s delivery fees and the electricity you actually use.”
https://seekingalpha.com/article/4386757-spark-energy-inc-2020-q3-results-earnings-call-presentation
See page 9/25
I don’t see red. But then I don;t own any 4% issues.
Martin, Its not too late, market is giving you a second chance at redemption, as BAC-P the 4.125% perpetual can be had still at $25.55. Be ready at market open tomorrow, lol.
They report 3/4 …. 4th Q & yr
Wow- down 2.15% – fast. 25.01
On the news this morning that the spot price in Texas for a mega watt hour has increased about 20X or 2000% from $ 40 to $8,000. Even a few days of that could really smart.
I am sure we will be seeing people on the news who get massive electric bills having picked one of these companies as their ‘supplier’ thinking they are saving money but then get crushed when the co. has to buy on the spot market! Sad. We got these calls and mailings all the time..at least on the calls we are on the Do Not Call list.. we opted out of calls via our suppliers too. Save a little..pay a lot! Bea
Yes Bea–there is always a price to be paid–will have to see if they put out any ‘news’ on this.
Thanks, Tim. It’s been on my watch (to sell) list as it floats 4/22.
Yes CR–I should have noted that as well as the spread is 6.578% so it will timbler on the spread if we don’t have a huge increase in 3 month libor.
don’t you think this effects the common way more than the preferred stock
bob–yes it does–but I don’t cover common shares so I mention the preferred. In this case with very dicey financials it would tumble over to the preferred.
Tim
So is this a short-term phenomenon that they will recover from and therefore actually be a buying opportunity or are you saying its an existential threat to the company?
Thanks!
Tim, thanks for the tip. I foolishly went ahead and bought 300 shares of SPKEP after I saw my 280 shares bought slightly below par after ex div saw positive price gain for the common and the preferred with Fidelity analysts continue to be “bullish”. My Dallas friend from Doug’s made technical buys and sells for the common and the preferreds. He does agree that the market maker (IMHO, the management too) kind of tease the buyers and sellers at times. Their SEC filing is always behind, debt to equity ratio did decline along with declining revenue. My sense is: this stock is dicier than LUMN common (the new symbol for Century LINK). Fidelity does not give accurate buy and sell info on the preferred, neither does Schwab. Fortunately, Vanguard does. 3841 shares exchanged hands on the preferreds, about 1 hour plus after market open. Common appeared positive at this time. No news. I had a limit order to sell at par losing just $30+. I will probably hold. This looks like market makers OR the dumb company play games as they have done many times. I will leave my limit order to sell at par today to see what happens. The shippers, Gas Log A, B, C and of course the Partnership (grandfather preferred), GLOG-A all are acting surprisingly well. Safe Bulkers and other bulkers by Seeking Alpah seem to suggest that they should do fine UNLESS the black swan (another huge hit of COVID 19 variant mutation, e.g. be it So. Africa or UK) hit us all. If I can get rid of this fake electric utility, or retail reseller, I intend to plow the proceeds to JMPNZ, the lower senior bond. JMP price action seems to suggest its staying power while it continue to suspend dividend to the common. So does Safe Bulkers, Inc., SB. I read the earnings call transcript and Q and A, I trust hese two Greek brothers who own tons of commons and preferreds. I try not to buy more, but its 8.8% QDI is compelling. Picked up another $1,100 yesterday. Thank you and Gridbird for all the wonderful SAFE and GOOD selections. They have all been acting very well. John. BTW, I got my first shot of Pfizer vaccination last Saturday and should get the second one in 21 days, despite news that the county facility had some problems with thawed and ruined inventory a few days earlier. Hope that the current down trend of new cases of COVID continues and some good compromise working out on opening schools …… John
Tim and Gumfighter, The Bid vs ASK volume seems to suggest that very few SELLERS vs. BUYERS for the preferreds. Gumfighter could be correct. Someone just bought 720 shares @ $24.50. The 10 day price chart for the common suggest the current price is back to what was traded 10 days ago. I will probably stay firm on my $25 and take the risks. Gumfighter, I would not however recommend buy SPKEP because there should be relatively safer and less tricky in shippers or even OTRKP or some of the Gridbird/Tim’s suggestions for “high yield” such as WCC-A or QRTEP. Just MHO.
My Dallas friend is concerned with his huge position. I sold them all, taking some small loss in my taxable account and intend to plow the proceeds to Safe Bulkers C (considered by Schwab as risky because it barely meets the exchange rule of NYSE). If one were to do a simple price chart comparison vs. SPKE common, it is clear that Safe Bulkers (SB, common) which still pays ZERO dividend to its commons. For 6, 3, 3, 1 months, I have to believe that SB is ready to see good profits coming very soon. Q and A with two analysts appeared to be positive because the price of common has climbed substantially. Comparing WCC vs. QRTEA, the analysts seem to favor WCC. So, I will replace the SPKEP in my IRA account with more WCC-A. BTW, SPKEP seems recovering. Then I must re learn my lesson from Gridbird, i.e. it works until it does not. While SPKE is much better than Just Energy. It is still a retail utility which had horrible history of customers complaint since Day 1.