<SUBMISSION>
<ACCESSION-NUMBER>0001606268-17-000093
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>90
<PERIOD>20170630
<FILING-DATE>20170804
<DATE-OF-FILING-DATE-CHANGE>20170804
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>Spark Energy, Inc.
<CIK>0001606268
<ASSIGNED-SIC>4931
<IRS-NUMBER>465453215
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-36559
<FILM-NUMBER>171007063
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>12140 WICKCHESTER LANE
<STREET2>SUITE 100
<CITY>HOUSTON
<STATE>TX
<ZIP>77079
<PHONE>(713) 600-2600
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>12140 WICKCHESTER LANE
<STREET2>SUITE 100
<CITY>HOUSTON
<STATE>TX
<ZIP>77079
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>a2017-q2x10q.htm
<DESCRIPTION>10-Q Q2 2017
<TEXT>
Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
             Washington, D.C. 20549             


    FORM 10-Q    


                                        
ý    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 
                  For the quarterly period ended June 30, 2017
                                        
o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
                                        
                   For the transition period from     to     
                                        
                       Commission File Number: 001-36559
                               Spark Energy, Inc.
             (Exact name of registrant as specified in its charter)
                                                         
           Delaware                       46-5453215     
(State or other jurisdiction of        (I.R.S. Employer  
incorporation or organization)        Identification No.)


                        12140 Wickchester Ln, Suite 100
                              Houston, Texas 77079

                    (Address of principal executive offices)
                                        
                                 (713) 600-2600
              (Registrant's telephone number, including area code)
                                        
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this Chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and "emerging growth company"
in Rule 12b-2 of the Exchange Act.    
Large accelerated filer o          Accelerated filer x 
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller
reporting company o
Emerging Growth Company x

If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. x
  
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes o  No x

There were 13,145,636 shares of outstanding Class A common stock, 21,485,126
shares of Class B common stock and 1,704,339 shares of Series A Preferred stock
outstanding as of August 2, 2017.

--------------------------------------------------------------------------------


PART I. FINANCIAL INFORMATION                                                       
ITEM 1. FINANCIAL STATEMENTS                                                        
                                                                                    
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2017 AND DECEMBER 31,    
2016 (unaudited)                                                                 2  
                                                                                    
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME      
FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016 AND THE SIX MONTHS ENDED    
JUNE 30, 2017 AND 2016 (unaudited)                                               4  
                                                                                    
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS      
ENDED JUNE 30, 2017 (unaudited)                                                  6  
                                                                                    
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED      
JUNE 30, 2017 AND 2016 (unaudited)                                               7  
                                                                                    
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)             9  
                                                                                    
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND       
RESULTS OF OPERATIONS                                                           43  
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK              69  
ITEM 4. CONTROLS AND PROCEDURES                                                 71  
PART II. OTHER INFORMATION                                                      72  
ITEM 1. LEGAL PROCEEDINGS                                                       72  
ITEM 1A. RISK FACTORS                                                           73  
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS             74  
ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                         75  
ITEM 4. MINE SAFETY DISCLOSURES                                                 75  
ITEM 5. OTHER INFORMATION                                                       75  
ITEM 6. INDEX TO EXHIBITS                                                       76  
APPENDIX A                                                                      78  
SIGNATURES                                                                      79  




                                       1
--------------------------------------------------------------------------------
  Table of Contents  

PART 1. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
                               SPARK ENERGY, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                   AS OF JUNE 30, 2017 AND DECEMBER 31, 2016
                                 (in thousands)
                                  (unaudited)

                                       2
--------------------------------------------------------------------------------
  Table of Contents  

                                                                              December 31,  
                                                           June 30, 2017          2016      
Assets                                                                       
Current assets:                                                              
Cash and cash equivalents                                 $       13,126     $      18,960 
Restricted cash                                                      919                 — 
Accounts receivable, net of allowance for doubtful                                         
accounts of $2.1 million and $2.3 million as of June 30,                                   
2017 and December 31, 2016, respectively                          95,690           112,491 
Accounts receivable—affiliates                                     3,883             2,624 
Inventory                                                          3,442             3,752 
Fair value of derivative assets                                      835             8,344 
Customer acquisition costs, net                                   18,377            18,834 
Customer relationships, net                                       13,225            12,113 
Prepaid assets                                                     1,466             1,361 
Deposits                                                           6,374             7,329 
Deposit - Verde consideration                                     65,785                 — 
Other current assets                                               9,203            12,175 
Total current assets                                             232,325           197,983 
Property and equipment, net                                        3,993             4,706 
Fair value of derivative assets                                      122             3,083 
Customer acquisition costs, net                                    7,880             6,134 
Customer relationships, net                                       20,218            21,410 
Deferred tax assets                                               54,105            55,047 
Goodwill                                                          80,947            79,147 
Other assets                                                       9,123             8,658 
Total assets                                              $      408,713     $     376,168 
Liabilities, Series A Preferred Stock and Stockholders'                      
Equity                                                                       
Current liabilities:                                                         
Accounts payable                                          $       49,341     $      52,309 
Accounts payable—affiliates                                        4,089             3,775 
Accrued liabilities                                               21,749            36,619 
Fair value of derivative liabilities                               6,947               680 
Current portion of Senior Credit Facility                          7,500            51,287 
Current payable pursuant to tax receivable                                                 
agreement—affiliates                                               1,454                 — 
Current contingent consideration for acquisitions                  5,856            11,827 
Current portion of note payable                                        —            15,501 
Convertible subordinated notes to affiliates                           —             6,582 
Other current liabilities                                          1,024             5,476 
Total current liabilities                                         97,960           184,056 
Long-term liabilities:                                                                     
Fair value of derivative liabilities                               3,711                68 
Payable pursuant to tax receivable agreement—affiliates           48,432            49,886 
Long-term portion of Senior Credit Facility                       76,500                 — 
Subordinated debt—affiliate                                       15,000             5,000 
Deferred tax liability                                                 —               938 
Contingent consideration for acquisitions                          3,986            10,826 
Other long-term liabilities                                        1,330             1,658 
Total liabilities                                                246,919           252,432 
Commitments and contingencies (Note 13)                                                    
Series A Preferred Stock, par value $0.01 per share,                                       
20,000,000 shares authorized, 1,610,000 shares issued and                                  
outstanding at June 30, 2017 and zero shares issued and                                    
outstanding at December 31, 2016                                  39,111                 — 
Stockholders' equity:                                                                      
    Common Stock (1) :                                                                     
Class A common stock, par value $0.01 per share,                                           
120,000,000 shares authorized, 13,235,082 issued, and                                      
13,175,356 outstanding at June 30, 2017 and 12,993,118                                     
issued and outstanding at December 31, 2016                          132                65 
Class B common stock, par value $0.01 per share,                                           
60,000,000 shares authorized, 21,485,126 issued and                                        
outstanding at June 30, 2017 and 20,449,484 issued and                                     
outstanding at December 31, 2016                                     216               103 
    Additional paid-in capital                                    35,277            25,413 
    Accumulated other comprehensive (income)/loss                    (17 )              11 
    Retained earnings                                              2,132             4,711 
    Treasury stock, at cost, 59,726 shares at June 30,                                     
2017 and zero shares at December 31, 2016                         (1,285 )               — 
    Total stockholders' equity                                    36,455            30,303 
Non-controlling interest in Spark HoldCo, LLC                     86,228            93,433 
    Total equity                                                 122,683           123,736 
Total liabilities, Series A Preferred Stock and                                            
stockholders' equity                                      $      408,713     $     376,168 


(1)  Outstanding shares of common stock reflect the two-for-one stock split,
which took effect on June 16, 2017. See Note 4 "Equity" for further discussion.

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                       3
--------------------------------------------------------------------------------
  Table of Contents  

                               SPARK ENERGY, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
           FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
                     (in thousands, except per share data)
                                  (unaudited)
                                           Three Months Ended June 30,          Six Months Ended June 30,   
                                             2017             2016 (2)           2017 (1)         2016 (2)  
Revenues:                                                                                        
Retail revenues                        $     151,604       $     110,058     $     348,104       $ 220,077 
Net asset optimization                                                                                     
(expense)/revenues (3)                          (168 )              (677 )            (361 )          (150 )
Total Revenues                               151,436             109,381           347,743         219,927 
Operating Expenses:                                                                              
Retail cost of revenues (4)                  114,637              56,963           260,398         125,763 
General and administrative (5)                19,346              19,799            43,839          37,179 
Depreciation and amortization                  9,656               8,253            18,926          15,042 
Total Operating Expenses                     143,639              85,015           323,163         177,984 
Operating income                               7,797              24,366            24,580          41,943 
Other (expense)/income:                                                                          
Interest expense                              (2,452 )              (832 )          (5,897 )        (1,585 )
Interest and other income                       (265 )               195               (66 )           100 
Total other expenses                          (2,717 )              (637 )          (5,963 )        (1,485 )
Income before income tax expense               5,080              23,729            18,617          40,458 
Income tax expense                               409               4,735             2,814           5,723 
Net income                             $       4,671       $      18,994     $      15,803       $  34,735 
Less: Net income attributable to                                                                           
non-controlling interests                      3,592              16,653            12,454          28,221 
Net income attributable to Spark                                                                           
Energy, Inc. stockholders              $       1,079       $       2,341     $       3,349       $   6,514 
Less: Accumulated dividend on Series A                                                                     
preferred stock                                  991                   —             1,174               — 
Net income attributable to                                                                                 
stockholders of Class A common stock   $          88       $       2,341     $       2,175       $   6,514 
Other comprehensive loss, net of tax:                                                            
Currency translation loss              $         (26 )     $         (61 )   $         (75 )     $     (61 )
Other comprehensive loss                         (26 )               (61 )             (75 )           (61 )
Comprehensive income                   $       4,645       $      18,933     $      15,728       $  34,674 
Less: Comprehensive income                                                                                 
attributable to non-controlling                                                                            
interests                                      3,576              16,620            12,407          28,188 
Comprehensive income attributable to                                                                       
Spark Energy, Inc. stockholders        $       1,069       $       2,313     $       3,321       $   6,486 
                                                                                                            
Net income attributable to Spark                                                                 
Energy, Inc. per share of Class A                                                                
common stock                                                                                     
    Basic                              $        0.01       $        0.19     $        0.17       $    0.66 
    Diluted                            $        0.01       $        0.15     $        0.16       $    0.57 
                                                                                                           
Weighted average shares of Class A                                                                         
common stock outstanding                                                                                   
    Basic                                     13,104              12,086            13,050           9,799 
    Diluted                                   13,376              13,278            13,257          10,959 



(1) Financial information has been recast to include results attributable to the 
    acquisition of Perigee Energy, LLC by an affiliate on February 3, 2017. See  
    Notes 2 and 3 "Basis of Presentation and Summary of Significant Accounting   
    Policies" and "Acquisitions" for further discussion.                         


(2) Financial information has been recast to include results attributable to the 
    acquisition of the Major Energy Companies by an affiliate on April 15, 2016. 
    See Note 2 and 3 "Basis of Presentation and Summary of Significant Accounting
    Policies" and "Acquisitions" for further discussion.                         


(3) Net asset optimization revenues (expenses) includes asset optimization       
    revenues—affiliates of $0 and $41 for the three months ended June 30, 2017   
    and 2016, respectively, and asset optimization revenues—affiliates cost of   
    revenues of $0 and $376 for the three months ended June 30, 2017 and 2016,   
    respectively, and asset optimization revenues—affiliates of $0 and $154 for  
    the six months ended June 30, 2017 and 2016, respectively, and asset         
    optimization revenue—affiliates cost of revenues of $0 and $1,633 for the six
    months ended June 30, 2017 and 2016, respectively.                           


(4) Retail cost of revenues includes retail cost of revenues—affiliates of $0 and
    less than $100 for the three months ended June 30, 2017 and 2016,            
    respectively, and $0 and less than $100 for the six months ended June 30,    
    2017 and 2016, respectively.                                                 


(5) General and administrative includes general and administrative               
    expense—affiliates of $6,100 and $4,000 for the three months ended June 30,  
    2017 and 2016, respectively, and $13,400 and $8,400 for the six months ended 
    June 30, 2017 and 2016, respectively.                                        



                                       4
--------------------------------------------------------------------------------
  Table of Contents  

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                       5
--------------------------------------------------------------------------------
  Table of Contents  

                               SPARK ENERGY, INC.
             CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                     FOR THE SIX MONTHS ENDED JUNE 30, 2017
                                 (in thousands)
                                  (unaudited)
                 Issued    Issued                                                                                                                                                                      
                Shares of Shares of                  Class A Common Class B Common                   Accumulated Other  Additional Paid-in Retained Earnings Total Stockholders'    Non-controlling    
                 Class A   Class B   Treasury Stock      Stock          Stock       Treasury Stock     Comprehensive         Capital           (Deficit)            Equity              Interest        Total Equity  
                 Common    Common                                                                      Income (Loss)                                                                                   
                  Stock     Stock                                                                                                                                                                      
Balance at                                                                                                                                                                                                           
December 31,                                                                                                                                                                                                         
2016              6,497    10,225             —      $         65   $        103   $            —   $            11     $      25,413      $      4,711      $        30,303      $         93,433     $     123,736 
Stock based                                                                                                                                                                                                          
compensation          —         —             —                 —              —                —                 —             1,195                 —                1,195                     —             1,195 
Restricted                                                                                                                                                                                                           
stock unit                                                                                                                                                                                                           
vesting             121         —             —                 1              —                —                 —             1,053                 —                1,054                     —             1,054 
Consolidated                                                                                                                                                                                                         
net income            —         —             —                 —              —                —                 —                 —             3,349                3,349                12,454            15,803 
Foreign                                                                                                                                                                                                              
currency                                                                                                                                                                                                             
translation                                                                                                                                                                                                          
adjustment for                                                                                                                                                                                                       
equity method                                                                                                                                                                                                        
investee              —         —             —                 —              —                —               (28 )               —                 —                  (28 )                 (47 )             (75 )
Distributions                                                                                                                                                                                                        
paid to                                                                                                                                                                                                              
non-controlling                                                                                                                                                                                                      
unit holders          —         —             —                 —              —                —                 —                 —                 —                    —               (19,822 )         (19,822 )
Net                                                                                                                                                                                                                  
contribution by                                                                                                                                                                                                      
NG&E                  —         —             —                 —              —                —                 —                 —                 —                    —                   210               210 
Dividends paid                                                                                                                                                                                                       
to Class A                                                                                                                                                                                                           
common                                                                                                                                                                                                               
stockholders          —         —             —                 —              —                —                 —                 —            (4,754 )             (4,754 )                   —            (4,754 )
Dividends to                                                                                                                                                                                                         
Preferred Stock       —         —             —                 —              —                —                 —                 —            (1,174 )             (1,174 )                   —            (1,174 )
Conversion of                                                                                                                                                                                                        
Convertible                                                                                                                                                                                                          
Subordinated                                                                                                                                                                                                         
Notes to Class                                                                                                                                                                                                       
B Common Stock        —       518             —                 —              5                —                 —             7,790                 —                7,795                     —             7,795 
Treasury Stock        —         —           (60 )               —              —           (1,285 )               —                 —                 —               (1,285 )                   —            (1,285 )
Stock Split       6,617    10,742             —                66            108                —                 —              (174 )               —                    —                     —                 — 
Balance at June                                                                                                                                                                                                      
30, 2017         13,235    21,485           (60 )    $        132   $        216   $       (1,285 ) $           (17 )   $      35,277      $      2,132      $        36,455      $         86,228     $     122,683 


   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.


                                       6
--------------------------------------------------------------------------------
  Table of Contents  

                               SPARK ENERGY, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
                                 (in thousands)
                                  (unaudited) 
                                                            Six Months Ended June 30,    
                                                            2017 (1)          2016 (2)   
Cash flows from operating activities:                                      
Net income                                               $     15,803      $     34,735 
Adjustments to reconcile net income to net cash flows                      
provided by operating activities:                                          
Depreciation and amortization expense                          18,411            17,474 
Deferred income taxes                                               3             2,597 
Stock based compensation                                        2,905             2,442 
Amortization of deferred financing costs                          531               235 
Excess tax benefit related to restricted stock vesting            179                 — 
Change in Fair Value of Earnout liabilities                    (2,568 )           1,000 
Accretion on fair value of Major Earnout and Provider                                   
Earnout liabilities                                             2,660                 — 
Bad debt expense                                                  919               462 
Loss (gain) on derivatives, net                                31,473            (3,496 )
Current period cash settlements on derivatives, net           (11,828 )         (15,829 )
Accretion of discount to convertible subordinated notes                                 
to affiliate                                                    1,004                71 
Other                                                             224                51 
Changes in assets and liabilities:                                         
Decrease in accounts receivable                                18,072            21,001 
(Increase) decrease in accounts receivable—affiliates          (1,925 )             831 
Decrease in inventory                                             310             1,704 
Increase in customer acquisition costs                        (12,074 )          (5,356 )
Decrease in prepaid and other current assets                    5,394             2,306 
(Increase) decrease in other assets                              (788 )             536 
Decrease in accounts payable and accrued liabilities          (18,422 )          (9,248 )
Increase (decrease) in accounts payable—affiliates                313              (291 )
Decrease in other current liabilities                          (2,862 )            (414 )
Decrease in other non-current liabilities                        (328 )          (1,612 )
Net cash provided by operating activities                      47,406            49,199 
Cash flows from investing activities:                                      
Purchases of property and equipment                              (371 )          (1,449 )
Payment of the Major Energy Companies Earnout                  (7,403 )               — 
Payment of the Provider Companies Earnout and                                           
Installment Note                                               (7,353 )               — 
Acquisitions of Perigee and other customers                    (9,353 )               — 
Deposit for Verde Acquisition                                 (65,785 )               — 
Contribution to equity method investment in eRex Spark              —              (413 )
Net cash used in investing activities                         (90,265 )          (1,862 )
Cash flows from financing activities:                                      
Proceeds from issuance of Series A Preferred Stock, net                                 
of issuance costs paid                                         37,937                 — 
Borrowings on notes payable                                   121,000                 — 
Payments on notes payable                                     (93,789 )         (25,152 )
Proceeds from disgorgement of stockholders short-swing                                  
profits                                                           666               580 
Restricted stock vesting                                       (2,009 )            (909 )
Excess tax benefit related to restricted stock vesting              —               141 
Payment of dividends to Class A common stockholders            (4,754 )          (3,657 )
    Payment of distributions to non-controlling                                         
unitholders                                                   (19,822 )          (9,967 )
Purchase of Treasury Stock                                     (1,285 )               — 
Net cash provided by (used in) financing activities            37,944           (38,964 )
(Decrease) increase in Cash and cash equivalents and                                    
Restricted cash                                                (4,915 )           8,373 
Cash and cash equivalents and Restricted cash—beginning                                 
of period                                                      18,960             4,474 
Cash and cash equivalents and Restricted cash—end of                                    
period                                                   $     14,045      $     12,847 
Supplemental Disclosure of Cash Flow Information:                          
Non-cash items:                                                                         
    Property and equipment purchase accrual              $         50      $         22 
    Liability due to tax receivable agreement            $          —      $    (27,462 )
    Tax benefit from tax receivable agreement            $          —      $     31,490 
Cash paid during the period for:                                           
Interest                                                 $      1,395      $        944 
Taxes                                                    $      7,232      $      1,892 


(1) Financial information has been recast to include results attributable to the
acquisition of Perigee Energy, LLC by an affiliate on February 3, 2017. See
Notes 2 and 3 "Basis of Presentation and Summary of Significant Accounting
Policies" and "Acquisitions," respectively, for further discussion.
(2) Financial information has been recast to include results attributable to the
acquisition of the Major Energy Companies by an affiliate on April 15, 2016. See
Notes 2 and 3 "Basis of Presentation and Summary of Significant Accounting
Policies" and "Acquisitions," respectively, for further discussion.


                                       7
--------------------------------------------------------------------------------
  Table of Contents  

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                       8
--------------------------------------------------------------------------------
  Table of Contents  

SPARK ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Formation and Organization
Organization

Spark Energy, Inc. ("Spark Energy," "Company," "we" or "us") is an independent
retail energy services company that provides residential and commercial
customers in competitive markets across the United States with an alternative
choice for natural gas and electricity. The Company is a holding company whose
sole material asset consists of units in Spark HoldCo, LLC (“Spark HoldCo”).
Spark HoldCo owns all of the outstanding membership interests or common stock in
each of Spark Energy, LLC (“SE”), Spark Energy Gas, LLC (“SEG”), Oasis Power
Holdings, LLC ("Oasis"), CenStar Energy Corp. ("CenStar"), Electricity Maine,
LLC, Electricity N.H., LLC and Provider Power Mass, LLC (collectively, the
"Provider Companies"); Major Energy Services, LLC, Major Energy Electric
Services, LLC, and Respond Power, LLC (collectively, the "Major Energy
Companies"), and Perigee Energy, LLC ("Perigee"), the operating subsidiaries
through which the Company operates. The Company is the sole managing member of
Spark HoldCo, is responsible for all operational, management and administrative
decisions relating to Spark HoldCo’s business and consolidates the financial
results of Spark HoldCo and its subsidiaries.

SE is a licensed retail electric provider in multiple states. SE provides retail
electricity services to end-use retail customers, ranging from residential and
small commercial customers to large commercial and industrial users. SE was
formed on February 5, 2002 under the Texas Revised Limited Partnership Act (as
recodified by the TBOC) and was converted to a Texas limited liability company
on May 21, 2014.

SEG is a retail natural gas provider and asset optimization business
competitively serving residential, commercial and industrial customers in
multiple states. SEG was formed on January 17, 2001 under the Texas Revised
Limited Partnership Act (as recodified by the TBOC) and was converted to a Texas
limited liability company on May 21, 2014.

Oasis, through its operating subsidiary, Oasis Power LLC, is a retail energy
provider formed on August 28, 2009 as a limited liability company under the
TBOC. We acquired Oasis on July 31, 2015 from an affiliate.

CenStar is a retail energy provider incorporated on July 18, 2008 under the New
York Business Corporation Law. We acquired CenStar on July 8, 2015.

The Provider Companies operate as retail energy providers. Electricity Maine,
LLC, Electricity N.H., LLC, and Provider Power Mass, LLC were formed on June 17,
2010, January 20, 2012 and August 22, 2012, respectively, as limited liability
companies under the Maine Limited Liability Company Act. We acquired the
Provider Companies on August 1, 2016, as described in Note 3 "Acquisitions."

The Major Energy Companies operate as retail energy providers. Major Energy
Services, LLC, Major Energy Electric Services, LLC and Respond Power, LLC were
formed on October 11, 2005, September 12, 2007 and July 11, 2008, respectively,
as limited liability companies under the New York Limited Liability Company Law.
We completed the purchase of all the outstanding membership interests of the
Major Energy Companies on August 23, 2016 from an affiliate, as described in
Note 3 "Acquisitions."

Perigee is a retail energy provider. Perigee was formed on October 5, 2011 as a
Texas limited liability company. We completed the the purchase of all of the
outstanding membership interests of Perigee on April 1, 2017 from an affiliate,
as described in Note 3 "Acquisitions."

We are a Delaware corporation formed on April 22, 2014 for the purpose
facilitating an initial public offering ("IPO") of our Class A common stock, par
value $0.01 per share ("Class A common stock"), and to become the sole

                                       9
--------------------------------------------------------------------------------
  Table of Contents  

managing member of, and to hold an ownership interest in, Spark HoldCo. In
connection with our IPO, NuDevco Retail Holdings LLC ("NuDevco Retail Holdings")
formed NuDevco Retail, LLC (“NuDevco Retail”), a single member limited liability
company, on May 29, 2014, to hold the remaining Spark HoldCo units and shares of
our Class B common stock, par value $0.01 per share ("Class B common stock"). In
January 2016, Retailco, LLC ("Retailco") succeeded to the interest of NuDevco
Retail Holdings of its Class B common stock and an equal number of Spark HoldCo
units it held pursuant to a series of transfers. See Note 4 "Equity" for further
discussion.
Relationship with our Founder and Majority Shareholder
W. Keith Maxwell, III (our "Founder") is the owner of a majority in voting power
of our common stock through his ownership of NuDevco Retail and Retailco.
Retailco is a wholly owned subsidiary of TxEx Energy Investments, LLC ("TxEx"),
which is wholly owned by Mr. Maxwell. NuDevco Retail is a wholly owned
subsidiary of NuDevco Retail Holdings, which is a wholly owned subsidiary of
Electric HoldCo, LLC, which is also a wholly owned subsidiary of TxEx.

Emerging Growth Company Status

As a company with less than $1.07 billion in revenues during its last fiscal
year, the Company qualifies as an “emerging growth company” as defined in the
Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth
company may take advantage of specified reduced reporting and other regulatory
requirements.

The Company will remain an “emerging growth company” until as late as the last
day of the Company's 2019 fiscal year, or until the earliest of (i) the last day
of the fiscal year in which the Company has $1.07 billion or more in annual
revenues; (ii) the date on which the Company becomes a “large accelerated filer”
(the fiscal year-end on which the total market value of the Company’s common
equity securities held by non-affiliates is $700 million or more as of June 30);
(iii) the date on which the Company issues more than $1.0 billion of
non-convertible debt over a three-year period.
As a result of the Company's election to avail itself of certain provisions of
the JOBS Act, the information that the Company provides may be different than
what you may receive from other public companies in which you hold an equity
interest.
Exchange and Registration Rights

The Spark HoldCo Third Amended and Restated Limited Liability Company Agreement
provides that if the Company issues a new share of Class A common stock, Series
A Preferred Stock (as defined below) or other equity security of the Company
(other than shares of Class B common stock, and excluding issuances of Class A
common stock upon an exchange of Class B common stock or Series A Preferred
Stock), Spark HoldCo will concurrently issue a corresponding limited liability
company unit either to the holder of the Class B common stock, or to the Company
in the case of the issuance of shares of Class A common stock, Series A
Preferred Stock or such other equity security. As a result, the number of Spark
HoldCo units held by the Company always equals the number of shares of Class A
common stock, Series A Preferred Stock or such other equity securities of the
Company outstanding.

Each share of Class B common stock, all of which are held by NuDevco Retail and
Retailco, has no economic rights but entitles the holder to one vote on all
matters to be voted on by stockholders generally. Holders of Class A common
stock and Class B common stock vote together as a single class on all matters
presented to our stockholders for their vote or approval, except as otherwise
required by applicable law or by our certificate of incorporation.

NuDevco Retail and Retailco have the right to exchange (the “Exchange Right”)
all or a portion of their Spark HoldCo units (together with a corresponding
number of shares of Class B common stock) for Class A common stock (or cash at
Spark Energy, Inc.’s or Spark HoldCo’s election (the “Cash Option”)) at an
exchange ratio of one share of Class A common stock for each Spark HoldCo unit
(and corresponding share of Class B common stock)

                                       10
--------------------------------------------------------------------------------
  Table of Contents  

exchanged. In addition, NuDevco Retail and Retailco have the right, under
certain circumstances, to cause the Company to register the offer and resale of
NuDevco Retail's and Retailco's shares of Class A common stock obtained pursuant
to the Exchange Right. Retail Acquisition Co., LLC ("RAC") was entitled to
similar registration rights under the $2.1 million convertible subordinated note
(the "CenStar Note") and $5.0 million convertible subordinated note (the "Oasis
Note") prior to their respective conversions to Class B common stock in January
2017. Refer to Note 9 "Debt" for further information.
2. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying interim unaudited condensed consolidated financial statements
(“interim statements”) of the Company have been prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”) and
pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC"). This information should be read in conjunction with our consolidated
financial statements and notes contained in our annual report on Form 10-K for
the year ended December 31, 2016. The Company's unaudited condensed consolidated
financial statements are presented on a consolidated basis and include all
wholly-owned and controlled subsidiaries. We account for investments over which
we have significant influence but not a controlling financial interest using the
equity method of accounting. All significant intercompany transactions and
balances have been eliminated in the unaudited condensed consolidated financial
statements.
The preparation of the Company's condensed consolidated financial statements
requires estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the interim financial statements and the reported amounts of revenues and
expenses during the period. Actual results could materially differ from those
estimates. Effects on the business, financial condition and results of
operations resulting from revisions to estimates are recognized when the facts
that give rise to the revision become known. The information furnished herein
reflects all normal recurring adjustments that are, in the opinion of
management, necessary for a fair presentation of the condensed consolidated
financial statements. Operating results for the three and six months ended June
30, 2017 are not necessarily indicative of the results that may be expected for
the full year or for any interim period.

Transactions with Affiliates
The Company enters into transactions with and pays certain costs on behalf of
affiliates that are commonly controlled by W. Keith Maxwell III, and these
affiliates enter into transactions with and pay certain costs on our behalf, in
order to reduce risk, reduce administrative expense, create economies of scale,
create strategic alliances and supply goods and services among these related
parties.
These transactions include, but are not limited to, certain services to the
affiliated companies associated with the Company’s debt facility prior to the
IPO, employee benefits provided through the Company’s benefit plans, insurance
plans, leased office space, administrative salaries for management due diligence
work, recurring management consulting, and accounting, tax, legal, or technology
services based on services provided, departmental usage, or headcount, which are
considered reasonable by management. As such, the accompanying condensed
consolidated financial statements include costs that have been incurred by the
Company and then directly billed or allocated to affiliates, and costs that have
been incurred by our affiliates and then directly billed or allocated to us, and
are recorded net in general and administrative expense on the condensed
consolidated statements of operations with a corresponding accounts
receivable—affiliates or accounts payable—affiliates, respectively, recorded in
the condensed consolidated balance sheets. Additionally, the Company enters into
transactions with certain affiliates for sales or purchases of natural gas and
electricity, which are recorded in retail revenues, retail cost of revenues, and
net asset optimization revenues in the condensed consolidated statements of
operations with a corresponding accounts receivable—affiliate or accounts
payable—affiliate in the condensed consolidated balance sheets. The allocations
and related estimates and assumptions are described more fully in Note 14
"Transactions with Affiliates."

Presentation of the Acquisition of Major Energy Companies

On April 15, 2016, National Gas & Electric, LLC (“NG&E”), an affiliate of the
Company, completed the acquisition of 100% of the membership interests of Major
Energy Companies. On May 3, 2016, Spark HoldCo and Retailco entered into a
Membership Interest Purchase Agreement (the "Major Purchase Agreement") with
NG&E for the purchase of all of the membership interests of the Major Energy
Companies. Spark HoldCo and Retailco completed the acquisition of the Major
Energy Companies from NG&E on August 23, 2016. As the acquisition of Major
Energy Companies was a transfer of equity interest of entities under common
control, the Company's historical financial statements for the three and six
months ended June 30, 2016 previously filed with the SEC have been recast in
this Form 10-Q to include the results attributable to Major Energy Companies
from April 15, 2016. The unaudited condensed consolidated financial statements
for this recast period have been prepared from Major Energy Companies'
historical cost-basis and may not necessarily be indicative of the actual
results of operations that would have occurred had the Company owned the Major
Energy Companies during the recast period.

Presentation of the Acquisition of Perigee Energy, LLC

On February 3, 2017, NG&E, an affiliate of the Company, completed the
acquisition of 100% of the membership interests of Perigee. On April 1, 2017,
the Company and Spark HoldCo completed the purchase of all of the outstanding
membership interests of Perigee from NG&E. As the acquisition of Perigee was a
transfer of equity interest of entities under common control, the Company's
historical financial statements have been recast in this form 10-Q to include
the results attributable to Perigee from February 3, 2017. The unaudited
condensed consolidated financial statements for this recast period have been
prepared from Perigee's historical cost-basis and may not necessarily be
indicative of the actual results of operations that would have occurred had the
Company owned Perigee during the recast period.

Restricted Cash

Restricted cash includes cash balances held in escrow, which will be settled as
acquired customers are transferred to the Company.

Subsequent Events

Subsequent events have been evaluated through the date these financial
statements are issued. Any material subsequent events that occurred prior to
such date have been properly recognized or disclosed in the condensed
consolidated financial statements. See Note 16 "Subsequent Events" for further
discussion.

Recent Accounting Pronouncements

Adopted Standards

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock
Compensation (Topic 718) ("ASU 2016-09"). ASU 2016-09 includes provisions
intended to simplify various aspects of accounting for shared-based payments,
including income tax consequences, classification of awards as either equity or
liability and classification on the statement of cash flows. This guidance is
effective for annual and interim reporting periods of public entities beginning
after December 15, 2016, with early adoption permitted. The Company adopted ASU
2016-09 on January 1, 2017.

The new standard requires prospective recognition of excess tax benefits
resulting from stock-based compensation vesting and exercises to be recognized
as a reduction of income taxes and reflected in operating cash flows.
Previously, these amounts were recognized in additional paid-in capital and
presented as a financing activity on the statement of cash flows. Net excess tax
benefits of $0.2 million were recognized as a reduction of income taxes for the
six months ended June 30, 2017. Prior periods have not been adjusted.

The Company has elected to continue to estimate the number of stock-based awards
expected to vest, as permitted by ASU 2016-09, rather than electing to account
for forfeitures as they occur.

                                       11
--------------------------------------------------------------------------------
  Table of Contents  


ASU 2016-09 requires that employee taxes paid when an employer withholds shares
for tax-withholding purposes to be reported as financing activities in the
statement of cash flows. Previously, these cash flows were included in operating
activities. The Company has elected to adopt this prospectively, as permitted by
ASU 2016-09. This change resulted in a $1.7 million impact on the statement of
cash flow for the six months ended June 30, 2017.

In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810):
Interests Held through Related Parties that Are under Common Control ("ASU
2016-17"). ASU 2016-17 amends the consolidation guidance on how a reporting
entity that is the single decision maker of a variable interest entity ("VIE")
should treat indirect interests in the entity held through related parties that
are under common control with the reporting entity when determining whether it
is the primary beneficiary of that VIE. Under ASU 2016-17, a single decision
maker of a VIE is required to consider indirect economic interests in the entity
held through related parties on a proportionate basis when determining whether
it is the primary beneficiary of that VIE. If a single decision maker and its
related party are under common control, the single decision maker is required to
consider indirect interests in the entity held through those related parties to
be the equivalent of direct interests in their entirety. The amendments are
effective for public business entities for fiscal years beginning after December
15, 2016 (the Company's first quarter of fiscal 2017), including interim periods
within those fiscal years. Early adoption is permitted. The standard may be
applied retrospectively or through a cumulative effect adjustment to retained
earnings as of the beginning of the fiscal year of adoption. The Company adopted
ASU 2016-17 effective January 1, 2017, and the adoption had no impact on the
Company's consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows
(Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 is intended to add and
clarify guidance on the classification and presentation of restricted cash on
the statement of cash flows. ASU 2016-18 requires that a statement of cash flows
explain the change during the period in the total of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents.
Therefore, amounts generally described as restricted cash and restricted cash
equivalents should be included with cash and cash equivalents when reconciling
the beginning-of-period and end-of-period total amounts shown on the statement
of cash flows. The amendments are effective for public business entities for
fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. Early adoption is permitted, including adoption in an interim
period. The Company adopted ASU 2016-18 effective April 1, 2017, and has
included restricted cash with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of
cash flows.

Standards Being Evaluated/Standards Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with
Customers, which requires an entity to recognize the amount of revenue to which
it expects to be entitled for the transfer of promised goods or services to
customers. The standard permits the use of either the retrospective or
cumulative effect transition method. In August 2015, the FASB issued ASU No.
2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date, which deferred the effective date to periods beginning after
December 15, 2017. Early adoption is permitted only as of annual reporting
periods beginning after December 15, 2016. In December 2016, the FASB further
issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606,
Revenue from Contracts with Customers, to increase stakeholders' awareness of
the proposals and to expedite improvements to ASU 2014-09. The Company plans to
adopt the standard using the modified retrospective approach. After assessing
the new standard, the Company expects that there will be no material impacts to
our revenue recognition procedures.

The FASB issued additional amendments to ASU No. 2014-09, as amended by ASU No.
2015-14:
•      March 2016 - ASU No. 2016-08, Revenue from Contracts with Customers (Topic
       606): Principal versus Agent Considerations (Reporting Revenue Gross      
       versus Net) ("ASU 2016-08"). ASU 2016-08 clarifies the implementation     
       guidance on principal versus agent considerations. The guidance includes  
       indicators to assist an entity in determining whether it controls a       
       specified good or service before it is transferred to customers.          



                                       12
--------------------------------------------------------------------------------
  Table of Contents  

•      April 2016 - ASU No. 2016-10, Revenue from Contracts with Customers (Topic
       606): Identifying Performance Obligations and Licensing ("ASU 2016-10").  
       ASU 2016-10 covers two specific topics: performance obligations and       
       licensing. This amendment includes guidance on immaterial promised goods  
       or services, shipping or handling activities, separately identifiable     
       performance obligations, functional or symbolic intellectual property     
       licenses, sales-based and usage-based royalties, license restrictions     
       (time, use, geographical) and licensing renewals.                         


•      May 2016 - ASU No. 2016-12, Revenue from Contracts with Customers (Topic  
       606): Narrow Scope Improvements and Practical Expedients ("ASU 2016-12"). 
       ASU 2016-12 clarifies certain core recognition principles including       
       collectability, sales tax presentation, noncash consideration, contract   
       modifications and completed contracts at transition and disclosures no    
       longer required if the full retrospective transition method is adopted.   



In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU
2016-02"). ASU 2016-02 amends the existing accounting standards for lease
accounting by requiring entities to include substantially all leases on the
balance sheet by requiring the recognition of right-of-use assets and lease
liabilities for all leases. Entities may elect to not recognize leases with a
maximum possible term of less than 12 months. For lessees, a lease is classified
as finance or operating and the asset and liability are initially measured at
the present value of the lease payments. For lessors, accounting for leases is
largely unchanged from previous guidance. ASU 2016-02 also requires qualitative
disclosures along with certain specific quantitative disclosures for both
lessees and lessors. The amendments in this ASU are effective for fiscal years
beginning after December 15, 2018, with early adoption permitted, and are
effective for interim periods in the year of adoption. The ASU should be applied
using a modified retrospective approach, which requires lessees and lessors to
recognize and measure leases at the beginning of the earliest period presented.
The Company is currently evaluating the impact of adopting this guidance on its
consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic
230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15").
ASU 2016-15 provides guidance on the presentation and classification of eight
specific cash flow issues in the statement of cash flows. Those issues are cash
payment for debt prepayment or debt extinguishment costs; settlement of
zero-coupon debt instrument or other debt instrument with coupon interest rates
that are insignificant in relation to the effective interest rate of the
borrowing; contingent consideration payments made after a business combination;
cash proceeds from the settlement of insurance claims, cash received from
settlement of corporate-owned life insurance policies; distribution received
from equity method investees; beneficial interest in securitization
transactions; and classification of cash receipts and payments that have aspects
of more than one class of cash flows. The guidance is effective for interim and
annual reporting periods beginning after December 15, 2017, with early adoption
permitted. This ASU should be applied using a retrospective transition method
for each period presented. The Company is currently evaluating the impact of
adopting this guidance on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). ASU
2016-16 requires immediate recognition of the current and deferred income tax
consequences of intercompany asset transfers other than inventory. Current U.S.
GAAP prohibits the recognition of current and deferred income taxes for an
intra-entity asset transfer until the asset has been sold to an outside party.
This guidance is effective for annual and interim reporting periods of public
entities beginning after December 15, 2017, with early adoption permitted as of
the beginning of an annual reporting period for which financial statements
(interim or annual) have not been issued or made available for issuance. This
ASU should be applied using a modified retrospective basis through a
cumulative-effect adjustment directly to retained earnings as of the beginning
of the period of adoption. The Company is currently evaluating the impact of
adopting this guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic
805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01
clarifies the definition of a business with the objective of adding guidance to
assist entities with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of assets or businesses. The definition of a
business affects many areas of accounting, including

                                       13
--------------------------------------------------------------------------------
  Table of Contents  

acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 is effective
for annual periods beginning after December 15, 2017, including interim periods
within those periods, and the amendments should be applied prospectively on or
after the effective date. The Company is currently evaluating the impact of
adopting this guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and
Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04").
ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating
Step 2 from the goodwill impairment test. Under the amendments in this update,
an entity should perform its annual or interim, goodwill impairment test by
comparing the fair value of a reporting unit with its carrying amount. An entity
should recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit's fair value. However, the loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit.
ASU 2017-04 should be applied on a prospective basis and is effective for annual
or any interim goodwill impairment tests in fiscal years beginning after
December 15, 2019. Early adoption is permitted for interim or annual goodwill
impairment tests performed on testing dates after January 1, 2017. The Company
is currently evaluating the impact of adopting this guidance on its consolidated
financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation
(Topic 718) ("ASU 2017-09"). ASU 2017-09 provides guidance about which changes
to the terms or conditions of a share-based payment award require an entity to
apply modification accounting. An entity should account for the effects of a
modification unless all of the following are met:

•      The fair value of the modified award is the same as the fair value of the 
       original award immediately before the original award is modified          


•      The vesting conditions of the modified award are the same as the vesting  
       conditions of the original award immediately before the original award is 
       modified                                                                  


•      The classification of the modified award as an equity instrument or a     
       liability instrument is the same as the classification of the original    
       award immediately before the original award is modified.                  



The amendments in ASU 2017-09 are effective for all entities for annual periods,
and interim periods within those annual periods, beginning after December 15,
2017. The amendments should be applied prospectively to an award modified on or
after the adoption date. The Company is currently evaluating the impact of
adopting this guidance on its consolidated financial statements.

3. Acquisitions

Acquisition of Perigee

On April 1, 2017, the Company and Spark Holdco completed the purchase of all of
the outstanding membership interest of Perigee, a Texas limited liability
company with operations across 14 utilities in Connecticut, Delaware,
Massachusetts, New York and Ohio. The purchase price for Perigee from NG&E was
approximately $4.4 million, which consisted of a base price of $2.0 million,
$0.2 million additional customer option payment, and $2.2 million in working
capital, subject to adjustments.

The acquisition of Perigee by the Company and Spark HoldCo from NG&E was a
transfer of equity interests of entities under common control on April 1, 2017.
Accordingly, the assets acquired and liabilities assumed were based on their
historical value as of April 1, 2017. NG&E acquired Perigee on February 3, 2017
and the fair value of the net assets acquired were as follows (in thousands):

                                       14
--------------------------------------------------------------------------------
  Table of Contents  

                                                      
Cash                                         $    23 
Intangible assets - customer relationships     1,100 
Goodwill                                       1,540 
Net working capital, net of cash acquired      2,085 
Fair value of derivative liabilities            (443 )
Total                                        $ 4,305 



The initial working capital estimate paid for Perigee by NG&E was $2.6 million
and is subject to adjustment as of June 30, 2017. The Company subsequently paid
$2.2 million in working capital to NG&E on April 1, 2017. Finalization of the
Company's working capital adjustment with NG&E is still pending as of June 30,
2017, subject to finalization of the working capital estimate as of February 3,
2017. An estimated working capital adjustment between the Company and NG&E of
$1.3 million was recorded as of June 30, 2017 and is included in accounts
receivable - affiliates.

Customer relationships

The acquired customer relationships intangibles related to Perigee are
reflective of Perigee's customer base, and were valued at the respective dates
of acquisition using an excess earnings method under the income approach. Using
this method, the Company estimated the future cash flows resulting from the
existing customer relationships, considering attrition as well as charges for
contributory assets, such as net working capital, fixed assets, and assembled
workforce. These future cash flows were then discounted using an appropriate
risk-adjusted rate of return by retail unit to arrive at the present value of
the expected future cash flows.

Goodwill

The excess of the purchase consideration over the estimated fair value of the
amounts initially assigned to the identifiable assets acquired and liabilities
assumed was recorded as goodwill. Goodwill arose on the acquisition of Perigee
by NG&E primarily due to the value of Perigee's access to a new utility service
territory. Goodwill recorded in connection with the acquisition of Perigee is
deductible for income tax purposes because the acquisition of Perigee was an
acquisition of all of the assets of Perigee. The valuation and purchase price
allocation of Perigee was based on a preliminary fair value analysis performed
as of February 3, 2017, the date Perigee was acquired by NG&E. During the
measurement period, the Company will record adjustments to the working capital
balances upon settlement of the final working capital balances per the terms of
the purchase agreement.

We have not included pro forma information for Perigee acquisition because it
did not have a material impact on our financial position or results of
operations.
 
Acquisition of the Provider Companies

On August 1, 2016, the Company and Spark HoldCo completed the purchase of all of
the outstanding membership interests of the Provider Companies. The Provider
Companies serve electrical customers in Maine, New Hampshire and Massachusetts.
The purchase price for the Provider Companies was approximately $34.1 million,
which included $1.3 million in working capital, subject to adjustments, and up
to $9.0 million in earnout payments, valued at $4.8 million as of the purchase
date, to be paid by June 30, 2017, subject to the achievement of certain
performance targets (the "Provider Earnout"). See Note 10 "Fair Value
Measurements" for further discussion on the Provider Earnout, including the
final earnout payment made in June 2017. The purchase price was funded by the
issuance of 1,399,484 shares of Class B common stock (and a corresponding number
of Spark HoldCo units) sold to Retailco, valued at $14.0 million based on a
value of $10 per share; borrowings under the Senior Credit Facility of $10.6
million; and $3.8 million in net installment consideration to be paid in ten
monthly payments that commenced in August 2016. The first payment of $0.4
million was made with the initial consideration paid. See Note 9 "Debt" for
further discussion of the Senior Credit Facility.

                                       15
--------------------------------------------------------------------------------
  Table of Contents  


The acquisition of the Provider Companies was accounted for under the
acquisition method in accordance with ASC 805, Business Combinations (“ASC
805”). The allocation of purchase consideration was based upon the estimated
fair value of the tangible and identifiable intangible assets acquired and
liabilities assumed in the acquisition. The allocation was made to major
categories of assets and liabilities based on management’s best estimates, and
supported by independent third-party analyses. The excess of the purchase price
over the estimated fair value of tangible and intangible assets acquired and
liabilities assumed was allocated to goodwill. The purchase price allocation for
the acquisition of the Provider Companies was finalized as of December 31, 2016.
       


Acquisition of the Major Energy Companies

On August 23, 2016, the Company and Spark HoldCo completed the transfer of all
of the outstanding membership interests of the Major Energy Companies, which are
retail energy companies operating in Connecticut, Illinois, Maryland (including
the District of Columbia), Massachusetts, New Jersey, New York, Ohio, and
Pennsylvania across 43 utilities, from NG&E in exchange for consideration of
$63.4 million, which included $4.3 million in working capital, subject to
adjustments; an assumed litigation reserve of $5.0 million, and up to $35.0
million in installment and earnout payments, valued at $13.1 million as of the
purchase date, to be paid to the previous members of the Major Energy Companies,
in annual installments on March 31, 2017, 2018 and 2019, subject to the
achievement of certain performance targets (the “Major Earnout”). The Company is
obligated to issue up to 400,000 shares of Class B common stock (and a
corresponding number of Spark HoldCo units) to NG&E, subject to the achievement
of certain performance targets, valued at $0.8 million (81,436 shares valued at
$10 per share) as of the purchase date (the "Stock Earnout"). See Note 10 "Fair
Value Measurements" for further discussion on the Major Earnout and Stock
Earnout. The purchase price was funded by the issuance of 4,000,000 shares of
Class B common stock (and a corresponding number of Spark HoldCo units) valued
at $40.0 million based on a value of $10 per share, to NG&E. NG&E is owned by
our Founder.

The acquisition of the Major Energy Companies by the Company and Spark HoldCo
from NG&E was a transfer of equity interests of entities under common control on
August 23, 2016. Accordingly, the assets acquired and liabilities assumed were
based on their historical values as of August 23, 2016. NG&E acquired the Major
Energy Companies on April 15, 2016 and the fair value of the net assets acquired
was as follows (in thousands):

                                             Reported as of     Q1 2017 Adjustments   June 30, 2017  
                                           December 31, 2016            (1)          
Cash                                     $          17,368      $                —   $       17,368 
Property and equipment                                  14                       —               14 
Intangible assets - customer                                                                        
relationships & non-compete agreements              24,271                       —           24,271 
Other assets - trademarks                            4,973                       —            4,973 
Non-current deferred tax assets                      1,042                       —            1,042 
Goodwill                                            34,728                     260           34,988 
Net working capital, net of cash                                                                    
acquired                                            (6,746 )                     —           (6,746 )
Fair value of derivative liabilities                (7,260 )                     —           (7,260 )
Total                                    $          68,390      $              260   $       68,650 


(1) Changes to the purchase price allocation in the first quarter of 2017
related to NG&E's working capital settlement with the Major Energy Companies'
sellers. No adjustments were recorded subsequent to the first quarter of 2017.

The initial working capital estimate paid to the Major Energy Companies by NG&E
was $10.3 million. The Company subsequently paid $4.3 million in working capital
to NG&E on August 23, 2016. Approximately $6.0 million was recorded as an equity
transaction and treated as a contribution on August 23, 2016, revised to $4.9
million and $4.7 million based on the estimated working capital true-up
adjustments with NG&E as of March 31, 2017 and December 31, 2016, respectively.
An estimated working capital adjustment between the Company and NG&E of $1.4
million was recorded as of December 31, 2016 and is included in accounts payable
- affiliates at

                                       16
--------------------------------------------------------------------------------
  Table of Contents  

June 30, 2017 and December 31, 2016. The Stock Earnout of $0.8 million due to
NG&E is also reflected as a reduction to equity as of June 30, 2017 and December
31, 2016. Finalization of the Company's working capital adjustment with NG&E was
completed prior to April 15, 2017.
The fair values of intangible assets were measured primarily based on
significant inputs that are not observable in the market and thus represent a
Level 3 measurement as defined by ASC 820, Fair Value Measurement ("ASC 820").
The fair value of derivative liabilities were measured by utilizing readily
available quoted market prices and non-exchange-traded contracts fair valued
using market price quotations available through brokers or over-the-counter and
on-line exchanges and represent a Level 2 measurement as defined by ASC 820.
Refer to Note 10 "Fair Value Measurements" for further discussion on the fair
values hierarchy.

Goodwill

The excess of the purchase consideration over the estimated fair value of the
amounts initially assigned to the identifiable assets acquired and liabilities
assumed was recorded as goodwill. Goodwill arose on the acquisition of the Major
Energy Companies by NG&E primarily due to the value of the Major Energy
Companies brand strength, established vendor relationships and access to new
utility service territories. Goodwill recorded in connection with the
acquisition of the Major Energy Companies is deductible for income tax purposes
because the acquisition of the Major Energy Companies was an acquisition of all
of the assets of the Major Energy Companies. The valuation and purchase price
allocation of the Major Energy Companies was based on a preliminary fair value
analysis performed as of April 15, 2016, the date the Major Energy Companies
were acquired by NG&E. During the measurement period, the Company recorded
adjustments to the working capital balances upon settlement of the final working
capital balances per the terms of the purchase agreement.

Goodwill was transferred to the Company based on the acquisition of the Major
Energy Companies by NG&E on April 15, 2016. Goodwill recorded in connection with
the transfer of the Major Energy Companies is deductible for income tax
purposes.

In December 2016, certain executives of the Major Energy Companies exercised a
change of control provision under employment agreements with the Major Energy
Companies. As a result, the Company recorded employment contract termination
costs of $4.1 million as of December 31, 2016. The Company paid employment
contract termination costs totaling $1.9 million during the six months ended
June 30, 2017. As of June 30, 2017, the Company's liability related to the
contract termination costs was $2.2 million, to be paid over a 22 month period
beginning April 1, 2017.

4. Equity

Non-controlling Interest

The Company holds an economic interest and is the sole managing member in Spark
HoldCo, with NuDevco Retail and Retailco holding the remaining economic interest
in Spark HoldCo. As a result, the Company has consolidated the financial
position and results of operations of Spark HoldCo and reflected the economic
interest retained by NuDevco Retail and Retailco as a non-controlling interest.

The Company and NuDevco Retail and Retailco owned the following economic
interests in Spark HoldCo at December 31, 2016 and June 30, 2017, respectively.

Non-controlling Interest Economic Interest

                                       17
--------------------------------------------------------------------------------
  Table of Contents  

                  The Company   NuDevco Retail and Retailco (1) (2) 
December 31, 2016      38.85 %                          61.15 %     
June 30, 2017          38.12 %                          61.88 %     


                                       .
(1) In January 2016, Retailco succeeded to the interest of NuDevco Retail
Holdings of its Class B common stock and an equal number of Spark HoldCo units
it held pursuant to a series of transfers.
(2) In January 2017, Retailco converted the CenStar Note and Oasis Note into
269,462 and 766,180 shares, respectively, of Class B common stock.


The following table summarizes the portion of net income and income tax expense
(benefit) attributable to non-controlling interest (in thousands):
                                    Three Months Ended June 30,          Six Months Ended June 30,   
                                       2017               2016              2017             2016    
                                                                                                     
Net income allocated to                                                                             
non-controlling interest         $        3,164      $     16,777     $      11,569      $   28,785 
Income tax expense (benefit)                                                                        
allocated to non-controlling                                                                        
interest                                   (428 )             124              (885 )           564 
Net income attributable to                                                                          
non-controlling interest         $        3,592      $     16,653     $      12,454      $   28,221 



Stock Split

On May 22, 2017, the Company authorized and approved a two-for-one stock split
of the Company's issued Class A common stock and Class B common stock, which was
effected through a stock dividend (the "Stock Split"). Shareholders of record at
the close of business on June 5, 2017 were issued one additional share of Class
A common stock or Class B common stock of the Company for each share of Class A
common stock or Class B common stock, respectively, held by such shareholder on
that date. Such additional shares of Class A common stock or Class B common
stock were distributed on June 16, 2017. All shares and per share amounts in
this report have been retrospectively restated to reflect the Stock Split.

Share Repurchase Program

On May 23, 2017, the Company authorized a share repurchase program of up to
$50.0 million of Spark Class A common stock through December 31, 2017. The
Company funds the program through available cash balances, its credit
facilities, and operating cash flows. The shares of Class A common stock may be
repurchased from time to time in the open market or in privately negotiated
transactions based on ongoing assessments of capital needs, the market price of
the Class A common stock, and other factors, including general market
conditions. The repurchase program does not obligate Spark to acquire any
particular amount of Class A common stock and it may be modified or suspended at
any time, and can be terminated prior to completion.

The Company uses the cost method to account for its treasury shares. Purchases
of shares of Class A common stock are recorded at cost, and the gross cost of
the Class A common stock purchased is charged to a contra equity account
entitled "Treasury Stock."

During the three and six months ended June 30, 2017, the Company repurchased
59,726 shares of its Class A common stock at a weighted-average price of $21.52
per share, for a total cost of approximately $1.3 million.

Class A Common Stock

The Company had a total of 13,175,356 and 12,993,118 shares of its Class A
common stock outstanding at June 30, 2017 and December 31, 2016, respectively,
and 59,726 and zero shares of treasury stock at June 30, 2017 and December 31,
2016, respectively. Each share of Class A common stock holds economic rights and
entitles its holder

                                       18
--------------------------------------------------------------------------------
  Table of Contents  

to one vote on all matters to be voted on by shareholders generally. All shares
and per share amounts in this Quarterly Report on Form 10-Q have been
retrospectively restated to reflect the Stock Split.

Class B Common Stock

The Company has a total of 21,485,126 and 20,449,484 shares of its Class B
common stock outstanding at June 30, 2017 and December 31, 2016, respectively.
Each share of Class B common stock, all of which are held by NuDevco Retail and
Retailco, have no economic rights but entitles its holder to one vote on all
matters to be voted on by shareholders generally. All outstanding shares and per
share amounts in this Quarterly Report on Form 10-Q have been retrospectively
restated to reflect the Stock Split.

Holders of Class A common stock and Class B common stock vote together as a
single class on all matters presented to our shareholders for their vote or
approval, except as otherwise required by applicable law or by our certificate
of incorporation.

Conversion of CenStar and Oasis Notes

On January 8, 2017 and January 31, 2017, respectively, the CenStar Note and
Oasis Note were converted into 269,462 and 766,180 shares of Class B common
stock (and related Spark HoldCo units). Refer to Note 9 "Debt" for further
discussion.

Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income attributable
to stockholders (the numerator) by the weighted-average number of Class A common
shares outstanding for the period (the denominator). Class B common shares are
not included in the calculation of basic earnings per share because they are not
participating securities and have no economic interest in the Company. Diluted
earnings per share is similarly calculated except that the denominator is
increased (1) using the treasury stock method to determine the potential
dilutive effect of the Company's outstanding unvested restricted stock units,
(2) using the if-converted method to determine the potential dilutive effect of
the Company's Class B common stock and (3) using the if-converted method to
determine the potential dilutive effect of the outstanding convertible
subordinated notes into the Company's Class B common stock. All shares and per
share amounts in this Quarterly Report on Form 10-Q have been retrospectively
restated to reflect the Stock Split.

The following table presents the computation of earnings per share for the three
and six months ended June 30, 2017 and 2016 (in thousands, except per share
data):

                                       19
--------------------------------------------------------------------------------
  Table of Contents  

                                         Three Months Ended June 30,    Six Months Ended June 30,  
                                             2017            2016           2017           2016    
Net income attributable to Spark                                                                  
Energy, Inc. stockholders              $         1,079   $     2,341   $       3,349   $    6,514 
Less: Accumulated dividend on Series A                                                            
preferred stock                                    991             —           1,174            — 
Net income attributable to                                                                        
stockholders of Class A common stock   $            88   $     2,341   $       2,175   $    6,514 
                                                                                                   
Basic weighted average Class A common                                                             
shares outstanding                              13,104        12,086          13,050        9,799 
Basic EPS attributable to stockholders $          0.01   $      0.19   $        0.17   $     0.66 
                                                                                       
Net income attributable to                                                                        
stockholders of Class A common stock   $            88   $     2,341   $       2,175   $    6,514 
Effect of conversion of Class B common                                                            
stock to shares of Class A common                                                                 
stock                                                —             —               —            — 
Effect of conversion of convertible                                                               
subordinated notes into shares of                                                                 
Class B common stock and shares of                                                                
Class B common stock into shares of                                                               
Class A common stock (1)                             —          (332 )             —         (312 )
Diluted net income attributable to                                                                
stockholders of Class A common stock                88         2,009           2,175        6,202 
                                                                                                   
Basic weighted average Class A common                                                             
shares outstanding                              13,104        12,086          13,050        9,799 
Effect of dilutive Class B common                                                                 
stock                                                —             —               —            — 
Effect of dilutive convertible                                                                    
subordinated notes into shares of                                                                 
Class B common stock and shares of                                                                
Class B common stock into shares of                                                               
Class A common stock (1)                             —           986               —          986 
Effect of dilutive restricted stock                                                               
units                                              272           206             207          174 
Diluted weighted average shares                                                                   
outstanding                                     13,376        13,278          13,257       10,959 
                                                                                       
Diluted EPS attributable to                                                                       
stockholders                           $          0.01   $      0.15   $        0.16   $     0.57 



(1) The CenStar Note and Oasis Note converted into 269,462 and 766,180 shares of
Class B common stock on January 8, 2017, and January 31, 2017, respectively.

The conversion of shares of Class B common stock to shares of Class A common
stock was not recognized in dilutive earnings per share for the three and six
months ended June 30, 2017 as the effect of the conversion was antidilutive.

Variable Interest Entity

Spark HoldCo is a variable interest entity due to its lack of rights to
participate in significant financial and operating decisions and inability to
dissolve or otherwise remove its management. Spark HoldCo owns all of the
outstanding membership interests in each of the operating subsidiaries through
which the Company operates. The Company is the sole managing member of Spark
HoldCo, manages Spark HoldCo's operating subsidiaries through this managing
membership interest, and is considered the primary beneficiary of Spark HoldCo.

The assets of Spark HoldCo cannot be used to settle the obligations of the
Company except through distributions to the Company, and the liabilities of
Spark HoldCo cannot be settled by the Company except through contributions to
Spark HoldCo.

The following table includes the carrying amounts and classification of the
assets and liabilities of Spark HoldCo that are included in the Company's
condensed consolidated balance sheet as of June 30, 2017 (in thousands):

                                       20
--------------------------------------------------------------------------------
  Table of Contents  


                                              June 30, 2017  
Assets                                       
Current assets:                              
Cash and cash equivalents                    $        13,043 
Accounts receivable                                   95,690 
Other current assets                                 122,590 
Total current assets                                 231,323 
Non-current assets:                          
Goodwill                                              80,947 
Other assets                                          41,927 
Total non-current assets                             122,874 
Total Assets                                 $       354,197 
                                             
Liabilities                                  
Current liabilities:                         
Accounts payable and Accrued Liabilities     $        74,688 
Intercompany payable with Spark Energy, Inc.          23,927 
Current portion of Senior Credit Facility              7,500 
Contingent consideration                               5,856 
Other current liabilities                             12,060 
Total current liabilities                            124,031 
Long-term liabilities:                       
Long-term portion of Senior Credit Facility           76,500 
Subordinated debt — affiliate                         15,000 
Contingent consideration                               3,986 
Other long-term liabilities                            5,041 
Total long-term liabilities                          100,527 
Total Liabilities                            $       224,558 



5. Preferred Stock

On March 15, 2017, the Company issued 1,610,000 shares of 8.75% Series A
Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock ("Series
A Preferred Stock"), par value $0.01 per share and liquidation preference $25.00
per share, plus accumulated and unpaid dividends, at a price to the public of
$25.00 per share ($24.21 per share to the Company, net of underwriting discounts
and commissions). The Company received approximately $39.0 million in net
proceeds from the offering, after deducting underwriting discounts and
commissions and a structuring fee. Offering expenses of $1.0 million were
recorded as a reduction to the carrying value of the Series A Preferred Stock.
The net proceeds from the offering were contributed to Spark HoldCo to use for
general corporate purposes.

Holders of the Series A Preferred Stock have no voting rights, except in
specific circumstances of delisting or in the case the dividends are in arrears
as specified in the Series A Preferred Stock Certificate of Designations. From
March 15, 2017, the Series A Preferred Stock issuance date, to, but not
including, April 15, 2022, the Series A Preferred Stock will accrue dividends at
an annual percentage rate of three-month LIBOR plus 6.578%.

The liquidation preference provisions of the Series A Preferred Stock were
considered contingent redemption provisions because there were certain rights
granted to the holders of the Series A Preferred Stock that were not

                                       21
--------------------------------------------------------------------------------
  Table of Contents  

solely within the control of the Company upon a change in control of the
Company. Accordingly, the Series A Preferred Stock is presented within the
mezzanine portion of the accompanying consolidated balance sheet.

The Company had a total of 1,610,000 shares of Series A Preferred Stock issued
and outstanding at June 30, 2017 and no shares of Series A Preferred Stock
issued and outstanding at December 31, 2016. As of June 30, 2017, the Company
had accrued $1.2 million related to dividends to holders of Spark's Series A
Preferred Stock. This dividend was paid on July 15, 2017.

A summary of the Company's mezzanine equity for the six months ended June 30,
2017 is as follows:

                                                              (in thousands) 
Mezzanine equity at December 31, 2016                        $             — 
Issuance of Series A Preferred Stock, net of issuance cost            37,937 
Accumulated dividends on Series A Preferred Stock                      1,174 
Mezzanine equity at June 30, 2017                            $        39,111 



In connection with the issuance of the Series A Preferred Stock, the Company and
Spark HoldCo entered into the Third Amended and Restated Spark HoldCo Limited
Liability Company Agreement to amend the prior agreement to provide for, among
other things, the designation and issuance of Spark HoldCo Series A preferred
units, as another equity security of Spark HoldCo to be issued concurrently with
the issuance of Series A Preferred Stock by the Company, including specific
terms relating to distributions by Spark HoldCo in connection with the payment
by the Company of dividends on the Series A Preferred Stock, the priority of
liquidating distributions by Spark HoldCo, the allocation of income and loss to
the Company in connection with distributions by Spark HoldCo on Series A
preferred units, and other terms relating to the redemption and conversion by
the Company of the Series A Preferred Stock.

6. Property and Equipment
Property and equipment consist of the following amounts as of (in thousands):
                           Estimated useful                     
                            lives (years)      June 30, 2017     December 31, 2016 
Information technology          2 – 5         $      29,998     $          29,675 
Leasehold improvements          2 – 5                 4,568                 4,568 
Furniture and fixtures          2 – 5                 1,026                 1,024 
Total                                                35,592                35,267 
Accumulated depreciation                            (31,599 )             (30,561 )
Property and equipment—net                    $       3,993     $           4,706 


Information technology assets include software and consultant time used in the
application, development and implementation of various systems including
customer billing and resource management systems. As of June 30, 2017 and
December 31, 2016, information technology includes $1.3 million and $1.1
million, respectively, of costs associated with assets not yet placed into
service.
Depreciation expense recorded in the condensed consolidated statements of
operations was $0.5 million and $0.5 million for the three months ended June 30,
2017 and 2016, respectively, and $1.0 million and $0.9 million for the six
months ended June 30, 2017 and 2016, respectively.
7. Goodwill, Customer Relationships and Trademarks
Goodwill, customer relationships and trademarks consist of the following amounts
as of (in thousands):

                                       22
--------------------------------------------------------------------------------
  Table of Contents  

                                        June 30, 2017   December 31, 2016 
Goodwill                               $      80,947   $          79,147 
Customer relationships - Acquired (1)                  
Cost                                   $      64,671   $          63,571 
Accumulated amortization                     (37,476 )           (31,660 )
Customer relationships - Acquired, net $      27,195   $          31,911 
Customer relationships - Other (2)                     
Cost                                   $       9,828   $           4,320 
Accumulated amortization                      (3,580 )            (2,708 )
Customer relationships - Other, net    $       6,248   $           1,612 
Trademarks (3)                                         
Cost                                   $       6,770   $           6,770 
Accumulated amortization                        (672 )              (431 )
Trademarks, net                        $       6,098   $           6,339 


(1) Customer relationships - Acquired represent those customer acquisitions
accounted for under the acquisition method in accordance with ASC 805. See Note
3 "Acquisitions" for further discussion.
(2) Customer relationships - Other represent portfolios of customer contracts
not accounted for in accordance with ASC 805 as these acquisitions were not in
conjunction with the acquisition of businesses.
(3) Trademarks reflect values associated with the recognition and positive
reputation of acquired businesses accounted for as part of the acquisition
method in accordance with ASC 805 through the acquisitions of CenStar, Oasis,
the Provider Companies and the Major Energy Companies. These trademarks are
recorded as other assets in the condensed consolidated balance sheets. See Note
3 "Acquisitions" for further discussion.

Changes in goodwill, customer relationships and trademarks consisted of the
following (in thousands):

                                         Customer Relationships - Customer Relationships - 
                         Goodwill (1)            Acquired                  Others             Trademarks    
Balance at December                                                                                        
31, 2016               $        79,147   $           31,911       $            1,612       $         6,339 
Additions (Major                                                                                           
Working Capital                                                                                            
Adjustment)                        260                    —                        —                     — 
Additions (Perigee)              1,540                1,100                    5,508                     — 
Amortization expense                 —               (5,816 )                   (872 )                (241 )
Balance at June 30,                                                                                        
2017                   $        80,947   $           27,195       $            6,248       $         6,098 


(1) Changes in goodwill in the six months ended June 30, 2017 include NG&E's
working capital settlement with the Major Energy Companies' sellers of $0.3
million and Perigee's goodwill of $1.5 million.

The acquired customer relationship intangibles related to the Major Energy
Companies and the Provider Companies were bifurcated between hedged and unhedged
customer contracts. The unhedged customer contracts are amortized to
depreciation and amortization based on the expected future cash flows by year.
The hedged customer contracts were evaluated for favorable or unfavorable
positions at the time of acquisition and amortized to retail cost of revenue
based on the expected term and position of the underlying fixed price contract
in each reporting period. Customer relationship amortization expense for the
three and six months ended June 30, 2017 was $3.6 million and $5.8 million,
respectively, which is net of $0.6 million amortization expense and $0.5 million
amortization gain, respectively, included in cost of revenues.

Estimated future amortization expense for customer relationships and trademarks
at June 30, 2017 is as follows (in thousands):

                                       23
--------------------------------------------------------------------------------
  Table of Contents  

Year ending December 31, 
2017                     $  7,257 
2018                       12,393 
2019                        7,948 
2020                        3,880 
2021                        2,811 
> 5 years                   5,252 
Total                    $ 39,541 



8. Customer Acquisitions

On April 3, 2017, the Company and Spark HoldCo exercised an option to acquire
approximately 41,000 RCEs from a third party for a purchase price of
approximately $7.0 million, of which $4.9 million has been paid. The purchase
price was capitalized as customer relationships and is being amortized over a
three year period as customers begin using electricity under a contract with the
Company.

9. Debt
Debt consists of the following amounts (in thousands):
                                                   June 30, 2017        December 31, 2016  
Current Portion of Senior Credit Facility -                                               
Bridge Loan                                      $          7,500     $                 — 
Current portion of Prior Senior Credit                                                    
Facility—Working Capital Line (1) (2)            $              —     $            29,000 
Current portion of Prior Senior Credit                                                    
Facility—Acquisition Line (2)                                   —                  22,287 
Current portion of Note Payable—Pacific Summit                                            
Energy                                                          —                  15,501 
Convertible subordinated notes to affiliate                     —                   6,582 
Total current debt                                          7,500                  73,370 
Long-term portion of Senior Credit Facility                76,500                       — 
Subordinated Debt                                          15,000                   5,000 
Total long-term debt                                       91,500                   5,000 
Total debt                                       $         99,000     $            78,370 


(1) As of June 30, 2017 and December 31, 2016, the Company had $33.7 million and
$29.6 million in letters of credit issued, respectively.
(2) As of June 30, 2017 and December 31, 2016, the weighted average interest
rate on the current portion of our Senior Credit Facility was 4.62% and 4.93%,
respectively.

Deferred financing costs were $1.6 million and $0.4 million as of June 30, 2017
and December 31, 2016, respectively. Of these amounts, $0.8 million and $0.4
million is recorded in other current assets in the condensed consolidated
balance sheet as of June 30, 2017 and December 31, 2016, respectively, and $0.8
million and zero is recorded in other assets in the condensed consolidated
balance sheets as of June 30, 2017 and December 31, 2016, respectively,
representing capitalized financing costs related to our Senior Credit Facility
and Prior Senior Credit Facility.
Interest expense consists of the following components for the periods indicated
(in thousands):
                                    Three Months Ended June 30,            Six Months Ended June 30,    
                                       2017                2016              2017              2016     
Interest incurred on Senior                                                                            
Credit Facility (1)            $              543     $        405     $         1,237     $       723 
Accretion related to Earnouts                                                                          
(2)                                         1,433                —               2,660               — 
Letters of credit fees and                                                                             
commitment fees                               193              183                 417             375 
Amortization of deferred                                                                               
financing costs                               283              117                 531             234 
Interest incurred on                                                                                   
convertible subordinated notes                                                                         
to affiliate (3)                                —              127               1,052             253 
Interest Expense               $            2,452     $        832     $         5,897     $     1,585 


(1) Financial information has been recast to include results attributable to the
acquisition of the Major Energy Companies by an affiliate on April 15, 2016. See
Note 2 and 3 "Basis of Presentation and Summary of Significant Accounting
Policies" and "Acquisitions" for further discussion.
(2) Includes accretion related to the Provider Earnout of less than $0.1 million
and the Major Earnout of $1.4 million for the three months ended June 30, 2017,
and accretion related to the Provider Earnout of $0.1 million and the Major
Earnout of $2.6 million for the six months ended June 30, 2017.
(3) Includes amortization of the discount on the convertible subordinated notes
to affiliates of $0.0 million and $0.0 million, respectively, for the three and
six months ended June 30, 2017, and amortization of the discount on the
convertible subordinated notes to affiliates of less than $0.1 million and $0.1
million, respectively, for the three and six months ended June 30, 2016.
Prior Senior Credit Facility

The Company, as guarantor, and Spark HoldCo (the “Borrower,” and together with
Spark Energy, LLC, Spark Energy Gas, LLC, CenStar Energy Corp, CenStar Operating
Company, LLC, Oasis, Oasis Power, LLC, Electricity Maine, LLC, Electricity N.H.,
LLC, and Provider Power Mass, LLC, each a subsidiary of Spark HoldCo, the
“Co-Borrowers”) were party to a senior secured revolving credit facility (“Prior
Senior Credit Facility”), which included a senior secured revolving working
capital facility up to $82.5 million ("Working Capital Line") and a secured
revolving line of credit of $25.0 million ("Acquisition Line") to be used
specifically for the financing of up to 75% of the cost of acquisitions with the
remainder to be financed by the Company either through cash on hand or the
issuance of subordinated debt or equity.

The Prior Senior Credit Facility had a maturity date of July 8, 2017. The
outstanding balances under the Working Capital Line and the Acquisition Line
were paid in full on May 19, 2017 upon execution of the Company's new Senior
Credit Facility.

Senior Credit Facility
On May 19, 2017 (the “Closing Date”), the Company, as guarantor, and Spark
HoldCo (the “Borrower” and, together with SE, SEG, CenStar, CenStar Operating
Company, LLC, Oasis, Oasis Power, LLC, the Provider Companies, the Major Energy
Companies and Perigee Energy, LLC, each subsidiaries of Spark HoldCo, the
“Co-Borrowers”), entered into a senior secured borrowing base credit facility
(the “Senior Credit Facility”) in an aggregate amount of $120.0 million. The
Co-Borrowers are entitled to request an increase in the Senior Credit Facility
amount up to $150.0 million provided that, among other things, (i) no event of
default or default exists or would exist after giving effect thereto and (ii)
evidence of the Co-Borrowers’ compliance with financial covenants on a pro forma
basis before and after giving effect to such increase.

Subject to applicable sublimits and terms of the Senior Credit Facility,
borrowings are available for the issuance of letters of credit (“Letters of
Credit”), working capital and general purpose revolving credit loans up to $85.0
million (“Working Capital Loans”), and bridge loans up to $30.0 million (“Bridge
Loans”) for the purpose of partial funding for acquisitions. Borrowings under
the Senior Credit Facility may be used to refinance loans outstanding under the
previous Senior Credit Facility, pay fees and expenses in connection with the
current Senior Credit Facility, finance ongoing working capital requirements and
general corporate purpose requirements of the Co-Borrowers, to provide partial
funding for acquisitions, as allowed under terms of the Senior Credit Facility,
and to make open market purchases of the Company’s Class A common stock.

                                       24
--------------------------------------------------------------------------------
  Table of Contents  


The Senior Credit Facility will mature on May 19, 2019, and all amounts
outstanding thereunder will be payable on the maturity date. Borrowings under
the Bridge Loan sublimit will be repaid 25% per year, with the remainder due at
maturity.

At our election, the interest rate for Working Capital Loans and Letters of
Credit under the Senior Credit Facility is generally determined by reference to:

•      the Eurodollar rate plus an applicable margin of up to 3.00% per annum    
       (based on the prevailing utilization); or                                 


•      the alternate base rate plus an applicable margin of up to 2.00% per annum
       (based on the prevailing utilization). The alternate base rate is equal to
       the highest of (i) the prime rate (as published in the Wall Street        
       Journal), (ii) the federal funds rate plus 0.50% per annum, or (iii) the  
       reference Eurodollar rate plus 1.00%.                                     



Bridge Loan borrowings, if any, under the Senior Credit Facility are generally
determined by reference to:

• the Eurodollar rate plus an applicable margin of 3.75% per annum; or


•      the alternate base rate plus an applicable margin of 2.75% per annum. The 
       alternate base rate is equal to the highest of (i) the prime rate (as     
       published in the Wall Street Journal), (ii) the federal funds rate plus   
       0.50% per annum, or (iii) the reference Eurodollar rate plus 1.00%.       



The Co-Borrowers will pay a commitment fee of 0.50% quarterly in arrears on the
unused portion of the Senior Credit Facility. In addition, the Co-Borrowers will
be subject to additional fees including an upfront fee, an annual agency fee,
and letter of credit fees based on a percentage of the face amount of letters of
credit payable to any syndicate member that issues a letter a credit.

The Senior Credit Facility contains covenants that, among other things, require
the maintenance of specified ratios or conditions as follows:

•      Minimum Fixed Charge Coverage Ratio. Spark Energy, Inc. must maintain a   
       minimum fixed charge coverage ratio of not less than 1.25 to 1.00. The    
       Fixed Charge Coverage Ratio is defined as the ratio of (a) Adjusted EBITDA
       to (b) the sum of consolidated (with respect to the Company and the       
       Co-Borrowers) interest expense (other than interest paid-in-kind in       
       respect of any Subordinated Debt but including interest in respect of that
       certain promissory note made by Censtar Energy Corp in connection with the
       permitted acquisition from Verde Energy USA Holdings, LLC), letter of     
       credit fees, commitment fees, acquisition earn-out payments (excluding    
       earnout payments funded with proceeds from newly issued preferred or      
       common equity of the Company), distributions, the aggregate amount of     
       repurchases of the Company’s Class A common stock or commitments for such 
       purchases, taxes and scheduled amortization payments.                     



•      Maximum Total Leverage Ratio. Spark Energy, Inc. must maintain a ratio of 
       total indebtedness (excluding eligible subordinated debt) to Adjusted     
       EBITDA of no more than 2.00 to 1.00.                                      



The Senior Credit Facility contains various negative covenants that limit the
Company’s ability to, among other things, do any of the following:

• incur certain additional indebtedness;


• grant certain liens;


• engage in certain asset dispositions;


• merge or consolidate;


• make certain payments, distributions, investments, acquisitions or loans;


• materially modify certain agreements; or


• enter into transactions with affiliates.



                                       25
--------------------------------------------------------------------------------
  Table of Contents  


The Senior Credit Facility is secured by pledges of the equity of the portion of
Spark HoldCo owned by the Company, the equity of Spark HoldCo’s subsidiaries,
the Co-Borrowers’ present and future subsidiaries, and substantially all of the
Co-Borrowers’ and their subsidiaries’ present and future property and assets,
including accounts receivable, inventory and liquid investments, and control
agreements relating to bank accounts.

Spark Energy, Inc. is entitled to pay cash dividends to the holders of the
Series A Preferred Stock and Class A common stock and will be entitled to
repurchase up to an aggregate amount of 10,000,000 shares of the Company’s Class
A common stock through one or more normal course open market purchases through
NASDAQ so long as: (a) no default exists or would result therefrom; (b) the
Co-Borrowers are in pro forma compliance with all financial covenants before and
after giving effect thereto; and (c) the outstanding amount of all loans and
letters of credit does not exceed the borrowing base limits.

The Senior Credit Facility contains certain customary representations and
warranties and events of default. Events of default include, among other things,
payment defaults, breaches of representations and warranties, covenant defaults,
cross-defaults and cross-acceleration to certain indebtedness, certain events of
bankruptcy, certain events under ERISA, material judgments in excess of $5.0
million, certain events with respect to material contracts, actual or asserted
failure of any guaranty or security document supporting the Senior Credit
Facility to be in full force and effect, failure of Nathan Kroeker to retain his
position as President and Chief Executive Officer of the Company, and failure of
W. Keith Maxwell III to retain his position as chairman of the board of
directors. A default will also occur if at any time W. Keith Maxwell III ceases
to, directly or indirectly, own at least 13,600,000 Class A and Class B shares
on a combined basis (to be adjusted by any stock split, subdivisions or other
stock reclassification or recapitalization), and a controlling percentage of the
voting equity interest of the Company, and certain other changes in control. If
such an event of default occurs, the lenders under the Senior Credit Facility
would be entitled to take various actions, including the acceleration of amounts
due under the facility and all actions permitted to be taken by a secured
creditor.

In addition, the Senior Credit Facility contains affirmative covenants that are
customary for credit facilities of this type. The covenants include delivery of
financial statements, including any filings made with the SEC, maintenance of
property and insurance, payment of taxes and obligations, material compliance
with laws, inspection of property, books and records and audits, use of
proceeds, payments to bank blocked accounts, notice of defaults and certain
other customary matters.

Convertible Subordinated Notes to Affiliate

In connection with the financing of the CenStar acquisition, the Company,
together with Spark HoldCo, issued the CenStar Note to RAC for $2.1 million on
July 8, 2015. The CenStar Note matures on July 8, 2020, and bears interest at an
annual rate of 5%, payable semiannually. The Company has the right to pay
interest in kind at its option. The CenStar Note is convertible into shares of
the Company’s Class B common stock, par value $0.01 per share (and a related
unit of Spark HoldCo) at a conversion price of $8.285 per share. RAC may not
exercise conversion rights for the first eighteen months after the CenStar Note
is issued. The CenStar Note is subject to automatic conversion upon a sale of
the Company. The CenStar Note is subordinated in certain respects to the Senior
Credit Facility pursuant to a subordination agreement. The Company may pay
interest and prepay principal so long as the Company is in compliance with its
covenants; is not in default under the Senior Credit Facility and has minimum
availability of $5.0 million under its borrowing base under the Senior Credit
Facility. Shares of Class A common stock resulting from the conversion of the
shares of Class B common stock issued as a result of the conversion right under
the CenStar Note will be entitled to registration rights identical to the
registration rights currently held by NuDevco Retail and Retailco on shares of
Class A common stock it receives upon conversion of its existing shares of Class
B common stock. On October 5, 2016, RAC issued to the Company an irrevocable
commitment to convert the CenStar Note into 269,462 shares of Class B common
stock. RAC assigned the CenStar Note to Retailco on January 4, 2017, and on
January 8, 2017, the CenStar Note was converted into 269,462 shares of Class B
common stock.


                                       26
--------------------------------------------------------------------------------
  Table of Contents  

In connection with the financing of the Oasis acquisition, the Company, together
with Spark HoldCo, issued the Oasis Note to RAC for $5.0 million on July 31,
2015. The Oasis Note matures on July 31, 2020, and bears interest at an annual
rate of 5%, payable semiannually. The Company has the right to pay-in-kind any
interest at its option. The Oasis Note is convertible into shares of the
Company's Class B common stock, par value $0.01 per share (and a related unit of
Spark HoldCo) at a conversion price of $7.00 per share. RAC may not exercise
conversion rights for the first eighteen months after the Oasis Note is issued.
The Oasis Note is subject to automatic conversion upon a sale of the Company.
The Oasis Note is subordinated in certain respects to the Senior Credit Facility
pursuant to a subordination agreement. The Company may pay interest and prepay
principal so long as the Company is in compliance with its covenants; is not in
default under the Senior Credit Facility and has minimum availability of $5.0
million under its borrowing base under the Senior Credit Facility. Shares of
Class A common stock resulting from the conversion of the shares of Class B
common stock issued as a result of the conversion right under the Oasis Note
will be entitled to registration rights identical to the registration rights
currently held by NuDevco Retail and Retailco on shares of Class A common stock
it receives upon conversion of its existing shares of Class B common stock. On
October 5, 2016, RAC issued to the Company an irrevocable commitment to convert
the Oasis Note into 766,180 shares of Class B common stock. RAC assigned the
Oasis Note to Retailco on January 4, 2017, and on January 31, 2017 the Oasis
Note was converted into 766,180 shares of Class B common stock.

The conversion rate of $7.00 per share for the Oasis Note was fixed as of the
date of the execution of the Oasis acquisition agreement on May 12, 2015. Due to
a rise in the price of our common stock from May 12, 2015 to the closing of
Oasis acquisition on July 31, 2015, the conversion rate of $7.00 per share was
below the market price per share of Class A common stock of $8.11 on the
issuance date of the Oasis Note on July 31, 2015. As a result, the Company
assessed the Oasis Note for a beneficial conversion feature. Due to this
conversion feature being "in-the-money" upon issuance, we recognized a
beneficial conversion feature based on its intrinsic value of $0.8 million as a
discount to the Oasis Note and as additional paid-in capital. This discount was
amortized as interest expense under the effective interest method over the life
of the Oasis Note through the conversion on January 31, 2017, at which time the
remaining $1.0 million beneficial conversion feature was written-off and
recognized as interest expense.

Subordinated Debt Facility

On December 27, 2016, we and Spark HoldCo jointly issued to Retailco, an entity
owned by our Founder, a 5% subordinated note in the principal amount of up to
$25.0 million. The subordinated note allows the Company and Spark HoldCo to draw
advances in increments of no less than $1.0 million per advance up to the
maximum principal amount of the subordinated note. The subordinated note matures
approximately three and a half years following the date of issuance, and
advances thereunder accrue interest at 5% per annum from the date of the
advance. The Company has the right to capitalize interest payments under the
subordinated note. The subordinated note is subordinated in certain respects to
the Company's Senior Credit Facility pursuant to a subordination agreement. The
Company may pay interest and prepay principal on the subordinated note so long
as it is in compliance with its covenants under the Senior Credit Facility, is
not in default under the Senior Credit Facility and has minimum availability of
$5.0 million under the borrowing base under the Senior Credit Facility. Payment
of principal and interest under the subordinated note is accelerated upon the
occurrence of certain change of control or sale transactions. As of June 30,
2017, there was $15.0 million outstanding borrowings under the subordinated
note, and at December 31, 2016, there was $5.0 million in outstanding borrowings
under the subordinated note.

Pacific Summit Energy LLC
Prior to March 31, 2017, the Major Energy Companies were party to three trade
credit arrangements with Pacific Summit Energy LLC (“Pacific Summit”), which
consisted of purchase agreements, operating agreements relating to purchasing
terms, security agreements, lockbox agreements and guarantees, and provided for
the exclusive supply of gas and electricity on credit by Pacific Summit to the
Major Energy Companies for resale to end users.
Under these arrangements, when the costs that Pacific Summit paid to procure and
deliver the gas and electricity exceeded the payments that the Major Energy
Companies made attributable to the gas and electricity purchased, the Major
Energy Companies incurred interest on the difference. The operating agreements
also allowed Pacific Summit to provide credit support. Each form of borrowing
incurred interest at the floating 90-day LIBOR rate plus

                                       27
--------------------------------------------------------------------------------
  Table of Contents  

300 basis points (except for certain credit support guaranties that did not bear
interest). In connection with these arrangements, the Major Companies granted
first liens to Pacific Summit on a substantial portion of the Major Companies’
assets, including present and future accounts receivable, inventory, liquid
assets, and control agreements relating to bank accounts. As of December 31,
2016, the Company had aggregate outstanding amounts payable under these
arrangements of approximately $15.5 million, bearing an interest rate of
approximately 4.0%. The Company was also the beneficiary under various credit
support guarantees issued by Pacific Summit under these arrangements as of such
date. On September 27, 2016, we notified Pacific Summit of our election to
trigger the expiration of these arrangements. On March 31, 2017 the agreements
were terminated.
10. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability (exit price) in an orderly transaction between
market participants at the measurement date. Fair values are based on
assumptions that market participants would use when pricing an asset or
liability, including assumptions about risk and the risks inherent in valuation
techniques and the inputs to valuations. This includes not only the credit
standing of counterparties involved and the impact of credit enhancements but
also the impact of the Company’s own nonperformance risk on its liabilities.
The Company applies fair value measurements to its commodity derivative
instruments and a contingent payment arrangement based on the following fair
value hierarchy, which prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels:

•            Level 1—Quoted prices in active markets for identical assets and    
             liabilities. Instruments categorized in Level 1 primarily consist of
             financial instruments such as exchange-traded derivative            
             instruments.                                                        


•            Level 2—Inputs other than quoted prices recorded in Level 1 that are
             either directly or indirectly observable for the asset or liability,
             including quoted prices for similar assets or liabilities in active 
             markets, quoted prices for identical or similar assets or           
             liabilities in inactive markets, inputs other than quoted prices    
             that are observable for the asset or liability, and inputs that are 
             derived from observable market data by correlation or other means.  
             Instruments categorized in Level 2 primarily include non-exchange   
             traded derivatives such as over-the-counter commodity forwards and  
             swaps and options.                                                  


•            Level 3—Unobservable inputs for the asset or liability, including   
             situations where there is little, if any, observable market activity
             for the asset or liability. The Level 3 category includes estimated 
             earnout obligations related to the Company's acquisitions.          


As the fair value hierarchy gives the highest priority to quoted prices in
active markets (Level 1) and the lowest priority to unobservable data (Level 3),
the Company maximizes the use of observable inputs and minimizes the use of
unobservable inputs when measuring fair value. In some cases, the inputs used to
measure fair value might fall in different levels of the fair value hierarchy.
In these cases, the lowest level input that is significant to a fair value
measurement in its entirety determines the applicable level in the fair value
hierarchy.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents assets and liabilities measured and recorded at
fair value in the Company’s condensed consolidated balance sheets on a recurring
basis by and their level within the fair value hierarchy as of (in thousands):

                                       28
--------------------------------------------------------------------------------
  Table of Contents  

                                        Level 1        Level 2        Level 3         Total    
June 30, 2017                                                                                  
Non-trading commodity derivative                                                              
assets                               $         —     $      487     $        —     $      487 
Trading commodity derivative assets           67            403              —            470 
Total commodity derivative assets    $        67     $      890     $        —     $      957 
Non-trading commodity derivative                                                              
liabilities                          $      (160 )   $  (10,394 )   $        —     $  (10,554 )
Trading commodity derivative                                                                  
liabilities                                  (51 )          (53 )            —           (104 )
Total commodity derivative                                                                    
liabilities                          $      (211 )   $  (10,447 )   $        —     $  (10,658 )
Contingent payment arrangement       $         —     $        —     $   (9,842 )   $   (9,842 )


                                              Level 1     Level 2      Level 3        Total   
December 31, 2016                                                                  
Non-trading commodity derivative assets      $  1,511    $ 9,385     $       —     $  10,896 
Trading commodity derivative assets               101        430             —           531 
Total commodity derivative assets            $  1,612    $ 9,815     $       —     $  11,427 
Non-trading commodity derivative liabilities $      —    $  (661 )   $       —     $    (661 )
Trading commodity derivative liabilities            —        (87 )           —           (87 )
Total commodity derivative liabilities       $      —    $  (748 )   $       —     $    (748 )
Contingent payment arrangement               $      —    $     —     $ (22,653 )   $ (22,653 )


The Company had no transfers of assets or liabilities between any of the above
levels during the six months ended June 30, 2017 and the year ended December 31,
2016.
The Company’s derivative contracts include exchange-traded contracts fair valued
utilizing readily available quoted market prices and non-exchange-traded
contracts fair valued using market price quotations available through brokers or
over-the-counter and on-line exchanges. In addition, in determining the fair
value of the Company’s derivative contracts, the Company applies a credit risk
valuation adjustment to reflect credit risk, which is calculated based on the
Company’s or the counterparty’s historical credit risks. As of June 30, 2017 and
December 31, 2016, the credit risk valuation adjustment was not material.
The contingent payment arrangements referred to above reflect estimated earnout
obligations incurred in relation to the Company's acquisitions. As of June 30,
2017, the estimated earnout obligations were $9.8 million, which was comprised
of the Major Earnout and the Stock Earnout in the amount of $9.8 million, and
less than $0.1 million, respectively. The final Provider Earnout payment was
paid in June 2017. As of December 31, 2016, the estimated earnout obligations
were $22.7 million, which was comprised of the Provider Earnout, the Major
Earnout and the Stock Earnout in the amount of $4.9 million, $17.1 million, and
$0.7 million, respectively. As of June 30, 2017, the estimated earnouts are
recorded on our condensed consolidated balance sheets in current liabilities -
contingent consideration and long-term liabilities - contingent consideration in
the amount of $5.8 million and $4.0 million, respectively; and as of
December 31, 2016, in current liabilities - contingent consideration and
long-term liabilities - contingent consideration in the amount of $11.8 million
and $10.8 million, respectively.
The Provider Earnout was based on achievement by the Provider Companies of a
certain customer count criteria over the nine month period following the closing
of the Provider Companies acquisition. The sellers of the Provider Companies
were entitled to a maximum of $9.0 million and a minimum of $5.0 million in
earnout payments based on the level of customer count attained, as defined by
the Provider Companies membership interest purchase agreement. In March and June
2017, the Company paid the sellers of the Provider Companies $1.0 million and
$4.5 million, respectively, related to the earnout based on the achievement of
certain customer count and sales targets. During the three and six months ended
June 30, 2017, the Company recorded accretion of less than $0.1 million and $0.1
million, respectively, to reflect the impact of the time value of the liability
prior to the final payment in June 2017. The Company additionally recorded $0.5
million of general and administrative expense related to the change in fair
value of the earnout prior to the final payment in June 2017.

                                       29
--------------------------------------------------------------------------------
  Table of Contents  

The Major Earnout is based on the achievement by the Major Energy Companies of
certain performance targets over the 33 month period following NG&E's closing of
the Major Energy Companies acquisition (i.e., April 15, 2016). The previous
members of Major Energy Companies are entitled to a maximum of $20.0 million in
earnout payments based on the level of performance targets attained, as defined
by the Major Purchase Agreement. The Stock Earnout obligation is contingent upon
the Major Energy Companies achieving the Major Earnout's performance target
ceiling, thereby earning the maximum Major Earnout payments. If the Major Energy
Companies earn such maximum Major Earnout payments, NG&E would be entitled to a
maximum of 400,000 shares of Class B common stock (and a corresponding number of
Spark HoldCo units). Based on the financial results of the Major Energy
Companies during the first earnout period, NG&E was not entitled to receive an
issuance of shares of Class B common stock (and a corresponding number of
SparkHoldCo units). In determining the fair value of the Major Earnout and the
Stock Earnout, the Company forecasted certain expected performance targets and
calculated the probability of such forecast being attained. In March 2017, the
Company paid the previous members of the Major Energy Companies $7.4 million
related to the period from April 15, 2016 through December 31, 2016. During the
three and six months ended June 30, 2017, the Company recorded accretion of $1.4
million and $2.6 million, respectively, to reflect the impact of the time value
of the liability. The Company revalued the liability at June 30, 2017, resulting
in the decrease of the fair value of the liability to $9.8 million. The impact
of the $3.1 million decrease in fair value is recorded in general and
administrative expenses. As this calculation is based on management's estimates
of the liability, we classified the Major Earnout as a Level 3 measurement.
The following tables present reconciliations of liabilities measured at fair
value on a recurring basis using significant unobservable inputs (Level 3) for
the years ended June 30, 2017 and December 31, 2016.
                                               Major Earnout and      Provider Earnout        Total    
                                                 Stock Earnout                            
Fair value at December 31, 2016              $         17,760        $          4,893     $    22,653 
Change in fair value of contingent                                                                    
consideration, net                                     (3,068 )                   500          (2,568 )
Accretion of contingent earnout                                                                       
consideration (included within interest                                                               
expense)                                                2,553                     107           2,660 
Payments (1)                                           (7,403 )                (5,500 )       (12,903 )
Fair Value at June 30, 2017                  $          9,842        $              —     $     9,842 


(1) Payments include pay downs at maturity
Other Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, accounts
receivable—affiliates, accounts payable, accounts payable—affiliates, and
accrued liabilities recorded in the condensed consolidated balance sheets
approximate fair value due to the short-term nature of these items. The carrying
amounts of the Senior Credit Facility and Prior Senior Credit Facility recorded
in the condensed consolidated balance sheets approximate fair value because of
the variable rate nature of the Company’s line of credit. The fair value of our
convertible subordinated notes to affiliates is not determinable for accounting
purposes due to the affiliate nature and terms of the associated debt instrument
with the affiliate. The fair value of the payable pursuant to tax receivable
agreement—affiliate is not determinable for accounting purposes due to the
affiliate nature and terms of the associated agreement with the affiliate.
11. Accounting for Derivative Instruments
The Company is exposed to the impact of market fluctuations in the price of
electricity and natural gas and basis costs, storage and ancillary capacity
charges from independent system operators. The Company uses derivative
instruments to manage exposure to these risks, and historically designated
certain derivative instruments as cash flow hedges for accounting purposes.
The Company holds certain derivative instruments that are not held for trading
purposes and are not designated as hedges for accounting purposes. These
derivative instruments represent economic hedges that mitigate the Company’s
exposure to fluctuations in commodity prices. For these derivative instruments,
changes in the fair value are recognized currently in earnings in retail
revenues or retail cost of revenues.
As part of the Company’s strategy to optimize its assets and manage related
risks, it also manages a portfolio of commodity derivative instruments held for
trading purposes. The Company’s commodity trading activities are subject to
limits within the Company’s Risk Management Policy. For these derivative
instruments, changes in the fair value are recognized currently in earnings in
net asset optimization revenues.
Derivative assets and liabilities are presented net in the Company’s condensed
consolidated balance sheets when the derivative instruments are executed with
the same counterparty under a master netting arrangement. The Company’s
derivative contracts include transactions that are executed both on an exchange
and centrally cleared as well as over-the-counter, bilateral contracts that are
transacted directly with a third party. To the extent the Company has paid or
received collateral related to the derivative assets or liabilities, such
amounts would be presented net against the related derivative asset or
liability’s fair value. As of June 30, 2017 and December 31, 2016, the Company
had paid $0.3 million and zero in collateral outstanding, respectively. The
specific types of derivative instruments the Company may execute to manage the
commodity price risk include the following:

•      Forward contracts, which commit the Company to purchase or sell energy    
       commodities in the future;                                                


•      Futures contracts, which are exchange-traded standardized commitments to  
       purchase or sell a commodity or financial instrument;                     


•      Swap agreements, which require payments to or from counterparties based   
       upon the differential between two prices for a predetermined notional     
       quantity; and                                                             


•      Option contracts, which convey to the option holder the right but not the 
       obligation to purchase or sell a commodity.                               


The Company has entered into other energy-related contracts that do not meet the
definition of a derivative instrument or qualify for the normal purchase or
normal sale exception and are therefore not accounted for at fair value,
including the following:

•Forward electricity and natural gas purchase contracts for retail customer
load, and
•Natural gas transportation contracts and storage agreements.

Volumetric Underlying Derivative Transactions
The following table summarizes the net notional volume buy/(sell) of the
Company’s open derivative financial instruments accounted for at fair value,
broken out by commodity, as of (in thousands):
Non-trading 
    Commodity     Notional  June 30, 2017   December 31, 2016 
Natural Gas        MMBtu            9,054               8,016 
Natural Gas Basis  MMBtu                —                   — 
Electricity         MWh             5,001               3,958 


Trading
    Commodity     Notional  June 30, 2017    December 31, 2016 
Natural Gas        MMBtu              683             (953 )   
Natural Gas Basis  MMBtu               78             (380 )   




                                       30
--------------------------------------------------------------------------------
  Table of Contents  

Gains (Losses) on Derivative Instruments
Gains (losses) on derivative instruments, net and current period settlements on
derivative instruments were as follows for the periods indicated (in thousands):
                                                       Three Months Ended June 30,      
                                                        2017                 2016       
(Loss) gain on non-trading derivatives, net      $        (10,202 )    $        13,322 
Gain (loss) on trading derivatives, net                       525                  (77 )
(Loss) gain on derivatives, net                            (9,677 )             13,245 
Current period settlements on non-trading                                              
derivatives (1) (2) (3)                                     4,020                  953 
Current period settlements on trading                                                  
derivatives                                                   (24 )                 71 
Total current period settlements on derivatives  $          3,996      $         1,024 


(1) Excludes settlements of $0.9 million for the three months ended June 30,
2016 related to non-trading derivative liabilities assumed in the acquisitions
of CenStar and Oasis and $3.4 million for the three months ended June 30, 2016
related to Major Energy Companies.
(2) Excludes settlements of $1.3 million for the three months ended June 30,
2017 related to non-trading derivative liabilities assumed in the acquisitions
of the Provider Companies and Major Energy Companies.
(3) Excludes settlements of $0.4 million for the three months ended June 30,
2017 related to non-trading derivative liabilities assumed in the acquisitions
of Perigee and other customers.

                                                        Six Months Ended June 30,       
                                                        2017                 2016       
(Loss) gain on non-trading derivatives, net      $        (31,578 )    $         3,702 
Gain (loss) on trading derivatives, net                       105                 (206 )
(Loss) gain on derivatives, net                           (31,473 )              3,496 
Current period settlements on non-trading                                              
derivatives (1) (2) (3)                                    11,535               12,230 
Current period settlements on trading                                                  
derivatives                                                  (184 )                 66 
Total current period settlements on derivatives  $         11,351      $        12,296 


(1) Excludes settlements of less than $0.1 million and $0.1 million,
respectively, for the six months ended June 30, 2017 and 2016 related to
non-trading derivative liabilities assumed in the acquisitions of CenStar and
Oasis.
(2) Excludes settlements of less than $0.1 million for the six months ended June
30, 2017 related to non-trading derivative liabilities assumed in the
acquisitions of the Provider Companies and Major Energy Companies and $3.4
million for the six months ended June 30, 2016 related to Major Energy
Companies.
(3) Excludes settlements of $0.4 million for the six months ended June 30, 2017
related to non-trading derivative liabilities assumed in the acquisitions of
Perigee and other customers.

Gains (losses) on trading derivative instruments are recorded in net asset
optimization revenues and gains (losses) on non-trading derivative instruments
are recorded in retail revenues or retail cost of revenues on the condensed
consolidated statements of operations.

                                       31
--------------------------------------------------------------------------------
  Table of Contents  

Fair Value of Derivative Instruments
The following tables summarize the fair value and offsetting amounts of the
Company’s derivative instruments by counterparty and collateral received or paid
as of (in thousands):
                                                              June 30, 2017                                  
                                                 Gross                            Cash         
                                                Amounts                        Collateral        Net Amount  
        Description           Gross Assets       Offset       Net Assets         Offset          Presented   
Non-trading commodity                                                                                      
derivatives                  $       2,160     $ (1,557 )   $       603      $           —     $       603 
Trading commodity                                                                                          
derivatives                            264          (32 )           232                  —             232 
Total Current Derivative                                                                                   
Assets                               2,424       (1,589 )           835                  —             835 
Non-trading commodity                                                                                      
derivatives                          1,029       (1,145 )          (116 )                —            (116 ) 
Trading commodity                                                                                          
derivatives                            306          (68 )           238                  —             238 
Total Non-current Derivative                                                                               
Assets                               1,335       (1,213 )           122                  —             122 
Total Derivative Assets      $       3,759     $ (2,802 )   $       957      $           —     $       957 


                                                             June 30, 2017                                
                                                Gross                            Cash        
                                 Gross         Amounts          Net           Collateral      Net Amount  
        Description           Liabilities       Offset      Liabilities         Offset         Presented  
Non-trading commodity                                                                                    
derivatives                  $    (22,183 )   $ 15,040     $     (7,143 )   $        300     $    (6,843 )
Trading commodity                                                                                        
derivatives                          (128 )         24             (104 )              —            (104 )
Total Current Derivative                                                                                 
Liabilities                       (22,311 )     15,064           (7,247 )            300          (6,947 )
Non-trading commodity                                                                                    
derivatives                        (8,399 )      4,688           (3,711 )              —          (3,711 )
Trading commodity                                                                                        
derivatives                             —            —                —                —               — 
Total Non-current Derivative                                                                             
Liabilities                        (8,399 )      4,688           (3,711 )              —          (3,711 )
Total Derivative Liabilities $    (30,710 )   $ 19,752     $    (10,958 )   $        300     $   (10,658 )


                                                             December 31, 2016                                 
                                                   Gross                            Cash         
                                                  Amounts                        Collateral        Net Amount  
        Description            Gross Assets       Offset        Net Assets         Offset          Presented   
Non-trading commodity                                                                                         
derivatives                  $       19,657     $ (11,844 )   $      7,813     $           —     $      7,813 
Trading commodity                                                                                             
derivatives                             614           (83 )            531                 —              531 
Total Current Derivative                                                                                      
Assets                               20,271       (11,927 )          8,344                 —            8,344 
Non-trading commodity                                                                                         
derivatives                           7,874        (4,791 )          3,083                 —            3,083 
Total Non-current Derivative                                                                                  
Assets                                7,874        (4,791 )          3,083                 —            3,083 
Total Derivative Assets      $       28,145     $ (16,718 )   $     11,427     $           —     $     11,427 


                                                           December 31, 2016                               
                                                 Gross                           Cash         
                                 Gross          Amounts          Net          Collateral       Net Amount  
        Description           Liabilities       Offset       Liabilities        Offset          Presented  
Non-trading commodity                                                                                     
derivatives                  $       (662 )   $      69     $      (593 )   $           —     $      (593 )
Trading commodity                                                                                         
derivatives                           (92 )           5             (87 )               —             (87 )
Total Current Derivative                                                                                  
Liabilities                          (754 )          74            (680 )               —            (680 )
Non-trading commodity                                                                                     
derivatives                          (305 )         237             (68 )               —             (68 )
Total Non-current Derivative                                                                              
Liabilities                          (305 )         237             (68 )               —             (68 )
Total Derivative Liabilities $     (1,059 )   $     311     $      (748 )   $           —     $      (748 )



                                       32
--------------------------------------------------------------------------------
  Table of Contents  


12. Income Taxes

Income Taxes

The Company and CenStar are each subject to U.S. federal income tax as
corporations. Spark HoldCo and its subsidiaries, with the exception of CenStar,
are treated as flow-through entities for U.S. federal income tax purposes, and,
as such, are generally not subject to U.S. federal income tax at the entity
level. Rather, the tax liability with respect to their taxable income is passed
through to their members or partners. Accordingly, the Company is subject to
U.S. federal income taxation on its allocable share of Spark HoldCo’s net U.S.
taxable income.

The Company accounts for income taxes using the assets and liabilities method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and those assets and liabilities tax bases. The
Company applies existing tax law and the tax rate that the Company expects to
apply to taxable income in the years in which those differences are expected to
be recovered or settled in calculating the deferred tax assets and liabilities.
Effects of changes in tax rates on deferred tax assets and liabilities are
recognized in income in the period of the tax rate enactment. A valuation
allowance is recorded when it is not more likely than not that some or all of
the benefit from the deferred tax asset will be realized.

The Company periodically assesses whether it is more likely than not that it
will generate sufficient taxable income to realize its deferred income tax
assets. In making this determination, the Company considers all available
positive and negative evidence and makes certain assumptions. The Company
considers, among other things, its deferred tax liabilities, the overall
business environment, its historical earnings and losses, current industry
trends, and its outlook for future years. The Company believes it is more likely
than not that the deferred tax assets will be utilized.

On February 3, 2016, Retailco exchanged 2,000,000 of its Spark HoldCo units
(together with a corresponding number of shares of Class B common stock) for
shares of Class A common stock. The exchange resulted in a step up in tax basis,
which gave rise to a deferred tax asset of approximately $8.0 million on the
exchange date. In addition, the Company recorded an additional long-term
liability as a result of the exchange of approximately $10.3 million pursuant to
the Tax Receivable Agreement and a corresponding long-term deferred tax asset of
approximately $3.9 million. The initial estimate for the deferred tax asset, net
of the liability, under the Tax Receivable Agreement was recorded within
additional paid-in capital on our condensed consolidated balance sheet at
December 31, 2016.

On April 1, 2016, Retailco exchanged 3,450,000 of its Spark HoldCo units
(together with a corresponding number of shares of Class B common stock) for
shares of Class A common stock. The exchange resulted in a step up in tax basis,
which gave rise to a deferred tax asset of approximately $7.6 million on the
exchange date. In addition, the Company recorded an additional long-term
liability as a result of the exchange of approximately $10.3 million pursuant to
the Tax Receivable Agreement and a corresponding long-term deferred tax asset of
approximately $3.9 million. The initial estimate for the deferred tax asset, net
of the liability, under the Tax Receivable Agreement was recorded within
additional paid-in capital on our condensed consolidated balance sheet at
December 31, 2016.

On June 8, 2016, Retailco exchanged 1,000,000 of its Spark HoldCo units
(together with a corresponding number of shares of Class B common stock) for
shares of Class A common stock. The exchange resulted in a step up in tax basis,
which gave rise to a deferred tax asset of approximately $5.3 million on the
exchange date. In addition, the Company recorded an additional long-term
liability as a result of the exchange of approximately $6.9 million pursuant to
the Tax Receivable Agreement and a corresponding long-term deferred tax asset of
approximately $2.6 million. The initial estimate for the deferred tax asset, net
of the liability, under the Tax Receivable Agreement was recorded within
additional paid-in capital on our condensed consolidated balance sheet at
December 31, 2016.


                                       33
--------------------------------------------------------------------------------
  Table of Contents  

The Company had a net deferred tax asset of approximately $15.6 million related
to the step up in tax basis resulting from the purchase by the Company of Spark
HoldCo units from NuDevco Retail and NuDevco Retail Holdings (predecessor to
Retailco) on the IPO date. In addition, as of June 30, 2017, the Company had a
total liability of $49.9 million for the effect of the Tax Receivable Agreement
liability, with approximately $1.4 million classified as short-term liability
and the remainder as a long-term liability. The Company had a long-term deferred
tax asset of approximately $19.7 million related to the Tax Receivable Agreement
liability. See Note 14 "Transactions with Affiliates" for further discussion.

The effective U.S. federal and state income tax rate for the six months ended
June 30, 2017 and 2016 is 15.1% and 14.1%, respectively, with respect to pre-tax
income attributable to the Company's stockholders. The higher effective tax rate
for the six months ended June 30, 2017 is primarily attributable to the mix of
earnings between corporate and partnership income.

Total income tax expense for the six months ended June 30, 2017 differed from
amounts computed by applying the U.S. federal statutory tax rates to pre-tax
income primarily due to state taxes and the impact of permanent differences
between book and taxable income, most notably the income attributable to
non-controlling interest. The effective tax rate includes a rate benefit
attributable to the fact that Spark HoldCo operates as a limited liability
company treated as a partnership for federal and state income tax purposes and
is not subject to federal and state income taxes. Accordingly, the portion of
earnings attributable to non-controlling interest is subject to tax when
reported as a component of the non-controlling interest’s taxable income.
13. Commitments and Contingencies
From time to time, the Company may be involved in legal, tax, regulatory and
other proceedings in the ordinary course of business. Other than proceedings
discussed below, management does not believe that we are a party to any
litigation, claims or proceedings that will have a material impact on the
Company’s condensed consolidated financial condition or results of operations.
Liabilities for loss contingencies arising from claims, assessments, litigations
or other sources are recorded when it is probable that a liability has been
incurred and the amount can be reasonably estimated.

Indirect Tax Audits

The Company is undergoing various types of indirect tax audits spanning from
years 2006 to 2016 for which the Company may have additional liabilities arise.
At the time of filing these condensed consolidated financial statements, these
indirect tax audits are at an early stage and subject to substantial
uncertainties concerning the outcome of audit findings and corresponding
responses. As of June 30, 2017, we have accrued $1.8 million related to indirect
tax audits. The outcome of these indirect tax audits may result in additional
expense.

Legal Proceedings

The Company is the subject of the following lawsuits. At the time of filing
these combined and consolidated financial statements, this litigation is at an
early stage and subject to substantial uncertainties concerning the outcome of
material factual and legal issues. Accordingly, we cannot currently predict the
manner and timing of the resolution of this litigation or estimate a range of
possible losses or a minimum loss that could result from an adverse verdict in a
potential lawsuit.

John Melville et al v. Spark Energy Inc. and Spark Energy Gas, LLC is a
purported class action filed on December 17, 2015 in the United States District
Court for the District of New Jersey alleging, among other things, that (i)
sales representatives engaged as independent contractors for Spark Energy Gas,
LLC engaged in deceptive acts in violation of the New Jersey Consumer Fraud Act,
(ii) Spark Energy Gas, LLC breach its contract with plaintiff, including a
breach of the covenant of good faith and fair dealing. Plaintiffs are seeking
unspecified compensatory and punitive damages for the purported class,
injunctive relief and/or declaratory relief, disgorgement of revenues and/or
profits and attorneys’ fees. Initial discovery is ongoing. Spark Energy Inc. and
Spark Energy Gas, LLC

                                       34
--------------------------------------------------------------------------------
  Table of Contents  

intend to vigorously defend this matter and the allegations asserted therein.
Given the early stages of this matter, we cannot predict the outcome or
consequences of this case at this time.

Halifax-American Energy Company, LLC et al v. Provider Power, LLC, Electricity
N.H., LLC, Electricity Maine, LLC, Emile Clavet and Kevin Dean is a lawsuit
initially filed on June 12, 2014, in the Rockingham County Superior Court, State
of New Hampshire, alleging various claims related to the Provider Companies’
employment of a sales contractor formerly employed with one or more of the
plaintiffs, including misappropriation of trade secrets and tortious
interference with a contractual relationship. The dispute occurred prior to the
Company's acquisition of the Provider Companies. Portions of the original claim
proceeded to trial and on January 19, 2016, a jury found in favor of the
plaintiff. Damages totaling approximately $0.6 million and attorney’s fees
totaling approximately $0.3 million were awarded to the plaintiff. On May 4,
2016, following post-verdict motions, the defendants filed an appeal in the
State of New Hampshire Supreme Court, appealing, among other things the failure
of the trial court to direct a verdict for the defendants, to set aside the
verdict, or grant judgment for the defendants, and the trial court's award of
certain attorneys' fees. The appellate hearing was held on June 1, 2017. No
appellate decision has been issued to date. As of December 31, 2016 and June 30,
2017, respectively, the Company has accrued approximately $1.0 million in
contingent liabilities related to this litigation. Initial damages and
attorney's fees have been factored into the purchase price for the Provider
Companies, and the Company believes it has full indemnity coverage for any
actual exposure in this appeal.

Katherine Veilleux and Jennifer Chon, individually and on behalf of all other
similarly situated v. Electricity Maine. LLC, Provider Power, LLC, Spark Holdco,
LLC, Kevin Dean and Emile Clavet is a purported class action lawsuit filed on
November 18, 2016 in the United States District Court of Maine, alleging that
Electricity Maine, LLC, an entity acquired by Spark Holdco, LLC in mid-2016,
enrolled customers through fraudulent and misleading advertising and promotions
prior to the acquisition. Plaintiffs allege the following claims against all
Defendants: violation of the Maine Unfair Trade Practices Act, violation of
RICO, negligence, negligent misrepresentation, fraudulent misrepresentation,
unjust enrichment and breach of contract. Plaintiffs seek unspecified damages
for themselves and the purported class, rescission of contracts with Electricity
Maine, injunctive relief, restitution, and attorney’s fees. On July 7, 2017,
Plaintiffs filed a Motion for Leave to Amend their Complaint to add a new
Plaintiff. Discovery has not yet commenced in this matter. Spark HoldCo intends
to vigorously defend this matter and the allegations asserted therein. Given the
early stages of this matter, we cannot predict the outcome or consequences of
this case at this time. The Company believes it is fully indemnified for this
litigation matter, subject to certain limitations.

Gillis et al. v. Respond Power, LLC is a purported class action lawsuit that was
originally filed on May 21, 2014 in the Philadelphia Court of Common Pleas. On
June 23, 2014, the case was removed to the United States District Court for the
Eastern District of Pennsylvania. On September 15, 2014, the plaintiffs filed an
amended class action complaint seeking a declaratory judgment that the
disclosure statement contained in Respond Power, LLC’s variable rate contracts
with Pennsylvania consumers limited the variable rate that could be charged to
no more than the monthly rate charged by the consumers’ local utility company.
The plaintiffs also allege that Respond Power, LLC (i) breached its variable
rate contract with Pennsylvania consumers, and the covenant of good faith and
fair dealing therein, by charging rates in excess of the monthly rate charged by
the consumers’ local utility company; (ii) engaged in deceptive conduct in
violation of the Pennsylvania Unfair Trade Practices and Consumer Protection
Law; and (iii) engaged in negligent misrepresentation and fraudulent concealment
in connection with purported promises of savings. The amount of damages sought
is not specified. By order dated August 31, 2015, the district court denied
class certification. The plaintiffs appealed the district court’s denial of
class certification to the United States Court of Appeals for the Third Circuit.
The United States Court of Appeals for the Third Circuit vacated the district
court’s denial of class certification and remanded the matter to the district
court for further proceedings. The district court has ordered briefing on
Defendant’s motion to dismiss. The Company currently cannot predict the outcome
or consequences of this case at this time. The Company believes it is fully
indemnified for this litigation matter, subject to certain limitations.

14. Transactions with Affiliates

                                       35
--------------------------------------------------------------------------------
  Table of Contents  

The Company enters into transactions with and pays certain costs on behalf of
affiliates that are commonly controlled in order to reduce risk, reduce
administrative expense, create economies of scale, create strategic alliances
and supply goods and services to these related parties. The Company also sells
and purchases natural gas and electricity with affiliates. The Company presents
receivables and payables with the same affiliate on a net basis in the condensed
consolidated balance sheets as all affiliate activity is with parties under
common control.

Master Service Agreement with Retailco Services, LLC

We entered into a Master Service Agreement (the “Master Service Agreement”)
effective January 1, 2016 with Retailco Services, LLC ("Retailco Services"),
which is wholly owned by our Founder. The Master Service Agreement is for a
one-year term and renews automatically for successive one-year terms unless the
Master Service Agreement is terminated by either party. Retailco Services
provides us with operational support services such as: enrollment and renewal
transaction services; customer billing and transaction services; electronic
payment processing services; customer services and information technology
infrastructure and application support services under the Master Service
Agreement. See "Cost Allocations" for further discussion of the fees paid in
connection with the Master Service Agreement during the three and six months
ended June 30, 2017.
Accounts Receivable and Payable—Affiliates
The Company recorded current accounts receivable—affiliates of $3.9 million and
$2.6 million as of June 30, 2017 and December 31, 2016, respectively, and
current accounts payable—affiliates of $4.1 million and $3.8 million as of
June 30, 2017 and December 31, 2016, respectively, for certain direct billings
and cost allocations for services the Company provided to affiliates, services
our affiliates provided to us, and sales or purchases of natural gas and
electricity with affiliates.

Convertible Subordinated Notes to Affiliate

In connection with the financing of the CenStar acquisition, the Company,
together with Spark HoldCo, issued the CenStar Note to Retailco Acquisition Co,
LLC ("RAC"), which is wholly owned by our Founder, for $2.1 million on July 8,
2015. In connection with the financing of the Oasis acquisition, the Company,
together with Spark HoldCo, issued the Oasis Note to RAC for $5.0 million on
July 31, 2015. RAC converted the CenStar Note and the Oasis Note into shares of
Class B common stock on January 8, 2017 and January 31, 2017, respectively.
Refer to Note 9 "Debt" for further discussion.
Revenues and Cost of Revenues—Affiliates
The Company and an affiliate are party to an agreement whereby the Company
purchases natural gas from an affiliate. Cost of revenues—affiliates, recorded
in net asset optimization revenues in the condensed consolidated statements of
operations for the three months ended June 30, 2017 and 2016 related to this
agreement were zero and $0.4 million, respectively. Cost of revenues—affiliates,
recorded in net asset optimization revenues in the condensed consolidated
statements of operations for the six months ended June 30, 2017 and 2016 related
to this agreement were zero and $1.6 million, respectively.
The Company also purchases natural gas at a nearby third-party plant inlet that
is then sold to an affiliate. Revenues—affiliates, recorded in net asset
optimization revenues in the condensed consolidated statements of operations for
the three months ended June 30, 2017 and 2016 related to these sales were zero
and less than $0.1 million, respectively. Revenues—affiliates, recorded in net
asset optimization revenues in the condensed consolidated statements of
operations for the six months ended June 30, 2017 and 2016 related to these
sales were zero and $0.2 million, respectively.
Additionally, the Company entered into a natural gas transportation agreement
with another affiliate at its pipeline, whereby the Company transports retail
natural gas and pays the higher of (i) a minimum monthly payment or (ii) a
transportation fee per MMBtu times actual volumes transported. The current
transportation agreement renews annually on February 28 at a fixed rate per
MMBtu without a minimum monthly payment. While this transportation

                                       36
--------------------------------------------------------------------------------
  Table of Contents  

agreement remains in effect, this entity is no longer an affiliate as our
Founder terminated his interest in the affiliate on May 16, 2016. Cost of
revenues—affiliates, recorded in retail cost of revenues in the condensed
consolidated statements of operations related to this activity, was less than
$0.1 million, for the three and six months ended June 30, 2016.
Cost Allocations

The Company paid certain expenses on behalf of affiliates, which are reimbursed
by the affiliates to the Company, and our affiliates paid certain expenses on
our behalf, which are reimbursed by us. These transactions include costs that
can be specifically identified and certain allocated overhead costs associated
with general and administrative services, including executive management, due
diligence work, recurring management consulting, facilities, banking
arrangements, professional fees, insurance, information services, human
resources and other support departments to the affiliates. Where costs incurred
on behalf of the affiliate or us could not be determined by specific
identification for direct billing, the costs were primarily allocated to the
affiliated entities or us based on percentage of departmental usage, wages or
headcount. The total net amount direct billed and allocated from affiliates was
$6.3 million and $13.7 million, respectively, for the three and six months ended
June 30, 2017.

Of the $6.3 million and $13.7 million total net amounts directly billed and
allocated from affiliates, the Company recorded general and administrative
expense of $5.4 million and $11.9 million for the three and six months ended
June 30, 2017, respectively, in the condensed consolidated statement of
operations in connection with fees paid, net of damages charged, under the
Master Service Agreement with Retailco Services. Additionally under the Master
Service Agreement, we capitalized $0.2 million and $0.3 million of property and
equipment for the application, development and implementation of various systems
during three and six months ended June 30, 2017.

The total net amount direct billed and allocated from affiliates was $4.6
million and $9.6 million, respectively, for the three and six months ended June
30, 2016. Of this total net amount, $3.8 million and $8.0 million were recorded
as general and administrative expenses for the three and six months ended June
30, 2016, respectively, and $0.5 million and $1.1 million of property and
equipment were capitalized for the application, development, and implementation
of various systems.

Distributions to and Contributions from Affiliates

During the six months ended June 30, 2017 and 2016, the Company made net capital
distributions to NuDevco Retail and Retailco of $7.8 million and $6.4 million,
respectively, in conjunction with the payment of quarterly distributions
attributable to its Spark HoldCo units. During the six months ended June 30,
2017 and 2016, the Company made distributions to NuDevco Retail and Retailco for
gross-up distributions of $12.0 million and $3.5 million, respectively, in
connection with distributions made between Spark HoldCo and Spark Energy, Inc.
for payment of income taxes incurred by Spark Energy, Inc.

Proceeds from Disgorgement of Stockholder Short-swing Profits

During the three and six months ended June 30, 2017, the Company received zero
and $0.7 million, respectively, for the disgorgement of stockholder short-swing
profits under Section 16(b) under the Exchange Act accrued at December 31, 2016.
The amount was recorded as an increase to additional paid-in capital in our
condensed consolidated balance sheet as of December 31, 2016.

Class B Common Stock

In connection with the Major Energy Companies acquisition, the Company issued
Retailco 4,000,000 shares of Class B common stock (and a corresponding number of
Spark HoldCo units) to NG&E. In connection with the financing of the Provider
Companies acquisition, the Company sold 1,399,484 shares of Class B common stock
(and a corresponding number of Spark HoldCo units) to RetailCo, valued at $14.0
million based on a value of $10 per share.

                                       37
--------------------------------------------------------------------------------
  Table of Contents  


Subordinated Debt Facility

On December 27, 2016, the Company and Spark HoldCo jointly issued to Retailco,
an entity owned by our Founder, a 5% subordinated note in the principal amount
of up to $25.0 million. The subordinated note allows the Company and Spark
HoldCo to draw advances in increments of no less than $1.0 million per advance
up to the maximum principal amount of the subordinated note. The subordinated
note matures approximately three and a half years following the date of
issuance, and advances thereunder accrue interest at 5% per annum from the date
of the advance. The Company has the right to capitalize interest payments under
the subordinated note. The subordinated note is subordinated in certain respects
to the Company's Senior Credit Facility pursuant to a subordination agreement.
The Company may pay interest and prepay principal on the subordinated note so
long as it is in compliance with its covenants under the Senior Credit Facility,
is not in default under the Senior Credit Facility and has minimum availability
of $5.0 million under its borrowing base under the Senior Credit Facility.
Payment of principal and interest under the subordinated note is accelerated
upon the occurrence of certain change of control or sale transactions. As of
June 30, 2017 and December 31, 2016, there was $15.0 million and $5.0 million,
respectively, in outstanding borrowings under the subordinated note.

Tax Receivable Agreement

The Company is party to a Tax Receivable Agreement with Spark HoldCo, NuDevco
Retail Holdings and NuDevco Retail. This agreement generally provides for the
payment by the Company to Retailco, LLC (as successor to NuDevco Retail
Holdings) and NuDevco Retail of 85% of the net cash savings, if any, in U.S.
federal, state and local income tax or franchise tax that the Company actually
realizes (or is deemed to realize in certain circumstances) in future periods as
a result of (i) any tax basis increases resulting from the purchase by the
Company of Spark HoldCo units from NuDevco Retail Holdings, (ii) any tax basis
increases resulting from the exchange of Spark HoldCo units for shares of
Class A common stock pursuant to the Exchange Right (or resulting from an
exchange of Spark HoldCo units for cash pursuant to the Cash Option) and
(iii) any imputed interest deemed to be paid by the Company as a result of, and
additional tax basis arising from, any payments the Company makes under the Tax
Receivable Agreement. The Company retains the benefit of the remaining 15% of
these tax savings. See Note 12 "Income Taxes" for further discussion.

In certain circumstances, the Company may defer or partially defer any payment
due (a “TRA Payment”) to the holders of rights under the Tax Receivable
Agreement, which are currently Retailco and NuDevco Retail. During the five-year
period ending September 30, 2019, the Company will defer all or a portion of any
TRA Payment owed pursuant to the Tax Receivable Agreement to the extent that
Spark HoldCo does not generate sufficient Cash Available for Distribution (as
defined below) during the four-quarter period ending September 30th of the
applicable year in which the TRA Payment is to be made in an amount that equals
or exceeds 130% (the “TRA Coverage Ratio”) of the Total Distributions (as
defined below) paid in such four-quarter period by Spark HoldCo. For purposes of
computing the TRA Coverage Ratio:
 
•      “Cash Available for Distribution” is generally defined as the Adjusted    
       EBITDA of Spark HoldCo for the applicable period, less (i) cash interest  
       paid by Spark HoldCo, (ii) capital expenditures of Spark HoldCo (exclusive
       of customer acquisition costs) and (iii) any taxes payable by Spark       
       HoldCo; and                                                               


•      “Total Distributions” are defined as the aggregate distributions necessary
       to cause the Company to receive distributions of cash equal to (i) the    
       targeted quarterly distribution the Company intends to pay to holders of  
       its Class A common stock and Series A Preferred Stock payable during the  
       applicable four-quarter period, plus (ii) the estimated taxes payable by  
       the Company during such four-quarter period, plus (iii) the expected TRA  
       Payment payable during the calendar year for which the TRA Coverage Ratio 
       is being tested.                                                          



In the event that the TRA Coverage Ratio is not satisfied in any calendar year,
the Company will defer all or a portion of the TRA Payment to NuDevco Retail or
Retailco under the Tax Receivable Agreement to the extent necessary to permit
Spark HoldCo to satisfy the TRA Coverage Ratio (and Spark HoldCo is not required
to make and will not make the pro rata distributions to its members with respect
to the deferred portion of the TRA

                                       38
--------------------------------------------------------------------------------
  Table of Contents  

Payment). If the TRA Coverage Ratio is satisfied in any calendar year, the
Company will pay NuDevco Retail or Retailco the full amount of the TRA Payment.

Following the five-year deferral period ending September 30, 2019, the Company
will be obligated to pay any outstanding deferred TRA Payments to the extent
such deferred TRA Payments do not exceed (i) the lesser of the Company's
proportionate share of aggregate Cash Available for Distribution of Spark HoldCo
during the five-year deferral period or the cash distributions actually received
by the Company during the five-year deferral period, reduced by (ii) the sum of
(a) the aggregate target quarterly dividends (which, for the purposes of the Tax
Receivable Agreement, will be $0.18125 per Class A common stock share and
$0.546875 per Series A Preferred Stock share per quarter) during the five-year
deferral period, (b) the Company's estimated taxes during the five-year deferral
period, and (c) all prior TRA Payments and (y) if with respect to the quarterly
period during which the deferred TRA Payment is otherwise paid or payable, Spark
HoldCo has or reasonably determines it will have amounts necessary to cause the
Company to receive distributions of cash equal to the target quarterly
distribution payable during that quarterly period. Any portion of the deferred
TRA Payments not payable due to these limitations will no longer be payable.

We met the threshold coverage ratio required to fund the first TRA Payment to
Retailco and NuDevco Retail under the Tax Receivable Agreement during the
four-quarter period ending September 30, 2016, resulting in an initial TRA
Payment of $1.4 million becoming due in December 2016. On November 6, 2016,
Retailco and NuDevco Retail granted the Company the right to defer the TRA
Payment until May 2018. During the period of time when the Company has elected
to defer the TRA payment, the outstanding payment amount will accrue interest at
a rate calculated in the manner provided for under the Tax Receivable Agreement.
The initial payment of $1.4 million deferred until May 2018 was reclassified to
a current liability as of June 30, 2017. As of June 30, 2017, we do not expect
to meet the threshold coverage ratio required to fund the payment to Retailco,
LLC under the Tax Receivable Agreement during the four-quarter period ending
September 30, 2017. As such, the payment will be deferred pursuant to the terms
thereof. The liability has been classified as non-current in our condensed
consolidated balance sheet at June 30, 2017 and December 31, 2016.

15. Segment Reporting
The Company’s determination of reportable business segments considers the
strategic operating units under which the Company makes financial decisions,
allocates resources and assesses performance of its retail and asset
optimization businesses.
The Company’s reportable business segments are retail natural gas and retail
electricity. The retail natural gas segment consists of natural gas sales to,
and natural gas transportation and distribution for, residential and commercial
customers. Asset optimization activities, considered an integral part of
securing the lowest price natural gas to serve retail gas load, are part of the
retail natural gas segment. The Company recorded asset optimization revenues of
$39.2 million and $20.8 million and asset optimization cost of revenues of $39.4
million and $21.5 million for the three months ended June 30, 2017 and 2016,
respectively, which are presented on a net basis in asset optimization revenues.
The Company recorded asset optimization revenues of $101.1 million and $63.1
million and asset optimization cost of revenues of $101.5 million and $63.3
million for the six months ended June 30, 2017 and 2016, respectively, which are
presented on a net basis in asset optimization revenues. The retail electricity
segment consists of electricity sales and transmission to residential and
commercial customers. Corporate and other consists of expenses and assets of the
retail natural gas and retail electricity segments that are managed at a
consolidated level such as general and administrative expenses.
To assess the performance of the Company’s operating segments, the Chief
Operating Decision Maker analyzes retail gross margin. The Company defines
retail gross margin as operating income (loss) plus (i) depreciation and
amortization expenses and (ii) general and administrative expenses, less (i) net
asset optimization revenues (expenses), (ii) net gains (losses) on non-trading
derivative instruments, and (iii) net current period cash settlements on
non-trading derivative instruments. The Company deducts net gains (losses) on
non-trading derivative instruments, excluding current period cash settlements,
from the retail gross margin calculation in order to remove the non-cash impact
of net gains and losses on non-trading derivative instruments.

                                       39
--------------------------------------------------------------------------------
  Table of Contents  

Retail gross margin is a primary performance measure used by our management to
determine the performance of our retail natural gas and electricity business by
removing the impacts of our asset optimization activities and net non-cash
income (loss) impact of our economic hedging activities. As an indicator of our
retail energy business’ operating performance, retail gross margin should not be
considered an alternative to, or more meaningful than, operating income, as
determined in accordance with GAAP.
Below is a reconciliation of retail gross margin to income before income tax
expense (in thousands):

                                    Three Months Ended June 30,          Six Months Ended June 30,    
                                       2017              2016              2017              2016     
Reconciliation of Retail Gross                                                           
Margin to Income before taxes                                                            
Income before income tax expense $        5,080      $    23,729     $       18,617      $    40,458 
Interest and other income                   265             (195 )               66             (100 )
Interest expense                          2,452              832              5,897            1,585 
Operating Income                          7,797           24,366             24,580           41,943 
Depreciation and amortization             9,656            8,253             18,926           15,042 
General and administrative               19,346           19,799             43,839           37,179 
Less:                                                                                    
Net asset optimization expenses            (168 )           (677 )             (361 )           (150 )
Net, (loss) gain on non-trading                                                                      
derivative instruments                  (10,202 )         13,322            (31,578 )          3,702 
Net, Cash settlements on                                                                             
non-trading derivative                                                                               
instruments                               4,020              953             11,535           12,230 
Retail Gross Margin              $       43,149      $    38,820     $      107,749      $    78,382 



The Company uses retail gross margin and net asset optimization revenues as the
measure of profit or loss for its business segments. This measure represents the
lowest level of information that is provided to the chief operating decision
maker for our reportable segments.

Financial data for business segments are as follows (in thousands): 
Three Months Ended June      Retail           Retail         Corporate                       
        30, 2017          Electricity      Natural Gas       and Other      Eliminations      Spark Retail  
Total Revenues           $    131,908     $     19,528     $         —     $           —     $     151,436 
Retail cost of revenues       102,079           12,558               —                 —           114,637 
Less:                                                                                                       
Net asset optimization                                                                                     
expenses                            —             (168 )             —                 —              (168 )
Losses on non-trading                                                                                      
derivatives                    (9,333 )           (869 )             —                 —           (10,202 )
Current period                                                                                             
settlements on                                                                                             
non-trading derivatives         4,299             (279 )             —                 —             4,020 
Retail Gross Margin      $     34,863     $      8,286     $         —     $           —     $      43,149 
Total Assets at June 30,                                                                                   
2017                     $    838,978     $    302,637     $   247,693     $    (980,595 )   $     408,713 
Goodwill at June 30,                                                                                       
2017                     $     78,417     $      2,530     $         —     $           —     $      80,947 




                                       40
--------------------------------------------------------------------------------
  Table of Contents  

 Three Months Ended June      Retail           Retail         Corporate                       
        30, 2016           Electricity      Natural Gas       and Other      Eliminations      Spark Retail  
Total revenues            $     87,395     $     21,986     $         —     $           —     $     109,381 
Retail cost of revenues         49,717            7,246               —                 —            56,963 
Less:                                                                                         
Net asset optimization                                                                                      
revenues                             —             (677 )             —                 —              (677 )
Gains on non-trading                                                                                        
derivatives                     10,319            3,003               —                 —            13,322 
Current period                                                                                              
settlements on                                                                                              
non-trading derivatives           (272 )          1,225               —                 —               953 
Retail Gross Margin       $     27,631     $     11,189     $         —     $           —     $      38,820 
Total Assets at December                                                                                    
31, 2016                  $    577,695     $    242,739     $   169,404     $    (613,670 )   $     376,168 
Goodwill at December 31,                                                                                    
2016                      $     76,617     $      2,530     $         —     $           —     $      79,147 



 Six Months Ended June       Retail           Retail         Corporate                       
        30, 2017          Electricity      Natural Gas       and Other      Eliminations      Spark Retail  
Total revenues           $    265,602     $     82,141     $         —     $           —     $     347,743 
Retail cost of revenues       210,923           49,475               —                 —           260,398 
Less:                                                                                        
Net asset optimization                                                                                     
expenses                            —             (361 )             —                 —              (361 )
Losses on non-trading                                                                                      
derivatives                   (28,960 )         (2,618 )             —                 —           (31,578 )
Current period                                                                                             
settlements on                                                                                             
non-trading derivatives        12,005             (470 )             —                 —            11,535 
Retail Gross Margin      $     71,634     $     36,115     $         —     $           —     $     107,749 
Total Assets at June 30,                                                                                   
2017                     $    838,978     $    302,637     $   247,693     $    (980,595 )   $     408,713 
Goodwill at June 30,                                                                                       
2017                     $     78,417     $      2,530     $         —     $           —     $      80,947 


 Six Months Ended June 30,      Retail            Retail         Corporate                       
           2016               Electricity      Natural Gas       and Other      Eliminations      Spark Retail  
Total revenues              $     149,328     $     70,599     $         —     $           —     $     219,927 
Retail cost of revenues            96,017           29,746               —                 —           125,763 
Less:                                                                                            
Net asset optimization                                                                                         
revenues                                —             (150 )             —                 —              (150 )
Gains on non-trading                                                                                           
derivatives                           929            2,773               —                 —             3,702 
Current period settlements                                                                                     
on non-trading derivatives          9,345            2,885               —                 —            12,230 
Retail Gross Margin         $      43,037     $     35,345     $         —     $           —     $      78,382 
Total Assets at December                                                                                       
31, 2016                    $     577,695     $    242,739     $   169,404     $    (613,670 )   $     376,168 
Goodwill at December 31,                                                                                       
2016                        $      76,617     $      2,530     $         —     $           —     $      79,147 


16. Subsequent Events

Acquisition of Verde

On July 1, 2017, the Company and CenStar completed the acquisition from Verde
Energy USA Holdings, LLC (the “Seller”) of all of the outstanding membership
interests and stock in the Verde Companies (as defined in the Membership
Interest and Stock Purchase Agreement, dated as of May 5, 2017, by and among the
Company, CenStar and the Seller, as amended). Total consideration paid was
approximately $85.8 million, of which

                                       41
--------------------------------------------------------------------------------
  Table of Contents  

approximately $20.8 million was used to purchase positive net working capital.
The Company funded the closing consideration through: (i) approximately $6.8
million of cash on hand, (ii) approximately $15.0 million in subordinated debt
from the Company's founder and majority shareholder through an existing
subordinated debt facility, (iii) approximately $44.0 million in borrowings
under its senior secured revolving credit facility, and (iv) the issuance by
CenStar to the Seller of a promissory note in the aggregate principal amount of
$20.0 million (the “Promissory Note”). The Company deposited $65.8 million of
the purchase price due to the Seller before June 30, 2017, immediately prior to
payment of such amount on the July 1, 2017 closing date, and has reflected the
amount as a deposit in current assets as of June 30, 2017. In addition to the
consideration paid at closing, CenStar is obligated to pay 100% of the Adjusted
EBITDA earned by the Verde Companies for the 18 months following closing that
exceeds certain thresholds, subject to the Verde Companies’ ability to achieve
defined customer count criteria. Upon the close of the acquisition, the Verde
Companies became restricted subsidiaries and co-borrowers under the Company's
Senior Credit Facility.

Declaration of Dividends

On July 19, 2017, the Company declared a quarterly dividend of $0.18125 to
holders of record of our Class A common stock on August 29, 2017 and payable on
September 14, 2017.

On July 19, 2017, the Company declared a quarterly cash dividend in the amount
of $0.546875 per share of Series A Preferred Stock. This amount represents an
annualized dividend of $2.1875 per share. The dividend will be paid on
October 16, 2017 to holders of record on October 1, 2017 of Spark's Series A
Preferred Stock. The Company anticipates Series A Preferred Stock dividends
declared of $2.9 million in the aggregate for the year ended December 31, 2017
based on the Series A Preferred Stock outstanding as of June 30, 2017.

At-the-Market Issuance Sales Agreement
On July 21, 2017, the Company entered into an At-the-Market Issuance Sales
Agreement (“the ATM Agreement”) to periodically sell the Company’s Series A
Preferred Stock, having an aggregate offering price of up to $50.0 million in
market transactions.






                                       42
--------------------------------------------------------------------------------
  Table of Contents  

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the related notes thereto included
elsewhere in this report and the audited combined and consolidated financial
statements and notes thereto and management's discussion and analysis of
financial condition and results of operations included in our Form 10-K for the
year ended December 31, 2016 that was filed with the Securities and Exchange
Commission (“SEC”). In this report, the terms “Spark Energy,” “Company,” “we,”
“us” and “our” refer collectively to Spark Energy, Inc. and its subsidiaries.
              Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements that are subject to a number of
risks and uncertainties, many of which are beyond our control. These
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), can be identified by the
use of forward-looking terminology including “may,” “should,” “likely,” “will,”
“believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,”
“projects,” or other similar words. All statements, other than statements of
historical fact included in this report, regarding strategy, future operations,
financial position, estimated revenues and losses, projected costs, prospects,
plans, objectives and beliefs of management are forward-looking statements.
Forward-looking statements appear in a number of places in this report and may
include statements about business strategy and prospects for growth, customer
acquisition costs, ability to pay cash dividends, cash flow generation and
liquidity, availability of terms of capital, competition and government
regulation and general economic conditions. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we
cannot give any assurance that such expectations will prove correct.
The forward-looking statements in this report are subject to risks and
uncertainties. Important factors that could cause actual results to materially
differ from those projected in the forward-looking statements include, but are
not limited to:
• changes in commodity prices,


• extreme and unpredictable weather conditions,


• the sufficiency of risk management and hedging policies,


• customer concentration,


•         federal, state and local regulation, including the industry's ability  
          to prevail on its challenge to the New York Public Service Commission's
          order enacting new regulations that sought to impose significant new   
          restrictions on retail energy providers operating in New York,         


• key license retention,


• increased regulatory scrutiny and compliance costs,


• our ability to borrow funds and access credit markets,


• restrictions in our debt agreements and collateral requirements,


• credit risk with respect to suppliers and customers,


• level of indebtedness,


• changes in costs to acquire customers,


• actual customer attrition rates,


• actual bad debt expense in non-POR markets,


• actual results of the companies we acquire,


• accuracy of billing systems,


• ability to successfully navigate entry into new markets,


•         whether our majority stockholder or its affiliates offer us acquisition
          opportunities on terms that are commercially acceptable to us,         


•         ability to successfully and efficiently integrate acquisitions into our
          operations,                                                            


• ability to achieve expected future results attributable to acquisitions,


• competition, and



                                       43
--------------------------------------------------------------------------------
  Table of Contents  

•         the "Risk Factors" in our Form 10-K for the year ended December 31,    
          2016, our Form 10-Q for the quarter ended March 31, 2017 in this report
          on Form 10-Q, and other public filings and press releases.             



You should review the risk factors and other factors noted throughout or
incorporated by reference in this report that could cause our actual results to
differ materially from those contained in any forward-looking statement. All
forward-looking statements speak only as of the date of this report. Unless
required by law, we disclaim any obligation to publicly update or revise these
statements whether as a result of new information, future events or otherwise.
It is not possible for us to predict all risks, nor can we assess the impact of
all factors on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Overview

Spark Energy, Inc. is a growing independent retail energy services company
founded in 1999 that provides residential and commercial customers in
competitive markets across the United States with an alternative choice for
their natural gas and electricity. We purchase our natural gas and electricity
supply from a variety of wholesale providers and bill our customers monthly for
the delivery of natural gas and electricity based on their consumption at either
a fixed or variable price. Natural gas and electricity are then distributed to
our customers by local regulated utility companies through their existing
infrastructure. As of August 4, 2017, we operated in 94 utility service
territories across 19 states and the District of Columbia.

Our business consists of two operating segments:

•      Retail Electricity Segment. We purchase electricity supply through        
       physical and financial transactions with market counterparts and ISOs and 
       supply electricity to residential and commercial consumers pursuant to    
       fixed-price and variable-price contracts. For the three months ended June 
       30, 2017 and 2016, approximately 87% and 80%, respectively, of our retail 
       revenues were derived from the sale of electricity.                       



•      Retail Natural Gas Segment. We purchase natural gas supply through        
       physical and financial transactions with market counterparts and supply   
       natural gas to residential and commercial consumers pursuant to           
       fixed-price and variable-price contracts. For the three months ended June 
       30, 2017 and 2016, approximately 13% and 20%, respectively, of our retail 
       revenues were derived from the sale of natural gas. We also identify      
       wholesale natural gas arbitrage opportunities in conjunction with our     
       retail procurement and hedging activities, which we refer to as asset     
       optimization.                                                             



Recent Developments

New Senior Credit Facility

On May 19, 2017, Spark Energy, Inc., as guarantor, and Spark HoldCo (the
“Borrower” and, together with SE, SEG, CenStar, CenStar Operating Company, LLC,
Oasis, Oasis Power, LLC, the Provider Companies, the Major Energy Companies and
Perigee Energy, LLC, each subsidiaries of Spark HoldCo, the “Co-Borrowers”),
entered into a senior secured borrowing base credit facility (the “Senior Credit
Facility”) in an aggregate amount of $120.0 million. The Co-Borrowers are
entitled to request an increase in the Senior Credit Facility amount up to
$150.0 million provided that, among other things, (i) no event of default or
default exists or would exist after giving effect thereto and (ii) evidence of
the Co-Borrowers’ compliance with financial covenants on a pro forma basis
before and after giving effect to such increase. The Senior Credit Facility
replaced the prior senior credit facility, which was set to mature in July 2017.
Termination of Prior Senior Credit Facility

We were previously a party to the Amended and Restated Credit Agreement, dated
July 8, 2015, by and among Spark Energy, Inc., as parent, Spark Holdco and the
other co-borrowers party thereto, (the “Prior Credit Agreement”), which included
a senior secured revolving working capital facility up to $82.5 million and a
secured

                                       44
--------------------------------------------------------------------------------
  Table of Contents  

revolving line of credit of $25.0 million to be used specifically for the
financing of up to 75% of the cost of acquisitions. On May 19, 2017, in
connection with entering into the Senior Credit Facility, we terminated the
Prior Credit Agreement.

Stock Split

On May 22, 2017, we authorized and approved a two-for-one stock split of our
issued Class A common stock and Class B common stock, which was effected in the
form of a stock dividend (the "Stock Split"). Shareholders of record at the
close of business on June 5, 2017 were issued one additional share of our Class
A common stock or Class B common stock for each share of Class A common stock or
Class B common stock, respectively, held by such shareholders on that date. The
Stock Split was effected on June 16, 2017. All shares and per share amounts in
this Quarterly Report on Form 10-Q have been retrospectively restated to reflect
the Stock Split.

Share Repurchase Program

On May 24, 2017, we authorized a share repurchase program of up to $50.0 million
of Class A common stock through December 31, 2017. We are funding the program
through available cash balances, our credit facilities, and operating cash
flows. The shares of Class A common stock may be repurchased from time to time
in the open market or in privately negotiated transactions based on ongoing
assessments of capital needs, the market price of the Class A common stock, and
other factors, including general market conditions. The repurchase program does
not obligate us to acquire any particular amount of Class A common stock and it
may be modified or suspended at any time, and could be terminated prior to
completion.

During the three and six months ended June 30, 2017, we repurchased 59,726
shares of our Class A common stock at a weighted-average price of $21.52 per
share, for a total cost of $1.3 million.

Declaration of Dividends

On July 19, 2017, we declared a quarterly dividend of $0.18125 to holders of
record of our Class A common stock on August 29, 2017 and payable on September
14, 2017.

On July 19, 2017, we declared a dividend of $0.546875 to holders of record of
our Series A Preferred Stock on October 1, 2017 and payable on October 16, 2017.

Acquisition of Verde

On July 1, 2017, we and CenStar completed the acquisition from Verde Energy USA
Holdings, LLC (the “Seller”) of all of the outstanding membership interests and
stock in the Verde Companies (as defined in the Membership Interest and Stock
Purchase Agreement, dated as of May 5, 2017, by and among us, CenStar and the
Seller, as amended). Total consideration paid was approximately $85.8 million,
of which approximately $20.8 million was used to purchase positive net working
capital. We funded the closing consideration through: (i) approximately $6.8
million of cash on hand, (ii) approximately $15.0 million in subordinated debt
from our founder and majority shareholder through the Subordinated Facility
(defined below) (iii) approximately $44.0 million in borrowings under the Senior
Credit Facility, and (iv) the issuance by CenStar to the Seller of a promissory
note in the aggregate principal amount of $20.0 million (the “Promissory Note”).
The Company deposited $65.8 million of the purchase price due to the Seller
before June 30, 2017, immediately prior to payment of such amount on the July 1,
2017 closing date, and has reflected the amount as a deposit in current assets
as of June 30, 2017. In addition to the consideration paid at closing, CenStar
is obligated to pay 100% of the Adjusted EBITDA earned by the Verde Companies
for the 18 months following closing that exceeds certain thresholds, subject to
the Verde Companies’ ability to achieve defined customer count criteria.

At-the-Market Issuance Sales Agreement

                                       45
--------------------------------------------------------------------------------
  Table of Contents  

On July 21, 2017, we entered into an At-the-Market Issuance Sales Agreement
(“the ATM Agreement”) to sell our 8.75% Series A Fixed-to-Floating Rate
Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share and
liquidation preference $25.00 per share (the "Series A Preferred Stock"), having
an aggregate offering price of up to $50.0 million through December 31, 2017. We
intend to use the proceeds from any sales pursuant to the ATM Agreement, after
deducting the sales agent’s commissions and our offering expenses, for general
corporate purposes, which may include, among other things, funding working
capital, capital expenditures, liquidity for operational contingencies, debt
repayments and acquisitions.

Residential Customer Equivalents

The following table shows activity of our residential customer equivalents
("RCEs") during the three months ended June 30, 2017:
RCEs:                                                                                     
                                                                               % Increase 
(In thousands)       March 31, 2017 (1)  Additions   Attrition  June 30, 2017  (Decrease) 
Retail Electricity          609             110        (75)          644           6%     
Retail Natural Gas          197             10         (25)          182          (8)%    
Total Retail                806             120        (100)         826           2%     


(1) Includes 17,000 RCEs of Perigee Energy, LLC. See "-Factors Affecting
Comparability of Historical Results - Presentation of the Acquisition of Perigee
Energy, LLC" for further discussion of our results of Perigee Energy, LLC.

The following table details our count of RCEs by geographical location as of
June 30, 2017:
RCEs by Geographic Location:                                                                          
(In thousands)                   Electricity  % of Total Natural Gas  % of Total   Total    % of Total
East                                 516         80%         107         59%        623        75%    
Midwest                              49          8%          46          25%        95         12%    
Southwest                            79          12%         29          16%        108        13%    
Total                                644        100%         182        100%        826       100%    



The geographical regions noted above include the following states:

•      East - Connecticut, Delaware, Florida, Maine, Maryland (including the     
       District of Columbia), Massachusetts, New Hampshire, New Jersey, New York 
       and Pennsylvania;                                                         


• Midwest - Illinois, Indiana, Michigan and Ohio; and


• Southwest - Arizona, California, Colorado, Nevada and Texas.



Drivers of our Business

Customer Growth. Customer growth is a key driver of our operations. Our customer
growth strategy includes acquiring customers through acquisitions as well as
organically. We expect an emphasis on growth through acquisition to continue in
2017.

Acquisitions. Our acquisition strategy has two components. We independently
acquire companies and portfolios of companies through some combination of cash,
borrowings under the Senior Credit Facility, or through the issuance of common
or preferred stock or through financing arrangements with our Founder and his
affiliates. Additionally, our Founder formed NG&E in 2015 for the purpose of
purchasing retail energy companies and retail customer books that could
ultimately be resold to us. We currently expect that we would fund any future
transaction with NG&E using some combination of cash, subordinated debt, or the
issuance of Class A common stock or Class B common stock (and corresponding
Spark HoldCo units) to NG&E. However, actual consideration will depend,

                                       46
--------------------------------------------------------------------------------
  Table of Contents  

among other things, on our capital structure and liquidity at the time of any
transaction. There is no guarantee that NG&E will continue to offer us
acquisition opportunities. Additionally, as we grow and our access to capital
and opportunities improves, we may rely less upon NG&E as a source of
acquisitions and seek to enter into more transactions directly with third
parties.

Our ability to grow at historic levels may be constrained if the market for
acquisition candidates is limited and we are unable to make acquisitions of
portfolios of customers and retail energy companies on commercially reasonable
terms.

Organic Growth. Our organic sales strategies are used to both maintain and grow
our customer base by offering competitive pricing, price certainty, and/or green
product offerings. We manage growth on a market-by-market basis by developing
price curves in each of the markets we serve and comparing the market prices to
the price the local regulated utility is offering. We then determine if there is
an opportunity in a particular market based on our ability to create a
competitive product on economic terms that satisfies our profitability
objectives and provides customer value. We develop marketing campaigns using a
combination of sales channels, with an emphasis on door-to-door marketing and
outbound telemarketing given their flexibility and historical effectiveness. We
identify and acquire customers through a variety of additional sales channels,
including our inbound customer care call center, online marketing, email, direct
mail, affinity programs, direct sales, brokers and consultants. Our marketing
team continuously evaluates the effectiveness of each customer acquisition
channel and makes adjustments in order to achieve desired growth and
profitability targets.

We believe we can continue to grow organically, however achieving significant
organic growth rates has become increasingly more difficult given our size, much
of which is attributable to recent acquisitions. Additionally, increasing
regulatory pressure on marketing channels, such as door-to-door and outbound
telemarketing and the ability to manage customer acquisition costs, are
significant factors in our ability to grow organically.

Customer Acquisition Costs Incurred

Management of customer acquisition costs is a key component to our
profitability. Customer acquisition costs are spending for organic customer
acquisitions and do not include customer acquisitions through acquisitions of
businesses or portfolios of customer contracts, which are recorded as customer
relationships.

We attempt to maintain a disciplined approach to recovery of our customer
acquisition costs within defined time periods. We capitalize and amortize our
customer acquisition costs over a two year period, which is based on the
expected average length of an organic customer relationship. We factor in the
recovery of customer acquisition costs in determining which markets we enter and
the pricing of our products in those markets. Accordingly, our results are
significantly influenced by our customer acquisition spending.

Customer acquisition cost for the three months ended June 30, 2017 was
approximately $4.4 million.

Our Ability to Manage Customer Attrition

Customer attrition is primarily due to: (i) customer initiated switches; (ii)
residential moves and (iii) disconnection for customer payment defaults.

Customer attrition for the three months ended June 30, 2017 was 4.1%. Our
customer attrition has been lower in recent quarters as we have increased our
focus on the acquisition of higher lifetime value customers. We have also
increased our customer win-back efforts, and have more aggressively pursued
proactive renewals and other customer relationship strategies to maintain a low
level of customer attrition. Although we saw an increase in customer attrition
this quarter, attrition for the three months ended June 30, 2017 is in line with
attrition for the three months ended June 30, 2016.

Customer Credit Risk

                                       47
--------------------------------------------------------------------------------
  Table of Contents  


Our bad debt expense for the three and six months ended June 30, 2017 was less
than 1.0% of non-POR market retail revenues. An increased focus on collection
efforts and timely billing along with tighter credit requirements for new
enrollments in non-POR markets have led to a reduction in the bad debt expense
over the past several months. We have also been able to collect on debts that
were previously written off, which has further reduced our bad debt expense
during the three and six months ended June 30, 2017.

Weather Conditions

Weather conditions directly influence the demand for natural gas and electricity
and affect the prices of energy commodities. Our hedging strategy is based on
forecasted customer energy usage, which can vary substantially as a result of
weather patterns deviating from historical norms. We are particularly sensitive
to this variability because of our current substantial concentration and focus
on growth in the residential customer segment in which energy usage is highly
sensitive to weather conditions that impact heating and cooling demand. During
the three months ended June 30, 2017, we experienced milder than anticipated
weather conditions, which negatively impacted overall customer usage.

Asset Optimization

Our natural gas business includes opportunistic transactions in the natural gas
wholesale marketplace in conjunction with our retail procurement and hedging
activities. Asset optimization opportunities primarily arise during the winter
heating season when demand for natural gas is the highest. As such, the majority
of our asset optimization profits are made in the winter. Given the
opportunistic nature of these activities, we experience variability in our
earnings from our asset optimization activities from year to year. As these
activities are accounted for using mark to-market fair value accounting, the
timing of our revenue recognition often differs from the actual cash settlement.

Net asset optimization results were a loss of $0.2 million for the three months
ended June 30, 2017, primarily due to $0.8 million of our annual legacy demand
charges allocated to the quarter, offset by arbitrage opportunities we captured.
During the full year 2017, we are obligated to pay demand charges of
approximately $2.6 million under certain long-term legacy transportation assets
that our predecessor entity acquired prior to 2013.

Factors Affecting Comparability of Historical Financial Results

Presentation of the Acquisition of Perigee Energy, LLC

On April 1, 2017, the Company and Spark HoldCo, entered into a Membership
Interest Purchase Agreement (the "Perigee Purchase Agreement") with Retailco and
NG&E for the purchase of all the membership interests of Perigee Energy, LLC
from NG&E. The Company completed the acquisition of Perigee Energy, LLC from
NG&E on April 1, 2017. Because the acquisition of Perigee Energy, LLC was a
transfer of equity interests of entities under common control, the Company's
historical financial statements previously filed with the SEC have been recast
in this Form 10-Q to include the results attributable to Perigee Energy, LLC
from February 3, 2017. The unaudited condensed consolidated financial statements
for this recasted period have been prepared from NG&E's historical cost-basis
and may not necessarily be indicative of the actual results of operations that
would have occurred had the Company owned Perigee Energy, LLC during the
recasted period.

How We Evaluate Our Operations
                                 Three Months Ended June 30,           Six Months Ended June 30,     
(in thousands)                      2017               2016              2017               2016     
Adjusted EBITDA               $        20,023     $     15,699     $        54,393     $     36,760 
Retail Gross Margin           $        43,149     $     38,820     $       107,749     $     78,382 



Adjusted EBITDA. We define “Adjusted EBITDA” as EBITDA less (i) customer
acquisition costs incurred in the current period, (ii) net gain (loss) on
derivative instruments, and (iii) net current period cash settlements on
derivative instruments, plus (iv) non-cash compensation expense, and (v) other
non-cash and non-recurring operating items. EBITDA is defined as net income
(loss) before provision for income taxes, interest expense and depreciation and
amortization.

We deduct all current period customer acquisition costs (representing spending
for organic customer acquisitions) in the Adjusted EBITDA calculation because
such costs reflect a cash outlay in the period in which they are incurred, even
though we capitalize such costs and amortize them over two years in accordance
with our accounting policies. The deduction of current period customer
acquisition costs is consistent with how we manage our business, but the
comparability of Adjusted EBITDA between periods may be affected by varying
levels of customer acquisition costs. For example, our Adjusted EBITDA is lower
in periods of organic customer growth reflecting larger customer acquisition
spending.

We do not deduct the cost of customer acquisitions through acquisitions of
businesses or portfolios of customers in calculating Adjusted EBITDA.

We deduct our net gains (losses) on derivative instruments, excluding current
period cash settlements, from the Adjusted EBITDA calculation in order to remove
the non-cash impact of net gains and losses on derivative instruments. We also
deduct non-cash compensation expense as a result of restricted stock units that
are issued under our long-term incentive plan.

We believe that the presentation of Adjusted EBITDA provides information useful
to investors in assessing our liquidity and financial condition and results of
operations and that Adjusted EBITDA is also useful to investors as a financial
indicator of our ability to incur and service debt, pay dividends and fund
capital expenditures. Adjusted EBITDA is a supplemental financial measure that
management and external users of our condensed consolidated financial
statements, such as industry analysts, investors, commercial banks and rating
agencies, use to assess the following:

•      our operating performance as compared to other publicly traded companies  
       in the retail energy industry, without regard to financing methods,       
       capital structure or historical cost basis;                               


•      the ability of our assets to generate earnings sufficient to support our  
       proposed cash dividends; and                                              


•      our ability to fund capital expenditures (including customer acquisition  
       costs) and incur and service debt.                                        



Retail Gross Margin. We define retail gross margin as operating income (loss)
plus (i) depreciation and amortization expenses and (ii) general and
administrative expenses, less (i) net asset optimization revenues, (ii) net
gains (losses) on non-trading derivative instruments, and (iii) net current
period cash settlements on non-trading derivative instruments. Retail gross
margin is included as a supplemental disclosure because it is a primary
performance measure used by our management to determine the performance of our
retail natural gas and electricity business by removing the impacts of our asset
optimization activities and net non-cash income (loss) impact of our economic
hedging activities. As an indicator of our retail energy business’ operating
performance, retail gross margin should not be considered an alternative to, or
more meaningful than, operating income (loss), its most directly comparable
financial measure calculated and presented in accordance with GAAP.

We believe retail gross margin provides information useful to investors as an
indicator of our retail energy business's operating performance.

The GAAP measures most directly comparable to Adjusted EBITDA are net income
(loss) and net cash provided by operating activities. The GAAP measure most
directly comparable to Retail Gross Margin is operating income (loss). Our
non-GAAP financial measures of Adjusted EBITDA and Retail Gross Margin should
not be considered as alternatives to net income (loss), net cash provided by
operating activities, or operating income (loss). Adjusted EBITDA and Retail
Gross Margin are not presentations made in accordance with GAAP and have
important limitations as analytical tools. You should not consider Adjusted
EBITDA or Retail Gross Margin in isolation or as

                                       48
--------------------------------------------------------------------------------
  Table of Contents  

a substitute for analysis of our results as reported under GAAP. Because
Adjusted EBITDA and Retail Gross Margin exclude some, but not all, items that
affect net income (loss) and net cash provided by operating activities, and are
defined differently by different companies in our industry, our definition of
Adjusted EBITDA and Retail Gross Margin may not be comparable to similarly
titled measures of other companies.
Management compensates for the limitations of Adjusted EBITDA and Retail Gross
Margin as analytical tools by reviewing the comparable GAAP measures,
understanding the differences between the measures and incorporating these data
points into management’s decision-making process.

The following table presents a reconciliation of Adjusted EBITDA to net income
(loss) for each of the periods indicated.
                                     Three Months Ended June 30,       Six Months Ended June 30,    
(in thousands)                          2017              2016            2017             2016     
Reconciliation of Adjusted EBITDA                                                      
to Net Income (Loss):                                                                  
Net income                        $        4,671      $    18,994   $      15,803      $    34,735 
Depreciation and amortization              9,656            8,253          18,926           15,042 
Interest expense                           2,452              832           5,897            1,585 
Income tax expense                           409            4,735           2,814            5,723 
EBITDA                                    17,188           32,814          43,440           57,085 
Less:                                                                                  
Net, (losses) gains on derivative                                                                  
instruments                               (9,677 )         13,245         (31,473 )          3,496 
Net, Cash settlements on                                                                           
derivative instruments                     3,996            1,024          11,351           12,296 
Customer acquisition costs                 4,384            4,670          12,074            6,975 
    Plus:                                                                                          
    Non-cash compensation expense          1,538            1,824           2,905            2,442 
Adjusted EBITDA                   $       20,023      $    15,699   $      54,393      $    36,760 




                                       49
--------------------------------------------------------------------------------
  Table of Contents  

The following table presents a reconciliation of Adjusted EBITDA to net cash
provided by (used in) operating activities for each of the periods indicated.
                                    Three Months Ended June 30,         Six Months Ended June 30,    
(in thousands)                         2017              2016              2017             2016     
Reconciliation of Adjusted                                                              
EBITDA to net cash provided by                                                          
operating activities:                                                                   
Net cash provided by operating                                                                      
activities                       $       23,031      $    23,697     $      47,406      $    49,199 
Amortization of deferred                                                                            
financing costs                            (283 )           (118 )            (531 )           (235 )
Allowance for doubtful accounts                                                                     
and bad debt expense                       (563 )            445              (919 )           (462 )
Interest expense                          2,452              832             5,897            1,585 
Income tax expense                          409            4,735             2,814            5,723 
Changes in operating working                                                            
capital                                                                                 
Accounts receivable, prepaids,                                                                      
current assets                          (19,159 )        (20,531 )         (21,541 )        (24,138 )
Inventory                                 3,012            1,780              (310 )         (1,704 )
Accounts payable and accrued                                                                        
liabilities                               7,423            4,148            18,109            9,539 
Other                                     3,701              711             3,468           (2,747 )
Adjusted EBITDA                  $       20,023      $    15,699     $      54,393      $    36,760 
Cash Flow Data:                                                                         
Cash flows provided by operating                                                                    
activities                       $       23,031      $    23,697     $      47,406      $    49,199 
Cash flows used in investing                                                                        
activities                              (80,652 )         (1,029 )         (90,265 )         (1,862 )
Cash flows provided by (used in)                                                                    
financing activities                     46,741          (12,770 )          37,944          (38,964 )



The following table presents a reconciliation of Retail Gross Margin to
operating income (loss) for each of the periods indicated.
                                    Three Months Ended June 30,          Six Months Ended June 30,    
(in thousands)                         2017              2016              2017              2016     
Reconciliation of Retail Gross                                                           
Margin to Operating Income                                                               
(Loss):                                                                                  
Operating income                 $        7,797      $    24,366     $       24,580      $    41,943 
Depreciation and amortization             9,656            8,253             18,926           15,042 
General and administrative               19,346           19,799             43,839           37,179 
Less:                                                                                    
Net asset optimization                                                                               
(expenses) revenues                        (168 )           (677 )             (361 )           (150 )
Net, Losses on non-trading                                                                           
derivative instruments                  (10,202 )         13,322            (31,578 )          3,702 
Net, Cash settlements on                                                                             
non-trading derivative                                                                               
instruments                               4,020              953             11,535           12,230 
Retail Gross Margin              $       43,149      $    38,820     $      107,749      $    78,382 
Retail Gross Margin - Retail                                                                         
Natural Gas Segment              $        8,286      $    11,189     $       36,115      $    35,345 
Retail Gross Margin - Retail                                                                         
Electricity Segment              $       34,863      $    27,631     $       71,634      $    43,037 



Consolidated Results of Operations

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016


                                       50
--------------------------------------------------------------------------------
  Table of Contents  

(In Thousands)                                  Three Months Ended June 30,       
                                                  2017               2016            Change    
Revenues:                                                                         
Retail revenues                             $     151,604       $     110,058     $    41,546 
Net asset optimization (expense)/revenues            (168 )              (677 )           509 
Total Revenues                                    151,436             109,381          42,055 
Operating Expenses:                                                                           
Retail cost of revenues                           114,637              56,963          57,674 
General and administrative                         19,346              19,799            (453 )
Depreciation and amortization                       9,656               8,253           1,403 
Total Operating Expenses                          143,639              85,015          58,624 
Operating income (loss)                             7,797              24,366         (16,569 )
Other (expense)/income:                                                                       
Interest expense                                   (2,452 )              (832 )        (1,620 )
Interest and other income                            (265 )               195            (460 )
Total other expenses/(income)                      (2,717 )              (637 )        (2,080 )
Income (loss) before income tax expense             5,080              23,729         (18,649 )
Income tax expense (benefit)                          409               4,735          (4,326 )
Net income (loss)                           $       4,671       $      18,994     $   (14,323 )
Adjusted EBITDA (1)                         $      20,023       $      15,699     $     4,324 
Retail Gross Margin (1)                            43,149              38,820           4,329 
Customer Acquisition Costs                          4,384               4,670            (286 )
RCE Attrition                                         4.1 %               4.1 %             — 


(1) Adjusted EBITDA and Retail Gross Margin are non-GAAP financial measures. See 
    “—How We Evaluate Our Operations” for a reconciliation of Adjusted EBITDA and
    Retail Gross Margin to their most directly comparable financial measures     
    presented in accordance with GAAP.                                           



Total Revenues. Total revenues for the three months ended June 30, 2017 were
approximately $151.4 million, an increase of approximately $42.0 million, or
38%, from approximately $109.4 million for the three months ended June 30, 2016,
as indicated in the table below (in millions). This increase was primarily due
to an increase in electricity volumes driven by the acquisitions of the Provider
Companies and Major Energy Companies, partially offset by a decrease in natural
gas volumes and decreased electricity pricing.
Change in electricity volumes sold           $ 49.6 
Change in natural gas volumes sold             (2.8 )
Change in electricity unit revenue per MWh     (5.1 )
Change in natural gas unit revenue per MMBtu   (0.2 )
Change in net asset optimization revenue        0.5 
Change in total revenues                     $ 42.0 



Retail Cost of Revenues. Total retail cost of revenues for the three months
ended June 30, 2017 was approximately$114.6 million, an increase of
approximately $57.6 million, or 101%, from approximately $57.0 million for the
three months ended June 30, 2016, as indicated in the table below (in millions).
This increase was primarily due to an increase in electricity volumes driven by
the acquisitions of the Provider Companies and Major Energy Companies offset by
a decrease in the value of our retail derivative portfolio.

                                       51
--------------------------------------------------------------------------------
  Table of Contents  

Change in electricity volumes sold             $ 33.9 
Change in natural gas volumes sold               (1.4 )
Change in electricity unit cost per MWh           3.4 
Change in natural gas unit cost per MMBtu         1.4 
Change in value of retail derivative portfolio   20.3 
Change in retail cost of revenues              $ 57.6 



General and Administrative Expense. General and administrative expense for the
three months ended June 30, 2017 was approximately $19.3 million, a decrease of
approximately $0.5 million, or 3%, as compared to $19.8 million for the three
months ended June 30, 2016. This decrease was primarily attributable to a net
decrease in fair value of earnout liabilities, which decreased general and
administrative expenses, offset by increased billing and other variable costs
associated with increased RCEs as a result of the acquisitions of the Provider
Companies and the Major Energy Companies.

Depreciation and Amortization Expense. Depreciation and amortization expense for
the three months ended June 30, 2017 was approximately $9.7 million, an increase
of approximately $1.4 million, or 17%, from approximately $8.3 million for the
three months ended June 30, 2016. This increase was primarily due to the
increased amortization expense associated with customer intangibles from the
acquisitions of the Provider Companies and the Major Energy Companies.

Customer Acquisition Cost. Customer acquisition cost for the three months ended
June 30, 2017 was approximately $4.4 million, a decrease of approximately $0.3
million, or 6%, from approximately $4.7 million for the three months ended June
30, 2016. This decrease was primarily due to our decreased organic sales as we
have shifted our focus during the quarter to growth through acquisition, offset
by increase in customer acquisition cost of the Provider Companies.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016


                                       52
--------------------------------------------------------------------------------
  Table of Contents  

In Thousands                                      Six Months Ended June 30,       
                                                    2017              2016           Change   
Revenues:                                                                         
Retail revenues                               $     348,104      $    220,077     $ 128,027 
Net asset optimization (expenses) revenues             (361 )            (150 )        (211 ) 
Total Revenues                                      347,743           219,927       127,816 
Operating Expenses:                                                                         
Retail cost of revenues                             260,398           125,763       134,635 
General and administrative                           43,839            37,179         6,660 
Depreciation and amortization                        18,926            15,042         3,884 
Total Operating Expenses                            323,163           177,984       145,179 
Operating income                                     24,580            41,943       (17,363 ) 
Other (expense)/income:                                                                     
Interest expense                                     (5,897 )          (1,585 )      (4,312 ) 
Interest and other income                               (66 )             100          (166 ) 
Total other (expenses)/income                        (5,963 )          (1,485 )      (4,478 ) 
Income before income tax expense                     18,617            40,458       (21,841 ) 
Income tax expense                                    2,814             5,723        (2,909 ) 
Net income                                    $      15,803      $     34,735     $ (18,932 ) 
Adjusted EBITDA (1)                           $      54,393      $     36,760     $  17,633 
Retail Gross Margin (1)                             107,749            78,382        29,367 
Customer Acquisition Costs                           12,074             6,975         5,099 
RCE Attrition                                           4.0 %             4.2 %        (0.2 )%


(1) Adjusted EBITDA and Retail Gross Margin are non-GAAP financial measures. See 
    “—How We Evaluate Our Operations” for a reconciliation of Adjusted EBITDA and
    Retail Gross Margin to their most directly comparable financial measures     
    presented in accordance with GAAP.                                           



Total Revenues. Total revenues for the six months ended June 30, 2017 were
approximately $347.7 million, an increase of approximately $127.8 million, or
58%, from approximately $219.9 million for the six months ended June 30, 2016,
as indicated in the table below (in millions). This increase was primarily due
to an increase in electricity and natural gas volumes driven by the acquisitions
of the Provider Companies and Major Energy Companies, partially offset by
decreased electricity pricing.

Change in electricity volumes sold                 $ 132.1 
Change in natural gas volumes sold                    13.4 
Change in electricity unit revenue per MWh           (15.8 )
Change in natural gas unit revenue per MMBtu          (1.7 )
Change in net asset optimization revenue (expense)    (0.2 )
Change in total revenues                           $ 127.8 



Retail Cost of Revenues. Total retail cost of revenues for the six months ended
June 30, 2017 was approximately $260.4 million, an increase of approximately
$134.6 million, or 107%, from approximately $125.8 million for the six months
ended June 30, 2016, as indicated in the table below (in millions). This
increase was primarily due to an increase in electricity and natural gas volumes
driven by the acquisitions of the Provider Companies and Major Energy Companies,
and an increase of our retail derivative portfolio.


                                       53
--------------------------------------------------------------------------------
  Table of Contents  

Change in electricity volumes sold             $  94.1 
Change in natural gas volumes sold                 6.7 
Change in electricity unit cost per MWh           (6.4 )
Change in natural gas unit cost per MMBtu          4.4 
Change in value of retail derivative portfolio    35.8 
Change in retail cost of revenues              $ 134.6 



General and Administrative Expense. General and administrative expense for the
six months ended June 30, 2017 was approximately $43.8 million, an increase of
approximately $6.6 million, or 18%, as compared to $37.2 million for the six
months ended June 30, 2016. This increase was primarily due to increased billing
and other variable costs associated with increased RCEs as a result of the
acquisitions of the Provider Companies and Major Energy Companies, offset by a
net decrease in fair value of earnout liabilities which decreased general and
administrative expense.

Depreciation and Amortization Expense. Depreciation and amortization expense for
the six months ended June 30, 2017 was approximately $18.9 million, an increase
of approximately $3.9 million, or 26%, from approximately $15.0 million for the
six months ended June 30, 2016. This increase was primarily due to the increased
amortization expense associated with customer intangibles from the acquisitions
of the Provider Companies and the Major Energy Companies.

Customer Acquisition Cost. Customer acquisition cost for the six months ended
June 30, 2017 was approximately $12.1 million, an increase of approximately $5.1
million, or 73%, from approximately $7.0 million for the six months ended June
30, 2016. This increase was primarily due to customer acquisition costs of the
Major Energy Companies and Provider Companies, offset by decreased organic sales
in the second quarter of 2017.

Operating Segment Results
                                              Three Months Ended                      Six Months Ended         
                                                    June 30,                               June 30,            
                                            2017                2016                2017              2016     
                                             (in thousands, except volume and per unit operating data)         
Retail Electricity Segment                                                                        
Total Revenues                       $       131,908       $     87,395       $       265,602     $   149,328 
Retail Cost of Revenues                      102,079             49,717               210,923          96,017 
Less: Net Gains (Losses) on                                                                                   
non-trading derivatives, net of cash                                                                          
settlements                                   (5,034 )           10,047               (16,955 )        10,274 
Retail Gross Margin (1) —                                                                                     
Electricity                          $        34,863       $     27,631       $        71,634     $    43,037 
Volumes — Electricity (MWhs)               1,379,051            879,814             2,764,165       1,466,491 
Retail Gross Margin (2) —                                                                                     
Electricity per MWh                  $         25.28       $      31.41       $         25.92     $     29.35 
                                                                                                               
Retail Natural Gas Segment                                                                        
Total Revenues                                19,528             21,986                82,141          70,599 
Retail Cost of Revenues                       12,558              7,246                49,475          29,746 
Less: Net Asset Optimization                                                                                  
(Expenses) Revenues                             (168 )             (677 )                (361 )          (150 )
Less: Net Gains on non-trading                                                                                
derivatives, net of cash settlements          (1,148 )            4,228                (3,088 )         5,658 
Retail Gross Margin (1) — Gas        $         8,286       $     11,189       $        36,115     $    35,345 
Volumes — Gas (MMBtus)                     2,629,087          3,006,025            10,848,366       9,118,456 
Retail Gross Margin (2) — Gas per                                                                             
MMBtu                                $          3.15       $       3.72       $          3.33     $      3.88 




                                       54
--------------------------------------------------------------------------------
  Table of Contents  

(1) Reflects the Retail Gross Margin attributable to our Retail Natural Gas
Segment or Retail Electricity Segment, as applicable. Retail Gross Margin is a
non-GAAP financial measure. See “How We Evaluate Our Operations” for a
reconciliation of Adjusted EBITDA and Retail Gross Margin to their most directly
comparable financial measures presented in accordance with GAAP.
(2) Reflects the Retail Gross Margin for the Retail Natural Gas Segment or
Retail Electricity Segment, as applicable, divided by the total volumes in MMBtu
or MWh, respectively.

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016
Retail Electricity Segment
Total revenues for the Retail Electricity Segment for the three months ended
June 30, 2017 were approximately $131.9 million, an increase of approximately
$44.5 million, or 51%, from approximately $87.4 million for the three months
ended June 30, 2016. This increase was largely because of an increase in
volumes, primarily due to our acquisition of the Major Energy Companies and the
Provider Companies, as well as organic growth in the East, resulting in an
increase of $49.6 million. This increase was partially offset by lower customer
pricing, driven by the lower electricity pricing environment from milder than
anticipated weather, which resulted in a decrease of $5.1 million.
Retail cost of revenues for the Retail Electricity Segment for the three months
ended June 30, 2017 were approximately $102.1 million, an increase of
approximately $52.4 million, or 105%, from approximately $49.7 million for the
three months ended June 30, 2016. This increase was primarily due to an increase
in volumes as a result of the acquisitions of the Major Energy Companies and the
Provider Companies, as well as organic growth in the East, resulting in an
increase of $33.9 million, and an increase in supply cost of $3.4 million. We
also recognized a change in the value of our retail derivative portfolio used
for hedging, which resulted in an increase of $15.1 million.
Retail gross margin for the Retail Electricity Segment for the three months
ended June 30, 2017 was approximately $34.9 million, an increase of
approximately $7.3 million, or 26%, from approximately $27.6 million for the
three months ended June 30, 2016, as indicated in the table below (in millions).
Change in volumes sold                                   $ 15.7 
Change in unit margin per MWh                              (8.4 )
Change in retail electricity segment retail gross margin $  7.3 


Retail Natural Gas Segment
Total revenues for the Retail Natural Gas Segment for the three months ended
June 30, 2017 were approximately $19.5 million, a decrease of approximately $2.5
million, or 11%, from approximately $22.0 million for the three months ended
June 30, 2016. This decrease was primarily attributable to a decrease in
customer sales volumes, which decreased total revenues by $2.8 million, lower
rates driven by the lower natural gas pricing environment, which resulted in a
decrease in total revenues of $0.2 million, slightly offset by an increase of
$0.5 million in net asset optimization revenues.
Retail cost of revenues for the Retail Natural Gas Segment for the three months
ended June 30, 2017 were approximately $12.6 million, an increase of $5.4
million, or 75%, from approximately $7.2 million for the three months ended June
30, 2016. This increase was primarily due to the change in the value of our
retail derivative portfolio used for hedging, which resulted in an increase of
$5.4 million, and increased supply cost of $1.4 million, offset by a decrease in
volume, which resulted in a decrease of $1.4 million.
Retail gross margin for the Retail Natural Gas Segment for the three months
ended June 30, 2017 was approximately $8.3 million, a decrease of approximately
$2.9 million, or 26%, from approximately $11.2 million for the three months
ended June 30, 2016, as indicated in the table below (in millions).

                                       55
--------------------------------------------------------------------------------
  Table of Contents  

Change in volumes sold                                   $ (1.4 )
Change in unit margin per MMBtu                            (1.5 )
Change in retail natural gas segment retail gross margin $ (2.9 )



Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Retail Electricity Segment
Total revenues for the Retail Electricity Segment for the six months ended June
30, 2017 were approximately $265.6 million, an increase of approximately $116.3
million, or 78%, from approximately $149.3 million for the six months ended June
30, 2016. This increase was primarily due to an increase in volume from the
acquisition of the Major Energy Companies and the Provider Companies and the
addition of several higher volume commercial customers in the East, which
resulted in an increase in revenues of $132.1 million. This increase was
partially offset by a decrease in electricity pricing, driven by the lower
electricity pricing environment from milder than anticipated weather, which
resulted in a decrease of $15.8 million.
Retail cost of revenues for the Retail Electricity Segment for the six months
ended June 30, 2017 was approximately $210.9 million, an increase of
approximately $114.9 million, or 120%, from approximately $96.0 million for the
six months ended June 30, 2016. This increase was primarily due to an increase
in volume as a result of the acquisition of the Major Energy Companies and the
Provider Companies and the addition of higher volume commercial customers in the
East, which resulted in an increase of $94.1 million. Additionally, there was an
increase of $27.2 million due to a change in the value of our retail derivative
portfolio used for hedging. These increases were partially offset by decreased
electricity prices, which resulted in a decrease in retail cost of revenues of
$6.4 million.
Retail gross margin for the Retail Electricity Segment for the six months ended
June 30, 2017 was approximately $71.6 million, an increase of approximately
$28.6 million, or 67%, from approximately $43.0 million for the six months ended
June 30, 2016, as indicated in the table below (in millions).
Change in volumes sold                                   $ 38.1 
Change in unit margin per MWh                              (9.5 )
Change in retail electricity segment retail gross margin $ 28.6 


Retail Natural Gas Segment
Total revenues for the Retail Natural Gas Segment for the six months ended June
30, 2017 were approximately $82.1 million, an increase of approximately $11.5
million, or 16%, from approximately $70.6 million for the six months ended June
30, 2016. This increase was primarily attributable to an increase in customer
sales volume resulting from the acquisitions of Major Energy Companies, which
increased total revenues by $13.4 million offset by lower rates driven by the
lower natural gas pricing environment, which resulted in a decrease in total
revenues of $1.7 million, and a decrease of $0.2 million in net optimization
revenues.
Retail cost of revenues for the Retail Natural Gas Segment for the six months
ended June 30, 2017 was approximately $49.5 million, an increase of
approximately $19.8 million, or 67%, from approximately $29.7 million for the
six months ended June 30, 2016. This increase was due to a $8.7 million change
in the fair value of our retail derivative portfolio used for hedging, an
increase of $6.7 million related to increased volume resulting from the
acquisition of the Major Energy Companies and increased supply costs of $4.4
million.
Retail gross margin for the Retail Natural Gas Segment for the six months ended
June 30, 2017 was approximately $36.1 million, an increase of approximately $0.8
million, or 2%, from approximately $35.3 million for the six months ended June
30, 2016, as indicated in the table below (in millions).

                                       56
--------------------------------------------------------------------------------
  Table of Contents  

Change in volumes sold                                   $ 6.7 
Change in unit margin per MMBtu                           (5.9 )
Change in retail natural gas segment retail gross margin $ 0.8 



Liquidity and Capital Resources

Our liquidity requirements fluctuate with our customer acquisition costs,
acquisitions, collateral posting requirements on our derivative instruments
portfolio, distributions, the effects of the timing between payments of payables
and receipts of receivables, including bad debt receivables, and our general
working capital needs for ongoing operations. Our borrowings under the Senior
Credit Facility are also subject to material variations on a seasonal basis due
to the timing of commodity purchases to satisfy required natural gas inventory
purchases and to meet customer demands during periods of peak usage. Moreover,
estimating our liquidity requirements is highly dependent on then-current market
conditions, including forward prices for natural gas and electricity, and market
volatility.

Our primary sources of liquidity are cash generated from operations and
borrowings under our Senior Credit Facility. We believe that cash generated from
these sources will be sufficient to sustain current operations and to pay
required taxes and quarterly cash distributions including the quarterly
dividends to the holders of the Class A common stock and the Series A Preferred
Stock for the next twelve months. In order to finance the acquisition of the
Verde Companies, we borrowed $44.0 million under our Senior Credit Facility and
$15.0 million under the Subordinated Facility. Remaining availability under
these two facilities as of June 30, 2017 is $2.3 million and $10.0 million,
respectively.

On May 19, 2017, Spark Energy, Inc. as guarantor, and Spark Holdco, LLC (“Spark
Holdco," and together with certain subsidiaries of Spark Holdco, LLC, the
“Co-Borrowers”) entered into a $120.0 million senior secured revolving credit
facility (the "Senior Credit Facility"). The Facility, which includes a $30.0
million accordion, replaces the prior $107.5 million credit facility, which was
set to mature July 2017. The Verde Companies became co-borrowers under the
Senior Credit Facility upon the closing of our acquisition of the Verde
Companies.

The Senior Credit Facility provides for bridge loans up to $30.0 million
("Bridge Loans") for the purpose of partial funding of permitted acquisitions,
which enables us to pursue growth through mergers and acquisitions. We are
obligated to make payments of 25% of amounts outstanding as Bridge Loans
annually, which in turn increases availability under the line, with the balance
due at maturity. We will be constrained in our ability to grow through
acquisitions using financing under the Senior Credit Facility to the extent we
have utilized the Bridge Loan capacity. As of June 30, 2017, there is currently
no availability under the Senior Credit Facility for Bridge Loans. In addition,
the Senior Credit Facility requires us to finance permitted acquisitions with at
least 25% of either cash on hand, equity contributions, or subordinated debt.
There can be no assurance that our Founder and majority shareholder and their
affiliates will continue to finance our acquisition activities.

On October 7, 2016, we filed a registration statement under the Securities Act
on Form S-3 covering offers and sales, from time to time, by us of up to
$200,000,000 of Class A common stock, preferred stock, depositary shares and
warrants, and by the selling stockholders named therein of up to 22,679,126
shares of Class A common stock. The registration statement was declared
effective on October 20, 2016.

On December 27, 2016, we entered into the $25.0 million Subordinated Facility
with Retailco, which is wholly owned by our Founder. Please see "—Subordinated
Debt Facility" for a description of the Subordinated Facility.

Share Repurchase Program

On May 24, 2017, the Company authorized a share repurchase program of up to
$50.0 million of Class A common stock through December 31, 2017. The Company
intends to fund the program through available its credit facilities and cash
balances, as well as future operating cash flows. The shares of Class A common
stock may be repurchased from time to time in the open market or in privately
negotiated transactions based on ongoing assessments of capital

                                       57
--------------------------------------------------------------------------------
  Table of Contents  

needs, the market price of the Class A common stock, and other factors,
including general market conditions. The repurchase program does not obligate
Spark to acquire any particular amount of Class A common stock and it may be
modified or suspended at any time, and could be terminated prior to completion.

At-the-Market Issuance Sales Agreement
On July 21, 2017, the Company entered into the ATM Agreement to sell the
Company’s Series A Preferred Stock, having an aggregate offering price of up to
$50.0 million. The Company intends to use the proceeds from any sales pursuant
to the ATM Agreement, after deducting the sales agent’s commissions and the
Company’s offering expenses, for general corporate purposes, which may include,
among other things, funding working capital, capital expenditures, liquidity for
operational contingencies, debt repayments and acquisitions.

Based upon our current plans, level of operations and business conditions, we
believe that our cash on hand, cash generated from operations, and available
borrowings under the Senior Credit Facility and Subordinated Facility will be
sufficient to meet our capital requirements and working capital needs. We
believe that the financing of any additional growth through acquisitions in 2017
may require further equity financing and/or further expansion of our Senior
Credit Facility to accommodate such growth.

The following table details our total liquidity as of the date presented:
($ in thousands)                         June 30, 2017  
Cash and cash equivalents               $        13,126 
Senior Credit Facility Availability (1)           2,293 
Subordinated Debt Availability                   10,000 
Total Liquidity                         $        25,419 


(1) Subject to Senior Credit Facility borrowing base and covenant restrictions.
See “—Cash Flows—Senior Credit Facility.”

Capital expenditures for the six months ended June 30, 2017 included
approximately $12.1 million for customer acquisitions and $0.4 million related
to information systems improvements.
The Spark HoldCo, LLC Agreement provides, to the extent cash is available, for
distributions to the holders of Spark HoldCo units such that we receive an
amount of cash sufficient to cover the estimated taxes payable by us, the
targeted quarterly dividend we intend to pay to holders of our Class A common
stock, the quarterly dividends on our Series A Preferred Stock, and payments
under the Tax Receivable Agreement we have entered into with Spark HoldCo,
Retailco and NuDevco Retail.

During the six months ended June 30, 2017, we paid dividends to holders of our
Class A common stock for the three months ended December 31, 2016 and March 31,
2017 of approximately $0.18125 per share for each dividend declaration or $4.8
million in the aggregate. On July 19, 2017, our Board of Directors declared a
quarterly dividend of $0.18125 per share for the second quarter of 2017 to
holders of the Class A common stock on August 29, 2017. This dividend will be
paid on September 14, 2017. The dividends that we anticipate paying on an
annualized basis equal approximately $0.725 per share or $9.6 million in the
aggregate on an annualized basis based on the Class A common stock outstanding
at June 30, 2017. Our ability to pay dividends in the future will depend on many
factors, including the performance of our business in the future and
restrictions under our Senior Credit Facility. Management does not currently
believe that the financial covenants in the Senior Credit Facility will cause
any such restrictions.

In order for us to pay our stated dividends to holders of our Class A common
stock and corresponding distributions to holders of our non-controlling
interest, Spark HoldCo generally is required to distribute approximately $15.6
million on an annualized basis to holders of its Spark HoldCo units. If our
business does not generate enough cash for Spark HoldCo to make such
distributions, we may have to borrow to pay our dividend. If our business
generates cash in excess of the amounts required to pay an annual dividend of
$0.725 per share of Class A common stock, we currently expect to reinvest any
such excess cash flows in our business and not increase the dividends payable to

                                       58
--------------------------------------------------------------------------------
  Table of Contents  

holders of our Class A common stock. However, our future dividend policy is
within the discretion of our Board of Directors and will depend upon various
factors, including the results of our operations, our financial condition,
capital requirements and investment opportunities.

For the three months ended June 30, 2017, the Company accrued $1.2 million
related to dividends to holders of our Series A Preferred Stock. This dividend
was paid on July 15, 2017. In accordance with the terms of the Series A
Preferred Stock, our Board of Directors declared a quarterly cash dividend in
the amount of $0.546875 per share of the Series A Preferred Stock. The dividend
will be paid on October 16, 2017 to holders of record on October 1, 2017 of the
Company's Series A Preferred Stock. The Company anticipates Series A Preferred
Stock dividends declared for the year ended December 31, 2017 of $1.73 per share
or $2.9 million in the aggregate based on the Series A Preferred Stock
outstanding as of June 30, 2017.

We expect to make payments pursuant to the Tax Receivable Agreement that we have
entered into with Retailco LLC (as assignee of NuDevco Retail Holdings), NuDevco
Retail and Spark HoldCo in connection with our IPO. Except in cases where we
elect to terminate the Tax Receivable Agreement early (or the Tax Receivable
Agreement is terminated early due to certain mergers or other changes of
control) or we have available cash but fail to make payments when due, generally
we may elect to defer payments due under the Tax Receivable Agreement for up to
five years if we do not have available cash to satisfy our payment obligations
under the Tax Receivable Agreement or if our contractual obligations limit our
ability to make these payments. Any such deferred payments under the Tax
Receivable Agreement generally will accrue interest. If we were to defer
substantial payment obligations under the Tax Receivable Agreement on an ongoing
basis, the accrual of those obligations would reduce the availability of cash
for other purposes, but we would not be prohibited from paying dividends on our
Class A common stock.

We did not meet the threshold coverage ratio required to fund the first payment
to NuDevco Retail Holdings under the Tax Receivable Agreement during the
four-quarter period ending September 30, 2015. As such, the initial payment
under the Tax Receivable Agreement due in late 2015 was deferred pursuant to the
terms thereof.

We met the threshold coverage ratio required to fund the first TRA Payment to
Retailco and NuDevco Retail under the Tax Receivable Agreement during the
four-quarter period ending September 30, 2016, resulting in an initial TRA
Payment of $1.4 million becoming due in December 2016. On November 6, 2016,
Retailco and NuDevco Retail granted us the right to defer the TRA Payment until
May 2018. During the period of time when we have elected to defer the TRA
Payment, the outstanding payment amount will accrue interest at a rate
calculated in the manner provided for under the Tax Receivable Agreement. The
initial payment of $1.4 million under the Tax Receivable Agreement due in May
2018 was reclassified to a current liability as of June 30, 2017. See Note 14
"Transactions with Affiliates" in the notes to our condensed consolidated
financial statements for additional details on the Tax Receivable Agreement. See
also “Risk Factors—Risks Related to our Class A Common Stock” in our Annual
Report on Form 10-K for the year ended December 31, 2016 for risks related to
the Tax Receivable Agreement.

As of June 30, 2017, we do not expect to meet the threshold coverage ratio
required to fund the payment to Retailco, LLC under the Tax Receivable Agreement
during the four-quarter period ending September 30, 2017. As such the payment of
$1.9 million under the Tax Receivable Agreement due in late 2017 will be
deferred pursuant to the terms thereof.

Pacific Summit Energy LLC
Prior to March 31, 2017, the Major Energy Companies were party to three trade
credit arrangements with Pacific Summit Energy LLC (“Pacific Summit”), which
consisted of purchase agreements, operating agreements relating to purchasing
terms, security agreements, lockbox agreements and guarantees, and provided for
the exclusive supply of gas and electricity on credit by Pacific Summit to the
Major Energy Companies for resale to end users. On March 31, 2017, the Pacific
Summit arrangements were terminated, and the credit requirements of Major Energy
Companies were funded from our working capital. All amounts due to Pacific
Summit have been paid as of June 30, 2017.

                                       59
--------------------------------------------------------------------------------
  Table of Contents  


Cash Flows

Our cash flows were as follows for the respective periods (in thousands):
                                            Six Months Ended June 30,         
                                             2017                2016              Change     
Net cash provided by operating                                                               
activities                            $        47,406      $       49,199     $       (1,793 )
Net cash used in investing activities $       (90,265 )    $       (1,862 )   $      (88,403 )
Net cash provided by (used in)                                                               
financing activities                  $        37,944      $      (38,964 )   $       76,908 


Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016

Cash Flows Provided by Operating Activities. Cash flows provided by operating
activities for the six months ended June 30, 2017 decreased by $1.8 million
compared to the six months ended June 30, 2016. The decrease was primarily the
result of a decrease in the changes in working capital for the six months ended
June, 30 2017.

Cash Flows Used in Investing Activities. Cash flows used in investing activities
increased by $88.4 million for the six months ended June 30, 2017, which was
primarily due to pre-funding of the Verde acquisition in June 2017 and the
acquisitions of Perigee and other customers during the six months ended June 30,
2017, as well as earnout payments made during the six months ended June 30, 2017
related to the Provider Companies and the Major Energy Companies.

Cash Flows Provided by Financing Activities. Cash flows provided by financing
activities increased by $76.9 million for the six months ended June 30, 2017.
The increase in cash flows provided by financing activities was primarily due to
proceeds received from the issuance of our Series A Preferred Stock, increased
net borrowings under our Senior Credit Facility to fund the Verde acquisition,
offset by additional dividends and distributions made to holders of our Class A
and Class B common stock, respectively.

Prior Senior Credit Facility

The Company, as guarantor, and Spark HoldCo (the “Borrower,” and together with
Spark Energy, LLC, Spark Energy Gas, LLC, CenStar Energy Corp, CenStar Operating
Company, LLC, Oasis Power Holdings, LLC and Oasis Power, LLC, Electricity Maine,
LLC, Electricity N.H., LLC and Provider Power Mass, LLC, each a subsidiary of
Spark HoldCo, the “Co-Borrowers”) were party to a senior secured revolving
credit facility, as amended (“Prior Senior Credit Facility”).

The Prior Senior Credit Facility had a maturity date of July 8, 2017. The
outstanding balances under the Working Capital Line and the Acquisition Line
were paid in full on May 19, 2017 upon execution of the Company's new Senior
Credit Facility.

Senior Credit Facility
On May 19, 2017 (the “Closing Date”), the Company, as guarantor, and Spark
HoldCo (the “Borrower” and, together with SE, SEG, CenStar, CenStar Operating
Company, LLC, Oasis, Oasis Power, LLC, the Provider Companies, the Major Energy
Companies and Perigee Energy, LLC, each subsidiaries of Spark HoldCo, the
“Co-Borrowers”), entered into a senior secured borrowing base credit facility
(the “Senior Credit Facility”) in an aggregate amount of $120.0 million. The
Co-Borrowers are entitled to request an increase in the Senior Credit Facility
amount up to $150.0 million provided that, among other things, (i) no event of
default or default exists or would exist after giving effect thereto and (ii)
evidence of the Co-Borrowers’ compliance with financial covenants on a pro forma
basis before and after giving effect to such increase.


                                       60
--------------------------------------------------------------------------------
  Table of Contents  

Subject to applicable sublimits and terms of the Senior Credit Facility,
borrowings are available for the issuance of letters of credit (“Letters of
Credit”), working capital and general purpose revolving credit loans up to $85.0
million (“Working Capital Loans”), and bridge loans up to $30.0 million (“Bridge
Loans”) for the purpose of partial funding for acquisitions. Borrowings under
the Senior Credit Facility may be used to refinance loans outstanding under the
Prior Senior Credit Facility, pay fees and expenses in connection with the
current Senior Credit Facility, finance ongoing working capital requirements and
general corporate purpose requirements of the Co-Borrowers, to provide partial
funding for acquisitions, as allowed under terms of the Senior Credit Facility,
and to make open market purchases of the Company’s Class A common stock.

The Senior Credit Facility will mature on May 19, 2019, and all amounts
outstanding thereunder will be payable on the maturity date. Borrowings under
the Bridge Loan sublimit will be repaid 25% per year, with the remainder due at
maturity.

At our election, the interest rate for Working Capital Loans and Letters of
Credit under the Senior Credit Facility is generally determined by reference to:

•      the Eurodollar rate plus an applicable margin of up to 3.00% per annum    
       (based on the prevailing utilization); or                                 


•      the alternate base rate plus an applicable margin of up to 2.00% per annum
       (based on the prevailing utilization). The alternate base rate is equal to
       the highest of (i) the prime rate (as published in the Wall Street        
       Journal), (ii) the federal funds rate plus 0.50% per annum, or (iii) the  
       reference Eurodollar rate plus 1.00%.                                     



Bridge Loan borrowings, if any, under the Senior Credit Facility are generally
determined by reference to:

• the Eurodollar rate plus an applicable margin of 3.75% per annum; or


•      the alternate base rate plus an applicable margin of 2.75% per annum. The 
       alternate base rate is equal to the highest of (i) the prime rate (as     
       published in the Wall Street Journal), (ii) the federal funds rate plus   
       0.50% per annum, or (iii) the reference Eurodollar rate plus 1.00%.       



The Co-Borrowers will pay a commitment fee of 0.50% quarterly in arrears on the
unused portion of the Senior Credit Facility. In addition, the Co-Borrowers will
be subject to additional fees including an upfront fee, an annual agency fee,
and letter of credit fees based on a percentage of the face amount of letters of
credit payable to any syndicate member that issues a letter a credit.

The Senior Credit Facility contains covenants that, among other things, require
the maintenance of specified ratios or conditions as follows:

•      Minimum Fixed Charge Coverage Ratio. Spark Energy, Inc. must maintain a   
       minimum fixed charge coverage ratio of not less than 1.25 to 1.00. The    
       Fixed Charge Coverage Ratio is defined as the ratio of (a) Adjusted EBITDA
       to (b) the sum of consolidated (with respect to the Company and the       
       Co-Borrowers) interest expense (other than interest paid-in-kind in       
       respect of any Subordinated Debt but including interest in respect of that
       certain promissory note made by Censtar Energy Corp in connection with the
       permitted acquisition from Verde Energy USA Holdings, LLC), letter of     
       credit fees, commitment fees, acquisition earn-out payments (excluding    
       earnout payments funded with proceeds from newly issued preferred or      
       common equity of the Company), distributions, the aggregate amount of     
       repurchases of the Company’s Class A common stock or commitments for such 
       purchases, taxes and scheduled amortization payments.                     



•      Maximum Total Leverage Ratio. Spark Energy, Inc. must maintain a ratio of 
       total indebtedness (excluding eligible subordinated debt) to Adjusted     
       EBITDA of no more than 2.00 to 1.00.                                      



The Senior Credit Facility contains various negative covenants that limit the
Company’s ability to, among other things, do any of the following:

                                       61
--------------------------------------------------------------------------------
  Table of Contents  


• incur certain additional indebtedness;


• grant certain liens;


• engage in certain asset dispositions;


• merge or consolidate;


• make certain payments, distributions, investments, acquisitions or loans;


• materially modify certain agreements; or


• enter into transactions with affiliates.



The Senior Credit Facility is secured by pledges of the equity of the portion of
Spark HoldCo owned by the Company, the equity of Spark HoldCo’s subsidiaries,
the Co-Borrowers’ present and future subsidiaries, and substantially all of the
Co-Borrowers’ and their subsidiaries’ present and future property and assets,
including accounts receivable, inventory and liquid investments, and control
agreements relating to bank accounts.

Spark Energy, Inc. is entitled to pay cash dividends to the holders of the
Series A Preferred Stock and Class A common stock and will be entitled to
repurchase up to an aggregate amount of 10,000,000 shares of the Company’s Class
A common stock through one or more normal course open market purchases through
NASDAQ so long as: (a) no default exists or would result therefrom; (b) the
Co-Borrowers are in pro forma compliance with all financial covenants before and
after giving effect thereto; and (c) the outstanding amount of all loans and
letters of credit does not exceed the borrowing base limits. Spark HoldCo’s
inability to satisfy certain financial covenants or the existence of an event of
default, if not cured or waived, under the Senior Credit Facility could prevent
the Company from paying dividends to holders of the Series A Preferred Stock and
Class A common stock.

The Senior Credit Facility contains certain customary representations and
warranties and events of default. Events of default include, among other things,
payment defaults, breaches of representations and warranties, covenant defaults,
cross-defaults and cross-acceleration to certain indebtedness, certain events of
bankruptcy, certain events under ERISA, material judgments in excess of $5.0
million, certain events with respect to material contracts, actual or asserted
failure of any guaranty or security document supporting the Senior Credit
Facility to be in full force and effect, failure of Nathan Kroeker to retain his
position as President and Chief Executive Officer of the Company, and failure of
W. Keith Maxwell III to retain his position as chairman of the board of
directors. A default will also occur if at any time W. Keith Maxwell III ceases
to, directly or indirectly, own at least 13,600,000 Class A and Class B shares
on a combined basis (to be adjusted by any stock split, subdivisions or other
stock reclassification or recapitalization), and a controlling percentage of the
voting equity interesting of the Company, and certain other changes in control.
If such an event of default occurs, the lenders under the Senior Credit Facility
would be entitled to take various actions, including the acceleration of amounts
due under the facility and all actions permitted to be taken by a secured
creditor.

In addition, the Senior Credit Facility contains affirmative covenants that are
customary for credit facilities of this type. The covenants include delivery of
financial statements, including any filings made with the SEC, maintenance of
property and insurance, payment of taxes and obligations, material compliance
with laws, inspection of property, books and records and audits, use of
proceeds, payments to bank blocked accounts, notice of defaults and certain
other customary matters.

Master Service Agreement with Retailco Services, LLC

We entered into a Master Service Agreement (the “Master Service Agreement”),
effective January 1, 2016, with Retailco Services, LLC ("Retailco Services"),
which is wholly owned by our Founder. The Master Service Agreement is for a
one-year term and renews automatically for successive one-year terms unless the
Master Service Agreement is terminated by either party. On January 31, 2017, the
Master Service Agreement renewed automatically pursuant to its terms for a one
year period ending on December 31, 2017.


                                       62
--------------------------------------------------------------------------------
  Table of Contents  

Retailco Services provides us with operational support services such as:
enrollment and renewal transaction services; customer billing and transaction
services; electronic payment processing services; customer services and
information technology infrastructure and application support services under the
Master Service Agreement.

During the three and six months ended June 30, 2017, the Company recorded
general and administrative expense of $5.4 million and $11.9 million,
respectively, in connection with the Master Service Agreement. For the three and
six months ended June 30, 2017, Penalty Payments totaled zero and $0.1 million,
respectively, and Damage Payments totaled zero.

Additionally, under the Master Service Agreement, we capitalized $0.2 million
and $0.3 million, respectively, during the three and six months ended June 30,
2017, of property and equipment for software and consultant time used in the
application, development and implementation of various systems including
customer billing and resource management systems.

Ongoing Obligations in Connection with Acquisitions

The Company is obligated to make earnout and installment payments in connection
with the acquisitions of the Major Energy Companies and Verde Companies as more
fully described in this Quarterly Report on Form 10-Q. In the case of the Major
Energy Companies acquisition, these payments could be as much as $35 million
depending upon operating results and the customer counts through 2019. See
further discussion related to the valuation of the earnouts in Note 10 "Fair
Value Measurements" to the Company's quarterly financial statements included
herein.

Convertible Subordinated Notes to Affiliate

The Company from time to time issues subordinated debt to affiliates of
Retailco, which owns a majority of the Company’s outstanding common stock and is
indirectly owned by our Founder, who serves as the Chairman of the Board of
Directors of the Company. The Company’s Senior Credit Facility requires that at
least 25% of permitted acquisitions thereunder be financed with either cash on
hand or subordinated debt.

On July 8, 2015, the Company issued a convertible subordinated note to Retailco
Acquisition Co, LLC ("RAC"), which is wholly owned by our Founder, for $2.1
million. The convertible subordinated note was scheduled to mature on July 8,
2020, and carried interest at an annual rate of 5%, payable semiannually. The
convertible subordinated note was convertible into shares of the Company’s Class
B common stock (and a related unit of Spark HoldCo) at a conversion price of
$8.285, at any time following the eighteen month anniversary of issuance. Shares
of Class A common stock resulting from the conversion of the shares of Class B
common stock issued as a result of the conversion right under the convertible
subordinated note are entitled to registration rights identical to the
registration rights currently held by Retailco on shares of Class A common stock
it receives upon conversion of its existing shares of Class B common stock. On
October 5, 2016, RAC issued to the Company an irrevocable commitment to convert
the convertible subordinated note into 269,462 shares of Class B common stock.
RAC assigned the convertible subordinated note to Retailco on January 4, 2017,
and on January 8, 2017, the convertible subordinated note was converted into
269,462 shares of Class B common stock.

On July 31, 2015, the Company issued a convertible subordinated note to RAC for
$5.0 million. The convertible subordinated note was scheduled to mature on July
31, 2020, and carried interest at a rate of 5% per annum, payable semi-annually.
The convertible subordinated note was convertible into shares of Class B common
stock (and a related unit of Spark HoldCo) at a conversion rate of $7.00 per
share, at any time following the eighteen month anniversary of issuance. Shares
of Class A common stock resulting from the conversion of the shares of Class B
common stock issued as a result of the conversion right under the convertible
subordinated note are entitled to registration rights identical to the
registration rights currently held by Retailco on shares of Class A common stock
it receives upon conversion of its existing shares of Class B common stock. On
October 5, 2016, RAC issued to the Company an irrevocable commitment to convert
the convertible subordinated note into 766,180 shares of Class B common stock.
RAC assigned the convertible subordinated note to Retailco on January 4, 2017,
and on January 31, 2017, the convertible subordinated note was converted into
766,180 shares of Class B common stock.

                                       63
--------------------------------------------------------------------------------
  Table of Contents  


Subordinated Debt Facility

On December 27, 2016, the Company and Spark HoldCo jointly issued to Retailco,
an entity owned by our Founder, a 5% subordinated note in the principal amount
of up to $25.0 million. The subordinated note allows us and Spark HoldCo to draw
advances in increments of no less than $1.0 million per advance up to the
maximum principal amount of the subordinated note (the "Subordinated Facility").
The subordinated note matures approximately 3 ½ years following the date of
issuance, and advances thereunder accrue interest at 5% per annum from the date
of the advance. We have the right to capitalize interest payments under the
subordinated note. The subordinated note is subordinated in certain respects to
our Senior Credit Facility pursuant to a subordination agreement. We may pay
interest and prepay principal on the subordinated note so long as we are in
compliance with our covenants under the Senior Credit Facility, are not in
default under the Senior Credit Facility and have minimum availability of $5.0
million under our borrowing base under the Senior Credit Facility. Payment of
principal and interest under the subordinated note is accelerated upon the
occurrence of certain change of control transactions.

We plan to use the Subordinated Facility to enhance working capital, for growth
initiatives, and for capital optimization. As of June 30, 2017, there was $15.0
million in outstanding borrowings under the Subordinated Facility.

Investment in ESM

The Company and Spark HoldCo, together with eREX Co., Ltd., a Japanese company,
are joint venture partners in eREX Spark Marketing Co., Ltd ("ESM"). Operations
for ESM began on April 1, 2016 in connection with the deregulation of the
Japanese power market. As of June 30, 2017, the Company has contributed 156.4
million Japanese Yen, or $1.4 million, for 20% ownership of ESM. As of June 30,
2017, ESM has approximately 70,000 customers, which are currently excluded from
our RCEs.
Off-Balance Sheet Arrangements
As of June 30, 2017, we had no material off-balance sheet arrangements.

Related Party Transactions

For a discussion of related party transactions, see Note 14 "Transactions with
Affiliates" in the unaudited condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are described in “Management's
Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Policies and Estimates” in our Annual Report on
Form 10-K for the year ended December 31, 2016. There have been no changes to
these policies and estimates since the date of our Annual Report on Form 10-K
for the year ended December 31, 2016.

Recent Accounting Pronouncements

Adopted Standards

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock
Compensation (Topic 718) ("ASU 2016-09"). ASU 2016-09 includes provisions
intended to simplify various aspects of accounting for shared-based payments,
including income tax consequences, classification of awards as either equity or
liability and classification on the statement of cash flows. This guidance is
effective for annual and interim reporting periods of public entities beginning
after December 15, 2016, with early adoption permitted. The Company adopted ASU
2016-09 on January 1, 2017.

                                       64
--------------------------------------------------------------------------------
  Table of Contents  


The new standard requires prospective recognition of excess tax benefits
resulting from stock-based compensation vesting and exercises to be recognized
as a reduction of income taxes and reflected in operating cash flows.
Previously, these amounts were recognized in additional paid-in capital and
presented as a financing activity on the statement of cash flows. Net excess tax
benefits of $0.2 million were recognized as a reduction of income taxes for the
six months ended June 30, 2017. Prior periods have not been adjusted.

The Company has elected to continue to estimate the number of stock-based awards
expected to vest, as permitted by ASU 2016-09, rather than electing to account
for forfeitures as they occur.

ASU 2016-09 requires that employee taxes paid when an employer withholds shares
for tax-withholding purposes to be reported as financing activities in the
statement of cash flows. Previously, these cash flows were included in operating
activities. The Company has elected to adopt this prospectively, as permitted by
ASU 2016-09. This change resulted in a $1.7 million impact on the statement of
cash flow for the six months ended June 30, 2017.

In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810):
Interests Held through Related Parties that Are under Common Control ("ASU
2016-17"). ASU 2016-17 amends the consolidation guidance on how a reporting
entity that is the single decision maker of a variable interest entity ("VIE")
should treat indirect interests in the entity held through related parties that
are under common control with the reporting entity when determining whether it
is the primary beneficiary of that VIE. Under ASU 2016-17, a single decision
maker of a VIE is required to consider indirect economic interests in the entity
held through related parties on a proportionate basis when determining whether
it is the primary beneficiary of that VIE. If a single decision maker and its
related party are under common control, the single decision maker is required to
consider indirect interests in the entity held through those related parties to
be the equivalent of direct interests in their entirety. The amendments are
effective for public business entities for fiscal years beginning after December
15, 2016 (the Company's first quarter of fiscal 2017), including interim periods
within those fiscal years. Early adoption is permitted. The standard may be
applied retrospectively or through a cumulative effect adjustment to retained
earnings as of the beginning of the fiscal year of adoption. The Company adopted
ASU 2016-17 effective January 1, 2017, and the adoption did not have a material
impact on the Company's consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows
(Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 is intended to add and
clarify guidance on the classification and presentation of restricted cash on
the statement of cash flows. ASU 2016-18 requires that a statement of cash flows
explain the change during the period in the total of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents.
Therefore, amounts generally described as restricted cash and restricted cash
equivalents should be included with cash and cash equivalents when reconciling
the beginning-of-period and end-of-period total amounts shown on the statement
of cash flows. The amendments are effective for public business entities for
fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. Early adoption is permitted, including adoption in an interim
period. The Company adopted ASU 2016-18 effective April 1, 2017, and has
included restricted cash with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of
cash flows.

Standards Being Evaluated/Standards Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with
Customers, which requires an entity to recognize the amount of revenue to which
it expects to be entitled for the transfer of promised goods or services to
customers. The standard permits the use of either the retrospective or
cumulative effect transition method. In August 2015, the FASB issued ASU No.
2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date, which deferred the effective date to periods beginning after
December 15, 2017. Early adoption is permitted only as of annual reporting
periods beginning after December 15, 2016. In December 2016, the FASB further
issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606,
Revenue from Contracts with Customers, to increase stakeholders' awareness of
the proposals and to expedite improvements to ASU 2014-09. After assessing the
new standard, the Company expects that there will be no material impacts to our
revenue recognition procedures.

                                       65
--------------------------------------------------------------------------------
  Table of Contents  


The FASB issued additional amendments to ASU No. 2014-09, as amended by ASU No.
2015-14:
•      March 2016 - ASU No. 2016-08, Revenue from Contracts with Customers (Topic
       606): Principal versus Agent Considerations (Reporting Revenue Gross      
       versus Net) ("ASU 2016-08"). ASU 2016-08 clarifies the implementation     
       guidance on principal versus agent considerations. The guidance includes  
       indicators to assist an entity in determining whether it controls a       
       specified good or service before it is transferred to customers.          


•      April 2016 - ASU No. 2016-10, Revenue from Contracts with Customers (Topic
       606): Identifying Performance Obligations and Licensing ("ASU 2016-10").  
       ASU 2016-10 covers two specific topics: performance obligations and       
       licensing. This amendment includes guidance on immaterial promised goods  
       or services, shipping or handling activities, separately identifiable     
       performance obligations, functional or symbolic intellectual property     
       licenses, sales-based and usage-based royalties, license restrictions     
       (time, use, geographical) and licensing renewals.                         


•      May 2016 - ASU No. 2016-12, Revenue from Contracts with Customers (Topic  
       606): Narrow Scope Improvements and Practical Expedients ("ASU 2016-12"). 
       ASU 2016-12 clarifies certain core recognition principles including       
       collectability, sales tax presentation, noncash consideration, contract   
       modifications and completed contracts at transition and disclosures no    
       longer required if the full retrospective transition method is adopted.   



In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU
2016-02"). ASU 2016-02 amends the existing accounting standards for lease
accounting by requiring entities to include substantially all leases on the
balance sheet by requiring the recognition of right-of-use assets and lease
liabilities for all leases. Entities may elect to not recognize leases with a
maximum possible term of less than 12 months. For lessees, a lease is classified
as finance or operating and the asset and liability are initially measured at
the present value of the lease payments. For lessors, accounting for leases is
largely unchanged from previous guidance. ASU 2016-02 also requires qualitative
disclosures along with certain specific quantitative disclosures for both
lessees and lessors. The amendments in this ASU are effective for fiscal years
beginning after December 15, 2018, with early adoption permitted, and are
effective for interim periods in the year of adoption. The ASU should be applied
using a modified retrospective approach, which requires lessees and lessors to
recognize and measure leases at the beginning of the earliest period presented.
The Company is currently evaluating the impact of adopting this guidance on its
consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic
230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15").
ASU 2016-15 provides guidance on the presentation and classification of eight
specific cash flow issues in the statement of cash flows. Those issues are cash
payment for debt prepayment or debt extinguishment costs; settlement of
zero-coupon debt instrument or other debt instrument with coupon interest rates
that are insignificant in relation to the effective interest rate of the
borrowing; contingent consideration payments made after a business combination;
cash proceeds from the settlement of insurance claims, cash received from
settlement of corporate-owned life insurance policies; distribution received
from equity method investees; beneficial interest in securitization
transactions; and classification of cash receipts and payments that have aspects
of more than one class of cash flows. The guidance is effective for interim and
annual reporting periods beginning after December 15, 2017, with early adoption
permitted. This ASU should be applied using a retrospective transition method
for each period presented. The Company is currently evaluating the impact of
adopting this guidance on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). ASU
2016-16 requires immediate recognition of the current and deferred income tax
consequences of intercompany asset transfers other than inventory. Current U.S.
GAAP prohibits the recognition of current and deferred income taxes for an
intra-entity asset transfer until the asset has been sold to an outside party.
This guidance is effective for annual and interim reporting periods of public
entities beginning after December 15, 2017, with early adoption permitted as of
the beginning of an annual reporting period for which financial statements
(interim or annual) have not been issued or made available for issuance. This
ASU should be

                                       66
--------------------------------------------------------------------------------
  Table of Contents  

applied using a modified retrospective basis through a cumulative-effect
adjustment directly to retained earnings as of the beginning of the period of
adoption. The Company is currently evaluating the impact of adopting this
guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic
805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01
clarifies the definition of a business with the objective of adding guidance to
assist entities with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of assets or businesses. The definition of a
business affects many areas of accounting, including acquisitions, disposals,
goodwill, and consolidation. ASU 2017-01 is effective for annual periods
beginning after December 15, 2017, including interim periods within those
periods, and the amendments should be applied prospectively on or after the
effective date. The Company is currently evaluating the impact of adopting this
guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and
Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04").
ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating
Step 2 from the goodwill impairment test. Under the amendments in this update,
an entity should perform its annual or interim, goodwill impairment test by
comparing the fair value of a reporting unit with its carrying amount. An entity
should recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit's fair value. However, the loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit.
ASU 2017-04 should be applied on a prospective basis and is effective for annual
or any interim goodwill impairment tests in fiscal years beginning after
December 15, 2019. Early adoption is permitted for interim or annual goodwill
impairment tests performed on testing dates after January 1, 2017. The Company
is currently evaluating the impact of adopting this guidance on its consolidated
financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation
(Topic 718) ("ASU 2017-09"). ASU 2017-09 provides guidance about which changes
to the terms or conditions of a share-based payment award require an entity to
apply modification accounting. An entity should account for the effects of a
modification unless all of the following are met:

•      The fair value of the modified award is the same as the fair value of the 
       original award immediately before the original award is modified          


•      The vesting conditions of the modified award are the same as the vesting  
       conditions of the original award immediately before the original award is 
       modified                                                                  


•      The classification of the modified award as an equity instrument or a     
       liability instrument is the same as the classification of the original    
       award immediately before the original award is modified.                  



The amendments in ASU 2017-09 are effective for all entities for annual periods,
and interim periods within those annual periods, beginning after December 15,
2017. The amendments should be applied prospectively to an award modified on or
after the adoption date. The Company is currently evaluating the impact of
adopting this guidance on its consolidated financial statements.

Contingencies
In the ordinary course of business, we may become party to lawsuits,
administrative proceedings and governmental investigations, including regulatory
and other matters. As of June 30, 2017, management does not believe that any of
our outstanding lawsuits, administrative proceedings or investigations could
result in a material adverse effect.
Liabilities for loss contingencies arising from claims, assessments, litigation,
fines, penalties and other sources are recorded when it is probable that a
liability has been incurred and the amount can be reasonably estimated.

For a discussion of the status of current litigation and governmental
investigations, see Note 13 "Commitments and Contingencies" in the Company’s
unaudited condensed consolidated financial statements.

                                       67
--------------------------------------------------------------------------------
  Table of Contents  

Emerging Growth Company Status
We are an “emerging growth company” within the meaning of the federal securities
laws. For as long as we are an emerging growth company, we will not be required
to comply with certain requirements that are applicable to other public
companies that are not “emerging growth companies” including, but not limited
to, not being required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act, the reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements
and the exemptions from the requirements of holding a nonbinding advisory vote
on executive compensation and stockholder approval of any golden parachute
payments not previously approved. In addition, Section 107 of the JOBS Act
provides that an emerging growth company can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for
complying with new or revised accounting standards, but we have irrevocably
opted out of the extended transition period and, as a result, we will adopt new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for other public companies.
We intend to take advantage of these exemptions until we are no longer an
emerging growth company. We will cease to be an “emerging growth company” upon
the earliest of: (i) the last day of the fiscal year in which we have $1.07
billion or more in annual revenues; (ii) the date on which we become a “large
accelerated filer” (the fiscal year-end on which the total market value of our
common equity securities held by non-affiliates is $700 million or more as of
June 30); (iii) the date on which we issue more than $1.0 billion of
non-convertible debt over a three-year period; or (iv) the last day of 2019.

                                       68
--------------------------------------------------------------------------------
  Table of Contents  

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in
commodity prices and interest rates, as well as counterparty credit risk. We
employ established policies and procedures to manage our exposure to these
risks.
Commodity Price Risk

We hedge and procure our energy requirements from various wholesale energy
markets, including both physical and financial markets and through short and
long term contracts. Our financial results are largely dependent on the margin
we are able to realize between the wholesale purchase price of natural gas and
electricity plus related costs and the retail sales price we charge our
customers. We actively manage our commodity price risk by entering into various
derivative or non-derivative instruments to hedge the variability in future cash
flows from fixed-price forecasted sales and purchases of natural gas and
electricity in connection with our retail energy operations. These instruments
include forwards, futures, swaps, and option contracts traded on various
exchanges, such as NYMEX and Intercontinental Exchange, or ICE, as well as
over-the-counter markets. These contracts have varying terms and durations,
which range from a few days to a few years, depending on the instrument. Our
asset optimization group utilizes similar derivative contracts in connection
with its trading activities to attempt to generate incremental gross margin by
effecting transactions in markets where we have a retail presence. Generally,
any of such instruments that are entered into to support our retail electricity
and natural gas business are categorized as having been entered into for
non-trading purposes, and instruments entered into for any other purpose are
categorized as having been entered into for trading purposes. Our net (loss)
gain on non-trading derivative instruments net of cash settlements was $(6.2)
million and $(20.0) million for the three and six months ended June 30, 2017,
respectively.

We have adopted risk management policies to measure and limit market risk
associated with our fixed-price portfolio and our hedging activities. For
additional information regarding our commodity price risk and our risk
management policies, see “Item 1A—Risk Factors” in our Annual Report on Form
10-K for the year ended December 31, 2016.

We measure the commodity risk of our non-trading energy derivatives using a
sensitivity analysis on our net open position. As of June 30, 2017, our Gas
Non-Trading Fixed Price Open Position (hedges net of retail load) was a long
position of 861,822 MMBtu. An increase of 10% in the market prices (NYMEX) from
their June 30, 2017 levels would have increased the fair market value of our net
non-trading energy portfolio by $0.3 million. Likewise, a decrease of 10% in the
market prices (NYMEX) from their June 30, 2017 levels would have decreased the
fair market value of our non-trading energy derivatives by $0.3 million. As of
June 30, 2017, our Electricity Non-Trading Fixed Price Open Position (hedges net
of retail load) was a short position of 80,790 MWhs. An increase of 10% in the
forward market prices from their June 30, 2017 levels would have decreased the
fair market value of our net non-trading energy portfolio by $0.2 million.
Likewise, a decrease of 10% in the forward market prices from their June 30,
2017 levels would have increased the fair market value of our non-trading energy
derivatives by $0.2 million.

We measure the commodity risk of our trading energy derivatives using a
sensitivity analysis on our net open position. As of June 30, 2017, our Gas
Trading Fixed Price Open Position was a long position of 20,000 MMBtu. An
increase in 10% in the market prices (NYMEX) from their June 30, 2017 levels
would have increased the fair market value of our trading energy derivatives by
less than $0.1 million. Likewise, an decrease in 10% in the market prices
(NYMEX) from their June 30, 2017 levels would have decreased the fair market
value of our trading energy derivatives by less than $0.1 million.

Credit Risk

In many of the utility services territories where we conduct business, POR
programs have been established, whereby the local regulated utility purchases
our receivables, and becomes responsible for billing the customer and collecting
payment from the customer. This service results in substantially all of our
credit risk being linked to the applicable utility and not to our end-use
customer in these territories. Approximately 63% of our retail revenues were
derived from territories in which substantially all of our credit risk was
directly linked to local regulated utility

                                       69
--------------------------------------------------------------------------------
  Table of Contents  

companies for the three and six months ended June 30, 2017, respectively, all of
which had investment grade ratings as of such date. During the same period, we
paid these local regulated utilities a weighted average discount of
approximately 1.2% and 1.3%, respectively, of total revenues for customer credit
risk protection. In certain of the POR markets in which we operate, the
utilities limit their collections exposure by retaining the ability to transfer
a delinquent account back to us for collection when collections are past due for
a specified period.

If our collection efforts are unsuccessful, we return the account to the local
regulated utility for termination of service. Under these service programs, we
are exposed to credit risk related to payment for services rendered during the
time between when the customer is transferred to us by the local regulated
utility and the time we return the customer to the utility for termination of
service, which is generally one to two billing periods. We may also realize a
loss on fixed-price customers in this scenario due to the fact that we will have
already fully hedged the customer’s expected commodity usage for the life of the
contract.

In non-POR markets (and in POR markets where we may choose to direct bill our
customers), we manage customer credit risk through formal credit review in the
case of commercial customers, and credit score screening, deposits and
disconnection for non-payment, in the case of residential customers. Economic
conditions may affect our customers’ ability to pay bills in a timely manner,
which could increase customer delinquencies and may lead to an increase in bad
debt expense. Our bad debt expense for the three and six months ended June 30,
2017 was approximately less than 1.0% of non-POR market retail revenues. See
“Management's Discussion and Analysis of Financial Condition and Results of
Operations — Drivers of Our Business” for an analysis of our bad debt expense
related to non-POR markets during the six months ended June 30, 2017.
We are exposed to wholesale counterparty credit risk in our retail and asset
optimization activities. We manage this risk at a counterparty level and secure
our exposure with collateral or guarantees when needed. At June 30, 2017,
approximately 84% of our total exposure of $7.1 million was either with an
investment grade customer or otherwise secured with collateral or a guarantee.
Interest Rate Risk
We are exposed to fluctuations in interest rates under our variable-price debt
obligations. At June 30, 2017, we were co-borrowers under the Senior Credit
Facility, under which $84.0 million of variable rate indebtedness was
outstanding. Based on the average amount of our variable rate indebtedness
outstanding during the three months ended June 30, 2017, a 1% percent increase
in interest rates would have resulted in additional annual interest expense of
approximately $0.8 million. We do not currently employ interest rate hedges,
although we may choose to do so in the future.

                                       70
--------------------------------------------------------------------------------
  Table of Contents  

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and our
Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this Quarterly
Report on Form 10-Q. The term “disclosure controls and procedures,” as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and
other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the company's management, including its principal executive and principal
financial officers or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. Management recognizes that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost benefit relationship of
possible controls and procedures. Based on this evaluation, management concluded
that our disclosure controls and procedures were effective as of June 30, 2017
at the reasonable assurance level.

Management believes the unaudited condensed consolidated financial statements
included in this Quarterly Report on Form 10-Q fairly represent in all material
respects our financial condition, results of operations and cash flows at and
for the periods presented in accordance with GAAP.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified
in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of
the Exchange Act that occurred during the three months ended June 30, 2017 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

                                       71
--------------------------------------------------------------------------------
  Table of Contents  

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are the subject of lawsuits and claims arising in the ordinary course of
business from time to time. Management cannot predict the ultimate outcome of
such lawsuits and claims. While the lawsuits and claims are asserted for amounts
that may be material, should an unfavorable outcome occur, management does not
currently expect that any currently pending matters will have a material adverse
effect on our financial position or results of operations except as described
below. See Note 13 "Commitments and Contingencies" to the unaudited consolidated
financial statements for a description of certain other proceedings.

The Company is the subject of the following lawsuits:

John Melville et al v. Spark Energy Inc. and Spark Energy Gas, LLC is a
purported class action filed on December 17, 2015 in the United States District
Court for the District of New Jersey alleging, among other things, that (i)
sales representatives engaged as independent contractors for Spark Energy Gas,
LLC engaged in deceptive acts in violation of the New Jersey Consumer Fraud Act,
(ii) Spark Energy Gas, LLC breach its contract with plaintiff, including a
breach of the covenant of good faith and fair dealing. Plaintiffs are seeking
unspecified compensatory and punitive damages for the purported class,
injunctive relief and/or declaratory relief, disgorgement of revenues and/or
profits and attorneys’ fees. Initial discovery is ongoing. Spark Energy Inc. and
Spark Energy Gas, LLC intend to vigorously defend this matter and the
allegations asserted therein. Given the early stages of this matter, the Company
cannot predict the outcome or consequences of this case at this time.

Halifax-American Energy Company, LLC et al v. Provider Power, LLC, Electricity
N.H., LLC, Electricity Maine, LLC, Emile Clavet and Kevin Dean is a lawsuit
initially filed on June 12, 2014, in the Rockingham County Superior Court, State
of New Hampshire, alleging various claims related to the Provider Companies’
employment of a sales contractor formerly employed with one or more of the
plaintiffs, including misappropriation of trade secrets and tortious
interference with a contractual relationship. The dispute occurred prior to the
Company's acquisition of the Provider Companies. Portions of the original claim
proceeded to trial and on January 19, 2016, a jury found in favor of the
plaintiff. Damages totaling approximately $0.6 million and attorney’s fees
totaling approximately $0.3 million were awarded to the plaintiff. On May 4,
2016, following post-verdict motions, the defendants filed an appeal in the
State of New Hampshire Supreme Court, appealing, among other things the failure
of the trial court to direct a verdict for the defendants, to set aside the
verdict, or grant judgment for the defendants, and the trial court's award of
certain attorneys' fees. The appellate hearing was held on June 1, 2017. No
appellate decision has been issued to date. As of December 31, 2016 and June 30,
2017, respectively, the Company has accrued approximately $1.0 million in
contingent liabilities related to this litigation. Initial damages and
attorney's fees have been factored into the purchase price for the Provider
Companies, and the Company believes it has full indemnity coverage for any
actual exposure in the appeal.

Katherine Veilleux and Jennifer Chon, individually and on behalf of all other
similarly situated v. Electricity Maine. LLC, Provider Power, LLC, Spark Holdco,
LLC, Kevin Dean and Emile Clavet is a purported class action lawsuit filed on
November 18, 2016 in the United States District Court of Maine, alleging that
Electricity Maine, LLC, an entity acquired by Spark Holdco, LLC in mid-2016,
enrolled customers through fraudulent and misleading advertising and promotions
prior to the acquisition. Plaintiffs allege the following claims against all
Defendants: violation of the Maine Unfair Trade Practices Act, violation of
RICO, negligence, negligent misrepresentation, fraudulent misrepresentation,
unjust enrichment and breach of contract. Plaintiffs seek unspecified damages
for themselves and the purported class, rescission of contracts with Electricity
Maine, injunctive relief, restitution, and attorney’s fees. On July 7, 2017,
Plaintiffs filed a Motion for Leave to Amend their Complaint to add a new
Plaintiff. Discovery has not yet commenced in this matter. Spark HoldCo intends
to vigorously defend this matter and the allegations asserted therein. Given the
early stages of this matter, we cannot predict the outcome or consequences of
this case at this time. The Company believes it is fully indemnified for this
litigation matter, subject to certain limitations.


                                       72
--------------------------------------------------------------------------------
  Table of Contents  

Gillis et al. v. Respond Power, LLC is a purported class action lawsuit that was
originally filed on May 21, 2014 in the Philadelphia Court of Common Pleas. On
June 23, 2014, the case was removed to the United States District Court for the
Eastern District of Pennsylvania. On September 15, 2014, the plaintiffs filed an
amended class action complaint seeking a declaratory judgment that the
disclosure statement contained in Respond Power, LLC’s variable rate contracts
with Pennsylvania consumers limited the variable rate that could be charged to
no more than the monthly rate charged by the consumers’ local utility company.
The plaintiffs also allege that Respond Power, LLC (i) breached its variable
rate contract with Pennsylvania consumers, and the covenant of good faith and
fair dealing therein, by charging rates in excess of the monthly rate charged by
the consumers’ local utility company; (ii) engaged in deceptive conduct in
violation of the Pennsylvania Unfair Trade Practices and Consumer Protection
Law; and (iii) engaged in negligent misrepresentation and fraudulent concealment
in connection with purported promises of savings. The amount of damages sought
is not specified. By order dated August 31, 2015, the district court denied
class certification. The plaintiffs appealed the district court’s denial of
class certification to the United States Court of Appeals for the Third Circuit.
The United States Court of Appeals for the Third Circuit vacated the district
court’s denial of class certification and remanded the matter to the district
court for further proceedings. The district court has ordered briefing on
Defendant’s motion to dismiss. We currently cannot predict the outcome or
consequences of this case at this time. The Company believes it is fully
indemnified for this litigation matter, subject to certain limitations.

Jurich v. Verde Energy USA, Inc., is a purported class action originally filed
on March 3, 2015 in the United States District Court for the District of
Connecticut and subsequently re-filed on October 8, 2015 in the Superior Court
of Judicial District of Hartford, State of Connecticut. The Amended Complaint
asserts that Verde charged rates in violation of its contracts with Connecticut
customers and alleges (i) violation of the Connecticut Unfair Trade Practices
Act and (ii) breach of the covenant of good faith and fair dealing. Plaintiffs
are seeking unspecified actual and punitive damages for the purported class and
injunctive relief. The parties have exchanged initial discovery. The matter is
set for mediation on August 4, 2017. Verde intends to vigorously defend this
matter and the allegations asserted therein. Given the early stage of this
matter, we cannot predict the outcome or consequences of this case at this time.
The Company believes it is fully indemnified for this litigation matter, subject
to certain limitations.

Richardson et al v. Verde Energy USA, Inc. is a purported class action filed on
November 25, 2015 in the United States District Court for the Eastern District
of Pennsylvania alleging that Verde violated the Telephone Consumer Protection
Act by placing marketing calls using an automatic telephone dialing system or a
prerecorded voice to the purported class members’ cellular phones without prior
express consent and by continuing to make such calls after receiving requests
for the calls to cease. Plaintiffs are seeking statutory damages for the
purported class and injunctive relief prohibiting Verde’s alleged conduct.
Discovery has commenced in this matter. Verde intends to vigorously defend this
matter and the allegations asserted therein.  Given the early stages of this
matter, we cannot predict the outcome or consequences of this case at this time.
The Company believes it is fully indemnified for this litigation matter, subject
to certain limitations by original owners of the Verde Companies.

Coleman v. Verde Energy USA Illinois, LLC is a purported class action filed on
January 23, 2017 in the United States District Court for the Southern District
of Illinois alleging that Verde violated the Telephone Consumer Protection Act
by placing marketing calls using an automatic telephone dialing system or a
prerecorded voice to the purported class members’ cellular phones without prior
express consent. Plaintiffs are seeking statutory damages for the purported
class and injunctive relief. Verde is seeking to dismiss this matter or
consolidate it with the duplicative Richardson matter based on the
“first-to-file” rule. Verde’s Motion to Dismiss or, in the alternative, to Stay
or Transfer the matter, is currently pending. Verde intends to vigorously defend
this matter and the allegations asserted therein. Given the early stages of this
matter, we cannot predict the outcome or consequences of this case at this time.
The Company believes it is fully indemnified for this litigation matter, subject
to certain limitations.

Item 1A. Risk Factors.

Security holders and potential investors in our securities should carefully
consider the risk factors under "Item 1A. - Risk Factors" in our 2016 Annual
Report on Form 10-K and in “Item 1A. - Risk Factors” in our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2017, which are incorporated herein by
reference. Except as

                                       73
--------------------------------------------------------------------------------
  Table of Contents  

provided below, there has been no material change in our risk factors from those
described in the 2016 Annual Report on Form 10-K and Quarterly Report on Form
10-Q for the quarter ended March 31, 2017. These risks are not the sole risks
for investors. Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially adversely affect our
business, financial condition or results of operations.

We cannot guarantee that our share repurchase plan will enhance shareholder
value.

Our Board of Directors has authorized a share repurchase program, which permits
us to purchase up to $50.0 million of our Class A common stock in the open
market or in privately negotiated transactions through December 31, 2017. The
share repurchase program does not obligate us to repurchase a specific dollar
amount or number of shares of Class A common stock. The specific timing and
amount of purchases, if any, will depend upon several factors, including ongoing
assessments of capital needs, the market price of the Class A common stock, and
other factors, including general market conditions. There can be no assurance
that we will make future purchases of Class A common stock or that we will
purchase a sufficient number of shares to satisfy market expectations.

Purchases of our Class A common stock pursuant to our share repurchase program
could affect the market price of our Class A common stock and increase
volatility. We cannot provide any assurance that purchases under the share
buyback program will be made at the best possible price. Additionally, purchases
under our share repurchase plan could diminish our cash reserves or increase
borrowings under our Senior Credit Facility or Subordinated Facility, which may
impact our ability to finance future growth and to pursue possible future
strategic opportunities and acquisitions. Although our share repurchase program
is intended to enhance long-term shareholder value, there is no assurance that
it will do so.

We are permitted to and could discontinue our share repurchase program prior to
its expiration or completion. The existence of the share repurchase program
could cause our Class A common stock price to be higher than it would be in the
absence of such a plan, and any such discontinuation could cause the market
price of our Class A common stock to decline.

Reference is made to the risk factor entitled “We face risks due to increasing
trends in regulation of the retail energy at the state level” in Item 1A of Part
I in our Form 10-K for the year ended December 31, 2016. In order to update this
risk factor for developments that have occurred during the third quarter of
2017, the following information is added to the risk factor:

On July 27, 2017 the New York Appellate Court ruled on the appeal of NYPSC
jurisdiction over ESCO pricing. The Appellate Court held that the NYPSC has
broad authority over the ESCOs, including the authority to set jurisdiction and
reasonable rate requirements for the ESCOs. Although the Appellate Court’s
decision does not put the Resetting Order back into effect, it does provide the
NYPSC with express authority to adopt a follow-up to the Resetting Order that
imposes rate restrictions on the ESCOs. The ESCOs are in the process of
appealing this decision.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information regarding purchases of our Class A
common stock by us during the three months ended June 30, 2017. Stock purchases
may be made in the open market or in privately negotiated transactions based on
ongoing assessments of capital needs, the market price of the Class A common
stock, and other factors, including general market conditions. The share buyback
program does not obligate us to acquire any specific dollar amount or number of
shares of Class A common stock, and it may be terminated prior to completion.


                                       74
--------------------------------------------------------------------------------
  Table of Contents  

                               Total                  Total Number of   Approximate Dollar 
                             Number of  Average Price Shares of Class    Value of Class A  
                              Class A     Paid Per     A Common Stock   Common Stock That  
Period                        Common      Share of      Purchased as   May Yet Be Purchased
                               Stock       Class A    Part of Publicly      Under the      
                             Purchased  Common Stock     Announced         Program (in     
                                                        Program (1)       thousands) (1)   
April 1, 2017 through April                                                               
30, 2017                            —             —                —                    — 
May 1, 2017 through May 31,                                                               
2017                                —             —                —   $           50,000 
June 1, 2017 through June                                                                 
30, 2017 (2)                   59,726   $     21.52           59,726   $           48,715 
                                                                                           
Total                          59,726   $     21.52           59,726   $           48,715 


 
(1) On May 24, 2017, the Company announced that the Board of Directors
authorized a share repurchase program of up to $50.0 million of Class A common
stock through December 31, 2017.
(2) During June 2017, the Company acquired 59,726 shares of common stock at a
weighted-average price of $21.52 for a total purchase price of $1.3 million
(including fees, commissions and expenses). The number of shares of Class A
common stock purchased reflects trades that were executed and settled during the
month.



Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

                                       75
--------------------------------------------------------------------------------
  Table of Contents  

                                       Item 6. Exhibits                                        
                                                              Incorporated by Reference        
Exhibit                Exhibit Description             Form  Exhibit   Filing Date SEC File No.
                                                              Number               
             Membership Interest Purchase Agreement,                               
             by and among Spark Energy, Inc., Spark                                
  2.1#       HoldCo, LLC, Provider Power, LLC, Kevin   10-Q      2.1    5/5/2016    001-36559  
              B. Dean and Emile L. Clavet, dated as                                
                         of May 3, 2016.                                           
             Membership Interest Purchase Agreement,                               
             by and among Spark Energy, Inc., Spark                                
  2.2#       HoldCo, LLC, Retailco, LLC and National   10-Q      2.2    5/5/2016    001-36559  
             Gas & Electric, LLC, dated as of May 3,                               
                              2016.                                                
                Amendment No. 1 to the Membership                                  
              Interest Purchase Agreement, dated as                                
  2.3#        of July 26, 2016, by and among Spark     8-K       2.1    8/1/2016    001-36559  
                Energy, Inc., Spark HoldCo, LLC,                                   
             Provider Power, LLC, Kevin B. Dean and                                
                        Emile L. Clavet.                                           
             Membership Interest and Stock Purchase                                
              Agreement, by and among Spark Energy,                                
  2.4#        Inc., CenStar Energy Corp. and Verde     10-Q      2.4    5/8/2017    001-36559  
              Energy USA Holdings, LLC, dated as of                                
                          May 5, 2017.                                             
                First Amendment to the Membership                                  
             Interest and Stock Purchase Agreement,                                
  2.5        dated July 1, 2017, by and among Spark    8-K       2.1    7/6/2017    001-36559  
             Energy, Inc., CenStar Energy Corp., and                               
                 Verde Energy USA Holdings, LLC.                                   
  3.1          Amended and Restated Certificate of     8-K       3.1    8/4/2014    001-36559  
               Incorporation of Spark Energy, Inc.                                 
  3.2         Amended and Restated Bylaws of Spark     8-K       3.2    8/4/2014    001-36559  
                          Energy, Inc.                                             
              Certificate of Designations of Rights                                
  3.3           and Preferences of 8.75% Series A      8-A        5     3/11/2017   001-36559  
                Fixed-to-Floating Rate Cumulative                                  
              Redeemable Perpetual Preferred Stock                                 
  4.1           Class A Common Stock Certificate       S-1       4.1    6/30/2014   333-196375 
                Promissory Note of CenStar Energy                                  
  4.2        Corp., effective July 1, 2017, payable    8-K       10.1   7/6/2017    001-36559  
               to Verde Energy USA Holdings, LLC.                                  
              Credit Agreement, dated as of May 19,                                
              2017, among Spark Energy, Inc., Spark                                
              HoldCo, LLC, Spark Energy, LLC, Spark                                
              Energy Gas, LLC, CenStar Energy Corp,                                
              CenStar Operating Company, LLC, Oasis                                
             Power, LLC, Oasis Power Holdings, LLC,                                
               Electricity Maine, LLC, Electricity                                 
              N.H., LLC, Provider Power Mass, LLC,                                 
             Major Energy Services LLC, Major Energy                               
  10.1       Electricity Services LLC, Respond Power   8-K       10.1   5/24/2017   001-36559  
                 LLC and Perigee Energy, LLC as                                    
               Co-Borrowers, Coöperatieve Rabobank                                 
                    U.A., New York Branch, as                                      
              Administrative Agent, an Issuing Bank                                
              and a Bank, and Coöperatieve Rabobank                                
             U.A., New York Branch and BBVA Compass,                               
                as Joint Lead Arrangers and Sole                                   
               Bookrunner, and the Other Financial                                 
                 Institutions Signatory Thereto                                    
                Certification of Chief Executive                                   
 31.1*         Officer pursuant to Rule 13a-14(a)                                  
              under the Securities Exchange Act of                                 
                              1934.                                                
                Certification of Chief Financial                                   
 31.2*         Officer pursuant to Rule 13a-14(a)                                  
              under the Securities Exchange Act of                                 
                              1934.                                                
  32**        Certifications pursuant to 18 U.S.C.                                 
                          Section 1350.                                            
101.INS*             XBRL Instance Document.                                       
101.SCH*              XBRL Schema Document.                                        
101.CAL*           XBRL Calculation Document.                                      



                                       76
--------------------------------------------------------------------------------
  Table of Contents  

101.LAB*      XBRL Labels Linkbase Document.         
101.PRE*   XBRL Presentation Linkbase Document.      
101.DEF*    XBRL Definition Linkbase Document.       



* Filed herewith
** Furnished herewith
# The registrant agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request
† Compensatory plan or arrangement or managerial contract

                                       77
--------------------------------------------------------------------------------
  Table of Contents  

APPENDIX A

CFTC. The Commodity Futures Trading Commission.

ERCOT. The Electric Reliability Council of Texas, the independent system
operator and the regional coordinator of various electricity systems within
Texas.

FERC. The Federal Energy Regulatory Commission, a regulatory body that
regulates, among other things, the transmission and wholesale sale of
electricity and the transportation of natural gas by interstate pipelines in the
United States.

ISO. An independent system operator. An ISO manages and controls transmission
infrastructure in a particular region.

MMBtu. One million British Thermal Units, a standard unit of heating equivalent
measure for natural gas. A unit of heat equal to 1,000,000 Btus, or 1 MMBtu, is
the thermal equivalent of approximately 1,000 cubic feet of natural gas.

MWh. One megawatt hour, a unit of electricity equal to 1,000 kilowatt hours
(kWh), or the amount of energy equal to one megawatt of constant power expended
for one hour of time.

Non-POR Market. A non-purchase of accounts receivable market.

NYPSC. New York Public Service Commission.

POR Market. A purchase of accounts receivable market.

RCE. A residential customer equivalent, refers to a natural gas customer with a
standard consumption of 100 MMBtus per year or an electricity customer with a
standard consumption of 10 MWhs per year.

REP. A retail electricity provider.

RTO. A regional transmission organization. A RTO, similar to an ISO, is a third
party entity that manages transmission infrastructure in a particular region.

                                       78
--------------------------------------------------------------------------------
  Table of Contents  

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
                                                                                              
                                             Spark Energy, Inc.                               
                                                                                              
                                                                                              
August 4, 2017                                         /s/ Robert Lane                        
                                                       Robert Lane                            
                                                       Chief Financial Officer (Principal     
                                                       Financial Officer and Principal        
                                                       Accounting Officer)                    





                                       79
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>certceoexh311-q22017.htm
<DESCRIPTION>EXHIBIT 31.1 CERTIFICATION BY CEO
<TEXT>
Exhibit
                                                                    EXHIBIT 31.1
  CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) AND RULE
          15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Nathan Kroeker, certify that:

1. I have reviewed this Quarterly Report (the “report”) on Form 10-Q of Spark
Energy, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control over
financial reporting.



--------------------------------------------------------------------------------

Date: August 4, 2017
 
/s/ Nathan Kroeker
Nathan Kroeker
Chief Executive Officer and President


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>certcfoexh312-q22017.htm
<DESCRIPTION>EXHIBIT 31.2 CERTIFICATION BY CFO
<TEXT>
Exhibit
                                                                    EXHIBIT 31.2
  CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) AND RULE
          15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Robert Lane, certify that:
1. I have reviewed this Quarterly Report (the “report”) on Form 10-Q of Spark
Energy, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control over
financial reporting.



--------------------------------------------------------------------------------

Date: August 4, 2017
 
/s/ Robert Lane
Robert Lane
Chief Financial Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>certceoandcfoexh32-q22017.htm
<DESCRIPTION>EXHIBIT 32 CERTIFICATION BY CEO AND CFO
<TEXT>
Exhibit
                                                                      EXHIBIT 32

    Certification by the Chief Executive Officer and Chief Financial Officer
                      Pursuant to 18 U.S.C. Section 1350,
                              Adopted Pursuant to
                 Section 906 of the Sarbanes-Oxley Act of 2002

      In connection with the Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017 (the “Report”) of Spark Energy, Inc., a Delaware corporation (the
“Company”), as filed with the Securities and Exchange Commission on the date
hereof, Nathan Kroeker, Chief Executive Officer of the Company and Robert Lane,
Chief Financial Officer of the Company, each certify, pursuant 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to his knowledge:
 
1.          This Report fully complies with the requirements of section 13(a) or 
            15(d) of the Securities Exchange Act of 1934, as amended; and        


2.          The information contained in the Report fairly presents, in all      
            material respects, the financial condition and results of operations 
            of the Company.                                                      



Date: August 4, 2017

                                                              /s/ Nathan Kroeker
                                                                  Nathan Kroeker
                                                         Chief Executive Officer



                                                                 /s/ Robert Lane
                                                                     Robert Lane
                                                         Chief Financial Officer







</TEXT>
</DOCUMENT>
</SUBMISSION>