Spruce Power announces change in accounting firm

Spruce Power Holding Corp (NYSE:SPRU), a company operating in the electric services industry with a market capitalization of $46.88 million, has disclosed a change in its independent registered public accounting firm, according to a recent 8-K filing with the U.S. Securities and Exchange Commission. According to InvestingPro analysis, the company currently operates with a significant debt burden of $612 million and is trading below its Fair Value. The Denver-based company informed Deloitte & Touche LLP of its dismissal following the completion of the audit for the fiscal year ended December 31, 2024. The company’s Audit Committee and Board of Directors have approved the appointment of CohnReznick LLP as the new auditor, pending standard client acceptance procedures.

The company’s relationship with Deloitte began on April 19, 2023. Deloitte’s audit report for the year ended December 31, 2023, did not contain any adverse opinion, disclaimer of opinion, nor was it qualified or modified in terms of audit scope or accounting principles. However, the 8-K filing noted material weaknesses in the company’s internal control over financial reporting for the same period, as previously reported in the company’s Annual Report on Form 10-K.

These weaknesses included issues with maintaining an effective control environment, control activities, the review and approval of manual journal entries, accounting for complex transactions such as business combinations and investments, and revenue recognition under ASC 606. InvestingPro data reveals concerning financial indicators, including rapid cash burn and challenges with interest payments on debt. The platform’s comprehensive analysis shows 12 additional warning signals that subscribers can access.

Despite these internal control concerns, there were no disagreements or reportable events between Spruce Power and Deloitte that would require mention in Deloitte’s report on the company’s financial statements. Both Deloitte and CohnReznick have provided letters to the SEC, filed as exhibits with the 8-K, agreeing with the statements made regarding the change in auditors.

Spruce Power’s decision to switch accounting firms comes as the company continues to navigate the complex financial landscape of the energy sector, with a current ratio of 2.75 indicating sufficient liquid assets to meet short-term obligations. The change is a significant move for the company, which has not consulted with CohnReznick on any accounting principles or auditing matters prior to this engagement. For a deeper understanding of SPRU’s financial position, InvestingPro subscribers can access a detailed Pro Research Report, part of the platform’s coverage of over 1,400 US equities.

This news is based on the press release statement provided by Spruce Power Holding Corp and the company’s recent SEC filing.

In other recent news, NJR Clean Energy Ventures, a subsidiary of New Jersey Resources (NYSE:NJR), has finalized the sale of its residential solar portfolio to Spruce Power Holding Corporation. The transaction, which involves a 91 megawatt collection of solar assets, is valued at $132.5 million. Meanwhile, Spruce Power reported a third-quarter revenue of $21.4 million and an operating EBITDA of $17.7 million. Despite a GAAP net loss of $53.5 million, the company remains optimistic about its growth prospects.

These are recent developments in the companies’ operations. NJR expects the proceeds from the solar portfolio sale to be used for reducing corporate debt and bolstering general working capital. On the other hand, Spruce Power adjusted its full-year 2024 operating EBITDA guidance to a midpoint of $60 million, down from $68 million.

The solar portfolio sale reflects NJR’s strategic focus on strengthening and streamlining its clean energy portfolio. Concurrently, Spruce Power plans to acquire nearly 10,000 home solar systems, further solidifying its position as a leading owner-operator and servicer of residential solar assets.

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