Texas Deep Freeze Delivers Macquarie $210 Million Windfall
The Texas deep freeze that upended the U.S. energy market has delivered Macquarie Group Ltd. a windfall of as much as A$270 million ($210 million) amid wild swings in gas and electricity prices.
The Sydney-based investment bank on Monday raised its profit forecast, citing increased demand for its gas and power supply services in the U.S. At the same time, Griddy Energy, a household supplier in Texas that’s backed by Macquarie Energy is handing out massive electricity bills to residents who used power when wholesale prices were spiking.
Macquarie is the second-biggest physical gas supplier in the U.S. behind BP Plc, and typically moves gas between different parts of the country based on last-minute customer needs.
Last week the bank profited as its major clients -- including energy companies -- sought to buy and move higher-than-expected volumes of gas and electricity to their customers amid the crisis in Texas, according to a person with knowledge of the matter. The price of physical gas, which is normally less than $3 per million British thermal units, skyrocketed to as much as $1,250 in some locations last week.
As the cold blast froze oil and gas wells, sent electricity prices to record highs and caused blackouts for 5 million homes and businesses, more of Macquarie’s customers ordered gas for Texas that had to be shipped from other parts of the country, the person said.
Consumers are now feeling the impact of the huge price swings. Griddy customers in Texas are being handed massive utility bills some as high as $8,000. The supplier charges electricity based on real-time prices in wholesale markets, therefore passing the costs straight on to consumers. Griddy saw the problem developing and even urged its retail customers last weekend to switch to another provider. By Sunday last week, 20% managed to do so.
Macquarie’s commodities business is unusual among banks in the U.S., where counterparts such as Goldman Sachs Group Inc. and Morgan Stanley have had to curb commodities trading activities to satisfy regulators. But Macquarie, which expanded its commodities operations by purchasing Cargill Inc.’s power and gas trading business in the U.S. in 2017, doesn’t trade commodities with its own balance sheet, the person said.
In its profit upgrade, Macquarie said the “extreme winter weather conditions in North America have significantly increased short-term client demand for Macquarie’s capabilities in maintaining critical physical supply across the commodity complex and particularly in relation to gas and power.”
After two weeks ago saying earnings in the year ending March 31 will be “slightly” down on last year’s result, Macquarie on Monday forecast profit would now be up 5%-10%. That implies net income of about A$2.87 billion ($2.3 billion) to A$3 billion, compared to A$2.73 billion a year earlier.
The improved outlook sent Macquarie shares to a one-year high in Sydney trading. The stock was up 3.7% to A$147.56 at 3:50 p.m. in Sydney, the highest since Feb. 21, 2020.
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