Gas and electricity vendors rack up billions in profits from Texas freeze – fr

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Gas and electricity vendors rack up billions in profits from Texas freeze – fr


According to more than two dozen interviews and quarterly earnings reports, natural gas suppliers, pipeline companies and banks that trade in commodities have emerged as the biggest winners in the US winter explosion market. February which shook the gas and electricity markets.

The deep freeze caught Texas utilities off guard, killed more than 100 people and left 4.5 million without power. Demand for heat has pushed wholesale electricity costs to 400 times the usual amount and sent natural gas prices to record highs, forcing utilities and consumers to pay exorbitant bills.

After the storm, few companies wanted to talk about their financial gains, not wanting to be seen as taking advantage of the hardships of others. But a clearer picture emerges from quarterly profits and as utility companies, mistreated by big bills, continue their efforts to recoup their losses.

The biggest winners were companies with access to supplies including leading energy trader Vitol, gas suppliers Kinder Morgan (KMI.N), Enterprise Products Partners (EPD.N) and Energy Transfer (ET.N), and the banks Goldman Sachs (GS. N), Bank of America (BofA) (BAC.N) and Macquarie Group (MQG.AX).

The combined companies are expected to reap billions of dollars in profits selling gas and electricity during the storm, according to interviews and public document reviews. However, some companies may never collect these sales due to an ongoing litigation.

The losers include producers who could not deliver oil and gas due to frozen well heads, collection systems and processing stations. Week-long shale producer Pioneer Natural Resources (PXD.N) cost $ 80 million, Chevron (CVX.N) about $ 300 million and Exxon Mobil (XOM.N) $ 800 million of dollars.

Utilities complain about price gouging and unwarranted supply cancellations. The Federal Energy Regulatory Commission is currently examining the gas and electricity markets for possible market manipulation.

Goldman Sachs and Vitol did not comment. BofA did not respond to a request for comment.

“MAXIMUM WITHDRAWAL”

Energy Transfer, which can store around 60% of daily U.S. gas consumption in areas hardest hit by the February frost, could bring in $ 850 million in profit from selling the fuel to utilities and industrial customers during the storm, according to analysts at East Daley Capital. Other people familiar with its operations say that number could be higher.

Energy Transfer has not commented on this story. The company reports its results on Thursday.

Rival Enterprise Products Partners said the storm resulted in earnings of around $ 250 million in the first quarter.

Kinder Morgan, another pipeline and gas storage operator, made around $ 1 billion during the storm, the vast majority of it on rising gas prices and sales. Anticipating strong demand, Kinder Morgan said it sent emergency workers and generators ahead of the storm to its gas and pipeline storage facilities.

In early February, gas prices ranged from $ 2.50 to $ 3 per million British thermal units (mmBtu) at the Houston hubs in Tulsa, Oklahoma. Prices started climbing on February 11 to reach hundreds of dollars, with the Tulsa hub hitting a record high of $ 1,192.86 on February 17, according to government data.

“That’s what happens when you go from a very well supplied market to a very tight market, and in this case an extremely tight market,” said one natural gas trader. “It was very localized pain, and it really surprised a lot of people. “

Energy traders from three Texas power co-ops told Reuters they paid up to $ 400 per mmBtu during a four-day period that began on Valentine’s Day weekend. They requested anonymity as they were not authorized to speak about the crisis. San Antonio municipal utility CPS Energy said its gas bill for the week was around $ 700 million.

“I have been monitoring the natural gas markets for 20 years. I’ve never seen a price increase like we’ve seen, ”said Tyson Slocum, member of the Energy and Environment Advisory Board of the Commodity Futures Trading Commission and director of Public Citizen’s advocacy organization. of consumers.

WIN AND LOSE

Australia’s Macquarie, the second-largest U.S. natural gas distributor, said its trading around the storm improved its overall profit outlook for the year by around 10%, which analysts put at around $ 400 million Australians ($ 317 million).

Before the storm, traders in Macquarie studied how previous cold fronts had disrupted infrastructure to prepare a plan, sources within the company said, who requested anonymity. The company has not commented on this story.

Texas grid operator ERCOT has waived $ 1 billion in service charges and state officials are considering securitizing unpaid ERCOT bills from failed utilities.

Many companies that have profited from the trade, such as Goldman Sachs and BofA, are also facing losses due to their exposure to utilities and power co-ops that have gone bankrupt, according to court documents.

BofA has made hundreds of millions of dollars through its trading arm, according to a source with direct knowledge of the matter, but it owes it nearly $ 480 million through Brazos Electric Power Cooperative, which has filed for bankruptcy.

Disputes over price gouging and reneged on contracts also emerged after some vendors said the freeze was a force majeure event that allowed them to suspend contracts.

Macquarie was sued by Exxon to write off an $ 11 million gas bill. CPS Energy sued BP, Chevron, Energy Transfer and others for submitting bills amounting to hundreds of millions of dollars.

Texas wind farm operators also sued the trading arms of JP Morgan Chase and Citigroup, claiming the cold snap was an extreme event that voided contracts to produce and deliver electricity.

Our Standards: Thomson Reuters Trust Principles.

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