Traders across Wall Street are poised for significant profits from the freeze that roiled energy markets and left swathes of the US without electricity last month. That is, if they can collect.
Goldman Sachs could gain more than $US200 million ($262 million) from the physical sale of power and natural gas and from financial hedges after spot prices surged across much of the US, according to people with knowledge of the matter. Morgan Stanley’s gains could come in under $US200 million, according to a person with familiar with the matter, and Bank of America. stands to rake in profits as well.
Goldman Sachs could gain more than $US200 million from the physical sale of power and natural gas and from financial hedges after spot prices surged across much of the US.Credit:AP
But those gains in their totality may prove elusive given the crisis’s fallout – tipping energy companies into bankruptcy, triggering legal challenges and prompting government intervention. The uncertainty is such that Goldman executives estimate that the bank may realise less than half of its paper gains, the people said, asking not to be identified as the information isn’t public.
The full extent of the profits is also likely to be hampered at Morgan Stanley and Bank of America, where offsets from other investments and unprecedented actions from regulators would likely curtail the windfall.
The historic cold that battered the central US last month led to sweeping blackouts as ice formed on wind turbines and pipelines froze, forcing oil and gas wells to shut. As traders and power suppliers struggled to find fuel to meet obligations, prices skyrocketed. In Oklahoma, gas traded at more than 300 times normal levels, while electricity in Texas surged to $US9,000 per megawatt-hour.
“The polar vortex drove volatility in energy markets, and, as a market-maker and liquidity provider, we were positioned to help our clients manage their risks in that challenging environment,” Maeve DuVally, a Goldman Sachs spokeswoman, said in a statement.
Bank of America also gained hundreds of millions of dollars in trading revenue due to the winter storm, the Financial Times reported Friday. The bank said in a statement that any revenue will be offset by losses and reduced revenues from investments in wind and other alternate power suppliers in Texas, as well as other affected markets.
Mark Lake, a Morgan Stanley spokesman, declined to comment.
