Texas storm is windfall for some Wall Street firms

A handful of Wall Street firms that bet big on the power sector in recent years made millions in paper profits when the winter storm in Texas boosted demand for the electricity generated by plants they own. SoftBank Group Corp.’s Fortress Investment Group LLC and Kennedy Lewis Investment Management LLC, a $3 billion credit hedge fund in New York, were two of the biggest winners in the trade. Other significant investors include Avenue Capital Group, Guggenheim Partners LLC, JPMorgan Chase & Co.’s asset-management arm and Pacific Investment Management Co. In February, when subfreezing temperatures forced the state’s grid operator to call for widespread blackouts, some natural-gas plants in Texas were still able to sell electricity to power hundreds of thousands of homes, often at higher than usual prices. Collectively, two companies—Temple Generation I and TexGen Power—that own many of the plants made more than an estimated $200 million over the storm’s course, according to investors in the power-generation companies.

Owning more than 90% of Temple and TexGen are overlapping sets of investment firms. In the wake of the Texas storm, there have been state hearings and public outrage at energy price increases that were pushed onto retailers. Some of the state’s largest power-generation companies lost hundreds of millions of dollars each as they grappled with outages and gas supply issues. The plants largely owned by Wall Street firms took steps in the days before the storm to increase the chances they would remain operational. In the end, they were among the few to actually make money. Fortress, Kennedy Lewis, Avenue, Guggenheim, JPMorgan’s asset-management arm and Pimco declined to disclose the return on their investment or speak publicly about any profits. “We are proud of the plant staff’s performance and sacrifices they made to keep the lights on for Texans during this difficult time,” said Temple Chief Executive Dan Hudson in a statement. Some of the plants benefited from having been built in recent years to withstand extremely cold weather. Temple and TexGen also took steps to manage risk. Management teams were focused on the storm and its potential severity as early as two weeks before it hit, investors said. They increased staffing levels, rented additional equipment and had crews of workers sleeping at the plants to take turns covering shifts. “We knew we were going to have a week of hell,” said one executive. Temple and TexGen Power also had secured multiple sources of natural gas when they emerged from bankruptcy in 2018, a decision that lessened the impact of gas shortages that hit systemwide. Additionally, they made strategic market decisions.