Monday, March 8, 2021

PEU Boys Target Texas Electrical Market Post Deep Freeze


Financial strains on Texas city-owned utilities, rural electric cooperatives and the grid operator has spurred calls for state aid and lured private equity firms into plans to fix multi-billion-dollar charges.

The state's power costs jumped by roughly 10 times the usual, to about $47 billion, during a week-long cold snap that took down nearly half of its power plants. The charges have driven one co-op into bankruptcy and left two dozen others facing bills they will be hard-pressed to cover without outside help.

Several private equity firms have been in talks with the operator of the Texas electric grid to provide it financial support, four people familiar with the talks told Reuters.

 ERCOT is the nonprofit Texas electrical grid operator.

It remains unclear what form this funding would take and whether Texas officials would agree to an offer from private equity firms. The buyout firms would likely provide a loan or bond which would cover the near-term cash needs of the Electric Reliability Council of Texas (ERCOT), the people said.

Texas funneled millions to private equity underwriters like The Carlyle Group.   Governor Rick Perry gave $35 million to Carlyle affiliate Vought Aircraft Industries for 3,000 new Texas jobs (which never materialized).  Triumph overpaid Carlyle for Vought with its unfulfilled Texas promise.

I wrote my elected state official on Carlyle's free use of $35 million in taxpayer money for nearly six years.  Representative Drew Darby defended Governor Perry's economic development kitty.  

Rep. Darby is the former Chair and current member of the House Energy Committee.  He is a key figure in rejiggering the Public Utility Commission and ERCOT after the Valentine's Day winter storm.  Disclosure:  We lost power on Sunday, February 14th.  It was not fully restored until Thursday, February 18th.

PEU boys "bait and switched" the state of Texas on Vought.  The switch occurred two years into the fifteen year economic grant period when Vought reclassified the $35 million from operating activities to financing activities.  Texans gave The Carlyle Group a free six year loan of $35 million.  After cutting 35 jobs (vs. adding 3,000) Vought repaid a mere $900,000.  That's an annual interest rate of 0.2%.  

Carlyle's sweetheart deal should anger Texas citizens.  Granting the greed and leverage boys a stake of Texas electrical utility mess adds to my level of outrage.  Piss poor service and high bills are my experience having worked for more than one private equity affiliate. 

Griddy, the seller of wholesale energy, charged citizens outrageous bills during the winter storm crisis.  It received an investment from Macquarie in December 2020.  Macquarie, like The Carlyle Group, seeks outsized returns on their money.  

PEU boys have a record of broken promises in Texas, as does the state legislature.  Let's not have these groups pair up for Texas' electrical future. 

A walk back in time to PEU ownership of TXU, which was renamed Energy Future Holdings, revealed.

They (KKR, TPG and Goldman Sachs Capital Partners) have pulled $560 million in advisory and monitoring fees out of the company since the buyout and created an operating structure that's built to squeeze everything they can from debt holders.

By April 2014 the company couldn't make its scheduled debt payments and was forced into bankruptcy.

Goldman Sachs energy traders stand to make as much a $200 million off the winter storm.

Traders at Goldman Sachs Group Inc could earn roughly $100 million in profit from the winter storm last month that left many across Texas and other southern U.S. states without electricity, clean water and heat, Bloomberg News reported on Friday.

The Wall Street bank's earnings from the physical sale of power and natural gas and financial hedges after spot prices jumped, could top $200 million on paper, but they will likely take a significant write down, Bloomberg reported.

The Texas legislature designed and oversaw the electrical system and market which recently failed millions.  It should not turn to the greed and leverage boys in reforming or repairing what elected officials and their appointees broke so spectacularly mid February. 

Update 3-10-21:  Texas Governor Greg Abbott sent the overcharge issue to the Texas Legislature. What might they do with $16 billion in overcharges the PUC refused to reverse?  The PUC is down to one person.  

Update 3-12-21:  Blackstone Group affiliate Frontera Holdings declared bankruptcy.  Frontera sells electricity to Mexico from a Texas power plant.