The winter storms that swept across the U.S., particularly Texas, upending the energy market and knocking out power for millions of people, have delivered a windfall for Macquarie Group, with the Australian bank lifting its profit outlook for 2021 by as much as 10 percent, just two weeks after warning that earnings would be "slightly down".
"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," according to the company, which is the second-largest supplier of gas in North America after oil major BP, as quoted by Reuters.
Macquarie's energy business unit typically trades large quantities of natural gas to meet last-minute consumer demand, moving gas from areas of low usage to areas where the demand is high.
According to analysts, the gains made by the energy business unit over nearly a week of frigid temperatures, which sent demand for gas and power soaring in the U.S., could single-handedly boost Macquarie's overall profit by about $317 million.
The deadly winter storm sent power prices surging to $8,800 per megawatt-hour in some parts of Texas, from an average of $26 per MWh. Meanwhile, real-time natural gas prices shot up by more than 300 times in Texas's deregulated market, as electricity generators competed for natural gas supplies.
Customers are now staring at massive electricity bills. This has led to US politicians promising to investigate how some companies have profited heavily from the winter storm.
"This week is like hitting the jackpot, with some of these incredible prices," said Roland Burns, president at Comstock.
Following the revised profit outlook, Macquarie's shares rose 3.5 percent to A$147.15 on Monday, the highest level in a year, outperforming the broader market.
"Macquarie appears to be capitalizing well on volatility and financial market dislocation," Bank of America Securities analysts said in a note, as they revised their earnings forecast for the Sydney-headquartered company.
Macquarie's Commodities and Global Markets division contributes close to 40 percent of its group earnings. Analysts had earlier expressed concerns that the pandemic could chip away at profits from the division if high energy-use industries closed down.
The company's performance suffered last year as the pandemic subdued deal-making and compounded economic woes, leading to a rise in impairment charges.
But, a strong initial public offering of Nuix last year, its majority-owned data analytics software business, and the boom in the energy business, have helped raise the company's share price to pre-pandemic levels.
The company, which also operates Australia's largest asset manager and investment banking business, is also hoping for another boost from a recovery in local M&A activity this year.