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Macquarie, Texas and the complex business of electricity

The Australian financial services company has announced a profit guidance upgrade prompted by a win from its commodities business thanks to the crisis in Texas. It’s a bad look, but it illustrates both a complex and flawed market, and a bank with a great eye for a niche.

Texas' Gas-Export Clampdown Shocks Market As Blackouts Drag On
Workers repair a power line in Austin, Texas. Photo: Bloomberg via Getty Images

Macquarie Group found itself on Monday in the somewhat indelicate position of providing a bountiful profit-forecast upgrade prompted by the extreme weather that has left millions of Texans freezing in the dark.

Having guided two weeks earlier for a decline in group net profit in the year to March 31, Macquarie instead revised its guidance to a 5% to 10% increase, all thanks to a boost from the commodity business that could be as much as A$270 million ($210 million).

The profits are in a business that specializes in getting gas and electricity from one part of the US to another, taking a commission on the price of the moment as it does so. This means Macquarie has benefited from the wild price spikes that have accompanied Texans being deprived of power, sometimes facing bills for thousands of dollars for the electricity they do manage to use.

However, it is a reach to blame Macquarie for any of this: insiders describe the bank as a cog in a complex machine and insist that Macquarie has nothing to do with setting prices.

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