Tag Archives: Texas energy crisis

The Largest Energy Coop In Texas Files For Bankruptcy As Liquidity Crisis Spreads

The Largest Energy Coop In Texas Files For Bankruptcy As Liquidity Crisis Spreads

By Zerohedge

The Arctic blast and severe winter storms that pounded Texas weeks ago have claimed another victim as the credit crisis widens. Texas’s largest power cooperative filed for bankruptcy protection in federal court in Houston Monday, citing a $1.8 billion bill from the state’s grid operator, ERCOT, according to Reuters

The Largest Energy Coop In Texas Files For Bankruptcy

According to court documents, Brazos Electric Power Cooperative, the largest generation and transmission co-op in the Lone Star State, filed for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas. The company said it could not pay a $1.8 billion bill from ERCOT stemming from a severe cold snap last month.

Brazos and other utility companies who have committed to providing power to the grid were unable to during the mid-February crisis that left up to 4 million customers without power. This meant utilities had to purchase replacement power at extremely high rates, and some of these extra costs were passed on to customers. 

Clifton Karnei, executive vice president of Brazos, said in the filing that the magnitude of the charges “could not have been reasonably anticipated or modeled” and surpassed Brazo’s highest liquidity levels in years. On Feb. 25, Brazos told ERCOT that would it wouldn’t be able to pay what was owed. Leaving the company with “no choice” but to file for bankruptcy. Brazos has assets and liabilities between $1 billion and $10 billion.

“Brazos Electric suddenly finds itself caught in a liquidity trap that it cannot solve with its current balance sheet,” Karnei said in the filing. 

Liquidity Crisis

Liquidity Crisis Spreads

Readers may recall, we were one of the first to uncover the “mind-blowing” power bills some Texans were slapped with. Some people, who opted into variable power bills, were charged as much as $17k for power. We even did that math and said it would cost $900 to charge a Tesla in Texas during the energy crisis. 

“The municipal power sector is in a real crisis,” Maulin Patani, a Volt Electricity Provider LP founder, an independent power marketer who is not affiliated with Brazos, told Reuters. He said ERCOT should suspend the service charges to stop the waterfall of defaults. 

Fitch Ratings warned last week about downgrades for all Texas municipal power firms on ERCOT’s grid. The debt rating company said costs from the storm “could exceed the liquidity immediately available to these issuers.” 

The first causality of the Texas energy crisis was Just Energy, which saw shares last week crash by more than 20% after the company released a statement about steep losses incurred last month, warning of doubts about remaining a ‘going concern’ (translation: it may not survive).

ERCOT recently suggested some market participants have not posted collateral to cover some of the bills as defaults begin. 

Kenan Ogelman, ERCOT’s vice-president of commercial operations, said market participants who buy power from them have to post collateral as a down payment on energy purchases. He said some entities have “failed to deliver it.”

“Defaults are possible, and some have already happened,” Ogelman warned

Read https://silverreportuncut.com/a-primer-on-commodity-supercycles-inflation-where-it-hurts

Dozens of other energy providers face massive charges for electricity during February’s freak Arctic blast in Texas. The default domino has begun… 

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First Texas Energy Casualty Just Energy Warns It Likely Won’t “Endure” Following Unprecedented #EnergySqueeze

First Texas Energy Casualty Just Energy Warns It Likely Won’t “Endure” Following Unprecedented #EnergySqueeze

Just Energy’s shares crashed more than 21% in the premarket after the company released a statement about steep losses incurred during the winter storms that swept across Texas last week warning of doubts about remaining a ‘going concern’ (translation: it may not survive).

“The financial impact could change as additional information becomes available,” it said in the statement.

“Accordingly, the financial impact of the Weather Event on the Company once known, could be materially adverse to the Company’s liquidity and its ability to continue as a going concern.”

Just Energy hit a record low ($4.05) in premarket trading since it went public in 2002… and peaked above $600 in 2007.

The retail energy provider specializing in electricity and natural gas commodities, renewable energy options, and carbon offsets revealed that it lost $250 million due to Texas’s latest “weather event”.

“The sustained high prices from February 13, 2021 through February 19, 2021, during which real-time market prices were artificially set at USD $9,000/MWh for much of the week, it is likely that the Weather Event has resulted in a substantial negative financial impact to the Company.”

Based on current information available to the company as of the time of this press release, the company estimates that the financial impact of the Weather Event on the company could be a loss of approximately USD $250 million (approximately CAD $315 million), but the financial impact could change as additional information becomes available to the company,” Just Energy stated. 

Read https://silverreportuncut.com/they-call-it-a-commodity-super-cycle-what-does-that-even-mean

The company warned the material impact could cause “liquidity” issues and raises doubts it can continue operating. It’s currently talking with top stakeholders regarding the impact of the weather event last week. 

As we first discussed more than a week ago, and long before the full extent of the Texas freeze was revealed (see “Energy Trader: We’ve Officially Hit “Holy S*it Levels“), the extreme moves in natgas caught many energy and power companies offside, and Just Energy may well be the first causality of last week’s weather event. In the coming days, more energy firms could release statements about steep losses. 

“We’ll have to see what kind of defaults come to the surface,” Again Capital’s John Kilduff said, and as of this moment we are waiting to see who else drowned in the “rogue wave.”

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Texas Blackout Costs Mexican Manufacturers $2.7 Billion

Texas Blackout Costs Mexican Manufacturers $2.7 Billion

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By Noi Mahoney of Freightwaves,

Rolling power blackouts have affected key industrial sites across Mexico, including border states home to hundreds of factories producing everything from auto parts to electronics.

Texas Blackouts Cost Mexican Manufacturers $2.7 Billion

Factories across northern Mexico states such as Tamaulipas, Chihuahua and Nuevo Leon reported more than $2.7 billion in losses from blackouts that started Monday when Texas began limiting natural gas supplies, according to Mexico’s National Council of the Maquiladora and Export Manufacturing (INDEX).

INDEX reported 2,600 companies across Mexico have been affected by the power outages since Monday. 

General Motors, Mazda and Volkswagen are suspending some of their operations for several days in Mexico due to the natural gas shortage, the automakers said in separate statements.

“Due to the natural gas shortage affecting the Mexican territory, our Silao Guanajuato Complex was forced to stop its operations on the night of February 16 and February 17,” GM said in a statement.

Volkswagen adjusted the production schedule of its plant in Puebla where it produces the Jetta, Taos and Golf model cars. 

Japanese automaker Mazda announced it would stop production of its plant in Salamanca, Mexico, starting Wednesday due to the lack of natural gas from the U.S. Production could resume by Friday.

More blackouts across Mexico could be on the horizon with Texas Gov. Greg Abbott’s announcement that natural gas sale and exports to Mexico will be suspended until Sunday.

“Some of the natural gas produced in Texas is occasionally shipped out of state. Today I have issued an order effective today through February 21, requiring producers who have been shipping to locations outside of Texas to instead sell that natural gas to the Texas power generator which will also increase the power produced and it will be shipped to homes in Texas,” Abbott said during a Wednesday press conference. 

Ports of entry across Texas have been mostly unaffected by the wintry weather, according to U.S. Customs and Border Protection.

“The Los Indios International Bridge in Brownsville, Texas, has been closed until further notice due to no electricity or water. Commercial traffic is diverted to Veterans International Bridge,” according to a Thursday email from CBP.