(Bloomberg) -- Goldman Sachs Group Inc. is set to rake in winnings almost four years after a trade that swung in its favor following a Texas cold snap that upended markets.
The Wall Street powerhouse was locked in a contentious battle with Mexico’s dominant power company over more than $400 million Goldman said it was owed from a routine natural gas trade that went wild when a deep freeze descended on Texas in February 2021. The state-owned utility, Comision Federal de Electricidad, has agreed to foot a reduced portion of that bill, amounting to roughly $300 million, according to people with knowledge of the matter, handing a big win to Goldman’s trading desk.
It’s the kind of routine deal turning in Goldman’s favor that’s helped cement the firm’s reputation as a savvy trader. But, in this case, the bank was left hanging after the utility blamed rogue traders, fired its own staff and even indicated that it was Goldman that lacked financial sophistication because it struck the contract with a US-based subsidiary rather than the parent company.
The spat led to Goldman’s senior-most executives trying to force through a resolution and attracted the attention of former Mexican President Andres Manuel Lopez Obrador, who had championed the utility during his time in office. As another cold snap descends this week on Texas and much of the US has battled a winter storm, the focus returns to Wall Street commodities desks, which often are on the winning side of bets impacted by freakish weather events that roil markets.
An agreement was reached that significantly reduced the economic and operational scope of the dispute, resulting in a satisfactory solution and allowing both parties to close the procedure before the London Court of International Arbitration, according to statement from the utility, CFE. A representative for Goldman Sachs declined to comment.
In pursuing CFE, Goldman was pitted in a tricky battle with a sovereign entity, chasing a big financial reward after many Mexican households faced power outages as Texas cut off fuel exports following malfunctions. That storm had set off sweeping blackouts in the US as ice formed on wind turbines and some pipelines froze, forcing oil and gas wells to shut. As power suppliers and traders struggled to track down fuel to meet obligations, prices skyrocketed.
That had a direct impact on a contract between CFE and Goldman first set up in August 2017. As part of the arrangement with the utility’s US-based unit, the investment bank’s obligations to CFE were tied to a monthly index of gas prices, while CFE would be exposed to daily rates at certain hubs, such as the Waha hub in West Texas.
The daily price there surged nearly 100 times, while the monthly price was left largely unchanged, leaving the CFE subsidiary on the hook for an unusually large amount.
As part of its arguments, CFE had said it shouldn’t have to fulfill the contract because of the unforeseeable, extreme price action, Bloomberg News previously reported. The company also said that Goldman failed to strike a rock-solid contract because it didn’t get an explicit nod from the parent company as a guarantor on the trade, undermining the bank’s ability to extract the money.
©2025 Bloomberg L.P.