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From hedge fund to sovereign wealth: Norway’s investment chief eyes active approach

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Nicolai Tangen is used to turning heads in his native Norway. Several years ago, when he was a successful hedge fund manager in London, he arrived at the weekly regatta in a millionaires’ playground in the south of the country in a shiny modernised vessel that put the other shabby chic boats in the shade.

“Everybody else turns up in fairly ordinary boats but Nicolai’s looked like he’d spent a lot of money on it,” said one onlooker in Blindleia, perhaps Norway’s most exclusive area for summer cabins. Asked about it today, Mr Tangen laughs: “I have to admit: I did buy an old boat, and we did tune it up quite a lot. We may have overtuned it a bit.”

It is an attitude the 54-year-old is taking to the gargantuan $1.3tn Norwegian oil fund where he took the helm last September after a bruising and controversial appointment process. “There are always a lot of things to fine-tune. It’s like a sailing boat: you tighten a bit here, and loosen a bit there, and the thing ends up sailing a bit faster. That’s the goal,” Mr Tangen says in an interview with the Financial Times.

Chart showing ESG exclusions are boosting the fund but parliamentary bans dent returns

His appointment as only the third head of the investor in its 25-year history comes at a crucial juncture for one of the few sovereign wealth funds to be based in a democracy. Its success has been based on it converting Norway’s oil revenues into financial assets by essentially emulating a huge index fund, owning large swaths of stocks and bonds in line with the markets rather than taking big bold bets on their direction or on individual companies.

But its enormous size — it now owns, on average, 1.4 per cent of every listed company in the world and 2.5 per cent of every European stock after its assets increased almost 30-fold this century — brings new dilemmas about exactly what sort of fund it should be. At its core is the question of whether the fund should be an active investor or a more passive one merely tracking markets, a debate Mr Tangen is keen to have.

It also spills over into the fund’s increasing focus on environmental, social and governance issues at the companies it owns, raising fears of whether it could be viewed more as a foreign policy tool than a financial investor. And the contested appointment of Mr Tangen has sparked a debate about the fund’s own complex governance and the role of the politicians who oversee it.

Norway's central bank governor Oystein Olsen with Nicolai Tangen. The bank initially allowed the head of the Norwegian oil fund to keep his controlling stake in AKO Capital, but some politicians decried the potential conflicts of interest
Norway’s central bank governor Oystein Olsen with Nicolai Tangen. The bank initially allowed the head of the Norwegian oil fund to keep his controlling stake in AKO Capital, but some politicians decried the potential conflicts of interest © Mosvold Larsen/NTB Scanpix/AFP/Getty

Underpinning all this is Mr Tangen himself. Appointing the founder of London-based hedge fund AKO Capital with personal investments of almost $1bn as head of the fund was a bold move that sparked a huge political and media storm in egalitarian Norway. Mr Tangen notes that his predecessor Yngve Slyngstad told him that the fund generated more headlines from March, when his appointment was made public, until September, when he took charge, than in the previous 25 years combined. Some still wonder whether Mr Tangen is the right fit and whether he might try to overtune the fund.

“It’s still puzzling,” says Espen Henriksen, associate professor of finance at BI business school in Oslo, of the selection of Mr Tangen. He questions whether the skills from running an actively managed hedge fund are transferable to an oil fund. “Is a hedge fund manager the right person for the fund?”

Increasing returns

Norway put its first krone into the fund in 1996 as an attempt both to preserve its oil wealth for future generations and avoid Dutch disease, where the discovery of natural resources by a country ends up harming its economy. It has been remarkably successful, becoming the world’s largest sovereign wealth fund and providing Norway with about a quarter of its annual government budget through its annual contributions.

An oil worker talks to a reporter on a rig in the Johan Sverdrup oilfield. Norway's oil fund owns, on average, 1.4% of every listed company in the world and 2.5% of every European stock
An oil worker talks to a reporter on a rig in the Johan Sverdrup oilfield. Norway’s oil fund owns, on average, 1.4% of every listed company in the world and 2.5% of every European stock © Tom Little/AFP/Getty

Over time, the bureaucrats at Oslo’s finance ministry in charge of its investment strategy have moved it from only owning bonds at the outset to today having 70 per cent of its assets in stocks, 28 per cent in fixed income and the rest in property. Its first investments in a new asset class of renewable energy infrastructure could come later this year but are unlikely to make up a sizeable chunk of the fund any time soon.

Mr Tangen has little influence over asset allocation, merely accepting the investment mandate and the equities-bonds split given to him by the finance ministry via parliament. Instead, as chief executive of Norges Bank Investment Management, the manager of the fund, Mr Tangen focuses on the internal machinery of the investor. In his office inside the country’s central bank, he outlines how his five-year tenure will focus above all on three areas: performance; communications; and talent management.

Performance is ultimately where he will be judged. The fund has delivered, on average, 0.25 percentage points of excess return each year over its benchmark index of global equities and bonds. “If we can continue that, or perhaps even tweak it up — that’s the goal — then that’s phenomenal. Because the pool is so big, you need relatively small excess returns to make a big difference,” he says in an interview in mid-December. He wheezes and coughs throughout the interview as it is only his second day back in the office after contracting coronavirus, a diagnosis that forced the central bank governor and deputy governor into quarantine, too.

Chart showing the equity factors that contribute to relative returns at the fund

Mr Tangen says his role is to create a “safe area” where people in the fund can take risks. He turned again to sailing for help, saying he consulted psychologists with the UK sailing team to talk about “bouncebackability” — the ability to respond to mistakes. “What I like with sailing is that you can be in the lead, and then the wind changes direction and it’s not your fault — it’s something completely external — and then suddenly you’re last. But that mustn’t impact the way you take risks in the next race,” he adds.

A big fan of learning from other disciplines, Mr Tangen then invokes ski jumping, where professional athletes spend on average just five-and-a-half minutes in the air a year. He argues it is similar with investment, where fund managers might experience just three big crises in their career. Both scenarios require a simulator in which to practise dealing with stressful periods, he says. The oil fund has set up an investment simulator to show fund managers how they have traded, whether they perform worse when stressed, whether they tend to trade too early or too late. “You try to make a trade and it reads your history back to you — are you sure you are not making this too early?” he adds.

Chart showing that returns on assets are often volatile

Mr Tangen says learning from mistakes is crucial to success in asset management. “We screw up all the time. We screw up 48-49 per cent of the cases. You have to put that learning into a system. That’s what the simulator does. That’s why this is such a humbling industry. It’s just impossible to get an inflated view of yourself because you make mistakes all the time.”

Active moments

A critical question for the fund is whether its assets should be passively or actively managed. The fund is only allowed to deviate slightly from its reference index of stocks and bonds. That makes it a de facto index fund like those of the leading providers such as Vanguard, according to Mr Henriksen, one where almost all its risk comes from the broader movements of markets rather than individual stockpicking. Its small attempts at active management have produced negligible risk-adjusted returns in recent years, according to several experts. Mr Henriksen argues that running it as an index fund makes eminent good sense in a democracy such as Norway, where a more active strategy could give politicians an excuse to meddle more in the fund’s management.

Nicolai Tangen says of the oil fund: 'It’s like a sailing boat: you tighten a bit here, and loosen a bit there, and the thing ends up sailing a bit faster. That’s the goal'
Nicolai Tangen says of the oil fund: ‘It’s like a sailing boat: you tighten a bit here, and loosen a bit there, and the thing ends up sailing a bit faster. That’s the goal’ © Clive Mason/Getty

“It disciplines random ideas from both fund managers and politicians alike. If asset managers could follow their strong beliefs, why couldn’t politicians follow their strong beliefs?” he asks.

Mr Tangen is convinced that the fund is “much more” than a simple index fund, however. He argues that, instead of passive investing, the fund is involved in “enhanced indexing”, where portfolio managers have some latitude to deviate from the reference index. For instance, in 2019 it went underweight on Wirecard, the German payments company that was revealed by the FT last year to have run fraudulent operations, boosting its returns. But Mr Tangen adds that the fund is active in other ways.

“There are so many active decisions going into nearly everything in the fund. The second thing is that one of the very important parts of the mandate is to have the active ownership strategy on the ESG side. The only way you can do that is to also have active management. In my mind, it goes together,” he says.

An example of how the fund is becoming more active on the ownership side is that it started from the beginning of this year publicising how it will vote at annual shareholder meetings five days in advance, a move that could give the fund more influence among other investors. An adviser to a senior Norwegian politician frets that the fund could be seen as an activist investor if the policy is mishandled: “The big worry has always been that the fund could be perceived as a tool of the Norwegian government rather than just an investor. More focus [on ESG] may increase the risk of that.”

Chart showing the soaring size of Norway’s sovereign wealth fund

Karin Thorburn, a professor of finance at the Norwegian School of Economics in Bergen, says it could rebound on the fund: “If you claim you take more responsibility for governance, and companies do bad things, then how responsible are you?”

Mr Tangen, who dismisses fears of the oil fund being viewed as a foreign policy tool, has already suggested the fund could improve its performance by doing more of the things that today boost its returns. That includes selling out of companies that behave poorly on ESG matters, as well as giving more money to external fund managers to invest in emerging markets or smaller stocks. He says the fund does not need “to take more risks” but that it could potentially “reallocate” its risk budget, which is currently largely tied up in owning real estate.

Prof Thorburn says there are two potential dangers to such a strategy: costs and risks. One of the oil fund’s biggest successes is delivering its returns at a very low cost with just 530 workers: its management costs last year were 0.05 per cent of its assets under management. Using more external managers could push up the fund’s costs; active funds typically charge 1-2 per cent of their AUM for their services.

A more active strategy could also increase both financial and political risk, Prof Thorburn argues. “If you start making lots of bets, it’s great if it goes well but what happens if it doesn’t go well? It’s one of the success factors of the fund that nobody questions the investment strategy. That’s because they’ve had this index tracker,” she says. But she adds that much depends on just how active Mr Tangen wants the fund to be.

Nicolai Tangen has brought a desire for cross-disciplinary learning from AKO, including asking former downhill skier Aksel Lund Svindal to teach his staff about risk-taking
Nicolai Tangen has brought a desire for cross-disciplinary learning from AKO, including asking former downhill skier Aksel Lund Svindal to teach his staff about risk-taking © Fabrice Coffrini/AFP/Getty

Some Norwegian politicians point to the controversy around Mr Tangen’s appointment. He was initially allowed by Norway’s central bank to keep his controlling stake in AKO Capital, which has $22bn in assets under management, as well as his private investments in a blind trust. Politicians from all parties decried the potential conflicts of interest — as well as the problems of holding some assets in tax havens — and forced him to divest his AKO stake to a charitable foundation and liquidate his private investments.

“Parliament showed that, if it really comes down to it, it is in charge of the fund,” says one opposition politician in Oslo. A political adviser adds: “A lot of politicians would love to have more control of the fund and how it invests. This was a warning.”

Burnishing the fund

Mr Tangen insists he bears no scars from the ordeal. “I never spend any time on conflicts, I put them straight behind me,” he says. But he has tried to harness the huge focus on the fund last year to boost recruitment, saying applications have increased 10-fold in recent months.

Architects from Snohetta, the practice behind Oslo’s spectacular opera house, have talked to staff of the Norwegian oil fund about creativity
Architects from Snohetta, the practice behind Oslo’s spectacular opera house, have talked to staff of the Norwegian oil fund about creativity © Santi Visalli/Getty

His focus on talent management goes well beyond recruitment. As befits somebody with a masters degree in social psychology (as well as another in history of art), Mr Tangen says: “People are important for me: how do you make them tick, how can they thrive? You can always do things a tiny bit better.”

He has brought a desire for cross-disciplinary learning from AKO. He has brought in architects from Snohetta, the practice behind Oslo’s spectacular opera house, to talk about creativity; the Norwegian public health officials tackling Covid-19 to discuss making “something complicated easier to communicate”; and former downhill skier Aksel Lund Svindal to learn about risk-taking. Portfolio managers at the fund learned how to interview companies from the police officers who grilled the terrorist Anders Behring Breivik.

To those who argue that a hedge fund manager might be a strange fit for a cautious sovereign wealth fund, he claims his skills are “100 per cent transferable”. He adds that the key is having a “systematic approach” to tasks such as finding and motivating the right people and creating a framework “so people are not afraid of taking risks”.

Mr Tangen is also working at improving communication from the fund, both internally and externally. He continues Mr Slyngstad’s caution of talking about the markets — merely noting that “after periods of great fear, you have euphoria”, while refusing to speculate on how it could pan out. Instead, he says he wants to lift the profiles of many of the others who work in the fund rather than a singular focus on the chief executive. He also talks of the thousands of messages he has already received from ordinary Norwegians “who care deeply about the amount of money they have in the fund”. He has increased the number of meetings, informal communication and information shared with the finance ministry, which sets the mandate for the fund.

“If you think about it, I’ve got one client,” he says, before quickly adding: “Well, basically, I’ve got five million clients. That’s just great fun.”



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US stocks make gains on Fed message of patience over monetary policy

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Stocks on Wall Street reversed earlier losses after Jay Powell, the Federal Reserve chairman, reiterated the central bank’s desire to stick with accommodative policies during his second day of testimony to Congress.

The tech-heavy Nasdaq Composite ended the day up 1 per cent, having fallen almost 1 per cent at the opening bell. The S&P 500 climbed 1.1 per cent, marking the blue-chip benchmark’s second consecutive rise after five sessions of back-to-back losses.

A morning sell-off in US Treasuries also faded, with the yield on the 10-year note having climbed as much as 0.07 percentage points to slightly less than 1.43 per cent, its highest level since February last year, before settling back to 1.37 per cent.

Treasuries have been hit by expectations that US president Joe Biden’s $1.9tn stimulus plan will stoke inflation, which erodes the cash value of the debt instruments’ interest payments. However, the more recent rise in yields has also been accompanied by a rise in real rates, which are more indicative of the return investors make after inflation and signal an improving growth outlook for the economy.

Higher yields, which move inversely to the price of the security, also knock-on to equity valuations by affecting the price-to-earnings multiples investors are willing to pay for companies’ shares. A higher yield, analysts say, makes fast-growth companies whose earnings represent a slim proportion of their stock market value less attractive in comparison.

Shares in the 100 largest companies on the Nasdaq are valued at a multiple of 37 times current earnings, against 17 times for the global FTSE All-World index of developed market equities.

“When bonds yield close to zero, you are not losing out by investing in those companies whose cash flows could be years into the future,” said Nick Nelson, head of European equity strategy at UBS. “[But] as bond yields start to rise, that cost of waiting [for companies’ earnings growth] increases.”

Earlier on Wednesday, investors’ retreat from growth stocks rippled into Asia. Hong Kong’s Hang Seng index sank 3 per cent, its worst daily performance in nine months. Chinese investors using market link-ups with bourses in Shanghai and Shenzhen dumped Hong Kong-listed shares at a record pace, selling a net HK$20bn ($2.6bn) on Wednesday. China’s CSI 300 index fell 2.6 per cent. Japan’s Topix slipped 1.8 per cent, dragged down by tech stocks.

Column chart of Hang Seng index, daily % change showing worst day for Hong Kong stocks in 9 months

European equity markets closed higher, with the Stoxx 600 regional index rising 0.5 per cent and London’s FTSE 100 index up 0.5 per cent. UBS’s Nelson said European equities were less vulnerable to rising yields because European stocks generally traded at lower valuations than in Asia and the US. “We have fewer big technology companies here.”

While the bond market ructions have unsettled many equity investors, some believe this should not affect stock markets because the inflation expectations that have driven the Treasury sell-off are linked to bets of a global recovery.

“Rising bond yields and rising inflation from low levels provide a historically attractive environment for equities,” said Patrik Lang, head of equity strategy and research at Julius Baer. Traditional businesses whose fortunes are linked to economic growth, such as “industrials, materials and especially financials”, should do better in a reflationary environment than tech stocks, added Lang.



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Fed needs to ignore ‘taper tantrums’ and let longer rates rise

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The writer is chief executive officer and chief investment officer of Richard Bernstein Advisors 

The Ferber Method, a sleep training technique, teaches babies to self-soothe and fall asleep on their own. It’s as much a training technique for new parents to ignore their baby’s crying as it is for the child to learn to cope by themself. 

The US Federal Reserve should consider Ferberising bond investors and ignore future “taper tantrums” like the market disruption that occurred when the central bank signalled tighter monetary policy in 2013. The long-term health and competitiveness of the US economy may depend on bond investors’ self-soothing ability to cope with reality.

The slope of the yield curve is a simple model of the profitability of lending. Banks pay short-term rates on deposits and other sources of funds and receive longer-term rates by issuing mortgages, corporate loans, and other lending agreements.

A steeper curve, therefore, is a simple measure of better bank profit margins, and has in past cycles spurred greater willingness to lend. Historically, the Fed’s Survey of Senior Bank Lending Officers shows banks have been more willing to make loans to the real economy when the yield curve has been steeper.

A chart showing how banks have been more willing to lend with a steep yield curve. As the slope on the US treasuries  10-year-less-2-year yield curve has steepened, so the net percentage of banks reporting tighter lending standards has fallen

With that simple model of bank profits in mind, textbooks highlight the Fed’s control of short-term interest rates as a tool to control lending. The Fed reduces banks’ cost of funding and stimulates lending when it lowers interest rates. But it increases funding rates and curtails lending when it raises short-term rates. Coupling lower short-term rates with a steeper yield curve can be a powerful fillip to bank lending. 

However, policies in this cycle have been unique. As US short-term interest rates are near zero, the Fed has attempted to further stimulate the economy by buying longer-dated bonds and lowering long-term interest rates. Those actions have indeed lowered long-term borrowing costs in the economy, but banks’ willingness to lend has been constrained because lending margins have been narrow and risk premiums small.

Banks in past cycles might have been willing to lend despite a relatively flat yield curve because they could enhance narrow lending margins by using leverage. However, regulations after the financial crisis now limit their ability to use leverage.

This policy and regulatory mix has fuelled some of the growth in private lending. Private lenders are not subject to regulated leverage constraints and can accordingly lend profitably despite a flat curve. The growth in private lending effectively reflects an unintended disintermediation of the traditional banking system. This has meant liquidity destined for the real economy has largely been trapped in the financial economy.

The yield curve has started to steepen, and the Fed should freely allow long-term interest rates to increase for monetary policies to benefit the real economy more fully. Allowing long-term rates to increase would not only begin to restrain financial speculation as risk-free rates rise, but could simultaneously foster bank lending to the real economy. 

Thus, the need for the Fed to Ferberise bond investors. Banks’ willingness to lend is starting to improve as the curve begins to steepen, but some economists are suggesting the central bank should continue its current strategy of lower long-term interest rates because of the potential for a disruptive “taper tantrum” by bond investors. The Fed needs to ignore investors’ tantrums and allow them to self-soothe.

The investment implications of the Fed allowing longer-term interest rates to rise seem clear. Much of the speculation within the US markets is in assets such as venture capital, special purpose acquisition vehicles, technology stocks and cryptocurrencies. These are “long-duration” investments that have longer-time horizons factored into their valuations. They underperform when longer-term rates rise because investors demand higher returns over time. Capital would be likely to be redistributed to more tangible productive assets.

Investors and policymakers should be concerned that monetary policy is fuelling speculation rather than supporting the lending facilities needed to rebuild the US’s capital stock and keep the country’s economy competitive.

Like a new parent to a baby, the Fed should not rush to coddle bond investors’ tantrums and should let the financial markets soothe themselves. Short-term financial market volatility might cause some sleepless nights, but the Fed could unleash the lending capacity of the traditional banking system by letting the yield curve steepen further.



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What we’ve learned from the Texas freeze

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One thing to start: While the freeze in Texas caused havoc for most, some companies have reaped big rewards. Australia’s Macquarie Group said yesterday full-year profits could rise by up to 10 per cent as a result of a surge in demand for its natural gas shipping business.

Welcome to today’s newsletter, where Texas remains in focus. In our first item, Derek Brower asks if oil’s modest price rise in reaction to last week’s events signals that the rally will soon run out of steam.

Further rises, after all, will only tempt America’s shale producers to dive into growth mode. For our second item, Justin Jacobs speaks to Devon boss Rick Muncrief about when the taps will be turned back on.

Elsewhere we round up the key reading on the Texas fallout from the FT and beyond; ask how the appointment of a general to head up Brazil’s Petrobras has gone down in the markets (hint: not well) and bring you the latest on the proxy battle to green ExxonMobil.

Thanks for reading. Please get in touch at energy.source@ft.com. You can sign up for the newsletter here. — Myles

Is the oil rally nearing the end of the road?

Texas’s cold snap last week lifted oil prices — yet still brought a warning for the market’s bulls. The Permian Basin, the world’s most prolific oil-producing region, froze up. US production fell by 2m barrels a day, according to Wood Mackenzie. Kpler, a data provider, estimates the country’s total output in February will be down by 1m b/d.

By Tuesday morning, after it emerged that producers would take weeks to fully restore flows, US oil futures were trading for around $62.50 per barrel, just $2.50 or so more than its price on the eve of the snowstorm. Hardly an Abqaiq-style oil-price leap.

One explanation is that huge volumes of refining capacity are offline too, removing a big source of demand and neutralising some of the supply disruption. But the market’s relative calm also begs questions about how resilient oil’s rally is — especially with an Opec meeting next week, when the cartel must decide how much, if any, of its 7m barrels a day or more of offline supply it will begin restoring.

Many analysts remain bullish. Goldman Sachs, Wall Street’s most influential oil-price forecaster, upped its expectations by $10 a barrel this week. It now expects Brent, which was above $66 on Tuesday morning, to hit $75 in the third quarter.

Line chart of US crude production showing The big Texan freeze

Yet the bull case increasingly depends on many things coming true at once, points out Neil Atkinson, an independent analyst who was formerly head of oil markets at the International Energy Agency. Sanctioned Iranian barrels must remain offline; US supply must remain constrained; and economies must rebound quickly. Above all, Opec must keep cutting.

Current prices are in a “sweet spot” for the cartel, said Atkinson. But any further price rises could prompt a response from shale (see below) and test Opec’s discipline, prompting a response from its biggest producer.

“Over the years, Saudi Arabia has shown its willingness to shift policy and maximise output if compliance falls and/or if the perceived costs of co-operation exceed the perceived benefits,” wrote Bassam Fattouh, head of the Oxford Institute for Energy Studies and a Saudi oil-policy expert, in an article explaining the kingdom’s recent decision unilaterally to deepen its owns cuts.

“Thus, Saudi Arabia can easily swing in the opposite direction in response to low compliance and given the relatively low level of Saudi production, the size of the upward swing could be quite substantial, as was the case in April 2020.”

(Derek Brower)

American oil market eyes production boost

After the oil-price surge of recent weeks, the big question hanging over the US shale patch, and broader oil market, is when American producers will start loosening the purse strings and opening up the taps.

That point might now be visible on the horizon. “If we do see commodity prices rapidly increase back to $70 or $80 a barrel, you’re going to be generating a lot of free cash and that gives you a lot of optionality on things you could think about,” Rick Muncrief, chief executive of Devon Energy, a major Permian producer, told ES last week.

For now, Muncrief’s company is keeping a 5 per cent cap on production growth and promising a windfall for shareholders if prices keep climbing. “First things first, we want to make sure we stay disciplined,” Muncrief said.

But his comments to ES point to when companies might ditch the capital discipline mantra and become more vocal about their ability to both accelerate output growth and keep cash flowing to shareholders.

Robert Kaplan, head of the Dallas Fed, also talked about the potential for oil producers to pivot away from capital discipline as prices rise. “I’ve learned sometimes if prices get high enough mindsets can change,” he told an International Energy Forum conference yesterday.

“To get back to 13m barrels a day, yes, you would need a change in mindset. Probably spurred by higher prices. Can I predict whether that will or won’t happen? No I can’t predict it, but I think we should be on watch for it,” Kaplan said.

We will get more of an idea of the mood in the shale patch later this week, after Pioneer Natural Resources, EOG Resources, Diamondback Energy, Occidental Petroleum and Apache have all reported earnings.

Expect a lot of talk about when producers might start getting back into the growth game. (Justin Jacobs)

What to read on the Texas freeze

A weeklong catastrophe left millions without power and heat amid some of the coldest weather the state has seen in a century.

The failure of the state’s electric grid caused immense human suffering, financial pain for consumers (and gain for some energy companies), and has spawned a wide-ranging conversation about where things went wrong and how to prevent it from happening again. Here are the key pieces to read:

  1. Start with Bloomberg’s in-depth account of the early hours of Monday morning, when the state’s grid operator, the Electric Reliability Council of Texas, was forced to plunge millions into darkness as power generation seized up.

  2. The International Energy Agency put the pieces together here in a broad overview of how the grid broke down — and points out that the lessons from Texas should be learned far and wide, especially as the world becomes increasingly electrified and vulnerable to disruptions.

  3. Gregory Meyer and I covered the financial fallout from the storm, including the story of one family in Burleson, Texas, which saw their electric bill suddenly spike to more than $8,000. We also explored who the winners and losers were in a $50bn bonanza of power trading.

  4. Some companies that cashed in on the crisis are being accused of profiteering. The gas producer Comstock Resources said surging natural gas prices were like “hitting the jackpot”.

  5. The crisis sparked an inevitable debate pitting renewables advocates against fossil fuel backers. This green versus brown debate generated much more heat than light. But the issue of intermittent renewables’ reliability is a critical one. The FT’s editorial board argued that frozen wind turbines were hardly the main cause of the grid’s collapse as the natural gas system, which has the largest share of the power market, also failed.

  6. A less sexy but probably more important issue is why so much of Texas’ energy system was so easily felled by temperatures that much of the rest of the country sees on a regular basis. This excellent Texas Tribune story looks at why “winterising” power plants, pipelines and wells might not be as easy or cheap as state officials hope.

  7. Finally, there is a fascinating debate over the role climate change did or did not play in the Arctic blast. My colleagues Leslie Hook and Steven Bernard have a nice explanation (and graphic) of how the jet stream bent south, covering Texas in freezing arctic air.

(Justin Jacobs)

Data Drill

Shares in Petrobras fell off a cliff yesterday as the market absorbed Brazilian president Jair Bolsonaro’s decision to oust the state oil group’s chief executive in favour of a general.

Bolsonaro had blamed Petrobras’s erstwhile boss Roberto Castello Branco for recent rises in petrol and diesel prices, which had provoked the ire of the country’s truck drivers.

Strikes over fuel costs in 2018 paralysed Brazil’s economy and sapped support for the government, helping secure Bolsonaro’s election to office.

Line chart of Share price (Brazilian reals) showing Petrobras shares plunge after Bolsonaro ousts CEO

Power Points

Endnote

The proxy battle at ExxonMobil rumbles on, with activist group Engine No.1 blasting the oil major’s assertion that its carbon-cutting plan was in line with the Paris accords.

Exxon has stuck to its guns as an oil producer even as rivals like BP and Shell lay out plans to shift into greener sources of energy and reduce fossil fuel output. But it has made concessions in the face of investor pressure, including pledges to cut emissions intensity by 2025.

This month the company said that its emissions targets were “projected to be consistent with the goals of the Paris agreement” and would position it to be “an industry leader in greenhouse gas performance by 2030”.

Engine No.1, which wants to install four new energy-transition-focused directors on Exxon’s board, was having none of it. In a letter to the board yesterday, it wrote:

“None of the company’s new claims change its long-term trajectory which would grow total emissions for decades to come. This is not consistent with, but rather runs directly counter to the goals of the Paris agreement.”

Exxon did not respond to a request for comment.

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