The February Arctic blast, which caused prolonged blackouts across the central U.S., cost American and European power companies more than $10 billion, according to an S&P Global Market Intelligence review of more than two dozen first-quarter earnings reports.

Only a few of the companies — a group that includes investor-owned generators, retailers, developers and transmission and distribution providers — came out ahead. Many incurred substantial losses from the cost of fuel and purchasing supplemental power due to historic failures of the Electric Reliability Council Of Texas Inc. market and natural gas supply chain during the winter storm.

Vistra Corp., the largest generator in Texas, it reported that its retail arm took in $510 million less in the first quarter of 2021, compared to the prior-year period, while its generation fleet brought in $1.5 billion less, prompting a sharp cut to 2021 earnings guidance.

"We are obviously very disappointed with the financial loss as a result of the effects of [the winter storm], and it is even more difficult to accept given our team members' preparation and execution before, during, and after the storm," Vistra CEO Curt Morgan said in April. "The results do not reflect our performance; however, we understand the reality in front of us and are prepared to move the company forward."

It was a common theme: Executives implied a breezy earnings season as the economy recovered from the COVID-19 pandemic, if not for the storm.

"Impacts from [the winter storm] overshadowed what were otherwise solid financial results," Black Hills Corp. Senior Vice President and CFO Richard Kinzley said during the company's first-quarter 2021 earnings call May 5. The South Dakota company reported costs of $571.3 million as natural gas prices spiked, leading to a negative, after-tax EPS impact of 15 cents. Like others, Black Hills turned to the capital markets to maintain liquidity, securing an $800 million term loan in February.

Part of the solution

Iberdrola SA subsidiary Avangrid Inc., which has roughly 1,250-MW of generation in Texas, came out on top, reporting an adjusted EPS up 25 cents compared to the year-ago quarter because it met delivery obligations and produced excess electricity in Texas during the storm when prices were high.

"We're a price taker for our non-contracted capacity," in Texas, Dennis Arriola, CEO and director, said on an earning call. "So it's during times like this where we're part of the solution and providing that un-contracted energy to customers [when] they desperately needed it.

Algonquin Power & Utilities Corp. is disputing some of the storm costs incurred under a hedging contract, asserting force majeure to a counterparty to avoid having to pay exorbitant costs.

"The severe nature of the storm was unusual in the level of impact across a very large geography," Arun Banskota, Algonquin president, CEO and director, said in an earnings call. The company's 150-MW Senate Wind Project in north-central Texas buckled under icy conditions, and it was forced to purchase power on the market under elevated pricing to satisfy a hedge contract, leaving it on the hook for up to $55 million. But, Banskota added, "The diversity of our fleet and contracting strategies, both within ERCOT and across the rest of our geographically distributed portfolio, also served us well in helping to mitigate the impact of [the storm] on our results."

The crisis prompted many companies to rethink their investments and exposure in Texas.

Germany-headquartered RWE AG took a €400 million hit while its Texas plants did not produce requisite power, and was forced to turn to the spot market to meet supply obligations.

"We are conducting an analysis of all our markets to see where we might have similar situations like in ERCOT to avoid any repetition," RWE CFO Michael Muller said. "All aspects are being taken into consideration, not only the hedging strategy itself; we are also looking into the entire asset management as well as investment decisions."

The broadly negative power sector impacts contrasted sharply with the midstream sector, where the extreme weather event benefitted Energy Transfer LP's bottom line with $2.4 billion in additional EBITDA, and Kinder Morgan Inc. recorded a $1 billion windfall, although some other pipeline operators took a hit.

Customers hit hard

Utility executives expressed confidence that regulators would be supportive with regard to cost recovery. Xcel Energy Inc. plans to propose cost deferrals over two years for $965 million in fuel expenses.

"We expect it will be recovered, probably over a longer time frame than normal," Michael Doyle, senior equity analyst for Edward Jones, said in an April interview. "It should be fairly earnings-neutral to the utility, [but] it does increase customer bills, and utilities are interested in keeping customer bills to the minimum."

The storm reportedly killed between 100 and 200 people in Texas, and some customers are seeking accountability. Duke Energy Corp. disclosed in its 10-Q filing that it and its project companies have been named in multiple lawsuits seeking recovery of "property damages, personal injury and for wrongful death" incurred as a result of power losses.

"Currently, 15 state court actions have been filed in counties across Texas, all of which name Duke Energy Corporation," Jennifer Garber, a Duke spokeswoman, said in an email. "One case that is pending in federal court in Texas names several Duke Energy non-regulated commercial renewables subsidiaries. We are currently reviewing these filings and believe Duke Energy has complied with all of its legal obligations."

'Lessons learned'

Texas lawmakers have been debating how to plug a $3 billion hole left by unmet market payments caused in part by regulators' decision to inflate electricity prices to the $9,000/MWh cap. The May 31 legislative deadline is approaching for a market bailout measure. Lawmakers are also mulling weatherization requirements.

But even some companies that were prepared for the weather incurred hefty losses. Robert Sean Trauschke, chairman, president and CEO of OGE Energy Corp., which was hit with $930 million in fuel and purchased power costs, said "every single one of our plants generated megawatts every day during this event." The company had a winterization package on the 465-MW Mustang Energy Center, a natural gas plant in Oklahoma, he added.

Mauricio Gutierrez, president, CEO and director of NRG Energy Inc., which reported a $967 million financial impact, said "one of the biggest lessons learned from this storm is how interactive and interconnected the electric and natural gas sectors are, and our focus is not just on hardening the power generation side of the equation."

"Instead, we believe the entire system, including natural gas, needs to be hardened as they say from wellhead to light bulb," Gutierrez added.

But some see a market opportunity as debates flare about how to prevent another such catastrophe.

"There's going to be some more problems," William Jackson Berger, chairman, president and CEO, of Houston-based Sunnova Energy International Inc., a provider of residential energy systems, told analysts. "I don't know if it will be this year or next year, but there's more problems coming, and people know that."