BlackRock, Citi in $100 Million Fight Over Texas Storm Aftermath

By Christian Berthelsen | April 16, 2021

A Texas wind farm owned by BlackRock Inc. is locked in a $100 million court battle with Citigroup Inc. over losses caused by the devastating winter storms in Texas.

The BlackRock unit, Mariah Del Norte, sells power to Citigroup under a 2016 agreement, but was unable to generate power during the February storm. Citigroup has declared the event a default and sought to bill the unit $100 million for undelivered power, which Mariah says is more than the wind project’s total revenue from 2017 to 2020.

The Mariah unit, in response, has sought to invoke a force majeure clause in the agreement to void its normal obligations, noting the storm was so crippling that it wasn’t even available to procure power from other sources to provide to Citigroup in satisfaction of the contract. Mariah is asking a judge to issue an injunction barring Citigroup from collecting on the bill or seizing the wind farm’s assets.

“Mariah was prevented from performing due to an unprecedented winter storm, the scale and destruction of which rivals that of the worst hurricanes to hit Texas, coupled with an energy market failure that has no precedent,” the unit said in the lawsuit.

The litigation is without merit, Scott Helfman, a Citigroup spokesman, said in an email.

Mariah said the storm was so overwhelming that icing developed on the massive turbines’ blades, compromising their aerodynamics and crippling their ability to generate power. Even when they could turn, other frozen mechanical components slowed the spin rate, further hampering production, and the conditions were too dangerous for maintenance workers to attempt repairs.

Wind Power

Texas is a major source of wind-generated power in the U.S. The 230-megawatt Mariah project spans three counties in the Texas panhandle.

The February blackouts struck when a rare and powerful blast of winter weather swept across Texas, crippling nearly half the power plants in the state. Millions of people were left without electricity, heat and in some cases drinking water. More than 100 died. By some estimates, the economic loss from the storm was as much as $300 billion.

In most of the U.S., wind and solar farms have long-term contracts to supply power to utilities or large corporations. Such deals are rare in Texas, so many renewable-power developers turn to financial institutions and other parties instead.

Some of the contracts in Texas require that the plants deliver electricity even if they don’t generate it themselves. During the blackout, when many wind farms froze, owners had to buy power at record-high prices, which reached $9,000 per megawatt hour.

In its lawsuit, Mariah said Citigroup’s $100 million demand is based on the $9,000-per-megawatt price that was imposed on the market by Texas regulators in an effort to dampen demand and encourage generation. Mariah called the figure “an artificial amount imposed by regulators that has since been roundly criticized and rejected” by market monitors.

Under the normal terms of its contract, Citigroup pays the Mariah project $22.65 for each megawatt hour of electricity delivered.

–With assistance from Chris Dolmetsch and Brian Eckhouse.

About the photo: Pike Electric service trucks line up after a snow storm on February 16, 2021 in Fort Worth, Texas. Winter storm Uri has brought historic cold weather and power outages to Texas as storms have swept across 26 states with a mix of freezing temperatures and precipitation. (Photo by Ron Jenkins/Getty Images) Photographer: Ron Jenkins/Getty Images North America

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