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In our excitement over the real Nobels yesterday a few interesting stories slipped between the cracks — primarily this one:
MIAMI & HAMBURG, Germany–(BUSINESS WIRE)–Citadel, a leading global investment firm, has entered into a definitive agreement to acquire 100% of Hamburg-based power trading firm FlexPower.
The proposed acquisition is a strategic investment by Citadel and will introduce a new era of growth for FlexPower. The combination of Citadel’s extensive risk management, technological and analytical capabilities with FlexPower’s renewable market expertise will enable FlexPower to deliver reliable power risk management solutions to a broader range of producers and consumers across Germany and Europe.
First of all, Alphaville loves the Miami-Hamburg dateline on the press release. We’d like to see more weird combos like this, maybe Helsinki-Las Vegas, or Hull-Dubai. More importantly, this is another big indicator of how hot commodities and energy are for hedge funds right now.
As we wrote last week, Citadel is widely considered the leader — it already has a huge commodity business, and earlier this year even got into production — but Jain Global, Balyasny, Qube Research & Technologies, DRW and Jane Street are all ratcheting up their commodity businesses. There are probably lots more too.
Citadel doesn’t make a lot of acquisitions, but it bought Japanese power wholesaler Energy Grid last year, and has been building up a new commodities trading hub in Australia. This week’s purchase of FlexPower indicates it doesn’t intend to let anyone else erode its lead. As Citadel’s commodities supremo Sebastian Barrack said in the statement:
This acquisition strengthens Citadel Commodities’ position as a leading investor and risk manager in power markets, and builds on our success in global energy trading. It also reflects Citadel’s continued commitment to the development of robust and well-functioning European energy markets.
FlexPower has only been around since 2022, and focuses on energy produced by renewable sources. Citadel’s statement says it trades a portfolio of “more than 1,700 megawatts across six European countries, amounting to over 11 terawatt-hours placed annually on short-term power markets”.
It’s an intriguing deal partly because Germany doesn’t exactly have a reputation as a friendly haven for big American financial firms in general, and hedge funds and private equity in particular. And energy is for obvious reasons a politically sensitive area.
Trading it might not seem like a big potential vector for controversy, but we’d imagine some German politicians would love to blame a big evil American hedge fund for any price increases that might at some point happen, whatever the merits.
That said, Ken Griffin’s financial empire does seem to be fairly comfortable in Germany and has been cautiously welcomed into the fold. Last year the country added Citadel Securities to its list of primary dealers, which is a fairly big deal. Maybe we’ll see more Miami-random-German-city press releases in the future?
