The company and its services: Guzman Energy is a trading and marketing firm that uses its energy expertise and sophisticated computer programs to supply customers with electricity and natural gas at the lowest prices available in the energy market.
The Coral Gables-based company looks for imbalances in the market, like an underutilized electric generating plant or surplus power supplies, and can sell energy to buyers — mostly municipal energy companies and rural power cooperatives — at lower prices than standard utilities.
Guzman buys and sells physical volumes of electricity from traditional power plants and renewable sources, as well as natural gas. It also trades in energy-related financial instruments like options, futures contracts and renewable energy credits (RECs), which support renewable energy.
Since it began operating in 2013, Guzman Energy has grown from a tiny startup to an important player on the U.S. energy market. Its customers include about 30 power companies, municipal energy concerns and energy cooperatives. The electricity it sells reaches tens of thousands of homes and businesses.
Since 2014, Guzman has traded over 19 million megawatt hours of electricity to power tens of thousands of homes and businesses, large volumes of natural gas and over 1.5 million RECs. It also owns and operates a solar power facility in New Mexico.
Florida law bans Guzman and other energy traders from selling electricity in the state and competing with companies like Florida Power & Light.
“Our lines of business roughly break down into financial energy trading, physical energy supply and renewable energy development,” said Leo Guzman, founder and CEO of Guzman Energy.
“We trade financially 24 hours a day, 365 days per year,” he said. “This is a massively complex business in which we will submit tens of thousands of bids in a given day. Our activity here has helped to make the markets more efficient and to minimize price spikes during extreme weather events in order to keep prices lower and less volatile.”
Another team of specialists works to ensure that the lowest cost power “is always flowing to our customers … matching power supply with the load [demand] on a real-time basis,” Guzman said.
Getting started: Guzman Energy was founded in 2013 by Leo Guzman, who has more than four decades of experience in finance and energy markets. Guzman arrived in Miami from Cuba as a teenager in the 1960s and, after his university studies, worked in energy-related finance operations at Chase Manhattan Bank and Lazard Frères. In 1987, Guzman set up Guzman & Company, a Coral Gables-based investment bank that works in the domestic energy and power industries, plus other sectors. Later he decided to use his energy expertise, as well as the talents of quantitative analysis experts at the bank, to establish Guzman Energy. “We analyzed the power markets and saw an opportunity for us to make a mark in the energy space,” Guzman said.
The difference: Even as energy prices have fallen in recent years, many power suppliers continue to raise rates for municipal utilities and energy cooperatives. Guzman Energy provides these clients with reliable energy at lower costs. Using its knowledge of U.S. energy markets and sophisticated mathematical models, the firm can identify inefficiencies in the market and find the best opportunities to buy electricity and natural gas for its clients at the lowest prices.
Revenues: For calendar year 2015, Guzman Energy said its revenues were more than $8.3 million for all its business segments. Year-to-date, revenues totaled $24.3 million and growth for full-year 2016 is expected to continue in double digits. In 2015, not all business segments were operating, so the rapid growth in 2016 reflects their contributions since starting up.
Competitors: Competition varies based on the line of business. The energy trader competes with independent power suppliers like Tenaska, Calpine and NRG Energy, plus large banks like Morgan Stanley, Citibank and Goldman Sachs that trade in energy contracts.
Glitch: “Given that we were new to this space, everything we’ve done has been trial by fire,” Guzman said. “Our first foray into owning renewable assets, given their complex structures, was not without hiccups. But we’ve been fortunate in that we have not committed any big mistakes and have always learned and adapted very quickly.”
Outside view: Guzman Energy has nimbly identified and taken advantage of revolutionary changes in U.S. energy markets — namely, lower prices for natural gas and renewable energy, said Frank A. Wolak, an expert on energy markets and director of Stanford University’s Program on Energy and Sustainable Development. “Guzman Energy provides benefits to its customers by finding the least cost-mix of generation resources to meet their needs. Guzman’s expertise in developing sophisticated quantitative models, and experienced energy procurement and sales staff, provide it with a competitive advantage,” he said.
What customers say: The Kit Carson Electric Cooperative in Taos, New Mexico, provides electricity to about 30,000 residential and commercial members in three counties and switched to Guzman Energy earlier this year as its energy supplier because it could obtain access to more renewable energy and lower costs than before, said Luis Reyes, the cooperative’s CEO. The cooperative signed a 10-year contract with Guzman in February, and terminated a previous agreement with another energy supplier that ran until 2040 under which rates increased over 100 percent. “With Guzman, we have a better handle on cost and over the life of the contract will save $50 million to $70 million for our members,” Reyes said.
“Guzman also brings the opportunities to have more renewable in our portfolio, as well as the ability to build more solar locally, which is huge for our community. Under the previous agreement we were limited to 5 percent renewable, which is unacceptable. We believe this is the model for the future for cooperatives and municipalities.”
In New Mexico, Guzman Energy built and operates a solar power facility that supplies part of the electricity demand of the nearby city of Aztec (more than 6,500 residents). “The structure allows the city to incorporate a small but significant renewable component into their electric supply now, and for 25 years in the future if they choose to purchase the facility,” said Edwin Reyes, principal of Enchantment Energy Consulting, who worked on the project for the city. The solar farm will provide future savings for the city, he said.
Challenges and outlook: “The rapid change in energy markets is both our opportunity and our challenge,” Guzman said. The company has enjoyed success by staying ahead of competitors and growing very quickly, “but the downside is that we have to constantly see where the markets are going and where the next opportunity will lie.”
Story courtesy of the Miami Herald