Citadel Buys Goldman Alum’s Company to Trade Power in Japan

(Bloomberg) -- Ken Griffin’s Citadel is buying Energy Grid Corp., a company that trades and sells power products, as the hedge fund firm expands its commodities business in Japan. 

The acquisition of Tokyo-based Energy Grid is expected to close in the third quarter, the company said in a statement Friday. Pricing details of the deal weren’t disclosed. 

Japan’s power industry, which was liberalized in 2016, is attracting more overseas firms as volatility increases due to extreme weather, a transition away from fossil fuel, and the resumption of some nuclear reactors. Firms need to be onshore and licensed to begin physical power trading, which allows them access to a larger market. BP Plc and Engie SA both launched Japan power trading desks in Tokyo last year.

Energy Grid was founded in 2021 by a former Goldman Sachs Group Inc. trader, and sells risk management products to help Japanese companies hedge pricing volatility in the electricity market. 

Commodity returns have been a boon for Citadel and a major profit driver. Last year, Citadel’s commodity-trading business made more than $4 billion, Bloomberg reported in February. It’s one of five core strategies for the firm, along with equities, credit, quantitative strategies, and macro and fixed income.

Citadel’s flagship Wellington fund gained 7.5% year-to-date, according to a person familiar with the matter. 

The Energy Grid deal comes as Citadel starts building up its Japan presence again after it shuttered operations in the country during the global financial crisis. Early last year, the firm started applying for an investment management license in the country for its hedge fund, Bloomberg reported. 

Energy Grid’s employees will stay with the company as it transitions to become part of Citadel in Japan, according to the statement. Its Chief Executive Officer Yohei Jozaki said the company plans to expand trading volume and offer long-term risk management solutions. 

Following the integration, the company will broaden hedging solutions for Japanese energy producers and consumers, said Citadel’s Head of Commodities Sebastian Barrack. Citadel has about 200 staff in Asia. 

Griffin’s other firm Citadel Securities LLC, which is a market-making business, obtained a license in Japan in 2022 and opened an office to sell US fixed-income offerings. 

(Updates with Citadel flagship fund’s returns in sixth paragraph, executive comments)

©2024 Bloomberg L.P.