Record flooding near Calgary has left the downtown core of Canada’s oil capital empty while forcing the closing of three oil pipelines and causing as much as $5 billion in damage to homes and offices.
Companies including Cenovus Energy Inc. and Encana Corp. asked employees to work from home yesterday as power to the office towers in Canada’s fourth-largest city remained cut off for a fourth day. Most shops and restaurants that rely on office workers for business were closed.
"We have no power, no phone and I’m losing $1,000 a day in business," said a teary-eyed John Freriksen, the owner of La Fleur, a flower shop one block south of the Bow building, where Cenovus and Encana are based.
"Insurance will cover some of the losses, but the damages are a lot more than people think."
Freriksen lost $4,000 worth of inventories as his cooling units shut down without electricity and said he expects it will take another week before he’s able to get his business operating again.
The flooding is the latest blow for the economy in Canada’s oil patch, which is facing approval delays for pipelines such as TransCanada Corp. (TRP)’s Keystone XL to ship rising volume of crude from the oil sands. Pipeline bottlenecks have pushed prices for Canadian crude to about $17 below U.S. benchmarks.
Losses related to the flooding may be $3 billion to $5 billion, according to preliminary estimates from Tom MacKinnon, a BMO Capital Markets analyst. That’s at least 10 times more than losses tallied in 2005 when what was then the largest flood in a century damaged homes and businesses. The Alberta government pledged $1 billion in relief funding for flooding victims.
Intact Financial Corp., Canada’s second-largest personal and casualty insurer by market value, fell to a 17-month low yesterday.
MacKinnon estimated the flooding may reduce per-share earnings at the Toronto-based company by about $1 to $1.50.
Last weekend’s floods forced the evacuation of as many as 75,000 people from their homes in Calgary, about 7% of the city’s population.
Parts of Calgary, with more corporate headquarters than every other Canadian city except Toronto, are still under water after the Bow and Elbow rivers swelled from record rainfall in the nearby Rocky Mountains, spilling into low-lying communities. The city is working to restore power as early as today and drain sewage from areas of the city closest to the rivers, including the Stampede grounds, where Calgary’s best-known cowboy festival is scheduled to begin in less than two weeks.
Calgary’s $75-billion economy is driven by the oil and gas industry, which helped the city post Canada’s second-fastest growth last year, according to a report by the Conference Board of Canada.
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