Alberta Business MarketingApr
1
2010
Oct
15
2009
We’re in the process now of putting together our annual “Best and Worst” feature for the December issue and, oh, what a year it’s been. Choosing our top 10 business stories of the year has never been so competitive. Do you go for the arrest of Calgary’s $400-million Ponzi schemers or Capital Power Corporation’s $500-million initial public offering?
Many of the top stories, of course, are conflations of each other. The explosion of shale gas production, for example, is the meta-story behind such phenomena as the collapse in the price of natural gas, the colossal provincial deficit and the loss of 60,000 jobs in Alberta since this time last year.
(It’s interesting how former Alberta Energy analyst Jim Roy’s once laughable prediction that the new royalty framework would result in a decline in provincial royalties has come to pass. A government report issued this month estimated that the government would forego $2 billion in revenue over a three-year period as a result of the framework’s sliding royalty scale that gives producers a holiday when prices are down and taxes them to the hilt when prices are up. And you know where prices are. This is the opposite of how it should work. Government needs stability in its revenue stream. It’s business that is set up to take risks. But to take risks it needs the prospect of huge rewards on the upside.)
Another meta-story changing the landscape in Alberta involves the electrical power industry. What do Enmax Corporation’s fight over Bill 50, TransAlta Corp.’s takeover of Canadian Hydro Developers and the Capital Power IPO have in common? They are all reactions to anticipated emissions control legislation that is going to seriously add to the cost of generating and transmitting power the old way – in massive coal-fired plants far from the people who end up using it.
Enmax believes the future lies in “distributed generation” – that is, producing power in small quantities where it is consumed (homes, enterprises) by renewable (wind, solar) or high-efficiency (heat recovery) means. Going against the herd, Enmax wants to hasten this transformation and be the dominant provider of small power generation systems currently being tested in employees’ homes. Hence in its view Alberta does not need more high-voltage wires crossing the landscape, as Bill 50 would make possible without public hearings.
By contrast, TransAlta isn’t looking to transform its whole business model, but it is prepared to pay a premium per megawatt generated for renewable power producer Canadian Hydro in order to earn emissions credits that might offset the CO2 emissions at its coal-fired plants. (Atco Power, which took a long time to see the green light, is now proposing a system of dams on the Slave River system for the same reason.)
Capital Power, meanwhile, is now free to raise money in the markets to attempt renewable takeovers like TransAlta’s and organically grow its renewables arm that includes things like generating power from methane from biomass at its Edmonton Goldbar plant. At the same time parent Epcor Utilities (read: Edmonton taxpayers) is relieved of the potential liability of crushing new emissions control regulations.
Another potential scenario, not anticipated in these corporate moves, is that with the newfound abundance of natural gas we will see more thermal generation using this cleaner-burning fuel than coal. By some estimates, the United States could cut its greenhouse gas emissions from the power sector by 40% in a matter of months simply by running its existing gas-fired peaking power plants full-out and idling the dirtiest coal-fired generators.
This reshaping of the electrical power industry is just beginning and, I expect, will be a feature of our Best and Worst package for years to come.
Sep
30
2009
No sooner had we dispatched our October issue, featuring a special report on innovation, to the printers than some counterintuitive news came to light. In contrast to the history of technology companies, ideas and talent leaving the province – a fact we sought solutions to in our cover story, “Building the Economy of Ideas” – we learned that Radient Technologies Inc. was relocating its operations from Ontario and British Columbia to the Edmonton Research Park.
Radient has a patented way of isolating active ingredients in natural products using microwave assisted processing. This is highly useful to biotechnology, pharmaceutical, food and cosmetic companies.
No doubt the move had something to do with the $5.5-million round of financing coming from AVAC Ltd., Agriculture and Agri-Food Canada, Foragen Technologies Management Inc., Koniag Development Corporation and a private investor from B.C. It’s no secret that when a group of venture capitalists takes a controlling stake in a startup, they call the shots, including where the company is located. Usually it works the other way around, with American or Central Canadian VCs plucking viable ideas out of Alberta before they take root. It’s good to see it can work both ways.
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From brain gain to commodity loss…. TD Economics on September 28 echoed something that we first raised back in our April issue, namely how the advent of shale gas pulls the plug on what has really constituted the Alberta advantage for the past decade. To quote economist Derek Burleton: “The potential for an accelerated long-term decline of an industry that does so much of the heavy lifting in the Alberta economy is arguably the No. 1 risk facing the province’s standard of living.”
Not just the gas producers, not just the drillers, not just the government so dependent on gas royalties but all businesspeople in Alberta have to think through what this means for them.
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Suddenly “emotional intelligence” is hot again. Popularized and first applied to the workplace by psychologist Daniel Goleman in the 1990s, this concept – representing the soft skills to moderate one’s own behaviour and empathize with that of others – is very much in demand in a recessionary environment where companies are short-staffed, their employees are stressed out and morale is hitting rock bottom (something my colleague Deborah Yedlin and I discussed on the weekly Edmonton AM business panel on CBC Radio on September 30).
At the recent Canadian Business Outlook forum in Calgary, CCS Corporation chairman and CEO and Concord Well Servicing co-founder David Werklund spoke at length about it, attributing a great deal of his success to what he’d learned over the years about dealing with people. As some will know, Werklund, chosen by Ernst & Young as Canada’s Entrepreneur of the Year in 2005, is a self-made Alberta farm boy who never went to university. EI isn’t the sort of thing they teach in commerce programs anyway.
I just finished reading a book on the subject, The Other Kind of Smart, by Edmontonian Harvey Deutschendorf, whose day job is as a coach and event manager with Alberta Employment and Immigration. Deutschendorf does a good job of encapsulating 20 years of research and findings on emotional intelligence into a short yet comprehensive business self-help guide. Look for a review in our November issue.
Jul
2
2009
It would be funny were it not so ominous for all of us the Alberta government’s belated reaction to the threat to it posed by shale gas. When I was researching “The Shale Gas Revolution” for April’s oil and gas industry report back in February, I put in a call to the Ministry of Finance to see if they anticipated any impact to the provincial treasury of massive new gas finds in the United States. They referred me to the energy ministry.
Fair enough. Alberta Energy has its own technocrats responsible for watching the industry and advising on the collection of natural gas royalties. But after posing the question to them, spokesman Bob McManus got back to me insisting that they did not anticipate any significant impact on revenues. But shale gas is such a game-changer, I persisted. Alberta has tons of shale, he replied. As if it were a question of geology, not finance.
Unfortunately, none of that Alberta shale has yet produced gas on a commercial scale, save for the eastern extremity of the Montney formation extending over the border from British Columbia (which, if you ask any geologist, isn’t technically a shale play but rather a finer soapstone, though producers use the same techniques to extract the gas there as for shale). Worse still, all of Alberta’s gas production – conventional, coalbed, tight, what-have-you – is finding itself in a losing battle to stay competitive with shale production coming on-stream close to major markets in Texas, Louisiana and Pennsylvania. Last I heard there were just 69 drilling rigs operating in the province, compared to hundreds, mostly drilling for gas, three years ago. People in the industry will tell you, regardless of any economic recovery, gas prices are going to stay low in North America for 10 years at least, because any price spike can quickly be matched by a run-up in shale production.
Now it looks as if the glory days of 2000-2006, when gas prices were high and Alberta was supplying as much as a third of the United States market, was the aberration, not today’s low prices. And finally the penny has dropped in the halls of government that those billions of dollars a year in gas revenues that were largely responsible for the budget surpluses and “Ralph bucks” in those years are not coming back, probably ever.
On June 23 Premier Stelmach finally made the link between shale gas and the revenue shortfall in public, hinting that the government would respond with yet more royalty tweaks (which of course will do nothing to fix the fiscal shortfall) and broad-based spending cuts. I’d feel more confident in our leadership if it had recognized this five months ago, when a shmo like me did.
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