Standard & Poor’s says the recent horrendous weather in Alberta should not affect credit ratings of firms with significant operations in the affected area.

Weeks of rain and flooding have afflicted Alberta. This was followed by a major “start-of-summer” storm with severe high winds and rain bringing golf-ball-sized hail and reports of tornados. “Although there were luckily no reports of any injuries, it is not yet known how much damage the storm caused,” S&P says. “The storm did create operational issues for electrical utilities and forced the closing of several natural gas processing and chemical plants in the region, however.”

“The effect of the flooding and tornados in Southern Alberta on the operations of the region’s gas and electricity utilities has been minor,” says Standard & Poor’s Ratings Services credit analyst Laurie Conheady. “Fortunately the damage to utility assets incurred to date has not been extensive, with no major urban centers being without power for an extended period of time.”

Remedial costs incurred by local electricity network providers, such as Edmonton-based EPCOR Utilities Inc., Calgary-based ENMAX Corp., and the rural network provider FortisAlberta Inc., are expected to be manageable. The operational issues from recent flooding are minor compared with the conditions the utilities experience every year due to inclement weather, it adds.

The asset damage incurred by AltaLink LP, the provincial electricity transmission company, is also minor. Also, legislation protects AltaLink from liability due to any potential interruptions to supply and its fixed monthly cash flows are unaffected by variable volumes.

“When costs due to storm damage are out of the ordinary, which they do not appear to be in this case, they are generally recoverable either through insurance or through the regulated rate process,” says Standard & Poor’s credit analyst Nicole Martin.

The storm also reduced the availability of ethane to Nova Chemicals Corp.’s plant in Joffre, AB. It is likely this curtailment will add to the pressures on near-term earnings, S&P says, although the effects might be partially mitigated by offsetting price increases given Alberta’s importance in supplying the North American ethylene/polyethylene market. “Nova currently has good liquidity and we do not expect that this event will materially affect its position,” says Standard & Poor’s credit analyst Kenton Freitag. “Based on the assumption that the ethane deliveries will eventually resume to normal, we do not anticipate that this event will have an effect on the ratings on Nova.”

The closure of various extraction facilities, located near Empress, AB, will not materially affect Fort Chicago Energy Partners LP’s cash flows, it adds. Inter Pipeline Fund’s natural gas liquids extraction operations at Empress II and Empress V have been minimally affected by power outages and damages, as a result of severe weather. The damages caused by the severe weather storm are still being examined, but Standard & Poor’s expects the damages to be rectified in the short term and covered under IPF’s insurance policies.