WHY WOMEN COULD SAVE THE OIL SANDS + First Progress, then Celtic. Who’s next?
Gregg Saretsky ALBERTA’S
BUSINESS PERSON OF THE YEAR
WESTJET 2.0 The iconic airline’s president and CEO is shaking things up. That’s good for just about all of us
THE TOP
15
BUSINESS STORIES
2012 ©albertaventure.com OF
PM #40020055
Sowing the Seeds of Success
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Contents
DEcember 2012
36
A Year to Remember An election for the ages, a fight for Alberta’s future and 13 other stories looking back on the year that was By Max Fawcett
Cover Colin way; illustration SÉbastien thibault DECEMBER 2012
ALBERTAVENTURE.COM
Contents
Departments
industry report: Transportation and Logistics
8
Editor’s Note
Final Acts 74
Lunch With
66
13
Landing in Leismer
The Briefing
Cleared for takeoff: Find out why more energy companies are taking to the air
The Pat Daniel era ends at Enbridge; A guide to office gift-giving; A word on debt from Canadian Western Bank’s new president
By Geoffrey Morgan
Making the Connection
Smart Investor
Discover how Alberta’s logistics hubs keep the province in business
Hits, misses and what lies ahead: final words from a parting columnist
48
By FABRICE TAYLOR
21
Travel Essentials
Eat, Pray, Travel. Why more people are looking to experience a culture rather than just visit a destination By Robin Schroffel
48
Why Women Could Save the Oil Sands
Diversity isn’t just a buzzword – it’s a strategic asset
Cleankeys CEO Randy Marsden talks big ideas with Lita McDonald. It’s mentorship with a side of ginger beef By Michael Ganley
76
70
20
december 2012
Legal Eagles
Thou shall make thy case: The 10 Legal Commandments By Marzena Czarnecka
By Alix Kemp
72
The Never-Ending Story
Alberta needs to invest in its roads, bridges and highways. What else is new? By max fawcett
By Alix Kemp
27
Spotlight
54
What Benefit?
The vagueness of the “net benefit” test for foreign investment in Canada has many business people in an uproar, but is it really worth the concern?
FEATURES
80 78
Growing Concern
By Michael Ganley
Senior citizens are a growth market, and Care to Share is positioned for success in it
58
The New Gold Rush
By Annalise Klingbeil
International oil and gas giants are tripping over themselves to get a piece of the Montney play. Should you join them?
28
80 66
By max fawcett
60 Good to Great
Alberta’s Business Person of the Year, Gregg Saretsky, is shaking things up at WestJet. That’s a good thing for just about all of us
Entrepreneurs are defined by their willingness to take risks. Meet one that takes that to a whole new level By Michael Hingston
Special Delivery
28
Next Up
How one Boston Pizza franchisee in Red Deer might have changed the course of his billion-dollar franchisor’s business for good
82
Predictions 2013
What will be the defining issue of the coming year? Three prominent Albertans weigh in
By Omar Mouallem
By max fawcett
coming in January
The Fast Growth 50 – Alberta Venture presents the annual list of the province’s 50 fastest growing companies. Find out how your business stacks up.
The HR Guide – The province is facing a labour shortage, again. Are you doing enough to recruit, engage and retain the best possible employees?
Become a fan on Facebook.com/albertaventure.com. Follow us on Twitter @albertaventure
photographs colin way, JESSICA FERN FACETTE, illustration pierre-Paul Pariseau ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
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This month at albertaventure.com An in-depth look at Alberta’s Business Person of the Year This month, WestJet CEO Gregg Saretsky is named Alberta’s Business Person of the Year for his company’s bold new direction and impressive financial results. He’s the second WestJet CEO to be so named, following Clive Beddoe in 1999.
WEB EXCLUSIVE The Secret to Secret Santa Don’t get caught off-guard at your corporate Christmas party’s Secret Santa gift exchange this year. Find a few tips and tricks to get the best gift, at albertaventure.com/ secretsanta
For a behind-the-scenes look at Alberta Venture’s photo shoot with Saretsky and an extended gallery of images from it, go to albertaventure.com/bpoy2013. To read the story that accompanied Beddoe’s win, go to albertaventure.com/beddoe.
Extended Coverage Pat Daniel’s Exit Interview One of his final duties as president and CEO of Enbridge was to sit down and discuss his legacy with Alberta Venture editor Michael Ganley. The complete transcript of their discussion can be found at
Photo Gallery The Batcave Revealed Take a look inside Richard Carramusa’s “Batcave,” his innovative remote-kitchen that could change the way Boston Pizza runs its franchise business. albertaventure.com/ thebatcave
albertaventure.com/ patdaniel
Look for this symbol on the pages of Alberta Venture for your cue to click for more content
most popular
1. Alberta’s 25 Most Innovative Organizations 2. Platinum’s Inequities 3. Meet Riaz Mamdani 4. Captain Planet 5. Gassed Up
EXTENDED COVERAGE Why Women Could Save the Oil Sands In an industry that has been male-dominated for years, female executives are starting to make their mark. For additional facts and stats on women working in the oil sands and the energy industry, go online. albertaventure. com/ womeninoilsands
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EDITOR’S NOTE
Transformers
Envisioning a bright future for Alberta
Join Michael online at BizBeat, where he blogs on major news, including new developments on stories Alberta Venture has covered in the past. albertaventure.com/ bizbeat
In early November, more than 100 Albertans gathered at the Banff Springs Hotel to talk about big ideas for this province’s future. It was the inaugural Transform Alberta summit, put on by us here at Venture Publishing in partnership with Capital Power. The idea was to gather people from all walks of life – entrepreneurs, politicians, educators and artists – and have them come up with ideas to help Alberta harness the various waves on which it rides. The place brimmed with energy and enthusiasm. We spoke of establishing Alberta as a global centre for excellence in energy production and consumption, of ensuring our financial stability, of building bridges between people and places and of winning the global war for talent. But the word heard most often – after “transform” and “innovation,” which can be useful but are often of unclear meaning – was complacency. Albertans are complacent, we heard many times, because we have it so good. The wealth is rolling in and we’re gorged and satisfied. Why diversify our economy, when oil and gas already has us hopping? Why upset the cart, when we’re already a jurisdiction to be envied and emulated? But standing still has never been a solid foundation on which to build a future, so we came up with ideas.
As was occasionally pointed out, we’ve never been short of them. It has been the will to act that has been lacking. It was said, for instance, that the report of the Premier’s Council for Economic Strategy (dubbed the “Emerson Report” after chair David Emerson), released in May 2011, is full good ideas. In typical fashion, though, it’s still just gathering dust. Of course a great many Albertans are not complacent. Those at the Banff Springs for the summit were not. Alberta’s Business Person of the Year, WestJet CEO Gregg Saretsky, is not. Two years ago he took leadership of that tremendously successful airline and what has he done since then? He has introduced “premium economy” seating and initiated plans for a regional short-haul carrier. In so doing, as managing editor Max Fawcett writes in “Good to Great” on page 28, he is transforming the company from a startup to an institution. We have the opportunity now, while the economy is good, to do something similar for the province. There is hope. Harnessing the almost limitless opportunities in front of us will require vision, leadership and hard work. Some of that leadership must come from politicians, who require a mandate from the electorate, which requires effort from the grassroots. And Alberta – home to the Famous Five and the
Socreds and the Reform Party – has always been good at grassroots. The Banff Springs was a perfect setting for the summit despite the snowfall that stranded some folk in their hometowns: What an inspired idea William Cornelius Van Horne had 125 years ago, to build the Castle of the Rockies. Van Horne, the general manager of the Canadian Pacific Railway at the time, saw the potential for tourism in that stunning place. His work transformed Banff and even the province itself, introducing countless travellers to the Rockies. Before too long we at Alberta Venture will produce a report on the ideas from the summit. We will circulate it as far and wide as possible in hopes of helping to ignite the grassroots. Let us have the foresight and courage to act on.
Michael Ganley Editor mganley@albertaventure.com @MikeatVenture
photograph curtis trent 8 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
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ATTEND THE 2012
8C9<IK8ËJ 9LJ@E<JJ G<IJFE F= K?< P<8I AWARD LUNCHEON
Join distinguished members of Alberta’s business community as they congratulate Gregg Saretsky, president and CEO of WestJet, on his receipt of the prestigious Alberta’s Business Person of the Year Award
TUESDAY, JANUARY 29, 2013 BMO Centre, Calgary, AB Registration: 11:00 a.m. Luncheon: 11:30 a.m. to 1:30 p.m. Questions? Call 1-866-227-4276 ext 244 or email events@albertavenure.com
TICKET PRICE Individual Tickets: $95.00 plus GST Table of eight: $760.00 Recognizing Alberta Venture’s 15th anniversary, we are pleased to introduce the Business Person of the Year bursary. $10 from every ticket sold will go to the Gregg Saretsky Bursary Fund at Mount Royal University in support of the business faculty. This bursary is made possible by the support of the Chartered Accountants of Alberta. Register online at bpoy.albertaventure.com
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D EC E M B E R
2012
C a p i ta l ]
Sphere of Influence
End of an Era When Patrick Daniel took over as president and CEO of Enbridge on January 1, 2001, the company’s shares were trading at $10.93 and it had just completed a year in which it earned $392 million on revenues of $3 billion (putting it 16th on the Venture 100 list that year). When he punched his card for the final time this past September 28, the price was $38.40 (and that’s with the stock having split twice) and the company had annual income of $1 billion on revenues of $19.4
billion, putting it fourth on the Venture 250 list. To put it mildly, it’s been a good decade for Enbridge, which is now Canada’s largest transporter of crude oil. Daniel is now 66 and retires as one of the titans of the Alberta business scene, but his tenure has not ended on a high note. With the Northern Gateway pipeline bogged down in opposition and the 2010 spill in Michigan fresh in everyone’s mind (courtesy of the “Keystone Kops” comment made
Background Check Daniel was born and raised in Entwistle, a small farming community 95 kilometres west of Edmonton. His father owned a hardware store and his mother was a schoolteacher. He graduated with degrees in chemical engineering from the University of Alberta and the University of British Columbia before beginning his career in the oil patch.
by U.S. National Transportation Safety Board chair Deborah Hersman), Daniel leaves at a difficult time. But even on his final day he’s still trying to get his message out. “Many Canadians don’t appreciate that we operate by far the biggest crude oil pipeline system in the world,” he says. “It is a mechanical operation and we have a spill rate that is about half the industry average. I don’t think Canadians realize how much we put into pipeline maintenance and inspection.”
25,000 kilometers of Enbridge pipline in North America
The New Guy “ I don’t think we can stick our head in the sand and not pay attention to what is being said and read by the public,” says new president and CEO Al Monaco. Enbridge’s Northern Gateway critics, environmental activists, First Nations and scathing U.S. regulators may not be the company’s primary stakeholders,” he says, “but they are important stakeholders.” Parting Comment
Gone Green Enbridge has interests in close to 1,000 MW of renewable energy projects, including eight wind farms, four solar farms, a geothermal facility, four waste heat recovery facilities and a fuel cell.
“ Enbridge has been around for 160 years in the gas distribution business and 60-some years in the crude oil business. When you’re the biggest and recognized as the best in the world, I would hope that Canadians would be proud of that.” 2.2 million barrels of oil are delivered by Enbridge everyday
Find the complete interview with Patrick Daniel at albertaventure.com/patdaniel
BIG $34 Billion
NUMBERS
The value of Enbridge’s assets in 2011
65%
Percentage of U.S.-bound crude oil from Western Canada transported by Enbridge
$800 million The cost to date to clean up the spill in Michigan
Photograph Colin way DECEMBER 2012
ALBERTAVENTURE.COM 13
theBRIEfing VERBATIM On preparing a successor for his role as COO
“We’re really focusing on leadership development internally. We’ve got very good depth in our senior management group both at the executive level and at the senior vice-president level at the bank. Both groups include people that have had solid backgrounds in commercial banking, and we’ve got a number of candidates to step into the role that I will be exiting. It’s of key importance for us to have the right people, because as with any company, it’s the people that are there that will make the difference.” On Canadians’ high levels of personal debt
Risky Business After spending the bulk of his career in risk management, Chris Fowler prepares to take over as chief executive of Canadian Western Bank
B
ack when Chris Fowler first joined Canadian Western Bank in 1991, the company had $1 billion in assets. Today, the Edmonton-headquartered bank’s assets total more than $14 billion, and Fowler will soon be responsible for its continued growth. The bulk of his career has been in commercial lending and credit-risk management, two areas that have fuelled Canadian Western Bank’s growth. Fowler is CWB’s president and chief operat-
ing officer, but he will be taking over the CEO’s role when Larry Pollock retires in March 2013. This will mark the first time in 22 years that CWB has changed its CEO. On what he has learned from Larry Pollock
“What have I learned? That’s hard to say because it’s vast. I think the main thing that I – or anybody else – have learned from him is that you always need to be interested, you always need to ask questions and always need to be opportunistic.”
“The level of personal indebtedness should be a worry for all parts of the financial industry. The economy functions from two sides: you need people to be in the market to buy retail and durable goods and you also need consumers to put savings into capital items like bonds and the stock market, which allow businesses to grow. But when you’ve got very high debt levels – and particularly when a high percentage of debt is against housing – then you have a lot of people with all their eggs in one basket and a less diversified financial position.” On the best way to tackle Canadians’ debt
“Financial literacy is the key. Understand the implications of being in debt and what choices you’re making when you take debt on. Clearly, ensure that when you take on debt, you understand what you need to pay it back. The number one issue that really came out of the recession in the United States was a lack of financial literacy. There was a belief in the housing market
that you could buy a house and it would always go up in value. And that you could refinance at any time, and you would be able to sell your house and pay your debts at any time. Of course, that’s not ultimately what happened.” On a possible increase in interest rates
“We’re in a very low interest rate environment and people can service a very high level of debt today. At some point, the date of which we don’t know, there will be an effect on servicing that debt.” On the reputation of Canadian bankers
“I believe all the Canadian banks will be just fine ahead of the Basel 3 capital rules that are coming into play January 1. I think that Canada has a very strong reputation on the banking side and I think the track record has been so positive that the Canadian banking sector’s reputation has gained in recent years.” On Canadian Western Bank’s role in the financial industry
“The bank started back in 1984 because the Eastern banks would stop lending when the economy was turning down in the West. It was access to credit. Our founders looked at that and said, “No, we should have our own bank where we can make decisions in Western Canada and participate in the economy.” And that has always been our perspective.” On moving into Ontario, Quebec and beyond
“Our moves into Ontario would be more in the equipment finance, leasing and residential mortgage areas. So those are very specific and targeted areas where we’re not in the face of the bigger banks.” photograph Ryan girard
14 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
ETC.
The Cynical Guide to Office Christmas Gifting The holiday season is all about tradition, but some â&#x20AC;&#x201C; eggnog, anyone? â&#x20AC;&#x201C; are more enjoyable than others. When it comes to holiday traditions in the workplace, one of the most vexing is the giving of gifts to your co-workers. With that in mind, here are a few gift ideas to help you survive the ordeal, along with a strategy that can let you have a little fun in the process.
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ALBERTA SPRINGS 10-YEAR WHISKY Skip the bottle of Scotch that everyone else is buying. Instead, show your savvy â&#x20AC;&#x201C; and your patriotism â&#x20AC;&#x201C; with a bottle of Alberta whisky. No less an expert than Davin de Kergommeaux, the author of a recent book called Canadian Whisky: The Portable Expert, has described it as one of his favourites.
TICKETS TO THE WORST SHOW IN TOWN This one takes a bit of finesse, since you want to find a gift that will be suitably unpleasant for your target without it appearing that way. But the good news is that there is always a truly execrable live performance happening somewhere in your city. Buy a pair of tickets and revel in the fact that your unwitting target will feel compelled to honour them.
YOU ARE NOT A GADGET BY JARON LANIER There arenâ&#x20AC;&#x2122;t many readable books that have been written about the philosophy of technology, but Lanierâ&#x20AC;&#x2122;s manifesto about our deepening relationship with technology and where it might take us as a society is certainly one of them. Best of all, it will give you two something other than your latest malware infection to talk about.
GIFT CERTIFICATE FROM SEPHORA Letâ&#x20AC;&#x2122;s face it â&#x20AC;&#x201C; your administrative assistant spends all day helping you look good. This Christmas, return the favour by giving a gift certificate from a store that specializes in making its customers look their best. Failing that, an envelope full of cash is never a bad idea. Okay, weâ&#x20AC;&#x2122;ll quit kidding around. Turn to page 16 for some real gifting ideas.
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www.parklandcounty.com/business In 2012, we made Alberta Ventureâ&#x20AC;&#x2122;s â&#x20AC;&#x2122;s list of Top 25 Communities in Western Canada to do Business.
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theBRIEfing Listed
Alberta Venture’s Gifting Guide From new smartphones to smart looking knives, we’ve created a list that you can to use to shop for the business person in your life – or give to those who are shopping for you.
For The Guy Who Loves Gadgets (but hates Apple)
For The Person Who Likes To Entertain
ASUS TRANSFORMER PAD INFINITY TABLET
NESPRESSO ESPRESSO MAKER
With the Asus Transformer Pad Infinity, you might as well have a home theatre system with you everywhere you go. It boasts a 1920 x 1200 resolution full HD screen with Super IPS+ mode (meaning it’s suitable for outdoor use), scratch-resistant Corning Gorilla Glass 2 and SonicMaster audio technology for high-quality sound. $499.99 www.bestbuy.ca Other ideas: Nexus 4 smartphone, from $309 play.google.com
For The Foodie In Your Life HARUYUKI TSUCHIME KNIFE Said to look like waves striking a beach in the moonlight, Haruyuki Tsuchime blades from Seki, Japan, make a striking introduction into the world of high-end Japanese knives and a great addition to any kitchen. From $105, knifewear.com Other ideas: Wine Collective subscription, $87.99 per month, Palate Expansion shipment winecollective.ca
Good coffee at home and the office takes time and talent – that, or frequent runs to the neighbourhood café. But things change when you’ve got a Nestle Nespresso machine. Its 16 premium blends and collection of accessories lets you make barista-quality espresso, lattes and cappuccinos simply by loading a capsule and pressing a button. $369.99, Nespresso CitiZ Limousine espresso machine, futureshop.ca Other ideas: Victoria Spirits gin, From $48, 750 ML, victoriaspirits.com
For The Gal Who Likes To Indulge FAIRMONT GIFT CARD There’s no question that Fairmont is the name in luxury hotels in Canada, and with 16 properties in the country, it’s safe to say that one of these gift cards – redeemable for accommodations, services and meals regardless of whether or not you’re a guest – won’t go unused. fairmontgiftcard.com Other ideas: Kiehl’s Creme du Corps, $37.50, 250 mL bottle kiehls.ca
The Gifts that Keep on Giving CHARITABLE DONATION
For The Guy Who Likes To Look Good
Sometimes we just don’t need more stuff, and that’s where CanadaHelps comes in. The donation-facilitation website connects donors with more than 80,000 charities, making it easy to contribute, either on your behalf or on someone else’s, in just a few clicks. www.canadahelps.org
CASHMERE SCARF If there’s one fashion accessory that enjoys a long season in Alberta, it’s the scarf, so it right with cashmere. Designers like Brooks Brothers and J. Crew offer soft cashmere scarves for both men and women in stylish plaids, Fair Isle knits, and solid colours. US $348, cashmere heather plaid scarf, brooksbrothers.com
EXPERIENCE ALBERTA’S HISTORY PASS (UNLIMITED ACCESS TO HISTORIC SITES AND MUSEUMS) Sometimes we get so wrapped up in work we forget there’s a world out there. Give an escape – many escapes – with an Experience Alberta’s History pass. Passholders get one year of unlimited access to 18 provincial historic sites and museums.
Other ideas: Saphir shoeshine starter kit, US $195, hangerproject.com
$30, adult; $75, family history.alberta.ca/mainfiles/experiencealbertahistory.aspx
For all the Type-A personalities out there, we’ve developed a guide to winning – yes, winning – your office’s Secret Santa gift exchange albertaventure.com/secretsanta
16 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
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theBRIEfing Funny Money
Required Reading
Profits from Prophets On December 21st of this month, the world will end. Or, at least, that’s what some people seem to think. The idea, one that’s been expanded upon in books, on websites and on handwritten newsletters that get stuck under your car’s windshield wiper, is that the ancient Maya people – you know, the ones that mysteriously died out centuries ago – looked into the stars and were able to identify, with remarkable precision, the date on which the world as we know it would end. According to “authors” like José Argüelles,
Lawrence Joseph and Daniel Pinchbeck, the Mayan prophesy will come to fruition this month. You’re skeptical. So are we. But there are plenty of people who do subscribe to this idea, and collectively they present a once-in-a-lifetime business opportunity for the enterprising entrepreneur. In order to give you a bit of inspiration, we’ve come up with a few Rapture-related businesses that could do well as the world approaches this latest doomsday prediction – and when the next one rolls around in due course. Pet babysitting service
Real estate brokerage The virtuous won’t need earthly shelter once they’re elevated to heaven, so it stands to reason that they’d be willing to unload their homes for a reasonable discount. All you need to do is raise a few thousand dollars, draft up a legal document that says you take possession the day after the Rapture and start making your offers.
Just because people get raptured doesn’t mean their beloved cats and dogs do. That’s where you come in. For a nominal upfront payment – money they soon won’t need – you can offer to feed, walk and otherwise care for their pets that are stuck back on Earth.
The End!
Home renovations
Singing Telegrams
Just because your potential customers aren’t interested in selling their house doesn’t mean you can’t earn their business. Instead, why not offer them the chance to turn their former home into a testimonial to their virtue, a symbolic reminder to all those who are still stuck on Earth – burning in a lake of fire, presumably – that their choice to go shopping on Sundays was not, in fact, the right one. Pride may be a sin, but we’re willing to bet that God would cut you a break on this one.
You’re in heaven, but that person who sat in the cubicle next to you – you know, the one who smacked her gum and talked loudly on the phone about her dates – isn’t. Why not send her a singing telegram that reminds her of that fact, perhaps with a few choice biblical phrases thrown in for good measure? Here, too, upfront payment is a must, since, you know, the Rapture isn’t actually coming.
18 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
The Dragon Speaks There can be no doubting
W. Brett Wilson’s ability or his willingness to get his name out there, and he’s done so again, this time in book form with his autobiography Redefining Success/Still Making Mistakes. In it, the “hugely popular former co-star of CBC’s Dragons’ Den and Slice’s Risky Business,” as the dust jacket describes him, tells a story of sin and redemption. He confesses to working too hard, to being too driven and to neglecting his family and friends. A divorce and a cancer diagnosis force him to confront his demons, and, with a story arc worthy of Hollywood, he rediscovers the importance of family and friends and the simple virtues of life, concluding that “wealth, fame and status become very superficial measures of real happiness.” The book also ventures through tales from the Dragons’ Den, and Wilson periodically restates his commitment to philanthropy as a means to build business, but mostly this is a tribute to the man known as the Dragon with a heart.
There’s a better place to put your money. SAFE, SECURE COMMERCIAL REAL ESTATE INVESTMENTS TAX ADVANTAGED STRUCTURE SUPERIOR ANNUAL RETURNS DIVERSIFIED WESTERN CANADIAN PORTFOLIO OVER 30 YEARS OF SERVICE TO INVESTORS
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THE SMART INVESTOR By FABRICE TAYLOR
THE FINAL COUNTDOWN
A review of the biggest hits – and misses – of the last two years
T
20 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
Intertape Polymer Fund (TSE:ITP) (' 0 / .
STOCK PRICE $
he end of the year is a time of reckoning, reflection, bragging and eating crow, particularly for the stock market pundit and particularly when it’s his final Smart Investor column for Alberta Venture. I’ve been writing this column for a few years now and by and large, if you’ve taken my advice, you’ve done well. There are exceptions of course, but we learn as much from our mistakes as we do from our triumphs, so let’s look at a few of each. Intertape Polymer was a monster hit. Recommended in this space in July of 2011 when the stock was trading at $1.55, it has since given investors a return of almost 400 per cent. Intertape is one of my favourite kinds of investment – what I like to call a broken stock on the mend. Once upon a time it was a $45 stock in a decent industry (tapes, films and other packaging goods), but the company borrowed heavily to expand and it nearly blew up. The ensuing financial crisis almost finished it off. But a couple of long heart-to-heart conversations with CEO Greg Yull and some hard digging convinced me that the company could get turned around. If it did, I figured the stock would take off too. After all, the 40-year-old business had $800 million of sales and a market value of only about $60 million. That’s cheap if it’s in any way profitable, and I thought profits were going up. I was right – and I was pretty much alone. No analysts covered it. (There are 20 analysts for every two-bit gold mine but no interest in an industrial gem that actually had the potential to give the returns investors hope for from mines but rarely get.) Another kind of company I like to look at is what I call a “pickax” firm. I get the name from a history of the Klondike gold rush I once read that revealed it wasn’t the miners who made the money but rather the saloon, whorehouse and pickax supplier. They took no
, + * ) ( '
commodity price risk but still earned a great living because no matter how much or how little (more likely the latter) a miner made, he still needed a pickax. One such company recommended in this column in March of 2011 was Athabasca Minerals, which produces gravel in Fort McMurray for oil sands producers, who use it for roads and equipment. No matter how much money these producers make (or how little) and no matter the price of oil or the cost of labour, they need gravel to grow, and that’s something they all want to do. And because, as they say, “gravel don’t travel” (due to the cost of shipping it), having it where it’s needed leads to huge profitability. Athabasca earns almost 50 per cent on equity, which is far better than oil sands producers. The return so far? Almost 900 per cent. Another winner was Bauer Performance Sports, the hockey gear giant. The reasoning behind this pick was that the market just wasn’t correctly valuing its assets. The stock was trading at around $7, or roughly eight times trailing earnings. But brand names, as Warren
Buffett knows, are valuable assets and deserve a premium valuation, not a discount. Bauer’s name is so powerful that when Nike bought the company it branded the gear “Nike Bauer”. That’s saying something. So is the fact that the stock recently hit a high of just under $12. I still like it, as well as the others mentioned. Now, to be fair, I have to own up to a dog. That would likely be Edgewater Wireless. It’s a great concept – a faster WiFi router in a world where data volumes are increasing exponentially – but a tough business, especially for an undercapitalized firm. Although well-managed, Edgewater suffered from a chronic lack of capital and the return is negative 60 per cent. The lesson? Great ideas aren’t always enough. Going forward, my micro-cap pick for 2013 is Nordex Explosives, which as the name implies makes things that go boom. Its customers are mines and quarries and construction firms, all growth industries that will serve this little pickax company well, and I think it will do well for you too. AV For more ideas, you can join my newsletter at www.presidentsclub.ca.
travel essentials By Robin Schroffel
Reasonable Accommodations Why more travellers are trading the hotel for a homestead
THE ESSENTIALS
Business Class Case by Powerbag
The way people travel is changing. Just a few years ago it was all about ticking off a list of sights and retreating back to your hotel room, but according to Willie Kelly, senior consultant with Edmonton’s Paull Travel Ltd., one of the biggest travel trends she’s seeing is the turn towards experiential travel. That means soaking up the culture and the spirit of a place by living in it, Kelly says, rather than simply observing it from outside. “Most North Americans are well-travelled to start off with. Now they want to do the experience thing – go and feel and see and smell, that Eat, Pray, Love feeling.” A huge part of getting that experience involves breaking from routine when it comes to booking accommodations. “A hotel is a hotel,” Kelly says. “What kind of experience do
you get from a hotel?” Booking a private apartment in Paris, an overwater bungalow in Bora Bora or a turret in a Scottish castle, however, is another matter entirely – one that can add that extra immersive dimension that turns a mere vacation into a life-changing experience. From rooms in Tibetan monasteries and luxurious tents in the African savannah to Mick Jagger’s own Caribbean retreat and rustic-chic cabins on Australian Outback farms, alternative accommodations are everywhere – and they’re getting more accessible all the time. The Internet, obviously, is a good place to start looking. But an even better idea, Kelly says, is to talk to friends who have done it themselves. And although you don’t technically need to use a travel agent, it’s not a bad idea when you’re
booking a place that’s less corporate than a Hilton or a Holiday Inn. Online travel scams can be pretty sophisticated, and with an agent you’ve got someone who can vouch for the property and make recommendations based on experience. Plus, if things do go awry and your dreamy Moroccan riad turns out to be a vacant lot, it’s their job to sort out the mess, get you into new digs and push for that refund. If you do choose to book on your own, Kelly says that it pays to be on your guard. We’ve all heard horror stories of places found online that looked perfect but turned out to be roach-infested dumps. Kelly recommends building a safety net by only making payments with a credit card (never cash or personal cheque). And if someone’s asking for the full payment up front, listen to your gut: chances are it’s a scam.
Ever find yourself with a dying battery and escalating blood pressure as you race towards the nearest electrical outlet? Powerbag takes the stress out of our modern-day device-dependence by combining traditional briefcase functionality with enough stored battery power to charge a smartphone up to four times. Simply connect via USB and you’re back in business. The case’s padded compartments for laptops and tablets keep your technology safe from harm, while its airport checkpoint-friendly design means you don’t even have to take your computer out of your bag when passing through security. mypowerbag.com US$149.99
Week at Clayoquot Wilderness Resort You don’t have to head south for a blissful escape – or even overseas, for that matter. The Clayoquot Wilderness Resort brings luxury into the Canadian wilderness and integrates its guests with nature in absolute comfort. Prospector-style tents are outfitted with antiques, wood stoves and exquisite rugs, while outside, bears wander through the misty forest. “It’s the only place that I remember leaving and crying,” says Paull Travel senior consultant Willie Kelly. wildretreat.com, from $9,450 per person, all inclusive
PHOTOGRAPHS COURTESY OF CLAYOQUOT WILDERNESS RESORT DECEMBER 2012
ALBERTAVENTURE.COM 21
SeatGuru app Take the guesswork out of aircraft seat selection for good with SeatGuru, the latest app from online travel bible TripAdvisor. Find out if you’ve got a good one or a bad one at a glance through the handy colour-coding system (red for bad, green for good) and read notes on each individual seat, including everything from its amenities like TV and power outlet to how likely it is you’ll be bumped into by travellers walking up and down the aisle and how much leg room you’ll actually have. App Store and Google Play download, free
Love Home Swap membership Featured in the Wall Street Journal, the Sydney Morning Herald, and Elle Decor, the website Love Home Swap connects homeowners in more than 95 countries for the perfect house swap. Upscale, character-infused homes and condos are the norm here, from designer Brooklyn townhouses to chalets in the French Alps to Australian beach homes. On top of helping travellers save big bucks on holiday accommodations, house swaps give you the chance to live like a local and experience a destination in an entirely new way. lovehomeswap.com, US$159 per year
CONVENIENCE, COMFORT, CONTROL.
AFAR magazine subscription
CHARTER AIRCRAFT MANAGEMENT AIRCRAFT SALES WE OFFER THE LARGEST, MOST DIVERSE JET AND TURBOPROP FLEET IN WESTERN CANADA & CAN PROVIDE EXPERT ADVICE ON ALL YOUR AIRCRAFT CHARTER & OWNERSHIP REQUIREMENTS
230 Aviation Place NE, Calgary, AB T2E 7G1 Phone: 403.275.8121 Toll Free: 1.888.291.4566
www.sunwestaviation.ca
Since publishing its inaugural issue in 2009, AFAR has set itself apart from other consumer travel magazines with its focus on experiential travel. Bright, full-page photographs, unusual destinations and journeys, and an almost National Geographic-like sense of discovery inspire and inform armchair travellers like few others on the rack are able to manage. afar.com, US$30 for 7 issues
ADVERTISING SUPPLEMENT
Who Do You Want to Talk to? IMAGINE IF YOU HAD 25 MINUTES TO SPEAK directly to your key audience, whether it be your stakeholders, investors, members, customers or employees. Imagine the opportunities you would have to tell them about your organization. ✓ What would you say to them?
✓ What are the facts and figures that you would want them to know about your organization? ✓ What are the stories that would enhance your image and build your brand? ✓ How could you provide more value to your association members? ✓ What messages could you convey to government and regulators? ✓ How would you be able to inspire current and potential employees? ✓ What else might you be able to up-sell or crosssell to existing customers?
Venture can help you reach your desired audience – efficiently and with impact
The business of magazines
MEET VENTURE PUBLISHING
THE 25 MINUTE MEDIUM
You know Venture Publishing for its award-winning business magazines Alberta Venture and Alberta Oil. But did you know that Venture Publishing provides the publishing expertise behind many leading custom consumer and business magazines and websites in Alberta for a diverse client list? A custom magazine is the optimal tool for brands and organizations to connect with key decisionmakers. By combining journalistic insights with marketing acumen, custom magazines deliver inspiring and entertaining communications to readers through branded storytelling. At Venture, we’ve proven that this approach results in loyal consumers, engaged association members and increased customer activity. At Venture Publishing, we have an understanding and insight into how great custom magazines work. We believe in tailor-made, high quality, editoriallyled products that achieve a client’s communication and marketing objectives. Every organization is unique, and our publishing strategies are too. The magazines we produce for our clients serve to: • Educate readers on products and services • Communicate to members on association issues • Recruit new employees • Shape public opinion • Motivate behaviorial change
Global research shows that, on average, a custom magazine will...
Be read for 25 minutes or more While some media rely on shock tactics for instant impact, the effect is transitory. By contrast, custom magazines focus on the long-term relationship, and have a depth of space to convey multiple messages and product detail, cost-effectively. The net effect is shown by a comparison of viewer attention:
MEDIUM
ATTENTION GENERATED
Online advertisement
5 seconds
Billboard advertising
8 seconds
Radio advertisement
20 seconds
TV advertisement
30 seconds
Custom magazine
25 minutes (1,500 seconds)
STAND OUT FROM THE CROWD On average, we are each exposed to upwards of 3,000 advertising messages each day, yet only act on one every five days. A custom magazine can ensure your organization stands out. It can help you connect with your target audience, change mind-set, build a relationship with them and acquire new customers, helping drive sales and loyalty. Companies that want to brand themselves as a provider of choice, that need to maintain existing relationships with clients, attract new members or employees, or build their profile as an association with lobbying powers can all benefit from a custom magazine.
Create high levels of response
Almost 50% of custom magazine readers act or respond after each issue.
Increase brand loyalty
In an Association of Publishing Agencies survey conducted by Millward Brown, 94% of respondents said they look forward to receiving a custom magazine, and 62% recommend the title to a friend.
Generate an average 8% uplift in sales
ADVERTISING SUPPLEMENT
Have a lasting impact
One in four readers will pick up an issue of a custom magazine more than three times, and 62% will keep it for a week or more.
Achieve many communication and marketing objectives, including: • mark a significant milestone or business
achievement • communicate on association issues • shape opinion • drive traffic • acquire new customers • recruit employees • increase sales • cross- or up-sell • reassure purchase decision • provide information and educate • entertain • communicate and support brand positioning • build loyalty • generate advocacy • reduce churn • add value or reward customers and members • motivate staff • provide sales collateral • support a franchise
Magazines have a unique set of attributes, which explains why readers connect with this medium like no other: • Magazines are truly portable, in a way that even a
wi-fi connected laptop can never be • Magazines can impart multiple messages, in a
way that a single TV, radio or cinema advertisement cannot • Magazines are a ‘permissive’ medium which
readers select, unlike most other forms of marketing that ‘broadcast’ information at the consumer • Magazines are aspirational, appealing to an
individual’s self image or professional status
WHY VENTURE PUBLISHING? Venture Publishing‘s full-service contract publishing division has award-winning expertise in editorial, design, production, sales and circulation management, allowing it to provide a turn-key service for clients. Our staff is experienced in both conceptualizing and launching new magazines, and relaunching existing titles on a fee-for-service basis. Our unique insight into the custom magazine sector, combined with an unmatchable knowledge of Alberta and its associated industries, positions Venture Publishing as the first choice for associations or businesses wanting to create a title with minimum impact on their own resources and maximum marketing effect. Our portfolio includes a range of frequency, formats and creative approaches, which reflect our tailor-made approach to each project. Venture Publishing has an established and highly successful sales force, allowing us to work with clients to maximize advertising opportunities within their titles. All of our sales activity is supported by our in-house marketing team which produces a range of materials to promote our clients’ magazines effectively. Additionally, our expertise in print production and distribution ensure cost efficiency for our clients’ budgets. For clients that wish to reach the province’s influential and affluent business community, we can offer distribution as a ride-along with Alberta Venture and/or Alberta Oil magazines, ensuring the custom magazine ends up on the desk of Alberta’s decision-makers. Venture Publishing’s digital division has extensive experience in creating and developing websites on behalf of clients around the world. From creating site maps and user journeys, building fully interactive sites with the latest technologies, to content refreshes, our team is able to help you develop your online presence for maximum effect.
The best testimonial for our relationship is the magazine itself; it regularly receives an enthusiastic reception from readers and from Finning management. With help from Venture Publishing, the magazine has evolved into a very readable and interesting publication that supports our sales objectives. Venture’s editorial, advertising, production and circulation crew is friendly, flexible, responsive and easy to work with. I particularly appreciate the insights they have provided on how to develop editorial content, the speed with which they have been able to understand the needs of our business, and the sensitivity they demonstrate in dealing with our sales team and customers. - Jeff Howard, Publications Manager, Finning (Canada)
ENGAGING AND INFORMATIVE BRANDED CONTENT
Our relationship with Venture Publishing Inc. is strong. The best thing I like about our relationship is I can put all of my trust into them and know I am going to get an excellent product every time. I do feel they are the best in the business. - Erin Stevenson, Merit Contractors Association
In an age of information overload, where search engines provide a wealth of data within seconds, magazines have a unique ability to filter out, to sort the wheat from the chaff. Magazines can be advisory, the information they contain can be timesaving, and the net effect is that the reader is more inclined to act upon content. People love magazines, and while readers understand that a custom magazine is partly a marketing tool, they welcome and enjoy reading branded content that stimulates, informs and entertains them. Custom magazines use the mediumâ&#x20AC;&#x2122;s positive attributes to best advantage, overlaying a clientâ&#x20AC;&#x2122;s marketing and communication objectives on to well-crafted content that appeals to readers. Custom magazines have become an increasingly important part of the media mix. In 2009, marketers invested more into branded content than ever before, according to a study by the Custom Publishing Council. In our experience, custom magazines engage with readers in a way that suits them, allowing them to opt in at the time and location of their choice. This puts them in control and makes the message all the more welcomed. One of the greatest benefits of customized branded content is the ability to keep the dialogue timely and ongoing. More importantly, custom publications put the client firmly in control of the message. Studies show that readers respond to this approach: The Roper Public Affairs Custom Publishing Survey from March 2009 reveals that 70% of surveyed participants have acted on tips and information delivered to them in a custom publication.
VENTURE IS PROUD TO BE THE PUBLISHER OF CHOICE FOR: Finning Canada Merit Contractors Consulting Engineers of Alberta Alberta Health Services â&#x20AC;&#x201C; Mental Health Promotion Canadian Association of Drilling Engineers Edmonton Chamber of Commerce Alberta Cancer Foundation Edmonton Symphony Orchestra Alberta Regional Council of Carpenters and Allied Workers MacEwan University School of Business Petroleum Services Association of Canada Productivity Alberta United Way of the Capital Region In addition, we have published special commemorative magazines for STARS, Alberta Land Surveyors Association, Syncrude Canada, Epcor, Alberta Ballet, and Canadian Energy Pipelines Association, among others.
If this kind of powerful marketing and communications tool is of interest, we would be happy to show you our portfolio of magazines. Feel free to contact Ruth Kelly, publisher, 780-990-0839 ext 224 rkelly@venturepublishing.ca to learn more about how you can benefit from Ventureâ&#x20AC;&#x2122;s publishing expertise.
The business of magazines
E ? S ; H I = I F F ? A ? @ I O H >;N C I H
The spotlight Alberta Venture salutes those individuals and companies that have been singled out for recognition of their accomplishments. • The Alberta Order of Excellence has eight new members: Robert Hironaka, Roger Jackson, Irving Kipnes, Griffin Lloyd, Preston Manning, Ronald Southern, Robert Westbury and Rosaleen Zdunich. • Mark Regehr, formerly of MNP corporate finance, joins Next Equities as its new portfolio manager. • A. Scott Hamilton replaces David Criddle as the CFO of Pro-Trans Ventures, a Calgary-based transportation and logistics company. Criddle will remain as a member of the board of directors. • CYGAM Energy
has appointed David Taylor as president and CEO, replacing Giuseppe Rigo. Rigo remains chairman of the board and managing director of CYGAM subsidiaries Rigo Oil Company Tunisia and Vega Oil.• Ag for Life, a Calgarybased non-profit dedicated to educating Albertans about agriculture, has appointed Stephen Vandervalk and Rich Smith to its board of directors. Vandervalk is the president of the Grain Growers of Canada, while Smith is the executive director of Alberta Beef Producers. • Bill McKenzie has been appointed as CEO of Wild Rose Brewery. He was previously the president of
Big Rock. • Chris Fowler, the president and COO of Canadian Western Bank, has been appointed to the Art Gallery of Alberta’s board of directors. • Mart Resources has appointed Dmitri Tsvetkov as CFO. Tsvetkov was previously the CFO of Heritage Oil. • James Thomson has retired as vice-president of land at Painted Pony Petroleum and has been replaced by Bruce Hall, previously the vice-president of corporate development. Barry McNamara joins the company in Hall’s previous position. He was most recently the vicepresident of development at Spartan Oil.
AWARDS/EVENTS Canmore Connected The town of Canmore received Google’s eTown award for the Canadian Prairie region. The eTown awards, a new program for Google this year, highlight TOWN the importance of the online AWARD economy and recognize 2012 towns with a high potential for online business growth. The award was presented to Blake Richards, MP for the riding of Wild Rose, in Ottawa. “The entrepreneurs and business leaders in Canmore have long been at the leading edge in harnessing the power of technological innovation to create jobs, growth and prosperity,” he said. “They provide an excellent example for businesses and governments across Canada, and I applaud them.” SEND NOTICE Send your notices of awards or appointments to feedback@albertaventure.com.
28 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
By Max Fawcett / PHOTOGRAPHS COLIN WAY
GREAT GOOD TO
Alberta’s Business Person of the Year, Gregg Saretsky, is shaking things up at WestJet. That’s a good thing for just about all of us >
DECEMBER 2012
ALBERTAVENTURE.COM 29
If it ain’t broke, don’t fix it. It’s a cardinal rule when it comes to running a business. Yet in his first year as WestJet’s president and CEO,
Gregg Saretsky decided to break it – big time.
The company, he announced this past January, would explore the possibility of creating a regional short-haul carrier, one that would compete directly against Air Canada in some of Canada’s most underserved markets.
Gregg Saretsky,
on his favourite pastime “ I love to travel, and this business gives me a great opportunity to do that. But I love to get off the beaten track. So for me, going to Miami Beach is very low on the list. Finding a beach in the South Pacific that’s remote and where I can stay in a thatched hut? Perfect.”
30 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
He understood that the move would be met with skepticism. “We’d said for 16 years that the success of our business model was a function of its simplicity: a single fleet of 737s, a single maintenance program and a single set of spares. And all of a sudden, we’re talking about a new airline that’s completely different.” That’s why Saretsky left the final decision in the hands of the company’s 8,600-plus employees. He and his executive team – including all of the company’s vice-presidents – travelled across the country to meet with “WestJetters,” selling them on the plan in face-to-face interactions, small group sessions and a series of larger town hall forums. It worked. On February 8, 2012, the company announced that its plan had been endorsed by 92 per cent of its employees, a show of support that surprised even Saretsky. “I expected it to pass,” he says, “and if it didn’t pass we would be the reason it failed because we didn’t do a good job of explaining why this strategy was important to WestJet. But 92 per cent is resounding, in any kind of vote. It says we have incredible support from our employee-owners, who are ready to take the next step.” If you only knew about Saretsky from a potted biography, you’d PROBABLY
conclude he was destined to end up as the CEO of an airline. After all, both of his parents worked for airlines, his two brothers are pilots (one for Cathay Pacific and the other for Air Canada) and he married the daughter of a pilot. As former Canadian Airlines executive and longtime colleague and friend Jack Miles says, Saretsky has “jet fuel running through his veins.” But Saretsky’s bloodlines didn’t really kick in until he was in his mid20s. “I wanted to be a doctor,” he says. “I did a bachelor of science degree in biochemistry and microbiology at UBC, and the intention was to go on to medical school. It wasn’t until my graduating year that I realized I didn’t really want to do medicine.” He enrolled in the University of British Columbia’s MBA program, thinking that he could combine his interest in science with a degree in business and work on the commercial side of the health-care field. All the while, though, he was spending his summers working in the airline business, first as a flight attendant for Air Canada and later as a customer service agent with Wardair. After graduating, he worked in banking for two years before realizing that his calling didn’t involve cashing cheques or helping people plan their financial futures. He quit his job at the Bank of Montreal and signed on with Canadian Airlines, and his career took off from there. What was the appeal of the airline industry? “It’s ever-changing, and it’s fast-paced,”
Gregg Saretsky at WestJet’s corporate headquarters in Calgary
he says. “The business has so many different facets. There’s a finance facet, a customer service facet, a production facet. It’s a whole bunch of businesses in one, and the opportunity to try your hand at every one of those things along the way is really attractive. You’ll never be bored, and every day is different.” He knows what he’s talking about, too. In his decade-long stints at both Canadian and Alaska Airlines, Saretsky did everything short of flying the planes and unloading the baggage. At Canadian, he worked as a marketing manager in a variety of regions and departments before being promoted to the role of vice-president of airports, a position that saw him handle the operational management of Canadian’s 110 North American airports and the people that staffed them. After two years in that role, he was bumped up to vice-president of passenger marketing, where, among other things, he negotiated joint ventures with Qantas, Air New Zealand, and China Airlines in order to open up those growing markets. He then jumped to upstart Alaska Airlines in 1998, where he spent almost a decade as the company’s executive vice president of marketing and planning. In that role he grew the company’s online sales from three per cent to 48 per cent of total sales, developed a network of code-sharing relationships that expanded the once-regional airline’s reach, and optimized the company’s flight schedule to the point where it led the industry in aircraft utilization. But after almost two years as Alaska’s executive vice-president of flight and marketing, Saretsky decided to come home to Canada and an airline that bore a striking resemblance to Alaska. “I’d never flown
WestJet and I’d never experienced it for myself,” he says, “but I heard these incredible stories about what a wonderful airline it was. And being in the industry I watched their financial results from a distance, and I was always amazed at this little airline that seemingly could do nothing but great things.” SARETSKY JOINED WESTJET IN 2009 as the vice-president of
WestJet Vacations, but Miles suspected that he was being groomed for something bigger. “I have a hunch that when they hired him as a vice-president, they were looking at him to see what he was made of and where else he could go,” Miles says. “He spoke to me before he went, and I said ‘Gregg, you’re not going to be in that position very long.’ ” Sure enough, Saretsky was promoted to executive vice-president of operations of WestJet just four months later, although Miles confesses that even he didn’t expect Saretsky to rise to the very top quite so quickly. But in April 2010, less than a year after he joined the company, Saretsky was appointed as WestJet’s president and CEO. He replaced outgoing president and CEO Sean Durfy, who had held both positions since 2007. Saretsky knew he has some big shoes to fill. “Founders, they cast big shadows. Clive [Beddoe] and the team of founders did a wonderful job giving this airline a great start and getting it as far as they have. It’s always hard to follow in the footsteps of a founder.” That said, Saretsky isn’t afraid to try – or to take the company in a direction that differs from the vision laid out by those founders. Take its recent decision to introduce “premium > DECEMBER 2012
ALBERTAVENTURE.COM 31
economy” seating, one that has rankled many who take the company’s mission to “liberate Canadians from the high cost of travel” as an article of faith. Saretsky says the move is a reflection of another important aspect of the company’s culture, its commitment to serving its customers, but that he understands why some people might find it curious. Still, he says, the company can’t be afraid of change. “All of these decisions, as our business model continues to evolve, deviate from the model that was launched in 1996,” he says. “But for a successful business, standing still isn’t an option. A successful business is always moving forward. According to Dan Muzyka, the president and CEO of the Conference Board of Canada and a professor of entrepreneurship at UBC’s Sauder School of Business, Saretsky’s ability to make that transition between the past and the present is critical to WestJet’s future. “It is very rare – very rare – that you get a sustained successful growth company whose founding entrepreneur hangs on,” he says. “I’ve seen a number of cases where even if that happens, there comes a Rubicon – they don’t make it through the transition. And sometimes they take the company with them.” WestJet’s challenge, Muzyka says, is to transform itself from a startup to an institution, and that’s something he thinks Saretsky is tailor-made for. His background in the industry and his demonstrated capacity for meeting operational objectives are key assets for the company. “Strategy isn’t just about broad statements and visions,” he says. “It’s about implementing them. And Gregg is very good at that.” But it’s Saretsky’s leadership style, and the fact that it dovetails so nicely with WestJet’s corporate culture, that really sets him apart, Muzyka says. “There’s a wide array of leadership styles, and an array of successful leaders. But this empathetic quality and ability to relate to people is truly exceptional. Is he bottom line oriented? Absolutely. But he’s achieving that through people.” Atco chairman Ron Southern – a man who knows a thing or two about leadership – has only known Saretsky
Gregg Saretsky’s favourite airport in the world: YVR (Vancouver) “ There’s all this space, and you get a view of the mountains – you really get a sense that you’ve arrived in Canada, probably more so than any other airport.” 32 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
WestJet shares are up
Risk/Reward Buying shares in an airline company has traditionally been risky enough to make betting on horse racing look like a conservative financial investment. For example, Air Canada’s “B” shares are down some 91 per cent from their 2007 highs.
Not WestJet, though. Since Saretsky took over as CEO on April 1, 2010, its shares are up 30 per cent, and it even initiated a five cent quarterly dividend in late 2010 that it has since bumped up to eight cents.
30%
since he came to WestJet in 2009, but he says he’s been impressed by the qualities he brings to the table. “The ones that really stand out have an indefinable pride in their organization that they’re able to convey to everybody in the organization,” he says. “From that, these leaders and their companies show an unusual attention to their customers and their satisfaction. It doesn’t matter whether it’s in oilfield equipment supply or in air travel.” And while different people define leadership differently, Southern says, they all know it when they see it. “Gregg’s got it,” he says. IN NOVEMBER, WESTJET ANNOUNCED ITS FINANCIAL RESULTS FOR THE
third quarter of 2012, and like the previous 29 quarters it was a profitable one for the company. That’s an impressive streak for any company, but it’s downright remarkable in light of the fact that it runs straight through the 2008/09 recession, a period that drowned just about every other airline in the world in red ink. The company’s most recent quarter is one of its most impressive yet, too. Its profits jumped 80 per cent year-over-year (and 86 per cent on a fully diluted per-share basis) on revenues of $866.5 million. Those numbers could get even better in the last quarter of the year, too. As of October its load factor (a crucial metric in the airline industry) was 81.2 per cent, the fourth consecutive record monthly figure, and it stands to reason that it will increase even further with the busy holiday travel season. WestJet’s rosy results are a reflection of the improving North American economy, to be sure, but they’re also a product of the company’s decision to embrace code-sharing – an arrangement where two or more airlines share the same flight, and one that Saretsky used with great aplomb at Alaska – as a low-cost way to expand its reach. It signed its first code-sharing agreement with Cathay Pacific in October of 2010, and this past >
Gregg Saretsky’s least favourite airport in the world: LHR (London-Heathrow) “ It’s big. There are multiple terminals. Making a connection between those multiple terminals is always a bit of a headache. They move a lot of people, but it’s not very smooth.”
September reached one with British Airways that brought its total number of code-sharing partners to eight. “We now have people that board WestJet flights every day that come from China and India and Latin America and Europe,” Saretsky says. “These are guests that would never have made it across WestJet’s threshold if we didn’t have these wonderful airline partnerships. That’s provided a fuel for us that allows the airline to continue to grow.” But despite the company’s financial momentum, Saretsky isn’t prepared to rest on his laurels. “I think we have hit an inflection point,” he says. “We’re not really that fast growth company that was doubling in size every couple of years. We’re an adolescent, and with adolescence come other challenges – but other opportunities as well. Our opportunity, going forward, is to try and harness all the things that contributed to our success in the early days, but not cling to the past. We need to look to the future, and figure out how we can take those strengths and leverage them into opportunities.”
“ Our opportunity is to try and harness all the things that contributed to our success in the early days, but not cling to the past. – Gregg Saretsky, president and CEO, WestJet A major part of that is the decision to create a regional carrier, one that will be officially launched in the second half of 2013. In October, WestJet employees voted to name their new carrier “WestJet Encore,” and after some deliberation the company decided to locate its headquarters in Calgary. While it’s a major step forward for the company, it’s also a trip back in time to its days as a startup. “Starting a brand new airline isn’t for sissies,” Saretsky says. “When I think back to 1996, when the founders of WestJet did what they did, that was a pretty bold move. And in many respects, we’re recreating the early days of WestJet with WestJet Encore.” And while the rollout of WestJet Encore will consume most of his time in the near term, Saretsky has other long-term goals for WestJet. He’s a major proponent of the value of mentoring, in large part because he had two mentors himself – Jack Miles and Ted Shetzen – when he was coming up through the ranks at Canadian Airlines. WestJet has never had a formal mentoring program, but Saretsky intends to change that. “I think my biggest opportunity to imprint my leadership style on the company is through our leadership development program,” he says. 34 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
Community Spirit WestJet Encore will begin flying to smaller communities in the latter half of 2013, but back in June it flew in over 100 representatives from 32 communities and asked them to pitch the company on why they should fly there. The response, to say the least, was enthusiastic – and the enthusiasm wasn’t confined to those meetings at WestJet’s head office, either. “Some of them have written blogs, some of them have written songs, and some of them have written petitions,” Saretsky says.
“Penticton officially changed its name to WestJetville for a day. Some have done flash mobs to show us community spirit and how much they’re waiting for WestJet to come to town. The outreach from those communities has been fantastic.”
“It’s something we haven’t done at WestJet. For 16 years we’ve been focused on growth, and just finding people – warm bodies – to fill the jobs as the company grew so fast. Now, it’s time to take a breath. We’re starting a whole new regional airline and we’re going to have opportunities to move people around and give them a chance to try their hand at doing something different. That’s where all the growth takes place.” He also has his eye on the possibility of one day launching international wide-body service, a move that would truly put it in Air Canada’s league. “It’s on the drawing board,” he says, “but we have a lot of heavy lifting ahead to get our regional airline up and running and make sure it’s contributing to our profitability. But ultimately, yes, I think we dream of the day when we’ll have wide-body aircraft serving the far reaches of the world from Canada.” And while it might be tempting to try and take Air Canada’s title as the largest domestic airline by market share, Saretsky thinks that’s not the right battle for WestJet to fight. “It’s not about being bigger. We don’t aspire to be bigger. We aspire to continue to be better, in everything we do.” So where will WestJet be in 10 years, and what will it look like? Saretsky can’t say for certain, of course, but he’s been around long enough to know that it would be foolish to make any definitive predictions. “Success, to me, would be that 10 years from now we’re much bigger than we are today, obviously. But 10 years ago we said that we’d never fly to Toronto-Pearson. Today, Toronto-Pearson is the biggest airport in our network as measured by seat miles. So where could we be 10 years from now, when 10 years ago we weren’t even flying to Toronto-Pearson?” AV Go online for a behind-the-scenes look at Alberta Venture’s photo shoot with WestJet CEO Gregg Saretsky. albertaventure.com/bpoy2012
Alberta’s
ANNUAL REVIEW
biz
PEOPLE
NEWS
by max fawcett
An election for the ages,
a FIGHT over the FUTURE of Alberta’s ENERGY sector and 13 other things that made 2012
a YEAR TO REMEMBER
If the Mayans are in fact correct and the world really does end later this month, it will have gone out – in Alberta, anyways – with a bang. The year 2012 wasn’t lacking for controversy, after all, with an increasingly rancorous debate about who controls Alberta’s oil wealth and how (or if, depending on one’s perspective) it can be safely delivered to international markets, a very hostile takeover in the boardroom of one of Canada’s most storied companies and the most exciting provincial election in living memory. It wasn’t all good news in 2012, of course – we lost Peter Lougheed, probably the finest politician that Alberta has ever seen and an influential leader of the federation. And the tragedy of Highway 63 continues to unfold before our very eyes. But if we do manage to make it to 2013 unscathed by doomsday prophecies, Mayan or otherwise, one thing is for sure: The year to come is going to have a lot to live up to. >
Illustration Sébastien Thibault DECEMBER 2012
ALBERTAVENTURE.COM 37
“ Peter Lougheed was quite simply one of the most remarkable Canadians of his generation.” – Prime Minister Stephen Harper
PEOPLE
Alberta Loses Its champion On September 14, 2012, Alberta lost the greatest leader it had ever known. Former Premier Peter Lougheed, who many consider the author of Alberta’s most important successes, died in hospital of natural causes. He was 84 years old. The tributes poured in from all parts of the country, and even his former political foes paid tribute to the enormous impact he had on both his country and his province. Premier Alison Redford, who referred to him as a mentor and role model, echoed that message. “He not only believed in a strong and united Canada, he believed that Alberta did not have to succeed at the expense of Canada but as a proud member of a country working together — a country where all succeeded,” she said. And while Lougheed became famous for his battles with Ottawa and Liberal Prime Minister Pierre Trudeau over the patriation of the constitution and the hated National Energy Program, he was equally willing to clash with the oil companies in order to ensure that Albertans got their fair share. Indeed, one of the first things the Lougheed government did after turfing the long-governing Social Credit party from office in 1971 was to raise the royalties that resource companies were paying to the province. The big oil companies threatened to leave Alberta, but the Harvardeducated Lougheed held his ground (befitting a former football player) and called their bluff. It worked, and much of the social infrastructure that Albertans pride themselves upon today was built with the money that flowed from that decision. “Canada lost a truly great man,” Prime Minister Stephen Harper said in response to the news that Lougheed had passed away. “Peter Lougheed was quite simply one of the most remarkable Canadians of his generation.” Well said, Mr. Prime Minister. PHOTOGRAPH COLIN WAY
Bill C-18 came into force August 1, 2012. Now farmers have a choice in who they sell their grain to and under what terms.
biz
THE END OF THE MONOPOLY
NEWS
BRIGHT LIGHTS, BIG CITY It’s the stuff that dreams are made of. On May 8, 2012, the Edmonton Symphony Orchestra made its official debut at New York’s Carnegie Hall, and more than a thousand – that’s right, a thousand – Albertans made the trip to watch them perform. The ESO’s appearance at Carnegie was part of the Spring For Music festival, a program for which orchestras from North America can apply to play. The ESO selection was a validation of ESO music director Bill Eddins’s vision and creativity, not just because the juried competition pits the best symphonies
in North America against each other but also because the only criterion that they’re judged on is their ability to come up with an original program of music – no relying on the classics here. The magnitude of the ESO’s accomplishment was perhaps best summed up by Paul Wells, a columnist with Maclean’s magazine and an unabashed classical music aficionado. “I don’t believe three new Canadian compositions have been featured in that hall in the half-century since [the federal government sponsored a night of Canadian music in the 1950s], and this time it’s
PEOPLE
BORDER SKIRMISH
not government-funded,” he wrote. “It’s a program of music proposed by an American conductor and selected by an American jury, in competitive circumstances, strictly on its merit, fair and square.”
The Canadian Wheat Board was founded on July 5, 1935, with a mandate to market wheat and barley on behalf of producers in Alberta, Saskatchewan, Manitoba and a small part of B.C. But as with the long gun registry, Stephen Harper’s Conservative government made good on its election promise to scrap the CWB’s monopoly (technically, its monopsony) over the sale of barley and wheat in Western Canada. Bill C-18, which was passed in December of 2011, came into force on August 1, 2012, and despite protests from some farmers and the organizations representing them, they will all now have a choice in whom they sell their grain to and under what terms. The CWB, which had been the largest marketer of its kind in the world, continues to operate as a voluntary marketing organization, but it must now compete with private sector interests. Only time will tell whether farmers get the higher prices for their products that proponents of the move have suggested they will.
“ We will continue to protect the jurisdiction we have over our energy resources.” –PREMIER Alison Redford
There’s more than just the Rocky Mountains separating B.C and Alberta these days. Facing an increasingly hostile electorate and a mandatory election in 2013, B.C. Premier Christy Clark tried to do her best Danny Williams impression this summer. In response to Alberta’s call for a national energy strategy and pressure from both the province and Enbridge to take a position on the proposed Northern Gateway pipeline, Clark effectively attempted to extort resource royalties from Alberta. “If Alberta doesn’t decide they want to sit down and engage, the project stops. It’s as simple as that,” she told an interviewer during the annual Council of the Federation meeting that was held in Halifax in July. Premier Alison Redford immediately fired back, telling Clark that she wasn’t interested in sharing any of Alberta’s constitutionally-guaranteed resource royalties. “From my perspective, I’m not going to sit back and wait for the conversation to continue to be defined without ensuring that Albertans and Canadians understand what Alberta’s position is, and that is we will continue to protect the jurisdiction we have over our energy resources.” >
“ if alberta doesn’t decide thay want to sit down and engage, the project stops.” – PREMIER christy clark
PHOTOGRAPHS COLIN WAY; CPIMAGES DECEMBER 2012
ALBERTAVENTURE.COM 39
“ In a company’s evolution, different leaders are needed at different times.” – Phoebe Buckland, Talisman
THE REPLACEMENTS Nexen and Talisman weren’t the only companies that made changes at the top last year. Here are some of the other high-profile leadership transitions that took place in 2012.
biz
THE CHANGING OF THE GUARD
SUNCOR
IN
Out
Steve Williams
Rick George
ENBRIDGE IN
Out
Al Monaco
Patrick Daniel
Manzoni
OUT
KVISLE
B AYTEX E N E R G Y
IN
It was a dangerous year for longstanding CEOs in Alberta’s oil patch. In January, Nexen’s Marvin Romanow’s 13-year tenure with the company was brought to an abrupt halt when he was asked to step aside in favour of CFO Kevin Reinhart. Then in September, Talisman Energy CEO John Manzoni, who was celebrating his five year anniversary in that company’s top job, resigned unexpectedly. Manzoni, who joined the company from BP in 2007, was replaced by former TransCanada CEO and Talisman board member Hal Kvisle. Why did Manzoni leave? “The board and management team have been reviewing the strategic direction of the company, and given the transition, took the decision that it was the right time for a new leader to drive the next phase of growth,” said Talisman spokesperson Phoebe Buckland. “In a company’s evolution, different leaders are needed at different times.” Whether that evolution includes a sale like the one that followed Marvin Romanow’s departure at Nexen remains to be seen. >
IN
Out
James Bowzer
Anthony Marino
B P CA N A D A Out
Anne Drinkwater
IN
Christina Verchere
NEWS
THE HIGHWAY FROM HELL Just a few minutes before 9 a.m. on a Sunday last September, two cars travelling in opposite directions along Highway 63 between Edmonton and Fort McMurray collided. The driver of one of the vehicles and a passenger in the other died at the scene, while an eight-year-old boy and the driver of the second vehicle were badly injured and airlifted to hospital. It was not the first such
accident on the “Highway of Death” this past year. In the wake of an accident that killed seven people in April, the Alberta government pledged to twin the entire 240-kilometre highway by the fall of 2016. It’s a project that began in 2006 but has only managed to separate traffic along 52 kilometres so far. For the people who travel Highway 63 on a regular basis, it has been a case of too little, too late. > PHOTOGRAPHS JASON STANG; daniel wood
Soccer coach. Business strategist.
Whether he’s on the field or in the boardroom, Edmonton business strategist John Scanga is always in “coach mode”. As a soccer coach himself, John has noticed many parallels between coaching kids and coaching business leaders. He says it’s all about staying positive and using people’s natural talents to reach any goal. atb.com/john
John Scanga, Business Manager SAVING І BORROWING І INVESTING І KNOW-HOW ™ Trademarks of Alberta Treasury Branches.
The incident raised questions about the safety of Alberta’s food supply chain, as well as the prudence of the federal government’s hands-off approach to monitoring.
biz NEWS
CRUDE SITUATON
TOTAL RECALL Alberta’s beef industry was rocked this fall when an outbreak of E. coli was linked to the XL Foods packing plant in Brooks. Eventually, more than 1,800 beef products were pulled from store shelves across Canada, but not before 17 people were sickened by the tainted meat. But while XL Foods came under heavy scrutiny, both for the silence that its owners maintained for weeks after the first recall and its decision to lay off some of its employees, in the long-term the E. coli scare may do more damage to the reputation of the Canadian Food Inspection Agency, which took 12 days to issue the recall notice. The incident raised questions about the safety of Alberta’s food supply chain, as well as the prudence of the federal government’s hands-off approach to monitoring. The government of Premier Alison Redford pledged to do what it could to bolster the reputation of Alberta beef, but the damage may have already been done.
When it comes to oil prices, not all crude is created equal. And in 2012, Alberta producers once again had to take a discount to both global benchmarks – West Texas Intermediate and Brent – when selling their oil. The discount, which at times grew as large as $50 to Brent and $35 to WTI pricing, is due to a combination of factors that include a glut of supply in the central part of North America, an absence of refinery capacity and a lack of access to international markets. Relief could come in the form of an approval by the U.S. government of TransCanada’s proposed Keystone XL pipeline or by the Canadian government of Enbridge’s Northern Gateway – both would be even better, as far as Alberta’s land-locked oil producers are concerned – but a decision on the first won’t come until early next year and one on the latter could take far longer. It’s not just big companies like Suncor and Cenovus that are getting hurt by this price discrepancy, either, although their bottom lines have certainly felt the pinch. Economists from CIBC and the Bank of Montreal peg the annual cost to the Canadian economy at between $18 billion and $19 billion. $US/barrel
CANADA’S OIL GAP
$140 Brent Crude
$120
West Texas Intermediate
$100
Western Canada Select
$80 $60 $40 $20 2007
2008
Source: The Bank of Canada
200
2010
2011
2012
“ This proxy contest will not go well for the board and [CEO] Fred [Green].” – Bill Ackman, Pershing Square Capital
NEWS
workerS clean up the kalamazoo river spill
PRIVATE EQUITY, PUBLIC VICTORY
PROTESTERS FIGHT THE PROPOSED NORTHERN GATEWAY PIPELINE
PIPELINE PROBLEMS For Enbridge, it couldn’t have come at a worse time. In the midst of an increasingly hysterical public relations battle between the company and environmental activists in B.C. over the proposed Northern Gateway pipeline that would link Alberta crude to Asian markets via the B.C. coast, an estimated 1,000 to 3,000 barrels of crude were dumped into the Red Deer
biz
River from a leak in a 46year-old pipeline owned and operated by Plains Midstream Canada. No, the leak wasn’t Enbridge’s responsibility, but it served as a reminder for the company’s critics – as if they needed one – of what was at stake with Northern Gateway, a pipeline that would pass through the last temperate rainforest in North America. They got another just a month later,
when the U.S. National Transportation Safety Board released its report on the 2010 Kalamazoo river spill and found that Enbridge “took advantage of weak regulations” and permitted a “culture of deviance” when it came to safety. As if to add insult to injury, NTSB chairman Deborah Hersman compared Enbridge’s handling of the catastrophe to the Keystone Cops.
How many hedge fund managers does it take to shake up one of Canada’s oldest publicly-traded companies? One, if his name is Bill Ackman. A pitched behind-the-scenes boardroom battle began between Ackman’s Pershing Square Capital and CP’s board of directors in November 2011 when Pershing Square revealed its considerable interest in the struggling railway company. In an email that Ackman sent to board chairman John Cleghorn in January, the New York-based hedgie warned that, “This proxy contest will not go well for the board and [CEO] Fred [Green]. The track record is very poor, shareholders are disgruntled, and we are offering an alternative with a legendary reputation. We will win the election, likely by a landslide vote.” Cleghorn, Green and the rest of CP’s management team held firm until the May annual general meeting, but when it became obvious that they would lose the proxy contest, as Ackman had predicted, Green, Cleghorn and four other board members stepped down. They were replaced by former CN CEO Hunter Harrison and a slate of seven Pershing Square directors. The firm has already profited from its involvement with the company. CP shares have rallied from below $45, where they were trading in the fall of 2011 when Pershing Square made its play, to over $80 in September of this year. But now, with its executive team in place, the hard work of actually improving the company’s underwhelming operational metrics begins. Time will tell whether the company’s other shareholders do quite as well as Ackman and Pershing have made out. >
PHOTOGRAPH CPIMAGES DECEMBER 2012
ALBERTAVENTURE.COM 43
NEWS
THE PARTY OF THE CENTURY Pity the people responsible for organizing next year’s Calgary Stampede. After all, they’ll have one heck of an act to follow. The 2012 edition of the Calgary Stampede celebrated the event’s centennial, and it did it in style, setting a new attendance record of 1,409,371 despite rain falling on the final Sunday. The previous record was set in 2006. The event has come a long way from where it started a century ago, when it was held in September so that it didn’t interfere with the harvest. It wasn’t an annual event until 1923, and while the first running of it in 1912 drew an estimated 80,000 people – almost double the population of the city at the time – it lost money because of the $20,000 prize pool it offered up. It’s safe to say that this year’s version didn’t have any trouble finishing in the black.
PEOPLE
Premier Alison Redford
THE PEOPLE’S CHOICE Albertans may have re-elected yet another overwhelming Tory majority, but the familiar outcome doesn’t reflect the road the province’s voters took to get there. With just a week left until the April 23 election, Danielle Smith’s upstart Wildrose Alliance looked poised to form a government, or at the very least to cut into the
commanding majority that the PCs have enjoyed for the better part of a decade. But intemperate comments by Edmonton South West Wildrose candidate Allan Hunsperger about gay people, along with some poorly chosen words about the virtues of being white by Calgary Greenway Wildrose candidate Ron Leech, gave Alberta voters pause to reconsider the mandate that they seemed poised to
hand Smith and her team. In the end, they elected 61 Progressive Conservative MLAs (with 44 per cent of the popular vote) and 17 Wildrose MLAs (with 34.5 per cent of the vote), along with five Liberals and four New Democrats. And while Wildrose officials were understandably disappointed by the outcome, perhaps the biggest losers of all were the pollsters, all of whom failed in their predictions. Most weren’t even close, and one wonders whether news stations, political parties and other potential clients will be willing to shell out for their “wisdom” when the next election rolls around.
The 2012 edition of the Calgary Stampede celebrated the eventâ&#x20AC;&#x2122;s centennial, and it did it in style, setting a new attendance record of 1,409,371
PHOTOGRAPH colin way DECEMBER 2012
ALBERTAVENTURE.COM 45
The flurry of deals were worth more than $20 billion combined.
PEOPLE
NEWS
ALBERTA FOR SALE
Premier Ralph Klein made the cover of Alberta Venture’s 50 Most Influential People issue in 2005
KING RALPH GETS HIS CROWN It hasn’t been a good few years for former Premier Ralph Klein or his family, but they received some heartening news this year when they found out he was being appointed to the Order of Canada. Along with six other Calgary-area residents, including playwright Sharon Pollock, philanthropist Lois Mitchell, cardiologist Dr. Merril Knudtson, composer Allan Gordon Bell, ballet instructor Nancy Kilgour and broadcaster Gordon Rawlinson, Klein was given one of the country’s highest honours. It was a validation of the work that he performed as Premier of Alberta, both in terms of balancing the province’s books and raising its profile on the national and international stage. And while Klein is suffering from a rapidly progressing frontal-lobe dementia that has forced him to live in a care centre, his family said that he smiled upon being told about the Order of Canada recognition.
Foreign investment in Alberta’s energy sector continued to attract attention – and scrutiny – in 2012, but the stakes were effectively raised by whole-hog bids for Albertan companies that were tendered by Indonesia’s Petronas and the China National Offshore Oil Company (CNOOC). The first deal was struck between the state-owned Petroliam Nasional Bhd., or Petronas, and Progress Energy in June for an estimated $5.5 billion (the bid was later raised from $20.45 per share to $22, raising the overall value of the deal to $5.8 billion). CNOOC followed in August with a staggering $15.1 billion bid for Nexen, an Alberta-based energy
company with operations in the North Sea, the Gulf of Mexico and elsewhere. And in September, Kuwait’s state-owned petroleum company revealed that it was committing as much as $4 billion to help Athabasca Oil develop its Hangingstone and Birch oil sands properties. The flurry of deals, which were worth more than $20 billion combined, forced the Conservative government to clarify its stance on the so-called “net benefit” test. It also raised a pair of interesting questions: where, exactly, will they draw the line when it comes to foreign takeovers of Alberta energy companies, and how long will it take to get there?
NEWS
FOUR MORE YEARS In 2008, Barack Obama made history by becoming the first black president in U.S. history. In 2012, he made history of a different kind, becoming the first president since Franklin Delano Roosevelt to get re-elected with unemployment at or above eight per cent. It’s difficult to say whether that’s a credit to his leadership and campaigning skills or a result of Republican candidate Mitt Romney’s lack of both, but Obama managed to carry both the Electoral College and the popular vote in an election that many people had predicted he was destined to lose. And while Obama came away as the evening’s highest profile winner, there might not have been a bigger one than Nate Silver, who became America’s most controversial nerd during the campaign. The statistician and polling expert, who blogs for the New York Times at fivethirtyeight.com, became a national celebrity – and a pariah in right-leaning circles – for his early prediction of an Obama win. As it turned out, his predictions – for all 50 states and the popular vote – were dead-on. AV
WHY
WOMEN COULD SAVE THE
OIL SANDS Diversity, done right, isn’t just a buzzword – it’s a strategic asset > By Alix Kemp // Illustration Pierre-Paul Pariseau
48 ALBERTAVENTURE.COM december 2 0 1 2
december 2 0 1 2
ALBERTAVENTURE.COM 49
F
or the oil sands industry, all is not going according to plan. For Enbridge and
TransCanada, projects to ship crude out of the province via the proposed Northern Gateway and Keystone XL pipelines have faced major delays due to opposition in B.C. and the U.S. Even in Alberta, public perception of the oil and gas industry took a hit with news of pipeline spills in the province. Then in September, two weeks after Alberta introduced new limits on pollution for the oil sands, a report from Shell found that those limits are likely to be exceeded in short order. And that’s in addition to growing labour shortages. All of those problems, however, share a common solution, and it might not be what most people would expect. It has nothing to do with getting more young people into trade school programs, improving relationships with aboriginal groups or coming up with better environmental protections, although it could achieve all of those things. What oil sands companies need to do is hire more women.
In Canada’s mining and oil and
gas industry, women make up 19 per cent of the labour force, 12 per cent of senior executives, six per cent of board directors, and just one per cent of presidents and CEOs. Those numbers need to increase, and not just because gender equality makes people feel good. Studies have long pointed to differences in how men and women think. Karen Hughes, a University of Alberta professor cross-appointed to the sociology department and the School of Business, says research bears out the idea that women and men tend to have different approaches to business. “On average, women do bring some different competencies, skills and possibly approaches, compared to the way men traditionally have managed companies,” she says. A 2010 study in Science found that, on average, groups with more women tend to be collectively smarter than those with fewer, while factors such as the individual intelligence of group members had relatively little impact. In the study, groups of between two and five participants were asked to complete a variety of tasks, from solving puzzles to planning strategy. Those with more women consistently performed better, even after accounting for other factors. Researchers found that women increased the group’s overall intelligence because female participants displayed more “social sensitivity,” which meant groups collaborated and shared ideas more, thus getting better results. In general, Hughes says, women engage in more collaborative decision-making and pull in perspectives from a wider range of sources. But there are also some fundamental differences in how women approach problems. 50 ALBERTAVENTURE.COM december 2 0 1 2
In the 1950s, psychologist Lawrence Kohlberg presented children with a scenario in which a man’s wife is dying and he can’t afford the medicine to cure her. He asked if it would be moral to steal it. Boys overwhelmingly said, yes, stealing the medicine was justified. Girls, on the other hand, wanted to know more about the relationships between the man, his wife and the pharmacist selling the medication, and suggested he shouldn’t steal it because if he went to jail, he’d no longer be able to take care of his wife. As a result, Kohlberg surmised that the girls were incapable of moral reasoning, but in 1982, psychologist Carol Gilligan revisited the experiment. Girls, she argued, were perfectly capable of moral reasoning. They simply had a different approach to the problem, one that favoured co-operation and placed more value on relationships, rather than the boys’ blunt force solution of theft. That approach, what Gilligan called the “different voice” of women, is one that’s essential to Alberta’s oil sands. For Stephanie Sterling, the vice-president of business and joint venture management at Shell Canada, the importance of gender in the oil and gas industry is clear. The company has made a concerted effort to recruit women, and while Sterling says part of that is simply because women represent an untapped source of labour, it’s also because women bring something essential to the business. “The oil sands in particular depend on innovation and new ideas, things that will help us improve performance as we move forward,” she says. “Diverse ideas come from diverse people, so we need to be able to bring in as much innovation as we can into our developments going forward. Women are a key part of that, if we’re going to bring in ideas that are different than what we may have thought before.” That’s led Shell to develop a career development program aimed specifically at women entering senior leadership roles within the company, as well as a mentoring program that matches high-potential women with mentors who can help them reach those leadership positions. Sterling says Lorraine Mitchelmore, Shell Canada’s president and CEO, is an effective role model who has inspired women to move up in the company. “It helps us to attract other women. I always argue that for a woman to believe that she has a career in a company, she needs to be able to see herself in senior roles. So it’s really important for us to be able to have Lorraine in her role, and other female peers on the leadership team.”
“ As women we bring in more diverse opinions and throw the net wider in terms of ideas.” –Stephanie Sterling, vice-president, Shell Canada
Not everyone is convinced. Heather Christie-Burns, president and COO of Angle Energy Inc., for one, isn’t buying the idea that women bring something unique to the job that’s a result of intrinsic gender differences. That unique female perspective, says Christie-Burns, is simply a product of the relatively short time that women have been a part of the industry. Because the oil and gas sector has traditionally been dominated by men, Christie-Burns says women who enter it may come to the executive suite through a less traditional route. That, she says, gives them a different take on the business. She would know, too, since she did something similar by co-founding Angle Energy in 2004 rather than trying to rise through the ranks of an established company. But for Angle Energy, hiring more women is a purely practical move. “There is a need for workers, period,” Christie-Burns says, and women, like foreign workers and new graduates, are a recruitment opportunity for any growing oil and gas operation. “I don’t think trying to drive towards a 50-50 [gender] split necessarily makes sense, but from the perspective of getting the workforce you need, you should try to attract women.” >
The ASTech Foundation would like to congratulate this yearâ&#x20AC;&#x2122;s award winners.
2012 ASTEch AwArD wINNErS
Dr. Marvin Fritzler
Outstanding Contribution to the Alberta Science and Technology Community Award
Drader Custom Manufacturing Outstanding Achievement in Applied Technology and Innovation Award sponsored by SAIT polytechnic
Dr. J. Gregory Cairncross
Outstanding Leadership in Alberta Science Award
Dr. Sean Sanders
Innovation in Oil Sands Research Award
Dr. Zhangxing (John) Chen
Outstanding Leadership in Alberta Technology Award
Dr. Breanne Everett Leaders of Tomorrow Award
sponsored by Alberta Enterprise and Advanced Education
Kristy Burke
Excellence in Science and Technology Public Awareness Award
GrowSafe Systems Ltd.
Innovation in Agricultural Science Award
sponsored by Syncrude canada Ltd.
Hatsize Learning Corporation Innovation in Information and Communications Technology Award sponsored by TELuS
Scat Dogs Sniff-out New Answers for Environmental Performance in the Oil Sands Outstanding Achievement in Environmental Technology and Innovation Award sponsored by Agrium Inc.
sponsored by Dow AgroSciences
Innovative Trauma Care Inc.
Outstanding Science and Technology Start-Up Award
KMT Hepatech Inc.
Outstanding Commercial Achievement in Alberta Science and Technology Award
sponsored by NAIT
DISTINguIShED pATroNS
2012 ASTEch
After Party Reception Host
SpoNSorS Gold Sponsors
ASTech/Alberta Science Fair Featured Student
Nominate for 2013 ASTech Awards: www.astech.ca
Silver Sponsors canadian Natural resources Ltd. Nexen Inc. Bronze Sponsors Total E & p canada Ltd. Merck Enhance Energy replicon Alberta Innovates Bio Solutions computer Modelling group Ltd.
Alberta Science and Technology Leadership Foundation
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In Alberta, women make
up roughly the same proportion of the labour force in mining and oil and gas extraction as in the rest of Canada. And while the number of women in the industry has increased over the past 25 years, that proportion has remained relatively constant. In the past, however, women have often been confined to “softer” roles in the industry, such as human resources. And while that’s still the case at the executive level for many companies, Sterling suggests it may be starting to change. “We’re seeing a lot more women in our operations ranks,” she says, Still, women make up only 11 per cent of Shell’s Albian Sands operations. Some will say that’s par for the course. Change, after all, takes time, and we can hardly expect many women to make it to the executive suite when the proportion of entry level positions being filled by them is still just one in five. As that number improves, so too will the number of women in leadership roles. All that’s needed is time. Others, like Facebook COO Sheryl Sandberg, argue that it’s women’s own priorities that are keeping them from the executive suite, as they put family before their careers. From the moment a woman starts thinking about having a child, Sandberg says, “she starts thinking about making room for that child.... And literally from that moment, she doesn’t raise her hand anymore, she doesn’t look for a promotion, she doesn’t take on the new project, she doesn’t say, ‘Me. I want to do that.’ ” It’s a prevalent theory that women are voluntarily “opting out” of the workforce before they can reach leadership positions. Erin Leonty, the senior membership manager of Western Canada for Catalyst, an international organization dedicated to increasing gender diversity in the workplace, disagrees on both counts. The absence of women in leadership roles has nothing to with women opting out or being ambivalent about leadership positions, she says. A Catalyst study found that women desire leadership positions just as much as men, and children had no impact on their desire for a corner office. It’s also not a case of simply needing more time, since despite increasing numbers of women working in corporations across Canada, the proportion of female board members hasn’t increased noticeably. “The old ‘give it time’ strategy has obviously been proven ineffective,” she says. “And sadly the [oil and gas] industry falls well below an already low average of female representation.” That’s important, she says, because Alberta and Canada are falling behind countries with more diverse workforces, and it’s
their competitors who are benefiting. â&#x20AC;&#x153;Giving it time is really just going to set us back even further than we already are.â&#x20AC;? So what would be the impact on the oil sands, exactly, of having more women in executive or board positions? Thatâ&#x20AC;&#x2122;s impossible to quantify, since after all, no two executives will approach a problem exactly the same way. But itâ&#x20AC;&#x2122;s telling that two of the loudest voices calling for a co-operative national energy strategy belong to women: Premier Alison Redford has been pushing for a conversation on the topic since she took office, and Mitchelmore is among the most vocal proponents of the idea in the business community. While male-led oil sands companies like Cenovus and Suncor also support the initiative, Mitchelmore was the one to take the discussion to a national newspaper, partnering with the Financial Post and writing in an editorial that â&#x20AC;&#x153;The debate must be extended beyond governments and industry to include First Nations and the broader Canadian public.â&#x20AC;? Then again, one of the factors stalling the development of such a plan is the refusal of B.C. Premier Christy Clark to participate in that conversation. As Hughes points out, not all women approach management the same way, and thereâ&#x20AC;&#x2122;s no rule that male executives canâ&#x20AC;&#x2122;t participate in collaborative, transformational leadership. But there is one area in particular where women are already having a substantial impact on the oil sands: environmental management. Nicolette Stanley is an environmental coordinator at Shellâ&#x20AC;&#x2122;s Albian Sands, working as the team lead in waste, water and wildlife. Her team is predominantly female, she says, and sheâ&#x20AC;&#x2122;s noticed that many women often find work in the environmental or aboriginal relations side of oil sands management more appealing. Thatâ&#x20AC;&#x2122;s likely because those fields emphasize collaboration with community stakeholders, an area where women excel. While hiring more women wonâ&#x20AC;&#x2122;t solve all the challenges businesses operating in the oil sands are facing, itâ&#x20AC;&#x2122;s clear that they could help mitigate many of them. From labour shortages to managing the environmental impact of the oil sands, Sterling says women have a lot to offer oil sands producers. â&#x20AC;&#x153;As women we tend to bring in more ideas, more diverse opinions, and throw the net wider in terms of what the ideas could be or what direction we could take. I like to think that means we get to a better solution at the end of the day.â&#x20AC;? AV For additional information on women working in the oil sands and energy industry, go online to albertaventure.com/womeninoilsands
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When, at three mi
on Friday,October 19 minister Christian Para decision to reject Petrona Progress Energy, columnist and pu
channelling the frustration of thousands of Candi The vagueness of the “net benefit” test for foreign investment in Canada has many commentators and businessmen in an uproar. But is it really worth the concern? BY MICHAEL GANLEY
He railed against the unseemly timing of the announcement, against the lack of transparency and against Canada’s becoming a banana republic. Those tweets were deleted by the time the sun rose, but Coyne followed up the next Monday with a column in the National Post declaring that the “net benefit” test on which the decision rested ought not to be clarified, as so many other commentators have demanded, but instead be abolished. “The whole thing is a charade, applying a veneer of objectivity to what remains an entirely subjective – not to say opaque, arbitrary and meaningless – process,” he wrote. But many of the lawyers and other advisors that deal with the net benefit test don’t see much of a problem with the vagueness of the Investment Canada Act. It is in keeping with the way many laws are written. It’s why laws and regulations must be endlessly litigated and defined by courts, and why the facts of specific cases are of paramount importance. It is, quite simply, the nature of the beast. These advisors see not an insurmountable challenge to international investment in the minister’s decision, but simply a need for a new way of doing business. The Investment Canada Act replaced the Foreign Investment Review Act in 1985. It was one of Brian Mulroney’s first pieces of legislation after he became prime minister and it empowers the federal government to forbid foreign investments of “significant” size (currently defined as a takeout target with assets of more than $330 million) if those investments do not present a “net benefit to Canada.”
$3.1 billion
$5.5 billion
Exxon Mobil bid for Celtic Exploration
Petronas bid for Progress Energy
54 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
nutes to midnight , Canada’s industry dis announced his
s’s $5.5 billion bid for
ndit Andrew Coyne – no doubt
ans – took to the Twittersphere with a vengeance. There are a list of factors the government can take into account under the net benefit test, things like the effect of the takeover on economic activity, employment and competition in the country. A prospective purchaser must apply to Industry Canada to try to establish that there is, indeed, a net benefit. But the legislation “is drafted in such a way that the minister can pretty much drive a truck through it if he wants to,” says Subrata Bhattacharjee, a competition and foreign investment lawyer with Heenan Blaikie in Toronto. “It gives him significant discretion in trying to figure out if he is going to provide a determination of net benefit.” Colin MacDonald, a lawyer with Calgary’s Borden Ladner Gervais, says you don’t have to check off all the boxes to establish a net benefit. “In the oil and gas industry these days, you look at your employment levels and your cap-ex and say, ‘We’re going to at least match the cap-ex from last year of the oil company
we’re buying.’” Then the government takes the next step, which recently has been to encapsulate the steps the buyer says it will take in undertakings. Until 2008, there were no formal refusals by the federal government of an application under the act. But several developments in the last decade have changed how the government handles foreign investment reviews. The first was that the deals got bigger, a trend that was particularly evident in the mining sector where Vale acquired Inco, Xstrata acquired Falconbridge and Rio Tinto bought Alcan. Second was the arrival of state-owned enterprises as bidders. Third, the addition of national security provisions which, when triggered, make the sale automatically reviewable not only by the minister but by cabinet. Finally, in light of all of the above, public sentiment began to change. In response, the federal government added one page of guidelines on state-owned enterprises that talks about the need for transparency
in governance and management and for clear commercial objectives, and it began to get more aggressive in demanding guarantees from the potential purchasor. But the number of transactions that attract public scrutiny remains tiny. Since 1985, about 1,700 transactions have been reviewed. Three have been blocked. The first to feel the full impact of the new approach was that of Richmond, B.C.-based MacDonald, Dettwiler and Associates, which was prevented in 2008 from selling its space division to a U.S. company by then-minister Jim Prentice on the grounds that it would not be of net benefit to Canada. The second was the Potash case last year, when Australian miner BHP Billiton eventually dropped its bid after the Canadian government released a preliminary ruling that it was not satisfied the deal would be of net benefit. The third was the interim decision on Petronas. As Bhattacharjee points out, those three represent less than one per cent of deals. “The majority of transactions go through quietly,” he says. >
$2.1 billion
$15.1 billion
CNOOC purchased OptiCanada
CNOOC bid for Nexen
DECEMBER 2012
ALBERTAVENTURE.COM 55
It’s not as if ‘the people’ don’t have their say in the process. Indeed, the will of the people is what scuppered the BHP deal. “[Saskatchewan Premier] Brad Wall was very effective at building a coalition that was influential in the review, even though he had no standing,” Bhattacharjee says. “From a realpolitik standpoint, it was quite an achievement.” This influence is supported by the constitution, which assigns control over non-renewable resources to the provinces. Now we’re at the stage, with those deals that attract scrutiny, where the application of the net benefit test is very much a federal and to some degree provincial political issue. We’re also seeing the new approach being applied in the case of the Chinese National Offshore Oil Corporation’s $15.1-billion friendly bid for Nexen. Premier Alison Redford has been generally supportive of the CNOOC bid, although she asked the federal government to impose tougher management and employment conditions, the kind of standard undertakings that are now de rigeur in virtually all applications. CNOOC has, among other things, said it will make Calgary the head office for its North American operations and will list on the Toronto Stock Exchange.
MacDonald says there is a debate going on in the community that deals regularly with international investments. “One is, should there be more specificity around defining ‘net benefit,’ ” he says. “The majority of people would say it’s important that the government have some flexibility in being less specific than more on these investments, because every one is a little different. Others say, ‘That’s not very helpful, particularly now that the government has started to turn things down.’ ” Nothing in this debate changes the fact that the provinces have ultimate ownership and responsibility for the resources within their borders and will control how they are developed and taxed. What has changed, Bhattacharjee says, is the way advisors to potential buyers look at these deals. “The lawyers that are advising on the one per cent of the deals tend to be that subset of the traditional investment Canada lawyers that understand public policy and have a good idea about how to work with government relations people,” he says. “[Potential buyers] now have to look at this as part of a broader government relationspublic relations-regulatory matter as opposed
to what used to be purely a regulatory matter.” Bhattacharjee says the Petronas and CNOOC deals are linked inasmuch as the federal government is considering the two at just about the same time and wants to arrive at consistent results. “If you look at it through that lens,” he says, “Petronas is a very particular, timing-driven result.” In considering the CNOOC deal, the government will inevitably consider that Nexen is a significant player in the Canadian industry but it is by no means the largest, that most of its assets are not in Canada, and that the state-owned CNOOC was qualified as a foreign investor a year ago with its $2.1-billion purchase of Calgary-based Opti Canada. “I would be interested to know what extraordinary considerations would be at play because of the nature of Nexen’s assets,” Bhattacharjee says. “The government is at a point where it is dealing with very strong concerns about Chinese foreign investment generally, and it has to be seen to be providing a very close review because it is going to get some hard questions in the house if it clears the deal or if it doesn’t clear the deal without good reasons why.” AV
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The New
GOLD RUSH International oil and gas giants are tripping over themselves to get a piece of the Montney play. Should you join them? BY MAX FAWCETT
58 ALBERTAVENTURE.COM december 2 0 1 2
T
here are few certainties in the world other than death, taxes and Conservative governments in Alberta, but here’s a fourth you can add to that short list: another takeover in the Montney shale play. After all, for all the nationalist rhetoric and political gamesmanship that surrounded the proposed takeover of Progress Energy by Petronas, it’s the numbers that really matter. And those numbers are eye-catching, both for investors and for the people who have the good fortune to own and operate companies in that part of the country. The story behind those numbers is a fairly simple one. There are 450 trillion cubic feet of natural gas locked in the Montney shale formation alone, along with another 650 trillion in adjacent plays in the northern part of the province. Those reserves, and the companies that control them, have the good fortune of being just a few hundred kilometres from the west coast of
the province and the LNG export facilities that are being frantically built there. Those ports will usher that gas off to markets in Asia, where they can fetch multiples of the price they would in North America. When you can take something out of the ground for a dollar and sell it for 10, you know you’re doing the whole capitalism thing properly. The recent Petronas-Progress Energy tie-up and the less controversial purchase of Celtic Exploration by ExxonMobil have established a benchmark for the value of these holdings in the region. That benchmark is much higher than how the market is valuing the assets of other companies there, and that usually means one of two things: either the acquiring companies have made terrible decisions (not likely, given that one of them was ExxonMobil) or the market will have to adjust its valuation accordingly. Until it does, those companies operating in the Montney will be at the top of a lot of takeover target lists. And while the larger landholders in the region – Canadian Natural Resources, Suncor, Encana – are too big to be gobbled up in a takeover (either for financial or political reasons), there are a few smaller ones that are ripe for the taking. The only real questions that are left are who goes next, and for how much? In order to get an answer, we tapped Jody Chudley, an energy stock analyst, author of the valueoriented Punch Card Portfolio newsletter and, as of next month, Alberta Venture’s in-house stock picking expert. Here’s how he assesses the two deals, and how they impact the valuation of companies operating in the region.
British Columbia Alberta In order to understand the metrics involved in a takeover in the energy sector, I like to break the deal down into two parts. First, I calculate what I believe is the portion of the deal price that relates to the existing production. Second, I determine what the remainder of the purchase price implies about the valuation of the undeveloped assets being acquired. - Jody Chudley
Montney Shale Play
Petronas/Progress Deal Metrics Assets Acquired: Current production of 54,000 boe per day (87 per cent natural gas) and 1,122,000 undeveloped acres, 73 per cent of which are located in Northeast British Columbia.
Estimated value of current production acquired in the Petronas/Progress deal: Oil: 7,020 barrels @ $130,000 per flowing barrel = $912 million Gas: 46,980 boe @ $25,000 per flowing barrel = $1.174 billion Total estimated value of current production purchased $2.087 billion
Estimated value of undeveloped acreage acquired:
Other Candidates
Fort St. John
Birchcliff Energy Birchcliff Energy might not have the largest portfolio of land in the Montney shale – it’s ninth on the list of largest landholders in the region – but given its comparatively small market capitalization there might not be a company that’s more highly leveraged to the play. And while the company disappointed shareholders by putting itself up for sale and failing to find a buyer, with famed investor Seymour Schulich holding more than 25 per cent of the company’s shares it’s a safe bet that at some point the company will be put back up for sale.
Painted Pony Petroleum Painted Pony has some attractive light oil assets in the Saskatchewan Bakken, but it’s the company’s Montney acreage – approximately 101,700 acres worth of it – that had investors bidding up its shares in the wake of the Progress Energy deal. It’s no wonder, given the fact that Painted Pony’s Montney assets are in the exact same neck of the woods. It doesn’t hurt that they’re also astride the pipeline infrastructure that would take their gas to port in Kitimat.
Talisman Energy Talisman Energy is another diversified oil and gas company with considerable assets in the Montney region. New CEO Hal Kvisle has pledged to pull the company back from some of its underperforming international ventures and focus more on efficiency and near-term cash-flow generation, but it’s unclear what that will mean for its approximately 200,000 acres in the Montney. Still, it has a partnership on some of those assets with Sasol, and its overall operational profile is strikingly similar to that of Nexen. A takeover, in other words, isn’t out of the question.
The total Petronas offer price ended up being roughly $6 billion. If $2.087 billion of this purchase price is related to existing production, that means that $3.9 billion ($6 billion - $2.087 billion) of the purchase price is related to undeveloped resources. If we divide that by the company’s 1.1 million acres of undeveloepd land, we get a value of approximately $3,550 per acre. Interestingly, the valuation on the undeveloped land in the Celtic deal looks to be about the same (roughly $3,235 per acre).
Advantage Oil and Gas Arc Resources One of the most obvious targets is Arc Resources, a wellcapitalized mid-sized player in the region with plenty of current production and lots of undeveloped land.
Estimated value of current production (as of Q2 2012) Liquids (oil and wet gas): 36,125 boe/d x $100,000 per flowing barrel = $3.6 billion Dry gas production: 57,871 boe/d x $30,000 per flowing barrel = $1.7 billion Total estimated value of current production $5.3 billion
Estimated value of Arc’s undeveloped acreage 439 sections x 640 acres in a section = 280,000 acres If these acres are worth about $3,500 (as per the ProgressPetronas and ExxonMobil-Celtic deals), the Arc acreage would be worth just under $1 billion.
The final tally Total estimated value for Arc: $6.28 billion Less Arc’s debt: $665 million Equals Arc’s net asset value: $5.615 billion Divide by Arc’s 307 million shares outstanding Equals estimated value of: $18.28 Current share price: $24.22 Premium: -25%
Advantage is a little smaller than Arc, Celtic and Progress, but is also more leveraged to the Montney play. For companies looking to acquire only Montney assets, a pure play like Advantage could be very attractive as a takeover target.
Estimated value of current production (as of Q2 2012) Liquids (oil and wet gas): 1,380 boe/d x $100,000 per flowing barrel = $138 million Dry gas production: 21,620 boe/d x $30,000 per flowing barrel = $649 million Total estimated value of current production $787 million
Estimated value of Advantage’s undeveloped acreage 80 net sections X 640 acres in a section = 51,200 acres At $3,500 each, Advantage’s acreage would be worth $179 million.
Additional considerations Advantage also owns 21.15 million shares of Longview Oil that at recent market prices are worth $140 million.
The final tally Total estimated value for Advantage: $1.106 billion Less Advantage’s debt: $258 million Equals Advantage’s net asset value: $848 million Divide by Advantage’s 168 million shares outstanding Equals estimated value of: $5.05 Current share price: $3.55 Premium: 42%
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60 ALBERTAVENTURE.COM december 2 0 1 2
Special
DELIVERY
By Omar Mouallem
Richard Carramusa found an innovative way to solve a problem - and may have changed the course of a billion-dollar business in the process
T
here’s a strip mall in downtown Red Deer, that looks just like any other, and on a Sunday evening the travel agent, pet store and yoga studio are all closed. The only activity in it appears behind a heavy glass door where people in grey and black criss-cross in and out of frame carrying steel tubs or mop buckets. Step through the front door and you are technically in the back, surrounded by freezers as big as offices and industrial-sized sinks. But unless you’re a cook, pizza man or food inspector, you shouldn’t be here.Where’s here? It’s not “The Watson Centre,” as the placard sign above the storefront would have you believe (that’s the name of the plaza). The owner calls this “the Batcave,” though the Canada Revenue Agency much prefers “Red Deer Remote Kitchen Operations.” And if you’re thinking there’s no way you’d ever eat at “RemKO,” well, if you live in Red Deer there’s a pretty good chance that you already have.
Richard Carramusa, the owner of Red Deer’s two Boston Pizza restaurants, had a problem. Now, as far as problems go, it was a pretty good one to have. In fact, he didn’t even think he had a problem until August 2011, when he started bragging on Twitter about how busy his restaurants were. That wasn’t unusual. Neither was tweeting pictures of the South Hill restaurant’s packed lounge on a Friday night. What was troubling was the amount of sleep he lost over it. He started thinking about what was behind the crowds, the framed vintage Maple Leafs jersey and the dated wooden bar. It was ovens jammed with pizzas and rows of prepped pans waiting in the queue, phones on hold because staff couldn’t take any more orders, general managers stuck bagging takeout instead of interacting with customers, if only to ask for their patience. As Carramusa recalls, “We’ve got lineups out the door and we have people waiting two hours for deliveries. And 45-minute k-times [the time it >
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ALBERTAVENTURE.COM 61
Richard Carramusa behind the scenes at Boston Pizza’s “remote kitchen”
takes an order to go from the table to the kitchen and back] just aren’t good enough.” The 41-year-old called his Edmonton-based sort-of-silent partners, brothers Barry and Rick Arndt (Rick runs an architectural firm in Edmonton and is completely hands-off, but Barry, who operates franchises in Edmonton, often shares his advice and expertise with Carramusa). “We thought if we built another kitchen at each location then we could service north and south, but then we realized we’d have to buy two sets of new ovens, two sets of stoves, and the staff,” he says. “We thought no.” The other option was to open the city’s third location, but as the franchisee of three BPs Carramusa knew that wasn’t the answer either. The kitchen jams were limited to lunch, supper and weekend evenings. “That’s when you really make your money,” he says, “because you don’t typically have a full restaurant at 3:30 in the afternoon.” And, besides, building a Boston Pizza location from the ground up, which all franchisees must do, now costs as much as $3.5 million, and that doesn’t include the $60,000 franchising agreement. That’s almost triple what it cost when he opened his first location 16 years ago in Hinton with the Arndt brothers. But still, he thought, “There’s got to be a way we can take some pressure off and still make some money.”
C
arramusa, who’s in his 24th year with Boston Pizza, started as a 17-year-old Ponoka kid who was serving tables to save up for pharmacology studies. He quit school after two semesters to continue with the pizza chain because, he says (without a trace of irony), “I couldn’t imagine doing anything more rewarding.” As Boston Pizza grew from a modest franchise to a billion-dollar chain, he matured with it, moving through several roles in several cities and even doing a stint at “corporate” in Richmond, B.C. And yet, despite knowing the franchise’s operations inside and out, the solution to their problem in Red Deer wasn’t coming easily. Not, that is, until they started thinking bigger. Barry had already triggered two revolutions within the company through his Edmonton franchises – draught beer and delivery – and he was about to do it again. Carramusa suggested that if they could deflect the delivery service to a central building and the phone lines to an Edmonton call centre, they’d free up space in the ovens, cut delivery times by more than half and turn tables over at least one more time a night. It sounded like a perfect circle, and as Carramusa likes to say, “I’m a pizza man. All I know are circles and triangles.” But could he convince corporate? “There were a couple of executive guys that were hesitant, wondering, ‘Are we going to brand it? Is it going to be takeout and delivery or just delivery?’ When you’re a franchisor like Boston Pizza, everything has to be done a specific way,” he says. “Their job is to protect the brand. You can’t have rogue franchisees doing what they want because they think it’s a great idea.” The corporation warmed up to the idea in December of 2011 and gave Carramusa the go-ahead. But, while every one of BP’s 350 Canadian locations is numbered chronologically (Red Deer’s are 131 and 137), RemKO was christened 850, as if it were built in the future. “They wanted us to keep it on the q.t.,” Carramusa says. All this secrecy made its nickname, the Batcave, a no-brainer.
Almost a year later, Carramusa leans on the edge of his desk in RemKO’s tiny office. And even though his “real office” is at the North Hill location, it’s easy to see why Carramusa – a veritable man’s man who has the same penchant for fast cars as Bruce Wayne – loves it here. Several days a week he rolls up his French cuffs and starts cooking just because he enjoys the camaraderie. “That’s why he does so well,” says longtime friend Don Riep, co-owner of an Edmonton software company. “Everyone’s on an equal playing field and, with Richard, he’s the first guy to show respect to anyone working hard. He’s that kind of guy.” But what effect did the Batcave have on his business? Assistant general manager Bob Bales has just one word to describe the change: “amazing.” Bales has worked at every Carramusa franchise, including the one in Hinton, where he started as a server in 1997. RemKO’s effect on the South Hill location’s operations has been dramatic, he says. “Our kitchen is a lot more efficient – the cooks can keep up with our regular orders and our takeouts. It’s alleviated a lot of pressure. And the customers? They’re getting their food a lot faster and they’re a lot happier.” By transferring 10 per cent of the business off site, they’re turning each table about two more times per rush. At one-seventh of the cost of a new franchise, RemKO is quite ingenious. While they dabble with the template for it in areas like food and labour costs, it’s already attracting attention from others within the company. Recently, an exhausted Fort McMurray franchisee checked it out and loved what he saw. Mark MacDonald, who like Carramusa controls the only two BPs in his region, has successfully negotiated for a remote kitchen to take the pressure off his franchises. “Head office was willing and eager to work with us,” he says. “It’s because of what had happened in Red Deer. They agree that it’s a winning idea and it would fit well in our city as well.” His, however, won’t be so secretive. It will have a storefront and provide takeout, making it yet another first for the brand. Carramusa admits the system might not work as seamlessly in cities with multiple franchisees, as the politics over territory and profit-sharing might not be easily resolved. But as Boston Pizza enhances its online ordering service, something that’s been oddly under-marketed since launching in 2010, more RemKOs might be a natural progression for the company. For the time being, it remains an experiment – a case study, at best. But if you ask Carramusa, he’ll tell you that those cars leaving the Batcave parking lot are delivering his company’s future. AV Take a look inside Richard Carramusa’s “Batcave,” his innovative remote-kitchen, with an online photo gallery. Visit, albertaventure.com/thebatcave
Photograph colton ponto 62 ALBERTAVENTURE.COM december 2 0 1 2
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INDUSTRY REPORT
TRANSPORTATION & LOGISTICS T H E V I TA L S 2011
7
TOTAL INDUSTRY REVENUES
STATS
$20 BILLION
CANADIAN PACIFIC RAILWAY
107,300
Largest company in
Albertans employed in industry
Alberta
per cent Percentage of Alberta’s GDP
T H E p u lse
THE LAST STOP
O
ctober 2011 marked the end of the line for many rural bus routes. They were a casualty of the provincial government’s decision to deregulate the busing industry in Alberta. Since the 1960s, rural busing routes had been monopolized by Greyhound Canada in exchange for a commitment to run a certain number of buses between each town in the province. Today, Greyhound is no longer required to run buses to places like High Prairie, but it’s also no longer protected on more popular routes like those between Lethbridge and Calgary or Edmonton and Jasper. For example, Pacific Western Transportation, which operates the popular Red Arrow service, now offers routes to Claresholm, Lethbridge and Sylvan Lake.
$7 million annual loss
Sources: Alberta Transportation, Alberta Enterprise
THE NUMBERS
EMPLOYMENT IN THE TRANSPORTATION INDUSTRY BY SIZE OF COMPANY
13.2% MORE THAN 500 EMPLOYEES
37.7%
20 TO 99 EMPLOYEES
23.3%
28.8%
FEWER THAN 20 EMPLOYEES
66
Landing in Leismer Find out why more energy companies are taking to the air
70
100 TO 500 EMPLOYEES Making the Connection Discover how the province’s logistics hubs keep businesses moving
72
The Never Ending Story Alberta needs to invest in its roads, bridges and highways. What else is new?
DECEMBER 2012
ALBERTAVENTURE.COM 65
I.R.TRANSPORTATION & LOGISTICS
Landing in Leismer Why more oil sands companies are choosing to develop air transportation services to access their remote operations BY G eo f f rey M organ
T
he company operating a tiny, privately owned airstrip northwest of Conklin, Alberta, is gearing up to service Boeing 737 jet airliners. Statoil Canada, which owns and operates the Leismer Aerodrome, handled 38,000 passengers last year and averages 334 landings and takeoffs per month at the airstrip. And while Conklin has a population of only 337 people, there are three other competing airstrips in the immediate area. Tom Arisman, operations manager at Statoil, says the company’s goal is to build the Leismer Aerodrome into the airport of choice in Conklin. The cost of building an aerodrome in the oil sands ranges from $10 million to
$40 million. Still, oil sands producers like Suncor, Canadian Natural Resources, Devon and Shell all own aerodromes that allow airplanes to land at their operations,
the company plans to pave and extend the runway to 2,133 metres as it increases its production at its in-situ oil sands operation. And Statoil isn’t the only company
“ Our ultimate goal is to be the regional aerodrome of choice for the Conklin area” – Tom Arisman, operations manager at Statoil Canada and vice-president of Leismer Aerodrome.
some of which are already capable of handling a 737 jet. Suncor’s Firebag Aerodrome can, for example, and the company’s director of transportation, Bill Grainger, says it’s cheaper for Suncor to fly workers in on its own airline than it is to land a commercial carrier on its 2,100-metre paved runway. Statoil’s aerodrome includes a 1,524metre gravel runway, a terminal building and an automated weather station. In the future,
expanding its air transport division. Here’s a look at what energy companies are doing to fly more people directly to their oil sands projects. Project Pilots Suncor Energy recently bought a fourth Bombardier Challenger regional jet to ferry workers to and from its Firebag Aerodrome and nearby oil sands project > photoGRAPH EWAN NICHOLSON
66 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
Suncor Energy and its predecessor, Sun Oil Company, have had an aviation program for more than 65 years. The companyâ&#x20AC;&#x2122;s SunJet fleet includes four Bombardier regional jets and two corporate jets
DECEMBER 2012
ALBERTAVENTURE.COM 67
I.R.TRANSPORTATION & LOGISTICS
Length Matters Runaways
The Fort McMurray Airport is already the busiest single-runway airport in Canada, and the airport authority expects it will continue to get busier as projects like Imperial’s Kearl begin producing crude. And while there are 724,000 people who use Fort McMurray’s airport per year, there are thousands of additional passengers who fly directly to the oil sands and land on similarly sized runways.
Imperial Oil currently lands on its competitor’s runways when it transports workers to and from the Kearl oil sands project.
3,000 meters
2,300
2,286
2,100
2,000 meters
1,829 1,657
1,524
1,500
1,000 meters
Fort McMurray Airport
Shell’s Albian Aerodrome
Suncor’s Firebag Aerodrome
CNRL’s Horizon Aerodrome
Syncrude’s Mildred Lake Aerodrome
Statoil’s Leismer Aerodrome
Devon’s Kirby Lake Aerodrome
Edmonton’s E Construction built CNRL’s aerodrome, including its paved runway and adjacent apron, at a cost of $10 million, to handle two Boeing 737-600 aircraft.
of the same name. The company’s airline, SunJet, is one of the larger air transport divisions in the energy sector, employing 75 people – including pilots and flight attendants – and it has regular flights between Calgary, Edmonton, Fort McMurray and Saskatoon. The company transports most of its 25,000 monthly passengers on its own aircraft, but it will hire commercial airlines when SunJet is busy. Requesting Permission to Land Statoil keeps a staff of 10 people employed on the ground at the Leismer Aerodrome. They are responsible for everything from baggage management to de-icing the runway and planes, which are not always full of Statoil workers. Arisman says Leismer is used by other producers in the region, including Cenovus, and therefore doubles as a bus station for arriving and departing workers who, in Statoil’s case, travel 17 kilometres by bus between the aerodrome and the work site. Arisman says the modular terminal building at Leismer (which is similar to what exists
68 ALBERTAVENTURE.COM
DECEMBER 2012
at Canadian Natural’s Horizon aerodrome) keeps arriving workers out of the cold as buses arrive to transport them to site. Connecting Flights Just as energy companies develop and expand their own airstrips, regional airports are facing similar pressure to expand. The Fort McMurray Regional Airport served 724,000 passengers in 2011 (up from 223,000 in 2004) and was originally designed to hold only 200 people at a time.
The airport authority is currently expanding the terminal building to hold 400 people during peak hours. In Bonnyville, meanwhile, town council has asked Cenovus, Imperial Oil and Canadian Natural Resources to help upgrade the town’s regional airport. In fact, Cenovus is now the biggest user of Bonnyville’s airport and has agreed to contribute $300,000 toward a new weather system and a new GPS tool that will allow the company’s planes to land in foggy conditions. AV
Suncor bought its first 50-seat Bombardier plane for moving its workers to and from the oil sands in 2006. The company has since bought three more.
2
90-seat Bombardier Challenger 890s
2
50-seat Bombardier Challenger 850s
,ĞůĚ ŝŶ ĐŽŶũƵŶĐƟŽŶ ǁŝƚŚ͗
CONNECTING YOU WITH NORTH AMERICA’S GAS & OIL INDUSTRY
JUNE 11-13, 2013 CALGARY, ALBERTA, CANADA
STAMPEDE PARK gasandoilexpo.com
C-Suite Energy Executive Awards Gala 2013 Wednesday, February 6, 2013 The Westin Calgary 6:30 p.m. to 8:30 p.m.
Don’t miss out on this event, get your tickets early!
Energy Executive Awards
Find out who the winners are in the January 2013 issue of Alberta Oil. Register online at www.albertaoilmagazine.com/c-suites2013 Questions? Call 1-866-227-4276 ext 244 or email events@albertaoilmagazine.com
PRESENTED BY
SPONSORED BY
I.R.TRANSPORTATION & LOGISTICS
Highway 2
Grande Prairie
50,000 sq ft CARGO FACILITY
Making the Connection How Alberta’s new logistics hubs bring it all together
BY A L I X K E M P
Not surprisingly, most of Alberta’s
transportation infrastructure and shipping activity is centred around Edmonton and Calgary. Those communities, and the ones surrounding them, have been busy building the connections that give Alberta’s businesses access to markets in Canada, the U.S. and overseas. Over the past decade, both Edmonton and Calgary have planned and begun development on multimodal transportation and logistics hubs at their airports. Here’s a look at those facilities, as well as some of the others that have sprung up around the province.
Just how important are Alberta’s border crossings to our export buisiness? Find out at albertaventure.com/beyondborders
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A Bigger, Better Box Rocky View Country Balzac, a tiny hamlet directly north of Calgary, has a population of fewer than 1,000. But in 2010, Walmart Canada spent $115 million to build a 400,000-square-foot food distribution centre. Walmart’s first sustainable distribution centre, the facility is a hub for food being shipped to Walmart’s growing chain of Supercentres in Western Canada. It’s not surprising that Walmart chose the town, given that it’s located 20 minutes north of the Calgary International Airport just west of Highway 2. And those same factors have also attracted Walmart’s largest competitor. Target announced plans to build a 1.3-million-square-foot distribution centre five kilometres down the road. It will serve as one of the chain’s key distribution points as it expands into Western Canada in 2013.
Upgrader Alley Alberta’s Industrial Heartland Highway 63
582 sq km NORTHEAST OF EDMONTON
A 582-square-kilometre swath of land northeast of Edmonton is Canada’s largest hydrocarbon processing region, connected by Highway 63 to Fort McMurray and the oil sands. The Alberta’s Industrial Heartland Association was originally founded in 1998 by the town of Fort Saskatchewan, Strathcona County, Lamont County and Sturgeon County. Edmonton joined in 2010 and has begun development on the Edmonton Energy and Technology Park, a business park specializing in logistics, manufacturing and chemical processing. Also known as “Upgrader Alley,” the region is home to Shell’s Scotford refinery and upgrader, which process bitumen from the Athabasca oil sands into light crude. Nearby are CN’s Scotford Yard and its Fort Saskatchewan Oil & Gas Distribution Centre, a multi-commodity facility that ships construction materials, machinery and other products to and from Fort McMurray and Prince Rupert.
LAMONT COUNTY
EDMONTON
Port on the Prairie Port Alberta, Edmonton International Airport
EDMONTON INTERNATIONAL AIRPORT
400,000 sq ft Walmart Distribution Centre
BALZAC
CALGARY INTERNATIONAL AIRPORT
Edmonton International Airport, the Edmonton Economic Development Corporation and the Edmonton Chamber of Commerce launched plans to create Port Alberta in 2007. AirLINKS Business Park at Edmonton International Airport is Port Alberta’s air cargo facility, serviced by three cargo handlers, six cargo terminals, 11 airlines and more than 40 freight forwarders and customs brokers. A new 50,000-square-foot cargo facility was completed on-site earlier this year. When fully developed, AirLinks will cover 3,000 acres adjacent to Highway 2. Canadian Pacific Railway is planning to relocate its intermodal rail facility from southcentral Edmonton to a 240-acre site near the airport and Port Alberta, giving businesses easier access to the port in Prince Rupert, B.C. and Asia.
CALGARY The Calgary Connection
$2 billion AIRPORT EXPANSION
Highway 2
YYC Global Logistics Park Calgary International Airport In 2011, the Calgary International Airport broke ground on the YYC Global Logistics Park. The facility aims to provide a link between air, rail and road for businesses doing shipping in Alberta, and dovetails with the $2 billion expansion of the airport’s runways and international concourse. Since first launching the project in 2000, Calgary International Airport has added more than 1.5 million square feet of warehouse space and nearly tripled the amount of cargo that goes through the airport. The park provides easy access to Deerfoot Trail, part of Highway 2 and the Canamex corridor, and is just 20 minutes from a new Canadian National intermodal rail yard, due for completion in 2013.
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I.R. TRANSPORTATION & LOGISTICS
The
Never-Ending Story Alberta needs to make some much-needed investments in its roads, bridges and highways. What else is new? BY M A X FAWC ET T
O
n April 23, 2012, former Calgary mayoral hopeful and provincial conservative candidate Ric McIver won his Calgary-Hays riding by a convincing 2,956 vote margin. Two weeks later he learned of his reward for winning so handily: a spot in Premier Alison Redford’s cabinet as the minister of transportation. Little did he or anyone else know at the time that it would prove to be one of the most difficult assignments the premier would hand out that day. Less than a week later, a horrific head-on collision on Highway 63 between two pickup trucks killed seven people, including a Fort McMurray pastor, his wife and one of their two young sons. Since then McIver has been busy reassuring Albertans that his government is committed to twinning the treacherous 240-kilometre stretch of road that connects Edmonton and Fort McMurray as quickly as possible. That may be hard for them to believe, though, and for good reason.
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Despite the project having been announced in 2006, at the time of the accident in April only 16 kilometres of Highway 63 had been twinned. Another 36 has since been completed, and the province has announced plans to finish the job by the fall of 2016. But as McIver told the Globe and Mail in April, “Things are going to get a lot [busier] between now and the end of 2014.” The same could well be true for the rest of the province’s transportation infrastructure, which includes 31,000 kilometres of highways (27,500 kilometres of which are paved) and 4,000-plus bridge structures serving Alberta’s 2.8 million licensed drivers and 3.2 million registered vehicles. Years of underfunding during the Klein regime left the government with a multibillion-dollar infrastructure gap when he exited the office in 2006, and while the province, in partnership with the federal government and local municipalities, has chipped away at that deficit, it hasn’t eliminated it entirely, much less gotten ahead of the work that needs to be done.
That workload isn’t going to get any smaller, either. By 2028, the province’s population is expected to increase by 40 per cent to almost five million people. Just getting caught up on the roads, highways, overpasses and bridges that will be needed to facilitate this growth will be difficult. According to the Alberta Ministry of Transportation’s 2011-12 annual report, barely half of the province’s roads and highways are rated as being in “good” shape, with 14.6 per cent assessed as “poor” and 26.8 per cent as being in “fair” condition. According to Gene Syvenky, the CEO of the Alberta Roadbuilders and Heavy Construction Association, Alberta doesn’t have a choice when it comes to making these sorts of infrastructure investments. “The average road, without maintenance, has about a 12- to 15-year lifespan,” he says. “If you don’t do any maintenance in those 12 years, in the next five years the cost of repairing that road increases six-fold.” Linda Sloan, a city of Edmonton councillor and the president of the Alberta Urban Municipalities Association, shares Syvenky’s
assessment of the situation. “These are not discretionary investments that we’re making,” she says. “They’re critical.” The problem is that investments in roads, highways and other transportation infrastructure are often drawn from the same pools of money as other more politically attractive projects like schools and hospitals. “When we stack up against health-care and education, we always lose,” Syvenky says. “Should we rebuild a road or build a school? Well, you should build the school.” The solution, according to Sloan, is stable, predictable, long-term funding rather than the project-to-project, year-to-year system of grants that municipalities have depended on recently. “The municipal sustainability grant program has been valuable, and appreciated by municipalities, but it is very much a conditional grant system,” she says. “What we’d like to see is an enhancement of that, combined with some changes in the federal fuel tax program that would index the fuel tax monies that the federal government gives Alberta.”
strategy for the next 40 years, one that will cover roads, highways and bridges as well as rail, air and mass transit. Transportation Alberta is twinning Highway 63, McIver says, and is also focused on the ring roads in Edmonton and Calgary, bridge projects in Medicine Hat and the twinning of Highway 43 to Grande Prairie. “Those things are all high on the list of projects that need to be completed,” he says. The province is also looking at adding additional capacity to Highway 2. “We’ve been kind of chipping away at it over the last few years, but there isn’t a mandated schedule,” he says. “[But] I wouldn’t be surprised if some kind of schedule grows out of the transportation strategy that we hope to bring forward in the next year and a half.” And while he’d like to be able to promise more stability and predictability in terms of funding, he points out that the province has to face uncertainty on the revenue side as well. “If you look at gambling revenue, well, it generally doesn’t go down but it’s certainly not guaranteed. Resource revenue
“ We don’t have the population for privately owned highways. If the province had 10 million people it would be a different economic story, but with 3.7 million it’s pretty difficult.” – Gene Syvenky, CEO, Alberta Roadbuilders and Heavy Construction Association
Likewise, she’d like to see a more proactive effort in terms of figuring out which roads and highways need the investment before they start to fall apart or get overwhelmed by the growing number of cars and trucks travelling on them. “We haven’t had a coherent or consistent system of appraising the state of the infrastructure and quantifying what the costs are for the maintenance and renewal of old infrastructure and the costs relating to building new infrastructure,” she says. Syvenky concurs. “I think the bigger problem is that they’re taken for granted,” he says. “They’re out of sight, out of mind, and they remain out of sight until something breaks. And then, everything hits the fan.” The province, McIver says, is doing its best to get ahead of the issue before that happens. His department is in the process of creating a plan that will lay out a transportation
can fluctuate widely. Income tax revenue will vary greatly, depending upon the strength of the economy.” What about other solutions? National Post columnist Andrew Coyne has made the idea of so-called “smart tolls” one of his personal hobby horses, arguing that they would bring the kind of predictable revenue that municipalities are looking for while introducing a measure of financial accountability to people’s driving habits. “Using GPS-style in-car transponders and satellites, it’s now possible to charge drivers to use the roads generally, with the highest charges applying in downtown centres and at rush hour, just as you pay a higher charge to use your cellphone depending on the location and time of day,” he wrote in a July 11, 2012, column. “You’d even get a monthly bill in the mail.” But McIver says he’s talked to Albertans about that idea, and so far, at least, they aren’t interested. “I think there’s willingness to look at it, but what I’ve heard
from Albertans, loud and clear, is that they don’t support tolls unless it’s an alternate route.” There are those – libertarians, mostly – who argue that the solution lies in creating private options to public roads, and that the chaos and carnage on Highway 63 only underscores the value in such options. Roger Toutant, a contributor to the Ludwig von Mises Institute, which was created in 2010 to spread the message of Austrianschool economics, argues that a private road operator would be forced, by virtue of market pressures, to create a safer stretch of road than the one that currently connects Fort McMurray and Edmonton. “What we do know is that a private road operator would not sit idly by while his customers were killed. Otherwise, he would be sued into bankruptcy or would go to jail. His customers would leave for competing, safer roads. Killing customers would be very, very bad for business.” He’s not necessarily wrong. Indeed, in Ontario the privately owned and operated Highway 407 has lower per-user casualty and accident rates than its governmentowned competitor, Highway 401. But while Toutant’s ideological position may have merit, the idea of applying it to Alberta does not. Highway 63 currently handles around 4,200 vehicles a day, and according to Syvenky’s calculations it would need more than double that amount before an alternative route could be economically viable. “We don’t have the population for privately owned highways,” he says. “If the province had 10 million people it would be a different economic story, but with 3.7 million it’s pretty difficult.” McIver agrees. “The general consensus from the bean counters was that even if we made that a toll road, it would take forever to pay for it based on traffic count.” As a result, Alberta and its municipalities will have to keep chipping away at the problem, one highway, road and bridge at a time. And while it might be tempting to blame the federal government for failing to provide the kind of funding needed to get the province caught up on its infrastructure investments, McIver won’t do that. “I’m not going to kick them around because they’ve helped us and we’re grateful for that,” he says. “But I will be pleased to remind them that we’re not done.” AV
D ecember 2 0 1 2
ALBERTAVENTURE.COM 73
lunch with … By Michael Ganley
THE DINERS YOUNG EXEC
Lita McDonald COMPANY HISTORY
McDonald and Meghan Dear have developed a labelling system for grocery stores that allows consumers to identify and support local, regional and Canadian food products ESTIMATED 2012 REVENUES
Nil
EMPLOYEES
2
LUNCH
Selections from five dishes chosen by the proprietor, David Cheung SENIOR EXEC
Randy Marsden HISTORY
Marsden is best known as the CEO of Edmontonbased Cleankeys Inc., which makes easy-to-disinfect keyboards, but he has a history of invention and commercialization LUNCH
Selections from five dishes chosen by the proprietor, David Cheung PICTURED ABOVE Left: Lita McDonald Right: Randy Marsden
Search and Protect Lita McDonald and Meghan Dear have invested their money to launch a small business. Now they’re looking for outside help. The big question: Have they protected their idea?
L
ita McDonald and her business partner, Meghan Dear, think many consumers want to know more about where their food comes from. In particular, they believe people want to know where the ingredients were sourced, where the food was processed and who owns the company that made it. Motivations include freshness, support for the local economy and a lower environmental footprint. So they’ve developed a rating system, out of 10, that takes these factors into account. Their idea is to put the rating on a businesssized card, attach it to a grocery store shelf and let people make educated choices about where their food comes from. To add depth to the process they include a QR code that can be scanned for more information on how and why the score was arrived at. Their business, Localize, has done a 90-day trial run of the
program with 10 Sobeys stores in the Edmonton area. They labelled 400 products, stuff like Bles-Wold dairy products and Cheemo perogies. McDonald says not only were consumers more informed, but that it drove purchases: Those products that scored well saw a 12 per cent increase in sales. But Localize has hit a wall and needs funding. McDonald and Dear are debating whether or not to turn to outside investors – from friends and family to venture capitalists and government grants – to raise the money needed to take the business to the next level. They asked to have lunch with Randy Marsden. The Edmontonbased engineer and inventor has three successful businesses to his credit. He founded and launched Madentec, which makes devices that help people with disabilities, developed the Swype app, which allows users to “type” by sliding a finger across the keyboard, and invented Cleankeys, an easily-disin-
fected keyboard that is popular in hospitals. He thinks McDonald and Dear are ready to approach friends and family. “The big test is, if your own money is in – and it is – then you can feel OK asking friends and family because you can say, ‘I’m there already.’ ” But moving on from there? Marsden has some concerns. “This is too early stage for VCs,” he says. “They come in after you’re running and you need $5 or $10 million to expand.” He runs over the potential list of granting agencies and programs, many of which he has accessed himself: the Industrial Research Assistance Program, the various Alberta Innovates bodies, Alberta Enterprise. McDonald has already approached many of them. “The challenge for us is that we don’t really fit into a slot,” she says. “We can argue on the tech front that we use an app and smartphones and a website, but then funders see that Photograph Ryan Girard
74 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
we want to spend on marketing and they say, “Whoa.’ ” Marsden goes off on a tangent. “This is my big soapbox,” he says. “It’s like you’re cursed if you’re doing marketing. What’s wrong with that picture? You can have a great product and bad marketing and fail, or you can have a mediocre product and good marketing and really succeed.” Back on track, Marsden mentions TEC Edmonton’s deal generator, designed to connect entrepreneurs to angel investors. “Do you think we should be playing up the fact that we’re a social enterprise?” McDonald asks. “I tried playing that angle with Madentec because it had a pretty high social impact, and it works with angels,” Marsden says. “Some want their money to go towards something good, almost philanthropic, but government grants and VCs just want to see the economic benefit.” For lunch, Marsden had chosen the Pearl River Restaurant, an unassuming place in a dour industrial area on Edmonton’s 99th Street. When the proprietor, David Cheung, sees that there is a picture to be taken he takes control, ordering and serving five sparkling dishes. He even removes the serving spoons for fear they would make the food look less palatable.
“ My day job is selling microscopes. It’s a lot easier to sell a $500,000 widget than it is a $100-a-month service that nobody’s heard of.”– LITA MCDONALD Photos taken, Marsden has another thought. “What do you have that’s unique and patentable?” he asks. Without some kind of protection for Localize’s idea, he says, investors will be wary. “Your rating method is a formula?” “Yes,” McDonald says, and she explains the method. “It’s not a question of whether or not your food is local,” she says. “It’s how local you can go.” In order to account for the fact that there are various degrees of localness, McDonald and Dear developed a weighted score with a variety of considerations. The score is weighted 80 per cent toward place of production and place of ownership, and 20 per cent toward source of ingredients. There’s an additional component to address the regulatory definition of local, which the Canadian Food Inspection Agency says means
within 50 kilometres of the point of sale. “If the product is made within 50 kilometres of where it is sold, then it gets 10 out of 10,” McDonald says. “An example I like to use is Spolumbo’s sausages in Calgary. They’re owned locally and have a manufacturing facility in Calgary. They use Alberta pork. They get their basil from Didsbury. In Calgary, they get a 10 out of 10. In Edmonton, it’s a 9.7.” “I wonder if there is something protectable there?” Marsden says. “Can you say, ‘You could slap a ‘local’ label on your soup, Campbell’s, but there are rules that say it has to be within 50 kilometres. We’ve solved that with a rating system which we’ve patented’? That would go a long ways with strategic investors, and it would help with government grants, as well.” McDonald knows Dear has been working something through the patent system but is not sure exactly what. She recognizes that the right patent could be lucrative in a social enterprise realm where, as she says, “local-washing” has been an issue. Marsden emphasizes the defensive nature of patents, and their long lead time. “Patents take forever,” he says. “Whether or not it’s patentable, you can say pending, and sometimes companies string that along as long as they can, thinking, ‘We don’t think we’re going to get it, but we want to say that it’s pending as long as we can.’” He wonders aloud if Startup Edmonton might have a sponsoring law firm that can look at the patentability of the rating method. Marsden then decides to do a quick customer survey and explains Localize to Cheung. “You probably have your set suppliers,” he asks, “but would it make a difference to know if your ingredients are locally made or not?” “We are not very faithful,” Cheung says, laughing. “Whoever is cheap and good, we buy. It’s business and we need to survive. That’s the number one priority.” McDonald sympathises. “I was a student,” she says. “I didn’t care where it came from. It was the lowest price.” But the beauty of Localize is that it doesn’t necessarily raise the price. McDonald anticipates that Localize would make some money from grocers who implement the system and some from vendors to have their product highlighted, but in neither case would the price of the item necessarily go up. “When you go looking for an investor, it’s important to find one that has more than money to bring to the table,” he says. “Ideally they’d have money, they’d share your vision and they’d have some experience in the field you’re in.” AV
LEGAL EAGLES By MARZENA CZARNECKA
The 10 Legal Commandments Everything I know about life I learned from lawyers
hot topic
In this, the final edition of Legal Eagles, Marzena serves up a reminder of the things you really need to remember when dealing with a lawyer
O
ver the last 24 months, Legal Eagles has introduced you to almost 60 lawyers who have discussed a diversity of legal issues pertinent to Albertan businesses. A sub-theme running through most of the interviews and columns: business people do not use their legal advisors to the max. To help you do that, this final edition of Legal Eagles presents 10 legal commandments teased out of two years’ worth of interviews with Alberta lawyers. Follow them, and you’ll maximize the value of your lawyer. Flaunt them, and you’ll regret it. Ready? 1. Tell the lawyer what you want. Obvious, right? When your lawyer fails you, most of the time it’s at least partly because you didn’t actually tell him what you wanted to achieve. As Fraser Milner Casgrain’s Robert Roth told us in January 2011, every first conversation between client and lawyer should start like this: “Let me tell you about my game plan.” Make sure your lawyer knows what you want him to do, what you want to achieve – in the short term and in the long term – and, for good measure, what you desperately want to avoid. (And if you don’t have a game plan, get one before you get the lawyer documenting, OK?) 2. Get the right lawyer. You don’t need to like her, but you’ve got to respect her, you’ve got to trust that she’s doing the best by you and you’ve got to feel she hears everything you say. “When [clients] say to me, ‘My lawyer didn’t listen to me, didn’t care about what I said,’ my first question back at them is, ‘Why did you retain that lawyer in the first place?’” Richard Hajduk, eponymous 76 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
partner with Edmonton law firm Hajduk Gibbs, told us in September 2012. “It is very, very important that if you don’t have a good relationship with your lawyer from the outset and don’t feel you can work with that person that you seek out another one.” You’ve got choices galore – look in any legal directory. Ask your colleagues and competitors, and find a lawyer who’s right for you. 3. Ask lots and lots of stupid questions. “If you think it’s a stupid question, it’s probably a question that needs to be asked,” Adam Merrick, a partner with MacPherson Leslie & Tyerman in Edmonton, said in March 2012. And only a stu... – er, not-too-confident– lawyer will make you feel like you’ve asked a stupid question. Don’t know what your lawyer is doing? Or why? Ask. Don’t understand the answer? Ask again. And again. 4. The specialist is worth it. You wouldn’t get an electrician to fix your plumbing or a hairstylist to take out your appendix. So don’t hire a real estate lawyer to handle your patent application or a personal injury lawyer to structure your shareholder agreement. Who you hire can be important not just for the competence they bring, but for the message the mandate sends to your partners – or opponents. When it comes to business law, be it corporate or litigation and its various subsets, Alberta “is a fairly small legal market,” said James Murphy, a litigator with Calgary law firm Burnet, Duckworth & Palmer, in September 2012. “In some measure, we can all determine how serious [the other side] is by who they retain.” So retain the player who sends the right message.
5. Document, document, document. Be it prepping your business for sale or putting your best foot forward in litigation fisticuffs, your lawyer will be more effective if you arm him with data. So write stuff down, keep your emails, document your processes and your conversations. As insurance lawyer Megan McMahon, from the Calgary office of Gowling Lafleur Henderson, said in April 2012, every important telephone call should be followed up with an email. Made inquiries of an insurance broker about specific coverage? “Follow up that conversation with an email. ‘As we discussed, this is what I want to make sure is covered,’ ” McMahon stressed. Keep that email in your file or in the Cloud, so if there is a tussle about that particular issue, you can produce it. Make that practice second nature. If things go sideways, your lawyer will bless you for it. 6. Litigation sucks. “Almost any other solution is better than litigation,” said John Blair, a litigator with Borden Ladner Gervais in Calgary, in July 2011. “If you are a small business, litigation should be your last resort. It can end up being ruinous.” Martin Kratz, a senior intellectual property partner with Bennett Jones, echoed the sentiment in January 2012: “Ultimately I argue all litigation is unproductive for the business.” So try everything else first, including structuring your agreements, contracts etc. right to begin with. Then negotiate, arbitrate, meditate ... and if you end up in court, be prepared to fold at the right moment. Keep the big picture in mind: It should be about maintaining the value of your enterprise, not about “winning” some ego contest. 7. Make use of the protection of privilege. You want to be on the right side of the law, whether you’re engaged in aggressive tax planning or an egregious lawsuit. But you don’t want to bare all unless you have to, right? Here’s a tip from Garnet Matsuba, a tax lawyer with MacPherson Leslie & Tyerman in Edmonton, that’s worth its weight in gold: While communications
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“ Trust no one. Can’t be that cynical? Get a lawyer to be cynical for you.” between you and your lawyer are privileged, those between you and other advisors are not– unless they’re retained not by you but by the lawyer. Consider having your lawyer hire your accountant and other specialty advisors. It may be a butt-saving decision if things turn ugly. 8. Alternative billing arrangements can save you money – or not. Lawyers, especially good lawyers, are expensive. Fortunately, the profession’s gotten very competitive of late, which means billing by the hour in five-minute increments isn’t the only way your lawyer needs to bill you. Volume discounts, fixed fee structures, contingency fees, success fees, capped fees and blended rates are just a few of the options available to you. But don’t fall in love with alternative billing for the sake of alternative billing. Depending on your needs, the old-fashioned bill-able hour may still be your best option. As James Casey, managing partner of regional law firm Field, pointed out in August 2011, “It is imperative that the business person be forthright with the law firm about what their motivation is. If the motivation is simply, ‘This is a tough budget year, and I need to reduce my outside legal spend by 10 per cent,’ there are a variety of ways that could be done.” The good old billable hour– but with certain limits, discounts or tweaks – may be the best way to achieve that. 9. Trust no one. You’re in business with folks you went to kindergarten with. Your kids are best friends. You mother-in-law is your auditor. Want to be safe? Trust no one, unless you want to end up as a hapless fraud victim. “Unfortunately, most frauds, especially the larger frauds, are done by people who are trusted,” said James Thorlakson, litigation
partner with national law firm Miller Thomson in Edmonton, in October 2011. “That’s the person who has the opportunity.” So – trust no one. Can’t be that cynical? Get a lawyer to be cynical for you. 10. Bring legal talent in-house. When you have so many legal issues on the go that you or your second-in-command can’t keep track of which external lawyer is working on which project, think about investing in a general counsel. Now, you’ve got to have a sizable legal spend to do this, because GCs don’t come cheap – but they might not be as expensive as you think, either. Pekarsky Stein’s Adam Pekarsky, who recruits legal talent on behalf of corporate clients and firms, says many companies are unaware of just how deep the talent pool of potential GCs can be. “The corporate community underestimates the talent pool that is out there for them,” he says. “It’s a dirty little secret of the legal community: Even some of your best paid partners at some of the biggest, most profitable firms in the city would jump at the opportunity to be a startup company’s first counsel.” There. Now you know it all. Oh, and one more thing to remember. In the legal relationship, you’re the boss. JP Morgan said it best back in the day: “Well, I don’t know as I want a lawyer to tell me what I cannot do. I hire him to tell me how to do what I want to do.” Get yourself a legal eagle that helps you soar, not one that clips your wings. And then, fly. AV Next Month: This is Marzena Czarnecka’s last Legal Eagles column, but fear not– starting next month, she’ll be writing Alberta Venture’s new management column, The Strategy Session. Marzena Czarnecka is a Calgary-based freelance writer. Write her at legaleagles@albertaventure.com
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GROWING CONCERN By Annalise klingbeil
The Silver Surfers
Care to Share Senior Services capitalizes on Alberta’s aging population
GROWTH FILE #34 on the Fast Growth 50 Care to Share Senior Services Head office: Calgary Employees: 40 Industry: Professional Services 2010 gross annual sales: $395,287 2008 gross annual sales: $326,037 Three keys to growth:
THE Fast Growth
50
1. Quality service provided by compassionate staff 2. Marketplace need 3. Passion for the industry
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ennie doesn’t have enough food, Mabel is suffering from loneliness and Esther appears confused and is not sleeping well. The emails that fill Deanne Scott’s inbox after she’s gone home for the day are not what you’d find on a typical entrepreneur’s computer screen. Scott, the president of Care to Share Senior Services, often receives emails sent by concerned staff members that detail evening interactions with aging clients. “They’re operational issues, but they’re totally different operational issues,” says Michael Scott, Deanne’s husband and the company’s vice-president. In 2010, Michael left an accounting job he’d had for 25 years to help grow the business his wife built from the ground up. With her husband focused on the finances and marketing, Deanne has been able to focus on adding to the company’s more than 300 clients and 40 staff. The mother of two started Care to Share in 2002 with a simple note posted at the library that offered housekeeping services for seniors. After years of working in the insurance industry, she decided it was time to work on something she loved: helping seniors. “I just felt like I was getting kicked in the teeth and taking from people, and now I can give back,” she says. The company has grown into a one-stop-shop for seniors (the majority of whom live in their own homes), offering everything from house and groundskeeping to transportation, meal preparation and companionship. Everything about the Scotts’ business is simple, from the small northwest Calgary headquarters they moved into a year ago (Deanne
Deanne and Michael Scott left jobs in insurance and accounting, respectively, to grow their seniors-focused business, Care to Share Senior Services
previously ran the business out of the couple’s home) to the company website and even the business concept itself. It’s staying simple that has helped the company grow its revenues from $308,357 in 2008 to $395,287 in 2010. But like many Albertan businesses, the Scotts are struggling to find the right hires, and that’s particularly important for a customer-oriented business like theirs. “When the economy is hot
in Alberta, it’s tough for us because we can’t compete with the oil and gas industry or the service industry,” Michael says. “They’re able to pay a lot higher wages than we’re able to.” Even in the business’s early days, staffing was an issue as Deanne transitioned from being the company’s sole employee to trusting others to dust furniture, cook meals and drive clients to medical appointments. The company didn’t do photograph Bookstrucker
78 ALBERTAVENTURE.COM D E C E M B E R 2 0 1 2
Integrated Boardrooms
“ You have to love what you do in this industry to be good at it. ” – MICHAEL SCOTT
Eighty-three-year-old Mary Siferd has been using Care to Share’s housekeeping and yardwork services for the past decade and says staff members have been a real support over the years. “The word ‘care’ should be in huge capital letters because they really do care,” Siferd says. “They bend over backwards for me.” Siferd is intent on living in her own duplex for as long as possible and says the company’s staff and their services are helping make that possible. As the so-called grey tsunami starts to crest, ever-larger numbers of seniors will rely on services like those provided by Care to Share. And while there are other companies and volunteer organizations that offer the same services as Care to Share, competition doesn’t seem to be a worry for Deanne. “There is lots of competition, yes, but there’s so much work out there that it’s not competition.” In an industry where service matters, the couple says the diversity of services they offer and the staff members that do the work keep people coming back. If anything, Michael
says, they might have too much business to deal with. “There’s more need than there are services and it’s going to get worse,” he says. Still, just because there are a lot of seniors doesn’t mean there are a lot of seniors who are willing to ask for help – or to pay for it. The Scotts say many seniors struggle to deal with the emotional toll and loss of pride that comes with asking for help. For seniors who don’t have children paying for Care to Share’s services, convincing them to part with their hard-earned money to pay for tasks they did themselves for decades is a challenge. Michael says a lot of the company’s clients have most of their equity tied up in their homes and therefore don’t have the cash flow to fund a caregiver. But he’s passionate about the importance of keeping seniors in their homes, and he and Deanna are working on lobbying the provincial government to provide subsidies for the mid-income seniors as a means of providing preventive care that would actually save governments money down the road. It’s hard for Deanne to believe the housekeeping business she started a decade ago has evolved into a meaningful player in the healthcare sector. And even though it often involves late-night emails about a senior’s sleeping habits or doing interview after interview in order to find a new staff member that will have the right touch, she’s happy to be working with seniors. “It took a long time to find what I wanted to be when I grew up, and I found it,” she says. And after nearly three decades in the oil and gas industry, Michael is happy to be in a new field, even if the pay isn’t what it once was. He says that’s sort of the point. “You have to love what you do in this industry to be good at it,” he says. “If you’re in this to get rich, you’re in the wrong industry.” AV This is one in a series of success profiles on companies ranked in Alberta Venture’s Fast Growth 50. The complete rankings can be viewed at albertaventure.com/fastgrowth50-2012
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any advertising until two years ago, and relying only on word of mouth meant Deanne had to ensure her staff was consistently providing quality service. “You don’t want to hire just anybody,” she says. “You want to make sure they’re going to do a good job and they’re going to believe in what you’re doing.” Deanne has found success in hiring staff members who are mothers looking to keep busy and make a little cash while their kids are at school. Her staff also includes certified personal care aides and retirees – Care to Share’s oldest employee is 75.
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8/7/12 3:32:00 PM
NEXT UP By Michael Hingston
Dogged Determination
Entrepreneurs are defined by their willingness to take risks. Meet one that takes that to a whole new level
S
ami Hayek isn’t that great with dates, but there are a few he couldn’t help committing to memory. Take July 23, 2003. That’s the day, just three weeks after graduating from Spruce Grove Composite High School, that Hayek shipped off to the B.C. wilderness to start working on the Ensign 87 drilling rig. He had no experience, and the learning curve was steep. “I was really freaked out,” the 27-year-old entrepreneur remembers. “I was 120 pounds. Some of the bags we had to lift weighed 120 pounds. Everyone made a bet on me that I wouldn’t last more than a week.” But Hayek persevered. He had to. His father passed away when Hayek was just three years old, and their family wasn’t wealthy. Growing up without any kind of financial safety net, Hayek always knew it was up to him to make something of himself. That’s why he worked himself to the point of exhaustion for the next two years on the rig, frequently taking extra shifts during his week off. At one point, he worked 10 weeks in a row. During the off-season he’d stay with his sister in Slave Lake and wait tables at her restaurant for a little extra money. By the time Hayek was 20 years old, he’d saved up nearly $80,000 and was actively looking for a business to call his own. That business appeared in the form of what’s now called Pitbull Energy Services. One day, while waiting tables, Hayek met a man who made good money operating a vacuum truck. Hayek had seen these cleanup vehicles around the rigs in B.C., but didn’t know how much they charged for their work. It turned out to be $1,600 per day. “I’m like, ‘Wow. I should really look into this,’ ” Hayek says. That brings us to Important Date Number Two. On October 11, 2005, Hayek signed the documents officially sinking his life savings into financing a steamer truck (the vacuum truck’s little brother. “It’s five speeds, like a minivan,” Hayek says) that he didn’t even know how to drive. Still, he was excited. “I’ll never forget that day,” he says. “I dated a girl for eight years and didn’t remember her birthday, just to show you how important these dates are.” The work was there, too, at sites across northern B.C., Alberta and Saskatchewan, but once again, Hayek had to hustle to keep up. At first he
Sami Hayek at his Edmonton-based energy services company. Halfway around the world he runs a very different business – in the food industry
hired a driver, but before long he was running the whole operation single-handedly, which meant he had to personally be on call, 24/7. There were 50-hour shifts. Hayek remembers hitting a mental wall during one particularly gruelling night, while he was manually shovelling excess sand out of the bottom of the truck’s tank. He laid down on his back, weeping, and tried to kick the sand out instead. “There’s a thin line between courage
and stupidity,” he says, “and I was on the wrong side of that line for a long time.” Still, Pitbull was successful, generating as much as $500,000 per year in revenue. And if doing everything himself led to the occasional tear stained breakdown in the middle of nowhere, at least Hayek didn’t have to share his profits (60 to 70 per cent of the gross) with anyone else, either. photograph jessica fern facette
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So how did a guy who made his mark cleaning up after the oil sands wind up in Beirut, trying to get wealthy Middle Easterners to invest in a chain of Asian fast-food restaurants? In a word: the recession. In another: stir-fries. Pitbull continued to do well during the 2008 recession, but Hayek saw enough of his peers go under that he started looking for ways to diversify his investments. Around that time he went on a trip to Lebanon, where his family is from. While he was there, he got hungry. “I wanted Asian food,” he says. For years, Hayek had been a regular at the Edmonton-based chain Wok Box, which specializes in fresh, affordable and quickly made Asian dishes. But try as he might, he couldn’t find anything like that in Beirut. Hayek’s trip later took him to Dubai and Qatar. Same story. “They had a lot of very good high-end Asian, but nothing in that quick-service segment: $6 for a stir-fry, or whatever. I thought, ‘Wok Box would do well here.’ ” Back home, Hayek got in touch with Chris Bullock, one of Wok Box’s co-founders, and asked what it would take to open up a store in Lebanon. Bullock told him he hadn’t really considered it – at
the time they were looking at expanding across Canada, not internationally – and so he sold Hayek the franchisor rights for 14 countries across the Middle East and North Africa at a bulk rate. You can see the pattern emerging: once Hayek gets an idea in his head, he jumps in with both feet, experience and training be damned. “You have to take those big leaps,” he says. “Sometimes they can go sideways on you; sometimes they’re great. I don’t want to go step by step up that ladder. I’ve always made jumps.” This time around, the first order of business was finding investors. But Hayek quickly discovered that nobody in the Middle East was willing to fly halfway around the world just to observe a Wok Box location in the flesh, so Hayek flew to the region, along with some of the Wok Box brass, and started scouting for locations. This process took months, but as luck would have it they eventually settled on Beirut, the site of the original inspiration. Finally, the Lebanese Wok Box opened up in Sassine Square, “the Times Square of Beirut,” in late 2010, and it probably won’t surprise you to hear that Hayek has this date memorized, too: October 21. From there, potential franchisees from neighbouring countries were able to easily fly
out to visit the store. But there were problems in the Beirut store. The rent was extremely high, and Hayek decided that it wasn’t feasible to keep the expensive new store going, and he shut it down earlier this year, but not before securing those new franchisors he’d been courting all along. Hayek finally signed a deal with a group of investors in Qatar, guaranteeing a minimum of six new Wok Boxes in that country within the next four years. He’s also still in talks with a group in Oman, as well as another group representing the United Arab Emirates and Saudi Arabia. For now, the bulk of Hayek’s business remains in Edmonton with Pitbull. The former one-man operation now has 25 employees and 18 trucks, and it’s gunning to become a onestop shop for the oil industry. But Hayek still has a team overseas, spreading the gospel of Wok Box on his behalf. He remains the contact person for anyone else interested in opening a store in those 14 countries in and around the Middle East. And when that first quartet of locations in Qatar opens their doors, you can bet that Hayek will make a note of the date. AV Next Up is a series of profiles of emerging leaders in Alberta’s business community and public life.
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PREDICTIONS 2013
INTO THE CRYSTAL BALL
We asked three prominent Albertans one question: “What will be the defining issue in Alberta in 2013?” Setting aside concerns about trying to predict the future, here’s what they said
The global battle for talent
The price of oil, and our reliance on it
Elizabeth Cannon President, University of Calgary “We must recruit great students to our universities. We know there are a lot of jobs here post-graduation. Let’s get them here early so they can become part of our communities as students and then we know they will want to stay. We see that with the students that come here. The world of post-secondary education is very competitive, but it’s not about selling one institution. It’s about selling the province. We have Campus Alberta, an umbrella organization of the 26 post-secondary institutions in the province. We work together on mobility programs between our institutions and branding with government on what Campus Alberta is. There is more that can be done and we look to the provincial government to provide additional leadership. We’re seeing an increase in students coming from other provinces, particularly B.C. and Ontario, but the opportunity to draw in more students from other parts of the country as we build capacity in our institutions is an opportunity for us.”
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POST-SECONDARY INSTITUTIONS IN THE PROVINCE
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PROVINCES AND THREE TERRITORIES IN A PAN-CANADIAN ENERGY STRATEGY
Chris Labossiere
The pan-Canadian energy strategy
Co-founder, Yardstick Software “I have a bit of a pessimistic macroeconomic viewpoint resulting from a global slowdown coupled with currency, banking and sovereign debt issues. The major commodity economies are experiencing some abrupt slowdowns and if the emerging economies, which have been propping up our economy for a long time, slow, we might see a significant reduction in oil prices. The issue that will define us is how we react in such a world. How will our cities and our knowledge economy and the quality of life – all the things that are necessary for us to be competitive in a global economy – manage? Do we have the diversity in our economy and in our communities to be competitive if the oxygen gets sucked out of the room? The Premier’s task force on the economy a year ago – the Emerson report, which has a lot of dust on it – was one of the best things to come out of our government in the last few years. But what are we doing along those lines? What are we developing such that we are not completely reliant on energy in the future?”
Mike Shaikh Chair, Calgary Police Commission “We will have Keystone XL built before Northern Gateway because of our internal fighting, and it makes me sick to see that. I want to make sure we define a pan-Canadian energy strategy in such a way that it’s easier for people to do business across provinces so the country can flourish. Right now, we’re telling the world, ‘We’re not very easy to do business in.’ We need an energy commission going across the provinces and making recommendations to the prime minister. An energy strategy will help to get rid of the current price discount on our energy products. We are being annihilated. Not only the producers, but the government of Alberta itself is losing revenue. Once we have a pan-Canadian energy strategy, we will have different markets and the discounts will come down.”
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COMPETITIVE GLOBAL ECONOMY
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