New Zealand Faces $1.4 Billion Bill After Earthquake

New Zealand faces a NZ$2 billion ($1.4 billion) damage bill and a massive clean-up after Christchurch, its second-biggest city, was hit by a magnitude 7.0 earthquake that closed the central business district.

Authorities placed the city of 348,000 on New Zealand’s South Island under a state of emergency after the quake struck at 4:35 a.m. local time on Sept. 4, cutting power, damaging roads, rupturing sewer lines and water pipes and ripping facades off buildings. No deaths were reported. Prime Minister John Key allocated NZ$5 million to a rebuilding fund today, with economic development minister Gerry Brownlee to oversee reconstruction.

Aftershocks hit Christchurch yesterday as storms lashed the city, and the state of emergency will remain in place until at least Sept. 8, the Ministry of Civil Defence & Emergency Management said on its website. About 500 buildings in the city were damaged or destroyed, including 90 in the central business district, with army troops patrolling the area.

“We thought it was all over,” Craig Ebert, a senior economist at Bank of New Zealand who was staying on the 23rd floor of a Christchurch hotel as the temblor struck, said in a telephone interview. “I’ve bungee jumped and white-water rafted and the fear factor was way beyond that. You genuinely feared for your life because you had no control.”

The central business district of Christchurch, the largest city in the Canterbury region, will remain cordoned off while buildings, roads and pipes are checked, Mayor Bob Parker said yesterday.

Market Reaction

The NZX 50 Index (NZSE50FG) of stocks climbed in Wellington, led by building-related companies. Insurers fell. New Zealand’s dollar rose to 72.41 U.S. cents from 72.07 cents in New York on Sept. 3. The nation’s bonds declined, pushing 10-year yields to their highest in more than a month.

Standard & Poor’s said it may cut the rating of Christchurch City Council and unit Christchurch City Holdings Ltd. The risk assessor is monitoring the impact of the quake on the council’s assets and operations and any downgrade to the AA+ rating is unlikely to be more than one level, it said in a statement.

The quake comes as New Zealand, whose snowcapped peaks and verdant valleys formed the backdrop to the Academy Award-winning Lord of the Rings trilogy, struggles to rebound from its worst recession in 30 years.

‘Considerable Disruption’

“There will be considerable disruption to both the Canterbury and national economy in the short term,” Key told reporters in Wellington today, after hosting a three-hour meeting with his Cabinet. “There should be an increase in activity once reconstruction and repair kicks into full gear.”

The prime minister said he still intends to depart for Europe on Sept. 10 and next month’s municipal government elections will proceed as planned.

The country, the biggest global exporter of dairy products and lamb, is affected by about 15,000 earthquakes each year, according to GeoNet, an earthquake-monitoring site.

The government’s initial estimates of NZ$2 billion needed to repair the damage would be equivalent to “around 2 percent” of gross domestic product, Bank of New Zealand’s Ebert said.

“It’ll have as many positives as negatives, and probably more positives,” Ebert said. “It’s a very concentrated opportunity to get in there and do some work for builders who wouldn’t have otherwise been in work.”

Repair Cost

Damage at Lyttelton Port Co. (LPC), which handles coal exports about 12 kilometers (7 miles) southeast of Christchurch, will cost “millions” of dollars to repair, Chief Executive Peter Davie said in a Sept. 4 phone interview.

The container terminal has full electrical service, Lyttelton said in a statement today. Cargo operations were expected to resume by 3 p.m. local time, with the effect on shipping movements limited.

Telecom Corp. of New Zealand, the nation’s biggest phone company, is working with civil defense agencies to complete the restoration of services, it said. Payphones in and around Christchurch are being provided free for local, national and mobile calls.

“Telecom has obtained enough back-up generators and diesel to maintain core services, regardless of mains-power availability, and continues to attempt to access sites as soon as possible, subject to damage and civil defense requirements,” the company said in a media advisory.

Aftershocks Continue

Aftershocks as strong as magnitude 6.0 may occur this week, the government said. A severe weather warning for gale force winds was in place until at least 6 a.m. today, it said.

Winds in Christchurch have eased after gusting up to 70 kilometers per hour yesterday, Meteorological Service of New Zealand Ltd. Chief Forecaster Peter Kreft said from Wellington.

“It’s good conditions for people to be outside doing recovery work,” he said.

The earthquake caused minimal disruption to New Zealand’s milk supply, according to the Dairy Trader newsletter filed to the stock exchange today. Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said its plants in the Canterbury region were operating normally.

Damaged Buildings

Between 300 and 400 farms have been affected, 150 “severely,” with most damage done to buildings. Electricity has been restored to 95 percent of the urban and rural power network, Civil Defence said.

As many as 100,000 homes have been damaged, Key said.

Goodman Property Trust said its Christchurch assets, which represent about 10 percent of its portfolio, were largely unaffected by the earthquake following initial inspections, according to a regulatory filing.

Some 3,500 Christchurch customers were without power as of 3 p.m. local time, Orion New Zealand Ltd. said on its website. Orion aims to reduce that to less than 1,000 by tonight. Aftershocks temporarily cut power to parts of Christchurch airport today, the power distributor said.

The main quake struck about 55 kilometers west-northwest of the city and at a depth of 12 kilometers. One person received serious injuries and about 100 others received minor injuries, the government said.

Several aftershocks followed, including one of magnitude 5.7, the U.S. Geological Survey said on its website.

Shaking was felt as far west as Greymouth, about 166 kilometers away, and in Dunedin, about 309 kilometers away, according to Radio New Zealand. Damage was reported on the southern part of North Island, home to New Zealand’s capital, Wellington, and Auckland, its largest city.

New Zealand’s most powerful recorded earthquake occurred in January 1855 with an estimated magnitude of 8.2, according to GeoNet. It shifted vertically about 5,000 square kilometers of land.

The last quake to cause casualties in the nation hit in December 2007, when buildings in Gisborne collapsed. Eleven people were injured and one died of a heart attack, GeoNet said.

New Zealand is starting to benefit from a rebounding global economy and is poised to grow 3 percent this year, compared with a 1.6 percent contraction in 2009, according to the International Monetary Fund.

To contact the reporters for this story: Jacob Greber in Sydney at jgreber@bloomberg.net; Tracy Withers in Auckland or twithers@bloomberg.net

To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net

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