18 January 2005
Canadian Pacific,
Fording Agree to Mediate Coal Rate Dispute
Canadian Pacific Railway Ltd.,
the country's second-largest railway, and Fording Canadian Coal Trust agreed to mediate a
shipping rate dispute that could raise the railway's profit if the carrier prevails.
The companies said late yesterday in a joint statement that mediation would begin
20 Jan 2005 in the case involving the Elk Valley Coal Partnership. Elk Valley mines coal
in southeastern British Columbia that is carried to Vancouver by the railway for export. An Alberta
court case will be suspended for mediation.
The railway has said its revenue should rise because the contract links the rail rates to the amount
Elk Valley receives from companies such as Asian steelmakers. With coal prices rising, analysts such
as Morgan Stanley's James Valentine estimated a victory could have boosted the railway's earnings by
more than 67 percent from the current $2.72 analyst estimate.
The railway started the court case last year. Elk Valley, which is 60 percent owned by Fording, then
asked the Canadian Transportation Agency to block a rate increase. The agency's arbitrator last month
favored the railway, and Fording said after the ruling that the railway may be entitled to 27 percent
of future revenue increases if Canadian Pacific prevails.
Shares of Calgary-based Fording fell 37 cents to $94.05 yesterday in Toronto.
Vancouver-based Teck Cominco Ltd., which owns the other 40 percent of Elk Valley, fell
8 cents to $35.60. Calgary-based Canadian Pacific fell 25 cents to $39.65.
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