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18 April 2005

CPR Begins Capacity Expansion in Western Canada

Canadian Pacific Railway (TSX/NYSE: CP) announced today it has begun a major expansion of the track network in its western corridor extending from the Prairie region to the Port of Vancouver.
 
Map of the Western Corridor Expansion.
 
The expansion is expected to cost approximately $160 million. When completed this fall, it will increase CPR's capacity in western Canada by 12 percent, or more than 400 freight cars a day. Depending upon the rate of utilization of the additional capacity, the expansion would translate into full-year incremental earnings per share1 (EPS) in the range of $0.25 to $0.40.
 
"There have been positive developments in our customers' markets as well as sufficiently encouraging signals in the federal government's Bill C-44 that CPR has decided to take the first step to expand our western track network," said Rob Ritchie, President and Chief Executive Officer of CPR.
 
CPR recently signed a five-year contract with its largest customer, Elk Valley Coal Corporation, providing for an increase in coal volumes and rates through 2009. Three major potash producers, all served by CPR, have announced plans to increase production by a total of 2.6 million tonnes per year between the second quarter of 2006 and the fourth quarter of 2007. Bill C-44, as drafted with amendments to Canadian transportation law, would provide a sufficiently stable regulatory environment to give CPR the confidence to invest in more capacity.
 
CPR's $160-million expansion program this year is in addition to planned capital investment of approximately $760 million. Cash flow in 2005 will remain positive.
 
CPR's increased freight capacity will feed Asian markets that are hungry for Canada's resources. It will support the Vancouver Port Authority's expansion plans and the British Columbia government's port strategy to make the province the preferred gateway to North America for growing volumes of finished goods from China and its efforts to promote economic growth in the Interior. Western commodities, such as coal from the B.C. Interior and grain, sulphur and fertilizers from the Prairies, are moving to the west coast in growing volumes.
 
Mr. Ritchie said the federal, British Columbia, and Alberta governments have created a positive business climate for capital investment in infrastructure in the west. The three governments recognize that the biggest issue facing Canadian businesses is whether there will be sufficient transportation capacity for them to take advantage of growing global markets.
 
"Increased trade with China and other Asian countries has clearly shown that transportation capacity can be an enabler of economic growth. Canadian shippers and ports want to participate in growing global markets. They want us to expand track capacity, and we are encouraged enough to take the initial step. Decisions on whether and when additional expansion phases are carried out will be influenced by ongoing market conditions and the future policy environment in Canada," Mr. Ritchie said.
 
The expansion work this year involves 25 projects, including:
  • 10 projects between Moose Jaw, Sask., and Calgary to extend sidings and lay sections of double track;
  • 3 projects between Edmonton and Calgary to extend sidings and build a new siding;
  • 12 projects between Calgary and the Port of Vancouver to extend sidings and lay sections of double track.


  OKthePK Victoria British Columbia Canada - www.okthepk.ca