7 November 2007
CPR Disappointed by U.S. Roadblock
Canadian Pacific Railway Ltd. CEO Fred Green says he's
disappointed by a U.S. regulator's decision to stall the company's $1.5-billion (U.S.) takeover of the largest regional
railway in the United States, but he defended the purchase and touted growth prospects for coal shipments.
CPR now expects the U.S. Surface Transportation Board to conduct an in-depth review and issue a ruling by next October - a
five-month delay from a proposed May decision that CPR had been pushing for, Mr. Green said yesterday.
Calgary-based CPR struck a deal to buy the Dakota Minnesota & Eastern Railroad Corp. two months ago, portraying the
acquisition as a springboard to becoming a major transporter of coal, ethanol, steel, grain, and other commodities in the U.S. Midwest.
But the regulatory board ruled that CPR's DM&E takeover plans are "significant," rejecting the railway's argument that
the "minor" transaction deserved fast-track approval.
"We're disappointed that it was not seen to be minor," Mr. Green said during an investment webcast from New York. "But
it is what it is. The regulator has spoken and we will abide by exactly what they ask us to do."
The Mayo Clinic in Rochester, Minn., is the highest-profile critic to file its objections to the board.
Others voicing complaints include train rival Burlington Northern Santa Fe Corp. of Fort Worth, Tex., and the City of Winona, Minn.
The renowned Mayo Clinic expressed major reservations about CPR's coal expansion plans because up to 43 trains a day would go through
Rochester at high speeds, up from the DM&E's two or three trains at slow speeds. The hospital, which has 1,700 doctors and
scientists on staff, also warns that terrorists could target trains that travel within three blocks of the medical complex.
Mr. Green said he doesn't regret the DM&E deal. "The investment was made on the basis that it is a great regional railroad.
We're delighted to have acquired it."
He stressed that CPR hasn't made any decision yet on expanding into the Powder River Basin coal project in Wyoming, but said the
railway will carefully evaluate what looks to be "a great growth opportunity," at least at first glance.
"If there's not a business case, it would be foolhardy of me to advocate that we should invest in that."
CPR still needs to negotiate right-of-ways, access to coal mines, and competitive freight contracts, Mr. Green said.
However, he said CPR is well positioned to find innovative ways to bring Wyoming coal shipments to fruition, perhaps through
partnerships with utilities, construction companies, financing firms, or another major railway.
"We have many options to mitigate risks. There's no end of people who would be interested in being our partner," Mr. Green
said. "Let's investigate and explore."
Burlington and Omaha-based Union Pacific Corp. currently haul coal from the Powder River Basin's
mines.
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