CPR 'disappointed' by U.S. roadblock
Published: November 7, 2007
Source: Brent Jang, Globe & Mail
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
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
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
"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.
CANADIAN PACIFIC (CP)
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