14 November 2008
Canadian Pacific Trumpets Green Credentials
Toronto Ontario - Canadian Pacific Railway Ltd., bulking
up south of the border, is hoping that U.S. politicians will see trains as friends of the environment.
"With a single party - the Democrats - now controlling all three levels of government, there is a heightened potential for
re-regulation," CPR chief executive officer Fred Green said yesterday. "We believe that there may be a
pro-regulation bias in the U.S., fuelled in part by the credit market turmoil."
Calgary-based CPR, which took control of Dakota Minnesota & Eastern Railroad Corp. (DM&E) two weeks ago, believes
that U.S. politicians should take a closer look at the energy efficiency of freight trains instead of placing extra red tape on rail
operations.
"Rail is three to four times more fuel-efficient than truck," Mr. Green said during a webcast from CPR's annual
conference with analysts and institutional investors in Toronto. "This gives rail a cost and environmental advantage and the
potential to widen our competitive advantage."
Mr. Green said DM&E's proposal to haul coal from Wyoming's Powder River basin is a long-term possibility, but
"the uncertainty driven by the economic downturn and turmoil in the credit markets adds to the list of preconditions that need to
be satisfied before we can make a decision."
CPR is counting on a productivity drive, called Execution Excellence for Efficiency, to help the railway withstand the softening
economy next year, since no rebound is expected until 2010.
The global financial crisis and slowing economy prompted CPR to chop its capital spending budget by 20 percent next year to between
$800-million and $820-million. The freight carrier's forecast is based on the Canadian dollar averaging 85
cents (U.S.) next year.
The capital budget includes upgrading tracks and locomotives and building a Regina terminal that handles cargo containers. "Also
included is $100-million for upgrading the DM&E infrastructure, which is consistent with the plans that were
announced with the acquisition," CPR said.
Mr. Green declined to provide profit guidance, saying the range of potential economic outcomes makes forecasting "too wide to be
meaningful."
But he indicated that CPR will take a tough stance when discussing freight rates with Teck Cominco Ltd.'s Elk Valley coal operation,
despite weakened prices for the commodity.
Details of a five-year freight contract between CPR and Elk Valley are confidential, but the pact will expire
31 Mar 2009.
Elk Valley filed a submission to Canada's Competition Policy Review Panel in January, alleging that it is the victim of
"monopolistic rail services." Calgary-based Elk Valley complained that it is getting a raw deal "due to
the exercise of railway market power" by CPR in southeast British Columbia.
Mr. Green said yesterday that CPR is providing a valuable service for Elk Valley, and weakened metallurgical coal prices shouldn't
translate into lower freight rates.
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