Canadian Pacific announced its intention to explore strategic options for its main line track from Tracy, MN West into South Dakota, Nebraska and Wyoming and is inviting expressions of interest from prospective partners.
The line includes approximately 660 miles of track which encompasses CP’s current operations between Tracy, MN and Rapid City, SD, north of Rapid City to Colony, WY, South of Rapid City to Dakota Jct., NE and connecting branch lines. CP has operated the rail line in this area since it assumed operational control of the Dakota, Minnesota & Eastern (DM&E) railroad in 2008. A number of grain, ethanol, clay and merchandise customers are rail-served in the area.
“This portion of the CP network would be an attractive and highly viable opportunity for a low-cost operator. There is a strong long-term franchise here for an operator willing to maintain high quality service and explore growth opportunities with existing and future customers,” said E. Hunter Harrison, President and Chief Executive Officer. “CP has successfully built many partnerships with shortline and Class 1 railroads throughout its system and we look forward to assessing the ways interested parties could work together with us to deliver quality service to customers on the West end of the DM&E through an innovative partnership.”
“CP will continue to fully serve customers along this rail line as we work with interested parties and evaluate proposals. We have undertaken similar reviews on other portions on our network in the past that have resulted in positive outcomes for shippers, employees, and operators,’’ added Harrison.
Canadian Pacific also announced it will take a fourth quarter pre-tax non-cash charge of approximately $180 million ($107 million after tax) on its option to build into the Powder River Basin (PRB), which supplies about 40 per cent of the thermal coal consumed in the U.S., and is attractive because of its low sulphur content.
When CP acquired the Dakota Minnesota & Eastern railroad, it also acquired the option to build a 260-mile extension of its network into coal mines in the PRB. Components of the charge include the option, engineering design costs, land and capitalized interest.
It is CP’s intention to defer indefinitely plans to extend its rail network into the PRB coal mines based on continued deterioration in the market for domestic thermal coal, including a sharp deterioration in 2012.