Tuesday, May 26, 2009

Will changing traffic patterns alter investment guidelines?

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When traffic returns to the railroads in a post-recession economy, it may not come from the old familiar places, suggests CP Rail Chief Executive Fred Green.



Talking with reporters following the company's annual meeting in Vancouver, British Columbia, on May 22, Green said changes in public policy as well as in the financial markets may require a re-examination of long-term investments in railroad infrastructure.


As examples, he mentioned the possibility that the volume of container imports (a greatpre-recession source of revenue for intermodal carriers) may find new shipping lanes. He also said that shifting mandates in how energy is provided could affect such proposals as that to build a new coal-hauling line into the Powder River Basin coalfields (an option that CP acquired with its purchase ofthe Dakota, Minnesota & Eastern, which had won regulatory authority for sucha buildout but not the necessary financing).


If changes occur, said Green,"I wouldn't predict that there will be a net negative to the company, but jus ta net difference to the company ... it's something we have to keep oureyes wide open for." For instance, he said, a change in trade patterns between North America and China "could cause a completely different set of logistical needs: We'll still be involved, but in a different lane, a different corridor."



As for building the new coal line, Green commented: "We're not any closer than we were 18 months ago to making a decision on that--and until such time as those stars line up, it’s just an option."


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