Canadian Pacific to appeal grain shipment revenue caps

Canadian Pacific to appeal grain shipment revenue caps Canadian Pacific Railway said Thursday it plans to appeal a recent Canadian government move to reduce rail revenue on grain shipments.
   On Tuesday, the Canadian Transportation Agency announced final adjusted caps on how much the Canadian National and Canadian Pacific railways can earn from grain shipping.
   The agency’s found that historical “embedded” hopper car maintenance costs were $4,335 per car, whereas “actual” costs are now $1,356 per car. This difference represents a $71.4 million reduction to the agency's 2007-2008 revenue caps, which translates to $2.56 per ton based on forecasted tonnage of 27.85 million metric tons (Figures are in U.S. dollars).
   The CTA also said the decision is retroactive to Aug. 1 of last year.
   'We disagree, among other things, with the retroactive component of the CTA’s adjustment, and we will vigorously challenge it,' said Fred Green, Canadian Pacific chief executive officer. 'We believe the decision to make the adjustment retroactive is not supportable, based on the legal advice we have received. We are confident we can successfully appeal the CTA’s decision in the federal court.'
   The CTA adjustments were expected, however, the amount decided upon by the agency was higher than the railroads had predicted in previous financial statements.
   On Wednesday, Canadian Pacific cited the decision in reducing its profit expectation for the full year from previous estimates of $4.61 to $4.76 per share to $4.57 to $4.81 per share.
   'CTA’s adjustment could affect our guidance by as much as an additional 8 cents per share, however we feel confident that we will succeed in challenging the decision and therefore are not adjusting our guidance for the full amount of the potential impact,' said Mike Lambert, Canadian Pacific chief financial officer, in a statement.
   Farmers affected by the CTA decision said they were pleased with the government move.