CN sees Prince Rupert Port as a bright spot in its future

"We are already trying to figure out, and we are confident enough, that we are trying to figure out ways we increase capacity through the facility as well."--Hunter Harrison, CN Rail CEO speaking about the Fairview Container Terminal.

While the economic slowdown continues in the USA and other economic factors begins to affect the world of shipping, CN still finds that the Prince Rupert advantage will be something to trumpet to importers and exporters over the next few years.

The railroad is looking towards its transportation partners to begin to increase the current through put through the Fairview facility, with an eye towards larger ships arriving and of further expansion of the port's handling capabilities in the future.

Hunter Harrison, CN's CEO outlined his thoughts on the state of shipping and his railroad during a conference call earlier this week, the Daily News offered some of his talking points in a front page story in Thursday's paper.

CN BOSS BULLISH ABOUT PORT PROSPECTS FOR EXPANSION

He is expecting to see more large ships calling at Fairview
By Leanne Ritchie
The Daily News
Thursday, April 24, 2008

Pages one and two

In between a harsh winter, a slumping U.S. economy and high fuel costs, the new intermodal container terminal operations in Prince Rupert remained a bright spot for CN Rail in the first quarter of 2008.

During a conference call with analysts earlier this week, Hunter Harrison, CN's chief executive officer, said the company is on track to meet its projections of $100 million in revenue from the first year of operations and, despite a softening in import volumes, the rail company is continuing discussions with shippers to add more volume at the Maher Terminals facility.

"The $100 million in revenue in guidance for this year is still right on track," said Harrison. "I have been more optimistic in the past and thought we would have had more of that capacity filled by now but clearly the import volumes into North America from Asia are down."

There are two reasons CN believes it can beat its earnings estimate for volumes moving through the facility.

"One is we continue to have dialogue with additional customers and there are still a number of steamship companies and consortiums that are talking to us about making Prince Rupert a new port of call," Harrison said. "Also, we are talking to COSCO and their business partners about increasing the size of vessels they may use to call on Prince Rupert because of some rationalizing that is ongoing between the Atlantic and Pacific calls. This would also add the capacity to bulk up our numbers for this year."

COSCO began moving containers through the terminal in October of 2007. The ships stoping in Prince Rupert are part of the CKYH Alliance's Pacific Northwest Butterfly South Loop service, of which COSCO is one of four shipping lines. Each ship has a capacity of 5,400 TEUs (average 20-foot containers.)

And despite the slump in import volumes and problems in the U.S., Harrison said they are still working on ways to expand capacity at the port.

"We are already trying to figure out, and we are confident enough, that we are trying to figure out ways we increase capacity through the facility as well," he said.

It's been a hash winter for CN Rail, and soft markets have the company reducing its earnings forecast. CN released its first quarter results, with earnings falling four per cent to $311 million.
CN executives said its results were impacted by a severe winter in many parts of North America, high fuel costs, a strong Canadian dollar and slumping American economy.
"Thank God it's spring time," said Harrison.

The extreme cold and snow affected the entire system this winter, including Prince Rupert-to-Prince George.

In January, CN took the unprecedented step of suspending most operations in the West for almost two days to ensure the safety of employees.

"Clearly, I thought last year was a bad winter. This year went far beyond," he told analysts, noting record snowfall in Quebec, Ontario, Michigan and Wisconsin.

CN said weather challenges cost the company three cents per share of lost earnings.
"Contrary to other reports, I thought we bounced back pretty quick," he added, rejecting one analyst's suggestion that the company may have ended up cutting expenses too deeply.

Due to the challenges facing the U.S. economy and fuel costs, the railway also lowered its 2008 diluted earnings per share forecast to the "mid-single digit" range over 2007 earnings per share of $3.40. That's down from an earlier forecast of "mid-to-high" single digit growth. Revenues should grow at between six and eight per cent, the Montreal-based railway said.