Canadian Pacific to spend up to $1.2 billion on infrastructure, growth projects

By The Canadian Press  | January 17, 2012

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Canadian Pacific Railway locomotives work in the Calgary yard May 16, 2007. THE CANADIAN PRESS/Jeff McIntosh
Canadian Pacific Railway locomotives work in the Calgary yard May 16, 2007. THE CANADIAN PRESS/Jeff McIntosh

 

 

CALGARY - Canadian Pacific Railway Ltd. (TSX:CP) says it will spend between $1.1 billion and $1.2 billion in capital projects this year, with about one-quarter of the funds going towards business improvements and the rest towards maintaining assets.

The Calgary-based company, which is under pressure from its largest shareholder to change its chief executive and improve its operations, announced Tuesday that it will spend $800 million on preserving its existing capacity.

A further $275 million will go to expand CP's rail network capacity, develop its business and improve productivity — essentially following through on the current leadership's plans for turning around the company's lacklustre performance.

"At CP, we are executing our accelerated multi-year investment plan, to further improve service reliability, asset velocity, and operational efficiency, while expanding capacity to safely and efficiently support higher volumes," Fred Green, CP's president and CEO, said in a statement after markets closed Tuesday.

"The 2012 capital plan will focus on strategic and targeted investments to improve service and increase network capacity while funding business development and initiatives with rapid return on investment."

Green has been personally targeted for removal by U.S. activist investor Bill Ackman, who controls New York-based Pershing Square, which owns about 14.2 per cent of Canadian Pacific's stock.

Ackman has championed the idea of replacing Green with Hunter Harrison, a highly respected former CEO of Montreal-based Canadian National Railway (TSX:CNR), who retired from the industry in late 2009. Harrison has told reporters he'd be interested in returning to work but CN has warned him to honour agreements he signed that would restrict his activities with a competitor.

Ackman argues that Harrison has the expertise to improve CP's operations. Canadian Pacific's board of directors, which continues to support Green, counters that the two railways face different challenges and Green is better positioned to follow through on a strategic plan for getting the company back on track.