The Dakota, Minnesota & Eastern Railroad Corp. (DM&E) has determined the best approach to advancing its long-proposed Powder River Basin (PRB) project: a merger with Canadian Pacific Railway.
Yesterday, the two railroads announced they reached an agreement under which CPR would acquire the 2,500-mile DM&E and its subsidiaries — including the Iowa, Chicago & Eastern Railroad Corp. — for $1.5 billion. Expected to close within 30 to 60 days, the deal is subject to approval by the Surface Transportation Board, which might need six to 12 months to review the proposed merger.
The transaction’s terms include a $1.5 billion cash payment at closing and future contingent payments up to $1 billion; additional contingent payments totaling $350 million if construction on the PRB project begins by Dec. 31, 2025; and additional contingent payments up to $700 million if specified coal volumes begin to move from the basin prior to Dec. 31, 2025.
“The DM&E is an excellent fit for Canadian Pacific, making this a strategic end-to-end addition to our network,” said CPR President and Chief Executive Officer Fred Green in a prepared statement. “[We’re] excited about the prospect for growth in the coal-rich Powder River Basin. The DM&E’s favorable geographic position provides a unique ability to create an efficient and competitive additional link to Midwestern and eastern utilities.”
Proposed since1997, the $6 billion PRB project calls for constructing a 262-mile line through western South Dakota and eastern Wyoming, and upgrading 600 track miles in South Dakota and Minnesota to access the basin. In February, the Federal Railroad Administration denied the DM&E’s application for a $2.3 billion Railroad Rehabilitation and Improvement Financing loan to help fund the project.
“We think the agreement ultimately reached with CP is the best for all our stakeholders, which include current DM&E shareholders, employees, customers and the communities we serve, and the many groups and consumers waiting for the benefits that can be realized by the PRB project,” said DM&E President and CEO Kevin Schieffer. “CP has demonstrated the strongest interest in the PRB project and ongoing rail operations.”
However, the CPR merger doesn’t guarantee the project will proceed, he said.
“It will depend on market demand, construction costs and all the factors that we have always faced,” said Schieffer. “But … I feel very good about where we stand today.”
Source: Progressive Railroading Daily News
