ON NOVEMBER 25 the government of British Columbia announced that it had selected Canadian National Railway for a 60-year concession to operate the 2315 km BC Rail network. Premier Gordon Campbell said CN would pay C$1bn over the life of the concession. Half of this will be used to retire BC Rail’s debt, and the rest will fund job creation and public works projects, including upgrading at the port of Prince Rupert. He claimed BC Rail’s losses over the past 15 years totalled C$860m.

The transaction is subject to approval by Canada’s Competition Bureau and is expected to close in the first quarter of 2004. The deal, which includes operating rights and rolling stock but not the land or infrastructure, gives CN an option to renew for another 30 years. BC Rail operations will be integrated into CN over the next three years, and CN expects the acquisition to generate profits of C$100m a year. It hopes to use BC Rail’s losses and debts amounting to nearly C$2bn as a tax shelter for future earnings, but if the Canadian Customs & Revenue Authority rules against the plan, the price paid by CN will be reduced by the estimated value of the tax savings.

CN President & CEO E Hunter Harrison said 430 of BC Rail’s 1380 jobs will go through early retirement or ’attrition’. About 25% of BC Rail’s 121 locomotives will be wthdrawn, but 600 new centrebeam wagons will be acquired and 1 500 boxcars will be refurbished. CN also plans to invest C$1m in a new wheel shop at Prince George to serve both railways. Harrison said CNwould launch a ’Chicago Express’ service that will cut two days from the journey time between British Columbia and the US Midwest.

  • On December 5 CN and BC Rail invited third-party proposals for the operation of passenger services between North Vancouver and Prince George, and on the Prince Rupert - Prince George - Jasper corridors, aimed primarily at the tourist market. BC Rail had discontinued its loss-making passenger operations in October 2002, but the sale provides for their reinstatement to boost economic activity in the interior and northern part of the province.