BC Rail Ltd. has been sold to Canadian National Railway Co. for $1-billion, B.C. Premier Gordon Campbell announced Tuesday.
Proceeds of the sale are expected to be used to pay off the BC Rail's $500-million debt, create jobs in the northern part of the province, and create opportunities for economic development.
"This is an important day for British Columbia," Premier Gordon Campbell said at a press conference in Vancouver Tuesday. He said the deal will "unleash the full economic promise of the North."
"This partnership is a $1-billion investment in the future of B.C. It will provide lower rates, faster service, new transportation infrastructure, [and]]new jobs."
Under the deal, CN will pay the province $1-billion to buy the outstanding shares of BC Rail. CN gets the right to operate over BC Rail's railbed for 60 years under the lease, which can be renewed for another 30 years.
The railbed will still be owned by the province - under the Crown corporation of BC Railway Co. - with CN responsible for the maintenance and transportation.
After the lease, the province gets the infrastructure.
CN outmanoeuvred rivals Canadian Pacific Railway and a U.S. consortium comprised of Burlington Northern Santa Fe Corp. and OmniTrax by winning the right to operate BC Rail.
"Purchasing the BC Rail franchise is a strategically important initiative for CN, one that will strengthen our forest products business and that has significant scope for shareholder value creation," CN CEO, Hunter Harrison, said in a statement.
CN says it plans to cut 31 per cent of BC Rail's jobs or 430 positions, down from a work force about 1,380. The company says about 250 employees are eligible for early retirement.
Mr. Campbell said the deal will especially address the challenges faced by northern communities who feel that their needs have not been met by the current B.C. rail business model.
"Northern communities, shippers, and resource industries have made clear that BC Rail is failing them. This partnership directly addresses the needs that mayors and shippers told us must be met. By providing better service, an expanded Port of Prince Rupert and significant new community investments for Prince George and the North, the partnership will be a major new source of economic development for our entire province."
The plan will add 600 new rail cars to the fleet, a rate reduction of 7 per cent, on average, for interline shippers, and transit times that will be 30 per cent faster from Prince George to Vancouver.
It includes a new Chicago express line to be created in the first quarter of 2004 that will move freight from Prince George, B.C. to Chicago two days faster.
The plan also includes an expansion of the Port of Prince Rupert to improve access to Asia.
More to come