Manitoba’s northern First Nations have responded to the “for sale” notice on the port and rail line that allow Prairie farmers and handlers to ship grain exports through Hudson Bay.
The Canadian arm of U.S. shortline firm OmniTrax confirmed Friday it has a letter of intent in hand from a group of First Nations in northern Manitoba, seeking to buy the company’s Manitoba assets.
OmniTrax Canada said last month its Churchill, Man. port and Hudson Bay Railway will need more government support to keep operating or, failing that, another owner or operator should be found.
The letter of intent triggers a 45-day due diligence period in which the investor group and company “will work together to ensure that a purchase becomes a reality,” the company said Friday.
The Manitoba and federal governments “will be approached to participate” in the process and “support the purchaser” in the deal, the company said.
“Having visited many communities along the rail line, it became clear to me that the rail line served as a utility for these remote communities and that for the line and the assets to truly succeed, First Nation participation in ownership and management was essential,” OmniTrax Canada president Merv Tweed said in Friday’s release.
The company on Friday didn’t identify any of the members of the proposed investor group, saying “further specifics of the group” and of the proposed deal would be available in the New Year.
A representative from Manitoba Keewatinowi Okimakanak (MKO), the body representing the province’s northern First Nations, was not immediately available Friday afternoon.
OmniTrax, owned by Denver-based investment firm The Broe Group, said it has agreed to work with the investor group for “a number of years, ensuring a smooth transition and detailed knowledge transfer.”
The company said this deal “will add to the already substantial economic development of the participating northern Manitoban First Nations, as well as maintain vital interconnectivity for all of the communities currently being serviced along the line.”
A deal would also mean “a further boost to the enhancement of the railway and port as a major transportation infrastructure for the northern region of Canada, enabling increased regional, continental and global trade opportunities.”
OmniTrax bought the government-owned port and Canadian National Railway’s (CN) rail line in 1997 for $50 million. The federal and Manitoba governments put up a like sum to help fund improvements for both assets.
The port and rail line, built in the 1930s, were meant to serve northern communities and provide an alternate shipping route into and out of Western and central Canada. Starting at The Pas and Flin Flon in western Manitoba, OmniTrax’s track runs over 1,000 km northeast via Thompson, Wabowden and Gillam, Man. to Churchill.
The company has said vessels can shave up to three days off voyages to some ports in Western Europe, if sailing from Churchill as opposed to Thunder Bay.
Churchill’s ice-limited shipping season, typically July through October, has been a benefactor of global warming in recent years, but warmer weather also makes the company’s Hudson Bay Railway, much of which is built on permafrost, less stable.
The company’s port in the past five years has exported an average of 554,548 tonnes of grain per year, but shipments in 2015 dropped to just 186,000 tonnes.
Churchill’s exports were expected to slip after its main customer, the Canadian Wheat Board, lost its single marketing desk for Prairie wheat and barley in 2012.
The federal government that year budgeted for up to $25 million to provide exporters using Churchill with a $9 a tonne subsidy to use Churchill. That subsidy program is set to expire at the end of July 2017.
On top of the port’s grain traffic, OmniTrax has previously said its studies show the rail line to be worth over $40 million per year in economic value to Canada’s North. The port can also handle general and breakbulk cargo, goods such as building supplies and machinery, liquid bulk goods such as fuels, and containers.
“We’ve spoken to both levels of government and suggested to them that the railway truly is a utility into the North and should be treated that way,” Tweed said in an interview with 98.5 FM The Rock in Yorkton, Sask. last month. — AGCanada.com Network