Proposed deal ‘fallen apart’ for Hudson Bay Railway

The Port of Churchill in 2015. (CNS Canada photo by Jade Markus)

An acquisition deal-in-principle for northern Manitoba’s Hudson Bay Railway appears to have collapsed and the line’s current owners warn the railway may now be down for yet another shipping season.

Hudson Bay Railway (HBR), a subsidiary of Colorado-based shortline operator OnmiTrax, announced Tuesday “it now appears that this transaction has fallen apart.”

The proposed sale of the railway and its port facilities “to this group may not be possible,” the company said, referring to the announcement in late May of a deal in principle with an investors’ group including Toronto investment firm Fairfax Financial Holdings, Regina pulse crop processor AGT Food and Ingredients and Missinippi Rail Partners.

The Missinippi group is a joint operation of Missinippi Rail Limited Partnership and OneNorth, a pair of groups representing northern communities in Manitoba and Nunavut. CBC on Tuesday quoted a statement from OneNorth saying it “remain(s) at the table and we fully support the efforts to conclude a reasonable deal.”

HBR didn’t say in its statement Tuesday why the deal has derailed, nor did it disclose any financial terms of the proposed deal.

The company said Tuesday it “will continue to pursue any and all opportunities to sell the (railway) and related assets, and we will look to do so as expeditiously as possible.”

The rail line, which runs from the northwestern Manitoba communities of The Pas and Flin Flon northeast through Thompson to the Port of Churchill on Hudson Bay, hasn’t operated since May 2017, following flooding and washouts along the stretch between Amery (about 45 km northeast of Gillam) and Churchill.

HBR declared force majeure and an indefinite suspension of operations on the line on June 9 last year.

The company said the track bed was washed away in 19 spots, five bridges were “visibly damaged” and another 30 bridges and 600 culverts would need to be further assessed. It later said repairs would cost as much as US$60 million and it wasn’t prepared to pay without government assistance.

The Canadian Transportation Agency (CTA) last month granted a request filed by an unnamed representative of Manitoba’s provincial opposition New Democrats and ordered HBR to get repair work underway by Tuesday (July 3) at the latest.

‘Repair process’

HBR — which said June 18 it plans to appeal the CTA ruling — added Tuesday it “initiated the repair process last week by issuing an RFP (request for proposals) through our engineering firm AECOM.”

However, the company said, “we want to make clear that this development may jeopardize the opening of the rail line this season. As we have previously stated, we are not in a position to fund the entirety of the repairs to the HBR in the absence of a sale agreement.”

While HBR on Tuesday thanked Fairfax Financial and Grand Chief Arlen Dumas of the Assembly of Manitoba Chiefs for their “good faith efforts to get a deal done,” it also said it wasn’t able “to find common ground on certain key issues.”

HBR described the talks’ outcome as “unexpected and very unfortunate” and put out apologies to northern communities and other stakeholders who depend on the northern line.

The federal government has said its 2008 agreement with OmniTrax calls for federal financial support to the railway, for which OmniTrax in return was to maintain and operate rail service through to Churchill until 2029. OmniTrax “has not met its obligations,” Winnipeg MP and federal natural resources minister Jim Carr said last October.

OmniTrax had bought the government-owned port and Canadian National Railway’s (CN) rail line from The Pas to Churchill in 1997. The rail line, completed in 1929, and the port facility, built by 1931, were set up to serve northern communities and provide an alternate shipping route into and out of Western and central Canada.

From a grain export perspective, railing grain out of certain areas of Saskatchewan and Manitoba up and out through Churchill instead of east to Thunder Bay is believed to shave up to three days off voyages to some ports in Western Europe.

But the port’s grain handle declined in the five years after the deregulation of its main customer, the Canadian Wheat Board. OmniTrax shut down the port facility and laid off its staff before the 2016 grain shipping season.

The port’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 rail line, much of which is built on permafrost, less stable. — Network

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