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COMPETITION WATCH: Canadian Pacific to fight CTA decision on revenue entitlement

CALGARY, Alta. -- Canadian Pacific says it does not agree and plans to "vigorously challenge" the recent Canadian T...

CALGARY, Alta. — Canadian Pacific says it does not agree and plans to “vigorously challenge” the recent Canadian Transportation Agency (CTA) decision on adjusting the revenue entitlement under the Canada Transportation Act.

The CTA announced a volume-related adjustment that translates to a $2.59 per tonne impact on the railway revenue entitlement. The decision is retroactive to August 1, 2007.

“We disagree, among other things, with the retroactive component of the CTA’s adjustment, and we will vigorously challenge it,” said Fred Green, President and Chief Executive Officer. “We believe the decision to make the adjustment retroactive is not supportable, based on the legal advice we have received. We are confident we can successfully appeal the CTA’s decision in the Federal Court.”

Although CTA’s announcement was expected, the amount of the adjustment was higher than the assumptions CP had made for its 2008 outlook, said Mike Lambert, Chief Financial Officer.

“The prospective application of the CTA’s adjustment will affect our EPS guidance by reducing it approximately $0.05 per share, and therefore we are adjusting the range of our EPS outlook for 2008 downward to $4.65 to $4.80. The retroactive component of the CTA’s adjustment could affect our guidance by as much as an additional $0.08 per share, however we feel confident that we will succeed in challenging the decision and therefore are not adjusting our guidance for the full amount of the potential impact.”

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