Canadian Pacific responded to the recent announcement by the Canadian Transportation Agency (CTA) regarding the adjustment to the revenue entitlement under the Canada Transportation Act. The CTA announced a volume-related adjustment that translates to a $2.59 per ton 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 we expected this announcement, the amount of the adjustment is higher than the assumptions we made for our 2008 outlook, confirmed on January 29, 2008,” 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.”


The outlook for 2008 for diluted earnings per share before foreign exchange gains and losses on long-term debt and other specified items is expected to be in the range of $4.65 to $4.80.

The 2008 estimate assumes an average currency exchange rate of the US dollar at par with the Canadian dollar, and crude oil prices averaging US $87 per barrel.

Despite an uncertain economic environment and the impact of the CTA’s adjustment, the Company is not changing its revenue and expense outlook any further at this time. CP expects to grow total revenue by four to six per cent while total operating expenses are expected to increase by three to five per cent.

Capital investment is expected to be in the range of $885 to $895 million in 2008, essentially flat when compared with 2007.

CP expects free cash to be in excess of $250 million in 2008.

The 2008 outlook includes the projected earnings of the Dakota Minnesota & Eastern Railroad (DM&E) on an equity accounting basis for the full year.