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CPR to challenge federal grain hopper maintenance adjustment in court

Canadian Pacific Railway begs to differ with the Canadian Transportation Agency (CTA) on a recent grain hopper car maintenance adjustment decision.

The CTA has announced a volume-related adjustment to revenue entitlement under the Canada Transportation Act — retroactive to August 1, 2007 — that translates to a $2.59 per-ton impact on railway revenue entitlement, CPR said.

The amount of the adjustment is higher than assumptions the railroad made last month while confirming its 2008 outlook, said CPR Chief Financial Officer Mike Lambert in a prepared statement. So, the Class I plans to appeal the CTA's decision in federal court.

"We disagree, among other things, with the retroactive component of the CTA's adjustment, and we will vigorously challenge it," said CPR President and Chief Executive Officer Fred Green. "We believe the decision to make the adjustment retroactive is not supportable, based on the legal advice we have received."

The adjustment will reduce earnings per share (EPS) guidance by 5 cents per share, said Lambert. To compensate, the railroad is lowering its EPS guidance for 2008 from $4.80 to $4.65.

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