CP sells DM&E west end to G&W

[canpac08]

For those who don;t have access to the trains wire CP has picked a buy for the west end of the DM&E

http://www.prnewswire.com/news-releases ... 03711.html

[AARR]

Here's a little more info

Posted by Elba Steve on 1/3/2014, 5:12 am
G&W has come to agreement with Canadian Pacific to purchase the western most trackage of the D M&E, which totals about 660 miles. Trackage includes lines from Minnesota, Nebraska, South Dakota, and Wyoming, and will be named the Rapid City Pierre&Eastern Railway. About 52,000 carloads are handled annually on these lines. This information per Trains Magazine Newswire 1-02-14.

[JStryker722]

That'll make it an automatic class 2 Regional on miles alone.

[AARR]

There is a matrix that for a short line railroad to be profitable they need 100 carloads per mile per year. So for 660 miles of track that would be 66,000 carloads per year. 52,000 falls short of the ideal matrix. Now there are always exceptions to this rule but if you ever read corporate short line companies car loadings you'll see they are usually right around the 100 car loads per mile of track matrix.

Something else to note is there is not a lot of growth opportunities on this segment. Mostly grain (some potential growth), ethanol and ag-oil (both flat lined), cement (cyclical), and bentonite (flat lined).

Another consideration is with the exception of bentonite and cement most of the business is on the east end of the line and have the shortest haulage route to its connection with CP.

G&W knows their business and have a very successful track record growing traffic on their lines so it'll be interesting to see what they do with this line. Maybe some how they'll pick up some frac sand or oil transload business or maybe continue to push to move into Wyoming coal fields.

[JStryker722]

There is a matrix that for a short line railroad to be profitable they need 100 carloads per mile per year. So for 660 miles of track that would be 66,000 carloads per year. 52,000 falls short of the ideal matrix. Now there are always exceptions to this rule but if you ever read corporate short line companies car loadings you'll see they are usually right around the 100 car loads per mile of track matrix.

Something else to note is there is not a lot of growth opportunities on this segment. Mostly grain (some potential growth), ethanol and ag-oil (both flat lined), cement (cyclical), and bentonite (flat lined).

Another consideration is with the exception of bentonite and cement most of the business is on the east end of the line and have the shortest haulage route to its connection with CP.

G&W knows their business and have a very successful track record growing traffic on their lines so it'll be interesting to see what they do with this line. Maybe some how they'll pick up some frac sand or oil transload business or maybe continue to push to move into Wyoming coal fields.

Article said it would generate $65 million dollars a year. The current FRA threshold for Class 2 status is at least 450 miles and/or $40 million/yr. Of course that isn't saying you are off cuz I agree about your matrix theory on profitability.

[AARR]

Article said it would generate $65 million dollars a year. The current FRA threshold for Class 2 status is at least 450 miles and/or $40 million/yr. Of course that isn't saying you are off cuz I agree about your matrix theory on profitability.

I'm sure G&W sees opportunity with the line otherwise they would not have acquired it. I'm just curious how they are going to do it because their (I used the right version, Grammar Nazi's mode of operation is to invest and grow and not achieve profitability through deferred maintenance and other demoralizing cost-cutting practices.

[SousaKerry]

Although you used the proper "their" you only used one "("

[midland sub]

Being a Class 2 requires different paperwork with the FRA and STB on filing stuff. Shouldn't be much of an issue with G&W. As for the price they paid ($210 million), there's plenty of potential to make money with the traffic base, the real question is how much are they going to need to sink into the property to get it into a solid 25 mph operation?

[railohio]

I don't think the entire line has been a "solid 25" for more than 40 years.

[JStryker722]

I don't think the entire line has been a "solid 25" for more than 40 years.

CP did rebuild the DM&E line quite a bit so my guess they did get much of it to 25mph.

[midland sub]

Not the west end section G&W bought. CP kept around 1,200 miles of the DM&E. Several years ago there was an article in Trains about the section they purchased.

[AARR]

Several years ago there was an article in Trains about the section they purchased.

It was a very good article indeed along with a customer list and their locations, engine terminals, etc. This article is where I got the vast majority of information about this segment.

[JStryker722]

Several years ago there was an article in Trains about the section they purchased.

It was a very good article indeed along with a customer list and their locations, engine terminals, etc. This article is where I got the vast majority of information about this segment.

I didn't realize the DME was so long of a line.

[railohio]

That total includes the former IC&E, which was merged into the DM&E as part of the CP acquisition.

[GreatLakesRailfan]

This is everything west of Winona, Minnesota, correct?

[AARR]

This is everything west of Winona, Minnesota, correct?

No, from Tracy, MN west.

[cnw8835]

This is everything west of Winona, Minnesota, correct?

No. Everything west of Tracy, MN. I believe they will have trackage rights east to Mankato.

[midland sub]

They're getting what's left of the old C&NW line. There was a better article back in the early '90s on the DME.

[railohio]

I don't think the entire line has been a "solid 25" for more than 40 years.

CP did rebuild the DM&E line quite a bit so my guess they did get much of it to 25mph.

CP promised to rebuild it, but the governor of South Dakota has gone on the record with the STB saying the railroad hadn't lived up to its promises. What sections has CP completed?

[redcrumbox]

I don't think the entire line has been a "solid 25" for more than 40 years.

CP did rebuild the DM&E line quite a bit so my guess they did get much of it to 25mph.

CP promised to rebuild it, but the governor of South Dakota has gone on the record with the STB saying the railroad hadn't lived up to its promises. What sections has CP completed?

Subgrade testing done on the PRC subdivsion shows poor conditions exist. Ballast and ties alone will not be enough to keep the rails above the clay for years to come on the westward part of the line.
This link mentions the subgrade on pages 14-22.

http://assets.conferencespot.org/filese ... 39fdfa.pdf

Joint rail 2013.
http://www.flickr.com/photos/m_lastovic ... 6/sizes/h/

Joint rail 2012.
http://www.railpictures.net/viewphoto.p ... 337&nseq=2