The Regina-based Farmer Rail Car Coalition could have control of the federal government’s 12,000 grain cars by the end of this year.
Ottawa announced Nov. 24 it had reached an agreement-in-principle with the FRCC to sell the cars for $205 million.
That price includes $65 million in lease payments over five years, at which time the transfer will become permanent, a $35 million credit to upgrade the fleet, and a final payment of $105 million over eight years.
FRCC president Sinclair Harrison said the entire cost will be paid from cash flow.
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“There will be no increased costs to producers as a result of this sale,” he told reporters, adding the coalition met its other bottom-line goals of maintaining rail capacity and minimizing trade implications.
Harrison said the lease-to-purchase document could be in place by the end of December or early January.
The agreement signals the fulfilment of a nearly 10-year quest by the 17-member FRCC.
“We set out on a mission and we have completed that mission today,” Harrison said.
Originally, the coalition offered to buy the cars for $1. Harrison said the eventual $205 million price tag is not unreasonable.
“It came down to a decision last night – take it or leave it,” he said.
Vice-president Jim Robbins said the coalition wouldn’t have taken it if the members felt they couldn’t make their business plan work.
Bernie Churko, senior adviser to FRCC, added that the price is book value.
“I would suggest that at today’s market price $205 million is not an excessive amount to pay for those cars,” he said. “In fact it’s a reasonably attractive offer.”
The coalition now needs to conclude sublease arrangements with the railways. It will also seek bids for car maintenance.
It expects to save farmers $39 million a year in maintenance costs.
The coalition also has to work with the line elevator companies and other players interested in owning the cars.
“It’s true that the (Western Grain Elevators Association) and a few commodity groups opposed our proposal but I don’t think that that means they won’t work with us,” said Robbins. “When our enterprise is up and running, I have every expectation that they will work with us.”
Harrison added an impending federal election shouldn’t result in the cancellation of this deal.
“The decision has been made as to what’s right for farmers,” he said. “I don’t think anybody can accuse the government of rushing into this one after 10 years.”
