VANCOUVER, Feb. 14, 2013 /CNW/ - Westshore Terminals Investment
Corporation (TSX: WTE) (the "Corporation") announces today that the
board of directors has approved a $210 million capital expenditure
program which will see the replacement of the three oldest
stacker-reclaimers (all over 30 -40 years old) with new equipment. By
acquiring three new stacker-reclaimers of the same model, Westshore
will be able to significantly enhance its operational efficiencies in
several respects, including by standardizing spare parts, repairs and
maintenance, and by reducing overall maintenance downtime time and
costs involved in maintaining older equipment. The project will also
involve replacing the 42 year old outdated and inefficient
administration, operations and maintenance offices, shops and
warehouses with one consolidated complex, together with storage
optimization. The project is expected to take 4-5 years to complete in
stages.
No additional equipment is being added to the site, nor is the site
footprint being increased. Any additional throughput capacity would
only result from the improved productivity of the new equipment,
operating efficiencies, and reduced maintenance downtime, and would
only be realized if other participants in the coal chain can also
improve efficiencies. Currently, it is estimated that 2-3 million
tonnes per year might be possible, but in any event not before 2017.
The expenditures also include approximately $7 million for new, state of
the art dust suppression systems and related environmental control
equipment which will be completed this year.
Over the last five years through the end of 2012, Westshore has
implemented significant changes to its operations and enjoyed strong
and steady growth. Over that time, Westshore has reinvested
approximately $110 million in the terminal operations to upgrade and
replace some equipment, and add a fourth stacker-reclaimer in 2008. The
anticipated results of these efforts are that Westshore's capacity
going forward has increased to an estimated 33 million tonnes per
year. With the customer agreements currently in place, and which were
secured over the last two years, most of that capacity is committed
through to 2021- 2022.
In order to maintain these throughput levels for the long term,
additional reinvestment in the terminal's operations is required -
including specifically, the replacement of the three older stacker
reclaimers. The alternative would be to spend significantly more
money on annual maintenance capital to sustain these higher throughput
levels (estimated to be $50-60 million over the next 5-10 years), but
by doing so Westshore would continue to have old equipment that would
inevitably need to be replaced. Westshore has been in business for over
42 years and believes that replacing the older equipment with new is in
the best interest of operating the terminal for the decades to come.
The new stacker-reclaimers will have an anticipated useful life of
30-40 years.
As a result, the Corporation has determined that it is appropriate;
commencing Q2 2013, to initiate a capital projects fund to enable the
Corporation to lessen the amount of additional bank debt financing that
would otherwise be required to pay for these projects. The Corporation
will therefore, be holding back some funds, commencing with the Q2 2013
distribution, by setting a dividend rate of $0.33 per share per quarter
- being the approximate levels of distributions paid in Q2 and Q3 2012,
on the basis of the terminal handling 30 million tonnes or more (under
its existing customer contracts), for the next several years. To
further assist in building this capital project fund, the Corporation
will also be retaining any insurance recoveries from the business
interruption losses it ultimately receives (net of income taxes
payable) from the Berth1 trestle incident previously reported. Monies
recovered for physical losses from insurers will be used to reimburse
Westshore for it's out of pocket expenses to repair the trestle. This
distribution policy will be subject to regular review, and actual
operating performance at the terminal and the ultimate costs for these
projects may impact future distributions positively or negatively.
Even with this capital project fund, the Corporation still anticipates
requiring debt financing of up to $80 - $100 million over the short
term.
The foregoing statements concerning anticipated capital costs and timing
of the projects, improvements in performance terminal capacity,
distributions and debt levels are forward-looking statements that
reflect the current expectations of the Corporation with respect to
future events and performance. Forward-looking statements should not
be read as guarantees of future performance or results, and will not
necessarily be accurate indications of whether such performance or
results will be achieved.
Forward-looking statements are based on information available at the
time they are made, assumptions made by management, and management's
good faith belief with respect to future events, and will be impacted
by and are subject to the risks and uncertainties referred to above and
the capital expenditure program, as well as those outlined in the
Corporation's Annual Information Form that could cause actual
performance or results to differ materially from those reflected in the
forward-looking statements, historical results or current expectations.
SOURCE: Westshore Terminals Investment Corporation
