VANCOUVER, March 18, 2014 /CNW/ - Westshore Terminals Investment Corporation (TSX: WTE) ("Westshore" or the "Corporation") announced today that a dividend of $24,502,505 (representing $0.33 per share) will be paid on or before April 15, 2014 to shareholders of record on March 31, 2014, which is the same amount that was paid in Q1 2013. The Q1 2014 dividend will be designated an "eligible dividend" for Canadian tax purposes.
For the two months ended February 28, 2014, Westshore loaded 4.5 million tonnes as compared to 3.4 million tonnes for the same period in 2013. During this period in 2013, operations were negatively impacted by the repair efforts to rebuild the trestle at berth 1. Westshore anticipates that it will load approximately 7.2 million tonnes in Q1 2014 compared to 6.1 million tonnes for the same period in 2013. 2014 throughput to date has been adversely impacted by a number of factors including reduced train shipments as a result of the harsher winter weather conditions and certain rail operational issues, which are expected to be temporary. In total, however, the reduced coal shipments received (and therefore tonnes handled at the port) for Q1 are anticipated to total approximately one million tonnes less than previously expected, and as Westshore otherwise anticipates to be operating at capacity for the balance of the year, it is not clear that this lost volume can be made up later in the year.
As a result, and based on current information from Westshore's customers and based on agreements currently in place, 2014 throughput volumes are currently anticipated to be 31-32 million tonnes (down from the 32-33 million tonnes previously expected), at rates higher than 2013 as a whole.
Westshore has been actively engaged in engineering work and negotiations with machine suppliers for the next capital upgrade project, announced last year and anticipated at that time to cost approximately $230 million in total. This capital project involves replacing the three older stacker reclaimers (each being 30 - 40 years old), the 30 year old ship loader at berth 1, and consolidating the 40 year old offices, employee facilities and maintenance shops into one new building complex. Westshore has recently received updated quotes from equipment fabricators which include improved designs for the stacker reclaimers which were not previously believed to be available, and are considered superior, and will result in reduced maintenance cost and equipment downtime (and therefore more productivity) over the life of each machine.
The current quotes also reflect the existing Canadian/US dollar exchange rate, which has deteriorated some 10% year over year, and increased tax costs. The updated and revised budget (which will include the superior stacker design, all secured at fixed prices) is now anticipated to be approximately $275 million for the total project. The increase in up-front capital costs is expected to be more than recovered in reduced maintenance costs and reduced downtime (allowing for better continuous productivity) over the life of the stacker reclaimers.
The new equipment is expected to be delivered and installed over the next 4-5 years, in a phased sequence so as to minimize the disruptions to the operations. This project does not increase Westshore's overall operational footprint. Once fully operational, the new equipment is projected to increase the potential rated capacity at the terminal by 2-3 million tonnes per year. Actual throughput increases will be dependent on a number of factors outside of Westshore's control, including the performance of the other parties along the coal chain (rail and ship) and overall demand for coal. In any event, the new equipment will enable Westshore to maintain higher throughput levels over the longer term.
Upon completion, this project will also conclude a ten-plus year, $380 million capital upgrade of the terminal resulting in a total increase in rated throughput capacity from 23 million tonnes to 35-36 million tonnes (representing a capital cost per tonne of expansion of roughly $30-31/tonne, a very competitive cost for capacity upgrades by international industry standards), and effectively result in a newer, more modern and better equipped terminal, capable of maintaining higher throughput levels on a sustainable basis. These amounts do not include an additional $20 million plus in improved and updated environmental systems over the same period.
As a result, and subject to change based on other opportunities that may come before Westshore, the Corporation considers it appropriate to continue maintain the current level of dividends, being $0.33 per quarter, going forward to provide partial funding of this capital project and to enable the Corporation to lessen the amount of additional bank debt financing that would otherwise be required to pay for this project. This was the Corporation's stated position when the project was first announced in February 2013. This dividend level is based on the terminal handling 30 million tonnes or more (under its existing customer contracts) for the next several years and will be subject to ongoing regular review by the board of directors. Even with this capital fund, the Corporation still anticipates requiring debt financing of approximately $100 million over the medium term.
Westshore recovered a total of $32.3 million from its insurers arising from the Cape Apricot incident (which occurred in December 2012), by the end of 2013, and anticipates recovering a further $6.2 million during the second quarter of 2014, for a total of $38.5 million. This reflects Westshore's recoverable amount net of its deductible. Insurance proceeds recovered, over and above the $18 million repair costs to the terminal, will be applied towards funding the capital project. The claim on behalf of Westshore and its insurers against the ship owners and its insurers continues.
The foregoing statements concerning anticipated throughput volumes and loading rates, the cost, duration and effects of the capital project and the levels of dividends and debt 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 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
For further information:
Secretary & Vice President of Corporate Development