(The Canadian Press circulated the following on May 26.)
MONTREAL — A new locomotive factory to be built by Railpower Technologies Corp. (TSX:P) will help the company maintain its leadership in the hybrid train engine industry, the manufacturer said Monday as its stock nearly doubled on the news.
Railpower stock traded up 34 cents or 85 per cent to 74 cents on Monday morning’s news on a huge volume of more than 16.3 million shares on the Toronto Stock Exchange. The stock has a TSX 52-week high and low of 95 cents and 21 cents.
The new plant in St-Jean-sur-Richelieu, east of Montreal, will create 125 jobs, Railpower announced.
That’s good news for Quebec’s manufacturing economy, which has seen thousands of jobs cut in the last few years in the lumber, pulp and paper, textiles, clothing and shoe industries, mainly because of a high Canadian dollar and slumping demand from the United States market.
Railpower, which is based in nearby Brossard, Que., said the Ontario Teachers’ Pension Plan, which invested $35 million in the company early this year, is putting forward another $20 million in the form of a convertible debenture, to finance the factory construction and build additional demonstration locomotives.
“For the first time in its history, Railpower will own a dedicated, world-class manufacturing facility capable of building the world’s leading high-efficiency locomotives,” stated CEO Jose Mathieu.
“This facility is expected to significantly improve our manufacturing efficiencies and provide Railpower with the ability to rapidly expand its current production.”
Railpower develops technologies that make locomotives run more efficiently and with fewer emissions from their diesel engines. With diesel fuel at record high prices and pressure on all industrial companies to cut pollution, such locomotives could be attractive to Canadian freight haulers such as CN and CP Rail and U.S. rail companies.
The plant at St-Jean-sur-Richelieu will have 55,000 square feet of production space and 4,000 square feet of offices, with plans for future growth.
Marvin Wolff, an analyst with Paradigm Capital Inc. in Toronto, said the plant is an obvious way to help the company secure more orders.
“It’s critical,” he said. “You’ve got to have a plant, right?”
“I think it’s great,” Wolff said. “It creates jobs, it’s a Canadian industry. There’s not too many people building plants in Canada these days.”
Although Wolff described Railpower as a “leader” in the hybrid locomotive industry, he didn’t think the new plant would spur any forays by the company into the export market.
“It will be a while, I think, before they export any of these,” he said, adding that the export market will likely emerge when the company has people on the ground in other parts of the world.
He also noted that other countries use different sized track than in North America.
“You can’t easily move a locomotive from North America to Europe or anything like that,” Wolff said.
“There’s lots of locomotives to refurbish or switch over to hybrids in North America before you have to worry about them in any serious export business.”
Investment Quebec is providing a subsidy of up to $2.5 million for the new expansion by Railpower, which moved its head office from Vancouver to the Montreal area in 2006.
The provincial contribution is aimed at boosting employment in the area and “reflects the commitment of the government of Quebec towards the protection of the environment and promotion of new transportation technologies.”
The new plant will have state-of-the-art manufacturing and testing equipment, the company said, adding that it also will have areas for research and development and for the assembly of hybrid power plants for cranes.
The new investment by the $108.5-billion Ontario Teachers fund, like the plan’s early-January injection, is a five-year debenture paying five per cent annual interest. It is convertible at Teachers’ option into up to 50 million shares at 40 cents per share.
Railpower, whose new line of locomotives is said to cut greenhouse-gas emissions by up to 90 per cent, will seek shareholder approval of the private placement at its annual meeting June 26.
Monday’s announcement follows the company’s participation in the unveilling last week of what it called the first-ever six axle-multiple Genset locomotive for Union Pacific’s fleet of low-horsepower road switchers.
The locomotive went into service at Union Pacific’s yard in Rosedale, Calif.
In its latest financial report, Railpower said it narrowed its first quarter loss to $7.6 million from $8.4 million for the same period last year. Revenues fell to $3.3 million from $25.1 million last year, when Railpower had the largest order in the company’s history.