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I attended the annual meeting of the Providence & Worcester Railroad (AMEX: PWX) a few weeks ago and, unfortunately, have been a little too busy to collect my thoughts and impressions in order to post before this. Nonetheless, I hope that this is still timely for those who were unable to attend.

The meeting itself did not stir up much controversy this year. There was a lot of good discussion. Overall, one got a very strong sense that management is on top of things and is focused primarily on running the company as efficiently as possible while properly maintaining track, locomotives, rolling stock, and other equipment, etc., so that the company will have a viable future. There was some disruption due to "9/11" and some loss of business due to the economic downturn, but the company is still profitable and financially sound. There are a few "nuts and bolts" projects in the works to solve minor problems here and there, but nothing of really major consequence.

As far as news is concerned, there were four items of significance.

>> 1. Clearances have been raised to allow operation of "double stacks" on the main between Worcester and Providence and on the branch to East Providence, which ends at South Quay. A project to raise clearances to allow operation of "double stacks" on the corridor from Providence to Davisville is in the works, though it's somewhat complicated by the need to coordinate among multiple parties (Amtrak, the State of Rhode Island, etc.). It is envisioned that there will be a container port at Davisville.

>> 2. Management seesm to have decided not to pursue development of South Quay and the adjacent property as a container terminal, partly because there's room for a much larger facility at Davisville and partly because there's a lot of political pressure in East Providence to develop the South Quay property and several adjacent parcels for commercial purposes that probably will generate more revenue for the company. In any case, no development will proceed until the Army Corps of Engineers dredges the harbor and deposits the fill on the South Quay property, currently scheduled for this summer. The fill will raise the entire filled parcel above the 100 year flood plane. The company signed a joint development agreement with Chevron-Texaco recently that governs South Quay, the company's adjacent parcel, and an adjacent parcel owned by Chevron-Texaco, totalling 75 acres, and expects that owners of additional adjoining parcels also will join in the arrangement. This seems to be a moving target since they announced that a study had concluded that a container port would be the best use of the facility at last year's meeting.

>> 3. The company continues to handle coal movements on a trial basis for a power plant in Massachusetts in an attempt to determine the best arrangement for delivery of these loads. The earlier ships had unloaded in New Haven, but the most recent ship unloaded in Providence. Right now, the ships are simply dumping their coal onto a dock so the railroad can load it into the fleet (two consists) of coal hoppers with front end loaders. It appears that the P&W will be handling more coal shipments as power plants throughout New England have to comply with more stringent emission regulations. After the meeting, though, the thought that occurred to me is that a permanent coal loading facility on the South Quay property might make a lot of sense since the location will accommodate sea-going vessels when the Army Corps of Engineers finishes this summer's dredging project....

>> 4. The company has been involved in discussions of the fate of Amtrak, which may or may not involve a break-up of the Amtrak system. Management indicated that they are interested in obtaining a portion of the Northeast Corridor if it becomes available. There was some discussion of other potential acquisitions, but management indicated a preference "to wait until they come to us" rather than actively pursuing discussions in the hope of obtaining more favorable terms.

Overall, the business looks solid.

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