Friday, February 15, 2013

2013 capital expenditures keep industry on the fast track

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Norfolk Southern’s TS-8 gang replacing wood crossties in Columbus, Ohio, in 2012.
A Union Pacific crew readies a section of rail for welding along the Kearney Sub in the summer of 2012.
Norfolk Southern’s TS-8 gang replacing wood crossties in Columbus, Ohio, in 2012.
A Union Pacific crew readies a section of rail for welding along the Kearney Sub in the summer of 2012.
Norfolk Southern’s TS-8 gang replacing wood crossties in Columbus, Ohio, in 2012.

In another record-setting year, North American railroads continue to invest in themselves with capacity expansion and maintenance projects.

Last year's capital investment from the largest freight railroads hit a record $13 billion and those same railroads are expected to exceed that mark in 2013. A conservative estimate based on the Class 1 expenditure numbers is pointing toward an overall 2013 spend of more than $14 billion. While not all of this will go toward the engineering side of the industry, there will be plenty of crossties installed, rail laid and bridges rehabbed.

All seven North American Class 1 railroads, along with Amtrak, are planning strategic and measured engineering investments in order to expand capacity, keep up-to-date with maintenance and build infrastructure that maximizes their bottom line.

In our annual RT&S survey, we asked all the major railroads for a breakdown of their expected spending during the next year. In addition to the information gathered from the survey, supplemental sources, such as earning reports, industry association presentations and general reporting were used to gain a full picture of what the next year will bring. All dollar figures should be read as estimates and are subject to change.

RT&S thanks all those who responded to the survey.

Amtrak

Amtrak calls its 2013 planned agenda of infrastructure projects "robust."

"Amtrak continues to advance and invest in projects that provide both near-term benefits and long-term improvements for the effective delivery and reliability of intercity passenger rail service," said Amtrak President and CEO Joe Boardman.

Two major bridge projects will progress in 2013 including the conclusion of the $140-million Niantic River Movable Bridge replacement in Connecticut and the start of preliminary engineering and environmental work for the Susquehanna River Bridge replacement in Maryland.

The Gateway Program, which will provide additional capacity into Manhattan for intercity and New Jersey Transit commuter services, will progress by way of continued planning and other pre-construction activities.

Line upgrades will also be a focus for Amtrak including the further design, engineering and other pre-construction activities for a $450-million project to boost speeds along a 24-mile section of the Northeast Corridor in New Jersey to 160 mph. This project, which is expected to be complete in 2017, is funded by the federal high-speed rail program and supports the Gateway Program.

Amtrak completed installation of Positive Train Control (PTC) on a section of track between Philadelphia, Pa., and Washington, D.C., and intends to complete installation of PTC equipment along the Amtrak-owned right-of-way in 2013. The sections of track between New York and Philadelphia and Philadelphia to Harrisburg are 90 percent complete and Amtrak points out that PTC is currently operational between New York and Boston and along its track between Porter, Ind., to Kalamazoo, Mich.

BNSF

BNSF's planned 2013 capital commitment program of approximately $4.1 billion is close to $450 million more than its 2012 capital spend of $3.6 billion.

Approximately 56 percent of the railroad's capital plan, or $2.3 billion, will be spent on its core network and related assets. In addition, the program includes about $250 million for continued installation of PTC and $550 million for terminal, line and intermodal expansion and efficiency projects. BNSF's expansion and efficiency projects will be primarily focused on capacity expansion to accommodate Bakken Shale-related industrial products growth, intermodal terminal expansion, such as the completion of BNSF's Kansas City Intermodal Facility and other terminal improvements to enhance productivity and velocity.

Canadian National

Canadian National plans a total capital expenditure and operational expenditure program of CA$1.788 billion (US$1.777 billion), which is a slight increase over its 2012 spend of CA$1.735 billion (US$1.731 billion).

On the infrastructure side of the program, CN plans to install 94,000 net tons of new rail, 31,000 net tons of relay rail, approximately 1.55 million new wood crossties, 66,000 new concrete crossties and surface close to 9,500 track miles. All are increases over what the railroad installed in 2012.

CN kicked off 2013 by opening its Calgary Logistics Park. Major projects that will advance in 2013 along CN property include continued investment in its Kirk Yard reconstruction, which should be complete this year, the Saskatoon Double Main Track project, several siding initiatives and Steelton Hill Double Track project. The railroad's expansion projects in 2013 include the Plan Nord iron ore line development, various yards and facilities and continued development of its Memphis intermodal facility.

Canadian Pacific

Canadian Pacific's total operating and maintenance-of-way capital expenses in 2012 were approximately CA$960 million (US$957 million), with CA$33 million (US$32.9 million) for C&S capital and operating expenses. While final numbers were not available at press time for 2013, it is estimated the railroad will spend CA$640 million (US$638 million) on basic replacement capital, which does not include PTC or expansion capital.

CP will lay an estimated 306 track miles of new rail or 68,000 net tons, compared with 70,500 net tons in 2012. The tie program will see a boost with installation of 975,000 wood crossties and 650 concrete crossties compared to 831,500 wood crossties and 1,800 steel crossties in 2012. CP also plans to surface close to 3,000 miles of track, which is a slight bump from the 2,780 miles it did in 2012.

The railroad will also see its bridge and structures spending increase. It is planning 46 bridge replacements in 2013, including 23 on Dakota, Minnesota & Eastern-acquired properties, 62 deck replacement projects, 44 timber pile trestle upgrade projects and 190 individual culvert projects.

CSX

CSX plans to invest approximately $2.3 billion in its business in 2013, which is on top of the $7.8 billion it has placed in its network during the past four years.

In a press release concerning its 2013 capital spend, the railroad stated, "Many of the investments are related to long-term initiatives that give customers greater access to an increasingly interconnected global transportation network. This includes the company's National Gateway initiative creating double-stack intermodal train access between the mid-Atlantic ports and the Midwest."

CSX's annual engineering tasks include installation of 3.2 million crossties, laying 355 track miles of rail, surfacing 5,800 track miles, brush cutting 5,300 track miles, track geometry testing 53,000 track miles and performing 50,000 welds.

The railroad is expected to complete Phase 1 of the $850-million National Gateway project in 2013 and will immediately progress to Phase 2, which will open the mid-Atlantic by clearing 21 obstructions.

Bridges will also take a focus for CSX in 2013 and into 2014, with truss replacements planned in Baltimore, Md., Philadelphia, Pa., North Branch, W.Va., Springfield, Tenn., and timber trestle replacements planned for Athens, Ala., and Sumter, S.C.

New or expansion projects for CSX Intermodal are also planned in Valleyfield, Quebec, Canada, Baltimore, Md., Pittsburgh, Pa., and Fairburn, Ga.

The CSX investments are also expected to include $325 million associated with the implementation of PTC.

KCS

David Starling, Kansas City Southern president and CEO, told investors during the railroad's fourth quarter earnings call that the railroad is planning "capital spending to come in a bit above 20 percent of revenues." With total 2012 revenue hitting $2.2 billion, KCS may be spending somewhere in the ballpark of $440 million in 2013 on capital improvements, which is up from the $382.8 million spent in 2012.

While KCS did not disclose exactly how much will be spent on engineering, the railroad has said 2013 will be another big year for track, capacity and capital projects tied to new business development.

In the U.S., KCS plans to replace 550,000 ties and 20 miles of curved rail, construct new sidings in San Diego, Calif., and Texas and complete the Shreveport Terminal Complex expansion project with additional Centralized Traffic Control.

In Mexico, KCS will continue its primary project of rehabbing the line between Monterrey and Nuevo Laredo by installing 27 track miles with new 136-pound rail and 75,000 concrete crossties. Additionally, KCS will replace 56,000 ties between Corondiro and Lázaro Cárdenas to support 136-pound rail; undercut 28 miles of track around the Mexico network, replace ballast and change the rail in 29 crossovers from 115-pound rail to 136-pound rail; install more than 312,000 crossties and a total of 69 miles of rail, both 115-pound rail and 136-pound rail, (including the line from Monterrey to Nuevo Laredo) and begin a second phase of Sanchez yard, including more switch tracks, a north lead, locomotive and car repair tracks as part of the five-year plan for this yard.

Norfolk Southern

Norfolk Southern's 2013 planned capital improvement budget will come in right at the $2 billion mark.

The largest component will be $831 million for roadway improvements, including the maintenance and replacement of rail, crossties, ballast and bridges. Planned equipment spending of $420 million, followed by $229 million, about 11 percent of the 2013 budget, for PTC round out the list of top expenditures.

Investments in facilities and terminals are anticipated to be $203 million and include the continuation of a multi-year project to expand Bellevue rail yard in northern Ohio, which is the largest yard on NS' system; construction of a new intermodal terminal in Charlotte, N.C., as part of the railroad's Crescent Corridor initiative; completion of a new locomotive service facility in Conway, Pa.; and new and expanded bulk transfer facilities.

Norfolk Southern also expects to spend $84 million in infrastructure improvements to increase mainline capacity, accommodate traffic growth and provide NS' match for public-private partnership investments, such as the Chicago Region Environmental and Transportation Efficiency Program and the Crescent Corridor, which will improve the nation's transportation infrastructure, reduce fuel consumption and air pollution and relieve highway congestion by moving freight off highways onto rail.

Technology investments of $57 million are planned for new and upgraded systems and computers to enhance safety and improve operating efficiency and equipment utilization.

Union Pacific

Union Pacific's projected $3.6 billion 2013 capital spend is down slightly from the $3.7 billion spend in 2012, which was the largest capital budget in the company's history. More than half of the planned 2013 capital investment is replacement spending, while approximately $1 billion will be invested in service growth and productivity projects.

Work in 2013 includes major projects, such as the Santa Teresa, N.M., intermodal and fueling facility, which should be completed by early 2014 and continuation of various projects in the South. Phase 1 of the Santa Teresa facility is expected to have more than 55 miles of track and more than 151,000 crossties. Additional projects include continued work on the Sunset Corridor between Los Angeles and El Paso, Texas, several public-private partnerships, including Tower 55 with BNSF in Texas and various frac sand projects.

PTC spending will increase to approximately $450 million. UP revealed during its fourth quarter earnings call that it seems unlikely the industry will meet the 2015 PTC implementation deadline, but the railroad will continue making a "good-faith effort to do so and working closely with regulators as we implement the new technology."

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