CSX plans $2.2 billion capital program for 2017

Written by Mischa Wanek-Libman, editor
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CSX

CSX revealed a preliminary 2017 capital investment of $2.2 billion during its Fourth Quarter earnings call on Jan. 18.

 

If approved by the Class 1’s Board of Directors, the planned 2017 capital program reflects an approximate 18.5 percent reduction from the 2016 program of $2.7 billion. However, the 2016 capital plan included payments of $307 million for locomotives purchased under seller financing and delivered in 2015.

“As a result, we expect our 2017 capital investment to decline nearly $500 million from the 2016 level and begin returning to our long-term core capital investment guidance of around 16 percent to 17 percent of revenue,” said Frank Lonegro, executive vice president and chief financial officer.

CSX will devote 55 percent of its program to infrastructure and 12 percent, approximately $270 million, to Positive Train Control (PTC).

“We have invested $1.8 billion through the end of 2016 and we plan to invest about $270 million in 2017. CSX is on track to meet the legislative timeline for PTC. As we look at the path to achieving this goal, we now believe the total cost of PTC implementation will be about $2.4 billion before any third-party recoveries,” said Lonegro.

Anticipated spending on equipment will account for five percent of the planned program for 2017, but the Class 1 has significantly increased its strategic spending, which accounts for 26 percent of the planned program. To contrast, in 2016, CSX devoted 13 percent of its annual spend toward the strategic pot. Lonegro explained this increase in strategic investment will “support improved service, long-term growth and efficiency initiatives under the CSX of Tomorrow strategy.”

Lonegro said the railroad believes domestic intermodal business will be an area of long-term growth and to expect investments in facilities that will expand the terminal footprint in order to handle the increase in domestic business.

While the 2017 program is down, the amount CSX anticipates spending on maintenance, $1.2 billion, has remained steady during the past three years.

“We have had a very consistent capital program especially during downturns, which is a change in the past. We think maintaining a pace, both in good times and bad times, allows us to better utilize [and] deploy the capital, ” said Michael Ward, chairman and CEO.

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