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Friday, April 16, 2010

CSXT hikes PTC cost estimate to $1.2 billion

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CSX Transportation now expects to spend $1.2 billion or more developing and installing the crash avoidance technology known as positive train control, which has been mandated by a 2008 federal law, the Journal of Commerce reports. That is up from roughly $750 million that CSXT previously estimated to put in PTC across its network as required by the end of 2015. Company officials gave the new estimate in an April 14 conference call with Wall Street analysts.

"Because of the ongoing work to assure compliance and the timely completion of PTC, our current estimate of this multi-year investment has increased and is at least $1.2 billion," said Oscar Munoz, CSX's chief financial officer.

He said the higher cost estimate was driven by the final PTC regulation from the Federal Railroad Administration and by an implementation plan CSX has been drafting to send the FRA.

For 2010, CSX is spending $1.7 billion on all capital needs, and $170 million just on early PTC costs.

PTC requires connecting trackside locomotive tracking equipment to onboard controls that can either shut down an engine automatically to prevent a potential crash or allow distant dispatchers to remotely take control of the train should train crews not respond in time.

One analyst asked if CSXT and other railroads might want to see the implementation delayed, given the costs and that much of the technology has yet to be developed.

Michael Ward, the carrier's chairman, president and CEO, said "the intention of the freight rails is that we will live with the law, which is to have it in place by 2015." He indicated, though, that some commuter carriers appear to have issues with the schedule.

To develop PTC, "clearly there are some potential technological challenges," Ward said. "We think we can overcome them at this point. Should that prove to not be the case, then obviously we would work with Congress to implement as quickly as possible."