Union Pacific aims to spend approximately $3.1 billion on its 2017 capital program, pending approval by the Class 1's Board of Directors.
The bulk of the anticipated 2017 spend, $1.860 billion, will go toward infrastructure replacement, $435 million will to toward locomotives and other equipment, $300 million will go toward Positive Train Control (PTC), $255 million toward capacity and commercial facilities and $240 million toward technology.
The estimated 2017 spend represents an approximate 11 percent decline over Union Pacific‘s 2016 capital program of just under $3.5 billion. The biggest change year over year is the railroad’s planned spend on locomotives and equipment. Cameron Scott, executive vice president and chief operating officer, noted during Union Pacific’s 2016 Fourth Quarter earnings call that the railroad had planned to acquire 100 locomotives in 2017 per a previous purchase commitment, but the plan has been revised to include 60 locomotives in 2017 and the remaining 40 to be delivered in 2018.
When asked about the reduction in planned spending between 2016 and 2017 during the Q4 earnings call, Robert Knight, executive vice president and chief financial officer, noted the reduced spending in locomotives and PTC as two notable areas of reduction, but also explained Union Pacific’s approach to capital spending
“We always look at kind of a clean sheet approach if you will in terms of capital investments that we’re confident will drive returns and remember that every year, year in, year out, we spend just north of $2 billion on replacement capital, so everything above that is driven based on commercial decisions and with an eye on returns and capacity expansion, et cetera,” said Knight.
While spending on PTC is down slightly, the railroad is still on track to meet the 2018 deadline for installation. As of Sept. 1, 2016, the railroad has more than 800 track miles in revenue service demonstration operation and has invested $2.1 billion of what is anticipated to be a total cost of $2.9 billion.