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2/6/2013    



Rail Industry Trends Article
Capex in 2013: CN budgets $1.9 billion; major roads to collectively spend $13 billion



Rail Industry Trends
Yesterday, CN became the fifth Class I to announce its capital spending budget for 2013. CN plans to spend $1.9 billion (in Canadian dollars) this year to maintain and upgrade its network compared with the 2012 capex budget of more than $1.8 billion.

The 2013 budget includes more than $1 billion for track infrastructure upgrades and improvements, including the replacement of rail, ties and other track materials, bridge work, and capacity and productivity initiatives. CN plans to continue its extended siding program in northern British Columbia, Alberta and northern Ontario; double-track portions of its mainline in Saskatchewan and add new signals on an Alberta mainline; continue improving Kirk Yard in Gary, Ind., and a former Elgin, Joliet and Eastern Railway line in the Chicago area; and increase yard capacity and add sidings in the Baton Rouge, La., region.

The Class I also is budgeting $700 million for projects aimed at growing business with customers across a range of markets, including transloading operations and distribution centers; the construction of a recently announced intermodal terminal in Joliet, Ill., and completion of a Calgary Logistics Park project; and information technology upgrades.

In addition, CN has budgeted $200 million to acquire locomotives, intermodal equipment and vehicles, and refurbish locomotives and rail cars. The Class I expects to take delivery of 40 new and 37 second-hand high-horsepower locomotives over the next 24 months after acquiring 25 new and 123 second-hand high-horsepower locomotives in 2012.

The investments will help support the railroad's operational and service excellence goals, and make customers more competitive in domestic and global markets, said CN President and Chief Executive Officer Claude Mongeau in a prepared statement. The capex budget also will position the Class I to maximize further business opportunities in intermodal, energy, and other resource and manufacturing markets, he added.

Meanwhile, the Association of American Railroads (AAR) today announced that major U.S. freight railroads collectively plan to invest an estimated $24.5 billion this year to build, maintain and upgrade their networks. The combined investment includes $13 billion in projected capex to upgrade or enhance capacity.

In recent years, railroads have been spending about 17 percent of their annual revenue on capex compared with an average U.S. manufacturer that spends roughly 3 percent of their revenue on such expenditures, AAR officials said in a press release.

"While most other transportation modes rely on government funds, America’s freight railroads operate on infrastructure they own, maintain and upgrade to serve their customers and power our economy," said AAR President and Chief Executive Officer Ed Hamberger. "This year, freight railroads plan to continue to focus on investments that maintain and enhance our physical infrastructure and safety systems, including cutting edge technology that ensures we are ready to deliver for the future."

The freight railroads also estimate they will hire more than 11,000 people this year, primarily in response to retirements and attrition, AAR officials said.

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