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Railways Announce Capital Spending For 2011

On the heels of posting impressive full-year results for 2010, CP and CN have announced capital spending plans for 2011 that could exceed $2.6 billion.

CP plans to invest in the range of $950 million to $1.05 billion on rail infrastructure while CN intends to spend $1.7 billion.

CP chief financial officer Kathryn McQuade says her railway will focus “on continuously improving service reliability, asset velocity, and productivity.

“With strong demand projected in many of our commodity-based businesses, this capital plan will enable us to meet our customer’s needs and continue to lower our operating ratio to create a stronger franchise for the future,” she said.

“Investing in fast payback productivity and technology projects to further our lean and process re-engineering efforts thereby further improving shipment reliability and customer service.”

The railway will be pursuing growth in its transload, inter-modal and energy projects which offer and will continue investing in “Digital Railway” technologies to lift efficiency, service and safety to new levels, she added.

Among the top projects dollar- wise are:

$680 million for basic track infrastructure renewal;

$200 million for volume growth, productivity initiatives and network enhancements;

$80 million to strengthen and upgrade IT systems to enhance shipment visibility and information needs, and

$40 million to address capital regulated by governments, principally train control.CN’s priorities are projects

“to maintain a safe and fluid railway network, to grow the business efficiently and to continue to provide customers with a high level of service,” says Claude Mongeau, president and CEO.

“In the last five years, CN spent almost $8 billion on capital improvements. Such investments serve to build a quality network that, in turn, supports economic growth across Canada and the United States,” he said.

Approximately $1 billion of CN’s 2011 capital investment program will be targeted on track infrastructure to maintain safe railway operations and to improve the productivity and fluidity of its rail network. This includes replacement of rail, ties and other track materials and bridge improvements.CN’s

infrastructure envelope includes funds for strategic initiatives across the system and additional network improvements in Western and Eastern Canada, Mongeau said. “Equipment spending, which is intended to improve the quality of the fleet to meet customer requirements and includes the acquisition of new fuel-efficient locomotives as well as new freight cars, is targeted to reach approximately $200 million in 2011.”

CN also expects to spend approximately $500 million on facilities to grow the business, including transloads and distribution centres to serve off-line customers; new information technology to support operational and service excellence and other projects to increase productivity, he added.

Both railways were buoyed by their 2010 results. “During the year we once again improved our industry-leading train safety performance, a great accomplishment while moving a significant increase in volumes,” said Fred Green, CP’s president and CEO.

For the year, CP’s total revenues increased 13 per cent to $5 billion and its operating ratio improved to 77.6 per cent. “We are ramping up our resources and making long-term investments in our company to meet growing demand, further improve customer service, and achieve our three-to five-year target of a low 70s’ operating ratio.”

CN reported net income of $2.1 billion for 2010 compared to $1. 8 billion in 2009. Revenues for the year increased by 13 per cent to $8.3 billion, “mainly due to significantly higher freight volumes as a result of improving economic conditions in North America and globally; the impact of a higher fuel surcharge as a result of year-over- year increases in applicable fuel prices and higher volumes; and freight rate increases,” Mongeau said.CN’s operating ratio for 2010 was 63.6 per cent, compared with 66.7 per cent in 2009.

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