Thursday, June 21, 2012

710 repowers targeted for older GP38-2s

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Progress Rail Services' EMD subsidiary has targeted North America's 3,300 existing EMD GP38-2 locomotives (originally built between 1972 and 1986) for repowering with EMD's more modern 710 "ECO" line of diesel engines.

We're told the new engines fit with minimal modification into the footprint of the older EMD 645 engines they would be replacing and can use the same main generator. Fuel savings and, to some extent, improved emissions are at the root of this strategy.

The most important reason for remanufacturing these units is simple: The OEM's haven't made four axle locos in volume for more than 26 years and railroads, particularly Class I's, still have a need for low- and medium-horsepower locomotive fleets. Progress believes the repowering of these units with more fuel efficient 710 series engines makes economic sense when considering the volatility of diesel fuel prices.

The original GP38-2 locomotives are powered by EMD 16-645E (16 cylinder) non-turbocharged engines. Application of the 8-710G (8 cylinder) engines can increase fuel efficiency by a significant percentage and result in the locomotive meeting being able to comply with EPA Tier 0+ up to Tier 2 emissions levels. Even better, there are eight fewer cylinders to maintain and ultimately replace!

710 ECO repowers have already been applied to nearly 100 locomotives including units on the KCS, Caltrans and other owner/operators. In December of 2011, CP announced a deal that would ultimately result in the repower and remanufacture 150 GP-9 and up to 350 SD40-2 locomotives with EMD's 710 ECO repower product.

If completely remanufactured, the GP-38-2 locomotives targeted by Progress/EMD would be changed from the current designation of GP38-2 to GP22 ECO. The repowers produce a turbocharged 2,300 HP.

The cost? A complete remanufacturing is reported to run in excess of $1 million. We are told that Progress/EMD are currently working on less expensive versions of their 710 ECO repowering "package" to allow railroads to hit return-on-capital targets by investing in these fuel efficient conversions.

Anyone interested in considering the economics of a 710 repower can contact me at tkruglinski@railfin.com, and I will put them in touch with the right person at EMD.

Tony Kruglinski

Tony Kruglinski is President of Railroad Financial Corp., a financial advisory firm. He also serves as Chairman of Rail Equipment Finance (www.railequipmentfinance.com), an annual industry conference addressing critical developments concerning North America's railcar and locomotive fleet.

Kruglinski also mentors the annual Railroad Financial Desk Book, published each autumn. His Railway Age column, Financial Edge, is a longtime staple of the magazine and now will appear each month. Contact Tony at tkruglinski@railfin.com.

Website: www.railequipmentfinance.com