Wednesday, February 19, 2014

CN 2014 capex: C$2.1 billion

Written by  William C. Vantuono, Editor-in-Chief
CN announced on Feb. 19, 2014 a capital investment plan worth approximately C$2.1 billion (US$1.9 billion) “to continue to raise network safety and efficiency, improve service, and grow the business.” The amount is approximately $100 million higher than what CN invested in 2013.

CN is targeting to spend more than C$1.2 billion in 2014 on track infrastructure and to improve the safety, productivity, and fluidity of the network. This investment will include the replacement of rail, ties, and other track materials, bridge improvements, as well as various branch-line upgrades. It will also include funds for strategic initiatives and additional improvements to track infrastructure in western and eastern Canada as well as in the U.S. In 2013, CN invested approximately C$100 million in the Edmonton-Winnipeg corridor to increase rail capacity and to support the movement of strong volumes of grain and other commodities.

CN’s equipment capital expenditures in 2014 are targeted to reach approximately C$300 million, “allowing the company to tap growth opportunities and improve the quality of the fleet.” In 2014, CN will acquire an additional 45 new high-horsepower locomotives to accommodate increased traffic and improve operational efficiency. These acquisitions follow delivery of 44 new and 37 second-hand high-horsepower locomotives CN took in 2013.

By year-end 2014, CN will have acquired 763 high-horsepower locomotives over a 10-year period; these units will represent more than 50% of CN’s high-horsepower main line fleet. Of these acquisitions, 114 units will have AC traction motors, which “are more robust than DC motors in extreme winter conditions and improve locomotive fleet reliability.”

CN also expects to spend approximately C$600 million in 2014 on facilities to grow the business, including transloading terminals, distribution centers, and the completion of its Calgary Logistics Park project. This investment also includes capital for information technology to improve service and operating efficiency, and for other projects to increase the operational productivity.

All of these investments include capital projects “that will have a major impact on safety,” CN said. In addition to capital expenditures to ensure the integrity of CN’s rail infrastructure, the company is allocating funds to enhance its system-wide fault detection capabilities. CN will also complete construction in 2014 of two state-of-the-art training facilities—one in Winnipeg, the other in suburban Chicago—that “will help strengthen CN’s safety culture and prepare a new generation of safety-conscious railroaders.”

“CN is committed to making continued improvements in its safety performance,” said President and CEO Claude Mongeau. “Infrastructure investments are critical to this, as well as to driving improvements in customer service and taking advantage of freight opportunities to grow the business at low incremental cost. Investments in our network and distribution capability, the acquisition of new locomotives and equipment, and the enhancement of information systems and technology will help support our agenda of operational and service excellence. They will help us achieve our goal of becoming a true supply chain enabler and help our customers compete better in their markets. They will also position us to take advantage of business opportunities in intermodal, energy, and other resource and manufacturing markets.”