Wednesday, September 06, 2017

Four Class I’s revenue-adequate: STB

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The U.S. Surface Transportation Board on Sept. 5 determined that four U.S. Class I railroads are revenue-adequate for the year 2016, meaning that those railroads achieved a rate of return on investment (ROI) equal to or greater than the Board’s calculation of the average cost of capital to the freight rail industry.

The four railroads are BNSF, Norfolk Southern, Soo Line (the U.S. subsidiary of Canadian Pacific), and Union Pacific.

In Railroad Cost of Capital—2016, EP 558 (Sub-No. 20) (STB served Aug. 7, 2017), the Board determined that the 2016 railroad industry cost of capital was 8.88%. The revenue adequacy figure was calculated for each of the Class I freight railroads in operation as of Dec. 31, 2016 by comparing this figure to 2016 ROI data obtained from the carriers’ Annual Report R-1 Schedule 250 filings.

2016 Class I ROI figures are as follows:

• BNSF Railway Co.: 10.11%

• CSX Transportation, Inc.: 8.62%

• Grand Trunk Corp. (including U.S. affiliates of Canadian National Railway): 8.60%

• Kansas City Southern Railway Co.: 6.23%

• Norfolk Southern Combined Railroad Subsidiaries: 9.20%

• Soo Line Corp. (including U.S. affiliates of Canadian Pacific Railway): 9.58%

• Union Pacific Railroad Co.: 13.39%

In contrast, STB found that four Class I railroads—BNSF, Grand Trunk Corp. (the U.S. subsidiary of CN), Soo Line, and Union Pacific—were revenue-adequate for the year 2015. STB’s 2015 Railroad Cost of Capital was 9.61%.

2015 Class I ROIs were as follows:

• BNSF Railway Co.: 12.82%

• CSX Transportation, Inc.: 9.00%

• Grand Trunk Corp. (including U.S. affiliates of Canadian National Railway): 10.77%

• Kansas City Southern Railway Co.: 7.20%

• Norfolk Southern Combined Railroad Subsidiaries: 9.03%

• Soo Line Corp. (including U.S. affiliates of Canadian Pacific Railway): 14.50%

• Union Pacific Railroad Co.: 15.54%

For more information, download a PDF of STB’s full decision (Docket No. EP 552 [Sub-No. 21]) at the link below.

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