Western Railroad Discussion > UP CAPEX 2018

In case this hasn't already been posted:

$200 million increase over 2017

60 new locomotives

700 new freight cars

I don't think any specific MOW projects have been mentioned yet, other than the current Carrizozo and Baird Sub projects that are supposed to be completed by next week.


Allen



Edited 1 time(s). Last edit at 02/14/18 20:50 by bradleymckay.

Can you fill us in as to what the current Carizozo and Baird sub projects are?

stevef Wrote:
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> Can you fill us in as to what the current
> Carizozo and Baird sub projects are?

Second hand info: Carrizozo Sub - tie gang. Baird Sub - tie and steel gangs. UP has had tie and steel gangs working on both the Baird and Toyah Subs over the last 8 months. Rumors continue to swirl siding extensions and/or new sidings will be added this year and in 2019 on both subdivisions.


Allen



Edited 1 time(s). Last edit at 02/15/18 07:35 by bradleymckay.

So much for windfall capex investments in capacity expansion from the new tax laws. This is a minor amount of money relative to the tax break UP got. However, I have read where one of the challenges high-capital companies face is that, even though they don't depreciate fully their capital expenditures in the first year, they do book it internally that way. I am not sure if this is the case with railroads, and thus looking for input, and perhaps that has something to do with why no major increases.

Regardless, the opportunity for major capex increases related solely to capacity expansion and velocity improvements seems to be fading away...

Bruce

Didn't UP just announce a $500M yard in Central Texas? Sounds like a large increase in capacity.

Well I seen 7 of the new covered hopper cars when we went to Salina, KS last Tue. They were setting in Bavaria, KS on the KP and the last one was # 111372 and I did get a couple numbers of 111269, 111268 I believe they were. upkpfan

StStephen Wrote:
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> So much for windfall capex investments in capacity
> expansion from the new tax laws. This is a minor
> amount of money relative to the tax break UP got.

Capital projects are just stored on some shelf waiting. Given the fact the tax break was proposed and passed in a short period of time, there might not have been enough time to roll additional projects out for this year. The next two years (2019 and 2020) will be the real indicator of any windfall capex investments. I won't be holding my breath however.

King_Coal Wrote:
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> Didn't UP just announce a $500M yard in Central
> Texas? Sounds like a large increase in capacity.

Yes, this is a large project, and great they are investing. It is focused on a very profitable segment of UP's business (chemicals), so even better. But to my point, they are not increasing capital investments at any level near where the supposed tax code benefits are. There are many other areas where investments are "needed" if they are to grow traffic, particular in intermodal markets. Examples: move forward on re-build/expand capacity/streamline track layouts at LATC (the Shops Yard AKA The Piggyback Yard in LA), Industry, Houston, Kansas City. Look at new land acquisitions for new terminals in the Inland Empire, the Seattle-Tacoma area, and Minneapolis. Look at re-opening Albina (as a ramp). Re-start the Denver (Brighton) ramp project.

Other projects would include completion of Sunset Route 2MT between LA and Tucson. Additional 2MT between Portland and Granger. And system-wide, look at re-alignment of 1800s routes that are difficult to compete with OTR trucking.

Maybe the numbers just don't work: maybe UP has decided these types of traffic (intermodal, expedited other traffic) will never provide the necessary returns for ongoing major investment. Maybe the threat of autonomous trucks is such that they don't want to invest much in intermodal beyond a handful of long, high-density lanes. If so, then in 20 or 30 years will see a smaller but more profitable company. Less market share. At some point that becomes self-defeating, I would suspect.

Bruce

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Edited 1 time(s). Last edit at 04/07/18 13:09 by darkcloud.

They didn't waste anytime on increasing the dividend...

Are the locomotives part of those already on order from progress rail??

Darkcloud, I had thrown out an idea about this about 6 months ago

https://www.trainorders.com/discussion/read.php?11,4366353,4369252#msg-4369252

somewhat tongue-in-cheek. (not always a safe thing to do on these boards...). The volumes at West Colton are way below what they used to be. UP, however, doesn't seem able to move things through there that fast. With the Roseville rebuild a few years (which is a disaster of design and execution) plus a Red Rock terminal, both dispatching long-distance haulers to the dwindling LA Basin carload spots (ie: Buena Park/Anaheim, COI, Long Beach, etc), a small re-configured City of Industry yard could (for a railroad that could execute) handle anything that needed to be switched outside of those haulers. That might include LA&SL traffic, plus anything from the Basin south of RV and west of Red Rock. On a carload basis, that's not very much any more.

Then convert West Colton into a ramp. It does not have the potential capacity of a ramp such as Global 4, or Marion, or even expanded Lathrop, simply because of the land needed for trailer/container/chassis parking. It would probably be more in the range of East LA or even an expanded Global 2: maxed out somewhere around 450,000 to 550,000 lifts/year. That is based on how UP operates their ramps; BNSF gets around 75% more lifts per acre than UP, though that number is improving. As an example, Lathrop's expansion (which has stalled) at full build-out with 3800 spots is estimated by UP at 750,000 lifts/year. I think West Colton could get around 2500 spots.

Probably irrelevant; UP will do whatever they do. Who knows what freight railroading will look like in 20 years?

Bruce



Edited 1 time(s). Last edit at 02/17/18 10:10 by StStephen.