UP Plans 25 Percent Capital Spending Jump in 2011

Union Pacific Railroad tentatively plans to increase its capital spending on network repairs and growth projects 25 percent in 2011 to $3.25 billion, company officials said.

While the 2011 budget is still being finalized, Chief Financial Officer Robert M. Knight told stock analysts Nov. 4 that UP expects to allocate $3 billion to regular capital expenditures next year and another $250 million on federally mandated crash avoidance technology called positive train control. That compares with $2.6 billion the company is spending this year, counting both regular capex and PTC programs.

UP officials did not provide many details on how it will distribute the $3 billion, but Knight said it will include buying 100 more efficient locomotives next year to start a program of adding 100 to 200 each year through 2015.

By The Numbers: U.S. Rail Cargo.

Those save more fuel than units they replace. They are also equipped with gear that allows locomotives to be distributed throughout a train and run by a single crew in the lead engine cab. Such distributed power units allow railroads to run longer average trains, meaning they use fewer crews and separate trains to haul the same amount of freight.

This year, UP first budgeted $2.5 billion for its total capex program. It added $100 million more last May, mainly to buy 7,000 new domestic containers plus chassis to help meet unexpectedly strong demand for intermodal service. UP recently ordered 2,200 more of those boxes by shifting plans within the 2010 budget, for a total of 9,200 this year. Company officials have not yet said how many containers they plan to buy during 2011.

Beyond the high-efficiency locomotives, UP through its capital budget is funding several corridor upgrades in its system, from Chicago-area investments to double-tracking some of its Southwest track network and preparing to replace a low, century-old bridge over the Mississippi River at Clinton, Iowa, that now has to disconnect about six hours daily to make way for barges or other river traffic.

-- Contact John D. Boyd at jboyd@joc.com.