Berkshire’s BNSF to spend $3.9 Billion on its Rail Network

Burlington Northern Santa Fe Railway Company (BNSF) plans to spend $3.9 billion on network upgrades this year. The railroad, owned by Warren Buffett’s Berkshire Hathaway Inc., says that its capital spending plan is an increase of $400 million over its 2011 allocation of $3.5 billion. As the economy shows signs of improvement and revenue from freight traffic increases, the major freight railroads of the country, which include BNSF, together plan to spend about $13 billion this year, an increase of $1 billion from the previous year. The investment will “ensure our infrastructure remains strong and improve the efficiency of our operations,” Matthew Rose, CEO of the BNSF, said in a statement.

Providing a break-up of the planned spending, BNSF said $2.1 billion will be set aside to upgrade its core rail network. Approximately $1.1 billion will be spent on locomotives, freight cars and other equipment, and about $300 million will be deployed to develop the federally mandated system to remotely stop trains headed for a collision.

BNSF will spend $400 million on expansion and efficiency projects, which will focus on coal routes. They plan to improve the velocity and capacity, and the new intermodal facility atKansas City. The railroad’s coal routes include its main line through Nebraska and Lincoln. It also serves Wyoming’s Powder River Basin, home to the largest and cheapestU.S.reserves of the power-plant fuel. BNSF is also a direct beneficiary of the rapid growth of oil drilling in the northern- U.S. Bakken region, where pipeline growth has failed to keep up with the expansion in drilling, increasing petroleum shipments by rail. Rising fuel prices has also led to an increase in intermodal shipments, as truckers team-up with railroads to move containers over long distances.

In February 2010,Berkshirespent an estimated $26.5 billion to acquire 77.5 percent of Burlington Northern Santa Fe. Buffett has called the investment a proxy to theU.S.economy. In the first nine months of last year,Burlingtonpaid $2.75 billion of dividends toBerkshire, and declared another $750 million for the fourth quarter of 2011.

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