Bloomberg News

Buffett Railroad Boosts Capital Plan to $3.9 Billion in Coal Bet

February 01, 2012

Feb. 1 (Bloomberg) -- Burlington Northern Santa Fe, the railroad controlled by Warren Buffett, plans $3.9 billion in capital spending this year, an increase of 11 percent from 2011, as the company boosts capacity for coal shipments.

The 2012 proposal includes $2.1 billion on the core network and $1.1 billion on locomotive, freight car and equipment acquisitions, the company said in a statement today. The Fort Worth, Texas-based railroad is also spending $300 million this year on a U.S. rail-safety mandate.

Buffett’s Berkshire Hathaway Inc. is increasing spending at the second-biggest U.S. rail operator after he made an “all-in wager” on the U.S. economy when he bought Burlington in early 2010 for about $26.5 billion. The largest U.S. freight railroads may boost capital expenditures to a record $13 billion in 2012 as their revenue rises amid gains in freight traffic, the Association of American Railroads said Jan. 30.

The investment will “ensure our infrastructure remains strong and improve the efficiency of our operations,” said Matthew Rose, CEO of the railroad, in the statement.

The railroad’s plan calls for $400 million in terminal, intermodal-expansion and efficiency projects, which will focus on coal routes. The rail serves mines in the Western U.S., including Wyoming’s Powder River Basin, which holds the largest and cheapest U.S. reserves of the power-plant fuel.

Burlington Northern is also benefitting as oil drilling in the northern-U.S. Bakken region outpaces pipeline growth, boosting petroleum shipments by rail. Intermodal shipments, which can move by sea, rail and highway, are also rising at the company as rising fuel prices prompt truckers to partner with railroads to move containers over long distances.

--With assistance from Mario Parker in Chicago. Editors: Dan Kraut, Dan Reichl

To contact the reporters on this story: Natalie Doss in New York at ndoss@bloomberg.net; Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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