Feds Say Railroad Finances Are OK
Two of the nation’s largest railroads are making solid returns on their investments and a third is close to that point, according to federal regulators.
The Surface Transportation Board announced Oct. 16 that it determined Union Pacific and Norfolk Southern, two major shippers of coal for electric cooperatives, were “revenue adequate” for fiscal 2011.
Omaha, Neb.-based Union Pacific registered a 13.1 percent return on investment, while Norfolk Southern, headquartered in Virginia, checked in at 12.9 percent.
Both were well above the 11.6 percent threshold set by the STB as the cutoff point at which it considered freight railroads to be revenue adequate for 2011. CSX Transportation fell short of that mark by just 0.3 percent.
The financial standing of the railroads is improving―in 2009, no carrier was revenue adequate, and in 2010, only Union Pacific reached that point.
The STB’s annual determination is important because it figures into rate challenges by captive shippers such as electric cooperatives, who often lack access to competitive rail service and pay more to haul coal.
If the railroads’ bottom lines are growing, shippers contend there is no reason to saddle them with exorbitant shipping rates that have to be passed on to consumers.
Even as the STB issued its revenue adequacy finding, Union Pacific reported its best-ever quarterly results, saying it recorded net income of $1 billion in the third quarter of fiscal 2012.
The company said its earnings-per-share jumped by 18 percent from the same period last year, even though coal shipments dropped by 12 percent.
Norfolk Southern said net income for the third quarter was down 27 percent, largely because of losses in revenue from coal hauling. CSX reported a slight decline in net earnings, but a slight increase in earnings per share, thanks to some repurchased shares in the last year.
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