Archive for the ‘Featured Stories’ Category
The Federal Transit Administration (FTA) has announced a proposed rule that would establish a framework for a Public Transportation Safety Program under FTA’s authority, allowing the agency to monitor, oversee and enforce safety in the public transit industry.
“With transit ridership at its highest levels in generations, and our nation’s transit agencies facing increased pressure to meet the demand for service, we must continue to ensure that safety remains the top priority,” said FTA Acting Administrator Therese McMillan. “This rulemaking is a major step forward in establishing FTA’s safety regulatory framework, as all future safety-related rules, regulations and guidance will be informed by the Public Transportation Safety Program.”
The proposed rule would implement FTA’s authority, which was established by Congress in the Moving Ahead for Progress in the 21st Century Act (MAP-21), to conduct inspections, audits, and examinations, and to test equipment, facilities, rolling stock, and the operations of public transit systems. It will also allow the FTA to take appropriate enforcement actions, including directing the use of, or withholding, Federal funds and issuing directives and advisories to the transit agencies.
The proposed rule is based on the principles and practices of Safety Management Systems (SMS), which focuses on organization-wide safety policy and accountability, proactive hazard identification, and risk-based decision-making.
U.S. Transportation Secretary Anthony Foxx stated, “Every day, millions of Americans take public transportation to get to work, school, medical appointments, and other important destinations. This new program will help us ensure that transit continues to be a safe way to get around, and a safe place to work.”
Also in the proposed rule, The FTA has defined a National Public Transportation Safety Plan, which the FTA expects to publish in the Federal Register for public comment in the next several months. The plan will include safety performance for all public transportation, minimum safety performance standards for revenue transit vehicles, a Safety Certification Training Program, and other content determined by FTA.
Public comments on the proposed rule must be received by October 13, 2015.
The Federal Railroad Administration (FRA) has delivered its “Status of Positive Train Control Implementation” report to Congress, showing most railroads will miss the December 31, 2015, positive train control (PTC) implementation deadline.
PTC prevents train-to-train collisions, over-speed derailments, incursions into established work zone limits and a train going to the wrong track because a switch was left in the wrong position.
“Positive Train Control is the most significant advancement in rail safety technology in more than a century,” stated U.S. Transportation Secretary Anthony Foxx. “Simply put: it prevents accidents and saves lives, which is exactly what we seek to do at the Department of Transportation every single day. We will continue to do everything in our power to help railroads install this technology.”
The FRA noted that it has provided significant assistance to railroads to help them become PTC compliant, including funding of more than $650 million to passenger railroads, $400 million in Recovery Act funding, and an issuance of nearly $1 billion loan to the Metropolitan Transportation Authority for PTC on the Long Island Rail Road and Metro-North.
The FRA has also built a PTC testbed in Pueblo, Colo., established a PTC task force, and has worked directly with the Federal Communications Commission (FCC) and the Advisory Council on Historic Preservation to resolve issues related to spectrum use and to improve the approval process for PTC communication towers.
FRA Acting Administrator Sarah Feinberg stated, “The Federal Railroad Administration will continue to use its resources and expertise to help railroads achieve the critical goal to have Positive Train Control implemented.”
The “Status of Positive Train Control Implementation” report was mandated by the House of Representatives Appropriations Committee. The December 31, 2015, PTC implementation deadline was established by Congress in 2008.
Wabtec Corporation plans to acquire, for approximately $1.8 billion including assumed debt, Faiveley Transport S.A., a provider of integrated systems and services for the railway industry. The sale is subject to various conditions, including labor group consultations and other regulatory requirements.
Faiveley Transport is headquartered in Gennevilliers, France, has more than 5,700 employees in 24 countries and generated record sales of approximately $1.2 billion in its most recent fiscal year.
Wabtec’s Executive Chairman Albert J. Neupaver stated, “Faiveley Transport is an excellent strategic fit, expanding our geographic presence considerably, broadening our product and service capabilities, and enhancing our technology and innovation initiatives, all of which will make us a more efficient global competitor.”
“We are excited by the compelling opportunities and synergies created from the combination of two rail industry leaders with historic ties, a commitment to growth and efficiency, and a focus on technology, quality and customer service,” continued Neupaver. “We would be pleased to welcome the Faiveley family as a long-term Wabtec shareholder with representation on our Board of Directors.”
Combining Wabtec and Faiveley Transport will create one of the largest public rail equipment companies, with approximate revenues of $4.5 billion. Wabtec expects to realize at least €40 million in annual pre-tax synergies from the transaction. The acquisition is expected to be accretive to Wabtec’s earnings per diluted share in 2016.
The transaction will be completed in the following steps:
- Wabtec has made an irrevocable offer to the owners of approximately 51 percent of Faiveley Transport’s shares for a purchase price of €100 per share, payable 25 percent in cash and 75 percent in Wabtec preferred stock. Shareholders owning 51 percent of Faiveley Transport have entered into exclusive discussions with Wabtec;
- Wabtec expects that the 51 percent shareholders will enter into a definitive share purchase agreement and Faiveley Transport will enter into a transaction agreement with Wabtec once required labor group consultations are completed; and
- Wabtec will commence a tender offer for the remaining publicly traded Faiveley Transport shares upon completing the share purchase. The public shareholders will have the option to elect to receive €100 per share or Wabtec preferred stock. Wabtec intends to delist Faiveley Transport from Euronext after the tender offer if minority interests represent less than 5 percent.
Wabtec plans to fund the cash portion of the transaction with cash on hand, existing credit facilities and potentially other debt financing.
Raymond T. Betler, Wabtec’s president and CEO, said, “Faiveley Transport brings to Wabtec many complementary products, a strong presence in the European and Asian transit industries, and solid relationships with blue-chip, global customers. Together, we expect to strengthen our ability to help our customers improve their safety, productivity and efficiency. We look forward to working with the Faiveley Transport team to ensure a successful combination for all stakeholders.”
When the transaction is completed, Stéphane Rambaud-Measson, current chairman of the Management Board and CEO of Faiveley Transport, will join Wabtec as president and CEO of Wabtec’s Faiveley Transport group and as Wabtec corporate executive vice president, reporting to Betler.
“The combination of our operations with Wabtec would be an excellent strategic move for Faiveley Transport,” said Rambaud-Measson. “Our complementarity is remarkable, both in terms of product portfolios and geographies. This transaction would enable us to pursue our ambition to become a global leader in railway equipment and services for the passenger transit market.”
“Faiveley Transport would double in size with the contribution of Wabtec’s transit division thus enlarging the French industrial footprint of the group. The strong commitment of the Faiveley family as long-term shareholders is a testimony of the powerful industrial rationale of the proposed combination,” added Rambaud-Measson.
UBS Investment Bank and DC Advisory are serving as financial advisors to Wabtec for the transaction, and Jones Day is acting as legal advisor.
Federal Railroad Administration (FRA) Acting Administrator Sarah Feinberg recently spoke before a House Committee about the state of positive train control (PTC) implementation in the United States, saying that despite FRA’s financial support, technical assistance and repeated warnings to Congress, many railroads have stated publicly they will not meet the December 31, 2015, deadline for PTC implementation.
Feinberg pointed out to the U.S. House Committee on Transportation and Infrastructure, Subcommittee on Railroads, Pipelines, and Hazardous Materials that the initial analysis of recent information from 32 of the 38 railroads the FRA is currently tracking for enforcement purposes has found that Class I railroads have:
- Completed or partially completed installations of approximately 50 percent of the locomotives that require PTC equipment;
- Deployed approximately 50 percent of wayside units;
- Replaced approximately 50 percent of signals that need replacement; and
- Completed most of the required mapping for PTC tracks.
“As I have stated to this committee before: safety is the Federal Railroad Administration’s top priority,” said Feinberg. “The rail system is not as safe as it could be without the full implementation of PTC. A safe rail system requires the full implementation of Positive Train Control. And that’s why FRA will enforce the Dec. 31, 2015 deadline for implementation, just as Congress mandated.”
Feinberg noted that, following passage of the PTC mandate in 2008, railroads submitted their PTC Implementation Plans in 2010 that laid out a path that would allow each railroad to meet the deadline.
“For several years, FRA has been sounding the alarm that most railroads have not made sufficient progress in implementing PTC. In the 7 years since passage of the PTC mandate, FRA has dedicated significant resources and worked closely with the railroad industry in order to assist and guide implementation,” she said.
Feinberg noted that the FRA has hired extra staff to assist with the issue, worked with the Federal Communications Commission to resolve spectrum issues and improve the approval process related to PTC communication towers, built a PTC system test bed at its Transportation Technology Center in Pueblo, Colo., and provided funding of approximately $650 million in grants funds to support PTC.
“I have also established a new PTC Task Force Team within FRA – that team is aggressively managing and monitoring each individual railroads’ progress, tracking data, ensuring we have the most accurate and up-to-date information, and reporting in to me multiple times per week,” said Feinberg. “This team is working in close collaboration with the many individuals at FRA, based here in Washington and in offices around the country, already working on this challenge.”
Feinberg informed the committee that, according to the American Public Transportation Association, (APTA), 29 percent of commuter railroads are planning to complete installation of PTC equipment by the end of 2015, with full implementation of PTC for all commuter lines expected by 2020. She also said that the Association of American Railroads (AAR) projects that the following will completed by the end of 2015:
- 39 percent of locomotives will be fully equipped;
- 76 percent of wayside interface units will be installed;
- 67 percent of base station radios will be installed; and
- 34 percent of required employees will be trained.
Starting on January 1, 2016, FRA will impose penalties on railroads that have not fully implemented PTC.
“Fines will be based on FRA’s PTC penalty guidelines, which establish different penalties depending on the violation,” she explained. “The penalties may be assessed per violation, per day and may be raised or lowered depending on mitigating or aggravating factors. The total amount of penalty each railroad faces will depend upon the amount of implementation progress the railroad has made.”
“FRA will also use additional, appropriate enforcement tools to ensure railroads implement PTC on the fastest schedule possible – be it emergency orders, compliance orders, compliance agreements, additional civil penalties, or any other tools at our disposal,” Feinberg said.
She said that the FRA asked Congress to provide them with additional authorities in order to review, approve, and require interim safety measures for individual railroads between January 1, 2016 and each railroad’s full PTC implementation.
“These interim safety requirements would be to ensure railroads are forced to raise the bar on safety if they miss the PTC deadline – but will not and cannot be used to replace or extend the deadline,” said Feinberg.
The Rail Safety Improvement Act of 2008 requires that, by December 31, 2015, PTC be fully implemented on Class I railroad main lines where any toxic hazardous materials are transported and on main lines where regularly scheduled intercity or commuter rail passenger service is conducted.
Association of American Railroads (AAR) President and CEO Edward R. Hamberger has stated that America’s freight rail industry is committed to ensuring that positive train control (PTC) is interoperable on the entire nationwide network.
“Freight railroads have been moving forward with PTC for years and remain 100 percent committed to ensuring this complex ‘system of systems’ gets safely installed and thoroughly vetted and tested,” said Hamberger. “Our railroads have 62,000 miles to equip with PTC and getting that safely completed is a top priority.”
Hamberger noted that, given the size and scope of deploying PTC on the entire rail network, it’s absolutely impossible to meet the 2015 deadline mandated by Congress for a fully functioning PTC system. He pointed out that freight railroads currently have a team of 10,000 employees, manufacturers, software designers and safety experts devoted full time to developing, installing and testing the safe creation of PTC.
In the AAR’s most recent PTC progress report to the Federal Railroad Administration FRA, Hamberger stated that by the end of 2015 more than 11,000 railroad route miles will be equipped with PTC and approximately 9,000 locomotives will be PTC ready. In addition, 76 percent of the 34,000 required wayside units will be installed, 67 percent of base station radios will be in place, and 32,446 of 95,971 railroad employees will be PTC trained.
“Reaching deadlines is important, but even more important is that when PTC is turned on it is fully operational and enhancing safety,” said Hamberger, noting that, to date, freight railroads have invested approximately $5.7 billion in private capital into PTC and expect to spend billions more before the system is fully implemented.
He also stated that the freight rail industry was transparent early on, clearly warning policy makers the 2015 deadline was unachievable, which has been echoed by former and current FRA officials, as well as others on Capitol Hill.
“Freight railroads have indicated for some time they require until 2018 to deploy all the necessary equipment and outfit the locomotive fleet, followed by up to two years of testing and validation that the nationwide system is properly working in all regions,” said Hamberger.
In its press release, the AAR noted that safety of freight rail operations is the industry’s top priority, and the statistics underscore the point: 2014 was the safest year on record for freight rail. It also pointed out that given enough time to ensure the complicated safety network is working effectively, PTC will make a safe method of transportation even safer.
Rail industry groups warn that new brake system and other requirements contained in last week’s crude-by-rail regulations could have a chilling impact on rail operations. On May 1, the U.S. Department of Transportation issued a final rule for transporting flammable liquids by rail and aligned the rule with Canada’s new tank car standards.
The Association of American Railroads (AAR) welcomed the new design standards for tank cars but questioned the rulings on both the ECP brake requirement and the 30 mph speed limit.
“First and foremost, the DOT has no substantial evidence to support a safety justification for mandating ECP brakes, which will not prevent accidents,” said Edward R. Hamberger, AAR president and CEO. He pointed out that the government’s ECP simulation analysis concluded with the cautionary note, “Given that this is based on a limited simulation set, the results could be a bit optimistic and should be taken with a grain of salt.”
Hamberger stated that the speed restrictions DOT handed down are dependent on the actions of rail customers or tank cars owners. “This decision not only threatens the operational management of the U.S. rail system, but trains moving 30 mph will compromise network capacity by at least 30 percent. The far-reaching effects of this decision will be felt by freight and passenger customers alike. Slow-moving trains will back up the entire rail system,” said Hamberger.
“Attention and resources should be allocated to addressing the underlying causes of rail accidents and brakes simply aren’t on that list,” continued Hamberger. “Unjustified regulations such as this trigger a reallocation of investments that will not generate the kind of safety benefits the industry and the public expects. The regulation does not take into account the disruption the ECP mandate will wreak on railroad – both freight and passenger – operations.”
The American Petroleum Institute (API) President and CEO Jack Gerard pointed out that the ECP brake regulation does not take into account the limited shop capacity that is available for retrofitting the existing tank car fleet with the new timeline.
“The safety impact of ECP brakes is marginal at best,” said Gerard. “It is concerning that regulators did not select one of several alternative braking technologies that have much clearer benefits for safety.”
“We support upgrades to the tank car fleet and want them completed as quickly as realistically possible,” stated Gerard. “The railcar manufacturing industry’s own calculations show it does not have the shop capacity to meet the retrofit timeline announced today, which will lead to shortages that impact consumers and the broader economy.”
The Greenbrier Companies, Inc., manufacturers of the “Tank Car of the Future”, which meets the new DOT-117/TC-117 tank car standards, was pleased with the rule for updating the standards and stated the timelines are achievable.
The company believes the tank car design improvements produce tangible and immediate safety benefits that far exceed any marginal benefit from U.S. DOT-mandated ECP brakes, which Greenbrier has consistently questioned.
Greenbrier said that a rapid replacement and retrofit phase-out timeline is completely feasible. A report prepared for the company by Cambridge Systematics indicates that the unjacketed DOT-111s and unjacketed CPC-1232s in crude oil service could be retrofitted in 3.7 years, while similar cars in ethanol service could be retrofitted in an additional 2.3 years.
The report also noted that, with 2015 manufacturing capacity for new tank cars at over 40,000 units, the entire tank car fleet that is currently operating without advanced safety features could be replaced in less than five years.
Upon announcing the new rule, U.S. Transportation Secretary Anthony Foxx said, “Safety has been our top priority at every step in the process for finalizing this rule, which is a significant improvement over the current regulations and requirements and will make transporting flammable liquids safer.”
“Our close collaboration with Canada on new tank car standards is recognition that the trains moving unprecedented amounts of crude by rail are not U.S. or Canadian tank cars – they are part of a North American fleet and a shared safety challenge,” added Foxx.
The final rule for a high-hazard flammable train (HHFT), which constitutes a continuous block of 20 or more tank cars loaded with a flammable liquid or 35 or more tank cars loaded with a flammable liquid dispersed through a train, includes:
- Upgrades to tank car standards – new tank cars constructed after October 1, 2015, are required to meet the new DOT Specification 117 design or performance criteria;
- New risk-based retrofitting schedule – The rule requires replacing the entire fleet of DOT-111 tank cars for Packing Group I within 3 years and all non-jacketed CPC-1232s, in the same service, within approximately 5 years;
- New braking standard – HHFTs require a functioning two-way end-of-train device or a distributed power braking system. Each high-hazard flammable unit train (HHFUT), which is a single train with 70 or more tank cars loaded with Class 3 flammable liquids, that has at least one tank car with Packing Group I materials, must be operated with an electronically controlled pneumatic (ECP) braking system by January 1, 2021. All other HHFUTs must have ECP braking systems installed after 2023.
- Reduced operating speeds – restricts all HHFTs to 50 mph in all areas and HHFTs containing any tank cars not meeting the enhanced tank car standards required by this rule are restricted to operating at a 40 mph speed restriction in high-threat urban areas;
- Routing analysis – all HHFT trains must have a routing analysis that considers, at a minimum, 27 safety and security factors. A route must be selected based on its findings. Planning requirements are prescribed in 49 CFR §172.820.
- Railroad point of contact for information – information related to the routing of hazardous materials must be provided to the state and/or regional fusion centers, and state, local and tribal officials when the train is traveling through their jurisdictions;
- Offerors of unrefined petroleum-based products – offerrors must develop and carry out sampling and testing programs to address the criteria and frequency of sampling. They must also certify that hazardous materials subject to the program are packaged in accordance with the test results, document the testing and sampling program outcomes, and make that information available to DOT personnel upon request.
Canada’s Minister of Transport Lisa Raitt said, “This stronger, safer, more robust tank car will protect communities on both sides of our shared border. Through strong collaboration we have developed a harmonized solution for North America’s tank car fleet. I am hopeful that this kind of cooperation will be a model for future Canada-U.S. partnership on transportation issues.”
FRA Acting Administrator Sarah Feinberg stated, “This new rule governing the movements of crude and ethanol trains will enable us to focus more precisely on oil train accident prevention, and mitigation. This rule will save lives and homes, and protect communities. As I have said before, there is no silver bullet that will solve this challenge. Improving safety requires constant re-examination of every procedure and protocol to make sure sufficient safeguards and redundancies are in place to protect the American public. We will continue to focus on this challenge, not just today, but in the future.”
The rule was developed by the Pipeline and Hazardous Materials Safety Administration (PHMSA) and Federal Railroad Administration (FRA), in coordination with Canada. A summary of the final rule is available on the DOT website.
The U.S. Surface Transportation Board (STB) has approved a joint proposal by Louisville & Indiana Railroad (L&I), a subsidiary of Anacostia Rail Holdings (ARH), and CSX to upgrade a freight corridor between Indianapolis, Ind., and Louisville, Ky. This decision allows CSX and L&I to jointly use the 106.5-mile railroad line in accordance with the freight railroad operating easement that L&I granted to CSX.
CSX plans to invest approximately $100 million upgrading the line to remove weight restrictions, increase track speed, and add capacity, which will allow better rail access to the Port of Indiana-Jeffersonville and provide more efficient rail service for freight shipments through the region.
Oscar Munoz, CSX president and COO, stated, “These upgrades will benefit L&I and CSX customers in the Midwest and across the companies’ networks by improving operational efficiency, allowing more direct transit across Ohio, Indiana and Kentucky, and reducing congestion in those states.”
“The privately funded upgrades, which will include the installation of new rail, upgrades to the rail bed structure and bridge improvements, will enhance service and capacity on this rail line,” said Munoz.
“This project enhances critical rail infrastructure that connects local customers to America’s freight transportation network, supporting local manufacturing, economic development, jobs and competitiveness,” said Peter Gilbertson, chairman and CEO of Anacostia Rail Holdings.
Under the proposal approved by the STB, CSX will be responsible for installing continuously welded rail and ties to improve the track from Federal Railroad Administration (FRA) Class 2 (speeds up to 25 miles per hour) to FRA Class 4 (speeds to 60 miles per hour), where signaling and track geometry permit.
CSX will also be responsible for the replacement of Bridge No. 40.19 at Columbus, Ind., the modernization of the current train dispatching system, and removal of weight restrictions to increase the maximum gross weight from 263,000 pounds to 286,000 pounds on the line.
In 1994, L&I began operations on the 106-mile line. Since 2000, CSX trains have operated an approximate 52-mile portion of the corridor between Louisville and Seymour, Ind., en route to Cincinnati, Ohio.
In their STB application filed in FD 35523, the applicants state that L&I would continue to provide overhead and exclusive local service on the line. At the time of the application, they said the line handled two trains per day between Indianapolis and Seymour (both L&I); four trains per day between Seymour and Jeffersonville Yard, Ind. (two for L&I and two for CSXT); and seven trains per day between Jeffersonville Yard and Louisville, Ky. (five for L&I and two for CSXT). Upon completion of the upgrade, the railroads said that there would be a total of 17 trains per day operating between Indianapolis and Jeffersonville Yard (two for L&I and 15 for CSXT), and 20 trains per day operating between Jeffersonville Yard and Louisville, (five for L&I and 15 for CSXT).
As part of their deal, L&I would be required to compensate CSXT whenever L&I moves cars that are taller than 18’6” above the top rail or weigh more than 263,000 pounds GWOR over the upgraded line without CSXT involvement (per car fee). L&I would also compensate CSXT when it originates or terminates, without CSXT involvement, a certain yearly number of those cars at customers that are served by CSXT or accessible to CSXT by reciprocal switch, unless that traffic is interchanged by L&I with a third-party carrier at Louisville or Jefferson (volume fee). Additionally, L&I would be precluded from granting operating rights to other Class I railroads without CSXT’s permission (a use consent provision).
In its ruling, the STB found that the record shows that the proposed transaction would benefit the shipping public and enhance competition by facilitating more efficient, cost-saving operations. Following the upgrade, applicants would be able to provide shippers with more efficient, competitive service. The proposed transaction would enhance applicants’ ability to compete not only with other railroads, but also with freight that currently moves via other modes of transportation, such as long and short haul trucking companies.
In particular, joint use of the line would create routing flexibility and performance improvements for CSXT in the Midwest. As applicants state, following the implementation of the proposed transaction, CSXT would be able to avoid routing traffic through Queensgate Yard in Cincinnati, a major classification terminal, and eliminate the use of circuitous routes, which are currently necessary to cross the Ohio River. CSXT has two Ohio River crossings on its primary north-south corridors, one at Henderson, Ky./Evansville, Ind. and one at Cincinnati, Ohio/Covington, Ky. The proposed transaction would give CSXT an additional crossing at Louisville, Ky. Additionally, CSXT could use the Line to reduce congestion on other CSXT lines, such as the Louisville Cincinnati Subdivision (LCL Subdivision). The upgraded line would enable CSXT to operate longer intermodal trains to intermodal terminals, providing operating economies for CSXT. Applicants anticipate that the systemwide efficiency increases for CSXT would reduce service time by approximately 130.5 hours per day, resulting in annual savings of approximately $11.8 million.
“In this case, we find that the public benefits from the infrastructure improvements to the line and the efficiency gains for the applicants outweigh any potential anticompetitive effects caused by the per car fee, the volume fee, and the use consent provision. We are satisfied that the per car fee, the volume fee, and the use consent provision are reasonable provisions intended to protect CSXT’s significant capital investment in the upgrade,” the STB said.
More than 1,600 railroad and supplier representatives were in town this week for the American Short Line and Regional Railroad Association annual convention in sunny Orlando.
The event marked the first annual convention for the association under its new president, Linda Bauer Darr. She succeeded Rich Timmons, who retired last year after about a dozen years leading the short line group. She presided over the convention’s official grand opening and delivered a state of the industry presentation during the event.
The ASLRRA 2015 Connections convention featured the organization’s largest number of exhibitors. Rail industry suppliers and contractors took up more than 235 booths in the sold-out exhibit hall at the Hilton Orlando, displaying some of the latest technology products and services.
ASLRRA 2015 Connections featured numerous educational sessions addressing railroading’s hottest topics, including short line PTC implementation, bridge management plans, Hurricane Sandy’s impact on railroad rates and coverage, and natural gas technology for locomotives. Other highlights included updates on the Short Line Safety Institute, a panel discussion with top executives from short line holding companies and the presentation of prestigious safety, marketing and distinguished service awards.
The event officially opened March 28 with various committee meetings and a service project and ends April 1.
Genesee & Wyoming Inc. (G&W) will acquire about 95 percent of the shares of Freightliner Group Limited, a London-based international freight rail operator, from Arcapita and other shareholders for approximately US$755 million and the assumption of US$13 million in net debt and capitalized leases.
The proposed acquisition, which is expected to be completed by the end of the first quarter, would dramatically expand G&W international investments in Europe and Australia and provide a “strong platform” for future non-U.S. investments, G&W executives said in a Feb. 25 call with reporters and analysts.
Freightliner is the second-largest freight rail operator in the U.K. with its subsidiary, Freightliner Ltd., the largest rail maritime intermodal operator in the country. Freightliner also has operations in Poland, Germany, the Netherlands and Australia. The company employs over 2,500 people worldwide and has an annual revenue base of approximately US$785 million derived from the U.K. (65 percent), Continental Europe (25 percent), and Australia (10 percent).
Members of the existing Freightliner management team will retain an approximate 5-percent stake but G&W plans to own 100 percent by mid-2020.
“The acquisition of Freightliner is an excellent strategic fit for G&W,” said G&W President and CEO Jack Hellmann. “First, we are adding a world-class intermodal and heavy-haul franchise in the United Kingdom that will be the foundation of G&W’s European Region. Second, the overlap of our respective rail businesses in Australia and the Netherlands will unlock operating synergies and expand our presence in each of those markets. Third, we are pleased to be joined by a highly talented management team who have a long track record of success in building Freightliner over the past two decades.”
Post-acquisition, “we expect to build the existing business and also unlock a range of attractive rail investment opportunities worldwide,” Hellmann added.
Russell Mears, CEO of Freightliner Group, commented, “G&W brings additional investment firepower, extended international reach and increased below-rail infrastructure expertise to add to the existing strengths of the Freightliner Group. Their commitment to safety and service quality in all activities mirrors our own values.”
Freightliner owns 8 of the 13 U.K. maritime terminals where it operates and also owns a fleet of 250 trucks for pick-up and delivery. Its heavy haul subsidiary provides bulk rail freight service throughout the U.K., primarily serving the aggregates, cement, coal, and waste industries, and provides infrastructure train service to Network Rail, the owner of the U.K.’s rail infrastructure network.
In Continental Europe, Freightliner Poland primarily serves aggregates and coal customers in Poland, and operates in eastern Germany. The company’s Rotterdam-based ERS subsidiary provides cross-border intermodal services connecting 3 northern European ports to key cities in Germany, Poland, Italy and other countries.
In Australia, Freightliner currently transports coal and containerized agricultural products in New South Wales and is also an accredited rail service provider in Western Australia, South Australia and Queensland.
Freightliner operates in open access rail freight markets with limited ownership of track assets. Its fleet of primarily leased equipment includes approximately 250 standard gauge locomotives (mostly diesel-electric) as well as 5,500 wagons, with equipment maintenance provided at its own in-house shops.
Hellmann noted that following the Freightliner acquisition, G&W’s corporate structure will be best understood by looking at three parts. “The first will be our traditional North American short line and regional railroad operations, which is expected to contribute approximately 77 percent of annual pro forma operating income, where we will continue to execute on our long-term plan of commercial growth across our coast-to-coast rail footprint as well as acquisition growth from further consolidation of the short line rail industry,” he said. “The second will be our Australian operations, which is expected to contribute approximately 12 percent of annual pro forma operating income, where our above-rail and below-rail operations in South Australia and the Northern Territory will be combined with Freightliner’s above-rail business in New South Wales.”
“The third part will be our European operations, which is expected to contribute approximately 11 percent of annual pro forma operating income, with Freightliner’s U.K. business as the cornerstone that also will lead the development of our intermodal business serving deep seaports in northern Europe and our heavy-haul operations in Poland,” Hellmann added.
During its first year of ownership, G&W expects Freightliner to generate approximately £510 million in revenues (US$785 million at current exchange rates) and £60 million of EBITDA (US$93 million), which includes annual operating lease expense of £45 million (US$69 million). G&W expects the acquired business to require annual average capital expenditures of approximately £17 million (US$26 million) and to have depreciation and amortization expense of approximately £18 million (US$28 million).
Following the acquisition, G&W said it plans to maintain approximately $500 million of available capacity under its revolving credit facility for future investments. “Given the above-rail nature of Freightliner’s operations with limited ownership of track, it is worth noting that G&W’s European segment will have a relatively high operating ratio (approximately 90 percent) due to its lower capital intensity as well as the prevalence of rolling stock under operating leases,” concluded Hellmann.
G&W owns and operates short line and regional freight railroads in the United States, Australia, Canada, the Netherlands and Belgium. In addition, G&W operates the 1,400-mile Tarcoola to Darwin rail line, which links the Port of Darwin with the Australian rail network in South Australia. Operations include 116 railroads organized in 11 regions, with more than 15,000 miles of owned and leased track, 5,200 employees and over 2,000 customers. The company also provides rail service at 37 ports in North America, Australia and Europe and performs contract coal loading and railcar switching for industrial customers.
The Association of American Railroads (AAR) has announced that Michael Rush has moved from his post as associate general counsel to senior vice president safety and operations, succeeding Robert VanderClute who is retiring after 12 years with the AAR.
Before joining AAR, VanderClute served for five years as vice president of rail at Parsons Brinckerhoff. Prior to that, he worked at Amtrak for 27 years, eventually being named vice president of operations and chief operating officer.
He earned a bachelor’s degree from the University of Tennessee and completed the transportation executive program at Harvard University.
“Bob’s contributions to the AAR, to our members and to the rail industry worldwide are vast,” said AAR President and CEO Edward R. Hamberger. “His depth of railroad knowledge and hands-on experience will be difficult to duplicate. As well, his love for all things railroading is unsurpassed. He is the consummate ‘train enthusiast,’ and his face lights up whenever a train goes by.”
Rush joined the AAR in 1980 and has counseled the AAR and its member railroads on environmental, hazardous materials and safety matters. He also spearheaded the freight rail industry’s push for stronger tank car safety standards.
Rush graduated with honors from the National Law Center at George Washington University.
“Safety has and always will be front and center for the rail industry and we are fortunate to have Mike’s expertise to lead this critical area,” said Hamberger. “Mike’s insights on myriad issues, particularly those with a safety focus are immeasurable.”