CP Rail to spend $1 billion on capital projects in 2011

Canadian Pacific Railway Ltd (CP.TO) (CP.N) plans to spend up to C$1.05 billion ($1.06 billion) on capital projects in 2011, about 25 percent more than it spent last year, as the Canadian and U.S. economies pick up steam.

CP, Canada's second-biggest railway, said it will spend between C$950 million and C$1.05 billion this year, up from the C$750 million to C$800 million budgeted for 2010.

"This is a capital plan reflective of the growth opportunities that there are at CP," said RBC Capital Markets analyst Walter Spracklin, who had expected the railroad to budget about C$900 million for capital projects in 2011.

CP, which has tracks across Canada and in the Upper Midwest and Northeastern United States, will spend C$680 million on renewing its track infrastructure and C$200 million on boosting rail volumes and productivity.

Another C$80 million will be used to upgrade computer systems.

CP's biggest customer, miner Teck Resources Ltd (TCKb.TO), could present an immediate growth opportunity if it cranks up its coal output to help fill the gap left by Australia's flood-hit exports, Spracklin said.

"There is significant demand for metallurgical export coal, Teck is the second-biggest player in the world and CP is the only way to get it to port," he said.

CP's shares were down 13 Canadian cents at C$66.11 on the Toronto Stock Exchange on Wednesday afternoon. Shares in bigger rival Canadian National Railway Co (CNR.TO) were also weaker, down 59 Canadian cents at C$66.66.

The capital budget is equal to about a fifth of CP's expected 2011 revenues of C$5.3 billion, according to estimates from Thomson Reuters I/B/E/S. The company is scheduled to release its fourth-quarter and full-year 2010 results on Jan. 26.

From Reuters