STB: Rail industry's cost of capital contracted in 2014

The Surface Transportation Board (STB) last week announced the railroad industry's composite after-tax cost of capital has been calculated at 10.65 percent for 2014, down from 11.32 percent In 2013.

The cost-of-capital figure represents the board's estimate of the average rate of return needed to persuade investors to provide capital to the freight-rail industry, according to an STB press release.

The board calculates the figure annually, and uses it to evaluate the adequacy of an individual railroad’s revenue each year. The figure also is used to determine the reasonableness of a challenged rail rate, consider a proposal to abandon a rail line, or value a particular railroad operation.

The board also determined that in 2014, the cost of railroad long-term debt was 3.58 percent and the cost of common equity was 12.06 percent. The capital structure mix of railroads was 16.66 percent long-term debt, 83.34 percent common equity and 0.0 percent preferred equity.

Meanwhile, the board recently announced it is extending the deadline from Aug. 24 to Sept. 23 for filing comments on the Draft Environmental Impact Statement for the Tongue River Railroad Co.'s plans to construct and operate 42 miles of new line between Colstrip and the Ashland/Otter Creek areas of Montana.

This is the second deadline extension announced. Click this link to view the new deadline-extension notice.