The Daily Item, Sunbury, PA


August 31, 2013

World's fastest train to resume trials as Japan plans new line


Bloomberg News — Concerns about high construction costs and uncertain demand have fueled resistance to plans for high-speed rail in countries including the U.S. and Britain. California is struggling to lay tracks for an $86 billion high-speed line after Congress cut off 2012 funds for such projects. The California High-Speed Rail Authority has also been working to settle lawsuits challenging the project.

The British government is facing resistance to plans for a high-speed link between London and Birmingham, scheduled to open in 2026 before being extended to Manchester and Leeds. The Institute of Directors has called on the government to abandon the plans, arguing that its 50 billion-pound ($78 billion) price tag is too steep.

Unlike those projects, JR Central's maglev line won't depend on government financing. The company says it will use cash flow, the highest of any railway operator in the world, along with loans and bonds to fund the project.

JR Central had free cash flow, or money from operations minus capital spending, of $2.95 billion in the fiscal year ended March. That compares with $2.42 billion at Union Pacific Corp., the largest U.S. railroad by sales, according to data compiled by Bloomberg.

The Japanese company, whose bullet trains carried more passengers last year than any airline in the world, predicts net income will rise 11 percent to 222 billion yen this fiscal year. It has made a profit every year since it was listed on the Tokyo Stock Exchange in 1997.

"JR Central's bullet train is a cash cow," said Shinichi Yamazaki, an analyst at Okasan Securities Group Inc. "They have access to enough money, including loans, to pay for the project. They could even build it faster, but looking at their finances, it's better to aim for 2027."

JR Central will issue 5-year, 10-year and 20-year bonds in equal amounts to help finance the project, according to the company. The rail operator is rated Aa3 by Moody's Investors Service, the same as the Japanese government.

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