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  • Pertaining to all railroading subjects, past and present, in New England
Pertaining to all railroading subjects, past and present, in New England

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 #1298740  by F-line to Dudley via Park
 
BostonUrbEx wrote:
CN9634 wrote:Surprisingly however, the figures are believable for an outfit such as Pan Ams...
Is it really? I'm looking at this and all I see is PAR making P&W look like a model train set. To be honest, the reason I was looking for this information was because I was wondering what the feasibility was of a PAR + P&W merger. The resulting railroad would have a good hold on an entire region, and they could trim out some redundant lines in Connecticut, plus the Gardner branch, adding some savings into the mix without losing customers or the ability to be a gateway for New England. When I see this, though, the P&W seems really insignificant when considering it's system map. I guess that does however explain not only why it hasn't happened yet, but why I've never heard of such a rumor or heard of the idea being kicked around.
P&W has a lot fewer physical assets than PAR. Fewer route miles, higher % of trackage rights (especially in CT) for their route miles. Smaller fleet. Fewer yards, fewer staff bases, fewer staff. But they're a highly efficient operation...way, way, way moreso than PAR. Because they cover that system in fewer crew shifts with two Class 3 mainlines dumping onto the NEC as their primary spines, run fewer trains quicker and staff them better so local customers don't take for-freaking-ever to get served, their locomotive fleet is less-underpowered and better-maintained with higher uptime, and higher percentage of their system has 19'6" or better clearances (outside of PAS, very little on PAR exceeds 17'). So despite PAR's reputation for running lean, they're not very efficient at all. P&W ends up being a Class II railroad all the same...albeit a bit further on the low end of the scale than PAR. They do an autorack round-trip from Worcester to Davisville on all- Class 3 or Class 7 track in one half-shift every day, have another crew to the 102-mile round trip from Worcester to Willimantic for the NECR handoff on all- Class 3 track in one half-shift every day, do Worcester to Cedar Hill in New Haven 100 miles one-way on all- Class 3 or Class 7 track in one half-shift every day then fan out to Danbury or Middletown/Wethersfield. And they do the stone trains to New York City a few days a week all in one shift. And Gardner may be 10 MPH but at 30 miles they get back home in one shift. No part of their system takes more than 1 crew shift and one set of power to get 1 way between extreme points in the system, and most of their interchanges can be done round-trip in one shift. This is the only way they can tether that much of their system out of just home base in Worcester and the yards in Valley Falls and Pawtucket.

You may want to look at some stats on the tonnage the carriers haul and freight revenues that have to be reported to the AAR for purposes of retaining their Class II status. I haven't been able to find any, but I bet if you did the efficiency difference would be screamingly obvious. They've also been extremely incremental and conservative in expanding their territory, and hedge a lot on where they're likely to get state aid. It helps that they are the only game in town for Rhode Island freight and biggest game in town for Connecticut freight, so things like the revival of the Willimantic Branch, Valley Line, and Belle Dock are being led by the nose with state investment despite being non-passenger lines. Very low risk for them to put the elbow grease into growing the business. So given that their expenditures are pretty lean for the tonnage they carry and they've been methodical about only taking small bites...P&W's probably got some piles of cash it's sitting on if it ever wants to swing for the fences. I doubt they'd be able to swallow all of PAR, but if Pan Am were partitioned with NS swallowing the other 50% of the Patriot Corridor (or P&W only negotiating enough of a share for guaranteed haulage) they might be in a position to make a play for the north-south orientation of the system.


So when doing a valuation of those assets you have to take things like this into account, and also look at what parts of PAR's system are the most wasteful. And just follow the discussions on this forum to see where that's a huge concern. Clearly northern Maine and ex-MEC territory. They can't move point-to-point very quickly at all, they have the problem of "canning hell" of perpetually running out of staff hours before completing a run, and they have perpetual fleet shortages exacerbating the situation. Waterville and Rigby--85 some-odd miles--are half a world away at (barely) 10 MPH. It's a crew shift one-way between Mattawamkeag and Waterville, and a crew shift one-way between Waterville and Rigby...if they're lucky. This is why they have such incredible difficulty getting any Maine intermodal going, and why past experiments with that have always been short-lived and chased away their partners. The useful interchanges--the Irving Lines @ Keag, CMQR @ Northern Maine Jct. near Bangor, SLR @ Danville Jct.--just aren't reachable in a way that holds the attention of Class I's like CSX, CP, CN, etc. Or even Norfolk Southern to large degree. Ex-B&M territory is considerably better because so much of it is on MBTA or Downeaster-maintained Class 4 track, but "canning hell" returns to large degree on the mainline. It takes many days, many crews, lots of power, and a lot of discrete point-to-point moves to get across the system. And that absolutely affects their valuation in an acquisition. MellonFink are unique amongst railroad managers in finding these kinds of limitations tolerable. No buyer is going to bite without holding against them the humongous upgrade gap to get the system to Class 3. And no buyer is going to be interested in absorbing 100% of the rolling ruins they have in their locomotive fleet.

So simply having enough "stuff" to make their neighbors look like model train sets doesn't mean their "stuff" is all it's cracked up to be. You really have to portion out PAR into 3 separate regions and 3 separate regional valuations: PAS, Eastern MA/NH/Downeaster territory, and the ex-MEC. PAS has the highest upside, but it's upside only the Class I owner of the other 50% share can tap because of the resources and expertise that have to be moved into place to get that line competitive with CSX. That's pretty much a fixed valuation, but we have a good idea what that is. ex-B&M to Portland is a sell-high that rests almost entirely on the back of the Downeaster and state-paid upgrades. Almost all of the lines have passenger interests present of future paying the way for upgrades, it's next for a state-paid double stack upgrade after the Patriot Corridor and thus good/reliable intermodal, and the ports (Portsmouth, Boston) are juicy targets. Since that would be wholly open bidding unlike PAS they probably run up the score a lot here. And have that overpay cover over the warts like the abominable condition of the Worcester main and Stony Brook. Which, if P&W were to make a bid...would be high-priority upgrades for its "new" north-south mainline that they'd probably be open to transacting to MassDOT for immediate upgrade help.

And then...they're just going to take a steep write-off in Maine. Those branches with the closed mills are nearly worthless, and the state-of-repair hole is just too deep. It may even take 3-way talks with MEDOT about their timetable for a Downeaster extension on the Lower Road to Augusta--and outlining how those passenger upgrades can help replace the Back Road past Danville as the freight main--to get somebody willing to take those assets. In fact...I couldn't see somebody like P&W bidding at all for the whole non-NS part of the system at all unless they could count on having the Downeaster bring Class 4 track to within 18 miles of Waterville within 10 years. Same goes for anyone targeting them from the north. Waterville-Ayer has to be able to be done one-way in one day's work to be truly attractive to anyone who values efficiency. And no buyer is going to be willing to buy a whole second railroad's worth of just upgrades after buying the railroad from PAR.


It's very complicated to pin an easy-to-parse number value on them. Because in addition to having closed-books and owners notorious for keeping an aura of mystery about what their financials actually are...and the PAS partnership shaping who would make a bid for what...the "railroad" itself consists of areas of such widely divergent value and performance. And has its fortunes north and east of PAS more dependent on big passenger investment making the railroad's physical plant viable in any way/shape/form than any of the other carriers in New England.
 #1298783  by F-line to Dudley via Park
 
BandA wrote:Would it make business sense for PanAM to upgrade their 10MPH track? For P&W to upgrade their slow track (i think folks said the Worcester-Gardener branch)? Or are they smart to save their money.
Yeah, well sure. People have been screaming for 3 decades now what a necessity that is, but Billerica has its own quixotic ideas about how to run a railroad so that never happens unless passenger interests are paying for it. Even PAS hasn't made nearly the dent NS hoped at getting mainline speeds up to a very modest Class 2 bump because PAR ain't feelin' it.
 #1298942  by jbvb
 
I have personal experience with D&B making up numbers (and not very realistic ones) when the real ones were private. I can't speak to where Google might have gotten the PAR numbers, but I'll try asking someone who might burst out laughing if they're silly enough.
 #1299025  by CN9634
 
F-line to Dudley via Park wrote:
BostonUrbEx wrote:
CN9634 wrote:Surprisingly however, the figures are believable for an outfit such as Pan Ams...
Is it really? I'm looking at this and all I see is PAR making P&W look like a model train set. To be honest, the reason I was looking for this information was because I was wondering what the feasibility was of a PAR + P&W merger. The resulting railroad would have a good hold on an entire region, and they could trim out some redundant lines in Connecticut, plus the Gardner branch, adding some savings into the mix without losing customers or the ability to be a gateway for New England. When I see this, though, the P&W seems really insignificant when considering it's system map. I guess that does however explain not only why it hasn't happened yet, but why I've never heard of such a rumor or heard of the idea being kicked around.
P&W has a lot fewer physical assets than PAR. Fewer route miles, higher % of trackage rights (especially in CT) for their route miles. Smaller fleet. Fewer yards, fewer staff bases, fewer staff. But they're a highly efficient operation...way, way, way moreso than PAR. Because they cover that system in fewer crew shifts with two Class 3 mainlines dumping onto the NEC as their primary spines, run fewer trains quicker and staff them better so local customers don't take for-freaking-ever to get served, their locomotive fleet is less-underpowered and better-maintained with higher uptime, and higher percentage of their system has 19'6" or better clearances (outside of PAS, very little on PAR exceeds 17'). So despite PAR's reputation for running lean, they're not very efficient at all. P&W ends up being a Class II railroad all the same...albeit a bit further on the low end of the scale than PAR. They do an autorack round-trip from Worcester to Davisville on all- Class 3 or Class 7 track in one half-shift every day, have another crew to the 102-mile round trip from Worcester to Willimantic for the NECR handoff on all- Class 3 track in one half-shift every day, do Worcester to Cedar Hill in New Haven 100 miles one-way on all- Class 3 or Class 7 track in one half-shift every day then fan out to Danbury or Middletown/Wethersfield. And they do the stone trains to New York City a few days a week all in one shift. And Gardner may be 10 MPH but at 30 miles they get back home in one shift. No part of their system takes more than 1 crew shift and one set of power to get 1 way between extreme points in the system, and most of their interchanges can be done round-trip in one shift. This is the only way they can tether that much of their system out of just home base in Worcester and the yards in Valley Falls and Pawtucket.

You may want to look at some stats on the tonnage the carriers haul and freight revenues that have to be reported to the AAR for purposes of retaining their Class II status. I haven't been able to find any, but I bet if you did the efficiency difference would be screamingly obvious. They've also been extremely incremental and conservative in expanding their territory, and hedge a lot on where they're likely to get state aid. It helps that they are the only game in town for Rhode Island freight and biggest game in town for Connecticut freight, so things like the revival of the Willimantic Branch, Valley Line, and Belle Dock are being led by the nose with state investment despite being non-passenger lines. Very low risk for them to put the elbow grease into growing the business. So given that their expenditures are pretty lean for the tonnage they carry and they've been methodical about only taking small bites...P&W's probably got some piles of cash it's sitting on if it ever wants to swing for the fences. I doubt they'd be able to swallow all of PAR, but if Pan Am were partitioned with NS swallowing the other 50% of the Patriot Corridor (or P&W only negotiating enough of a share for guaranteed haulage) they might be in a position to make a play for the north-south orientation of the system.


So when doing a valuation of those assets you have to take things like this into account, and also look at what parts of PAR's system are the most wasteful. And just follow the discussions on this forum to see where that's a huge concern. Clearly northern Maine and ex-MEC territory. They can't move point-to-point very quickly at all, they have the problem of "canning hell" of perpetually running out of staff hours before completing a run, and they have perpetual fleet shortages exacerbating the situation. Waterville and Rigby--85 some-odd miles--are half a world away at (barely) 10 MPH. It's a crew shift one-way between Mattawamkeag and Waterville, and a crew shift one-way between Waterville and Rigby...if they're lucky. This is why they have such incredible difficulty getting any Maine intermodal going, and why past experiments with that have always been short-lived and chased away their partners. The useful interchanges--the Irving Lines @ Keag, CMQR @ Northern Maine Jct. near Bangor, SLR @ Danville Jct.--just aren't reachable in a way that holds the attention of Class I's like CSX, CP, CN, etc. Or even Norfolk Southern to large degree. Ex-B&M territory is considerably better because so much of it is on MBTA or Downeaster-maintained Class 4 track, but "canning hell" returns to large degree on the mainline. It takes many days, many crews, lots of power, and a lot of discrete point-to-point moves to get across the system. And that absolutely affects their valuation in an acquisition. MellonFink are unique amongst railroad managers in finding these kinds of limitations tolerable. No buyer is going to bite without holding against them the humongous upgrade gap to get the system to Class 3. And no buyer is going to be interested in absorbing 100% of the rolling ruins they have in their locomotive fleet.

So simply having enough "stuff" to make their neighbors look like model train sets doesn't mean their "stuff" is all it's cracked up to be. You really have to portion out PAR into 3 separate regions and 3 separate regional valuations: PAS, Eastern MA/NH/Downeaster territory, and the ex-MEC. PAS has the highest upside, but it's upside only the Class I owner of the other 50% share can tap because of the resources and expertise that have to be moved into place to get that line competitive with CSX. That's pretty much a fixed valuation, but we have a good idea what that is. ex-B&M to Portland is a sell-high that rests almost entirely on the back of the Downeaster and state-paid upgrades. Almost all of the lines have passenger interests present of future paying the way for upgrades, it's next for a state-paid double stack upgrade after the Patriot Corridor and thus good/reliable intermodal, and the ports (Portsmouth, Boston) are juicy targets. Since that would be wholly open bidding unlike PAS they probably run up the score a lot here. And have that overpay cover over the warts like the abominable condition of the Worcester main and Stony Brook. Which, if P&W were to make a bid...would be high-priority upgrades for its "new" north-south mainline that they'd probably be open to transacting to MassDOT for immediate upgrade help.

And then...they're just going to take a steep write-off in Maine. Those branches with the closed mills are nearly worthless, and the state-of-repair hole is just too deep. It may even take 3-way talks with MEDOT about their timetable for a Downeaster extension on the Lower Road to Augusta--and outlining how those passenger upgrades can help replace the Back Road past Danville as the freight main--to get somebody willing to take those assets. In fact...I couldn't see somebody like P&W bidding at all for the whole non-NS part of the system at all unless they could count on having the Downeaster bring Class 4 track to within 18 miles of Waterville within 10 years. Same goes for anyone targeting them from the north. Waterville-Ayer has to be able to be done one-way in one day's work to be truly attractive to anyone who values efficiency. And no buyer is going to be willing to buy a whole second railroad's worth of just upgrades after buying the railroad from PAR.


It's very complicated to pin an easy-to-parse number value on them. Because in addition to having closed-books and owners notorious for keeping an aura of mystery about what their financials actually are...and the PAS partnership shaping who would make a bid for what...the "railroad" itself consists of areas of such widely divergent value and performance. And has its fortunes north and east of PAS more dependent on big passenger investment making the railroad's physical plant viable in any way/shape/form than any of the other carriers in New England.
Don't confuse the value of the assets with its ability to generate revenue. While certainly you can mark that into value, railroads are obviously infrastructure intensive (Note the high PP&E) and have a liquidation scrap value. On top of that, you can sweep a lot of the propensity to make money into 'goodwill' which typically in account is a 'it-doesn't-fit-anywhere-else' account. To be honest, with all the hype of the Pan Am brand I expected the goodwill to be much higher... unless that value is reflected in some other asset.

So to say that the lines in Maine are "nearly worthless' is extremely false as at the end of the day you have the scrap value. Also, you have real estate value, easement & ROW values, fiber-optic line values (Yes PAR leases out FO lines) and oh right, equipment. For PAR you probably don't have much depreciation on the old assets, with a lot of them purchased at or near scrap value.

The railroads ability to generate revenue could never accurately be determined as its endless what could happen to any railroads (A boom or a bust scenario is feasible for a lot of lines), but I would confidentially say that PAR is worth more in pieces than as a whole.

One wonders what the long term debt is.. if it is something that may be owed to another subsidiary under the umbrella, Mellon or a foreign entity.
 #1299480  by QB 52.32
 
F-line to Dudley via Park wrote:
BandA wrote:Would it make business sense for PanAM to upgrade their 10MPH track? For P&W to upgrade their slow track (i think folks said the Worcester-Gardener branch)? Or are they smart to save their money.
Yeah, well sure. People have been screaming for 3 decades now what a necessity that is, but Billerica has its own quixotic ideas about how to run a railroad so that never happens unless passenger interests are paying for it. Even PAS hasn't made nearly the dent NS hoped at getting mainline speeds up to a very modest Class 2 bump because PAR ain't feelin' it.
It is very difficult for any New England railroad to justify spending money to upgrade track in a meaningful way because of the low financial returns on the long-term capital investment of doing so, so it isn't about answering to people screaming or quixotic ideas, it's about the economics of the situation and, actually, prudent management decision-making. That's why for Pan Am, P&W or any other short-haul standalone New England railroad, track improvements come mostly with public investment.