Railroad records strong profits

Posted: Thursday, April 15, 2004

ANCHORAGE (AP) Alaska Railroad Corp. is reporting much stronger-than-expected revenues of $127 million last year, resulting in a sizable profit for the state-owned railroad.

The corporation on Monday said it made a $14.5 million profit last year on revenue that rose more than 20 percent. Last year, railroad executives said they were aiming for a $5.5 million profit on $103 million in revenue.

In 2002, railroad profits were $8.9 million and revenue totaled $106 million.

The railroad attributed the strong 2003 results to the resumption of coal shipments from Healy, a road construction project near Bird Creek and greater-than-anticipated deliveries of a petroleum product called naphtha.

The railroad's revenue also included $14.7 million in grants, almost all from the federal government, compared with $3.9 million in 2002, according to the corporation's annual report.

''Considering the questionable economic forecast for 2003, we are genuinely pleased,'' Pat Gamble, the railroad's chief executive, said in a statement. ''The railroad surpassed its budget estimates and had its best business year to date.''

The railroad gets most of its revenue from hauling coal, gravel and other freight.

At the start of 2003, executives had a somewhat pessimistic outlook for that part of the business. The gloomy prospect was largely because the Usibelli Coal Mine in Healy after losing a key contract with Hyundai, its largest customer in South Korea had stopped using the railroad to transport as much as 3.5 million tons of coal a year. The railroad wasn't banking on any coal shipments last year.

But in September the former partners hashed out a new deal and coal again began rolling down the tracks from Healy to tidewater at Seward.

In the end, total freight revenue in 2004 was $84.1 million, up from $76 million in 2003, according to financial statements.

Stronger-than-expected shipments of naphtha, a refined-oil product used in manufacturing and as a raw material for gasoline, also helped lift the freight business in 2003, said John Binkley, chair of the railroad's board of directors.

Flint Hills Resources produces naphtha at its North Pole refinery and has been shipping hundreds of thousands of barrels each month. The refinery sends it by rail to the Port of Anchorage, where it is loaded onto tankers for transport to Asia.

The railroad said it transported 16 percent more fuel from the North Pole refinery in 2003 than it did in 2002.

The railroad's freight business in 2003 also got a boost from a state Transportation Department construction project on the Seward Highway near Bird Creek, Binkley said. Crews are excavating tons of rock from the mountainside north of the creek, where they will build a large parking lot.

The railroad is hauling the rock a few miles south, where crews will use it as fill material to move the highway and the railroad track out onto the mud flats, away from a dangerous avalanche slope.

Continued development in Southcentral drove a high demand for gravel, and the report noted that the railroad logged a 5.3 percent increase in total gravel shipments in 2003.

Total passenger revenue in 2003 rose modestly to $14.2 million from $13.9 million in 2002, according to the report.

The railroad made a $3.1 million profit from its real estate holdings throughout the state, the report said.

The railroad said its total operating expenses rose in 2003 to $101 million from $92.3 million the prior year.

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