Palm Beach Florida USA - Canadian Pacific (CP) will renew its locomotive fleet by continuing to rebuild stored high-horsepower AC-traction units in 2019 and 2020 before considering the purchase of new power, CEO Keith Creel says.
 
"We're not in the market at all for new locomotives," Creel told an investor conference on Wednesday.
 
The railroad's not likely to buy new until 2021 or 2022, he says.
 
CP stored more than 600 locomotives between 2012 and 2016, when former CEO E. Hunter Harrison implemented his Precision Scheduled Railroading operating model.
 
CP moves tonnage on fewer, longer, trains, which allows it to rely on a smaller active locomotive fleet despite handling more traffic.
 
CP has been sending AC units out for modernization, with the fleet expansion necessary to handle increased international intermodal and crude oil traffic.
 
CP's volume is up 10 percent this year when measured by revenue ton-miles.
 
The railroad took delivery of 80 modernized AC4400s from General Electric this year, and is scheduled to receive 30 upgraded SD90MACs next year as SD70ACU locomotives from Progress Rail.
 
Creel says CP favors rebuilding older high-horsepower units for two reasons, it's cheaper, and a modernized older locomotive is more reliable than a new locomotive that's compliant with U.S. Tier IV emissions requirements.
 
CP is rebuilding units for a little less than $2 million each, while a new GE comes with a sticker price of around $3 million, Creel says.
 
New locomotives are less reliable than a re-manufactured unit, Creel says.
 
Until manufacturers work out the bugs and reliability matches older units, CP is not interested in buying new, he says.
 
The railroad does have options on short-term locomotive leases if traffic rises faster than expected, Chief Financial Officer Nadeem Velani says.
 
It's unlikely that CP would grab surplus locomotives that are being retired at CSX Transportation and Union Pacific as both railroads implement their scheduled railroading operating models.
 
CP's entire road fleet is AC-traction and capable of running in distributed power mode, something that's not common as Class I railroads purge their rosters of older DC-traction units.
 
Creel spoke at the Credit Suisse Industrials Conference.
 
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