AS AN asset class, railways have a worrying history. Railway mania in Britain in the 1840s left plenty of unwary investors nursing hefty losses; that episode sits in most lists of history’s biggest speculative bubbles. But the prices of shares and bonds are dauntingly high, which has stoked interest in all manner of outlandish “alternative” assets in recent years. That, along with legal changes making it easier to repossess collateral that goes clickety-clack, may soon have investors funnelling cash into locomotives, carriages and goods wagons again.
Precious little private money is currently invested in rolling stock. That partly reflects the ownership of railways around the world, which are mainly in state hands. Around 87% of the €10.8 billion ($14.4 billion) spent on locomotives and railway cars in Europe in 2011-13, for example, came from governments, according to a new study by Roland Berger, a consulting firm. This reliance on the public purse means that investment comes fitfully, if at all, arriving when it is available rather than when it is needed. Romania’s state railway still operates 60-year-old steam trains.
The scarcity of public funds has hastened deregulation. The European Union’s fourth package of railway reforms, for example, is designed to open all domestic rail markets to full competition by 2019. Operators should be keen....Continue reading
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