UPDATE 1-CN Rail plans C$1.9 bln in capital spending

Tue Feb 5, 2013 2:36pm EST

* CN to spend C$1 bln on infrastructure

* C$700 mln for growth, C$200 mln on acquisitions

* Railway spent C$1.8 bln in 2012

TORONTO, Feb 5 (Reuters) - Canadian National Railway Co , the country's largest rail operator, said on Tuesday it would invest C$1.9 billion ($1.9 billion) in 2013, or slightly more than last year, to upgrade its rail system, improve service and expand business.

CN Rail, whose 2013 profit forecasts last month fell short of analyst expectations, will spend C$1 billion on track infrastructure in Canada and the United States.

CN's capital investment last year was more than C$1.8 billion.

The railway is facing stepped-up competition from its main domestic rival, Canadian Pacific Railway Ltd , which is attempting a turnaround under the leadership of Hunter Harrison, who previously built CN into North America's most efficient railroad.

Montreal-based CN Rail will spend C$700 million for expansion this year, including investments in transloading operations and distribution centers to transfer freight between rail and truck. Some of the spending will go toward construction of the intermodal terminal in Joliet, Illinois.

It will spend about C$200 million on locomotives and other equipment. The company expects to take delivery of 40 new and 37 second-hand locomotives over the next 24 months.

CN shares, which have climbed nearly 6 percent since the start of the year and remain near all-time highs, rose a modest 0.4 percent to C$95.57 on the Toronto Stock Exchange in early afternoon trading. Shares were up 0.6 percent at C$95.87 in New York.

The spending plan was unveiled a day after CN confirmed that it was losing its chief operating officer, Keith Creel, to Canadian Pacific. Creel, a protege of CP CEO Harrison when he ran Canadian National, is widely expected to succeed him eventually at the helm of CP.

Last month, CN Rail said it expected earnings per share in 2013 to rise in the high-single digits on a percentage basis, which would mark a sharp slowdown from the previous two years.