Effort to kill RR lost in Texas legislature. If the state DOT had not been able to help plan over and under various roads would have been very difficult. Was an ingenious way to stiffle the RR which fortunately did not work.l
http://www.progressiverailroading.com/high_speed_rail/news/Texas-lawmaker-fails-in-bid-to-end-DallastoHouston-rail-proposal--44565
daveklepperAll Aboard Flordia will provide some validation ---- or some invalidation. We should wait and see......
Maybe but AAF is almost an entirely different project in that:
1. AAF is Experienced railroaders and real estate developers.
2. If the passenger idea fails the freight railroad will still be generating revenue and so will the real estate developments.
3. Owning a freight railroad means they have access to Federal Programs giving them access to financing with perhaps less scruitiny than a new start-up and definitely lower interest rates.
4. It's not really HSR it is closer to near-HSR with a top speed of 125 mph. Less insurance premium and risk, in my opinion. The track infrastructure is not seperated between passenger and freight. In all honestly I think if Electronic Braking was standardized across the U.S. on both freight and passenger trains and once PTC is in place that the FRA might consider enough of a added safety margin to raise passenger train speeds by 10-15 mph on dual use track in this country.
5. The installed or new rail portion is not a long distance and is far less costly than Dallas to Houston.
6. AAF incremental approach and possibly future expansion plans. We have still not heard of any plans beyond Dallas to Houston for Texas Central and they have been asked repeatedly. They just want to focus on Dallas to Houston and in my opinion that is rather strange they have not outlined an expansion beyond that one line.
Fred, as you know, I have great respect for you. When arguments start to call people's use of English words into question, or make fun of their resume or name-dropping habits, I consider it a distraction from the actual discussion, and to have extended crosstalk purely about semantics, especially when it starts being waspish rather than merely pointed, contributes little to the 'meat'.
In the present case, which discusses a railroad far from the clickety-clack or whistling stage, we're discussing the politics and financial arrangements (including the finance of the necessary engineering) that will be needed for this particular HSR project. It could have taken all of about four sentences to establish that anyone putting the necessary number of billions of dollars into such a project would conduct, or insist on, a 'second opinion' from skilled experts regarding the details of the plan and the financial arrangements to be made. I find that so common-sense as not to require repetition. We should now move on to substantive details. (And I do not say this with the intent of being the Forum Police.)
Let me propose an alternative theme. We've been discussing the probable role of the Japanese both as contractors and a source of finance for the Texas project. Now, if I remember correctly from my reading of Old Man Thunder, Soto ran what was essentially a scam on the international bankers when he set up the New Tokaido Line. I don't remember the precise details and don't have the book to check, but surely there are people here who remember them. Perhaps it is time for the Japanese to 'pay that forward' and underwrite the construction of this new high-speed system whether or not the cold hard numbers of present analysis justify it...
Wizlish Might I also suggest that we tentatively accept the technical usage, refrain from ad hominem (or feminam) remarks, and get back to discussing HSR?
Might I also suggest that we tentatively accept the technical usage, refrain from ad hominem (or feminam) remarks, and get back to discussing HSR?
All Aboard Flordia will provide some validation ---- or some invalidation. We should wait and see......
I !wish it success. I thought my package transport idea might help, but I cannot be the judge even of that. I am as skeptical as anyone, but still I want it to succeed. After all, I am a railfan.
Three possibilities: 1. I succeeds and does better than break even including interest on borrowed money, etc. 2. It loses money but continiues to be valuable to its owners because of real-estate issues. 3. It loses so much money that even real-estate values cannot save it in the long run. The first outcome might provide some validation for the Texas HAR. The second and third could only provide invalidation.
schlimm"The Texas Central Railway has not presented any validated ridership, revenue, or cost projections." So my question is how would anyone obtain validity on the above, give that there is no basis for comparison? You might obtain a good projection within some stated confidence interval, but that is hardly in the same league as a validated scientific test.
Exactly, nothing in this country to compare it against......period.
And thats why I think American creditors / financiers are not going to have anything to do with this project unless the company first obtains a large tranche of money from either overseas, Export-Import bank or some other international body. My guess is if the Japanese do not step in, might be the Export-Import bank.
A couple of major risks here:
1. Current management has almost zero business experience running a high speed railroad. So projections are going to be almost meaningless here for reasons I stated in posts above, primarily and pardon the pun.......no track record by any of the management folks.
2. No past proven high speed railroads in the United States that are trully profitable. This is a big one that unfortunately the first HSR in operation has to overcome. Being the first also means your risk premium is a lot higher without an example to point to that has been successful. That means higher interest rates, more skeptical equipment lessors, etc.
3. No hard evidence that Texans will leave their cars behind or abandon their favorite airlines even for a high speed maglev between those cities. Again kind of part of the above two points.
This ongoing semantics discussion is interesting, even if its only real connection to a railroad board is that it appears to be turning into a train wreck. But I think a point that might be established here is that "validation" appears to be a technical term used by auditors, and has a meaning (as Sam1 said) related to 'verify information according to some accepted standard'. This is probably anathema to people who value 'validation' in its scientific meaning and context, and I don't know whether it would qualify as 'jargon' to those who don't recognize the special sense.
Here is an example I found -- admittedly not directly related to any of the uses of 'validation' in the discussion of the Texas high-speed proposal -- that discusses some of the semantic issues:
http://www.riskdynamics.eu/blog/bid/279643/Model-Validation-vs-Internal-Audit-So-similar-so-different
Sam1 Validate as per Merriam-Webster: to support or cooroborate on a sound or authoritative basis. Auditors validate the numbers in a proposal. If you don't like validate, you can substitute verify, etc.
Validate as per Merriam-Webster: to support or cooroborate on a sound or authoritative basis. Auditors validate the numbers in a proposal. If you don't like validate, you can substitute verify, etc.
In the area of scientific research design and experimentation, validity refers to whether a study is able to scientifically answer the questions it is intended to answer.
In clinical fields, the assessment of validity of a diagnosis and various diagnostic tests are extremely important. As diagnosis augments treatments, medications, and the patient's life, it is extremely important to know that when running diagnostic tests that clinicians are truly testing what they intend to test.
It is generally accepted that the concept of scientific validity addresses the nature of reality and as such is an epistemological and philosophical issue as well as a question of measurement.
C&NW, CA&E, MILW, CGW and IC fan
Also, I really wish I could live in the world Sam1 is living in where projections are a determinant in financiing and banks spend a lot of time pouring over revenue projections and the business model. That would really be interesting to watch since most of them have never run a business themselves and would have no clue.
Sam1 "Well, duh!" You just can't help belittle people with whom you disagree, can you? Do you think this is how mature business people talk to each other? Do you think, "Well, duh" is commonly used in big time negotiations? Not in the world that I experienced! Had I said that in an executive committee meeting or with the board of directors or told them that they just don't understand, I would have been gone. And rightly so! Just what experience have you had with large capital projects? To what extent have you been involved with investment bankers?
"Well, duh!" You just can't help belittle people with whom you disagree, can you?
Do you think this is how mature business people talk to each other? Do you think, "Well, duh" is commonly used in big time negotiations? Not in the world that I experienced! Had I said that in an executive committee meeting or with the board of directors or told them that they just don't understand, I would have been gone. And rightly so!
Just what experience have you had with large capital projects? To what extent have you been involved with investment bankers?
The "well, duh" was some light sarcasm directed at your ongoing tone of condescension and your apparent need to trumpet your corporate resume at least once in every thread. Others on here have experienced far saltier language emanating from the mouths of CEOs and business executives and other leaders in government and elsewhere.
WizlishThe issue is not public information or knowledge -- it's due diligence. Any investor in a project NEEDS to get independent verification of as much as they can -- assume nothing, take nothing on faith, make sure everything is substantiated in ways that make sense. Sure, that's carried out under tight NDAs if you're wise ... but if you don't understand how reality is going to reflect the pro formas you were presented with, or if you don't grasp how the technology works or how the investment will pay for itself, well ... as they said, expect to be parted. (If not parted out!)
Oh my gosh, are we really having this conversation?
Heh, again it's a private company. The investors of the company are the owners of the company as they own the full equity (that means all the stock) unless the company floats public stock....if it does float public stock it no longer is a private company it is a public company.
Otherwise I think you mean future creditors not future investor since Texas Central has not announced an IPO or even plans for one. For a creditor, yes, due dilligence plays a role but creditors play by a different set of rules altogether because they can secure part of what they loaned the company via expanded ownership rights, control, or securing the debt that is owed.
A creditor is NOT necessarily an investor, big difference in rights. As a creditor I would really NOT have to do that much due dilligence other than to ensure my money is backed by some form of collateral or partially secured via order of payback if the company seeks bankruptcy protection or a lien on assets. For example, if the company has a market value of $8 Billion and no debt. Really I could care less about it's revenue projections and I can lend it $2 Billion without losing sleep as long as I secure the debt.
I can do that by holding title on leased equipment, I can do that via property liens, I can do that by having the company officers sign a statement saying I am the first creditor above the others.
Some of you should at least attempt to run a business to understand these concepts instead of reading them from a textbook and reciting them back online in a mish mash. I have done so and guess what? Bankers never lent me money based on my revenue projections. They lent me money based on current debt levels and PAST revenue taken in because I was largely debt free. They didn't care one woot about future revenue projections.........AND that is real life. Now, if I was debt heavy, they would have asked for revenue projections and maybe investigated some more but I wasn't debt heavy and that extra step they viewed as irrelevant.
Another common misconception on you guys that read text books instead of experience this in real life. My ability to borrow was not constrained by my Net Worth, it was constrained by how much gross revenue the business would bring in. My personal Net Worth was irrelevant as the business was run as a C Corporation. All the bankers cared about was gross revenue and ability to pay (and they relied on past statements of income vs projections for that). Gross Margin is looked at as a somewhat elastic measure in that a different operator of the same business can have a larger gross margin than another based on how smart they are at running the business efficiently. The operator before me had a lower gross margin than myself because he didn't challenge the tax assessor, landlord, or the insurance guy on their figures (they were all incorrect).
I can massively lie about financial projections and a good portion of businesses do. I cannot lie about what I took in last month and certified to the State of Texas or the IRS without being thrown in jail (a good creditor will check, a landlord will definitely check and ask you to sign an agreement where they can review state records on a ongoing basis). So trust in current and past figures is a LOT higher than projections.
Back to the Texas Central Railroad since it is new and nobody has yet run a HSR rail line privately. They are probably going to need to obtain a large chunk of their financing outside of the United States. Now depending on how that financing is secured or not secured will determine what kind of deal they get from financiers within the United States.
The first fleet of Hiawathas was a past HS Passenger Train that was not privately financed. Might interest you to know the money for that came from the Roosevelt Administration as the Milwaukee Road wasn't in good financial shape at the time.
CMStPnP Deggesty As Sam says, not in so many words--any investor in a large scale project who does not thoroughly vet the project before putting his money into it is like one who is soon parted from his money. You missed the point being made just like she did.
Deggesty As Sam says, not in so many words--any investor in a large scale project who does not thoroughly vet the project before putting his money into it is like one who is soon parted from his money.
As Sam says, not in so many words--any investor in a large scale project who does not thoroughly vet the project before putting his money into it is like one who is soon parted from his money.
You missed the point being made just like she did.
I think you have missed their point far worse.
The issue is not public information or knowledge -- it's due diligence. Any investor in a project NEEDS to get independent verification of as much as they can -- assume nothing, take nothing on faith, make sure everything is substantiated in ways that make sense. Sure, that's carried out under tight NDAs if you're wise ... but if you don't understand how reality is going to reflect the pro formas you were presented with, or if you don't grasp how the technology works or how the investment will pay for itself, well ... as they said, expect to be parted. (If not parted out!)
Actually, it does happen and sometimes with colorful metaphors sprinkled in so that the recieving end is clear on how their position is being seen. It really depends on the industry your in as well. Manufacturing.....like General Motors or General Electric tends to use the tougher language. So do Stock Brokerages.
Easy come, easy go company cultures such as Utilities, Insurance, Telecom, etc where they can just increase the rates if they are wrong and so......no harm done if they let CPT John Hazelwood at the helm for a while and they happen to start hemmoraging money. They tend to be more relaxed in their discussions about revenue projections and business positions.
I remember at General Motors a Senior Economist referring to another as "Fred the Di*khead" among his close friends and associates because he felt he was more of a yes man than doing his job as a Economist should.
I remember another Female Economist at General Motors being brought to tears after a Senior Executive exploded at her with a barrage of profanity and said "Jesus Ch***t, what are you telling me here?.....I feel like I am on Freddy Krugars roller coaster from hell........your stats should tell a story not jump all over the place and leave the audience in absolute confusion" (I cleaned this last part up a bit).....I got a snicker out of the last display because she was not very bright in the communication department despite the advanced degree from Wharton.
So yes it does happen.
CMStPnP Deggesty As Sam says, not in so many words--any investor in a large scale project who does not thoroughly vet the project before putting his money into it is like one who is soon parted from his money. You missed the point being made just like she did. A private company does not have to make public disclosures as she presumes. A private company can supply such information under confidentiality agreements to private investors or financiers. That means the disclosed information remains private not public. For decades and decades nobody on the planet knew what Readers Digest made as a company or what it's revenue was. They could not even approximate it. Why? It was a privately held company which did not have to publicly disclose anything. Billions can be raised without public disclosure of much financial details. An IPO does not have to occur before billions can be raised. That assumption is pure foolishness.
You missed the point being made just like she did. A private company does not have to make public disclosures as she presumes. A private company can supply such information under confidentiality agreements to private investors or financiers. That means the disclosed information remains private not public. For decades and decades nobody on the planet knew what Readers Digest made as a company or what it's revenue was. They could not even approximate it. Why? It was a privately held company which did not have to publicly disclose anything.
Billions can be raised without public disclosure of much financial details. An IPO does not have to occur before billions can be raised. That assumption is pure foolishness.
Whether the money is raised in the public markets or whether it is a private placement is irrelevant.
I don't believe that I even hinted at an IPO, which would be selling stock. My view was on debt financing.
The people putting up the money will want to know whether the project is sound, i.e. they have a reasonable probability of getting their money back. And they are going to want some independent verification of the plan's variables.
Since TCR has not disclosed it financing plans, no one knows what the source of the financing will be. The Japanese Central Bank has indicated that it will participate in the financing. It is a public institution, and it is required to shine a light on its activities.
Telling someone that they missed the point, by the way, is belittling. It adds nothing to the conversation.
CMStPnP Sam1 If TCR fails it probably will be dumped on the Texas taxpayers. The state is not likely to allow a failed railway between Dallas and Houston to go to seed. Really? Why not? Did the State jump in to save the partially constructed multi-billion dollar super collidor project? Where is the evidence the state will jump in to save this project and not let it fade away? Furthermore, where is the money for that type of rescue going to come from if the state did not have money to complete the super collidor project?
Sam1 If TCR fails it probably will be dumped on the Texas taxpayers. The state is not likely to allow a failed railway between Dallas and Houston to go to seed.
Really? Why not? Did the State jump in to save the partially constructed multi-billion dollar super collidor project? Where is the evidence the state will jump in to save this project and not let it fade away? Furthermore, where is the money for that type of rescue going to come from if the state did not have money to complete the super collidor project?
Most of the super collider is underground and, therefore, did not have much of a visual presence. Moreover, it did not have a readily available commercial use, and Texas did not have the resources to take it over. In fact, the federal government did not have the resources or at least an interest it taking it over.
If TCR's infrastructure were shuttered, no one knows whether the taxpayers would be on the hook for it.
Under one scenario the project would be allowed to go to seed. Under an opposite scenario, the state or federal government would take it over, just as the federal government (Amtrak) took over operation of the Auto Train after it failed as a private enterprise.
Sam1 Whether it is old technology or new technology is irrelevant. It is being applied in a different market. One variable is revenue. It is the first item on the income statement. The project promoters probably will develop three or four revenue scenarios for their planned high speed railway between Dallas and Houston. Ultimately, irrespective of how the project is financed, i.e. public, private placement or a combination thereof, they will have to take their revenue scenarios, along with all of their cost estimates, etc., to the investment bankers or the venture capitalists. The bankers know that most project promoters tend to adopt the best case revenue scenarios. Before they accept them they will have an independent evaluation (validation) of the revenue numbers. Goldman Sachs, for example, may use internal personnel to complete the evaluation. If it a smaller firm, they may use outside evaluators. The bankers are not going to take the project promoters scenarios without challenging them. Not when one is talking $10 to $12 billion for the project! And that is before the cost of debt service is factored into the equations. That's a senior accounting and audit manager for a Fortune 250 corporation. Also included on the resume is eight years with a Wall Street Bank and four years with a major New England regional bank.
Whether it is old technology or new technology is irrelevant. It is being applied in a different market.
One variable is revenue. It is the first item on the income statement. The project promoters probably will develop three or four revenue scenarios for their planned high speed railway between Dallas and Houston.
Ultimately, irrespective of how the project is financed, i.e. public, private placement or a combination thereof, they will have to take their revenue scenarios, along with all of their cost estimates, etc., to the investment bankers or the venture capitalists.
The bankers know that most project promoters tend to adopt the best case revenue scenarios. Before they accept them they will have an independent evaluation (validation) of the revenue numbers.
Goldman Sachs, for example, may use internal personnel to complete the evaluation. If it a smaller firm, they may use outside evaluators. The bankers are not going to take the project promoters scenarios without challenging them. Not when one is talking $10 to $12 billion for the project! And that is before the cost of debt service is factored into the equations.
That's a senior accounting and audit manager for a Fortune 250 corporation. Also included on the resume is eight years with a Wall Street Bank and four years with a major New England regional bank.
Well, duh! Obviously if banks or other financial sources are involved they will check out the proposal. My objection to your statement, had you read as carefully as your lengthy resume would suggest you can, is in your choice of the term "validated" which I have now stated several times. The term strongly implies a high degree of certitude, which simply is not there with regard to revenue projections.
Sam1If TCR fails it probably will be dumped on the Texas taxpayers. The state is not likely to allow a failed railway between Dallas and Houston to go to seed.
They still had to raise money on totally speculative products. HSR is not anything new, except here. My point is that there is no such thing as a "validated" market analysis for a HSR in TX, just a careful prediction of growth based on the relevant factors. If a former accountant for a utility doesn't get it, that's not relevant.
schlimm Fortunately visionaries such as Bill Gates and Steve Jobs, to name two, didn't have to have a "validated" plan.
Fortunately visionaries such as Bill Gates and Steve Jobs, to name two, didn't have to have a "validated" plan.
They did not have to raise billions of dollars either, and no one knows of the hundreds or thousands who failed.
Johnny
CMStPnP Sam1 Ridership, revenue, and cost estimates can be validated by an independent auditor or consultant. Amongst other things they would test assumptions and estimates against acceptable benchmarks; look for constistency in formula applications; and assess the robustness of the market analyses. They would also test the finance plan for reasonableness, compliance with accounting and financial standards, etc. Project promoters tend to focus on the best case scenarios, i.e. they see their project through rose colored glasses. An independent auditor or consultant would draw attention to worse case and intermediate case scenarios. He would look for and validate (attest) the exist strategies. Now um.........when has a privately run and owned company thats not traded on any U.S. Stock exchange done any of the above in the past? Do you have an example?
Sam1 Ridership, revenue, and cost estimates can be validated by an independent auditor or consultant. Amongst other things they would test assumptions and estimates against acceptable benchmarks; look for constistency in formula applications; and assess the robustness of the market analyses. They would also test the finance plan for reasonableness, compliance with accounting and financial standards, etc. Project promoters tend to focus on the best case scenarios, i.e. they see their project through rose colored glasses. An independent auditor or consultant would draw attention to worse case and intermediate case scenarios. He would look for and validate (attest) the exist strategies.
Now um.........when has a privately run and owned company thats not traded on any U.S. Stock exchange done any of the above in the past? Do you have an example?
Ownership has nothing to do with prudence.
JCR is a stock company. It appears to be a supporter of Texas Central Railway (TCR).
TCR has not revealed its financing plans, other than to say that it will not take public monies. That does not mean that it will not be floating debt in the public markets. Or taking a cue from its Japanese sponsor and selling shares in the market. That is exactly what JCR, as well as several other privatized Japanese railway companies have done.
Even if the company is privately held, it will have to obtain financing. It probably will do so from large investors, e.g. KKR, TPG, Goldman Sachs, Japanese Central Bank, etc. They are not going to put up the money for the project without some independent assurance that it is viable.
If TCR fails it probably will be dumped on the Texas taxpayers. The state is not likely to allow a failed railway between Dallas and Houston to go to seed. Accordingly, the people, represented by the regulators, have a vested interest in making sure that the project is viable. And the regulators will be using independent evaluators to assess the viability of the project.
Private investors built a merchant power plant in Midlothian, Texas. The developers got their money from a consortium of investment bankers. They insisted that the viability of the plant be evaluated by an independent assessor. It was done by one of the big four accounting firms.
Sam1Ridership, revenue, and cost estimates can be validated by an independent auditor or consultant. Amongst other things they would test assumptions and estimates against acceptable benchmarks; look for constistency in formula applications; and assess the robustness of the market analyses. They would also test the finance plan for reasonableness, compliance with accounting and financial standards, etc. Project promoters tend to focus on the best case scenarios, i.e. they see their project through rose colored glasses. An independent auditor or consultant would draw attention to worse case and intermediate case scenarios. He would look for and validate (attest) the exist strategies.
schlimm Sam1 The Texas Central Railway has not presented any validated ridership, revenue, or cost projections. Without them it is impossible to know whether its proposed high speed railway between Dallas and Houston will be financially successful. Validated? How? When entering a totally new territory, any projections can not be validated, at least not in the generally used definition of the term.
Sam1 The Texas Central Railway has not presented any validated ridership, revenue, or cost projections. Without them it is impossible to know whether its proposed high speed railway between Dallas and Houston will be financially successful.
Validated? How? When entering a totally new territory, any projections can not be validated, at least not in the generally used definition of the term.
Ridership, revenue, and cost estimates can be validated by an independent auditor or consultant.
Amongst other things they would test assumptions and estimates against acceptable benchmarks; look for constistency in formula applications; and assess the robustness of the market analyses. They would also test the finance plan for reasonableness, compliance with accounting and financial standards, etc.
Project promoters tend to focus on the best case scenarios, i.e. they see their project through rose colored glasses. An independent auditor or consultant would draw attention to worse case and intermediate case scenarios. He would look for and validate (attest) the exist strategies.
Sam1The Texas Central Railway has not presented any validated ridership, revenue, or cost projections. Without them it is impossible to know whether its proposed high speed railway between Dallas and Houston will be financially successful.
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