2. The pay of rail executives depends on short-term profits, so they’re against long-term investments.
I think that is not as obvious an explanation as it may intuitively seem:
a. a company’s profit is not equal to it’s cash-flow. Profit includes the value of the assets invested in; so a valuable investment should normally not look bad on the balance sheet, even when evaluated in the short run.
b. If there really was a clear 19% or so ROI, even if the accounting ignored a.: You’d typically expect a train company to debt-finance an overwhelming share of the electrification capex, as is common for large infrastructure projects, attenuating the importance of the cash-flow issue, and making the investment even more attractive for equity investors.
I think that is not as obvious an explanation as it may intuitively seem:
a. a company’s profit is not equal to it’s cash-flow. Profit includes the value of the assets invested in; so a valuable investment should normally not look bad on the balance sheet, even when evaluated in the short run.
b. If there really was a clear 19% or so ROI, even if the accounting ignored a.: You’d typically expect a train company to debt-finance an overwhelming share of the electrification capex, as is common for large infrastructure projects, attenuating the importance of the cash-flow issue, and making the investment even more attractive for equity investors.