[PPT] - Advisory Committee Rail Fleet Update April 13, 2015 Agenda Macro PowerPoint Presentation

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Rail Energy Transportation Advisory Committee Rail Fleet Update

April 13, 2015

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2 Rail Energy Transportation Advisory Committee April | 2015

Agenda

Macro & Freight Environment Freight Car Deliveries & Build Forecast Covered Hopper Outlook Coal Tank Car Outlook Regulatory Update

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3 Rail Energy Transportation Advisory Committee April | 2015

Macro & Freight Environment

Improved economic outlook and rail traffic expected during 2015, and return to more

stable long term growth rates

Real GDP growth est. ~ 3% for 2015 and slightly below thereafter
Industrial production to grow 4% in 2015
Housing starts in 2015 est. at 1.1MM
Gas prices at historical lows, having positive impact on consumer spending
Growth in rail traffic expected to continue with new car builds, demand and

replacements

Freight car builders delivered over 67k cars in 2014, with current forecasts at over

90k cars in 2015; ~36% increase

Source: FTR Associates , Oxford Economics

Rail traffic growth continues in petroleum, grain and chemical markets

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4 Rail Energy Transportation Advisory Committee March | 2015

Railcar Demand Drivers

NA Carloads est. 3.2% growth in 2015 and

~ 2.5% per year beyond

2015/16 corn production 13.5 Billion

bushels; yields at 171bushels/acre (USDA)

Farm products carloads grew over 12% in

2014

Growth continues in Chemicals, Sand and

Ag sectors

New chemical capacity expected to come
nline in 2016-17
Rail traffic remains strong, steady growth

for US GDP & IP North American Rail Carloadings

Source: FTR Associates Source: FTR Associates

20 25 30 35 40 45 50 Millions

Forecast Period

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5 Rail Energy Transportation Advisory Committee March | 2015

1.0 1.5 2.0 2.5 3.0 3.5 4.0 Millions 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 Millions 3.0 3.5 4.0 4.5 5.0 5.5 Millions 0.0 0.5 1.0 1.5 2.0 2.5 Millions

N.A. Railcar Loadings by Car type

Covered Hopper Carloadings Tank Carloadings Box Carloadings OT Hopper Carloadings

Source: FTR Associates

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6 Rail Energy Transportation Advisory Committee March | 2015

Freight Car Builds

2014 Orders 2014 Deliveries 4Q’14 Backlog

Source: Railway Supply Institute, ARCI 4Q-2014 Other category includes Box, Flat, Gondolas, OT Hoppers, Intermodal Large CH, 7,250 Med CH, 11,937 Small CH, 49,809 Tank Cars, 38,578 Other, 30,660 Large CH > 5500 c/f Med CH 3500-5500 c/f Small CH < 3500 cf Tank Cars Other Large CH, 2,449 Med CH, 4,481 Small CH, 13,402 Tank Cars, 35,293 Other, 11,603 Large CH > 5500 c/f Med CH 3500-5500 c/f Small CH < 3500 cf Tank Cars Other Large CH, 10,490 Med CH, 9,856 Small CH, 39,835 Tank Cars, 57,625 Other, 25,031 Large CH > 5500 c/f Med CH 3500-5500 c/f Small CH < 3500 cf Tank Cars Other

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7 Rail Energy Transportation Advisory Committee April | 2015

Freight Car Builds

Freight Car Delivery Forecast

Significant growth in total freight car deliveries expected in 2015

Source: Economic Planning Associates, FTR Associates

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 2013 2014 2015F 2016F 2017F 2018F

Economic Planning Associates FTR Associates

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8 Rail Energy Transportation Advisory Committee April | 2015

Covered Hopper Car Builds

2015 Covered Hopper deliveries driven over 50% by Small cube builds

Source: Economic Planning Associates, FTR Associates

Covered Hopper Delivery Forecast

5,000 10,000 15,000 20,000 25,000 30,000 35,000 2013 2014 2015F 2016F 2017F 2018F

Economic Planning Associates FTR Associates

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9 Rail Energy Transportation Advisory Committee March | 2015

Sand & Cement

Stone, sand & gravel ~ 7% of U.S. rail

carloadings

Est. ~2.5% growth in U.S. sand

carloadings due to inc sand use and cement growth

Housing and construction continues to

recover; est. 4% growth in 2015 and higher

US cement volume is expected to rise to

101.4MM tons by YE 2018 from 87.8MM in 2014

Cement consumption CAGR ~4.3% during

the period 2013–18 Stone, Sand, Glass, Clay and Gravel Carloadings

Source: FTR Associates / Rail Equipment 1Q’15 Source: FTR Associates, Market line

100 200 300 400 500 600 700 800 900 1,000 Thousands

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10 Rail Energy Transportation Advisory Committee March | 2015

Coal

Coal ~ 38% of U.S. carloadings; will

continue to be a significant share of total volume

2014 Coal production grew 1% in 2014,

but expected to decline in 2015-16 (EIA)

Coal consumption was roughly flat in

2014

Carload volumes held relatively steady

for the first half of Q1-15 but have now dropped below 2014 levels

2015 demand expected to decline as

natural gas prices remain low and retirements of coal power plants continue

Coal Loadings

(thousands)

Source: FTR Associates, AAR

6,200 6,400 6,600 6,800 7,000 7,200 7,400 7,600 7,800 8,000 Thousands

Source: FTR Associates / Rail Equipment 1Q’15

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11 Rail Energy Transportation Advisory Committee April | 2015

Tank Car Builds

Tank builds to be driven by CBR, replacements and regulatory changes.

Source: Economic Planning Associates, FTR

Tank Car Delivery Forecast

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 2013 2014 2015F 2016F 2017F 2018F Economic Planning Associates FTR Associates

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12 Rail Energy Transportation Advisory Committee March | 2015

Petroleum, Crude Oil & Natural Gas

Petroleum, crude, & natural gas products

make up 4% of North American Car Loadings

U.S. crude oil production record levels, EIA
est. 9.3MM b/d in 2015
U.S. Petroleum Carloads still expected to grow

in 2015

Canadian oil sands production est. to grow

2.5x, up to 4.8 million b/d by 2030; railcar loadings growth of 7-9% thru 2017

EIA forecast WTI price ~ $55/bbl in 2015 and

$71/bbl in 2016

Oil price impact on investment, however east-

west moves remain core to CBR traffic; further delays in pipeline projects

Source: FTR Associates, EIA, CAPP

North American Petroleum, Crude and Natural Gas Loadings

(Thousands) 100 200 300 400 500 600 Thousands

Source: FTR Associates / Rail Equipment 1Q’15

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13 Rail Energy Transportation Advisory Committee April | 2015

Tank Car Regulatory Update

DOT/PHMSA Proposed Rulemaking (HM-251) filed with OIRA, May 2015 Final Rule

release noted on DOT regulatory schedule update

Transport Canada Consultation efforts continues. Gazette 1 (NPRM) or possibly

Gazette II (Final Rule) expected Spring 2015

Interested trade associations: AAR, RSI, API, AFPM, Growth Energy, RFA, ACC,

CAPP

Holistic approach to safe rail transportation of flammable liquids remains critical.
Harmonization efforts conducted between US DOT and TC
Scope of regulations and prioritization of modifications requires clarity, commodity

based or train operations under consideration

Prescribed sets of standards for new and existing tank cars sought, performance

standard available as option

Harmonized modification timeline sought, compliance driven by scope and anticipated

modification capacity

Economic impact of proposals to be reviewed in US and Canada

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Appendix

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Small Cube Hopper Car Builds

Small cube builds still expected significant growth in 2015 due to sand and cement.

Source: Economic Planning Associates, FTR

Small Cube Hopper Delivery Forecast (< 3500 c/f)

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 2013 2014 2015F 2016F 2017F 2018F

Economic Planning Associates FTR Associates