Economics of Using Unit Trains vs Manifest Trains

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1 Economics of Using Unit Trains vs Manifest Trains Darin Selby, Vice President Energy Markets & Short Line Partner Relations

2 Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the securities laws concerning potential future events involving KCS and its subsidiaries, which could materially differ from the events that actually occur. The words projects, estimates, forecasts, believes, intends, expects, anticipates, and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are based upon information currently available to management and management s perception thereof as of the date of this presentation. Differences that actually occur could be caused by a number of external factors over which management has little or no control, including: competition and consolidation within the transportation industry; the business environment in industries that produce and consume rail freight; revocation of the rail concession of KCS s subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination of, or failure to renew, agreements with customers, other railroads and third parties; interest rates; access to capital; disruptions to KCS s technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; credit risk of customers and counterparties and their failure to meet their financial obligations; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents along KCS s rail network, facilities or customer facilities involving the release of hazardous materials, including toxic inhalation hazards; fluctuation in prices or availability of key materials, in particular diesel fuel; dependency on certain key suppliers of core rail equipment; changes in securities and capital markets; loss of key personnel; labor difficulties, including strikes and work stoppages; insufficiency of insurance to cover lost revenue, profits or other damages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic conditions; political and economic conditions in Mexico and the level of trade between the United States and Mexico; the outcome of claims and litigation involving KCS or its subsidiaries; and other factors affecting the operation of the business. More detailed information about these factors may be found in filings by KCS with the Securities and Exchange Commission, including KCS s Annual Report on Form 10-K for the year ended December 31, 2012 (File No ) and subsequent reports. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. KCS is not obligated to update any forward-looking statements in this presentation to reflect future events or developments. All reconciliations to GAAP can be found on the KCS website, kcsouthern.com/investors. 2

3 Benefits of Crude by Rail Time to Market Lower Capital Requirements Optionality Crude Quality Management Fast delivery time per train Fast construction rails in place Lower permitting hurdles Shorter investment horizon Increased market coverage Flexibility to deliver to key market, direct to refinery, or to move where the production occurs Neat Barrel Quality In = Quality Out Bi-directional movement 3

4 Oil Refineries in the US

5 Shale Plays, Refineries, & Pipeline Infrastructure Noticeable gaps in the pipeline network. Some with significant hurdles. 5

6 !and Rail Infrastructure Railroads and Pipeline Operators have many opportunities to work together across North America 6

7 Crude Oil Basins & Connecting Partners Canadian Heavy Oil: CPRS Kansas City CN Jackson CN Cockrell, IL Bakken Region: BNSF Kansas City CPRS Kansas City Niobrara Region: UP Kansas City BNSF Kansas City Cushing Barrels: SKOL Pittsburg, KS Permian Basin: UP Dallas TXPF/FWWR Dallas Eagle Ford Shale: KCS Direct 7

8 Crew Change Points Connecting Partners 8

9 Evolution of the Destination Terminal Days Weeks Months Year(s)

10 Evolution of the Unit Train Days Weeks Months Year(s)

11 Bakken Crude to the US Gulf Coast TRIP 3 11 days 31 days TRIP 2 11 days TRIP 1 11 days Manifest Unit

12 Canadian Crude to the US Gulf Coast TRIP 3 13 days 40 days TRIP 2 13 days TRIP 1 13 days Manifest Unit

13 Monthly Cost of Rail Equipment per Load Lease Rate Per Month 1 $1,000 $1,500 $2,000 $2,500 $3,000 Turns Per Month 2 $500 $750 $1,000 $1,250 $1, $333 $500 $667 $833 $1,000 $250 $375 $500 $625 $750

14 Monthly Cost of Rail Equipment per Barrel * Lease Rate Per Month 1 $1.67 $2.50 $3.33 $4.17 $5.00 Turns Per Month 2 $0.83 $1.25 $1.67 $2.08 $ $0.56 $0.83 $1.11 $1.39 $1.67 $0.42 $0.63 $0.83 $1.04 $1.25 * Assuming 600 barrels per tank car

15 Unit Train Customer Service Advantages! Bulk Desk Communication! On-Line Tools! Run-Through Locomotives Efficient Interchanges Short-Term Surge Capacity! Coordinated Train Inspections! Train Size Optimization 15

16 Beaumont, Nederland & Port Arthur Crude Oil Destinations 16

17 Port Arthur & Gulf Coast Crude Oil Demand Exxon Mobil 600k bbl/day Coking: 1.1m tons/yr PORT ARTHUR, TX Crude Oil Production Capacity: 1.7m bbl/day Coking Capacity: 7.8m tons/year Rail Unloading Capacity: <3% of production capacity Total The broader Gulf Coast Region* has 26 Refineries with Coking Capacity 174k bbl/day Coking: 1.3m/yr Motiva 660k bbl/day Coking: 3.1m tons/yr Valero 310k bbl/day Coking: 2.3m tons/yr Source: Company websites, EIA.gov & priceofoil.org *Gulf Coast Region includes NM, TX, LA, AR, AL & MS 17

18 Port of Beaumont Orange County KCS completed its access in July 2013 to the Port of Beaumont bulk commodity facility One dock has been completed to allow 120-car unit trains to be loaded into barges Crude oil storage tanks are nearing completion 18

19 Developing Crude Oil Opportunities Current Customer Anticipated Volume 19

20 Condensate by Rail Advantages! Utilize the empty backhaul capacity of a crude unit train! Backhaul return may provide shippers with a discounted price 20

21 KANSAS CITY SOUTHERN 21

22 KCS Rail Network! Founded in 1887! Over 6,100 miles in U.S., Mexico and Panama! 2013 revenues reached $2.4 billion! Best positioned growth rail story 2013 Kansas City City Southern 22

23 Kansas City Southern Combined, Kansas City Southern Railway Company, Kansas City Southern de México S.A. de C.V. and Panama Canal Railway Company offer: More than 6,400 track miles Seamless trade in and out of Mexico Service to 12 Gulf ports and 1 Pacific Ocean port Service to more than 140 transload centers and 18 intermodal ramps 181 interchange points with other railroads, including all U.S. and Mexico Class 1 railroads 23

24 KCS Revenue Growth $2.2B $2.4B $2.1B $1.8B $1.5B

25 2013 Revenue Mix Industrial & Consumer Products Other 25% 3% Automotive 9% 18% Chemical & Petroleum 14% Energy 16% 15% Agriculture & Minerals Intermodal 25

26 Contact Information Shawn Mindrup, Sales Account Executive Energy Markets & Short Line Relations Office (816) Darin Selby, Vice President Energy Markets & Short Line Relations Office (816) W. 12 th Street Kansas City, MO PO Box Kansas City, MO

27 Kansas Kansas City Southern City Southern 27

28 KCS Rail Network 2013 Kansas City City Southern