THE PARTNERSHIP OF RAIL & COAL MOVING AHEAD 2014 RMCMI ANNUAL MEETING SEPTEMBER 19, 2014 1
BNSF is a Leading U.S. Railroad A Berkshire Hathaway company 32,500 route miles in 28 states and two Canadian provinces Over 43,000 employees Over 6,000 locomotives 13,100 bridges and 87 tunnels Moves one-fourth of the nation s rail freight Operates over 1,600 freight trains per day Serves over 40 ports Leads rail industry in technological innovation
BNSF Coal Routes
BNSF & the Coal Market BNSF Response Moving Forward
BNSF & The Coal Market
BNSF Volumes Steadily Increased Volume in Thousands (2,315) (2,535) (183) (465) *Domestic Intermodal represents largest number of units and is growing rapidly. 2006 Volumes = 10,637 2013 Volumes = 10,093 (2,230) (956) (1,409) 2013 Units
Rail Demand Outpaces than the Economy 2013 BNSF VOLUME GROWTH VS. GDP GROWTH INCREMENTAL UNIT GROWTH* 5.8% 814,347 4.2% 3.6% 2.3% 4.6% 3.1% GDP Growth BNSF Volume Growth BNSF Handled Half of the Growth in 2013 436,535 1.7% 1.8% Q1 Q2 Q3 Q4 2013 *Class I Total represents U.S. traffic only
Coal Forces at Work FOR Percent of Electricity Generation Economics Recent New Builds Natural Gas History Domestic Resource Technology EPA Regulations Age of Fleet Shale Gas Plays and Gas Price State Renewable Portfolio Standards Greenhouse Gas Regulation Current Economic Activity AGAINST
Natural Gas Prices Doubled Since 2012 $7.5 Daily Henry Spot Hub Price Daily Spot Price $6.5 USD$/mmBtu $5.5 $4.5 $3.5 $2.5 $1.5 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Generation is Up Across Coal Regions PACIFIC NORTHWEST 1.6% 0.7% PACIFIC SOUTHWEST ROCKY MOUNTAIN 0.2% 2014 YTD vs 2013 YTD WEST CENTRAL 0.4% SOUTH CENTRAL 3.2% CENTRAL INDUSTRIAL 1.9% SOUTHEAST 1.8% 1.1% NEW ENGLAND 1.8% MIDDLE ATLANTIC Source: EEI, Weekly Electric Output Report
PRB Coal Burn Increased 200.9 206.7 Tons / millions 182.5 2012 1H 2013 1H 2014 1H Source: Energy Ventures Analysis
PRB Inventories Declined 100 90 80 Days of burn 70 60 50 40 30 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Source: Energy Ventures Analysis 12
Coal Sets in Service Surged in Mid-2013 COAL SETS IN SERVICE 436 450 453 448 444 441 457 457 466 478 479 473 475 484 409 376 335 341 345 347 2013 2014
Results Manageable Until October 2013 When Crude and Ag Traffic Surged SHUTTLE SETS PURCHASED AND CRUDE SETS RUNNING 31 of the 36 Sept Oct 2013 activations were in a 10-day period, Oct 1-10 at request of shippers, matching harvest timing.
BNSF Weekly Volumes Continue to Grow Thousands 235 230 225 220 215 210 205 200 195 190 185 180 175 170 165 160 155 150 145 140 135 130 125 120 -----2012----- -----2013----- ----2014---- 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 1 3 5 7 9 11 13 15 17 19 21 23 2 5 2 7 2 9 3 1 3 3 Week Six times this year, BNSF handled over 200K units/week, highest since 2007
Increasing BNSF Volumes Impacted Service Across Commodities GROWTH YEAR TO DATE OVER 2013 IN COAL, AG AND CRUDE SHIPMENTS 47,157 SLOWER TRAIN VELOCITY YEAR OVER YEAR HAS BEEN FELT ACROSS COMMODITIES Coal Ag Crude 22,183 5,303 Coal Ag Crude Measured in Units Handled -17% $57-22% -24% Miles Per Day Change for Coal and Crude (Aug. 2014 v Aug. 2013) Shuttle Trips Per Month Change for Agriculture (Aug. 2014 v Aug. 2013) Source: BNSF internal data year-to-date through August
BNSF Response
BNSF s Record Capital Commitment BNSF is committed to ensuring future capability and reliability of our railroad to accommodate the business growth Goal is to build capacity above volume growth F
BNSF s 2014 Capital Commitment $5 billion record capital investment in 2014 Approximately $1 billion to improve and expand rail capacity in the Northern Corridor
Adding Capacity in Key Areas
New Adding Employees New Employees 4,000 * 5,000 * in 2013 in 2014 *well above attrition
Expanding Our Road Locomotive Fleet Expanding our Road Locomotive Fleet NEW ROAD LOCOMOTIVES Approximately $1.1 billion will be invested in 2014 Adding 500 locomotives in 2014 - Added 346 to date* +500 *Added YTD is through 9/4
Expanding Capacity Across the Network
Meeting and Exceeding 2014 Capital Goals Yearly Goals: 500 3,000 2,000 $900 $2,300 Actuals (YTD): 346 2,419 2,313 $546* $1,617* Locomotives Delivered TY&E Hiring Engineering and Mechanical Hiring Expansion Capital (Millions) Maintenance Capital (Millions) *YTD 8/22 represents YTD through July 2014. YTD 9/5 represents YTD through August 2014.
Moving Forward
Coal Tons Delivered Year-to-Date Tons 200 180 160 140 120 100 80 60 40 20 0 BNSF CUMULATIVE COAL DELIVERIES BY MONTH 87% 77% Decrease in U.S. Past Dues Since March 2014 High Jan Jan Jan Jan Jan Jan Jan Jan Jan Feb Mar Apr May Jun Jul Aug 2012 2013 2014
Trains Holding for Power* *Trains holding for power = cars waiting due to congestion or a critical resource. Down 46.7% from February 2014 As of 9/9/14
Recovery Outlook by Region South Region Improvement will continue. Majority of major track work projects winding down. Remaining Transcon bottlenecks addressed in 2015. Central Region More gradual improvement. Continue to operate a high number of coal sets. Track work close to two-thirds complete. North Region Incremental improvements. Uneven progress as track recovery continues. Heavy maintenance programs continue into fall, impact short-term velocity. 28
Coal Movement is Part of the Network Planning Process Coal tons delivered is a function of set productivity and network productivity. More sets does not always equal more coal delivered. We will continue to communicate and work with our Customers.
BNSF will restore speed and service. Your business is important to BNSF. Our focus is serving you now, and in the future.