STAYING AFLOAT IN CHOPPY WATERSMarch 2009John StokesHighstar Capital - Partner

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THE TRANSPORTATION INDUSTRY IS IN TURMOIL

DECLINE IN IMPORT CONTAINER VOLUMES Port of Long Beach down 23.3% in January 2009 vs. January 20081

Port of Los Angeles down 7.6% in January 2009 vs. January 20082

Port of Savannah down 18.1% in January 2009 vs. January 20083

SHIFTING SHIPPING PATTERNS All-water services to East Coast What will happen to Transpacific trade?

STRESS ALL ALONG THE LOGISTICS CHAIN Intermodal rail volumes are down 13% year-to-date through March 13, 20094

THE BOTTOM LINE IS UNCERTAINTYNOBODY KNOWS WHERE WE ARE HEADED

1 Port of Long Beach. www.polb.com/economics/port_stats/teus_year_to_date.asp2 Port of Los Angeles. www.portoflosangeles.org/maritime/stats.asp3 Port of Savannah. www.gaports.com/salesandmarketingbusinessdevelopment/GPAbythenumbers/tabid/435/default.aspx4 Rick Patterson. UBS Rail Weekly. March 13, 2009.

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HOW IS PORTS AMERICA GROUP DEALING WITH IT?

REDUCING COSTS (THE OBVIOUS) Limited range to control Terminal infrastructure costs are fixed

THE REAL KEY WILL BE INCREASING VOLUME Only reliable way to reduce unit cost

HAVE TO GAIN MARKET SHARE FROM COMPETITORS Other Operators Other Ports Other Shipping Lines

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BASIS FOR COMPETITION IS IMPORTANT

LOW PRICE IS IMPORTANT The parameter most often measured Cost of stevedoring and terminal services is minimal as compared to the value of the box

HIGH VALUE TO THE CUSTOMER IS MORE IMPORTANT But, it may be harder to produce And, may even be harder to measure

CUSTOMERS PAY FOR VALUE, NOT PRICE

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KEYS TO SURVIVAL

UNDERSTANDING WHAT IS VALUABLE TO YOUR CUSTOMER

FIGURING OUT HOW TO PRODUCE THAT PRODUCT OR SERVICE WHICH IS MOST VALUABLE TO YOUR CUSTOMER

HAVING THE MEANS TO EXECUTE SUCCESSFULLY

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WHAT IS A PRIVATE EQUITY INVESTOR?

NOT A PARENT COMPANY

NOT A LENDER

NOT A MANAGEMENT TEAM

PRIVATE EQUITY IS INVESTOR CAPITAL

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TYPES OF PRIVATE EQUITY FUNDS

LEVERAGE BUYOUT (“LBO”) FUNDS Invest in diverse business sectors Short hold periods (3-5 years) Active Board Members (Set the Strategy) Capital gains driven

INFRASTRUCTURE FUNDS (PENSION FUNDS) Invest in infrastructure assets and businesses Longer hold periods (sometimes indefinite) Monitor from board level (rely on management to run business) Cash flow (dividends) driven

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HIGHSTAR CAPITAL IS A HYBRID

LBO STYLE INVESTOR Generally hold for 3-7 years

INFRASTRUCTURE SPACE Operating businesses and assets

DIRECTLY ENGAGED WITH MANAGEMENT Managers and operators create value

LONG TERM FOCUSED Short-term gains last for the short-term New investors pay for long term potential

CAPITAL GAINS DRIVEN Generally do not take current dividends Value is created by long term potential of the business

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INFRASTRUCTURE INVESTMENTS

ELECTRIC POWER GENERATION

WASTE-TO-ENERGY

SOLID WASTE DISPOSAL

NAUTURAL GAS PIPELINES

WATER AND WASTEWATER UTILITIES

AIRPORTS

MARINE TERMINALS

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OWNERSHIP OBJECTIVES

TRANSFORM THE BUSINESS

DEVELOP A STRONG, LONG TERM BUSINESS PLAN

BUILD BEST IN CLASS MANAGEMENT TEAM

INVEST IN GROWTH

OPTIMIZE CAPITAL STRUCTURE

STRONG, DEMONSTRABLE RESULTS

CAPITAL GAINS COME FROM FUTURE VALUE

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HOW DOES PRIVATE EQUITY SEE THE TERMINAL BUSINESS?

HIGH VOLATILITY SINCE 2007 Shift from congestion to over-capacity Shifting Imports vs. Exports Shifting volume East Coast vs. West Coast Increasing environmental pressures Increasing cost pressures

THE VOLATILITY WILL ONLY INCREASE Panama Canal Expansion Loss of some carrier lines (customers) Changing views toward captive (carrier-line) terminals Changing views toward public independent terminals

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CAPITAL REQUIREMENTS WILL INCREASE DRAMATICALLY

IN THE TERMINAL Stronger quays Larger and more productive cranes More sophisticated and effective IT

IN THE PORT Deeper channels Rail access

SURROUNDING INFRASTRUCTURE Highway access Rail clearing Distribution centers

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THE SCENARIO FOR THE FUTURE

LIMITED GROWTH IN VOLUME

GREATER VOLATILITY

HIGHER CAPITAL DEMANDS

RESTRICTED ACCESS TO CAPITAL

INTENSE COMPETITION

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HIGHSTAR’S APPROACH

DIVERSE GEOGRAPHIC FOOTPRINT Reduces exposure to shifting shipping patterns Reduces exposure to natural disasters Reduces exposure to political uncertainties

REDUCE VOLATILITY IN REVENUES AND CASH FLOW

WIDE CUSTOMER CONTACT

INITIALLY ACCOMPLISHED THROUGH ACQUISITION

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PORTS AMERICA MAP

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IMPROVE OPERATING EFFICIENCY

BEST IN CLASS MANAGEMENT TEAM

TRIMMED OVERHEAD COSTS

AGGRESSIVE BEST PRACTICES PROGRAM SHARED ACROSS TERMINALS

OPTIMIZING CAPITAL STRUCTURE

GOAL IS LOWEST POSSIBLE COST WITHOUT SACRIFICING CUSTOMER SERVICE

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CUSTOMER FOCUS

COMMERCIAL FUNCTION IN SENIOR MANAGEMENT

KNOW WHAT IS VALUABLE TO EACH CUSTOMER

CREATE PRODUCTS AND SERVICES TAILORED TO SPECIFIC CUSTOMER NEEDS

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GAIN MARKET SHARE

FURTHER EXPAND GEOGRAPHIC FOOTPRINT Oakland, California Bayonne, New Jersey Puerta Mexico (Toluca, Mexico)

EXPAND SERVICES Do more for the same customers Open windows to new customers Help our partners gain customers

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PARTNERING WILL BE KEY

CAPITAL WILL BE TIGHT FOR EVERYBODY

PROJECTS WILL BE BIGGER AND MORE EXPENSIVE

THE COST OF FAILURE WILL BE HIGHER, BOTH IN TERMS OF DOLLARS AND SURVIVAL

MULTIPLE PARTNERS WILL BE NEEDED TO IMPROVE THE PROBABILITY OF SUCCESS

INTERESTS NEED TO BE ALIGNED

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PICKING THE RIGHT PARTNERS

KNOW YOUR OWN OBJECTIVES

KNOW YOUR OWN STRENGTHS AND WEAKNESSES

LOOK FOR PARTNERS WITH COMPATIBLE (NOT NECESSARILY IDENTICAL) OBJECTIVES

LOOK FOR PARTNERS WITH COMPLEMTARY STRENGTHS AND WEAKNESSES

IT MAY TAKE MORE THAN ONE PARTNER TO FILL OUT THE TEAM

BUT, AVOID EXESSIVE COMPLEXITY

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PORT OF OAKLAND OUTER HARBOR TERMINAL CONCESSION

PORT OF OAKLAND Seeking reliable cash flow stream, increase throughput, and expand IPI cargo Has terminal available for long-term concessionaire

MSC In search of long-term West Coast port for cargo Can provide cargo (including IPI) to bring to port

RAIL ROADS In order to make investment, rail needed assurance that container throughput would increase Rails need to invest in clearing for rail in order to double stack on certain routes

PORTS AMERICA GROUP AND HIGHSTAR Brought together all constituents into a partnership Efficient, multi-customer, facility operator Capital to invest in infrastructure

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JAXPORT – GM SUV VOLUMES

GENERAL MOTORS Closed Janesville, WI plant and moved production to Arlington, TX Approximately 30,000 SUVs for export to Europe and Middle East required a port of

disembarkment

CSX Provide rail access from Texas through Florida panhandle Estimated revenues of almost $6.0 million per year

JAXPORT Added jobs to terminal facility and local community Earned approximately $0.3 million in dockage, wharfage and security revenues for JAXPORT

AMPORTS Had relationship, and capacity at current terminal in Jacksonville Consolidator of relationships and solutions provider

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SUMMARY

THE WATERS HAVE ONLY BEGUN TO BECOME CHOPPY

SURVIVAL WILL REQUIRE FOCUS ON CUSTOMERS

THE ONLY NEW MARKETS WILL BE THOSE THAT YOU STEAL FROM OTHERS

TEAMING WITH THE RIGHT PARTNERS CAN IMPROVE THE PROBABILITY OF SUCCESS