To México & Beyond...shipped by rail; loss of the rail concession of KCS’ subsidiary, Kansas City...
Transcript of To México & Beyond...shipped by rail; loss of the rail concession of KCS’ subsidiary, Kansas City...
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To México & BeyondGreg Walling
VP Network Design
February 2015
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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. Words such as
“projects,” “estimates,” “forecasts,” “believes,” “intends,” “expects,” “anticipates,” and similar expressions are intended to
identify many of these 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 news release. 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 use items
shipped by rail; loss of the rail concession of KCS’ 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’ 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 on KCS’ rail network or at KCS’ 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; availability of qualified
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;
increased demand and traffic congestion; the outcome of claims and litigation involving KCS or its subsidiaries; and other
factors affecting the operation of the business. More detailed information about factors that could affect future events may be
found in filings by KCS with the Securities and Exchange Commission, including KCS’ Annual Report on Form 10-K for the
year ended December 31, 2014 (File No. 1-4717) 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 news release to reflect future events or developments. All reconciliations to GAAP can be found on the
KCS website, kcsouthern.com/investors.
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Initiation of Railway Age in México at Veracruz
1837
1873
1881 1908 1937
Veracruz route to México City is complete
US & México connected at N. Laredo/Laredo
1898
N. Laredo to México City is complete
FerrocarrilesNacional de México (FNM) is Created
1926
FNM returns rail lines to original owners
Rail lines are officially expropriated
1987
Divisions created and path to modern network laid
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Railroading is no New Rodeo in México
1996
Concessions awarded privatizing the operations of most rail lines
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Capital Has Flowed into México
Since 2008, KCS has invested over to $275
million on the Houston to Lazaro
Cardenas cross border corridor alone.
100 mile new mainline addition at Victoria
-Rosenberg
Significant expansion and upgrade at the
Salinas Victoria (Monterrey), and Puerta
Mexico terminals
Investment and expansion of the
intermodal facility at Interpuerto in San
Luis Potosi
Track and parking expansion at the Toluca
Auto Terminal
Upgrades and expansion at the Port of
Lazaro Cardenas
Continued investment in lift equipment and
technology at all locations
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$2.3 Billion USD since 1997
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The Importance of Laredo
Source: KCS Market Research derived from BTS Data
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Laredo, TX El Paso, TX Eagle Pass, TX Nogales, AZ Otay Mesa, CA Hidalgo, TX Brownsville, TX
Pe
rce
nt
of
Sh
are
of
Sh
ipm
en
ts
2012 U.S. Surface Trade by Border CrossingImports and Exports Volume
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Where do we Grow to Support the Border?
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UP
UPKCSR
KCSMKCSM
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Where do we Grow to Support the Border?
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UP’s predecessor reaches Brownsville
1904
1905
1908 2004
KCSM’s predecessor reaches Matamoros
Original US permit issued for a rail bridge across the Rio Grande
1910
Original rail bridge built (owned by the FNM and StLB&MRailway)
Presidential Permit issued to Cameron County on Oct 1st
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Brownsville/Matamoros Historical Overview
2015
New rail bridge nearing completion
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Current Operation
KCSM and UP Operate to and from
the International Bridge
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New Brownsville/Matamoros Bridge
Courtesy of Cameron County
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LINE “F”
Existing
Rail Bridge
Rail Bypass Project in MATAMOROS, TAMPS.
FOTOS 18 OCT 2012 1/1 CONEXION SUR.pptxFOTOS 14 DIC 2012/9VIA EN PUENTE 10+600.pptx
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Celaya Rail Hub
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Lázaro CárdenasGrowth Plans
Bulk
Facility
New Container
Terminal
New Auto
Terminal
Expanded
Container Terminal
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Expansion started in
2013 and will be
completed in 2030
Total Investment - $4.6B
New railroad bypass will
significantly improve
both railroad’s ability to
serve the port
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Veracruz gets its Mojo Back
Source: Mexican PNI (Plan Nacional de Infraestructura)
Port of Veracruz Modernization PlansCurrent and Future Rail Access
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42%
48%
6%4%
Maintenance Growth / Locomotives
Regulatory IT / Other
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KCS Investing for Growth, Asset Utilization, Safety, and Service
2015 Capital Expenditures Investing in Growth - Equipment• All 85 locomotives ordered in 2014 have been delivered.• 50 additional locomotives ordered for 2015 with the first
deliveries scheduled for February.• Secured options for 2016 and 2017 locomotive orders.• Expansion of grain and automotive fleets.
Investing in Growth - Capacity
• Crude oil network mainline and capacity improvements.• Kansas City IFG Terminal expansion to facilitate interchange. • Jackson, Mississippi in year two of a three year expansion
project to nearly double capacity.• Wylie, Texas intermodal facility to open mid-year.• Sanchez Yard three year, $60M+ expansion project.• Seven new or expanded sidings to improve line of road fluidity.
Investing in Maintenance – Velocity Benefits
• Track programs between Shreveport and Baton Rouge to provide increased speeds from (40 to 49MPH), benefitting crude shipments.
• CTC implementation on the Laredo subdivision and in Mexico to improve fluidity and increase maximum allowable speed.
• Continued mainline improvements between Monterrey and Nuevo Laredo, MX, allowing for speed increase to 68MPH.
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Efficiency of the Mexican Railways
Source: IDB (2013) Observatorio de Carga y Logística, “Información Estadística sobre los Sistemas Ferroviarios Latinoamericanos”.
Locomotive productivity of Latin American Railways
(million t-km per fleet locomotive)
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So, why do we spend so
much time debating
México’s capabilities?
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Courtesy of Pro México
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México is too economically
important for you to ignore
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2013 Foreign Direct Investment (FDI) reached $39.2 Billion (120% increase vs 2012)
Manufacturing sector was key in 2013 with 72.3% investments
85% of FDI was registered on states where KCS has access
2014 FDI trough June reached $9.7 Billion.
– 71.8% manufacturing .
From 2000 to 2014 FDI accounts $354.3 Billion
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Foreign Direct Investment (FDI) in México
Source: KCS Market Research based on Secretaría de Economía de México.
Data includes all economic sectors. (2013 & 2014 FDI)
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México’s free trade agreements foster a strong business growth environment
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Guatemala
El Salvador
Honduras
Nicaragua
Costa Rica
Colombia
Bolivia
Chile
Uruguay
Peru
Venezuela
Japan
European Union
Iceland
Liechtenstein
Norway
Switzerland
Israel
Canada
United States
SOURCE: DOC, Bloomberg Businessweek, World Bank, Mexico Today, J.P. Morgan, U.S. Bureau of Labor Statistics, SICE, Goldman Sachs, Boston Consulting Group, Reuters
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México Automotive Plants
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México Energy Reform is a Reality
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Reform could drive an increase
in rail shipments in the following
ways:
Increased LPG and refined products could be the first growth market
Movement of steel tubing for new pipelines
Importation of frac sand from the United States
Crude by rail from new producing regions to refineries
Increased intra-México moves of diesel, LPG, gasoline and fuel oil
Reform could reduce power generation cost, further
improving Méxican competitiveness and strengthen near shoring thesis
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Private Investment in Transload Terminals
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70 +
14 New Transload Facilities
added in the past 5 years:• Sodisa, NL• Industrias Kam, NL• Puerta del Norte; NL• Regiomontana de Acero, NL• Bulkmatic García, NL• FR Terminales García, NL• Bulkmatic, QA• Rehrig Pacific, QA• LITION, QA• LIT, Chichimequillas QA• Transilmex, SLP• KTN Tlaltepoxco, HG• LC Logistics, MH• TPP, MH
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Questions?
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