THE MEXICO CONNECTION

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THE MEXICO

CONNECTION

Frank Hernandez

General Director U.S./Mexico Ops

BNSF Railway

June 17, 2015

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Current

Respective

Gateway

Operation

Volumes

by

Gateway

Border

Process

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Current

Respective

Gateway

Operation

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Current Gateway Operations

Tucson

Presidio

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Brownsville / Matamoros Gateway

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Tucson

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Laredo / Nuevo Laredo Gateway

Investments in 2015

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KCSM Expansion Projects

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SOURCE: AMF Cancun ExpoRail 2015 – Oscar Del Cuerto Cuevas KCSM.

MASTER PLAN FOR THE SANCHEZ YARD

OPERATIONAL SUPPORT RAILS

COMONFORT SIDING EXTENSION

ESCOBEDO YARD CTC

SIDING EXTENSION - 3 KM

EXPANSION OF SANTA MARIA IN COAHUILA

EXPANSION OF CAPACITY OF THE ESCOBEDO YARD

SIDING EXTENSION FOR OJO SECO

CONSTRUCTION OF THE “Y” IN THE AHORCADO YARD

SIDING EXTENSION IN JACUARO -3KM COAHUILA NUEVO LEON TAMAULIPAS SAN LUIS POTOSI HIDALGO PUEBLA VERACRUZ JALISCO USA

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Tie Projects

NUEVO LAREDO – LAMPAZOS 72,680 RAILROAD TIES LAMPAZOS – LEAL 18,670 RAILROAD SLIDES SLP – SALTILLO 23,000 RAILROAD TIES ACAMBARO – CORONDIRO 17,000 RAILROAD TIES CORONDIRO – LAZARO C. 5,000 RAILROAD TIES MONTERREY – MATAMOROS 19,000 RAILROAD TIES SLP – TAMPICO 28,000 RAILROAD TIES SLP – AHORCADO 65,650 RAILROAD TIES AHORCADO – HUEHUETOCA 4,000 RAILROAD TIES M. HERRERA – ACAMBARO 25,000 RAILROAD TIES LAMPAZOS MONTERREY MATAMOROS SALTILLO TAMPICO SANTA FE MORELLA CELAYA AGUASCALLENTES PEROTE

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Tucson

Presidio

Current Gateway Operations

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PUENTE INTERNACIONAL MANTENIMIENTO TALLER DE A RAMOS ARIZPE 7 Bodega Rasini MESA GIRATORIA A EAGLE PASS

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Vía 01 Vía 02 Vía 03 Vía Auxiliar R -1 5 + 6 6 4 R_-1 7 + 6 0 0 Espuela R -1 7 + 8 0 6 .3 0 R -1 7 + 9 7 8 R -1 7 + 6 5 6 R -1 7 + 9 1 2 R -2 0 + 9 1 0 R -2 0 + 9 6 4 R -2 1 + 0 9 4 R -1 5 + 5 1 0 R -1 7 + 8 3 8 NORTE R -1 8 + 4 3 2 .4 R -2 0 + 9 2 7 .8 R -2 0 + 8 4 2 .7 R -1 8 + 5 1 2 .4 Vía limpieza 101 Vía Limpieza 102

Vía Extracción Norte

Vía Extracción sur

Vía 04 Vía 05 CH-1 CH-2 CH-3 CH-4 CH-5 CH-6 CH-7 CH-8 CH-9 CH-11 CH-10 CH-12 CH-13 CH-14 CH-15 CH-16 CH-17 CH-18 CH-19 CH-20 R -1 8 + 2 2 0 .3 9 4 R -2 2 + 1 9 7 .8 6 6 R -2 1 + 0 7 7 .8 6 6 Cervecería Modelo Via Principal Esta conexión ya no existe. 12

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Tucson

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Current Gateway Operations

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Tucson

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Rail Relay Projects

Modernization of the Infrastructure

• FXE/FSRR have rehabilitated 60% of their network

• FXE/FSRR’s basic network has a capacity for 130 tons per car

CAPACITY ON THE NETWORK IN 1999 CAPACITY ON THE NETWORK IN 2014

SYMBOLS (FOUR AXIS POINTS)

130 TONS OF CARGO CAPACITY 123 TONS OF CARGO CAPACITY 120 TONS OF CARGO CAPACITY 110 TONS OF CARGO CAPACITY

0.00 KILOMETERS WITH CAPACITY

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0 100 200 300 400 500 600 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Infrasturcure and Capacity Equipment Telecommunications Other

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FXE / FERROSUR Infrastructure Investments

Accumulated 1998-2014: 3,434 Millions of dollars M illi ons in USD 67.5 241.6 155.0 78.4 79.3 85.5 137.0 136.9 311.8 323.8 199.8 165.9 174.3 347.5 255.1 398.8 276.5 411.4

Investment Program for FXE/FSRR from 1998-2015

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Tucson

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Tucson

Presidio

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Volumes

by

Gateways

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San Diego Volumes*

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2012 2013 2014 NORTH SOUTH 49% 47% 48% 51% 53% 52%

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Tucson Volumes

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 2010 2011 2012 2013 2014 Nogales Volumes NORTH SOUTH 50% 49% 50% 49% 50% 51% 50% 50% 51% 50%

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El Paso Volumes

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 2010 2011 2012 2013 2014 NORTH SOUTH 48% _48% 45% 46% 47% 55% 54% 53% 52% 52%

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Brownsville Volumes

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 2010 2011 2012 2013 2014 NORTH SOUTH 55% 49% 52% 54% 53% 46% _47% _45% _51% 48%

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Eagle Pass vs Laredo Volumes

0 100,000 200,000 300,000 400,000 500,000 600,000 2010 2011 2012 2013 2014 LAREDO EAGLE PASS

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Current

Border

Process

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Mexico Overview

Mexico Volume 2014

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BNSF International Gateways

CANADA

USA

MEXICO

Tucson Nogales Presidio Ojinaga

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International Border Support

•

Interaction, support, and liaison for the following internal

business units, ensuring seamless and transparent

transborder shipments :

INTERNAL PARTNERSHIPS

• Transportation/Operations

• Mexico and Canada Marketing Sales • Mechanical

• Service Design

• Equipment Distribution • Ag/Grain Desk

• Unit Train Desk • Customer Support

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International Border Support

EXTERNAL PARTNERSHIP’S

• AAR Transborder Committee

• Set business standards for all

Class I railroads, including Mexico and Canada, for international transborder business

• U.S. Customs-CBP • Other PGA’s

• Canadian Customs-CBSA

• Mexico Customs - Aduana • Sagarpa

• Connecting Rail Carriers • Domestic • Foreign Quarterly/bi-monthly meetings at each BNSF gateway • U. S. Brokers • Canadian Brokers • Mexico Brokers • Freight Forwarders • International Customers

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Eagle Pass Set Out Traffic at Car Level

Year Total Cars for Delivery to FXE Total IM Cars Set Out Percentage of Cars S/O 2013 42,116 3 .00007% 2014 50,324 4 .00008% YTD 2015 26,491 4 .00002% 118,931 11 TOTAL IM

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El Paso Set Out Traffic at Car Level

Year

Total Cars for Delivery to FXE Total IM Cars Set Out Percentage of Cars S/O 2013 47,658 149 .003% 2014 46,061 194 .004% YTD 2015 11,660 189 .002% 105,379 532 TOTAL IM

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Challenges Southern Border

•

Ventanilla Unica de

Comercio Exterior Mexicano

•

“VUCEM”

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TALKING POINTS

•

All remaining slides are

TALKING POINTS and will

not be visible to the

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3A) Brownsville / Matamoros Gateway

(

Rosita International bridge

)

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1. Haulage agreement with Union Pacific Railroad (UPRR) from Algoa to

Brownsville.

2. Mexican interchange railroad at Matamoros is Kansas City Southern de

Mexico (KCSM). KCSM is wholly owned by KCS.

3. Current hours of operation at the BROWNSVILLE / MATAMOROS Gateway:

 0800 – 2000hrs, Monday thru Saturday (12hrs per day, no directional

windows)

 1000 – 1400hrs, Sunday

 This Gateway and interchange hours are used solely by UPRR and

KCSM

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5A) Laredo / Nuevo Laredo Gateway

1. Trackage rights on UPRR to Robstown and delivery of our trains to KCS at

this location. Haulage Agreement with KCS between Robstown to Laredo. 2. Mexican interchange railroad at Nuevo Laredo is KCSM.

3. This Gateway has historically been the # 1 U.S./Mexico Gateway, as it relates to total volumes interchanged. Eagle Pass / Piedras Negras Gateway is now vying for that title.

4. Current hours of operation at at the LAREDO / NUEVO LAREDO Gateway is 24/7, as follows:

 0200 – 0800hrs Northbound Export Window (NEW)

 0800 – 1400hrs Southbound Export Window (SEW)

 1400 – 2000hrs NEW

 2000 – 0200hrs SEW

 This Gateway and interchange hours are shared by KCS, UPRR, and

KCSM

5. KCSM network improvements include: Sanchez yard, siding extensions, spring switches, double tack along 30% of Laredo to Mexico city corridor, CTC from Laredo to Mexico city, intermodal yards.

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9A) Eagle Pass / Piedras Negras

Gateway

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1. Trackage rights to Eagle Pass Gateway.

2. Mexican interchange railroad at Piedras Negras is Ferrocarril Mexicano (FXE).

3. FXE is owned by Grupo Mexico and UPRR. It has also merged with Ferrocarril

Sureste (FERROSUR).

4. This Gateway has been challenging the LAREDO / NUEVO LAREDO Gateway for total volumes interchanged.

5. Current hours of operation at at the EAGLE PASS / PIEDRAS NEGRAS Gateway is 24/7, as follows:

 0000 – 0600hrs SEW

 0600 – 1200hrs NEW

 1200 – 1800hrs SEW

 1800 – 0000hrs SEW

 This Gateway and interchange hours are shared by BNSF, UPRR, and FXE

6. UP Eagle Pass Sub improvements include: CTC from Spofford to MP 25.6, double track segments, new classification yard at Spofford / Laughlin.

7. FXE network improvements include: Rio Escondido yard (in fourth of 7 phases of development), siding extensions, spring switches, double track segments, CTC islands, intermodal yards.

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12A) Presidio / Ojinaga Gateway

On the Mexican side of the border, forms part of the FXE network. On the USA side, it forms part of the Texas Pacifico. Both FXE & Texas Pacifico form part of Grupo Mexico.

Bridge is owned by the Mexican Government & the State of Texas.

Bridge sustained fire damage February 29, 2008 and has been OOS since that date.

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13A) El Paso / Cd. Juarez Gateway

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1. Mexican interchange railroad at Cd. Juarez is FXE.

2. FXE is owned by Grupo Mexico and UPRR. It has also merged with

Ferrocarril Sureste

(

FERROSUR

)

.

3. Current hours of operation at the EL PASO / CD. JUAREZ Gateway:



1600 – 0700hrs

(

15hrs per day, no directional windows

)

.



This Gateway and interchange hours are shared by BNSF, UPRR,

and FXE.

4. BNSF Eagle Pass Sub improvements include: New “Y” at Belen, NM.

5. FXE network improvements include: Meseta yard, siding extensions,

spring switches, double track segments, CTC islands, intermodal

yards.

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18A) Tucson / Nogales Gateway

1. Current hours of operation at the TUCSON / NOGALES Gateway:



0900

–

1700hrs Monday thought Sunday (

8hrs per day, no directional

windows

).

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19A) San Diego / Tijuana Gateway

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1. Interchange with the San Diego Imperial Valley Railroad (SDIY) at San Diego,

who then interchanges with the Baja California Railroad (BJRR) at the San Isidro

yard at the border.

2. Mexican interchange railroad at Tijuana is BJRR.

3. BJRR is owned by the Mexican government, but has granted concession rights to BJRR.

4. Current hours of operation at the SAN DIEGO / TIJUANA Gateway:

 0900 – 1200hrs Monday through Friday.

5. BJJR network improvements include: 6 new storage tracks at Tijuana, transload facility, cold storage warehouse, and team tracks.

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28A) Eagle Pass vs Laredo

• I have purposefully placed the EAGLE PASS & LAREDO Gateway volumes

on the same slide, in order to allow you to see the impressive growth that has taken place at the EAGLE PASS Gateway.

• In recent years, have seen 21% growth in volumes year after year at the

EAGLE PASS Gateway. If this trend continues, this Gateway will probably take over 1st place, as being the Gateway with the highest volume of railway interchanges. This could happen as early as this year and has sporadically occurred on a monthly basis, several times during past three years.

• In recent years, while still busy, we have seen much less growth at Laredo

gateway. As a matter of fact, there was basically “ZERO” growth during

2014, as more and more rail traffic either shifted toward the EAGLE PASS Gateway or new business began using EAGLE PASS.

• That concludes my presentation. I thank you for your time and will be glad to attempt to answer any questions you might have, as time permits.