Laredo Update

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Laredo Update
Joe Adams Union Pacific Railroad March 9, 2007
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Union Pacific Railroad
Seattle
Eastport

• Commodity Revenue 11.7 B
• Miles of Track 33,000 in
• 23 States
• Employees 49,000
• Annual Payroll 3.3 B
• Customers 25,000
• Locomotives 7,700
• Freight Cars 104,000

• Fast Facts
• Commodity Revenue 11.7 B
• Miles of Track 33,000 in
• 23 States
• Employees 49,000
• Annual Payroll 3.3 B
• Customers 25,000
• Locomotives 7,700
• Freight Cars 104,000

Portland
Duluth
Twin Cities
Chicago
Omaha
SLC
Oakland
Denver
KC
St. Louis
LA
Memphis
Dallas
Calexico
Nogales
El Paso
New Orleans
Houston
Eagle Pass
Laredo
Brownsville
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UP San Antonio Service Unit
Taylor
TEXAS
Alpine
Austin
Katy
SAN ANTONIO
Flatonia
Victoria
Spofford
MEXICO
Eagle Pass
Fast Facts
Corpus Christi

• Miles of Track 1,544
• Employees 1,296
• Annual Payroll 112.5 M
• Track Capital Spending 54.2 M
• Capacity Capital Spending 6.4 M

Laredo
GULF OF MEXICO
Brownsville
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Webb County Union Pacific Economic Impact 181
Employees 11.7 Million Annual Payroll
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Railroading Is Capital IntensiveAverage Capital
Spending as a Percent of Revenue
1995 2004 Data Selected Industry Data
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Capital Spending In Millions
3,200
2,860
2,800
2,393
2,127
1,955
1,942
1,867
1,850
1,700
2001
2002
2003
2005
1998
1999
2000
2004
2006 Est
2007 Potential
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Capital Allocation
Capital Investment Safety - Thruput
- Growth - Maintainability
Capital Investments
2007 Capital Plan (MM)
( Millions)
Maintenance of Way 1,500 Locomotives
677 Capacity 550 Commercial Facilities 195 Freigh
t Cars 125 Info Tech 90 Safety All Other
63 Total Capital 3,200
Includes Cash Capital and Lease Financings
2007 Planned Resource Additions Locomotives
300 Units Freight Cars
1,300 Cars TEY Workforce 2,336 People
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Maintainability

• Key Issues
• Rising Gross Ton Miles
• Increased Train Density
• Catch-up On Legacy Roads

• Strategies
• Maintenance Planning Techniques
• On-Track Productivity
• Improved Track Components
• Concrete Composite Ties
• Premium Rail
• Off-Track Maintenance Equipment

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Velocity Values

• 1 MPH 250 Locomotives
• 1 MPH 5,000 Freight Cars
• 1 MPH 180 TEY Employees

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Updated Five Year OutlookMajor Constrained
Corridor and Terminal Areas
I-5 Corridor
Seattle
Eastport
Portland
Duluth
Powder River Basin
Central Corridor
Twin Cities
Chicago
Omaha
SLC
Oakland
KC
N. Platte
Denver
St. Louis
Line
Terminal
Memphis
LA
Dallas
Ft. Worth
Calexico
Nogales
El Paso
San Antonio
Houston
New Orleans
Eagle Pass
Sunset Corridor
Laredo
Brownsville
Texas Gulf
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2007 Capital Projects

• Key Capacity Additions
• Sunset Double Track / LA Basin
• Tucson / Yuma Terminals
• San Antonio Terminal Facilities
• TP Route - CTC sidings
• Shreveport Gateway
• San Antonio Houston Corridor
• Houston Terminal Facilities
• Strang / Angleton Terminals
• Salt Lake City Grant Tower
• PRB Joint Line / Bill Yard
• North Platte Terminal - 3MT
• Nebraska / Iowa CTC
• Chicago Gateway

Portland
Chicago
Mason City
Bill
Clinton
North Platte
Salt Lake City
Denver
St. Louis
Kansas City
Los Angeles
Yuma
Ft. Worth
Red Rock
Shreveport
El Paso
Tucson
Houston
San Antonio
Angleton
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Growth Challengeby Business Team
of Total Growth 2006 - 2011
Sample Operating Implications
2011 70 - 80 43 - 45 86 - 90
172 - 177
2006 51 36 72
150 8,340 2,789 22,360
Volume Sunset Rte Trns/Day PRB - Daily
Loads PRB - Tot UP Trns/Day No. Platte to
Gibbon Resources Locomotives 1st Crew
Starts Active TEY
9,100 - 9,800 3,290 - 3,420 25,400 -
26,050
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Texas Gulf Coast
Ft. Worth/Dallas

• Key Issues
• Complex Network / Alternatives
• Terminal Intensive
• Gateways / Mexico
• Rock Network Impact

New Orleans
San Antonio
Houston
Eagle Pass
Laredo
Brownsville

• Strategies
• Process Improvements
• Manifest Design Standard
• Targeted Capital
• Gateway Management

Houston SU Car Dwell
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FXETFMUP
Calexico
Nogales
Tecate
El Paso
Presidio
Eagle Pass
Laredo
Brownsville
(FXE)
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Calexico
Nogales
El Paso
Presidio
Eagle Pass
Laredo
Brownsville
FXE
TFM
FSE
Short Lines
FXE Trackage Rights on TFM
TFM Trackage Rights on FXE
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Mexico Markets Historical Performance
Peso Devaluation
Economic Downturn
7 CAGR
NAFTA Effective
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Mexico Markets Revenue Distribution2006 Revenue
1.37 Billion
Market Share
By Commodity
Gateway Breakdown (Volume)
Automotive 413M (30)
(27)
Agricultural Products 410M (30)
Industrial Products 303M (22)
(73)
Intermodal 124M (9)
Chemicals 120M (9)
Energy 1 (lt1)
FXE
KCSM
Note Volume/Market Share data from 2006 CS-54
report Steel-wheel
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Despacho Previo (DP)

• Process developed for clearing southbound rail
  shipments into Mexico in order to reduce
  congestion and interchange delays at the border
• Overview
• Broker notification upon waybilling
• Processing time is allowed for clearance of
  Mexican Customs (72 hours)
• UP assesses an escalating document delay charge
  per day after the processing time has expired
  (Finished Autos/Auto Parts moving to/from the OEM
  are excluded)
• Upon clearance, cars are assembled into
  pre-blocked run-through trains for the Mexican
  railroads (i.e. Pine Bluff)

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Features

• Accelerated advance clearance of Mexican Customs
• International pre-blocked run-through trains for
  all commodities
• Improved transit time in the U.S. and Mexico
• Consistent service
• Less switching of cars at intermediate yards in
  the U.S. and Mexico
• Increased capacity of international gateways

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Benefits

• 7-days per week crossing of cars at the border
• Dependable transportation for all commodities
• Inventory cost reduction
• Consistency of transportation product
• Greater customer satisfaction
• Just-in-time inventory
• Less risk of loss and damage
• More cost-efficient gateways
• Ability to grow rail markets
• Continued expansion of rail transportation

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Despacho Previo Action Plan

• Problem Statement
• Non-Cleared Manifest Traffic arriving on the San
  Antonio Service Unit causes significant delay to
  all KCSM interchange traffic and consumes
  significant line and terminal capacity as it is
  set out before border crossing
• Desired State
• Zero broker cars set out at the border crossing
  and before

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Comparison of Despacho Previo Charges
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Thank You!!!