Alabama State Port Authority

Supplement dated February 23, 2017 to Preliminary Official Statement dated February 14, 2017 with respect to

ALABAMA STATE PORT AUTHORITY

$125,625,000* DOCKS FACILITIES REVENUE REFUNDING BONDS, SERIES 2017A (AMT), $13,950,000* DOCKS FACILITIES REVENUE REFUNDING BONDS, SERIES 2017B (NON-AMT), $7,910,000* DOCKS FACILITIES REVENUE REFUNDING BONDS, SERIES 2017C (NON-AMT), AND $133,260,000* DOCKS FACILITIES REVENUE REFUNDING BONDS, SERIES 2017D (TAXABLE)

INTRODUCTION

This Supplement is intended to supplement the Preliminary Official Statement, dated February 14, 2017 (the “POS”), relating to the issuance of the above-referenced bonds (the “Series 2017 Bonds”) by the Alabama State Port Authority (the “Authority”). All capitalized terms used in this Supplement and not defined herein shall have the meaning specified in the POS unless the context or use clearly indicates otherwise. This Supplement is not intended to be read alone. Instead, this Supplement is intended to be read in conjunction with the information contained in the POS. This Supplement is not intended to act as a substitute for or as a replacement of the information contained in the POS except as expressly provided herein.

RECENT EVENT

On February 21, 2017 an employee of the Authority inadvertently released sensitive personnel information, via an email, to an unauthorized recipient in response to a phishing email. The information released includes names, addresses, social security numbers and 2016 compensation information. No customer data was involved in this matter and the Authority’s systems were not compromised. The Authority has taken and continues to take steps to protect against adverse consequences to its employees and retirees, including notifying federal and state authorities and securing assistance for the affected personnel from an identity theft protection service, and is in the process of providing notice to the employees of the occurrence and of actions taken by the Authority and advice as to protective steps to be taken by the employees and retirees. Nevertheless, management expects that there could be instances of identity theft and adverse consequences to employees and/or retirees. While this incident will result in some near-term expenses, the Authority does not expect that this matter will result in a material adverse impact on the financial condition or operations of the Authority.

ADDITIONAL INFORMATION

For further information during the initial offering period with respect to the Series 2017 Bonds, contact Larry R. Downs, Secretary-Treasurer and Chief Financial Officer, Alabama State Port Authority, 250 North Water Street, Mobile, Alabama 36602 (telephone: (251) 441-7050).

* Preliminary; subject to change.

03943645.2 This Preliminary Official Statement and the information herein is subject to change, completion, and amendment without notice. A definitive Official Statement will be made available prior to the delivery of these securities. See “INTRODUCTION– Changes to the Preliminary Official Statement”. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. * Preliminary; subjecttochange. Official Statementtoobtaininformation essentialtothemakingofaninformedinvestmentdecision. New York,onorabout______,2017. the Series2017Bondsindefinitiveformwillbeavailablefordelivery throughthefacilitiesofTheDepositoryTrustCompanyinNewYork, matters willbepassedonfortheUnderwritersbytheircounsel, Maynard,Cooper&Gale,P.C.,Birmingham,Alabama.Itisexpectedthat Alabama. CertainlegalmatterswillbepassedonfortheAuthority byitscounsel,HandArendallLLC,Mobile,Alabama.Certainlegal Corp. guaranteed underaninsurance policy tobe issued concurrentlywiththe delivery ofthe Series 2017 Bonds by Assured GuarantyMunicipal “RISK FACTORS”and“DISCLAIMERSANDOTHERMISCELLANEOUSMATTERS”. Bonds, see“TAXMATTERS”. See “SECURITYANDSOURCEOFPAYMENT”and“RISKFACTORS”. The Authority cannot be sued to enforce payment of the Series 2017 Bonds or to enforce any other contractual arrangements. Alabama arepledgedtothepaymentofprincipalof,redemptionpremium(ifany)andinterestonSeries2017 Bonds. constitute obligationsoftheStateAlabama,andneitherfullfaithcreditnortaxingpower Stateof and conditionsmoreparticularlydescribedherein.TheAuthorityhasnotaxingpower.Series2017Bonds donot herein. TheAuthoritywillreservetherighttoissueadditionalparityandsubordinateobligationssubjectcertain terms premium (ifany)andinterest,solelyoutofcertainrevenuestheAuthoritypledgedtopaymentthereofas described described moreparticularlyherein.InterestwillbepayableontheSeries2017BondseachApril1andOctober1,beginning 1,2017. and, whenissued,willberegisteredinthenameofCede&Co.,asnomineeTheDepositoryTrustCompany,NewYork, York,as are togetherreferredtointhisOfficialStatementasthe“Series2017Bonds”.TheSeriesBondsissuablefullyregisteredbonds Dated: Dateofinitialdelivery NEW ISSUES(4)-BOOKENTRYONLY Harbor FinancialServices, LLC

to othermatters. on theSeries2017Bondsis,underexistinglaw,exemptfromAlabamaincometaxation.See“TAXMATTERS”hereinwithrespect the Series 2016D Bonds isnotexcludablefromgross income for federal income tax purposes.Inthe opinion of Bond Counsel,interest earnings ofcertaincorporationsforpurposescalculatingthealternativeminimumtaximposedonsuchcorporations.Interest federal alternativeminimumtaximposedonindividualsandcorporation;suchinterest,however,isincludedintheadjustedcurrent and corporations.InterestontheSeries2017BBonds2017Cisnotanitemoftaxpreferenceforpurposes on theSeries2017ABondsisanitemoftaxpreferenceforpurposesfederalalternativeminimumimposedindividuals Bonds, ora“relatedperson”,bothwithinthemeaningofSection147(a)InternalRevenueCode1986,asamended.Interest held byapersonwhois“substantialuser”ofthefacilitiesrefinancedwithproceedssuchSeries2017ABondsor2017B on anySeries2017ABondor2017Bforperiodduringwhichsuchis excludable fromgrossincomeforfederaltaxpurposes,exceptthatnoopinionisexpressedastosuchexclusionofinterest certain covenantsoftheAuthority,interestonSeries2017ABonds,2017BBondsand2017Cis

Docks FacilitiesRevenue This coverpagecontainscertain informationforquickreferenceonly.Itisnotasummaryofthisissue.Investors mustreadtheentire The Series 2017 Bondsareofferedwhen,asand if issued,subjecttoapprovalofvalidity by BondCounsel, Hand ArendallLLC, Mobile, The scheduled payment of principal and interest, when due, on those Series 2017Bondsmaturing in 2023and thereafter will be For a description of certain risk factors and other considerations involved in an investment in the Series 2017 Bonds, see The Series2017Bondswillbesubjecttoredemptionpriortheirrespectivematuritiesasdescribedherein. For informationonthetaxstatusofSeries2017Bondsandcertainotherconsequencesarisingwithrespectto 2017 The Series2017Bondswillconstitutespecial,limitedobligationsoftheAuthoritypayable,astoprincipal,redemption The Series2017ABonds,the2017B2017CBondsand2017Dconstituteseparateseries and In theopinionofBondCounsel,underexistinglawaspresentlyconstruedandadministeredassumingcompliancewith Series 2017A(AMT) Refunding Bonds, $125,625,000* FOR MATURITIES,AMOUNTS,RATES,PRICES,&INITIAL CUSIPNUMBERS,SEEINSIDECOVER. PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 14, 2017

Series 2017B(Non-AMT) Docks FacilitiesRevenue ALABAMA STATE PORT AUTHORITY Refunding Bonds, $13,950,000*

The dateofthisOfficial Statementis______.

SunTrust Robinson Humphrey Citigroup Series 2017C(Non-AMT) Docks FacilitiesRevenue Refunding Bonds, $7,910,000* Underlying: Due: October1,asshownontheinsidecover Insured:

S&P: A-(stableoutlook) Fitch: A-(negativeoutlook) S&P: AA(stableoutlook) RATINGS (SeeRatingsherein): UMB Bank,N.A. Docks FacilitiesRevenue Series 2017D(Taxable) Refunding Bonds, $133,260,000*

ALABAMA STATE PORT AUTHORITY

$125,625,000*

Docks Facilities Revenue Refunding Bonds, Series 2017A (AMT)

MATURITIES, AMOUNTS, RATES, PRICES & CUSIP NUMBERS

Maturity Principal Amount Interest Rate Price or Yield CUSIP

2017 $2,135,000 2023** 7,065,000 2024** 7,420,000 2025** 7,790,000 2026** 8,180,000 2027** 8,420,000 2028** 8,840,000 2029** 9,280,000 2030** 8,805,000 2031** 10,440,000 2032** 10,965,000 2033** 11,510,000 2034** 12,090,000 2035** 12,685,000 ______

$13,950,000*

Docks Facilities Revenue Refunding Bonds, Series 2017B (Non-AMT)

MATURITIES, AMOUNTS, RATES, PRICES & INITIAL CUSIPS

Maturity Principal Amount Interest Rate Price or Yield CUSIP

2018 $4,050,000 2019 4,295,000 2020 4,565,000 2021 1,040,000 ______

* Preliminary, subject to change. ** Insured Bonds.

$7,910,000*

Docks Facilities Revenue Refunding Bonds, Series 2017C (Non-AMT)

MATURITIES, AMOUNTS, RATES, PRICES & INITIAL CUSIPS

Maturity Principal Amount Interest Rate Price or Yield CUSIP

2022 $10,000 2023** 10,000 2024** 10,000 2025** 10,000 2026** 15,000 2027** 15,000 2028** 15,000 2029** 15,000 2030** 15,000 2031** 15,000 2032** 15,000 2033** 15,000 2034** 20,000 2035** 20,000 2036** 7,710,000

______

$133,260,000*

Docks Facilities Revenue Refunding Bonds, Series 2017D (Taxable)

MATURITIES, AMOUNTS, RATES, PRICES & INITIAL CUSIPS

Maturity Principal Amount Interest Rate Price or Yield CUSIP

2017 $725,000 2018 1,050,000 2019 1,065,000 2020 1,085,000 2021 4,910,000 2022 13,895,000 2023** 2,155,000 2024** 2,235,000 2025** 2,320,000 2026** 2,415,000 2027** 2,125,000 2028** 2,215,000 2029** 2,315,000 2030** 2,425,000 2031** 2,845,000 2032** 2,965,000 2033** 3,115,000 2034** 3,275,000 2035** 3,445,000 2036** 3,620,000 2037** 18,890,000 2038** 19,840,000 2039** 20,825,000 2040** 13,505,000

* Preliminary, subject to change. ** Insured Bonds.

Assured Guaranty Municipal Corp. (“AGM”) makes no representation regarding the Series 2017 Bonds or the advisability of investing in the Series 2017 Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “Bond Insurance” and “Appendix F- Specimen Municipal Bond Insurance Policy

The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

______

ALABAMA STATE PORT AUTHORITY

Members of the Board of Directors

Horace H. Horn, Jr., Chairman Joe McCarty, 1st Vice Chairman Ben C. Stimpson, 2nd Vice Chairman Daryl H. Dewberry Alvin K. Hope II Tim Parker, III Algernon “Al” Stanley Bestor Ward Mobile Mayor Sandy Stimpson (Ex-Officio) James K. Lyons Director and Chief Executive Officer

Larry R. Downs Secretary-Treasurer and Chief Financial Officer ______

FINANCIAL ADVISOR Pinnacle Financial Group, LLC Rowayton, Connecticut ______

FEASIBILITY CONSULTANT MICP Capital San Francisco, California ______

BOND COUNSEL AND COUNSEL FOR THE AUTHORITY Hand Arendall LLC Mobile, Alabama ______

INDEPENDENT ACCOUNTANTS Warren Averett, LLC Birmingham, Alabama ______

COUNSEL TO THE UNDERWRITERS Maynard, Cooper & Gale, P.C. Birmingham, Alabama ______

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TABLE OF CONTENTS

Page

INTRODUCTION ...... 1 General ...... 1 Changes to the Preliminary Official Statement ...... 2

GLOSSARY OF TERMS USED IN OFFICIAL STATEMENT ...... 2

THE PLAN OF FINANCING ...... 4 General ...... 4 Refunding Plan ...... 4

SOURCES AND USES OF FUNDS ...... 5 Series 2017A Bonds ...... 5 Series 2017B Bonds ...... 5 Series 2017C Bonds ...... 5 Series 2017D Bonds ...... 6

DESCRIPTION OF THE SERIES 2017 BONDS ...... 6 General Provisions ...... 6 Method and Place of Payment ...... 6 Redemption of Series 2017A Bonds Prior to Maturity ...... 7 Redemption of Series 2017B Bonds Prior to Maturity ...... 7 Redemption of Series 2017C Bonds Prior to Maturity ...... 8 Redemption of Series 2017D Bonds Prior to Maturity ...... 9 General Redemption Provisions ...... 9 Registration and Exchange ...... 10 Book-Entry Only System ...... 10 Authority for Issuance ...... 10 Amendments to Bond Order ...... 10

SECURITY AND SOURCE OF PAYMENT ...... 11 General ...... 11 Description of Docks Facilities Revenues ...... 11 Debt Service Reserve Fund ...... 12 Maintenance of Rates and Charges ...... 12 Establishment of Rates and Charges ...... 13 Swap Transaction ...... 13 Additional Senior Lien Bonds ...... 13 Subordinate Obligations ...... 13 The United States Bankruptcy Code ...... 13

BOND INSURANCE ...... 14

AVAILABLE STATE TAX REVENUES ...... 16 General ...... 16 Coal Severance Tax ...... 16 Oil and Gas Severance Tax ...... 17

OTHER GOVERNMENTAL SUPPORT ...... 18 Conditional Appropriations ...... 18 Capital Grants ...... 18

DEBT SERVICE REQUIREMENTS AND COVERAGE ...... 19

Debt Service ...... 19 Historical Coverage ...... 20 Pro Forma and Projected Coverage ...... 20

FINANCIAL SYSTEM ...... 21

FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 21 General ...... 21 Statements of Revenues, Expenses, and Changes in Net Assets/Statements of Net Assets ...... 21 Management’s Discussion and Analysis – Fiscal Years 2015 and 2016 ...... 24 Management’s Discussion and Analysis – Three Months Ended December 31, 2015 and 2016 ...... 24 Contingent Liabilities ...... 24

THE AUTHORITY ...... 25 General ...... 25 Management ...... 25 Employee Relations ...... 28 Insurance and Risk Management ...... 30

AUTHORITY OPERATIONS ...... 30 General ...... 30 Competitive Position on the Gulf of Mexico ...... 31 General Note Regarding Description of Authority Facilities...... 31 Turning Basins ...... 31 Coal Handling and Storage Facilities ...... 32 General Cargo/Intermodal Facilities ...... 34 Bulk Material Handling and Warehouse Facilities ...... 35 Terminal Railway Facilities ...... 36 Marine Liquid Bulk Terminal Facilities ...... 36 Other Existing Facilities ...... 36 Recently Completed Authority Facilities ...... 37 Five-Year Capital Plan ...... 37 Environmental Impact and Policy ...... 38 Hurricane Preparedness ...... 38 Security ...... 39

LITIGATION ...... 39

RISK FACTORS ...... 39 General ...... 39 Authority’s Immunity from Suits to Enforce Payment of Bonds and Other Obligations ...... 40 Dependence on Market Conditions and Political Climate ...... 40 Feasibility Report ...... 40 Dependence on Certain State Tax Revenues ...... 40 Hurricanes and Other Severe Weather ...... 41 Other Risks of Loss, Damage or Destruction ...... 41 Costs Associated with Enhanced Security Precautions ...... 41 Financial Performance and Capital Commitments ...... 42 Environmental Regulation ...... 42 Competition ...... 42 Termination or Expiration of Material Contracts...... 42 Regulatory Factors Affecting Coal Industry ...... 42 Tax-Exempt Status of Series 2017A Bonds, Series 2017B Bonds, and Series 2017C Bonds ...... 42 Employee Relations ...... 43 State Legislative Control ...... 43 The United States Bankruptcy Code ...... 43

ECONOMIC AND DEMOGRAPHIC INFORMATION ...... 44 General ...... 44 Population ...... 44 Employment ...... 45 Income Levels ...... 46 Education ...... 46 Utilities ...... 47 Transportation ...... 47

LEGAL MATTERS ...... 48

TAX MATTERS ...... 48 Series 2017A Bonds, Series 2017B Bonds and Series 2017C Bonds ...... 48 Certain Collateral Federal Tax Consequences ...... 49 Original Issue Discount ...... 49 Premium ...... 49 Series 2017D Bonds ...... 49

VERIFICATION OF CERTAIN COMPUTATIONS RELATING TO SERIES 2017 BONDS ...... 50

UNDERWRITING ...... 50

CONTINUING DISCLOSURE ...... 51 General ...... 51 Compliance with Prior Undertakings ...... 52

RATINGS ...... 52

REPORT OF FEASIBILITY CONSULTANT ...... 53

INDEPENDENT ACCOUNTANTS ...... 53

FINANCIAL ADVISOR ...... 53

DISCLAIMERS AND OTHER MISCELLANEOUS MATTERS ...... 53

ADDITIONAL INFORMATION ...... 55

Appendix A – Audited Financial Statements of the Authority for the fiscal years ended September 30, 2015 and September 30, 2016 Appendix B – Report of Feasibility Consultant Appendix C – Book-Entry Only System Appendix D – Summary of the Bond Order Appendix E – Proposed Opinions of Bond Counsel Appendix F – Specimen Municipal Bond Insurance Policy

iii [THIS PAGE INTENTIONALLY LEFT BLANK.]

OFFICIAL STATEMENT

ALABAMA STATE PORT AUTHORITY

$125,625,000* $13,950,000* $7,910,000* $133,260,000* Docks Facilities Revenue Docks Facilities Revenue Docks Facilities Revenue Docks Facilities Revenue Refunding Bonds, Refunding Bonds, Refunding Bonds, Refunding Bonds, Series 2017A (AMT) Series 2017B (Non-AMT) Series 2017C (Non-AMT) Series 2017D (Taxable)

INTRODUCTION

General

This Official Statement is furnished in connection with the issuance of the Series 2017 Bonds referred to above (the “Series 2017 Bonds”) by the Alabama State Port Authority (the “Authority”).

The Authority is an agency of the State of Alabama. The Series 2017 Bonds are being issued pursuant to a Master Bond Order executed by the Director of the Authority pursuant to a resolution adopted on October 31, 2006 by the governing body of the Authority, as heretofore supplemented and amended, and as further amended and supplemented by that certain Eleventh Supplemental Bond Order dated ______, 2017 (the “Eleventh Supplemental Bond Order”; and together with the Master Order, as amended and supplemented, being hereinafter referred to as the “Bond Order”). Certain provisions of the Bond Order are described herein under “DESCRIPTION OF THE SERIES 2017 BONDS” and “SECURITY AND SOURCE OF PAYMENT”. For a description of certain other provisions of the Bond Order, see “Appendix D – Summary of the Bond Order”.

The Eleventh Supplemental Bond Order, pursuant to which the Series 2017 Bonds are issued, includes multiple amendments to the Bond Order as it pertains to permitted investments, Reserve Fund instruments and related matters, as described more particularly in Appendix D – Summary of the Bond Order – Amendments to Bond Order”. The purchasers of the Series 2017 Bonds will be deemed to have consented to the amendments and they will become effective upon issuance and delivery of the Series 2017 Bonds.

Pursuant to a Trust Agreement dated as of November 1, 2006 (the “Trust Agreement”) between the Authority and Regions Bank (the “Trustee”), the Authority has, among other things, authorized the Trustee to hold certain of the funds and accounts established under the Bond Order, directed the Trustee to apply the monies in certain funds and accounts for the purposes provided in the Bond Order, and authorized the Trustee to exercise remedies on behalf of the holders of the Series 2017 Bonds in the event of default. See “Appendix D – Summary of the Bond Order”.

The Series 2017 Bonds will be issued as four separate series and will constitute special, limited obligations of the Authority payable, as to principal, redemption premium (if any) and interest, solely out of certain revenues of the Authority pledged to the payment thereof as described herein. The Series 2017 Bonds will be issued on a parity of lien with certain outstanding indebtedness of the Authority more particularly described herein. The Authority will reserve the right to issue additional parity and subordinate obligations subject to certain terms and conditions more particularly described herein. The Authority has no taxing power. The Series 2017 Bonds do not constitute obligations of the State of Alabama, and neither the full faith and credit nor the taxing power of the State of Alabama are pledged to the payment of the principal of, redemption premium (if any) and interest on the Series 2017 Bonds. See “SECURITY AND SOURCE OF PAYMENT”.

The scheduled payment of principal of and interest, when due, on those Series 2017 Bonds maturing in 2023 and thereafter will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Series 2017 Bonds by Assured Guaranty Municipal Corp. (the “Insurer”). See “BOND INSURANCE”.

The Series 2017A Bonds, the Series 2017B Bonds, the Series 2017C Bonds, and the Series 2017D Bonds are being issued as separate series because, as described more particularly in “TAX MATTERS”, the tax attributes of the four series differ. For information regarding the tax treatment of the Series 2017 Bonds, see “TAX MATTERS”.

* Preliminary, subject to change.

The Series 2017 Bonds are being issued for the purpose of (i) refunding certain outstanding debt of the Authority, (ii) funding a debt service reserve fund for the benefit of the Series 2017 Bonds, and (iii) paying the costs of issuing the Series 2017 Bonds. See “THE PLAN OF FINANCING”.

The Series 2017 Bonds are subject to optional and mandatory redemption at the times and under the circumstances set forth herein. See “DESCRIPTION OF THE SERIES 2017 BONDS”. The Series 2017 Bonds are being offered in the denomination of $5,000 or any multiple thereof and may be transferred and exchanged subject to certain terms and conditions set forth herein. See “DESCRIPTION OF THE SERIES 2017 BONDS”.

For a description of certain risk factors and other considerations involved in an investment in the Series 2017 Bonds, see “RISK FACTORS” and “DISCLAIMERS AND OTHER MISCELLANEOUS MATTERS”.

The Authority has covenanted to undertake certain continuing disclosure pursuant to Rule 15c2-12 of the Securities and Exchange Commission. See “CONTINUING DISCLOSURE”.

Changes to the Preliminary Official Statement

This Preliminary Official Statement and the information herein is subject to change, completion, and amendment. A definitive Official Statement will be made available prior to the delivery of the Series 2017 Bonds.

For purposes of this Preliminary Official Statement, selling compensation, delivery dates, and certain other information dependent on pricing of the Series 2017 Bonds have been omitted. Further, for purposes of this Preliminary Official Statement, offering prices, interest rates, aggregate principal amount, principal amount per maturity, and certain other information dependent on pricing of the Series 2017 Bonds have been estimated. Actual information dependent on pricing will be established after pricing of the Series 2017 Bonds and will be reflected in the final Official Statement. Such actual information will vary from the estimates.

Investors should check under the heading “INTRODUCTION–Changes to the Preliminary Official Statement” in the final Official Statement for guidance regarding information dependent on pricing of the Series 2017 Bonds and for guidance regarding other information that is changed between the date of this Preliminary Official Statement and the date of the final Official Statement.

GLOSSARY OF TERMS USED IN OFFICIAL STATEMENT

Certain capitalized terms used frequently in this Official Statement are defined in this section of the Official Statement. In addition, certain capitalized terms used in this Official Statement and not defined in this section are defined in “Appendix D – Summary of the Bond Order”.

“Additional Revenues” shall have the meaning set forth in “Appendix D – Summary of the Bond Order”.

“Additional Senior Lien Bonds” shall have the meaning set forth in “SECURITY AND SOURCE OF PAYMENT”.

“Authority” means the Alabama State Port Authority, an agency of the State of Alabama.

“Available State Tax Revenues” means appropriations available to the Authority under the provisions of the Coal Tax Act and the Oil and Gas Severance Tax Act on an ongoing basis without further action by the Alabama Legislature, which are more particularly described in “AVAILABLE STATE TAX REVENUES” herein.

“Bond Order” shall have the meaning set forth in “INTRODUCTION”.

“Bonds” shall have the meaning set forth in “SECURITY AND SOURCE OF PAYMENT”.

“Docks Facilities” shall have the meaning set forth in “Appendix D – Summary of the Bond Order”.

“Docks Facilities Revenues” shall have the meaning set forth in “Appendix D – Summary of the Bond Order”.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.

“Insured Bonds” means those Series 2017 Bonds maturing in 2023 and thereafter.

“Insurer” means Assured Guaranty Municipal Corp.

“Investment Income” shall have the meaning set forth in “Appendix D – Summary of the Bond Order”.

“Net Revenues Available after Debt Service” means the Docks Facilities Revenues plus Available State Tax Revenues less Operating Expenses.

“Operating Expenses” shall have the meaning set forth in “Appendix D – Summary of the Bond Order”.

“Prior Senior Lien Bonds” shall have the meaning set forth in “SECURITY AND SOURCE OF PAYMENT”.

“Senior Lien Bonds” shall have the meaning set forth in “SECURITY AND SOURCE OF PAYMENT”.

“Series 2006A Bonds” shall mean the Authority’s Docks Facilities Revenue Bonds, Series 2006A, which are outstanding in the aggregate principal amount of $127,305,000.

“Series 2006B Bonds” shall mean the Authority’s Docks Facilities Revenue Bonds, Series 2006B, which are outstanding in the aggregate principal amount of $42,195,000.

“Series 2006D Bonds” shall mean the Authority’s Docks Facilities Revenue Bonds, Series 2006D, which are outstanding in the aggregate principal amount of $21,600,000.

“Series 2008A Bond” shall mean the Authority’s Dock Facilities Revenue Refunding Bond, Series 2008A, which is outstanding in the principal amount of $29,955,000.

“Series 2010 Bonds” shall mean the Authority’s Dock Facilities Revenue Bonds, Series 2010, which are outstanding in the aggregate principal amount of $106,045,000.

“Series 2017 Bonds” means collectively the Series 2017A Bonds, the Series 2017B Bonds, the Series 2017C Bonds, and the Series 2017D Bonds.

“Series 2017A Bonds” means the Authority’s $125,625,000* Docks Facilities Revenue Refunding Bonds (AMT), Series 2017, dated the date of initial delivery, which are being offered by this Official Statement.

“Series 2017B Bonds” means the Authority’s $13,950,000* Docks Facilities Revenue Refunding Bonds, Series 2017B (Non-AMT), dated the date of initial delivery, which are being offered by this Official Statement.

“Series 2017C Bonds” means the Authority’s $7,910,000* Docks Facilities Revenue Refunding Bonds, Series 2017C (Non-AMT), dated the date of initial delivery, which are being offered by this Official Statement.

“Series 2017D Bonds” means the Authority’s $133,260,000* Docks Facilities Revenue Refunding Bonds, Series 2017D (Taxable), dated the date of initial delivery, which are being offered by this Official Statement.

“State” means the State of Alabama.

“Subordinate Obligations” shall have the meaning set forth in “SECURITY AND SOURCE OF PAYMENT”.

“Trustee” means Regions Bank, Mobile, Alabama, which is the trustee, paying agent, and registrar for the Series 2017 Bonds.

* Preliminary, subject to change.

THE PLAN OF FINANCING

General

Refunding Plan

The Authority has heretofore issued the Series 2006A Bonds, the Series 2006B Bonds, the Series 2006D Bonds and the Series 2010 Bonds (collectively, the “Refunded Bonds”), all or a portion of which will be refunded contemporaneously with the issuance of the Series 2017 Bonds. The Series 2006A Bonds and Series 2006D Bonds, which are subject to the alternative minimum tax, will be currently refunded with proceeds of the Series 2017A Bonds. The Series 2006B Bonds, which are not subject to the alternative minimum tax, will be refunded, in part, with proceeds of the Series 2017B Bonds, the Series 2017C Bonds and the Series 2017D Bonds. The Series 2010 Bonds will be refunded with proceeds of the Series 2017D Bonds. For more information concerning the tax treatment of the four subseries of Series 2017 Bonds, see “TAX MATTERS”.

In order to effect the refunding of the Refunded Bonds, the Authority and Regions Bank, Birmingham, Alabama (the “Escrow Trustee”), will enter into an escrow trust agreement (the “Escrow Agreement”) simultaneously with the issuance of the Series 2017 Bonds. Pursuant to the Escrow Agreement, the Authority will establish one or more irrevocable trust funds for the benefit of the holders of the Refunded Bonds (the “Escrow Funds”) and will deposit therein a portion of the proceeds of the Series 2017 Bonds. The amount so deposited in the Escrow Funds will be used to purchase certain United States government securities (the “Escrow Securities”). The cash flow from the Escrow Securities, without reinvestment, when added to any uninvested cash in the Escrow Funds, will be sufficient to pay (i) the principal and interest requirements on the Refunded Bonds from (and including) their next respective principal and interest payment dates through their respective redemption dates and (ii) the redemption price (principal, premium, and accrued interest) of Refunded Bonds maturing after their respective redemption dates, which will be called for redemption on their respective redemption dates. After the Escrow Fund is established, the Refunded Bonds will no longer be considered outstanding. Verification of the sufficiency of cash flow from the Escrow Securities to pay all such debt service requirements on the Refunded Bonds will be made by the verification agent, Samuel Klein and Company, Newark, New Jersey.

SOURCES AND USES OF FUNDS

Series 2017A Bonds

The expected sources and uses of funds for the Series 2017A Bonds are as follows (rounded to the nearest whole dollar):

Sources of Funds Principal Amount of Series 2017A Bonds ...... $125,625,000.00* Transfers from prior debt service/reserve funds ...... Plus: Original Issue Premium ...... Less: Original Issue Discount ...... Transfer from DSRF ...... Total ......

Uses of Funds Deposit to Escrow Fund ...... Deposit to Reserve Fund ...... Expenses of Issuance(1) ...... Total ......

Series 2017B Bonds

The expected sources and uses of funds for the Series 2017B Bonds are as follows (rounded to the nearest whole dollar):

Sources of Funds Principal Amount of Series 2017B Bonds ...... $13,950,000.00* Transfers from prior debt service/reserve funds ...... Plus: Original Issue Premium ...... Less: Original Issue Discount ...... Transfer from DSRF ...... Total ......

Uses of Funds Deposit to Escrow Fund ...... Deposit to Reserve Fund ...... Expenses of Issuance(1) ...... Total ......

Series 2017C Bonds

The expected sources and uses of funds for the Series 2017C Bonds are as follows (rounded to the nearest whole dollar):

Sources of Funds Principal Amount of Series 2017C Bonds ...... $7,910,000.00* Transfers from prior debt service/reserve funds ...... Plus: Original Issue Premium ...... Less: Original Issue Discount ...... Transfer from DSRF ...... Total ......

Uses of Funds Deposit to Escrow Fund ...... Deposit to Reserve Fund ...... Expenses of Issuance(1) ...... Total ......

* Preliminary; subject to change. (1) Includes printing costs, rating agency expenses, legal costs, underwriters’ discount, and other expenses. 5

Series 2017D Bonds

The expected sources and uses of funds for the Series 2017D Bonds are as follows (rounded to the nearest whole dollar):

Sources of Funds Principal Amount of Series 2017D Bonds ...... $133,260,000.00* Transfers from prior debt service/reserve funds ...... Plus: Original Issue Premium ...... Less: Original Issue Discount ...... Transfer from DSRF ...... Total ......

Uses of Funds Deposit to Escrow Fund ...... Deposit to Reserve Fund ...... Expenses of Issuance(1) ...... Total ...... ______* Preliminary; subject to change. (1) Includes printing costs, rating agency expenses, legal costs, underwriters’ discount, and other expenses.

DESCRIPTION OF THE SERIES 2017 BONDS

General Provisions

The Series 2017 Bonds will be fully registered bonds in the denomination of $5,000 or any multiple thereof, will be dated the date of initial delivery, and will be numbered separately from 1 upward.

The Series 2017 Bonds will mature annually on October 1 in the amounts and years set forth on the inside cover page hereof. The Series 2017 Bonds will bear interest at the applicable per annum rates set forth on the inside cover page hereof. Interest shall be computed on the basis of a 360-day year with 12 months of 30 days each. Interest on the Series 2017 Bonds will be payable on each April 1 and October 1, beginning October 1, 2017.

The Series 2017 Bonds will be issued pursuant to the Bond Order. Certain provisions of the Bond Order are described herein under “DESCRIPTION OF THE SERIES 2017 BONDS” and “SECURITY AND SOURCE OF PAYMENT”. For a description of certain other provisions of the Bond Order, see “Appendix D – Summary of the Bond Order”.

Method and Place of Payment

The Series 2017 Bonds will be issued in book-entry only form, as described below under “Book-Entry Only System”, and the method and place of payment will be as provided in the book-entry only system. The provisions set forth in this section below will apply in the event that the use of the Book-Entry Only System for the Series 2017 Bonds is discontinued.

Payment of interest due on each interest payment date will be made by check or draft mailed on such interest payment date to the persons who were registered holders of the Series 2017 Bonds on the regular record date for such interest payment date, which will be the 15th day of the month preceding such interest payment date. Payment of the principal of (and premium, if any, on) the Series 2017 Bonds and payment of accrued interest due upon redemption on any date other than an interest payment date will be made only upon surrender of the Series 2017 Bonds at the principal office of the Trustee (Regions Bank) in Mobile, Alabama.

The holder of Series 2017 Bonds in an aggregate principal amount of $500,000 or more may, upon the terms and conditions of the Bond Order, request payment of debt service by wire transfer to an account of such holder maintained at a bank in the continental United States or by any other method providing for payment in same-day funds that is acceptable to the Trustee.

Redemption of Series 2017A Bonds Prior to Maturity

Optional Redemption. Series 2017A Bonds maturing on October 1, ____ or thereafter, in whole or in part, may be redeemed at the option of the Authority on ______1, ____ or any date thereafter at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date.

Mandatory Redemption of 2017A Term Bonds. The Series 2017A Bonds maturing on October 1, ____ (the “2017A Term Bonds”) are subject to mandatory redemption, by lot, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on October 1 in years and principal amounts (after credit as provided below) as follows:

Year Amount

______

$______of the 2017A Term Bonds will be retired at maturity

Not less than 45 or more than 90 days prior to each mandatory redemption date with respect to the 2017A Term Bonds, the Registrar will proceed to select for redemption, by lot, 2017A Term Bonds of the required maturity or portions thereof in an aggregate principal amount equal to the amount required to be redeemed and shall call such 2017A Term Bonds or portions thereof for redemption on such mandatory redemption date. The Authority may, not less than 90 days prior to any such mandatory redemption date, direct that any or all of the following amounts be credited against the 2017A Term Bonds scheduled for redemption on such date: (i) the principal amount of 2017A Term Bonds of the required maturity delivered by the Authority to the Trustee for cancellation and not previously claimed as a credit; and (ii) the principal amount of 2017A Term Bonds of the required maturity previously redeemed pursuant to the optional redemption provisions with respect to the Series 2017A Bonds and not previously claimed as a credit.

Provisions Generally Applicable to Redemption Prior to Maturity. Except in the case of mandatory redemption of 2017A Term Bonds, if less than all Series 2017A Bonds Outstanding are to be redeemed, the particular maturities or portions thereof to be redeemed may be specified by the Authority by written notice to the Trustee, or, in the absence of timely receipt by the Trustee of such notice, shall be selected by the Trustee by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that (i) the principal amount of Series 2017A Bonds of each maturity to be redeemed must be $5,000 or an integral multiple thereof, and (ii) if less than all Series 2017A Bonds with the same stated maturity are to be redeemed, the Series 2017A Bonds of such maturity to be redeemed shall be selected by lot by the Trustee.

Redemption of Series 2017B Bonds Prior to Maturity

Optional Redemption. Series 2017B Bonds maturing on October 1, ____ or thereafter, in whole or in part, may be redeemed at the option of the Authority on ______1, ____ or any date thereafter at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date.

Mandatory Redemption of 2017B Term Bonds. The Series 2017B Bonds maturing on October 1, ____ (the “2017B Term Bonds”) are subject to mandatory redemption, by lot, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on October 1 in years and principal amounts (after credit as provided below) as follows:

Year Amount

______

$______of the 2017B Term Bonds will be retired at maturity

Not less than 45 or more than 90 days prior to each mandatory redemption date with respect to the 2017B Term Bonds, the Registrar will proceed to select for redemption, by lot, 2017B Term Bonds of the required maturity or portions thereof in an aggregate principal amount equal to the amount required to be redeemed and shall call such 2017B Term Bonds or portions thereof for redemption on such mandatory redemption date. The Authority may, not less than 90 days prior to any such mandatory redemption date, direct that any or all of the following amounts be credited against the 2017B Term Bonds scheduled for redemption on such date: (i) the principal amount of 2017B Term Bonds of the required maturity delivered by the Authority to the Trustee for cancellation and not previously claimed as a credit; and (ii) the principal amount of 2017B Term Bonds of the required maturity previously redeemed pursuant to the optional redemption provisions with respect to the Series 2017B Bonds and not previously claimed as a credit.

Provisions Generally Applicable to Redemption Prior to Maturity. Except in the case of mandatory redemption of 2017B Term Bonds, if less than all Series 2017B Bonds Outstanding are to be redeemed, the particular maturities or portions thereof to be redeemed may be specified by the Authority by written notice to the Trustee, or, in the absence of timely receipt by the Trustee of such notice, shall be selected by the Trustee by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that (i) the principal amount of Series 2017B Bonds of each maturity to be redeemed must be $5,000 or an integral multiple thereof, and (ii) if less than all Series 2017B Bonds with the same stated maturity are to be redeemed, the Series 2017B Bonds of such maturity to be redeemed shall be selected by lot by the Trustee.

Redemption of Series 2017C Bonds Prior to Maturity

Optional Redemption. Series 2017C Bonds maturing on October 1, ____ or thereafter, in whole or in part, may be redeemed at the option of the Authority on ______1, ____ or any date thereafter at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date.

Mandatory Redemption of 2017C Term Bonds. The Series 2017C Bonds maturing on October 1, ____ (the “2017C Term Bonds”) are subject to mandatory redemption, by lot, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on October 1 in years and principal amounts (after credit as provided below) as follows:

Year Amount

______

$______of the 2017C Term Bonds will be retired at maturity

Not less than 45 or more than 90 days prior to each mandatory redemption date with respect to the 2017C Term Bonds, the Registrar will proceed to select for redemption, by lot, 2017C Term Bonds of the required maturity or portions thereof in an aggregate principal amount equal to the amount required to be redeemed and shall call such 2017C Term Bonds or portions thereof for redemption on such mandatory redemption date. The Authority may, not less than 90 days prior to any such mandatory redemption date, direct that any or all of the following amounts be credited against the 2017C Term Bonds scheduled for redemption on such date: (i) the principal amount of 2017C Term Bonds of the required maturity delivered by the Authority to the Trustee for cancellation and not previously claimed as a credit; and (ii) the principal amount of 2017C Term Bonds of the required maturity previously redeemed pursuant to the optional redemption provisions with respect to the Series 2017C Bonds and not previously claimed as a credit.

Provisions Generally Applicable to Redemption Prior to Maturity. Except in the case of mandatory redemption of 2017C Term Bonds, if less than all Series 2017C Bonds Outstanding are to be redeemed, the particular maturities or portions thereof to be redeemed may be specified by the Authority by written notice to the Trustee, or, in the absence of timely receipt by the Trustee of such notice, shall be selected by the Trustee by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that (i) the principal amount of Series 2017C Bonds of each maturity to be redeemed must be $5,000 or an integral multiple thereof, and (ii) if less than all Series 2017C Bonds with the same stated maturity are to be redeemed, the Series 2017C Bonds of such maturity to be redeemed shall be selected by lot by the Trustee.

Redemption of Series 2017D Bonds Prior to Maturity

Optional Redemption. Series 2017D Bonds maturing on October 1, ____ or thereafter, in whole or in part, may be redeemed at the option of the Authority on ______1, ____ or any date thereafter at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date.

Mandatory Redemption of 2017D Term Bonds. The Series 2017D Bonds maturing on October 1, ____ (the “2017D Term Bonds”) are subject to mandatory redemption, by lot, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on October 1 in years and principal amounts (after credit as provided below) as follows:

Year Amount

______

$______of the 2017D Term Bonds will be retired at maturity

Not less than 45 or more than 90 days prior to each mandatory redemption date with respect to the 2017D Term Bonds, the Registrar will proceed to select for redemption, by lot, 2017D Term Bonds of the required maturity or portions thereof in an aggregate principal amount equal to the amount required to be redeemed and shall call such 2017D Term Bonds or portions thereof for redemption on such mandatory redemption date. The Authority may, not less than 90 days prior to any such mandatory redemption date, direct that any or all of the following amounts be credited against the 2017D Term Bonds scheduled for redemption on such date: (i) the principal amount of 2017D Term Bonds of the required maturity delivered by the Authority to the Trustee for cancellation and not previously claimed as a credit; and (ii) the principal amount of 2017D Term Bonds of the required maturity previously redeemed pursuant to the optional redemption provisions with respect to the Series 2017D Bonds and not previously claimed as a credit.

Provisions Generally Applicable to Redemption Prior to Maturity. Except in the case of mandatory redemption of 2017D Term Bonds, if less than all Series 2017D Bonds Outstanding are to be redeemed, the particular maturities or portions thereof to be redeemed may be specified by the Authority by written notice to the Trustee, or, in the absence of timely receipt by the Trustee of such notice, shall be selected by the Trustee by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that (i) the principal amount of Series 2017D Bonds of each maturity to be redeemed must be $5,000 or an integral multiple thereof, and (ii) if less than all Series 2017D Bonds with the same stated maturity are to be redeemed, the Series 2017D Bonds of such maturity to be redeemed shall be selected by lot by the Trustee.

General Redemption Provisions

Any redemption will be made upon notice of not less than 30 or more than 90 days by registered or certified mail to the holders of Series 2017 Bonds to be redeemed.

If a trust is established for payment of less than all Series 2017 Bonds of a particular series and maturity, the Series 2017 Bonds of such maturity to be paid from the trust shall be selected by the Trustee within 7 days after such trust is established and shall be identified by a separate CUSIP number or other designation satisfactory to the Trustee. The Trustee shall notify holders whose Series 2017 Bonds (or portions thereof) have been selected for payment from such trust and shall direct such holders to surrender their Series 2017 Bonds to the Trustee in exchange for Series 2017 Bonds with the appropriate designation.

Upon any partial redemption of a Series 2017 Bond, such Series 2017 Bond shall be surrendered to the Trustee in exchange for one or more new Series 2017 Bonds in authorized form for the unredeemed portion of principal.

Any Series 2017 Bond (or portion thereof) which is to be redeemed must be surrendered to the Trustee for payment of the redemption price. Series 2017 Bonds (or portions thereof) duly called for redemption will cease to bear interest after the redemption date, unless the Authority defaults in payment of the redemption price.

Registration and Exchange

The Series 2017 Bonds will be issued in book-entry only form, as described below under “Book-Entry Only System”, and the method for registration and exchange of the Series 2017 Bonds will be as provided in the book-entry only system. The provisions set forth in this section below will apply in the event that the use of the Book-Entry Only System for the Series 2017 Bonds is discontinued.

The Series 2017 Bonds are transferable only on the bond register maintained at the principal office of the Trustee. Upon surrender of a Series 2017 Bond to be transferred, properly endorsed, a new Series 2017 Bond will be issued to the designated transferee.

The Series 2017 Bonds will be issued in denominations of $5,000 or any multiple thereof and, subject to the provisions of the Bond Order, may be exchanged for a like aggregate principal amount of Series 2017 Bonds, of any authorized denominations and of the same series and maturity, as requested by the holder surrendering the same.

No service charge shall be made for any transfer or exchange, but the Authority may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Book-Entry Only System

The Series 2017 Bonds are issuable as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York, to which debt service payments on the Series 2017 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2017 Bonds. Individual purchases of the Series 2017 Bonds will be made in book-entry only form, and individual purchasers (“Beneficial Owners”) of the Series 2017 Bonds will not receive physical delivery of bond certificates.

So long as DTC or its nominee is the registered owner of the Series 2017 Bonds, disbursement of debt service payments to DTC is the responsibility of the Trustee, disbursement of debt service payments to DTC Participants is the responsibility of DTC, and disbursement of debt service payments to the Beneficial Owner is the responsibility of DTC Participants or Indirect Participants as more fully described herein.

For more details on DTC and the book-entry only system, see Appendix C to this Official Statement.

Authority for Issuance

The Series 2017 Bonds are being issued under the authority of the constitution and laws of the State of Alabama, including particularly Chapter 1 of Title 33 (Sections 33-1-1 et seq.) and Article 7 of Chapter 2 of Title 33 (Sections 33-2-180 et seq.) of the Code of Alabama (1975), which authorizes (1) the Authority to issue its docks Facilities Revenue Refunding Bonds in such aggregate principal amounts as the Authority may determine to be advisable, for the purpose of providing funds for the acquisition, construction, equipment or improvement of Docks Facilities, together with the expenses incident to the authorization, issuance and sale of such bonds, and (2) the Authority to issue its bonds for the purpose of refunding any or all of the bonds then outstanding, together with any interest thereon whether due and unpaid at the time of issuance of such refunding bonds or not, and with any premium that may be necessary to be paid in order to redeem or retire those outstanding bonds proposed to be refunded.

Amendments to Bond Order

The Eleventh Supplemental Bond Order, pursuant to which the Series 2017 Bonds are issued, includes multiple amendments to the Bond Order as it pertains to permitted investments, Reserve Fund instruments and related matters, as described more particularly in Appendix D – Summary of the Bond Order – Amendments to Bond Order”. The sole holder of the Series 2008A Bond has consented to such amendments. The purchasers of the Series 2017 Bonds will be deemed to have consented to the amendments and they will become effective upon issuance and delivery of the Series 2017 Bonds.

The Bond Order provides that underwriters of Additional Senior Lien Bonds issued after the issuance of the Series 2017 Bonds may, on behalf of such Additional Senior Lien Bonds issued after the issuance of the Series 2017 Bonds, consent to any amendment of the Bond Order which is described in the official statement or other offering document with respect to such Additional Senior Lien Bonds and such consent shall be treated as consent of the holders of such Additional Senior Lien Bonds.

SECURITY AND SOURCE OF PAYMENT

General

The Series 2017 Bonds are special, limited obligations of the Authority payable solely out of and secured by a pledge of and lien on (i) Docks Facilities Revenues and (ii) any income from the investment thereof.

The Authority previously has issued its $61,300,000 Docks Facilities Revenue Refunding Bond, Series 2008A, which is outstanding as of the date of this Official Statement in the principal amount of $36,575,000 (the “Series 2008A Bond” or the “Prior Senior Lien Bonds”). The Prior Senior Lien Bonds will remain outstanding after the issuance of the Series 2017 Bonds and will be secured by a pledge and assignment of the Docks Facilities Revenues on parity of lien with the pledge thereof in favor of the Series 2017 Bonds.

Additionally, the fixed payments to be made by the Authority pursuant to its existing swap transaction with Merrill Lynch Capital Services, Inc. (see “Swap Transaction” below) will be on a parity of lien with the Prior Senior Lien Bonds and the Series 2017 Bonds. Additional bonds may be issued (“Senior Lien Bonds”) which may be secured by Docks Facilities Revenues on a parity of lien with the Prior Senior Lien Bonds and the Series 2017 Bonds, subject to certain limitations. See “Additional Senior Lien Bonds” below. The Authority also has reserved the right to incur additional subordinated indebtedness, subject to certain limitations. See “Subordinate Obligations” below. The Authority also has reserved the right to enter into additional interest rate hedge agreements, subject to certain limitations. See “Appendix D – Summary of the Bond Order”.

In addition to the Docks Facilities Revenues, under existing laws of the State of Alabama, certain revenues under the Coal Tax Act and the Oil and Gas Severance Tax Act described more particularly below (the “Available State Tax Revenues”) are presently available to the Authority if there are insufficient monies otherwise available to the Authority to pay the Authority’s operating expenses and debt service on the Authority’s outstanding indebtedness. However, the Available State Tax Revenues are not pledged and, under the terms of existing state legislation, cannot be pledged for the benefit of the Series 2017 Bonds or any other obligations or indebtedness of the Authority. The Coal Tax Act is subject to renewal by act of the Alabama Legislature, failing which it will expire in October, 2021. In addition, the Legislature of the State of Alabama has reserved the right at any time to repeal, rescind or modify the legislation providing for the levy, collection or use of any or all of the Available State Tax Revenues by the Authority. See “AVAILABLE STATE TAX REVENUES” below.

The Series 2017 Bonds shall not be or constitute general obligations or indebtedness of the Authority, the State of Alabama, or any city, county or other subdivision thereof, but shall be special, limited obligations of the Authority, payable solely from and secured by a lien upon and pledge of the Docks Facilities Revenues and certain of the Special Funds established under the Bond Order on a parity with the pledge thereof in favor of all Series of Senior Lien Bonds, if any, outstanding under the Bond Order. No holder of any Series 2017 Bond shall ever have the right to compel the exercise of any taxing power of the State or any city, county or other political subdivision thereof to pay any such Series 2017 Bond. The Series 2017 Bonds are not secured by any mortgage, security interest or other lien on the land or facilities comprising the Docks Facilities or any other property or facilities of the Authority.

For a description of certain other provisions of the Bond Order, see “Appendix D – Summary of the Bond Order”.

Description of Docks Facilities Revenues

The Docks Facilities Revenues include all gross revenues of the Authority derived from fees and charges for services by the Authority for the use of the Authority’s Docks Facilities. See “THE AUTHORITY” below. Such fees and charges include, without limitation, handling and processing charges, tariffs, surcharges and other fees and lease and rental payments. The Docks Facilities Revenues specifically exclude any Available State Tax Revenues and any amounts received by the Authority from appropriations to the Authority made by the State. See “AVAILABLE STATE TAX REVENUES” below.

Docks Facilities Revenues for the Authority’s fiscal year ended September 30, 2016, were derived approximately 40.6% from coal handling and storage, approximately 28.6% from general cargo handling and intermodal facilities, approximately 16.1% from the Authority’s Terminal Railroad, approximately 0.2% from bulk handling and warehouse facilities, and approximately 14.5% from other facilities. Because the Authority’s bulk material handling and warehouse facilities currently are used primarily as supplemental capacity to the main facility for

the Authority’s coal handling and storage operations, McDuffie Terminal, if revenues from these two facilities are combined, Docks Facilities Revenues for the Authority’s fiscal year ended September 30, 2016, were derived approximately 40.8% from coal handling and storage. See “AUTHORITY OPERATIONS” below.

Debt Service Reserve Fund

Pursuant to the Bond Order, the Authority has established a debt service reserve fund (the “Debt Service Reserve Fund” or the “Reserve Fund”) for the benefit of the Prior Senior Lien Bonds and the Series 2017 Bonds and other Senior Lien Bonds, if any, issued under the Bond Order (collectively, the “Senior Lien Bonds”). When the Series 2017 Bonds are issued, the Authority will be required to deposit in the Reserve Fund an amount which, when added to amounts then on deposit in the Reserve Fund, will be not less than the Debt Service Reserve Requirement immediately following the issuance of the Series 2017 Bonds is equal to the lesser of 10% of the principal amount of the Senior Lien Bonds then outstanding; the maximum annual debt service on the Senior Lien Bonds then outstanding; and 125% of the average debt service on the Senior Lien Bonds then outstanding (the “Debt Service Reserve Fund Requirement”).

The Authority has covenanted in the Bond Order to pay into the Reserve Fund, simultaneously with the issuance of any Senior Lien Bonds, an amount which, when added to amounts then on deposit in the Reserve Fund, will be not less than the Debt Service Reserve Fund Requirement immediately following the issuance of such Senior Lien Bonds. Amounts held in the Reserve Fund shall be applied solely to the payment of principal and interest on outstanding Senior Lien Bonds when monies in the Debt Service Fund are insufficient for such purpose. Whenever monies in the Reserve Fund are applied for that purpose, the Bond Order requires that the Reserve Fund shall be replenished in accordance with the procedures described therein.

The Authority has reserved the right to issue additional Senior Lien Bonds which are not secured by the Debt Service Reserve Fund.

Maintenance of Rates and Charges

In the Bond Order, the Authority covenants that each Fiscal Year it will charge and collect such rates and charges for use of the services of the Docks Facilities and will restrict Operating Expenses so that:

(i) The sum of Net Revenues Available for Debt Service and Investment Income in each Fiscal Year shall not be less than the greater of (a) 125% of Debt Service on all Senior Lien Bonds then outstanding payable during such Fiscal Year and (b) 100% of the sum of Debt Service on Senior Lien Bonds and Subordinate Obligations and all required deposits in the Debt Service Reserve Fund, Subordinate Debt Service Reserve Fund and Renewal and Replacement Fund, and all amounts payable from the Sub-Subordinate Debt Service Fund during that Fiscal Year (the “Net Revenues Available for Debt Service test”);

(ii) The sum of Docks Facilities Revenues, Additional Revenues and Investment Income for each Fiscal Year shall be at least equal to 100% of the sum of (a) Operating Expenses for such Fiscal Year, (b) the total amount of Debt Service on all outstanding Senior Lien Bonds and Subordinate Obligations for such Fiscal Year, and (c) the deposits, if any, required to be made during such Fiscal Year to the Debt Service Reserve Fund and the Subordinate Debt Service Reserve Fund (the “Annual Receipts test”); and

(iii) Docks Facilities Revenues and Investment Income for each Fiscal Year shall be at least equal to 150% of the sum of (a) the total amount of Debt Service on all outstanding Senior Lien Bonds for such Fiscal Year and (b) the deposits, if any, required to be made under the Bond Order during such Fiscal Year to the Debt Service Reserve Fund and the Subordinate Debt Service Reserve Fund (the “Docks Facilities Revenue test”).

For purposes of clause (i), above, “Net Revenues Available for Debt Service” for any Fiscal Year shall include any amounts transferred from the Revenue Stabilization Fund to the Revenue Fund during such Fiscal Year, but shall not include any amounts transferred from the Revenue Fund to the Revenue Stabilization Fund during that period. For purposes of clauses (ii) and (iii) above, “Docks Facilities Revenues” for any Fiscal Year shall include any amounts transferred from the Revenue Stabilization Fund to the Revenue Fund during such Fiscal Year, but shall not include any amounts transferred from the Revenue Fund to the Revenue Stabilization Fund during such Fiscal Year.

In the Bond Order, the Authority also covenants that if during any Fiscal Year the Net Revenues Available for Debt Service for such Fiscal Year are less than as described above, the Authority will employ an Independent Consultant to make recommendations in the Authority’s operations so that it will produce Net Revenues Available for Debt Service to meet the required amounts. The Authority is required under the Bond Order to adopt and carry out the 12

recommendations of such Independent Consultant, and provided it does so, its failure to meet the foregoing requirements does not constitute an event of default under the Bond Order.

Establishment of Rates and Charges

The Authority has substantial discretion in fixing the rates and charges for services rendered by the Authority, subject to market conditions. The Authority’s rates and charges are not subject to regulation by the Alabama Public Service Commission or any other state or federal regulatory body.

Swap Transaction

In December, 2002, the Authority entered into a swaption contract with Merrill Lynch Capital Services, Inc. in order to monetize certain expected debt service savings in respect of the Authority’s callable Docks Facilities Revenue Bonds, Series 1996. This swaption contract gave Merrill Lynch the option to enter into a variable-to-fixed interest rate swap effective October 1, 2006. Merrill Lynch exercised its option under the swaption contract on July 18, 2006, which required the Authority to commence paying a fixed interest rate of 5.38% and the Authority to receive a variable interest rate calculated as 67% of the one-month LIBOR rate on an initial notional amount of $60,455,000. The swap agreement with Merrill Lynch expires on October 1, 2021. The variable rate debt service on the Series 2008A Bond is hedged by the swap agreement As of September 30, 2015 and 2016, the swap had a negative fair value of approximately $6,954,378 and $5,242,924, respectively, and in accordance with GASB 53, is recorded in the accompanying financial statements. The swap value is calculated using an industry accepted option pricing model that uses market interest rates and a volatility assumption on the valuation date. The interest rate and volatility data is used to calculate the present value of the potential future cash flows of the swap.

Additional Senior Lien Bonds

The Bond Order provides that the Authority may issue additional bonds, notes or other obligations (“Additional Senior Lien Bonds”) on a parity with the Prior Senior Lien Bonds and the Series 2017 Bonds as to the lien on and payment from the Docks Facilities Revenues for any one or more of the following purposes: (i) to acquire and construct certain capital improvements, including the payment of capitalized interest with respect thereto, and (ii) to refund or retire bonds then outstanding under the Bond Order.

No such Additional Senior Lien Bonds may be issued or incurred under the Bond Order unless the Additional Senior Lien Bonds tests set forth in the Master Bond Order have been met. See “Appendix D – Summary of the Bond Order”.

Prior to the issuance of such Additional Senior Lien Bonds the Authority must deliver to the Trustee certain prescribed documents, which are described more particularly in “Appendix D – Summary of the Bond Order”. The Series 2017 Bonds are being issued by the Authority as Additional Senior Lien Bonds.

Subordinate Obligations

The Authority may issue at any time bonds, notes or other evidences of indebtedness (“Subordinate Obligations”) payable out of and secured by a pledge of Docks Facilities Revenues subject and subordinate to the pledge of Docks Facilities Revenues securing the Senior Lien Bonds, provided that such Subordinate Obligations are made expressly subordinate to the lien of the Prior Senior Lien Bonds and the Series 2017 Bonds. The Authority may also incur “Sub-Subordinate Obligations” (that is, termination or other unscheduled payments required to be made in connection with an interest rate hedge agreement) secured by a pledge of Docks Facilities Revenues that is subject and subordinate to the pledge securing the Senior Lien Bonds, the Subordinate Obligations and the payment of Operating Expenses.

The United States Bankruptcy Code

Chapter 9 of the United States Bankruptcy Code permits a municipality – that is, a political subdivision or public agency or instrumentality of a state – that is insolvent or unable to meet its debts as they come due to file a petition for relief in the federal bankruptcy courts if it is specifically authorized to do so by state law and can satisfy certain statutory requirements related to pre-filing negotiations with its creditors. The term “municipality” is broad enough to include revenue-producing bodies that provide services which are paid for by users rather than by general taxes; however, although existing Alabama statutes currently authorize certain political subdivisions in Alabama to file petitions for relief under Chapter 9, prospective purchasers of the Series 2017 Bonds should assume that, at present,

existing Alabama statutes do not authorize the Authority to file such a petition for relief. However, Alabama law could be changed during the life of the Series 2017 Bonds to permit the Authority to file such a petition for relief.

If Alabama law were changed to permit the Authority to file for relief under Chapter 9 of the United States Bankruptcy Code, bankruptcy proceedings by the Authority could have adverse effects on holders of the Series 2017 Bonds, including (i) delay in the enforcement of their remedies, (ii) subordination of their claims to the claims of those supplying goods and services to the Authority necessary for operation of the Authority’s Docks Facilities after the initiation of bankruptcy proceedings and to the administrative expenses of bankruptcy proceedings, and (iii) imposition without their consent of a plan for the adjustment of the debtor’s debts that reduces or delays payment on the Series 2017 Bonds. Such a plan of adjustment, when confirmed by the bankruptcy court, binds all creditors who had notice or actual knowledge of the proceedings and discharges all claims against the political subdivision unless excepted from discharge by the plan or the order confirming the plan. Among other conditions for confirmation, the plan must either be accepted by each class of claims or interests that is impaired under the plan, or accepted by at least one impaired class if the plan is otherwise confirmable, does not discriminate unfairly, and is fair and equitable. An impaired class accepts a plan only if it has been accepted by at least 2/3 in amount and more than 50% in number of the allowed claims of such class that vote to accept or reject the plan.

Under existing law, a petition filed under Chapter 9 of the Bankruptcy Code does not operate as a stay of application of pledged special revenues to payment of debt secured by such revenues. Thus, an automatic stay under Chapter 9 should not be effective to prevent payment of principal and interest on the Series 2017 Bonds from the Docks Facilities Revenues.

BOND INSURANCE

BOND INSURANCE POLICY

Concurrently with the issuance of the Insured Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Insured Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Insured Bonds when due as set forth in the form of the Policy included as Appendix F to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

ASSURED GUARANTY MUNICIPAL CORP.

AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.

AGM’s financial strength is rated “AA” (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”), “AA+” (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”) and “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

Current Financial Strength Ratings

On July 27, 2016, S&P issued a credit rating report in which it affirmed AGM’s financial strength rating of “AA” (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take.

On August 8, 2016, Moody’s published a credit opinion affirming its existing insurance financial strength rating of “A2” (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody’s may take.

On December 14, 2016, KBRA issued a financial guaranty surveillance report in which it affirmed AGM’s insurance financial strength rating of “AA+” (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take.

For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Capitalization of AGM

At September 30, 2016, AGM’s policyholders’ surplus and contingency reserve were approximately $3,891 million and its net unearned premium reserve was approximately $1,378 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of AGM, AGM’s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM’s indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles.

Incorporation of Certain Documents by Reference

Portions of the following documents filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:

(i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (filed by AGL with the SEC on February 26, 2016);

(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 (filed by AGL with the SEC on May 5, 2016);

(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 (filed by AGL with the SEC on August 4, 2016); and

(iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016 (filed by AGL with the SEC on November 4, 2016).

All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Insured Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding AGM included herein under the caption “BOND INSURANCE – Assured Guaranty Municipal Corp.” or included in a document incorporated by reference herein (collectively, the “AGM Information”) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. 15

Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

Miscellaneous Matters

AGM makes no representation regarding the Insured Bonds or the advisability of investing in the Insured Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “BOND INSURANCE”.

AVAILABLE STATE TAX REVENUES

General

The Alabama Legislature has enacted legislation which makes available the tax revenues described below for the benefit of the Authority (the “Available State Tax Revenues”). See “RISK FACTORS – Dependence on Certain State Tax Revenues.” The revenues described below are available, if necessary, to pay debt service on the Series 2017 Bonds; however, such revenues are not pledged to secure payment of the Series 2017 Bonds and the Authority will not be obligated to use such revenues to pay debt service on the Series 2017 Bonds. The legislation providing for such taxes expressly reserves the right to repeal, rescind or modify such taxes. The Authority has covenanted in the Bond Order to use its best efforts to seek appropriations from the Alabama Legislature for use by the Authority in paying Operating Expenses, including appropriations under the Coal Tax Act and Oil and Gas Severance Tax Act. The Authority further covenants to take all steps necessary to obtain payment of appropriations due under the Coal Tax Act and the Oil and Gas Severance Tax Act before the end of each quarter during which the Authority becomes entitled to such appropriation.

Coal Severance Tax

Legislation was enacted in 1972 (referred to herein as the Coal Tax Act) which permits the proceeds from a special excise tax at the rate of 13.5 cents per ton of coal severed in the State of Alabama (the “Coal Severance Tax”) to be transferred to the Authority and permits, under certain circumstances, the Authority to use such proceeds for certain purposes. The proceeds of such Coal Severance Tax are required initially to be deposited in a trust fund (the “Bulk Handling Trust Fund”). At the close of each fiscal year, subject to certain procedural and documentary requirements, there is required to be transferred to the Authority out of such trust fund an amount equal to the smaller of (i) the amount of any deficiency in revenues derived by the Authority from its coal handling and storage facilities to pay the aggregate of (a) the expenses (exclusive of depreciation) incurred in operating and maintaining the coal handling and storage facilities of the Authority for such fiscal year and (b) the principal and interest due in such year on the bonds of the Authority for the payment of which revenues from such coal handling and storage facilities have been pledged, or (ii) the balance held in the above-referenced trust fund.

The Authority has not required any of the proceeds of the Coal Severance Tax since 1988. In a given fiscal year, if proceeds of such tax are not required to be paid to the Authority, then, under the terms of the legislation, such proceeds are required to be transferred to the General Fund of the State of Alabama. The proceeds of such tax may not be pledged to pay debt service on any Bonds of the Authority. Collections from the levy of the Coal Severance Tax for the last five fiscal years of the State were as follows:

Fiscal Year Collections 2016 $1,269,110 2015 2,029,640 2014 2,263,318 2013 4,915,242* 2012 231,040* ______Source: State of Alabama Department of Finance; State of Alabama Department of Revenue. * The amount shown for FY 2013 includes $2,272,894 that should properly be credited to collections in FY 2012.

Under the legislation relating to the Coal Severance Tax, as most recently amended, the tax will terminate in October, 2021 unless further extended by the Legislature. The Coal Severance Tax has been extended numerous times since it was first enacted.

Oil and Gas Severance Tax

Legislation was enacted in August 1987 (referred to herein as the Oil and Gas Severance Tax Act) to provide that the first $9,500,000 of the net amount derived from the levy of a special excise tax at the general rate of 8% (with certain exceptions) on the production of oil and gas in the State of Alabama (the “Oil and Gas Severance Tax”) shall be credited to an account established in the Treasury of the State of Alabama and known as the “Alabama Docks Facilities Contingency Trust Fund”. Such legislation provides that during the first twenty days of each quarter of each fiscal year of the State, beginning with the fiscal year commencing October 1, 1987, the Director of the Authority shall notify the Director of Finance of the State of Alabama, in writing, as to whether the revenues anticipated to be derived by the Authority from the operation of its facilities for that quarter, plus those monies the Director of the Authority anticipates will be made available during that quarter pursuant to the proceeds of the coal severance tax referred to above, will be sufficient to pay the aggregate of (1) the expenses anticipated to be incurred in operating and maintaining the Authority’s coal handling and storage facilities during that quarter (including depreciation for that quarter not to exceed $500,000), (2) the expenses anticipated to be incurred in connection with operating and maintaining all of the Authority’s other facilities during that quarter (exclusive of depreciation), and (3) an amount equal to the principal and interest that has or will come due during that quarter on (a) those bonds of the Authority for the payment of principal and interest on which the revenues of the Authority’s coal handling and storage facilities have been pledged and for which payment has not otherwise been provided through the establishment of a trust or escrow fund making provision for the payment or retirement thereof, and (b) all other bonds or other obligations of the State of Alabama or of the Authority for payment of principal of and interest on which any of the revenues of the Authority have been pledged and for which payment has not otherwise been provided through the establishment of a trust or escrow fund making provision for the payment or retirement thereof.

Upon receipt of such notification, and such supporting documentation as the Director of Finance of the State may specify, there shall be transferred and paid out of the Alabama State Docks Contingency Trust Fund to the Authority an amount equal to the lesser of (i) the amount of such expected deficiency or (ii) such an amount as shall then be contained in, and as shall during the remainder of the then current quarter of the fiscal year be deposited to the credit of, the Alabama State Docks Facilities Contingency Trust Fund. The legislation provides that similar deficiency amounts shall be paid to the Authority during each quarter of each fiscal year thereafter. Within forty-five days after the close of the third quarter of each fiscal year, any monies then contained in, and as shall during the remainder of the fourth quarter of the fiscal year be deposited to the credit of, the Alabama State Docks Facilities Contingency Trust Fund, except for an amount equal to the amount anticipated to be needed by the Authority during the fourth quarter of the fiscal year to satisfy the expected deficiency, if any, for that quarter, shall be transferred out of the Alabama State Docks Facilities Contingency Trust Fund and deposited to the credit of the General Fund of the State of Alabama.

The legislation provides that, notwithstanding any provision of or implication in the legislation to the contrary, no amount transferred and paid to the Authority pursuant to such legislation shall be pledged by the Authority to pay principal of or interest on any bonds or other obligations issued by or for the benefit of the Authority, nor shall such legislation be deemed to be a contract between the State of Alabama or the Authority and the holders of any bonds or other obligations issued by or for the benefit of the Authority. The legislation further provides that no holders of any bonds issued by or for the benefit of the Authority shall be deemed beneficiaries of such legislation or the appropriations, payments or transfers provided for therein and that the amounts appropriated or ordered transferred and paid to or for the benefit of the Authority constitute voluntary payments by the State of Alabama to or in aid of the Authority. Since enactment of the legislation, the Authority has not had to notify the Director of Finance as to any insufficiency of revenues. The legislation does not provide for a termination date for such payments to the Authority as are provided for therein.

Collections from the levy of the Oil and Gas Severance Tax for the last five years of the State were as follows: Fiscal Year Collections(1) 2016 $28,698,298 2015 51,115,026 2014 82,508,791 2013 86,007,617 2012 83,429,597 ______Source: State of Alabama Department of Finance; State of Alabama Department of Revenue. (1) Only the first $9,500,000 of such tax revenues are required to be credited to the Alabama Docks Facilities Contingency Trust Fund, as described above.

OTHER GOVERNMENTAL SUPPORT

Conditional Appropriations

In 1987, legislation was adopted by the Legislature of the State of Alabama appropriating up to $3,500,000 to the Authority for the fiscal year commencing October 1, 1987 and ending September 30, 1988. The legislation provided that such appropriation was conditional upon the availability of funds in the General Fund of the State of Alabama and that such monies would remain in the General Fund unless and until the Authority could demonstrate to the Director of Finance of the State and to the satisfaction of the Governor that there was a demonstrated need for all or a portion of such conditional appropriation. Such appropriation was not used by the Authority and lapsed on September 30, 1988. In the Bond Order (and in bond orders relating to prior series of the Authority’s bonds), the Authority has covenanted to use its best efforts to obtain similar appropriations from the Legislature of Alabama to pay Operating Expenses in each year until final payment of the Authority’s bonds. Pursuant to such efforts, similar legislation has been enacted by the Legislature to make a conditional appropriation in the same amount to the Authority for each fiscal year since the fiscal year ending September 30, 1988 through fiscal year ending September 30, 2017, but none of any such appropriations have been used by the Authority except for the fiscal year ending September 30, 1996, during which the Authority received the full $3,500,000 conditional appropriation which allowed the Authority to fully discharge an obligation to the United States Corps of Engineers of a like amount related to the Authority’s share of the cost of deepening a portion of the Mobile Ship Channel that otherwise was due to be paid in installments of principal and interest over an extended payment period. No assurances can be given that such appropriations will continue to be made in future years.

Capital Grants

In addition to the Available State Tax Revenues (which are available to the Authority without additional action of the Alabama Legislature) and conditional appropriations (which require action of the Alabama Legislature), both the State of Alabama and the federal government award grants to the Authority from time to time for particular capital purposes. For example, the cost of the Authority’s Choctaw Point Container Terminal, opened in 2008, was paid for almost entirely out of grants from the State of Alabama ($80,000,000) and the United States government ($59,800,000). See “AUTHORITY OPERATIONS”. During fiscal years ended September, 2015 and 2016, the Authority recorded approximately $4,196,000 and $5,419,000, respectively, for federal grants relating to specific capital improvements more particularly described below.

During fiscal years ended September 30, 2015 and 2016, the Authority recorded approximately $3,117,000 and $5,419,000, respectively, from the federal government under the U.S. Department of Transportation Investment Generating Economic Recovery (TIGER) program. These reimbursements were for land improvements for an intermodal container transfer facility, as well as a rail bridge to the facility that opened in fiscal 2016. During the fiscal year ended September 30, 2015, the Authority recorded direct and pass-through federal funding of approximately $694,000 from the U.S. Environmental Protection Agency under the National Clean Diesel Emissions Reduction (DERA) program, and $385,000 from U.S. Department of Homeland Security under the Port Security Grant program.

In fiscal 2016, the Authority, designated as an Energy Port by the Water Resources Reform and Development Act of 2014, received funds totaling $2,475,000 from the Army Corps of Engineers to be used for dredging. This amount is included in capital grants and contributions on the statements of revenues, expenses, and changes in net position.

DEBT SERVICE REQUIREMENTS AND COVERAGE

Debt Service

The following table sets forth debt service requirements on the Prior Senior Lien Bonds and the Series 2017 Bonds, which will be the only indebtedness secured by the Docks Facilities Revenues following the issuance of the Series 2017 Bonds. Debt that the Authority expects to refund with these bonds is not included in the following table. Please note that totals for the below columns may not foot due to rounding.

Bond Series 2017A Series 2017B Series 2017C Series 2017D Prior Senior Total Debt Year Bonds(1)(2) Bonds(1)(2) Bonds (1)(2) Bonds(1)(2) Lien Bonds(1)(3) Service(1)(2)

2017 $5,676,927 $393,312 $179,542 $3,909,401 $8,678,188 $18,837,370 2018 6,174,500 4,747,500 318,400 6,685,084 8,575,305 26,500,789 2019 6,174,500 4,790,000 318,400 6,681,993 8,475,570 26,440,463 2020 6,174,500 4,845,250 318,400 6,682,578 8,353,187 26,373,915 2021 6,174,500 1,092,000 318,400 10,483,794 8,264,416 26,333,110 2022 6,174,500 328,400 19,345,799 25,848,699 2023 13,239,500 327,900 7,216,044 20,783,444 2024 13,241,250 327,400 7,230,705 20,799,355 2025 13,240,250 326,900 7,241,234 20,808,384 2026 13,240,750 331,400 7,256,519 20,828,669 2027 13,071,750 330,650 6,877,502 20,279,902 2028 13,070,750 329,900 6,887,050 20,287,700 2029 13,068,750 329,150 6,902,082 20,299,983 2030 12,129,750 328,400 6,919,807 19,377,957 2031 13,324,500 327,650 7,240,721 20,891,871 2032 13,327,500 326,900 7,240,207 20,894,607 2033 13,324,250 326,150 7,260,162 20,910,562 2034 13,328,750 330,400 7,276,436 20,935,586 2035 13,319,250 329,400 7,295,328 20,943,977 2036 8,018,400 7,311,375 15,329,775 2037 22,407,108 22,407,108 2038 22,447,744 22,447,744 2039 22,477,646 22,477,646 2040 14,155,131 14,155,131 2041

Total ______(1) For purposes of this table, principal amounts to be retired in a fiscal year pursuant to mandatory redemption provisions are shown as maturing in that fiscal year. (2) Annual debt service amounts have been estimated for purposes of this table. Actual principal amounts and maturities and actual interest rates for the Series 2017 Bonds will be established after pricing of the Series 2017 Bonds and will be reflected in the final Official Statement. (3) Debt Service on the Series 2008A Bond is based upon the annual interest cost to the Authority of 6.38%, which takes into account the effect of the Swap Agreement. See “SECURITY AND SOURCE OF PAYMENT – Swap Transaction”.

Historical Coverage

The following table sets forth certain historical debt service coverage ratios for fiscal years indicated for debt of the Authority. The ratios shown below correspond to each of the three tests which comprise the rate covenant applicable to the Prior Senior Lien Bonds and the Series 2017 Bonds, namely (i) the Net Revenues Available for Debt Service test, (ii) the Annual Receipts test and (iii) the Docks Facilities Revenues test. See “SECURITY AND SOURCES OF PAYMENT – Maintenance of Rates and Charges”.

Fiscal Year Current Docks Net Revenues NRADS Annual Receipts DFR Ended Year Debt Facilities Available for Coverage Coverage Coverage September 30 Service(1) Revenues Debt Service(2) Ratio(3) Ratio(4) Ratio(5) (in thousands) (in thousands) (in thousands)

2016 $25,909 $119,690 $54,824 2.116 1.177 4.652 2015 25,584 144,886 67,431 2.636 1.263 5.695 2014 25,340 162,319 81,004 3.197 1.368 6.438 2013 25,222 147,508 73,532 2.915 1.321 5.892 2012 25,243 144,686 74,393 2.947 1.346 5.777 2011 21,197 121,533 55,806 2.633 1.225 5.786 2010 20,735 106,460 45,250 2.182 1.130 5.189 ______(1) Actual debt service payable during such fiscal year on the Authority’s outstanding senior long-term debt secured by Docks Facilities Revenues. (2) Docks Facilities Revenues, less Operating Expenses, plus Available State Tax Revenues and Investment Income. The Available State Tax Revenues are not pledged to secure the Series 2017 Bonds. See “AVAILABLE STATE TAX REVENUES”. For years 2000-2006, Investment Income may reflect accrued earnings. (3) Net Revenues Available for Debt Service divided by current year debt service for such fiscal year. (4) Docks Facilities Revenues plus Investment Income divided by Operating Expenses plus current year debt service. The Authority has not required any of the Available State Revenues since 1988. See “AVAILABLE STATE TAX REVENUES” herein. (5) Docks Facilities Revenues plus Investment Income during such fiscal year divided by current year debt service for such fiscal year. Pro Forma and Projected Coverage

Certain pro forma and projected coverage information relating to the Prior Senior Lien Bonds and the Series 2017 Bonds is set forth in “Appendix B – Report of Feasibility Consultant”. As described therein, the Feasibility Consultant has assumed annual debt service amounts for fiscal years 2017 through 2021 which are higher than the estimated annual debt service amounts shown in the table herein. See “DEBT SERVICE REQUIREMENTS AND COVERAGE”.

The prospective financial information included in this Official Statement and the appendices hereto has been prepared by MICP Capital (see “REPORT OF FEASIBILITY CONSULTANT”) and is the responsibility of the Authority’s management. The Authority and its management believe that the prospective financial information included in Appendix B has been prepared on a reasonable basis, reflecting the best estimates and judgments, and represents, to the best of management’s knowledge and opinion, the Authority’s expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results.

Warren Averett, LLC has neither examined, compiled nor performed any procedures with respect to the prospective financial information contained in Appendix B of this Official Statement and, accordingly, Warren Averett, LLC does not express an opinion or any other form of assurance on such information or its achievability. Warren Averett, LLC assumes no responsibility for and denies any association with the prospective financial information and any other information derived therefrom included elsewhere in this Official Statement.

The Warren Averett, LLC report included in this offering document refers exclusively to the Company’s historical financial information. Warren Averett, LLC reports do not cover any other information in this offering and should not be read to do so.

The prospective financial information included in this Official Statement and the appendices hereto was not prepared with a view toward compliance with published guidelines of the United States Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

FINANCIAL SYSTEM

The Authority operates on a fiscal year basis beginning October 1 and ending September 30. The significant accounting practices for the Authority’s finances are summarized in the notes to the audited financial statements of the Authority included in Appendix A to this Official Statement.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

This section of the Official Statement presents certain historical financial information concerning the Authority. Certain information in this section, together with certain other information contained in this Official Statement, will be updated annually and such annual report will be filed with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System in accordance with the requirements of Rule 15c2-12 of the Securities and Exchange Commission. See “CONTINUING DISCLOSURE”.

Statements of Revenues, Expenses, and Changes in Net Assets/Statements of Net Assets

The following statements of revenues, expenses, and changes in net assets for the Authority for the fiscal years ended September 30, 2014, 2015, and 2016 and the related statements of net assets as of September 30, 2014, 2015 and 2016 were derived from the audited financial statements of the Authority. The financial statements of the Authority as of and for such years were audited by Warren Averett, LLC, independent accountants. The following statements should be read in conjunction with the audited financial statements and the related notes of the Authority contained in Appendix A.

The statements of revenues, expenses, and changes in net assets for the three-month periods ended December 31, 2015 and 2016 and the related statements of net assets as of December 31, 2016 have been derived from unaudited interim financial statements. In the opinion of management, the unaudited interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement. Historical results are not necessarily indicative of results that may be expected for any future period.

The information set forth in the following tables should be read in conjunction with, and is qualified in its entirety by, “Management’s Discussion and Analysis – Fiscal Years 2015 and 2016” below and “Management’s Discussion and Analysis – Three Months Ended December 31, 2015 and 2016”.

Alabama State Port Authority Statements of Revenues, Expenses, and Changes in Net Assets

Fiscal Year Ended September 30 2014 2015 2016 Q1-FY2016 Q1-FY2017 (unaudited) OPERATING REVENUES McDuffie Coal Terminal $78,287,865 $70,601,662 $48,544,505 $10,506,795 $9,247,898 General Cargo/Intermodal 35,901,440 33,810,695 34,280,808 7,727,173 7,356,261 Bulk Handling and Warehouse 7,927,270 1,955,696 278,561 87,175 - Terminal Railway 23,742,475 22,097,399 19,267,877 5,001,412 4,308,068 Marine Liquid Bulk Terminal 3,486,807 3,505,708 3,464,329 305,224 380,736 Other 12,972,868 12,915,099 13,854,900 3,627,663 4,273,118 Total operating revenues 162,318,725 144,886,259 119,690,252 27,255,442 25,566,081

OPERATING EXPENSES Operation and maintenance of facilities 76,381,573 71,757,336 59,096,173 13,501,493 13,066,681 Depreciation and amortization 29,812,318 30,983,663 32,659,787 8,372,965 8,373,677 General and administrative 17,515,806 18,048,410 17,382,779 4,436,508 4,356,615

Total operating expenses 123,709,697 120,789,409 109,138,739 26,310,966 25,796,973

OPERATING INCOME (LOSS) 38,609,028 24,096,850 10,551,513 944,476 (230,892)

NONOPERATING INCOME (EXPENSES) Investment income 816,489 820,700 844,119 154,358 219,071 Change in fair value of interest rate swap 2,329,879 1,228,575 1,711,454 780,959 920,794 Interest expense (17,062,636) (16,955,157) (16,732,470) (4,175,448) (4,132,083) Interest rate swap expense (2,847,619) (2,544,475) (2,166,347) (551,960) (461,419) Other, net 2,834,111 (1,161,037) (5,793,896) 158,963 244,962 Total nonoperating (expenses) (13,929,776) (18,611,394) (22,137,140) (3,633,128) (3,208,675)

Gain (loss) before capital grants and contributions 24,679,252 5,485,456 (11,585,627) (2,688,652) (3,439,567)

Capital grants and contributions 13,462,295 4,195,886 7,894,061 - -

Increase (Decrease) in net position 38,141,547 9,681,342 (3,691,566) (2,688,652) (3,439,567)

NET POSITION Beginning of year 326,371,856 337,593,927 347,275,269 347,275,269 343,583,703 Prior period adjustment-GASB 68 and 71 (26,919,476) - - - - End of year or period $337,593,927 $347,275,269 $343,583,703 $344,586,617 $340,144,136

Alabama State Port Authority Statements of Net Assets

As of As of September 30 December 31 2014 2015 2016 2016 (unaudited) CURRENT ASSSETS Cash and cash equivalents $31,443,921 $38,078,460 $35,667,715 $35,236,455 Cash and cash equivalents, restricted - - 2,304,000 - Short-term investments 18,634,587 18,950,653 19,239,383 15,217,160 Trade accounts receivable, net of allowances for doubtful accounts 15,839,766 12,443,073 10,882,187 10,587,897 Capital grants receivable 3,044,715 2,178,625 2,090,892 - Inventories 3,219,773 3,383,179 3,510,572 3,714,423 Prepaid expenses and other assets 10,439,376 10,804,288 9,937,212 9,837,196 Total current assets 82,622,138 85,838,278 83,631,961 74,593,131

NONCURRENT ASSETS Investments 31,681,924 32,135,334 32,647,460 24,436,329 Capital assets, net 642,436,328 637,097,636 624,342,466 618,066,147 Other assets, net 2,479,250 2,019,272 1,079,990 3,367,816 Total noncurrent assets 676,597,502 671,252,242 658,069,916 645,870,292 TOTAL ASSETS 759,219,640 757,090,520 741,701,877 720,463,423

DEFERRED OUTFLOWS OF RESOURCES Pension 1,193,638 2,707,116 3,402,625 3,402,625 Unamortized debt refunding 6,144,012 5,330,854 4,501,237 4,297,948

Total deferred outflows of resources 7,337,650 8,037,970 7,903,862 7,700,573

CURRENT LIABILITIES Accounts and contracts payable 5,788,997 3,693,562 3,326,308 1,623,151 Accrued liabilities Salaries and wages 2,837,904 2,309,115 2,198,467 1,761,018 Vacation and sick leave 1,913,597 1,950,688 1,831,380 1,693,762 Environmental liability 108,682 120,535 137,454 137,454 Current maturities of long-term debt 9,245,000 9,755,000 10,295,000 10,855,000 Accrued interest payable 9,439,778 9,195,653 8,944,383 4,362,160 Other 1,774,847 2,948,021 2,686,372 3,050,690 Total current liabilities 31,108,805 29,972,574 29,419,364 23,483,235

Noncurrent liabilities Vacation and sick leave 2,870,397 2,926,033 2,747,071 2,540,642 Unearned revenues 501,104 469,301 310,429 388,568 Environmental liability 2,722,417 2,931,758 3,631,743 3,631,743 Derivative liability 8,182,953 6,954,378 5,242,924 4,322,130 Unpaid claims 2,324,865 1,990,658 2,460,466 2,460,466 Net pension liability 26,802,493 26,727,201 26,519,802 26,368,488 Long-term debt, net of premiums (net) and current maturities 354,450,329 344,652,741 334,315,153 323,449,504 Total noncurrent liabilities 397,854,558 386,652,070 375,227,588 363,161,541 TOTAL LIABILITIES 428,963,363 416,624,644 404,646,952 386,644,776 DEFERRED INFLOWS OF RSOURCES Pension - 1,228,577 1,375,084 1,375,084 NET POSITION Net Investment in capital assets 284,885,011 288,020,749 284,233,550 288,059,591 Restricted - expendable 57,906,512 58,675,987 61,780,843 59,476,843 Unrestricted (5,197,596) 578,533 (2,430,690) (7,392,298)

Total net position $337,593,927 $347,275,269 $343,583,703 $340,144,136

Management’s Discussion and Analysis – Fiscal Years 2015 and 2016

Management has adopted the custom of writing a discussion of comparative fiscal year financial results in the Management’s Discussion and Analysis section of the audited financial statements. This discussion for fiscal years 2015 and 2016 may be found in Appendix A, beginning on page 4.

Management’s Discussion and Analysis – Three Months Ended December 31, 2015 and 2016

The below discussion and analysis of the Authority’s financial performance provides an overview of the Authority’s financial activities for the three months ended December 31, 2015 and 2016. Please read it in conjunction with the Authority’s financial statements that precede this section of the Official Statement.

Based on the three months ended December 31, 2016, the Authority experienced operating results that were unfavorable to the results for the same period of 2015, driven by policies and events in China that resulted in the downturn in the international market for metallurgical coal. This market condition negatively affected volumes transiting both McDuffie Terminal and the Terminal Railway, and to a lesser extent, influenced shipments of steel slabs through the General Cargo/Intermodal facilities. With the exception of steel slabs, volumes through the General Cargo facilities increased. Improvements at the Marine Liquid Bulk Terminal associated with increased volume, along with gains in the Other segment, linked to grain, cement, and other basic materials, dampened the effects of decreased coal volume on the Authority.

Operating revenues for the three months ended December 31, 2016 were $25.6 million, a decrease of $1.7 million (6.2%) from the three months ended December 31, 2015. This decrease in operating revenues resulted primarily from a decrease of $1.3 million (12.0%) in revenues at the McDuffie Terminal, and the associated decrease of $0.7 million (13.9%) at the Terminal Railway. General Cargo/Intermodal revenues trailed the prior year by $0.4 million (4.8%). Partially offsetting the decline related to coal and steel, revenues at the Marine Liquid Bulk Terminal increased $0.1 million (24.7%), and the Other areas improved by $0.6 million (17.8%).

The operating loss for the three months ended December 31, 2016 was $0.2 million, a decrease of $1.2 million from the $0.9 million income from the same period in 2015. Operating expenses were reduced by $0.5 million (2.0%). Operation and maintenance of facilities expense improved by $0.4 million (3.2%) due to a reduction in headcount, and lower variable costs due to decreased operating levels affecting maintenance, operating supplies, and services. General and administrative expense improved by $0.1 million (1.8%) due to lower personnel cost.

Total net non-operating expenses decreased $0.4 million (11.7%) for the three months ended December 31, 2016, compared to the same period in 2015. Other net income improved by $0.1 million (54.1%), investment income and interest expense improved by less than $0.1 million each (41.9% and 1.0%, respectively). Interest rate swap expense improved by $0.1 million (16.4%) and the interest rate swap experienced a $0.1 million favorable change in fair value (17.9%) in the three months ended December 31, 2016 as compared to the same period in 2015.

As there were no capital grants and contributions for the three months ended December 31, 2016, the net loss for the Authority was $3.4 million, which is a deterioration from the $2.7 million loss during the three months ended December 31, 2015. For the three months ended December 31, 2016, net assets decreased to $340,144,136 from $344,586,617 in the same period of 2015. Of the Authority’s $340,144,136 in net position at December 31, 2016, $288,059,591 (85%) represents its investment in capital assets (including intangible assets), less any outstanding debt used to acquire or construct these assets. An additional 17% of the Authority’s net position, $59,476,843, represents resources subject to external bond restrictions related to the use of these funds for debt service, and collateral held in accordance with the interest rate swap agreement.

Contingent Liabilities

For a discussion of certain contingent liabilities of the Authority, see Note 10 in the notes to the audited financial statements of the Authority included in Appendix A to this Official Statement.

THE AUTHORITY

General

The State of Alabama’s operations at the Port of Mobile are owned and managed by the Alabama State Port Authority, which is an agency of the State of Alabama, created in 2000 pursuant to the provisions of Title 33 of the Code of Alabama 1975, as amended. Prior to August 2000, the State of Alabama’s operations at the Port of Mobile were owned and managed as a department of the State with the Director being appointed by and serving at the pleasure of the Governor of the State. Effective August 1, 2000, the name of the Alabama State Docks was changed to the “Alabama State Port Authority” and the Authority became a separate agency of the State governed by a nine-member board of directors. The Authority was created to promote, develop, construct, maintain and operate all harbors and seaports within the State, including the inland waterways program of the State. The Authority is a self-supporting entity whose finances are accounted for separately and apart from those of the State, the Authority functioning much in the manner of an enterprise operation. The Authority’s revenues are not paid into the State Treasury, and the Authority has generally received no appropriations from the General Fund of the State of Alabama other than for capital improvements. See “OTHER GOVERNMENTAL SUPPORT – Capital Grants”.

The great majority of the activities of the Authority are conducted at Mobile, the Authority’s extensive facilities in and around Mobile being an integral part of the Port of Mobile hereinafter discussed. The Authority also operates 11 inland ports on the rivers of Alabama. As will be discussed more fully below, the Authority operates certain of its business segments directly while other business segments are outsourced to third parties through lease arrangements.

Management

The Governor of the State of Alabama appoints eight members of the Board of Directors of the Authority, subject to confirmation by the Senate of the State of Alabama. In addition, one ex-officio member serves as the ninth member of the Board. The Board of Directors appoints the Director of the Authority. The Director serves as the chief executive officer of the Authority and as such is responsible for managing the affairs of the Authority.

The Authority is not a component unit of any county or city within the State of Alabama since none of these exercise oversight responsibilities over the Authority. Such oversight responsibility is considered to mean the existence of financial interdependency, the ability to significantly influence operations and the accountability for fiscal years.

The Board of Directors is presently composed of the following persons:

Expiration of Name Profession Term

Horace H. Horn, Jr., Chairman Vice President, External Affairs of PowerSouth Energy 07/31/2019 Joe McCarty, First Vice Chairman President and Managing Director, Timberline Management Co., Inc. 07/31/2020 Ben C. Stimpson, Jr., Second Vice Chairman Public Relations Liaison, Canfor Southern Pine 07/31/2019 Daryl H. Dewberry Vice President UMWA International 07/31/2019 Alvin K. Hope II Member, Maynard, Cooper & Gale, P.C. 07/31/2020 Tim Parker, III President, Parker Towing Company 07/31/2018 Algernon “Al” Stanley Vice President, Stanley Construction Co., Inc. 07/31/2020 T. Bestor Ward, III President, Ward Properties and Safe Archives 07/31/2018 Sandy Stimpson (Ex-Officio) Mayor, City of Mobile 07/31/2017

The present top management personnel of the Authority are:

Name Office Term

James K. Lyons Director and CEO At the Pleasure of the Board of Directors Larry R. Downs Secretary-Treasurer and CFO At the Pleasure of the Director H.S. “Smitty” Thorne Deputy Director and COO At the Pleasure of the Director Linda K. Paaymans Senior Vice-President, Finance At the Pleasure of the Director Judith L. Adams Vice-President, Marketing At the Pleasure of the Director Bradley N. Ojard Senior Vice-President, Operations At the Pleasure of the Director James F. “Frank” Fogarty Vice-President, Trade and Development At the Pleasure of the Director Jerald E. Kichler Vice-President, Engineering Services At the Pleasure of the Director Robert C. Harris, Jr. Vice-President, Environmental and At the Pleasure of the Director Program Management

Biographical information pertaining to each of the aforesaid officers is set out below:

James K. Lyons – Director and Chief Executive Officer. Mr. Lyons was born in Mobile, Alabama and is 68 years old. He received a Bachelor of Arts degree from the University of Alabama in 1971. He completed the Executive Development Program at the University of Tennessee in 1987. Mr. Lyons’ maritime industry career spans forty years. From 1971 to 1976, Mr. Lyons worked in marine construction and export warehousing. In 1976, he joined a subsidiary of Ryan-Walsh, one of the largest stevedoring companies in the world headquartered in Mobile. He left the company in 1996 as Vice President, Marketing to form his own port, terminal operations and shipping line services company, Trinity Marine and Transportation Consulting. In 1997, he was named Assistant Director for the Alabama State Docks and, in July 1999, was named Director. As director, Mr. Lyons oversaw the governance transition and restructuring of the State Docks to the Alabama State Port Authority. In 2000, he was named Director and Chief Executive Officer of the Authority. Mr. Lyons has overseen construction of new facilities and upgrades to railroad, pier infrastructure, and equipment while taking the port from the 14th largest to the 9th largest seaport in the country. Mr. Lyons managed the implementation of the newly completed $100 million Pinto Island Terminal that serves the $4.3 billion steel mill at Calvert. Mr. Lyons serves on the Executive Board of the Warrior-Tombigbee Development Association, the Board of Directors of the Coosa-Alabama River Improvement Association and the United Way of Southwest Alabama, the Management Committee of the Mobile Bay National Estuary Program, , the Board of Advisors for the Mobile Area Chamber of Commerce, and is a former member of the board of the Birmingham Branch of the Atlanta Federal Reserve Board.

Larry R. Downs – Secretary-Treasurer and Chief Financial Officer. Mr. Downs was born in Pascagoula, Mississippi and is 67 years old. Mr. Downs graduated in June 1972 with a Bachelor of Science degree in Accounting from the University of South Alabama. In 1978, he received his Master of Business Administration degree from the University of South Alabama. He began his employment with the Alabama Department of Examiners of Public Accounts in July 1972, as a field auditor and concluded his employment with the Examiners in 1980 as a District Supervisor. Mr. Downs joined the Authority in June 1980 as Secretary-Treasurer/Comptroller. He has continued in this position as Chief Financial Officer until the present time. Under Mr. Downs’ leadership, the Authority has received the Certificate of Achievement for Excellence in Financial Reporting for the Government Finance Officers Association of the United States and Canada (GFOA). Mr. Downs’ team has earned this distinguished award twenty-four times since 1989. Mr. Downs has served as a member of the American Association of Port Authorities’ Finance Committee since 1981, is a member of the Government Finance Officers Association, as well as other professional organizations.

H.S. “Smitty” Thorne –Deputy Director & Chief Operating Officer. Smitty Thorne was born in Panama City, Florida and is 70 years old. He began his maritime career with Ryan-Walsh Stevedoring Company, Inc. His first position in 1967 was as a boarding agent for the company’s wholly-owned steamship agency, freight forwarding and stevedoring operation before being promoted as Port Manager in Panama City (earning the distinction as the youngest port manager in company history). By 1978, Mr. Thorne had been named Vice President of Ryan-Walsh and Southern Steamship operations in Panama City, overseeing the company’s second most profitable port operation in the company’s 26 port matrix. By 1981, Mr. Thorne was serving as Vice President, Operations for New Orleans, the company’s largest port operation, and by 1986 was named Divisional Vice President in Savannah, Georgia. His responsibilities in this position included oversight and management of Ryan-Walsh’s operations in ports Norfolk, Virginia and Jacksonville, Florida, as well as its Texas ports and the company’s Mississippi River operations between the Gulf and Little Rock, Arkansas. Mr. Thorne continued his service as Divisional Vice President until 1996, when he joined Jackson-Kearney Group. He served as general manager for the Mobile-Pascagoula-Panama City operations, and then as Vice President of Operations for New Orleans, which included the second largest terminal and stevedoring operation in New Orleans, and the company’s warehousing and freight forwarding divisions. In 2000, Mr. Thorne 26

joined the Alabama State Port Authority as General Manager, Bulk Operations and, by 2001, Mr. Thorne assumed general management responsibility for rail operations and in 2002 was named Vice President, Operations port wide (including all port operations – bulk, general cargo, intermodal, rail and Port Police). In 2007, he was promoted to Executive Vice President and Chief Operating Officer in order to meet operational management requirements as the port adjusted to expanding business and new terminal opportunities. Mr. Thorne was subsequently given additional administrative responsibilities and direct oversight for the Authority’s marketing efforts, and elevated to Deputy Director and Chief Operating Officer in 2012.

Linda K. Paaymans – Senior Vice-President, Finance. Ms. Paaymans was born in New Haven, Connecticut and is 55 years old. She received a Bachelor of Arts degree from Yale University in 1982, and in 1987 received her Master of Business Administration degree, concentrating on corporate finance, from the Lubin School of Business at Pace University in 1987. While an undergraduate, Ms. Paaymans began her career in manufacturing as a maintenance worker at a brass foundry. After graduation she worked in a variety of positions at Mechanical Plastics Corp., developing skills in sales, accounting, procurement, and operations. It was during this employment that Ms. Paaymans earned her advanced degree. In 1988, Ms. Paaymans joined Ciba-Geigy, a Swiss-based multinational pharmaceutical and specialty chemicals manufacturer where she held a series of progressively responsible positions in accounting, finance, information technology, and procurement, becoming heavily involved in quality systems, safety, project management, and process improvement during this time. In 1999, Ms. Paaymans transitioned to another Swiss multinational, cement manufacturer Holcim, working in procurement and manufacturing controlling. During this time, she was also responsible for leading a team that automated the procurement processes via a web-based front-end to ERP back-end integration. In 2008, Ms. Paaymans joined the Alabama State Port Authority as Vice-President, Finance, with responsibility for systems, planning, and process improvement. Elevated to Senior Vice-President in 2011, she is currently involved in pension administration and collective bargaining activities in addition to leading the financial reporting and information technology efforts for the Authority.

Judith L. Adams – Vice-President, Marketing. Ms. Adams was born in Monroe, Louisiana and is 54 years old. Ms. Adams holds a Bachelor of Arts degree from Louisiana State University. Prior to joining the Authority, Ms. Adams served for nearly seven years as a legislative analyst and Political Action Committee manager for the Interstate Natural Gas Association of America (INGAA) in Washington, D.C. Her work with the trade group primarily focused on campaign finance reform, wetlands and coastal resource issues, pipeline safety, clean air and clean water legislation. Ms. Adams began her career as a legislative assistant with the Louisiana Department of Natural Resources working on oil and gas leases, lands management and royalty disputes. Ms. Adams joined the Alabama State Port Authority in 1994 as a Federal Grant Manager. She currently serves as Vice President of Marketing for the Alabama State Port Authority and is responsible for media relations, public affairs, government affairs, real estate and fixed asset management, and Theodore operations. She also oversees economic development at the Authority, and through her work with local and state economic developers, has seen the successful completion of the Authority’s Marine Liquid Bulk Terminal project to support INEOS-Phenol and the Navy Homeport and International Paper property reversions. She also actively served on Alabama’s industrial recruitment teams that attracted Aker Solutions ASA, Standard Concrete Products, Berg Spiral Pipe Corp. and ThyssenKrupp Steel and Stainless USA. Ms. Adams serves on the Board of Directors of the National Waterways Conference, where she serves on the Executive Committee. Ms. Adams is also on the Board of Directors of Partners for Environmental Progress, and is the current Chair of the Public Relations Committee for the American Association of Port Authorities. She currently works with the Coalition of Alabama Waterways Association on regulatory and legislative initiatives, and serves on the Mobile Area Chamber of Commerce Governmental Affairs State and Federal Committees and the Oil and Gas Task Force. She is a member of the Economic Development Association of Alabama, the Southern Economic Development Council, Leadership Alabama, and the Public Relations Council of Alabama.

Bradley N. Ojard– Senior Vice-President, Operations. Mr. Ojard was born in Duluth, Minnesota and is 59 years old. He received a Bachelor of Science degree in Mechanical Engineering from the University of Minnesota in 1981. He became registered Professional Engineer from the state of Minnesota in 1986 and earned his Master of Business Administration degree from University of Minnesota in 1989. In 1981, he began his career with U. S. Steel at the Minnesota Ore Operations in Mountain Iron, Minnesota, serving in numerous engineering and maintenance capacities. In 1986, Mr. Ojard transferred to U. S. Steel’s marine transportation subsidiary USS Great Lakes Fleet in Duluth, Minnesota. There, he served in various operational, commercial and engineering capacities. In 1997, Mr. Ojard was transferred to Mobile, Alabama to play a major role in the management of Warrior & Gulf Navigation company and its subsidiary Mobile River Terminal, culminating in being named Senior Director Operations with operational responsibilities expanded to include Birmingham Southern Railroad and the Fairfield Southern Company. Mr. Ojard joined the Alabama State Port Authority in 2007 as the Vice President Operations, and was subsequently promoted to Senior Vice President in 2011. Operation responsibilities include the McDuffie Coal Terminal, , the Pinto

Island Slab Handling Terminal, the Terminal Railway, and the safety department. Mr. Ojard serves on the board of directors of the Warrior-Tombigbee Waterway Association, as well as numerous professional organizations.

James F. (Frank) Fogarty – Vice President -- Trade and Development. Mr. Fogarty was born in Mobile, Alabama and is 66 years old. He received a Bachelor of Science degree from the College of Business Management Studies at the University of South Alabama. He completed the Executive Development Program at the University of Tennessee in 1990. Mr. Fogarty has 42 years of professional experience in domestic and international trade, terminal operations and stevedoring in U.S. ports. Mr. Fogarty’s maritime career began in 1970 working on the docks in Mobile as a checker with the ILA while attending school at the University of South Alabama. Upon completion of school in 1975, Mr. Fogarty joined Ryan-Walsh Stevedoring Company in Mobile where he initially worked in the maintenance department. In 1981 he was promoted to Vice President of Ryan-Walsh. He left the company in 1994 to join Inchcape Shipping as Executive Vice President, before departing in 1997 to become President and CEO of Fairway Terminal Corporation. Fairway was purchased by P&O Ports in 2000, and in 2004 Mr. Fogarty was promoted to Senior Vice President. P&O Ports changed hands twice more before its name was changed to Ports America. Mr. Fogarty retired in June of 2012 and moved home to the Mobile area in 2013. Coming out of retirement, he joined the Alabama State Port Authority in June of 2013. Mr. Fogarty is actively involved in the Tennessee-Tombigbee Waterway Association, Propeller Club of Mobile, Coosa-Alabama River Improvement Association, Alabama Germany Partnership, North Alabama International Trade Association, Inland River, Ports and Terminals Association, and Alabama Automotive Manufacturers Association.

Jerald E. Kichler, P.E. – Vice President – Engineering Services. Mr. Kichler was born in Pensacola, Florida and is 62 years old. He received a Bachelor of Science degree in Civil Engineering from the University of South Alabama in 1976. He received Alabama Professional Engineer Licensure in 1982. Mr. Kichler’s maritime engineering career spans forty years, all at the Alabama State Docks/Alabama State Port Authority. From 1976 to 2000 he served as a staff engineer. In 2000, Mr. Kichler was promoted to Engineering Manager and in 2010 became the Vice President of Engineering Services. Mr. Kichler is responsible for representing the Port Authority on engineering activities by overseeing the design and construction management of major projects. Some of his recent and more challenging projects have been the $100 million Pinto Island Terminal; the Container Handling Facility at Choctaw Point; and the recently completed Garrows Bend Intermodal Container Transfer Facility. Mr. Kichler serves on the University of South Alabama’s College of Engineering Industrial Advisory Board.

Robert C. Harris, Jr., P.E. – Vice President – Environmental and Program Management. Mr. Harris was born in Sheffield, Alabama and is 59 years old. He graduated with a Bachelor of Chemical Engineering degree from Auburn University in 1980, and also has a Master of Business Administration degree from Murray State University and a Master of Science Degree in Chemical Engineering from the University of Tennessee. Mr. Harris is a registered professional engineer in Alabama, and has over 30 years of experience in engineering and environmental management. After graduating from Auburn University, Mr. Harris worked for the Tennessee Valley Authority for developing coal combustion emission control technology. After eight years with the TVA, he worked for Martin Marietta Energy Systems in Oak Ridge, Tennessee on environmental remediation projects for the U.S Department of Energy. Upon completion of a Master’s Degree in Chemical Engineering, Mr. Harris went to work for International Paper in Vicksburg, Mississippi as a process manager at the Company’s Vicksburg linerboard mill. Mr. Harris joined the Alabama State Port Authority in May of 1995 and was named the Manager of Environmental, Health and Safety in June of 1996, with responsibility for managing the Authority’s environmental compliance and dredging management programs. In 2011 he was named Vice President of the Environmental and Program Management Division of the Port Authority, and has assumed additional responsibilities for the Port Authority’s Grant Management and Disadvantaged Business Enterprise programs. Mr. Harris is the former Chairman of the Harbors and Navigation Committee and a member of the Environment Committee of the American Association of Port Authorities.

Employee Relations

The Authority employs approximately 500 persons, which include (i) 172 employees who are hired pursuant to examinations given by the Alabama State Personnel Department in its administration of the State Merit System, (ii) 197 hourly-rate employees who are represented by the International Longshoremen’s Association (ILA), (iii) 104 Terminal Railroad employees who are represented by various unions, and (iv) 8 key management executives, including the Director. Most department managers, operations managers and key supervisors have been employed with the Authority for many years. In June 2009, at the height of operations, the Authority employed a total of 689 persons in the various categories. The Authority adjusted employment levels during the 2009 recession, and again in 2015 as the worldwide demand for steel and metallurgical coal impacted global markets.

Employees covered by the State Merit System enjoy benefits which include sick leave, annual leave, military leave, holidays and a state employees’ health insurance program. Payment of such State Merit System benefits other than sick leave and vacation are not accrued on the books of the Authority but are included when paid in operating expenses for the operating department in which the employee works. In addition, Merit System employees participate in the State Employees’ Retirement System (RSA). Depending on date of hire and whether they are a certified law enforcement officer, employees contribute 6.5% to 8.5%, of their gross salary to the Retirement Systems of Alabama (RSA), while the Authority’s contribution was 13.31% to 13.45%, and 14.09% to 14.57%, respectively, for fiscal years 2015 and 2016. The amount the employee contributes is governed by statute while the amount of the Authority contribution is reviewed and adjusted each year by RSA. As of September 30, 2016, the Authority reported a liability of $20,951,325 for its proportionate share of the net RSA liability. See “Appendix A – “Financial Statements of the Authority for the fiscal years ended September 30, 2015 and September 30, 2016”.

Alabama law precludes participation by State employees covered by the State Merit System in union activities. Certain State employees participate in the Alabama State Employees Association, an organization which acts in an advisory capacity to employees and to members of State government.

The largest segment of the Authority’s hourly-paid employees is represented by ILA Local 1984, which, as their official bargaining agent, negotiates pay, benefits, and work rules with management. The Authority’s latest contract with the ILA expired on March 31, 2015, with the parties still actively participating in collective bargaining in pursuit of a new contract. These employees are governed by the Railway Labor Act; thus the contract remains in force until superseded by a new contract.

The Authority maintains both a non-contributory pension plan for some of its ILA employees with fiscal year 2016 contributions of $1,271,000, or 10.5% of payroll, and a defined contribution plan for all of its ILA employees with fiscal year 2016 contributions of $977,000, or 8.1% of payroll. ILA-represented employees vested in the hourly defined benefit plan prior to January 1, 2011, as well as those non-vested employees making that irrevocable decision, participate in the defined contribution plan at 25% match to their contributions. Those electing to transition to the defined benefit plan as their sole Authority-provided retirement plan, along with all employees hired after January 2, 2011, receive a basic employer contribution of 6% of wages along with a 50% match on the first 6% of employee contributions. As of September 30, 2016, the Authority’s reported net pension liability for its Hourly Paid ASPA Workers Retirement Plan was $4,681,878. See “Appendix A – Financial Statements of the Authority for the fiscal years ended September 30, 2015 and September 30, 2016”.

Employees of the Terminal Railroad are represented by their characteristic national railroad labor organizations, including the Brotherhood of Locomotive Engineers (BLE), Brotherhood of Maintenance of Way Employees (BMWE), Transportation Communication International Union (TCIU), Brotherhood of Railway Carmen Division of Transportation Communication International Union (BRC/TCIU), International Association of Machinists & Aerospace Workers (IAM-AW), International Brotherhood of Electrical Workers (IBEW), and the United Transportation Union (UTU). Terminal Railroad employees participate in the railroad retirement program administered by the Federal Railroad Retirement Board. The Terminal Railroad provides a supplementary pension for its employees with 2016 fiscal year contributions of $192,000 in the aggregate for such employees. Employees of the Terminal Railroad are provided salaries and benefits which are consistent with the representative craft into which they are organized (for example, locomotive engineers belong to one craft and trainmen to another). The latest agreements with the Authority expire on March 31, 2018. Under the Railway Labor Act current contracts remain in force until superseded by a new contract. As of September 30, 2016, the Authority’s reported net pension liability for its Terminal Railway ASPA Workers Supplemental Retirement Plan was $886,599. See ”Appendix A – Financial Statements of the Authority for the fiscal years ended September 30, 2015 and September 30, 2016”.

All Authority employees are eligible to participate in a public employee 457 savings plan. This benefit allows employees to save, on a tax-deferred basis, amounts in accordance with parameters periodically updated by the IRS.

The Authority is subject to work stoppages typical of those incurred by other ports in the United States, usually in the form of local work stoppages in response to nationwide union-sponsored work stoppages. The Authority has not been subject to a work stoppage in over 35 years.

The Alabama State Employees’ Insurance Board (SEIB) determines annually the required contributions from agencies and retirees to adequately fund retiree health costs. The employer contribution per month per retiree is funded on a pay-as-you-go basis through the active employee premiums each agency pays for its active employees. The accrued OPEB liability for the Authority, as calculated by the State, is set forth below as of the end of the following fiscal years ended September 30: 29

Fiscal Year Accrued OPEB liability

2009 $5,544,432 2010 7,197,985 2011 8,418,655 2012 11,010,124 2013 13,228,107 2014 15,207,396 2015 17,356,456

The last year for which information is currently available is fiscal year 2015. It should be noted that the State’s audit for FY 2015 has not yet been released; therefore, no assurances can be given that the Authority’s OPEB liability for such fiscal year will not be adjusted. Furthermore, no assurances can be given regarding the rate of growth for the Authority’s accrued OPEB liability during fiscal year 2016 or beyond.

Insurance and Risk Management

The Authority is exposed to various risks of loss relating to tort litigation; theft of, damage to, and destruction of property; errors and omissions; and natural disasters. The Authority carries either commercial insurance or coverage provided through The State Insurance Fund of Alabama (a self-insurance fund coupled with excess commercial coverage). The State Insurance Fund of Alabama has a coverage deductible of $5,000, and the Inland Marine coverage (equipment) has a deductible ranging from $100,000 to $1,750,000, for any one occurrence, depending upon the classification of the asset and the type of risk coverage. The Authority is also exposed to the risk of loss resulting from the operation of equipment and general, professional, fiduciary, and law enforcement liability for which it carries commercial insurance having deductibles ranging from $0 to $250,000. The Authority is self-insured to the extent of the amounts deductible from loss coverage amounts. The Authority also provides for losses in excess of its primary coverages for General Liability, Maritime Employers Liability, Employers Liability, and Auto Liability by carrying excess/umbrella liability insurance coverage up to $100 million.

The Authority is partially self-insured with respect to workers’ compensation claims. Each claim for a loss in excess of the established self-insured retention of $750,000 or $1,000,000, depending on the classification code of the affected employee, is covered up to the $25 million policy limit. Claims that have been incurred but have not been reported, as well as a case development factor for known claims, have been accrued as unpaid claims. During fiscal 2016 and fiscal 2015, the Authority had no settlements that exceeded insurance coverage limits. For more information about the Authority’s insurance coverage and risk management policies, see the audited financial statements and the related notes of the Authority contained in Appendix A.

AUTHORITY OPERATIONS

General

The Authority is headquartered and has its principal operations located at the Port of Mobile in Mobile, Alabama. The Port of Mobile is located in the southwestern part of the state at the junction of the mouth of the Mobile River and the head of Mobile Bay. The City of Mobile is approximately 30 miles north of the bay entrance from the Gulf of Mexico. All of Alabama’s navigable inland waterway systems are connected to the Port of Mobile.

The Port of Mobile handles more than 1,300 vessels annually, serving cargo shipments to major ports in Latin America, the United Kingdom, continental Europe, the Mediterranean Sea, Africa, Asia and the Pacific Ocean. Important imports handled by the Authority are coal, iron and steel, automotive components and electronics, forest products, cement, chemicals, textiles, copper and aluminum. Important exports passing through the Authority’s terminals are coal, forest products, grain, iron and steel, frozen poultry, chemicals and machinery.

The Authority’s terminals are served by five major Class I railroads: AGR/Burlington Northern Santa Fe Railway, Canadian National Railway, CSX Transportation, Norfolk Southern Railway, and Kansas City Southern Rail, and two Class III (Short Line) railroads, CG Railway and Alabama State Docks Terminal Railway. Land transportation to the Authority is provided by a network of highways, including two federal interstate highways, one extending east and west (I-10), the other extending north from Mobile (I-65).

Inland waterway transportation to the Authority’s facilities is available through the Warrior-Tombigbee River system, the Tennessee-Tombigbee water system and the Intracoastal Waterway. The Tennessee-Tombigbee Waterway opened in 1985 and links the central section of the United States to the Port of Mobile. This waterway permits access to shipping from mining, agriculture and manufacturing regions adjacent to the Tennessee, Ohio, Illinois, Missouri and Upper Mississippi rivers. The Intracoastal Waterway links the Port of Mobile to terminals stretching from Brownsville, Texas to Carrabelle, Florida. In all, the Port of Mobile boasts nearly 15,000 miles of navigable inland waterway connections.

The Authority’s facilities at the Port of Mobile are located on a land area of approximately 2,600 acres adjacent to the Mobile central business district or within the Theodore Industrial Park in Mobile County. The Authority’s principal existing facilities are described more particularly below under “AUTHORITY OPERATIONS – New Authority Facilities”.

The Authority maintains its sales, marketing and customer services operations out of its Mobile office. The Trade & Development marketing staff have significant depth and breadth of experience in trade, ocean and common carrier logistics, and customer services.

The Port of Mobile is one of 35 ports on the U.S. Gulf of Mexico coast. Of the 35 ports, New Orleans, Louisiana, Gulfport and Pascagoula, Mississippi, and Pensacola, Florida, constitute the Port of Mobile’s closest competition geographically. New Orleans is the only one of these ports of any consequence, with principal competition coming from Savannah, Georgia on the east coast. As a means of showing relative port activity, the tonnage volumes for the most current U.S. data available (2015) was:

Port Tonnage New Orleans, Louisiana 87,809,854 Mobile, Alabama 58,594,752 Pascagoula, Mississippi 26,589,863 Gulfport, Mississippi 1,890,607 Pensacola, Florida 918,862 ______Source: U.S. Army Corps of Engineers Navigation Data Center, Waterbourne Commerce of the United States, last revised on October 12, 2016.

Competitive Position on the Gulf of Mexico

The only Gulf Coast bulk commodity facilities comparable to the Port of Mobile are located near New Orleans. Seaport facilities at Pascagoula, Gulfport and Pensacola located nearest to Mobile principally handle general cargo. The Pascagoula facilities are largely operated by private firms for their exclusive use. The Pensacola and Gulfport facilities are limited in capacity and specialize in handling certain commodities. Pensacola specializes in handling petroleum, chemicals, bagged feeds, flour and grains, and Gulfport has concentrated on handling imported fruit.

For additional information on the competitive position of the Authority in the Gulf of Mexico region, see “AUTHORITY OPERATIONS–Coal Handling and Storage Facilities–Competition Among Gulf of Mexico Ports”, “AUTHORITY OPERATIONS–General Cargo/Intermodal Facilities–Competition Among Gulf of Mexico Ports”, “AUTHORITY OPERATIONS–New Authority Facilities–Competition Among Gulf of Mexico Ports”, and “Appendix B – Report of Feasibility Consultant”.

General Note Regarding Description of Authority Facilities

As shown on the Authority’s Statements of Revenues, Expenses, and Changes in Net Assets (see “FINANCIAL CONDITION AND RESULTS OF OPERATIONS”), the Authority’s revenues are accounted for under the following six business areas: Coal Handling and Storage, General Cargo/Intermodal, Bulk Handling and Warehouse, Terminal Railway, Marine Liquid Bulk Terminal, and Other. The facilities of each of these business areas are described below. Additionally, as described more particularly below, the Authority completed construction of the Pinto Island Steel Handling Facility in 2010, which supports the import of steel slabs destined for further manufacture by AM/NS in Calvert, Alabama.

Turning Basins

The Port of Mobile enjoys two turning basins to accommodate various shipments. Completed in 2010, the Upper Bay Turning Basin is located in the lower harbor and serves the Mobile Container Terminal, Pinto Island 31

Terminal and McDuffie terminal. The Upper Bay Turning Basin is the Port’s largest turning basin and is vital for larger vessels servicing containerized, bulk and general cargo shippers because it shaves hours off a call to Port facilities located on the lower harbor. This turning basin measures 1,175 feet by 715 feet, and is located in the lower harbor, between Pinto Island and Little Sand Island. The federal project extended the capability of the 45-foot Mobile Ship Channel to make it easier for ships to get into and out of three major terminals at the Port currently servicing vessels that exceed 850 feet in length.

The Upper Bay Turning Basin is a critical part of Alabama’s overall transportation infrastructure and a significant economic development tool for the state. It allows the Port to support larger vessels engaged in international trade within the Southeast and Gulf Coast region. The turning basin has cut transit times for ships from six to three hours.

The Port of Mobile’s smaller turning basin is located at the north end of Mobile harbor and is engineered to handle vessels up to 850 feet in length.

Coal Handling and Storage Facilities

McDuffie Terminal. The Port of Mobile handles more coal tonnage than any other U. S. coastal port. The Authority’s largest operation is the coal handling facility at McDuffie Island (the “McDuffie Terminal”). McDuffie Island is about two miles south of the primary Port of Mobile complex and is accessible from the mainland by a causeway. McDuffie Island is joined on three sides by dedicated channels. The Mobile River channel on the east side of the island is presently authorized to a depth of 55 feet and the U.S. Army Corps of Engineers is currently maintaining the channel at 45 feet. The Arlington channel on the south side of the island is authorized to be dredged to a depth of 27 feet but is presently maintained at a depth of 18 feet. The Garrow’s Bend channel on the west side of the island is authorized to be dredged to a depth of 27 feet but is presently maintained at a depth of 13 feet. This area is maintained for river barge fleeting with capability to handle 90 barges. Additional fleeting was added in 2010 to provide additional capacity.

McDuffie Terminal, primarily handling coal mined in Alabama, began operations in January 1975 in response to increased exports to world markets. The facility has operated continuously since that time, with several expansions driven by market conditions. Coal handled through the facility has been primarily metallurgical coal used in connection with the making of steel. The initial facility consisted of a single ship berth, a storage yard with a single stacker reclaimer and a continuous barge unloader. Shortly after the opening of the first phase, the second phase was completed, adding a second storage yard and stacker reclaimer, a second barge unloader, and a single rail car dump with a single loop track. During the early 1980s, the third phase was completed, which added a second ship berth with a substantially larger ship loader, a third storage yard with a stacker reclaimer, a third barge unloader, and a double rail car dump. The facility continued to operate as a pure export facility.

Gulf Power, a Southern Company subsidiary, had been importing coal through the port’s older facility, the Bulk Material Handling Plant. In the mid-1990s, in order to meet its burn requirements, the utility decided to mix the coal imported through the Bulk Material Handling Plant with coal from the Illinois Basin. In response, the Authority loaded coal from the Bulk Plant into barges and transported the coal to the McDuffie facility to mix with the Illinois Basin coal received by rail. In 1995, the Authority ordered its first ship unloader with plans to put it on the first berth built at McDuffie. Prior to delivery of that crane, the Authority signed a contract with British Steel to build an iron reduction facility on the north end of McDuffie Island. In 1997, the Authority completed and commissioned the third ship berth at McDuffie, which was designed to receive both iron ore and coal. In conjunction with the third berth and ship unloader, a fourth storage yard was added with a bi-wing stacker. At the same time, in order to add more versatility, a second stacker was installed between the second and third storage yards.

The importation of iron ore for the iron reduction facility only lasted a short time before that facility was mothballed, and then eventually closed and removed from the property. At that time, the importation of coal began to climb very rapidly. In 2002, the Authority purchased, through a capital lease, a second ship unloader that was put on the third berth. This unloader was paid for by the Authority’s primary import customer through an assessment added to existing rates.

As imports continued to grow, the Authority entered into an agreement with the Southern Company and four of its generating subsidiaries to provide additional unloading capacity. This was accomplished with the addition of a third ship unloader that was placed on the first ship berth to augment the oldest ship loader. As part of that project, a third barge loader was added, along with a high speed rail loader and a second stacker reclaimer in the first storage yard, allowing the port to supply rail-served power plants. This agreement called for Southern Company to pay the Authority

an assessment added to established rates that would enable the Authority to recover, with interest, eighty percent of the investment in the expansion.

With multiple operations, the Authority found that there were many operating constraints negatively impacting the unloading and loading rates for barges, ships and rail cars, and determined that existing facilities were not going to be sufficient to handle the additional volumes. Another agreement was forged with other customers, which added additional stacker reclaimers to each of the second and third storage yards, an additional high speed reclaimer system to the number four storage yard, numerous crossovers and additional conveyers that created redundancy and enabled more operations to occur simultaneously. These additions were paid for by an additional assessment on those customers, recovering eighty percent of the capital expended, plus interest, over a ten year period.

These capacity improvements have dramatically enhanced the productivity of the terminal. The most pointed example is shiploading at the number two ship berth where load rates have increased from approximately 30,000 tons a day to 40,000 tons per day. Barge unloading, which often had to be stopped during vessel operations, is able to continue without interruption. Prior to this, during peak periods, barges could backlog to as many as sixty waiting for unloading, resulting in tremendous demurrage. In 2010, the Authority completed the rebuild of its number two rail dump, enabling the Authority to continuously dump rail cars and reduce the time to work a train by approximately sixty percent. In exchange for this $2.6 million investment, the principal railroad serving McDuffie agreed to increase the switching rates paid to the Authority by approximately thirty percent. In addition to this, the same railroad has agreed to fully fund approximately $2 million worth of track work that will enable the terminal to handle three unit-trains simultaneously.

Coal Handling Data. Historical volume of coal handled through the Port of Mobile declined significantly from 2014 through 2016, as shown in the following table: Historical Volume of Coal Handled (in millions)

Fiscal Year Outbound Tons Inbound Tons Total Tons 2016 7.63 2.88 10.51 2015 12.70 2.67 15.37 2014 15.66 2.67 18.33 2013 12.50 3.62 16.12 2012 12.71 2.46 15.17 2011 12.00 3.87 15.87 2010 9.96 6.25 16.21 2009 9.10 7.73 16.83 2008 9.86 10.75 20.61 2007 8.42 12.62 21.04 ______Source: Alabama State Port Authority.

As discussed in the Feasibility Report, the international price of metallurgical coal plummeted from a high of $330 per metric ton in 2012 to under $100 per metric ton in 2016. This steep decline resulted in a similar decline in the Port’s export tonnage during this period. The Port’s largest coal shipper, Walter Energy Company, eventually filed for Chapter 11 bankruptcy in July 2015. When Warrior Met Coal acquired Walter Energy in March 2016, it initially closed Mine No. 4 and reduced the operating hours of Mine No.7 in Brookwood, Alabama. Warrior Met Coal then negotiated a new labor agreement that allows for additional operating flexibility of the two mines. Mining at Mine No. 4 resumed in August 2016 and efforts are underway to restore Mine No. 7 to full operation. Since the beginning of 2016, the international price of metallurgical coal has increased dramatically as China has reduced its coal mining operations and resumed importing Australian coal (see “Factors Affecting International Coal Trade Market” below). As stated in greater detail in the Feasibility Report, this improved pricing of metallurgical coal is expected to result in increased production at both of the Warrior Met Coal mines and increased tonnage being exported through the Port, although no assurances can be given that such increase will occur. See “Appendix B- Report of Feasibility Consultant.”

Competition Among Gulf of Mexico Ports. Although there are thirty-five (35) ports along the United States Gulf of Mexico coast, only three – Plaquemines and South Louisiana on the Gulf coast and Jacksonville on the Atlantic coast - have import/export coal volumes of any significance and the total tonnage at those ports is well below that of the Authority. The Authority believes that none of these ports offer a viable competitive alternative to the shippers and

receivers that utilize the Authority’s facilities due to the barriers of distance, adequacy of coal handling capabilities, or the nature of the inland routes that limit connecting carriers. See “Appendix B – Report of Feasibility Consultant”.

Factors Affecting International Coal Trade Market. The international market for metallurgical coal, in recent years, has been affected, to a large extent, by policies and events emanating from China. See “Appendix B – Report of Feasibility Consultant”. The tonnage of metallurgical coal handled by the Port of Mobile is significantly affected by the international price of such coal, which has been extremely volatile in recent years. For example, according to the Feasibility Report, the international price of metallurgical coal has increased from $78 per metric ton at the beginning of 2016 to $243 per metric ton in October 2016, following a steady drop in price between 2012 and 2015 from $330 per metric ton to under $100 per metric ton. This recent increase in the price of metallurgical coal is expected to result in a significant increase in export tonnage through the Port of Mobile in FY 2017, although no assurances can be given that such increase will occur. See “Appendix B – Report of Feasibility Consultant”.

Import coal handled by the Port is mostly steam coal for use in power generation by Southern Company in its power plants. The recent downtrend in coal imports reflects changes that have taken place in Southern Company’s mix of power sources, with coal use declining relative to natural gas. For more information regarding factors affecting the international coal trade market, see “Appendix B – Report of Feasibility Consultant”.

General Cargo/Intermodal Facilities

General. Within the Port of Mobile, the Authority owns and operates approximately 5,000,000 square feet of covered storage and open yard facilities, many of which are located adjacent to the piers and tracks.

The Authority owns and operates a total of 37 berths at the Port of Mobile, which are used primarily for the handling of breakbulk or general cargo. Since 2000, the Authority and its partners have invested significant capital into modernizing existing terminals and constructing new terminals. Major modernization projects include Pier 2 container yard expansion and enhancements, expansion of the Pier C Warehouse, a warehouse conversion to a modern blast freezer/cold storage terminal, and yard improvements at Pier C, D and D2. In this same period, new construction brought the Authority a new Pier A terminal and warehouse, wharf at Pier E, and new storage capacity at the grain elevator. Additionally, the General Cargo and Intermodal facilities have invested in added equipment, a container interchange gate, new cargo tracking software, terminal lighting and paving, and other improvements to move cargo efficiently and effectively.

In addition to regular material handling equipment, the Authority also has specialized cranes to handle heavy cargos. Two rail-mounted gantry container cranes have a capacity of 30-tons and 40-tonsand serve container operations at the Pier 2 container yard. In addition to the container cranes, the Authority owns a 110-ton diesel-electric Gottwald Mobile Harbor Crane, which is also equipped to handle containers. The Authority has an agreement in place with a private entity to mobilize a 400-ton capacity heavy lift barge crane to the port on an as-needed basis, allowing for turnkey heavy lift and transport services from ship to site. This range of services makes the Port of Mobile a suitable option for project cargo such as the movement of equipment for existing and new manufacturers. This capability allows all of the Authority’s port users to pursue efficient and cost effective specialty lift services.

The Authority has a small facility that can handle container ships drawing up to 40 feet of water on its main port complex, catering to general cargo ships that also carry small numbers of containers. Beginning in 2008, the Mobile Container Terminal, operated by concessionaire APM Terminals, has handled the majority of container moves in the port, with revenue from those operations reflected in its Real Estate division. The terminal has two container cranes with a technical capacity of about 75,000 TEUs. This capacity is marketed for niche carriers that might not fit in at the Mobile Container Terminal. The area previously dedicated solely to containers is now heavily utilized for handling large shipments of steel pipe, project cargo and other commodities.

Located on the Authority’s main docks, Alabama Steel Terminals is the Port of Mobile's dedicated, state-of- the-art steel coil handling facility that opened in January 2015. The new rail, truck, barge and ship served terminal is located on a 40-foot deep channel at the Port Authority's Pier D2 berth. The 178,200 square foot covered bay area is equipped with four (4) 50-ton overhead bridge cranes with an additional 168,000 sq. ft. of open storage yard serving an annual throughput of over 1,000,000 tons of steel coil product. Alabama Steel Terminals utilizes integrated technology to provide shippers and customers real time logistics data, making it the most technologically advanced steel handling facility in the nation.

Pinto Island Steel Handling Facility. The Authority commissioned a purpose-built facility in 2010 on Pinto Island that meets the logistics demands of the AM/NS steel operation at Calvert, Alabama. The project involved

constructing a 20 foot by 1,000-foot freestanding marine wharf (capable of berthing a 750-foot Panamax vessel) with barge handling capability located behind the ship berth. There are three wide-span gantry cranes, each with 125 feet of outreach and 150 feet of back reach. The $100 million import terminal is capable of handling annually in excess of five million tons of semi-finished steel slab. The 20-acre terminal consists of 1000 ft. of deep water dock dredged to 45-feet, as well as an automated barge loading system positioned between the ship berth and the shoreline. The cranes are able to unload steel from ships to waiting barges or to the terminal storage yard possessing 150,000 metric tons of storage capacity. Each crane has a maximum lift capacity of 74 Metric Tons under hook. All three cranes and heavy lift machines utilize electro-permanent magnetic lifting beams to lift steel slabs. To maximize barge handling productivity, the Authority designed a unique mechanically operated integrated barge-haul system that positions barges under the cranes.

The Pinto Island marine terminal has a 45-foot draft, the capability to discharge 25,000 metric tons per day from a docked vessel, and load up to 10 barges per day whether a vessel is in berth or not. Storage capacity is sufficient to store 150,000 metric tons of steel, the amount consumed in about 12 days at the mill’s full production rates. The facility utilizes a RFID (radio frequency identification) system to read unique identifiers on each slab handled, in order to support the IT systems and inventory management practices of AM/NS.

For additional information concerning the Pinto Island facility, see “Appendix B – Report of Feasibility Consultant”.

Competition Among Gulf of Mexico Ports. The Authority believes that there is no practical alternative to the Authority’s facilities with respect to the handling of steel for the AM/NS plant in Calvert, Alabama due to the barriers of distance, transportation and cost. See “Appendix B – Report of Feasibility Consultant”.

General Cargo/Intermodal Handling Data. In the last five fiscal years, general cargo shipments imported through the Port of Mobile were as follows (in tons):

2012 2013 2014 2015 2016 Woodpulp 601,585 674,728 626,162 488,051 442,240 Iron & Steel 3,789,495 4,087,247 5,297,091 4,964,620 4,799,132 Lumber 3,885 1,669 1,118 556 4,142 Aluminum 47,267 47,151 57,028 80,069 49,763 Other Forest Products 557 262 - 283 154 Other Commodities (1) 164,619 118,625 19,785 54,962 127,312 Total 4,607,408 4,929,682 6,001,184 5,588,541 5,422,743 ______Source: Alabama State Port Authority. (1) Includes containerized cargo.

In the last five fiscal years, general cargo shipments exported through the Port of Mobile were as follows (in tons):

2012 2013 2014 2015 2016 Woodpulp 457,432 280,842 282,362 302,163 328,487 Frozen Chicken or Food 91,230 117,309 112,717 100,326 131,692 Iron & Steel 610,446 446,659 555,657 388,108 608,803 Lumber 176,784 197,445 186,116 213,230 242,396 Other Forest Products 223,761 279,303 188,818 177,233 202,137 Other Commodities (1) 48,256 649 25,811 29,779 20,273 Total 1,607,909 1,322,207 1,351,481 1,210,839 1,533,788 ______Source: Alabama State Port Authority. (1) Includes containerized cargo.

Competition Among Gulf of Mexico Ports. The Gulf of Mexico region is the principal gateway for the export of U.S. forest products, one of the two largest commodity groups in U.S. general cargo trade. The other major general cargo ports in the Gulf region are Houston, New Orleans, Brownsville, Tampa and Port Arthur. The principal competitor to the Authority’s facilities is in New Orleans. See “Appendix B – Report of Feasibility Consultant”.

Bulk Material Handling and Warehouse Facilities

The Bulk Material Handling Plant, which was used primarily as supplemental capacity to the McDuffie coal terminal, ceased operations during 2015 as the market for steam coal deteriorated, and is currently used for lay berth. 35

The location is currently being evaluated for other revenue producing purposes. The facilities available for alternative use include a 1,540-foot long dock where two oceangoing vessels can berth at the same time in 40 feet of water; storage space consisting of open space capable of holding up to 500,000 tons of material; and warehouse space with the capacity of 50,000 tons.

Terminal Railway Facilities

The Authority’s Terminal Railway includes 5 diesel locomotives, 3 hybrid diesel/genset locomotives, and more than 75 miles of track to serve warehouses, piers and other facilities at the Port of Mobile. The Terminal Railway also has a fleet of 100 all-purpose 50-foot Hydro-Cushion boxcars. The units are “free runners” for service all over the United States. The Terminal Railway serves the Authority’s main port, McDuffie and Choctaw Point terminals, as well as private industries north of the main port complex and industries within the Brookley Industrial Complex. The Authority’s Terminal Railway connects with the five major Class I railroads serving the Port of Mobile, which include the AGR/Burlington Northern Santa Fe, Canadian National, CSX, Kansas City Southern, and Norfolk-Southern. The Terminal Railway’s joint interchange yard is large enough to accommodate 1,200 railcars. The Terminal Railway facilities are designed to provide rail service not only to warehouses and major facilities, but also directly to ship berths.

The Authority entered into a contract with CG Railway, a subsidiary of International Shipholding Corporation, to construct and operate an intermodal facility for the shipment of fully loaded railcars between the Port of Mobile and a destination near Mexico City, Mexico. This intermodal facility was relocated from New Orleans and required an aggregate investment of approximately $26 million. This capital investment included the construction of a new loading dock with ramps to gain access to double-decker roll-on/roll-off ships, each of which has the capacity to haul approximately 122 railcars. CG Railway averages approximately 84 voyages per year but has the capacity to operate as many as 94 voyages per year. This rail ferry intermodal facility is capable of shipping approximately 22,000 railcars annually, benefiting Alabama companies doing business in Mexico. The State of Alabama made a grant of $10 million toward the overall cost of this project. The remaining capital investment (approximately $13 million) was financed with proceeds of the Series 2006A Bonds with the Authority recovering this investment, including interest from capital surcharges paid by CG Railway.

Marine Liquid Bulk Terminal Facilities

In May, 2000, the Authority dedicated the Marine Liquid Bulk Terminal located on the Theodore Industrial Canal. It has a 1,100-foot pier that can accommodate ships up to 850 feet in length with a 125 foot beam, and a 400 foot or two 300 foot barges. The terminal is capable of allowing two vessels to dock at one time because of its pier jetty design. The facility is presently servicing the inbound product needs of the INEOS Phenol, Inc. plant, which is located near the dock.

Other Existing Facilities

The Authority maintains a number of smaller operating units to manage various activities that are unique to the more mainstream port business areas. These operations include Real Estate, Dredging Management, Harbormaster, Middle Bay Port, and the Inland Docks.

Dredging Management and the Harbormaster group are an important part of overall port operations. Dredging Management represents a cost center where the focus is on the management of the disposal of dredged material. Higher costs for dredging due to the environmental sensitivity of disposing dredged material are an important issue for the Authority. The Harbormaster operation generates revenue and incurs expenses in association with their role managing harbor pilots that assist vessels in safely entering the port and docking at the various piers.

The Real Estate division and Middle Bay Port produce revenue almost exclusively through the rental of properties. The revenues derived from the Choctaw Point Container Terminal and Garrows Bend Intermodal Container Transfer Facility are included in Real Estate, along with revenues from the rental of property. Construction of the Authority’s Choctaw Point projects began in April, 2005, which, upon completion of phase I in September 2008, constituted a $300 million capital investment in a new state-of-the-art container terminal with a startup capacity of more than 350,000 units annually. The Choctaw Point Container Terminal is being completed in phases with full build out capable of an annual capacity of 1.3 million units. Operations began at the Choctaw Point Container Terminal in October 2008, and the expansion of its footprint was completed in 2016 with the addition of two new super-Post Panamax cranes and an enlarged container yard capable of handling 475,000 units annually. The Authority’s total capital contribution to the project was approximately $150 million for Phase 1, most of which was derived from state and federal grants. See “OTHER GOVERNMENTAL SUPPORT – Capital Grants”. The remaining $150 million

capital investment was made by Mobile Container Terminal LLC, originally a joint venture between APM Terminals North America (80%), a subsidiary of Maersk, Inc., and Terminal Link, a division of CMA CGM (20%). APM Terminals purchased the remainder of the venture from Terminal Link in 2010. Mobile Container Terminal LLC is operating the Choctaw Point Container Terminal pursuant to a 30-year lease with the Authority. The European-based Airbus consortium completed construction of a $600 million Final Assembly Line for the A320 aircraft within four miles of the APM Terminals container facility. Major shipments of materials and equipment for the aircraft come through the Port of Mobile. APM Terminals is operating the newly opened Intermodal Container Transfer Facility. These facilities have immediate access to two interstate systems, five Class 1 railroads and nearly 15,000 miles of inland waterway connections. The facilities provide terminal customers with access to global networks covering all possible trade routes to and from the Port of Mobile.

Middle Bay Port comprises 200 acres of prime waterfront property and numerous buildings. Roughly forty percent of the real estate and five buildings are under a long-term lease to Aker Solutions and M.H. Wirth, which have expanded their operations from the manufacturing of umbilicals used in completion of offshore wells, to risers and other components and equipment, used in the offshore oil and gas industry. The Authority also owns a grain elevator, which is leased to FGDI, which is now a subsidiary of the Japanese company Mitsubishi. The lease has six years left on the first extension term with one ten year extension remaining. FGDI completed a $9 million expansion at the elevator in 2010, which grew the storage capacity from 1 million bushels to 3 million. These enhancements also increased the operational flexibility and throughput capability of the elevator. The lease is based on vessel dockage and generates $800,000 to $1.2 million per year, which is booked into the Real Estate division. The Terminal Railroad serves the elevator and generates about $800,000 in switching charges per year.

The Inland Docks Facilities of the Authority consist of eleven facilities located on State of Alabama inland waterways. These facilities are located and designed to offer mining, agriculture and industry economical barge service to and from the Port of Mobile. Many of these terminals also provide barge access, via the Tennessee-Tombigbee Waterway, to and from markets located along the Upper Mississippi, Missouri and Ohio Rivers. The Authority’s Inland Docks terminals have excellent highway access, with many of the terminals equipped with rail.

Inland Dock Facilities are located at Bridgeport on the Tennessee River; Cordova, Tuscaloosa-Northport, and Demopolis on the Warrior-Tombigbee System; Montgomery, Selma and Claiborne on the Alabama River; Phenix City, Eufaula and Columbia on the Chattahoochee River; and Axis on the Mobile River.

With the exception of the inland dock at Axis, which serves SSAB Steel and has handling revenue, the Inland Docks Facilities produce revenue almost exclusively through the rental of properties.

Recently Completed Authority Facilities

During 2016, the Alabama State Port Authority completed construction of an Intermodal Container Transfer Facility (ICTF) for the Port of Mobile which connects the APM Terminals container facility with rail service to major markets in the US Southeast and Mid-West. The intermodal rail facility is the second project of the Port Authority’s three-prong intermodal development at Choctaw Point, which includes the APM Terminals container facility and a planned logistics park. The facility includes two operating tracks, a run-around track, and a car repair siding track, each at a minimum of 3,000 ft. in length, as well as rubber tired gantry (RTG) runways and chassis storage areas, multilane gates, power distribution and lighting, an access road, and related surface improvements. The intermodal rail facility is equipped with optical character recognition (OCR) portals at rail and truck entrances to increase throughput efficiency. The ICTF services import/export containerized cargoes moving through APM Terminals Mobile as well as domestic containerized cargoes from regional manufacturers. A $10 million rail bridge connects the Garrows Bend ICTF with up to five Class I-railroads serving the Port of Mobile. Both the ICTF rail bridge and this first phase of the ICTF are funded by the Port Authority and a $12 million (USD) U.S. Department of Transportation TIGER grant. The Authority anticipates additional upgrades and expansions will be made to the ICTF during the next 12-18 months, which will enhance the container facility’s throughput capacity. See “Five-Year Capital Plan” below.

Five-Year Capital Plan

The Authority is currently implementing a $180 million capital plan through FY 2021 that will be funded by grants, investments from public/private partnerships and some additional indebtedness. The primary objective of the capital plan is to grow the Authority’s business, which will diversify the Port’s operating profile. The major elements of the capital plan include (1) approximately $50 million for further expansion of the container terminal, (2) approximately $54 million for the addition of an automotive terminal, (3) approximately $30 million for pier upgrades for general cargo activities and (4) approximately $8 million for a dredging system at strategic locations to reduce costs.

Within the next 18 months, the Authority anticipates incurring approximately $50 million of additional indebtedness, which will be supported by guaranteed lease payments from APM Terminals. The proceeds of such indebtedness will be used to complete Phase 4 of the container terminal. With the completion of Phase 2, annual throughput capacity at the Port is expected to grow from 350,000 TEU to approximately 500,000 TEU. See Appendix B – Report of Feasibility Consultant. The completion of Phase 3 will provide the Authority with 20 acres of additional container yard.

Environmental Impact and Policy

General. The Authority manages its environmental obligations in a manner which is expected to produce compliance with all applicable federal and state regulations. Although the Authority cannot predict the outcome of all matters described in this section, the Authority does not expect that any of these matters will affect adversely its ability to pay the principal of and interest on the Series 2017 Bonds.

Contaminated Site Liability. The Authority has been notified by federal and state environmental regulatory agencies that it is potentially liable for the costs of environmental investigation and cleanup activities on some of its properties. In each of these matters, the Authority is cooperating with the notifying agency and taking appropriate action to investigate and remediate environmental damage and contamination. In the opinion of the Authority’s management, the potential outcomes, taken individually or in the aggregate, will not have a material adverse effect on the financial position or operations of the Authority. The Authority recognizes the costs for ongoing and future remediation, environmental damage and contamination by recording a liability for estimated costs. At September 30, 2016, the Authority had recorded aggregate environmental liabilities of approximately $3,769,000. Where appropriate, the Authority pursues financial reimbursement from other potentially liable parties. No assurances can be given that other contaminated sites do not exist or will not be discovered in the future. The Authority’s policy has been to undertake voluntary cleanup action when contamination is discovered during maintenance and construction.

Environmental Policy. It is the policy of the Authority to comply fully and promptly with all applicable environmental laws, regulations, and permits. Furthermore, it is the policy of the Authority to minimize impacts to the environment, to seek opportunities to enhance natural resources while carrying out Authority projects, and to promote cooperation and understanding with the public, customers and governmental agencies regarding environmental issues involving the Authority. To that end, as part of the wetlands mitigation required for the construction of the Choctaw Point Terminal, the Authority developed a waterfront park with public recreational facilities that have been donated to the City of Mobile to be kept as a green space in perpetuity. Additionally, the Authority has successfully applied to participate in the Green Marine Initiative, an environmental certification program for the North American marine industry. It is a voluntary, transparent and inclusive initiative that addresses environmental issues through key performance indicators in order to reduce the environmental footprint of industry. Benchmarking of annual environmental performance will follow the program’s exhaustive self-evaluation guides which will then be verified by an accredited external party. As part of the application, the Authority agreed to publish its results.

Hurricane Preparedness

The Authority is responsible for developing, operating and maintaining port facilities covering approximately 3,500 acres in the Port of Mobile and throughout the State of Alabama. The Authority is a major contributor to the economy of the State of Alabama. As a result, a prolonged interruption in the operations of the Authority could have adverse impacts to the State’s economy.

In order to prevent such an interruption, the Authority developed an Emergency Operations Plan (EOP) to define actions to be taken in an emergency and to identify personnel responsible for those actions. The purpose of the EOP is to maintain a comprehensive emergency management program for the Authority. This program seeks to mitigate the effects of various hazards, to take measures that will protect the public, minimize injury to personnel and damage to Authority property, and to establish a recovery system to return the Port of Mobile to normal operations as soon as practicable. This plan defines policies and responsibilities for mitigating, preparing for, responding to and recovering from the effects of natural disasters, technological accidents, port security threats and other major disrupting incidents.

The EOP covers activities associated with the property, personnel and operations of the Authority. During the initial phases of plan development, the EOP Task Force performed a Hazard and Vulnerability Analysis to identify potential emergencies that could impact Authority operations or impact the local community as a result of the presence of the Authority. The result of this analysis has been incorporated into the EOP.

Each year in April, prior to the onset of hurricane season, Authority managers and staff of each department meet to review hurricane procedures and amendments are made as necessary. An inventory of emergency supplies is performed and purchases made for items of need. Port maintenance employees check Authority facilities to make sure portable buildings are properly secured. Tenants are notified in writing to be sure that extra care is taken in housekeeping and security of their facilities.

When the U.S. Weather Service predicts a tropical storm or a hurricane will enter the Gulf of Mexico within 96 hours, the Authority’s director convenes a strategy meeting of all managers and critical staff to discuss specific plans. At this time, a person from each department is assigned to coordinate preparations for their area, and is required to review contingency plans and make preparations to initiate necessary activities. Hurricane action plans have been developed for each division within the Authority. These plans are contained in the Emergency Operations Plan.

Hurricane Katrina, which struck the central Gulf Coast in 2005, and Hurricane Ivan, which struck northwest Florida and southwest Alabama in 2004, were significant events. There have been no recent hurricanes of similar magnitude.

Security

Authority facilities are operated in accordance with industry standards for best practices, and meet the requirements of all local, state, federal and international security regulations. Working according to the requirements of 33 CFR Part 105, the Authority developed a U.S. Coast Guard approved port security plan that contains a coordinated set of initiatives that improved security at the port and mitigated the threat posed by an unsecured perimeter. This was accomplished through use of real and virtual fencing and a credential system integrated with a cardholder management system linked to controlled access gates.

Interior security has been enhanced by installation of camera surveillance systems positioned to monitor all piers, warehouses, rail yards and open areas and to provide a means to track vessel movements within the port complex. Improved lighting enhanced the effectiveness of the CCTV system and patrol officers benefited from improved visibility during their regular rounds. Construction of a new Port Police command center, a security control system and relay station, a wireless backhaul system, and upgraded equipment for Port Police officers has improved the Authority’s ability to protect its assets and provide support for local law enforcement officers in the event of civil disturbance or a terrorist incident.

The cost to implement these security enhancements has been significant, with the Authority and federal grants sharing in the costs. On-going security costs have been partially defrayed by the imposition of a security surcharge, which generates approximately 54% of the Police Department’s annual operating budget.

LITIGATION

There is no litigation pending or, to the knowledge of the Authority, threatened questioning the validity of the Series 2017 Bonds, the proceedings under which they are to be issued, the security for the Series 2017 Bonds provided by the Bond Order, the consummation of the transactions contemplated by the Bond Order, the organization of the Authority, or the election or qualification of the Authority’s officers.

The Authority is a party to several suits and has been notified of various claims against it arising from matters relating to its normal operations. The Authority believes that ultimate resolution of these claims will not materially affect the Authority’s financial position or its results of operations, other than to the extent of the accrued liabilities described in Note 10 to the audited financial statements of the Authority included in Appendix A to this Official Statement.

RISK FACTORS

General

The ability of the Authority to collect Docks Facilities Revenues in amounts sufficient to make payments on the Series 2017 Bonds, when due, is affected by, and subject to, conditions that may change in the future to an extent and with effects that cannot be determined at this time. The risks described herein, and other risks that may arise in the future, may adversely affect revenues and, consequently, payment of the principal of and interest on the Series 2017 39

Bonds. No representation or assurance is given, or can be made, that Docks Facilities Revenues will be realized by the Authority in amounts sufficient to make payments on the Series 2017 Bonds when due and to pay necessary operating expenses.

The risk factors discussed below should be considered in evaluating the Authority’s ability to make payments of the principal of and interest due on the Series 2017 Bonds. The following discussion of risk factors is not intended to be exhaustive and should be read in conjunction with all other parts of this Official Statement, including the feasibility report included in Appendix B to this Official Statement.

Authority’s Immunity from Suits to Enforce Payment of Bonds and Other Obligations

The Constitution of Alabama of 1901 provides that the State of Alabama shall never be made a defendant in any court of law or equity. The act that created the Authority in 2000 (see “THE AUTHORITY”) provides that the Authority shall continue to enjoy the same immunity from suit as that formerly enjoyed by the Alabama State Docks Department. Accordingly, neither any trustee or paying agent named in the Bond Order nor any owner of the Series 2017 Bonds can bring suit against the Authority to enforce payment of the Series 2017 Bonds or any of the contractual arrangements contained in the Bond Order or otherwise contemplated by the transactions described herein. Therefore, if the Authority defaults in any way, it cannot be sued for specific performance, damages or otherwise. However, certain officers of the Authority are, under existing law, subject to mandamus in the event that they have money available for payment of debt service on the Series 2017 Bonds and do not apply such money as and to the extent provided in the Bond Order.

Dependence on Market Conditions and Political Climate

The Authority’s results of operations are affected by, among other things, the global supply and demand for certain cargo products, particularly coal, forest products, grain and other bulk cargos, as well as other commodities such as chemicals and steel; the supply of such products available for import or export through the Authority’s facilities; general economic conditions in the United States and foreign countries; changes in the international political climate, particularly the political climate in South American countries; the relative value of international currencies; competition from other ports, particularly ports on the Gulf Coast; shipping rates for general and other cargo; and the effect of governmental regulation on the shipping and other industries. Historical data indicates that the demand for and supply of cargo goods are subject to extreme volatility and can vary significantly from year to year. Many of these factors are beyond the control of the Authority. For further discussion of the market conditions that the Authority faces, see “Appendix B – Report of Feasibility Consultant”.

Feasibility Report

The Report of the Feasibility Consultant, prepared by MICP Capital (“MICP Capital”) included as Appendix B to this Official Statement contains certain assumptions and forecasts. Actual results are likely to differ, perhaps materially, from those forecasts. Accordingly, the forecasts contained in the Report of the Feasibility Consultant are not necessarily indicative of future performance, and none of the Underwriters, the Feasibility Consultant, or the Authority assumes any responsibility for the failure to meet such forecasts. In addition, certain assumptions with respect to future business and financing decisions of the Authority are subject to change. If actual results are less favorable than the results forecast in the Report of the Feasibility Consultant, or if the assumptions used in preparing such forecasts prove to be incorrect, the amount of the Authority’s revenues may be materially less than expected and, consequently, the ability to make timely payments of the principal of and interest on the Series 2017 Bonds from the Authority’s revenues may be materially adversely affected. See “DEBT SERVICE REQUIREMENTS AND COVERAGE–Pro Forma and Projected Coverage”, “REPORT OF FEASIBILITY CONSULTANT”, and “Appendix B – Report of Feasibility Consultant”.

Dependence on Certain State Tax Revenues

Legislation has been enacted from time to time by the Legislature of Alabama to support the operations of the Authority. Such legislation presently consists of the Coal Severance Tax and the Oil and Gas Severance Tax. See “AVAILABLE STATE TAX REVENUES.” The Authority has in past years, specifically fiscal years 1987 and 1988 when earnings from operations were inadequate, found itself dependent on the revenues resulting from such legislation to maintain its operations and meet its obligations, receiving $3,226,000 and $2,033,000 in said two years, respectively, from the proceeds of the Coal Severance Tax. The Coal Severance Tax will terminate on October 1, 2021, unless extended by the Alabama Legislature. In enacting the Oil and Gas Severance Tax, the Legislature of Alabama expressly reserved the right at any time to repeal, rescind or modify such legislation or such appropriations, payments or

transfers. While the Authority intends actively to seek extension of the Coal Severance Tax prior to the scheduled expiration thereof, no assurances can be given that the Coal Severance Tax will in fact be extended or that the legislation levying the Coal Severance Tax, or any other legislation providing for support of the Authority, will not be terminated, repealed, rescinded or modified. Any termination, repeal, rescission or modification of any of such legislation would have a material adverse effect on the Authority and its ability to meet its obligations in the event the Authority’s other revenues are not at the time otherwise sufficient for such purposes.

Hurricanes and Other Severe Weather

The Gulf Coast region is subject to occurrences of severe weather, including hurricanes. The Authority’s property and equipment is insured against damage from such weather hazards in amounts the Authority’s management believes to be reasonable. However, substantial damage from a natural disaster could have a significant negative impact to the extent insurance proceeds are not sufficient to repair or replace property and equipment and to the extent the operations or customers of the Authority are impaired by such damage.

The State of Alabama is generally susceptible to hurricanes and similar storms in which winds and tidal surges are powerful enough to cause severe destruction. The Authority’s Port of Mobile facilities, which are located in a coastal area, are particularly susceptible to such storms and their effects. The Authority has adopted a hurricane plan in an effort to, among other things, establish protective measures to be put into effect at the Authority and to make its facilities safer in case of a hurricane. The Authority’s casualty insurance covers buildings and structures located on land. However, there is no assurance that proceeds of such insurance would always be sufficient to fully compensate for hurricane or other storm damage to such buildings and structures. There can be no assurance that the Authority has provided adequate reserves to repair any of its docks, wharves and piers. In addition, the amount of Docks Facilities Revenues of the Authority lost during any necessary period of repair cannot be predicted.

The most recent hurricane to affect the Authority’s Port of Mobile facilities was Katrina in 2005. The Authority’s Port of Mobile facilities were closed for six days as a result of the hurricane. The Authority sustained significant damages, but before the end of Fiscal Year 2009 restoration was completed and all recovery amounts were received. There have been no recent hurricanes of similar magnitude.

Other Risks of Loss, Damage or Destruction

The Authority’s ability to generate Docks Facilities Revenues from its properties and facilities are also at risk from other events of force majeure, such as fires and explosions, spills of hazardous substances, strikes and lockouts, sabotage, wars, blockages, riots and terrorist-related actions. While the Authority has attempted to address the risk of loss from many of these sorts of occurrences through the purchase of commercial property and casualty insurance, certain of these events may not be covered by standard property and casualty insurance coverage. Notwithstanding that the Authority may seek recovery under its insurance policies in the event of such losses, there exists the possibility that an insurer may deny coverage and refuse to pay a claim and there is an attendant risk of litigation and delay in receipt of any loss claim payments. In the event of damage to facilities, the collection of lease rental or other tariffs, fees and charges for the use of such facilities and other amounts comprising Docks Facilities Revenues could be impaired for an undetermined period.

Costs Associated with Enhanced Security Precautions

As a result of the September 11, 2001, terrorist attacks in New York City and Washington, D.C., on November 25, 2002, President Bush signed the Maritime Transportation Security Act (“MTSA”) into law. The MTSA established a framework as to how to protect the ports of the United States from terrorism. The MTSA also established plans related to national and regional areas, facilities, and vessels which are aimed at deterring maritime terrorist incidents. Ports and their facilities, including the Authority, are required to conduct vulnerability assessments and develop security plans to mitigate the risks identified. To this end, MTSA also established a federal grant program designed to help ports make security enhancements in a timely and effective manner.

The Authority remains committed to identifying and implementing safeguards designed to increase security and promote public safety. As a vital economic engine for the region, the Authority must carefully balance the impact of the added security measures against the continued flow of commerce into and out of the Port of Mobile.

Funding of security enhancements remains a primary concern. The cost to implement these security enhancements has been significant, with the funding shared by the Authority and federal grants. On-going security costs have been partially defrayed by the imposition of a security surcharge which generates approximately 54% of the Port of Mobile Police Department’s current annual operating budget. To the extent that additional federal or state 41

requirements related to security or anti-terrorist measures are imposed upon the Authority and grant money or other federal or state financial assistance is not available, the Authority may be forced to absorb additional security-related expenditures into its operating budget, which may reduce Docks Facilities Revenues, which will, in turn, have an adverse impact on the Authority’s ability to satisfy its debt service obligations on the Series 2017 Bonds.

Financial Performance and Capital Commitments

The Authority has typically, from time to time, committed itself to significant capital projects intended to be financed with internally generated funds in order to accomplish needed improvements and renovations to its facilities. Because the Authority’s revenues and profitability are subject to changes in market conditions and other risks, the level of future revenues, and earnings or losses, and the adequacy of future earnings to cover fixed charges and to fund capital commitments cannot be predicted. See “FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS”.

Environmental Regulation

The Authority’s operations are subject to significant environmental regulation. See “FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Contingent Liabilities.” Although management of the Authority believes that it is in substantial compliance with environmental regulations, the imposition of new regulations or the future determination of noncompliance with existing or future regulations could have a material adverse effect on the operations of the Authority. See “AUTHORITY OPERATIONS – Environmental Impact and Policy”.

Competition

The Authority faces competition in the operations of facilities from other ports, principally those located on the Gulf Coast of the United States. See “AUTHORITY OPERATIONS”. Increases in the level of competition from Gulf Coast and other ports that engage in the businesses, and handle the same cargo, as that handled by the Authority, due to expansion of such competing ports or otherwise, may have an adverse impact on the revenues of the Authority. This would result in a decrease in Docks Facilities Revenues, which would have a detrimental impact on the Authority’s ability to satisfy its obligations with respect to the Series 2017 Bonds.

Termination or Expiration of Material Contracts

Although the Authority has no reason to believe that current users or tenants of its facilities will prematurely terminate existing leases or similar agreements entered into with the Authority, or choose not to renew such agreements at their stated expiration, there can be no assurance that such sources of revenues to the Authority currently derived from such agreements will be available in future years. A loss of such revenues could adversely affect the ability of the Authority to pay its debt service obligations on the Series 2017 Bonds.

Regulatory Factors Affecting Coal Industry

Historically, a significant portion of the Authority’s gross revenues is derived from coal handling and storage operations. See, “AUTHORITY OPERATIONS – Coal Handling and Storage Facilities” and “Statements of Revenues, Expenses and Changes in Net Assets” herein. The coal mining industry is subject to regulation by federal, state and local authorities with respect to such matters as employee health and safety; limitations on land use; mine permitting and licensing requirements; reclamation and restoration of mining properties after mining is completed; storage, treatment and disposal of wastes; remediation of contaminated soil and groundwater; air quality standards; water pollution; protection of plant-life and wildlife, including endangered or threatened species; protection of wetlands; and surface water and groundwater quality and availability. Regulatory agencies have the authority under certain circumstances to order a mine to be temporarily or permanently closed, in which case the production, sale and shipment of coal would be disrupted. Such actions involving a major customer of the Authority could have a material adverse effect on the Authority’s financial condition, results of operations and cash flows.

In addition, the possibility exists that new legislation or regulations could be adopted that may materially affect mining operations of the Authority’s customers. Such new legislation or regulations could have a material adverse effect on the Authority’s financial condition and results of operations.

Tax-Exempt Status of Series 2017A Bonds, Series 2017B Bonds, and Series 2017C Bonds

It is expected that the Series 2017A Bonds, Series 2017B Bonds, and Series 2017C Bonds (hereinafter referred to in this section as the “Tax-Exempt Bonds”) will qualify as tax-exempt obligations for federal income tax purposes as of the date of issuance. See “TAX MATTERS”. It is anticipated that Bond Counsel will render opinions substantially 42

in the form attached hereto as Appendix E, which should be read in their entirety for a complete understanding of the scope of the opinions and the conclusions expressed therein. A legal opinion expresses the professional judgment of the attorney rendering the opinion as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

The tax status of the Tax-Exempt Bonds could be affected by post-issuance events. There are various requirements of the Internal Revenue Code of 1986, as amended, that must be observed or satisfied after the issuance of the Tax-Exempt Bonds in order for the Tax-Exempt Bonds to qualify for, and retain, tax-exempt status. These requirements include appropriate use of the proceeds of the Tax-Exempt Bonds, use of the facilities financed by the Tax-Exempt Bonds, investment of bond proceeds, and the rebate of so-called excess arbitrage earnings. Compliance with these requirements is the responsibility of the Authority.

The Internal Revenue Service conducts an audit program to examine compliance with the requirements regarding tax-exempt status. Under current IRS procedures, in the initial stages of an audit with respect to the Tax- Exempt Bonds, the Authority would be treated as the taxpayer, and the owners of the Tax-Exempt Bonds may have limited rights to participate in the audit process. The initiation of an audit with respect to the Tax-Exempt Bonds could adversely affect the market value and liquidity of the Tax-Exempt Bonds, even though no final determination about the tax-exempt status has been made. If an audit results in a final determination that the Tax-Exempt Bonds do not qualify as tax-exempt obligations, such a determination could be retroactive in effect to the date of issuance of the Tax-Exempt Bonds.

In addition to post-issuance compliance, a change in law after the date of issuance of the Tax-Exempt Bonds could affect the tax-exempt status of the Tax-Exempt Bonds or the effect of investing in the Tax-Exempt Bonds. For example, the United States Congress could eliminate or limit the exemption for interest on the Tax-Exempt Bonds, or it could reduce or eliminate the federal income tax, or it could adopt a so-called flat tax. It cannot be predicted whether or in what form any such change in law may be enacted or whether, if enacted, any such change in law would apply to the Tax-Exempt Bonds.

The Bond Order does not require the Authority to redeem the Tax-Exempt Bonds and does not provide for the payment of any additional interest or penalty if a determination is made that the Tax-Exempt Bonds do not comply with the existing requirements of the Internal Revenue Code of 1986, as amended, or if a subsequent change in law adversely affects the tax-exempt status of the Tax-Exempt Bonds or the effect of investing in the Tax-Exempt Bonds.

Employee Relations

Various national railroad labor organizations represent the Authority’s approximately 95 non-management employees engaged in the Authority’s Terminal Railroad operations. Approximately 264 hourly paid employees of the Authority are represented by the International Longshoreman’s Association (the “ILA”), as official bargaining agent for such employees. The Authority’s current contract with the ILA expired on March 31, 2015. With the assistance of the Federal Mediation Board, the parties continue to negotiate toward a new contract. Although management of the Authority believes that its relations with the unions are good, the failure to reach agreement on collective bargaining agreements in the future could have an adverse impact on the operations of the Authority. See “THE AUTHORITY – Employee Relations”.

State Legislative Control

The Authority, as an instrumentality of the State created by legislative act, is subject to the virtually plenary powers of the Legislature of Alabama, which meets annually in regular session and from time to time in extraordinary session at the call of the Governor of the State.

The United States Bankruptcy Code

Information describing the applicability of the United States Bankruptcy Code to the Authority and the Series 2017 Bonds is set forth in this Official Statement under the caption “SECURITY AND SOURCE OF PAYMENT”.

In addition, the financial failure or bankruptcy of a user or tenant of the Authority, such as a shipping line or mining company, could adversely affect the ability of such user or tenant to honor its obligations to the Authority and the ability of the Authority to enforce the terms of any agreement with any such user or tenant. It could also allow such user or tenant to reject its use or lease agreement. Further, the Authority’s right to receive payment of amounts accrued 43

prior to bankruptcy may be limited to the rights of an unsecured creditor of the bankrupt entity. Hence, the financial failure or bankruptcy of an Authority user or tenant could result in delays and/or reductions in payments to the Authority, which could affect the Authority’s ability to pay debt service on the Series 2017 Bonds. Historically, the Authority has not experienced significant payment shortfalls from its principal users.

ECONOMIC AND DEMOGRAPHIC INFORMATION

General

The State of Alabama entered the United States of America as the 22nd state on December 14, 1819. The borders of the State of Alabama encompass 32,690,000 acres and 1,300 miles of navigable waterways. The natural resources of the State of Alabama include diverse agricultural lands, extensive commercial forests, and abundant reserves of oil, gas, coal, iron, and limestone. The economy of the State of Alabama has been shifting, from dependence on agriculture toward increasing reliance on trade, service, construction, and manufacturing industries. Major manufactured products produced in the State include automobile and auto-related supplies, primary metals, chemicals, textiles, paper, processed foods, transportation equipment, wood products, and electrical equipment. Agricultural activities and the extraction of mineral resources also contribute significantly to the State of Alabama’s economy.

Population

The following table sets forth population statistics for the State of Alabama and the United States from 1970 to 2015.

1970 1980 1990 2000 2010 2015 Estimate

State of Alabama 3,444,354 3,894,025 4,040,389 4,447,100 4,779,736 4,858,979 United States 203,302,020 226,542,204 248,718,302 281,421,906 308,745,538 321,418,820 ______Source: U.S. Census Bureau.

Employment

The following table sets forth estimated nonagricultural wage and salary employment statistics for State of Alabama as of a recent date:

State of Alabama Employment by Industry

Number Employed % Manufacturing ...... 259,088 14.7 Retail Trade ...... 237,968 13.5 Public Administration ...... 211,543 12.0 Health Care and Social Assistance ...... 205,322 11.6 Accommodation and Food Services ...... 173,954 9.9 Administrative and Waste Services ...... 120,833 6.9 Professional and Technical Services ...... 97,214 5.5 Construction ...... 83,778 4.8 Wholesale Trade ...... 73,963 4.2 Finance and Insurance ...... 70,918 4.0 Transportation and Warehousing ...... 56,287 3.2 Other Services (except Public Admin.) ...... 44,940 2.5 Real Estate, Rental and Leasing ...... 21,994 1.2 Information ...... 21,243 1.2 Educational Services ...... 19,959 1.1 Arts, Entertainment and Recreation ...... 15,942 0.9 Management of Companies and Enterprises...... 15,556 0.9 Utilities……………………………………………………………….. 14,280 0.8 Agriculture, Forestry, Fishing and Hunting...... 12,261 0.7 Mining ...... 6,269 0.4 Total wage and salary employees ...... 1,763,312 100.0 ______Source: Alabama Department of Labor.

The following table sets forth labor force estimates and employment rates for State of Alabama on the dates indicated:

September 2012 2013 2014 2015 2016*

Civilian Labor Force 2,174,972 2,167,238 2,161,313 2,146,157 2,188,762 Employment 2,001,849 2,010,431 2,014,284 2,015,189 2,063,931 Unemployment 173,123 156,807 147,029 130,968 124,831 ______Sources: U.S. Department of Labor, Bureau of Labor Statistics. *Preliminary

The following table sets forth comparative unemployment rates for the State of Alabama and the United States for the dates indicated:

September 2012 2013 2014 2015 2016*

State of Alabama 8.0 7.2 6.8 6.1 5.7 United States 8.1 7.4 6.2 5.3 4.8 ______Sources: U.S. Department of Labor, Bureau of Labor Statistics. *Preliminary

Income Levels

Per capita income is the total income of all families and individuals in a given area divided by the total population of the area. For the year 2015, the U.S. Bureau of Economic Analysis estimates the following with respect to per capita income levels in the jurisdictions indicated:

Per Capita Income

State of Alabama $38,030 United States 48,112 ______Source: U.S. Bureau of Economic Analysis.

Median family income is defined by the U.S. Census Bureau as the amount which divides the income distribution of families into two equal groups, half having incomes above the median, half having incomes below the median. For the year 2015, the U.S. Census Bureau estimates the following with respect to median family income levels in the jurisdictions indicated:

Median Family Income

State of Alabama $57,160 United States 68,260 ______Source: U.S. Census Bureau.

Education

Alabama provides a mix of public and private educational opportunities. The Alabama State Board of Education establishes policies and exercises general control over the State’s public school system. The Board is composed of elected representatives from each of Alabama’s seven congressional districts plus the Governor as its president. The Board and the Alabama State Department of Education oversee 1,467 public schools in Alabama serving more than 743,893 students. The State has approximately 137 local school districts, each with its own local board and superintendent of education.

For 2015, Alabama’s state average score on the ACT was 19.1. This compares with the national average score of 21.0.

Alabama has a varied and comprehensive assessment program. It includes the following: ACT Aspire gauges student progression in reading and mathematics (Grades 3-8); ACT Aspire gauges student progression in science (Grades 5 and 7); ACT Aspire gauges student progression in reading, mathematics, English, writing and science (Grade 10); ACT with Writing gauges student progression in reading, mathematics, English, writing and science (Grade 11); ACT WorkKeys gauges student progression in reading, mathematics and locating information (Grade 12); and ACT QualityCore End-of-Course Assessments (EOC) gauges student progression in algebra I and English 9 or 10, including students who are enrolled in algebra IB, algebraic essentials B and English Essentials 9 or 10 (Grades 8-12). (This program will be retired at the end of the 2016-2017 school year.).

In addition, ACCESS for ELLs 2.0 is an English language proficiency assessment used to monitor English language learners (ELLs) and their progress in acquiring academic English within the school context, as well as language associated with language arts, mathematics, science and social studies across four domains of Speaking, Listening, Reading and Writing (Grades K-12). Alternate ACCESS for ELLs is a performance-based assessment developed for ELLs with significant cognitive disabilities (Grades 1-12). The Alabama Alternative Assessment (AAA) is a performance-based assessment administered as an alternate to the general education state assessment, and administered to students with significant cognitive disabilities. The AAA assessment is administered in the areas of reading and mathematics (Grades 3-8 and 10), and science (Grades 5, 7 and 10).

All students must complete a total of 24 credits in order to receive a High School diploma. The credits include the following: English language arts (4 credits for English 9, 10, 11 and 12 or equivalent of each); mathematics (3 credits for algebra I, geometry, algebra II or algebra II with trigonometry or equivalent of each); Alabama course of study (1 credit for mathematics or equivalent from career and technical education); science (2 credits for biology and physical science [chemistry or physics] or equivalent of each); Alabama course of study (2 credits for science or equivalent from career and technical education); social studies (4 credits for world history, U.S. history I and II, U.S. government and economics or equivalent of each); career and technical education and/or foreign language and/or arts 46

education (3 credits); career preparedness (1 credit); Lifelong Individualized Fitness Education (LIFE) or JROTC (1 credit); health education (½ credit); and elective credits (2 ½ credits).

At the public university level, Alabama offers undergraduate and graduate programs in liberal arts, business and various sciences through an extensive network of 16 public universities and colleges. In addition, the Alabama Community College System oversees a 2-year public college system of 25 junior/community colleges.

Complementing the public institutions are 21 private universities and colleges. Located throughout the State, 10 of these institutions offer undergraduate and advanced degrees, 11 offer undergraduate degrees, and 2 award associate degrees and certificates.

The following table indicates the level of education in Alabama as compared to the United States as a whole for persons age 25 years and over as of 2015.

Level of Education Alabama United States

High School Graduate 84.9% 87.1% Bachelor’s Degree or higher 24.2% 30.6% ______Source: U.S. Census Bureau.

Utilities

Electrical generation service in Alabama is provided by Alabama Power Company, the Tennessee Valley Authority, electric cooperatives, and municipal electric systems, utilizing primarily coal, hydroelectric, and nuclear facilities.

Natural gas is supplied from several sources. Although an increasingly significant quantity is supplied from the natural gas and crude oil fields of Alabama, the majority of the statewide gas requirements are provided from out-of- state sources via interstate gas transmission lines. Gas distribution companies or gas districts distribute natural gas. The larger distribution companies include Alabama Gas Corporation, the Mobile Gas Service Corporation, and Huntsville Utilities.

Transportation

Alabama contains one of the largest networks of inland river systems in the nation. Across the northern section of the State, through the heartland and down to the Gulf of Mexico flow the waters of four major rivers offering barge transportation to industries and businesses that depend on the movement of large, heavy or bulky cargoes. The Port of Mobile is one of the nation’s busiest ports in tons of cargo handled.

Under the direction of the Tennessee-Tombigbee Water Development Authority, a 234-mile waterway has been constructed to connect the Tennessee River with the Tombigbee River and thereby connect the waterways of mid- America with the Gulf of Mexico through the Port of Mobile.

To complement its natural river system Alabama has built a system of 11 inland docks located throughout the State and operated by the Alabama State Port Authority. At several locales, grain elevators have been constructed to provide storage for Alabama agricultural products.

Five Class I railroads and twenty-three short lines operate more than 4,728 miles of track within Alabama, linking the State to all of the nation’s major markets. Four major lines serve the Port of Mobile, three major railroads converge on the manufacturing and distribution centers of Birmingham while two lines serve the capital city of Montgomery.

Interstate routes and four-lane divided highways link major Alabama cities to national markets. A supporting system of federal, State and farm-to-market routes provide 95,486 miles of all-weather highways serving every community in the State.

LEGAL MATTERS

The legality and validity of the Series 2017 Bonds will be approved by Bond Counsel, Hand Arendall LLC, Mobile, Alabama. Bond Counsel has been employed primarily for the purpose of preparing certain legal documents and supporting certificates, reviewing the transcript of proceedings by which the Series 2017 Bonds have been authorized to be issued, and rendering opinions in conventional form as to the validity and legality of the Series 2017 Bonds and the exemption of interest thereon from Federal and State of Alabama income taxes.

Although Bond Counsel assisted in the preparation of certain portions of this Official Statement and is of the opinion that the statements made therein under the captions “DESCRIPTION OF THE SERIES 2017 BONDS”, “LEGAL MATTERS”, “TAX MATTERS”, and “Appendix D – Summary of the Bond Order” fairly summarize the matters therein referred to, Bond Counsel has not been requested to check or verify, has not checked or verified, and will express no opinion with respect to the adequacy, accuracy, completeness or fairness of any other information contained in this Official Statement.

It is anticipated that Bond Counsel will render separate opinions for the four subseries of Series 2017 Bonds substantially in the forms attached hereto as Appendix E. In connection with the rendering of each such opinions, Bond Counsel is serving as counsel to the Authority. Certain legal matters will be passed upon for the Authority by its counsel, Hand Arendall LLC, Mobile, Alabama. Certain legal matters will be passed upon for the Underwriters by their counsel, Maynard, Cooper & Gale, P.C., Birmingham, Alabama.

The various legal opinions to be delivered concurrently with the delivery of the Series 2017 Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

TAX MATTERS

Series 2017A Bonds, Series 2017B Bonds and Series 2017C Bonds

In the opinion of Bond Counsel, under existing law, interest on the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds is excludable from gross income for federal income tax purposes, except that no opinion is expressed by Bond Counsel as to the exclusion of interest on any Series 2017A Bond or Series 2017B Bond for any period during which the Series 2017A Bond or Series 2017B Bond is held by a person who, within the meaning of Section 147(a) of the Internal Revenue Code, as amended (the “Code”) is a “substantial user” of the facilities refinanced with the proceeds of such Series 2017A Bonds or Series 2017B Bonds or a “related person”. Interest on the Series 2017A Bonds is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest on the Series 2017B Bonds and the Series 2017C Bonds is not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations.

In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the Authority in connection with the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds, and Bond Counsel has assumed compliance by the Authority with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds from gross income under Section 103 of the Code.

In addition, in the opinion of Bond Counsel, under existing laws of the State of Alabama, interest on the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds will be exempt from State of Alabama income taxation.

Bond Counsel will express no opinion regarding federal tax consequences arising with regard to the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds other than the opinions expressed in the preceding paragraphs.

Certain Collateral Federal Tax Consequences

Prospective purchasers of the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds should be aware that ownership of the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income”, foreign corporations subject to a branch profits tax and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds. Bond Counsel will not express any opinion as to such collateral tax consequences. Prospective purchasers of the Series 2017A Bonds, the Series 2017B Bonds and the Series 2017C Bonds should consult their tax advisors as to collateral federal income tax consequences.

Original Issue Discount

In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of a Series 2017A Bond, a Series 2017B Bond and a Series 2017C Bond to the extent properly allocable to each owner of such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond is excludable from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity of such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond over the initial offering price to the public, excluding underwriters and other intermediaries, at which price a substantial amount of such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond of such maturity were sold.

Under Section 1288 of the Internal Revenue Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of a Series 2017A Bond, Series 2017B Bond and Series 2017C Bond during any accrual period generally equals (i) the issue price of such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will increase the owner's tax basis in such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond. Any gain realized by an owner from a sale, exchange, payment or redemption of a Series 2017A Bond, Series 2017B Bond and Series 2017C Bond will be treated as gain from the sale or exchange of such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond.

Premium

An amount equal to the excess of the purchase price of a Series 2017A Bond, Series 2017B Bond and Series 2017C Bond over its stated redemption price at maturity constitutes premium on such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond. A purchaser of a Series 2017A Bond, Series 2017B Bond and Series 2017C Bond must amortize any premium over such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond's term using constant yield principles, based on the purchaser's yield to maturity. As premium is amortized, the purchaser's basis in such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond prior to its maturity. Even though the purchaser's basis is reduced, no federal income tax deduction is allowed. Purchasers of any Series 2017A Bond, Series 2017B Bond and Series 2017C Bond at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Series 2017A Bond, Series 2017B Bond and Series 2017C Bond.

Series 2017D Bonds

Interest on the Series 2017D Bonds is not excludable from gross income for federal income tax purposes. In the opinion of Bond Counsel, under existing laws of the State of Alabama, interest on the Series 2017D Bonds will be exempt from State of Alabama income taxation.

Bond Counsel will express no opinion regarding federal tax consequences arising with regard to the Series 2017D Bonds. Each prospective purchaser of the Series 2017D Bonds should seek advice based upon the purchaser’s particular circumstances from an independent tax advisor.

VERIFICATION OF CERTAIN COMPUTATIONS RELATING TO SERIES 2017 BONDS

The accuracy of (i) the arithmetical computations of the adequacy of the payments of principal and interest on the securities being held in the Escrow Fund, together with the initial cash balance in the Escrow Fund, to provide for the payment or redemption of the Refunded Bonds as contemplated by the Escrow Agreement, and (ii) the mathematical computations supporting the conclusion of Bond Counsel that the Series 2017 Bonds are not “arbitrage bonds” under the applicable provisions of the Internal Revenue Code, will be verified by Samuel Klein and Company, independent certified public accountants, Newark, New Jersey. Such verification will be based, in part, upon information supplied to such accountants by the Underwriters.

UNDERWRITING

The Series 2017A Bonds are being purchased from the Authority by Citigroup Global Markets Inc., Harbor Financial Services, LLC, SunTrust Robinson Humphrey, Inc., and UMB Bank, N.A. (the “Underwriters”). The Underwriters have agreed to purchase the Series 2017A Bonds for an aggregate purchase price of $______(which represents the face amount of the Series 2017A Bonds less underwriters’ discount of $______and original issue discount of $______). The initial public offering price set forth on the inside cover page may be changed by the Underwriters, and the Underwriters may offer and sell the Series 2017A Bonds to certain dealers (including dealers depositing the Series 2017A Bonds into investment trusts) and others at prices lower than the offering price set forth on the inside cover page. The Underwriters will purchase all the Series 2017A Bonds if any are purchased.

The Series 2017B Bonds are being purchased from the Authority by the Underwriters. The Underwriters have agreed to purchase the Series 2017B Bonds for an aggregate purchase price of $______(which represents the face amount of the Series 2017B Bonds less underwriters’ discount of $______and original issue discount of $______). The initial public offering price set forth on the inside cover page may be changed by the Underwriters, and the Underwriters may offer and sell the Series 2017B Bonds to certain dealers (including dealers depositing the Series 2017B Bonds into investment trusts) and others at prices lower than the offering price set forth on the inside cover page. The Underwriters will purchase all the Series 2017B Bonds if any are purchased.

The Series 2017C Bonds are being purchased from the Authority by the Underwriters. The Underwriters have agreed to purchase the Series 2017C Bonds for an aggregate purchase price of $______(which represents the face amount of the Series 2017C Bonds less underwriters’ discount of $______and original issue discount of $______). The initial public offering price set forth on the inside cover page may be changed by the Underwriters, and the Underwriters may offer and sell the Series 2017C Bonds to certain dealers (including dealers depositing the Series 2017C Bonds into investment trusts) and others at prices lower than the offering price set forth on the inside cover page. The Underwriters will purchase all the Series 2017C Bonds if any are purchased.

The Series 2017D Bonds are being purchased from the Authority by the Underwriters. The Underwriters have agreed to purchase the Series 2017D Bonds for an aggregate purchase price of $______(which represents the face amount of the Series 2017D Bonds less underwriters’ discount of $______and original issue discount of $______). The initial public offering price set forth on the inside cover page may be changed by the Underwriters, and the Underwriters may offer and sell the Series 2017D Bonds to certain dealers (including dealers depositing the Series 2017D Bonds into investment trusts) and others at prices lower than the offering price set forth on the inside cover page. The Underwriters will purchase all the Series 2017D Bonds if any are purchased.

Citigroup Global Markets Inc., one of the Underwriters of the Series 2017 Bonds, has entered into a retail distribution agreement with UBS Financial Services Inc. (“UBSFS”). Under this distribution agreement, Citigroup Global Markets Inc. may distribute municipal securities to retail investors through the financial advisor network of UBSFS. As part of this arrangement, Citigroup Global Markets Inc. may compensate UBSFS for their selling efforts with respect to the Series 2017 Bonds

SunTrust Robinson Humphrey (STRH), one of the Underwriters of the Series 2017 Bonds, has entered into an agreement (the “Distribution Agreement”) with SunTrust Investment Services, Inc. (“STIS”) for the retail distribution 50

of certain municipal securities offerings, including the offering of the Series 2017 Bonds. Pursuant to the Distribution Agreement, STRH will share a portion of its underwriting compensation, with respect to the Series 2017 Bonds, with STIS. STRH and STIS are both subsidiaries of SunTrust Banks, Inc. SunTrust Robinson Humphrey is the trade name for certain capital markets and investment banking services of SunTrust Banks and its subsidiaries.

CONTINUING DISCLOSURE

General

The Authority has covenanted for the benefit of the holders of the Series 2017 Bonds to provide the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”) with (i) certain financial information and operating data relating to the Authority on an annual basis (the “Annual Financial Information”) within 180 days after the end of its fiscal year and (ii) notices (“Material Event Notices”) of the occurrence of the following events in a timely manner not in excess of 10 business days after the occurrence of the event:

1. A delinquency in payment of principal of or interest on the Series 2017 Bonds.

2. Non-payment related defaults under the proceedings of the Authority authorizing the Series 2017 Bonds, whether or not such defaults constitute an event of default thereunder, if material.

3. Unscheduled draws on any debt service reserve fund reflecting financial difficulties of the Authority.

4. Unscheduled draws on any credit enhancement or liquidity facility with respect to the Series 2017 Bonds reflecting financial difficulties of the Authority.

5. Substitution of a credit enhancer for the one originally described in the Official Statement (if any), or the failure of any credit enhancer respecting the Series 2017 Bonds to perform its obligations under the agreement between the Authority and such credit enhancer.

6. The existence of any adverse tax opinion with respect to the Series 2017 Bonds, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 TEB) or other material notices or determinations with respect to the tax status of the Series 2017 Bonds, or other material events affecting the tax status of the Series 2017 Bonds.

7. Any modification of the rights of the registered owners of the Series 2017 Bonds, if material.

8. Redemption of any of the Series 2017 Bonds prior to the stated maturity or mandatory redemption date thereof, if material, and tender offers with respect to the Series 2017 Bonds.

9. Defeasance of the lien of any of the Series 2017 Bonds or the occurrence of circumstances which, pursuant to such authorizing proceedings, would cause the Series 2017 Bonds, or any of them, to be no longer regarded as outstanding thereunder.

10. The release, substitution or sale of the property securing repayment of the Series 2017 Bonds, if material.

11. Any changes in published ratings affecting the Series 2017 Bonds.

12. Bankruptcy, insolvency, receivership or similar event of the Authority.

13. The consummation of a merger, consolidation, or acquisition involving the Authority or the sale of all or substantially all of the assets of the Authority, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.

In addition, the Authority has covenanted to provide in a timely manner to EMMA notice of the Authority’s failure to provide the Annual Financial Information on or before the date specified herein.

Unless otherwise included in the audited financial statements to be provided to EMMA, as more particularly described below, the Annual Financial Information will include financial information and operating data relating to the Authority of the type found in the section of this Official Statement called “FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Statements of Revenues, Expenses, and Changes in Net Assets/Statements of Net Assets”, and will also include (i) the amount of coal severance tax revenues (if any) collected and available for deposit in the Bulk Handling Trust Fund during the prior fiscal year and the amount (if any) of such revenues transferred to the Authority during such period, (ii) the amount of oil and gas severance tax revenues (if any) collected and available for deposit in the Alabama Docks Facilities Contingency Trust Fund during the prior fiscal year, (iii) the annual volume of coal handled by the Authority during the prior fiscal year and (iv) the annual volume of general cargo shipments handled by the Authority during the prior fiscal year. The Authority will provide to EMMA, when and if available, audited financial statements prepared in accordance with accounting principles described in the audited financial statements included in this Official Statement as an appendix.

The Authority shall never be subject to money damages for its failure to comply with its obligations to provide the required information. The only remedy available to the holders of the Series 2017 Bonds for breach by the Authority of its obligations to provide the required information shall be the remedy of specific performance or mandamus against appropriate officials of the Authority. The failure by the Authority to provide the required information shall not be an event of default with respect to the Series 2017 Bonds under the Bond Order. A failure by the Authority to comply with its obligations to provide the required information must be reported as described above and must be considered by any broker, dealer, or municipal securities dealer before recommending the purchase or sale of the Series 2017 Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Series 2017 Bonds and their market price.

No person other than the Authority shall have any liability or responsibility for compliance by the Authority with its obligations to provide information. The Trustee has not undertaken any responsibility with respect to any required reports, notices or disclosures.

The Authority retains the right to modify its obligations described above as long as such modification is done in a manner consistent with Rule 15c2-12 of the Securities and Exchange Commission.

Compliance with Prior Undertakings

Certain bonds issued by the Authority are insured by bond insurance companies. The ratings on those bond insurance companies have been changed at various times over the past several years. Information about the downgrades was publicly reported. The Authority did not file a notice under SEC Rule 15c2-12 with respect to each such downgrade.

RATINGS

S&P Global Ratings, a business unit of Standard & Poor’s Financial Services, LLC (“S&P”) has assigned ratings to the Series 2017 Bonds as indicated on the cover page, with the understanding that, upon delivery of the Series 2017 Bonds, a policy insuring the payment when due of the principal of and interest on the Series 2017 Bonds will be insured by the Insurer. S&P and Fitch have also assigned underlying ratings to the Series 2017 Bonds (as shown on the cover page). The insured rating on the Series 2017 Bonds reflects S&P’s current assessment of the creditworthiness of the Insurer and its ability to pay claims on the policies of insurance.

Fitch Ratings is expected to assign an underlying rating of “A- (negative outlook)” to the Series 2017 Bonds (as shown on the cover page), which reflects its current assessment of the creditworthiness of the Authority with respect to obligations secured by the Docks Facilities Revenues.

Any definitive explanation of the significance of any such ratings may be obtained only from the appropriate rating agency. The Authority furnished to each rating agency the information contained in this Official Statement and certain other information respecting the Authority and the Series 2017 Bonds. Generally, rating agencies base their ratings on such materials and information, as well as on their own investigations, studies and assumptions.

The above ratings are not recommendations to buy, sell or hold the Series 2017 Bonds, and any such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any or all of such ratings may have an adverse effect on the market price of the affected Series 2017 Bonds. Except as may be required in connection with the obligations described under the heading “CONTINUING DISCLOSURE”, 52

neither the Authority nor the Underwriters have undertaken any responsibility either to bring to the attention of the Series 2017 Bondholders any proposed revision, suspension or withdrawal of a rating or to oppose any such revision, suspension or withdrawal.

REPORT OF FEASIBILITY CONSULTANT

The Report of the Feasibility Consultant, prepared by MICP Capital (“MICP Capital”) has been included in Appendix B of this Official Statement with the consent of MICP Capital and in reliance upon MICP Capital’s expertise in seaport matters. The Report of the Feasibility Consultant should be read in its entirety. From time to time, MICP Capital prepares studies and projections for the Authority for use by the Authority in its planning activities.

As noted in the Report of the Feasibility Consultant, MICP Capital is of the opinion that the underlying assumptions presented in the report provide a reasonable basis for the projections in the report. However, any projection is subject to uncertainty. There will usually be differences between actual and projected results because events and the circumstances that surround them do not always occur as expected and such differences can be material.

The Report of the Feasibility Consultant prepared by MICP Capital that is included in Appendix B of this Official Statement supplements a prior report prepared for the Authority in 2010 in connection with the issuance of certain of the Authority’s bonds. The prior report may be obtained from the Authority upon request. The prior report also may be read at the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System internet web site at www.emma.msrb.org.

INDEPENDENT ACCOUNTANTS

The financial statements of the Authority in Appendix A to this Official Statement have been audited by Warren Averett, LLC, Birmingham, Alabama, independent accountants, as stated in their report (which contains an explanatory paragraph indicating that the management’s discussion and analysis and supplemental pension information, required by the Governmental Accounting Standards Board, accompanying the financial statements were not audited) appearing herein as Appendix A to this Official Statement.

FINANCIAL ADVISOR

Pinnacle Financial Group, LLC, Rowayton, Connecticut, is serving as Financial Advisor to the Authority with respect to the sale of the Series 2017 Bonds. The Financial Advisor assisted in the preparation of this Official Statement and in other matters relating to the planning, structuring and issuance of the Series 2017 Bonds and provided other advice.

Pinnacle Financial Group, LLC is a firm regularly engaged in the business of providing financial and advisory services. The Financial Advisor will not will be permitted to participate in underwriting any of the Series 2017 Bonds.

DISCLAIMERS AND OTHER MISCELLANEOUS MATTERS

This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or holders of any of the Series 2017 Bonds.

All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions.

The order and placement of material in this Official Statement, including its appendices, are not to be deemed a determination of relevance, materiality or importance, and all material in this Official Statement, including its appendices, must be considered in its entirety.

The information in this Official Statement has been obtained from sources which are considered dependable and which are customarily relied upon in the preparation of similar official statements, but such information is not guaranteed as to accuracy or completeness. 53

All estimates and assumptions contained herein are believed to be reliable, but no representation is made that such estimates or assumptions are correct or will be realized.

No person, including any broker, dealer or salesman, has been authorized to give any information or to make any representation other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Authority.

The Series 2017 Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities laws and will not be listed on any stock or other securities exchange, and neither the Securities and Exchange Commission nor any federal, state, municipal or other governmental agency will pass upon the accuracy, completeness or adequacy of this Official Statement. The Bond Order has not been qualified under the Trust Indenture Act of 1939, as amended.

Any information or expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create an implication that there has been no change as to the affairs of the Authority since the date hereof.

Certain statements contained in this Official Statement including, without limitation, statements containing the words “estimates,” “believes,” “anticipates,” “expects,” and words of similar import, constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Authority to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, population trends and political and economic developments that could adversely impact the collection of revenues, as well as those factors described in this Official Statement under “RISK FACTORS”. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Authority disclaims any obligation to update any such factors or to publicly announce the results of any revision to any of the forward-looking statements contained herein to reflect future events or developments.

The prospective financial information included in this Official Statement and the appendices hereto has been prepared by MICP Capital (see “REPORT OF FEASIBILITY CONSULTANT”) and is the responsibility of the Authority’s management. Warren Averett, LLC has neither examined nor compiled the accompanying prospective financial information and, accordingly, Warren Averett, LLC does not express an opinion or any other form of assurance with respect thereto. Warren Averett, LLC’s report included in Appendix A to this Official Statement relates to the Authority’s historical financial information. It does not extend to the prospective financial information and should not be read to do so.

In connection with this offering, the Underwriters may over allot or effect transactions which stabilize or maintain the market price of the Series 2017 Bonds offered hereby at a level above that which might otherwise prevail in the open market, and such stabilizing, if commenced, may be discontinued at any time. The prices and other terms of the offering and sale of the Series 2017 Bonds may be changed from time to time by the Underwriters after the Series 2017 Bonds are released for sale, and the Series 2017 Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers, without prior notice.

The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

This Official Statement is being provided to prospective purchasers either in bound printed format or in electronic format. This Official Statement may be relied upon only if it is in its bound printed format or as printed in its entirety in such electronic format.

ADDITIONAL INFORMATION

This Official Statement has been approved by the governing body of the Authority.

ALABAMA STATE PORT AUTHORITY

By: James K. Lyons, Executive Director

55 [THIS PAGE INTENTIONALLY LEFT BLANK.]

APPENDIX A

Audited Financial Statements of the Alabama State Port Authority for the fiscal years ended September 30, 2015 and September 30, 2016

[THIS PAGE INTENTIONALLY LEFT BLANK.]

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Alabama State Port Authority Hourly Paid Workers Defined Contribution Plan (Hourly DC Plan)

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

C) M Employees' Retirement System of Alabama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

C) M Employees' Retirement System of Alabama (ERS) – Continued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

C) M Employees' Retirement System of Alabama (ERS) – Continued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

! C) M Employees' Retirement System of Alabama (ERS) – Continued %&1/+& /#3/0/(4 %&1/+& 9-%&1% #&7 %5%$$%7 6(50+"1 +5 %1+6$*%1 #&7 %5%$$%7 &50+"1+5 %1+6$*%1 %0#(%7(+ M+&(/&6%7 < &% % " % " &% % &% 2%7,7! ,7+ %&%" D % &@!777 @8777% " &:+ 2%7,7!+ %&% % %% % %" %% % %" % % %" A %5%$$%7 %5%$$%7 6(50+"1 &50+"1+5 +5 %1+6$*%1 %1+6$*%1 < % " 2 " " % " @7#58 @B % "2 % 1" " % B #!, % % % " 2 + %&" %2 % % % " %2 ,5 87 + %&" %2 2 $ % 7 B ; @,8!7 @##7, < %% % %" % @777 % % + %& " %2 2 $ % 2%7,7 2%" D %" 2 & &% 2%7,75:.% % % %% % %" %% % %" % 2 %" D A %#$%&7%7%-(%,3%$A ,75 @7!7 ,7# ,8#, ,78 ,7,8 ,7,7 #,!! ; @!8!

5 C) M Employees' Retirement System of Alabama (ERS) – Continued %&1/(/'/(4+5(.%6(.+$/(4R1 $+-+$(/+&#(%.#$%+5(.%%( %&1/+&/#3/0/(4(+.#&2%1/& (.%/1*+6&( #(% ; % % + %&R % % % 2 & " " " % #E + %&R % % % 2 & 2 %" " " % %" %(5E* % %" %(8E* "%% % 2%7,7 % A 6$$%&( H%*$%#1% /1*+6&( #(% H&*$%#1% CH DH EH + %&C % % % 2 & @,!,! @,78, @!,577 Hourly Paid Alabama State Port Authority Workers Retirement Plan (Hourly DB Plan) 0#&%1*$/-(/+& + + %&C % & & % & % % I %& ,7 % & ;% & % ,&% " &% %" % 2 %" F % & <0 &% B" %2 %& 2 :; 2 2 & &% %" " :;+ %& %D 2 F % &<0 2&" 9 %: ; % % 2& % & + 2 + %& % & 2 :;F % &<0 B " " & " &2 2 2& 2 % %$ " . "% + %&: 6,,#$4+5/2&/5/*#&(**+6&(/&2 +0/*/%1 % % % 2 & %% % %" %% % %" % % 2 "%& F % & <0 G" % F % & <0 R "%& 2 % 2 &%% %2&F % &<0 : % % 2 & % %" D &2 "" % " 2 % :' %% % % :

# C) M

Hourly Paid Alabama State Port Authority Workers Retirement Plan (Hourly DB Plan) – Continued %&%5/(1 $+'/7%7 %" F % &<0 2" 2 % " "%& " 7 &% %" % "%% & 2 @,57 @5 &% %" & %& " " &% %": + & %" %" @! % % &% %" " &% : % "%" 2 % "" % 'B) "E &&%:+"%" 2" 2 %" &% %" % 2 % " "%&2 %" 2 &2 "%" " % % % %"%% 2 :' %" 7&% %" 2 % G% % %% G 2 &2 %% " & 2" 2 % " "%& % "" % " % %"%% 2 : ,-0+4%%1+'%$%734%&%5/(%$,1 + 2%7,7! ,7 & %" %2&2 % A

' " & %2 "% "%% &%" 2 7 ! ' " & 2 %" 2 7 7 +" & 7, 7 ,#, ,#! +&($/36(/+&1 ; + %&C "& " %2 "% & % $ J % J D %" (E* %D %D " % % 2 2 & %7B&%% % "% % B&% % % &% % : % %D %7B&%% :

8 C) M Hourly Paid Alabama State Port Authority Workers Retirement Plan (Hourly DB Plan) – Continued +&($/36(/+&1M+&(/&6%7 ; %$%" %2 %"%% &% % % I %&,7! "% %& % : ; "% " !E % %% E % % % : ; " B%% 2 "% :; " % 1" %& "% 2 2 & &% %":; % "% ""% 2 & 2 %D %7B&% % " 2 % %D % 8 &% : ; "% % " $ % D " %B% & %> "% % 2 %D %&% % &% % " 2 : %2 %% &@,5777 @8777$ 7E #E &% " %%" %&% 2%7,7! ,7% " &: %( %&1/+&/#3/0/(4 ; + %&R 2 & % 2% 7 ,7! ,7 2 & " " 2 & % 2& "% I %&,7! ,7% % % 2%7 % &"" "% % " : ; 2 & 2%7,7! ,7"% % "% % " % A #(% ' :77E < " % !:77E ' % %% !:77E F & % &% %&% 2%7,7! %F % &<0 %2 B,777 2 / % &;2 % 1" " ++ ,7 % %%&% % &% % 1 " % :!E % 1" % & % ,77# " /B,7: < 2 % & % % 2 B,777 < 2 / % & ;2 1 " % :!E % 1" % & % ,77# " /B,7:

7 C) M Hourly Paid Alabama State Port Authority Workers Retirement Plan (Hourly DB Plan) – Continued %( %&1/+&/#3/0/(4M+&(/&6%7 ; % % " 2 % "% % %% % " 1 % " %&% 2%7,7! ,7A +&2;%$, #$2%( 9-%*(%7 %#0 00+*#(/+& #(%+5 %(6$& &'%1(,%&(4-%A ):: !:77E 7:77E )::3 % %B;% "% :77E 7:8E )::' % ;% % ,#:77E :,E )::9 % %0 :7E ,:85E )::$ #:77E !:#E / %B2"> "% ,:7E :,E 77:77E + 2% 7 ,7! ,7 % % " " % & % D %% E % % F % &<0 R "%& : ; B% " % %% F % & <0 % 2 B2 "> " 2 B % " % % % %% ("%% * %" 1 % " :; % %" 2 % " B% "% %% 2& " % % % %% 2& % " %" 2& " : ; " % % 2 & B% % %% !:7E !:7E " 2 %(2 ,7B&%0 0&%3.' * :7!E :5E 2% 7 ,7! ,7 % " &: ; % 1" " % " % " %2 2 "%% " %2 % " %2 2 2 "%% "& % %&% :0 R "%& % 1" 2 2 > % 1" %2 & "%% 2% :;% % B% "% %% % % 1"2 & % 2 &:

C) M Hourly Paid Alabama State Port Authority Workers Retirement Plan (Hourly DB Plan) – Continued .#&2%1/&(.%%( %&1/+&/#3/0/(4 +(#0 %&1/+& %( %&1/+& /76*/#$4 %&1/+& /#3/0/(4 %( +1/(/+& /#3/0/(4 ; 0 " ." 2%,7 @,#7!78 @558 @!7875! %"" 55# B 55# ' % " ,#,! B ,#,! %% " (#87* B (#87* % (78#,!* B (78#,!* %2 M &% B ,5!8 (,5!8* 0 & (,5!8* (,5!8* B " B 7875 (7875* " (5!* 7875 (7###* 0 " 2%7,7! @,8 @!#78 @!##5#

+(#0 %&1/+& %( %&1/+& /76*/#$4 %&1/+& /#3/0/(4 %( +1/(/+& /#3/0/(4 ; 0 " ." 2%,7 @,5## @##! @!,78 %"" 55# B 55# ' % " ,8!8 B ,8!8 %% " (##5* B (##5* % 5887 B 5887 %2 M &% B 8,## (8,##* 0 & (8,##* (8,##* B " B 8! (8!* " ,,,, 8! (!7* 0 " 2%7,7 @,#7!78 @558 @!7875! ; " % " " 2 & % &% 2% 7 ,7! % % & " % & % 1" " "I %&,7!:

, C) M Hourly Paid Alabama State Port Authority Workers Retirement Plan (Hourly DB Plan) – Continued %&1/(/'/(4+5(.%%( %&1/+&/#3/0/(4(+.#&2%1/&(.%/1*+6&( #(% ; % % 2 &" " " % !E 2 & " % %" %(E* % %" %(5E* "%% % 2%7,7!A 6$$%&( H%*$%#1% /1*+6&( #(% H&*$%#1% H H CH

2 & @!8#!!,7 @!##5# @,5,,, %&1/+& 9-%&1% #&7 %5%$$%7 6(50+"1 +5 %1+6$*%1 #&7 %5%$$%7 &50+"1 +5 %1+6$*%1 %0#(%7(++6$04 0#& % &% 2% 7 ,7! ,7 %" D % &@78777 @!,777% " &:+ 2%7,7!+ %&% % %% % %" %% % %" % % %" A %5%$$%7 %5%$$%7 6(50+"1 &50+"1+5 +5 %1+6$*%1 %1+6$*%1

% "2 % 1" " % @5 @,78, B ,775 < % " 2 " " % " B ,,5 ; @5 @#8 + % % %% % %" %% % %" % F % &<0 2%" D A ,75 @(7,!* ,7# (5,!5* ,78 5,8 ,7,7 (7,,#* ,7, (* ; @(7,!#* C) M Terminal Railway Alabama State Port Authority Workers Supplemental Retirement Plan (Railway Plan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

' " & %2 "% "%% &%" 2 #, #! ' " & 2 %" 2 +" & 75 , ; 87 ,

C) M Terminal Railway Alabama State Port Authority Workers Supplemental Retirement Plan (Railway Plan) MContinued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

C) M Terminal Railway Alabama State Port Authority Workers Supplemental Retirement Plan (Railway Plan) – Continued %( %&1/+&/#3/0/(4M+&(/&6%7 ; % % " "& % &% 2% 7 ,7! ,7A +&2;%$, #$2%( 9-%*(%7 %#0 00+*#(/+& #(%+5 %(6$& &'%1(,%&(4-%A ):: !:77E 7:77E )::3 % %B% "% :77E 7:8E )::' % ;% % ,#:77E :,E )::9 % %0 :7E ,:85E )::$ #:77E !:#E / %B2">"% ,:7E :,E

77:77E + 2% 7 ,7! ,7 % % " " % & % D %% E % % & R "%& : ; B% " % %% & % 2 B2 "> " 2 B % " % % % %% ("%% * %" 1 % " :; % %" 2 % " B% "% %% 2& " % % % %% 2& % " %" 2& " : ; " % % 2 & B% % %% !:7E !:7E " 2 %(2 ,7B&%0 0&%3.' * :7!E :5E 2% 7 ,7! ,7 % " &: ; % 1" " % " % " %2 2 "%% " %2 % " %2 2 2 "%% "& % %&% :0 R "%& % 1" 2 2 > % 1" %2 & "%% 2% :;% % B% "% %% % % 1"2 & % 2 &:

! C) M Terminal Railway Alabama State Port Authority Workers Supplemental Retirement Plan (Railway Plan) – Continued .#&2%1/&(.%%( %&1/+&/#3/0/(4 +(#0 %&1/+& %( %&1/+& /76*/#$4 %&1/+& /#3/0/(4 %( +1/(/+& /#3/0/(4 ;

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!5 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX B

Report of Feasibility Consultant

[THIS PAGE INTENTIONALLY LEFT BLANK.] Feasibility Study in Conjunction With Proposed Facilities Revenue Refunding Bonds

January, 2017

Prepared for

Alabama State Port Authority

Prepared by

MICP CAPITAL

Feasibility Study: Revenue Refunding Bonds

Table of Contents 1 INTRODUCTION...... 4 1.1 Background on Previous Feasibility Study and Financing ...... 4 1.2 Port Profile ...... 4 1.3 Projects Funded by prior ASPA Bond Issues...... 5 1.4 Description of Report Content ...... 5 1.5 Methodology ...... 6 ASPA Documents ...... 6 Internet Research ...... 6 Interviews ...... 7 1.6 MICP Capital Qualifications...... 7 2 ASPA BUSINESS AREA REVIEW AND PROJECTIONS ...... 8 2.1 Coal Handling and Storage ...... 10 International Coal Markets ...... 10 U.S. Metallurgical Coal Exports ...... 12 ASPA Coal Trade ...... 13 Terminal Facilities ...... 15 Customers ...... 15 McDuffie Revenue ...... 20 McDuffie Expenses ...... 21 Actual Performance vs. 2010 Projections ...... 22 Projections ...... 23 2.2 General Cargo/Intermodal ...... 25 Pinto Island Steel Terminal ...... 25 Pinto Island Terminal Facilities ...... 26 Alabama Steel Terminal ...... 26 General Cargo Trade...... 27 General Cargo Markets ...... 28 Revenue and Expense Analysis ...... 29 Projections ...... 30 2.3 Marine Liquid Bulk Terminal ...... 31 Liquid Bulk Terminal ...... 31 Revenue and Expense Analysis ...... 31 Actual Performance vs. 2010 Projections ...... 32 Projections ...... 32 2.4 Terminal Railway ...... 32

MICP CAPITAL 2

Feasibility Study: Revenue Refunding Bonds

Operations ...... 32 Revenue and Expense Analysis ...... 33 Actual Performance vs. 2010 Projections ...... 34 Projection ...... 34 2.5 Other Business Areas ...... 35 Marine Container Market Developments ...... 35 Mobile Container Terminal and Intermodal Container Transfer Facility ...... 37 Revenue and Expense Analysis ...... 37 Actual Performance vs. 2010 Projections ...... 38 Projection ...... 38 2.6 General Office ...... 38 Expense Analysis ...... 38 Actual Performance vs. 2010 Projections ...... 41 Projection ...... 41 3 PROJECTED CASH FLOW AND DEBT PAYMENT ...... 42 4 SENSITIVITY ANALYSIS ...... 44 5 APPENDIX ...... 45

MICP CAPITAL 3

Feasibility Study: Revenue Refunding Bonds

1 INTRODUCTION

MICP Capital has undertaken a feasibility study for the Alabama State Port Authority (ASPA, the Port, the Authority or Docks) to determine expected future earnings for the Port’s existing business base. The feasibility study objective is to determine the sufficiency of projected cash flows to adequately support the Port’s debt coverage obligations after a reduction in interest expense as a result of a proposed new bond issue undertaken to refund and defease certain outstanding bonds. The review and projections for the existing business base represent an update of similar analysis performed in the feasibility study associated with ASPA’s Series 2010 Revenue Bonds.

1.1 Background on Previous Feasibility Study and Financing

In November 2010, MICP Capital completed a feasibility study for ASPA to determine whether the Port’s expected future earnings would be sufficient to support its debt coverage obligations associated with all outstanding bond issues at that time, as well as new proposed bond issues. The report was produced in connection with proposed Series 2010 Revenue Bonds of the ASPA undertaken to fund the Authority’s projects under its Capital Program. Specifically, the bond proceeds were used to replace the construction financing for a new steel handling terminal on Pinto Island. The Series 2010 ASPA Bonds had a par amount of $106,045,000.

The Pinto Island terminal was completed and fully operational by the end of 2010. Operations since that time have fulfilled their planned purpose of handling inbound steel for the large new steel processing plant in Calvert, Alabama, about 49 river miles up the Tombigbee River from Mobile.

1.2 Port Profile

The Alabama State Port Authority became an independent state agency in 2000, and is governed by a nine member board. ASPA is a self supporting entity that functions much in the way of an enterprise operation. ASPA was created with the objective that it promote, develop, construct, maintain and operate all harbors and sea ports within Alabama. The great majority of the Port’s activity is centered in Mobile.

The revenue areas or business segments of the Port include: Coal Handling and Storage General Cargo / Intermodal (including the Pinto Island steel terminal) Liquid Bulk Terminal Railway Other Business Areas o Real Estate o Harbormaster o Dredging Management o Middle Bay Port o Inland Docks

The Port acts both as an operating port in certain business segments, and as a landlord in other segments. The mix of activities is driven by a strategy of building diversification at the same time the Port leverages its key resources: specific operating expertise, successful project development experience and land. Since 2000, ASPA has approximately doubled in size in terms of annual revenue generated. Port capital projects have totaled over $800 million during the same time period, with projects financed through the bond market, customer partnerships, public grants and cash flows.

MICP CAPITAL 4

Feasibility Study: Revenue Refunding Bonds

New capabilities, added capacity and general efficiency improvements have resulted from the capital investments. In turn, customers have moved more tonnage through the Port. Significantly, a number of major customers have made long term commitments to the Port through direct upfront investment or agreements to add a capital recovery component to their rates over a period of time. These customer financial commitments have been a cornerstone to a number of projects to include expanding and improving coal handling abilities, supporting construction related to Port rail operating capabilities, a new steel terminal for handling steel coils on the general cargo docks, and the development of a marine container terminal and associated intermodal container transfer facility.

1.3 Projects Funded by prior ASPA Bond Issues

The bonds to be refunded with the issuance of the 2017 ASPA Bonds have funded a number of projects. In November and December of 2006 ASPA successfully issued Revenue Bonds, Series 2006 A-D, raising $309,750,000 to fund the Port’s Capital Program and refund existing debt. Major projects funded included the expansion of the ASPA McDuffie Terminal, allowing for increased handling efficiencies and coal volumes; a new rail/ferry intermodal facility to serve new business in conjunction with the CG Railway; property acquisitions for Port expansions; and a new access bridge to the Mobile container terminal, which was under development at that time. Other projects were also included in the funding to improve facilities and underlying infrastructure so as to increase efficiency, as well as projects to lessen the environmental impact of Port activities.

Besides funding the construction of the new Pinto Island steel terminal, the 2010 ASPA Bonds also funded other smaller projects. These included the Port’s contribution of approximately $12 million toward a $33 million U.S. Army Corp of Engineers project to build a ship turning basin in the upper/lower harbor, $2.6 million to build a new unit train coal dump at McDuffie Coal Terminal and $7 million for updating the load capacity on Pier C at the General Cargo dock. The turning basin has allowed for a significant improvement in productivity for very large vessels calling at the Port by cutting transit time. The rail project significantly increased the Port’s coal unit train capacity.

1.4 Description of Report Content

As in the previous feasibility report done in conjunction with the 2010 ASPA Bonds, this report provides an update on the ASPA business areas. Current market conditions are reviewed along with the financial results of recent operations by the Port in each of its main business segments. Key performance drivers are identified along with their sensitivity to critical external variables. Total Port business activity is incorporated in a financial projection of cash flow after debt service and capital improvement projects.

In performing its role as a gateway either to foreign ports or the inland U.S. distribution network, the Port is a player in a number of dynamic markets. Of particular importance are exports of metallurgical coal, the import of carbon steel slabs for processing, the import and export of steel coils, and the growing role of marine container traffic as the Mobile area develops into an important regional distribution hub in conjunction with expanding Port capabilities.

Steelmakers in Europe and Brazil rely on the unique characteristics of metallurgical coal from Alabama’s Blue Creek coal seam, and the Port serves as the point of demarcation for coal sourced from the area. The report considers the factors influencing the competiveness of Alabama metallurgical coal, including the forces on both the supply and demand side in China that end up impacting markets world-wide.

The Port also has a very different interface with steel markets other than through the derived global demand for metallurgical coal. ASPA plays a direct role in the supply chains for the producers of finished steel products and their customers. The Port’s Pinto Island steel terminal is a critical component in the supply chain for the AM/NS plant in Calvert (purchased from ThyssenKrupp in 2014), receiving and trans-loading to barge foreign produced steel slabs MICP CAPITAL 5

Feasibility Study: Revenue Refunding Bonds that are the raw inputs required by its state-of-the-art steel processing plant. ASPA has also, in conjunction with a partner, constructed the Alabama Steel Terminal on the General Cargo Docks. The new terminal is handling exports and imports of steel coil and is positioned in particular for export growth from AM/NS Calvert. The Port has directed considerable investment in recent years to position it to serve the growth in demand for steel products in the Gulf region. The report explores the current status of the markets and the potential for increased throughput volumes at the Port.

In 2008 container ships began calling at the new Mobile container terminal (MCT) constructed on Choctaw Point in partnership with APM Terminals and Terminal Link, a subsidiary of the CMA CGM shipping line. APM Terminals, a subsidiary of The Maersk Group, has since become the Port’s sole partner and has continued to work with the Port to expand operations to include partnering in the construction of the new Intermodal Container Transfer Facility (ICTF) that opened in 2016. The ICTF significantly expands the capabilities of the Port’s intermodal complex by offering a modern rail link direct to dockside container loading and unloading, as well as a new opportunity to handle domestic intermodal traffic. The report explores the implications of these new capabilities in conjunction with the expansion of the Panama Canal in terms of potential new opportunities for the Port to gain business by offering shippers more efficient distribution channel solutions.

Other ongoing significant operations at the Port include General Cargo operations supporting both inbound and outbound forest and paper products, and the Marine Liquid Bulk Terminal serving INEOS Phenol, a major producer of phenol and acetone. Serving all business sectors with around-the-clock tailored operations is the Port’s Terminal Railway, which performs activities that range from dumping coal cars to moving containers into the ICTF to serving non-ASPA facilities in the greater Port of Mobile area. These business areas as well as the Port’s management cost structure are also reviewed in the feasibility study report.

1.5 Methodology

Information gathered in support of the project feasibility study comes from a variety of sources. Documents provided by ASPA, data obtained on the internet, and personal interviews (both face-to-face and by phone) represented the primary sources from which data was collected.

ASPA Documents 1. 2010 through 2016 detail financial statements 2. 2010 through 2016 coal, railway, general cargo operations data 3. 2010 through 2016 capital spending detail 4. 2017 Operating and Capital budgets 5. 2010 through 2016 Tonnage by Commodity Type 6. 2010 through 2016 actual and 2017 budget employee counts by department 7. Various ASPA commercial agreements

Internet Research 1. U.S. Energy Information Administration 2. Southern Company 3. Warrior Met Coal 4. Drummond Company 5. Publications reporting on current coal market issues 6. ArcelorMittal USA 7. World Steel Association 8. U. S. Environmental Protection Agency 9. CG Railway MICP CAPITAL 6

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10. Journal of Commerce and other industry sites

Interviews 1. ASPA management 2. AM/NS Calvert management representative 3. Southern Company management representative 4. Drummond Company management representative 5. Warrior Metallurgical Coal management representative 6. United Mine Workers of America executive 7. APM Terminals management representative 8. Shipping line executives 9. Large retail company executives

1.6 MICP Capital Qualifications

MICP Capital, formerly Manalytics International, is a California corporation based in the San Francisco Bay Area and was founded as an advisory and consulting group with specialized expertise in the Transportation, Logistics and Supply Chain sectors. See the website at micpcapital.com.

MICP Capital sector specialization includes:

Marine shipping International and domestic supply chain management Intermodal services Rail and truck transportation and distribution Transportation equipment valuation Materials management Technology, asset and non-asset based integrated logistics

The firm works with a broad range of companies and organizations – ports, shippers, service providers, investors and governmental institutions. The port work includes both strategic planning for revenue generation and facilities planning. The firm is very familiar with ASPA as a result of working with the Port on numerous projects over the past seventeen plus years. The assigned consultants also worked on the previous bond feasibility studies referred to in this report.

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2 ASPA BUSINESS AREA REVIEW AND PROJECTIONS

The Alabama State Port Authority, through the Port of Mobile, has historically served the needs of the state’s exporters of break-bulk and bulk products. Forest products exports were the early focus of the Port; however, over the last three decades exports have broadened to include foodstuffs, iron and steel products, and in particular coal. In more recent years import activity has picked up at the Port in response to the region’s growing population and industrial base, as well as the worldwide trend towards a more open trade environment and the resulting growth of trade activity. Over the past decade container traffic moving through the Port has also increased significantly and is now positioned for major growth. Exhibit 2-1 shows total annual revenue by business segment since 2006.

Exhibit 2-1:

Total ASPA Revenue by Business Segment $180,000

$160,000

$140,000

$120,000 All Other $100,000 Liquid Bulk Terminal Ry

$1,000 $80,000 Gen Cargo/Inter Bulk Terminal $60,000 McDuffie Coal

$40,000

$20,000

$- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: ASPA

ASPA has conducted the business of the Port both from the perspective of a port operator and that of a landlord. The Port has maintained its traditional operator role in its most important segment--coal, where management has a 30 year plus history in running a coal port operation. The Port also operates the Pinto Island Terminal where imported carbon steel slabs are received. The general cargo segment also relies on the Port’s operating expertise, though stevedoring companies contract for the actual handling of cargo. However, ASPA also relies on outside operators and functions more as a landlord in situations where either considerable outside investment (the Mobile container terminal and new Intermodal Container Transfer Facility) or unique operating expertise (the Marine Liquid MICP CAPITAL 8

Feasibility Study: Revenue Refunding Bonds

Bulk Terminal) is required. The Port’s strategy looks to maximize throughput for the benefit of the state of Alabama at the same time it seeks to diversify its activities in order to create a sound financial footing.

The ten year trend in Exhibit 2-1 reflects the strides the Port has taken to grow its business, though with periodic setbacks driven by the impact of both markets and the performance of key shippers. Successful diversification has come in the form of exploiting the Port’s unique position and capabilities related to steel industry shipments and the ramping up of marine container shipping infrastructure and expertise. While coal shipments are expected to recover much of the business lost in FY 2016, and hold the position as the Port’s most important commodity, new growth is expected for import steel slabs and exports of steel coils. The Mobile container terminal and new Intermodal Container Transfer Facility are now positioned to experience dynamic growth over the next five years in response to fundamental changes taking place in important supply chains.

Besides the active business segments reviewed below, the Port continues to develop new opportunities. One of these, not included in the business projections, is the development of an auto terminal targeted to serve both exports of Alabama produced autos and auto imports from fast growing Mexican manufacturers. The Port is presently reviewing proposals from a number of potential partners for a plan to begin construction of a $54 million terminal at the site of the former Bulk Plant.

Another opportunity with a longer timeline is trade development with Cuba, both for break-bulk and container shipments. The Port has positioned itself to build on this opportunity through an ongoing program to develop trade relationships in Cuba. The container trade possibilities include transshipment or feeder hub strategies in ports such as Mariel, on the west side of Cuba due south of Mobile.

There may also be additional opportunities in the Mexican trade beyond steel coil shipments, the railcar ferry currently supported by the Port and the proposed auto business. Ocean carriers are evaluating new services for north-south lanes such as between Mexico and the Gulf ports for not only autos, but other products impacted by congestion on both rail and truck lanes. Mobile is positioned to be an active partner in these initiatives.

The primary Port operating segments for coal, general cargo, the terminal railway, the liquid bulk plant and other operations, mostly related to real estate activity, are reviewed below. The FY 2016 actual results are reviewed and 2015 actual results are compared to projections made in 2010 as part of the last bond feasibility study, with any significant variances examined. Projections are then updated for the five year period beginning with FY 2017.

For the Port as a whole revenue dropped from $144.9 million in FY 2015 to $119.7 million in FY 2016, with about 93% of the lost revenue directly tied to a steep plunge in coal shipments. The Feasibility report supporting the 2010 Port bond offering projected financial results through FY 2015. Actual FY 2015 revenue was 1.1% higher than the Base Case revenue projection of $143.2 million for 2015. Different segments had either positive or negative variances related to the projection and these are noted in the discussion below.

With the major shortfall in FY 2016 revenue, earnings before depreciation and amortization were down from $53.8 million in FY 2015 to $38.7 million in 2016. The 2010 projection of earnings for 2015 was $54.5 million, which was $0.8 million (1.4%) better than actual.

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2.1 Coal Handling and Storage

International Coal Markets In 2012, 9 billion tons of coal was mined worldwide. Of that total, 70% was consumed in China, the U.S. and India, with China alone accounting for 50%. The principal use for coal was for the generation of electricity, which represented 59% of all coal consumed. Coal is generally produced in the countries that consume it, so world trade in coal represents a relatively small portion of coal consumed. In 2012, 15% of the coal consumed worldwide was imported. The world coal trade occurs in two separate markets: steam (or thermal) coal used principally in power generation and metallurgical (or coking) coal used in the steel making process. Worldwide steam coal imports in 2012 were about 1 billion tons and metallurgical coal imports were just over 300 million tons.1

The U.S. Energy Information Agency (EIA) “reference case” projects total worldwide coal production reaching 10 billion tons in 2040. The projection anticipates a 7% decline in steam coal imports by 2040 at the same time metallurgical coal imports increase 14%, mostly due to increased steel production in India, which has limited metallurgical coal of its own.

Exhibit 2-2:

Total Metallurgical Coal Exports by Region (million short tons) 2013 2040 Region actual projected % change

Australia 187.0 239.7 28%

United States 65.7 33.7 -49%

Canada 38.9 37.1 -5%

Indonesia 28.2 26.3 -7%

Eurasia 18.4 27.0 47%

Southern Africa 4.5 27.6 513%

Other 1.5 1.7 13%

Total 344.2 393.1 14%

source: EIA International Outlook 2016

Australia is the source of over half of the world’s metallurgical coal exports. The projected increase in exports of metallurgical coal from Australia and Southern Africa (principally Mozambique) is due mostly to increased steel production projected to occur in Asia. While Australia, the U.S. and Canada remain the top three export regions over the projection period, the U.S. is expected to see a substantial reduction in exports in the two decades after 2020 due to increased Australian and Southern Africa exports to Europe.

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Feasibility Study: Revenue Refunding Bonds

Australian mines are viewed as having the lowest unit production costs, allowing them to compete favorably at price levels even in the weakest market conditions. Production levels in Australia have developed to meet the substantial demands of China and other Asian countries in the Pacific market. However, demand for coal is susceptible to factors other than the underlying economic demand. Actual levels of coal trade can be significantly impacted by such things as changes in policy in importing countries, floods, labor strikes and transportation bottlenecks. When these factors come into play in major import regions like China or export regions like Australia they can have a dramatic impact on the market.

In 2011 heavy rains and flooding in Australia disrupted the supply of coal to ports and at the same time tied up shipping. As a result, there was a dramatic rise in both steam and metallurgical coal prices that drove higher production in exporting countries around the world. More recently, China has emphasized increased coal production to meet domestic demand that in turn limited imports from Australia in 2014 and 2015, which then pushed Australian coal into the Atlantic market, bringing down both metallurgical and steam coal prices.

At the present time the coal markets are seeing another China driven change in price levels. Metallurgical coal prices have jumped from $78 per metric ton at the beginning of 2016 to $243 per metric ton in October.2 The surge in prices is mostly driven by China’s efforts to rationalize its coal industry and improve mining productivity. The policy initiative that ignited the market was the implementation of a policy in April to limit domestic coal production by limiting the number of days mines can operate to 276 per year, down from 330 days per year.

China is seeking to reduce the number of coal mines through closures and consolidation, with a 2016 target of closing 1,000 mines. There are over 10,000 active coal mines in China and the government wants to close 5,600 of them, including all those producing less than 90,000 tons of coal per year. The ultimate goal is to eliminate 500 million tons of capacity over the next three to five years.3

Besides the issue of trying to trim an overcapacity state-supported industry, the consolidation also has the objective of addressing worker safety issues, which have become an important political issue within China. There is public pressure to improve worker safety, and high accident rates in the coal mining industry, particularly in small under- managed mines, have drawn much media attention.

China is also attempting to rationalize and consolidate other state-supported industries to include steel, cement and chemicals. These plans always have to be sensitive to the potential disruption caused by displacement of large numbers of workers. One advantage the government has in trying to make progress with the coal mining industry is that it is dispersed, and the impacted mines tend to be small in terms of the number of employees affected.

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U.S. Metallurgical Coal Exports The graph below shows metallurgical coal exports for the total U.S. and for Mobile:

Exhibit 2-3: Metallurgical Coal Exports (Million Tons) 80.0

70.0

60.0

50.0

Total U.S. 40.0 Mobile 30.0

20.0

10.0

- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Energy Information Agency

Looking at the destinations for U.S. coal exports in 2014, 16 countries were the recipients of 88% of the 60 million tons exported. Europe, including Turkey, imported 46% of the tonnage followed by 19% going to the countries of Japan, India, South Korea, and China; 12% to Brazil and 10% to Canada and Mexico. For Mobile, 57% of metallurgical coal exports went to four countries: Germany (18%), Brazil (16%), U.K. (12%) and Turkey (11%). All of Europe, including Turkey, received 71% and South America 19% of metallurgical coal exports from Mobile.4

U.S. Metallurgical coal is principally mined for the export market. In 2014 just over one billion tons of coal was mined in the U.S. Metallurgical coal represented less than 90 million tons of total coal mined, with 21 million tons consumed by coke plants for steel production along with the 60 million tons exported that year.

Miners will supply coal as long as they can operate at a point on their “cost curve” that is covered by the prices in the international coal markets. While U.S. exports for the most part supply the Atlantic market, if markets in Asia slacken, the low cost excess coal from Australia can come into the market at prices that displace U.S. producers in Europe and Brazil. The steep decline in exports in 2015, which continued into the first half of 2016, reflects just such an occurrence. The graph below shows the export price per ton for all U.S. metallurgical coal exports.

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Feasibility Study: Revenue Refunding Bonds

Exhibit 2-4:

U.S. Metallurgical Coal Exports Average Price per Ton

$200.00

$180.00

$160.00

$140.00

$120.00

$100.00

$80.00

$60.00

$40.00

$20.00

$- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Energy Information Agency

The drop in prices after 2012 coincides with increased coal production in China, which combined with slower economic growth there, resulted in an actual decline in net imports. The resulting excess Australian coal moved in part to the Atlantic market. With changed conditions in China that have increased metallurgical coal imports from Australia and driven up prices, more attractive opportunities can be expected for U.S. miners in their traditional markets.

ASPA Coal Trade Originally developed to support the export trade in 1975, McDuffie Coal Terminal has since been adapted to handle coal imports as well. In the 2016 fiscal year ending September 30, the Port handled a total of 10.5 million tons of coal (see Exhibit 2-5), with exports of 6.0 million tons of metallurgical coal and 1.1 million tons of steam coal; imports of 2.9 million tons of import steam coal; and 0.6 million tons of domestic steam coal moving by rail to the Port for transloading to barge. (Note that domestic coal is included in import tons for the purpose of the chart below as it is typically blended with import coal or moves to the same inland destination after transloading to barge as does import coal).

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Exhibit 2-5:

ASPA Coal Shipments Fiscal Year 2006 to 2016 (million tons)

25.0

20.0

15.0

10.0

5.0

- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Export Tons Import/Dom Tons Total Tons

Source: ASPA

Import coal tonnage is steam coal for use in power generation and is for use by Southern Company to fuel its power plants. Steam coal imports, usually from Colombia, are sometimes blended with coal arriving at the Port by rail from mine sites in the Illinois Basin. The imported coal, blend of import and domestic coal, or unblended domestic coal is then loaded on barges for delivery to power plants. The domestic rail shipments are added to imports in the chart above. The downtrend in coal imports reflects the change that has taken place in the Southern Company’s mix of power sources, with coal use declining relative to natural gas.

Export tonnage is mostly metallurgical coal, though since 2013 there have also been steady exports of steam coal that have averaged 1.3 million tons per year. The large drop in export metallurgical coal tonnage in 2016 is a result of a poor market along with the impact of depressed prices in particular on the Port’s largest export customer.

The shippers and receivers of coal seek to minimize the cost of the transportation component of the delivered product, as it is critical in the determination as to whether coal sources can be competitive in particular markets. A port’s location relative to both sources of coal and users of coal determines its viability as a transit point in either international or domestic movements. Also, aside from simple distance, the efficiency with which carriers connect between the port and either the shipment source or ultimate destination is critical to the transportation cost function.

The ASPA’s great strength related to the coal markets is tied to its location relative to producing coal mines, coal- fired power plants and key transportation arteries, including a major gateway to the inland waterways and five Class I railroads. The Port further supports this advantage with constant efforts to develop and maintain the kind of coal port facilities that make their customers competitive in international markets. MICP CAPITAL 14

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Terminal Facilities In 2014 (the latest data available) Mobile handled more coal tonnage than any other U.S. coastal port area5. Situated inside Mobile Bay on the mouth of the Mobile River, the Port has direct access to the Tennessee/Tombigbee waterway and the Intra-coastal Waterway, and five Class I railroads whose lines connect Mobile to local and regional markets. The Port features McDuffie Coal Terminal (McDuffie), a modern and specialized coal handling facility. The coal terminal is capable of efficiently managing both import and export trade through coal interchanges between any combination of vessels, river barges and railroads. McDuffie offers three berths and is served by a 45 foot navigation channel from the Gulf of Mexico that is maintained by the U.S. Army Corps of Engineers.

In recent years the Port has increased efficiency and built in flexibility in terms of being able to handle either import or exports at the McDuffie Coal Terminal. The Port has relied on customer partners as well as the 2006 bond offering to finance the cost of these improvements. As a result, the Port can now use Berth 1 to either export up to 8 million tons of coal annually or it can handle imports up to 6 million tons. Berth 2 has export capacity up to 12 million tons and Berth 3 has import capacity of up to 8 million tons.

Barge loaders can handle all available import capacity, while barge unloading capacity is about 6 million tons per year. Besides inbound barges with coal to export, trains arriving at the Port with export coal or domestic coal being transloaded to barges have two dumps available, each capable of handling over 6 million tons per year. Additionally, the Port can store up to approximately 2.4 million tons of coal.

A project funded with $52.7 million from the 2006 bond financing contributed to the McDuffie expansion and increased flexibility as well as other improvements. The enhancements provided for redundant systems so that the terminal’s systems, which often operate 24 hours/7 days per week, can be taken off line for maintenance and repair while the new by-passes and systems allow continuous terminal operations. As a result, McDuffie has the ability to conduct different operations at the same time, which increases productivity. Added conveyors, modifications to transfer towers and two new stacker/reclaimers along with upgrades to the yard's electrical system were improvements that further enhanced productivity.

Until early in 2015 ASPA also utilized the Bulk Materials Handling Plant as overflow capacity for the McDuffie Coal Terminal. The facility was closed in 2015 and the site is being prepared for another use. All coal related tonnage above includes tons previously handled at the Bulk Plant as well as at McDuffie.

With a workforce of about 165 people dedicated solely to coal operations, the support of the Port owned Terminal Railway, and an ongoing modernization program that actively partners with customers for financial support and critical input, the ASPA is the leading coastal coal port in the U.S.

Customers ASPA’s largest customers who have relied on the Port in support of their coal trade have seen significant changes in their markets or operations over recent years. These customers include Southern Company, which imports steam coal or receives it by rail at the Port; Drummond Company, which is not only a source of Southern Company import coal, but exports metallurgical coal through the Port; and Warrior Met Coal, the new owner of Walter Energy mines that produce metallurgical coal that is exported through the Port.

Southern Company The last ten years have seen major changes in the power generating industry, and the experience of Southern Company reflects these changes. In 2006, coal was the source for 70% of the power generated by Southern Company. By 2015, coal had fallen to 34% of all sources of power generated. At the same time total power generated declined from 201 billion kilowatt hours in 2006 to 187 billion kilowatt hours in 2015. The forces in play

86:DWHUERUQH&RPPHUFH6WDWLVWLFV MICP CAPITAL 15

Feasibility Study: Revenue Refunding Bonds that created these dramatic changes included stiffer environmental regulations related to coal fired power emissions, the development of fracking technologies that unlocked vast natural gas resources, and significant improvement in the power consumption efficiencies for both household appliances and commercial/industrial machinery.

Exhibit 2-6:

Southern Company Coal Share of Power Generation

80%

70%

60%

50%

40%

30%

20%

10%

0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Southern Company Form 10-K’s

At Southern Company in 2006 coal was the “base line” fuel source, meaning that coal fired plants ran at maximum capacity full time, while natural gas consumption (13% of all sources) helped cover peak demand. By 2015 the role of coal and gas in power generation at Southern Company had flipped: natural gas had become the base line fuel source (46% of all sources) while coal filled the role of the fuel source used to cover peak demand. The impact of greatly expanded natural gas production is reflected by the fact that prices (Henry Hub Spot Price) climbed as high as $13.42 per million BTU at the end of 2005 but reached a low since then of $1.73 per million BTU in March of 2016.

In addition to the relative price of the fuels used in power generation, Southern Company has had to consider the cost and limitations imposed by changes in regulations related to emissions from coal use. The Southern Company coal fired units in the ASPA service area are compliant with current environmental regulations. Without changes in regulations these plants are expected to be in service for many years in their role as efficient providers of needed additions to base line power generation. However, if the EPA’s Clean Power Plan regulation to cut carbon emissions is implemented (it was stayed by the U.S. Supreme Court in February 2016 to allow review in the lower courts), the remaining coal fired plants served by ASPA may be impacted prior to the regulation’s first compliance period between 2022 and 2024.

The reduction in coal use by Southern Company as a whole has played out in a like manner at its power plants located in the ASPA service area. In 2010 the Port served six Southern Company power plants, including five that could receive coal only by barge. Three of the water served plants have since taken their coal fired power generating units out of service and replaced them with gas fired units, and a fourth has replaced some of its coal fired power capacity. Currently, most of the Port’s Southern Company coal volume is going to two plants that can receive coal only by barge. The coal destined for these plants is imported and loaded on barges for delivery, imported and then

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Feasibility Study: Revenue Refunding Bonds blended with domestic coal from the Illinois Basin and loaded to barges, or the domestic coal is transloaded from rail to barge for delivery.

Exhibit 2-7:

ASPA: Steam Coal to Southern Company (million tons/fiscal yr)

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: ASPA

One plant that has received coal transloaded from ship to rail at the Port in the past has since converted its coal generating power units to be compatible with lower BTU Powder River Basin coal that arrives by rail from the Montana/Wyoming area. Making the investment necessary to adapt coal fired units to consume Powder River Basin coal is an option at both locations still served by ASPA that depends on the expected relative delivered cost of coal from available sources. Even if the coal fired power units were modified to burn Powder River Basin coal, the coal would still need to be transloaded to barge, though not all of this activity would necessarily have to occur at the Port.

With the changes in coal’s role to a peak demand fuel source, Southern Company has gone from purchasing coal under long term contract (rolling three year contracts at set prices and volumes) to spot market purchases or short term contracts. The result is that coal volumes move in much closer alignment to underlying market forces.

As a reflection of the strategic relationship between the Port and Southern Company, in 2004 the Southern Company partnered with the Port on a project to modernize and convert a former export only berth to one that handles import coal. Southern Company agreed to share in the cost of the project by paying an assessment fee based on coal tonnage transloaded at the Port and destined to their power plants. That fee is included in ASPA revenue.

Drummond Company The Drummond Company is active in both coal imports and exports. On the import side, steam coal from Drummond’s Colombia mine has been the source of most of the coal imported for use by Southern Company. Drummond’s extensive steam coal mining operation in Colombia produces close to 30 million tons of steam coal a year, but most is shipped to non-U.S. destinations.

Drummond’s Shoal Creek Mine located south of Birmingham produces metallurgical coal for export to steel producers mostly located in Brazil and Europe. Current production capacity of the mine is just over 2 million tons per MICP CAPITAL 17

Feasibility Study: Revenue Refunding Bonds year with reserves estimated to be about 100 million tons of coal. All mine production moves to the Port for export, usually by barge. While mine production has varied to some degree with the changes in the market over time, it has remained relatively stable.

Exhibit 2-8:

ASPA Metallurgical Coal Exports Drummond Co. (million tons/fiscal yr)

3.5

3.0

2.5

2.0

1.5

1.0

0.5

- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: ASPA

Lower tonnage volumes in 2006 and 2007 were the result of the mine closing for repairs for a period of time in 2006 after a non-injury explosion. The mine was able to increase production after metallurgical coal prices surged in 2010 and 2011, and the company has been able to maintain production at levels near current capacity even with the decline in metallurgical coal prices that bottomed out in early 2016. In late 2015 Drummond did send out notices for a lay-off as required under the WARN Act before any large layoff can occur, however, prices never fell low enough before rebounding to consider a mine closure or large layoff.

Drummond sells nearly all its coal under long term contracts, with very little being sold on the spot market. However, it is able to realize the benefits of the large metallurgical coal price increases such as those that occurred in 2016 because contracts are adjusted quarterly for pricing (now typical for the industry). With prices having more than doubled in the past year there is an expectation they will settle lower than the current level at some point, but there is optimism they will stay considerably higher than $100 per metric ton and support mine operations at full production capacity.

Warrior Met Coal Warrior Met Coal, a company formed by the senior creditors of Walter Energy, purchased the mining assets of Walter Energy as part of a Chapter 11 bankruptcy settlement on March 31, 2016. Walter Energy, the Port’s largest coal shipper, filed for Chapter 11 bankruptcy protection in July of 2015.

Walter Energy had in recent years expanded from its Alabama base to acquire mines in West Virginia, British Columbia and South Wales in Britain. With metallurgical coal prices falling from a high of $330 per metric ton in 2012 to under $100 per metric ton in 2016, the company could no longer support its operations and debt load. With the

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March transition, Warrior Met Coal assumed control of Walter Energy’s Mine No. 4 and Mine No. 7 in Brookwood, Alabama.

When Warrior Met Coal took over operations, Mine No. 4 was closed and Mine No. 7 was operating on a limited basis. A new labor agreement was negotiated with additional operational flexibility and the decision was made to reopen Mine No. 4 when coal prices began increasing from their lows and reached $90 per ton. Since then coal prices have surged. Mining at Mine No. 4 re-started in August 2016 and it is building to full shifts. At the same time efforts continue to get Mine No. 7 back to full operation. Ultimately the company believes the mines have a combined maximum capacity of 6.5 to 7.2 million tons of coal per year, production levels that can be sustained as long as metallurgical coal prices stabilize in a range not far below $150 per metric ton. For the next 12 months tonnage is likely to be less than that as operations are reestablished.

Exhibit 2-9:

ASPA Metallurgical Coal Exports Walter Energy/Warrior Met Coal (million tons/fiscal yr)

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: ASPA

The closing of Mine No. 4 and reduced operations at Mine No. 7 dramatically reduced ASPA’s fiscal year 2016 shipment volume relative to prior years. However, with a recovered metallurgical coal market in combination with a focused emphasis on rejuvenating the Brookwood mines, Warrior Met Coal believes it is positioned to see shipments rebound to historical levels again.

Other Coal Customers Two other important coal customers are Javelin Global Commodities and Seneca Coal Resources. From 2013 through 2015 they (or their predecessors) each exported between 1.3 million and 1.5 million tons of coal: Javelin steam coal and Seneca metallurgical coal. In 2016 each saw their exports drop to about 1.0 million tons.

Javelin is a global commodities trading firm, which in mid-2015 took over business previously coming from J. Aron, another trader and subsidiary of Goldman Sachs. The transition occurred when the principal coal trader at J. Aron left to start Javelin and was followed by customers. The steam coal they ship through the Port is sourced in the Illinois Basin and moves by rail to Mobile. Export destinations are mostly in Europe and were concentrated in the

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Netherlands, Germany and U.K. in 2015. Declining coal prices had a negative impact on FY 2016 volumes, but with recovering prices the expectation is for tonnage to return to pre-2016 levels.

Seneca, a West Virginia based miner, purchased the Oak Grove mine on Alabama’s Blue Creek seam from Cliffs Natural Resources in December 2015. Cliffs laid off about half the mine’s workforce the October before the sale. After the purchase by Seneca, negotiations for a new labor contract were protracted and negatively impacted mine production. However, mine coal inventories were high enough that shipment levels did not face the full brunt of lower production tonnage. Given the increase in metallurgical coal prices, Seneca is expected to return to export coal levels of about 1.5 million tons annually.

McDuffie Revenue The ASPA generates revenue at McDuffie through coal handling, the dockage of ships and barges for loading and unloading coal, miscellaneous operating activities (barge cleaning, special handling charges, etc.), security fees and tonnage fees charged for capital recovery in association with specific capital developments.

The Bulk Plant has served in the past to augment McDuffie coal capabilities but was closed in FY 2015. Historical coal data presented below combines the Bulk Plant with McDuffie (note that there was a small amount of iron ore handled at the Bulk Plant prior to 2014). Total revenue by year for ASPA coal is shown in Exhibit 2-10.

Exhibit 2-10: McDuffie Coal Terminal Total Revenue FY 2010 to FY 2016 (Million $)

100.00

90.00

80.00

70.00

60.00

50.00 Million $ $ Million 40.00

30.00

20.00

10.00

- 2010 2011 2012 2013 2014 2015 2016

Source: ASPA

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Exhibit 2-11: Total Revenue in 2016 Fiscal Year by Category at McDuffie Coal Terminal

2016 - Total Revenue $48.5 million

Dockage 17%

Other Operating 4%

Capital Handling Assessment 67% 12%

Source: ASPA

Nearly all handling revenue at McDuffie is generated under multi-year contracts with the Port’s major coal customers. Most of these contracts do not specify minimum volumes; though the Port’s customers do have contracts with their own customers for the volume of coal for which they are required to deliver or take delivery. Dockage revenue is based on tariff rates and the actual size and time at the dock for vessels utilizing the Port’s berths. Other Operating revenue is typically tariff based and applies to such ancillary services as barge cleaning, coal blending and storage. The tariff rate the Port applies as a security assessment is also included in the category of Other Operating revenue in the charts above. Capital Assessment revenue, which is collected based on a charge per ton handled, reflects agreements made by the Port and customers to fund past capital improvement projects that have significantly increased Port capacity, particularly with regard to imports. The capital balance on one significant project was fully amortized by the end of FY 2016, and another will fully amortize during the course of FY 2017, leaving one project whose capital balance will likely be amortizing over a period extending well beyond a decade. As a result, the capital assessment fee will drop from 12% of revenue in 2016 to less than 2% in the years beyond 2017.

McDuffie Expenses Before depreciation and expenses allocated from the General Office, McDuffie Coal Terminal incurred $30.5 million of expense in fiscal 2016 in support of the Port’s handling 10.5 million tons of coal. The workforce at McDuffie, which averaged 188 people in 2016, accounted for 57% of the McDuffie total expense. The labor force is segmented between supervisory personnel, hourly workers involved in coal and ship handling, and hourly workers responsible for the maintenance of the plant. All hourly workers at McDuffie, as well as at all other port facilities except the Terminal Railway, are represented by the International Longshoremen’s Association (ILA). The number of hourly workers in a given year varies with coal volumes, as do most other operating expenses.

At McDuffie Coal Terminal the other maintenance expenses related to materials and outside services represented 10% of the 2016 total expense before allocations and depreciation. The rental of equipment was 12% of the total expense. The equipment rental expense group principally represented large bull dozers for coal handling. The remainder of expense was incurred in the categories of dredging, the expense to maintain the depth around the piers at the McDuffie Coal Terminal and then to dispose of the removed material; utilities and miscellaneous operations. Dredging expense is not tied to activity level at McDuffie, rather to major storms and normal river silting. The major MICP CAPITAL 21

Feasibility Study: Revenue Refunding Bonds portion of dredging expense is the removal of dredged materials and in 2016 there were onetime expenses associated with removal of dredged material that doubled normal expenses.

Actual Performance vs. 2010 Projections For the years since 2010 ASPA coal volumes reached a peak in FY 2014 at 18.3 million tons (see Exhibit 2-5), just below the 20 million plus tons in the record coal years of 2007 and 2008. After dropping to 15.4 million tons in 2015, about the base level over the past decade, coal volumes plunged 32% in FY 2016 to 10.5 million tons.

The 2010 projection anticipated coal volumes would maintain at a level of 18 million tons per year through FY 2015. Export tons actually performed better than expected over the period, running almost 1 million tons a year above the projected 9.5 million tons a year. On the other hand, import and domestic steam coal volumes averaged 5.8 million tons a year, including a 2015 volume drop of 35%, compared to the projection of 8.5 million tons annually.

A steady volume of export steam coal beginning in 2013 added strength to the exports. Metallurgical coal exports met projection levels through 2015. In 2016 metallurgical coal exports dropped 38% due in part to market conditions, but more specifically due to business issues that impacted two of the Port’s three metallurgical coal shippers. The Port’s largest coal customer, Walter Energy, sold their Alabama mines to Warrior Met Coal in a bankruptcy settlement, and the market and business turmoil combined to limit shipments and reduce their exports in 2016 by 50%.

Steam coal imports and domestic shipments of steam coal (rail to the Port and barge to the power generation plant) were negatively impacted by the changing mix away from coal at area power generating plants. Steam coal imports/domestic tonnage gradually declined from 8 million tons in 2010 to 6.1 million tons in 2014. The transition to gas fired facilities at Port served plants then led to a 35% drop in 2015 volume before falling another 13% in 2016.

The underlying metallurgical coal market is sending strong signals in terms of large and rapid price movements that suggest it is in full recovery. With Alabama coal sources that offer coal qualities attractive to steel producers worldwide, the two new mine owners, Warrior Met Coal and Seneca, should be positioned to restore the operations they took over to production levels close to those achieved since 2010.

Given the major changes in the power generation sources at Southern Company, a revival of steam coal imports is unlikely. It is possible that the use of steam coal has stabilized, at least in terms of seeing the remaining coal served facilities served by the Port continuing to operate for their planned life. There is still the possibility that the Port’s import/domestic steam coal volumes could be adversely affected by the implementation of the EPA’s Clean Power Plan or Southern Company’s substitution of Powder River Basin coal for import and Illinois Basin coal.

Total McDuffie annual Revenue (including that from the Bulk Plant prior to its closing) increased 47% from $58.5 in 2010 to $86.2 million in 2014 before declining to $72.6 million in 2015. The revenue then dropped 33% to $48.8 million in 2016 due to the already noted plunge in volume. The 2010 projection for coal revenue was $67 million in 2015, $7.2 million below actual 2015 revenue. Higher than expected revenue resulted from higher rates and capital assessment charges than used in the 2010 projection.

The Port is able to manage overall McDuffie Terminal expense in a way that allows adjustment to business conditions. Lower volumes of coal handled resulted in reduced labor related expenses, lower operating expenses and reduced maintenance, though reductions are not fully proportional to changes in volume. Total expense before depreciation and allocations at McDuffie Terminal (and Bulk Plant) grew from $34.4 million in 2010 to $41.6 million in the high volume year of 2014 before falling to $39.8 in 2015 and then to $30.9 million in 2016. The 2010 projection had expenses growing to a high in 2015 of $33.9 million. Actual 2015 expenses were higher than projected in 2010 due to higher than expected average wages and other employee related expenses.

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Annual earnings before depreciation and allocations at McDuffie (and Bulk Plant) reached $44.6 million in 2014 (a gross margin of 52%) before declining to $32.8 million in 2015 (45% margin) and finally to $17.9 million (37% margin) in FY 2016. The 2010 Base Case projection anticipated earnings before allocations and depreciation building to $32.4 million by 2015 (representing a 48% gross margin), $.04 million below what was actually realized.

Projections The five year projection for McDuffie Coal Terminal, shown in Exhibit 2-12, is based on the expected throughput for specific customers on the export, domestic and import sides of the coal business. Coal volumes during the projection period are most dependent on the expected rebound in metallurgical coal exports for the two shippers that acquired existing operations in FY 2016, and secondly on the Southern Company maintaining the level of throughput expected in 2017. The Base Case projections assume that these three customers are able to achieve the business levels they currently expect in FY 2017 and are able to maintain these over the projection period.

Export levels of metallurgical coal are expected to increase by about 2.4 million tons in FY 2017 over 2016 and another 500,000 tons in 2018 to a total of 8.2 million tons, in large part based on Warrior Met Coal’s ability to increase production while continuing to sell into a strong export market. After an increase in steam coal exports in 2017 to 1.8 million tons they are expected to return to a more normal 1.0 million tons a year over the remainder of the projection period. Along with steam coal exports total exports are projected to be 9.2 million tons per year from FY2018 through FY 2021. Imports of steam coal for Southern Company are expected to decline by 700,000 tons below the FY 2016 level at the same time domestic coal moving from unit trains to barge for delivery to Southern Company power plants is expected to increase by about 200,000 tons.

The three metallurgical coal miners served by the Port have a potential combined capacity of up to about 12 million tons per year, 50% above the projected annual totals. While a strong market and smooth operations may in fact result in years where these kinds of volumes are approached, general market volatility and the vulnerability of any single miner to temporary operational disruptions in output tempers the outlook in terms of including higher coal volumes in the Higher Performance Case for the Port.

The Port is at some risk in terms of future coal volumes due to the uncertainty as to whether the new metallurgical coal operators, Warrior Met Coal and Seneca, will be able to sustain their respective businesses. Both have the advantages of making the decision to invest at a time of depressed coal prices that have since nearly tripled, and new labor contracts with increased flexibility and reduced legacy costs. If they are able to successfully manage the operational challenges at their respective mines they both have an opportunity to prosper. However, the Lower Performance Case for the Port assumes that a combination of market volatility and operating issues lowers export metallurgical coal volumes by 1.2 million tons and total coal exports to 8.0 million tons per year in 2018.

The Lower Performance Case for the Port also assumes that Southern Company imports/domestic shipments turn lower before the end of the projection period due to either the substitution of Powder River Basin coal and the subsequent loss by the Port of some of the rail to barge volumes, or the implementation of further regulatory restrictions on burning coal. Base Case import/domestic shipments of 3.0 million tons of steam coal fall by 33% to 2.0 million tons in 2019 for the remainder of the projection period.

Handling revenue associated with coal is principally based on rates that are part of multi-year contracts. Rates are typically tied to publically available escalation indexes. These contract rates are coupled with the assumption that tariff rates will increase by 1.0% over the all Urban Consumer Price Index (CPI-U) each year over the projection period for the Base Case and Stronger Performance Case, and at CPI-U for the Weaker Performance Case. The tariff rates, as they apply to most of the coal business, cover dockage and ancillary services, as well as the security fee. The assumed tariff rate increases are in line with increases the Port has implemented in recent years, though the Port did not implement tariff increases for FY 2017. Coal throughput also determines the level of expected capital

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Feasibility Study: Revenue Refunding Bonds assessment receipts included in revenue that are assessed as a per ton fee in association with the recent Berth 1 project improvements.

The expense projections are dependent both on the extrapolation and projection of historical relationships and specific expected changes in cost variables. The labor force is projected to change over time based on historical relationships to volume, while hourly wage rates are assumed to generally grow in line with the CPI-U plus 1.0%. The rates of increase are an estimate, as the ILA contract is currently being negotiated. For the likely range of coal volumes the number of supervisory positions remains constant, and salary increases are assumed to be at CPI-U plus merit increases averaging 1.5%. Employee benefits are expected to increase by 1% per year over wage and salary increases. Other expenses are tied to coal volumes and an assumed underlying inflation rate equal to the CPI-U. The Base Case and Stronger Performance Case assume CPI-U at 2.0%, while the Weaker Performance Case assumes a 1.5% CPI-U.

For the Base Case, McDuffie revenue over the 5 year projection totals $270.2 million, 41% of the total revenue the ASPA is expected to generate in the period. For the 5 year period ending in 2016 combined McDuffie and Bulk Plant (which included some non-coal commodities) revenue totaled $360.8 million, which was 50% of Port revenue. Gross margins (considering expense before General Office allocations, insurance charges and depreciation) are expected to average 44% at McDuffie, about 4 percentage points lower than the five year period through 2016 (as a result of lower projected coal volumes. McDuffie earnings before allocations and depreciation total $120.0 million for the 5 year projection period, which is 44% of the Port’s projected earnings before G&A allocations and depreciation. For the 5 year period ending in 2016 McDuffie/Bulk Plant gross earnings totaled $172.2 million, which was 1% of the Port’s earnings before G&A allocations and depreciation.

Exhibit 2-12: McDuffie Coal Terminal 2016 Actual and 5-Year Projection 2017 to 2021 Coal Throughput, Revenue, Expenses and Earnings ASPA Coal Tons: Actual 2017 2018 2019 2020 2021 2016 McDuffie Export Tons 7,060,000 9,455,000 9,155,000 9,155,000 9,155,000 9,155,000 McDuffie Domestic Tons 573,000 781,000 781,000 781,000 781,000 781,000 McDuffie Import Tons 2,875,000 2,174,000 2,174,000 2,174,000 2,174,000 2,174,000 McDuffie Total Tons 10,508,000 12,410,000 12,110,000 12,110,000 12,110,000 12,110,000

McDuffie Coal Terminal Actual 2016 2017 2018 2019 2020 2021 Revenue $48,545,000 $54,321,000 $52,427,000 $53,446,000 $54,488,000 $55,555,000 Expenses $30,486,000 $28,821,000 $29,053,000 $29,901,000 $30,775,000 $31,675,000 Earnings before Alloc & Depr $18,058,000 $25,500,000 $23,375,000 $23,546,000 $23,714,000 $23,879,000

Source: ASPA 2016 actual and MICP Capital Projection

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2.2 General Cargo/Intermodal

General cargo operations include the Pinto Island Steel Terminal and the main dock complex, which covers almost two miles of waterfront and includes 37 berths where ships can load to a draft of 40 feet. At the south end of the main Docks complex is Berth 2 where the paved 16-acre yard handles the Port’s container traffic from vessels carrying mixed loads of container/break bulk cargo. The general cargo operations are supported by a number of on-dock warehouses for storage of inbound and outbound commodities. A new addition to the main dock, completed in 2015, is the Alabama Steel Terminal, a project jointly developed by the Port and Alabama Steel Terminals, LLC to handle inbound and outbound steel coils.

Pinto Island Steel Terminal The ASPA’s development of steel handling capabilities on property purchased on Pinto Island was completed prior to the end of 2010. The project was undertaken as a direct result of plans by the ThyssenKrupp Group of Düsseldorf, Germany to invest $4.6 billion in a state-of-the-art carbon steel and stainless steel processing facility in Calvert, Alabama. That plant became operational at approximately the same time as Pinto Island Steel Terminal, with its final carbon steel processing lines coming on line late in 2011. The steel processing plant is located on the Tombigbee River, about 49 miles by river barge from the Port of Mobile.

The carbon steel processing facility in Calvert was developed by ThyssenKrupp in tandem with a new plant in Brazil that was to provide most of the raw carbon steel slabs to be transloaded to barges at Pinto Island and processed in Calvert. The Brazil operation was beset with start-up difficulties, which in combination with a declining steel market caused ThyssenKrupp to suffer significant financial losses in what was a new push into the Americas. Eventually, ThyssenKrupp made the strategic decision to sell both the Calvert and Brazil plants and de-emphasize steel processing relative to its other business areas. The Calvert plant was purchased in February 2014 in a joint venture by ArcelorMittal, the largest steel company in the world, and Nippon Steel & Sumitomo Metal Corp., the world’s second largest steel company. The new company is named AM/NS Calvert. The new company is not encumbered by the legacy development costs of the Calvert and Brazil operations that were such a burden for ThyssenKrupp.

As part of the transaction with ThyssenKrupp, AM/NS is obligated to purchase a minimum of 2 million metric tons of steel slabs from the Brazil plant for a period of 6 years from the closing. At full capacity AM/NS Calvert requires approximately 4.4 million metric tons of carbon steel slabs per year. Production levels at the Calvert plant have stayed at levels lower than expected since the plant opened and the Port has not handled more than the 3.5 million metrics tons that it did in FY 2014. While now at about 85% of capacity, AM/NS believes it has made improvements to the plant at Calvert that will now allow operations to achieve design capacity.

Besides the ThyssenKrupp mill in Brazil, AM/NS sources steel slabs from ArcelorMittal plants in Mexico, Brazil and in the upper Midwest. The Brazil and Mexico sourced slabs are transloaded at Pinto Island, and those from the U.S. move by rail to Calvert. (Note that imported steel slabs are not subject to new import duties that apply to steel coils, as the slabs are imported as a raw material source by U.S. based steel producers).

AM/NS Calvert is designed to have inbound slabs arrive by barge. There is a small rail facility adjacent to the plant that is designed for handling outbound rail shipment of steel coils that has been used by AM/NS to receive some of their steel slabs. The slabs that are sent by rail are typically for short lead time projects that would not be possible if they had to fit into the longer supply chain lead time dictated by the foreign sourced steel. AM/NS has been handling about 350,000 metric tons of steel slabs per year by rail and is limited by rail operating constraints from receiving more than approximately 700,000 metric tons.

Ultimately, the Calvert plant, one of the most modern in the industry worldwide, is targeting high value added markets in automotive and energy that are long lead time continuous flow applications of steel making, which rely on long term contracts as opposed to the spot market. At this stage in AM/NS’s development of its target markets it sells a

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Feasibility Study: Revenue Refunding Bonds variety of products into a much wider market covering the auto, energy, construction, household appliance and industrial product industries. While even high value added markets are susceptible to economic swings (automotive is currently good and energy is not), they are less volatile than lower end markets that can be impacted by sudden worldwide market forces such as those being experienced now with an abundance of low cost Chinese steel imports.

AM/NS Calvert is following a strategy that is similar to that formulated by ThyssenKrupp, but with what they would consider the significant advantage of having an extensive and well established sales and service infrastructure in place in the target market areas. ArcelorMittal, which is responsible for marketing the AM/NS products, considers the automotive market to be a key business sector worldwide for which it focuses expertise in developing lighter, stronger and more cost effective steels. At the time of the acquisition they considered the AM/NS plant to be the most modern finishing facility in the world, positioned to take advantage of their expectation for 15% growth in the NAFTA automotive market over the next ten years.

The plant’s location near Mobile puts it at the hub of the southeastern U.S. auto manufacturing industry (15 manufacturers of autos or engines, with the annual capacity to manufacture approximately 1.7 million autos within four hours of Mobile) and just a short-sea route from Mexican-based auto manufacturing plants. ThyssenKrupp originally selected the location near Mobile not only due to its proximity relative to potential customers, but the availability of a sound transportation infrastructure, including the Port.

Pinto Island Terminal Facilities The Pinto Island Terminal is a 20 foot by 1,000 foot freestanding marine terminal (capable of berthing a 850 foot Capesize vessel) with barge handling capability located behind the ship berth. There are three wide-span gantry cranes, each with 125 feet of outreach and 150 feet of back reach. The cranes are capable of unloading steel slabs from ships to either barges staged between the ship dock and sheet pile wall, or direct to a storage area behind the sheet pile wall. The cranes employ permanent electric magnets and state-of-the-art lifting gear. To maximize barge handling productivity, ASPA designed a unique mechanically operated integrated barge-haul system that positions barges under the cranes.

The marine terminal has a 45 foot draft, the capability to discharge 25,000 metric tons per day from a docked vessel, and load up to 10 barges per day whether a vessel is in berth or not. Storage capacity is sufficient to store 150,000 metric tons of steel, the amount consumed in about 12 days at full production at the Calvert mill. The terminal utilizes an RFID (radio frequency identification) system to read unique identifiers on each slab handled, in order to support AM/NS’s IT systems and inventory management practices.

The ASPA services provided to AM/NS (unloading vessels, moving steel slabs, loading barges, and inventory reporting) are specified in the Cargo Handling Agreement between the two entities that was originally established between the Port and ThyssenKrupp and then transferred to AM/NS. Rates associated with wharfage and handling services are defined in the agreement. Dockage, harbor and security fees and any services not specified in the agreement are billed at market driven tariff rates. The agreement has a thirty year term with a ten year option period. There are no penalty payments for failure by AM/NS to provide projected volumes, though it is guaranteed that all imported steel for the new steel processing plant will be unloaded, handled, stored and shipped through the Port’s Pinto Island facility, and that AM/NS steel marine exports will move through Port facilities.

Alabama Steel Terminal In 2015 ASPA and Alabama Steel Terminals, LLC (AST) dedicated a new steel coil handling facility located on the main General Cargo dock complex. AST financed the construction of the $36 million facility on Port property. The parties have a long term agreement under which AST manages the facility and leases the property from the Port and the Port, in turn, shares with AST a specified portion of the revenue stream generated by handling steel coils. Rates are set in the Port General Cargo tariff.

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The facility is served by rail, truck and barge and is on a 40-foot deep channel. The Port believes the facility offers coil handling capabilities unique to any other marine terminal facility. The current facility represents the first of two phases of construction, with the second phase on adjoining property flexibly set to occur once steel coil volumes approach capacity at the phase one facility.

The facility provides 178,200 square feet of covered area equipped with four overhead bridge cranes and another 168,000 square feet of storage space. There are multiple door entrances and an inside rail track that can handle up to ten cars. The outside crane can provide service to and from vessels and barges. Total capacity for the facility can vary significantly depending on the mix of import versus export and the frequency of vessel calls. In FY 2016 over 900,000 tons were handled through AST.

Exports from AST are steel coils from the two finishing mills in Calvert: AM/NS and Outokumpu. Both export principally to Mexico. AM/NS ships to a variety of industries, but automotive related shipments are expected to be a long term driver of export growth. Outokumpu has had a steady annual export level of raw stainless steel coils moving to one of its own plants in Mexico for further processing.

AM/NS sees significant near term opportunities in the Mexican market, including with auto manufacturers. While they exported just over 200,000 tons in the Port’s FY 2016, AM/NS believes there will be rapid growth for them in the Mexican market as a result of its ability to leverage their sales force there as well as due to expected growth in the Mexican auto industry.

The stainless steel operating plant at Calvert was sold by ThyssenKrupp in 2013 to Finnish stainless steel maker Outokumpu. The stainless steel operation is built adjacent to the carbon steel processing mill, and Outokumpu has a contract with AM/NS for shared services--most notably they have use of the AN/MS hot strip mill to process the slabs from their stainless steel melt shop. There are no significant near term changes expected in stainless steel exports, with Outokumpu continuing to ship close to 350,000 tons per year to its Mexican plant.

Imported steel coils face new duties, enacted in the past year, to prevent foreign exporters from selling their export steel at a price below cost. Of the 550,000 tons of imported steel in FY 2016, approximately half came from Korean steelmakers supplying Korean automakers in the U.S. These imports may be more price inelastic given the value added by steel specifications required for high end auto applications. In general, if higher duties prevail for a period of time, there is expected to be a negative impact on Port steel coil import levels.

General Cargo Trade Mobile is a leading general cargo port and offers modern terminal facilities, rail connections, competitive tariffs, and proximity to foreign sources and markets. Besides steel slabs and coils, the Port handled another 2.8 million tons of general cargo in fiscal year 2016. As one of the country’s major forest product centers, the Port handles imports and exports of wood pulp, lumber, paper products and other forest products. The combined tonnage volumes of the non- steel slab or coil shipments have, as a group, remained very consistent over recent years.

The Gulf region is the principal gateway for U.S. forest products and metal products, the two largest commodity groups in U.S. general cargo trade. The other major general cargo ports in the Gulf are Houston, New Orleans, Brownsville, Tampa and Port Arthur. For export forest products, whose producers are often within 120 miles of Mobile, the Port has an advantage over other nearby ports due to inland freight alternatives that mean lower costs for shippers. The nature of port competition is different for import wood pulp, where Port Arthur, Jacksonville, Baltimore and Philadelphia are competitors based on the more distant inland destinations for shipments.

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Exhibit 2-13:

ASPA General Cargo Traffic (Tons) by Fiscal Year, 2011 to 2016

General Cargo/Inter. 2011 2012 2013 2014 2015 2016 Wood pulp 685,000 602,000 675,000 626,000 488,000 442,000 Pig Iron 242,000 415,000 560,000 703,000 516,000 788,000 Steel Slabs 2,097,000 2,643,000 2,870,000 3,867,000 3,427,000 3,064,000 Iron & Steel Products 501,000 731,000 652,000 682,000 750,000 685,000 Other Metal Products 122,000 47,000 53,000 102,000 356,000 312,000 Other Commodities 43,000 169,000 121,000 21,000 52,000 132,000 Total Imports 3,690,000 4,607,000 4,930,000 6,001,000 5,589,000 5,423,000 Frozen Chicken or Food 159,000 91,000 117,000 113,000 100,000 132,000 Lumber 225,000 177,000 197,000 186,000 213,000 242,000 Wood pulp 561,000 457,000 150,000 113,000 89,000 113,000 Rolled Fluff Pulp 0 0 131,000 169,000 214,000 215,000 Kraft Liner Board 101,000 122,000 175,000 131,000 128,000 160,000 Iron & Steel Products 521,000 583,000 428,000 535,000 388,000 550,000 Other Commodities 146,000 178,000 124,000 105,000 79,000 122,000 Total Exports 1,713,000 1,608,000 1,322,000 1,351,000 1,211,000 1,534,000 Grand Total 5,403,000 6,215,000 6,252,000 7,353,000 6,799,000 6,957,000 Source: ASPA

General Cargo Markets In FY 2016 General Cargo totaling 7 million tons was handled, 60% of which was imported steel slabs and steel coils, both for import and export. Total imports of 5.4 million tons represented 77% of cargo, though with steel slabs removed imports were 60% and exports 40% of the adjusted total. Wood pulp (8% of imports, or 18% of total imports excluding steel slabs) was the one significant import commodity outside of metal related products in FY 2016. On the export side, iron and steel (36% of exports) and wood pulp and rolled fluff pulp (together 21% of exports) figured prominently, as did lumber (16% of exports), liner board (10% of exports) and frozen food products (9% of exports).

The outlook for import general cargo is favorable with a number of trends expected to support current volumes over the next five years. Imports of wood pulp from South America are expected to increase due to continued new export capacity there and demand from U.S. importers. Alabama and the wider Southeast region remains a leading producer of poultry for export. While exports of frozen poultry have actually increased over the last four years, they are down significantly over the last ten years, and it is likely these exports will see some shifting to containerized loads in future years. The higher volume exports at greatest risk are lumber and market wood pulp, which are vulnerable to competition from other countries, particularly in light of the growing strength of the U.S. dollar. However, fluff pulp exports have increased, offsetting declines in market wood pulp, with Weyerhaeuser and International Paper joining Georgia Pacific in shipping fluff pulp through Mobile in recent years.

With a timberland base of 23 million acres, the third largest in the continental U.S., the forest products industry is Alabama’s largest manufacturing industry and is number two among all states in producing wood pulp. The composition of wood pulp exports has changed over time from market wood pulp (short fiber hardwood pulp) to fluff pulp (long fiber soft wood pulp). The market wood pulp producers have seen their export market decline due to MICP CAPITAL 28

Feasibility Study: Revenue Refunding Bonds competition from lower cost South American operations, while Alabama’s Southern Yellow Pine has proved to be a good source for fluff pulp, whose exports are increasing. Fluff pulp is used to produce absorbent paper products, principally baby diapers (which accounts for over 80% of the fluff pulp market).

The import business shows promise for potential growth. Wood pulp capacity is expanding in South America at the same time it is shrinking in the U.S. The Port continues to work with the carriers in the South America to U.S. wood pulp trade to take advantage of trends that could produce increases in import tonnage, and further leverage the Port’s connections to five national rail carriers that ship pulp from the Port to all of North America.

Revenue and Expense Analysis ASPA earns revenue at the General Cargo / Intermodal facilities through charges to vessels for docking at a pier, a percentage of the handling revenue earned by outside stevedores who move cargo between the storage or transit areas and point of inland conveyance, and miscellaneous services associated with these activities. The facilities handle break-bulk cargo as well as containerized cargo that is on vessels carrying both containers and break-bulk cargo. (Prior to September 2008 and the opening of the Mobile container terminal, all container vessels docked at the facility). Revenue is also generated through rental of land, offices and equipment.

The Port provides centralized billing and general maintenance services in support of stevedoring companies that conduct cargo operations. Storage is provided in the adjacent warehouse facilities on a short term basis to maintain the Port’s flexibility in adapting to changes in the general cargo business. The Port believes that by continuing to own and control terminal warehouse facilities they add value by maximizing the utilization of all available space based on their ability to make adjustments to accommodate the needs of the highest priority uses at any given point in time.

Revenues earned on steel coils throughput at AST and the AM/NS steel slabs handled on Pinto Island are covered by long term contract. All AST revenue is tariff based, while the AM/NS handling rates are specified in the contract, and rates for other Pinto Island services are tariff based.

Total General Cargo/Intermodal revenue in FY 2016 was $34.3 million, representing 29% of total Port revenue. General Cargo revenue in FY 2016 was up 1.5% over FY 2015 as a result of a 3% tariff increase. The 2010 projection of 2015 General Cargo revenues was $39.2 million, based on higher than realized imports of steel slabs at Pinto Island. Steel slab imports in 2015 were 1 million tons below the 2010 projected level.

Since 2010 forest product exports of lumber and linerboard have shown modest increases, as have both imports and exports of iron and steel products, to include steel coils. Both imports and exports of wood pulp have declined over the same period, as have food product exports. Increased rolled fluff pulp exports have absorbed some of the declines in wood pulp tonnage.

Total General Cargo / Intermodal expenses before the allocation of general office expenses and depreciation were $11.7 million in FY 2016. Personnel related expenses were 48% of the total. Dredging (5% of expenses), utilities (9% of expense), other operating (14% of the total), and maintenance materials and services (22%) were the other major categories. Expenses in FY 2016 were lower than 2015 by $1.0 million due mostly to lower dredging expense ($.53 million lower) and lower labor related expense due to a decline in volume ($.33 million). The 2010 projection of 2015 General Cargo expenses was $11.0 million compared to the actual of $12.7 due to higher than anticipated expenses at the Pinto Island operation.

General Cargo earnings before the allocation of general office expenses and depreciation were $22.6 million in 2016 (a gross margin of 66%), just below the peak earnings in 2012 of $22.7 million (66% margin). Actual earnings in 2015 of $21.0 million were lower than the 2010 projection for 2015 earnings by $7.1 million due mostly to lower than expected steel slab volumes and higher than expected expenses at Pinto Island.

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Projections There is continuing opportunity to handle break-bulk loads of forest products, frozen poultry, and iron and steel products. Break-bulk carriers continue to aggressively pursue international markets where at one end of a move volumes are not sufficient to support the intermodal infrastructure required for containerized shipments. Also, there is a segment of the traffic that will always move break-bulk due to oversize and weight characteristics, such as project cargo. The challenge is to make Mobile the preferred point of entry or exit based on location and available services, both for the carriers and their shippers.

Given the area base in pulp and paper production, there is believed to be not only long term staying power but a positive upside with regard to the import wood pulp business. The same is believed true for imported steel products in association with the large and growing automotive industry in the southeast. There is still uncertainty with regard to the long term sustainability of export business, particularly the market wood pulp shipments that face significant foreign competition, though losses of this business have in recent years been offset by increased exports of fluff pulp.

For the Base Case, steel slab imports are assumed to rebound by 400,000 tons in 2017 to reach 3.5 million tons in FY 2017 (FY 2014 was 3.4 million tons) and then grow to 4.2 million tons by 2021. The Base Case assumes AM/NS has overcome technical issues that were keeping the Calvert mill at production levels below design capacity, and that they are successful in continuing to build their market for high value added steel in such industries as automotive. The Higher Performance Case assumes that carbon steel slab imports increase to 4.4 million tons in support of strong growth in the Mexican auto manufacturing sector.

Steel coil projection assumptions are also driven by AM/NS activity. For the Base Case, steel coil exports grow from 550,000 tons in 2017 to 1.11 million tons in 2021 at the same time imports maintain their 2016 level of 560,000 tons. The export tonnage reflects level stainless steel exports and the growth of exported carbon steel coils to Mexican manufacturers. It is assumed that steel coil exports, anchored by steel to auto makers, hold up in the face of higher import duties. The Higher Performance Case assumes that carbon steel coil exports jump to 1.5 million tons in 2019 in response to demand from Mexican auto makers, and hold that level over the remainder of the projection. The Weaker Performance Case utilizes Base Case assumptions except that steel coil imports are reduced by 50% in 2018 and beyond due to unfavorable duties.

Exhibit 2-14 Projected Tonnage of Carbon Steel Slab Imports at Pinto Island and Alabama Steel Terminal Imports and Exports of Steel Coils (Base Case)

Tons: FY2017 FY2018 FY2019 FY2020 FY2021 Pinto Island Imports Carbon Steel Slabs 3,468,000 3,527,000 3,748,000 3,968,000 4,189,000

Alabama Steel Terminal Imports Carbon Steel Coils 556,000 556,000 556,000 556,000 556,000

Alabama Steel Terminal Exports Stainless Steel Coils 341,000 341,000 341,000 341,000 341,000 Carbon Steel Coils 213,000 441,000 551,000 661,000 772,000

It is assumed that tonnage throughput, excluding steel coils and slabs, will remain constant over the 5 year projection period and that ASPA will be able to realize annual tariff increases of 1.0% above CPI-U for all General Cargo shipments. On the expense side, the key assumptions include the average annual increases for both supervisory

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Feasibility Study: Revenue Refunding Bonds and hourly workers as well as increases in benefits related expenses. Once again, other expenses are subject to an underlying inflation rate equal to the CPI-U.

General Cargo/Intermodal revenue over the 5 year projection totals $187.0 million, which represents 28% of projected port revenue for the period. For the 5 year period ending in 2016 General Cargo had total revenue of $167.9 million, 23% of the Port total. Gross margins (accounting for expense before allocations and depreciation) average 62% for the projection period, down slightly from 64% over the last five years. For the five year projection period, earnings before the allocation of general office expenses and depreciation are projected to total $116.4 million, or 39% of the Port total. Actual earnings before the allocation of general office expenses and depreciation totaled $107.2 million for the five years ending in 2016, representing 32% of the Port total.

2.3 Marine Liquid Bulk Terminal

Liquid Bulk Terminal The Port seeks to build its customer base and long term business prospects by offering property for development that fits with the unique logistical requirements of firms seeking access to both U.S. and international markets. The multi- faceted world-wide industrial chemical markets hold the potential for having firms that would find a competitive advantage associated with a Mobile location. The potential attraction exists due to access to the inland as well as intracoastal waterways, service by five Class I railroads to all major industrial areas, and the rich chemical feedstock sources on the nearby Gulf coast.

In the late 1990’s PHENOLCHEMIE, Inc., a producer of phenol and acetone, reached agreement with the ASPA to develop a plant on Port property. The agreement included an initial term through 2009, with the company having the option for two 10 year extensions. INEOS Phenol, the world’s largest producer of phenol and acetone, acquired the plant in 2001. The company has exercised the first of the two options for a 10 year extension. The Mobile plant is now one of five operated by INEOS Phenol.

The plant was completed in 1999 and began both receiving feedstock chemicals and shipping phenol and acetone. Initially the plant had a capacity of 400 metric tons of phenol and 250 metric tons of acetone, but with the last expansion completed late in 2005 the capacity increased to 540 metric tons of phenol and 330 metric tons of acetone.

Phenol, a by-product of coal tar distillation, is used in the manufacturing of products ranging from adhesives, compact discs, household appliances, pantyhose, plastics, textiles, organic intermediates, solvents, materials for paints and coatings, and, just as they did 100 years ago, aspirin. The Mobile plant serves U.S. and Asian manufacturers of these products.

Revenue and Expense Analysis The ASPA generates operating revenue at the Marine Liquid Bulk Terminal under contract rates for the dockage of vessels and barges, and the usage of the facility for both inbound and outbound products. The contract carries a guaranteed business level; however, actual revenues are running significantly above that level.

Since 2010 revenues have remained constant at about the $3.5 million level, which was in fact the total revenue for FY 2016. The Port incurs a minimal level of operating expense at the Marine Liquid Bulk Terminal, as the customer staffs and operates the facility in conjunction with the production function that occurs there. Non-allocated expenses, which most significantly included utilities, outside professional fees and maintenance expense were $341,000 in fiscal 2016.

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Actual Performance vs. 2010 Projections The 2010 Projection for FY 2015 revenue was $3.8 million, while actual revenue was $3.5 million. Actual earnings before depreciation and allocated expense in FY 2015 were $2.0 million, 42% below the projection of $3.47 million made in 2010 due to lower than expected volumes and higher than expected operating expenses.

Projections INEOS Phenol continues to invest in its Mobile facility, and should be producing at this site long after the second ten year option comes available in 2019. A generally conservative stance has been taken toward the projection of tonnage—holding it constant at the expected 2017 level over the projection period, an amount that assumes no further expansion of the plant, as well as the company’s continued ability to operate at near capacity in response to market demand. Rental revenues are assumed to remain a constant, but very minor contributor.

Total Marine Liquid Bulk revenue during the 5 year projection period is $18.8 million, which is 3% of the Port total for the period. Earnings before the allocations and depreciation total $16.8 million or 6% of total port earnings over the period.

2.4 Terminal Railway

Operations The Terminal Railway provides switching services between the Port’s terminals and the Class I railroads serving Mobile, and also moves railcars to and from local industries outside of the main port complex. It operates on 75 miles of track using eight locomotives.

The Terminal Railway provides a number of unique services for a varied customer base. At its most basic level the railway is the interface between the national rail network and the docks where marine shipments originate or are received. In this role the railway handles or otherwise “switches” railcars in the movement between an interchange with a Class I railroad and the dock location where a commodity is either moved to or from a ship. It is the act of switching a railcar that generates revenue based on a tariff or contract rate. Besides the fee earned for a switch, other significant revenue is generated through services that include storage, repair, and interchange of railcars. Switching activity takes place not only at Alabama State Port Authority docks, but at private industries that have no direct Class I railroad service.

A variation of the Terminal Railway’s switching activity is the service provided at McDuffie Coal Terminal. For inbound coal unit trains for export or transload to barge for domestic delivery, the Class I railroad, either CSX or Canadian National Railway (CN), takes the train directly to McDuffie. They then leave the train for the Terminal Railway to dump the cars of coal. A smaller switching fee is typically earned for this activity.

Another switching activity involves the CG Railway, which moves railcars by ferry boat with four day service between Mobile and Coatzacoalcos, Mexico, connecting with the Mexican National Railway on one end and the Terminal Railway on the other (where a switch to or from a Class I railroad is provided). The CG Railway initiated the service on their double deck ferries at the Port in 2007, served by a loading facility capable of moving railcars off/onto either deck. The new terminal facility was a joint development by CG Railway and the Port, whose construction was funded by the ASPA 2006 Bond Series and the State of Alabama’s Capital Improvement Trust Fund. The terminal, with its twin deck design, is the first of its kind.

Unrelated to port activity, the Terminal Railway earns “joint facility” revenue from the Alabama & Gulf Railroad (AGR). The revenue is essentially for the rental of tracks the AGR must cross in order to connect between their owned track and operations in Mississippi and northern Alabama on one hand, and their main depot west of the ASPA. The

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Feasibility Study: Revenue Refunding Bonds amount of joint facility revenue is a function of the number of AGR cars that cross the 3.5 mile section of track owned by the Terminal Railway.

The Terminal Railway currently has 104 employees. The employees are represented by 7 different unions, a number not unusual for a railroad union workforce, with different representation for clerks, brakemen, locomotive engineers, maintenance of way employees, and three unions for employees who maintain railcars and other equipment.

The Railway operates 24 hours a day seven days a week with three shifts. Individual shifts are formulated to meet expected business demands. The Terminal Railway’s eight locomotives are assigned to jobs as work demands.

Revenue and Expense Analysis In fiscal year 2016 the Terminal Railway had total revenue of $19.3 million, down 13% from FY 2015 due to a 53% reduction in the number of coal car switches at McDuffie. Switching activity at the General Cargo/Intermodal facility and at non-port facilities generated 47% of revenue in FY 2016. Other switching at the Port’s coal and grain facilities, as well as at the CG Railway dock, produced another 24% of the revenue. Miscellaneous Operating Revenue, to include items such as car repair revenue, and revenue for weighing services, was $3.2 million and 17% of total revenue. The CG Railway pays a capital assessment charge that totaled about $1.4 million in 2016 to fund their share of the construction cost of the terminal facility where their ferries dock. The charge is included in revenue and represents 7% of the total.

Exhibit 2-15:

Total Revenue in 2016 Fiscal Year by Category at Terminal Railway (Million $)

2016 - Total Revenue $19.2 million

Switching - Grain 3% Switching - CGR 7%

Switching - GC/I, Switching - Coal non-ASD 14% 47%

Other Operating 17%

Capital Assess Rental 7% 5%

Source: ASPA

Personnel related expenses accounted for 84% of Terminal Railway expenses totaling $10.5 million before general office allocations, insurance charges and depreciation in fiscal 2016. Other operating expenses, to include fuel, supplies, and utilities totaled $1.1 million (10% of expense) and other maintenance related expense (materials and outside services for railcars, other equipment, and the right of way) was $1.0 million and 8% of total expense.

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Exhibit 2-16: Total Expense in 2016 Fiscal Year by Category at Terminal Railway

2016- Total Expense $12.6 million M&R - Labor 15%

Labor Op/Non-Op 35%

Employee Related 32%

M&R - Other 8% Other Operating 10%

Source: ASPA

Actual Performance vs. 2010 Projections Actual FY 2015 Terminal Railway revenue of $22.1 million was just 0.5% less than revenue of $22.2 million in the 2010 projection for 2015. Actual earnings before depreciation and allocated expense in FY 2015 were $8.6 million, 34% better than the 2010 projection of $6.4 million made in 2010 due principally to higher than projected industry switching.

Projection Financial performance for the Terminal Railway over the five year projection period is dependent on port activity levels at McDuffie Coal Terminal, the General Cargo/Intermodal Terminal, the grain terminal, CG Railway facility and the new Intermodal Container Transfer Facility (ICTF). Non-port related activity, including industry switching and joint facility rents represent important revenue contributors.

The projection embodies the assumptions for the coal, general cargo business and ICTF. The Railway is expected to be able to continue annual tariff rate increases of 1.0% above the CPI-U over the projection period. The Terminal Railway’s hourly pay and benefits increase at CPI-U plus 1.0% and employee benefit expense increases by 1% per year above the wage rate increases. Other expenses are assumed to be subject to annual inflation at the CPI-U rate.

Terminal Railway revenue is projected to grow from $19.3 in FY 2016 to $23.4 million by 2021 based on increased tariff rates, maintaining expected 2017 business levels serving industry, the grain terminal and CGR, and projected levels of business at McDuffie and the ICTF. Business at the new ICTF is responsible for much of the growth, and is based on the assumption that the Terminal Railway will continue to serve the facility on behalf of Class I railroads (moving container stack cars to Class I yards in the Mobile area). Total revenue for the five year period is projected to be $105.8 million, or 16% of the Port total for the period.

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Gross margins (for expenses before allocations and depreciation, and excluding capital assessments and other rental revenue) average 33% in the projection period. Earnings before allocations and depreciation are expected to total $34.9 million for the projection period, 12% of the Port total.

2.5 Other Business Areas

The ASPA maintains a number of smaller operating units to manage various activities that are unique, though integral, to the more mainstream port business areas. These operations include The Real Estate Division, Dredging Management, Harbormaster, Middle Bay Port, and the Inland Docks (actually 11 separate facilities).

Dredging Management and the Harbormaster group are an important part of overall port operations. Dredging Management represents a cost center where the focus is on the management of the disposal of dredged material. Higher costs for dredging due to the environmental sensitivity of disposing dredged material are an important issue for the Port. The Harbormaster operation generates revenue and expenses in association with their role managing harbor pilots that assist vessels in safely entering the port and docking at the various piers.

The Real Estate Division, Middle Bay Port, and the Inland Docks (with the exception of Axis) produce revenue almost exclusively through the rental of properties that are leased out for periods that typically run from 10 to 30 years. Middle Bay Port comprises 200 acres of prime waterfront property and numerous buildings. The property has a two- sided 600-foot pier with a draft of 34 feet. Current users of Middle Bay provide services to the Gulf oil and gas sector, and the facility generates sufficient revenue to cover the Port’s operating costs. The inland dock at Axis serves SSAB Steel, and has revenue based on volume crossing the dock.

Through the Real Estate Division ASPA continues to seek new investments in the port area, which then serve as properties where companies can be recruited to locate. They also try to develop cargo related business that can utilize their properties. The development of the Marine Liquid Bulk Terminal and the construction of the container facility at Choctaw Point are examples of successful results from these types of Port efforts. Other public-private partnerships have led to the development of the pig iron, cement and grain terminals, all of which are important contributors to Real Estate Division revenues.

The Real Estate Division includes the Mobile container terminal (MCT) and Intermodal Container Transfer Facility (ICTF) developed in partnership with APM Terminals, a global container terminal operator that is a sister company of Maersk Lines. While APM Terminals, the facility operator, pays rent under a long term contract, the Port also benefits with the payment of “additional rent” based on the number containers handled.

Marine Container Market Developments The Port has seen significant growth of container traffic, which prior to the opening of the Mobile container terminal, was handled over the general cargo berths. The development of automotive and other manufacturing industries in Alabama has driven container growth, as well as the conversion of traditional break-bulk cargo to shipment in containers.

Underlying the opportunity the Port has for high growth in marine container volumes are major developments in the worldwide supply chain. Changes impacting the container trades include the expansion of the Panama Canal, the refocusing of retail supply chains on rapid fulfillment of orders direct to the consumer, and the consolidation of the major marine carriers.

The Panama Canal Expansion The Panama Canal serves some 35% of the trade between Asia and America. Before the expansion, ships carrying 4,500 TEU (20 foot container equivalents) were the maximum size (Panamax) but with the $5.4 billion expansion MICP CAPITAL 35

Feasibility Study: Revenue Refunding Bonds complete, ships carrying as many as 13,000 TEU can pass. This change enables several things to occur: 1) new larger ships (20,000 TEU) in the Trans-Pacific (Asia-U.S. west coast) service displace the previous large vessels, and a cascading effect frees up ships (6,000 to 9,000 TEU) for service to the East and Gulf Coasts through the Canal; 2) Panama trades are now competitive with service from Asia through the Suez Canal; and 3) the larger size ships in East and Gulf service offer superior economics and take away market share of rail intermodal moves. Some 136 ships can now fit through the Canal that previously could not. With the larger vessels comes a challenge to the ports to serve their large size and volume spikes. The Canal expansion may see a gradual transition in ships and deployments rather than a wholesale change. Vessels in the 6,000 to 9,000 TEU range will be the first new entrants. And carriers/ alliances may create transshipment hubs in Panama to enable both large and small ports in the Gulf and East Coasts to receive improved service frequency and improved economics.

Estimates of the net container volume increases in the Gulf vary widely but a 15% increase is expected according to most industry sources. Of that 15% average, Mobile, with a smaller base, excess capacity, enhanced rail service and other shipper initiatives described below, would be expected to share a larger proportion.

Supply Chain Changes Retailers and distributors, and particularly the “Big Box” retailers such as Wal-Mart, Target, Home Depot, and Lowe’s have historically built their distribution centers (DC’s) near the largest population hubs (e.g., Chicago and Atlanta). Volume dictated this decision-making, and this strategy led to cost savings and price reductions for consumers. But with Internet competition from Amazon and many others comes the need for much faster and almost immediate fulfillment of orders to homes and local addresses in last-mile manner. The giant DCs are not competitive in this environment. Thus the retailers are changing their DC strategies to create multi-purpose or “Omnichannel” facilities, which can replenish stores in volume shipments as well as respond to Internet orders and special customer service requirements. Wal-Mart is currently evaluating a DC investment in Mobile for just such a purpose. Other retailers are certain to follow. The area near and around Mobile has been underserved by these companies.

At the same time, US railroads are re-evaluating their networks and service portfolios. Canadian National Railway Company (CN), a major US player particularly in the north-south lanes, signed an agreement with ASPA to expand intermodal services to and from Mobile. This service will be a timely complement to the retailers’ new DC strategies. Locations such as Memphis, Indianapolis and Chicago, long the target of intermodal services off the west coast, become potential destinations for Gulf ports like Mobile. Container trains with some 700 TEUs of containers create excellent economics.

In another supply chain development impacting ASPA, shipments of basic commodities are seeing the gradual impact of containerization. Resins have long represented a bulk move for Houston, but inland supply chain and shipment size economics, as well as costs associated with finding empty containers for export, may produce export moves in locations such as Mobile. The conversion is early in its development, but is indicative of how the evaluation of complete and complex supply chains can impact traditional port dynamics. Some estimates put the resin conversion at 500,000 TEUs annually, with Houston the main beneficiary but other ports such as Mobile also sharing in the gain.

Yet another supply chain undergoing review and change is that of foodstuffs and medical supplies in the cold chain. The proposed Wal-Mart DC will include cold storage to support the company’s position as the largest grocery store chain in the U.S. Poultry and produce companies can also be expected to look at export supply chains in a new light with the availability of port centric cold chain facilities and services. This will enhance the existing cold storage facility for chicken exports out of Mobile.

Shipping Line Consolidation With the serious financial condition of many of the container carriers, industry consolidation is occurring. But the freight is still flowing and the underlying demand for container carriage continues. CMA-CGM has purchased APL,

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Feasibility Study: Revenue Refunding Bonds while Maersk has purchased Hamburg Sud and the three Japanese lines announced that they will be combining into one operating entity. The two Chinese lines have combined. With these changes come re-evaluation of deployments, port priorities, and increased volumes. The combined lines bring the ability to source a broader spectrum of potential shippers, reducing the risk of deploying ships into smaller markets, potentially allowing for more direct calls and less hub use, which can mean opportunity for Mobile.

Mobile Container Terminal and Intermodal Container Transfer Facility The Port’s marine container complex development represents a partnership that utilizes Port owned land along with private and public funding sources for infrastructure. In September 2008 ASPA opened the newly constructed Mobile container terminal (MCT) on Choctaw Point that had been funded by the Federal government, State of Alabama and the terminal operator, a joint venture between APM Terminals and Terminal Link. The construction of an access bridge to the Mobile container terminal facility, funded by the ASPA 2006 Series Bonds, was completed in December 2009. The bridge allows unencumbered truck access to and from the terminal by elevating the roadway over a major rail line.

Working from a master plan for the full development of an extensive marine terminal complex the Port next built an Intermodal Container Transfer Facility (ICTF) to allow for the seamless loading/unloading of containers onto/off of container stack trains. The ICTF, representing a $50 million investment by the Port funded through federal and state grants and ASPA operating cash flow, was completed and put into service in May 2016. The ICTF is currently served by the Canadian National, but four other Class 1 railroads (CSX, Norfolk Southern, Kansas City Southern and BNSF) are expected to eventually serve the facility. Once fully built-out the ICTF is expected to be able to handle 200,000 TEU’s annually.

Development of the shipside container handling facility at the MCT has now progressed into the construction of Phase 2 of five planned phases. APM Terminals is investing $50 million in the current build-out on 20 additional acres that approximately doubles dockside capacity, adds two new super-Post Panamax cranes to the two existing cranes and expands the container yard. The cranes are expected to arrive in May 2017 and to be in service by July. With the completion of Phase 2, MCT annual throughput capacity will grow from 350,000 TEU to approximately 500,000 TEU.

When all Phases, encompassing another 60 acres, are complete the fully developed MCT is expected to have an annual throughput capacity of 1,500,000 TEU. Timing of the development rollout will be driven by the need to accommodate higher container volumes. Funding of the development is to be provided by APM Terminals, ASPA operating cash flows and new ASPA debt serviced by an increase in fixed rent paid by APM Terminals.

With the continuing development of the Port’s marine container complex the services provided by ocean carriers have also expanded. Beginning with one feeder service and one Far East service when the MCT opened, the services have recently expanded with the addition of two more Far East services and a Europe service, meaning there are now five container services calling each week at Mobile. Another Europe service is expected to begin in April 2017.

The current marketing efforts of the Port are jointly coordinated with APM terminals, the Port of Houston and Port Tampa Bay and are directed at both shippers and ocean carriers. The local and immediate hinterland markets for each port are distant enough that they do not directly compete.

Revenue and Expense Analysis The Real Estate Division, Dredging Management, Harbormaster, Middle Bay Port, and the Inland Docks combined in 2016 to produce revenue of $13.9 million, 12% of the ASPA total. More than half the revenue was produced by the Real Estate Division (59%), while the Harbormaster generated 17% of the total, the Middle Bay Port 14% and the combined Inland Docks 6%. The Real Estate Division revenue included $2.7 million of fixed and volume based rents

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Feasibility Study: Revenue Refunding Bonds generated by the MCT/ICTF and $5.5 million of revenue in the form of dockage, wharfage, rent, security fees and other service fees generated at separate Port terminal facilities handling grain, cement, aggregates and pig iron

With total expenses of $4.6 million in 2016, the combined other business areas produced $9.2 million in earnings before the allocation of general office expense and depreciation, 18% of the Port total. Dredging, utilities and maintenance items represented the most prominent expenses.

Actual Performance vs. 2010 Projections The 2010 projections for revenue and expense in FY 2015 assumed constant business levels, with underlying revenue and expenses increasing with inflation. Actual FY 2015 performance produced revenue of $11.6 million, a positive variance of $.6 million. However, actual 2015 expenses were about $1.0 million higher than in the 2010 projection largely due to abnormally high maintenance expenses for the Real Estate Division in FY 2015.

Projection For the 5 year projection period the other business areas, with the exception of the Harbormaster (whose revenue is driven by assumptions that determine overall Port activity) and MCT/ICTF, are expected to maintain anticipated 2017 business levels.

For the Base Case, containers handled by the MCT reach 162,000 in FY 2017 and then double to 324,000 by 2020, before increasing another 10% in 2021. At the same time the number of containers handled at the ICTF grows from less than 10% of container volume in 2017 (7,500 containers) to 20% of all containers handled (71,300) in 2021. The Stronger Performance Case assumes container traffic doubles by 2020 and then grows at 25% in 2021. The Weaker Performance Case grows containers handled at 15% a year over the projection period.

Exhibit 2-16: Projected Containers Handled--Base Case FY2017 FY2018 FY2019 FY2020 FY2021 MCT Containers 162,000 194,400 233,280 324,000 356,400 ICTF Containers 7,500 14,580 23,328 48,600 71,280

Vessel visits are projected based on import/export volumes expected at various Port facilities, which in turn drives annual Harbormaster revenue. Total revenue generated for the Base Case over the 5 year projection period for Other Business Areas is $76.3 million, 12% of all Port revenue. MCT/ICTF additional rents are $12.6 million over five years, 17% of the total, and increase earnings by the same amount.

Expenses are projected to grow at the CPI-U rate plus 1.5% per year at the Harbormaster group given the larger personnel component within the cost structure, and in line with the CPI-U at the other properties. The total amount of earnings before the allocation of general office expense and depreciation over the 5 year projection period is $25.9 million, 18% of the Port total.

2.6 General Office

General Office expenses are driven principally by the staff and management needs of the Port. These expenses reflect general management; financial, accounting and systems support; business development; security; and certain allocated expenses (maintenance and insurance).

Expense Analysis The General Office represents the overhead support for the ASPA. Functions include executive management, accounting, engineering, information technology, and human resources, among others. Also included in the General MICP CAPITAL 38

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Office totals are the Port Police related expenses that include the police force and all other security expenses, as well as Central Garage (repair services for the main Port area vehicles and heavy equipment) and Central Maintenance. A large portion of Central Garage and Maintenance areas are charged directly to the business segments for specific services performed.

The General Office currently has 158 employees, including 55 police officers and a total of 38 employees between Central Garage and Central Maintenance. The remaining 65 employees carry out the administrative duties of the Port. The administrative side of the General Office has increased by 2 people since 2010, with several departments adding or losing a position.

In addition to administrative and technical support, the General Office also includes Trade and Development, which is responsible for marketing the Port’s cargo services and industrial recruitment, the effort to locate industry supported by marine commerce on ASPA or nearby properties. They are heavily involved in developing opportunities associated with the MCT/ICTF as well as working on the proposed new auto terminal along with other projects.

Engineering Services is a group that coordinates new construction and major maintenance activities. The group has grown in response to the demand for technical support in conjunction with the growing number of construction projects underway at the Port.

The information technology group provides support to all of the Port’s business segments with systems that offer a full suite of applications. The main enterprise resource planning (ERP) system is Oracle's E-Business Suite and includes all financials with a customized billing system. It also handles all general cargo and steel break bulk operations. The Terminal Operating System (TOS) for McDuffie is home grown due to the unique requirements with various coal grades and import/export/domestic with rail, barge and vessels. The cost of all these systems run about 1.5 to 2% of ASPA's annual revenues over the last few years and is in line with industry standards. The systems are scalable and will handle the expected increases in activity with little additional cost. The McDuffie system is currently being rewritten, with an 18 month schedule, to further take advantage of the Oracle technology. The TOS system for the container terminal is Navis and is managed by APM Terminals. ASPA IT has a full disaster recovery site in a hardened facility at a local University that is managed by a third party. The IT department also supports port security as per Department of Homeland Security requirements for cyber security and perimeter monitoring. Within the next 3 years the Oracle system will be evaluated for more up to date technology.

Total General Office expense in fiscal 2016 was $17.4 million (before depreciation expense), with administrative functions representing almost two-thirds of the total, Protection 28%, and Central Garage and Maintenance 12%. . Exhibits 2-17 and 2-18 show General Office expense categories for FY 2016 and trends since 2010.

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Exhibit 2-17: General Office Total Expenses before Depreciation by Category in 2016 Fiscal Year FY 2016 - Total Expense $17.4 million

Protection Administration 28% 60%

Central Garage and Maintenance 12%

Source: ASPA

Exhibit 2-18: General Office Expenses before Depreciation FY 2010 to 2016 (Million $)

$12

$10

$6 Million $ $ Million $4

$0 2010 2011 2012 2013 2014 2015 2016

Administration Port Police Central Garage & Maintenance

Source: ASPA

Like all U.S. ports, the ASPA is subject to requirements set by the local, state, federal and international security regulations. Working with the U.S. Department of Homeland Security, the Port has improved security through initiatives undertaken in recent years. The protective force of 16 in 2000 has been transformed from being part of a

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Feasibility Study: Revenue Refunding Bonds contract guard service to a better trained law enforcement staff of 55 with upgraded equipment and a modern command center. At the same time, the perimeter of the port has been protected with real and virtual fencing, and the implementation of a state-of-the-art credential system to control access. Better lighting and the expanded installation of camera surveillance systems that can track vessel movements and all facilities have improved internal security. The Port continues to enhance its security capabilities. About $8.3 million in security related capital projects have been completed since FY 2010, funded by operating revenues and grants.

ASPA, in conjunction with other ports in the Gulf Ports Association, has established a security fee that is charged to the users of the Port. The total revenue generated through this fee in FY 2016 was $3.3 million, which is included in the revenue of the various operating segments.

Actual Performance vs. 2010 Projections Actual General Office expenses in FY 2015 (before depreciation) were $18.0 million, which was $1.4 million under the total originally projected for the year in 2010. The difference is accounted for by lower Port Police expense ($1.9 million).

Projection The General Office is assumed to maintain the same staffing levels for the five year projection period beginning in 2017. Salary expenses are expected to grow at 1.5% per year over CPI-U during the projection period. The total of employee benefits expense, 28% of 2016 General Office expense before depreciation, is projected to grow at 1% per year over salary increases. The remaining expense is projected to grow at the CPI-U rate.

MICP CAPITAL 41

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3 PROJECTED CASH FLOW AND DEBT PAYMENT

The ASPA’s various business segments have been reviewed and projections for revenues and expenses developed based on an evaluation of their respective future business prospects. Exhibit 5.1 in the Appendix displays the summarized financials by business segment. The presented results correspond with the previous discussion regarding each segment.

In the opinion of MICP Capital, the underlying assumptions as presented in each of the previous business segment sections provide a reasonable basis for the projections. However, any projection is subject to uncertainty. There will usually be differences between actual and projected results because events and the circumstances that surround them do not always occur as expected, and such differences can be material.

The estimated annual debt service amounts for the “New Debt Service” are shown on the schedule in the appropriate year based on the expected market at the time of the proposed bond offering. The actual debt service level will be determined by market conditions when the bonds are sold.

For reference, the schedule also shows the average annual amount of $15.5 million (in 2016 dollars) required for other capital improvement projects (CIP’s) that must be funded from cash flows after 2017. Such projects in the past have included a wide range of expenditures, with some examples being General Cargo dock pile replacement, warehouse floor refurbishment, new magnets for the Pinto Island cranes, a new coal conveyor at McDuffie, and new track switches for the Terminal Railway. There may be additional capital projects that are funded by some combination of private partner investment, grants and new ASPA debt that is serviced through guaranteed partner rental payments.

Expenses are presented in a manner consistent with previous tests utilizing audited financials. Total insurance expense and Port Police expense are included along with expenses for Other Business Areas in Other Operating and Maintenance Expense, and G & A expense is general office expense less Port Police expense.

The purpose for formulating the projection of total port revenues and expenses is to test the Port’s ability to service interest and principal obligations for existing debt remaining plus the refunding debt. The specific tests, Rate Covenant Tests and Additional Bond Tests established under ASPA’s Master Bond Order (also performed in previous feasibility analysis), follow below.

Rate Covenant Tests

Net Revenue Test: Docks Facilities Revenues, Available State Tax Revenues and investment income less operating expenses (Net Revenues Available for Debt Service) in an amount not less than the greater of

1.25 x Annual Debt Service on Senior Lien Bonds and 1.00 x Annual Debt Service on all Senior and Subordinate Bonds and required deposits to the Senior Debt Service Reserve Fund, Subordinate Debt Service Reserve Fund, Sub-Subordinate Debt Service Fund and Renewal and Replacement Fund.

Annual Receipts Test: Docks Facilities Revenues, all available state tax revenue actually received, and investment income in an amount at least equal to

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1.00 x Annual Debt Service on Senior and Subordinate Debt Service and Operating Expense and required deposits to the Senior Debt Service Reserve Fund and Subordinate Debt Service Reserve Fund.

Gross Revenue Test: Docks Facilities Revenues and investment income in an amount at least equal to

1.50 x Senior and Subordinate Annual Debt Service plus required deposits to the Senior Debt Service Reserve Fund and Subordinate Debt Service Reserve Fund.

Additional Bond Tests

Net Revenue Coverage: Historical 12 month Net Revenues Available for Debt Service plus 60% of estimated Docks Facilities Revenues to be derived by the Authority from the Capital Improvements to be financed with the proposed Bonds plus new approved rates and charges are in an amount not less than the greater of

1.25 x Maximum Annual Debt Service (MADS) on Senior Lien Bonds 1.00 x MADS on Senior and Subordinate Bonds and required deposits to the Senior Debt Service Reserve Fund, Subordinate Debt Service Reserve Fund, Sub-Subordinate Debt Service Fund and Renewal and Replacement Fund.

Annual Receipts Coverage: Historical 12 month Docks Facilities Revenues and State Receipts plus 60% of estimated Docks Facilities Revenues to be derived by the Authority from the Capital Improvements to be financed with the proposed Bonds plus new approved rates and charges in an amount at least equal to

1.00 x MADS on Senior and Subordinate bonds, Operating Expenses and required deposits to the Senior Debt Service Reserve Fund and Subordinate Debt Service Reserve Fund.

Gross Revenue Coverage: Historical 12-month Docks Facilities Revenues plus 60% of estimated Docks Facilities Revenues to be derived by the Authority from the Capital Improvements to be financed with the proposed Bonds plus new approved rates and charges in an amount at least equal to

1.50 x MADS on Senior and Subordinate bonds and required deposits to the Senior Debt Service Reserve Fund and Subordinate Debt Service Reserve Fund.

The Additional Bond Tests rely on either 12 months of historical revenue or net revenue adjusted to reflect current rates plus 60% of the additional revenue expected to be generated by bond funded projects in the year after their completion. The 12 month period selected is the 2016 fiscal year that generated revenue of $119,690,000 and net revenue of $39,582,000. The rates in effect for FY 2017 are an average of about 0.4% higher than the rates that applied in fiscal 2016, indicating a test year net revenue total of $40,094,000. The 0.4% higher rates reflect the combined impact of contracted rate increases for coal handling, railcar switches and additional rents for containers handled at the Mobile container terminal. To the test year net revenue adjusted for FY 2017 rates, an amount is added equal to 60% of the incremental revenue projected for the Intermodal Container Transfer Facility (ICTF) development in 2017 (the first full fiscal year after the completion of the project.)

As described in the Other Business Areas section above, the project was operational in April 2016. Incremental new revenues in FY 2017 as a result of the ICTF project will come from the base rent, additional rent for the actual containers handled and switch revenue for the Terminal Railway at the ICTF.

The results of the Rate Covenant and Additional Bond Tests (Exhibit 5.2) all indicate that the ASPA can service its debt service obligations at Base Case business levels. MICP CAPITAL 43

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4 SENSITIVITY ANALYSIS

The projections in Section 4 represent a Base Case view of the ASPA business over the five year projection period. Business levels across the Port are expected to benefit from continuing moderate economic growth with the CPI-U at 2.0%, which is consistent with the Federal Reserve Board’s inflation target. It is assumed the Port can win tariff increases an average 1.0% above the CPI-U as a reflection of ASPA realizing the benefits of the value added by location and service offered. Overall Port revenue and margins benefit from a rebound in coal shipments, as well as increased imports of steel slabs and exports of steel coils.

A Weaker Performance Case was formulated to capture the potential impact of possible alternative futures on the Port’s financial performance. The Weaker Performance Case projection assumes: A failure of metallurgical miners to meet expected export levels due to either operational or market hurdles A reduction in Southern Company steam coal shipments in the last two years of the projection period due to either reduced coal fired power generation due to new regulations or loss of some domestic shipments due to the transloading to rail of Powder River Basin coal at inland ports Imports of steel coil fall 50% after FY 2017 as a result of higher import duties Container volume growth for the MCT is a slower than expected 15% per year The Port is unable to achieve tariff increases greater than the CPI-U rate

The Stronger Performance Case assumes: AM/NS achieves near full capacity production levels at the carbon steel plant early in the projection period Increased export levels of AM/NS carbon steel coils, with annual exports jumping to 1.5 million tons per year in FY 2019 due to strong demand by Mexican auto manufactures Higher levels of container throughput at the MCT/ICTF, with a doubling by 2019 and 25% growth after that

The Weaker Performance Case results in net revenues dropping by $5.0 million relative to the Base Case in FY 2018. By 2021 the negative impact on net revenues is $8.1 million. Lower imports of steel slabs and exports of steel coils relative to the base case are the major contributing factors to lower net revenues. The Rate Covenant Tests and Additional Bond Tests for the Weaker Performance Case are in Exhibit 5.3 in the Appendix. Despite the lower financial performance, the Port passes all the Rate Covenant Tests and Additional Bond Tests for the Weaker Performance Case.

In the Stronger Performance Case net revenues are higher by $1.8 million in FY 2018 and by $3.5 million in FY 2021, the last year of the projection. The higher net revenues are driven by increased imports of steel slabs, exports of steel coils and containers handled at the MCT and ICTF. The Rate Covenant Tests and Additional Bond Tests for the Stronger Performance Case are in Exhibit 5.4 in the Appendix.

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5 APPENDIX

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Exhibit 5-1 Cash Flow and Debt Service Repayment—Base Case Actual: Projection: ($1,000) 2014 2015 2016 2017 2018 2019 2020 2021 Revenue: McDuffie $ 78,288 70,602$ 48,545$ 54,321$ 52,427$ 53,446$ 54,488$ 55,555$ Bulk Terminal 7,927 1,956 279 - - - - - Gen Cargo/Inter 35,901 33,811 34,280 33,610 35,679 37,393 39,216 41,092 Terminal Ry 23,742 22,097 19,268 20,204 19,765 20,548 21,930 23,401 Liquid Bulk 3,487 3,506 3,464 3,612 3,685 3,758 3,834 3,910 Other Business Segments 12,973 12,915 13,855 13,817 14,501 15,165 16,407 17,030 Total 162,319 144,886 119,690 125,564 126,056 130,310 135,875 140,987 Expenses: McDuffie 38,388 38,326 30,486 28,821 29,053 29,901 30,775 31,676 Bulk Terminal 3,252 1,424 412 - - - - - Gen Cargo/Inter 14,003 12,740 11,684 13,018 13,474 14,083 14,698 15,320 Terminal Ry 14,387 13,512 12,577 13,052 13,344 13,334 14,845 16,331 Liqu id Bulk 254 345 341 391 398 406 415 423 Other Operation & Maintenance Ex pense 12,035 12,640 13,148 12,871 13,206 13,552 13,907 14,272 Total O & M 82,319 78,986 68,648 68,153 69,475 71,276 74,640 78,022 Earnings Before Alloc & Depr 79,999 65,900 51,042 57,412 56,581 59,035 61,235 62,965 General and Administration 11,844 12,122 12,304 13,124 13,551 13,993 14,450 14,924 Earnings Before Depr 68,156 53,778 38,738 44,288 43,030 45,042 46,785 48,041 Inv estment Income 816 821 844 536 340 340 340 340 Net Revenues $ 68,972 54,599$ 39,582$ 44,824$ 43,370$ 45,382$ 47,125$ 48,381$ Ex isting Debt Serv ice 8,775 8,678 8,575 8,476 8,353 New Debt Serv ice 10,067 18,511 18,552 18,609 18,654 Total Debt Service 18,843 27,189 27,128 27,085 27,007 Cash Flow after Debt Service 25,981 16,181 18,254 20,040 21,374 Capital Improv ement Projects--cash flow funded 14,059 15,840 16,156 16,481 16,810 Cash Flow after Debt Service & CIP's $ 11,921 $ 341 $ 2,098 3,559$ $ 4,564 Source: ASPA and MICP Capital Projection

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Exhibit 5-2: Rate Covenant Tests and Additional Bond Tests—Base Case Actual: Projection: ($1,000) 2016 2017 2018 2019 2020 2021 Rate Covenant Tests Net Revenue Test (greater than 1.25) Rev enue + Av ailable State Tax Rev enues + Inv est Income $ 56,128 $ 54,479 $ 56,491 $ 58,234 $ 59,490 less Operating ex penses (Av ailable State Tax Rev = $10,769,000) $ 18,843 $ 27,189 $ 27,128 $ 27,085 $ 27,007 Div ided by annual debt serv ice 2.98 2.00 2.08 2.15 2.20 Annual Receipts Test (greater than 1.00) Rev enue + State Tax Receipts (none) $ 125,564 $ 126,056 $ 130,310 $ 135,875 $ 140,987 Div ided by operating ex p + annual debt serv ice $ 100,119 $ 110,215 $ 112,396 $ 116,175 $ 119,953 1.25 1.14 1.16 1.17 1.18 Gross Revenue Test (greater than 1.50) Rev enue div ided by Debt Serv ice 125,564 126,056 130,310 135,875 140,987 18,843 27,189 27,128 27,085 27,007 6.66 4.64 4.80 5.02 5.22 Additional Bond Tests Net Revenue Coverage (greater than 1.25) Historical 12 month Net Rev enues $ 39,582 adjusted to reflect current rate lev els (coal, MCT contracts) $ 40,094 Plus 60% of incremental rev enue due to capital improv ements $ 211

Plus Av ailable State Tax Rev enues $ 10,769 Div ided by Max imum Annual Debt Serv ice (MADS) $ 27,189 1.88 Annual Receipts Coverage (greater than 1.00) Historical 12 month Rev enues + Inv est Income + State Tax Receipts (none) 120,534 $ adjusted to reflect current rate lev els (coal, MCT contracts) $ 121,046 Plus 60% of incremental rev enue due to capital improv ements $ 211 Div ided by operating ex p + MADS $ 108,141 1.12 Gross Revenue Coverage (greater than 1.50) Historical 12 month Rev enues + Inv est Income adjusted to reflect current rate lev els $ 121,046 Plus 60% of incremental rev enue due to capital improv ements $ 211 Div ided by MADS $ 27,189 4.46 Source: ASPA and MICP Capital Projection

MICP CAPITAL 47

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Exhibit 5-3: Rate Covenant Tests and Additional Bond Tests—Weaker Performance Case Actual: Projection: ($1,000) 2016 2017 2018 2019 2020 2021 Rate Covenant Tests Net Revenue Test (greater than 1.25) Rev enue + Av ailable State Tax Rev enues + Inv est Income $ 56,128 $ 49,468 $ 50,060 $ 50,708 $ 51,381 less Operating ex penses (Av ailable State Tax Rev = $10,769,000) $ 18,843 $ 27,189 $ 27,128 $ 27,085 $ 27,007 Div ided by annual debt serv ice 2.98 1.82 1.85 1.87 1.90 Annual Receipts Test (greater than 1.00) Rev enue + State Tax Receipts (none) $ 125,564 $ 118,306 $ 117,546 $ 121,040 $ 124,823 Div ided by operating ex p + annual debt serv ice $ 100,119 $ 107,477 $ 106,062 $ 108,865 $ 111,897 1.25 1.10 1.11 1.11 1.12 Gross Revenue Test (greater than 1.50) Rev enue div ided by Debt Serv ice 125,564 118,306 117,546 121,040 124,823 18,843 27,189 27,128 27,085 27,007 6.66 4.35 4.33 4.47 4.62 Additional Bond Tests Net Revenue Coverage (greater than 1.25) Historical 12 month Net Rev enues $ 39,582 adjusted to reflect current rate lev els (coal, MCT contracts) $ 40,073 Plus 60% of incremental rev enue due to capital improv ements $ 211

Plus Av ailable State Tax Rev enues $ 10,769 Div ided by Max imum Annual Debt Serv ice (MADS) $ 27,189 1.88 Annual Receipts Coverage (greater than 1.00) Historical 12 month Rev enues + Inv est Income + State Tax Receipts (none) $ 120,534 adjusted to reflect current rate lev els (coal, MCT contracts) $ 121,025 Plus 60% of incremental rev enue due to capital improv ements $ 211 Div ided by operating ex p + MADS $ 108,141 1.12 Gross Revenue Coverage (greater than 1.50) Historical 12 month Rev enues + Inv est Income adjusted to reflect current rate lev els $ 121,025 Plus 60% of incremental rev enue due to capital improv ements $ 211 Div ided by MADS $ 27,189 4.46 Source: ASPA and MICP Capital Projection MICP CAPITAL 48

Feasibility Study: Revenue Refunding Bonds

Exhibit 5-3: Rate Covenant Tests and Additional Bond Tests—Stronger Performance Case Actual: Projection: ($1,000) 2016 2017 2018 2019 2020 2021 Rate Covenant Tests Net Revenue Test (greater than 1.25) Rev enue + Av ailable State Tax Rev enues + Inv est Income $ 56,128 $ 56,256 $ 60,166 $ 61,630 $ 62,985 less Operating ex penses (Av ailable State Tax Rev = $10,769,000) $ 18,843 $ 27,189 $ 27,128 $ 27,085 $ 27,007 Div ided by annual debt serv ice 2.98 2.07 2.22 2.28 2.33 Annual Receipts Test (greater than 1.00) Rev enue + State Tax Receipts (none) $ 125,564 $ 128,239 $ 134,392 $ 139,676 $ 145,310 Div ided by operating ex p + annual debt serv ice $ 100,119 $ 110,621 $ 112,802 $ 116,581 $ 120,781 1.25 1.16 1.19 1.20 1.20 Gross Revenue Test (greater than 1.50) Rev enue div ided by Debt Serv ice 125,564 128,239 134,392 139,676 145,310 18,843 27,189 27,128 27,085 27,007 6.66 4.72 4.95 5.16 5.38 Additional Bond Tests Net Revenue Coverage (greater than 1.25) Historical 12 month Net Rev enues $ 39,582 adjusted to reflect current rate lev els (coal, MCT contracts) $ 40,094 Plus 60% of incremental rev enue due to capital improv ements $ 211

Plus Av ailable State Tax Rev enues $ 10,769 Div ided by Max imum Annual Debt Serv ice (MADS) $ 27,189 1.88 Annual Receipts Coverage (greater than 1.00) Historical 12 month Rev enues + Inv est Income + State Tax Receipts (none) $ 120,534 adjusted to reflect current rate lev els (coal, MCT contracts) $ 121,046 Plus 60% of incremental rev enue due to capital improv ements $ 211 Div ided by operating ex p + MADS $ 108,141 1.12 Gross Revenue Coverage (greater than 1.50) Historical 12 month Rev enues + Inv est Income adjusted to reflect current rate lev els $ 121,046 Plus 60% of incremental rev enue due to capital improv ements $ 211 Div ided by MADS $ 27,189 4.46 Source: ASPA and MICP Capital Projection MICP CAPITAL 49

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APPENDIX C

Book-Entry Only System

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The information contained in this section concerning The Depository Trust Company and its book-entry only system has been obtained from materials furnished by The Depository Trust Company to the Authority. The Authority and the Underwriters do not make any representation or warranty as to the accuracy or completeness of such information.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2017 Bonds. The Series 2017 Bonds will be issued as fully-registered securities registered in the name of Cede & Co., DTC’s partnership nominee or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2017 Bond certificate will be issued for each maturity of the Series 2017 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book- entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Series 2017 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2017 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2017 Bond (a “Beneficial Owner”) is in turn to be recorded on the Direct Participants’ and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participant or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2017 Bonds are to be accomplished by entries made on the books of Direct Participants and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2017 Bonds, except in the event that use of the book-entry system for the Series 2017 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2017 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2017 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2017 Bonds. DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2017 Bonds are credited, which may or may not be the Beneficial Owners. The Direct Participants and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2017 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2017 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the documents governing the terms of

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the Series 2017 Bonds. For example, Beneficial Owners of Series 2017 Bonds may wish to ascertain that the nominee holding the Series 2017 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided to them directly.

Redemption notices shall be sent to DTC. If less than all of the Series 2017 Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2017 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an “Omnibus Proxy” to the Authority as soon as possible after the record date. The “Omnibus Proxy” assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2017 Bonds are credited on the record date (identified in a listing attached to the “Omnibus Proxy”).

Principal, premium and interest payments on the Series 2017 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon receipt of funds and corresponding detail information, in accordance with their respective holdings shown on DTC’s records. Payments by Direct Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of Direct Participants and Indirect Participants and not of DTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, premium (if any) and interest to Cede & Co. (or such other DTC nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct Participants and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2017 Bonds at any time by giving reasonable notice to the Authority and the Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates for the Series 2017 Bonds are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates for the Series 2017 Bonds will be printed and delivered to DTC.

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APPENDIX D

Summary of the Bond Order

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SUMMARY OF THE BOND ORDER

The following constitutes a summary of certain provisions of the Master Bond Order of the Authority dated November 21, 2006 (the “Master Bond Order”), as previously amended and supplemented, and in particular as amended and supplemented by an Eleventh Supplemental Order (the “2017 Order”) dated ______, 2017 pertaining to the Authority’s Docks Facilities Revenue Refunding Bonds, Series 2017A (Non-AMT), Docks Facilities Revenue Refunding Bonds, Series 2017B (AMT), Docks Facilities Revenue Refunding Bonds, Series 2017C (Taxable) (collectively, the “Series 2017 Bonds”). The Master Bond Order, as supplemented and amended, is herein referred to as the “Bond Order”. See also “SOURCES AND USES OF FUNDS,” “DESCRIPTION OF THE SERIES 2017 BONDS” and “SECURITY AND SOURCE OF PAYMENT.” Specific amendments to the Bond Order that are included in the 2017 Order are described under the caption “Amendments to Master Bond Order”. Capitalized terms used in this summary and not otherwise defined in this Official Statement shall have the respective meanings set forth in the Bond Order. All references and summaries pertaining to the Bond Order in this Official Statement are, separately and in whole, qualified by reference to the exact terms of the Bond Order, a copy of which may be obtained from the Authority.

Definitions

“Additional Revenues” means all Available State Tax Revenues actually received by the Authority and to the extent not restricted from being used to pay Debt Service or Operating Expenses, any other amounts actually received by the Authority from State taxes or licenses or from appropriations to the Authority made by the State or from any other source.

“Alternate Credit Enhancement” or “Alternate Liquidity Facility” shall mean a letter of credit, insurance policy, line of credit, surety bond, standby purchase agreement or other security or liquidity instrument, as the case may be, issued as a replacement or substitute for any Credit Enhancement Facility or Liquidity Facility, as applicable, then in effect.

“Appreciated Principal Amount” means, as of any date of computation with respect to any Capital Appreciation Bond, an amount equal to the principal amount thereof at its initial offering plus an amount of interest that, based on semiannual compounding on each Compounding Date from the date of delivery on the basis of a 360- day year of twelve 30-day months, will produce a yield approximately equal to the yield to maturity for such Bond specified in or pursuant to the applicable Supplemental Order. A schedule setting forth the Appreciated Principal Amount of Capital Appreciation Bonds as of the Compounding Dates may be set forth in the form of such Capital Appreciation Bond. The Appreciated Principal Amount with respect to any date other than the Compounding Dates is the Appreciated Principal Amount on the next preceding Compounding Date or dated date as noted on the form thereof, as the case may be, plus the fraction of the difference between the Appreciated Principal Amount on such next preceding Compounding Date or dated date and the next succeeding Compounding Date that equals the ratio of (a) the number of days from such next preceding Compounding Date or dated date to the date for which the determination is being calculated to (b) the total number of days from such next preceding Compounding Date or dated date to the next succeeding Compounding Date.

“Assumed Amortization Period” means the period of time specified in paragraph (a) or paragraph (b) below, as selected by the Fiscal Officer:

(a) Five (5) years; or

(b) The period of time, exceeding five (5) years, set forth in a written opinion delivered to the Authority, of an investment banker selected by the Authority and experienced in underwriting indebtedness of the character of a Bond issued pursuant to the Bond Order, as being not longer than the maximum period of time over which indebtedness having comparable terms and security issued or incurred by similar issuers of comparable credit standing would, if then being offered, be marketable on reasonable and customary terms.

“Assumed Interest Rate” means the rate per annum (determined as of the last day of the calendar month next preceding the month in which the determination of Assumed Interest Rate is being made) set forth in an opinion delivered to the Authority of an investment banker selected by the Authority and experienced in underwriting

D-1

indebtedness of the character of a Bond issued pursuant to the Bond Order, as being not lower than the lowest rate of interest at which indebtedness having comparable terms, security and federal tax status amortized on a level debt service basis over a period of time equal to the Assumed Amortization Period, and issued or incurred by similar issuers of comparable credit standing would, if being offered as of such last day of the calendar month, be marketable on reasonable and customary terms; provided that such rate shall be neither (i) lower than the rate specified in the “Thirty Bond Index” published in The Bond Buyer, or successor index, as in effect on the date of such opinion, nor (ii) higher than the highest rate, if any, permitted by law at which such Bonds could be sold on that day.

“Authority Enabling Act” means Section 33-1-1, et seq., Code of Alabama 1975, as amended.

“Authorizing Act” means Section 33-2-180, et seq., Code of Alabama 1975, as amended.

“Available Revenues” means Docks Facilities Revenues plus Available State Tax Revenues and any amounts from State taxes and licenses that are expected to be available to the Authority on an ongoing basis without further action by the Legislature of Alabama.

“Available State Tax Revenues” means appropriations available to the Authority under the provisions of the Coal Tax Act and Oil and Gas Severance Tax Act.

“Bond Anticipation Notes” means any notes issued in anticipation of the issuance of a Series of Bonds.

“Bond Counsel” means Independent Counsel (or firm thereof) whose opinions respecting the legality or validity of securities issued by or on behalf of states or political subdivisions thereof and the exemption of interest thereon from Federal income taxation are nationally recognized.

“Bond Order” means the Master Bond Order made by the Director and the Authority pursuant to which any Bonds are authorized to be issued, together with any Supplemental Order.

“Bonds” means any Senior Lien Bonds or Subordinate Obligations.

“Capital Improvements” means improvements constituting Docks Facilities and extensions and additions to Docks Facilities that are properly chargeable to fixed capital account under generally accepted accounting practice and includes (a) real estate (and easements and other interests therein) on, under or over which any such improvements, extensions or additions are, or are proposed to be, located; and (b) equipment useful in connection with the operation of the Docks Facilities.

“Certificate of Authentication and Registration” means a certificate executed by the Registrar regarding the authorization and registration of any Bonds in such form as may be provided in a Supplemental Order pertaining thereto.

“Coal Tax Act” means Section 40-13-1, et seq., Code of Alabama 1975, as amended.

“Code” means the Internal Revenue Code of 1986, as amended, including, when appropriate, the statutory predecessor of the Code and all applicable Treasury regulations (including any proposed regulations in force) thereunder, including any regulations issued and proposed and in force and effect under the statutory predecessor of the Code.

“Compounding Date” means, as to a series of Capital Appreciation Bonds, each date on which interest is compounded thereon pursuant to the applicable Supplemental Order.

“Construction Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Credit Enhancement Facility” means a letter of credit, insurance policy, surety bond, line of credit or other instrument then in effect provided by a Credit Facility Provider in order to secure or guarantee the payment of principal of and interest on any Bonds.

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“Credit Facility Provider” means any bank, insurance company, pension fund or other financial institution which provides a Credit Enhancement Facility or Alternate Credit Enhancement for any Bonds.

“Debt Service” for any period means, except as otherwise provided in the Bond Order and described in this Summary, as of any date of calculation with respect to any Series of Bonds, an amount equal to the sum of (i) interest due during such period on the Bonds of such Series, (ii) the principal amount, as of the beginning of such period, of outstanding Bonds of such Series that mature on any future date in such period, reduced by the aggregate principal amount of such Bonds that would at or before that future date cease to be outstanding by reason, but only by reason, of the application of Sinking Fund Installments at or before that future date, and (iii) the amount of any Sinking Fund Installment with respect to the Bonds of such Series required to be paid on any future date in such period (calculated on the assumption that Bonds outstanding at the date of calculation will not cease to be outstanding except by reason of payment on the due date thereof or redemption from Sinking Fund Installments) provided that for purposes of the Bond Order, Bonds that are deemed paid under the Bond Order shall not be deemed to be outstanding.

“Debt Service Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Debt Service Disbursement Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Debt Service Reserve Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Debt Service Reserve Fund Requirement” means as of any date of calculation with respect to any Series of Bonds, the Debt Service Reserve Fund Requirement for such Series specified as described herein under the caption “Debt Service Reserve Fund.”

“Depository” means any securities depository that is a clearing agency under federal law operating and maintaining, with its participants or otherwise, a book entry system to record beneficial ownership of Bonds or Debt Service, and to effect transfers of Bonds, in book entry form, and includes and means initially The Depository Trust Company (a limited purpose trust company), New York, New York.

“Director” means the chief executive officer of the Authority appointed pursuant to the Authority Enabling Act, and each successor to such office.

“Docks Facilities” means docks and all kinds of docks facilities, including elevators, compresses, conveyors, warehouses, water and rail terminals, bulk handling facilities, coal handling facilities, grain elevator facilities, wharves, piles, quays, cold storage facilities, loading and unloading facilities, and other related structures, facilities, equipment, property and improvements of every kind needful for the convenient use of same, in aid of commerce and use of the waterways of the State, now or hereafter existing, that are now or hereafter owned or held, are or are to be under the management and control of the Authority and are located along navigable rivers, streams or waterways now or hereafter existing within the State, but such term shall not include any Special Purpose Facilities.

“Docks Facilities Revenues” means all gross revenues of the Authority derived from charges made by the Authority for all services provided by the Authority to, and for the use of Docks Facilities by, persons using any of the Docks Facilities, including all special handling and processing charges, tariffs, surcharges and other fees, but excluding any amounts received by the Authority from State taxes or licenses or from appropriations to the Authority made by the State.

“Federal Certificate” means an interest-bearing certificate of deposit having a maturity of not more than ten years after the date of issuance thereof that is issued by any bank, savings and loan association or trust company organized under the laws of the United States of America or any state thereof that is (to the extent not insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation) collaterally secured by a pledge of Federal Securities (a) having at any date of calculation a market value (taking account of any accrued interest thereon) not less than the principal of and the accrued interest on the certificates of deposit secured thereby, (b) deposited and pledged with any Federal Reserve Bank or with any bank or trust company organized under the

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laws of the United States of America or any state thereof, and having combined capital, surplus and undivided profits of not less than $15,000,000, and (c) for which, in the case of such certificates when held other than in the Debt Service Fund or the Debt Service Reserve Fund, a receipt signed by the bank or trust company having custody of such collateral securities and containing a sufficient description thereof has been furnished to the Authority.

“Federal Securities” means (a) any obligations or securities that are direct general obligations of the United States of America, and (b) any obligations or securities payment of the principal of and the interest on which is unconditionally guaranteed by the United States of America.

“Fiscal Officer” means the Secretary-Treasurer of the Authority appointed by the Director pursuant to the Authority Enabling Act.

“Fiscal Year” means the fiscal year of the State, being presently the period of twelve (12) consecutive calendar months beginning on October 1 of one calendar year and ending on September 30 of the next succeeding calendar year.

“Fitch” shall mean Fitch, Inc., and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority.

“Government Securities” means as specifically provided in Section 33-2-180 (7), Code of Alabama 1975, as amended, any bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States of America, including obligations of any federal agency to the extent such obligations are unconditionally guaranteed by the United States of America and any certificates or any other evidences of an ownership interest in such obligations of, or unconditionally guaranteed by, the United States of America or in specified portions thereof (which may consist of the principal thereof or the interest thereon).

“Holder” means the person in whose name a Bond is registered as shown on the registry books of the Registrar pertaining to such Bond.

“Independent Auditor” means a certified public accountant, or firm thereof, who are independent within the meaning of Rule 1.01 of the Code of Professional Ethics of the American Institute of Certified Public Accountants.

“Independent Consultant” means either (i) an Independent Engineer or (ii) a consulting firm regularly engaged in the preparation of feasibility studies and projections of revenues and expenses for entities such as the Authority, that are involved in international trade and transport, which consulting firm and the members, officers, owners, partners or employees thereof are not regularly engaged or employed by the Authority.

“Independent Counsel” means legal counsel who is not employed full time by the Authority.

“Independent Engineer” means an engineer who is duly registered and qualified to practice the profession of engineering under the laws of Alabama and who is not a full-time employee of the Authority and who is not otherwise employed by the Authority.

“Interest Payment Date” means, with respect to any Series of Bonds, any date on which interest is due on such Bonds pursuant to the Supplemental Order authorizing the issuance of such Bonds.

“Interest Rate Hedge Agreement” means an interest rate swap, an interest rate cap or other such arrangement obtained by the Authority, in accordance with State law in effect at the time, with the goal of (i) lowering the effective interest rate to the Authority on Bonds or managing interest cost to the Authority, (ii) hedging the exposure of the Authority with respect to its obligations on Bonds against fluctuations in prevailing interest rates; (iii) otherwise reducing risk (including, without limitation, in addition to interest rate risk, tax risk or liquidity renewal risk) or otherwise managing exposure to changing markets (including, without limitation, in advance of issuances of Bonds); (iv) achieving a more appropriate matching of its assets and liabilities; and (v) otherwise pursuing an optimal capital structure.

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“Investment Income” shall mean payments of interest and investment earnings from moneys on deposit in the Special Funds or the Additional Revenues Fund actually received by the Authority but shall not include any accrued but unrealized interest on investment earnings.

“Issuance Costs,” with respect to any Series of Bonds, means:

(i) the initial or acceptance fee of the Trustee (which includes the administration fee for the first year), the fees and taxes for recording and filing any instruments securing the Bonds and the reasonable fees and expenses in connection with any actions or proceedings that the Trustee may reasonably deem desirable to bring in order to perfect or protect the lien of such security;

(ii) the costs of legal fees and expenses, underwriter’s spread, underwriting fees, rating agency fees and other financing costs and expenses, financial advisor’s fees, accounting fees and expenses, consulting fees, Trustee’s fees, paying agent and certifying and authenticating agent fees, reasonable fees and expenses of counsel to the Trustee, reasonable fees and expenses of the Authority, publication costs, title insurance premiums, and printing and engraving costs incurred in connection with the authorization, sale, issuance and carrying of the Bonds and the preparation of all documents executed in connection with the issuance of the Bonds; and

(iii) other costs in connection with the issuance of the Bonds permitted by the Authorizing Act to be paid or reimbursed from proceeds of the Bonds.

“Liquidity Facility” shall mean any letter of credit, line of credit, standby purchase agreement or other instrument then in effect which provides for the payment of the purchase price of any Bonds by a Liquidity Provider upon the tender thereof in the event remarketing proceeds are insufficient therefor.

“Liquidity Provider” shall mean any bank, insurance company, pension fund or other financial institution which provides a Liquidity Facility or Alternate Liquidity Facility for any Bonds.

“Mandatory Redemption Requirement” means, as to any Series of Bonds, any provisions for mandatory redemption that may be set forth in a Supplemental Order for any such Bonds.

“Maturity Amount” means the Appreciated Principal Amount due and payable at maturity with respect to a Capital Appreciation Bond.

“Maximum Annual Debt Service” means, with respect to any particular Series of Bonds, as of any date of determination, the maximum amount of Debt Service maturing or the Maturity Amount due (as the case may be) during the then current or any then succeeding Fiscal Year with respect to any such Bonds; provided, that for purposes of this definition, the principal amount or Appreciated Principal Amount (as the case may be) of any Bonds subject to a Mandatory Redemption Requirement during such Fiscal Year shall, for purposes of this definition, be considered as maturing in the Fiscal Year and in the amount provided for during such Fiscal Year in which such Mandatory Redemption Requirement occurs; and provided further, that for purposes of the Bond Order, Bonds that are deemed paid under the Bond Order shall not be deemed to be outstanding.

“Maximum Annual Debt Service Requirement” means, as of any date of determination, the maximum amount of Debt Service maturing or the Maturity Amount due (as the case may be) during the then current or any then succeeding Fiscal Year with respect to any Senior Lien Bonds then outstanding; provided, that for purposes of this definition, the principal amount or Appreciated Principal Amount (as the case may be) of any Senior Lien Bonds subject to a Mandatory Redemption Requirement during such Fiscal Year shall, for purposes of this definition, be considered as maturing in the Fiscal Year and in the amount provided for during such Fiscal Year in which such Mandatory Redemption Requirement occurs; and provided further, that for purposes of the foregoing formula, Senior Lien Bonds that are deemed paid under the provisions of the Bond Order shall not be deemed to be outstanding.

“Moody’s” shall mean Moody’s Investors Service, a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term

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“Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority.

“Net Revenues Available for Debt Service” means for any applicable period Available Revenues less Operating Expenses.

“Oil and Gas Severance Tax Act” means Section 40-20-1, et seq., Code of Alabama 1975, as amended.

“Operating Expenses” means, for the applicable period or periods, the reasonable and necessary expenses of efficiently and economically administering and operating the Docks Facilities and of maintaining the Docks Facilities in good repair and operating condition, determined in accordance with generally accepted accounting principles (not including, however, depreciation, interest, amortization, payments into any of the Special Funds or the Rebate Fund or any expenses for items properly capitalized under generally accepted accounting principles), and any other charges expressly stated in the Bond Order to constitute an operating expense, excluding (i) any extraordinary item that is not, by generally accepted accounting principles, treated as an operating expense and (ii) any items that by generally accounting principles are properly chargeable to fixed capital account.

“Paying Agent” means with respect to any Series of Bonds, such bank or trust company provided for in the Supplemental Order under which such Series of Bonds are issued and with respect to the Series 2017 Bonds, Regions Bank, Mobile, Alabama, or its successor.

“Permitted Investments” means and include any of the following:

(a) Federal Securities and Federal Certificates;

(b) Obligations issued or guaranteed by any of the following:

(i) Federal Home Loan Bank System,

(ii) Export-Import Bank of the United States,

(iii) Federal Financing Bank,

(iv) Government National Mortgage Association,

(v) Federal Home Loan Mortgage Company,

(vi) Federal Housing Administration,

(vii) Private Export Funding Corp,

(viii) Federal National Mortgage Association,

(ix) Federal Farm Credit Bank, and

(x) Resolution Funding Corporation,

(xi) Rural Economic Community Development Administration (formerly, Farmers Home Administration)

or any indebtedness issued or guaranteed by any instrumentality or agency of the United States;

(c) Pre-refunded municipal obligations rated in one of the two highest rating categories by at least one Rating Agency and meeting the following conditions:

(i) (A) such obligations are not to be redeemed prior to maturity or the Trustee has been given irrevocable instructions concerning their call for redemption, and (B) the issuer of such obligations has covenanted not to redeem such obligations other than as set forth in such instructions;

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(ii) such obligations are secured by Federal Securities or Federal Certificates that may be applied only to interest, principal, and premium payments on such obligations;

(iii) the principal of and interest on such Federal Securities or Federal Certificates (plus any cash in the escrow fund with respect to such pre-refunded obligations) are sufficient to meet the liabilities of the obligations;

(iv) the Federal Securities or Federal Certificates serving as security for the obligations are held by an escrow agent or trustee; and

(v) such Federal Securities or Federal Certificates are not available to satisfy any other claims, including those against the trustee or escrow agent;

(d) Direct and general long-term obligations of any state of the United States of America or the District of Columbia (a “State”), to the payment of which the full faith and credit of such State is pledged and that are rated in one of the two highest rating categories by at least one Rating Agency;

(e) Direct and general short-term obligations of any State, to the payment of which the full faith and credit of such State is pledged and that are rated in one of the two highest rating categories by at least one Rating Agency;

(f) Interest-bearing demand or time deposits with, or interests in money market portfolios issued by, state banks or trust companies, national banking associations or savings and loan associations that are members of the Federal Deposit Insurance Corporation (“FDIC”), including the Trustee or any of its affiliates. Such deposits or interests must be (i) continuously and fully insured by FDIC or (ii) fully secured by Federal Securities, Federal Certificates or obligations described in clause (b) of this definition (“clause (b) securities”) or (iii) secured by surety company bonds held by the Trustee that, when executed, shall be for an amount equal to the amount of such interest-bearing demand or time deposits that is not secured by (i) or (ii) above. Such Federal Securities, Federal Certificates or clause (b) securities must have a market value at all times at least equal to the principal amount of the deposits or interests. The Federal Securities, Federal Certificates or clause (b) securities must be held by a third party (who shall not be the provider of the collateral), or by any Federal Reserve Bank or depositary, as custodian for the institution issuing the deposits or interests. Such third party shall have a perfected first lien in the Federal Securities, Federal Certificates or clause (b) securities serving as collateral, and such collateral is to be free from all other third party liens;

(g) Repurchase agreements, (i) the maturities of which are thirty (30) days or less or (ii) the maturities of which are longer than thirty (30) days, provided the securities subject to such agreements are marked to market at least weekly, and in either case are entered into with a Qualified Financial Institution. Each repurchase agreement shall be in respect of Federal Securities and Federal Certificates or clause (b) securities (collectively, “Repurchase Securities”), which shall be required to be acquired at the market price and maintained in an amount equal to at least 102% of the total principal and accrued interest under the repurchase agreement. In addition, the provisions of the repurchase agreement shall meet the following requirements:

(A) a third party (the “Custodian”), which shall not be the provider of the repurchase agreement and which shall be acceptable to the Trustee (for Trustee-held funds) or to the Authority (for Authority-held funds) will be required to have possession of the Repurchase Securities;

(B) failure by the repurchase agreement provider to cure any deficiency in the requisite levels of Repurchase Securities within two (2) Business Days (or such shorter period as may be specified in the repurchase agreement) will require the Custodian to liquidate the Repurchase Securities immediately; and

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(h) Money market accounts of any state or federal bank, including the Trustee or any of its affiliates, or bank whose holding parent company is rated in the top two short-term or long-term rating categories by at least two Rating Agencies;

(i) Investment agreements the issuer of which complies with clause (a) of the definition of a Qualified Financial Institution;

(j) Any debt or fixed income security, the issuer of which is rated in the highest rating category by at least two Rating Agencies;

(k) money market mutual funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody’s rated Aaa, Aa1 or Aa2.;

Forward purchase agreements provided that the issuer of which is a Qualified Financial Institution and that the securities to be delivered thereunder are limited to investments specified in subparagraphs (a) through (e) hereinabove; and

Investment agreements or other forms of investments approved in writing by the Credit Facility Provider providing a Credit Enhancement Facility or Alternate Credit Enhancement for any Series of Bonds; and

“Person” means natural persons, firms, joint ventures, associations, trusts, partnerships, corporations, limited liability companies, public bodies, and similar entities, whether for profit or non-profit.

“Qualifying Bank” means any bank organized under the laws of the United States of America or under the laws of one of the States of the United States of America, which is a member of the Federal Deposit Insurance Corporation (or any agency of the United States of America that may succeed to its functions), and having the power to administer trusts, and having capital, surplus and undivided profits of at least $50,000,000.

“Qualified Financial Institution” means either (a) a bank, trust company, savings and loan association, national banking association, insurance company or other financial services company, including the Trustee or any of its affiliates, whose long-term debt obligations (or if such financial institution has no long-term debt obligations, then whose deposits) or those of its parent corporation (provided such corporation unconditionally guarantees its subsidiary’s obligations with respect to the Bonds or the Authority) are rated in one of the three highest rating categories by at least one Rating Agency, or (b) any institution listed as a primary government securities dealer of the Federal Reserve Bank of New York and whose long-term debt obligations (or if such financial institution has no long-term debt obligations, then whose deposits) or those of its parent corporation (provided such corporation unconditionally guarantees its subsidiary’s obligations with respect to the Bonds or the Authority) are rated in one of the three highest rating categories by at least one Rating Agency.

“Rating Agencies or Rating Service” shall mean any of Moody’s, S&P or Fitch, which is then providing a rating on Bonds issued pursuant hereto, or their respective successors and assigns, or if any shall be dissolved or no longer assigning credit ratings to long-term debt, then any other nationally recognized security assigning credit ratings to long term debt designated by the Authority and satisfactory to the Trustee.

“Rebate Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Redemption Price” means the price (exclusive of accrued interest) payable on the redemption date in order to affect redemption on that date of a Bond duly called for redemption.

“Registrar” means with respect to any Series of Bonds, such bank or trust company provided for in the Supplemental Order under which such Series of Bonds are issued and with respect to the Series 2017 Bonds, Regions Bank, Mobile, Alabama, or its successor.

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“Reimbursement Agreement” shall mean any reimbursement agreement, credit agreement, line of credit agreement, standby purchase agreement or other agreement, by and between a Credit Facility Provider or Liquidity Provider, as applicable, and the Authority.

“Renewal and Replacement Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Required Rebate” means any amount that is required, by the provisions of Section 148 (f) of the Code and any applicable regulations, to be paid to the United States of America with respect to any Bonds in order that the Bonds shall not be treated as “arbitrage bonds” within the meaning of Sections 103 (b) (2) and 148 of the Code and any applicable regulations.

“Required Renewal and Replacement Fund Balance” means the sum of $7,500,000, which may, with the concurrence of the Independent Consultant, be decreased from time to time by Supplemental Order.

“Reserve Fund Instrument” means a surety bond, or insurance policy or a letter or line of credit or similar instrument.

“Revenue Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Revenue Stabilization Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Scheduled Mandatory Redemption Provision” means the provision for scheduled mandatory redemption in any Supplemental Order under which any Bonds are issued.

“Senior Lien Bonds” means any bonds, notes or other evidences of indebtedness issued pursuant to a Supplemental Order in accordance with the Bond Order on parity as respects the senior lien pledge of Docks Facilities Revenues made therein.

“Serial Maturity Date” means the maturity date for all Bonds of any Series that are stated to mature in consecutive annual installments.

“Series” means a single series of Bonds having common governing provisions pursuant to a Supplemental Order under which such Bonds are issued.

“S&P” shall mean Standard & Poor’s Ratings Services, a division of McGraw-Hill, duly organized and existing under and by virtue of the laws of the State of New York, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority.

“Sinking Fund Account” means the special account by that name established pursuant to the Bond Order comprising part of the Debt Service Fund.

“Sinking Fund Installment” means the amount of money provided in any Supplemental Order that is required to be applied in any one year to redeem or pay at maturity any Term Bonds.

“Special Funds” means the Revenue Fund, the Debt Service Fund, the Debt Service Reserve Fund, the Subordinate Debt Service Fund, any Subordinate Debt Service Reserve Fund, the Sub-Subordinate Debt Service Fund, the Construction Fund, the Renewal and Replacement Fund and the Revenue Stabilization Fund.

“Special Purpose Facilities” means any capital improvements or facilities hereafter acquired or constructed by the Authority from funds other than Docks Facilities Revenues or obligations payable from Docks Facilities Revenues.

“State” when not used as a portion of a name, means the State of Alabama.

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“State Treasurer” means the Treasurer of the State.

“Sub-Subordinate Obligations” means any termination or other unscheduled payments required to be made in connection with an Interest Rate Hedge Agreement, the payment of which is secured by a pledge of Docks Facilities Revenues subordinate first to the prior pledge thereof made in the Bond Order to secure any Senior Lien Bonds and second, to any pledge thereof made to secure any Subordinate Obligations and which the payment of principal, interest and any premium thereon are due to be repaid subsequent to the payment of Operating Expenses as provided in the Bond Order.

“Sub-Subordinate Debt Service Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Subordinate Debt Service Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Subordinate Debt Service Reserve Fund” means the Special Fund by that name established pursuant to the Bond Order.

“Subordinate Obligations” means any bonds, notes or other evidences of indebtedness issued pursuant to a Supplemental Order in accordance with the Bond Order which are secured by a pledge of Docks Facilities Revenues subordinate to the prior pledge thereof made in the Bond Order to secure any Senior Lien Bonds but which the payment of principal, interest and any premium thereon are due to be repaid prior to the payment of Operating Expenses as provided in the Bond Order.

“Supplemental Order” means any order that may be made by the Authority and the Director supplementary to the Master Bond Order containing the items required in the Bond Order and any other items pertaining to any details or the sale of any Bonds and reciting that it is supplemental to the Master Order.

“Tax Exempt Bonds” means all Series of Bonds, the interest on which is intended to be excluded from the gross income of the owners thereof for federal income tax purposes.

“Term Bonds” means Senior Lien Bonds payable prior to or at their stated maturity from Sinking Fund Installments deposited in the Sinking Fund Account.

“Trustee” means Regions Bank in its capacity as trustee under the 2006 Trust Agreement or such other person acting in the capacity of trustee under or pursuant to the 2006 Trust Agreement.

“Variable Rate Obligation” means any Bond that does not bear interest throughout its term at a fixed rate, but that does bear interest at a rate that, during part or the entirety of the term of such Bond, varies from time to time based upon a formula or other method of determination set forth in the Supplemental Order authorizing the issuance of such Bond. If the rate of interest on any Bond that had been a Variable Rate Obligation becomes fixed for the balance of the period until its maturity, that Bond shall thereupon cease to be a Variable Rate Obligation. A Bond shall not be deemed a Variable Rate Obligation solely because the rate of interest thereon may be adjusted if such interest becomes includable in gross income for purposes of federal income taxation.

“2006 Trust Agreement” means the Trust Agreement between the Authority and the Trustee, dated as of the date hereof.

Security Provided

Pledge of Docks Facilities Revenues. In the Bond Order, the Authority has pledged for payment of all Senior Lien Bonds issued thereunder, including the Series 2017 Bonds, so much as may be necessary therefor of the gross revenues derived by the Authority from charges made by it for services and for the use of its facilities, including all handling and processing fees, tariffs, surcharges and other fees charged by the Authority, along with any of such revenues on deposit in any of the Special Funds and any interest income from the investment of such funds on deposit in any of the Special Funds.

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Maintenance of Rates and Charges. In the Bond Order, the Authority covenants that each Fiscal Year it will charge and collect such rates and charges for use of the services of the Docks Facilities and will restrict Operating Expenses so that:

(iii) Docks Facilities Revenues and Investment Income for each Fiscal Year shall be at least equal to 150% of the sum of (a) the total amount of Debt Service on all outstanding Senior Lien Bonds and Subordinate Obligations for such Fiscal Year and (b) the deposits, if any, required to be made under the Bond Order during such Fiscal Year to the Debt Service Reserve Fund and the Subordinate Debt Service Reserve Fund.

Flow of Funds

Flow of Funds Generally. The Bond Order creates the Special Funds plus the Rebate Fund and the Additional Revenues Fund. The Trustee is the depository for the Debt Service Fund, the Debt Service Reserve Fund, the Subordinate Debts Service Fund, the Subordinate Debt Service Reserve Fund, the Rebate Fund and any accounts therein. The Authorizing Act also provides, in accordance with State law at the time the Master Bond Order was adopted, for the establishment of the Debt Service Disbursement Fund, of which the State Treasurer is the custodian, disbursing agent and depository. State law no longer requires that debt service be paid through the Debt Service Disbursement Fund. Generally, monies representing gross revenues of the Authority and any monies in the Revenue Stabilization Fund that the Authority elects to transfer are deposited into the Revenue Fund and flow first into the Debt Service Fund, then into the Debt Service Reserve Fund, then into the Subordinate Debt Service Fund, then into the Subordinate Debt Service Reserve Fund and then, after making provisions for payment of Operating Expenses, into the Sub-Subordinate Debt Service Fund, the Renewal and Replacement Fund, and such amounts that the Authority elects to transfer to the Revenue Stabilization Fund.

Revenue Fund. The Bond Order provides that the Authority will deposit into the Revenue Fund all Docks Facilities Revenues and Additional Revenues and any monies the Authority elects to transfer from the Revenue Stabilization Fund to the Revenue Fund. On or before the twenty-fifth day of each month, the Authority is required to transfer any Additional Revenues to the Additional Revenues Fund and, after making provision for any required

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deposits to the Rebate Fund, the balance of any monies on deposit in the Revenue Fund into the following funds and in the following order, to the extent there are sufficient monies on deposit in the Revenue Fund:

(a) Into the Debt Service Fund, the sum required to be paid into the Debt Service Fund under the Bond Order;

(b) Into the Debt Service Reserve Fund, the sum required to be paid into the Reserve Fund under the Bond Order;

(d) Into the Subordinate Debt Service Reserve Fund, the sum required to be paid therein under the Bond Order;

(e) Into the Sub-Subordinate Debt Service Fund, the sum required to be paid therein under the Bond Order;

(f) Into the Renewal and Replacement Fund, the sum required to be paid therein under the Bond Order; and

(g) Into the Revenue Stabilization Fund, any amounts the Authority elects to transfer thereto.

Before the payments are made under the foregoing subparagraphs (e), (f) and (g), monies remaining in the Revenue Fund are required to be used first for payment of Operating Expenses. If any monies shall remain in the Revenue Fund after payment of all such expenses and payments into all such funds, they may be withdrawn by the Authority and applied for any lawful purpose.

Debt Service Fund. There is required to be paid into the Debt Service Fund the following:

(a) Contemporaneously with the issuance of the Series 2017 Bonds and any additional Senior Lien Bonds that may hereafter be issued, out of the proceeds of such Bonds, an amount equal to accrued interest on, or a premium (if any) on the sale thereof.

(b) On or before the twenty-fifth day of each month until the principal of and interest on the Senior Lien Bonds shall have been paid in full, out of the monies on deposit in the Revenue Fund, an amount equal to (i) one-sixth (1/6) of the semiannual installment of interest that will mature on the Senior Lien Bonds on the then next succeeding Interest Payment Date, plus (ii) one-twelfth (1/12) of the amount necessary to provide for the payment of principal due on each Serial Maturity Date. If fewer than twelve such monthly dates precede the next Serial Maturity Date, then, on each such date an equal amount shall be deposited so as to cause the total amount deposited to equal the amount of principal due on the next Serial Maturity Date. Such monthly payments need be made only to the extent that the amount then on deposit in any such subaccount is less than the amount required to be on deposit therein in accordance with the Bond Order. The frequency and amount of any deposits is subject to adjustment due to any Interest Rate Hedge Agreements the Authority may have entered into and with regard to Variable Rate Obligations or any other obligations which provide for the payment of principal of or interest on such obligations on a basis other than semiannual payments of interest and annual payments of principal. During any month in each year in which a Sinking Fund Installment is due and in each year that precedes a year in which a Sinking Fund Installment is due, deposit in each applicable subaccount in the Sinking Fund Account in the Debt Service Fund an amount equal to one-twelfth of the amount necessary to provide for the payment of the next Sinking Fund Installment.

(c) In the event that the monies paid or transferred into the Debt Service Fund with respect to any month shall be less than the amount required to be paid therein with respect to such month, or the amount on deposit in the Debt Service Fund is, for any reason, less than the cumulative sum then required to be on deposit in the Debt Service Fund then a delinquency shall be deemed to exist with respect to the payments required to be made into the Debt Service Fund, and the Authority shall, on or before the last

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business day of each month thereafter until such time as the payments into the Debt Service Fund are current, pay into the Debt Service Fund, in addition to the monthly payments described in clause (b), all monies remaining in the Revenue Fund on such date after payment of the amounts required in said clause (b) to be paid into the Debt Service Fund with respect to such month; provided, however, that upon the transfer of monies into the Debt Service Fund from the Debt Service Reserve Fund to be applied for payment of Senior Lien Bonds then due, any then existing delinquency with respect to payments into the Debt Service Fund shall be deemed to have been cured to the extent of the amount of monies so transferred from the Debt Service Reserve Fund into the Debt Service Fund.

All monies paid into the Debt Service Fund are required to be used only for payment of the principal of and the interest on the Senior Lien Bonds, upon or after the respective maturities of such principal and interest. If, at the final maturity of the Senior Lien Bonds, there remains in the Debt Service Fund a sum in excess of the amount required to pay in full the principal (including principal required to be redeemed under any mandatory redemption provisions of the Bond Order or any Supplemental Order) of and the interest on the Bonds, then any such excess is required to be returned to the Authority.

Debt Service Reserve Fund. Subject to the last sentence of this paragraph, contemporaneously with the issuance of any Series of Senior Lien Bonds, there is required to be paid into the Debt Service Reserve Fund an amount equal to the difference between the amount then on deposit in the Debt Service Reserve Fund and the Debt Service Reserve Fund Requirement, which for the Senior Lien Bonds shall be (subject to the qualification described in the last sentence of this paragraph) an amount equal to the lesser of (i) 10% of the principal amount of the Senior Lien Bonds then outstanding, (ii) the maximum annual debt service on the Senior Lien Bonds and (iii) 125% of the average annual debt service on the Senior Lien Bonds. The Debt Service Reserve Fund Requirement for other Bonds shall be as specified in the Supplemental Order authorizing their issuance. In lieu of making such deposit, the Authority may cause a Reserve Fund Instrument to be deposited guaranteeing the payment to the Authority of an amount equal to all or a portion of the Debt Service Reserve Fund Requirement. The issuer of any such Reserve Fund Instrument shall be rated, at the time of its deposit, in one of the two highest rating categories by at least one rating agency maintaining a rating with respect to the Senior Lien Bonds secured by the Debt Service Reserve Fund. If and when any further additional Senior Lien Bonds shall be issued and unless there is paid into the Debt Service Reserve Fund contemporaneously with the issuance of any such Bonds such amount as, when added to the amount then on deposit in the Debt Service Reserve Fund, will equal the Debt Service Reserve Fund Requirement, the Authority is required to make monthly deposits to the Debt Service Reserve Fund so that the Debt Service Reserve Fund Requirement applicable immediately following the issuance of such additional Senior Lien Bonds will be achieved within one year of the date of issuance thereof. The Authority may elect to issue one or more Series of Senior Lien Bonds that are not secured or payable from the Debt Service Reserve Fund, in which case the holders of such Senior Lien Bonds shall have no right to have any portion of the Debt Service on such Senior Lien Bonds paid from any amounts in the Debt Service Reserve Fund, and the Debt Service on such Senior Lien Bonds shall not be taken into account in determining the Debt Service Reserve Requirement.

The monies forming a part of the Debt Service Reserve Fund are to be held in reserve for payment of the principal of and interest on the Senior Lien Bonds, but are to be used for such purpose only when necessary to prevent a default in the payment of such principal and interest. In the event that the monies on deposit in the Debt Service Fund are insufficient on any Interest Payment Date to pay the interest and the principal, if any, maturing with respect to the Senior Lien Bonds on that date, then such monies are to be transferred from the Reserve Fund to the Debt Service Fund for payment of interest, or principal, or both, on the Bonds as to which there would otherwise be a default. When the amount of monies on deposit in the Debt Service Reserve Fund exceeds the Maximum Annual Debt Service Requirement, the monies on deposit in the Debt Service Reserve Fund may be transferred to the Revenue Fund, in which event no further payments need be made into the Debt Service Reserve Fund.

Subordinate Debt Service Fund and Subordinate Debt Service Reserve Fund. Deposits to the Subordinate Debt Service Fund or any Subordinate Debt Service Reserve Fund are only required on such dates and in such amounts as are specified in the Supplemental Order authorizing the issuance of the related Subordinate Obligations. Any amounts on deposit in the Subordinate Debt Service Fund are to be applied to the payment of the principal or any interest and any premium on Subordinate Obligations as and when due or to the required funding of any Subordinate Debt Service Reserve Fund, provided, however, that any payments out of the Subordinate Debt Service Fund or the Subordinate Debt Service Reserve Fund can only be made using any funds remaining after the

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Trustee transfers monies in either of such funds to the Debt Service Fund or the Debt Service Reserve Fund to cure any deficiency in either of such funds.

Sub-Subordinate Debt Service Fund. After making provisions for the payment of all Operating Expenses, deposits to the Sub-Subordinate Debt Service Fund are only required on such dates and in such amounts as are required to pay Sub-Subordinate Obligations. The amounts on deposit in the Sub-Subordinate Debt Service Fund shall be applied to the payment of any Sub-Subordinate Obligations as and when due, provided, however, if on the third (3rd) day before any Interest Payment Date, the amount in any of the subaccounts in the Debt Service Fund shall be less than the amount required to be on deposit therein pursuant to the Bond Order, after deposits, if any, are made pursuant to the Bond Order, the Trustee shall transfer moneys from the Sub-Subordinate Debt Service Fund to the Debt Service Fund to make good any such deficiency (or the entire amount in either of such funds if less than sufficient), and provided further that if on any day next following the date of a payment and deposit required by the Bond Order, the amount in any of the subaccounts in the Debt Service Reserve Fund shall be less than the amount required to be on deposit therein pursuant to the Bond Order, the Trustee shall transfer moneys from the Subordinate Debt Service Fund to the appropriate subaccount in the Debt Service Reserve Fund an amount sufficient to cure any such deficiency (or the entire amount in either of such funds if less than sufficient).

Renewal and Replacement Fund. After making provisions for the payment of all Operating Expenses, there is required to be deposited in the Renewal and Replacement Fund, an amount equal to one-twelfth (1/12) of the lesser of (i) $500,000 and (ii) the difference between the Required Renewal and Replacement Fund Balance in the amount then on deposit in the Renewal and Replacement Fund. Any monies paid or transferred into the Renewal and Replacement Fund shall be used solely for the purpose of paying the costs of such replacements, renewals, extensions and other improvements to the Docks Facilities which either evidence the revenue-producing capacity of the Docks Facilities or shall improve the quality of service provided by the Docks Facilities; provided, that if at any time the monies on deposit in the Revenue Fund shall not be sufficient to make any required payment in the Debt Service Fund, the Debt Service Reserve Fund, the Subordinate Debt Service Fund, any Subordinate Debt Service Reserve Fund, if any, or the Sub-Subordinate Debt Service Fund, then the monies on deposit in the Renewal and Replacement Fund shall be transferred to any such Special Funds, but only to such extent as may be necessary to cure such deficiency. The monies forming a part of the Renewal and Replacement Fund may be withdrawn by the Authority from time to time, provided that such withdrawal be made for a purpose for which the Renewal and Replacement Fund was created. Any monies on deposit in the Renewal and Replacement Fund in excess of the Required Renewal and Replacement Fund Balance may be withdrawn by the Authority and applied for any lawful purpose.

No delinquency shall be deemed to exist with respect to the monthly deposits required to be made into the Renewal and Replacement Fund, notwithstanding the fact that the amount deposited into the Renewal and Replacement Fund during any month is less than the amount required to be deposited into the Renewal and Replacement Fund for that month.

Revenue Stabilization Fund. After making provisions for the payment of all Operating Expenses, the Authority may deposit in the Revenue Stabilization Fund any amounts that it elects to transfer to the Revenue Stabilization Fund. Monies in the Revenue Stabilization Fund shall be available solely for the transfer to the Revenue Fund at such times as the Authority determines in its sole discretion, provided, however, if in any month there are insufficient Docks Facilities Revenues on deposit in the Revenue Fund to make any required payments to any of the other Special Funds or the Rebate Fund, the Authority shall be required to transfer monies from the Revenue Stabilization Fund to the Revenue Fund for application in accordance with the Bond Order.

Construction Fund. The Construction Fund will be established by the Authority pursuant to the Supplemental Order providing for the issuance of any Bonds for the purpose of accounting for monies derived by the Authority from the issuance of such Bonds. Monies on deposit in the Construction Fund may be used solely for the purpose of constructing or acquiring Capital Improvements.

Additional Revenues Fund. On or before the twenty-fifth day of each month, the Authority is required to pay and transfer all Additional Revenues on deposit in the Revenue Fund into the Additional Revenues Fund. Monies in the Additional Revenues Fund shall be used to pay Operating Expenses unless and except to the extent the Authority chooses to use such funds to cure any deficiency in the Debt Service Fund, the Debt Service Reserve

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Fund, the Subordinate Debt Service Fund, the Subordinate Debt Service Reserve Fund, if any, or the Sub- Subordinate Debt Service Fund.

Security for Special Funds. The depository or depositories for the Special Funds, the Additional Revenues Fund and the Rebate Fund is required to keep the monies on deposit in the fund for which it is depository continuously secured, for the benefit of the Authority and the holders of the Bonds, either (a) by holding on deposit, as collateral security, Federal Securities (hereinafter referred to), or other marketable securities eligible as security for the deposit of trust funds under regulation of the Comptroller of the Currency, having a market value (exclusive of accrued interest) not less than the amount of monies on deposit in the fund being secured, or (b) if the furnishing of security in the manner provided by the foregoing clause (a) is not permitted by the then applicable laws and regulations, then in such other manner as may be required or permitted by the then applicable state and Federal laws and regulations respecting the security for, or granting a preference in the case of, the deposit of trust funds; provided, however, that any such depository or trustee is not required to so secure any portion of the monies on deposit in any such fund for which it is depository that is secured by the Federal Deposit Insurance Corporation or by any agency of the United States of America that may succeed to either such corporation’s functions or that is Permitted Investments.

Investment of Special Funds. The Authority shall, to the extent practicable, (i) cause all moneys on deposit in the Debt Service Fund to be kept continuously invested in Permitted Investments having stated maturities, or being redeemable at the option of the Holder at a stated price and time, not later than the date that such moneys shall, under the terms hereof, be needed to pay the principal and interest maturing with respect to any Senior Lien Bonds, as the case may be, or the Redemption Price of any herein required to be redeemed on such date, (ii) cause all moneys on deposit in the Debt Service Reserve Fund, if any, to be kept continuously invested in Permitted Investments having stated maturities, or redeemable at the option of the Holder at a stated price and time not later than the date of last maturity of any Senior Lien Bonds then outstanding hereunder. Such securities, together with all income therefrom, shall become a part of the fund which moneys were used to make such investment to the same extent as if they were moneys on deposit therein; provided, however, that the Trustee shall pay to the Authority, for deposit in the Revenue Fund, the interest income from any such securities held in the Debt Service Reserve Fund if at the time such interest income is received there is on deposit in such fund an amount at least equal to the Maximum Annual Debt Service Requirement on any Senior Lien Bonds then outstanding.

The Authority shall, to the extent practicable, cause all money on deposit in the Revenue Fund, the Renewal and Replacement Fund, the Additional Revenues Fund and the Revenue Stabilization Fund to be invested in Permitted Investments, redeemable at the option of the Holder at a stated price and the time, prior to the date when it is anticipated by the Authority that such funds will be needed. Any such securities, together with all income therefrom, shall become a part of the fund which moneys were used to make such investment and shall be held by the depository for such fund to the same extent as if they were moneys on deposit in such fund.

The Authority shall cause all money on deposit in the Construction Fund to be invested in Permitted Investments redeemable at the option of the Holder at a stated price and the time, prior to the date when it is anticipated by the Authority that such funds will be needed. Any such securities, together with all income therefrom, shall become a part of the Construction Fund and shall be held by the depository for such fund to the same extent as if they were moneys on deposit in such fund.

The Authority shall cause all money on deposit in each subaccount of the Subordinate Debt Service Fund, Subordinate Debt Service Reserve Fund or the Sub-Subordinate Debt Service Fund to be invested in Permitted Investments having stated maturities or redeemable at the option of the Holder as provided in the Supplemental Order authorizing the issuance of the related Subordinate Obligations. Any such securities and together with all income therefrom, shall become a part of the fund which moneys were used to make such investment and shall be held by the depository for such fund to the same extent as if they were moneys on deposit in such fund.

The Trustee and each depository for any of the Special Funds or the Additional Revenues Fund shall be fully protected in making any investment, sale or conversion in accordance with the provisions of this Section, and in the event any moneys in the Special Funds or the Additional Reserve Fund shall be invested as authorized in this Section, it shall not be necessary for the depository therefor to secure any such investment (in any case where security for such moneys might otherwise be required) so long as such moneys shall remain so invested.

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Additional Senior Lien Bonds

The Authority may issue Senior Lien Bonds in addition to the Senior Lien Bonds now outstanding (a) to refund or retire Bonds then outstanding under the Bond Order or (b) to acquire Capital Improvements. Any such additional Senior Lien Bonds will be secured by the Bond Order equally and ratably with the Senior Lien Bonds then outstanding.

Prior to the issuance of any additional Senior Lien Bonds, the Authority is required to deliver to the Registrar, among other things, the following:

(a) Supplemental Order. A Supplemental Order duly executed on behalf of the Authority and containing the following: (1) a description of the Senior Lien Bonds proposed to be issued, including the date, the aggregate principal amount, the series designation, the interest rate or rates (or provisions for determining such rate or rates), the maturity or maturities and the forms of such Senior Lien Bonds and the Registrar’s Certificate of Authentication and Registration applicable thereto, and any provisions for redemption thereof prior to their respective maturities; (2) a statement of the purpose or purposes for which the Senior Lien Bonds are proposed to be issued; (3) any other provisions that do not conflict with the provisions hereof; (4) a request that the Registrar authenticate and deliver the Senior Lien Bonds proposed to be issued; (5) the series designation of the Senior Lien Bonds proposed to be issued; (6) the person or persons to whom such Senior Lien Bonds shall be delivered; (7) a statement as to which (if any) of such Senior Lien Bonds are to be issued by sale and which (if any) are to be issued by exchange; (8) the sale price of those (if any) of such Senior Lien Bonds to be issued by sale and the terms upon which those (if any) to be issued by exchange are to be issued: (9) a list of all Senior Lien Bonds previously issued by the Authority hereunder and at the time outstanding and of the Supplemental Orders under which they were issued; (10) if any of such Senior Lien Bonds are to be issued for the purpose of refunding any Senior Lien Bonds theretofore issued hereunder or any other securities of the Authority, a brief description of such Senior Lien Bonds or other securities to be so refunded; and (11) if any of such Senior Lien Bonds are to be issued for the purpose of acquiring, by construction or otherwise, Capital Improvements, or to refund securities of the Authority (other than Senior Lien Bonds) issued for such purpose, a brief description of such Capital Improvements;

(b) Certificate Concerning Net Revenues Available for Debt Service. A Certificate of the Director and Fiscal Officer certifying that the sum of Net Revenues Available for Debt Service and Investment Income for the preceding Fiscal Year or any consecutive twelve (12) calendar months during the eighteen (18) month period immediately preceding the date of issuance of the proposed Series of Senior Lien Bonds (adjusted as described in the following sentence) plus a sum equal to 60% of the estimated Docks Facilities Revenues (as projected by an Independent Consultant) to be derived by the Authority from the Capital Improvements to be financed in whole or in part with the proposed Series of Senior Lien Bonds for the twelve month period immediately following the commencement of operations of each of such Capital Improvements, are in an amount not less than the greater of (i) 125% of the Maximum Annual Debt Service on all Senior Lien Bonds then outstanding and the proposed Series of Senior Lien Bonds, or (ii) 100% of the Maximum Annual Debt Service on all Senior Lien Bonds and Subordinate Obligations then outstanding and the proposed Series of Senior Lien Bonds and all required deposits into the Debt Service Reserve Fund, the Subordinate Debt Service Reserve Fund, the Sub-Subordinate Debt Service Fund, the Renewal and Replacement Fund and the Rebate Fund during that Fiscal Year. For purposes of the preceding sentence, “Net Revenues Available for Debt Service” for any Fiscal Year or other period shall (x) be adjusted for any approved increase in the Authority’s rates and charges by applying any intervening increase in rates and charges as though such increase were in effect for the entire 12 month period with respect to which the Net Revenues Available for Debt Service were calculated and (y) include all amounts not in excess of 25% of the Maximum Annual Debt Service on all Senior Lien Bonds then outstanding and the proposed Series of Senior Lien Bonds that are transferred from the Revenue Stabilization Fund to the Revenue Fund during such period, but shall not include any amounts transferred from the Revenue Fund to the Revenue Stabilization Fund during that period. In making the calculation required by this paragraph for any issuance of Senior Lien Bonds for the purpose of refunding any Bonds then outstanding, the Debt Service on the Bonds to be refunded shall be disregarded;

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(c) Certificate Concerning Annual Receipts Test. A Certificate of the Director and Fiscal Officer certifying that the sum of Docks Facilities Revenues, Additional Revenues and Investment Income for the preceding Fiscal Year or any consecutive twelve (12) calendar months during the eighteen (18) month period immediately preceding the date of issuance of the proposed Series of Senior Lien Bonds (adjusted as described in the following sentence) plus a sum equal to 60% of the estimated Docks Facilities Revenues (as projected by an Independent Consultant) to be derived by the Authority from the Capital Improvements to be financed in whole or in part with the proposed Series of Senior Lien Bonds for the twelve (12) month period immediately following the commencement of operation of each of such Capital Improvements are in an amount not less than 100% of the sum of (i) Operating Expenses for such Fiscal Year, (ii) the Maximum Annual Debt Service on all Senior Lien Bonds and Subordinate Obligations then outstanding and the proposed Series of Senior Lien Bonds, and (iii) the deposits, if any, required to be made hereunder during such Fiscal Year to the Debt Service Reserve Fund and the Subordinate Debt Service Reserve Fund. For purposes of the preceding sentence, “Docks Facilities Revenues” shall (i) be adjusted for any approved increase in the Authority’s rates and charges by applying any intervening increase in rates and charges as though such increase were in effect for the entire twelve month period with respect to which the Docks Facilities Revenues were calculated and (ii) include all amounts not in excess of 25% of the Maximum Annual Debt Service on all Senior Lien Bonds then outstanding and the proposed Series of Senior Lien Bonds that are transferred from the Revenue Stabilization Fund to the Revenue Fund during such period, but shall not include any amounts transferred from the Revenue Fund to the Revenue Stabilization Fund during that period. In making the calculation required by this paragraph for any issuance of Senior Lien Bonds for the purpose of refunding any Bonds then outstanding, the Debt Service on the Bonds to be refunded shall be disregarded;

(d) Certificate Concerning Gross Revenue Test. A certificate of the Director and Fiscal Officer certifying that the Docks Facilities Revenues and Investment Income for the preceding Fiscal Year or any consecutive twelve (12) calendar months during the eighteen (18) month period immediately preceding the date of issuance of the proposed Series of Senior Lien Bonds (adjusted as described in the following sentence) plus a sum equal to 60% of the estimated Docks Facilities Revenues (as projected by an Independent Consultant) to be derived by the Authority from the Capital Improvements to be financed in whole or in part with the proposed Series of Senior Lien Bonds for the twelve (12) month period immediately following the commencement of operation of each such Capital Improvements, are in an amount not less than 150% of the sum of (i) the Maximum Annual Debt Service on all Senior Lien Bonds and Subordinate Obligations then outstanding and the proposed Series of Senior Lien Bonds, and (ii) the deposits, if any, required to be made hereunder during such Fiscal Year to the Debt Service Reserve Fund and the Subordinate Debt Service Reserve Fund. For purposes of the preceding sentence, “Docks Facilities Revenues” for any Fiscal Year or other period shall (i) be adjusted for any approved increase in the Authority’s rates and charges by applying any intervening increase in rates and charges as though such increase were in effect for the entire twelve (12) month period with respect to which the Docks Facilities Revenues were calculated and (ii) include all amounts not in excess of 25% of the Maximum Annual Debt Service on all Senior Lien Bonds then outstanding and the proposed Series of Senior Lien Bonds that are transferred from the Revenue Stabilization Fund to the Revenue Fund during such period, but shall not include any amounts transferred from the Revenue Fund to the Revenue Stabilization Fund during that period. In making the calculation required by this paragraph for any issuance of Senior Lien Bonds for the purpose of refunding any Bonds then outstanding, the Debt Service on the Bonds to be refunded shall be disregarded.

(e) Certificate of Fiscal Officer Concerning Revenues and Expenses. A Certificate by the Fiscal Officer, in form satisfactory to the Registrar, setting forth in detail, for the twenty-four (24) calendar months immediately preceding the date of issuance of the proposed Series of Senior Lien Bonds, the Avail- able Revenues, the Operating Expenses and the Net Revenues Available for Debt Service, including any Investment Income;

(f) Opinion of Independent Counsel. An opinion dated as of the date of issuance of the proposed Series of Senior Lien Bonds, signed by Independent Counsel, approving the forms of all documents required in the preceding subparagraphs of this Section to be delivered to the Registrar and reciting that they comply with the applicable requirements of this Section; and

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(g) Opinion of Bond Counsel. An opinion dated as of the date of issuance of the proposed Series of Senior Lien Bonds, signed by Bond Counsel and approving the validity and legality of such Senior Lien Bonds.

Issuance of Subordinate Obligations

The Authority may, at any time and from time to time, issue Subordinate Obligations pursuant to a Supplemental Order pertaining thereto, payment for which is secured by a pledge of Docks Facilities Revenues subject and subordinate to the pledge of Docks Facilities Revenues contained in the Order for the benefit of any Senior Lien Bonds, provided that such Subordinate Obligations and the Supplemental Order under which such obligations are issued expressly provides that the lien thereof is subordinate to the lien of all Senior Lien Bonds, including Senior Lien Bonds then outstanding and any Senior Lien Bonds to be issued thereafter pursuant to the terms of the Order. The proceeds of any Subordinate Obligations may be pledged as security for such Subordinate Obligations, free and clear of the lien of the Order.

Prior to the issuance of any Subordinate Obligations, the Authority shall deliver to the Registrar those of the Subordinate Obligations proposed to be issued, duly executed and sealed, accompanied by the following:

(a) A Supplemental Order pertaining thereto.

(b) A Certificate of the Director and Fiscal Officer certifying that the Net Revenues Available for Debt Service for the preceding Fiscal Year or any consecutive twelve (12) calendar months during the eighteen (18) month period immediately preceding the date of issuance of the proposed Series of Subordinate Obligations (adjusted as described in the following sentence), plus a sum equal to 60% of the estimated Docks Facilities Revenues (as projected by an Independent Consultant) to be derived by the Authority from the Capital Improvements to be financed with the proposed Series of Subordinate Obligations for the twelve (12) month period immediately following the commencement of operation of each such Capital Improvements, are in an amount not less than 100% of the Maximum Annual Debt Service on all Senior Lien Bonds then outstanding, all Subordinate Obligations then outstanding and the proposed Series of Subordinate Obligations, and all required deposits into the Debt Service Reserve Fund, any Subordinate Debt Service Reserve Fund, the Renewal and Replacement Fund and the Rebate Fund. For purposes of the preceding sentence, “Net Revenues Available for Debt Service” for any Fiscal Year or other period shall (i) be adjusted for any approved increase in the Authority’s rates and charges by applying any intervening increase in rates and charges as though such increase were in effect for the entire 12 month period with respect to which the Net Revenues Available for Debt Service were calculated and (ii) include (A) any amounts transferred from the Revenue Stabilization Fund to the Revenue Fund during such period and (B) any Investment Income, but shall not include any amounts transferred from the Revenue Fund to the Revenue Stabilization Fund during that period. In making the calculation required by this paragraph for any issuance of Subordinate Obligations for the purpose of refunding any Bonds then outstanding, the Debt Service on the Bonds to be refunded shall be disregarded.

(c) Opinions to the same effect as those required to be delivered with respect to the issuance of any Senior Lien Bonds, as well as by an opinion of Bond Counsel to the effect that the terms and conditions and the issuance of such Subordinate Obligations will not conflict with any of the terms hereof.

Sub-Subordinate Obligations

The Authority may from time to time, in its discretion, incur Sub-Subordinate Obligations in connection with the execution of an Interest Rate Hedge Agreement. Any such Sub-Subordinate Obligation must be expressly made subject to payment of Senior Lien Bonds and Subordinate Obligations, whether or not then outstanding, and to the payment of Operating Expenses.

Special Purpose Facilities

The Authority may finance Special Purpose Facilities from the proceeds of obligations issued by the Authority without regard to any requirements of the Order with respect to the issuance of Senior Lien Bonds, subject, however, to the following conditions:

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(a) Such obligations shall be payable solely from rentals derived by the Authority under a lease entered into between the Authority and the person, firm or corporation which will be utilizing the Special Purpose Facilities to be financed;

(b) There shall be filed with the Trustee prior to the issuance of such obligations a certificate of the Director, certifying that the estimated rentals to be derived by the Authority from the lease with respect to the Special Purpose Facilities to be financed will be at least sufficient to pay the principal of and interest on such obligations, all costs of operating and maintaining such Special Purpose Facilities and all sinking fund, reserve or other payments required by the order securing such obligations; and

(c) In addition to all rentals with respect to the Special Purpose Facilities to be financed, the Authority shall charge a reasonable rental (unless the Director shall determine that a lower rental is in the best interests of the Authority) for the land upon which said Special Purpose Facilities are to be constructed and any existing improvements located thereon, which rental shall be deemed Additional Revenues not available for the payment of such obligations.

Variable Rate Obligations, Reimbursement Agreements, Interest Rate Hedge Agreements and Bond Anticipation Notes

The Authority may (i) issue all or any portion of a Series of Bonds as Variable Rate Obligations, (ii) enter into reimbursement agreements in connection with a Credit Enhancement Facility, (iii) issue one or more Series of short term obligations in the nature of commercial paper (if permitted by State law) or of Bond Anticipation Notes in anticipation of the issuance of any Series of Bonds, (iv) enter into Reimbursement Agreements in connection with the issuance of any Bonds, or (v) enter into Interest Rate Hedge Agreements to simulate either a variable or fixed rate of interest.

If the Authority issues any Variable Rate Obligations, (a) for purposes of determining compliance with the rate covenant for any period prior to the date of calculation the actual weighted rate of interest for the period shall be deemed to be the interest rate, (b) for purposes of determining whether additional Senior Lien Bonds may be issued, outstanding Variable Rate Obligations and additional Senior Lien Bonds to be issued as Variable Rate Obligations shall be deemed to bear interest at a rate determined based upon a rate equal to 120% of either the highest rate actually borne during the prior 24 months or a generally accepted index for similar securities, and (c) for purposes of determining whether any outstanding Variable Rate Obligation is deemed paid and discharged under the Bond Order, such Obligation shall be deemed to bear interest at the maximum rate applicable to it.

If the Authority enters into any reimbursement agreement with a Credit Facility Provider Debt Service shall not include payments required to be made by the Authority under such reimbursement agreement to reimburse such Credit Facility Provider for payments made to pay the principal of or interest or any premium on the Bonds, unless the Authority’s obligation to make such payments shall have accrued and become actual.

If the Authority enters into any Interest Rate Hedge Agreements to simulate a fixed rate of interest, the Authority shall, subject to certain conditions set forth in the Bond Order, treat the debt structure that is simulated through the combination of Variable Rate Obligations and the interest rate hedge agreement as the actual interest rate borne by such Variable Rate Obligations for purposes of calculating or projecting the Debt Service on such Variable Rate Obligations during the effective period for the Interest Rate Hedge Agreement. If the Authority enters into any Interest Rate Hedge Agreements to simulate a variable rate of interest, the Authority shall, subject to certain conditions set forth in the Bond Order, treat the debt structure that is simulated through the combination of fixed rate Bonds and the interest rate hedge agreement as the actual interest rate borne by such fixed rate Bonds for purposes of calculating or projecting the Debt Service on such fixed rate Bonds during the effective period for the Interest Rate Hedge Agreement. If the Authority enters into any Interest Rate Hedge Agreements to simulate a different basis for the rate of interest (a “basis swap”), the results of that basis swap transaction shall be included in the calculation of Debt Service, except that such results shall be ignored for purposes of calculating or projecting Debt Service for purposes of determining compliance with the Authority’s rate covenant and tests for the issuance of additional Bonds.

All requirements of the Bond Order applicable to Bonds shall apply to Bond Anticipation Notes or other obligations having a maturity of less than five years intended and reasonably expected by the Authority to be

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refinanced, except that for purposes of determining the Debt Service applicable to such short term obligations for purposes of compliance with the Authority’s rate covenant and tests for the issuance of Bonds pursuant to the Bond Order, the short term obligations shall be deemed to be amortized on the basis of level debt service over the Assumed Amortization Period and to bear interest at the Assumed Interest Rate.

Default

Any of the following shall constitute a default by the Authority under the Bond Order:

(a) failure by the Authority to pay the principal of, the interest on or the premium (if any) on any Bond as and when the same shall become due as provided therein and in the Bond Order (whether such shall become due by maturity, by any Scheduled Mandatory Redemption Provision or otherwise);

(b) failure by the Authority to make any payment required to be made into any Special Fund, which such failure continues for a period of not less than thirty (30) days; or

(c) failure by the Authority to perform and observe any of the agreements and covenants on its part contained in the Bond Order (other than in the payment of the principal of and interest on the Bonds) which such failure continues for a period of not less than thirty (30) days after written notice of such failure has been given to the Authority by the Owner of not less than twenty-five percent (25%) in principal amount of the Bonds then outstanding.

Upon any such default by the Authority, the Trustee on behalf of the holders of the Senior Lien Bonds, or the holder of any Subordinate Obligation or Sub-Subordinate Obligation, then outstanding is empowered to proceed, either at law or in equity by mandamus or other lawful remedy to enforce and compel performance by officers of the Authority of all agreements of the Authority herein contained, including the fixing of rates, the collection and proper segregation of the Authority’s Revenues and the proper application of said revenues. The Authority itself is immune from suit.

Pursuant to the Trust Agreement, the Trustee is empowered to act on behalf of the holders of the Senior Lien Bonds in the event of occurrence of any event of default under the Bond Order, and must act in accordance with the instructions of the holders of a majority of the Senior Lien Bonds. Any Credit Facility Provider is treated as the registered owner of any obligations it insures for purposes of directing or exercising all rights and remedies available with respect to such insured obligations.

No remedy provided for under the Bond Order is intended to be exclusive of any other available remedy or remedies.

Other Provisions

Tax Covenants. In the Bond Order, the Authority agrees that it will comply with the provisions of and governing regulations applicable to Sections 103 and 141 through 150 of the Code and any applicable regulations, to the extent that compliance therewith is necessary in order that the interest income on any Series of Bonds issued as Tax Exempt Bonds shall be and remain exempt from federal income taxation. Further, the Authority will (i) in a timely manner, make all Required Rebates and any similar payments required to be made respecting Tax Exempt Bonds (utilizing moneys of the Authority from the Rebate Fund or to the extent insufficient therefor, from the Special Funds and take such other action as shall be necessary, under the provisions of Sections 103 and 141 through 150 of the Code and any applicable regulations, to preserve the exemption of the interest on any Tax Exempt Bonds from federal income taxation generally, and (ii) refrain from taking any action that would, under the provisions of Sections 103 and 141 through 150 of the Code and any applicable regulations, result in the interest on any Tax Exempt Bonds being or becoming subject to federal income taxation generally.

Proper Books and Records. The Authority is required by the Bond Order to maintain complete books and records pertaining to its facilities and all receipts and disbursements with respect thereto.

Annual Audits. The Authority is required following the close of each Fiscal Year, to cause an audit of its books for such fiscal year to be made by an Independent Auditor. Each such audit shall include the following

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matters with respect to the Authority’s facilities: (1) a statement in reasonable detail of the revenues from and expenditures made with respect to the Docks Facilities during such fiscal year; and (2) a balance sheet as of the end of such fiscal year with respect to the Docks Facilities. Within one hundred twenty (120) days following the end of each Fiscal Year, the Authority will furnish a copy thereof to the Trustee and to the Holder of any of the Bonds who may request the same in writing, and each of them is granted the right to discuss the contents of the audit with the Independent Auditor making the same and to secure from the Independent Auditor such additional information respecting the matters set out in the Bond Order or in the audit as may be reasonably required.

No Free Service. The Authority is not permitted under the Bond Order to furnish or permit to be furnished from its facilities any free service of any kind to any person, firm or corporation with respect to any service for which a charge is regularly and customarily made.

Covenant to Seek Appropriations. The Authority has covenanted to use its best efforts to seek appropriations from the Alabama Legislature to pay Operating Expenses. In addition, the Authority has covenanted to take all steps necessary to obtain payments of appropriations due to be paid pursuant to the Coal Tax Act and the Oil and Gas Severance Tax Act before the end of each quarter during which the Authority becomes entitled to any such appropriation.

Sale or Lease and Repair of Facilities Except Under Certain Conditions. Under the Bond Order, the Authority may not sell or lease the whole or any integral part of the Docks Facilities until all of the Bonds have been paid in full or unless and until provision for such payment has been made. The Authority is required to operate the Docks Facilities continuously or cause the same to be operated so long as any of the Bonds remain unpaid, and it will keep the same in good repair and in efficient operating condition, making from time to time all needful repairs and replacements thereto and thereof.

Consolidation or Merger. Nothing contained in the Bond Order prevents the consolidation of the Authority with, or merger of the Authority into, any public corporation having corporate authority to carry on the business of operating the Docks Facilities, or the transfer by the Authority of its facilities as an entirety to a public corporation whose properties and income are not subject to taxation, provided that upon any such consolidation, merger or transfer, the due and punctual payment of the principal of and the interest on the Bonds according to their tenor and the due and punctual performance and observance of all the agreements and conditions of the Bond Order to be kept and performed by the Authority are expressly assumed in writing by the corporation resulting from such consolidation or surviving such merger to which the Docks Facilities shall be transferred as an entirety, and provided further, that such consolidation, merger or transfer will not cause or result in any lien being affixed to or imposed on or becoming a lien on the revenues of the Authority that will be prior to the lien of the pledge made in the Bond Order for the benefit of the Bonds or in any foreclosable mortgage becoming a lien on such facilities or in the interest income on the Bonds becoming subject to Federal or Alabama income taxation.

Inspecting the Facilities of Bondholders. Pursuant to the Bond Order, the Authority will permit the holders of any of the Bonds to inspect, at any reasonable time, any and every part of Docks Facilities and the books and records of the Authority appertaining thereto and will assist in furnishing facilities for such inspection.

Defeasance. Whenever the entire indebtedness secured by the Bond Order shall have been fully paid, the Revenue Fund is to be discontinued and the obligations of the Authority under the Bond Order shall be deemed satisfied and discharged. Any of the Bonds shall be deemed to have been paid when there shall have been irrevocably deposited with the Trustee or State Treasurer for payment thereof the entire amount (principal and interest) due or to be due thereon until and at maturity, and, further, any of the Bonds shall also be deemed to have been paid when the Authority shall have deposited with the Trustee or State Treasurer the following;

(a) the applicable redemption price of such Bond, including the interest that will mature thereon to a date on which it may, under the terms of the Bond Order, be redeemed,

(b) a certified copy of an order calling such Bond for redemption, and

(c) either (i) evidence satisfactory to the Trustee and any Paying Agent that notice of redemption of such Bond has been given as provided in the Bond Order, or (ii) irrevocable powers authorizing the Trustee to give such redemption notice.

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In addition, any of the Bonds shall, for all purposes, be deemed fully paid if there shall be filed with each of the following:

(1) a trust agreement between the Authority and a Qualifying Bank making provision for the retirement of such Bonds by creating for that purpose an irrevocable trust fund sufficient to provide for payment and retirement of such Bonds (including payment of the interest that will mature thereon until and on the dates they are retired, as such interest becomes due and payable), which said trust fund shall consist of (A) Governmental Securities which are not subject to redemption prior to their respective maturities, will produce funds sufficient so to provide for payment and retirement of such Bonds, or (B) both cash and such securities which together will produce funds sufficient for such purpose, or (C) cash sufficient for such purpose;

(2) a certified copy of an order calling for redemption those of such Bonds, if any, that, according to said trust agreement, are to be redeemed prior to their respective maturities; and

(3) evidence that notice of such redemption has been given pursuant to the Bond Order or that irrevocable powers for the giving of such redemption notice have been conferred on the Trustee.

Disclaimer of General Liability. The Bond Order specifically provides that the agreements, covenants or representations contained in the Bond Order or contained in the Bonds do not constitute or give rise to any personal or pecuniary liability or charge against the general credit of the Authority.

Retention of Monies for Payment of Bonds. Should any Bond not be presented for payment when due, whether by maturity or otherwise, or should any check or draft mailed or otherwise delivered by the Registrar or any Paying Agent to the Holder of a Bond not be presented to the Registrar or any Paying Agent for payment, the Registrar, subject to the provisions of any applicable escheat or similar law, is entitled under the Bond Order to retain from any monies transferred to the Registrar for the purpose of paying principal or interest so due, for the benefit of the Holder or Holders of the Bonds with respect to which such principal or interest is due, a sum of money sufficient to pay such Bond or to pay the interest represented by such check or draft, as the case may be, when the same are presented for payment (upon which sum the Registrar shall not be required to pay interest). All liability of the Authority to the Holder or Holders of the Bonds with respect to which such principal or interest is due, and all rights of such holder or holders against the Authority under the Bonds or under the Bond Order shall thereupon cease and determine, and the sole right of such holder or holders shall thereafter be against such deposit. If any Bond or any check or draft issued to the holder of a Bond shall not be presented for payment within a period of five (5) years following the date when such Bond becomes due, whether by maturity or otherwise, or the date when such check or draft was issued, as the case may be, the Registrar shall, subject to the provisions of any applicable escheat or similar law, return to the Authority any monies theretofore held by it for payment of such principal or interest, as the case may be, and such Bond or the interest represented by such check or draft shall (subject to the defense of any applicable statute of limitation) thereafter be an unsecured obligation of the Authority.

Modification of the Bond Order. The Authority may, without the consent of or notice to the Holders of any Bonds, but with notice to the Trustee and to any Credit Enhancer or Liquidity Provider, adopt an order or orders modifying or amending the Bond Order: (a) to specify and determine any matters relative to a Series of Bonds which are not contrary to or inconsistent with the Bond Order and which will not adversely affect the interest of the Holders of any such Series of Bonds; (b) to cure any defect, omission or ambiguity in the Bond Order; (c) to add to the covenants and agreements of the Authority in the Bond Order other covenants and agreements to be observed by the Authority which are not contrary to or inconsistent with the Bond Order as theretofore in effect; (d) to add to the limitations and restrictions in the Bond Order other limitations and restrictions to be observed by the Authority which are not contrary to or inconsistent with the Bond Order as theretofore in effect; (e) to confirm, as further assurance, any pledge under, and the subjection to any claim, lien or pledge created or to be created by, the Bond Order or the Authorizing Act of the revenues of the Authority pledged to the payment of Senior Lien Bonds or of any other moneys, securities or funds; (f) to provide for the issuance of Senior Lien Bonds, Subordinate Obligations or Sub-Subordinate Obligations to the extent permitted by and in accordance with the applicable provisions of the Bond Order; or (g) to make any other change which does not adversely affect the interest of the Holders of any such Series of Bonds. In addition to the foregoing, the Authority may modify and supplement the Bond Order at any time and from time to time, to the extent it shall deem necessary or desirable, but only with (i) notice to the Trustee, (ii) with regard to any amendment or supplement which affects all Bonds and other obligations then outstanding, the

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consent of the Holders of 66-2/3% of the outstanding principal amount of Senior Lien Bonds and of 66-2/3% of the outstanding principal amount of Subordinate Obligations, (iii) with regard to any amendment or supplement which affects less than all Bonds and other obligations then outstanding, the consent of the Holders of 66-2/3% of the outstanding principal amount of each Series so affected. For purposes of the foregoing sentence, so long as any Bonds are secured by a Credit Enhancement Facility the Credit Enhancement Provider shall be treated as the Holder of such Bonds for purposes of consenting to any amendment or supplement. Notwithstanding the foregoing, the Bond Order may not, without the consent of any Credit Enhancer or Liquidity Provider and the Holders of all of a particular Series of Bonds then outstanding, be so modified, restated or amended in such a manner as to: (1) make any change in the maturity of such Series of Bonds or in the Scheduled Mandatory Redemption Provision; (2) make any change in the rate of interest borne by or Appreciated Principal Amount of any of such Series of Bonds; (3) reduce the amount of the principal or redemption premium payable on any such Series of Bonds; (4) modify the terms of payment of principal of or interest on any such Series of Bonds (or redemption premiums, if any) or any of them or impose any conditions with respect to such payment; or (5) affect the rights of the Holders of less than all of any such Series of Bonds then outstanding. No amendment of the Bond Order shall be made except as provided in the Bond Order unless the Authority shall have received on the date of such amendment an opinion of Bond Counsel to the effect that such amendment will not adversely affect the exemption from Federal income taxation of any of any Bonds then outstanding.

Concerning the Trustee, the State Treasurer, Paying Agents and Depositories. The Bond Order contains broad exculpatory clauses in favor of the State Treasurer, the Trustee and any paying agents or depositories named by the Authority pursuant to the Bond Order or any supplemental order.

2006 Trust Agreement

The Authority and Regions Bank, as trustee, previously have entered into the 2006 Trust Agreement in order to provide for certain of the Special Funds to be held in trust and for the Trustee to undertake to enforce certain covenants and remedies on behalf of the holders of the Senior Lien Bonds.

The Trustee shall hold the moneys in the Debt Service Fund and the Debt Service Reserve Fund for the benefit of Holders of any Senior Lien Bonds, and shall hold the moneys in the Subordinate Debt Service Fund, the Subordinate Debt Service Reserve Fund, the Sub-Subordinate Debt Service Fund and the Rebate Fund for the benefit of Holders of any Bonds.

The Trustee is also empowered to act on behalf of the Holders of the Senior Lien Bonds to enforce the covenants and agreements contained in the Bond Order and to exercise such remedies as are available to the Holders of the Senior Lien Bonds pursuant to the Bond Order, including bringing any action permitted under the Bond Order on behalf of the Holders of the Senior Lien Bonds.

The Trustee has agreed to perform the duties assigned to it subject to certain conditions, including:

(a) it will not be liable except for noncompliance with the provisions of the Trust Agreement, its willful misconduct or its gross negligence or the breach of any warranty or the untruthfulness of any representation made by it in the Trust Agreement;

(b) it may consult with counsel and will not be answerable for any action taken or failure to take any action in good faith on advice of counsel;

(c) it will not be answerable for any action taken in good faith on any notice, request, consent, certificate or other document it believes to be genuine; and

(d) it will not be liable for the proper application of any moneys other than those paid to or deposited with it.

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Amendments to Bond Order

The Eleventh Supplemental Bond Order, pursuant to which the Series 2017 Bonds are issued, includes multiple amendments to the Bond Order as it pertains to permitted investments, Reserve Fund Instruments and related matters, as described below. The sole holder of the Series 2008A Bond has consented to the amendments. The purchasers of the Series 2017 Bonds will be deemed to have consented to the amendments and they will become effective upon issuance and delivery of the Series 2017 Bonds.

Amendment of Definition of Permitted Investments. Permitted Investments in pre-refunded municipal obligations or in either long term obligations of a state of the United States may be rated in one of the two highest rating categories by any rating agency, rather than in only the highest rating category. In the case of either long or short term state obligations, the required rating may be from only one rating agency rather than two, as was previously required.

Amendment of Definition of Qualified Financial Institution. A Qualified Financial Institution, as defined in the Bond Order, will include those rated in one of the three highest rating categories by at least one rating agency, rather than in one of the two highest rating categories.

Amendments Regarding Debt Service Reserve Fund. Any insurer providing a surety bond or insurance policy, and any bank or trust company providing a letter or line of credit, in lieu of a cash deposit to the Debt Service Reserve Fund maintained under the Bond Order may be rated, at the time the surety, insurance policy or letter or line of credit is deposited as a Reserve Fund Instrument, in one of the three highest rating categories of any rating agency then maintaining a rating with respect to the Senior Lien Bonds secured by the Reserve Fund. The Bond Order previously required ratings in one of the two highest categories for any such Reserve Fund Instrument and did not specify whether or not the rating must be maintained. In addition, the amendments specify that any alternative reserve fund for the benefit of Senior Lien Bonds which are not secured by the parity Debt Service Reserve Fund may secure one or more series of Senior Lien Bonds.

Consent by Underwriters to Future Amendments. The amendments provide that underwriters of Additional Senior Lien Bonds issued after the issuance of the Series 2017 Bonds may, on behalf of such Additional Senior Lien Bonds, consent to any amendment of the Bond Order which is described in the official statement or other offering document with respect to such Additional Senior Lien Bonds and such consent shall be treated as consent of the holders of such Additional Senior Lien Bonds.

The foregoing description is qualified by the summary included in this Appendix D and by the exact terms of the Eleventh Supplemental Bond Order, a copy of which may be obtained from the Authority.

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APPENDIX E

Proposed Opinions of Bond Counsel

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[Letterhead of Hand Arendall LLC]

March ___, 2017

Alabama State Port Authority Mobile, Alabama

Re: $125,625,000* Alabama State Port Authority Docks Facilities Revenue Refunding Bonds, Series 2017A (AMT)

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the Alabama State Port Authority, an agency of the State of Alabama (the “Authority”), of the obligations in caption (the “Series 2017A Bonds”). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion.

The Series 2017A Bonds will be issued pursuant to a Master Bond Order (the “Master Bond Order”) executed by the Director of the Authority pursuant to a resolution adopted on October 31, 2006 by the governing body of the Authority, as previously supplemented and amended and as supplemented by an Eleventh Supplemental Bond Order (the “Eleventh Supplemental Order”) executed by the Director of the Authority pursuant to a resolution adopted on February 21, 2017 by the governing body of the Authority. The Series 2017A Bonds will constitute special, limited obligations of the Authority payable, as to principal, redemption premium (if any) and interest, solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

As to questions of fact material to our opinion, we have relied upon representations of the Authority, the certified proceedings and other certifications of public officials furnished to us, and certifications furnished to us by or on behalf of the Authority, without undertaking to verify the same by independent investigation.

Based upon the foregoing, we are of the opinion that, under existing law:

1. The Authority is duly created and validly existing as an agency of the State of Alabama, with the power to adopt and perform under the Master Bond Order, as supplemented and amended, and the Eleventh Supplemental Order.

2. The Series 2017A Bonds have been duly authorized, executed, issued and delivered by the Authority in accordance with the constitution and laws of the State of Alabama, including particularly Chapter 1 of Title 33 (Section 33-1-1 et seq.) and Article 7 of Chapter 2 of Title 33 (Sections 33-2-180 et seq.) of the Code of Alabama (1975), and are valid and binding special obligations of the Authority, payable solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

* Preliminary, subject to change.

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3. The Master Bond Order creates a valid pledge of Docks Facilities Revenues for the benefit of the Series 2017A Bonds and the other obligations issued under the Master Bond Order, as supplemented and amended. The Series 2017A Bonds are secured by such pledge, pro rata one with the other and with the Authority’s Docks Facilities Revenue Bonds, Series 2008A and Docks Facilities Revenue Refunding Bonds, Series 2017B, Series 2017C and Series 2017D and with any other Senior Lien Bonds (as defined in the Master Bond Order) when, as, if and to the extent issued.

4. Under existing law, as presently construed and administered, the interest income on the Series 2017A Bonds will be excludable from gross income of the recipient thereof for federal income tax purposes, except for interest on any Series 2017A Bond for any period during which such Bond is held by a “substantial user” of the facilities financed by the Series 2017A Bonds, or a “related person” within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the “Code”); however, interest on the Series 2017A Bonds is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The opinion set forth in the preceding sentence is subject to the condition that the Authority comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2017A Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority has covenanted to comply with such requirements but failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2017A Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Series 2017A Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Series 2017A Bonds.

5. Interest on the Series 2017A Bonds is, under existing law, exempt from State of Alabama income taxation.

The rights of the owners of the Series 2017A Bonds and the enforceability of the Series 2017A Bonds and the Master Bond Order and Eleventh Supplemental Order are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur.

Very truly yours,

HAND ARENDALL LLC

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[Letterhead of Hand Arendall LLC]

March ___, 2017

Alabama State Port Authority Mobile, Alabama

Re: $13,950,000* Alabama State Port Authority Docks Facilities Revenue Refunding Bonds, Series 2017B (non-AMT)

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the Alabama State Port Authority, an agency of the State of Alabama (the “Authority”), of the obligations in caption (the “Series 2017B Bonds”). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion.

The Series 2017B Bonds will be issued pursuant to a Master Bond Order (the “Master Bond Order”) executed by the Director of the Authority pursuant to a resolution adopted on October 31, 2006 by the governing body of the Authority, as previously supplemented and amended and as supplemented by an Eleventh Supplemental Bond Order (the “Eleventh Supplemental Order”) executed by the Director of the Authority pursuant to a resolution adopted on February 21, 2017 by the governing body of the Authority. The Series 2017B Bonds will constitute special, limited obligations of the Authority payable, as to principal, redemption premium (if any) and interest, solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

Based upon the foregoing, we are of the opinion that, under existing law:

2. The Series 2017B Bonds have been duly authorized, executed, issued and delivered by the Authority in accordance with the constitution and laws of the State of Alabama, including particularly Chapter 1 of Title 33 (Section 33-1-1 et seq.) and Article 7 of Chapter 2 of Title 33 (Sections 33-2-180 et seq.) of the Code of Alabama (1975), and are valid and binding special obligations of the Authority, payable solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

* Preliminary, subject to change.

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3. The Master Bond Order creates a valid pledge of Docks Facilities Revenues for the benefit of the Series 2017B Bonds and the other obligations issued under the Master Bond Order, as supplemented and amended. The Series 2017B Bonds are secured by such pledge, pro rata one with the other and with the Authority’s Docks Facilities Revenue Bonds, Series 2008A and Docks Facilities Revenue Refunding Bonds, Series 2017A, Series 2017C and Series 2017D, and with any other Senior Lien Bonds (as defined in the Master Bond Order) when, as, if and to the extent issued.

4. Under existing law, as presently construed and administered, the interest income on the Bond will be excludable from gross income of the recipient thereof for federal income tax purposes, except for interest on any Series 2017B Bond for any period during which such Bond is held by a “substantial user” of the facilities financed by the Series 2017B Bonds, or a “related person” within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the alternative minimum tax imposed by Section 55 of the Code; provided that in the case of corporations (as defined for federal income tax purposes) such interest will be taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. The opinions set forth in the preceding sentence are subject to the condition that the Authority comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2017B Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority has covenanted to comply with such requirements but failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2017B Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Series 2017B Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Series 2017B Bonds.

5. Interest on the Series 2017B Bonds is, under existing law, exempt from State of Alabama income taxation.

The rights of the owners of the Series 2017B Bonds and the enforceability of the Series 2017B Bonds and the Master Bond Order and Eleventh Supplemental Order are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.

Very truly yours,

HAND ARENDALL LLC

E-4

[Letterhead of Hand Arendall LLC]

March ___, 2017

Alabama State Port Authority Mobile, Alabama

Re: $7,910,000* Alabama State Port Authority Docks Facilities Revenue Refunding Bonds, Series 2017C (non-AMT)

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the Alabama State Port Authority, an agency of the State of Alabama (the “Authority”), of the obligations in caption (the “Series 2017C Bonds”). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion.

The Series 2017C Bonds will be issued pursuant to a Master Bond Order (the “Master Bond Order”) executed by the Director of the Authority pursuant to a resolution adopted on October 31, 2006 by the governing body of the Authority, as previously supplemented and amended and as supplemented by an Eleventh Supplemental Bond Order (the “Eleventh Supplemental Order”) executed by the Director of the Authority pursuant to a resolution adopted on February 21, 2017 by the governing body of the Authority. The Series 2017C Bonds will constitute special, limited obligations of the Authority payable, as to principal, redemption premium (if any) and interest, solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

Based upon the foregoing, we are of the opinion that, under existing law:

2. The Series 2017C Bonds have been duly authorized, executed, issued and delivered by the Authority in accordance with the constitution and laws of the State of Alabama, including particularly Chapter 1 of Title 33 (Section 33-1-1 et seq.) and Article 7 of Chapter 2 of Title 33 (Sections 33-2-180 et seq.) of the Code of Alabama (1975), and are valid and binding special obligations of the Authority, payable solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

* Preliminary, subject to change.

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3. The Master Bond Order creates a valid pledge of Docks Facilities Revenues for the benefit of the Series 2017C Bonds and the other obligations issued under the Master Bond Order, as supplemented and amended. The Series 2017C Bonds are secured by such pledge, pro rata one with the other and with the Authority’s Docks Facilities Revenue Bonds, Series 2008A and Docks Facilities Revenue Refunding Bonds, Series 2017A, Series 2017B and Series 2017D, and with any other Senior Lien Bonds (as defined in the Master Bond Order) when, as, if and to the extent issued.

4. Under existing law, as presently construed and administered, the interest income on the Bond will be excludable from gross income of the recipient thereof for federal income tax purposes and will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the alternative minimum tax imposed by Section 55 of the Internal Revenue Code of 1986, as amended (the “Code”); provided that in the case of corporations (as defined for federal income tax purposes) such interest will be taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. The opinions set forth in the preceding sentence are subject to the condition that the Authority comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2017C Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority has covenanted to comply with such requirements but failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2017C Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Series 2017C Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Series 2017C Bonds.

5. Interest on the Series 2017C Bonds is, under existing law, exempt from State of Alabama income taxation.

The rights of the owners of the Series 2017C Bonds and the enforceability of the Series 2017C Bonds and the Master Bond Order and Eleventh Supplemental Order are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.

Very truly yours,

HAND ARENDALL LLC

E-6

[Letterhead of Hand Arendall LLC]

March ___, 2017

Alabama State Port Authority Mobile, Alabama

Re: $133,260,000* Alabama State Port Authority Docks Facilities Revenue Refunding Bonds, Series 2017D (Taxable)

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the Alabama State Port Authority, an agency of the State of Alabama (the “Authority”), of the obligations in caption (the “Series 2017D Bonds”). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion.

The Series 2017D Bonds will be issued pursuant to a Master Bond Order (the “Master Bond Order”) executed by the Director of the Authority pursuant to a resolution adopted on October 31, 2006 by the governing body of the Authority, as previously supplemented and amended and as supplemented by an Eleventh Supplemental Bond Order (the “Eleventh Supplemental Order”) executed by the Director of the Authority pursuant to a resolution adopted on February 21, 2017 by the governing body of the Authority. The Series 2017D Bonds will constitute special, limited obligations of the Authority payable, as to principal, redemption premium (if any) and interest, solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

Based upon the foregoing, we are of the opinion that, under existing law:

2. The Series 2017D Bonds have been duly authorized, executed, issued and delivered by the Authority in accordance with the constitution and laws of the State of Alabama, including particularly Chapter 1 of Title 33 (Section 33-1-1 et seq.) and Article 7 of Chapter 2 of Title 33 (Sections 33-2-180 et seq.) of the Code of Alabama (1975), and are valid and binding special obligations of the Authority, payable solely out of (i) Docks Facilities Revenues and (ii) any income from the investment thereof on deposit in any of the special funds established under the Master Bond Order.

3. The Master Bond Order creates a valid pledge of Docks Facilities Revenues for the benefit of the Series 2017D Bonds and the other obligations issued under the Master Bond Order, as supplemented and amended. The Series 2017D Bonds are secured by such pledge, pro rata one with the other and with the Authority’s Docks Facilities Revenue Bonds, Series 2008A and Docks Facilities Revenue Refunding Bonds, Series 2017A, Series 2017B and Series 2017C, and with any other Senior Lien Bonds (as defined in the Master Bond Order) when, as, if and to the extent issued.

* Preliminary, subject to change.

E-7

4. Interest on the Series 2017D Bonds is, under existing law, exempt from State of Alabama income taxation.

The rights of the owners of the Series 2017D Bonds and the enforceability of the Series 2017D Bonds and the Master Bond Order and Eleventh Supplemental Order are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.

Very truly yours,

HAND ARENDALL LLC

E-8

APPENDIX F

Specimen Municipal Bond Insurance Policy

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AsSURED MUNICIPAL BOND GUARANTY' MUN I CI~Al INSURANCE POLICY

ISSUER:

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F-1

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A S

Fo,", 500NY (5100)

F-2 [THIS PAGE INTENTIONALLY LEFT BLANK.] [THIS PAGE INTENTIONALLY LEFT BLANK.]

ALABAMA STATE PORT AUTHORITY • Docks Facilities Revenue Refunding Bonds, Series 2017A (AMT), Series 2017B (Non-AMT), Series 2017C (Non-AMT) and Series 2017D (Taxable)