FINAL REPORT

Long-Term Container Traffic Forecast, 2020-2060

Vancouver Fraser Port Authority #200203-04

October 2020 Contents

SECTION CONTENT PAGE

Executive Summary 3 1 Macro-Economic Trends and Container Port Demand to 2050 33 2 Competitive Developments at Ports & Terminals - Localised and Discretionary Markets 85 3 Trends in Container Shipping 133 4 North American Intermodalism & Cost Differentials 165 5 The Competitive Cost Structure for VFPA 196

2 6 Container Sector SWOT Analysis & Influencing Factors 219 7 Forecast Container Handling Volumes at VFPA Terminals 2020-2060 226

This report and the model are based upon the application of scientific principles and professional judgment to certain facts with resultant subjective interpretations. Professional judgments expressed herein are based on the currently available facts within the limits of the existing data, scope of work, budget and schedule. The report cannot, and makes no attempt to, anticipate all changes to those conditions and circumstances, which occur after its date of issue of the documentation provided. To the extent that more definitive conclusions are desired by the client than are warranted by the currently available facts, it is specifically our intent that the conclusions stated herein are intended as guidance and not necessarily as a firm course of action, except where explicitly stated as such. 3

Executive Summary The Long-Term Forecast Period is to 2050 - Robust but Flexible Approach Used To ensure better granularity, the container forecasts are generated on the basis of the shorter-term to 2030 and then adoption of specific scenarios for the period to 2050 - this reflects the need to better consider potential longer-term developments

▪ A series of container forecasts have been developed to 2050. Approach to the Forecasts Adopted

▪ A discontinuity is noted in the approach to forecasting. The model which has driven demand in the period since the mid-1990s has been based on globalisation. 2030+ ▪ More recently, the pace of economic development in East Asia has stimulated the To 2030 Scenario level of containerised exports, with this particularly focusing demand on Vancouver Based ▪ Given the long term perspective on demand that is the subject of this study, it is apparent that a simple (if modified) extrapolation of these trends will not provide an adequate picture of future demand levels. ▪ In order to accommodate possible developments a twin-track approach has been Open & developed: Globalisation Green - High ▪ To 2030 - continued globalization and Asian demand for both imports and exports 4 ▪ From 2030 to 2050 - specific and relevant scenarios are explored and applied, to Case better take into account potential much longer-term structural changes and potential

Approach to Forecasts for VFPA Asian Status Quo - demand Base Case

Share to Total North Share of Share to Share to Vancouver Vancouver America Pacific Pacific Pacific terminals & Prince volumes West Coast North West Gateway share Rupert Protectionist - Low Case Introduction to North America - Container Volumes by Key Regions of Interest Pacific Gateway remains a key component of the Pacific Northwest region and the wider North American container port market

▪ The Pacific Gateway region of Port of Vancouver and Prince Rupert compete with a Container Volumes by Region - Pacific Coast Split, 2000-2019 in ‘000 TEU range of different facilities in serving North American demand through various container trade routes, such as: 70,000 ▪ Transpacific routes to/from North East Asia – i.e. the Hong Kong-Japan range. 60,000 ▪ Transpacific routes to/from South East Asia – i.e. ASEAN range. 50,000 ▪ Other liner services connecting the Pacific West Coast with Europe and the Suez US Gulf 40,000 Canal routing from Asia to the East Coast of North America. East Coast ▪ The Pacific Northwest region to/from Europe via the Panama Canal, including the 30,000 Pacific South Panama Canal expansion which opened in 2016. 20,000 Pacific North ▪ Total PNW regional container demand increased from 4.77 million TEU in 2000 to 10,000 9.09 million TEU for 2019 - this confirms average growth of 3.5% per annum for this - period, with growth of 3.8% per annum for the more recent 2009-2019 period.

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North American Container Volume Growth by Coast, 2000-2019 in ‘000 TEU Container Volumes at Ports in US PNW/Pacific Gateway, 2000-2019 in ‘000 TEU

35,000 10,000 30,000 9,000 Pacific North 8,000 Others 25,000 Pacific 7,000 Prince Rupert 20,000 Coast 6,000 15,000 5,000 East Coast 4,000 10,000 Vancouver 3,000 5,000 2,000 US Gulf Sea-Tac - 1,000

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2001 2000 Container Volume Growth has Occurred in all Regions - Atlantic South & US Gulf Shares Up US Pacific South is the largest sub-region in North America, but its share of total container port market reduced from 37.5% in 1990 to 33.0% for 2019 - Atlantic South/Atlantic North benefitting from All-Water routes via Suez and Panama Canals

▪ All sub-region areas in North America have seen positive annual growth over the Summary of Long-Term Container Trends by Region, 2000-2019 period between 2000 and 2019. The Atlantic South and Atlantic North saw some of the higher growth over this period. This has largely been due to the emergence of more Region Volumes - Million TEU % Share All-Water services from Asia in the first decade of the 2000s, subsequently supported by the expansion of the Panama Canal (which also benefitted US Gulf Ports). 2000 2019 2000 2019

East Coast 55% Atlantic South 5.3 11.3 17.5% 18.8% port share Pacific North 4.8 9.1 16.0% 15.2% increased in 50% 2015 in Atlantic North 7.2 15.2 23.7% 25.6% anticipation of West Coast the new 45% Panama Canal East Coast US Pacific 11.3 19.7 38.0% 33.0% opening 40% South US Gulf 1.6 4.5 5.0% 7.5% 6 35% 2014 2015 2016 2017 2018 2019 ▪ The Pacific North region has seen its growth increase by around 4.0% per annum over Annual Container Growth by North American Sub-Port Region, 2000-2019 in % the period, though this was largely due to the emergence of Prince Rupert from 2007 and Vancouver’s ability to continue to improve its throughput (and develop 7.0% infrastructure to support the growth). 6.0% ▪ The Pacific North decline of just 0.8% is due to the lower than average growth at the 5.0% Sea-Tac complex, not the Pacific Gateway ports in Canada. 4.0%

Key Conclusions: 3.0%

2.0% ▪ Despite some cargo shift and varying growth between sub-regions, still a substantial amount of container cargo moving through each of the “4 corners” 1.0% in North America 0.0% ▪ Important that the Pacific North decrease in share does not detract from the role US Pacific South Pacific North US Gulf Coast Atlantic South Altantic North of the Pacific Gateway area - ports from all regions compete for some of the exact same discretionary hinterland markets in North America Review of North American Macro-Economic Position and Relationship with Port Demand There has been long-term growth in both Canada and the US - the GFC caused a decline and it is assumed that the impact of COVID-19 will see a short-term fall in GDP development - the long-term fundamentals of container traffic to trade goods remains

▪ Container trade volumes (and port demand) are directly related to the overall volumes North America - Overall GDP Development from 1990 (index-linked) of traded goods – especially in the manufactured sector. This is particularly the case for cargoes imported into North America. 200.0 190.0 ▪ In addition, in the case of Vancouver, the important containerised export sector is driven by the pace of demand for primary goods in Asia and the developing Far East 180.0 markets. 170.0 160.0 ▪ The US economy declined sharply by around 3.8% between 2007 and 2009, due to 150.0 USA the GFC, although did rebound and continued to grow to 2019. The same general 140.0 Canada pattern was noted in Canada, but the decline was somewhat less severe, namely a 130.0 decline of 2.1%, as a result of strong commodity exports over the period. However, 120.0 since this drop both exports and imports have continued to improve. 110.0

▪ The potential impact of COVID-19 is included in the 2020e figures, although these are, 100.0

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7 of course, estimates prepared at the end of April 2020. 1990 2020e

North America Trade Volume Development Since 1990 - Index-Linked

1990 1995 2000 2005 2010 2015 2016 2017 2018 2019 2020e Key Conclusions: US ▪ North American economies saw Exports 100 140 208 270 332 454 461 483 507 516 488 a decline due to the GFC and a similar fall is estimated for 2020 Imports 100 140 243 301 309 406 408 424 442 446 422 too Canada ▪ There was a continued growth in Exports 100 151 234 294 315 418 417 436 450 455 426 both exports and imports over the longer-term period for both Imports 100 135 202 235 260 338 340 342 354 364 341 Canada and the US - impacted by GFC in 2009 and now by COVID- 19 - albeit both relatively short- term Stability of Key Import & Export Commodities Moving via Pacific Gateway Ports Imports from Asia continue to be grouped in 6 main classifications, including household goods and for construction and vehicle industries - exports are also generally consistent, with forest products and grains (unsurprisingly) the leading items shipped to Asia

▪ The range of containerised commodities entering and leaving the Pacific gateway Containerised Imports by Commodity into Pacific Gateway Region, 2010 & 2019e region continues to be consistent: ▪ Imports - household goods, construction & materials and industrial, auto and 1000 vehicle parts are the leading volume commodities 800 ▪ Exports - lumber, woodpulp and speciality crops are the major volume goods 600 leaving Canada through this gateway. 400

▪ Analysis of data in 2010 and again for 2019e confirms the following: ‘000TEU 200 ▪ Imports - the 6 categories shown account for an estimated 96.7% of imported goods in 2020 and 97.2% for 2019e 0 Household Construction Industrial, Machinery Basic metals Other goods ▪ Exports - the listed 6 commodities represented an estimated 72.6% of exports in goods & materials Auto & 2010 and 59.3% for 2019e Vehicle Parts

8 ▪ Reasonable to assume that these trade patterns for key commodities will continue 2010 2019e

Key Conclusions Containerised Exports by Commodity out of Pacific Gateway Region, 2010 & 2019e

600 ▪ The highest volume commodities entering / leaving the Pacific Gateway region can be grouped into a few major categories 500 400 ▪ For imported goods, the 6 leading classifications generate over 97% - this high figure has been stable over the past 10 years 300 200 ▪ It is reasonable to assume that the same import cargoes will continue to be imported into the region from Asia moving forward - there has been volume 100 growth, with household goods rising by 6% per annum and industrial, auto & 0 vehicle parts up by 9.7% per annum Lumber Woodpulp Specialty crops Meat, fish & Basic metals Other goods poultry ▪ Similar trends noted for export activity - same key commodities generating the majority of container volume, albeit that the share of the largest groups has 2010 2019e reduced from almost 73% to just under 60% ▪ The export cargoes are still dominated by forest products and grains - this position will not change, based on the types of commodities produced in BC Data sources: Statistics Canada, World Bank, Port of Vancouver, WSP (served by Vancouver and Prince Rupert) Impact of COVID-19 - Snapshot from Oxford Economics Indicates GDP Drop in 2020 As of the start of April 2020, estimates of the possible impact of COVID-19 started to emerge, with GDP in both Canada and the US projected to decline, with Canada down by -6.5% and the US by -4.1%

▪ The full impact of COVID-19 is not currently known (as of April 2020). Information from Oxford Economics, April 13, 2020

▪ There have been some estimates in terms of GDP and the impact for 2020 - the tables are from Oxford Economics (OE) directly and have, therefore, been left in the format produced by this widely-accredited organisation.

▪ It can be seen from the OE information shown that GDP in 2020 will see widespread decreases on a global basis compared to 2019.

▪ These indications predict the US at around -4.1% and Canada at -6.5%, although both will rebound strongly in 2021.

▪ These are, of course, just one example of projected impact on GDP.

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Key Conclusions:

▪ The role of WSP here is not to produce information that can be supplied by specialist economists, but instead to summarise the details ▪ The subsequent forecasts provide alternative information about GDP projections for 2020 and beyond Forecast Methodology uses an In-depth Analytical Process for Robust Outputs A six-step approach is applied to generating future volume potential of North American volumes, Pacific West Coast and Pacific North volumes, before volumes for the Pacific gateway region and all VFPA Terminals are generated

Analytical Process

▪ A linear process with 6 distinct stages of analysis enable the scope to be addressed concisely with an increasing knowledge base developed throughout the project to further inform analysis. 06 ▪ This knowledge base can be reviewed and updated to measure performance and inform future commercial decisions. 05 ▪ Defined structure enables deliverables and emerging analysis to be shared through interim reports as Outturn Terminal Volumes & Market Shares required. Terminal breakdowns are applied, and volumes re- 04 contextualised within N. American market outlook 10

Apply Utilisation-Based Tariff Uplifts & Analyse Cost Comparison 03 Tariff uplifts are modelled based on forecast utilisation, with parallel built-up cost analysis undertaken (versus Prince Rupert) to understand cost headroom and potential for volume switching Scenario Testing 02 Bottom-up assessment & testing of specific scenario tests including: future pandemic and GFC, trade agreement cessation (USMCA), manufacturing focus, and competitive port behaviour.

Probabilistic / Stochastic Modelling Assessment Understanding of historical best/worst case scenarios vs ‘most-likely’ outcomes for input 01 to Monte-Carlo simulation. Understand risk profile based on output percentile ranges.

Bottom-Up Forecasts - VFPA & Prince Rupert Based on granular, flow-specific origin/destination data & correlation to most applicable GDP values under three specific macroeconomic scenarios (high case [open/green], base case [open/mixed], low case [protectionist/carbon dependent].

Top-Down Forecast Benchmarks - All-N. American Ports Based on total throughput & assessed GDP correlation to N. American GDP. Developed in order to provide context behind detailed Pacific North volumes & benchmarks of market shares etc. Regional Container Port Demand Forecasts - Total North America at 89.8 million TEU in 2050 Total North American container port demand to rise from 54.6 million TEU in 2020 to 89.8 million TEU by 2050 and 99.0 million TEU by 2060 - reflecting continued annual growth

▪ A summary of the forecast for North American total container port confirms continued North American TEU, Top-Down Forecast to 2060 growth throughout the forecast period, as the following confirms: ▪ In 2020, volumes of 54.6 million TEU are anticipated 120,000,000 ▪ This takes into account the decrease caused by the COVID-19 pandemic, from the 2019 total volumes of 60.0 million TEU. ▪ Over the longer-term, increases will occur, to reach: 100,000,000 ▪ 76.6 million TEU in 2035, annual growth since 2020 of 2.3% per annum ▪ 89.8 million TEU by 2050, annual increases of 1.1% per annum from 2035 ▪ This growth is occurring in highly-established economies in Canada and the US 80,000,000 and assumes that 59.9 million TEU in 2022 will have seen the likely impact of COVID-19 overcome 60,000,000 11 North American TEU, Top-Down Forecast Phase Summary

2010 2020 2035 2050 North American TEU 40,000,000 (Total, Top-Down Forecast) 44,151,142 54,621,009 76,551,247 89,775,091

CAGR Summary 2.15% 2.28% 1.07% 20,000,000

Key Conclusions: -

▪ North American total container port demand will overcome the COVID-19 impact

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2014 A 2014 2012 A 2012 in 2020 - probably by the end of 2022 and start of 2023 A 2010 ▪ Total Canadian and US container port volumes will continue to see annual growth, reaching 89.8 million TEU by the end of 2050 and 99.0 million TEU by North American TEU (Total, Actuals) North American TEU (Total, Top-Down Forecast) 2060 Regional Container Port Demand Forecasts - Total Pacific West Coast By Port (Share Held) Assuming that the western seaboard retains a share of 48% of the total North American port demand will see a total of around 47.0 million TEU reached by the end of the forecast period

▪ Development of the total Pacific West Coast by port has also been established to Pacific West Coast TEU, Top-Down Forecast by Port to 2060 2060. 50,000,000 ▪ These volumes are a proportion of the total North American container port market already established, equivalent to 48%. 45,000,000 ▪ An individual breakdown by each port is shown in the table. The decrease caused by COVID-19 is included for 2020, with the return to pre-COVID-19 levels anticipated in 40,000,000 2024. 35,000,000 Pacific West Coast TEU, Top-Down Forecast Phase Summary 30,000,000 Facility Metric Value Sea-Tac % of Pacific West Coast 13% 25,000,000 12 Vancouver % of Pacific West Coast 12% Prince Rupert % of Pacific West Coast 4% Pacific North Others % of Pacific West Coast 2% 20,000,000 Oakland % of Pacific West Coast 9% Los Angeles % of Pacific West Coast 33% 15,000,000 Long Beach % of Pacific West Coast 27% Pacific South others % of Pacific West Coast 1% 10,000,000

Pacific West Coast % of N. American Total 48% 5,000,000

Key Conclusions: -

▪ The impact of COVID-19 will cause a decline for 2020, followed by an initial

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2012 A 2012 2010 A 2010 rebound, but not until 2024 will pre-COVID-19 levels be reached on the Pacific West Coast Sea-Tac Vancouver Prince Rupert Pacific North Others Oakland Los Angeles Long Beach Pacific South others ▪ By the end of the forecast period, the western seaboard will see total port demand reach almost 47.0 million TEU Regional Container Port Demand Forecasts - Total Pacific North by Port (Share Held) Impact of COVID-19 is expected to see a decline in total regional port demand for 2020 and take at least 2 years to recover - thereafter, there will be annualised increases across this region’s ports throughout the long-term forecast to 2060

▪ In 2019, the Pacific North region if including Sea-Tac, Vancouver and Prince Rupert Pacific North TEU, Top-Down Forecast to 2060 generated total port demand of 8.2 million TEU. 16,000,000 ▪ If the current share of this market is retained by each port, then by 2060 the individual port totals will have risen to: ▪ Vancouver: 5.60 million TEU 14,000,000 ▪ Prince Rupert: 1.68 million TEU

▪ Sea-Tac: 6.23 million TEU 12,000,000 ▪ The impact of COVID-19 can be seen in the anticipated demand for 2020, with pre- COVID-19 levels reached during 2022 and into 2023 10,000,000

Pacific North TEU, Top-Down Forecast Phase Summary 13 Facility Metric Value 8,000,000 Sea-Tac % of Pacific North 46% Vancouver % of Pacific North 41% 6,000,000 Prince Rupert % of Pacific North 12%

Pacific North % of N. American Total 14% 4,000,000

Key Conclusions: 2,000,000

▪ Once the impact of COVID-19 is overcome, continued and annual growth is anticipated for the Pacific North region -

▪ The 2019 regional total of 8.2 million is expected to reach just over 13.5 million

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2014 A 2014 2012 A 2012 TEU by 2060 - very long-term annual growth of 1.2% per annum A 2010 Sea-Tac Vancouver Prince Rupert Pacific Gateway Ports Compete for Two Distinct Markets - Local Canada & Discretionary Areas Vancouver serves local import/export markets, but also discretionary regions in North America - Prince Rupert specialises in handling primarily import containers straight to intermodal rail and onward to the US Midwest and more distant Canadian areas

Summary of Competition for Pacific Gateway Ports of Prince Rupert / Vancouver Location of Prince Rupert and Vancouver and WCNA Competing Ports

Local Hinterlands Discretionary markets Prince Rupert British How served ▪ Truck market - generally ▪ Intermodal rail markets, Columbia within 350 miles over 550 miles Vancouver Relevance to Vancouver ▪ Vancouver - 33% is ▪ Vancouver - 66% truck/local moves by rail to the US, >550 ▪ Prince Rupert’s split has Central and Eastern Seattle/Tacoma miles: Rail grown, from 5% to 15% Canada Washington/ currently ▪ Prince Rupert - US Oregon discretionary is 66% <350 miles: and Central and Eastern Truck 14 Canada is 33% Competition ▪ Localised terminals ▪ PNW of Seattle-Tacoma ▪ San Pedro ports of Los Angeles/Long Beach North ▪ Vancouver competes for two different ▪ Oakland California markets in Canada and the US: ▪ Major ECNA ports - i.e. NY/NJ, Virginia. 1. Local Canadian truck markets - Oakland generally within 350 miles of the Savannah etc port and serving the local population South demands of Western Canada. Key Conclusions: California 2. Discretionary markets - this competition is ongoing between all ▪ Competition exists in both of Vancouver’s key markets - local and discretionary Los Angeles/Long Beach ports looking to serve key US discretionary areas through intermodal rail, which comprise ▪ Existence of competing facilities for local and discretionary will continue - large US Midwest hinterlands in key though unlikely to see any new ports being built in this mature economy areas, including Atlanta, St Louis, Cincinnati, Chicago, Memphis and Columbus/Ohio Valley. Capacity (100%) at WCNA Container Ports, 2020-2025 and the Position in 2030 & 2035 Some additional capacity - new Seattle’s T5, Prince Rupert to have commenced on its Phase II expansion and both GCT Vanterm and DP World Centerm complete projects - the major regional initiative will be RBT2 in 2029 (Phase 1) and 2035 (Phase 2)

▪ After 2020, there are known investment plans at WCNA ports to add capacity: Confirmed Capacity Expansion at Container Ports in ‘000 TEU, 2020 - 2025 ▪ Prince Rupert’s second phase, as it builds to 2.0 million TEU from 2023. 35,000 ▪ In Vancouver, DP World Centerm to add 600,000 TEU by 2022, with GCT Vanterm capacity up by 25% from 2022. The decline of 400,000 TEU per annuum in 2023 is 30,000 due to the FSD stopping container handling (due to its limitations of vessel sizes) 25,000 P.Rupert ▪ Seattle will have opened its new T5 in 2020 20,000 Vancouver ▪ San Pedro ports will continue with additional, small, yearly increments. Sea-Tac ▪ Longer-term estimates become more difficult, due to possible delays to construction, 15,000 Oakland economic conditions etc, so an estimate for 2030 includes: 10,000 ▪ Prince Rupert has unconfirmed plans for 4.0 million TEU, but are not included. LA / LB 5,000 ▪ Pier 300 in LA will have added an estimated 500,000 TEU p.a. by 2027. - 15 ▪ RBT2 current estimates are put at 2029 for Phase 1 and 2035 for Phase 2, though 2020 2021 2022 2023 2024 2025 it is crucial that the construction process begins as soon as possible

Development of Confirmed Capacity at WCNA Ports in ‘000 TEU, 2020 - 2025 Planned / Known Capacity Plans by WCNA Port in 2030 & 2035

Port 2020 2021 2022 2023 2024 2025 35,000 30,000

P.Rupert 1,500 1,500 1,500 2,000 2,000 2,000 25,000

20,000 Vancouver 4,600 4,600 5,350 4,950 4,950 4,950 2030 15,000 2035 Sea-Tac 7,350 7,350 7,350 7,350 7,350 7,350 10,000 5,000 Oakland 3,700 3,700 3,700 3,700 3,700 3,700 - P.Rupert Vancouver Sea-Tac Oakland LA / POLB LA / LB 27,320 27,840 28,360 28,880 29,410 29,630 Conclusions of Localised Market Competing Ports & Terminals GCT Deltaport faces major capacity issues due to lack of traction, while other facilities expand - notably Prince Rupert, DPW Centerm and GCT Vanterm. Fraser Surrey Docks is developing a strong niche for smaller container vessels

Port / Terminal GCT Deltaport - GCT Vanterm - Vancouver DPW Centerm - DPW Fraser Surrey Docks DPW Prince Rupert Vancouver Vancouver - Vancouver Strengths ▪ Large scale, modern ▪ Capacity expansion ▪ Support of global ▪ Established, mixed-use ▪ Very strong recent terminal plans operator, DP World facility offering additional container growth ▪ Good intermodal on- ▪ Confirmed capacity container capacity ▪ Support of global dock connectivity expansion plans ▪ Support of global operator, DP World ▪ Recent DREP project ▪ Joint synergies with operator, DP World ▪ High-quality, modern improved rail facilities Prince Rupert ▪ Container volumes rising infrastructure and deep water ▪ Excellent location for shipping Weaknesses ▪ Needs more capacity - ▪ Downtown location ▪ Downtown location ▪ More limited water depth ▪ Lower volumes of local unlikely until at least ▪ Berthing for only 1 ▪ Size of ship that can call traffic / local demand 16 2029 vessel ▪ Less export activity ▪ DP4 expansion a big environmental challenge Opportunities ▪ Increase volumes - ▪ Could see additional ▪ Growth in future ▪ Useful option for smaller ▪ Transload activity from especially to US volumes as Deltaport container volumes container ships Canadian Tire - Midwest, but linked to congested anticipated ▪ Provides additional expected to increase extra capacity ▪ Potential for terminal container capacity ▪ Transloading could also capacity densification aid export potential ▪ Existing liner contract ▪ Continues to expand with SM Lines number of liner users ▪ CN is incentivised to grow volumes Threats ▪ Lack of traction on ▪ Delays to capacity ▪ Any delays to capacity ▪ Longer-term, increase in ▪ Delay in generating expansion plans - expansion plans plans ship sizes could see additional capacity ongoing since 2005 ▪ Phase 2 capacity seems calls precluded ▪ Earliest for new capacity unlikely due to berth ▪ Existing liner contract of 2029 unrealistic as no restrictions with SM Lines impact assessment reports yet filed Conclusions of Discretionary Market Competing Ports

Port / Terminal LA / LB / Oakland Seattle-Tacoma Pacific Gateway North Atlantic Region South Atlantic Region

Strengths ▪ Large-scale, very well- ▪ Established option for ▪ Growing volumes - very ▪ NY/NJ invested in ▪ Strong volume growth at established gateway serving markets strong for Prince Rupert additional intermodal - Savannah - supported option ▪ Aggressive and Greenville Yard by good intermodal and ▪ Estimated 50% of competitive support of ▪ NY/NJ remains a “must- DCs volumes moving to Canadian railroads call” port in region, ▪ Savannah increasing rail discretionary markets ▪ CN incentivised to grow regardless capabilities from 2020 ▪ Infrastructure in place - Prince Rupert volumes ▪ Virginia has excellent ▪ Charleston seeking to be on-dock rail and intermodal connectivity more active in serving connectivity to Class 1 US Midwest too railroads Weaknesses ▪ History of labour ▪ US railroads less ▪ Vancouver Port Authority ▪ NY/NJ an expensive ▪ Reliance on US railroads instability focussed on intermodal inability to develop option for shippers (CSX & Norfolk ▪ Intermodal provided by ▪ Seattle-Tacoma losing Deltaport capacity ▪ Halifax and Montreal Southern) US railroads share of Pacific North niche options for Asian ▪ Panama Canal limits 17 ▪ Highly expensive costs - West market to cargo size of All-Water routing i.e. terminal charges, rail Vancouver and Prince ▪ Panama Canal limits ships costs Rupert size of All-Water routing ▪ Complicated rail profile ships exiting port region

Opportunities ▪ Volumes to grow in line ▪ T5 at Seattle will allow ▪ Prince Rupert and DPW ▪ Recent investment in ▪ Continued market with overall market - not 18,000 TEU ships to call Centerm expansion Heartland Corridor by penetration from extra market share - improve plans NS improves access to Savannah competitiveness ▪ Prince Rupert volume US Midwest growth continuing ▪ Ship size growth on All- ▪ Incentivised CN Water via Suez Canal Threats ▪ From Pacific Gateway ▪ Limited local hinterland ▪ GCT Deltaport lack of ▪ North / South Atlantic ports do not operate collectively - ports plus no access to capacity traction compete with each other and all other ports Canadian market (via ▪ ECNA largest ships still smaller than WCNA - and rail) expected to remain so at 14,500 TEU compared to 18,000 TEU for WCNA - for foreseeable future Container Ship Size Developments – Global Trends Ever-larger ships being ordered – cascading occurring on all secondary routes, including trades involving WCNA ports

▪ Shipping lines seek greater economies of scale through larger vessels. Container Ship Sizes ▪ Further rise in containerisation not restricted by technology or knowledge but ability to fit through the various canals. Panamax (1980) LOA (m) : 250 3,000-4,000 TEU Beam (m): 32 ▪ New vessels struggling with the lack of infrastructure at various ports, with only a few capable Draft (m)*: 12.5 of handling their huge size and cargo. This initially leads to an increase in transshipment until Post Panamax (1988) LOA (m) : 285 4,000-5,000 TEU Beam (m): 40 such time as more deep-water terminals are developed in the region (such as N.Europe). Draft (m)*: 13 Post Panamax Plus (2000) LOA (m) : 300 Beam (m): 43 ▪ A lack of deep-water capabilities in a region, will drive a continued increase in transshipment 6,000-8,000TEU and size of feeder vessels, primarily for European trades. Draft (m)*: 14.5 New Panamax (2014) LOA (m) : 366 Beam (m): 49 12,500 TEU ▪ Significant investment in port infrastructure to accommodate these large vessels set to Draft (m)*: 15.2 continue for the foreseeable future. Post New Panamax (2006) 15,000 TEU & LOA (m) : 400 ▪ The majority of the ULCSs are deployed on the main arterial trade lanes direct from the Far Triple E (2013) Beam (m): 59 Draft (m)*: 15.5 East to Europe. 18 18,000 TEU New Generation LOA (m) : 430 ▪ For ports, in addition to providing infrastructure for larger ships, there is a need to efficiently Beam (m): 59 23,000 TEU handle rising container exchanges per ship call, including storage, rail capacity etc. Draft (m)*: 15.5

▪ Cascading onto other routes – particularly from Asia-Europe to Asia-WCNA - ongoing * Fully laden draft. Vessels require 10-15% under keel clearance at the berth.

8,000 TEU to 14,000 TEU 14,000 TEU to 18,000 TEU 18,000 TEU to 23,000 TEU

E Class Maersk: 397m, Triple E Maersk: 400m, 23,000 TEU: 400m, 24 rows, 420m, 24 rows, 16.5m 22 rows, 16m 23 rows, 16m ▪ Port around the world were sized to accommodate ▪ Cranes were extended to 23 rows ▪ Declining benefits of scale for vessels the E class Maersk by providing 16m of draft ▪ No change required for berth or channel drafts >20,000TEU ▪ Cranes were upgraded to 22 rows ▪ Berth length should be able to accommodate but cranes would need 24 rows and deeper draft Small Reductions in Trade Lane Ship Capacity and Liftings in Eastbound Transpacific in 2019 Eastbound Transpacific volumes and utilisation have been increasing - further gradual increase in vessel size anticipated towards 18,000 TEU ships for WCNA ▪ In 2018, Transpacific liftings of loaded traffic to Canada increased by almost 7% Estimated Transpacific Eastbound Capacity Utilisation: 2009 – 2019 (‘000 TEU) compared to 2017, to reach 1.31m TEU with volumes moving ahead of possible tariff issues and inventories stocked. In 2019, liftings dropped to 1.27m TEU. 1,600.00 120% ▪ Vessel capacity has reflected the trend. Utilisation has remained at very high levels 1,400.00 from 2010 (after the impact of the Global Financial Crisis) and despite continued 100% vessel size increases. 1,200.00 ▪ 80% It seems likely that vessels will increase beyond 14,000TEU and towards 18,000 1,000.00 TEU, then VFPA terminals will need to be able to handle these larger ships. 800.00 60% ▪ Despite all of the Vancouver terminals (and Prince Rupert) being common user, they have succeeded in attracting significant – and ever-increasing – discretionary 600.00 US transit business on the Eastbound transpacific routes away from the San Pedro 40% terminals that are actually owned by the shipping lines 400.00 20% 200.00 19 Key Conclusions: - 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

▪ Utilisation in Eastbound Transpacific has been rising - along with volumes - with Liftings Capacity Utilisation 96% estimated for 2019 ▪ Impact of COVID-19 will be seen in 2020, due to removal of ships and blank sailings - however, it is expected to return to equilibrium thereafter in 2021

Summary of ‘000 TEU 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019f Estimated Transpacific Eastbound Liftings 800 1000 1000 1050 1100 1150 1175 1200 1300 1310 1273 Activity to 2019f Capacity 1000 1000 1100 1075 1200 1200 1350 1300 1350 1375 1330

% Utilisation 80% 100% 91% 98% 92% 96% 87% 92% 96% 97% 96%

Source: WSP / PR News Service / Alphaliner Recent Developments in Transpacific Trades by Major Shipping Lines Major lines of Maersk, MSC and COSCO have seen volumes drop in 2019, whereas Hapag-Lloyd, ONE Alliance, Evergreen and SM Lines have all experienced growth of varying magnitudes

▪ Transpacific container volumes for 2019 confirmed a 2.8% drop in trade lane volumes. Transpacific Full Liftings for Key Shipping Lines, 2010-2020 YTD in TEU This impacted ports, with many WCNA facilities seeing low or a lack of growth. COVID-19 expected to see further declines in the first half of 2020, at least. 3,000,000 2,500,000 VFPA Volumes Lifted – Full and Empty – 2008 to 2020 YTD in TEU 2,000,000 1,500,000 3,500,000 1,000,000 3,000,000 2,500,000 500,000 2,000,000 - 1,500,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1,000,000 500,000 Hapag Lloyd ONE COSCO Evergreen SML CMA CGM - VFPA Volumes - Empty VFPA Volumes - Loaded YML OOCL MSC Maersk OTHERS

20

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009 2008

Total Liftings (Full and Empty) for Key Shipping Lines, 2010-2020 YTD in TEU Volume Changes by Major Operators in Transpacific

2020 YTD 2020 (Jan-… 3,500,000 Trades, 2018 vs 2019 3,000,000 Winners + / - in % Losers + / - in % 2,500,000 2,000,000 Maersk Line -17.7% Hapag Lloyd +7.6% 1,500,000 1,000,000 MSC -2.8% ONE Alliance +43.0% 500,000 - COSCO -1.9% Evergreen +11.7% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Hapag Lloyd ONE COSCO Evergreen SML CMA CGM SM Lines +91.0% YML OOCL MSC Maersk OTHERS International ISO Containers via Intermodal Network in North America Continues to Grow Longer-term growth in intermodal network for international containers is around 3.0%, but Q4 2019 saw a big decline of -9.1% over Q4 2018 and industry concerns that COVI-19 will be impacted based on port throughput dropping in 2020

▪ North America’s intermodal system for carrying international containers is determined Development of Intermodal Container Market in North America Since 2000 by the following: Year Number Intermodal ▪ The capacity of on-dock and near-dock container terminals. ▪ The adequacy of access between the terminals and intercontinental service ‘000 containers % of total activity network. 2000 5326.5 51.5% ▪ The physical capacity of the relevant rail network. ▪ The capacity of major intermodal terminals able to serve the key areas of 2005 7915.3 58.0% demand, such as the US Midwest and eastern North America. 2010 7250.4 54.1% ▪ Considerable investment has been made (and is continuing) in on-dock intermodal systems at the major Pacific Gateway, US Pacific Northwest and San Pedro ports, 2011 7451.6 53.0% along with ECNA ports. 2012 7645.9 51.5% ▪ The number of international containers on the North American intermodal network continues to increase: 2013 7823.1 50.3% ▪ From 5.32 million ISO containers in 2000 to 9.0 million for 2019. 2014 8166.0 50.2% ▪ Consistent, longer-term growth of 3.0% per annum for the period 2000 to 2019. 2015 8501.9 50.1% ▪ Continuing shorter-term growth of 2.8% per annum between 2010 and 2019. 2016 8541.0 50.0% ▪ ISO international containers continuing to represent around 50% of total activity of intermodal networks of railroads. 2017 9067.6 50.1%

Key Conclusions: 2018 9558.5 50.0%

2019f 9300.0 50.0% It is imperative that any port using the intermodal networks of North American railroads needs to offer high-quality facilities CAGR – 2000 - 2019f 3.0% per annum

Long-term growth continues but Q4 2019 saw a fall of -9.1% compared to Q4 2018 CAGR – 2010 - 2019f 2.8% per annum and just over -2.2% for the full year - even allowing for Q4 2018 being ramped-up ahead of US-China trades issues, the drop in Q4 2019 is substantial Source: IANA Data Largescale On-Dock Intermodal Rail Facilities Offered at Major Competing WCNA Terminals To compete for discretionary markets, ports and terminals must ensure access to sufficient intermodal rail facilities - Pacific Gateway intermodal rail is competitive and capable of meeting current requirements, but as volumes grow, so must intermodal rail capacity

LA - Rail is 27% of Cargo but 33% Share Openly Being Targeted Long Beach – 60 Weekly Rail Departures

Rail Cars working track Rail cars storage track Terminal Tracks Storage – Rail Cars Terminal – – storage capacity 8 x 823m (working) 64 (working) Pier 300 8 x 823m (storage) 64 (storage) Pier T 85 89 12 x 762m (working) 96 (working) Pier 400 Pier G 16 38 6 x 1951m (storage) 126 (storage)

Terminal Island 4 x 701m (working) 28 (working) Pier F 28 0 (Evergreen/NYK Line) 5 x 701m (storage) 35 (storage) Pier J 83 0 3 x 914m (working) 27 (working) Yangming/China Shipping 3 x 914m (storage) 27 (storage) Pier A 47 16 On-dock facilities under development as part of new terminal 22 Trapac Terminal investment Pier B Plans known to re-develop on-dock facilities

Seattle-Tacoma – 50+ Weekly Rail Departures Pacific Gateway – Targeting US Hinterlands

Port Key Summary Terminal Key Summary

Being modernised as part of investment, but Seattle T5 Vancouver – served by CN and CPR – 1158m of track exists Deltaport 8 tracks, 8534m Seattle – T18 (SSA) 10-acre site with 2286m of track

Tacoma North Intermodal Yard (Port – 26-acre site with 8153m of track Vanterm 9 tracks, 2926m Authority) Almost 2,450m of trackage available for on- Centerm Tacoma – PCT (PAG) 25-acre site with 7176m of track dock intermodal rail activities

7 working tracks (5500m), 6 storage tracks Prince Rupert served by CN Tacoma – WUT (Hyundai) 22.5-acre site with 5140m of track – (6100m)

Source: All information obtained directly from each port/terminal operator The US Midwest is the Key Market for all Major Container Ports on all Coasts of North America Of the competing ports, all have some existing networks in place - the effectiveness of transport costs and efficiencies are crucial to attracting this cargo

▪ The US Midwest markets represent a major area that a wide range of different ports Indication of Typical Share of Port Volumes Moving to Discretionary Markets in all compete to serve. North America

▪ A combination of intermodal rail costs, sufficient on-dock rail capacity to build trains 100% and an efficient level of service from railroad operators are all key components that 90% will allow a port to compete for this market. 80% 70% 60% ▪ As an indication, the share of container traffic to this wide-ranging discretionary region 50% varies by port, although there are substantiating reasons supporting the position. 40% 30% ▪ A total of 95% of Prince Rupert rail volumes are moving by rail, but some of the total is 20% going to Canadian markets (i.e. Prairies, Ontario, etc.). Around 66% moves to just the 10%

US Midwest markets. 0% LA/LB

Role of Key Competing Ports for US Midwest Market Share NY/NJ Montreal

23 P.Rupert

Savannah Vancouver Port Rationale for Midwest Markets Charleston

LA/LB Traditional role, but large local markets also need to be served Key Conclusions

Vancouver Growing share due to good CN/CPR support - but port utilisation increasing and needs to ensure not impacted by congestion The desire to keep serving the US Midwest markets by major competing ports will continue Prince Rupert Designed to be an intermodal port - strong volume growth, helped by competitive CN intermodal rates. Terminal expansion The existing ports and supporting logistics networks, including intermodal rail, are required - as planned all well-established and barriers to entry are high – even for existing ports. Savannah High rail/distribution investment, continues to target shippers directly, investment in infrastructure. Successful strategy It is not possible to compete for US Midwest markets cargo without cost-effective intermodal rail and full railroad support NY/NJ Increasing rail capacity, but very large local market offers demand - ships have to call regardless Competition for US Midwest markets between ports will remain fierce Charleston Increasing capacity and targeting Asian services Montreal Full vessels calling to port, strong local markets, full ships Intermodal rail capacity availability to be a crucial competitive component discharge/load, good inland terminal location

Note: US Midwest market includes areas including Atlanta, Memphis, St Louis, , Cincinnati, Chicago and Ohio Valley Conclusions of Intermodal in North America & Pacific Gateway Perspective

Strengths Weaknesses Opportunities Threats

▪ Established and largescale market in ▪ US Pacific North West intermodal issues ▪ Transloading for Pacific Gateway region ▪ Ability of ECNA ports to compete to North America, with high number of include services from less intermodal- - especially if Prince Rupert can develop serve key discretionary markets international containers moving incentivised US railroads the supporting facilities ▪ Severe weather can be a short-term ▪ Pacific Gateway are supported by highly ▪ Transloading is more widely-adopted in ▪ Vancouver already has some transload issue in Western Canada in Q1 each commercialised Canadian railroads US than Canada at present - partly due facilities - can continue to serve both year - though CN and CP adopt to servicing US domestic trades to/from imports and exports contingency plans ▪ GCT Deltaport recently expanded Alaska and Hawaii intermodal rail facilities ▪ Main costs associated with transloading ▪ For Vancouver, near-port lumber export ▪ Intermodal activity has some seasonal not prohibitive vs direct deliveries - a transload services in Prince Rupert pose ▪ IANA data shows that intermodal activity differences, so ports have to gear-up for choice driven by specific shipper a competitive threat (particularly given for international containers continuing to peak periods preference higher land and labour costs in 24 grow - long-term of around 3% per Vancouver) annum since 2000 ▪ Q4 2019 and Q1 2020 saw confirmed declines in international containers ▪ Prolonged impact of COVID-19 - but all ▪ Increased intermodal rail capacity at moving via intermodal rail competing ports in North America for US both Pacific Gateway ports discretionary markets will see same ▪ COVID-19 will further impact intermodal trends rail volumes Methodology - Identify Routes, Apply Shipping, Port & Inland Costs The methodology includes calculation of the shipping costs, port handling costs, road/rail transportation costs and key drivers for the cost calculations.

Shipping Costs Identify Routes to be Stevedoring/Port Road & Intermodal to/from major Cost Conclusions Dues Rail Transport Served markets

▪ The comparative built-up costs for competing ports for a range of locations from both East and West coast routings is generated to help assess the competitiveness of Vancouver SHIPPING COSTS ▪ Shipping costs are from WSP’s current in-house shipping costs database for baseline shipping costs for operating deepsea services. ▪ While current charter rates may be lower than the costs calculated in this analysis, for longer term evaluation actual trading costs give the best insight into competitive structures, if the following is used: ▪ Daily capital charge of the vessel (capacity, new build price, lifetime, average deployment, long-term profitability, residual value) 25 ▪ Voyage time (distance, sailing speed, loading/unloading rates, time in port, time for Suez Canal passage) PORT & HANDLING ▪ Operational characteristics (average capacity utilisation, TEU/box ratio) COSTS ▪ Operational Costs (Maintenance & Insurance, Staffing, Fuel Consumption, Port Dues) ▪ Additional canal charges are included for transiting the Suez Canal ▪ Port handling charges are the average of the import/export tariffs published for a laden 40-ft container. For the gateway ports, the charges include the stevedoring and gate charges for a container. ▪ The tariffs applied in the analysis assume volume discounts for a large shipping line and local practices based on experience in the region. ▪ For inland transport costs a tailored calculation model is set-up to estimate the trucking and rail costs for a variety of trips. These costs are INLAND subsequently compared with quotations obtained from local trucking companies. The road transportation cost calculations take into account: TRANSPORT ▪ Daily capital charge of the truck (new build price, lifetime, average deployment, long-term profitability, residual value) COSTS ▪ Trip time (Distance, road conditions and average achievable driving speed, time at border crossings, resting time allowance, loading and unloading time) ▪ Operational Costs (Maintenance & insurance of truck, labour costs) ▪ Average Fuel Price for each trip (average of diesel prices for the countries transited) ▪ Empty return charge to cover for imbalances between import and export of goods to/from certain locations. ▪ Rail/intermodal costs are based on a fee per km; discharge fee and then a final road haulage figure calculated in the same way as above. Built-Up Costs Conclusions - Current Ship Deployments: Vancouver Highly Competitive Vancouver is a cost-effective port option for serving Chicago from Shanghai, as well as being highly competitive for Toronto and Memphis under current ship deployments

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ The results of the total built-up cost comparisons of shipping a 40ft container from Cost Comparisons for Shipments ex Shanghai by Port, in US$/FEU Shanghai to five inland destinations in the US and Canada via nine US/Canadian container facilities is shown. 3500 ▪ The choice of ports covers both the direct Transpacific sailing route and use of the Suez Canal option to ECNA 3000

▪ These cost comparisons identify that Vancouver is highly competitive for serving 2500 Chicago and also Toronto. 26 2000 ▪ Also, for other locations, such as Memphis, the cost differential is quite marginal, often under 5%, so Vancouver is still considered as a cost-effective option. 1500

1000 Top 3 Most Cost-Effective Routings ex Shanghai 500 Rank Chicago Toronto Memphis Montreal Akron 1 Vancouver NY LA NY NY 0 Chicago Toronto Memphis Montreal Akron 2 NY Norfolk Vancouver Norfolk Norfolk Vancouver P. Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax 3 Seattle Vancouver Savannah Halifax Savannah

Key Conclusions: Note: Seattle and LA/LB are not included for transport costs to Toronto and Montreal due to a lack of intermodal services available, a lack of cargo moving to these areas and a need for cross-border trucking costs (data which is unavailable) ▪ There are a range of different sailing and port options to access Chicago and other key locations from Shanghai, using both coasts of North America ▪ The inland cost is a major factor in determining overall price

▪ Vancouver is the lowest cost option for Chicago and the cheapest WCNA port for Toronto Vancouver Will Remain a Competitive Cost Option for Key Discretionary Areas Vancouver remains cost efficient compared with competing ports in the US and Canada particularly for inland destinations of Chicago, Toronto and Memphis

▪ Vancouver remains cost efficient compared with competing ports in USA and Canada • Frequency, reliability and capacity of intermodal services – particularly for distances of particularly for inland destinations of Chicago, Toronto and Memphis, although the >500km it is likely that the containers will be moved from the quay via rail. In order not access of bigger vessels into LA has improved its performance in all instances from to lose the benefit of a quick discharge on the quayside, it is imperative that the rail Singapore and Shanghai. providers have the necessary capacity and frequency of services to ensure that the containers are not left waiting for a connection. ▪ For units destined to Montreal and Akron, NY/NJ terminals continue to offer the most cost-effective routes. • Frequency, reliability and capacity of road haulage – the same is true for road haulage options for distances <500km. ▪ Although larger vessels are expected to be deployed on the Trans-Pacific services in both the short and long terms, the overall result of the cheapest option, remains more • Further volume discounts are also possible to offer to major clients in order to reduce or less the same, proving that the primary aspect of the built-up cost calculation their built-up costs and guarantee some core port volumes. remains the inland haulage costs, rather than any deep-sea saving of attracting and deploying larger tonnage. Invariably, the destinations favour the closest facilities in terms of cost-effectiveness. 27 ▪ The only exception is the size of vessels accommodatable in LA, which has improved the ranking of the port for all destinations over time, although in reality the cost differential with other competing ports including Vancouver remains marginal.

▪ Although this Section has concentrated on the cost effectiveness of various cargo Key Conclusions routings, it is important to stress that this is not the only factor that shipping lines will assess in order to determine which ports they serve, although in truth these too are also driven by financial requirements, because of the expensive nature of the ULCSs ▪ Vancouver remains cost efficient compared with competing ports in the US and they operate: Canada, including for inland destinations of Chicago, Toronto and Memphis

• Terminal efficiency, i.e. the number of containers that can be handled per hour. This ▪ Although larger vessels are expected to be deployed on Transpacific services in affects the amount of time spent in port and therefore the cost of a port stay. The both the short and long terms, the overall result of the cheapest option remains more productive a port can be on a regular and reliable basis, the cheaper the port largely constant, proving that the primary aspect of the built-up cost calculation stay and also the slower a vessel needs to sail between ports to meet the next remains the inland haulage costs, rather than any deep-sea saving berthing window, giving further fuel savings. ▪ The challenge for Vancouver will be to ensure that it can continue to offer • Customs clearance – it is again important to ensure that once a container has been infrastructure that can support the transport cost position it enjoys - water depth discharged, it is not delayed unnecessarily with customs and security checks that for large ships, berthing space, efficient load/discharge operations, good delay the final delivery date/time of a consignment, which could (depending on the intermodal rail connectivity/service/prices more discretionary hinterlands commodity) effect the output of a factory production line. Built-Up Costs Confirms Competitiveness of Vancouver Vancouver is highly competitive to inland discretionary markets - its strong historic volume growth helps to prove this conclusion. Moving forward, it is very reasonable to assume that volumes to more distant markets will continue to expand due to cost effectiveness

Strengths Weaknesses Opportunities Threats

▪ Vancouver remains cost efficient ▪ Increasing ship sizes to 18,000 TEU to • Ability of Vancouver to compete with ▪ Prince Rupert could potentially adjust compared with competing ports in US LA/LB will lower some element of overall Memphis is key - port is either second or handling costs to compete, if necessary and Canada. cost - but it is not a substantial third most cost competitive US difference in total costs population moving more southerly will ▪ Longer-term, Vancouver as a port will ▪ Vancouver is the lowest cost option for ensure this location remains important to become more congested, so lack of Chicago - and position expected to overall demand capacity expansion a big risk and needs remain unchanged in future to be avoided • Vancouver expansion will enable a ▪ Vancouver also competitive (within three continuation of cost-effective transport ▪ CN remains incentivised to continue to 28 cheapest ports options) for Toronto and services to these key inland locations support Prince Rupert with efficient, Memphis cost-effective intermodal rail services

▪ Both Pacific Gateway ports benefit from excellent intermodal rail service

▪ Key discretionary markets will continue to represent key locations for Vancouver to serve Qualitative Evaluation of Competitive Factors Endorses Vancouver’s Market Position While not all factors are of equal weight and vary in significance between customers, this assessment if indicative of the qualitative evaluation undertaken by shipping lines and shippers of cargo when evaluating port choice and terminal investment

▪ Vancouver ranks highly in this qualitative assessment, in almost all sectors: Relative Competitive Position of VFPA vs Pacific West Coast Ports

▪ Physical Capability & Planned Capacity Developments: VFPA P. Rupert Sea-Tac San Pedro ▪ Vancouver - Very good facilities for ship size accessibility and available capacity – particularly at Deltaport, but must develop RBT2 project to maintain effectiveness Infrastructure & terminal and avoid congestion. capabilities **** **** *** ***** ▪ Sea-Tac - Less deepwater capacity and a more fractured terminal structure and T5 is only major planned investment. Planned capacity ***** ***** ** **** ▪ Prince Rupert - recent investment made by then new owner, DP World, with developments known future plans, albeit remain unconfirmed and will bring some challenges to Productivity of terminals develop. **** **** *** *** ▪ San Pedro - largest terminals on the Pacific Coast, with a substantial critical mass of volumes and customers, with large local markets to serve. Middle Harbor in Delivered costs to US 29 Long Beach is the major terminal capacity project, but continued reluctance to Discretionary Markets **** **** *** *** embrace automation continues. Intermodal capacity ▪ Productivity factors: **** **** *** **** ▪ Vancouver - Good use of land and operating density at terminals Import/export balance ▪ Prince Rupert - Traditionally operated at higher levels per crane, so has been an ***** ** *** **** area needing improvement Local demand ▪ Sea-Tac - Needs to improve utilization, not helped by the use of chassis at many **** ** **** ***** US terminals, especially on the Pacific West coast Existing customer base ▪ San Pedro - fully aware of the need to improve productivity as a solution instead of simply looking to build further terminals at a much higher cost. Achieving these **** **** ** ***** objectives will not be without challenges, especially with regard to the unionised workforce.

Total 34 29 23 33

% 85.0% 72.5% 57.5% 82.5% Real GDP Growth in North America – Continued Short-to-Medium Term but COVID-19 Impact COVID-19 impact is widely expected to be restricted to the short term, with significant negative GDP movements in 2020 offset to a degree by extra-ordinary growth in 2021, after which growth is expected to return to pre-pandemic trajectories.

▪ Real GDP growth has been maintained in both the US and Canada since the Global Financial Real GDP Growth - North America (%) Crisis was resolved during 2009. This has remained within a range of +0.7% in Canada, 2015, and +3.1%, Canada, 2011. 6.0%

▪ The WSP volume forecast model disaggregates inbound TEU flows based on granular territory 4.0% origin data (presented as flows to Western Canada, Other Canada, and US), and outbound flows by trade partnerships at a national level (presented as outbound flows from the same 2.0% origins). 0.0% ▪ Using GDP as the explanatory variable in forecasts therefore requires equally granular input data. Territory-by-territory GDP data has been sourced from Statistics Canada and analysed -2.0% outbound trade proportions by trade partner in order to robustly calculate weighted GDP values to drive outbound flow volumes. -4.0% ▪ Regional GDP forecasts are not reliably forecast, and have been derived from a calculation of Anticipated COVID-19 Impact 30 historical growth rates versus that of Canada overall, with Western Canada growth to be -6.0% Canada + 0.46%, and Other Canada to be Canada -0.26% from the following: -8.0%

▪ 2010-2019 CAGR: Canada 2.12%

2049

2047

2045

2043

2041

2039

2037

2035

2033

2031

2029

2027

2025

2023

2021

2019

2017

2015 2013 ▪ 2010-2019 CAGR: Western Canada 2.57% 2011 ▪ 2010-2019 CAGR: Other Canada 1.86% Western Canada Other Canada Canada United States Canadian GDP Growth Versus West & Other Canada, Index Values 2010=1 Real GDP Growth Values 1.3 2020 2021 2022 2023 2024 2035 2050 1.2 Western Canada -5.7% 4.7% 2.2% 2.2% 2.2% 1.9% 1.7% 1.1 Other Canada -6.5% 3.9% 1.5% 1.4% 1.4% 1.3% 1.2% Canada -6.2% 4.2% 1.7% 1.7% 1.7% 1.5% 1.4% 1 United States -5.9% 4.7% 1.6% 1.6% 1.6% 1.5% 1.3% 0.9 CAN Export 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Partners -0.3% 7.3% 4.7% 4.7% 4.6% 2.5% 2% USA Export Western Canada Other Canada Canada Partners -1.2% 6.1% 3.9% 3.9% 3.9% 2.0% 1.8% NB: various forecast sources have been considered, our base case applies the most recent IMF World Economic Outlook (April 2020) for 2020 & 2021 growth values, and the most recent medium-term outlook (October 2019) for values from 2022 to 2024 inclusive. From 2025 values are manually softened to reflect uncertainty in the production of a conservative forecast. VFPA Multiplier Calculations & Forecast Phases Historical GDP:TEU multipliers since the end of the GFC have been analysed, and anomalous values removed in order to return short term forecast multipliers. In order to reflect uncertainty in future forecast years, multipliers are softened over three phases throughout the forecast period: short term (2020-2025: historical avg. exc. anomalies), medium term (2035-2050: 0.8), and long term (2050 onwards). A summary of the multipliers for each example are also shown in each chart

Western Canada, Inbound Multipliers Other Canada, Inbound Multipliers USA, Inbound Multipliers

6.00 2025 = 0.90 12.00 2025 = 1.50 6.00 2025 = 0.93 2035 = 0.80 10.00 2035 = 0.80 5.00 2035 = 0.80 4.00 2045 = 0.77 2045 = 0.77 8.00 4.00 2045 = 0.77 2050 = 0.75 2050 = 0.75 2050 = 0.75 2.00 6.00 3.00 4.00 2.00 - 2.00 1.00 - (2.00) - (2.00) (1.00)

(4.00) (4.00) (2.00)

2050 2050

2047 2047

2044 2044

2041 2041

2038 2038

2035 2035

2032 2032

2029 2029

2026 2026

2023 2023

2020 2020

2017 2017

2014 2014

2011 2011

2050

2047

2044

2041

2038

2035

2032

2029

2026

2023

2020

2017 2014 31 2011

Western CAN Forecast Multiplier Other CAN Forecast Multiplier USA Forecast Multiplier

Western Canada, Outbound Multipliers Other Canada, Outbound Multipliers USA, Outbound Multipliers

1.50 4.00 2025 = 0.94 2.00 2035 = 0.80 1.00 3.00 1.50 2045 = 0.77 1.00 2.00 2050 = 0.75 0.50 0.50 1.00 - - 2025 = 0.90 - 2025 = 0.94 (0.50) (0.50) 2035 = 0.80 (1.00) 2035 = 0.80 2045 = 0.77 (1.00) 2045 = 0.77 (1.00) 2050 = 0.75 (2.00) (1.50) 2050 = 0.75

(1.50) (3.00) (2.00)

2050 2050 2050

2047 2047 2047

2044 2044 2044

2041 2041 2041

2038 2038 2038

2035 2035 2035

2032 2032 2032

2029 2029 2029

2026 2026 2026

2023 2023 2023

2020 2020 2020

2017 2017 2017

2014 2014 2014

2011 2011 2011

Western CAN Forecast Multiplier Other CAN Forecast Multiplier USA Forecast Multiplier Supply & Demand Requiring the Development of Roberts Bank Terminal 2 Demand is expected to become constrained without intervention from 2033 - congestion will occur prior to this date too as utilisation increases above the more optimal 85% operating utilisation across the incumbent terminals

▪ Assessment of the baseline demand versus existing terminal capacity shows that without further capacity expansion, demand will become constrained from 2033 onwards.

▪ While the supply chains or specific port operations at Port of Vancouver have not been assessed, it is reasonable to anticipate significant pressure on the existing terminal operations prior to this date as utilisation levels above roughly 85% tend to lead to congestion either at berths or landside.

▪ The development of RBT2 with a go-live date of 2029 appears logical based on Base Case demand assumptions - this is demonstrated in the graphs below.

VFPA Total Demand vs Capacity (@100% Utilisation) Exc. RBT2, Values in TEU VFPA Total Demand vs Capacity (@100% Utilisation) Inc. RBT2, Values in TEU

8,000,000 8,000,000

7,000,000 7,000,000

6,000,000 6,000,000

32 5,000,000 5,000,000

4,000,000 4,000,000

3,000,000 3,000,000

2,000,000 2,000,000

1,000,000 1,000,000

- -

2060 F 2060 2060 F 2060

2058 F 2058 2058 F 2058

2056 F 2056 2056 F 2056

2054 F 2054 2054 F 2054

2052 F 2052 2052 F 2052

2050 F 2050 2050 F 2050

2048 F 2048 2048 F 2048

2046 F 2046 2046 F 2046

2044 F 2044 2044 F 2044

2042 F 2042 2042 F 2042

2040 F 2040 2040 F 2040

2038 F 2038 2038 F 2038

2036 F 2036 2036 F 2036

2034 F 2034 2034 F 2034

2032 F 2032 2032 F 2032

2030 F 2030 2030 F 2030

2028 F 2028 2028 F 2028

2026 F 2026 2026 F 2026

2024 F 2024 2024 F 2024

2022 F 2022 2022 F 2022

2020 F 2020 2020 F 2020

2018 A 2018 2018 A 2018

2016 A 2016 A 2016

2014 A 2014 A 2014

2012 A 2012 2012 A 2012

2010 A 2010 A 2010

DP World Centerm Container Terminal GCT Delta Port Container Terminal DP World Centerm Container Terminal GCT Delta Port Container terminal Fraser Surrey Docks GCT Vanterm Container terminal Fraser Surrey Docks GCT Vanterm Container terminal VFPA Total Robertsbank II VFPA Total 33

Section 1: Macro-Economic Trends and Forecast Container Port Demand to 2060 Introduction to Section: The Long-Term Forecast Period is to 2060 - Robust but Flexible To ensure better granularity, the container forecasts are generated on the basis of the shorter-term to 2030 and then adoption of specific scenarios for the period to 2060 - this reflects the need to better consider potential longer-term developments

▪ A discontinuity is noted in the approach to forecasting. The model which has driven Approach to the Forecasts Adopted demand since the mid-1990s has been based on globalization - namely, the migration of manufacturing from North America to East Asia (particularly China) and the 2030+ resulting scale of containerised imports into North America has been the driving force To 2030 Scenario of Transpacific demand. Based ▪ More recently, the pace of economic development in East Asia has stimulated the level of containerised exports, with this particularly focusing demand on Vancouver. Open & Given the long term perspective on demand for this study, it is apparent that a simple Globalisation Green - High (if modified) extrapolation of these trends will not provide an adequate picture of future Case demand levels. In order to accommodate possible developments a twin-track approach has been developed: ▪ To 2030 - continued globalisation and Asian demand for both imports and exports Asian Status Quo - ▪ From 2030 to 2060 - specific and relevant scenarios are explored and applied, to demand Base Case 34 better take into account potential much longer-term structural changes and potential

▪ Each of the following key demand areas will be assessed, as outlined: Protectionist ▪ Local Demand – the Vancouver/BC Market: - Low Case ▪ US Midwest Markets: ▪ Forecast of volumes through VFPA terminals for the local market, with macro- economic factors, drivers of traffic and key market sectors impacting container ▪ Specific access and competitiveness to the US Midwest market will be noted traffic all identified. and assessed – this analysis will compare Vancouver with all other ports in North America also able, or seeking, to serve this key market area. ▪ Future port development decisions are contingent on a thorough understanding of local economic dynamics, hence the availability of a significant local base of ▪ The share of key inland US markets retained by competing ports in North container cargo for export is also a key issue and will be addressed. America will be assessed, based on container trade flows for import and export demand and competitiveness of intermodal access and ports. ▪ The issue of transloading will be covered, where appropriate. It is known that over 50 per cent of local import traffic is subsequently transloaded into ▪ Continental Demand - North America East & West Coast: domestic containers. ▪ The broader North American hinterland remains of paramount importance to ▪ Western, Central & Eastern Canada Demand – Prairies, Ontario & Quebec: VFPA, especially as a greater share of import demand is moving to US hinterlands. To ensure completeness of the research process it is necessary to ▪ Key regional macro-economic factors impacting the port range will be address demand across North America, with a specific emphasis on the Asian undertaken to help outline future container growth levels for these markets. This trades. analysis will compare Vancouver with all other ports in North America also able, or seeking, to serve this key market area. ▪ The markets that VFPA (and Prince Rupert) importing into will have special attention and the ability of the port to retain or grow its share will be commented upon. 35

Introduction to North American Port Region Introduction to North American Container Port Market - Key Gateways from the “4 corners” Well-established port markets – competition for discretionary US Midwest markets is strong

▪ Key macro-economic factors and trends form drivers behind container demand in Location of Major Gateway Container Ports in North America North America and the region’s trading partners.

▪ The Pacific Gateway region includes both the Port of Vancouver (Vancouver) and Prince Rupert Prince Rupert and competes with a range of different facilities in serving North American demand through various container trade routes, such as: ▪ Transpacific routes to/from North East Asia – i.e. the Hong Kong-Japan range. Vancouver Seattle ▪ Transpacific routes to/from South East Asia – i.e. ASEAN range. Tacoma Montreal ▪ Other liner services connecting the Pacific West Coast with Europe and the Suez Halifax Canal routing from Asia to the East Coast of North America. ▪ The Pacific Northwest region to/from Europe via the Panama Canal, including the New York/New Jersey new Panamax dimensions/Panama Canal expansion that opened in 2016. Baltimore Oakland ▪ Other relevant trades, including on North-South routes Hampton Roads 36 Los Angeles/Long Beach ▪ Therefore, the future development of container demand will be a function of the Charleston Savannah following factors: Houston New Orleans ▪ The overall scale of demand in the North American markets and specifically demand routed via Port of Vancouver and competing ports in North America. ▪ The competitive position of terminals (and Pacific Gateway region Source: WSP Vancouver’s Container Throughput (TEU) overall) versus competing ports in North America on all coasts. ▪ The capacity of the terminals to handle containerised cargoes. ▪ Port competition for key inland discretionary markets is strong, with Chicago and the US Midwest served from all four ‘corners’ of North America, plus the US Gulf. ▪ A highly-developed intermodal network covering North America allows ports to target more distant hinterlands, in addition to more immediate port vicinities, which means ▪ The quality of facilities, intermodal rail connectivity to discretionary markets, local competition across North America includes: market demand and container trade lanes served are all vital competitive factors driving demand. ▪ Pacific South - Long Beach/Los Angeles, Oakland ▪ Pacific Northwest - Pacific Gateway (of Vancouver (BC), Prince Rupert) and US ▪ Other factors can influence port competitiveness – workforce disruptions, investment ports of Seattle-Tacoma in infrastructure, dredging and ‘step-change’ events like the Panama Canal expanding. ▪ North Atlantic – NY/NJ, Montreal, Halifax, Baltimore, Philadelphia, Hampton Roads ▪ It should be noted that this Long Term Forecast Study uses the term “Pacific (Virginia) Northwest” to cover the major container ports of Vancouver Fraser Port Authority ▪ South Atlantic/US Gulf – Charleston, Savannah, Houston, New Orleans/Mobile (VFPA) and Prince Rupert (which collectively comprise the Pacifica Gateway) and the Northwest Seaport Alliance (NWSPA) of Seattle and Tacoma (Sea-Tac). Pacific Gateway Competes for Key Market Areas - Local, Canada, US Midwest & Continental Isolated system “shocks” continue to occur – impact all geographic regions and components of the industry. In Q2 2020, the full extent of the COVID-19 pandemic is unknown, but is already starting to impact trade demand and population consumption

▪ , The following represents the key market areas for Vancouver and the Pacific Examples of General Factors Influencing Container Ports & Shipping Gateway region: Maritime System ▪ Local Demand – i.e. Vancouver and British Columbia. Shipping Ports Trade Waterways Shocks ▪ Western, Central and Eastern Canadian Demand – i.e. Prairies, Ontario and Quebec. Panama Canal Ship size Operating China impact Economic - i.e. ▪ US Midwest – i.e. Chicago and other discretionary markets. expansion – increasing and performance – on world trade, COVID-19 bigger ship resultant need to handle BREXIT, US- (2020)*, GFC ▪ There is some regional demand competition between Vancouver and Seattle-Tacoma, access cascading bigger ships China tariffs (2009) with the ports’ each serving local (separate) markets. Goods tend not to move across the border between Canada and the US in large volumes due to trucking costs, which Suez Canal Introduction of Port & terminal Commodity Natural means that the majority of local cargo moves through each of the different ports - i.e. improvement – IMO 2020 congestion pricing and disasters - i.e. Seattle-Tacoma primarily serves areas in the immediate US Pacific Northwest. two-way ship S&D Iceland volcano However, there is definitely competition for more distant discretionary areas. flows fluctuations - (2009), floods i.e. energy, in NYC (2012) 37 ▪ This means that Vancouver competes with Prince Rupert for Canadian cargo, with agriculture) Prince Rupert, Seattle-Tacoma, US Pacific South ports and North American East Coast ports (notably Savannah, Charleston, Virginia, New York/New Jersey, Halifax Growth of liner New alliances Interest in Trade Epidemics – and Montreal) for the discretionary US Midwest markets. The role of the ports on the services from forming/ terminal agreements - i.e. ebola East Coast of Canada and the US being linked to Asia via the Suez Canal is an Asia changes (to 3 automation i.e. TPP, (2015), SARS important consideration for ports serving the Transpacific trades (and those facilities on the US East Coast linked to Asia via the Panama Canal). groups in 2018) NAFTA (2003)

▪ The analysis is structured as follows: All-Water Liner M&A Still just 5% of Manufacture Localised ▪ The development of North American container port demand is detailed for the services to US activity - terminals shifts - i.e. low- accidents – i.e. period since 1990. This is an important perspective as the relative shares of the ramp-up in including automated by cost changes – Busan (2020) major port ranges have developed significantly over the longer-period and the early 2000s disposing of 2020 China to Dubai (2016), impact of system “shocks” and one-off infrastructure developments, such as the terminals Vietnam Tianjin (2015) Panama Canal expansion being completed in 2016. ▪ The links between GDP, trade expansion and container port volumes over the Liner financial Workforce Re-shoring / Other – piracy historical study period are defined. performance volatility near-sourcing - (Somalia), issues i.e. Mexico for European ▪ The development of the Pacific West Coast markets – and Port of Vancouver’s role North America migrant crisis in this sector – is considered. General trends are identified. ▪ The importance of the Asian trades as the primary driver of Pacific West Coast Note: * = Full extent of impact of COVID-19 is unknown and at time of writing (Q2 2020) it demand is detailed. The future of trade volumes here will be a critical determinant is only possible to estimate what may be shortly to occur with the pandemic of future demand over the longer run. Assessment of North American Port Data is Filtered to Derive In-Depth Trends & Analysis The approach used enables a more granular and in-depth analysis of container volume development in North America to be completed

▪ A filtered approach is undertaken with respect to the assessment of North American Approach to Outlining North American Port Data container demand.

▪ This is completed on the following basis: ▪ Total North American container port demand since 2000 - to derive the entire market that exists and the growth that has occurred, including through economic Total North Volumes/Share cycles and extreme events like the Global Financial Crisis (GFC) America by Coast ▪ The split by the Pacific West Coast, East Coast and US Gulf - both volumes and share of the overall market ▪ The Coasts are then further filtered: ▪ Pacific West Coast to Pacific South (i.e. Long Beach, Los Angeles and Oakland) ▪ Pacific North (i.e. Vancouver, Prince Rupert and Seattle-Tacoma) 38 ▪ East Coast - by North and South Atlantic Volumes/Share Development of ▪ US Gulf considered in its entirety per Coastal ▪ The specific volume growth of the Pacific North region is outlined, confirming specific Pacific North volume growth and split by ports Sub-Regions

▪ The Pacific Gateway region, of Vancouver and Prince Rupert, is carefully considered. The rapid increase in volumes through Prince Rupert since its opening and the continued growth at Vancouver are the two key trends

Key Conclusions: Development of Vancouver ▪ This approach enables a more granular and in-depth analysis of container volume development in North America to be completed Pacific Volumes & ▪ It is important that sub-regions are outlined separately, in order to better Gateway Trends understand the relevant trends and issues (that are to be addressed throughout the Report) 39

Overview of North American Container Port Demand Since 2000 & Assessment of Regions North American Container Port Volumes at 59.9 Million TEU for 2019: 3.8% p.a. since 2000 There was just a small increase of 1.2% for 2019 over the 59.2 million TEU recorded in 2018 – primarily due to the impact of trade concerns between the US and China. However, consistent, longer-term growth continues to occur on the Continent overall

▪ The total North American container port market was estimated to be 59.9 million TEU North America: Total Container Volumes, 2000-2019 in ‘000 TEU in 2019, which reflects growth of 3.8% per annum since 2000 and 4.0% per annum since 2011 (and after the rebound from the GFC). More recently, port demand has 70,000 been rising by 4.5% per annum since 2014. Other key trends include: 60,000 ▪ Almost 50% of all containers are full imports arriving from Asia, endorsing the 50,000 continuing reliance on consumer goods, especially from China. Full export containers account for 30% - some regions are much stronger, notably the Pacific 40,000 Gateway with forest products and agricultural products from Vancouver. 30,000 ▪ The TEU/box ratios, currently of 1.8 on the West Coast are higher than the global 20,000 average of around 1.6. The East Coast is closer to the noted global average. 10,000

▪ Average weights of import containers are relatively low compared to global levels - -

40 largely driven by a high reliance on lighter luxury goods/consumer durables from

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2002 2001 Asia, with back-haul loads much heavier due to commodities (i.e. forest products). 2000 Average TEU Growth Rates in North America Container Ports Between 2000 & 2019 ▪ Impact of GFC for Pacific West and East coasts can be seen - expect to see a similar drop for 2020 due to impact of COVID-19 pandemic, although a rebound is 5.0% expected. 4.5% Key Conclusions: 4.5%

▪ North America is a mature container port market, with substantial volumes 4.0% 4.0% moving through the continent’s ports in both Canada and the US 3.8% ▪ Container demand through ports has continued to increase, positively, and has shown the ability to recover from issues such as recessions (2001) and the 3.5% GFC (2009)

• There will be some impact to port volumes caused by the COVID-19 pandemic - 3.0% although it is reasonable to expect overall demand to recover during 2021 2000-2019 2011-2019 2014-2019 North American Container Port Volumes by Coast - Continued Increases on all Coasts Similar growth patterns occurring on both Pacific West and East Coast coasts in North America - to date, US Gulf has been less impacted by economic cycles, although this will change with COVID-19 situation

▪ After continued growth in the early years of the 2000s, the North American port North America: Container TEU Volumes by Coast, 2000-2019 in ‘000 TEU industry was impacted by the GFC, with volumes dropping in 2009. 70,000 ▪ However, there was a strong rebound in 2010 and a period of sustained and ongoing increases occurred year-on-year thereafter, culminating in the 2019 total of 59.9 60,000 million TEU already outlined. 50,000 US Gulf 40,000 ▪ The Pacific West and East Coasts of North America have largely replicated the same growth pattern over the assessment period, with both growing throughput demand 30,000 East Coast since 2000 through to 2019: 20,000 10,000 ▪ Pacific West Coast - 16.1 million TEU to 28.8 million TEU. - Pacific

▪ East Coast - 12.4 million TEU to 26.6 million TEU. Coast

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2001 2000 41 ▪ The US Gulf coast was not impacted by the GFC due to its (at the time) limited exposure to Asian services and container trades - although this has now changed, with Houston and Mobile seeing weekly Asian services. Over the assessment period, North America: Development of Container TEU by Coast, 2000-2019 in ‘000 TEU volumes increased from 1.6 million TEU to almost 4.5 million TEU. 35,000 30,000 Key Conclusions: 25,000 Pacific 20,000 Coast ▪ Pacific West and East Coast port growth has been similar since 2000 - this is 15,000 largely due to a major exposure to Asian import demand East Coast 10,000 ▪ US Gulf growth has been more consistent, but it will be impacted by COVID-19 5,000 because of the growth in Asian import demand US Gulf -

▪ There has been a narrowing in the gap between Pacific West and East Coast

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2002 2001 volumes over the past decade due to the Panama Canal expansion project, 2000 continued use of All-Water routes via Suez Canal (supported by infrastructure investments at East Coast ports) and shift from time-sensitive logistics chains to reliability and on-time delivery Total Volumes & Share per Region Since 2000 - East Coast Growth, Pacific South Share Down The Pacific North region, which includes Vancouver (BC) and Prince Rupert has seen volumes continue to increase since 2010 but this is due to Pacific Gateway ports, not Sea-Tac in the US - longer-term growth/share of East Coast and US Gulf has occurred

Container Volumes by Region - Pacific Coast Split, 2000-2019 in ‘000 TEU Container Volumes Share by Region - Pacific Coast Split, 2000-2019 in % 70,000 100% 60,000 90% 80% 50,000 70% US Gulf 40,000 60% US Gulf East Coast 50% 30,000 East Coast 40% Pacific South Pacific South 20,000 30% Pacific North 20% Pacific North 10,000 10% - 0%

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Development of Container Volumes - Pacific Coast Split, 2000-2019 in ‘000 TEU Development of Share of Market - Pacific Coast Split, 2000-2019 in %

30,000 50% 25,000 45% 40% East Coast 20,000 35% 30% Pacific North 15,000 Pacific South 25% Pacific South 20% 10,000 Pacific North East Coast 15% 10% US Gulf 5,000 US Gulf 5%

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2001 2000 Container Volume Growth has Occurred in all Regions - Atlantic South & US Gulf Shares Up US Pacific South is the largest sub-region in North America, but its share of total container port market reduced from 37.5% in 1990 to 33.0% for 2019 - Atlantic South/Atlantic North benefitting from All-Water routes via Suez and Panama Canals

▪ All sub-region areas in North America have seen positive annual growth over the Summary of Long-Term Container Trends by Region, 2000-2019 period between 2000 and 2019. The Atlantic South and Atlantic North saw some of the higher growth over this period. This has largely been due to the emergence of more Region Volumes - Million TEU % Share All-Water services from Asia in the first decade of the 2000s, subsequently supported by the expansion of the Panama Canal (which also benefitted US Gulf Ports). 2000 2019 2000 2019

East Coast 55% Atlantic South 5.3 11.3 17.5% 18.8% port share Pacific North 4.8 9.1 16.0% 15.2% increased in 50% 2015 in Atlantic North 7.2 15.2 23.7% 25.6% anticipation of West Coast the new 45% Panama Canal East Coast US Pacific 11.3 19.7 38.0% 33.0% opening 40% South US Gulf 1.6 4.5 5.0% 7.5% 43 35% 2014 2015 2016 2017 2018 2019 ▪ The Pacific North region has seen its growth increase by around 4.0% per annum over Annual Container Growth by North American Sub-Port Region, 2000-2019 in % the period, though this was largely due to the emergence of Prince Rupert from 2007 and Vancouver’s ability to continue to improve its throughput (and develop 7.0% infrastructure to support the growth). 6.0% ▪ The Pacific North decline of just 0.8% is due to the lower than average growth at the 5.0% Sea-Tac complex, not the Pacific Gateway ports in Canada. 4.0%

Key Conclusions: 3.0%

2.0% ▪ Despite some cargo shift and varying growth between sub-regions, still a substantial amount of container cargo moving through each of the “4 corners” 1.0% in North America 0.0% ▪ Important that the Pacific North decrease in share does not detract from the role US Pacific South Pacific North US Gulf Coast Atlantic South Altantic North of the Pacific Gateway area - ports from all regions compete for some of the exact same discretionary hinterland markets in North America Pacific North West Region - Stronger Growth from Vancouver, Emergence of Prince Rupert Since forming the Northwest Seaport Alliance, the joint Seattle-Tacoma facilities handle the highest volumes in the region - however, Vancouver’s growth has seen it close this gap. Investment in infrastructure will need to continue to maintain the trend

▪ Container port demand volumes have continued to increase across the region, rising Development of Pacific North West Region Container Ports to 2019, in ‘000 TEU from just 4.8 million TEU to almost 9.1 million TEU over the assessment period. There were several noticeable trends occurring, including: 10,000 ▪ Total volume has fluctuated at Sea-Tac, but only minimal growth since 2010 has 9,000 Pacific North been gained. A declining share of the regional market can be seen. 8,000 Others 7,000 ▪ Vancouver has increased throughput strongly, from just 1.1 million in 2000 to Prince Rupert almost 3.4 million TEU for 2019. Strong rise in share of the market gained 6,000 5,000 ▪ Prince Rupert emerged and has grown volume to 1.2 million TEU per annum, 4,000 Vancouver providing an increased share of the overall regional market. 3,000 ▪ Demand at “other ports” has been consistent - this is not Asian import activity. 2,000 Sea-Tac 1,000 ▪ One of the biggest challenges to maintaining growth of throughput is to ensure that - investment in infrastructure is undertaken - especially crucial for Vancouver and

44 Rupert, who have seen stronger historic volume increases

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Comparison of Port Volumes in Pacific North West Region to 2019, in ‘000 TEU Share of Pacific North West Region Container Ports to 2019, in ‘000 TEU

4,500 100% Sea-Tac Pacific North 4,000 90% 80% Others 3,500 70% Prince Rupert 3,000 Vancouver 60% 2,500 50% 40% Vancouver 2,000 Prince Rupert 30% 1,500 20% Sea-Tac 1,000 Pacific North 10% 500 Others 0%

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Note: Vancouver volumes included Fraser Surrey Docks (FSD) from 2008 onwards Pacific North others includes Portland, Everett, Anchorage and Dutch Harbour Pacific Gateway Summary - Vancouver Volumes Up and Prince Rupert Activity Rising Strongly Vancouver now handling 3.40 million TEU per annum, but Prince Rupert already at 1.20 million TEU and a 26% share of the regional market - Vancouver total has flattened in 2017-2019, indicating potential expansion requirements to be undertaken

▪ Pacific Gateway volumes have increased from 1.16 million TEU in 2000 to 4.61 million Development of Pacific Gateway Total TEU by Port, 2000-2019e in ‘000 TEU TEU for 2019 - reflecting growth of 7.5% per annum. 5,000 ▪ Vancouver container volumes have continued to increase since 2000 - rising from 4,500 1.16 million TEU to an estimated 3.40 million TEU for 2019. 4,000 ▪ Prince Rupert commenced operations in 2007 and has seen container activity rise 3,500 strongly, reaching 1.21 million TEU for 2019. 3,000 2,500 Prince Rupert ▪ Share attributable to Vancouver of the Pacific Gateway container activity changing: 2,000 Vancouver ▪ Vancouver share currently now at 77% 1,500 1,000 ▪ Prince Rupert share growing fast - doubled from 11% in 2009 to 23% in 2019e 500 - ▪ Vancouver volumes have largely stagnated since 2017, when 3.25 million TEU were

45 handled, reflecting an increase of just 150,000 TEU in 3 years.

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Comparison of Port Volumes in Pacific Gateway Region, 2000 - 2019 in ‘000 TEU Development of Share of Pacific Gateway Total TEU by Port, 2000-2019e in %

4,000 100% 3,500 90% 80% 3,000 70% 2,500 60% 2,000 Vancouver 50% Prince Rupert 40% 1,500 Prince Rupert Vancouver 30% 1,000 20% 500 10%

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2000 2000 Growth of Loaded Imports at WCNA Ports - Prince Rupert Increases (From Low Start Point) Volumes are higher in San Pedro, although Vancouver has the largest throughput of all other ports. Vancouver has highest growth in the 2010-2019 period, while Prince Rupert has significantly outperformed all West Coast Pacific ports since 2015

6,000,000 ▪ Vancouver’s loaded imports have increased faster than all other west coast ports – this growth has stayed ahead of San Pedro ports (LA and Long Beach).

▪ The Pacific Gateway region ports have successfully targeted volumes to US discretionary hinterlands and this activity 5,000,000 continues to be a major volume driver.

Key Conclusions ▪ Highest volumes in San Pedro - followed by Vancouver 4,000,000 ▪ Pacific Gateway ports continue to out-perform all other LA Pacific Coast facilities LB 46 3,000,000 Oakland Growth in Loaded Imports for WCNA Ports - CAGR Sea-Tac Port 2010-2019 2015-2019 Vancouver

P.Rupert LA 1.0% 3.2% 2,000,000

LB 2.1% 0.9%

Oakland 2.2% 3.7% 1,000,000 Sea-Tac (Northwest n/a 1.1% Seaport Alliance)

- Vancouver 3.4% 1.9% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Prince Rupert n/a 11.7%

Note: Based on available data released by ports Loaded Exports are Shipped from BC Region to Support Forestry Industry via Vancouver Vancouver has a strong, traditional role for exports with locally-sourced forestry exports being shipped to Asia - position is expected to continue. Prince Rupert volumes low, but growing. US port demand has fluctuated, especially between the San Pedro ports

2,500,000 • Exports of localised forest products from BC support loaded exports through Vancouver and Prince Rupert - a unique factor benefitting these ports compared to other WCNA facilities due to the large local forestry activities. By comparison, long- standing US government initiatives to increase exports has stalled. 2,000,000 Key Conclusions: ▪ Growth since 2010 declined across all US ports, but Vancouver able to generate positive increases ▪ Impact due to weakening of activity in late 2019 due to 1,500,000 LA COVID-19 commencing in China - but Prince Rupert LB growth strong, regardless, since 2015 at 9.3% per annum 47 Oakland Growth in Loaded Exports for WCNA Ports - CAGR Sea-Tac Port 2010-2019 2015-2019 Vancouver 1,000,000 P.Rupert LA -1.4% 1.5%

LB -0.7% -0.9%

500,000 Oakland -0.3% 2.1%

Sea-Tac (Northwest n/a 1.2% Seaport Alliance)

- Vancouver 2.0% 1.3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Prince Rupert n/a 9.3%

Note: Based on available data released by ports Empty Units Returning to Asia are a Major Activity in San Pedro Ports - Strong Seasonality High volumes of Asian imports and large local market in Southern California means San Pedro ports ship a high number of empties back to Asia - with the position to remain. Export cargo loads for Vancouver means fewer empties return, Prince Rupert growth has been high, but comes from a low starting point and over time the growth will slow

3,500,000 • Empty units returning to Asia are a major part of activity at all West Coast ports. Empty box loadings are a smaller part of Vancouver’s traffic, although strong growth is still noted. Oakland is traditionally the main port for US exports from the West Coast 3,000,000 • Volumes in San Pedro are higher as shippers/carriers return empty units back to Asia - although the annual growth is lower due to higher throughput. 2,500,000 Key Conclusions: ▪ There is strong seasonality in empties - Summer peaks LA that reach 20% of traffic as boxes return to Asia ahead of 2,000,000 peak-season demand in North America LB 48 Growth in Empty Units for WCNA Ports - CAGR Oakland Sea-Tac Port 2010-2019 2015-2019 1,500,000 Vancouver

P.Rupert LA 4.0% 5.2%

1,000,000 LB 4.8% 4.0%

Oakland 0.4% 0.8% 500,000 Sea-Tac (Northwest n/a 7.1% Seaport Alliance)

- Vancouver 5.9% 6.2% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Prince Rupert n/a 16.1%

Note: Based on available data released by ports Pacific West Coast: Q1 2020 Volumes - Impact of COVID-19 Occurring The impact of COVID-19 is already being seen at Pacific Coast ports, based on Q1 2020 compared to Q1 2019 throughput - there have been especially strong drops in demand at Los Angeles (-22.7%) and Sea-Tac (-18.2%)

▪ A snapshot of confirmed Q1 2020 total volumes through Pacific West coast container Pacific West Coast Ports - Total TEU Volumes, Q1 2019 vs Q1 2020 ports offers an insight into the likely impact of COVID-19. 2,500,000 ▪ All ports on the western seaboard have experienced a decline in total container volumes for the first three months of 2020 compared to the comparable period of 2,000,000 2019, irrespective of sub-region.

▪ The drop is obviously due to the COVID-19 pandemic and weaker demand from China 1,500,000 initially, blanked liner services and the lockdown in Canada and the US. Q1 2019 1,000,000 ▪ This is a trend occurring on a global basis, not just on all coasts of North America, Q1 2020 although it will only be once further 2020 data is available that the true extent of the 500,000 falling port demand will be known. - Long Los Oakland Sea-Tac Vancouver P.Rupert 49 Pacific West Coast Ports - Declining TEU Volumes in Q1 2020 Beach Angeles

Port Q1 2019 Q1 2020 Diff +/-

Long Beach 1,806,723 1,682,920 -7.4%

Los Angeles 2,208,734 1,799,749 -22.7% Key Conclusions:

Oakland 612,151 581,665 -5.2% ▪ Q1 2020 decreases represent a snapshot of the initial impact of COVID-19

Sea-Tac 932,255 788,881 -18.2% ▪ Long-term assessments into Q2 and Q3 2020 will provide a better understanding of the likely decline for 2020 overall Vancouver 841,238 734,890 -14.5% ▪ Important to note that Pacific Ports are not the only facilities seeing a decline, as reductions are not only a widespread issue in North America but on a global Prince Rupert 248,251 237,989 -4.3% basis overall Summary Strengths, Weaknesses, Opportunities & Threats of North American Port Demand Development at Pacific Gateway ports also included

Strengths Weaknesses Opportunities Threats

▪ North America is a large, mature market ▪ Maturity of economies means that higher ▪ In terms of volumes, rebound from ▪ COVID-19 is obviously going to growth will not occur, such as in Asia COVID-19 will boost port demand in negatively impact port demand in 2020 latter part of 2020 and possibly into 2021 ▪ Long-term, there has been continued ▪ Even for ports in Canada, the strength or ▪ On a longer-term basis, reasonable to ▪ In Q2 2020, exact impact of COVID-19 growth weakness of the US economy is a expect the large population in US, unknown, but many ports projecting primary driving factor in overall port supported by Canadian consumers, to declines of between 5% and 10% for demand help generate trade activity and 2020 container demand ▪ North America served by Transpacific, ▪ Both Vancouver and Prince Rupert have ▪ Prolonged impact of COVID-19 could Transatlantic and All-Water services, established and good volumes moving to see larger volume drops 50 plus North-South activity - variety of US discretionary markets routes ▪ Pacific Gateway ports remain integral ▪ Rebound from COVID-19 could also see part of wider North American container possible port congestion if upturn too demand, with good, above-regional intense growth ▪ Vancouver has strong and highly- ▪ Consumer negativity towards China, established localised import and export especially from US, could impact future markets, leading to a more balanced spending trends (especially shorter- trade than many other ports term) ▪ Prince Rupert more exposed to highly- competitive US discretionary market volumes 51

North American Economic Development and Container Port Demand Review of North American Macro-Economic Position and Relationship with Port Demand There has been long-term growth in both Canada and the US - the GFC caused a decline and it is assumed that the impact of COVID-19 will see a short-term fall in GDP development - the long-term fundamentals of container traffic to trade goods remains

▪ Container trade volumes (and port demand) are directly related to the overall volumes North America - Overall GDP Development from 1990 (index-linked) of traded goods – especially in the manufactured sector. This is particularly the case for cargoes imported into North America. 200.0 190.0 ▪ In addition, in the case of Vancouver, the important containerised export sector is driven by the pace of demand for primary goods in Asia and the developing Far East 180.0 markets. 170.0 160.0 ▪ The US economy declined sharply by around 3.8% between 2007 and 2009, due to 150.0 USA the GFC, although did rebound and continued to grow to 2019. The same general 140.0 Canada pattern was noted in Canada, but the decline was somewhat less severe, namely a 130.0 decline of 2.1%, as a result of strong commodity exports over the period. However, 120.0 since this drop both exports and imports have continued to improve. 110.0

▪ The potential impact of COVID-19 is included in the 2020e figures, although these are, 100.0

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52 of course, estimates prepared at the end of April 2020. 1990 2020e

North America Trade Volume Development Since 1990 - Index-Linked

1990 1995 2000 2005 2010 2015 2016 2017 2018 2019 2020e Key Conclusions: US ▪ North American economies saw Exports 100 140 208 270 332 454 461 483 507 516 488 a decline due to the GFC and a similar fall is estimated for 2020 Imports 100 140 243 301 309 406 408 424 442 446 422 too Canada ▪ There was a continued growth in Exports 100 151 234 294 315 418 417 436 450 455 426 both exports and imports over the longer-term period for both Imports 100 135 202 235 260 338 340 342 354 364 341 Canada and the US - impacted by GFC in 2009 and now by COVID- 19 - albeit both relatively short- term Development of Canada GDP & Trade Since 1990 - Despite Economic Shocks, Growth Ongoing Economic shocks in 2000-2001 and 2009-2010 saw a contraction of GDP and trade - and the same will occur due to COVID-19 in 2020-2021. However, the longer-term trend is still one of overall growth for Canada (and North America overall)

▪ The close relationship between GDP and import and export activity in Canada has Development of Canada GDP and Trade since 1990 - index linked been ongoing for a substantial period of time - indeed, it is not expected to change, even allowing for severe economic shocks, such as the GFC in 2009 and the ongoing 500 200 COVID-19 pandemic. 450 ▪ The close pattern is clear in the chart, which tracks GDP with exports and imports 180 since 1990 and through to estimates for 2020. 400 ▪ The other important trend has been the continued divergence between imports and exports. Imports from Asia remain highly important but there has been a recent 350 160 increase in the volume of exports, with this reflecting continuing strong demand from 300 the Asian importers and also a limited rebalancing of relative costs. Exports - left 140 Imports - left ▪ For containerisation the effects of these trade and GDP developments have generated 250 a number of primary trends and conclusions. These consist of: GDP - right 53 ▪ A continued increase in demand which has placed severe pressures on each stage 200 120 of the distribution chain. ▪ In the US, a severe worsening of the balance of trade with this generating severe 150 difficulties for the repositioning of empty containers. 100 100 ▪ An assumption that demand will continue to expand at historic rates, with this leading to over-investment in shipping and terminal capacity.

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1992 1991 ▪ The impact of severe economic shocks is strong and causes pretty significant 1990 disruption to GDP and trade - although in 2010 there was a rebound and a return to 2020e growth. ▪ While it is too early (at the end of April 2020) to quantify the real impact of COVID- Key Conclusions: 19, it is reasonable to expect a drop in GDP, trade and container volumes for 2020, but a rebound in 2021. ▪ The development of trade is seen to be highly susceptible to macro-economic uncertainties - and is no different in Canada ▪ This was noted to a limited degree over 2000-2001 and in a much more far- reaching manner in the 2007-2009 period - similar outcome expected for COVID- 19 ▪ These developments continue to impact container trades, but over the longer- term, there has been growth in trade and GDP - in both Canada and the US Macro-Economic Trends and Container Port Demand Relationship to Continue The relationship remains robust, during periods of expansion, but also during cycles of decline, such as the GFC and, as expected for 2020 into 2021 - yet the longer-term position does show overall positive developments in North America, to support port activity

▪ The relationship between the expansion of the North America economies and the level North America Trade & Container Port Indices Since 1995 of trade is fundamental to the analysis of recent developments and future prospects. 500 ▪ A close relationship exists between the development of regional GDP, total trade volumes and container port demand. In most regions and throughout the period under 450 review, the variables have moved broadly in tandem and, indeed, the link was seen to be sustained during the recent contraction and subsequent recovery. 400 ▪ Although by the late 1970s the role of containers was already firmly established on the major long-haul trades (Transatlantic and Transpacific), the overall penetration of 350 containerisation remained limited on other secondary trades. Yet there is now little scope for further conversion for import cargoes, but a further shift of some 300 commodities (such as grains, forest products etc.) into empty units will continue to

support export demand from BC and, therefore, Vancouver. 250 Index Linked to 100to LinkedIndex 54 ▪ The indexed development of North American trade volumes and container port 200 demand since 1990 is shown, with a very close link between these two variables over the period 150 ▪ This link has remained highly robust even during periods of economic downturn, such as the GFC in 2009. A similar pattern looks to be emerging with the COVID-19 100 pandemic too, although the full impact will only be seen once more information

becomes available. 50

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In % 1995 2000 2010 2015 2016 2017 2018 2019 2020e Key Conclusions

GDP: A 2.7 3.7 3.0 1.8 1.5 2.3 2.8 2.0 -5.9 ▪ These analyses help to show that container port Port Demand: B 7.3 8.8 13.7* 5.5 1.6 7.8 5.9 1.2 -5.0** demand has consistently replicated the overall GDP trends over the longer period, Ratio (A/B) 2.6 2.4 4.6 3.1 1.1 3.4 2.1 0.6 0.8 ▪ The trend has continued during periods of negative development, such as during 2008 and 2009 - and it is Notes: * = Higher figure due to rebound after GFC. ** = Estimate. expected to occur again during 2020 and into the recovery in 2021 Sources: IMF, US Bureau of Economic Analysis, Statistics Canada, WSP Link Between GDP and North American Container Port Demand Remains Strong Relationship to continue - the full impact of COVID-19 not yet known, though can be estimated that both GDP and container port demand will be impacted, although this further endorses the existing link between the two relevant factors

▪ In addition to direct, trade-related factors, container port demand can be boosted by GDP & North American Container Port Demand Since 1990, % Change containerisation of general cargoes in developing markets and of backhaul bulk cargoes in mature markets. 6 15 ▪ The economic relationship between GDP growth and trade growth is highly relevant in forecasting the development of the containerised sector, with numerous other factors and limitations of economic data (often revised) and container handling statistics that 4 10 need to also be included. These items relate to the measurement and comparison of output growth and port demand/growth, including: 2 5 ▪ Container throughput includes empty containers, which do not represent cargo actually being traded. The proportion of empty containers within a port's throughput can vary significantly. 0 0 ▪ Transhipment trebles the number of port moves per container (and hence the TEU count), but is not additional cargo - fortunately, not a factor of regional North 55 American demand for this Study. -2 -5 ▪ An imbalance of loaded inbound and outbound containers (notably, between North America and the Far East) means that shippers continually search for more cargo to containerise on return legs of voyages. This has led to the increasing use of -4 -10 containers for iron and steel scrap, plus waste paper. There are also ‘neo-bulks’ such as forest products which remain an important driver for Vancouver demand.

▪ There are other economic relationships which modify the underlying link between -6 -15 economic growth and trade growth, such as fluctuations in propensities to consume or

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by relative movements in prices, incomes, exchange rates, tastes, confidence and 2020e other factors. GDP - left Container Port Demand - right ▪ There can be delays in the economy between causes and their effects, so that it is not always clear which periods should be compared when different aspects of economic Key Conclusions: development (such as output and trade) are contrasted.

▪ WSP uses container handling statistics published by ports themselves. Whilst every ▪ Overall, the link between GDP and container port demand in North America effort is made to employ comparable statistics, methods of calculation can differ remains strong and consistent - generally, this position is expected to continue between ports and distort the data. Despite the numerous factors – which need to be built into, or allowed for in the interpretation of, forecasts – the generation of trade ▪ The estimated impact of COVID-19 for 2020 has been estimated - while the exact through economic growth provides the most rational foundation for predicting the details may ultimately be slightly different, the estimation of a decline in both future direction and scale of import/export container handling demand. areas is deemed highly likely to be correct Relationship Linking North America West GDP & Container Port Demand Remains Intact Western regions remain a core market for Vancouver and the direct association between GDP and port throughput demand can be traced - and it is reasonable to expect it to continue in the future

▪ In order to further illustrate the relationship, the development of container demand for North America West GDP & Container Port Demand, 1996 - 2018 the West Coast of North America can be linked to the overall development of GDP for the western region of the continent. 35.0 5000 ▪ While this is only a partial picture of the hinterlands of the Pacific ports because container cargo does move beyond just the western areas, it nevertheless outlines 4500 that there is clearly a reasonable and continuing link between the two factors. 30.0 4000 ▪ The trend is also seen to be continuing over a longer-period of time too because the 3500 data can be traced back to 1996 and through to 2018. 25.0 ▪ It is also important to remain aware of the economic reach of the Pacific Gateway 3000 ports has extended over the period, which means it moves beyond just the Western areas of North America and competition with the Pacific South ports and the larger 20.0 2500 facilities on the East Coast of North America remains for discretionary hinterlands.

56 MillionTEU 2000 ▪ Yet for Vancouver, especially, the importance of the western hinterlands will continue 15.0 to remain key areas where significant volumes of container cargo flow to and from for 1500 its terminals - with the direct link between demand and GDP remaining in place moving forward. 1000 10.0 500

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Economic Drivers for Pacific Gateway Ports Economic Drivers for Pacific Gateway Ports - Introduction to Western Canada & Great Lakes Western Canada economy has grown by 4.6% per annum since 2000 - Ontario & Eastern Great Lakes region economy has increased by 3.4% per annum since 2000

▪ With increasing containerised cargoes shipped to/from eastern Canada and the US Gross Domestic Product for North America (Current USD Millions), 2018 Midwest, demand at Vancouver generated by the local economy remains equally important.

▪ Economic development of the region, plus Eastern Canada and the US (for discretionary markets) are assessed. Where possible, the potential impact of COVID- 19 or other relevant trends are included.

▪ Western Canada: ▪ The Western Canada economy includes the provinces of British Columbia, Alberta, Saskatchewan and Manitoba. This region of Canada has seen average compound annual growth of 4.6% since 2000. ▪ The majority of the period showed positive growth, the financial crisis in 2008/2009 and the global drop in oil price in 2015/2016 forced the overall region into 58 recession. In 2017, positive growth returned. ▪ The highest growth average for the region occurred in 2007 (+13%), led by Saskatchewan recording +23% growth. ▪ The lowest growth in the past 10 years was in 2017, where there was an increase of just +2.4%. ▪ The biggest decline was in 2008, where the region recorded a -12% fall in GDP.

▪ Ontario and Great Lakes Region: ▪ Pacific Gateway ports continue to seek to serve the more distant eastern regions of Canada, as well as the highly competitive US Midwest region. ▪ These are key regions of trade for both Vancouver and Prince Rupert, along with other major facilities seeking to move cargo to these discretionary areas. ▪ These regions include the regional markets of Ontario, the Great Lakes, Illinois and Chicago. ▪ The region overall has averaged GDP growth of 4.0% since 2010, with the annual growth rate (at current USD values) of 3.4% between 2000 and 2018.

▪ A breakdown of the development of GDP by year and specific areas is included Source: BEA; NWT Bureau of Statistics in Appendix 2. Development of Pacific Gateway Hinterland - Western Canada: BC & Canadian Prairies Consistent economic growth in Western Canada - all provinces generated growth of over 4% per annum for the longer-term period of 2000 - 2018. BC has strong anchor commodities for containerised exports, other areas rely strongly on oil and natural resources

▪ British Colombia (BC): Gross Domestic Product for Western Canadian Provinces (Current USD), 2018 ▪ Currently the 4th largest province with 2.95bn in GDP (2018 current USD values). Approximately 78% of workforce in the service industries, with 22% employed in Province CAGR 2000 - 2018 manufacturing, construction and resources. British Colombia +4.4%

▪ British Columbia’s manufacturing industry continues to be dominated by Alberta +4.8% processing natural resources harvested or extracted in the province such as canning salmon, processing fruits and berries, producing lumber and paper, and Saskatchewan +4.9% smelting and refining ores - all major anchors for containerised export volumes Manitoba +4.2% ▪ Alberta: ▪ The third largest economic province in Canada, the economy is largely driven by natural resources export and refinement. For example, oil sands (in Fort McMurray) and other forms of oil production support related industries such oil refinement and processing. 59 ▪ Major exports of crude petroleum and liquid gas accounting for over 65 per cent of export activity ▪ Benefits financially from energy production and exports but suffered recession in 2015 and 2016 when global oil prices dropped and will be impacted by very low oil prices in 2020.

▪ Saskatchewan: ▪ Relies heavily on natural resources, especially agriculture - position not expected to significantly change in future. ▪ Government of Saskatchewan states 95% of all goods produced depend directly on the province’s basic resources, i.e. grains, livestock, oil and gas, potash, uranium and wood, and their refined products. ▪ The fall in GDP for 2015 and 2016 reflected reduction in global oil prices and impact of neighbouring Alberta recession - likely to see similar occurrence again in 2020 due to very low oil prices. Source: NWT Bureau of Statistics ▪ Manitoba: ▪ University of Manitoba says the province is largest producer of sunflower ▪ Moderate and stable economy, based largely on natural resources - agriculture Canada’s seed and dry beans, plus a leading source for potatoes (for French Fries for fast (cattle farming and grains (mostly found in the southern half of the province)), food chains). Manitoba avoided entering negative growth in 2015 and 2016, the energy, oil, mining and forestry province has a CAGR of 4.2% between 2000 to 2018 Economic Overview of Pacific Gateway Hinterland - Eastern Canada & US Midwest Region has grown consistently since 2000 and represents a major population and economic hub - vehicle manufacturing is a major activity in Ontario, while Great Lakes region comprises 8 US states and a population of around 85 million people

▪ Pacific Gateway ports, along with other facilities throughout North America, continue Gross Domestic Product for Great Lakes region (Current USD), 2018 to compete to serve the more distant but key trading regions of eastern Canada and the highly-competitive US Midwest region.

▪ The importance of these regions is growing to Vancouver (and Prince Rupert) and the economic development remains of high importance, especially Ontario and Quebec which collectively represent around 60% of the Canadian economy ▪ Ontario: ▪ Continues to see steady increases in economic development, primarily remaining a service sector economy with strong manufacturing elements. ▪ Provincial capital, Toronto is the centre of Canada's financial services and banking industry and there is auto industry manufacturing from seven major companies operating 14 different plants. 60 ▪ Quebec: ▪ Economy dominated by manufacturing and service sectors ▪ Province has more than 250 companies involved with the aerospace manufacturing sector and until February 2020 included Bombardier (third Province / State CAGR 2000 - 2018 largest airplane manufacturer worldwide and is headquartered in Quebec). Ontario +3.6%

▪ Service industry includes finance, insurance, real estate and leasing activities. Quebec +3.6% ▪ Great Lakes region: Great Lakes states: ▪ A bi-national Canadian-American area that includes parts of eight US states (Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania and New York +3.9% Wisconsin), plus the province of Ontario. Collectively, an estimated population Pennsylvania +3.7% of around 85 million people. Ohio +3.1% ▪ A strong traditional shipping heritage, although growth in vessel sizes has precluded modern ships accessing many of the wharves and locations - still Indiana +3.3% sizeable quantities of cargoes moving, especially dry bulks like coal and grains. Michigan +2.3%

▪ Remains a large geographic and population-consuming region. Illinois +3.2% ▪ Within the US market, the Chicago area is a key interchange point for Wisconsin +3.5% intermodal distribution to/from the US Midwest, along with more localised demand (Chicago is the largest city in Illinois and the third largest city in the US Minnesota +3.8% by population). These two factors have long made Chicago a key target of the US West Coast ports, along with Vancouver and Prince Rupert. Source: NWT Bureau of Statistics and BEA 61

Structure of Container Demand for Pacific Gateway Ports - Focus on Vancouver Analysis of Pacific North Container Port Activity Shows Pacific Gateway Driving Growth Regional growth since 2000 of 3.3% per annum - Vancouver has seen 5.8% per annum, while Prince Rupert has also quickly ramped-up its share of the market since opening. Clearly, the Pacific Gateway has been the major driving force of regional demand

▪ Over the longer-term period, total Pacific North container port demand has increased Container Demand in Pacific North Region, 2000-2019 by 3.3% per annum, rising from almost 4.92 million TEU in 2000 to more than 9.08 million TEU for 2019. By comparison, Vancouver recorded 5.8% per annum over the 10000 same assessment period. 9000 8000 ▪ It is likely that 2020 will see a decline in the total container volumes handled, although 7000 in April 2020 (when writing) it is not possible to be more precise. 6000 Others ▪ Early estimates and predictions may indicate to a decline of between 5% and 10%, 5000 Prince Rupert depending on the full extent of the drop in activity in H1 2020 and the anticipated 4000 rebound in H2 2020. '000 TEU 3000 Vancouver (BC) 2000 Sea-Tac Alliance ▪ The impact of the GFC in 2009 and the subsequent recovery for 2010 can be seen. 1000 0 ▪ On a port-specific basis the level of container demand has varied:

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2002 2001 ▪ Vancouver has seen continued and strong increases in total container volumes. 2000 ▪ Prince Rupert has been able to increase its volumes quickly - albeit as a brand new port commencing operations entirely), Development of Container Volumes by Port in Pacific North Region, 2000-2019 ▪ The US facilities of Seattle and Tacoma have seen their throughputs fluctuate, with 4500 a lack of consistent, continuous growth. 4000 ▪ The US ports handle a significant volume of domestic container flows – i.e. containers 3500 shipped to/from Alaska and Hawaii and this complicates the overall picture. These 3000 Sea-Tac Alliance volumes are largely a separate business using Jones Act vessels on specific trades. 2500 2000 Vancouver (BC) Key Conclusions: ‘000 ‘000 TEU 1500 Prince Rupert 1000 Others ▪ Overall total demand volumes in Pacific North region continue to increase over 500 the longer-term period 0

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2002 2001 demand - which is also seeing a greater share of containers handled by both 2000 Vancouver and Prince Rupert Pacific Gateway Container Port Demand - Canada’s Imports/Exports Dominate Activity Prince Rupert is much more reliant on its ability to compete for and serve US discretionary markets - the share of its traffic moving to/from Canadian markets has fallen in the very recent past

▪ Pacific Gateway ports are clearly responsible for driving container port demand in the Port of Vancouver - Split of Container Activity Between 2014 and 2018 in % region, so it is prudent to assess the make-up of activity at both Vancouver and Prince Rupert in more detail. 50% 45% ▪ The split by each port and by type of container activity is identified - to imports and exports for both Canadian and US markets. 40% 35% US Imp ▪ International business is of primary significance to both ports, but the make-up of type 30% of traffic is very different between Vancouver and Prince Rupert: 25% US Exp ▪ Vancouver: 20% CAN Imp ▪ Canadian imports and exports dominate overall activity, with each averaging 15% CAN Exp between 40%-45% annually - also highlighting a reasonably balanced trade. 10% ▪ US imports have increased, from just over 5% in 2011 to around 12% by 2018, 5% while US exports have seen a small increment too. 0% 63 2011 2012 2013 2014 2015 2016 2017 2018 ▪ Prince Rupert: ▪ Clearly much more reliant on attracting US imports, namely serving the highly Prince Rupert - Split of Container Activity Between 2014 and 2018 in % competitive US discretionary hinterlands via intermodal rail - this share averages around 35%, as seen in 2018. 50% ▪ US exports are the second largest share, at 27% for 2018, although it has 45% fluctuated over the assessment period with 32% confirmed for 2016 40% ▪ Canadian markets reflect a smaller activity, with imports dropping from 29% in 35% US Imp 2001 to 20% for 2018. Indeed, exports have also dropped recently, with the 30% 2016 total of 32% also down to 27% in 2018 25% US Exp Key Conclusions: 20% CAN Imp 15% CAN Exp 10% ▪ Good import demand for containers entering Canada from Asia - also remains 5% good export potential to continue too (forest products and grains) 0% ▪ Likely that a reasonably balanced trade remains (for Vancouver), along with a 2011 2012 2013 2014 2015 2016 2017 2018 consistent container / TEU ratio - the economy and trading partners are mature, so major changes to the overall make-up of trade is unlikely

▪ Prince Rupert’s largest activity is imports to US hinterlands, but share of traffic has fallen in 2017 and 2018, as have share of Canadian exports Pacific Gateway Container Volumes - Canada Trade was 2.84 million TEU in 2018 for Vancouver Prince Rupert has seen a consistent growth across both Canadian and US imports and exports since 2016, with each component actively helping to boost overall port demand

▪ Volumes per market served have been generated for both Vancouver and Prince Port of Vancouver - Split of Container Activity Between 2014 and 2018 in TEU Rupert - this throughput builds on the previous slide which outlined the share of port volumes. 1,600,000 ▪ In addition to the overall trends already confirmed. it is important to note that the 1,400,000 volumes per Vancouver are substantially larger than at Prince Rupert, so this has to 1,200,000 be considered if making a direct comparison of the two charts. 1,000,000 US Import ▪ On this basis, the following can be noted: 800,000 US Export ▪ Vancouver: 600,000 Can Import ▪ Canadian exports of over 1.48 million TEU in 2018 is the largest single market, 400,000 Can Export but with Canadian imports reaching almost 1.36 million TEU, there is a substantial gap compared to the smaller US volumes. 200,000 ▪ US demand is still substantial, with imports at the end of 2018 over 423,700 0 64 TEU and exports just under 132,400 TEU. 2011 2012 2013 2014 2015 2016 2017 2018 ▪ Prince Rupert: Prince Rupert - Split of Container Activity Between 2014 and 2018 in TEU ▪ Volumes per routing lower than Vancouver, although US import traffic has continued to grow from 115,400 TEU in 2011 to 365, 250 TEU at the end of 400,000 2018. Canadian imports have been largely flat, until 2016 when the 136,650 TEU began rising to reach 203,800 TEU for 2018. 350,000 ▪ Canadian exports are the second largest component, reaching just under 300,000 282,000 TEU in 2018, reflecting continued growth since 2013. However, the 250,000 US Import port does still exports more empty units rather than full loads at present. 200,000 US Export Key Conclusions: 150,000 Can Import 100,000 Can Export ▪ Canadian exports and imports are by far the largest volume activity at 50,000 Vancouver, with both seeing increases since 2016 - US imports have also 0 increased between 2011 and 2017, although fell back a little in 2018 2011 2012 2013 2014 2015 2016 2017 2018 ▪ Prince Rupert traffic volumes are smaller, but US and Canadian imports and exports have all see growth since 2016 - a trend that continued into 2018 and beyond - subject to the potential impact of COVID-19 in 2020 The Structure of Vancouver Port Container Demand - Imports & Exports By Commodity A summary of the position in 2019, using the most up-to-date information available confirms the major imports and exports moving through VFPA facilities in containers - exports are grains, lumber and woodpulp, with imports of consumer goods and auto parts

▪ It is important to understand not only volumes, but wherever possible the specific VFPA Containerised Imports & Exports, 2019 - % of Total Flows commodities being shipped in to, and out of terminals in the Pacific North in order to fully understand the volume risk profile of the port operations. Animal Products, Dairy & Produce 7% Automobiles & Parts 9% ▪ While economies will dynamically adapt to market supply and demand structures, the following metrics, along with volume assessments give an understanding of current Cement and Related Products trade trajectories: Chemicals 4% 8% ▪ The degree of diversity within cargo flows; Coal ▪ Alignment with long term demand trends across these commodity groups at trade Consumer & Related Goods 36% origin/destination points; and Grain, Specialty Crops & Feed 27% ▪ The presence of viable substitute trades. Logs, Posts & Rough Wood Lumber ▪ Granular data has been made available by VFPA relating to recent commodity flows, 21% broken out by origin and destination. Our analysis has determined the following: Machinery & Parts 10% 65 ▪ With respect to inbound flows - there are no material differences in import Metals 5% 12% commodity groups between hinterlands assessed (West Canada, Other Canada, Minerals US), with consumer goods (36%), autos/parts (9%) and metals (12%) dominant. Ores & Concentrates ▪ With respect to outbound flows - cargoes are predominantly specialty crops (28%), Petroleum Products lumber (21%), and woodpulp (22%), with similar activity noted for Canada Potash & Potassium-Based Fertilizers Processed Food Products 4% Sulphur Woodchips Key Conclusions: Woodpulp 22% All Other Fertilizers ▪ Export commodities are clearly linked to the largescale forest products and grains activities in BC and Western Canada region All Other Forest Products 7% 5% All Other Commodities 5% ▪ Import commodities arriving are indicative of consumer goods from Asia, along with metals and automobile parts, which are known to move to Toronto and -40% -30% -20% -10% 0% 10% 20% 30% 40% Illinois/US Midwest Imports Exports Stability of Key Import & Export Commodities Moving via Pacific Gateway Ports Imports from Asia continue to be grouped in 6 main classifications, including household goods and for construction and vehicle industries - exports are also generally consistent, with forest products and grains (unsurprisingly) the leading items shipped to Asia

▪ The range of containerised commodities entering and leaving the Pacific gateway Containerised Imports by Commodity into Pacific Gateway Region, 2010 & 2019e region continues to be consistent: ▪ Imports - household goods, construction & materials and industrial, auto and 1000 vehicle parts are the leading volume commodities 800 ▪ Exports - lumber, woodpulp and speciality crops are the major volume goods 600 leaving Canada through this gateway. 400

▪ Analysis of data in 2010 and again for 2019e confirms the following: ‘000TEU 200 ▪ Imports - the 6 categories shown account for an estimated 96.7% of imported goods in 2020 and 97.2% for 2019e 0 Household Construction Industrial, Machinery Basic metals Other goods ▪ Exports - the listed 6 commodities represented an estimated 72.6% of exports in goods & materials Auto & 2010 and 59.3% for 2019e Vehicle Parts

66 ▪ Reasonable to assume that these trade patterns for key commodities will continue 2010 2019e

Key Conclusions Containerised Exports by Commodity out of Pacific Gateway Region, 2010 & 2019e

600 ▪ The highest volume commodities entering / leaving the Pacific Gateway region can be grouped into a few major categories 500 400 ▪ For imported goods, the 6 leading classifications generate over 97% - this high figure has been stable over the past 10 years 300 200 ▪ It is reasonable to assume that the same import cargoes will continue to be imported into the region from Asia moving forward - there has been volume 100 growth, with household goods rising by 6% per annum and industrial, auto & 0 vehicle parts up by 9.7% per annum Lumber Woodpulp Specialty crops Meat, fish & Basic metals Other goods poultry ▪ Similar trends noted for export activity - same key commodities generating the majority of container volume, albeit that the share of the largest groups has 2010 2019e reduced from almost 73% to just under 60% ▪ The export cargoes are still dominated by forest products and grains - this position will not change, based on the types of commodities produced in BC Data sources: Statistics Canada, World Bank, Port of Vancouver, WSP (served by Vancouver and Prince Rupert) Conversion of Tonnes to TEU Confirms Weights Slowly Increasing in Vancouver Exports containers outweigh import units by a ration of 2:1, which is unsurprising based on commodity analysis of lumber/grains being dominant exports and household goods/electronics the major inbound commodities

▪ Analysis of historic data in Vancouver bifurcates two key distinct container-weight Port of Vancouver Containerised Export & Import Tonnes & Conversion to TEU characteristics: ▪ Container load factors: 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ▪ The weight of laden containers varies naturally with the density of cargoes Exports being shipped, and will therefore develop unique characteristics over the course Million Tonnes 12.2 12.9 13.4 14.6 13.8 14.0 14.3 14.2 14.6 14.8 of time. This is important to understand when comparing TEU values with tonnage data, although there is a consistency in the cargoes moving via VFPA. Million TEU (Laden) 0.9 1.0 1.0 1.1 1.0 1.1 1.1 1.1 1.1 1.1 ▪ Empty vs Loaded ratios: Million TEU (Empty) 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 ▪ Empty container volumes are driven by trade deficits between partner nations, Tonnes/TEU (Laden) 13.0 12.9 12.8 13.0 13.2 13.1 13.0 12.9 13.0 13.2 necessitating the shipment of empty units to fulfill loaded orders. The system is not; however, a closed one, as containers may exit via other ports based on Tonnes/TEU (Overall) 12.2 11.9 11.6 12.0 12.5 12.6 12.4 12.5 12.6 12.8 prevailing commercial conditions. This includes the destination of containers within Canada and the US, shipping rates via Pacific & Atlantic Coasts, and Imports 67 demand for loaded exports. Million Tonnes 8.7 8.8 9.6 10.2 10.9 11.1 10.8 11.8 12.1 12.1 ▪ All input data is shown in the Table, with further analysis in the graph. Million TEU (Laden) 1.2 1.2 1.3 1.4 1.5 1.5 1.5 1.7 1.7 1.7 VFPA Inbound vs Outbound Flows, TEU Million TEU (Empty) 0.3 0.2 0.2 0.2 0.3 0.4 0.3 0.4 0.5 0.5 2.0 2.5 Tonnes/TEU (Laden) 7.1 7.1 7.1 7.2 7.3 7.2 7.1 7.1 6.9 7.1 Tonnes/TEU (Overall) 5.8 6.2 6.2 6.3 6.0 5.7 6.0 5.6 5.4 5.4 2 1.5 1.5 Key Conclusions 1.0

m TEU m 1

Out:InRatio ▪ Outbound volumes outweigh inbound by a ratio of 2:1 at VFPA terminals, with a 0.5 0.5 general upward trend observed between 2010 and 2019

- 0 ▪ This is likely to be driven by key commodities that are known to be moving in 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 each direction Laden Imports Empty Imports Laden Exports Empty Exports ▪ Carriers cannot carry the same number of laden containers for export as for Total Outbound:Inbound TEU Ratio imports because of weight balancing in loading ships ▪ Our volume forecast model forecasts exports on a discrete basis, and back- calculates empty flows to maintain the current in/outbound ratios Summary SWOT Analysis of Port of Vancouver’s Containerised Import & Export Commodities

Strengths Weaknesses Opportunities Threats

Commodity Imports ▪ Highly-established trading ▪ A strong reliance on consumer ▪ Greater flows of the same (but ▪ COVID-19, while a unique routes from Asia with goods from China remains higher volumes of) cargo to event, is showing the impact of consumer goods and auto (36% in 2019) discretionary markets a high reliance from China and parts for certain goods ▪ There are relatively fewer ▪ Essential to continue to offer import commodities arriving at sufficient capacity as consumer the port - although this is an goods can also move via established issue Prince Rupert

68 Commodity Exports ▪ Vancouver has a longstanding ▪ Local markets, especially in BC ▪ Prince Rupert is keen to role handling forest products and Ontario, will continue to develop more transloading and grains exports back to provide export return loads facilities in an attempt to gain Asia back to Asia - Vancouver is more export loads - albeit that highly competitive and is the its landside geographic port of choice, with established location does count against its supply-chains in place overall competitiveness ▪ There is a good spread amongst export traffic commodities (grain 27%, wood pulp 22% and lumber 21%) Vancouver Containerised Import Demand by Trading Partner: Unsurprisingly, China Dominates China remains the single largest trading partner for both Canadian and US imports via Vancouver - there was a decline in the share for US markets in 2019 due to trade issues, but for Canada the average is 50% and for the US 70%, so high exposure

▪ The importance of the Asian markets in driving containerised cargo flows through the Vancouver Imports to Canadian Markets by Trade Partners, % of TEU region (and via Vancouver) is clearly evident. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ▪ The tables show the proportion of containerised imports by origin country and the China 56% 56% 56% 55% 52% 52% 54% 51% 48% 49% dominance of Asian locations for both Canada and US markets using Vancouver, with the following additional key conclusions: Korea (South) 11% 11% 11% 11% 10% 10% 11% 10% 9% 9% Taiwan 5% 5% 5% 5% 4% 4% 5% 4% 4% 4% ▪ Canada: Thailand 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% ▪ China continues to be the single largest country source of imports, with an Vietnam 2% 2% 2% 2% 2% 2% 2% 2% 1% 1% estimated 49% share of containerised demand to Canada. India 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% ▪ The second largest share - and a considerable way behind - is the 9% recorded Hong Kong 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% by South Korea and this has fallen from 11% in 2016. Japan 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% ▪ US: Malaysia 2% 2% 2% 2% 2% 2% 2% 1% 1% 1% ▪ Even greater dependence on China, that had risen from around 6% to 70% in Italy 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 69 the past 4 years Others 10% 10% 10% 12% 16% 15% 12% 18% 22% 21% ▪ The increase in China’s share had occurred at the expense of South Korea, where the share had fallen to 11% for 2019 Vancouver Imports to US Markets by Trade Partners, % of TEU ▪ The impact of COVID-19 is likely to be more on overall volumes rather than shares for 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 both Canada and the US import containerised markets China 64% 64% 64% 65% 66% 64% 70% 69% 70% 65% Korea (South) 15% 15% 15% 16% 16% 18% 14% 14% 11% 11% Key Conclusions: Taiwan 7% 7% 7% 6% 4% 3% 3% 4% 4% 5% Vietnam 1% 1% 1% 1% 1% 2% 2% 3% 3% 4% ▪ Unsurprisingly, China is the dominant provider of containerised cargo for Thailand 3% 3% 3% 3% 2% 2% 2% 2% 3% 4% Vancouver, although US markets have a higher exposure than Canada Japan 1% 1% 1% 2% 3% 3% 3% 4% 4% 4% Hong Kong 5% 5% 5% 4% 4% 3% 2% 2% 2% 2% ▪ There are clear similarities in trading partners for both Canada and the US Malaysia 2% 2% 2% 1% 2% 1% 1% 1% 1% 1% import trades, with South Korea, Taiwan and other Asian countries retaining the Indonesia 0% 0% 0% 0% 0% 0% 1% 0% 1% 1% next largest shares - albeit a significant way behind the amount from China Singapore 1% 1% 1% 1% 1% 1% 0% 0% 0% 1% ▪ COVID-19 is likely to impact volumes rather than the make-up of trading Others 0% 0% 0% 1% 1% 2% 1% 1% 1% 1% partners Vancouver Containerised Export Demand by Trading Partner: Greater Country Diversity China is the largest Canadian export trading partner for Vancouver’s containerised demand, although a much lower share than for imports - for the US, export locations are more widespread, albeit that the 2019 trade war has impacted recent trends

▪ Locations where Vancouver’s containerised exports are shipped to, commencing in Vancouver Canadian Containerised Export Markets by Trade Partners, % of TEU Canada and the US are also considered for the period of 2010 through to 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ▪ The following summaries can be drawn from this assessment period: China 46% 46% 46% 47% 44% 45% 46% 46% 40% 41% ▪ Canada cargo trading partners: Japan 18% 18% 18% 16% 16% 15% 16% 16% 16% 15% ▪ China remains the largest trading location, but the share is falling, from a high India 4% 4% 4% 5% 7% 8% 4% 4% 5% 7% of 47% in 2013, a total of 40%/41% was recorded for 2018-2019. Taiwan 6% 6% 6% 5% 5% 5% 5% 5% 7% 5% ▪ A similar trend has occurred for Japan, with the share down from 18% to 15%- Korea (South) 4% 4% 4% 4% 4% 4% 4% 5% 5% 4% this is quite surprising, based on the Japanese government’s known desire to Vietnam 1% 1% 1% 1% 1% 1% 1% 2% 3% 3% utilise lumber and forest products more in housebuilding in its country Indonesia 3% 3% 3% 2% 3% 2% 3% 3% 3% 2% ▪ The only other change has been the proportion afforded to “others” which can Philippines 2% 2% 2% 2% 2% 2% 3% 3% 3% 2% be concluded is outside of Asia, based on the long list of Asian countries shown Hong Kong 3% 3% 3% 3% 3% 2% 2% 1% 1% 2% ▪ US cargo trading partners: Thailand 2% 2% 2% 1% 1% 1% 2% 2% 2% 1% 70 Others 13% 13% 13% 14% 14% 14% 14% 13% 16% 16% ▪ The impact of trade tensions with China is evident in the decline for 2019, which was down to a decade-low of just 13%- the trend has started in 2018 and is a big decline from the 37%/36% in 2013/2014, Vancouver US Containerised Export Markets by Trade Partners, % of TEU

▪ There has been a strong rise in share to South Korea. Indonesia was also up in 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 - both locations replacing the role of China to some extent Korea (South) 8% 8% 8% 7% 7% 10% 17% 16% 18% 23% Japan 15% 15% 15% 15% 17% 20% 15% 19% 16% 17% Key Conclusions: China 33% 33% 33% 37% 36% 33% 34% 32% 21% 13% Indonesia 5% 5% 5% 7% 7% 3% 4% 6% 7% 11% Taiwan 12% 12% 12% 7% 8% 7% 9% 5% 5% 7% ▪ China is still Canadian-sourced cargo’s largest export trading partner for containerised goods, but the share is much lower than for imports, with Japan Vietnam 6% 6% 6% 6% 5% 5% 4% 4% 11% 7% and India playing a larger role Thailand 7% 7% 7% 9% 8% 9% 6% 7% 10% 6% Malaysia 2% 2% 2% 2% 1% 1% 1% 1% 2% 5% ▪ Trade issues between the US and China can clearly be seen in 2018 and 2019, Philippines 2% 2% 2% 3% 3% 1% 2% 2% 3% 4% with a stronger trading role developing instead with South Korea and Indonesia Myanmar 0% 0% 0% 0% 0% 1% 1% 0% 1% 2% ▪ COVID-19 is likely to impact volumes rather than the make-up of trading Others 9% 9% 9% 9% 9% 11% 7% 7% 6% 6% partners, with the longer-term role of China linked to the relationship between the two governments Vancouver’s Containerised Import Demand by N.American Destination: Local & Distant Markets Western Canada (39%), Other Canada (35%) and the US (26%) are the 3 key locations for containerised imports - the leading areas within these wider regions is also outlined, confirming the importance of British Columbia, Ontario and Illinois (in particular)

▪ In the 1990s Vancouver was primarily a container port for BC markets, but in the Vancouver Containerised Imports by Destination Region, 2019 (%) 2000s the port increased penetration of distant markets in Canada and the US: ▪ Western Canada remains the largest market for imports, at 39% in 2019: Western Canada Total 28.4% ▪ British Columbia is dominant, with a consistent share of over 80% since 2015 ▪ Other Canada accounted for 35% in 2019, a declining total: British Columbia 19.5% ▪ Ontario is the largest sub-region in Other Canada, with 69%, followed by Quebec generating 26% ▪ US destinations are key markets and the port continues to maintain share of this Alberta 8.9% activity - despite the recent increase of Prince Rupert looking to serve the same markets and the more recent policies of the Trump Administration. ▪ Illinois (and Chicago) is the largest sub-region, although all areas listed form part of the wider US Midwest region. 71 ▪ It is clear that Vancouver is, and will remain, an important gateway for US imports Other Canada Total 46.1% of Asian cargo, irrespective of the US Administration in power. The Trump Administration policies have not impacted the share of US cargo. Ontario 31.1% Development of Vancouver Containerised Imports by N.American Destination

Million2,000,000 Tonnes Others 1,800,000 Ohio Quebec 12.8% 1,600,000 Tennessee 1,400,000 Michigan 1,200,000 Others 2.2% Minnesota 1,000,000 Illinois 800,000 600,000 Others 400,000 Quebec 200,000 Ontario USA Total 25.5% - Alberta 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 British Columbia 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Vancouver’s Containerised Export Demand by N.American Destinations: West Canada Largest Western Canada (76%) is easily the dominant location from where exported containerised goods are sourced - in particular, from British Columbia. This is consistent with the historic position at the port, although Other Canada and the US are also relevant

▪ The position with regard to export cargoes is different because locally-sourced BC Vancouver Containerised Imports in Tonnes by Origin Region, 2019 (%) commodities remain significant, as they have always done so.

▪ This factor underlines the degree to which the local export cluster has become a Western Canada Total 55.4% driving force for the port, which provides a relative advantage for ships calling with import cargoes that are then able to gain export loads returning to Asia. British Columbia ▪ The strength of Vancouver for exports is a combination of the manufacturing of goods 34.4% in British Columbia and Western Canada, plus the diversity of transloading facilities in Metro Vancouver and the number of shipping lines calling to the port’s container terminals. Alberta 21.0%

▪ Other Canada, especially Ontario, for grains/wheat etc, plus Minnesota and Illinois (auto parts) are other noted export locations generating containerised trade handled by VFPA terminals 72 Other Canada Total 35.4% Development of Vancouver Containerised Exports by N.American Origin Ontario 11.7% Million1,200,000 Tonnes Others Tennessee 1,000,000 Wisconsin Quebec 5.8% 800,000 Michigan Illinois 600,000 Others 17.9% Minnesota 400,000 Others Quebec 200,000 Ontario USA Total 9.1% - Alberta 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 British Columbia 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% Summary Conclusions of Vancouver’s Trading Partners & Destinations

Strengths Weaknesses Summary

Trading Partner - Imports ▪ Established demand from China in place ▪ Strong reliance on China for Canadian ▪ Strong trade link to China will remain - markets - although much less than for as will other Asian locations, in-keeping the US markets with free trade aims of Canada ▪ Some other Asian locations do provide ▪ Demand from non-China locations is ▪ COVID-19 likely to have strong, short- some, smaller volumes limited term impact on volumes rather than change the make-up of import trading partners Trading Partner - Exports ▪ More diverse range of countries served ▪ Still a strong reliance on Chinese ▪ A strong trade link to China to remain, in Asia demand for forest products and grains albeit that there is also a higher share of activity with other Asian countries too, such as South Korea and Japan ▪ Only 40% of exports from Canada go to China 73 N.American Destinations - Imports ▪ Vancouver has a good split to different ▪ US cargo at 26% of all Vancouver ▪ Vancouver continues to demonstrate an locations - better at spreading risk imports could be seen as a risk because ability to serve key markets without too these are discretionary markets - high a reliance on one specific area although this share is much lower than Prince Rupert’s exposure ▪ Confirms ability to port to serve local ▪ The Trump administration policies since areas, more distant locations in Canada 2016 have not negatively impacted the and the competitive US Midwest share moving to the US - the US railroads and ports will not be subsidised by the US government to lower rates, so reasonable to expect little change to market dynamics N.American Destinations - Exports ▪ Local BC markets for forest products is ▪ Very strong reliance on local markets ▪ Locally-sourced export goods to remain the major export activity (albeit seems unlikely to alter much in highly-dominant and seems unlikely to future) significantly change ▪ With supporting infrastructure, transloading services and localised shippers in place, reasonable for exports to be moving through Vancouver 74

Potential Impact of COVID-19 for Pacific Gateway Ports and Future Vancouver Container Demand Impact of COVID-19 - Snapshot from Oxford Economics Indicates GDP Drop in 2020 As of the start of April 2020, estimates of the possible impact of COVID-19 started to emerge, with GDP in both Canada and the US projected to decline, with Canada down by -6.5% and the US by -4.1%

▪ The full impact of COVID-19 is not currently known (as of April 2020). Information from Oxford Economics, April 13, 2020

▪ There have been some estimates in terms of GDP and the impact for 2020 - the tables are from Oxford Economics (OE) directly and have, therefore, been left in the format produced by this widely-accredited organisation.

▪ It can be seen from the OE information shown that GDP in 2020 will see widespread decreases on a global basis compared to 2019.

▪ These indications predict the US at around -4.1% and Canada at -6.5%, although both will rebound strongly in 2021.

▪ These are, of course, just one example of projected impact on GDP.

75

Key Conclusions:

▪ The role of WSP here is not to produce information that can be supplied by specialist economists, but instead to summarise the details ▪ The subsequent forecasts provide alternative information about GDP projections for 2020 and beyond 76

Container Regional Forecasts to 2060 77

Container Forecasts: Methodology Forecast Methodology uses an In-depth Analytical Process for Robust Outputs A six-step approach is applied to generating future volume potential of North American volumes, Pacific West Coast and Pacific North volumes, before volumes for the Pacific gateway region and all VFPA Terminals are generated

Analytical Process

▪ A linear process with 6 distinct stages of analysis enable the scope to be addressed concisely with an increasing knowledge base developed throughout the project to further inform analysis. 06 ▪ This knowledge base can be reviewed and updated to measure performance and inform future commercial decisions. 05 ▪ Defined structure enables deliverables and emerging analysis to be shared through interim reports as Outturn Terminal Volumes & Market Shares required. Terminal breakdowns are applied, and volumes re- 04 contextualised within N. American market outlook 78

Apply Utilisation-Based Tariff Uplifts & Analyse Cost Comparison 03 Tariff uplifts are modelled based on forecast utilisation, with parallel built-up cost analysis undertaken (versus Prince Rupert) to understand cost headroom and potential for volume switching Scenario Testing 02 Bottom-up assessment & testing of specific scenario tests including: future pandemic and GFC, trade agreement cessation (USMCA), manufacturing focus, and competitive port behaviour.

Probabilistic / Stochastic Modelling Assessment Understanding of historical best/worst case scenarios vs ‘most-likely’ outcomes for input 01 to Monte-Carlo simulation. Understand risk profile based on output percentile ranges.

Bottom-Up Forecasts - VFPA & Prince Rupert Based on granular, flow-specific origin/destination data & correlation to most applicable GDP values under three specific macroeconomic scenarios (high case [open/green], base case [open/mixed], low case [protectionist/carbon dependent].

Top-Down Forecast Benchmarks - All-N. American Ports Based on total throughput & assessed GDP correlation to N. American GDP. Developed in order to provide context behind detailed Pacific North volumes & benchmarks of market shares etc. 79

Container Forecasts: Top-Down North American Forecast Benchmarks Introduction to Regional Container Forecasts to 2060 - Key Development Factors Important that short-term shocks, even very severe like COVID-19, are put into perspective for a future infrastructure project that is part of planning in the period to 2060 - so, very long-term

▪ Projected development of container volumes at any port is a function of the overall Key Recent Factors Helping to Drive Projected Container Port Future Development scale of demand, the competitive position of the port’s terminals and the availability of capacity to meet demand on a cost-effective basis, complemented by the following key factors: ▪ Globalisation has boosted economic growth and ▪ In recent decades, as economies have expanded, trade has also increased to meet the demands of industry for raw materials and intermediate goods, and the demands of consumers for competitive products. Trade in manufactured goods (and intermediate goods) – the prime constituents of containerisation – has been at the centre of this global economic expansion. Globalisation ▪ Link between GDP and trade intensified: Lower-Cost boosted Transportation economic ▪ During this period, the fundamental structure of the world economy has altered. The ability to source finished or partially manufactured goods in areas of low growth 80 costs has been at the centre of the 'globalisation' of industries. Not only has this boosted world output, but it has also intensified the relation between economic output and trade. In the longer run, it will be the sustainability of this pattern of growth that will define the outlook for containerisation, and therefore demand development at Port Metro Vancouver’s container terminals. ▪ Lower-cost transportation has stimulated globalisation and stimulated demand Link between trade ▪ The container system has been both a catalyst and a beneficiary of these and GDP intensified developments. The availability of low-cost transport effectively eliminates freight charges as a significant consideration in the cost of most higher-value commodities. This allows complex global sourcing patterns to be developed. With the continued availability of low-cost labour in China and other developing regions, the migration of manufacturing to these locations seems certain to continue. ▪ Business lost between the 2008 and 2010 did recover, but from the current perspective of COVID-19 it is clear that considerable uncertainty exists at the Key Conclusions: macro-economic and trade level. ▪ Recent market stability since the GFC is being negatively impacted during 2020 and the full extent of the drop in container port volumes is yet to be seen ▪ Important to note that this Study relates to infrastructure developments to 2060, so is very long-term. Regional Container Port Demand Forecasts - Total North America at 89.8 million TEU in 2050 Total North American container port demand to rise from 54.6 million TEU in 2020 to 89.8 million TEU by 2050 and 99.0 million TEU by 2060 - reflecting continued annual growth

▪ A summary of the forecast for North American total container port confirms continued North American TEU, Top-Down Forecast to 2060 growth throughout the forecast period, as the following confirms: ▪ In 2020, volumes of 54.6 million TEU are anticipated 120,000,000 ▪ This takes into account the decrease caused by the COVID-19 pandemic, from the 2019 total volumes of 60.0 million TEU. ▪ Over the longer-term, increases will occur, to reach: 100,000,000 ▪ 76.6 million TEU in 2035, annual growth since 2020 of 2.3% per annum ▪ 89.8 million TEU by 2050, annual increases of 1.1% per annum from 2035 ▪ This growth is occurring in highly-established economies in Canada and the US 80,000,000 and assumes that 59.9 million TEU in 2022 will have seen the likely impact of COVID-19 overcome 60,000,000 81 North American TEU, Top-Down Forecast Phase Summary

2010 2020 2035 2050 North American TEU 40,000,000 (Total, Top-Down Forecast) 44,151,142 54,621,009 76,551,247 89,775,091

CAGR Summary 2.15% 2.28% 1.07% 20,000,000

Key Conclusions: -

▪ North American total container port demand will overcome the COVID-19 impact

2060 F 2060

2058 F 2058

2056 F 2056

2054 F 2054

2052 F 2052

2050 F 2050

2048 F 2048

2046 F 2046

2044 F 2044

2042 F 2042

2040 F 2040

2038 F 2038

2036 F 2036

2034 F 2034

2032 F 2032

2030 F 2030

2028 F 2028

2026 F 2026

2024 F 2024

2022 F 2022

2020 F 2020

2018 A 2018

2016 A 2016

2014 A 2014 2012 A 2012 in 2020 - probably by the end of 2022 and start of 2023 A 2010 ▪ Total Canadian and US container port volumes will continue to see annual growth, reaching 89.8 million TEU by the end of 2050 and 99.0 million TEU by North American TEU (Total, Actuals) North American TEU (Total, Top-Down Forecast) 2060 Regional Container Port Demand Forecasts - Total Pacific West Coast By Port (Share Held) Assuming that the western seaboard retains a share of 48% of the total North American port demand will see a total of around 47.0 million TEU reached by the end of the forecast period

▪ Development of the total Pacific West Coast by port has also been established to Pacific West Coast TEU, Top-Down Forecast by Port to 2060 2060. 50,000,000 ▪ These volumes are a proportion of the total North American container port market already established, equivalent to 48%. 45,000,000 ▪ An individual breakdown by each port is shown in the table. The decrease caused by COVID-19 is included for 2020, with the return to pre-COVID-19 levels anticipated in 40,000,000 2024. 35,000,000 Pacific West Coast TEU, Top-Down Forecast Phase Summary 30,000,000 Facility Metric Value Sea-Tac % of Pacific West Coast 13% 25,000,000 82 Vancouver % of Pacific West Coast 12% Prince Rupert % of Pacific West Coast 4% Pacific North Others % of Pacific West Coast 2% 20,000,000 Oakland % of Pacific West Coast 9% Los Angeles % of Pacific West Coast 33% 15,000,000 Long Beach % of Pacific West Coast 27% Pacific South others % of Pacific West Coast 1% 10,000,000

Pacific West Coast % of N. American Total 48% 5,000,000

Key Conclusions: -

▪ The impact of COVID-19 will cause a decline for 2020, followed by an initial

2060 F 2060

2058 F 2058

2056 F 2056

2054 F 2054

2052 F 2052

2050 F 2050

2048 F 2048

2046 F 2046

2044 F 2044

2042 F 2042

2040 F 2040

2038 F 2038

2036 F 2036

2034 F 2034

2032 F 2032

2030 F 2030

2028 F 2028

2026 F 2026

2024 F 2024

2022 F 2022

2020 F 2020

2018 A 2018

2016 A 2016

2014 A 2014

2012 A 2012 2010 A 2010 rebound, but not until 2024 will pre-COVID-19 levels be reached on the Pacific West Coast Sea-Tac Vancouver Prince Rupert Pacific North Others Oakland Los Angeles Long Beach Pacific South others ▪ By the end of the forecast period, the western seaboard will see total port demand reach almost 47.0 million TEU Regional Container Port Demand Forecasts - Total Pacific North by Port (Share Held) Impact of COVID-19 is expected to see a decline in total regional port demand for 2020 and take at least 2 years to recover - thereafter, there will be annualised increases across this region’s ports throughout the long-term forecast to 2060

▪ In 2019, the Pacific North region if including Sea-Tac, Vancouver and Prince Rupert Pacific North TEU, Top-Down Forecast to 2060 generated total port demand of 8.2 million TEU. 16,000,000 ▪ If the current share of this market is retained by each port, then by 2060 the individual port totals will have risen to: ▪ Vancouver: 5.60 million TEU 14,000,000 ▪ Prince Rupert: 1.68 million TEU

▪ Sea-Tac: 6.23 million TEU 12,000,000 ▪ The impact of COVID-19 can be seen in the anticipated demand for 2020, with pre- COVID-19 levels reached during 2022 and into 2023 10,000,000

Pacific North TEU, Top-Down Forecast Phase Summary 83 Facility Metric Value 8,000,000 Sea-Tac % of Pacific North 46% Vancouver % of Pacific North 41% 6,000,000 Prince Rupert % of Pacific North 12%

Pacific North % of N. American Total 14% 4,000,000

Key Conclusions: 2,000,000

▪ Once the impact of COVID-19 is overcome, continued and annual growth is anticipated for the Pacific North region -

▪ The 2019 regional total of 8.2 million is expected to reach just over 13.5 million

2060 F 2060

2058 F 2058

2056 F 2056

2054 F 2054

2052 F 2052

2050 F 2050

2048 F 2048

2046 F 2046

2044 F 2044

2042 F 2042

2040 F 2040

2038 F 2038

2036 F 2036

2034 F 2034

2032 F 2032

2030 F 2030

2028 F 2028

2026 F 2026

2024 F 2024

2022 F 2022

2020 F 2020

2018 A 2018

2016 A 2016

2014 A 2014 2012 A 2012 TEU by 2060 - very long-term annual growth of 1.2% per annum A 2010 Sea-Tac Vancouver Prince Rupert Key Conclusions for North American, Pacific West Coast and Pacific North Container Port Demand Forecasts

Strengths Weaknesses Key Summary

North America ▪ Established markets, continued growth ▪ Growth will be lower due to economic ▪ Longer-term continued growth, but and market maturity short-term overcoming impact of COVID-19 the big challenge ▪ Market will rebound after COVID-19, ▪ COVID-19 will see overall port demand albeit not until 2022-2023 (based on decline in 2020 current estimates) Pacific West Coast ▪ Pacific South ports of Los Angeles / ▪ Recent shift of some cargo to East ▪ Longer-term continued growth, but Long Beach will always be guaranteed Coast North America, as supported by short-term overcoming impact of significant volumes - along with massive the enlarged Panama Canal and Suez COVID-19 the big challenge, while Californian demand Canal routing remains biggest challenge successfully stopping share erosion to 84 for major West Coast ports East Coast crucial

▪ COVID-19 will see overall port demand decline in 2020

Pacific North ▪ Competitive market position driven by ▪ Sea-Tac volumes and growth less ▪ Longer-term continued growth, primarily Vancouver and Prince Rupert dynamic than Pacific gateway ports driven by Pacific Gateway ports and their ability to keep serving discretionary markets, but short-term overcoming impact of COVID-19 the big challenge

▪ COVID-19 will see overall port demand decline in 2020 85

Section 2: Competitive Developments at other Container Terminals - Local & Discretionary Markets 86

Introduction to Competitive Ports & Terminals Introduction To Analysis of Competing Ports to Vancouver Vancouver competes for a combination of localised and discretionary container traffic - this means a wide-range of different competing ports throughout the entire North American continent

▪ The development of container demand for the container terminal facilities at Breakdown of Port Competition to Vancouver - by Region Vancouver will be determined by a number of different factors, but the availability and type of competing capacity will be a key issue.

▪ Therefore, a detailed analysis of the structure and capabilities of container terminals on the North American west coast and east coast over the forecast period is valid to • Atlantic North • Prince cover both localized and discretionary hinterlands. • Atlantic Rupert ▪ This means specific emphasis on the following - as identified by the chart: South ▪ Continued development of Prince Rupert as the primary local competitor ▪ Overview of the other Pacific Northwest and Pacific South ports is provided as Discretionary these ports are all competitive options for serving other regions in North America volumes - US beyond the more localised areas. Local traffic from Easy ▪ Ability of East Coast North America (and to a lesser extent, US Gulf) to also serve 87 key discretionary hinterlands. Coast

▪ On this basis, the following key items are assessed further in order to help better determine the competitiveness of Vancouver and its noted future development plans for additional container terminal capacity in relation to other facilities throughout North America: Discretionary Discretionary ▪ Current and planned container terminal capabilities and investment. volumes - US volumes - from West ▪ Anticipated scale, timing and development of container terminal capacity Canada ▪ Development of longer-term historic productivity in each of the regional ports. Coast ▪ This Section will consider the competitiveness of infrastructure at all competing ports • Prince • Prince to Vancouver Rupert Rupert • Pacific South Introduction to Terminal Equity Ownership – West Coast North America Prince Rupert Vancouver (and Prince Rupert) have out-performed other West Coast North America ▪ DP World owns Fairview Cove terminals despite being the only facilities without direct shipping liner investors

Vancouver Port of Seattle ▪ DP World owns Centerm ▪ MSC (TIL) at TTI. ▪ Ontario Teachers / IFM 37.5% share each, BCI 25% ▪ CMA CGM at T-30, (JV: China Shipping 33.3%; share in GCT Deltaport & GCT Vanterm Matson 33.3%; SSA 33.3%).

▪ Oakland Tacoma ▪ Evergreen at B.E Nutter terminal, (Leased by Everport ▪ Evergreen at Pierce County Terminal, (Leased by Everport 70%). 100%).

▪ ONE (MOL) at Trapac, (MOL subsidiary 51%). ▪ K Line/ THE Alliance (ITS) at Husky (ITS subsidiary), 70% Brookfield AM 49%. share held. 88 ▪ MSC, ONE at Oakland ICT, (NYK 20%, SSA). ▪ Yang Ming at Olympic Container Terminal 100%

▪ Hyundai at Washington United Terminal 100%

Port of Long Beach Port of Los Angeles ▪ ONE at ITS Terminal Pier G, (70% K Line, 30% Ports ▪ AP Moller at Pier 400 100% America). ▪ APL/CMA CGM at GCT Pier 300, CMA CGM 10% Fenix ▪ Cosco at Pier J, (Cosco Shipping 46%; SSA 44%; Marine (EQT) 90%. CMA CGM 10%). ▪ Evergreen at LA Berth 226-236, (Leased by Everport 70%). ▪ MSC (TIL) at Pier A - operated by SSA LB Terminals, (TIL 50% and SSA 50%). ▪ Cosco at West Basin CT (JV: Yang Ming 40%; China shipping 40%; Ports America 20%). ▪ MSC (TIL) at TTI Pier T. ▪ ONE at Trapac (MOL subsidiary), (51%. Brookfield AM 49%).

▪ ONE at Yusen Terminal, (Leased - NYK 51%; Macquarie Note: Matson terminals omitted due to domestic shipping route activity 49%). Source: WSP, terminal operators, Introduction to Market Positioning - Competitive Factors Influencing Port & Terminal Choice There is a wide-range of different factors that can help influence port or terminal choice in North America - although a generic summary, many listed are applicable to the Pacific Gateway region and throughout North America

▪ Location – for marine access and in proximity to hinterlands (both local and Examples of the Main Typical Factors That Help Influence Port Choice discretionary). ▪ Geographic location - can impact transit times, hence for Prince Rupert it is a crucial competitive factor, also for Vancouver when compared to San Pedro ports ▪ Tariff levels (cargo handling and ship dues) and operating costs - important to note that the terminal handling costs portion is a comparatively low portion of overall logistics costs, so not a key driver of overall competitiveness ▪ For US & Canadian ports, the Harbor Maintenance Tax (HMT) on imports through US ports benefits Canadian terminals ▪ Performance and service levels (e.g. speed of container/dry bulk handling, flexibility, IT systems etc.). ▪ Labour arrangements. 89 ▪ Suitable facilities (e.g. physical accessibility, water depth, cranes etc.). ▪ Access to cost-effective intermodal rail - and/or support facilities of logistics networks, transloading sites etc. ▪ Competitiveness of rail (cost, uncongested rail routes, lower elevation change/longer trains, etc.) is highly crucial for discretionary markets in North America ▪ Availability of capacity. ▪ Avoidance of congestion. ▪ Potential for dedicated facilities/terminal areas. ▪ Priority berthing. ▪ Low degree of bureaucracy for customs and port authorities. ▪ Good vessel support systems in place that are efficient and cost competitive – pilots, tugboats etc. ▪ Other support services and functions – i.e. container maintenance and repair, bunkering/fuel, ships stores etc. ▪ Value-added services – i.e. container inspection, vessel hull inspection, logistics activities, Free Zone credentials etc. ▪ Good security and protection coverage at all times. Pacific Gateway Ports Compete for Two Distinct Markets - Local Canada & Discretionary Areas Vancouver serves local import/export markets, but also discretionary regions in North America - Prince Rupert specialises in handling primarily import containers straight to intermodal rail and onward to the US Midwest and more distant Canadian areas

Summary of Competition for Pacific Gateway Ports of Prince Rupert / Vancouver Location of Prince Rupert and Vancouver and WCNA Competing Ports

Local Hinterlands Discretionary markets Prince Rupert British How served ▪ Truck market - generally ▪ Intermodal rail markets, Columbia within 350 miles over 550 miles Vancouver Relevance to Vancouver ▪ Vancouver - 33% is ▪ Vancouver - 66% truck/local moves by rail to the US, >550 ▪ Prince Rupert’s split has Central and Eastern Seattle/Tacoma miles: Rail grown, from 5% to 15% Canada Washington/ currently ▪ Prince Rupert - US Oregon discretionary is 66% <350 miles: and Central and Eastern Truck 90 Canada is 33% Competition ▪ Localised terminals ▪ PNW of Seattle-Tacoma ▪ San Pedro ports of Los Angeles/Long Beach North ▪ Vancouver competes for two different ▪ Oakland California markets in Canada and the US: ▪ Major ECNA ports - i.e. NY/NJ, Virginia. 1. Local Canadian truck markets - Oakland generally within 350 miles of the Savannah etc port and serving the local population South demands of Western Canada. Key Conclusions: California 2. Discretionary markets - this competition is ongoing between all ▪ Competition exists in both of Vancouver’s key markets - local and discretionary Los Angeles/Long Beach ports looking to serve key US discretionary areas through intermodal rail, which comprise ▪ Existence of competing facilities for local and discretionary will continue - large US Midwest hinterlands in key though unlikely to see any new ports being built in this mature economy areas, including Atlanta, St Louis, Cincinnati, Chicago, Memphis and Columbus/Ohio Valley. Importance of US Midwest - Very Large Discretionary Market that Ports Compete to Serve All major container ports compete to serve these largescale hinterlands – ability to offer cost-effective, efficient intermodal rail services is key - the Pacific Gateway ports are both key options for servicing this demand

▪ The primary discretionary market in North America is the US Midwest. Central Access Routes to US Midwest – Transpacific & All Water to US East Coast/US Gulf Canada is also an important region targeted by ports on both the East and West coasts of the country.

▪ For a port to be competitive, it needs to be able to offer a connection to efficient and cost-effective intermodal rail, supplemented by good marine infrastructure.

▪ These factors represent a combination of quantitative and qualitative matters. Also, disruption to traffic flows by port/region and other ‘one-time’ infrastructure investments, like the Panama Canal are of importance but can lead to overstating volume growth, if not treated with caution.

▪ Drivers of competitiveness remain the fundamentals – i.e. good intermodal rail access at cost effective rates serving areas of demand where cargo required.

91 ▪ To serve the discretionary areas, the following gateway options form the forthcoming assessment: ▪ Pacific Gateway – Vancouver and Prince Rupert ▪ PNW – Northwest Seaport Alliance (Seattle-Tacoma) 3. Suez Canal ▪ Pacific South – San Pedro ports of Los Angeles/Long Beach and Oakland in northern California Access via the ▪ North Atlantic – Montreal, NY/NJ, Baltimore, Philadelphia, Baltimore and Suez Canal to Virginia ECNA and US ▪ South Atlantic – Charleston and Savannah Gulf is a ▪ Each of the above-listed ports are considered in more detail. competing option to Key Conclusion Transpacific & via Panama ▪ Prince Rupert has built its value-proposition by targeting and attracting discretionary cargo ▪ Vancouver has increased over time its volumes moving to US markets, although Note: Chicago and Ohio are shown as indicative of the US Midwest, but it is a larger region that also stretches the port also benefits from offering good local import/export cargo to shippers to more central locations in the US, including Columbus/Ohio Valley, Cincinnati etc. too 92

Analysis of Competitive Ports & Terminals - Localised Markets Introduction to Vancouver - Largescale Terminals With Rail, but Rising Utilisation Volumes to US Midwest have risen in recent years and currently at around 25% of total volumes - but congestion and high utilisation will curtail growth and issues remain over capacity expansion at Deltaport

▪ Vancouver offers modern port infrastructure, with continued investment by the Terminal Facility Infrastructure at Port of Vancouver (BC), Start of Q2 2020 governing authorities and terminal operators - as Table shows. GCT and DP World

are both highly-experienced terminal operators in this region and have two terminals. Terminal Area Quay Water Gantry Max Ship Current ity ▪ Maximum vessel size is possible up to New Panamax classification (12,500 TEU), (Ha) Length Depth Cranes Size Capacity although not fully loaded (the following slides assess depth at terminal). (m) (m) (Size (TEU) ▪ Access to on-dock rail is available at all terminals – this is a crucial component of the Class)* overall competitiveness of the port. Deltaport 85.0 1,100 15.9 10 New 1.8 ▪ Deltaport’s DREP project is crucial – increased intermodal rail capacity and improved (GCT) Panamax million semi-automated efficiencies to keep pace with growing US discretionary market demand. Vancouver is able to effectively serve its local area trough trucking and Vanterm 31.0 619 15.5 6 New 840,000 transload activities. (GCT) Panamax ▪ Development of additional capacity at Vancouver is the biggest and most important current issue. The Roberts Bank 2 project will add 2.4 million TEU p.a. of capacity and Centerm 28.0 647 15.0-15.5 6 New 900,000 enable to port to continue to compete effective for local and discretionary markets. (DP Panamax 93 World) Location of Vancouver Terminals FSD (DP 28.1 701 11.7 4 Panamax 400,000** World) Centerm & * = Assumes 1.5m is allowed for Under-Keel-Clearance (UKC) Vanterm ** = FSD capacity ranges between 400,000 TEU - 642,000 TEU, depending on source. The total of 400,000 TEU Author Vancouver Port fromFraser derived Source: WSP is used as it is from DP World directly. This figure will be dropping to 150,000 from 2023, according to DP World

Key Conclusions: Fraser Surrey ▪ The 3 major facilities offer largescale, modern infrastructure Docks ▪ Fraser Surrey Docks is a low cost option for smaller container vessels

▪ On-dock rail is crucial and all terminals can offer intermodal capabilities

▪ Future expansion of Deltaport remains the key issue requiring resolution

▪ Vancouver remains a key gateway option for both imports and exports for trade Deltaport with Asia Source: Vancouver Fraser Port Authority GCT Deltaport: Continued Demand to Use Facility from Lines - Congestion Concerns Exist Relatively little change to average lengths and drafts of ships calling since 2010 - but sizes of vessels utilising the terminal is expected to increase in future, placing a growing pressure on capacity available

▪ GCT Deltaport is the largest and most modern facility in the port and the location of Total Calls for Container Vessels at GCT Deltaport, 2010 - 2019 Roberts Bank is where future expansion needs to occur. It is the first semi-automated facility in the country and the 85ha state-of-the-art terminal is located in the outer 350 harbour at Roberts Bank, supported by an 1,100 metre of contiguous berthing, using Super Post-Panamax cranes 300

▪ There remains strong shipping line demand to use the terminal, with a higher number 250 of calls continuing to be made over the past 10 years. 200

▪ With the major shipping line alliance re-organisations completed a settled position 150

exists and GCT Deltaport can continue to meet the needs of its customers. Totalcalls 100 ▪ The major future issues for GCT Deltaport will be congestion as utilisation increases - vessels at the berth could also be impacted if the facility is struggling to move 50 containers off the terminal (ignoring any short-term impact COVID-19 may cause). 0 94 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ▪ The average TEU ship size has seen increases, especially since 2014, with the average vessel length and average ship draft consistent over the assessment period with the transpacific industry to the Pacific North. Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019

8,000 350.0 Key Conclusions 7,500 300.0 ▪ Deltaport is a modern. High-quality terminal facility, recently improved with the 250.0 7,000 largescale DREP initiative to help remove containers from the facility efficiently 200.0 6,500 ▪ The number of ships calling to the terminal has increased since 2016 - vessel 150.0 6,000

dimensions are largely consistent with industry trends 100.0 Length/Draft (m)Length/Draft ▪ The issue moving forward will be terminal capacity and keeping pace with TEU Size Average 5,500 50.0 future demand requirements - increasing congestion could also impact the 5,000 0.0 ability of ships to berth 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

▪ Average sizes of ships calling has increased and is reflective of vessel Average TEU Average LOA Average draft cascading onto Transpacific trades. It is likely to continue rising, which again will place pressure on this terminal to ensure it can offer sufficient capacity to support ocean carrier deployments (which will also see cargo exchanges increase) There are 2 Current Options for Developing Significant Extra Future Capacity at Deltaport Port Authority continues to favour the RBT2 option, while operator at Deltaport, GCT, wants to develop DP4 (despite significant environmental issues) - a resolution needs to be gained, quickly, to ensure overall port competitiveness is not negatively impacted.

Port Authority Development Preference GCT Deltaport Management Development Preference

Source: Source: GCT Source: Source: VFPA

Comparison Item RBT2 – Port Authority DP4 – GCT Deltaport

Costs • C$3.0 billion (reported estimate) • C$990 million (reported estimate)

How paid for? • Port Authority/private funding • GCT/owners – no taxpayer subsidy

Capacity to be Provided • 2.40 million TEU p.a. • 1.97 million TEU p.a.

Current status (Q2 2020) • Undergoing federal government assessments • Commissioned engineering and environmental studies - but reclamation of 30ha in an extremely sensitive area in shallow water questions credibility

Estimated timescales • If approvals and all financing gained, construction of 5.5 years ▪ Virtually inconceivable that this project could be done through VFPA is estimated - current estimate of operations by Port Authority expedited approval process, without resorting to full CEAA/IAAC review of 2029 process - even if achieves this objective, very long-term timescales apply GCT Vanterm: Total Ship Calls is Falling but Reflects Industry Trends of Bigger Ships Total number of ship calls declining - but average size of ship calling is increasing, from 5,012 TEU in 2012 to around 7,236 TEU for 2019. Biggest restrictive factor will be the berthing available which means only one (larger) ship can be handled

▪ GCT Vanterm is located in the inner harbour of the port is an established but Total Calls for Container Vessels, 2010 - 2019 productive facility. It is a 31ha container terminal with 619 metres of berth, using 6 x Super Post-Panamax gantries and an on-dock intermodal rail yard with nine tracks 300 totalling 2,962 metres. 250 ▪ Vessel calls to the facility have been declining since 2012, when 239 ships were recorded at the terminal - the figure for 2019 is 121 ship calls. 200

▪ While the length and draft of vessels calling has been largely consistent, there has 150 been an increase in the average TEU size of ships using the facility, from 5,142 TEU

in 2012 to 7,236 TEU for 2019. Totalcalls 100

▪ This indicates that larger ships are calling, although the number of visits continues to 50 fall - more containers on bigger ships is a Transpacific and industry trend. 0 96 ▪ However, fewer ships calling is also impacted by the terminal’s berthing restrictions - it 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 is only capable of receiving one vessel at a time due to more limited berth length.

▪ This is the bigger concern moving forward because it will be the most restrictive factor Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 for the facility 8,000 350.0 Key Conclusions 7,000 300.0 6,000 250.0 5,000 ▪ Terminal activity reflects trade lane and industry trends - larger, but fewer, ships 200.0 4,000 calling 150.0 3,000

▪ Average sizes of ships calling increased from 5,142 TEU in 2012 to 7,236 TEU 2,000 100.0 Length/Draft (m)Length/Draft for 2019 1,000 50.0 ▪ The berth can only receive one vessel at a time - this will be the largest 0 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 restrictive factor moving forward at this terminal VesselsTEU of Size Average Average TEU Average LOA Average draft GCT Vanterm Expansion Plans - Phase 1 Adds +25%, but Only 1 Ship Can Call at Berth Phase 1 already commenced and will improve annual capacity by 25% - a further 20% increase also planned by GCT but terminal restriction is the ability for only being able to receive 1 (larger) ship at a time

▪ GCT Vanterm has confirmed Phase 1 expansion plans - a C$160 million investment GCT Vanterm Capacity Plans - Phase 1 (Confirmed) & Phase 2 (Unconfirmed) and modernisation project. The scope of work includes: ▪ Replacement of key container handling equipment: Phase 1 Phase 2 ▪ 2 new ship-to-shore (STS) cranes. Capacity lifts 582,000 (+25%) 701,000 (+20%: GCT ▪ 10 rubber tired gantry cranes (RTGs). – • • figure) ▪ 19 loaded / empty container handlers. Timing • Project confirmed in • Planned build 2026- ▪ 40 tractor-trailers. May 2019 2028 ▪ Leasehold Improvements: • Fully online by 2023 • Fully online by 2029 ▪ Replacement of the existing ship fendering systems, including replacement of Deliverables More capacity More capacity ship bollards and fenders to accommodate and attract larger vessels calling • • Port of Vancouver. • Handle 14,000 TEU • Extra rail capacity ships (+52%) to 580,000 lifts ▪ Replacement and upgrade to the maintenance building infrastructure. ▪ Civil work improvements to accommodate the stacking of 5-high loaded Key conclusions • More terminal capacity • More terminal and rail containers. • Suitable for larger ships capacity / automation • Shoreside power • Ship berthing issues ▪ Upgrades to Terminal Operating System & Real Time Positioning Systems benefits could restrict expansion information Source: GCT • Unlikely to proceed Configuration Conclusions - Phase 1 Conclusions - Phase 2 of GCT Vanterm - Before Phase 1 ▪ Container handling capacity to rise ▪ Currently unconfirmed, will be Expansion by 25% per annum - capacity could challenging due to space available / Started be challenging based on only 1 berthing for just 1 vessel possible berth available ▪ Ability to handle larger ships within ▪ Key factor to Phase II is that GCT existing footprint - up to 14,000 TEU required to hand back Vanterm to possible VFPA in 2029 unless RBT2 proceeds ▪ Targeting major reductions in ▪ Expected to need automation - small greenhouse gases at operation terminal and extra capacity will bring greater densification, albeit costs of

automation will be a factor Source: Google Source: Google Earth, June 2019 DP World Centerm: Strong Increase in Size of Vessels Calling in 2018 & 2019 Number of container ships calling declined in 2018 and 2019 - but unsurprisingly because of vessel upsizing clearly occurring in Transpacific and to this facility. Essential that future capacity keeps pace with anticipated larger exchanges and volumes

▪ DP World Centerm is an established container facility, located in the inner harbour of Total Calls for Container Vessels, 2010 - 2019 the port and covers 28ha, with 647m of quay available. 250 ▪ There was a decline in the number of container vessels calling to DP World Centerm in 2018 and 2019, although this was due to the sizes of ships increasing substantially 200 ▪ In 2017, average ship size was just over 5,600 TEU ▪ For 2018 it was over 7,000 TEU 150 ▪ In 2019, vessels over 8,100 TEU were calling 100 ▪ Shipping line demand to use this facility with larger ships is increasing - larger ships Totalcalls likely to bring higher container exchanges and volumes, necessitating the need for 50 additional capacity to keep pace with demand.

0 98 DP World Centerm, 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Key Conclusions Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 ▪ Average sizes of ships calling has increased strongly between 9,000 350.0 2017 and 2019 - average units 8,000 300.0 now over 8,100 TEU 7,000 250.0 6,000 ▪ Vessel lengths also increased in 5,000 200.0 2018 and 2019 4,000 150.0 3,000 ▪ The trend of fewer calls but 100.0

larger vessels utilising the 2,000 (m)Length/Draft Average TEU TEU Size Average 50.0 terminal is reflective of 1,000 Transpacific and industry-wide 0 0.0 trends 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ▪ Essential that terminal capacity Average TEU Average LOA Average draft is able to keep pace with increased volume demand anticipated from larger ships calling DP World Centerm Expansion - to Deliver Capacity of 1.5 million TEU by Q1 2022 The project is a major upgrade for the Port Authority - adding up to 60% more annualised container capacity by adding just 15% more land and improved terminal configuration and access. Brings much-needed capacity to Vancouver

▪ The Centerm Expansion Project and South Shore Access Project commenced in July Centerm Expansion Project & South Shore Access Project 2019 and is scheduled to be complete by the beginning of 2022

▪ The projects will be contained to port land on the south shore of the Burrard Inlet, and include: ▪ Reconfiguration and expansion of the Centerm container terminal ▪ Once complete, the terminal will be able to accommodate a 60% increase in container traffic by having added only 15% more land. ▪ Existing capacity of 900,000 TEU per annum to be raised to 1.5 million TEU per annum. ▪ Construction of a new overpass on Centennial Road to bypass rail tracks. ▪ Changes to Waterfront Road so that it is a continuous port road from Canada Place to the McGill Street port entrance. 99 ▪ Removal of the Heatley Avenue overpass ▪ Installing a second shore power connection at Centerm on the newly expanded berth, so that if two ships with the necessary equipment are in port at the same time, they can both switch off their diesel-powered engines. ▪ Installing terminal equipment that will help reduce greenhouse gases, including electrified rail mounted gantry cranes in place of the diesel-powered rubber tire

gantry cranes currently used in the intermodal yard Source: Vancouver Port Authority Source: Vancouver Fraser

Key Conclusions

▪ Brings additional capacity to Centerm and the port overall

▪ Raises existing 900,000 TEU p.a. container capability to 1.5 million TEU p.a. by Q1 2022 (based on current, known timescales)

▪ Brings the ability to offer important shore-power connectivity for two ships simultaneously

▪ New terminal equipment will help reduce greenhouse gases DP World Fraser Surrey Docks: Niche Operation - Volumes Rising Due to Lack of Port Capacity Terminal has seen its average container ship calling increase from 2,020 TEU to 4,585 TEU between 2011 and 2019 - vessels are also longer, with LOA up from 191m to 278m, although regarded as a short-term trend due to capacity issues elsewhere in port

▪ Fraser Surrey Docks LP was acquired by DP World in February 2020 and is one of Total Calls for Container Vessels, 2010 - 2019 the largest modern multipurpose facilities on the West Coast of North America. The terminal is highly-established, having been constructed in 1962 and handles a 180 combination of containers, steel, forest products, bulks and project cargo. 160 ▪ Container vessel calls to this terminal have increased in recent years. For example, in 140 2015, a total of 74 ships called, but for 2018 and 2019, the figure had risen to 147, 120 with the 2019 total similar. Increased volume and shipping activity was because none of the other 3 terminals were able to handle a new market entrant (SM Lines - on a 100 short-term contract, which is expected to switch to DPW Centerm, if capacity allows) 80

Totalcalls 60 ▪ This terminal is a niche player in the market focused on smaller liner services, but unable to offer service to most ships calling Vancouver due to LOA and draft 40 limitations. However, it offers the ability to service the requirements of smaller ships 20 and specialist operators in the short-term. Longer-term, it is reasonable to expect DP 0 100 World to concentrate on steel or other non-containerised cargoes. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Configuration TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 of FSD Between 5,000 300.0 Containers and 250.0 Other Cargoes 4,000 200.0 3,000 150.0 2,000 100.0

1,000 (m)Length/Draft Average TEU TEU Size Average 50.0 0 0.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Source: FSD Average TEU Average LOA Average draft

Conclusions ▪ Bigger ships and more calls occurring at Fraser Surrey Docks over the past 5 years - though mainly due to lack of space at other facilities

▪ Longer-term potential as a non-container traffic option and from around 2023 it is assumed that facility will not be handling pure container services Introduction to Prince Rupert - Competitive Option for US Discretionary Markets The value proposition of this port will remain its shorter sailing time from Asia and ability to get import containers onto the intermodal rail network more quickly - supported by competitive CN rail services

▪ Prince Rupert’s local hinterland is small, so the port will always be largely reliant upon Current Terminal Infrastructure at Port of Prince Rupert, Q2 2020 serving more distant markets throughout North America. ▪ The Fairview Container Terminal at Prince Rupert opened in 2007. Upon acquiring the Area (ha) Quay Water Gantry On-Dock facility in April 2015 for C$580 million (US$457 million), new owner DP World Length Depth Cranes Rail? delivered capacity of 1.5 million TEU per annum by Q3 2017. (m) (m) ▪ The 2M Alliance of Maersk Line and MSC is a customer, with a direct service replacing slot charter space being taken on the former CKYHE grouping. ▪ The reliance upon just Cosco has eased as a result. This is a competitive threat to Fairview 56.0 800 17.0 (but 7 Yes Vancouver (BC) in the Pacific Gateway, as the 2M Alliance service calls to both ports. Cover 35.0m in ▪ Geographic location of Prince Rupert means that containers can arrive from Asia and Terminal channel) be placed onto the intermodal rail network more quickly than other facilities on the (DP World) West Coast of North America. Source: Prince Rupert Port Authority

101 Current Configuration of Fairview Cove Terminals, ▪ Prince Rupert remains a competitor to all ports for discretionary hinterlands in the US Port of Prince Rupert Midwest - continued support from CN and a strong geographic position representing 1 day less of sailing time form Asia will ensure the situation does not change in the future. • The reliance on CN rail to continue to provide highly-competitive and cost-effective intermodal rail services remains the crucial factor moving forward as the majority of inbound traffic is switched immediately to rail for more distant and discretionary hinterlands. • Prince Rupert is understood to be one of the largest individual contributors to profitability for CN, so the railroad remains highly motivated to continue to support the port’s growth and future success, especially as there is no competition from CP at this location. • DP World’s operation of Prince Rupert and Centerm could be leveraged to offer joint- contracts to boost volumes – i.e. a call at Centerm after Prince Rupert on Cosco and 2M Alliance calls.

Key Conclusions

Source: Google Source: Google Earth 2019 April ▪ Acquisition price of C$580M plus C$300M in initial investment yields total investment of C$880M for 1.5M TEU capacity, or C$587/TEU for brownfield capacity - a competitive figure and why DP World keen to further expand this facility Prince Rupert Expansion Plans to Develop Extra Capacity - Volume demand has outpaced capacity development since Prince Rupert opened - utilisation is already back to 80% based on effective 85% capacity, despite capacity rising to 1.5 million TEU p.a. in 2017. A clear need for capacity to be delivered, on time

▪ Container volume demand at Prince Rupert has been very strong since opening - Prince Rupert - Volumes & Utilisation by 85% & 100% Capacity Measure, 2008-2019 18.7% per annum, with capacity developed at 10.5% per annum. ▪ The port’s utilisation since opening has been high - despite some respite when 1400 120% capacity increased to the current 1.5 million TEU per annum in Q3 2017. (In the chart, 1200 50% of the capacity increase was added for 2017), 100% 1000 ▪ This clearly shows an ability to operate at high utilisation, but also that as new 80% capacity is developed, it is quickly absorbed by increasing throughput demand. 800 Volumes ▪ There is clearly a need for more capacity to be developed, quickly because utilisation 60% 600 Utilisation at 100% capacity is already back to 80% and port volume growth is continuing above regional averages. 40% 400 ▪ Moving forward, the planned future capacity consists of raising the existing 1.5 million Utilisation at 85% capacity TEU to 1.8 Million TEU (Q2 2021), then 2.0 million TEU (Q2 2022) and potentially up 200 20% to 4.0 million TEU, as required, from 2028. 0 0%

102

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009 2008

Prince Rupert - Average Annual Growth Volumes vs. Capacity in %, 2008 - 2019 Key Conclusions:

20.0% 18.8% 18.0% ▪ Container volume growth at Prince Rupert continues to be strong - higher than 16.0% capacity developed, to date 14.0% ▪ DP World can optimise the timing of at least next 2 capacity additions at Prince 12.0% 10.5% Rupert, to ensure rational development of new capacity 10.0% Volumes 8.0% Capacity ▪ Capacity has been added - but it has very quickly been filled 6.0% 4.0% 2.0% ▪ Port has demonstrated an ability to operate at high utilisation levels 0.0% CAGR '08-'19e ▪ The need for more capacity is clearly seen Summary of Asia Deep-Sea Shipping Liner Calls at Pacific Gateway Ports - Start of Q1, 2020 Both Vancouver and Prince Rupert continue to receive weekly calls from major Alliance operators - Prince Rupert is seeing the larger vessels of over 13,300 TEU. Additional calls are made to US PNW ports too on many schedules

▪ Almost all services are exclusively Transpacific-based to/from Asia. Summary of Weekly Deepsea Services Calling to Vancouver, Start of Q4 2019

▪ THE Alliance and OCEAN Alliance are the largest users of the Pacific Gateway region Operator Service Largest Ship Regional Ports Called - Cosco’s involvement in PR has been important in the port establishing its credibility (TEU) and volume development upon operations commencing. THE Alliance PN1 9,592 P.Rupert, Tacoma Vancouver ▪ All services calling to Vancouver terminals also then make additional calls in the US PNW region. THE Alliance PN2 8,814 Tacoma, Vancouver ▪ Vancouver is not always the first inbound port from Asia - only 4 of the deep-sea services. THE Alliance PN3 8,814 Vancouver, Seattle

▪ Vancouver is last outbound port on 8 services - due to its strong position for exports THE Alliance PN4 5,117 Tacoma, Vancouver out of BC. THE Alliance AL5 5,087 Seattle, Vancouver 103 ▪ PR calls can be assumed to result in a high discharge of intermodal cargo as no other ports called in this region in 75% of services using the port. OCEAN Alliance PNW3 7,024 Tacoma, Vancouver ▪ A summary of regional shipping line strategies is outlined in Appendix 2 OCEAN Alliance PNW4 5,888 Vancouver, Seattle

Summary of Weekly Deepsea Services Calling to Prince Rupert, Start of Q4 2019 OCEAN Alliance CIMEX1/ 11,388 Seattle, Vancouver Columbus Operator Service Largest Ship Regional Ports Called PNW (TEU) 2M TP9/Maple/ 8,814 Vancouver, Seattle THE Alliance PN1 9,592 P.Rupert, Tacoma, (Maersk/MSC)/Zim ZP9 Vancouver Hyundai Merchant PN2 5,095 Tacoma, Vancouver Marine OCEAN Alliance PSW2 / CEN 13,386 P.Rupert MSC California 9,404 Seattle, Vancouver Express OCEAN Alliance PNW2 / CPNW 10,842 P.Rupert SM Line PNS 4,585 Vancouver, Seattle 2M TP8/Orient/ZP8 11,294 P.Rupert Westwood Loop 1 2,674 Tacoma, Vancouver, Tacoma (Maersk/MSC)/Zim

Note: Westwood Loop 1 utilises a 14-day frequency. Westwood also operates two additional bulk/container services with a 1,500 TEU capacity on a 28-day frequency Summary Conclusions of Localised Market Competing Ports & Terminals GCT Deltaport faces major capacity issues due to lack of traction, while other facilities expand - notably Prince Rupert, DPW Centerm and GCT Vanterm. Fraser Surrey Docks is developing a strong niche for smaller container vessels

Port / Terminal GCT Deltaport - GCT Vanterm - Vancouver DPW Centerm - DPW Fraser Surrey Docks DPW Prince Rupert Vancouver Vancouver - Vancouver Strengths ▪ Large scale, modern ▪ Capacity expansion ▪ Support of global ▪ Established, mixed-use ▪ Very strong recent terminal plans operator, DP World facility offering additional container growth ▪ Good intermodal on- ▪ Confirmed capacity container capacity ▪ Support of global dock connectivity expansion plans ▪ Support of global operator, DP World ▪ Recent DREP project ▪ Joint synergies with operator, DP World ▪ High-quality, modern improved rail facilities Prince Rupert ▪ Container volumes rising infrastructure and deep water ▪ Excellent location for shipping Weaknesses ▪ Needs more capacity - ▪ Downtown location ▪ Downtown location ▪ More limited water depth ▪ Lower volumes of local unlikely until at least ▪ Berthing for only 1 ▪ Size of ship that can call traffic / local demand 104 2029 vessel ▪ Less export activity ▪ DP4 expansion a big environmental challenge Opportunities ▪ Increase volumes - ▪ Could see additional ▪ Growth in future ▪ Useful option for smaller ▪ Transload activity from especially to US volumes as Deltaport container volumes container ships Canadian Tire - Midwest, but linked to congested anticipated ▪ Provides additional expected to increase extra capacity ▪ Potential for terminal container capacity ▪ Transloading could also capacity densification aid export potential ▪ Existing liner contract ▪ Continues to expand with SM Lines number of liner users ▪ CN is incentivised to grow volumes Threats ▪ Lack of traction on ▪ Delays to capacity ▪ Any delays to capacity ▪ Longer-term, increase in ▪ Delay in generating expansion plans - expansion plans plans ship sizes could see additional capacity ongoing since 2005 ▪ Phase 2 capacity seems calls precluded ▪ Earliest for new capacity unlikely due to berth ▪ Existing liner contract of 2029 unrealistic as no restrictions with SM Lines impact assessment reports yet filed 105

Analysis of Competitive Ports & Terminals - Discretionary Markets 106

North West Seaport Alliance - Seattle-Tacoma Northwest Seaport Alliance Serves Local US Markets - New T5 is to Target US Midwest Stagnating volumes in recent years due to inadequate facilities and inferior rail, despite stronger North American container port markets - longer-term expansion at Tacoma possible

▪ The Northwest Seaport Alliance is a marine cargo operating partnership of the Port of Terminal Infrastructure at NorthWest Seaport Alliance Facilities Seattle and Port of Tacoma. The ports joined forces in August 2015 to unify Quay Length Gantry management of our marine cargo facilities and business to strengthen the Puget Terminal Area (ha) Depth (m) On-dock rail? Sound gateway and attract more marine cargo and jobs for the region. (m) Cranes ▪ Collectively the two ports are the fourth-largest container gateway in North America Seattle – North Harbor and now comprises the Northwest Seaport Alliance - Seattle is now referred to as the Terminal 5 – “North Harbor” with the Tacoma terminals now named the “South Harbour.” Global Terminal currently being modernised - 75ha site, 884m quay - by 2020, capacity of 1m ▪ Strategic plan of the agency is to urgently upgrade terminals with the focus on Gateway TEU, berthing for 2 x 18,000 TEU ships. On-dock rail. handling larger ships. In addition to the Terminal 5 modernisation project, (APL) redevelopment of the General Central Peninsula and Pier 4 in Tacoma could add Terminal 18 79.3 1,353 15.2 10 Yes almost 2.0 million TEU of extra capacity. (SSA Marine)

Terminal 30 (SSA 28.3 823 15.2 6 Near-dock Northwest Seaport Alliance – Two Harbors Marine/China 107 Shipping)

Terminal 46 33.2 701 15.2 5 Near-dock (TTI)

Tacoma – South Harbor

East Sitcum 21.9 335 15.5 4 Yes (PAG)

Husky Terminal 37.6 823 15.5 4 Yes (West Coast Stevedoring)

Washington United 44.5 793 15.5 6 Yes Terminals (HMM)

West Sitcum 54.6 671 15.5 5 Near-dock (SSA)

Pierce County Terminal 56.7 636 15.5 7 Yes (PAG) Source: Northwest Seaport Alliance New Seattle T5 will allow 2 x 18,000 TEU Ships to Call Simultaneously T5 is a definite upgrade on existing facilities and FAST initiatives are aimed at increasing rail competitiveness but rail route profile confirms a more challenging option compared to Pacific Gateway region - long-term aim of 2 large terminals in each location

▪ Following the amalgamation of Terminals 25 and 30 in 2009, there are now four ▪ At Tacoma, Hyundai Merchant Marine’s Washington United and Evergreen’s Pierce container terminals in Seattle, collectively occupying just over 215 hectares and County terminals have their own intermodal yards, with capacity for 52 and 78 double providing 3,721m of container quays. Berth depth is reasonably competitive with other stack container railcars, respectively. The Washington United Terminal quay was regional ports, with most berths offering 15.2m. extended by 183m in 2011 to accommodate longer vessels. Other terminals are served by two near-dock intermodal yards, used by both BNSF and UPRR. ▪ The Terminal 5 modernisation plan is now underway and this terminal is shut for container ships and operations. This project is providing a 1.0 million TEU per annum ▪ The ITS (K Line) Husky Terminal and Yangming’s Olympic Terminal have on-dock terminal that will be able to receive 2 x 18,000 TEU ships when it opens in phases access to the North Intermodal Yard, which can handle 76 double stack container between 2021 and 2023. railcars.

▪ Other projects include an extra 500m of quay for Terminal 18 and some expansion of ▪ To supplement activities, the adjacent South Intermodal Yard can accommodate 30 Terminal 46. The investment is required to increase Seattle’s competitive ability to doublestack container railcars on ramp tracks and 37 on interchange tracks handle larger ships in the Transpacific trades – vessels are becoming too large to utilise the port’s older, much smaller separated facilities. ▪ A ten-year strategic plan, announced in 2012, included redevelopment of its central peninsula to handle the largest vessels efficiently, including widening and deepening 108 ▪ The FAST (Freight Action Strategy for Seattle-Tacoma) represents 24 projects aimed waterways as necessary. There are also plans to expand rail capability to handle 1.5- at improving cargo flow (faster trains and raising intermodal train capacity) and linking mile long trains and provide a second rail crossing over the Puyallup River. the ports with rail networks (such as the East Marginal Way grade separation and the Alaskan Way viaduct).

▪ These long-term, largescale investment projects are needed, but ultimately the desire of the US railroads to help win intermodal traffic for discretionary markets will be the key driver.

Key Conclusions: ▪ T5 at Seattle is an improvement on existing facilities and FAST initiatives are aimed at increasing intermodal rail competitiveness (to be more similar to the Pacific Gateway and San Pedro ports) - however, with Phase 1 now due in 2021 and Phase 2 not coming on-line until 2023, the project is running behind the original planned delivery schedule of 2021 ▪ Lower backhaul export demand (like in BC for Vancouver) is still an issue ▪ FAST initiative targeting faster moving cargo through improved train speeds and intermodal train capacity

▪ Some issues remain with rail intermodal - connectivity in local area and elevation height through Rockies leads to higher fuel costs and shorter trains lengths (i.e. more expensive to offer lower capacity) ▪ In December 2019, Northwest Seaport Alliance CEO confirmed that the ultimate aim is to reduce the 9 terminals in Sea-Tac to 2 large terminals in the North (Seattle) and 2 large terminals in the South (Tacoma) to better support increase of much larger container ships, although no timescales were provided 109

San Pedro Ports & Oakland Long Beach has Plans for Pier E / LBCT Reconfiguration to Increase Quality of Infrastructure Port of Long Beach offers 5 terminals, ranging in size but all largest facilities offer on-dock intermodal rail access

▪ The West Coast Pacific range is dominated by the twin ports of Long Beach and Los Terminal Infrastructure - Port of Long Beach, Start of 2019 Angeles – which serve the entire North American hinterland via intermodal shipment as well as the local Californian market. Quay Depth Gantry On-dock Terminal Area (ha) Length ▪ Both San Pedro ports have always been at the forefront of container activity, handling (m) Cranes rail? the highest volumes, developing some of the largest terminals and handling the (m) biggest ships able to call to North America.

▪ There are six container terminals at Long Beach, dedicated to one or more container Pier A (SSA) 80.9 1,097 15.2 10 Yes shipping lines or consortia. Each facility is generally the result of a legacy terminal development by the shipping line in the past to ensure access to its own facility and capacity. There are on-dock intermodal rail facilities for almost all terminals. Pier C (SSA) 28.3 549 12.8 3 No

110 Pier E (LBCT - OOCL) 41.3 838 15.2 10 Yes – current

Pier E (LBCT - OOCL) 123.3 1,295 15.2 14 Yes – once fully constructed

12.8 Pier G (ITS K Line) 99.6 1,945 – 15 Yes – 15.2

Pier J (PCT – 12.8 SSA/Cosco 103.6 1,799 – 17 Yes 15.2 Shipping/CMA CGM)

Pier T (TTI/MSC) 155.8 1,524 16.8 14 Yes

Source: Port of Long Beach Los Angeles is Largest Container Port in North America - over 9 Million TEU p.a. Los Angeles has adopted an aggressive expansion of its infrastructure over the past 10 years - strong liner presence in terminals remains

▪ Los Angeles is the largest container port in North America, based on volumes and with Terminal Infrastructure - Port of Los Angeles, Start of 2019 a 2018 full year projection of approaching 10 million TEU, this position is not going to change. Quay Depth Gantry On-dock Terminal Area (ha) Length ▪ Situated adjacent to Long Beach, the port consists of largescale terminal infrastructure (m) Cranes rail? (m) that is connected to a range of shipping lines and alliances through longstanding, legacy contracts. B100-B102 - West Basin Container ▪ The aggressive expansion of facilities is reflected in the success of Los Angeles, the 53.4 762 16.2 10 Yes gap in volumes with Long Beach has increased - in 2007 it was 1.0 million TEU, by the Terminal (China end of 2017 it had reach 1.8 million TEU. Shipping)

▪ Current container terminals equate to over 688 hectares collectively, with 83 cranes – B121-B131 - West by comparison, Long Beach has 510 hectares (rising to 591 hectares when the Middle Basin Container 75.0 762 13.7 5 Yes Harbor project is completed) and 60 cranes (increasing to 73). Importance of on-dock Terminal (Yangming) 111 rail is paramount and terminals are well-catered. B136-B147 TraPac 13.7 – 89.0 1,411 – 10 No (Mitsui OSK Lines) 16.2

B212-B225 Yusen 14.3 – 75.0 1,768 – 12 Yes Terminals (NYK Line) 16.2

B226-B236 – Everport Terminal Services 82.0 1,768 13.7 11 Yes (Evergreen)

B302-B305 - Pier 300 13.7 Global Gateway South 118.0 1,219 – 16 Yes 15.2 (APL/EQT)

B401-B406 - Pier 400 196.0 2,225 16.8 19 Yes APM Terminals

Source: Port of Los Angeles Short Term Capacity Projections in San Pedro will see an Increase in the Short-Term Everport, Yang Ming and LBCT represent the confirmed capacity expansion investment programmes in San Pedro at present

Everport Terminal Expansion Project Short-Term Capacity Additions in San Pedro - Alliance Affiliation Noted

• Everport’s proposed project will cost $58 million. It includes deepening its berths and Alliance Terminal 2018 2019 2020 2021 2022 improve its terminal facilities, to accommodate the larger next-generation vessels. OCEAN Alliance Berths 226-229 wharves will be improved by increasing the depth from 45’ to 53’, Everport 1,610 1,610 1,610 1,610 1,610 while Berths 230-232 wharves to a 47’ berth depth. The project will also involve EWBCT - 1,800 1,800 1,800 1,800 1,800 constructing an additional 1.5 acres of backland and electrical improvements for five COSCO new AMP connections. Construction is expected to start in late 2018. GGS 3,500 3,500 3,500 3,500 3,500 LBCT 2,000 2,000 2,000 3,300 3,300 Yang Ming (WBCT) Terminal PCT 2,300 2,300 2,300 2,300 2,300 • WBCT will enhance its terminal facilities and deepen its berths to accommodate 14,000 TEU vessels and increase cargo volume. The Port plans improvements at the OCEAN alliance Total 11,210 11,210 11,210 12,510 12,510 terminal, include: The Alliance 112 ITS K-Line 1,400 1,400 1,400 1,400 1,400 • Construction of a new 1,260 linear foot wharf at Berths 126-129, TraPac 2,400 2,400 2,400 2,400 2,400 • Dredging to a depth of -53 feet at the newly constructed wharf WBCT - 1,200 1,200 1,200 1,200 1,200 Yang Ming • Expansion of the existing on-dock rail yard. Yusen 1,900 1,900 1,900 1,900 1,900 LBCT Expansion Project / Middle Harbor Redevelopment Project - Pier E The Alliance 6,900 6,900 6,900 6,900 6,900 • The Middle Harbor Project is a 10-year modernisation project of terminals on Piers D, Total E and F. The project includes, a modern 311-acre container terminal, an on-dock rail capacity, a shore-side electrical power, deeper channels to accommodate the ultra 2M large container vessels (ULVC) and electrification of terminal equipment. APMT 3,200 3,200 3,200 3,200 3,200 TTI 3,000 3,000 3,000 3,000 3,000

• The project is being constructed in three phases. 2M Total 5,650 5,650 5,650 5,650 5,650 • Phase 1 construction was completed in April 2016 Other SSA - 680 680 680 680 680 • Phase 2 was completed in October 2017. Matson • Phase 3 is scheduled to be completed by the end of 2020. When completed, SSA - Pier A 2,280 2,280 2,280 2,280 2,280 LBCT’s full capacity will reach 3.3M TEUs annually.

• Further summary of the expansion strategy in San Pedro is explained in Appendix 4. Other Total 2,960 2,960 2,960 2,960 2,960 Grand Total 27,320 27,320 27,320 28,420 28,420 Infrastructure Upgrade-Gerald Desmond Replacement Bridge: Due End of 2019 (was mid-2018) Gerald Desmond Bridge Replacement Project will allow larger ships to access LB’s terminals at Pier A, Pier B and Pier C

Current Proposed

Height 155ft above water 205ft above water Canal width 220ft 220ft Road Lanes The current Gerald Desmond Bridge has three lanes on the The new bridge will accommodate three lanes of traffic in both directions, and will include four safety incline, and two lanes on the decline, in each direction. lanes to mitigate delays from breakdowns and accidents and give emergency vehicles better access.

Project details Project Summary Part of $4.5 billion improvement to all Port of Long Beach to handle bigger ships at all terminals.

Build complete date Construction to be complete at the end of 2019

Planning July 2008: The Port of Long Beach’s initially estimates a bridge replacement project to be about $950 million.

113 May 2009: The Harbor Commission allocated $26.4 million to develop plans for the bridge replacement project Original Funding Transportation Infrastructure Finance and Innovation Act (TIFIA) Loan: $325M – (Interest and principal payments are set to begin in 2018) LA Metro: $17.3M Port of Long Beach: $117M State/Caltrans (California Department of Transportation) Funds: $153.7M Federal Funds: $675M

Total $1.288 billion

Revised Funding Increased to $1.47 billion – increase likely covered by Port of LB and Caltrans accounts Ownership - Investment Caltrans will assume responsibility of all operations and maintenance upon project completion

Project will improve competitiveness of terminals located behind the location of the bridge by increasing airdraft availability - adding 50ft of additional height Also delivers additional vehicle lanes on bridge - plus safety lanes to help increase flow of traffic for greater efficiency, especially during occasions of vehicle accidents or breakdowns Infrastructure Upgrade - Gerald Desmond Replacement Bridge Gerald Desmond Bridge Replacement Project will allow larger ships to access LB’s terminals at Pier A, Pier B and Pier C

Map of Gerald Desmond Bridge Replacement Project

Gerald Desmond Bridge

114

Gerald Desmond Bridge

▪ Gerald Desmond Bridge impact on Piers A, B and C will be much more limited than originally anticipated. Rapid growth in vessel LOA has turned the Inner Harbor channel and north turning basin into more major constraints. It is unlikely that Pier A will see ships over 10,000 TEU.

▪ In hindsight, perhaps if the City had known what the shipping liner were going to do, they might never have raised the bridge. However, the project is committed to now, regardless. Stagnating Volumes at Oakland due to Strong Regional Competition from San Pedro Ports Port of Oakland retains a traditional role as a last outbound call after San Pedro ports for exports back to Asia

▪ Extensive container handling capabilities, with a total area of 265ha and over 6,750m Terminal Infrastructure - Port of Oakland, Start of 2019 of container berths. Plays a secondary role on the US West Coast and is highly dependent upon serving the greater San Francisco markets. Quay Gantry Terminal Area (ha) Depth (m) ▪ Primarily acts as an export gateway and does not benefit from the significant Asian Length (m) Cranes import traffic volumes discharged in San Pedro.

▪ The loss of operators for the B20-B26 Outer Harbor facility and B67-B68 Charles P B20-B26 Outer Harbor – 16.8 1,287 12.8 – 15.2 4 Howard terminal has impacted the port’s growth of container volumes, with throughput For Lease remaining around 2.3 million TEU per annum per annum since 2010 – and reflected in 2017 growth being amongst the lowest of major ports. There are no immediate terminal expansion plans at Oakland, although potential exists to redevelop the inner B25-B33 TraPac Terminal 49.7 1,300 15.2 4 harbour. (Mitsui OSK Lines)

115 B33-B34 – For Lease 6.6 219 11.3 – 15.2 --

B35-B38 Ben E Nutter 29.9 688 15.2 4 Everport Terminal Services (Evergreen)

B55-B59 OICT (SSA) 109.2 1,823 15.2 10

B60-B63 Matson Terminal 32.1 836 12.8 4 (SSA)

B67-B68 Charles P Howard 20.4 614 12.8 4 Key Conclusion – For Lease

▪ Oakland’s traditional role as an export port and lack of Asian cargo (due to NB – Oakland terminals do not have on-dock rail, but access to BNSF & UPRR intermodal Source: Port of shipping lines calling to LA/LB first), means that there is more limited potential facilities within port located behind marine terminals. Oakland cargo to serve US discretionary markets 116

North Atlantic Ports - Canada North Atlantic Ports in Canada - Mix of Local and Discretionary Cargo but Limited Asian Cargo Montreal is a “must-call” port for local cargo demand - Halifax offers deep water

▪ The North Atlantic region of Canada offers two competing ports for US Midwest and Port Infrastructure at Montreal and Halifax discretionary cargo: ▪ Montreal - on the St Lawrence River, water depth limitations, with longer sailing Quay Gantry time from open sea. However, close to major Canadian consuming hinterlands and Port/Terminal Operator Length Depth (m) shipping lines continue to call Montreal on a dedicated basis, almost exclusively on Cranes a full discharge/load basis. (m) ▪ Halifax - very deep water and Halterm offers good infrastructure. Access to Ceres Montreal Cove limited due to bridge airdraft constraints. Empire Bickerdike 357 8.8 2 ▪ Majority of Montreal and Halifax volumes are on Europe / Mediterranean services, Stevedoring with limited Asian volumes. Racine MGT 2,381 11.0 5 Strengths & Weaknesses of Montreal and Halifax for US Discretionary Markets Maisonneuve Termont 827 10.7 4 Strengths Weaknesses 117 VIAU Termont 550 10.7 2 Montreal Strong local cargo market Limited water depth Cast MGT 740 11.0 4 to entice calls Halifax Ships are a full Majority of cargo on ships discharge/load for local markets Fairview Cove Ceres 700 16.8 5 New capacity at Additional sailing time up Halterm Halterm 1,045 14.0 16.2 5 Contrecoeur river (PSA) – Good rail connectivity Source: WSP derived from ports at/from port (CN & CPR) Halifax Very deep water Small local market - no Key Conclusions: enticement to call Good facilities at Halterm Only Halterm can receive ▪ Montreal handles small volumes of (South-East) Asia cargo (via Suez), but biggest ships requires transshipment in the Med (adding cost and time); never going to be a significant threat to Vancouver, particularly since volumes moving to Toronto Competitive and efficient Only 1 rail operator at port still require rail transfer CN rail links ▪ Halifax attracts some Asia volumes on all-water services, but very long distance (compared to NY) make it a niche player for discretionary volumes Port of Montreal - Contrecoeur Expansion to Target US Midwest Market Long-standing plans to develop 1.15 million TEU of additional capacity progressing – boost port’s capabilities. Project not expected to be impacted or delayed due to COVID-19

▪ Port of Montreal has long-standing plans to develop a new container terminal at the Planned Development of Contrecoeur Terminal site at Contrecoeur on the St. Lawrence River. ▪ The following is a summary of the project: ▪ Port Authority retains 468ha of land and 4km of shoreline. ▪ Contrecoeur is located approximately 25 nautical miles from the existing port terminals towards the open sea. ▪ Construction of the terminal is currently due to commence in 2020. ▪ Operations are currently planned to commence from 2023. ▪ There will be two phases of development – Phase 1 to offer 0.47 million TEU of annual capacity, with Phase 2 increasing the total to 1.15 million TEU from 2027. ▪ According to the Montreal Port Authority, the following key characteristics apply 118 to the planned development: ▪ Two berths and a container handling area ▪ An intermodal rail yard connected to the main network ▪ A truck entry portal connected to the road network ▪ Support facilities Source: Port of Montreal ▪ The Port Authority does not currently view Contrecoeur as a development for the relocation of existing container business but as the long-term solution to future capacity demand for the port overall. Key Conclusions: ▪ Existing terminal operators in the Port are currently expected to be involved in the process as terminal operator. ▪ Long-term project of Port Authority to meet future capacity demands and seek ▪ WSP is expecting this terminal project to be developed in-line with the Port Authority’s to increase volumes moving to US Midwest areas objectives. There may be some slippage of the operating commencement dates, if construction does not commence on time. ▪ Project itself continues to progress and according to Port Authority on target for operations to commence before 2025 ▪ Port authority remains committed to projected, even with a projection decline in 2020 container volumes due to COVID-19 of up to 15% ▪ Limited competitive threat to Vancouver, although prudent to include due to port aims of targeting additional US Midwest cargo

. Laurentia Terminal - Involvement of CN & Hutchison Ports to Target US Midwest Originally known as “Beauport” the strategy of the now-named Laurentia Terminal is to replicate the approach of Prince Rupert when it was established. Quebec Port Authority has hired Don Krusel, ex-Prince Rupert CEO to bring project to fruition

Summary of Quebec Port Authority (Beauport) Project ▪ Located at the head of the St Lawrence and Great Lakes trade corridor, this project is targeting container traffic currently moving to New York/New Jersey but by using Project Component Details larger vessels and placing cargo onto the intermodal rail network.

▪ The objective is to create a “Prince Rupert of the East Coast” and follow the same Location Quebec City - Head of St Lawrence River processes applied when that port was established.

▪ This means that in addition to infrastructure for larger ships and excellent intermodal Operator Hutchison Ports rail services, the need for CN to offer highly competitive - potentially subsidized - rates is essential in order to ensure its built-up transport costs are low enough to make the Size New wharf area of 17.5ha idea feasible.

Water Depth Minimum 15m at low tide Summary of Laurentia Terminal 119 Berth Length Extend current wharf by 610m

Private investment Private investment of C$250-C$400 million after infrastructure spend by port authority Rail Network to be developed - CN is a partner

in the project Source: WSP from Quebec Quebec Port fromSource: Authority WSP

Key Conclusions:

▪ Port and developers keen to stress that New York/New Jersey and the US Midwest is the target market, not Montreal or Halifax ▪ Will definitely require highly competitive intermodal rail rates

▪ Project is not yet confirmed, currently still in permitting processes and a 5-year Source: Presented at JOC Canada, June 2019 construction estimate is given by port authority

119 120

New York/New Jersey & Virginia NY/NJ is a “Must-Call” Port on East Coast due to Massive Local Population Demand There are 5 major container terminals at the port - Bayonne Bridge project has increased size of ship that can access but pilotage issues exist

▪ NY/NJ is the largest container port on the eastern seaboard. It remains a ‘must-call’ Location of Container Terminals at NY/NJ option for almost all shipping lines on all East-West and North-South trade routes serving the US North Atlantic region. There are a range of different terminal operations ▪ Carrier-controlled – APM Terminals ▪ Specialist terminal operator – PAG (PNCT) ▪ Financial interests – Macquarie (Maher Terminals), OTPF (GCT Bayonne, GCT NYCT)

▪ GCT Bayonne remains the best located container terminal in NY/NJ harbour because of the ease of access. Not impacted by the Bayonne Bridge airdraft restrictions.

▪ Accessing the Port Elizabeth complex and GCT New York via the Inner Harbour still involves application of specific US Coastguard/Harbour Pilot guidelines for ships of 12,000 TEU and above, which will slow vessel access. 121 ▪ The new Greenville Yard will bring intermodal rail access to the GCT Bayonne facility and as a result the Port Authority is targeting an increase in the share of containers Concluding Upside Potential / Downside Risks per Terminal at NY/NJ leaving the port by rail. This will improve competitiveness for US Midwest cargo in terms of capacity. Terminal Upside Potential Downside Risk

Container Support from Maersk Challenge to secure Quay Gantry • • Terminal Port/Terminal Operator Depth (m) APM Terminals Line third party traffic Facilities at Length (m) Cranes Expansion by 2019 NY/NJ • Large critical mass of High utilisation, APM Terminals APM Terminals 1,829 13.7 – 15.2 15 Maher Terminals • • customers/volumes potential congestion Maher T. Maher Terminals 3,087 13.7 – 15.2 16 Good location in Delays to Greenville Macquarie) GCT Bayonne • • NY/NJ harbour Yard opening GCT Bayonne GCT (OTPF) 549 13.1 6 Capacity potential Lower critical mass of GCT NYCT • • volumes GCT NYCT GCT (OTPF) 918 11.3 – 13.7 9 Support from MSC Little development in PNCT • • PNCT PAG 1,165 12.2 – 15.2 9 • Expansion by 2019 automation

Source: WSP derived from ports Virginia - Terminal Capacity and Scope to Expand, Strong Partnership with Norfolk Southern Limited local market means future growth will have to be generated from serving discretionary markets

▪ The primary focus of the port authority is maximising and developing the facilities that Location of Terminals in Virginia comprise the former APM terminals operation – now known as Virginia International Gateway (VIG)

▪ Former APM Terminals site is now a joint-venture of Virginia Ports Authority (VPA) and VIG Inc. (owned by Alinda Capital Partners and Universities Superannuation Scheme (USS)), with a lease signed in November 2016 to run to 2065.

▪ Original annual capacity of 1.3 million TEU now increased to 2m TEU (according to VPA) - scope to further expand the operation to 4m TEU per annum.

▪ Confirmed phase 2 will expand the size of the facility from 125.4 ha to 147.1 ha and extend the quay from 985m to 1,220m.

▪ Longer-term, VPA will eventually develop the five million TEU per annum Craney 122 Island site. Current timescales show further slippage in the published proposal - Phase One now estimated to be operational from 2028 instead of 2022.

▪ In time, Craney Island will be developed at Hampton Roads but access to the former APM Terminals Portsmouth-based terminal allowed the authority to gain access to a

modern, efficient operation rather than have to develop it from Greenfield. Source: Hampton Roads Economic Development Alliance Source: Development Economic Hampton Roads ▪ Norfolk Southern, in particular, continues to offer strong support to VPA facilities – the company is headquartered in Virginia.

Container Quay Key Conclusions Gantry Terminal Port/Terminal Operator Length Depth (m) Cranes Facilities at (m) Virginia ▪ Modern facilities, deepest water offered on ECNA Virginia : ▪ Small local population means port needs to target discretionary markets Virginia International VIT (state) 1,230 15.2 8 Gateway ▪ Can receive largest ships on All-Water services, especially via Suez Canal Norfolk International VIT (state) 1,290 15.2 14 Terminal ▪ Remains a competitor for WCNA, including Vancouver Source: WSP derived from ports 123

Savannah & Charleston In the South Atlantic Region Savannah Infrastructure Investment in Rail and Marine Ongoing Savannah targeting new arc of inland markets from Atlantic to Chicago via Memphis. Charleston has largescale facilities too

▪ At start of Q2 2018, GPA confirmed that Savannah Harbor Expansion Project (SHEP) South Atlantic Ports - Current Terminal Infrastructure was approximately 50% complete and is targeted for 2020 completion. Quay Gantry ▪ The project means deeper water to accommodate bigger ships to the port’s Garden Terminal Operator Depth (m) City facility – larger than 14,000 TEU vessels already handled. Length (m) Cranes

▪ The $127 million Mega-Rail project positions Savannah to rapidly increase service to Wilmington (NC) Port Authority 2,062 12.9 9 an arc of key inland markets, from Atlanta to Memphis, St. Louis, Chicago and the Ohio Valley. Key components include: Charleston ▪ Allows Savannah to shift more cargo from trucks to trains, reducing highway traffic congestion. Columbus St Port Authority 1,066 10.7 – 13.7 2 ▪ Construction began at the end of Q1 2018 and the planned 2020 completion will Wando Welch Port Authority 1,159 13.7 10 double rail lift capacity at Garden City Terminal to 1 million containers per annum. ▪ The facility will benefit from being served by both Norfolk Southern and CSX North Charleston Port Authority 762 13.7 6 124 Transportation and will allow both railroads to Chicago, St Louis and Cincinnati, with up to 24 hours time savings to be made. Savannah ▪ The investment further complements the continued development of largescale distribution warehousing offered at the port, which is utilised by major shippers, Garden City Port Authority 2,955 12.8 – 14.6 22 especially those bringing goods from Asia

▪ Ongoing port investments at Garden City Terminal include largescale investment in equipment, including: ▪ There are a total of 10 Super Post-Panamax ship-to-shore cranes on order – this will bring the overall number to 36 units ▪ Four cranes arrived in 2018 - final six unit by 2020. ▪ The 36 cranes will allow productivity of 1,300 containers per hour on/off vessels according to GPA.

Garden City Terminal, Port of Savannah 125

Analysis of Competitive Ports & Terminals - Summary Capacity Analysis Capacity at WCNA Container Ports - 2015-2019: Increases by Prince Rupert & San Pedro ports The period of 2015 through to 2019 has seen strong and continued port throughput growth for the WCNA container ports - the Pacific Gateway region has increased its capacity offered, with both ports investing to avoid congestion occurring

▪ Port and terminal capacity can be measured using a wide variety of different metrics, Capacity (100%) at WCNA Container Ports in ‘000 TEU, 2015 - 2019 using the number of cranes, berth length and density of containers per acre/hectare. 30,000 ▪ This summary is not a detailed technical assessment of capacity but instead serves to highlight ongoing investment at major competing ports. The data outlined relates to 25,000 100% capacity totals, but the following should be noted: P.Rupert ▪ it is estimated that utilisation rates of around 85% represent a maximum efficient 20,000 (or ‘effective’) use of a container terminal. Vancouver 15,000 ▪ This is an important consideration when defining when new capacity will be Sea-Tac required as a period of 100% utilisation would likely represent an inefficient 10,000 Oakland terminal that would be in danger of losing market share. LA / LB 5,000 ▪ This process helps to identify whether any existing port will see shorter-term capacity bottlenecks, which will impact its ability to continue to meet future growth demand. - 126 2015 2016 2017 2018 2019 ▪ The following is relevant here relating to Vancouver: ▪ While the Port Authority maintains an allowance for container capacity at Lynnterm Confirmed Capacity (100%) at WCNA Container Ports in ‘000 TEU, 2015 - 2019 the facility has no container cranes, developing a steel operation and is generally unattractive for container activity Port 2015 2016 2017 2018 2019 ▪ Fraser Surrey Docks has some limited container handling capabilities but is restricted on sizes of ships that can call P.Rupert 850 850 1,500 1,500 1,500 Key Conclusions

▪ In the period between 2015 and 2019, capacity additions are most noticeable in Vancouver 3,850 3,850 4,200 4,200 4,500 Prince Rupert, and Long Beach ▪ Prince Rupert capacity has increased from 850,000 TEU to 1.5 million TEU per Sea-Tac 6,350 6,350 6,350 6,350 6,350 annum - Vancouver has increased from 3.85 million TEU to 4.5 million TEU per annum Oakland 3,700 3,700 3,700 3,700 3,700 ▪ The San Pedro complex upgrades are primarily driven by the LB middle Harbor project, with 2.7 million TEU per annum added LA / LB 24,600 25,400 26,220 26,620 27,320 Capacity (100%) at WCNA Container Ports, 2020-2025 and the Position in 2030 & 2035 Some additional capacity - new Seattle’s T5, Prince Rupert to have commenced on its Phase II expansion and both GCT Vanterm and DP World Centerm complete projects - the major regional initiative will be RBT2 in 2029 (Phase 1) and 2035 (Phase 2)

▪ After 2020, there are known investment plans at WCNA ports to add capacity: Confirmed Capacity Expansion at Container Ports in ‘000 TEU, 2020 - 2025 ▪ Prince Rupert’s second phase, as it builds to 2.0 million TEU from 2023. 35,000 ▪ In Vancouver, DP World Centerm to add 600,000 TEU by 2022, with GCT Vanterm capacity up by 25% from 2022. The decline of 400,000 TEU per annuum in 2023 is 30,000 due to the FSD stopping container handling (due to its limitations of vessel sizes) 25,000 P.Rupert ▪ Seattle will have opened its new T5 in 2020 20,000 Vancouver ▪ San Pedro ports will continue with additional, small, yearly increments. Sea-Tac ▪ Longer-term estimates become more difficult, due to possible delays to construction, 15,000 Oakland economic conditions etc, so an estimate for 2030 includes: 10,000 ▪ Prince Rupert has unconfirmed plans for 4.0 million TEU, but are not included. LA / LB 5,000 ▪ Pier 300 in LA will have added an estimated 500,000 TEU p.a. by 2027. - 127 ▪ RBT2 current estimates are put at 2029 for Phase 1 and 2035 for Phase 2, though 2020 2021 2022 2023 2024 2025 it is crucial that the construction process begins as soon as possible

Development of Confirmed Capacity at WCNA Ports in ‘000 TEU, 2020 - 2025 Planned / Known Capacity Plans by WCNA Port in 2030 & 2035

Port 2020 2021 2022 2023 2024 2025 35,000 30,000

P.Rupert 1,500 1,500 1,500 2,000 2,000 2,000 25,000

20,000 Vancouver 4,600 4,600 5,350 4,950 4,950 4,950 2030 15,000 2035 Sea-Tac 7,350 7,350 7,350 7,350 7,350 7,350 10,000 5,000 Oakland 3,700 3,700 3,700 3,700 3,700 3,700 - P.Rupert Vancouver Sea-Tac Oakland LA / POLB LA / LB 27,320 27,840 28,360 28,880 29,410 29,630 Short-Term Port Capacity Development to 2020 Short-term capacity expansion underway at all major ECNA ports and at Houston - collectively, these ports will have added over 5.8 million TEU per annum between 2015 to 2020

▪ There are a range of confirmed or known projects over the shorter-term on a port Comparison of Short-Term Capacity at ECNA Ports & Houston to 2020 in .000 TEU basis, including: ▪ Virginia: 10000 9000 ▪ Former APMT facility, now Virginia International Terminal increased from 1.3 million TEU p.a. to 2.0 million TEU p.a. with yard space extended from 125.4 ha 8000 2015 to 147.1 ha and quay from 985m to 1,220m. - scope to expand to 4.0 million 7000 2016 TEU p.a. eventually. 6000 2017 ▪ Savannah: 5000 4000 2018 ▪ Additional cranes being added to garden City Terminal and further terminal densification, with an estimated 5.5 million TEU p.a. capacity expected in 2020. 3000 2019 2000 ▪ NY/NJ: 2020 1000 ▪ Various terminal projects in the shorter-term, including APM Terminals adding 0 128 0.8 million TEU, PNCT increasing capacity to 2.3 million TEU by 2020 and GCT Virginia Savannah NYNJ Montreal Halifax Charleston Houston Bayonne planning to generate almost 1.9 million TEU p.a. ▪ Montreal: Short-Term Capacity at ECNA & Houston, 2015-2020 by Port & Year, in ‘000 TEU ▪ In 2016, opened new VIAU terminal, raising annual capacity to 600,000 TEU per annum at this facility. 2015 2016 2017 2018 2019 2020 ▪ Halifax: Virginia 3,540 3,630 3,720 3,820 3,910 4,000 ▪ Halterm is adding equipment (notably RTGs) and minor reconfiguration of yard space to increase capacity and improve the current level of around 450,000 TEU per annum to up to 1.0 million TEU per annum Savannah 5,000 5,100 5,200 5,300 5,400 5,500 ▪ Charleston NYNJ 7,000 7,250 7,500 7,900 8,525 9,150 ▪ Modernising and improving facilities at Wando Welch facility, includes upgrades to support more post-Panamax ships as part of a $600 million investment. New Montreal 1,910 2,050 2,200 2,200 2,300 2,350 container terminal at former naval base is, (according to port authority) adding “50% more capacity” when it becomes operational by 2020. Halifax 700 700 700 800 900 1,000 ▪ Houston: ▪ Bayport Container Terminal still being developed to 2.3 million TEU per annum Charleston 4,000 4,500 5,000 5,300 5,400 5,500 when completed. The older Barbour's Cut Terminal is being modernised, with capacity increasing from 1.2 million TEU per annum to 2.0 million TEU per Houston 2,500 2,500 2,600 2,700 2,850 3,000 annum. Longer-Term Port Capacity Development to 2030 - Based on Confirmed Plans Capacity being added slows, overall - fewer confirmed plans. Reasonable to assume that terminals in NY/NJ will add capacity to avoid congestion

▪ Confirmed or known projects over the longer-term, include: Estimated Long-Term Capacity at Major ECNA Ports / Houston to 2030, in ‘000 TEU ▪ Virginia - eventually, Craney Island will add 5.0 million TEU p.a. but current timescales indicate slippage from 2022 to 2028. 10000 9000 ▪ Montreal - new terminal at Contrecoeur, fully-operational mid-2020s, adding Virginia 1.15m TEU of capacity per annum 8000 7000 Savannah ▪ Montreal - full build-out of Contrecoeur before 2030. 6000 NYNJ ▪ Halifax - Halterm has scope to utilise existing land 36 to create 2 berths and an 5000 Montreal intermodal yard, port authority considering other masterplan options in port. 4000 ▪ Savannah / Charleston region - Jasper Country is currently put at around 7 3000 Halifax million TEU per annum, with estimated capacity of around 2.5 million TEU per 2000 Charleston annum sometime possibly before 2030 (the date when full build-out at existing ports reached). 1000 Houston 0 129 ▪ Houston - full build-out achieved at existing terminals 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Short-Term Capacity at ECNA & Houston, 2015-2020 in ‘000 TEU 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Virginia 4,200 4,400 4,600 4,800 5,000 5,200 5,400 5,600 5,800 6,000

Savannah 5,600 5,700 5,800 5,900 6,000 6,100 6,200 6,300 6,400 6,500

NYNJ 9,150 9,150 9,150 9,150 9,150 9,150 9,150 9,150 9,150 9,150

Montreal 2,500 2,900 2,900 2,900 2,900 3,500 3,500 3,500 3,500 3,500

Halifax 1,100 1,200 1,300 1,400 1,500 1,500 1,500 1,500 1,500 1,500

Charleston 5,600 5,700 5,800 5,900 6,000 6,000 6,000 6,000 6,000 6,000

Houston 3,100 3,200 3,300 3,400 3,500 3,600 3,700 3,800 3,900 4,000 130

Competitive Ports & Terminals - Summary Conclusions Summary Conclusions of Planned Capacity at Pacific Gateway Terminals & Other WCNA Ports Port / Terminal Strengths Weaknesses

GCT Deltaport - Vancouver ▪ Recent rail investment has increased capacity and ▪ Traction of RBT2 - to date efficiencies for intermodal activity ▪ Possibility of delays caused by legal situation in ▪ Terminal volumes have been growing, but congestion Vancouver expected to occur soon ▪ GCT DP4 project highly likely to incur major environmental issues - means that RBT2 is a more viable option

GCT Vanterm - Vancouver ▪ Confirmed Phase 1 expansion plan underway, delivering ▪ Phase 2 expansion very challenging, especially as 25% more capacity by 2023 limited berth only allows 1 ship to call. Berth expansion needed, but not possible due to terminal design

DPW Centerm - Vancouver ▪ Confirmed expansion adding 600,000 TEU per annum ▪ Any subsequent capacity improvements after 2022 have 131 by 2022 to be driven by densification ▪ Throughput demand growth and potential warrants additional space

DPW Prince Rupert ▪ Future expansion plans are known - but unconfirmed ▪ South Kaien International Terminal (SKIT) could ▪ Expansion required quickly to keep pace with growth increase port capacity to 4 million TEU per annum - but demand remains unconfirmed and current port capacity is just ▪ Competitive for serving US discretionary hinterlands, 1.2 million (in 2019) cargo that will help fill new capacity ▪ High reliance upon US discretionary markets - these are highly competitive Seattle-Tacoma ▪ New Seattle T-5 terminal to open in 2020 ▪ Bottleneck will be supporting terminal and yard - if this ▪ Capability to handle 2 x 18,000 TEU ships size of ship is attracted (which is unknown at present) simultaneously ▪ Inland rail topography challenging

LA / LB / Oakland ▪ Major expansion plans at LB - Middle Harbor ▪ Delays will see utilisation increase and potential for ▪ LA has ongoing capacity improvement capital plans congestion increase ▪ Longer-term, Pier 500 remains LA option - but it is landfill and will be extremely expensive ▪ Oakland needs to increase throughput before capacity becomes an issue Summary Conclusions of Discretionary Market Competing Ports

Port / Terminal LA / LB / Oakland Seattle-Tacoma Pacific Gateway North Atlantic Region South Atlantic Region

Strengths ▪ Large-scale, very well- ▪ Established option for ▪ Growing volumes - very ▪ NY/NJ invested in ▪ Strong volume growth at established gateway serving markets strong for Prince Rupert additional intermodal - Savannah - supported option ▪ Aggressive and Greenville Yard by good intermodal and ▪ Estimated 50% of competitive support of ▪ NY/NJ remains a “must- DCs volumes moving to Canadian railroads call” port in region, ▪ Savannah increasing rail discretionary markets ▪ CN incentivised to grow regardless capabilities from 2020 ▪ Infrastructure in place - Prince Rupert volumes ▪ Virginia has excellent ▪ Charleston seeking to be on-dock rail and intermodal connectivity more active in serving connectivity to Class 1 US Midwest too railroads Weaknesses ▪ History of labour ▪ US railroads less ▪ Vancouver Port Authority ▪ NY/NJ an expensive ▪ Reliance on US railroads instability focussed on intermodal inability to develop option for shippers (CSX & Norfolk ▪ Intermodal provided by ▪ Seattle-Tacoma losing Deltaport capacity ▪ Halifax and Montreal Southern) US railroads share of Pacific North niche options for Asian ▪ Panama Canal limits 132 ▪ Highly expensive costs - West market to cargo size of All-Water routing i.e. terminal charges, rail Vancouver and Prince ▪ Panama Canal limits ships costs Rupert size of All-Water routing ▪ Complicated rail profile ships exiting port region

Opportunities ▪ Volumes to grow in line ▪ T5 at Seattle will allow ▪ Prince Rupert and DPW ▪ Recent investment in ▪ Continued market with overall market - not 18,000 TEU ships to call Centerm expansion Heartland Corridor by penetration from extra market share - improve plans NS improves access to Savannah competitiveness ▪ Prince Rupert volume US Midwest growth continuing ▪ Ship size growth on All- ▪ Incentivised CN Water via Suez Canal Threats ▪ From Pacific Gateway ▪ Limited local hinterland ▪ GCT Deltaport lack of ▪ North / South Atlantic ports do not operate collectively - ports plus no access to capacity traction compete with each other and all other ports Canadian market (via ▪ ECNA largest ships still smaller than WCNA - and rail) expected to remain so at 14,500 TEU compared to 18,000 TEU for WCNA - for foreseeable future 133

Section 3: Trends in Container Shipping Section 3: Recent Liner Developments and the Impact on VFPA Addressed Potential for greater competition as a result of larger ships calling to East Coast ports to serve the US Midwest via the Suez Canal outlined, along with developments in Transpacific trades by current Alliance groupings

Section 3: Trends in Container Shipping Ship Size Growth on Routes to/from Asia and North America

▪ A summary of key recent developments in container shipping impacting North Trade Route Max Ship Size - 2010 Max Ship Size - 2019 America will be clearly outlined, with specific emphasis on the following: ▪ Changes to vessel sizes on a global basis and the ‘cascade’ effect on Transpacific Transpacific Direct 5,350 TEU 14,500 TEU - 18,000 TEU ship sizes. ▪ Assessment of shipping line and alliance orderbooks and impact on services. Asia All-Water – ECNA 5,000 TEU 13,000 TEU ▪ Specific developments on the Transpacific trades, including provision of existing (Panama Canal) liner services, sizes of vessel used and emergence of revised Alliance groupings. Asia All-Water – ECNA 6,058 TEU 14,000 TEU ▪ Potential for greater competition as a result of larger ships calling to East Coast (Suez Canal) ports to serve the US Midwest via the Suez Canal. ▪ Impact on North American West Coast ports resulting from changing alliances and bigger vessels. 134 ▪ A summary forecast of ship size development on key trades to North America and a review of the competitive position of VFPA versus other ports. ▪ Assessment of impact of IMO 2020 on Transpacific trades. ▪ Summary SWOT analysis - with specific assessment of position of VFPA terminals compared to other key North American gateways. Introduction to Container Shipping Trends The trend for bigger ships is well established since 2004 – 18,000TEU+ ships in service. Almost all major lines are committed to Ultra Large Container Ships (ULCS).

This Section provides an overview of the Major container shipping trends and global ship World Container Fleet Development, since 1990 size revolution and the impact that this has on the specific region that the port of Vancouver is operating in, highlighting the increase in the size of tonnage deployed; the 25000 increase in the importance of larger vessels in the container fleet and the impact on the following main issues: 20000

▪ Shipping lines are striving for improved scale economies, which has resulted in the 15000 introduction of much larger vessels; 10000 ▪ There has been a miss-match between supply and demand, with this being due to the introduction of much larger vessels and weaker than anticipated global demand 5000 growth following from global economic conditions. This has resulted in severe and prolonged over-capacity; 0 90 91 92 93 94 95 06 07 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 est. ▪ The Asia-Europe container trade cannot absorb all of the largest vessels that have 135 been added to the market. The result has been a period of ‘cascading’ of large vessels <4000TEU 4000-7999TEU 8000-9999TEU 10,000TEU+ onto other trades – usually ahead of underlying demand and port capabilities; ▪ The search to fill the largest vessels has seen increased use of transhipment. The The implications for terminals are clear in this highly competitive market: number and size of feeder vessel services has increased - Indeed, this is vital to the economics of the largest vessels; ▪ They will have to expand – terminal area, length of quay and depth of water are all crucial if ports are to be able to increase the size of vessels they can handle; ▪ The reduction in the number of facilities that are able to handle the ULCS’s; ▪ They will need more yard space to be able to handle larger consignments; ▪ The importance to shipping lines of being able to take full advantage of the economies of scale by ensuring that the ULCS’s are well utilised; ▪ They will need more and more efficient gantry cranes to be able to increase their productivity, thereby reducing the port stay time. Cranes will also need to be wider to ▪ Further use of Vessel Share Agreements and more formal alliance partnerships. handle bigger vessels;

As a result of the increase in the size of vessels being deployed on all trades following ▪ They will need to train their crane drivers in order to increase their efficiencies. the cascading of larger tonnage from the main arterial trades, it is inevitable that the number of ports that are capable of handling the larger size of vessel will decline – not all In markets such as Trans-Pacific, this will mean that business will be focused on those ports will have the necessary depth of water, length of quay or number and type of gantry terminals that can meet the requirements of the shipping line. This has always been the cranes to be able to handle vessels of this size. case, but the economics of introducing much larger vessels will accelerate this trend. This is an extremely important point for container facilities in these regions. Container Ship Size Developments – Global Trends Ever-larger ships being ordered – cascading occurring on all secondary routes, including trades involving WCNA ports

▪ Shipping lines seek greater economies of scale through larger vessels. Container Ship Sizes ▪ Further rise in containerisation not restricted by technology or knowledge but ability to fit through the various canals. Panamax (1980) LOA (m) : 250 3,000-4,000 TEU Beam (m): 32 ▪ New vessels struggling with the lack of infrastructure at various ports, with only a few capable Draft (m)*: 12.5 of handling their huge size and cargo. This initially leads to an increase in transshipment until Post Panamax (1988) LOA (m) : 285 4,000-5,000 TEU Beam (m): 40 such time as more deep-water terminals are developed in the region (such as N.Europe). Draft (m)*: 13 Post Panamax Plus (2000) LOA (m) : 300 Beam (m): 43 ▪ A lack of deep-water capabilities in a region, will drive a continued increase in transshipment 6,000-8,000TEU and size of feeder vessels, primarily for European trades. Draft (m)*: 14.5 New Panamax (2014) LOA (m) : 366 Beam (m): 49 12,500 TEU ▪ Significant investment in port infrastructure to accommodate these large vessels set to Draft (m)*: 15.2 continue for the foreseeable future. Post New Panamax (2006) 15,000 TEU & LOA (m) : 400 ▪ The majority of the ULCSs are deployed on the main arterial trade lanes direct from the Far Triple E (2013) Beam (m): 59 Draft (m)*: 15.5 East to Europe. 136 18,000 TEU New Generation LOA (m) : 430 ▪ For ports, in addition to providing infrastructure for larger ships, there is a need to efficiently Beam (m): 59 23,000 TEU handle rising container exchanges per ship call, including storage, rail capacity etc. Draft (m)*: 15.5

▪ Cascading onto other routes – particularly from Asia-Europe to Asia-WCNA - ongoing * Fully laden draft. Vessels require 10-15% under keel clearance at the berth.

8,000 TEU to 14,000 TEU 14,000 TEU to 18,000 TEU 18,000 TEU to 23,000 TEU

E Class Maersk: 397m, Triple E Maersk: 400m, 23,000 TEU: 400m, 24 rows, 420m, 24 rows, 16.5m 22 rows, 16m 23 rows, 16m ▪ Port around the world were sized to accommodate ▪ Cranes were extended to 23 rows ▪ Declining benefits of scale for vessels the E class Maersk by providing 16m of draft ▪ No change required for berth or channel drafts >20,000TEU ▪ Cranes were upgraded to 22 rows ▪ Berth length should be able to accommodate but cranes would need 24 rows and deeper draft Container Ship Size Developments – Alliances Now Re-Aligned The arrangement of three alliances not four is the new “status quo” - desire to use terminals within the same company grouping (Maersk Line / APM Terminals, CMA CGM/Terminal Line, MSC/TiL) will continue. HMM due to join THE Alliance from April 2020.

▪ Consolidation in the shipping industry has resulted in recent merger and acquisition Development of Shipping Line Alliances activity and re-organisation of major container alliances from four groups to three: ▪ Maersk Line acquiring Hamburg Sud. ▪ Acquisition of NOL (APL) by CMA CGM / Terminal Link ▪ Merger of Cosco and China Shipping. ▪ Formation of The Ocean Network Express (ONE) by Japanese lines. ▪ Cosco take-over of OOCL (leading to sale of OOCL’s facility at Long Beach Container Terminal) ▪ Shipping lines also still want to use “sister-company” facilities (such as Maersk Line at APM Terminals): ▪ Many shipping lines have equity stakes in port terminals, which means: 137 ▪ Facilities being developed in accordance with the shipping lines’ requirements. ▪ The shipping lines ensuring strategic access to their hinterlands. ▪ Shipping lines not facing delays at own terminals. ▪ Lower port tariffs / transportation costs due to the integration of this step in the Note: SM Lines is also an independent operator supply chain. Key Conclusions: ▪ The trend has been further evidenced with APMT’s recent “volte face” in terms of a policy related to serving Maersk services at owned facilities. ▪ HMM is to join THE Alliance as a full member as from April 1st 2020, subject to ▪ Can cause some likely friction between Alliance partners where both companies the necessary regulatory approvals have own terminal assets - a common issue in San Pedro ports ▪ The four member lines of THE Alliance : HMM/Hapag-Lloyd/YangMing/Ocean ▪ Weakening global trade and oversupply of shipping capacity has put pressure on Network Express will extend the duration of their partnership for ten years until operating margins of the shipping lines. 2030

▪ Shipping lines retain a strong focus on cost reductions and tariff negotiations. ▪ Zim and the 2M Alliance are expanding the “strategic alliance” in place to cover the Asia-Mediterranean and Asia-US Pacific Northwest trades

▪ PIL is withdrawing from the Transpacific trades, to concentrate more on its core focus of intra-regional Asian trades and services linking Asia with Mid East/ISC Global Maritime – Container “Cascade” Effect Ability to handle larger vessels now required by Pacific West Coast ports due to cascading of large vessels from the main arterial trade lanes to Trans-Pacific as well as other secondary trade lanes.

1 2 The increase in the size of vessels deployed on the main arterial lanes has resulted in Vessels that were deployed on the main arterial trade lanes have now been a displacement of former largest vessels, such as “Triple E” Class vessels of 18,000TEU capacity, to secondary trade lanes. “cascaded” to secondary trade lanes, ahead of the “actual” trade demand, meaning that larger alliances are necessary to ensure that the vessels are as full as they can MSC Gülsün at 23,756TEU has since been replaced by the HMM Algeciras, with be. 23,964TEU as the largest vessel due to be deployed in April 2020. 3 138 Smaller ports are no longer able to handle main trade lane vessels and instead must rely on secondary trade vessels and feeder/short-sea services. However, this is leading to an increase in the amount of t/s and competing t/s hubs to handle the increasing capacity of feeder/short-sea tonnage, especially in Europe, Mediterranean and Middle East / Indian Sub-Continent geographies. 4 5 With the formation of the new alliance structure, there will be a reduced number of Displacement of <500TEU vessels by <2,500TEU vessels on feeder/short-sea service alternatives available to each shipper. services as a result of an increase in incidence of transhipment in the Europe, Mediterranean and Middle East / Indian Sub-Continent geographies. Pacific West Coast ports must be able to handle larger vessels efficiently to avoid losing volumes, or settle for handling secondary trade services. “Cascade” Effect on WCNA Container Ports- Driven by Ship Activity on Asia - Europe Routes Potential for larger vessels to be deployed on the Transpacific exists - shipping lines expected to continue deploying very biggest ships on Asia-Europe routes and then needing to find options for existing ships

▪ Global demand is behind global supply (vessel fleet) - so, bigger vessels are often put on Far East to N.Europe Container Trade Demand 2010-2022 (m TEU) trades that they are currently too big for and where there is insufficient demand to absorb vessels and capacity offered. 40 ▪ Asia to Europe trade demand will continue to be the primary deployment for the largest classes of vessels and hence the growth of this primary market as shown in the graph, 35 which highlights the likely need for bigger vessels on the primary trade lanes and thus an increase of vessel size for secondary trade lanes including Trans-Pacific as part of the 30 “cascade” effect. 25 ▪ The degree to which this tonnage can be absorbed is the key driving factor for movement of larger vessels onto other secondary trades, including to North American trade routes. Low 20 ▪ A summary of the development of container volumes shipped between East Asian and Base European markets in the period since 2010 confirms: 15 High 139 ▪ Volumes fell back in 2012 and in 2015, reflecting uncertainties in the Chinese market, 10

▪ Growth between 2010 and 2016 was 8.5% - significantly slower than the expansion 5 of the fleet aimed at these markets; ▪ Some recovery since 2015 and is expected to continue, but level of demand 0

remains relatively fragile.

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012 2011 ▪ Some further expansion is anticipated with demand rising at typical annual rates of 1.7%- 2010 2.5% - lower than had been anticipated some years ago. Key Conclusions ▪ The current largest vessels have already displaced smaller units onto the Transpacific and All-Water Suez routes - process is set to continue as more “ultramax” vessels are ordered and deployed on the Asia-Europe strings ▪ Fleet development plans of major lines/Alliances suggests further increases in vessels deployed on Asia-Europe strings - the move of ships to trades ▪ Size of vessels deployed on the Trans-Pacific services ever closer to the 18,000TEU serving North America will increase in magnitude vessels recently used on Asia-Europe trade lanes. ▪ Exact impact on the WCNA port market will be determined by strategies of individual lines, scale of demand growth on the Asia-Europe trades and the abilities of terminals in other trades to handle larger vessels

▪ Yet “cascade” effect still a key driver for Vancouver Fraser Port Authority Significant Increases in Ship Sizes – Cannot Continue Indefinitely North America / Canada continues to see increases in ship sizes in all trade routes - current largest sizes to be maintained

Key Conclusions

▪ For North American trades, maximum ship sizes reached for short-to-medium term - WCNA at 18,000 TEU, ECNA at 14,000 TEU

▪ Still room for vessel upsizing - current maximums will become the average size of ships

▪ Landside infrastructure not water depth is the key factor moving forward

▪ Vancouver Fraser Port Authority must try 140 to keep pace with these trends - deep water, can increase capacity and be able to get containers moving to hinterlands quickly and price competitively

Route Max Ship Size - 2010 Max Ship Size - 2012 Max Ship Size - 2015 Max Ship Size - 2019

Asia – North Europe 8,862 TEU 9,600 TEU 18,270 TEU 23,000 TEU

Trans-Pacific Direct 5,350 TEU 5,700 TEU 14,000 TEU 14,500 TEU - 18,000 TEU

Asia All-Water – ECNA 5,000 TEU 5,000 TEU 5,000 TEU 13,000 TEU (Panama Canal)

Asia All-Water – ECNA (Suez 6,058 TEU 6,450 TEU 9,300 TEU 14,000 TEU Canal) Transatlantic (N. Europe) 3,850 TEU 4,010 TEU 5,892 TEU 8,500 TEU Introduction to Global Container Shipping Line Fleet – March 2020 Summary of Operator fleet for Top 20 operators (based on TEU slots operated)

Total Owned Chartered Orderbook* Rank Operator TEU Ships TEU Ships TEU Ships % Chart TEU Ships % existing 1 APM-Maersk 4,158,225 697 2,357,701 314 1,800,524 383 43.3% 39,864 17 1.0% 2 Mediterranean Shg Co 3,813,010 572 950,000 137 2,863,010 435 75.1% 202,500 12 5.3% 3 COSCO Group 2,924,927 476 1,552,917 174 1,372,010 302 46.9% 115,000 5 3.9% 4 CMA CGM Group 2,643,734 490 995,711 126 1,648,023 364 62.3% 466,988 29 17.7% 5 Hapag-Lloyd 1,780,483 254 1,052,321 112 728,162 142 40.9% ONE (Ocean Network 1,570,657 220 523,762 72 1,046,895 148 66.7% 6 Express) 7 Evergreen Line 1,231,809 192 566,494 107 665,315 85 54.0% 541,707 65 44.0% Yang Ming Marine 599,538 90 181,395 40 418,143 50 69.7% 198,100 24 33.0% 8 Transport Corp. 9 Hyundai M.M. 414,600 62 131,508 15 283,092 47 68.3% 406,708 20 98.1% 141 10 PIL (Pacific Int. Line) 371,748 111 149,761 64 221,987 47 59.7% 11 Wan Hai Lines 276,190 97 160,636 66 115,554 31 41.8% 48,744 20 17.6% 12 Zim 270,876 58 4,992 1 265,884 57 98.2% 13 KMTC 162,498 67 56,677 25 105,821 42 65.1% 12,500 5 7.7% 14 Zhonggu Logistics Corp. 160,368 112 96,600 37 63,768 75 39.8% 4,964 3 3.1% 15 IRISL Group 152,419 48 94,387 44 58,032 4 38.1% 16 Antong Holdings (QASC) 145,772 116 114,353 61 31,419 55 21.6% 14,780 9 10.1% 17 SITC 120,111 83 91,366 65 28,745 18 23.9% 12,900 5 10.7% 18 X-Press Feeders Group 105,427 69 50,559 28 54,868 41 52.0% 5,564 2 5.3% 19 UniFeeder 92,355 59 92,355 59 100.0%

20 Sinokor 90,919 72 35,654 35 55,265 37 60.8% 32,307 23 35.5% Alphaliner / Source: WSP ▪ Lines commit the largest vessels to the main arterial trade lanes, such as Asia-Europe. As ships on these services gradually increase, so future deployment for the secondary trade lanes will also increase by the “cascade” of vessels from one service to the other. At present the global fleet of vessels is some 5,202 vessels with a capacity of 22,727,619 TEUs. By far the dominant size sector is the 11,000-14,500TEU range, with this accounting for approximately 3.7m TEUs. ▪ The focus of the current orderbook is on even larger tonnage. CMA CGM has orders of 9x23,100TEU vessels; MSC has 11x23,000TEU and HMM 12x23,000TEU vessels. These order are in addition to 44 vessels of 14,812-15,052TEU capacity for a combination of CMA CGM, Maersk, MSC and HMM, further indicating an increase in the average size of vessels to be deployed globally. ULCS Orders by Shipping Line Operator for Confirmed Orders – March 2020 – December 2022 Will be a number of larger ships delivered in 2019/2022 - will continue “cascade” process onto secondary routes, including Transatlantic linking USEC / Mediterranean and growing vessel sizes on direct Asia-Mediterranean services ULCS Fleet Size as at 31 March 2020, by main operator ▪ Planned ULCS builds between March 2020 and December 2022 are confirmed: Operator▪ Source: WSP / Alphaliner Number of ULCS TEU Totals CMA CGM 40 626,197 ▪ Maersk Line – Only two ships delivered in 2019 (each 15,282TEU) and placed on 11,000 - 14,500 25 318,214 Asia-Mediterranean route. Other orders are feeders of 13x2,200TEU due in 2020-21. 14,501 - 18,000 12 245,121 18,000 + (all 23,100) 3 62,862 ▪ MSC – Large newbuild pipeline with 16 ships due in 2019/2020. Includes 11 vessels (23,000TEU) all for deployment on 2 Asia-Europe strings. COSCO Shipping Lines 58 907,428 “megamax” M’s 11,000 - 14,500 33 446,052 Balance of 2019 orders includes 5x14,300TEU. Will have suitable tonnage for 14,501 - 18,000 7 102,188 increased tonnage on North American services and Asia-Med routes. 18,000 + 18 359,188 ▪ COSCO – Recently delivered “megamax” vessels (19,200-21,200TEU) on Asia- OOCL 17 271,568 Europe strings to replace the 13,000-14,000TEU vessels for likely switch to 11,000 - 14,500 11 143,090 Transpacific service, No confirmed further plans for new . 14,501 - 18,000 ULCS’s 18,000 + 6 128,478 ▪ CMA CGM – Large newbuild plans of the shipping lines, with 9x23,100TEU vessels Evergreen Marine 29 443,916 for delivery in 2020/2021 and a further 15x15,000TEU vessels over 2019-2022. 11,000 - 14,500 (all 11,850-12,000) 22 301,200 Options for cascade of existing tonnage to Trans-Atlantic services. 14,501 - 18,000 142 ▪ Hyundai MM - 12x23,900TEU vessels and 8x15000TEU vessels due in 2020 and 18,000 + 7 142,716 Maersk Line 83 2,374,728 2021, confirm that HMM is aligning with THE Alliance on main trade lanes. 11,000 - 14,500 32 387,180 ▪ Evergreen – 10 ships for 2020 and a further 10 for 2021. All vessels are expected to 14,501 - 18,000 20 712,532 be in the 11,850-12,000TEU range, suitable for US services. 18,000 + 31 1,275,016 MSC 110 1,662,380 ▪ Yang Ming – 5x12,690TEU and 11x11,850TEU vessels for delivery 2020-2022 to 11,000 - 14,500 76 992,656 upgrade Asia-Europe and Asia-Med from 10,000TEU capacity - although Asia-USWC 14,501 - 18,000 6 99,912 is also an option. 18,000 + (all 23,000) 28 569,812 Hyundai MM 9 113,990 ▪ Hapag-Lloyd - In a move aimed at bringing the company further in line with others in 11,000 - 14,500 9 113,990 the main East/West container trades, H-L is close to placing orders for up to 6 x 14,501 - 18,000 23,000TEU vessels. 18,000 + ▪ Zim, Wan Hai and PIL – no plans for delivery although there are 14 new vessel Hapag Lloyd 33 486,233 orders in the 14,800-15,000TEU range for delivery in 2020-2022 that have still to be 11,000 - 14,500 16 209,164 assigned to a line. Wan Hai has also ordered 8x3,036TEU and 12x2,038TEU vessels 14,501 - 18,000 11 164,923 18,000 + 112,146 in anticipation of a need for larger feeder vessels. 6 Yang Ming Marine 19 266,670 Key Conclusions 11,000 - 14,500 19 266,670 14,501 - 18,000 18,000 + ▪ Most major shipping lines will deliver vessels or have ships become ONE Alliance 29 442,224 available that can service North American trades, including Transpacific. 11,000 - 14,500 23 321,180 14,501 - 18,000 ▪ Expect some further upgrades to occur - will place pressure on operators 18,000 + 6 121,044 to fill vessels. TOTALS 427 7,595,334 Confirmation of ULCS Fleet and Orderbook for 2M Confirmed orders show short-term development of fleet - a number of vessels to be added to the Maersk Line and MSC fleets

Fleet size and description - 2M - ULCS Fleet by Size Range and Alliance, with future increases Orders MAR-20 MAR-20 Dec-2020 Dec-2020 Dec-21 Dec-21 Dec-22 Dec-22 Ship TEU Ship TEU Ship TEU No. TEUs Orderbook Increase Orderbook Increase Orderbook Increase Maersk 11,000- 14,500 32 387,180 14,501- 18,000 20 712,532 18,000+ 31 1,275,016 Total 83 2,374,728 MSC 11,000- 14,500 76 992,656 143 14,501- 18,000 6 99,912 18,000+ 28 569,812 3 69,000 Total 110 1,662,380 3 69,000

Fleet Size (excl. HMM) MAR-19 MAR-19 Dec-2020 Dec-2020 Dec-21 Dec-21 Dec-22 Dec-22

2M No. of ULCS TEU No. of ULCS TEU No. of ULCS TEUs No. of ULCS TEU

11,000- 14,500 108 1,379,836 108 1,379,836 108 1,379,836 108 1,379,836

14,501- Key Conclusions: 18,000 26 812,444 26 812,444 26 812,444 26 812,444 18,000+ 59 1,844,828 62 1,913,828 62 1,913,828 62 1,913,828 ▪ Strong orders were in place in April 2019

Total 193 4,037,108 196 4,106,108 196 4,106108 196 4,106,108 ▪ By end of 2022, this Alliance will have increased fleet and size of ULCS quite substantially compared to position in 2019 Confirmation of ULCS Fleet and Orderbook for Ocean Alliance Confirmed orders show short-term development of fleet - a number of vessels to be added to the CMA CGM, Cosco, Evergreen and OOCL fleets Fleet size and description – Ocean Alliance - ULCS Fleet by Size Range and Alliance, with future increases

Orders MAR-20 MAR-20 Dec-2020 Dec-2020 Dec-21 Dec-21 Dec-22 Dec-22 Ship TEU Ship TEU Ship TEU No. TEUs Orderbook Increase Orderbook Increase Orderbook Increase CMA CGM 11,000-14,500 25 318,214 14,501-18,000 12 245,121 2 30,104 6 90,000 4 60,000 18,000+ 3 62,862 7 161,700 2 46,200 Total 37 626,197 9 191,804 8 136,200 4 60,000 Cosco 11,000-14,500 33 446,052 14,501-18,000 7 102,188 18,000+ 18 359,188 144 Total 58 907,428 Evergreen 11,000-14,500 22 301,200 10 119,400 10 118,800 14,501-18,000 18,000+ 7 142,716 Total 29 443,916 10 119,400 10 118,800 OOCL 11,000-14,500 11 143,090 14,501-18,000 18,000+ 6 128,478 Total 17 271,568

Fleet Size Key Conclusions: Ocean MAR-20 MAR-20 Dec-2020 Dec-2020 Dec-21 Dec-21 Dec-22 Dec-22 Alliance No. of ULCS TEU No. of ULCS TEU No. of ULCS TEU No. of ULCS TEU ▪ CMA CGM already has orders for December 11,000- 2022 in place 14,500 91 1,208,556 101 1,327,956 111 1,446,756 111 1,446,756 14,501- ▪ Other ships orders are from Evergreen 18,000 22 347,309 24 377,413 30 467,413 34 527,413 18,000+ 34 693,244 41 854,944 43 901,144 43 901,144 ▪ Strong growth in fleet size between April Total 147 2,249,109 166 2,560,313 184 2,815,313 188 2,875,313 2019 and December 2022, including in ULCS Confirmation of ULCS Fleet and Orderbook for THE Alliance Confirmed orders show short-term development of fleet - a number of vessels to be added to the Hapag Lloyd/UASC, Yang Ming and ONE Alliance fleets Fleet size and description – THE Alliance - ULCS Fleet by Size Range and Alliance, with future increases Orders MAR-20 MAR-20 Dec-2020 Dec-2020 Dec-21 Dec-21 Dec-22 Dec-22 Ship Ship Ship No. TEUs Orderbook TEU Increase Orderbook TEU Increase Orderbook TEU Increase Hapag Lloyd/ UASC 11,000-14,500 16 209,164 14,501-18,000 11 164,923 18,000+ 6 112,146 Total 33 486,333 Yang Ming 11,000-14,500 19 266,670 4 49,920 6 72,780 6 71,100 14,501-18,000 18,000+ Total 19 266,670 4 49,920 6 72,780 6 71,100 145 ONE 11,000-14,500 23 321,180 14,501-18,000 Key Conclusions: 18,000+ 6 121,044 Total 29 442,224 ▪ Yang Ming has 16 ships being Hyundai MM delivered between December 2020 11,000-14,500 9 113,990 and December 2022 - no other vessels 14,501-18,000 8 120,000 due 18,000+ 12 276,000 Total 9 1113,990 12 276,000 8 120,000 ▪ THE Alliance is the smallest of the major alliance groups, but is still Fleet Size (incl HMM) increasing the number of ultra-large MAR-20 MAR-20 Dec-2020 Dec-2020 Dec-21 Dec-21 Dec-22 Dec-22 ships in service THE Alliance No. of ULCS TEU No. of ULCS TEU No. of ULCS TEU No. of ULCS TEU ▪ Involvement of HMM could bring 11,000-14,500 58 797,014 62 846,934 68 919,714 74 990,814 another 20 ships of 18,000+ TEU and 14,501-18,000 11 164,923 11 164,923 19 284,923 19 284,923 390,000 TEU of slot space in 2020- 18,000+ 12 233,190 24 509,190 24 509,190 24 509,190 2021 - sufficient for 2 deep sea services from Asia to Total 81 1,195,127 97 1,521,047 111 1,713,827 117 1,784,927 Europe/Mediterranean Small Reductions in Trade Lane Ship Capacity and Liftings in Eastbound Transpacific in 2019 Eastbound Transpacific volumes and utilisation have been increasing - further gradual increase in vessel size anticipated towards 18,000 TEU ships for WCNA ▪ In 2018, Transpacific liftings of loaded traffic to Canada increased by almost 7% Estimated Transpacific Eastbound Capacity Utilisation: 2009 – 2019 (‘000 TEU) compared to 2017, to reach 1.31m TEU with volumes moving ahead of possible tariff issues and inventories stocked. In 2019, liftings dropped to 1.27m TEU. 1,600.00 120% ▪ Vessel capacity has reflected the trend. Utilisation has remained at very high levels 1,400.00 from 2010 (after the impact of the Global Financial Crisis) and despite continued 100% vessel size increases. 1,200.00 ▪ 80% It seems likely that vessels will increase beyond 14,000TEU and towards 18,000 1,000.00 TEU, then VFPA terminals will need to be able to handle these larger ships. 800.00 60% ▪ Despite all of the Vancouver terminals (and Prince Rupert) being common user, they have succeeded in attracting significant – and ever-increasing – discretionary 600.00 US transit business on the Eastbound transpacific routes away from the San Pedro 40% terminals that are actually owned by the shipping lines 400.00 20% 200.00 146 Key Conclusions: - 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

▪ Utilisation in Eastbound Transpacific has been rising - along with volumes - with Liftings Capacity Utilisation 96% estimated for 2019 ▪ Impact of COVID-19 will be seen in 2020, due to removal of ships and blank sailings - however, it is expected to return to equilibrium thereafter in 2021

Summary of ‘000 TEU 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019f Estimated Transpacific Eastbound Liftings 800 1000 1000 1050 1100 1150 1175 1200 1300 1310 1273 Activity to 2019f Capacity 1000 1000 1100 1075 1200 1200 1350 1300 1350 1375 1330

% Utilisation 80% 100% 91% 98% 92% 96% 87% 92% 96% 97% 96%

Source: WSP / PR News Service / Alphaliner Recent Developments in Transpacific Trades by Major Shipping Lines Major lines of Maersk, MSC and COSCO have seen volumes drop in 2019, whereas Hapag-Lloyd, ONE Alliance, Evergreen and SM Lines have all experienced growth of varying magnitudes

▪ Transpacific container volumes for 2019 confirmed a 2.8% drop in trade lane volumes. Transpacific Full Liftings for Key Shipping Lines, 2010-2020 YTD in TEU This impacted ports, with many WCNA facilities seeing low or a lack of growth. COVID-19 expected to see further declines in the first half of 2020, at least. 3,000,000 2,500,000 VFPA Volumes Lifted – Full and Empty – 2008 to 2020 YTD in TEU 2,000,000 1,500,000 3,500,000 1,000,000 3,000,000 2,500,000 500,000 2,000,000 - 1,500,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1,000,000 500,000 Hapag Lloyd ONE COSCO Evergreen SML CMA CGM - VFPA Volumes - Empty VFPA Volumes - Loaded YML OOCL MSC Maersk OTHERS

147

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009 2008

Total Liftings (Full and Empty) for Key Shipping Lines, 2010-2020 YTD in TEU Volume Changes by Major Operators in Transpacific

2020 YTD 2020 (Jan-… 3,500,000 Trades, 2018 vs 2019 3,000,000 Winners + / - in % Losers + / - in % 2,500,000 2,000,000 Maersk Line -17.7% Hapag Lloyd +7.6% 1,500,000 1,000,000 MSC -2.8% ONE Alliance +43.0% 500,000 - COSCO -1.9% Evergreen +11.7% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Hapag Lloyd ONE COSCO Evergreen SML CMA CGM SM Lines +91.0% YML OOCL MSC Maersk OTHERS Summary of Container Shipping Line Services at Vancouver Container Terminals The following information provides a detailed summary of the advertised major shipping line services calling at the Vancouver container terminals: Centerm, Vanterm, Deltaport and Fraser Surrey Docks.

Shipping line services calling at Vancouver container terminals CANADA

Vancouver Asia – North America Services: 12 North Atlantic Vessels: 70 Services: 3 TEU: 2048-13830 Vessels: 36 TEU: 4252-9411

Australasia & Oceania Services: 1 148 Vessels: 9 TEU: 3868-4616

Prince VFPA US (West Coast) No. of Rupert Trade lane Service Shipping lines Min TEU Max TEU vessels VFPA Fraser Prince Long Los Portland Centerm Vanterm Deltaport Seattle Oakland Tacoma terminal Surrey Rupert Beach Angeles (Oregon) 2M - TP-9 / Maple (ZP9) Maersk / MSC / ZIM 7 8204 8814 Centerm Far East-PNW 'PN2' service HMM 2 4728 4728 Vanterm Far East-PNW service - PNS SM Line 6 4253 4398 Fraser Surrey OA - FE-WCNA service - PNW1 COSCO / CMA CGM / Evergreen / OOCL / APL 10 8102 13830 Vanterm OA - FE-WCNA service - PNW2 COSCO / CMA CGM / Evergreen / OOCL / APL 6 9469 10036 Centerm Asia / North OA - FE-WCNA service - PNW3 COSCO / CMA CGM / Evergreen / OOCL / APL 6 6332 7024 Vanterm America OA - FE-WCNA service - PNW4 COSCO / CMA CGM / Evergreen / OOCL / APL 6 5714 5888 Deltaport THE - FE-WCNA service - PN1 ONE / Hapag-Lloyd / Yang Ming 4 8110 8560 Deltaport THE - FE-WCNA service - PN2 ONE / Hapag-Lloyd / Yang Ming 8 6258 10010 Deltaport THE - FE-WCNA service - PN3 ONE / Hapag-Lloyd / Yang Ming 5 8204 11010 Deltaport THE - Japan-WCNA service - PN4 ONE / Hapag-Lloyd / Yang Ming 3 4432 4922 Deltaport Westw ood Shipping Line Westw ood 7 2048 2556 Centerm WCNA-ANZ 'Oceania' * Maersk / ANL / Hapag-Lloyd 9 3868 4616 Fraser Surrey California Express MSC 11 8400 9411 Deltaport North Med Pacific Express (MPS / MCPS) Hapag-Lloyd / Hamburg Süd 14 4252 5087 Fraser Surrey Atlantic THE - N. Europe-WCNA service - AL5 ONE / Hapag-Lloyd / Yang Ming 11 4922 5087 Fraser Surrey VFPA: Fewer Total Vessel Calls but Some Increase in Overall TEU Handled Trends noted at VFPA between 2010 and 2019 are consistent with wider Transpacific and industry activities of more containers arriving on bigger ships - interestingly, smallest increase in ship calling activity has been in average draft, with only minimal change

▪ Number of container vessels has seen some fluctuations between 2010 and 2019, Total Calls for Container Vessels, 2010 - 2019 although average LOA has increased,. This is in line with overall industry trends for container ships on the transpacific routes - current LOA of just over 300m and average 850 size of vessel increases.

▪ Index-linking of average container vessel calling factors over this assessment period 800 confirms the following, on a per annum basis: ▪ The average TEU growth has been 2.9% 750 ▪ The average vessel length has increased by 1.1%, with draft up by 0.9% 700 Key Conclusions 650 ▪ Under 750 calls now per annum, compared to over 830 five years ago 600 149 ▪ Fewer but larger ships in service is a wider Transpacific and industry trend 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 Indexed Average Container Vessel Calling Factors, 2010 - 2019

8,000 350.0 140.0 7,000 300.0 130.0 6,000 250.0 5,000 120.0 200.0 4,000 110.0 150.0 3,000 100.0 2,000 100.0

Length/Draft (m) 90.0 Average Average TEUSize 1,000 50.0

0 0.0 Dimension (2010 = 100) 80.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Average LOA Average draft Average TEU Average LOA Average draft VFPA Container Vessel Sizes - An Increase Towards Larger Ships Identified Comparison between position in 2010 and 2019 shows a shift towards a greater share of larger ships calling

Distribution of Container Vessel Capacity by Size of Ship - 2010 vs. 2019 Distribution of Container Vessel Calls by Share in % - 2010 vs. 2019

20% 20%

18% 18%

16% 16%

14% 14%

12% 12%

150 10% 10% 2010 2010 8% 2019 8%

Vessel Vessel calls (%) 2019 Vessel capacity Vessel capacity (%)

6% 6%

4% 4%

2% 2%

0% 0%

0 0

9,000 9,000

8,000 8,000

7,000 7,000

6,000 6,000

5,000 5,000

4,000 4,000

3,000 3,000

2,000 2,000

1,000 1,000

15,000 15,000

14,000 14,000

13,000 13,000

12,000 12,000

11,000 11,000

10,000 10,000 Vessel size Vessel size Container Shipping Services - DP World Centerm The following information provides a detailed summary of the advertised major shipping line services calling at DP World Centerm.

Shipping line services calling at DP World Centerm CANADA

Vancouver Asia North America – (DP World Centerm) Services: 3 Vessels: 20 TEU: 2048-10036

US (West Coast) Prince VFPA ports included in Max Rupert Trade lane Service Shipping lines Frequency No. of vessels Min TEU the rotation TEU Prince Centerm Seattle Tacoma Rupert 2M - TP-9 / Maple (ZP9) Maersk / MSC / ZIM Weekly 7 8204 8814 Asia / North COSCO / CMA CGM / Evergreen / America OA - FE-WCNA service - PNW2 OOCL / APL Weekly 6 9469 10036 Westwood Shipping Line Westwood Weekly 7 2048 2556

▪ Services offered by Ocean Alliance and 2M Alliance means major shipping lines are calling at Centerm: ▪ 2M - Maersk Line & MSC ▪ Ocean Alliance - CMA CGM, Cosco, OOCL, Evergreen ▪ These are all major operators who each can easily “cascade” bigger vessels onto the route - subject to demand. ▪ The cascade of bigger tonnage is expected to occur in the near future and the terminal must have the necessary infrastructure and capacity for larger ships in the future in order to compete. DP World Centerm: Strong Increase in Size of Vessels Calling in 2018 & 2019 Number of container ships calling has declined in 2018 and 2019 - average draft is consistent but as size of ships has increased, so has average vessel length

▪ There has been a large decline in the number of container vessels calling to DP World Total Calls for Container Vessels, 2010 - 2019 Centerm in 2018 and (anticipated) for 2019. 250 ▪ However, the sizes of ships have increased substantially in 2018 and 2018, to an average of 7,010 TEU and 8,105 TEU, respectively, and follows a trend ongoing since 2015. 200

150 Key Conclusions 100 ▪ Average sizes of ships calling has increased strongly between 2017 and 2019, with average units now over 8,100 TEU 50 ▪ The trend of fewer calls but larger vessels utilising the terminal is reflective of Transpacific and industry-wide trends 0 152 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 Indexed Average Container Vessel Calling Factors, 2010 - 2019

9,000 350.0 160.0 8,000 300.0 150.0 7,000 250.0 140.0 6,000 130.0 5,000 200.0 120.0 4,000 150.0 3,000 110.0 100.0

2,000 100.0 Length/Draft (m) Average Average TEUSize 1,000 50.0 90.0

0 0.0 Dimension (2010 = 100) 80.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Average LOA Average draft Average TEU Average LOA Average draft Container Shipping Services – GCT Deltaport The following information provides a detailed summary of the advertised major shipping line services calling at Deltaport.

Shipping line services calling at Deltaport CANADA

Vancouver Asia North America – (Deltaport) Services: 5 North Atlantic Vessels: 26 Services: 1 TEU: 4432-11010 Vessels: 11 TEU: 8400-9411

153

Prince VFPA US (West Coast) Rupert No. of Min Max Trade lane Service Shipping lines Frequency vessels TEU TEU Prince Long Deltaport Seattle Oakland Tacoma Rupert Beach COSCO / CMA CGM / Evergreen / OOCL OA - FE-WCNA service - PNW4 Weekly 6 5714 5888 / APL THE - FE-WCNA service - PN1 ONE / Hapag-Lloyd / Yang Ming Weekly 4 8110 8560 Asia / North America THE - FE-WCNA service - PN2 ONE / Hapag-Lloyd / Yang Ming Weekly 8 6258 10010 THE - FE-WCNA service - PN3 ONE / Hapag-Lloyd / Yang Ming Weekly 5 8204 11010 THE - Japan-WCNA service - PN4 ONE / Hapag-Lloyd / Yang Ming Weekly 3 4432 4922 North Atlantic California Express MSC Weekly 11 8400 9411 ▪ Trans-Pacific Services offered by THE Alliance and Ocean Alliance with vessels up to 11,000TEU can be increased with larger vessels when CMA-CGM and HMM orders in particular allow the “cascade” of vessels from main Asia-Europe services. ▪ Expect tonnage to increase to about 14,000TEU in short-term for these alliance groups. GCT Deltaport: Vessel Dimensions Reflect Industry Trends - Ship Calls Down 2019 There has been relatively little change to average lengths and drafts of ships calling between 2010-2019, but the number of vessels utilising the berth has seen some fluctuation, especially for 2019

▪ GCT Deltaport has seen total vessel calls increase in recent years. Total Calls for Container Vessels, 2010 - 2019

▪ In 2019, 325 vessels compares with 262 for 2015. The challenge moving forward will 350 be to avoid congestion and the ability to develop terminal capacity. 300 ▪ The average TEU ship size has seen increases, especially since 2014, with the average vessel length and average ship draft consistent over the assessment period. 250 This trend is also reflected in the indexed average vessel calling factors. 200

Key Conclusions 150 ▪ Vessel dimensions remain largely consistent, but a TEU size of ship increase 100 has occurred consistently between 2014 and 2018 50

▪ Ships being cascaded into Transpacific will account for increasing sizes of 0 154 vessels 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 Indexed Average Container Vessel Calling Factors, 2010 - 2019

8,000 350.0 120.0 7,800 300.0 115.0 7,600 250.0 7,400 110.0 7,200 200.0 105.0 7,000 150.0 6,800 100.0 100.0 6,600 Length/Draft (m) 95.0 Average Average TEUSize 6,400 50.0

6,200 0.0 Dimension (2010 = 100) 90.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Average LOA Average draft Average TEU Average LOA Average draft Container Shipping Services – GCT Vanterm The following information provides a detailed summary of the advertised major shipping line services calling at Vanterm.

Shipping line services calling at Vanterm CANADA

Vancouver Asia North America – (Vanterm) Services: 3 Vessels: 18 TEU: 4728-13830

155

No. of Min Max VFPA US (West Coast) Trade lane Service Shipping lines Frequency vessels TEU TEU Vanterm Seattle Tacoma

Far East-PNW 'PN2' service HMM Weekly 2 4728 4728

Asia / North America OA - FE-WCNA service - PNW1 COSCO / CMA CGM / Evergreen / OOCL / APL Weekly 10 8102 13830

OA - FE-WCNA service - PNW3 COSCO / CMA CGM / Evergreen / OOCL / APL Weekly 6 6332 7024

▪ Trans-Pacific Services offered by Ocean Alliance and HMM as new member of ONE Alliance. ▪ HMM has recently ordered 20+ vessels of >18,000TEU to join ONE Alliance and will therefore have any capacity to “cascade” to Trans-Pacific Services of about 14,000TEU. ▪ Ocean Alliance lines in shape of CMA-CGM have orders for vessels of 14-18,000TEU, which can easily replace the existing lower tonnage deployed here currently. GCT Vanterm: Vessels Calling Reflect Industry Trends of Bigger Ships in Service The total number of ship calls to the terminal is declining, from 239 in 2012 to an expected 121 for 2019 - however, the average size of ship calling is increasing, from 5,012 TEU in 2012 to an expected 7,236 TEU for 2019

▪ Vessel calls to the facility have been declining since 2012, when 239 ships were Total Calls for Container Vessels, 2010 - 2019 recorded at the terminal - the figure for 2019 is expected to be around 121. 300 ▪ While the length and draft of vessels calling has been largely consistent, there has been an increase in the average TEU size of ships using the facility, from 5,142 TEU 250 in 2012 to 7,236 TEU for 2019. 200 ▪ This indicates that larger ships are calling, although the number of visits continues to fall - more containers on bigger ships is a Transpacific and industry trend. 150

Key Conclusions 100 ▪ Terminal activity reflects trade lane and industry trends - larger, but fewer, ships 50 calling 0 156 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 Indexed Average Container Vessel Calling Factors, 2010 - 2019

8,000 350.0 150.0 7,000 300.0 140.0 6,000 250.0 130.0 5,000 200.0 120.0 4,000 150.0 110.0 3,000

2,000 100.0 100.0 Length/Draft (m)

Average Average TEUSize 1,000 50.0 90.0

0 0.0 Dimension (2010 = 100) 80.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Average LOA Average draft Average TEU Average LOA Average draft Container Shipping Services - Fraser Surrey Docks The following information provides a detailed summary of the advertised major shipping line services calling at Fraser Surrey Docks.

Shipping line services calling at Fraser Surrey Docks CANADA

Vancouver Asia North America – (Fraser Surrey Docks) Services: 1 North Atlantic Vessels: 6 Services: 2 TEU: 4253-4398 Vessels: 25 TEU: 4252-5087

Australasia & Oceania Services: 1 157 Vessels: 9 TEU: 3868-4616

VFPA US (West Coast) No. of Min Max Trade lane Service Shipping lines Frequency Long Portland vessels TEU TEU Fraser Surrey Seattle Los Angeles Oakland Beach (Oregon) Asia / North Far East-PNW service - PNS SM Line Weekly 6 4253 4398 America Australasia & WCNA-ANZ 'Oceania' joint Maersk / ANL / Hapag- Bi-weekly 9 3868 4616 Oceania service (WSN) Lloyd Med Pacific Express (MPS / Hapag-Lloyd / Hamburg Weekly 14 4252 5087 MCPS) Süd North Atlantic THE - N. Europe-WCNA ONE / Hapag-Lloyd / Weekly 11 4922 5087 service - AL5 Yang Ming ▪ Services offered at Fraser Surrey Docks are all Trans-Atlantic or other secondary services requiring smaller tonnage. ▪ These are services for SM Line, Maersk Line, Hapag-Lloyd and ONE Alliance with a maximum vessel size of just over 5,000TEU. ▪ TA services are also likely to increase in size as a result of the “cascade” of vessels from the main arterial lanes and the new orders of vessels for Maersk, Hapag-Lloyd and ONE Alliance members. DP World Fraser Surrey Docks: Bigger Ships Calling and More Frequently Terminal has seen its average container ship calling increase from 2,020 TEU to 4,585 TEU between 2011 and 2019 - vessels are also longer, with LOA up from 191m to 278m.

▪ Container vessel calls to this terminal have increased in recent years. IN 2015, 74 Total Calls for Container Vessels, 2010 - 2019 ships called, but for 2018 and 2019, the figure has risen to 147. 180 ▪ The average sizes of vessels calling has also been increasing since 2011, when the average vessel calling was a 2,020 TEU unit, but by the end of 2019 the average 160 vessel recorded is expected to be 4,585 TEU. 140 120 ▪ As ship size has increased, then so has the average length, although there has been a much lower change in average draft. 100 80 Key Conclusions 60 40 Bigger ships and more calls has been occurring at Fraser Surrey Docks over the 20 past 5 years - the terminal is benefitting from congestion at other facilities 0 158 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Size, LOA & Draft of Container Vessels Calling, 2010 - 2019 Indexed Average Container Vessel Calling Factors, 2010 - 2019

5,000 300.0 240.0 220.0 4,000 250.0 200.0 200.0 3,000 180.0 150.0 160.0 2,000 100.0 140.0 120.0 1,000 50.0 Length/Draft (m) Average Average TEUSize 100.0

0 0.0 Dimension (2010 = 100) 80.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Average LOA Average draft Average TEU Average LOA Average draft Lynnterm: Limited Container Ship Calls - Just 10 in 2019 Although much fewer numbers of container ships are calling to this facility, the same overall trends are in evidence as with all other terminals handling this cargo at Vancouver - bigger capacity vessels, that are slightly longer, but with limited changes to draft

▪ Terminal has seen fewer total ship calls overall, compared to other port facilities in Total Calls for Container Vessels, 2010 - 2019 Vancouver, with just 10 visits in 2019 and a decade-high of 28 calls in 2012. 30 ▪ There has been a consistent increase in average ship sizes since 2010 when the figure was 1,869 TEU - it has now risen to 2,590 TEU for 2019. 25

▪ While there has been relatively little change with average vessel drafts, some 20 increases in LOA has occurred, with ships averaging almost 209m calling throughout 2018 and 2019. 15

Key Conclusions 10 ▪ Limited number of container ships calling at facility and seems unlikely to 5 change substantially moving forward ▪ Vessel upsizing has been occurring - reflective of industry-wide trends 0 159 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average GT, LOA & Draft of Container Vessels Calling, 2010 - 2019 Indexed Average Container Vessel Calling Factors, 2010 - 2019

3,000 250.0 150.0 140.0 2,500 200.0 130.0 2,000 150.0 120.0 1,500 100.0 110.0 1,000 100.0 50.0 500 Length/Draft (m) 90.0

0 0.0 Dimension (2010 = 100) 80.0 Average Average GrossTonnage 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average TEU Average LOA Average draft Average TEU Average LOA Average draft Container Shipping Services – Prince Rupert The following information provides a detailed summary of the advertised major shipping line services calling at Prince Rupert. Prince Rupert services include vessels up to 13,000TEU capacity and the port is seeing calls from members of all three major alliance groups - further increases in ships size and demand throughput are expected Shipping line services calling at Prince Rupert CANADA Prince Rupert

Asia – North America Services: 5 Vessels: <28 TEU: 6500-13386

160 Canada USA No. of Min Max (West Coast) (West Coast) Trade lane Service Shipping lines Frequency vessels TEU TEU Prince Long Vancouver Seattle Oakland Tacoma Rupert Beach OA - FE-WCNA service - COSCO / CMA CGM / Evergreen / OOCL / PSW2 APL / Yang Ming / Wan Hai Weekly 7 10036 13386 2M - TP-8 / Orient Maersk / MSC Weekly 4 10888 11294 OA - FE-WCNA service - COSCO / CMA CGM / Evergreen / OOCL / PNW2 APL Weekly 6 9469 10036 Asia / North America THE - FE-WCNA service - PN1 ONE / Hapag-Lloyd / Yang Ming Weekly 4 8110 8560 2M/Zim - FE-WCNA service (TP-1 / Maple / ZC8) Maersk / MSC / ZIM Weekly 7 6500 9500 ▪ Services offered by alliances means that all major shipping lines are calling: ▪ 2M - Maersk Line & MSC ▪ Ocean Alliance - CMA CGM, Cosco, OOCL, Evergreen ▪ THE alliance - ONE, Hapag-Lloyd, Yangming ▪ These are all major operators who each can easily “cascade” bigger vessels onto the route - subject to demand. The cascade of bigger tonnage is expected to occur in the near future and the terminal must have the necessary infrastructure and capacity for larger ships in the future in order to compete. Shipping Lines / Services Strategies for Local & Regional Markets The size profile of vessels deployed in the region suggests great potential for direct vessel calls with larger tonnage in the short term. The ability to handle these ULCS’ OF 14-18,000TEU at the ports is therefore extremely important.

▪ The size profile of vessels deployed in the region suggests great potential for direct ▪ Vessels currently deployed are likely to increase in the short-term due to the known vessel calls with larger tonnage in the short term. The ability to handle these ULCS’ orderbooks of the main Ocean Alliance lines and CMA-CGM in particular. Vessels at OF 14-18,000TEU at the ports is therefore extremely important. Centerm and Delta are most likely to increase to 13-14,500TEU to match tonnage deployed on other strings served by other PNW ports. ▪ The maximum size of vessels deployed range from just 5,000TEU at Fraser Surrey to 13,300TEU at Prince Rupert and 13,800TEU at Vanterm. THE Alliance

▪ The increase of vessel sizes deployed means that lines want to call at a limited ▪ The Alliance’s Trans-Pacific Services, where Hapag Lloyd remains the strongest line, number of ports in order to turn vessels around quicker. This means that ports will call at Delta with four services (PN1-PN4), ranging from 5-11,000TEU capacity and at need to be capable of handling larger vessels in the short-term (14,000TEU) and as Prince Rupert with PN1 and 8,500TEU capacity. much as 18,000TEU capacity vessels in the long term. ▪ HMM will join THE Alliance and has ordered >20 vessels of 18,000TEU+ including ▪ To assess the potential for Trans-Pacific calls in The Pacific North West, the orders with record tonnage of 23,950TEU. These vessels will be deployed on the main strategies of the main alliance groups to serve the region are here reviewed: arterial trade lanes allowing the “cascade” of the current vessels deployed to the Trans-Pacific Services, thereby increasing the latter to 14,000TEU initially. 161 2M Alliance ▪ Hapag-Lloyd remains the number one line on the Trans-Pacific Service by volume, ▪ 2M Alliance services call at Prince Rupert (TP8) and Centerm (TP9) in the region with which will necessitate The Alliance Services increasing in size to meet the line’s vessels of 11,300TEU and 8,800TEU respectively. ambitions.

▪ Both Maersk Line and MSC have enough strong orders for vessels of >18,000TEU in Key Conclusions: the orderbook pipeline to allow vessels of 14,000TEU to call at one or more ports and to complement services to LA/Long Beach. ▪ The size profile of vessels deployed suggests great potential for direct vessel calls with larger tonnage in the short term. The ability to handle ▪ Maersk also operates 5,000TEU vessels on a Trans-Atlantic Service calling at Fraser Surrey. TA Services are also expected to increase in size but are not expected to these ULCS’ OF 14-18,000TEU at the ports is therefore extremely important. increase to more than 8,500TEU, which will be made available once >20,000TEU ▪ Both Maersk Line and MSC have enough strong orders for vessels of vessels are deployed on Asia-Europe; pushing 14,000TEU onto Trans-Pacific service >18,000TEU in the orderbook pipeline to allow vessels of 14,000TEU to call and 8,500TEU vessels to TA or other secondary services. at one or more ports and to complement services to LA/Long Beach. OCEAN Alliance ▪ Vessels currently deployed are likely to increase in the short-term due to ▪ The main Trans-Pacific services operated by Ocean Alliance where CMA-CGM and the known orderbooks of the main Ocean Alliance lines and CMA-CGM in COSCO remain the major lines, call at Prince Rupert. Centerm, Delta and Vanterm particular. Vessels at Centerm/Deltaport are most likely to see 13- with maximum tonnage of 13,300TEU, 10,000TEU, 5,800TEU and 13,800TEU 14,500TEU to match units deployed on strings served by other PNW ports. respectively. ▪ Hapag-Lloyd remains the number one line on the Trans-Pacific Service by volume, which will necessitate The Alliance Services increasing in size to meet the line’s ambitions which will be aided by HMM new orders. IMO 2020 - Summary of the Initiative IMO confirmed reduction of sulphur content in marine fuels from the current limit of 3.5% to 0.50% from January 1st, 2020.

Maritime transport accounts for 3.5% to 4% of all climate change emissions.

In 2016, the International Maritime Organization 1st of January 2020 (IMO) announced that the effective date for the Sulphur Content in reduction of marine fuel Marine Fuels Total Greenhouse Gas sulphur will be the 1st of reductions of 50% by January 2020. 3.50% 0.50% 2050 (compared to 2008 levels).

162

In 2018, the IMO agreed Reduce the carbon on its initial international intensity of shipping by shipping greenhouse gas 40% by 2030 (compared (GHG) reduction strategy, to 2008 levels). setting out a vision to decarbonise shipping as soon as possible this century.

Choices of Ship Owners:

• 0.10%S / 0.50%S Fuel Oil

• 0.10%S / 0.50%S MGO / DMA / GTL

• Scrubber New/Retrofit

• LNG Impact of IMO 2020 on Container Shipping Line Industry - Vessel Developments Numbers of vessels, new and retrofitted, with scrubbers increasing - but additional costs of fuel to be passed to shippers, who likely to pass through to consumers

Breakdown of containerships with scrubbers installed by size Containerships undergoing scrubber retrofits (2019) 120 120000 Number of vessels 0 10 20 30 40 50 100 100000

> 18,000 TEU 80 80000

15,000 - 18,000 TEU 60 60000

10,000 - 15,000 TEU 40 40000 TEUcapacity

5,100 - 10,000 TEU

Vessel Vessel size 20 20000 No. of ships undergoing No. ships ofundergoing retrofit 163 2,000 - 5,100 TEU

0 0

19 19

19 19

19 19

19 19

19 19 19 19

19 19 19 19 19

19 19 19

19 19

- - -

< 2,000 TEU -

Jul- Jul- Jul-

Apr- Apr-

Oct Oct

Jan- Jan- Jan- Jun- Jun-

Feb- Feb- Mar Mar

Aug- Aug- Sep- Sep-

May- May-

Newbuild Retrofit TEU Units

▪ Scrubbers are being provided to both newbuilds and retrofitting to existing vessels. Key Conclusions ▪ This activity is occurring across all vessel sizes, although in the 5,001 TEU - 10,000 TEU size range only retrofitting is ongoing due to no ships of this ▪ Low sulphuric fuels are more expensive then currently used fuel types - i.e. price classification being ordered. difference in Rotterdam is +48% and ship fuel bills will increase ▪ A further 99 ships (approximately 4.2 per cent of the existing fleet by capacity), are • Shipping lines have already started to try to pass on the additional charge to the undergoing scrubber retrofits at present - the total share of the fleet now ready in customer by way of the BAF (Bunker Adjustment Factor) surcharge December 2019 was under 20%. ▪ The number retrofits currently in progress has risen steadily from just three units at ▪ Shippers are likely to pass additional costs to consumers the beginning of the year to 23 units in July 2019 and is expected to reach 100 by the end of November 2019. ▪ Increase to ship fuel costs will favour Pacific Gateway ports, especially Prince Rupert, with shorter sailing distances - an upside for shippers able to use this ▪ Changes will impact Pacific Gateway region because it is a global issue. routing compared to All-Water and San Pedro options Key Conclusions - Shipping Market Review Confirms Further Ship-Size Increases Likely Pacific Gateway ports remain integral to Transpacific trades but pressure to continue to service larger vessels likely as the move towards greater use of 18,000 TEU units likely - IMO 2020 is an industry-wide issue

Strengths Weaknesses Opportunities Threats

▪ Container shipping is well-established in ▪ Continued and recent over-ordering of ▪ Any port or terminal with the ability to ▪ Potential instability of some shipping Pacific Gateway region new and larger ships to bring pressure offer good quality capacity in the lines - financial position varies for filling bigger ships with container best/required locations will be considerably ▪ Re-vamped alliances bring stability - competitive desire for lines to use fellow-company ▪ Potential pressure on tariffs from ▪ Recent strength of Prince Rupert and terminals shipping lines if demand weakens and ▪ Ability for shorter dwell times for cargo marginally cheaper built-up costs to economies of scale are not gained by also appealing major US destinations compared with ▪ Pacific Gateway is a crucial part of liner liner operators Vancouver logistics supply-chains ▪ The ability to meet larger ships being 164 cascaded from other routes is a key ▪ Transpacific remains a large and integral competitive factor routing of loaded containers from Asia ▪ Cascading of vessels to Pacific Gateway ▪ Pacific Gateway – Vancouver and is an opportunity for any terminals able Prince Rupert - sees two days of sailing to handle larger ships and more time saved compared to San Pedro throughput ports ▪ The shorter sailing time / distance to ▪ Pacific Gateway primarily serves North reach the Pacific Gateway remains an Asia - not suited to All-Water services to important cost saving factor ECNA so less impact from Suez Route ▪ Lack of terminal capacity at Centerm and Prince Rupert to keep pace with larger ships and more cargo 165

Section 4: North American Intermodalism & Cost Differentials Section 4: Role of Intermodal to VFPA, Prince Rupert & Competing US Ports Addressed Specific analysis of costs between Canadian and US railroads, plus assessment of the role of transloading in Pacific gateway region, its impact on costs and comparison to activity in US Pacific North West ports.

North American Intermodalism & Cost Differentials Summary of Canadian National Capital Investment Plan, 2019

▪ An assessment of the ability of competing ports in North America to serve overlapping hinterland markets, such as the US Midwest, will be undertaken as part of a detailed understanding of the continuing development of intermodal networks and rail platforms available.

▪ On the basis of the forecast level of demand anticipated for VFPA and Prince Rupert, an assessment will be made of the number of intermodal train paths that will be required to the east for the container sector.

▪ This is important as there are concerns emerging as to the capacity of the network when other commodities such as oil wagons, are included. It will be vital to establish the likely future requirements for VFPA at the earliest opportunity, especially for serving more distant hinterland markets. 166 ▪ Any other noted or known potential bottlenecks in the Canadian and US intermodal railroad sector will also be highlighted and commented upon to help put the position faced by VFPA (and Prince Rupert) into competitive context.

▪ Role of transloading in Pacific gateway region, impact on costs and comparison to activity in US Pacific North West ports.

▪ In addition, an assessment of the lower costs offered by Canadian intermodal railroads compared to US railroad service providers will be undertaken to address the following: ▪ Assessment of any cost differentials between Canadian and US intermodal operators. ▪ Ability/desire of US intermodal providers to reduce rates to compete. ▪ Potential future opportunities for VFPA to benefit from Canadian competitiveness, including estimated additional share of discretionary markets. Source: Canadian National ▪ Comments relating to potential viability of merger between any Canadian and US railroads, with qualitative analysis of possible implications, including on rates applied.

▪ The overall ability and extent of the competition between Canadian and US intermodal networks will also be assessed. 167

Introduction to Intermodal in North America Introduction to Intermodal Activity In North America and from WCNA Ports Intermodal is a crucial activity to Vancouver and all major WCNA container ports - it is imperative that efficient and cost-effective access to discretionary markets continues

▪ The development of intermodal links between Pacific West Coast gateway ports and Intermodal Networks in North America & Ports Served by Railroad, Start of 2020 the rest of North America has been one of the most significant factors shaping the North American market for container handling. Double-stack rail technology has stretched the hinterland of West Coast ports to the entire North American market, with service costs and transit time being highly competitive with that of All-Water services from the Far East.

▪ The continued use of West Coast ports to move cargoes between Asia and US Midwest or North American eastern states is determined by the capacity, efficiency and cost-competitiveness of the inland intermodal structure – comprising port, railroad and receiving facilities. Increasing demand until the mid-2000s was met by investment in both port and hinterland capabilities, notably completion of the Alameda Corridor through Los Angeles in 2002 and on-going improvements of the Fast Corridor through Seattle and Tacoma since 1998. These have contributed significantly to maintaining the capability of the system to connect the ports with the rail network efficiently. In 168 western Canada, investments in intermodal yards are closely linked to the developing marine terminals. The competitiveness of intermodal rail for Prince Rupert will remain crucial, while expansion at Vancouver - and in particular at Roberts Bank - must continue to delivery good-quality service at competitive prices

▪ This Section concentrates on the following key areas of interest to Port Metro Vancouver: ▪ A brief summary of intermodal market developments, including an assessment of known and/or and planned investments in intermodal capacity in the competitive region for Vancouver. Port Railroad Intermodal Provider ▪ An estimate of the adequacy of intermodal capacity to meet demand, with specific emphasis on infrastructure available at ports in the Pacific Northwest and Pacific Vancouver CP / CN Southwest regions, plus from the major container ports on the East Coast of North America serving key regions such as the US Midwest.. Prince Rupert CN ▪ A review of the importance of rail to Vancouver, with specific emphasis of the modal split between rail and truck and comments relating to future intermodal train Sea-Tac BNSF / UPRR paths required for both Vancouver and Prince Rupert. ▪ Comments relating to intermodal rail pricing in North America and the potential for Long Beach / Los Angeles BNSF / UPRR any merger activity amongst the Class 1 railroad operators that could impact Vancouver and the Pacific gateway port region. Oakland BNSF / UPRR International ISO Containers via Intermodal Network in North America Continues to Grow Longer-term growth in intermodal network for international containers is around 3.0%, but Q4 2019 saw a big decline of -9.1% over Q4 2018 and industry concerns that COVI-19 will be impacted based on port throughput dropping in 2020

▪ North America’s intermodal system for carrying international containers is determined Development of Intermodal Container Market in North America Since 2000 by the following: Year Number Intermodal ▪ The capacity of on-dock and near-dock container terminals. ▪ The adequacy of access between the terminals and intercontinental service ‘000 containers % of total activity network. 2000 5326.5 51.5% ▪ The physical capacity of the relevant rail network. ▪ The capacity of major intermodal terminals able to serve the key areas of 2005 7915.3 58.0% demand, such as the US Midwest and eastern North America. 2010 7250.4 54.1% ▪ Considerable investment has been made (and is continuing) in on-dock intermodal systems at the major Pacific Gateway, US Pacific Northwest and San Pedro ports, 2011 7451.6 53.0% along with ECNA ports. 2012 7645.9 51.5% ▪ The number of international containers on the North American intermodal network continues to increase: 2013 7823.1 50.3% ▪ From 5.32 million ISO containers in 2000 to 9.0 million for 2019. 2014 8166.0 50.2% ▪ Consistent, longer-term growth of 3.0% per annum for the period 2000 to 2019. 2015 8501.9 50.1% ▪ Continuing shorter-term growth of 2.8% per annum between 2010 and 2019. 2016 8541.0 50.0% ▪ ISO international containers continuing to represent around 50% of total activity of intermodal networks of railroads. 2017 9067.6 50.1%

Key Conclusions: 2018 9558.5 50.0%

2019f 9300.0 50.0% It is imperative that any port using the intermodal networks of North American railroads needs to offer high-quality facilities CAGR – 2000 - 2019f 3.0% per annum

Long-term growth continues but Q4 2019 saw a fall of -9.1% compared to Q4 2018 CAGR – 2010 - 2019f 2.8% per annum and just over -2.2% for the full year - even allowing for Q4 2018 being ramped-up ahead of US-China trades issues, the drop in Q4 2019 is substantial Source: IANA Data International Intermodal Activity in North America by Quarter - Q1 2013 - Q1 2020 International intermodal container activity was down -11.3% in Q1 2020 against Q1 2019 and American Association of Railroads confirmed a -10% decline in North American intermodal volume in weeks 1 - 16. The rebound will also cause some issues

Q1 2013 – Q1 2020 International Intermodal Containers in ‘000 Q3 2013 – Q3 2019f International Intermodal Containers in ‘000

2600 2600 2400 2400 2200 2200 2000 2000 1800 1800 1600 1600 1400 1400 1200 1200

1000 1000 Containers

800 Containers 800 '000 International '000 International

600 '000 International 600 400 400 200 200 0 0 170 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019

Q2 2013 – Q2 2019f International Intermodal Containers in ‘000 Q4 2013 – Q4 2019 International Intermodal Containers in ‘000

2600 2600 2400 2400 2200 2200 2000 2000 1800 1800 1600 1600 1400 1400 1200 1200

1000 1000 Containers

Containers 800 800 '000 International '000 International ‘000 International ‘000 International 600 600 400 400 200 200 0 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019

Key Conclusions:

▪ The drop in activity in Q4 2019 and Q1 2020 is clear to see - Q2 2020 will be down also, but then the subsequent rebound could cause congestion issues too 171

Intermodal Served from WCNA Region & Ports Intermodal Represented a 24% of Total CN Revenues in 2018 - C$3.47 Billion Intermodal revenues have increased by 6.0% per annum since 2014, with international containers currently a 67% share of volumes and domestic units the remaining 33% - CN’s current Capital Investment Plan totals C$3.9 billion of spend

▪ CN is undertaking a 2019 Capital Investment Plan of C$3.9 billion. The company Confirmed CN Capital Investments Plan for 2019 by Region invested C$1.3 billion in Western Canada in 2018, with C$1.1 billion in 2019.

▪ A total of 30 transload facilities and 23 intermodal terminals are currently operated in North America.

▪ Toronto represented 33% of international intermodal volumes in 2018 and added 30% more capacity with the opening of Malport in 2018. Confirmed expansions are in progress for markets of Detroit, Chicago, Memphis, Montreal and Vancouver.

▪ CN is planning to develop other inland terminals throughout the network to accommodate growing traffic volumes, including a new logistics hub in Milton, ON, to also help Central Canada’s access to key transborder markets.

172 Current CN Spend in Western Region of Canada

British Colombia ($345m) Alberta ($370m) Saskatchewan ($245m) ▪ New train passing siding ▪ 12 miles of double track ▪ Double track in Atwater, in Port Edward between Leaman and Melville (10 miles), Nilton (west of Fenwood, Melville (10 Edmonton) miles)

▪ Additional 2.5 miles of ▪ 5 miles of double-track ▪ Double-track, Biggar, Source: Canadian National double-track west of near Entrance, east of west Saskatoon (8 Prince George Alberta-British Columbia miles), Clavet, southeast border Saskatoon (7 miles)

▪ Replacement of 115 ▪ New track at Scotford ▪ Replacement of 66 miles miles of track & 38 road Yard, northeast of of rail and rebuild of 21 crossing surfaces Edmonton to raise yard road crossings capacity ▪ Replacement of 90 miles of rail & rebuilding 44 road crossing surfaces CN Offers a Network of Transload Centres in Key Locations Wide-range of facilities across Canada and into the US - Vancouver and Prince Rupert both served and allow access to the US Midwest regions

173

https://cnebusiness.geomapguide.ca/?map=TL&lang=en CP’s Intermodal Activities Generated 22% of Total Company Revenues in 2018 CP cites capacity and land availability to allow growth of this business segment - a number of key locations exist in the western region able to satisfy this activity in the future

▪ CP operates a number of strategically located intermodal terminals - linked to Intermodal Facilities - Canadian Pacific Vancouver’s container terminals. ▪ The company is investing $1.6 billion in 2019 (and estimating the same for 2020) across its network and facilities, with the majority on basic infrastructure.

▪ Total CP revenues in 2018 were $1.5 billion, with intermodal’s share at 22% - this total can be split to international and domestic: ▪ International: 42% ▪ Domestic: 58%

▪ Intermodal carload volumes are increasing, in 2014, CP handled 974,000 units and this had risen to almost 1.03 million units for 2018 - continued growth but just 1.3% per annum. 174

Identified Intermodal Expansion of CP Yards to Support Western Container Ports Confirmed Capital Spend of $1.6 Billion by CP in 2019

Location Yard Size / Expansion Item Amount Infrastructure Improvements Potential

Vancouver Port Coquitlam 100 acres available Basic Replacement 55% Replacing 245 miles of rail and 58 bridge projects - major focus in Western Region Calgary Dufferin 52 acres vacant (total lot size of 135 acres) Rolling Stock 20% $145 million on 60 locomotive modernisations - 110 locos upgraded Edmonton Ellerslie 200 acres vacant (total lot during 2017-2018 at a cost of $225 million size of 240 acres) Toronto Vaughan Intermodal 150 acres vacant (of 500 Network Improvement 15% Intermodal terminals and transload Facility total lot size) facilities are key focus

Greater Toronto Area Milton & Agincourt yards 110 acres vacant (of 188 Information Systems 5% Replacement of older, legacy systems total) / 75 vacant of 400 total) Other 5% Primarily buildings and environmental Chicago Schiller Park 75-acre site protection spend Canadian Pacific Railroad - Transload Facilities from Vancouver to East Coast and Chicago There is an existing network of facilities from Vancouver that support activities - both from CP and private operators. Important to Vancouver because it is also a key port of export for cargo - potential for more balanced traffic flows

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https://www.cpr.ca/en/choose-rail-site/PublishingImages/transload-map.png Largescale On-Dock Intermodal Rail Facilities Offered at Major Competing WCNA Terminals To compete for discretionary markets, ports and terminals must ensure access to sufficient intermodal rail facilities - Pacific Gateway intermodal rail is competitive and capable of meeting current requirements, but as volumes grow, so must intermodal rail capacity

LA - Rail is 27% of Cargo but 33% Share Openly Being Targeted Long Beach – 60 Weekly Rail Departures

Rail Cars working track Rail cars storage track Terminal Tracks Storage – Rail Cars Terminal – – storage capacity 8 x 823m (working) 64 (working) Pier 300 8 x 823m (storage) 64 (storage) Pier T 85 89 12 x 762m (working) 96 (working) Pier 400 Pier G 16 38 6 x 1951m (storage) 126 (storage)

Terminal Island 4 x 701m (working) 28 (working) Pier F 28 0 (Evergreen/NYK Line) 5 x 701m (storage) 35 (storage) Pier J 83 0 3 x 914m (working) 27 (working) Yangming/China Shipping 3 x 914m (storage) 27 (storage) Pier A 47 16 On-dock facilities under development as part of new terminal 176 Trapac Terminal investment Pier B Plans known to re-develop on-dock facilities

Seattle-Tacoma – 50+ Weekly Rail Departures Pacific Gateway – Targeting US Hinterlands

Port Key Summary Terminal Key Summary

Being modernised as part of investment, but Seattle T5 Vancouver – served by CN and CPR – 1158m of track exists Deltaport 8 tracks, 8534m Seattle – T18 (SSA) 10-acre site with 2286m of track

Tacoma North Intermodal Yard (Port – 26-acre site with 8153m of track Vanterm 9 tracks, 2926m Authority) Almost 2,450m of trackage available for on- Centerm Tacoma – PCT (PAG) 25-acre site with 7176m of track dock intermodal rail activities

7 working tracks (5500m), 6 storage tracks Prince Rupert served by CN Tacoma – WUT (Hyundai) 22.5-acre site with 5140m of track – (6100m)

Source: All information obtained directly from each port/terminal operator Facilities and Planned Investments in Intermodal Infrastructure Substantial in North America Same driving factors continue to influence intermodal - capacity availability at ports, rail paths and high-levels of cost-effective efficiency. Ongoing investment in Vancouver will deliver infrastructure improvements for start of 2021

▪ The development of the North American intermodal system and network has required WCNA On-Dock / Near-Dock Yard Capacity - Estimate for Q2 2020 very heavy investment in the various stages of the intermodal chain. In general, the capacity of the main lines linking the western ports with the eastern hinterland has not Port On-dock Near-dock Estimated Share of Yard been significantly constrained and, where difficulties have occurred, the necessary Yard Capacity Capacity investment to boost capacity has been forthcoming from the railroads. Vancouver 203 -- 203 8.9% ▪ The main constraints to the ability of the ports to maximise intermodal volumes have focused on: Prince Rupert 143 -- 143 6.3% ▪ The availability of on-dock container handling capability; ▪ Links between port rail facilities and the major east-west rail lines. Sea-Tac 245 143 489 21.5% ▪ The development of on-dock rail capacity at the major west-coast ports has followed an uncertain path since demand growth accelerated in the early 1990s. Initially, the Oakland -- 111 111 4.9% big operators were highly reluctant to allow organised port labour to take a major role 177 in intermodal container handling. This factor was responsible for the emphasis on 'near-dock' container yards, which became the principal means of linking marine Long Beach 452 -- 452 19.9% terminals with the rail system. This applied at both Los Angeles and Long Beach, where the emphasis near-dock construction resulted in the Intermodal Container Transfer Facility (ICTF). Los Angeles 550 -- 550 24.2%

▪ The costs associated with trucking containers from terminals to rail yards were obviously highly uncompetitive. Hence, there has been a switch in favour of on-dock ICTF (LA) 195 195 8.6% rail facilities and all new container terminals on the west coast either incorporate such a facility or provide on-dock access to an adjacent rail yard. The level of investment in these facilities has been very high and has provided capacity to handle current and anticipated intermodal volumes - this will remain true moving forward. Key Conclusions: ▪ The quality of any transportation system is determined by its weakest link, and these investments placed greater pressure on the connections between the ports and the main transcontinental rail lines. The focus of investment thus shifted to providing ▪ Pacific Gateway region has a share of over 16% of total West Coast Yard dedicated “rail corridors” – the Alameda Corridor serving Los Angeles/Long Beach and capacity at present - it is all on-dock the Fast Corridor serving Seattle/Tacoma, programmes central to the development of ▪ Investment at Deltaport has reinforced the on-dock capabilities of Vancouver intermodal volumes to/from these locations. (see next slide) New Rail Expansion at GCT Deltaport Substantially Increasing Daily Train Capacity Currently, 73% of containers passing through GCT Deltaport move via intermodal rail and of this total 38% goes to US locations - it remains imperative that the facility can meet future projected demand and deal with short-term cargo surges

▪ Vancouver continues to see strong investment in intermodal facilities, including for the Summary of Ongoing Investment at Port of Vancouver start of 2021 on the North Shore and South Shore. North Shore South Shore ▪ Specifically, the $300 million rail project that is delivering semi-automated operations will increase capacity from 1.8 million TEU per annum to 2.4 million TEU per annum and it is additional capacity certainly needed. The project details include: Investment C$214 million C$85 million ▪ Initial phase went live at start of Q4 2019. ▪ Final 2 tracks due to be operational before end of Q2 2020. ▪ Significant ability to build much longer trains - pre-expansion daily trains of 28,000- Activity Staging track and tunnel Double-tracking a 4km 30,000ft were built, but once all 7 tracks in place, daily trains of 45,000-55,000ft will improvements section of track be able to be built. ▪ Longer trains and being built 5 days per week. Completion For start of 2021 Second half of 2021 ▪ Will meet requirements of both CN and CP rail who each have outbound services. 178

Intermodal Rail Expansion at GCT Deltaport - Total Length of Trains Built in Feet Key Conclusions: 60,000 ▪ Substantial capacity increase for GCT Deltaport by end of Q2 2020 - well-placed 50,000 to meet projected future demand with 25% capacity rise to a substantial 2.4 million TEU per annum 40,000 ▪ Latest expansion follows previous investment that was undertaken to keep pace 30,000 Minimum with larger ships - facility caters for as many as 7,000 containers arriving from Maximum vessel calls 20,000 ▪ Facility will also be much better able to recover faster from cargo surges and 10,000 peak periods of demand 0 ▪ Greater use of automation will also increase environmentally efficiency and Pre-expansion Q1 2020 Q2 2020 reduce direct human risk, high important factors Summary of Other Intermodal Expansion at Pacific North Container Ports There are some confirmed expansion plans and investment at Prince Rupert - potentially more to support South Kaien International Terminal. T5 at Seattle the current focus at Sea-Tac

▪ There are a number of other ongoing or known improvements to intermodal cargo Intermodal Rail Projects at Pacific Ports - excluding Vancouver flows at WCNA ports that are relevant to the overall competitive position, including: ▪ Prince Rupert: Port Project Impact ▪ Zanardi Bridge and Causeway Project: ▪ $153.7 million of funding from government for construction of a new double- Prince Rupert Zanardi Bridge & Reduce operational track bridge over the Zanardi Rapids, rehabilitation of an existing single- Causeway Project conflicts and improve track bridge, plus expansion of causeway between bridge and Ridley Island. access ▪ Ridley Island Export Logistics Platform: Ridley Island Export Port funding for export ▪ Port authority received $49.85 million in September 2019 towards the $100 Logistics Platform transloading facilities million needed to develop a new facility that will include an off-dock container yard for export transloading Seattle - Tacoma Seattle T5 Longer trains will be built ▪ South Kaien International Terminal: once T5 is operational 179 ▪ This longer-term and largescale project that expects to substantially increase the port’s marine terminal facilities and capacity will have to include Longer-term development Re-organisation of 9 marine terminals to just 4 ▪ Seattle - Tacoma: larger facilities will likely ▪ Part of Seattle T5 redevelopment will see ability to build longer trains, though impact intermodal rail project not due to be finished until 2023. infrastructure too - albeit no ▪ Approach is more geared towards initiatives than infrastructure i.e. current timescales “matchback” focus where port facilitates linking retailers at inland load centres with exporters in same location. ▪ There are currently 9 container terminals that form the Northwest Seaport Alliance of Se-Tac. The organisation has confirmed that its longer-term aim is Key Conclusions: to amend this arrangement to the following: ▪ 2 larger terminals in the North - Seattle ▪ There are some known investment plans to support intermodal rail at Prince ▪ 2 larger terminals in the South - Tacoma Rupert - though these are relatively small compared to if the South Kaien International Terminal project is undertaken ▪ It is assumed that once this begins to occur, then there will also be some re- organisation of the intermodal rail facilities and infrastructure. However, this ▪ A new intermodal rail facility is part of the Seattle T5 project - longer-term is a longer-term objective, so only the Seattle T5 project is expected to really reasonable to assume further redevelopment, but not short-term and linked to change the current handling of containers via intermodal rail wider Sea-Tac changes Summary of Other Intermodal Expansion at WCNA Container Ports - San Pedro Complex Long Beach has a higher number of confirmed or known projects than at Los Angeles at present - however, the importance of intermodal rail to these two facilities will remain crucial moving forward, so assume Los Angeles will also invest further

▪ There are a number of other ongoing or known improvements to intermodal cargo Intermodal Rail Projects at San Pedro Ports flows at WCNA ports that are relevant to the overall competitive position, including: ▪ Long Beach: Port Project Impact ▪ Terminal Island Wye track Realignment Project: ▪ A US$40 million investment running from mid-2021 to early 2023 to help Long Beach Terminal Island Wye Track Move trains in/out of port trains enter/exit port facilities faster, using 10,000ft of track, while reducing Realignment Project faster and reduce loco loco idling. MARAD is paying US$14.5 million and port $25.5 million. idling time ▪ Middle Harbor: Middle Harbor Phase III Gives rail yard 75,000 ▪ Part of largescale investment for an on-dock rail yard that is being designed linear feet and 5 cranes to handle 1.1 million container units annually or about 24 trains per week. ▪ Pier G to Pier J: Pier G to Pier J double- Longer working and track access storage tracks, end of 2021 ▪ US$35 million project to create new 9,000ft departure track, removing older 180 tracks and adding 5,700ft of new trackage. Pier B On-Dock Rail Longer trains for more ▪ Pier B On-Dock Rail Support Yard: Support Yard cargo transfers ▪ Planned US$870 million project to ensure longer trains can be built within the port. Specific timescales not yet confirmed Fourth Track at Ocean Longer trains catered for by Boulevard 3,000ft of extra track ▪ Fourth Track at Ocean Boulevard ▪ A US$25 million project planned to add 3,000ft of rail tracks to improve Los Angeles Fenix Container Terminal Track expansion and access for marine terminals and eliminate a bottleneck at the Ocean (Pier 300) capacity increase Boulevard crossing. ▪ Los Angeles: Key Conclusions: . ▪ Over the past 10 years, the port authority confirmed spending of more than US$300 million on grade separation and rail-related projects. ▪ Port authority said it expects that it will, along with operators, continue to invest ▪ Long Beach has confirmed a substantial number of rail investment projects are in rail infrastructure, although specific details are currently unknown or highly either underway or planned limited. ▪ Fewer confirmed specific projects at Los Angeles, although it has invested in ▪ Fenix Container Terminal: intermodal rail access and at terminals over the past decade ▪ An US$18.2 million grant from the Department of Transportation was gained ▪ Intermodal rail is highly important in San Pedro, so reasonable to expect further in February 2020 to add 11,000ft of linear track to raise rail capacity at the Pier 300 former APM facility by 10% infrastructure spending to occur moving forward Canadian Railroads’ Intermodal Facilities - Networks of CN & CP Largely Unchanged CP has definitely focused on international shipping contracts with liner companies and CN has a clear desire to develop the East Coast from Quebec to Chicago, Detroit and Toronto

▪ The importance of on-dock will continue to increase for the Pacific Gateway ports, as it Intermodal Networks of CN and CPR will for Pacific North and Pacific South port regions - as it will for major ECNA ports also looking to compete for discretionary markets. Railroad CN CP ▪ It has to be noted that whole intermodal is a key activity undertaken, it is just one area of service of the total rail business, although there will, of course, be benefits gained Intermodal terminals & 29 30 by intermodal services from investment in track and the wider networks of the railroad yards - total operators Located in Canada 14 20 ▪ The Canadian railroad operators have been highly pro-active in improved and investing in service initiatives. Over recent years there has been a number of investments, including: Located in US 15 10 ▪ Canadian Pacific has reduced intermodal rail service between Toronto and Calgary by 20 hours, to a 64-hour time for the 3400 km journey Notable current initiative Quebec International Contracts with major Container Terminal container lines/Alliances 181 ▪ A four-day intermodal service to Chicago by Canadian Pacific ▪ Canadian National increased capacity on its Edmonton to Winnipeg in northern ▪ In May 2019, JOC reported that in the next 12-month period that Canadian railroad Ontario and the link between Winnipeg, Chicago and Memphis - in anticipation of contracts with CMA CGM, Cosco, Evergreen, MSC and Zim were all due to expire, growing demand with competition between the two railroads expected to intensify to secure this traffic. ▪ Reaching Chicago from Deltaport in 100 hours and getting to Memphis in 130 Cosco remains, of course, heavily linked to using Prince Rupert, hours

▪ Recent focus of the two Canadian railroads has been focused mostly towards Key Conclusions: maintaining the existing levels of service. There have not been many notable changes to the well-established infrastructure. ▪ CN has a strong focus on the East Coast at present, though its ongoing ▪ For CN, the proposed development of Quebec International Container Terminal in relationship with Prince Rupert, in particular, remains strong and a key Quebec, in conjunction with the new Port of Quebec Authority and Hutchison Ports, is component of revenues overall a key initiative. The project is primarily aimed at targeting existing New York/new Jersey cargo that is moving to the US Midwest of Chicago, but also Detroit and ▪ CP has successfully signed new liner shipping contracts and renewed with Toronto - hence, there is some potential overlap with some inland areas also served other operators - all Yangming volumes, the majority of ONE traffic and all by Vancouver (and Prince Rupert). Hapag-Lloyd containers notable recent examples ▪ CP has been successful in renewing and gaining contracts with major container ▪ A number of major shipping line contracts with Canadian railroads in process shipping lines out of Vancouver, recently, intensifying a clearer focus on international of finishing or due to finish - could see competition intensifying between Cn container traffic out of Vancouver. A 3-year deal has been signed with Yangming to and CP complement the handling of the majority of ONE traffic and all of Hapag Lloyd’s containers. Intermodal Train Paths for Pacific Gateway Ports Confirm the Need for Growing Train Capacity Estimated Weekly Intermodal Train Paths for Pacific Gateway ports provided, using typical industry parameters - the assessment further identifies the value and importance to the region of efficient intermodal rail support

▪ Intermodal rail access remains crucial for both ports in the Pacific Gateway region in Estimated Annual Intermodal Train Paths for Port of Vancouver, 2013 - 2024 being able to serve their import cargo markets. 4500 ▪ To offer an indication of the likely number of intermodal train paths required, it is 4000 necessary to make some general assumptions regarding both length of train and number of cars. 3500 3000 ▪ While the total can vary a little between rail operators the current Canadian Pacific 2500 Low Case average is around 160 cars, pulled by three engines. It is noted that US railroads tend 2000 to operate a wide range of between 115 and 170 cars (plus engines). Base Case 1500 High Case ▪ Therefore for the purposes of this assessment and to help generate an indication of 1000

likely future intermodal paths, the following methodology is used to reflect typical Paths Train Intermodal 500 industry benchmarks that can be used: 0 ▪ The Canadian Pacific figure of 160 cars per train.

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2015 2014 ▪ An average size of intermodal train with 160 cars will move 640 TEU, based on 2013 each doublestack rail car carrying four TEU. Estimated Annual Intermodal Train Paths for Prince Rupert, 2013 - 2024 ▪ It should be noted that no distinction between serving railroads is applied – i.e. in this analysis no assumptions are applied between whether CN or CP rail services are 1800 used. 1600 1400 ▪ The charts are not the train paths that will be available from railroads but an estimate of what will be required in order to meet container traffic volumes over the forecast 1200 period. No allowance has been made for the actual railroad supplying intermodal 1000 Low Case capacity 800 Base Case 600 High Case Key Conclusions: 400

Intermodal Train Paths Train Intermodal 200 ▪ The Prince Rupert rail option is under-utilised at present and able to offer 0

capacity

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2014 2013 ▪ The Vancouver routing will incur capacity constraints before Prince Rupert - an important potential issue moving forward as overall port volumes rise 183

Importance of US Midwest to Ports The US Midwest is the Key Market for all Major Container Ports on all Coasts of North America Of the competing ports, all have some existing networks in place - the effectiveness of transport costs and efficiencies are crucial to attracting this cargo

▪ The US Midwest markets represent a major area that a wide range of different ports Indication of Typical Share of Port Volumes Moving to Discretionary Markets in all compete to serve. North America

▪ A combination of intermodal rail costs, sufficient on-dock rail capacity to build trains 100% and an efficient level of service from railroad operators are all key components that 90% will allow a port to compete for this market. 80% 70% 60% ▪ As an indication, the share of container traffic to this wide-ranging discretionary region 50% varies by port, although there are substantiating reasons supporting the position. 40% 30% ▪ A total of 95% of Prince Rupert rail volumes are moving by rail, but some of the total is 20% going to Canadian markets (i.e. Prairies, Ontario, etc.). Around 66% moves to just the 10%

US Midwest markets. 0% LA/LB

Role of Key Competing Ports for US Midwest Market Share NY/NJ Montreal

184 P.Rupert

Savannah Vancouver Port Rationale for Midwest Markets Charleston

LA/LB Traditional role, but large local markets also need to be served Key Conclusions

Vancouver Growing share due to good CN/CPR support - but port utilisation increasing and needs to ensure not impacted by congestion The desire to keep serving the US Midwest markets by major competing ports will continue Prince Rupert Designed to be an intermodal port - strong volume growth, helped by competitive CN intermodal rates. Terminal expansion The existing ports and supporting logistics networks, including intermodal rail, are required - as planned all well-established and barriers to entry are high – even for existing ports. Savannah High rail/distribution investment, continues to target shippers directly, investment in infrastructure. Successful strategy It is not possible to compete for US Midwest markets cargo without cost-effective intermodal rail and full railroad support NY/NJ Increasing rail capacity, but very large local market offers demand - ships have to call regardless Competition for US Midwest markets between ports will remain fierce Charleston Increasing capacity and targeting Asian services Montreal Full vessels calling to port, strong local markets, full ships Intermodal rail capacity availability to be a crucial competitive component discharge/load, good inland terminal location

Note: US Midwest market includes areas including Atlanta, Memphis, St Louis, , Cincinnati, Chicago and Ohio Valley North American Railroad Schedules to Chicago by Port - Q1 2020 Geographic distance is a key factor in terms of speed of delivery - Pacific Gateway ports are competitive and benefit from cost- effective services provided by Canadian railroads

▪ Based on published intermodal schedules for the Class 1 Published Intermodal Schedules for Number of Days to Chicago by Port / Class 1 Railroad, End Q1 2020 railroads in North America to Chicago from a range of major ports, the following can be concluded from the indicative Canadian Canadian BNSF Norfolk Union CSX Corp. schedule information currently available: National Pacific Southern Pacific ▪ Geographic distance is a key factor in influencing the number of days involved in the movement of intermodal Prince 5.0 cargo. Rupert ▪ The additional time from Prince Rupert adds around 1 Vancouver 4.0 4.0 extra day to the published schedule (although this is off- set by the 1 day shorter sailing time). ▪ Due to a shorter geographic distance, NY/NJ can reach Sea-Tac 3.5 3.0 the same location in around 2.5 days, which is quicker than both Virginia and Savannah. 185 ▪ Important to note that this high-level summary LA/LB 3.0 - 3.5 represents just the time from key marine terminal to individual railroad intermodal terminal in Chicago and is not the complete supply-chain total door-to-door time. NY/NJ 2.5 2.5 ▪ Days listed based on final cut-off times at port terminals and first cargo availability listed by each railroad. VPA 3.0 3.0

Savannah 3.0 3.0 Source: WSP derived from published schedules published fromderived railroads’ Source: WSP

Key Conclusions:

▪ Delivery times are only one part of the logistical competitiveness by ports - but crucially important

▪ Vancouver is competitive, with Chicago served within 4 days.

▪ Prince Rupert has a slightly longer transit, but is not uncompetitive overall because of its excellent geographic location for shipping and ability to deliver containers direct to intermodal rail services ▪ Prince Rupert to Chicago (with a much less severe grade) is 2,600 miles while Seattle to Chicago is 2,450 miles (5.8% less distance) but the transit time shown is 40% less (3 vs 5 days) 186

Role of Transloading to Pacific Gateway Region Introduction to Transloading - Key Activity in North America and the Pacific Gateway Region Transloading facilities are widespread in North America - handling a wide-range of commodity groups moving via containers

▪ Transloading is the transfer of cargo between different modes. For the Pacific Summary of Transloading Distribution Locations in North America Gateway region (and Pacific Coast overall), it is a significant aspect of the container market and has seen significant demand increases in recent years.

▪ Transloading for Prince Rupert and Vancouver means: ▪ For imports the primary modal shift is between ocean-going containers – primarily 40ft and 45ft boxes and 53ft domestic North American containers. ▪ For exports the shift is between bulk and neo-bulk commodities into ocean-going containers for exports. These tend to be weight-limited and require 20’ containers and there is, therefore, an equipment repositioning issue. ▪ The Transload Distribution Association of North America (TDANA) has around 6,000 industry participants with a specific interest in the transload industry in North America and key commodity groups are agriculture, forest products, food and consumer products 187 ▪ TDANA confirms that its members transloading facilities are primarily located adjacent or near to each of he following:, ▪ Intermodal rail ramps and yards. ▪ Within reach of more densely populated areas. ▪ Within reach of areas of industry and manufacturing.

▪ For the Pacific Gateway region, the following synopsis applies:

▪ Pacific Gateway - Imports: Source: WSPTDANA using information Source: ▪ Potential for more transloading of volumes of containers bound for eastern Benefits of Transloading Disadvantages of Transloading Canada and the US and with the provision of facilities in Prince Rupert the rationale applies equally. This represents an upside for Pacific Gateway ports. Quicker return of empty ocean container Sufficient supply of 53ft domestic units ▪ Pacific Gateway - Exports: ▪ Primarily the transfer of bulk and neo-bulk commodities into ocean containers Frees-up ocean container for export load Sufficient transloading terminals for export. Prince Rupert already has a strong position with regard to the containerisation of grain from remote sources and Vancouver is a dominant port Avoidance of demurrage costs Potential additional time added to process for forest products to containers at transloading stations adjacent to the port.

Allows cargo distribution - close to port Additional handling of the cargo Ports in Canada see Lower Transload Activity than in US - Around 13% in Pacific Gateway Transloading is almost exclusively occurring at Vancouver - development of facilities for Prince Rupert would help the port, but geographic location is less supportive than for VFPA facilities which will continue to be more dominant in the Pacific Gateway region

▪ The level of transloading is seen to be considerably higher in the US ports than it is in Estimated Transload Activity Pacific Gateway Ports 2010-2019f, in ‘000 TEU British Columbia. The proportion of containers shipped via transloading is 39% in the US and just 13% in Canada. This indicates scope for significant further expansion in 1400 15.0% this sector 1200 14.5% ▪ The importance of transloading has increased significantly in the US but remained largely constant in Canada, with no year-on-year volume growth occurring recently. 1000 14.0% 800 13.5% Transload TEU ▪ The trend for US ports is linked to, and driven by, serving US domestic trades of Alaska and Hawaii where cargo is shipped in containers but then uses transload 600 13.0% Intact TEU facilities for distribution across the US mainland. % Transload 400 12.5% ▪ Nevertheless, while transloading activity is lower in Canada it still represents an ongoing activity and an opportunity to support Pacific Gateway ports. 200 12.0% 0 11.5% 188 ▪ It is understood that Canadian Tire is trialling the use of transloading at Prince Rupert , 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019f but the more distant geographic location will remain an issue to develop critical mass of activities. Key Conclusion:

▪ Prince Rupert lacks transloading activities - Vancouver’s dominance of this activity will continue and support the exports of forecast products Development of Estimated Transload Activity at Pacific Gateway Ports Since 2010

‘000 TEU 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019f

Transload TEU 153.7 156.6 165 172.7 181.4 184.1 193.0 193.0 193.0 193.0

Intact TEU 904.7 954.4 1088.4 1125.1 1236.9 1290.7 1254.2 1254.2 1254.2 1254.2

% Transload 14.5% 14.1% 13.2% 13.3% 12.8% 12.5% 13.3% 13.1% 12.9% 12.7%

Source: WSP, TTX Corp, ports Transloading Activity Largely Stable Since 2014 - Share of Around 38% at Seattle - Tacoma Transloading expected to reach 40% of activity at Seattle/Tacoma ports in the near future - a stable and consistent activity and typical of the process that generally occurs throughput much of North America

▪ Transloading is a larger volume activity in the US compared to Canada. Estimated Transload Activity at Seattle/Tacoma 2010-2019f, in ‘000 TEU

▪ This is reflective of: 900 45.0% ▪ More established transload facilities available. 800 40.0% ▪ Activity that is undertaken across the entire country - especially prevalent in San 700 35.0% Pedro, California and along the eastern seaboard. 600 30.0% ▪ There are a higher number of US ports compared to Canada 500 25.0% Transload TEU ▪ In the Pacific North West region, there is a lack of transload activity for Prince 400 20.0% Intact TEU Rupert. 300 15.0% % Transload ▪ Current estimates indicate that transloading at Seattle-Tacoma is continuing to 200 10.0% increase, albeit relatively slowly - it is estimated to reach 40% in the very near future. 100 5.0% 0 0.0% 189 ▪ Serving domestic cabotage cargoes, such as to/from Alaska / Hawaii is a factor here 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019f generating demand and based on the scale of activity for these domestic trades there is a relatively substantial amount of trade: Key Conclusions: ▪ October 2019 YTD total volumes - equivalent to 19% of total volumes: ▪ Alaska: 517,669 TEU ▪ Hawaii: 97,126 TEU ▪ Higher transload activity in Sea-Tac than in Canadian ports and that position not expected to change

Development of Estimated Transload Activity at Seattle/Tacoma Since 2010

‘000 TEU 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019f

Transload TEU 302.9 320.8 345.3 266.7 372.6 394.4 424.7 424.7 424.7 424.7

Intact TEU 801.9 730.1 778.3 710.8 613 656 671.3 671.3 671.3 671.3

% Transload 27.4% 30.5% 30.7% 27.3% 37.8% 37.5% 38.8% 39.0% 39.2% 39.4%

Source: WSP, TTX Corp, ports Consideration of Impact of Transloading on Transport Costs - Import Example in Canada Cost differences are marginal, generally - user preference is the primary driver in this sector. Vancouver will continue to generate containerised activity, leveraging location of goods, its facilities and wide range of liner services calling to its terminals

▪ A sample calculation has been developed that illustrates the underlying cost position Comparison of Transload vs. Direct Charges for Import Container in Canada of transloading versus a direct shipment to Toronto. Direct Via Transload ▪ This calculation is not designed to capture all of the costs involved in shipment of goods from China to Toronto but aims to show the comparative position for alternate options. The following assumptions have been made: C$/FEU CS/t C$/53ft C$/t Container ▪ The shipment comprises 21.5 tonnes of various household goods - i.e. volume limited commodities. Intermodal Charge 2220,00 108.42 2330,00 80.90 ▪ The direct transport costs is the intermodal rail charge from Prince Rupert / Vancouver. Drayage to Transload 185.00 9.00 ▪ The transload operation involves the transfer of these goods from a 40ft international ocean container to a 53ft domestic container - with a resulting Transload Charge C$/t 23.00 significant increase in the cubic capacity. 190 ▪ This transfer is undertaken at a local transload station with minimum truck Total 108.42 112.90 drayage charges - a representative per tonne transfer cost at the transload station is included. Reception Advantage* in 4.48 ▪ The intermodal rate for the 53ft domestic container is 5% higher than for the C$/t 40ft international shipping unit. Total C$/t 108.42 108.42 ▪ An allowance has been made to accommodate the clear advantage of handling the domestic container as part of the overall cargo flow at the receiving Distribution Centre. Notes:

Key Conclusions: ▪ 21.5 tonnes of household goods per FEU ▪ 28.8 tonnes of household goods per 53ft domestic unit ▪ There is little difference in the overall transport costs in the two alternatives - * = Scale economy at reception DC highly marginal but some variation on a on a case-by-case basis ▪ Cost differentials are generally limited - user preference is the primary driver in this sector Source: WSP, TDANA, includes estimates ▪ If facilities to transload imports were available at Prince Rupert, then it is realistic to estimate that the level of demand routed via the station would, over time, approach that recorded at Vancouver 191

Other Factors Relating to Intermodal and Pacific Gateway Region - incl. weather, mergers Extreme Weather Impacts Intermodal Rail Service in Pacific Gateway Region Under the Canada Transportation Act, railroads instigate a “Winter Contingency Plan” to deal with the most severe wintry weather conditions in Western Canada - shortened trains are the major change, with reductions of up to 63% in train-length undertaken

Canadian National: Canadian Pacific:

▪ When temperatures reach -25°C the cold has a cascading and debilitating effect on ▪ A winter contingency plan involves scheduled procedures and CP’s response to the rail system. weather intensifies as conditions worsen: ▪ When the temperature on a railway subdivision drops below -25 degrees Celsius, ▪ There is a need to reduce train length to maintain safe operation of a braking train’s train speed and length to ensure safety. system, For example, a 10,000-foot train may be restricted to 7,000 feet. The 3,000 feet of left-behind traffic still needs to move on a new train. ▪ When snow, ice and moisture fall on rail tracks a train’s weight is reduced. ▪ Locomotives are equipped with a on the front to act as a small plough ▪ When trains are shortened, more crews and locomotives are required to move the ‘cow catcher’ to help push snow away from the tracks. same volumes of traffic. The result is backups leading to congestion in the rail yards and on-line delays. ▪ In winter months, the number of locomotives on heavier bulk trains (i.e. coal and potash) are increased to safely handle additional moisture on the track. ▪ The shorter trains increase the number of trains, which are moving at slower speeds, which reduces the efficiency of the system during difficult operating conditions. ▪ CP deploys to clear snow and mitigate the impact of winter - plough/spreader , snow- 192 fighter and railway switch heater ▪ In winter 2018–19 CN’s network experienced significantly colder temperatures than the previous year, with about a 65% increase in nights below -30°C. There were 16 ▪ CP is installing new and smarter switch snow melting equipment across its western nights with temperatures below -40°C causing night operations to be halted to protect corridor. The equipment is designed with added sensory devices to allow for greater employees safe and mitigate the risk of derailments situational awareness at the track level.

Canadian National - Maximum Train Length in Western Canada for Head End Examples of CP’s Snow-fighter (below) and Power in Bad Weather Conditions Plow (right)

Above -250 C Tier 1 Tier 2 Tier 3 Colder than -250C to -300C -300C to -350C -350C 12,000ft 8,800ft 6,000ft 4,500ft

-33% -50% -63%

Note: Tier 4 is temperatures colder than -400C and trains are not operated /do not start for safety reasons

Source: Canadian National Source: Canadian Source: Canadian Pacific Weather is an Important Factor for Canada’s West Coast Ports and Intermodal Rail Services Severe weather, consisting of snow, freezing temperatures and wind, is an annual, short-term issues that must be faced - usually occurs during January and February each year, but Pacific Gateway region port and railroads familiar with the situation

▪ Intermodal rail is negatively impacted on occasion at Canada’s ports. Impact of Weather on Intermodal Rail in Western Canada

▪ Important to put the container backlogs into perspective: Date Recent Events ▪ The biggest factor is the severe winter weather ▪ Recent impacts to service levels have occurred in 2011, 2012, 2015 and 2018. 2011 • Backlog of intermodal rail activity at both Vancouver and ▪ Extreme cold, impact of snow and related instances such as derailments are the Prince Rupert more common problems. • Due to severe weather, railcar shortages and post Chinese New year import surge ▪ There have been some (less frequent) issues caused by railroad-controlled factors • Halifax (East Coast) had similar problems – i.e. supply of railcars 2012 • Backlog of intermodal rail activity at both Vancouver and Impact of Weather on Intermodal Rail in Competing Ports / Regions Prince Rupert Port or Port Region Similar Weather Issues? • Severe weather, including major derailment 2015 • Backlog at all Canadian West Coast ports US PNW - Sea-Tac Similar issues to Pacific Gateway, though not normally as • Severe weather and large inbound volume flows severe • Similar problems at Halifax (East Coast) San Pedro / Oakland No - different climate 2018 • CN said grain delays worst – spent $250 million on new track/yard capacity, adding staff and extra trains/capacity • CP confirmed extreme weather – February was extremely North Atlantic NY/NJ, Montreal and Halifax all see highly similar weather - cold (78% more days below -25 Celsius, but in early March snow, wind and freezing temperatures train speeds were up over February by 10%

Key Conclusions: 2020 • Some issues due to weather for CN, although protests by First Nations tribes also a factor, with average Vancouver Reasonable to expect each winter period to bring some disruption to service levels dwell times of 3.2 days increased to 5 days for a short period • CP reported no worse than usual delays due to weather Only a shorter-term issue mainly during January and February and into March, but by then conditions noticeably improve Both CN and CPR are fully aware of the challenges and do plan in advance to minimise disruption via Winter Contingency Plans - can cause some short-term build-up of containers at terminals Potential Mergers Between North American Railroad Operators - Limited for Class 1 More likely that smaller, selected acquisitions to occur, such as CP’s interest in CMQ in Quebec and Northeast of US - COVID-19 financial issues may further slow this spending in the short-term

▪ There is some history of mergers in the US railroad industry, such as the 1993 tie-up Network of Central Maine & Quebec Railway of Burlington Northern and Santa Fe and the 1996 arrangement that combined Union Pacific and Southern pacific, although this latter deal did encounter a number of major operating issues and for some years afterwards the level of service offered was challenging. The most recent merger occurred in 1997 when Norfolk Southern and CSX Transportation acquired the Conrail network on the US East Coast.

▪ Nevertheless, the process of merger and acquisition has been a key part of how the current Class 1 operators in North America have built their large-scale networks.

▪ So the concept itself is not unknown in North America and in November 2015 there were a number of press reports indicating that Canadian Pacific is interested in purchasing Norfolk Southern.

▪ This development comes just over a year after Canadian Pacific had an interest in 194 acquiring CSX Transportation, though the deal did not ultimately come to fruition, mainly due to the lack of desire on the part of the Florida-based operator.

▪ There has been little, if any, subsequent merger interest between the major operators - at least that has been reported in the international press.

▪ More likely will be continued and selected acquisitions, such as CP announced it is expecting to acquire the Central Maine & Quebec Railway (CMQ) from current owner Fortress Transportation and Infrastructure.

Summary of Central Maine & Quebec Railway (CMQ) Key Conclusions:

Component Value to CP ▪ Largescale acquisitions or mergers between the Class 1 railroads in North America seems very unlikely - especially after the COVID-19 pandemic when there will be a period of financial readjustment Route miles 481 miles of additional rail lines in East of Canada / Northeast US ▪ Smaller, strategic opportunities may be more appealing in the short-term, at least Key access gained East of Montreal in Quebec and ▪ CMQ will provide CP with direct access east of Montreal and through Quebec to throughout Maine cover Maine in the US Northeast Key Conclusions - Intermodal in North America & Pacific Gateway Perspective

Strengths Weaknesses Opportunities Threats

▪ Established and largescale market in ▪ US Pacific North West intermodal issues ▪ Transloading for Pacific Gateway region ▪ Ability of ECNA ports to compete to North America, with high number of include services from less intermodal- - especially if Prince Rupert can develop serve key discretionary markets international containers moving incentivised US railroads the supporting facilities ▪ Severe weather can be a short-term ▪ Pacific Gateway are supported by highly ▪ Transloading is more widely-adopted in ▪ Vancouver already has some transload issue in Western Canada in Q1 each commercialised Canadian railroads US than Canada at present - partly due facilities - can continue to serve both year - though CN and CP adopt to servicing US domestic trades to/from imports and exports contingency plans ▪ GCT Deltaport recently expanded Alaska and Hawaii intermodal rail facilities ▪ Main costs associated with transloading ▪ For Vancouver, near-port lumber export ▪ Intermodal activity has some seasonal not prohibitive vs direct deliveries - a transload services in Prince Rupert pose ▪ IANA data shows that intermodal activity differences, so ports have to gear-up for choice driven by specific shipper a competitive threat (particularly given for international containers continuing to peak periods preference higher land and labour costs in 195 grow - long-term of around 3% per Vancouver) annum since 2000 ▪ Q4 2019 and Q1 2020 saw confirmed declines in international containers ▪ Prolonged impact of COVID-19 - but all ▪ Increased intermodal rail capacity at moving via intermodal rail competing ports in North America for US both Pacific Gateway ports discretionary markets will see same ▪ COVID-19 will further impact intermodal trends rail volumes 196

Section 5: The Competitive Cost Structure for VFPA Introduction to Comparative Costs Analysis - Approach and Methodology This assessment delivers a robust and easily identifiable summary of transport costs for each competing port to VFPA linking Asia and key inland locations in North America on different trade lane options

▪ Provision of built-up costs and the ability to offer comparative door-to-door costs for ▪ For each trade lane listed, a range of competing ports is considered, including containers moving via Vancouver versus other important gateway port locations Vancouver, Prince Rupert, Halifax, Tacoma, Seattle, Los Angeles (representative of throughout North America for key Asian markets remains a crucial consideration. both ports in San Pedro), New York/New Jersey, Port of Virginia (Norfolk, Portsmouth, Hampton Roads), Halifax and Savannah. ▪ On this basis, cost calculations have been undertaken using the following key information: ▪ These ports of entry will cover all four “corners” of North America but also key locations in both Canada and the US for example, Toronto is indicative of a major ▪ Ocean transport costs, including pilotage, marine services etc. using latest data – Canadian hinterland that can be potentially served from both the West and East coast, available. while Chicago remains the key gateway to the US Midwest markets. ▪ Stevedoring charges at the port/terminal. ▪ ▪ Other port charges. For completeness of approach, the All Water routes via the Panama and Suez canals ware included for ports located on the East Coast of North America. ▪ Intermodal delivery costs to final destination ▪ This assessment delivers a robust summary of costs for using each competing port to ▪ This analysis is applied to key trade lane cost options for the largest current/future Vancouver and for each trade lane option, serving key discretionary markets in both 197 container ships using different ports of entry from noted ports of origin in Asia that are Canada and the US, while reflecting key industry developments, such as larger ships indicative of the key trade lanes of interest: and cost-competitiveness intermodal services. ▪ Singapore to Chicago. ▪ Shanghai to Chicago. ▪ Singapore to Toronto. ▪ Shanghai to Toronto. ▪ Singapore to Memphis. ▪ Shanghai to Memphis.

Comparative Costs - Process & Key Component Parts

Shipping Costs Identify Routes to be Stevedoring/Port Road & Intermodal to/from major Cost Conclusions Dues Rail Transport Served markets Methodology - Identify Routes, Apply Shipping, Port & Inland Costs The methodology includes calculation of the shipping costs, port handling costs, road/rail transportation costs and key drivers for the cost calculations.

Shipping Costs Identify Routes to be Stevedoring/Port Road & Intermodal to/from major Cost Conclusions Dues Rail Transport Served markets

▪ The comparative built-up costs for competing ports for a range of locations from both East and West coast routings is generated to help assess the competitiveness of Vancouver SHIPPING COSTS ▪ Shipping costs are from WSP’s current in-house shipping costs database for baseline shipping costs for operating deepsea services. ▪ While current charter rates may be lower than the costs calculated in this analysis, for longer term evaluation actual trading costs give the best insight into competitive structures, if the following is used: ▪ Daily capital charge of the vessel (capacity, new build price, lifetime, average deployment, long-term profitability, residual value) 198 ▪ Voyage time (distance, sailing speed, loading/unloading rates, time in port, time for Suez Canal passage) PORT & HANDLING ▪ Operational characteristics (average capacity utilisation, TEU/box ratio) COSTS ▪ Operational Costs (Maintenance & Insurance, Staffing, Fuel Consumption, Port Dues) ▪ Additional canal charges are included for transiting the Suez Canal ▪ Port handling charges are the average of the import/export tariffs published for a laden 40-ft container. For the gateway ports, the charges include the stevedoring and gate charges for a container. ▪ The tariffs applied in the analysis assume volume discounts for a large shipping line and local practices based on experience in the region. ▪ For inland transport costs a tailored calculation model is set-up to estimate the trucking and rail costs for a variety of trips. These costs are INLAND subsequently compared with quotations obtained from local trucking companies. The road transportation cost calculations take into account: TRANSPORT ▪ Daily capital charge of the truck (new build price, lifetime, average deployment, long-term profitability, residual value) COSTS ▪ Trip time (Distance, road conditions and average achievable driving speed, time at border crossings, resting time allowance, loading and unloading time) ▪ Operational Costs (Maintenance & insurance of truck, labour costs) ▪ Average Fuel Price for each trip (average of diesel prices for the countries transited) ▪ Empty return charge to cover for imbalances between import and export of goods to/from certain locations. ▪ Rail/intermodal costs are based on a fee per km; discharge fee and then a final road haulage figure calculated in the same way as above. Deep-Sea Shipping Costs for Container Ship by Size The costs per slot are cheaper the larger the vessel becomes. Economies of scale have been a major factor in increasing the size of ships on the main arterial trade lanes.

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from major Cost Conclusions Dues Transport Served markets

▪ The approach taken with regard to deepsea shipping costs focuses on the underlying Container Ship Scale Economies Based on Daily Operating Costs in US$’000 costs of operation on representative deepsea trades. ▪ A summary of costs incurred in trading various classes of deepsea vessels in the 35.00 current market. ▪ It is based upon capital costs, operating costs and fuel costs for the vessel when at-sea and in port. 30.00

▪ This data gives a good understanding of the basic drivers of shipping costs and will be 199 approximated over the medium term, and represent the general cost analysis 25.00 approach utilised by liner companies in network analyses.

▪ These costs assess the underlying shipping costs on representative trades: 20.00 ▪ A container shipped from Shanghai and Singapore ▪ Handled via Vancouver, Prince Rupert, Halifax, Oakland, Seattle, LA, NY/NJ, Norfolk and Savannah in order to define the general cost position. 15.00 ▪ For this assessment trades from Shanghai and Singapore are taken as representative for the Far Eastern market. 10.00 ▪ Although volumes are now dominated by China, it is the differentials between the different deepsea ports that is of primary importance to the competitive review provided. 5.00

0.00 2000 3500 4500 6800 8500 10800 12500 14500 18000 20000

Per FEU at Sea - $/day Per FEU in Port - $/day Deep-Sea Shipping Costs – Costs for Container Ship by Size Cost per TEU/FEU at sea calculated on the full cost of ownership and operating for a range of different sizes of container vessel that are currently deployed in the relevant market, or can be in the future, subject to deep enough water being available.

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from major Cost Conclusions Dues Transport Served markets

▪ Built-up daily shipping costs are based on underlying Container Ship Trading Costs costs – capital charge (current newbuilding and Capacity - TEUs 2000 3500 4500 6800 8500 10800 12500 14500 18000 20000 typical financing charge), operating costs from WSP’s internal database and bunker costs based on an Capital Costs average trading speed of 19 knots, known vessel Newbuild Price – m US$ 22.5 33.3 43.5 60.0 83.0 90.0 109.0 117.0 143.0 157.5 consumption and current bunker prices. Daily Capital Charge - $ 9,276 13,729 17,934 24,736 34,218 37,104 44,937 48,236 58,955 64,933

▪ These costs are not based on charter rates but reflect Operating Costs full ownership costs as owned vessels are generally Manning - US$/day 3,200 3,650 3,650 3,650 3,650 3,650 3,650 3,800 4,100 4,100 200 dominant. Repair & Maintenance - US$/day 1,096 1,568 1,734 2,456 2,903 3,238 3,573 3,948 4,353 4,353 Insurance - US$/day 655 936 1,035 1,466 1,733 1,933 2,133 2,350 3,100 3,250 ▪ Vessel sizes have been selected on the basis of the Admin/Other Charges* - US$/day 1,000 1,100 1,100 1,200 1,200 1,300 1,300 1,475 1,650 1,675 sizes currently deployed or dominant on the trades Total 5,951 7,253 7,519 8,773 9,486 10,121 10,656 11,573 13,203 13,378 under review and the potential future size. Fuel Costs ▪ The differences in savings from increasing the size of HFO - US$/tonne 450 450 450 450 450 450 450 450 450 450 ship from 2000TEU to 20000TEU are substantial are MDO - US$/tonne 681 681 681 681 681 681 681 681 681 681 substantial and demonstrate the benefits of the Consumption At Sea 18 knots 18 knots 19 knots 19 knots 19 knots 19 knots 19 knots 19 knots 19 knots 19 knots economies of scale. HFO - tonnes/day 32.8 50.3 53.5 79.5 98.6 118.0 136.5 153.5 163.5 166.0 MDO - tonnes/day 2.0 2.5 2.5 2.8 2.8 3.0 3.2 3.2 3.2 3.2 ▪ The ability of Vancouver to handle 20,000TEU Consumption In Port vessels in the future will ensure that the port enjoys a HFO - tonnes/day 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 competitive position, provided it makes the proposed MDO - tonnes/day 2.0 2.8 2.8 2.8 2.8 3.0 3.2 3.2 3.2 3.2 developments. Fuel Costs At Sea - US$/day 16,122 24,338 25,778 37,682 46,277 55,143 63,604 71,254 75,754 76,879 Fuel Costs In Port - US$/day 1,362 1,907 1,907 1,907 1,907 2,043 2,179 2,179 2,179 2,179 ▪ The following slides illustrate the specific costs for shipments ex Far East to US/Canada. Total Costs at Sea - $/day 31,349 45,319 51,230 71,191 89,981 102,368 119,197 131,063 147,912 155,190 Total Costs in Port - $/day 16,589 22,889 27,360 35,416 45,611 49,268 57,772 61,988 74,337 80,490

Note: * = Excludes agency, marketing and liner servicing costs Per TEU at Sea - $/day 15.67 12.95 11.38 10.47 10.59 9.48 9.54 9.04 8.22 7.76 Per TEU in Port - $/day 8.29 6.54 6.08 5.21 5.37 4.56 4.62 4.28 4.13 4.02

Per FEU at Sea - $/day 31.35 25.90 22.77 20.94 21.17 18.96 19.07 18.08 16.43 15.52 Per FEU in Port - $/day 16.59 13.08 12.16 10.42 10.73 9.12 9.24 8.55 8.26 8.05 Comparative Cost Structures - per FEU Shipping Costs to Vancouver Haul lengths from Singapore to Vancouver are used with calculated deep-sea costs to give cost per FEU - increase in ship size results in substantial drop in shipping costs

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

The shipping costs are calculated using the Sample Calculations – Deepsea Shipping Costs from Singapore to Vancouver following methodology: Vessel Capacity in 8500 10800 12500 14500 18000 20000 ▪ Typical current vessel sizes used. TEU ▪ Load factors of 95% built into the assessment. Load factor -% 95 95 95 95 95 95 ▪ One-way haul length is translated into days at sea for the voyage. Cargo size - boxes** 5,047 6,413 7,422 8,609 10,688 11,875 201 ▪ Port time is calculated based on known port Ocean haul length - nm 7,078 7,078 7,078 7,078 7,078 7,078 handling rates and current service rotations. Sea days @ 19 knots 15.52 15.52 15.52 15.52 15.52 15.52 ▪ The cost per FEU drops considerably once the larger capacity ships are deployed. Port (and canal) days 4.80 5.56 6.12 6.78 7.94 8.60

▪ Deep-Sea costs from Singapore to Vancouver Sea costs per day $ 89,981 102,368 119,197 131,063 147,912 155,190 are compared with costs to competing ports in the region. Port costs per day $ 45,611 49,268 57,772 61,988 74,337 80,490

▪ Similar costs have been calculated for the cos of Sea costs $ 1,396,682 1,588,949 1,850,171 2,034,347 2,295,877 2,408,844 shipments from Shanghai. Port costs $ 219,108 274,053 353,755 420,462 590,048 691,988

Port dues $ 12,500 12,500 13,655 13,655 14,888 14,888

Voyage cost $ 1,628,290 1,875,502 2,217,581 2,468,465 2,900,813 3,115,720

Cargo size in FEUs 4,038 5,130 5,938 6,888 8,550 9,500

Cost per FEU $403.29 $365.59 $373.49 $358.40 $339.28 $327.97 Comparative Cost Structures - per FEU Shipping Costs to Vancouver Haul lengths from Shanghai to Vancouver are used with calculated deep-sea costs to give cost per FEU - increase in ship size to Cleveland results in substantial drop in shipping costs

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

Sample Calculations – Deepsea Shipping Costs from Shanghai to Vancouver The shipping costs are calculated using the following methodology: Vessel Capacity in 8500 10800 12500 14500 18000 20000 TEU ▪ Typical current vessel sizes used.

▪ Load factors of 95% built into the assessment. Load factor -% 95 95 95 95 95 95

▪ One-way haul length is translated into days at Cargo size - boxes** 5,047 6,413 7,422 8,609 10,688 11,875 202 sea for the voyage. Ocean haul length - nm 5,110 5,110 5,110 5,110 5,110 5,110 ▪ Port time is calculated based on known port handling rates and current service rotations. Sea days @ 19 knots 11.21 11.21 11.21 11.21 11.21 11.21

▪ The cost per FEU drops considerably once Port (and canal) days 4.80 5.56 6.12 6.78 7.94 8.60 the larger capacity ships are deployed. Sea costs per day $ 89,981 102,368 119,197 131,063 147,912 155,190 ▪ Deep-Sea costs from Shanghai to Vancouver are compared with costs from competing Port costs per day $ 45,611 49,268 57,772 61,988 74,337 80,490 ports in the region. Sea costs $ 1,008,342 1,147,150 1,335,741 1,468,708 1,657,521 1,739,078

Port costs $ 219,108 274,053 353,755 420,462 590,048 691,988

Port dues $ 12,500 12,500 13,655 13,655 14,888 14,888

Voyage cost $ 1,239,950 1,433,703 1,703,150 1,902,825 2,262,457 2,445,954

Cargo size in FEUs 4,038 5,130 5,938 6,888 8,550 9,500

Cost per FEU $307.11 $279.47 $286.85 $276.27 $264.61 $257.47 Deep-Sea Shipping Cost by Selected Competing Port from Asia - Prince Rupert Lowest Costs A shipping line calling to Prince Rupert on current schedules benefits from lower costs - an important factor in the overall logistics transport chain - the shorter distance also means that, on average, 2 days of sailing time is also gained by shippers/ocean carriers

▪ The haul lengths between Shanghai and Singapore have been applied to the Total Cost For Deep-Sea Shipment from Shanghai by Port in US$, per FEU competing ports in North America, along with the average size of ship typically in service on ocean carrier rotations. Application of the daily operating costs for vessels $600 $533 of the average size in service have been used. $519 $511 $502 $500 ▪ The outputs on the basis of shipping cost per FEU in US$ confirms: $400 ▪ Shanghai - Prince Rupert is the lowest cost port option, followed by Vancouver and $314 $279 $279 Seattle as Pacific Gateway ports benefit from competitive haul lengths $300 $261 ▪ Singapore - Prince Rupert is the lowest cost port option, followed by Vancouver and Seattle and then LA/LB (despite the latter deploying bigger tonnage). $200 $100 ▪ Introduction of IMO 2020 rules is likely to exacerbate the cost savings because as low sulphur fuel costs rise for shipping lines, the additional steaming time to serve ports $0 outside the Pacific Gateway/Pacific Northwest will see this aspect of the logistics Vancouver Prince Halifax Seattle LA / LB NY/NJ Norfolk Savannah 203 transport chain rise. Rupert

Haul Lengths & Average Ships Size - Selected Ports in Asia and N. American Ports Total Cost For Deep-Sea Shipment from Singapore by Port in US$, per FEU

Port Shanghai Singapore Ship Size (TEU) $600 $507 $521 $478 $499 Vancouver 5,110 7,078 10,800 $500 $400 $366 $365 Prince Rupert 4,678 6,667 10,800 $400 $348 $300 Halifax 10,908 9,641 10,800 $200 Seattle-Tacoma 5,094 7,082 10,800 $100 LA / LB 5,708 7,062 12,500 $0 NY / NJ 10,582 7,669 10,800 Vancouver Prince Halifax Seattle LA / LB NY/NJ Norfolk Savannah Rupert Norfolk 10,391 10,133 10,800

Savannah 10,173 10,289 10,800 Source: Nautical Miles from Sea-Distances.org Shipping Scenarios - Medium-Term & Longer-Term will see Growth in Vessel Sizes Vancouver is well positioned to maintain cost-effective positions for Asian trades - longer-term, 18,000 TEU ships to WCNA are expected. The Pacific Gateway ports will see an increase to this ship size deployed as long as infrastructure allows

Shipping Scenarios Current Situation – Typical Vessel Sizes ▪ Three scenarios for ship size developments are defined. These assumptions form the basis for the shipping costs per container and include different capital cost, operating Vancouver Prince Halifax Tacoma Seattle LA/LB New York Norfolk Savannah costs and port and channel dues for each of the vessel sizes. Rupert 10800 10800 10800 10800 10800 12500 12500 12500 10800 ▪ The vessels listed are the average vessel sizes and maximum loading rate (in % of capacity) to arrive at representative average shipping costs.

▪ The following three scenarios are: Medium Term 2023 – Forecast Typical Vessel Sizes 1. Current Situation - Typical Vessel Sizes: ▪ The current situation takes into account the current existing port facilities Vancouver Prince Halifax Tacoma Seattle LA/LB New Norfolk Savannah Rupert York and typical vessel sizes calling at the port which are deployed (on average). ▪ In individual cases larger vessels will be deployed, but these will not 14500 14500 10800 12500 12500 14500 12500 12500 10800 204 influence the market share distribution to a significant extent. 2. Medium Term 2023 - Typical Vessel Sizes: Long Term Theoretical Potential (2028+) ▪ Assumed port upgrades to have taken place across the continent and in particular larger vessels being deployed on Transpacific trades. Vancouver Prince Halifax Tacoma Seattle LA/LB New York Norfolk Savannah ▪ Upsizing of vessels sailing through the Panama Canal will have scaled-up Rupert to the maximum potential. 14500 14500 12500 14500 14500 18000 14500 14500 12500 3. Long term theoretical potential 2028: ▪ Pressure on the shipping lines will increase further and ever larger vessels will likely be deployed in particular on the Transpacific trades. ▪ Expect 18,000 TEU ships will be common callers to the San Pedro complex, with 14,500 TEU vessels frequent at other WCNA ports and for both NY/NJ and Norfolk. Comparative Cost Structures – Vancouver is Highly Competitive vs. US Ports Stevedoring is only a small part of the overall transportation costs but is important because it can enable a port to offer a differentiating factor compared to the competition

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ An allowance for the known stevedoring have to be included in the overall Estimated Current Port Handling Costs - Pacific Gateway vs. US Ports, 2020 transportation cost assessment. Port Current Stevedoring Handling Rate ▪ Although generally only a small share of the overall cost calculations, handling charges/due at ports is one of the differentiating factors that competing ports can offer (US$ / FEU) (along with service levels/productivity and investment) and where there is some greater control retained. Vancouver 199 ▪ The starting point for the review is an identification of the charge made for container handling. This constitutes the 'headline rate' that is quoted by the stevedore for the Prince Rupert 190 205 basic operation of container shipment. In simplified terms, this represents the movement of a container from a vessel to the yard and then reloading on another vessel. Seattle - Tacoma 325 ▪ The data here summarised presents the conclusions of a detailed process that monitored and updated container handling charges in the major competitive deepsea Los Angeles / Long Beach 360 terminals for the period since 2010. ▪ The process involved maintaining a database of terminal handling charges and ports Halifax 285 costs at most major North American ports over time to better understand annual changes but also any longer-term trends occurring. New York / New Jersey 345 ▪ Some of this information remains confidential but the information shown nevertheless reflects the current position for 2020, as much as can be gained. It comprises different handling costs that apply to different shipping lines at a mix of the same port or Norfolk (Virginia) 320 competing ports in the same region, along with ports on a wider geographic basis in North America. Savannah 315 ▪ Container handling costs are detailed in terms of dollars per container and do not include additional charges for special containers or specific rates for empty boxes. Source: WSP / ports ▪ Ports in the Pacific gateway region offer highly competitive handling rates, with Vancouver offering the lowest figure, closely followed by Prince Rupert. Both ports are clearly highly competitive compared to all US ports. Port Handling Costs - Vancouver is Highly Competitive vs. US Ports USWC ports are somewhat higher than on the East Coast, although the impact on the overall competitive positioning is relatively small. Pacific Gateway tariffs are highly competitive. US ports also impacted by extra charges of Harbor Maintenance Tax

▪ Port Handling Costs Current Market Shares by Port ▪ Port handling costs in the US are relatively high. ▪ The impact of the port handling costs on the routing of containers is relevant, although differences in tariffs between ports (relative to the total transportation costs) are relatively small as a consequence of the high hinterland transportation costs. ▪ A difference in tariffs of around 100 US$/FEU results in an additional hinterland penetration of some 50 miles/ 80 kilometres). ▪ Canadian ports have significantly lower handling costs - generating a marginal benefit for the Canadian ports over the other US West Coast ports. ▪ The larger US East Coast ports are cheaper than the West Coast ports, resulting in an marginal advantage for those ports. 206 ▪ The US Harbor Maintenance Tax (HMT) is an important factor here. It does increase the cost for US ports but not Canadian gateways, with a fee equivalent to 0.125% being applied to the value of the goods - a container with $100,000 of goods would save US$125 moving through Vancouver or Prince Rupert for higher- value consumer durables, these will easily see an additional few dollars added to the overall supply-chain cost involved

▪ Costs of time in the port ▪ An indirect cost of a port is container handling efficiency. ▪ The turnaround time of the vessel and the associated costs are included in the model. ▪ The approach and departure time are included (0.75 days in the port of arrival and departure) as well as additional time for sailing up the rivers to Baltimore (1 day extra for two ways), Delaware River Ports (0.6 day extra for two ways) and Montreal (1.2 days extra for two ways) with a lower speed than when sailing at the ocean. ▪ Time at the quay and costs of the vessel waiting at the quay is calculated by taking an average assumed parcel size and dividing same by an assumed average container handling rates in the various ports (see table on the previous slide). Comparative Cost Structures - Inland Transport Inland costs are by far the most significant cost sector in the chain – a relationship exists between haul distance and pricing

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ A summary of distances between various competing Distance (km) Between Competing Ports and Destinations of Interest ports and representative US/Canadian destinations is here shown. These destinations have been chosen based on the most common routes used by a series of Chicago Toronto Memphis Montreal Akron major shippers.

▪ Distances are used to generate a cost comparison Vancouver 3465 4289 3898 4824 4052 matrix for both road and rail connections. Prince Rupert 4083 4907 4735 5076 4671 207 ▪ Haulage rates have been calculated based on a series of actual road haulage quotes and then these quotations used to derive a cost per km that was then applied to Halifax 2592 1782 3159 1235 2077 the remaining links. This is not an exact science (some rates could be reduced with volume discounts) and so a “line of best fit” was derived for the costs per km. Tacoma 3424 4236 3352 4769 3988 ▪ Comparative rail costs are also calculated. It is generally believed that the road rates will be the cheapest option Seattle 3286 4110 3680 4606 3835 for the relatively short distances (<500km), whereas longer haul distances are generally cheaper via rail. LA 3246 4056 2885 4592 3809 Road transport is relatively expensive in USA but is still used for short distances (<500km) because of the unreliability of rail and its occasional poor frequency and NY 1272 789 1763 597 704 lack of space.

▪ It should also be recognised that any rail haulage also Norfolk 1425 1071 1575 1159 857 includes a final delivery by road (US$ 120/unit), which adds to the overall cost of this mode of transport. Savannah 1534 1621 1019 1872 1172 Hinterland Transportation Costs - Combination of Road and Rail Depending on Distances Regional container demand follows regional GDP closely. Market potential of Vancouver is influenced by share of container demand and distribution of economic development.

▪ Regional Container Demand Estimated distribution of GDP (% of North American GDP) ▪ Container demand is the main driver of each port’s market share. ▪ Distribution is focused near consumption and production centres in the country. ▪ The share of container demand by state based on US Census data is derived for state level containerised import and export tonnage. ▪ An assumed centre point of the demand assesses each states on a county level and takes the economic gravity point of all counties within the state. ▪ This is based on the assumption that the geographical distribution of the containers follows regional GDP closely.

▪ Distances to the port ▪ Main determent of the routing of the cargo is the distance to the port by road and 208 rail. ▪ Distances to the ports are calculated from the economic points of gravity in each of the states. The distances are obtained from the data from Google Maps. ▪ Rail distances are based on a GIS model of the North American rail network. Estimated market share of container demand (% of North American demand) ▪ For each state the nearest rail depot is identified, with the road distance from each state to the various rail depots determined. Hinterland Transportation Costs - Greater Distances Mean Need for Cost-Effective Rail For longer distances intermodal transport becomes more attractive due to a lower per km costs of rail transport and offsets additional costs of intermodal exchange - Vancouver is highly cost-competitive, especially compared to all WCNA ports

▪ Focus is truck transport and intermodal rail transport by rail. Intermodal Rail Costs by Port to Key Inland Destinations in US$ per FEU

▪ For longer distances intermodal transport is more attractive due to a lower per km 3,000 costs of rail transport. This offsets additional costs at the intermodal exchange. 2,500 ▪ The analysis calculates both modes of transport and picks the cheapest of the two as representative. 2,000 1,500 ▪ Trucking costs calculation is based on the shortest route from the destination point to the entrance of the port and include fixed final delivery costs (for container handling at 1,000 pick up / drop off and waiting time) of US$50/container. 500 ▪ For intermodal costs the nearest rail depot from the destination point is selected and 0 the rail distances to each of the port determined, with costs for the transfer of the Chicago Toronto Memphis Montreal Akron container onto and off the train of US$60 each transfer. 209 Vancouver Prince Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax ▪ Vancouver is a highly-cost competitive intermodal rail option compared to all other ports on the West Coast of North America for key locations, such as Chicago, Toronto and Memphis. Overview of rail depots in US used for intermodal transport of containers

Key Conclusions:

▪ North American discretionary market are dependent on cost-effective intermodal rail options ▪ Geographic location and distance between port of entry and final destination a factor ▪ Vancouver is a highly competitive option for all destinations - especially Chicago, Toronto and Memphis and compared to West Coast ports ▪ Intermodal rates have been updated and based on information obtained from

source in Q2 2020 Source: Intermodal Association of North Association Source: AmericaIntermodalof North Comparative Cost Structures - Inland Transport Inland costs are by far the most significant cost sector in the chain – a relationship exists between haul distance and pricing

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ A summary of the cheapest inland haulage Cheapest Option Matrix ex Singapore (current) US$/FEU options are here summarised in order to – provide a comparative part of the full built-up cost analysis. Ports/ Chicago Toronto Memphis Montreal Akron Destination ▪ Road haulage rates are based on US$ 1.56/FEU per km Vancouver 1,480 1,799 1,499 2,049 1,685

▪ Intermodal rates are largely based on the Prince Rupert 1,712 2,034 1,967 2,100 1,942 210 following quotes per FEU/km, where direct information is not available: I. US$ 0.42 – LA/LB; Seattle Seattle 1,558 1,899 1,528 2,123 1,795 II. US$ 0.40 - Vancouver LA/LB 1,500 1,846 1,666 2,055 1,731 III. US$ 0.39 – Prince Rupert IV. US$ 1.12 – NY/NJ; Halifax; Norfolk Savannah 1,700 1,319 1,884 1,418 1,235 V. US$ 1.05 – Savannah

▪ Both road and rail rates include the cost of Norfolk 1,214 1,004 2,095 789 1,102 an empty return.

▪ Trucking costs include an additional NY/NJ 1,483 1,823 1,332 2,049 1,720 $50/FEU/km final delivery fee

▪ Intermodal exchange fee of $60/unit (on and Halifax 1,815 2,116 2,400 1,503 2,316 off) Note:

▪ Where possible, information sourced directly from railroads has been obtained and included in the above table. If not obtainable, the use of costs per distance are also used Built-Up Costs Conclusions - Current Ship Deployments: Vancouver Highly Competitive Vancouver is a cost-effective port option for serving Chicago for Singapore, as well as being highly competitive for Toronto (less than under 5% cost differential) for current ship deployments

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ The results of the total built-up cost comparisons of shipping a 40ft container from Cost Comparisons for Shipments ex Singapore by Port, in US$/FEU Singapore to five inland destinations in the US and Canada via nine US/Canadian container facilities is shown. The choice of ports covers both the direct Transpacific sailing route and use of the Suez Canal option to ECNA 3500

▪ These cost comparisons identify that Vancouver is the most competitive for the key 3000 location of Chicago and also competitive for Toronto from the West Coast 2500 ▪ Although Vancouver is more expensive than NY/NJ and Norfolk for Toronto and more 211 expensive than LA and Tacoma for Memphis, the cost differential is often under 5%, 2000 so Vancouver is still considered as a cost-effective option. 1500

Top 3 Cost-Effective Routings ex Singapore 1000

Rank Chicago Toronto Memphis Montreal Akron 500 1 Vancouver NY LA NY NY 0 2 NY Norfolk Savannah Norfolk Norfolk Chicago Toronto Memphis Montreal Akron

3 Seattle Vancouver Vancouver Halifax Savannah Vancouver P. Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax

Key Conclusions: Note: Seattle and LA/LB are not included for transport costs to Toronto and Montreal due to a lack of intermodal services available, a lack of cargo moving to these areas and a need for cross- border trucking costs (data which is unavailable) ▪ There are a range of different sailing and port options to access Chicago and other key locations from Singapore, using both coasts of North America ▪ The inland cost is a major factor in determining overall price

▪ Vancouver is the lowest cost option for Chicago and also competitive for Toronto with a price differential of under 5% Built-Up Costs Conclusions - Current Ship Deployments: Vancouver Highly Competitive Vancouver is a cost-effective port option for serving Chicago from Shanghai, as well as being highly competitive for Toronto and Memphis under current ship deployments

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ The results of the total built-up cost comparisons of shipping a 40ft container from Cost Comparisons for Shipments ex Shanghai by Port, in US$/FEU Shanghai to five inland destinations in the US and Canada via nine US/Canadian container facilities is shown. 3500 ▪ The choice of ports covers both the direct Transpacific sailing route and use of the Suez Canal option to ECNA 3000

▪ These cost comparisons identify that Vancouver is highly competitive for serving 2500 Chicago and also Toronto. 212 2000 ▪ Also, for other locations, such as Memphis, the cost differential is quite marginal, often under 5%, so Vancouver is still considered as a cost-effective option. 1500

1000 Top 3 Most Cost-Effective Routings ex Shanghai 500 Rank Chicago Toronto Memphis Montreal Akron 1 Vancouver NY LA NY NY 0 Chicago Toronto Memphis Montreal Akron 2 NY Norfolk Vancouver Norfolk Norfolk Vancouver P. Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax 3 Seattle Vancouver Savannah Halifax Savannah

Key Conclusions: Note: Seattle and LA/LB are not included for transport costs to Toronto and Montreal due to a lack of intermodal services available, a lack of cargo moving to these areas and a need for cross-border trucking costs (data which is unavailable) ▪ There are a range of different sailing and port options to access Chicago and other key locations from Shanghai, using both coasts of North America ▪ The inland cost is a major factor in determining overall price

▪ Vancouver is the lowest cost option for Chicago and the cheapest WCNA port for Toronto Built-Up Costs in 2023 - No Major Changes in Cost Rankings per Port from Singapore By 2023, Vancouver will remain highly-competitive for serving the key hinterland locations in North America from Singapore - while some increases in average ship sizes will occur, the port’s excellent location and cost-effective inland capabilities are the key factors

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ The same analysis was completed again for Singapore but this time taking into Cost Comparisons for Shipments ex Singapore by Port in 2023, in US$/FEU account anticipated average ship sizes in 2023, to reflect short-term industry trends and developments. The analysis concludes that the average size of ship to be calling 3500 frequently to the Pacific Gateway region will be around 12,500 TEU. 3000 ▪ Vancouver is, once gain, highly-competitive for a number of key inland locations, such as Chicago, Toronto and Memphis and for other locations price differentials are, 2500 generally, very small. 213 ▪ It is imperative that Vancouver has the capacity to handle anticipated larger container 2000 volumes and exchanges 1500

Top 3 Most Cost-Effective Routings ex Singapore 1000

Rank Chicago Toronto Memphis Montreal Akron 500

1 Vancouver NY Savannah NY NY 0 2 NY Norfolk LA Norfolk Norfolk Chicago Toronto Memphis Montreal Akron

3 Seattle Vancouver Vancouver Halifax Savannah Vancouver P. Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax

Key Conclusions: Note: Seattle and LA/LB are not included for transport costs to Toronto and Montreal due to a lack of intermodal services available, a lack of cargo moving to these areas and a need for cross-border trucking costs (data which is unavailable) ▪ There are a range of different sailing and port options to access Chicago and other key locations from Singapore, using both coasts of North America ▪ With the increase in sizes of vessels deployed on the routes by 2023, Vancouver remains a highly competitive cost option, especially for Chicago and Toronto Built-Up Costs in 2023 - No Major Changes in Cost Rankings per Port from Shanghai By 2023, Vancouver will remain highly-competitive for serving the key hinterland locations in North America from Shanghai - while some increases in average ship sizes will occur, the port’s excellent location and cost-effective inland capabilities are the key factors

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ The same analysis was completed again from Shanghai but this time taking into Cost Comparisons for Shipments ex Shanghai by Port in 2023, in US$/FEU account anticipated average ship sizes in 2023, to reflect short-term industry trends and developments. The analysis concludes that the average size of ship to be calling 3500 frequently to the Pacific Gateway region will be around 12,500 TEU. 3000 ▪ Vancouver is, once gain, highly-competitive for a number of key inland locations, such as Chicago, Toronto and Memphis and for other locations price differentials are, 2500 generally, very small. 214 2000 ▪ It is imperative that Vancouver has the capacity to handle anticipated larger container volumes and exchanges 1500

Top 3 Most Cost-Effective Routings ex Shanghai 1000 500 Rank Chicago Toronto Memphis Montreal Akron

1 Vancouver NY LA NY NY 0 Chicago Toronto Memphis Montreal Akron 2 NY Norfolk Vancouver Norfolk Norfolk Vancouver P. Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax 3 Seattle Vancouver Savannah Halifax Savannah

Note: Seattle and LA/LB are not included for transport costs to Toronto and Montreal Key Conclusions: due to a lack of intermodal services available, a lack of cargo moving to these areas and a need for cross-border trucking costs (data which is unavailable) ▪ There are a range of different sailing and port options to access Chicago and other key locations from Shanghai, using both coasts of North America ▪ With the increase in sizes of vessels deployed on the routes by 2023, Vancouver remains a highly competitive cost option, especially for Chicago and Toronto Built-Up Costs for Longer-Term, 2028: Similar Output Results of Competitive Vancouver Even with further increases in average sizes of ships, it is clear that Vancouver remains a highly cost-effective port option for a range of key inland locations from Singapore - challenge is to ensure it provides sufficient capacity and efficient intermodal rail

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ The same analysis was completed for Singapore but with anticipated average ship sizes Cost Comparisons for Shipments ex Singapore by Port in 2028, in US$/FEU longer-term to 2028 and beyond. 3500 ▪ The assessment concludes that the average size of ship calling frequently to the Pacific Gateway region will be around 14,500 TEU. 3000 ▪ Once again, Vancouver is highly competitive and ranked highly for Chicago, Toronto and 2500 for Memphis 215 ▪ Increase in vessel size accommodated at Los Angeles and Long Beach, has improved its 2000 position, marginally, but there is still a US$37 saving for each container using Vancouver and avoiding the San Pedro ports for all Chicago cargo. 1500

1000 Top 3 Most Cost-Effective Routings ex Singapore 500 Rank Chicago Toronto Memphis Montreal Akron

1 Vancouver NY LA NY NY 0 Chicago Toronto Memphis Montreal Akron 2 NY Norfolk Savannah Norfolk Norfolk

3 LA Vancouver Vancouver Halifax Savannah Vancouver P. Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax

Note: Seattle and LA/LB are not included for transport costs to Toronto and Montreal Key Conclusion: due to a lack of intermodal services available, a lack of cargo moving to these areas and a need for cross-border trucking costs (data which is unavailable) ▪ Vancouver will maintain a very strong competitive cost position from Singapore for serving Chicago and Toronto, even as vessel upsizing occurs on Transpacific - but will need to continue investment in facilities ▪ The results assume that Vancouver can efficiently handle regular ships calling of around 14,500 TEU, on average Built-Up Costs for Longer-Term, 2028: Similar Output Results of Competitive Vancouver Especially considering further increases in average sizes of ships, it is clear that Vancouver remains a highly cost-effective port option for a range of key inland locations - port’s challenge is to ensure it provides sufficient capacity and efficient intermodal rail

Shipping Costs Identify Routes to be Stevedoring/Port Road or Rail to/from Major Cost Conclusions Dues Transport Served Markets

▪ The same analysis was completed for Shanghai but with anticipated average ship sizes longer-term to 2028 and beyond. Cost Comparisons for Shipments ex Shanghai by Port in 2028, in US$/FEU

▪ The assessment concludes that the average size of ship calling frequently to the Pacific 3500 Gateway region will be around 14,500 TEU. 3000 ▪ Once again, Vancouver is highly competitive and ranked highly for Chicago, Toronto and for Memphis 2500 216 ▪ Increase in vessel size accommodated at Los Angeles and Long Beach, has improved its 2000 position, marginally, but there is still a US$46 saving for each container using Vancouver and avoiding the San Pedro ports for all Chicago cargo. 1500 Top 3 Most Cost-Effective Routings ex Shanghai 1000 Rank Chicago Toronto Memphis Montreal Akron 500 1 Vancouver NY LA NY NY

2 NY Norfolk Vancouver Norfolk Norfolk 0 Chicago Toronto Memphis Montreal Akron 3 LA Vancouver Savannah Halifax Savannah Vancouver P. Rupert Seattle Tacoma LA Savannah Norfolk NY Halifax Key Conclusions ▪ Vancouver will maintain a very strong competitive cost position from Shanghai Note: Seattle and LA/LB are not included for transport costs to Toronto and Montreal due to a lack of intermodal services available, a lack of cargo moving to these areas for serving Chicago and Toronto as vessel upsizing occurs on Transpacific - and a need for cross-border trucking costs (data which is unavailable) but will need to continue investment in facilities ▪ Analysis shows that while ship economies of scale and port handling costs are important, it is the inland portion that is the crucial, driving cost factor Conclusions - Vancouver Will Remain a Competitive Cost Option for Key Discretionary Areas Vancouver remains cost efficient compared with competing ports in the US and Canada particularly for inland destinations of Chicago, Toronto and Memphis

▪ Vancouver remains cost efficient compared with competing ports in USA and Canada • Frequency, reliability and capacity of intermodal services – particularly for distances of particularly for inland destinations of Chicago, Toronto and Memphis, although the >500km it is likely that the containers will be moved from the quay via rail. In order not access of bigger vessels into LA has improved its performance in all instances from to lose the benefit of a quick discharge on the quayside, it is imperative that the rail Singapore and Shanghai. providers have the necessary capacity and frequency of services to ensure that the containers are not left waiting for a connection. ▪ For units destined to Montreal and Akron, NY/NJ terminals continue to offer the most cost-effective routes. • Frequency, reliability and capacity of road haulage – the same is true for road haulage options for distances <500km. ▪ Although larger vessels are expected to be deployed on the Trans-Pacific services in both the short and long terms, the overall result of the cheapest option, remains more • Further volume discounts are also possible to offer to major clients in order to reduce or less the same, proving that the primary aspect of the built-up cost calculation their built-up costs and guarantee some core port volumes. remains the inland haulage costs, rather than any deep-sea saving of attracting and deploying larger tonnage. Invariably, the destinations favour the closest facilities in terms of cost-effectiveness. 217 ▪ The only exception is the size of vessels accommodatable in LA, which has improved the ranking of the port for all destinations over time, although in reality the cost differential with other competing ports including Vancouver remains marginal.

▪ Although this Section has concentrated on the cost effectiveness of various cargo Key Conclusions routings, it is important to stress that this is not the only factor that shipping lines will assess in order to determine which ports they serve, although in truth these too are also driven by financial requirements, because of the expensive nature of the ULCSs ▪ Vancouver remains cost efficient compared with competing ports in the US and they operate: Canada, including for inland destinations of Chicago, Toronto and Memphis

• Terminal efficiency, i.e. the number of containers that can be handled per hour. This ▪ Although larger vessels are expected to be deployed on Transpacific services in affects the amount of time spent in port and therefore the cost of a port stay. The both the short and long terms, the overall result of the cheapest option remains more productive a port can be on a regular and reliable basis, the cheaper the port largely constant, proving that the primary aspect of the built-up cost calculation stay and also the slower a vessel needs to sail between ports to meet the next remains the inland haulage costs, rather than any deep-sea saving berthing window, giving further fuel savings. ▪ The challenge for Vancouver will be to ensure that it can continue to offer • Customs clearance – it is again important to ensure that once a container has been infrastructure that can support the transport cost position it enjoys - water depth discharged, it is not delayed unnecessarily with customs and security checks that for large ships, berthing space, efficient load/discharge operations, good delay the final delivery date/time of a consignment, which could (depending on the intermodal rail connectivity/service/prices more discretionary hinterlands commodity) effect the output of a factory production line. Key Conclusions - Built-Up Costs Confirms Competitiveness of Vancouver Vancouver is highly competitive to inland discretionary markets - its strong historic volume growth helps to prove this conclusion. Moving forward, it is very reasonable to assume that volumes to more distant markets will continue to expand due to cost effectiveness

Strengths Weaknesses Opportunities Threats

▪ Vancouver remains cost efficient ▪ Increasing ship sizes to 18,000 TEU to • Ability of Vancouver to compete with ▪ Prince Rupert could potentially adjust compared with competing ports in US LA/LB will lower some element of overall Memphis is key - port is either second or handling costs to compete, if necessary and Canada. cost - but it is not a substantial third most cost competitive US difference in total costs population moving more southerly will ▪ Longer-term, Vancouver as a port will ▪ Vancouver is the lowest cost option for ensure this location remains important to become more congested, so lack of Chicago - and position expected to overall demand capacity expansion a big risk and needs remain unchanged in future to be avoided • Vancouver expansion will enable a ▪ Vancouver also competitive (within three continuation of cost-effective transport ▪ CN remains incentivised to continue to 218 cheapest ports options) for Toronto and services to these key inland locations support Prince Rupert with efficient, Memphis cost-effective intermodal rail services

▪ Both Pacific Gateway ports benefit from excellent intermodal rail service

▪ Key discretionary markets will continue to represent key locations for Vancouver to serve 219

Section 6: Container Sector SWOT Analysis & Influencing Factors Introduction to Container Sector SWOT Analysis and Influencing Factors Important to generate a clear understanding of the potential for VFPA and West Coast Canadian ports to continue to act as gateways for traffic - essential that the appropriate strategy is in place to maximise the volume trends and future potential

▪ It is known that import containers to US destinations have been a growing market for Provision of In-Depth SWOT of Vancouver’s Terminals vs. Competing Ports VFPA in recent years.

▪ The US Midwest remains a key market to serve for all North American ports. Strong competition exists with the likes of Los Angeles/Long Beach, together with major East Coast ports, including New York/New Jersey, Virginia, Charleston and Savannah to gain a share of this largescale discretionary market. ▪ Therefore, it is important to generate a clear understanding of the potential for VFPA Port and West Coast Canadian ports to continue to act as gateways for this traffic in order VFPA to ensure that the appropriate strategy is in place to maximise the recent volume Competition - trends. Terminals infrastructure ▪ However, it is also necessary to take into account other potential factors of note that could influence the competitiveness of VFPA and in doing so the volume of containers 220 handled. These items will be addressed on a qualitative and (where possible) quantitative basis and will include: ▪ Exchange rate fluctuations. ▪ Lasting impacts of continued working disruptions at US West Coast ports. ▪ Potential changes to US container imports across the border with Canada (import duties) ▪ COVID-19 Markets Other factors served - - i.e. trade costs, access issues etc. Summary of Competitive Position for Pacific Gateway Ports and Pacific Northwest Developing additional capacity will be the challenge for Pacific Gateway ports - Sea-Tac has more limited ongoing investment in infrastructure but is less able to attract discretionary cargo

Port Costs Infrastructure Investment Key Conclusions

Vancouver • Highly competitive, especially for • Good current facilities and • Capacity issue must be resolved • Good facilities, location and US Midwest & Central Canada infrastructure especially Deltaport in current decade operation. hinterlands • Recent rail investment at Deltaport • VFPA estimated date for RBT2 • Arguably, some of the most • Must ensure ability to successfully • Additional capacity needed – estimated at 2029 for Phase 1 - efficient and effective intermodal receive 14,500 TEU ships as congestion before early 2020s essential this additional capacity is services to Canada and the US these units enter service to likely developed to keep pace with • Scope for additional container maintain competitive costs to • Some existing transload facilities demand volumes, but Roberts Bank consuming regions which supports activity (albeit • GCT DP4 (extension to existing capacity must be developed transloading is lower than in the berth) is another has major • Vancouver benefits from strong US) environmental issues that look local market export cargo activity highly challenging • DPW Centerm and GCT Vanterm 221 offering capacity programmes in the shorter-term

Prince Rupert • Effective cost option for US • Short-term capacity is good at a • DP World recently delivered in • Some liner customer Midwest and discretionary modern terminal expansion - with further diversification is occurring markets • Potential to increase further, up to investment plans expected • Strong reliance on CN & Cosco, • Strategy of getting containers onto 4.0 million TEU per annum • Development of transload facilities • A competitive option for the intermodal system more could see additional market discretionary markets quickly due to shorter sailing time demand • Further terminal expansion is effective planned - will be needed as good growth occurring at facility

Seattle-Tacoma • Less competitive, due to US • New T5 at Seattle will help to • Ongoing investment, but • Struggles to grow discretionary railroad activities which have a receive larger ships - but no challenges generally beyond port traffic - Pacific gateway more cost greater focus on other guarantee they will call for railroad access effective and Canadian railroads commodities than intermodal • Longer-term plans to reduce 9 have stronger intermodal focus • Seeing share of Pacific North terminals to 4 larger facilities - but than US counterparts West market shifting more no timing estimates yet towards Canadian Pacific Gateway ports Summary Competitive Position of Primary Ports Competing for Discretionary Markets Additional main competitors to Vancouver for US Midwest cargo summarised

Port Costs Infrastructure Investment Key Conclusions

Los Angeles / Long Beach (San • More expensive than Vancouver • Large terminals, many with carrier • Continues as part of ongoing • Very strong local California market Pedro) • Introduction of automation - such interest masterplan projects - i.e. Middle will always entice ships to call as at LBCT - can help reduce • Carriers bring volumes and need Harbor in Long Beach • Retain critical mass, will always be operating costs to guarantee berthing access at all ‘must-call’ ports for largest ships • Impacted by less competitive US times • Will always serve discretionary railroads markets • Likely to be severely impacted by COVID-19

NY/NJ • Less competitive • Good quality facilities • Water depth, Bayonne Bridge – • Remain a ‘must-call’ port • Critical mass of local consumption • GCT Bayonne offers best location but strong reliance on individual • Will need capacity in the 2020s markets will ensure a need to call in harbour and will soon have terminals too • Slow, bureaucratic organisation Greenville Yard Longer-term capacity expansion 222 • programme unknown

Virginia • Cost effective to Midwest • High-quality facilities • Continues to invest - NIT South • Small local hinterland remains the • Highly-reliant on Norfolk Southern • Capacity available and expansion Yard being converted to semi- issue potential exists automated • Facilities and rail services very good • Most expensive ECNA port for terminal handling activities

Savannah • Cost effective at port - reliant on • High-quality, despite river • Investment in rail and DC’s • A strong competitor for rail, hence Mega-Rail project location/tidal reliance continues discretionary markets - albeit more • SHEP project due for completion • Garden City terminal capacity to the lower US Midwest states and in 2020 and will allow ships of be reached by end of next decade not Chicago over 14,500 TEU to call - region will need Jasper County to be progressing Qualitative Evaluation of Competitive Factors Endorses Vancouver’s Market Position (I) While not all factors are of equal weight and vary in significance between customers, this assessment if indicative of the qualitative evaluation undertaken by shipping lines and shippers of cargo when evaluating port choice and terminal investment

▪ Vancouver ranks highly in this qualitative assessment, in almost all sectors: Relative Competitive Position of VFPA vs Pacific West Coast Ports

▪ Physical Capability & Planned Capacity Developments: VFPA P. Rupert Sea-Tac San Pedro ▪ Vancouver - Very good facilities for ship size accessibility and available capacity – particularly at Deltaport, but must develop RBT2 project to maintain effectiveness Infrastructure & terminal and avoid congestion. capabilities **** **** *** ***** ▪ Sea-Tac - Less deepwater capacity and a more fractured terminal structure and T5 is only major planned investment. Planned capacity ***** ***** ** **** ▪ Prince Rupert - recent investment made by then new owner, DP World, with developments known future plans, albeit remain unconfirmed and will bring some challenges to Productivity of terminals develop. **** **** *** *** ▪ San Pedro - largest terminals on the Pacific Coast, with a substantial critical mass of volumes and customers, with large local markets to serve. Middle Harbor in Delivered costs to US 223 Long Beach is the major terminal capacity project, but continued reluctance to Discretionary Markets **** **** *** *** embrace automation continues. Intermodal capacity ▪ Productivity factors: **** **** *** **** ▪ Vancouver - Good use of land and operating density at terminals Import/export balance ▪ Prince Rupert - Traditionally operated at higher levels per crane, so has been an ***** ** *** **** area needing improvement Local demand ▪ Sea-Tac - Needs to improve utilization, not helped by the use of chassis at many **** ** **** ***** US terminals, especially on the Pacific West coast Existing customer base ▪ San Pedro - fully aware of the need to improve productivity as a solution instead of simply looking to build further terminals at a much higher cost. Achieving these **** **** ** ***** objectives will not be without challenges, especially with regard to the unionised workforce.

Total 34 29 23 33

% 85.0% 72.5% 57.5% 82.5% Qualitative Evaluation of Competitive Factors Endorses Vancouver’s Market Position (II) While not all factors are of equal weight and vary in significance between customers, this assessment if indicative of the qualitative evaluation undertaken by shipping lines and shippers of cargo when evaluating port choice and terminal investment

▪ Vancouver ranks highly in this qualitative assessment, in almost all sectors: ▪ Import/Export Balances & Local Demand: ▪ ▪ Cost Levels / Delivered Costs to Discretionary Markets in Canada & US: In contrast to the Californian ports, the balance between imports and exports in the Pacific Gateway and Pacific Northwest regions is considerably more ▪ Vancouver and Prince Rupert enjoy stevedoring cost advantages compared to positive – with this position generally helping to ease the problems associated Sea-Tac, due to generally lower cost structures. Exchange rates remain a factor. with repositioning empty containers. ▪ Pacific Gateway ports are highly competitive for Toronto as a representative ▪ Vancouver enjoys a relative advantage in contrast to both Sea-Tac and Prince distribution centre for eastern Canada and Chicago as an indicative option for the Rupert with a much more balanced profile. There are major existing and Upper Midwest. expanding containerised export opportunities for Vancouver and this will be a ▪ Sea-Tac generally enjoys a competitive cost structure on these hauls in contrast to more important driver than will be the case for competing ports. California ports, but the Canadian ports remain a more cost-competitive alternative. ▪ Each major port on the west coast has a strong local market – with the ▪ San Pedro is generally quite cost competitive and offers very high volumes of exception of Prince Rupert which is in an isolated location. Southern California potential cargo to transportation providers, while the sizeable local demand will remains a massive local market and will always underpin demand for the two always entice shipping lines to use these ports, with discretionary market traffic ports located in this state. therefore arriving on the same vessels. This position will not change over the 224 ▪ Existing Customer Base: forecast period. Terminal operators are generally serving ships in which their own companies have an interest. ▪ Vancouver’s customer base diversity has improved in recent years, while prince Rupert has moved from relying on just a single customer to seeing ▪ Intermodal Capacity: calls from the major alliance operators. ▪ Sea-Tac hampered by a lack of available on-dock rail capacity and – more ▪ Seattle and Tacoma are generally well-represented but not as much as the importantly – by congestion linking the ports with the transcontinental mainlines. San Pedro complex which will always be a “must-call” in any Transpacific liner These difficulties have declined in recent years as investment has been stepped- routing. up and also as volumes have stagnated, certainly not helped by issues of capacity for intermodal trains having to exit the local mountainous terrain between Everett to Key Conclusions: Spokane via Stevens Pass. Current access for Canadian National and Canadian Pacific in serving Port Metro Vancouver is not impacted by these restrictions and is less capacity constrained. ▪ In this qualitative exercise, Vancouver scores highly - it offers good ▪ Vancouver is served by two transcontinental lines, thus offering flexibility and infrastructure, capacity and cost structures security – Prince Rupert is well-served by CN, but offers users no alternative. ▪ Port competition on the Pacific West Coast remains strong and Vancouver (as ▪ San Pedro doublestack capacity and number of services to/from Southern with all ports) needs to continue to invest to maintain its relative position California is substantial and will continue to be offered by the two US West Coast railroad operators, even if at a slightly higher cost than the Canadian railroads can ▪ Prince Rupert has emerged recently, helped by DP World ownership, as a more provide. Moreover, the amount of intermodal capacity at both Long Beach and Los competitive option, which places even greater emphasis on Vancouver Angeles is expanding. developing the RBT2 facility Summary of Other Factors that Could Impact Vancouver’s Competitiveness There are a range of other important factors that can have some bearing on the competitive position of Vancouver - though, importantly, a number of these are not things that the port authority or its terminal operators can control

▪ There are a range of additional factors that could impact the overall competitiveness of Qualitative Summary of Other Factors to Impact Vancouver Competitiveness Vancouver’s container terminals, as identified. Item Positives Negatives ▪ One important factor here is to understand what VFPA can influence and control and what it has not ability to change. Exchange rate fluctuations* Canadian tariffs/charges Canadian tariffs can be ▪ All of the examples outlined are largely beyond the control of VFPA, can be lower higher ▪ Nevertheless, all of these items can have either a negative or positive impact on the US West Coast disruption Can lead to diversion to Can lead to diversion to Vancouver facilities - as outlined (on a qualitative basis). Pacific Gateway East Coast ▪ This means that the port authority, terminal operators and all stakeholders must Uncertainty in Pacific South Disruption has been less collectively work to mitigate the factors as much as possible at all times every time ILWU-PMA severe recently compared negotiations due - no to 2002 lockout, 2006 slow similar position in Canada down etc. 225 Border factors Lower import duties into Could result in loss of Canada relevant if overall traffic through Vancouver transport costs still lower - to a US port - but other Key Conclusions: US railroads more issues, like Harbor expensive, as are US ports Maintenance Tax for US Exchange rates Can bring positive and negative impact to Vancouver - but ports remains a factor something VFPA has no control over, though it is an ever- Cross border activity is changing factor also a time and logistics US West Coast Historically, US ports on West Coast have a poor issue, that can impact disruption reputation for labour disruption - has improved recently, overall efficiency but remains a potential factor COVID-19 Same for all North Q1 2020 volumes down Border factors Primarily a cost-related issue, though always potential for American ports - supply-chain distribution Vancouver no different to any competing facility COVID-19 All ports in North America in a similar position - not just Vancouver - and too soon to make a definitive judgement Prince Rupert Q1 drop much less Q2 2020 volumes likely to

be down in WSPhandling Used by Note: * deliverables = rates modelling 226

Section 7: Forecast Container Handling Volumes at VFPA Terminals 2020-2060 Section 7: Container Forecast Projections 2020-2060 - to Support VFPA Planning Development these forecasts may be used as part of future infrastructure planning projects and ongoing business development activities - the WSP team has significant experience of working with VFPA in these areas, based on previous project work

Section 7: Forecast Container Handling Volumes at VFPA Terminals 2020-2060 Overview of Forecasting Process - from Total North America Volumes to Vancouver Share by Terminal to 2060 ▪ Container forecasts for VFPA to 2060 will be provided under different development scenarios. These forecasts may be used as part of future infrastructure planning projects and ongoing business development activities. The WSP team has significant experience of working with VFPA in these areas, based on previous project work.

▪ The projections will outline growth and market capture for VFPA container facilities in North America, with projections on Base Case, Low Case and High Case scenarios: ▪ Container traffic in both TEU and number of containers. ▪ Inbound and outbound (import/export) traffic. ▪ Laden and empty traffic. Share to ▪ Share of market for import containers to key US locations – the size of the market Total North Share of Share to Share to Vancouver Vancouver served by VFPA noted and share retained compared to key competitors identified. America Pacific Pacific Pacific Terminals 227 & Prince volumes West Coast North West Gateway Share ▪ Estimated degree of containerisation for major export commodity groups, including Rupert specific emphasis on commodities being exported from Western Canada. ▪ Forecast moves through Intermodal Yards and truck gates at VFPA terminals. ▪ Each year of the projections will be displayed separately.

▪ In addition, the following will also be provided as part of the forecasting process: ▪ Total container volumes for the West Coast of North America and Pacific Northwest region. ▪ Total container volumes split for Vancouver and Prince Rupert – with a noted ▪ Model will include metrics supporting “early warning indicators” - i.e. short term supply-demand balance taking into account known expansion plans. economic risks and longer-term if capacity issues may be likely. These will be agreed upon with VFPA in advance of delivery of the draft model. ▪ Role of container pricing and impact on supply-demand balance in Pacific Gateway and wider US Pacific North West region ▪ VFPA has outlined that part of the forecast process should address probability ▪ Ability to isolate impacts of selected important scenarios in the model (and analysis using stochastic methodology. To address this part of the deliverable, WSP corresponding commentary in the report) such as decline of China as world’s will use traditional scenario-based modelling as well as a Monte Carlo Analysis based manufacturing centre/volumes moving to East Coast and/or other competing ports, approach using At Risk software. This will allow statistical distribution to be placed Prince Rupert refocusing on the Canadian market, and short-term events such onto input parametres to assess how the uncertainty in the input parametres will COVID-19, rail blockade and labour disruption. These factors can be grouped into generate a range of outcomes relating to the VFPA forecasts. categories and/or by level of impact (l/m/h). ▪ The WSP team has completed Monte Carlo Risk analysis for VFPA in a previous iteration of container forecasts. 228

Container Forecasts: Bottom-Up VFPA & PR Forecasts Real GDP Growth in North America – Continued Short-to-Medium Term but COVID-19 Impact COVID-19 impact is widely expected to be restricted to the short term, with significant negative GDP movements in 2020 offset to a degree by extra-ordinary growth in 2021, after which growth is expected to return to pre-pandemic trajectories.

▪ Real GDP growth has been maintained in both the US and Canada since the Global Financial Real GDP Growth - North America (%) Crisis was resolved during 2009. This has remained within a range of +0.7% in Canada, 2015, and +3.1%, Canada, 2011. 6.0%

▪ The WSP volume forecast model disaggregates inbound TEU flows based on granular territory 4.0% origin data (presented as flows to Western Canada, Other Canada, and US), and outbound flows by trade partnerships at a national level (presented as outbound flows from the same 2.0% origins). 0.0% ▪ Using GDP as the explanatory variable in forecasts therefore requires equally granular input data. Territory-by-territory GDP data has been sourced from Statistics Canada and analysed -2.0% outbound trade proportions by trade partner in order to robustly calculate weighted GDP values to drive outbound flow volumes. -4.0% ▪ Regional GDP forecasts are not reliably forecast, and have been derived from a calculation of Anticipated COVID-19 Impact 229 historical growth rates versus that of Canada overall, with Western Canada growth to be -6.0% Canada + 0.46%, and Other Canada to be Canada -0.26% from the following: -8.0%

▪ 2010-2019 CAGR: Canada 2.12%

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2015 2013 ▪ 2010-2019 CAGR: Western Canada 2.57% 2011 ▪ 2010-2019 CAGR: Other Canada 1.86% Western Canada Other Canada Canada United States Canadian GDP Growth Versus West & Other Canada, Index Values 2010=1 Real GDP Growth Values 1.3 2020 2021 2022 2023 2024 2035 2050 1.2 Western Canada -5.7% 4.7% 2.2% 2.2% 2.2% 1.9% 1.7% 1.1 Other Canada -6.5% 3.9% 1.5% 1.4% 1.4% 1.3% 1.2% Canada -6.2% 4.2% 1.7% 1.7% 1.7% 1.5% 1.4% 1 United States -5.9% 4.7% 1.6% 1.6% 1.6% 1.5% 1.3% 0.9 CAN Export 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Partners -0.3% 7.3% 4.7% 4.7% 4.6% 2.5% 2% USA Export Western Canada Other Canada Canada Partners -1.2% 6.1% 3.9% 3.9% 3.9% 2.0% 1.8% NB: various forecast sources have been considered, our base case applies the most recent IMF World Economic Outlook (April 2020) for 2020 & 2021 growth values, and the most recent medium-term outlook (October 2019) for values from 2022 to 2024 inclusive. From 2025 values are manually softened to reflect uncertainty in the production of a conservative forecast. North American GDP and Trade – Multiplier Confirms Close Links will Continue A close link between North American container port demand and GDP development continues, although this is likely to decline slowly over the long-term as the Canadian and US economies continue to mature.

Correlation Analysis Flow-Specific Multipliers Throughout Forecast Phases Medium ▪ Demand for containerised goods and macroeconomic measures such as GDP are Term Long generally highly correlated. In order to test this correlation, we have run regression Short Term Term analyses between historical values of these two variables. The strength is depicted in the R-Squared value which lies between -1 and 1. This may be interpreted in percentage terms as the explanatory variable (GDP) explaining a specific % of the dependent variable (TEU) in the model. The relationship is further explained by the Origin / Destination 2020 2021 2022 2023 2024 >> 2035 >> 2050 >> slope of the line of best fit between the scatter plots: a steeper the upward slope & Flow denotes higher sensitivity of the dependent variable to change in the explanatory Direction variable. This can be visualised on a scatter plot to quickly identify the trends. Western Multiplier Assessment Canada - 0.90 0.90 0.90 0.90 0.90 0.80 0.75 Inbound ▪ ‘Multipliers’ are calculated by dividing growth in one variable over growth in another 230 over the same time period. They are presented as a ratio of the dependent variable Other (TEU) over the explanatory variable (GDP). A multiplier of 1, for example, represents Canada - 1.50 1.50 1.50 1.50 1.50 0.80 0.75 a direct correlation: i.e. GDP growth of 2% translates to 2% growth in TEU. A Inbound multiplier of 2 translates 2% GDP growth to 4% TEU growth. There are a number of external factors which impact the reliability of the multipliers we calculate and the USA - 0.93 0.93 0.93 0.93 0.93 0.80 0.75 relatively small values in question can lead to outliers within the dataset. These are Inbound removed, with the average of all remaining values forming the short term multiplier outlook used in the forecast model.

Applied Multiplier, GDP & TEU Growth Forecast Western ▪ Canada - 0.90 0.90 0.90 0.90 0.90 0.80 0.75 Best practice modelling dictates that growth assumptions should be softened as the Outbound forecast period extends in to the future to account for increasing levels of uncertainty. This is built in to the modelling process via gradual reductions in the applied multiplier Other value throughout three distinct phases: short term, medium term, long term. Canada - 1.36 1.36 1.36 1.36 0.80 0.75 1.36 Outbound Forecast Application

▪ Our volume forecast model disaggregates flows by direction and domestic origin / USA - 0.94 0.94 0.94 0.94 0.94 0.80 0.75 destination, and applies the above steps to each on an individual basis. GDP growth Outbound values used in the model are set out alongside relevant detail on the previous page; all applicable multipliers are set out in the table above-right, and graphed on the following page for ease of comparison. All values are ramped in linear manner between phases. VFPA Multiplier Calculations & Forecast Phases Historical GDP:TEU multipliers since the end of the GFC have been analysed, and anomalous values removed in order to return short term forecast multipliers. In order to reflect uncertainty in future forecast years, multipliers are softened over three phases throughout the forecast period: short term (2020-2025: historical avg. exc. anomalies), medium term (2035-2050: 0.8), and long term (2050 onwards). A summary of the multipliers for each example is also shown in each chart

Western Canada, Inbound Multipliers Other Canada, Inbound Multipliers USA, Inbound Multipliers

6.00 2025 = 0.90 12.00 2025 = 1.50 6.00 2025 = 0.93 2035 = 0.80 10.00 2035 = 0.80 5.00 2035 = 0.80 4.00 2045 = 0.77 2045 = 0.77 8.00 4.00 2045 = 0.77 2050 = 0.75 2050 = 0.75 2050 = 0.75 2.00 6.00 3.00 4.00 2.00 - 2.00 1.00 - (2.00) - (2.00) (1.00)

(4.00) (4.00) (2.00)

2050 2050

2047 2047

2044 2044

2041 2041

2038 2038

2035 2035

2032 2032

2029 2029

2026 2026

2023 2023

2020 2020

2017 2017

2014 2014

2011 2011

2050

2047

2044

2041

2038

2035

2032

2029

2026

2023

2020

2017 2014 231 2011

Western CAN Forecast Multiplier Other CAN Forecast Multiplier USA Forecast Multiplier

Western Canada, Outbound Multipliers Other Canada, Outbound Multipliers USA, Outbound Multipliers

1.50 4.00 2025 = 0.94 2.00 2035 = 0.80 1.00 3.00 1.50 2045 = 0.77 1.00 2.00 2050 = 0.75 0.50 0.50 1.00 - - 2025 = 0.90 - 2025 = 0.94 (0.50) (0.50) 2035 = 0.80 (1.00) 2035 = 0.80 2045 = 0.77 (1.00) 2045 = 0.77 (1.00) 2050 = 0.75 (2.00) (1.50) 2050 = 0.75

(1.50) (3.00) (2.00)

2050 2050 2050

2047 2047 2047

2044 2044 2044

2041 2041 2041

2038 2038 2038

2035 2035 2035

2032 2032 2032

2029 2029 2029

2026 2026 2026

2023 2023 2023

2020 2020 2020

2017 2017 2017

2014 2014 2014

2011 2011 2011

Western CAN Forecast Multiplier Other CAN Forecast Multiplier USA Forecast Multiplier VFPA + Prince Rupert - Loaded Inbound Flows VFPA is expected to continue to serve West Canada, Other Canada and the US hinterlands over the long-term forecast period

VFPA Prince Rupert ▪ Flows in to Canadian regions outside of Western Canada (i.e. flows not to British ▪ Growth in inbound flows transiting Prince Rupert is predominantly driven by the US Columbia + Alberta) are significant to VFPA throughput - contributing 46% of total markets it serves. Volumes destined for the US constitute c.65% of total throughput, inbound TEU in 2019. compared to 14% in to Western Canada, and the remaining 21% to other Canadian regions ▪ While the GDP outlook for this region is lower than that of Western Canada, this is offset by higher observed GDP:TEU multipliers over the analysis period ▪ The differing target markets are driven by the less attractive commercial proposition of flows via Prince Rupert in to major Western Canadian demand centres such as ▪ Our base case analysis assumed no major changes to market shares in the Pacific Vancouver and Calgary. These commercial differentials are negated over the longer North, other than organic changes driven by differing growth rates in markets served. distance flows through cost dilution as well as presence of high quality rail We therefore project VFPA’s market share remaining at c.70% throughout the forecast infrastructure connections between Prince Rupert and the US Midwest. period.

3,000,000 3,000,000

232 2,500,000 2,500,000

2,000,000 2,000,000

1,500,000 1,500,000

1,000,000 1,000,000

500,000 500,000

- -

2060

2058

2056

2054

2052

2050

2048

2046

2044

2042

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2060

2058

2056

2054

2052

2050

2048

2046

2044

2042

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012 2010

Western CAN Other CAN USA Western CAN Other CAN USA

Flow 2010-2019 2020-2022 2022-2035 2035-2050 2050-2060 Flow 2010-2019 2020-2022 2022-2035 2035-2050 2050-2060 W Can 3.7% 3.1% 1.8% 1.4% 1.3% W Can 9.8% 6.8% 3.1% 1.4% 1.3%

O Can 3.7% 4.0% 1.7% 1.0% 0.9% O Can 9.8% 5.4% 2.1% 1.0% 0.9%

CAGRs Growth Forecast Forecast USA 3.7% 2.9% 1.4% 1.1% 1.0% USA 17.4% 5.6% 2.2% 1.1% 1.0% VFPA + Prince Rupert Loaded Outbound Flows Western Canada will remain the largest region for outbound loaded containers, although Other Canada will continue to provide growing volumes too - Prince Rupert throughput expected to remain much lower

VFPA & Prince Rupert ▪ VFPA handles the vast majority of loaded exports transiting the Pacific North - with a market capitalisation of c.87%.

▪ This is driven by similar market forces to those which influence imports, with ready access to major economic centres in Vancouver and Calgary. 90% of these Western Canada exports come from British Columbia, with 10% from Alberta.

▪ Export volumes are driven by forecast economic growth in export partner nations - this is predominantly driven by China (c.40% of total exports), with Japan taking 15% and India 7%.

▪ Prince Rupert loaded exports are very small, with reverse flows in its import hinterlands likely to be distributed across other facilities to access wider markets. VFPA Prince Rupert 3,000,000 3,000,000

2,500,000 2,500,000

233 2,000,000 2,000,000

1,500,000 1,500,000

1,000,000 1,000,000

500,000 500,000

- -

2060

2058

2056

2054

2052

2050

2048

2046

2044

2042

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2060

2058

2056

2054

2052

2050

2048

2046

2044

2042

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012 2010

Western CAN Other CAN USA Western CAN Other CAN USA

Flow 2010-2019 2020-2022 2022-2035 2035-2050 2050-2060 Flow 2010-2019 2020-2022 2022-2035 2035-2050 2050-2060 W Can 2.0% 5.4% 3.2% 1.7% 1.5% W Can 4.2% 2.0% 2.0% 1.7% 1.5%

O Can 2.0% 8.2% 4.3% 1.7% 1.5% O Can 4.2% 4.2% 3.0% 1.7% 1.5%

CAGRs Growth Forecast Forecast USA 2.0% 4.7% 2.8% 1.4% 1.3% USA 9.3% 4.7% 3.1% 1.4% 1.3% VFPA + Prince Rupert Empty Flows Empty container transportation is necessary to reposition containers on trades with unequal import and export volumes. After assessing the logistics gap, steady volumes relative to loaded flows are held constant throughout the forecast period

VFPA Prince Rupert 1,500,000 1,500,000

1,300,000 1,300,000

1,100,000 1,100,000

900,000 900,000

234 700,000 700,000

500,000 500,000

300,000 300,000

100,000 100,000

-100,000 -100,000

2060 2060

2058 2058

2056 2056

2054 2054

2052 2052

2050 2050

2048 2048

2046 2046

2044 2044

2042 2042

2040 2040

2038 2038

2036 2036

2034 2034

2032 2032

2030 2030

2028 2028

2026 2026

2024 2024

2022 2022

2020 2020

2018 2018

2016 2016

2014 2014

2012 2012

2010 2010

Western CAN Other CAN USA Western CAN Other CAN USA

Flow 2010-2019 2020-2022 2022-2035 2035-2050 2050-2060 Flow 2010-2019 2020-2022 2022-2035 2035-2050 2050-2060

Inbound -7.7% 3.5% 1.6% 1.1% 1.0% Inbound -26.3% 5.8% 2.3% 1.1% 1.0%

CAGRs Growth Forecast Forecast Outbound 7.6% 6.3% 3.6% 1.7% 1.5% Outbound 12.2% 3.9% 2.8% 1.6% 1.4% Share of Container Market to VFPA and Prince Rupert to 2060 - VFPA Share is Rising, Slowly Overview of total bottom-up forecast outputs for VFPA and Prince Rupert ports, using Base Case projections

8,000,000 90%

7,000,000

85% 6,000,000

5,000,000 80%

4,000,000 235

75% 3,000,000

2,000,000 70%

1,000,000

- 65%

2060 F 2060

2059 F 2059

2058 F 2058

2057 F 2057

2056 F 2056

2055 F 2055

2054 F 2054

2053 F 2053

2052 F 2052

2051 F 2051

2050 F 2050

2049 F 2049

2048 F 2048

2047 F 2047

2046 F 2046

2045 F 2045

2044 F 2044

2043 F 2043

2042 F 2042

2041 F 2041

2040 F 2040

2039 F 2039

2038 F 2038

2037 F 2037

2036 F 2036

2035 F 2035

2034 F 2034

2033 F 2033

2032 F 2032

2031 F 2031

2030 F 2030

2029 F 2029

2028 F 2028

2027 F 2027

2026 F 2026

2025 F 2025

2024 F 2024

2023 F 2023

2022 F 2022

2021 F 2021

2020 F 2020

2019 A 2019

2018 A 2018

2017 A 2017

2016 A 2016

2015 A 2015

2014 A 2014

2013 A 2013

2012 A 2012

2011 A 2011 2010 A 2010

VFPA Total Throughput PR Total Throughput VFPA Market Share VFPA & Pacific Gateway (West Canada) - Summary of Supply & Demand Overview of demand growth in line with total capacity for the Pacific Gateway (West Canada) region, with total throughput for VFPA and Prince Rupert shown for the forecast period

10,000,000

9,000,000

8,000,000

7,000,000

6,000,000

5,000,000 236

4,000,000

3,000,000

2,000,000

1,000,000

-

2060 F 2060

2059 F 2059

2058 F 2058

2057 F 2057

2056 F 2056

2055 F 2055

2054 F 2054

2053 F 2053

2052 F 2052

2051 F 2051

2050 F 2050

2049 F 2049

2048 F 2048

2047 F 2047

2046 F 2046

2045 F 2045

2044 F 2044

2043 F 2043

2042 F 2042

2041 F 2041

2040 F 2040

2039 F 2039

2038 F 2038

2037 F 2037

2036 F 2036

2035 F 2035

2034 F 2034

2033 F 2033

2032 F 2032

2031 F 2031

2030 F 2030

2029 F 2029

2028 F 2028

2027 F 2027

2026 F 2026

2025 F 2025

2024 F 2024

2023 F 2023

2022 F 2022

2021 F 2021

2020 F 2020

2019 A 2019

2018 A 2018

2017 A 2017

2016 A 2016

2015 A 2015

2014 A 2014

2013 A 2013

2012 A 2012

2011 A 2011 2010 A 2010

VFPA Total Throughput PR Total Throughput VFPA Capacity Pacific Gateway Total Capacity VFPA Rail vs Truck Movements By 2019, onward transit of imports and inbound cargoes for export had both hit an equilibrium of c.45% via rail, 55% via road.

▪ By 2019, onward transit of imports and inbound cargoes for export had both hit an equilibrium of c.45% via rail, 55% via road.

▪ We have not conducted a detailed review of the inland markets as part of this study, and therefore project this latest known value throughout the forecast period in order to indicate the likely demand for road and rail transit in the port’s vicinity.

Imports by Mode of Onward Transit, TEU Exports by Mode of Onward Transit, TEU

3,000,000 4,500,000

4,000,000 2,500,000 3,500,000

2,000,000 3,000,000 237

2,500,000 1,500,000 2,000,000

1,000,000 1,500,000

1,000,000 500,000 500,000

- -

2076 2076

2073 2073

2070 2070

2067 2067

2064 2064

2061 2061

2058 2058

2055 2055

2052 2052

2049 2049

2046 2046

2043 2043

2040 2040

2037 2037

2034 2034

2031 2031

2028 2028

2025 2025

2022 2022

2019 2019

2016 2016

2013 2013

2010 2010

Imports - Rail Imports - Road Exports - Rail Exports - Road 238

Container Forecasts: Stochastic Modelling Assessment Stochastic Model - Approach Probabilistic Model Method

▪ A stochastic model has been developed to test the sensitivity of model output to Sample model simulation showing 10,000 model iterations and forecast TEU uncertain future variables. growth

▪ The two key model drivers are future GDP growth, and its relationship to TEU (i.e. the ‘multiplier’). Our model contains a detailed assessment of these two variables across all 6 loaded flows: ▪ Inbound > Western Canada; P90 ▪ Inbound > Other Canada; P50 ▪ Inbound > United States; ▪ Outbound > Western Canada; P10 ▪ Outbound > Other Canada; and ▪ Outbound > United States. 239 ▪ The methodology applied is as follows: ▪ For each line we have assigned a low case, most likely and high case for each value. The low and high values used in the model are based on analysis of Sample growth forecast distribution curve (red histogram), and cumulative historical fluctuations in each variable; the ‘most likely’ is taken from the model 180probability curve (overlaid grey ‘S’ curve’) 12000 base case assumption. 160 10000 ▪ The model then applies a distribution that assigns a probability for each possible 140 value within the range occurring. In our model we have used the PERT 120 8000 Distribution, which is a skewed bell curve. 100 ▪ 10,000 simulations for each variable in each model year are run, as per the 6000 example above-right. 80 60 4000100% ▪ From these simulations, we calculate the median, P10, and P90 values of forecast 40 TEU growth on every flow, in every given year and plot the range versus our base 2000 case forecast. 20 ▪ The results can then be summarise in to CAGR values over the course of the 0 0

forecast period, and presented through a probability curve showing the distribution

3.3%

3.2%

3.1%

2.9%

2.8%

2.7%

2.6%

2.5%

2.3%

2.2%

2.1%

2.0%

1.9%

1.7%

1.6%

1.5%

1.4%

1.3%

1.1%

1.0%

0.9%

0.8%

0.6%

0.5%

0.4%

0.3%

0.2%

0.0%

-0.1%

-0.2%

-0.3%

-0.4% -0.6% of likely outcome values and cumulative probability to achieve the estimate. An -0.7% example output is included below-right. Probability Distribution Of 30 Year Forecast Compound Growth Model distribution outputs for each flow are set out below. The top of the S-Curve denotes 100% probability of values beneath that point along the X-Axis. Histograms denote specific distributions of 30-year compound growth factors

Western Canada, Inbound Other Canada, Inbound USA, Inbound 200 12000 180 12000 200 12000 180 160 180 10000 10000 10000 160 140 160 140 8000 120 8000 140 8000 120 120 100 100 6000 6000 100 6000 80 80 80 4000 60 4000 60 60 4000 40 40 2000 2000 40 2000 20 20 20

0 0 0 0 0 0

3.2%

3.0%

2.8%

2.5%

2.3%

2.1%

1.9%

1.6%

1.4%

1.2%

1.0%

0.7%

0.5%

0.3%

0.1%

1.8%

1.7%

1.6%

1.4%

1.3%

1.2%

1.0%

0.9%

0.8%

0.6%

0.5%

0.4%

0.3%

0.1%

0.0%

2.6%

2.5%

2.3%

2.2%

2.0%

1.9%

1.7%

1.6%

1.4%

1.3%

1.1%

1.0%

0.8%

0.7%

0.5%

0.4% -0.2%

-0.4% 0.2% -0.1% 240 -0.3%

Western Canada, Outbound Other Canada, Outbound USA, Outbound 200 12000 200 12000 200 12000 180 180 180 10000 10000 160 10000 160 160 140 140 140 8000 8000 8000 120 120 120 100 6000 100 6000 100 6000 80 80 80 4000 4000 60 4000 60 60 40 40 40 2000 2000 2000 20 20 20

0 0 0 0 0 0

2.9% 2.7%

2.7% 2.5%

2.6% 2.4%

2.4% 2.3%

2.3% 2.1%

2.1% 2.0%

1.9% 1.9%

1.8% 1.7%

1.6% 1.6%

1.4% 1.4%

1.3% 1.3%

1.1% 1.2%

1.0% 1.0%

0.8% 0.9%

0.6% 0.8%

0.5% 0.6%

0.3% 0.5%

3.2%

3.0%

2.9%

2.7%

2.6%

2.5%

2.3%

2.2%

2.0%

1.9%

1.8%

1.6%

1.5%

1.3%

1.2%

1.1% 0.9% Risk-Weighted Forecast Outputs Risk-weighted forecast outputs (P10, Median, and P90) are set out below for each flow; and plotted against our unadjusted base forecast for comparison

Western Canada, Inbound Other Canada, Inbound USA, Inbound

1000000 1400000 800000 900000 1200000 700000 800000 600000 700000 1000000 500000 600000 800000 500000 400000 600000 400000 300000 300000 400000 200000 200000 200000 100000 100000

0 0 0

2049

2049

2046

2046

2043

2043

2040

2040

2037 2037

2034 2034

2031 2031

2028 2028

2025 2025

2022 2022

2019 2019

2016 2016

2013 2013

2010 2010

2049

2046

2043

2040

2037

2034

2031

2028

2025

2022

2019

2016 2013 241 2010

Western Canada, Outbound Other Canada, Outbound USA, Outbound

1600000 1200000 250000 1400000 1000000 200000 1200000 800000 1000000 150000 800000 600000 600000 100000 400000 400000 200000 50000 200000

0 0 0

2049

2049 2049

2046

2046 2046

2043

2043 2043

2040

2040 2040

2037

2037 2037

2034 2034 2034

2031 2031 2031

2028 2028 2028

2025 2025 2025

2022 2022 2022

2019 2019 2019

2016 2016 2016

2013 2013 2013

2010 2010 2010 Aggregated Stochastic Summary Summarised stochastic model outputs for loaded flows at Port of Vancouver

Total Loaded Inbound Total Loaded In + Outbound

3500000 8,000,000 3000000 2500000 7,000,000 2000000 1500000 1000000 6,000,000 500000 0 5,000,000

Base Forecast Historical P10 P50 P90 242 4,000,000

Total Loaded Outbound 3,000,000 3,000,000 2,500,000 2,000,000 2,000,000 1,500,000 1,000,000 1,000,000 500,000 0 0

Base Forecast Historical P10 P50 P90 Base Forecast Historical P10 P50 P90 243

Container Forecasts: Scenario Testing Macro-Economic Scenarios – Underlying Assumptions For Low, Base & High-Case Growth The essential conditions for the three growth options generating long-term economic growth forecasts in this Study are shown

1: High-Case Scenario: Open and Green 2: Base-Case Scenario: Open/Mixed 3: Low-Case Scenario: Protectionist Downturn

Economic growth revamps over the period with increased Stable economic growth is maintained over the period (with Economic growth enters negative territory over 2020- domestic production, and international cohesion which occasional slowdowns, such as COVID-19) and the general 2021.This based on increasing protectionism and the improves international trade and environmental cooperation; post 2010 pattern is repeated; protectionist measures stable underlying Debt Crisis, plus COVID-19; environment suffers after initial step up in tariffs and barriers • Credit availability is largely sustained and debt repayment • Credit availability is curtailed in the short term as a result of is maintained at manageable levels; • Credit availability is maintained, but investment is focused global financial dislocation; on projects in the Developed World; • A return to long-term growth of US economy is sustained, • Long-term growth of US economy on average is sustained, with this accompanied by some continued protectionist • Long-term growth of US economy is sustained at a lower but short term contraction or stagnation drives protectionist policies; level, with selected tariffs on key commodity sectors – pressures; directly impacting containerised goods; • Impact of COVID-19 strong in 2020 with bounce-back • Impact of COVID-19 strong in 2020 with bounce-back realised in 2021 and return to previous growth trajectories • Impact of COVID-19 strong in 2020 with bounce-back realised in 2021 and return to previous growth trajectories from 2022 from 2022 244 realised in 2021 and return to previous growth trajectories from 2022 • Economic growth and continued free trade policies in the • Increased focus on protectionism in the EU – the ‘Fortress EU, with some protectionist response. • Limited economic expansion in the EU, with a focus on Europe’ approach; protection of key sectors. National policies dominate; • More flexible economic management within Euro zone, i.e. • Management of the contraction is the key driver of EU centralised debt management; • Lower exports reduce the pace of economic expansion in policy, with further rounds of Quantitative Easing; China and limit the scope for domestic demand growth as • Reform of the Chinese economy permits sustainable a driver; • Chinese economy under severe short-term pressure, with domestic growth and political stability; government spending focused on domestic demand – • Slower deregulation, restructuring and revitalisation of the scope for overseas investment restricted; • Continued deregulation, restructuring and revitalisation of Japanese and Korean economies, resulting in a closer balance in its trade flows; the Japanese and Korean economies, resulting in a closer • Japanese and Korean economies slow sharply, with a balance in its trade flows; focus on domestic demand growth; • Oil price lower as a result of weaker demand (US$40 per barrel), placing economic pressure on oil exporters and • Oil price more stable after COVID-19 (US$60 per barrel), Oil price collapse continues as a result of much weaker limiting the competitiveness of green solutions • permitting continued demand growth in OPEC countries demand (US$20 per barrel). This places severe economic and making green solutions more economic pressure on oil exporters; • Environmental issues important, but not as stressed during occasional economic slowdowns; • Strong focus on meeting environmental targets, with • Environmental issues relegated to secondary status and electrification of heat and transport and decarbonised limited progress is made; electricity generation. • Lower foreign direct investment in emerging and developing economies. • Limited foreign direct investment in emerging and developing economies Matrix for Long-Term Development Impacting Container Volumes The three cases on which long-term economic growth forecasts in this Study - along with the “status quo” option also identified

. Green Economy . High Case 1 Open / Green Economies open as trade war and protectionism rescinds. Global green credentials improve with significant Base Case investment in technology Open / Mixed Relatively open, continuation of current modest growth rate, limited further protectionism and progress with green 245 Economy Carbon on Reliance credentials Protectionist 2 Open . .

Low Case Protectionist / Carbon Increasing protectionist landscape, trade 3 war deepens and near-shoring becomes the norm. Green credentials suffer and there is only limited progress in reducing carbon. Carbon Economy Globalisation & Trade Scenario Tests - Pandemic

▪ Our analysis of the COVID-19 impact has focused on Canadian GDP Impact (Inbound TEU: Destination Canada) US GDP Impact (Inbound TEU: Destination Canada) two key drivers of port demand in the volume model: ▪ GDP impact; and 150.0 150 ▪ Trade impact (modelled via adjustments to 140.0 140 GDP:TEU multipliers) 130.0 130 ▪ Our GDP impact assessment is based on emerging 120.0 120 forecasts developed by the IMF since the pandemic occurred (April 2020) compared to the most recent 110.0 110 iteration published before (October 2019). 100.0 100 ▪ These two growth forecasts are set out as index 90.0 90 values (2017=100) to the right hand side of this page, 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 alongside the volume flow to which they correlate in 246 the volume model. Pre-COVID 19 Post-COVID 19 Pre-COVID 19 Post-COVID 19 ▪ We distil the following conclusions, which are applied to this scenario in the volume model: Weighted Canadian Export Partner GDP Impact (Outbound Weighted US Export Partner GDP Impact (Outbound TEU: Origin Canada) ▪ Stronger impact on net-importers such as Canada TEU: Origin Canada) & US (c.-8% impact), than net exporters 150 150 throughout Asia (c.-4% impact). ▪ A sharp drop-off in year 1; 140 140 ▪ Partial recovery in year 2 with faster-than 130 130 anticipated growth; 120 120 ▪ Return to BAU forecasts from year 3 onwards. 110 110 ▪ We have analysed trends in vessel calls in order to 100 100 attempt to gain an understanding on the relationship between these GDP values, and TEU throughout via 90 90 the multiplier mechanism. 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024

▪ Given the emerging nature of the pandemic, and the Pre-COVID 19 Post-COVID 19 Pre-COVID 19 Post-COVID 19 fact that any softening of multipliers in the event of negative GDP growth would soften the relative change in TEU, we have fixed GDP:TEU multipliers at 1:1 throughout the course of the pandemic impacts. Scenario Tests - GFC

▪ GFC impacts are modelled using a similar Canadian GDP Impact (Inbound TEU: Destination Canada) US GDP Impact (Inbound TEU: Destination Canada) methodology to that of a future outbreak: via adjustments to GDP, and the GDP:TEU relationship 200 160 (i.e. multipliers). 140 150 120 ▪ In order to understand the scale of deviation from 100 GDP trends prior to the GFC, we have run a 3-year 100 80 linear trend forecast model (ETS) throughout the GFC 60 period and compared the impact to actual data. 50 40 ▪ Output are presented to the right hand side of this 20 page as index values (2000=100) to the right hand - -

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2002 2001 they correlate in the volume model. 2000 Canada- Actual Canada-No GFC United States- Actual United States-No GFC 247 ▪ We distil the following conclusions, which are applied to this scenario in the volume model: ▪ Stronger impact on net-importers such as Canada Weighted Canadian Export Partner GDP Impact (Outbound Weighted US Export Partner GDP Impact (Outbound & US (c.-5-8% impact), than net exporters TEU: Origin Canada) throughout Asia (c.-3% impact). TEU: Origin Canada) ▪ Partial recovery in year 2 with faster-than 350 250 300 anticipated growth; 200 ▪ Return to BAU forecasts from year 3 onwards. 250 200 150 ▪ We have analysed trends in vessel calls in order to 150 100 attempt to gain an understanding on the relationship 100 50 between these GDP values, and TEU throughout via 50

the multiplier mechanism. - -

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2001 2001 2000 ▪ As the impact period is so short, we have not been 2000 able to robustly assess a trend between the GFC and GDP:TEU multipliers. Therefore, throughout any Weighted Exports - Origin Canada, TEU- Actual Weighted Exports - Origin US, TEU- Actual modelled future recession we fix multipliers at 1 : 1 as per the future pandemic scenario. Weighted Exports - Origin Canada, TEU-No GFC Weighted Exports - Origin US, TEU-No GFC Scenario Tests - Trade Agreements

▪ This scenario specifically assesses the impact of potential disruption to the USMC 2019 VFPA Containerised Imports & Export Commodities, % of Total Flows trade agreement, an update of NAFTA with several key changes of note: Animal Products, Dairy & Produce 7% ▪ Adjusted ‘de-minimis’ thresholds for low value goods flowing between the nations without taxes ($150CAD for customs, $40CAD for taxes) Automobiles & Parts 9% ▪ Increased North American content of motor vehicles, now 75%. Cement and Related Products

▪ Increased amount of North American steel, aluminium, and glass inputs to motor Chemicals 4% 8% vehicles, now 60%. Coal ▪ Increased quotas for US imports of Canadian & Mexican vehicles, now 2.6m. Consumer & Related Goods 36% ▪ Increased quotas for US imports of Canadian & Mexican auto parts, now 240bn. Grain, Specialty Crops & Feed 27% ▪ Removal of Canadian import restrictions on US Ultra filtered dairy Logs, Posts & Rough Wood ▪ Increased US access to Canadian dairy market, up 3.6% Lumber 21% 248 ▪ The agreement is effective for 16 year initially under the current terms. These may Machinery & Parts 10% be revisited after 6 years and potentially extended further by agreement. Metals 5% 12% ▪ Imports bound for US markets are important sources of volume transiting VFPA and Minerals Prince Rupert terminals. Implementing tariffs would increase the relative cost of Ores & Concentrates importing via these terminals in favour of terminals such as Sea-Tac, LA, and Long Beach which all present viable alternatives. Petroleum Products Potash & Potassium-Based Fertilizers ▪ While exports originating in the US are of lesser importance for VFPA terminals, any increase trade barriers would have a similarly negative impact on volume throughput Processed Food Products 4% at VFPA Terminals. Sulphur ▪ Real impacts are likely to occur along a sliding scale in line with the size of tariffs Woodchips implemented, and the scope of their coverage. In order to accurately model these Woodpulp 22% impacts, a bottom-up assessment on a commodity-by-commodity basis is required. In order to provide a high level proxy for this in the volume model, we have modelled the All Other Fertilizers effect of a 5% reduction in both import and export trades destined for / originating in All Other Forest Products 7% 5% the US transiting through VFPA. All Other Commodities 5%

▪ This scenario is closely tied to that relating to Prince Rupert’s commercial focus -40% -30% -20% -10% 0% 10% 20% 30% 40% turning to Canadian markets insomuch as these changes may force these strategic changes. Imports Exports Scenario Tests - Labour Disruption

▪ Labour disruption has been experienced to varying degrees and for various reasons Sample Disruption Impact: San Pedro Ports, 2014/15 Labour Disruption, Loaded throughout recent history across the North American-West Coast ports. Inbound TEU 8,400,000 22,000,000 ▪ Most notably, LA Long Beach among others were impacted to a material degree in 2015 as a result of disputes between dockworkers and their employers throughout 5% contract negotiations. The impact of this disruption has been analysed and is 8,200,000 presented to the right hand side of this page. This has been used as a benchmark for 20,000,000 this scenario assessment. 7% 5%

▪ It is feasible for such a scenario to arise again throughout the long term forecast period, and it is therefore important to quantify the most likely short, medium, and long 8,000,000 term outcomes of such an occurrence. 18,000,000 7% ▪ ‘Labour disruption’ is likely to track along the following three phases & characteristics: 7,800,000 ▪ Short term - port / terminals unable to handle container vessel calls, leading to 5% 0% 249 diversions to service diversions to nearby Pacific Coast facilities. Cargoes may 16,000,000 also be diverted to other, unaffected services to bypass potential disruption. 7,600,000 US Totals

▪ Medium term - vessel calls resume largely in line with pre-disruption schedules SanPedro Totals however, with lower load factors as a result of cargo being placed on other services. 14,000,000 7,400,000 ▪ Long term - load factors on trans-pacific flows are likely to reach a new equilibrium, with the potential for long term traffic on discretionary origin-destination flow volumes (i.e. flows originating-in or destined-for hinterlands other than 12,000,000 Western Canada) lost to competing ports. 7,200,000 ▪ In order to quantify these impacts for the purposes of the volume model, we have assumed the following impacts: 7,000,000 10,000,000 ▪ Year 1: 10% volume reduction on all in/out bound flows due to temporary vessel diversions 2013 2014 2015 ▪ Year 2: 2.5% reduction on all discretionary flows Total US ▪ Year 3-6: linear softening of discretionary flow reduction from 2.5% (in year 2) to San Pedro Ports Outturn 1% (in year 6) San Pedro Ports @ Aggregate US Growth Level ▪ Long run: 1% reduction to all discretionary flows Scenario Tests - Manufacturing Shifts

▪ Currently, about 38% of imports transiting via VFPA terminals to all markets originate Commodities Imported to Canadian Hinterlands from Key Markets, % of 2019 trade in China. As a result of organic economic growth across other (predominantly) South- Partnership East Asian nations, and the escalating ‘trade war’ with the US, there is a potential for 60.0% manufacturing to shift away from China in the future. 50.0%

▪ This scenario explores a material shift away from China to SE Asian nations such as 40.0% Thailand and Vietnam. We have analysed the characteristics of VFPA imports and set out supporting information on this page. Key outputs are as follows: 30.0% ▪ Cost Impact of higher deep sea charges is unlikely to tip the scale in the context of 20.0% adjusting prices to the extent that aggregate demand is impacted. Local (Western 10.0% Canadian) volumes are therefore unaffected; 0.0% ▪ There is potential for discretionary flows (to Other Canada, and USA) to transit via Animal Automobiles Chemicals Consumer & Machinery & Metals All Other Processed All Other other ports. These account for c.60% of total imports via VFPA. Products, & Parts Related Goods Parts Forest Food Products Commodities Dairy & Products Produce ▪ For the purposes of testing this scenario we have applied a 5% reduction to all 250 China Korea (South) Taiwan Thailand Vietnam discretionary flows, ramped up over the five years of the impact being modelled.

VFPA: 2019 Imports by Local Versus Discretionary Hinterlands, TEU Indicative Deep Sea as % of Total Transport Costs to Various Hinterlands, $/TEU from Shanghai 3,000 2,500 2,500 2,200 26% 2,000 39% Western CAN 1,500 1,250 Other CAN 1,000 USA 500

- 35% W.Can via Van O.Can Via Van USA via Van Deep Sea Handling Inland Total Cost Scenario Tests - Prince Rupert Canadian Focus

▪ Prince Rupert has experienced strong volume growth in imports since the beginning of Prince Rupert, Imports by Hinterland the analytical period in 2010. This is has; however, predominantly been derived from secondary hinterlands across the United States and, to a lesser extent, Central and 800,000 Eastern Canada. 700,000 ▪ This hinterland pattern is driven by a combination of strong rail connections to the US, 600,000 500,000 and, relative to VFPA terminals, a very high distance to major population centres in 64% Western Canadian. 400,000 64% 64% 300,000 68% 69% ▪ A material shift in its hinterland may be driven by one or both of the following: 59% 57% 61% 200,000 49% 21% ▪ Enforced change - for example, by shifting trade policy between the USMCA 49% 22% 21% 100,000 30% 30% 24% 26% 24% 19% 19% nations); or - ▪ Strategic change - for example driven by disruptive forces in the port industry such 2010 A 2011 A 2012 A 2013 A 2014 A 2015 A 2016 A 2017 A 2018 A 2019 A as heavy infrastructure investment / commercial incentivisation of shipping lines. 251 Western CAN Other CAN USA ▪ Whatever the driver, increased competition to Canadian markets (both Western & Others) represents a risk to VFPA volumes. High Level Built-Up Cost Comparison: Inbound Flows to Competitive Hinterlands ▪ We have run a high level cost comparison of total transport costs, as set out below- from VFPA vs Prince Rupert, $/TEU right to understand the scale of change required to materially impact each flow. We find: 3,000 2,520 2,533 2,340 ▪ Significantly higher inland costs are incurred on flows to Western Canadian 2,500 2,205 hinterlands (i.e. to the cities of Vancouver and Calgary) for volumes transiting via 1,966 Prince Rupert. These vastly outweigh the charges which are within the terminals’ 2,000 gift to influence such as handling fees. 1,500 1,237 ▪ Close price competition on flows to Other Canadian markets and the US. These may be influenced by the joint strategies of commercial stakeholders; however, are 1,000 unlikely to be materially impacted by terminal operator strategy alone. 500 ▪ In order to quantify the potential impact of this scenario for the purposes of the volume - model: we model no change to Western Canadian market shares, but a 5% reduction in imports and exports to/from the discretionary markets of Other Canada and United W.Can via Van W.Can Via PR O.Can Via Van O.Can Via PR USA via Van USA Via PR Deep Sea Handling Inland Total Cost States. Scenario Adjusted Base Case Summary of applied measures in the selected case

Scenario-Adjusted Base Case Volumes - Impact Assessment We have developed a scenario adjusted base case, incorporating what we believe to be the most likely combination of:

▪ Macroeconomic assumptions (such as economic growth in Canada and its trade partners);

▪ Trade propensity assumptions (i.e. degree of domestic production, or onshoring versus continuation of global trade dynamics); and

▪ A basket of one-off external events which are likely to have a material impact on volumes at the Port of Vancouver, or the market dynamics in the Pacific North.

Modelled Scenario(s) & Assumptions

Selected Outlook On / Off Year of First Impact 252 Economic Growth Outlook Base Case

Trade Propensity Outlook Base Case

Pandemic Recurrence Off -

Global Financial Crisis On 2032 Recurrence Trade Agreement Off - Cessation

Local Labour Disruption Off -

Shifting Manufacturing Off - Trends Away from China Shift in Strategic Direction at Prince Rupert to Focus Off - on Western Canadian Markets Scenario Adjusted High Case Summary of applied measures in the selected case

Scenario-Adjusted Base Case Volumes - Impact Assessment We have developed a scenario adjusted high case, incorporating what we believe to be the most optimistic combination of:

▪ Macroeconomic assumptions (such as economic growth in Canada and its trade partners);

▪ Trade propensity assumptions (i.e. degree of domestic production, or onshoring versus continuation of global trade dynamics); and

▪ A basket of one-off external events which are likely to have a material impact on volumes at the Port of Vancouver, or the market dynamics in the Pacific North.

Modelled Scenario(s) & Assumptions

Selected Outlook On / Off Year of First Impact 253 Economic Growth Outlook High Growth Case

Trade Propensity Outlook High Trade Case

Pandemic Recurrence Off -

Global Financial Crisis Off - Recurrence Trade Agreement Off - Cessation

Local Labour Disruption Off -

Shifting Manufacturing Off - Trends Away from China Shift in Strategic Direction at Prince Rupert to Focus Off - on Western Canadian Markets Scenario Adjusted Low Case Summary of applied measures in the selected case

Scenario-Adjusted Base Case Volumes - Impact Assessment We have developed a scenario adjusted low case, incorporating what we believe to be a pessimistic combination of:

▪ Macroeconomic assumptions (such as economic growth in Canada and its trade partners);

▪ Trade propensity assumptions (i.e. degree of domestic production, or onshoring versus continuation of global trade dynamics); and

▪ A basket of one-off external events which are likely to have a material impact on volumes at the Port of Vancouver, or the market dynamics in the Pacific North.

Modelled Scenario(s) & Assumptions

Selected Outlook On / Off Year of First Impact 254 Economic Growth Outlook Low Growth Case

Trade Propensity Outlook Low Trade Case

Pandemic Recurrence Off -

Global Financial Crisis On 2030 Recurrence Trade Agreement Off - Cessation

Local Labour Disruption Off -

Shifting Manufacturing On 2026 Trends Away from China Shift in Strategic Direction at Prince Rupert to Focus Off - on Western Canadian Markets 255

Container Forecasts: Outturn Terminal Volumes & Market Shares Estimated Terminal Volume Distribution at Port of Vancouver Terminal throughput is broadly aligned with the capacity breakdown. GCT Deltaport handles nearly 50% of total throughput, with the remainder split between DP World Centerm and GCT Vanterm

▪ GCT Deltaport is the busiest throughput terminal in Vancouver - handling 48% of total throughput in 2019.

▪ This leading position has diminished in recent years, having commanded around 60% market share in 2010. GCT Vanterm and DP World Centerm have seen small increases, while there has been greater use of Fraser Surrey Docks (due to capacity availability for smaller ships and space becoming less at all other facilities).

▪ The remainder of demand is relatively evenly split between DP World Centerm Terminal and GCT Vanterm Terminal, with both handling around 20% of demand, each,

▪ Lynnterm is not regarded as an option for container traffic, so is not included.

Historic Share of Demand by Terminal, 2010-2019, in % Share of Total Container Volumes by Vancouver Terminal, 2019

100% 21% 20% 90% DP World Centerm Container Terminal 256 80% GCT Delta Port 70% Container terminal

60% GCT Vanterm 11% Fraser Surrey 50% Fraser Surrey Docks Docks

40% GCT Deltaport GCT Vanterm DP World Centerm Container terminal 30%

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2011 2010 Supply & Demand Requiring the Development of Roberts Bank Terminal 2 Demand is expected to become constrained without intervention from 2033 - congestion will occur prior to this date too as utilisation increases above the more optimal 85% operating utilisation across the incumbent terminals

▪ Assessment of the baseline demand versus existing terminal capacity shows that without further capacity expansion, demand will become constrained from 2033 onwards.

▪ While the supply chains or specific port operations at Port of Vancouver have not been assessed, it is reasonable to anticipate significant pressure on the existing terminal operations prior to this date as utilisation levels above roughly 85% tend to lead to congestion either at berths or landside.

▪ The development of RBT2 with a go-live date of 2029 appears logical based on Base Case demand assumptions - this is demonstrated in the graphs below.

VFPA Total Demand vs Capacity (@100% Utilisation) Exc. RBT2, Values in TEU VFPA Total Demand vs Capacity (@100% Utilisation) Inc. RBT2, Values in TEU

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2060 F 2060 2060 F 2060

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2030 F 2030 2030 F 2030

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2020 F 2020 2020 F 2020

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DP World Centerm Container Terminal GCT Delta Port Container Terminal DP World Centerm Container Terminal GCT Delta Port Container terminal Fraser Surrey Docks GCT Vanterm Container terminal Fraser Surrey Docks GCT Vanterm Container terminal VFPA Total Robertsbank II VFPA Total wsp.com/maritime