EFTA01371103

31 October 2017 Railroads Canadian Rails Figure 46: U.S. Carload breakdown (ex-intermodal) [Figure 47: Canadian carload breakdown (ex-intermodai Other 4% Nonmetallic minerals 13% Autos & parts 7% Metallic ores & metal 8% Forest products 4% Ag & Food Products 16% Chent. e.< Petroleum 17% Other Nonmetal] _ 2% Th` minerals 7% Autos parts 7% &secs Dyad* eat. AAA I tarot Osseo 90* AAR fir Goal Coal volumes account for roughly one third of U.S. carloads (ex-intermodal) but just 10% of Canadian carloads (ex-intermodal). Cumulatively in NA. coal accounts for a little over one quarter of all carloads (ex-intermodal) which is down from just under 40% in 2010. Much of this decline is due to increased supply of natural gas, with 2016 becoming the first year that natural gas has exceeded coal in U.S. electricity generation on an annual basis. Figure 48: Average weekly coal carloads have been under pressure... 180,000 160,000 140,000 120,000 100,000 80,000 60,000 159,654 9 o • o 9 c o •- — as, a ad A u Cu 3 ▪ ea Z Q LA IL O O 2< Sant Dastr:A• luirA AAR - . . . - . . . - . . . . teletallh. ores & metals 17% Ag & Food Product,. serest PI OdlICA 11“:" Chem Petroleum C.o.)! 10% Figure 49: ...as U.S. electric generation has become less dependent on coal 100% • 80% 2 • 60% • 40% V Ts.• ▪ 20% 03 046 A A CC o 0 0 0 0 0 0 0 .0 0 0 IN C% ". N CV CV r.4 r. r", ■Coal Nat Gas • Other sane DIOSOW Bdt* !IA The decline, while significant, has not been linear, with volatility driven by changes in relative price and weather. The long-term trend is undeniable, however, resulting from the drastic decline in natural gas prices following the hydraulic fracturing-fueled U.S. shale boom. To put the move in context, the price of natural gas was roughly seven times more expensive than coal ten years ago (October 2015 MIT study), and today those prices are in parity with coal (including transport costs associated with coal). We have witnessed a 65% correlation with U.S. coal carloads and natural gas prices over the past ten years. Page 26 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0064296 CONFIDENTIAL SDNY_GM_00210480 EFTA01371103