EFTA Document EFTA01371104

31 October 2017 Railroads Canadian Rails [ Figure 50: NA Coal carloads have declined as natural gas prices have moved closer to parity with coal —Nat Gas Henry Hub Spot Price ($/Mbtu) -....—Cost of coal delivered to electric plants ($/Mbtu) $1S—Avg. Weekly Coal Carloads $0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Sore Damn< ant Ehl. AAA Figure 51 NA coal carloads vs. spread between nat gat: and coal Spread btwn nat gas and coal —Avg. Weekly Coal Carloads $15 160,000 160,000 $10 140,000 120,000 110,000 100,000 $0 80,000 60,000 -$S 60,000 'OS '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 1 sc.n. Druso34 Birk Et• 449 Given the aforementioned correlation, the outlook for natural gas prices is critical to gauge short- to medium-term prospects for coal shipments. To this point we note that Deutsche Bank's Commodities team forecasts natural gas prices to hover around $3.00 in 2018 and $3.10 in 2019. While volumes have somewhat recovered from the lows in early 2016, we expect pressure on coal volumes to persist long-term largely beginning again in 2019/2020 - albeit to a lesser extent than what we witnessed in 2014-15. Other factors that could drive improvements are a much weaker dollar and a much colder winter, which incentivizes exports and lowers inventories, respectively. We note that CNI is the least exposed of any major Class I rail with just 4% of revenue coming from coal in 2016. Figure 52: DB U.S. P ilo]. I Gaa supplyidernana 11101142 tbast. case) 11491dinul 6 Coawnerrial 21 7 19 1 72 5 Pea9019.4•40on 202 241 u4 112 191 204 14:41•• boons 14 1.7 18 Esowel Otte 56 5.9 64 70W Dinms1 WW1 64S 115 73.5 WwM£ uses 411 77 112 14••••4••• 9* 98 77 &coaxed 122 133 154 Oaken 49 48 45 147116.6 6 2S 21 /A OtItee 148 233 ISO 233 ONOtoi. fwd SO 41 14 Perin Import, 51 5 • SI roar L4I S'cm 59 7 611 65.2 Total WWI 1k1/81 704 734 73* Yaw And Walt. Get 310•004 fte/1 1613 2300 Merwel Gat Onwn•Sunumer/ /10.30 236 216 706 213 26.5 2>3 209 206 212 20 2.9 17 05 65 6.8 64 753 783 797 879 195 282 211 51 17 64 II 213 21 1 10.2 303 101 121 212 235 7.0 79 91 30 36 77 65 65 65 908 948 98* 275 311 31.9 71 77 8.S 231 247 252 30 23 27 21 20 IA IS 4 lel 179 33 32 30 68 69 69 812 165 441 91.3 966 93.0 1135 MO 3.555 mons Ca smoss someway ibdit 147 193 220 233 67 61 60 64 in 200 193 200 42 38 35 32 27 27 24 21 230 220 194 IBA 34 35 33 31 SI 53 SA 62 691 743 730 716 777 811 822 832 3.141 3377 3.306 3.029 sane sivnen• 0e3 we sr osgassoncese, Deutsche Bank Securities Inc Page 27 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0064297 CONFIDENTIAL SDNY_GM_002 10481 EFTA01371104