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Watco Companies Overview January 25, 2013 Southwestern Rail Conference

Watco Companies Overview January 25, 2013 Southwestern Rail Conference. Improve Customer Satisfaction Right Service Right Time In the Right Condition – Delivered SAFELY At the Right Price Improve Profitability Revenue Growth Rate EBITDA Growth Return on Assets > WACC% Free Cash Flows

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Watco Companies Overview January 25, 2013 Southwestern Rail Conference

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  1. Watco CompaniesOverview January 25, 2013Southwestern Rail Conference

  2. Improve Customer Satisfaction Right Service Right Time In the Right Condition – Delivered SAFELY At the Right Price Improve Profitability Revenue Growth Rate EBITDA Growth Return on Assets > WACC% Free Cash Flows Economic Value Add (EVA) Do Both Over the Long-Term Building Relationships with: Customers Watco Team Communities Vendors Investors Watco Customer First Foundation Principles Roll Tide Roll

  3. Watco Customer First Foundation PrinciplesWhen Successfully Applied

  4. Watco Performance System - Goals • Safety – 0 injuries / accidents every day • Service – Deliver accurate & timely service every day • People – Find, keep & develop the best Team possible every day • Profitability – Generate the most sustainable, long-term value every day • Capital – Maintain & use the right type & least amount of assets every day • Growth – Earn the right to grow by small improvements every day

  5. Watco Growth PerformanceListen-Understand-Grow Listen to our Customers – Listen and learn our Customers needs, then work with our operations teams to meet and exceed those needs with Watco Services. Listen Grow organically with each Customer. What can we do differently to capture more of their transportation dollar? UnderstandCustomers logistics supply chains “beginning to end”. Raw material in… to finished product out. Grow Understand

  6. Watco – What We Do! • One of the largest car repair service providers in U.S. • Largest privately owned short line railroad operator in U.S. • One of the fastest growing terminal operators • International service in Canada and Western Australia • 4,500 track miles • 3,200 Team Members • 400 locomotives • 3,900 railcars • 26 states served • 750,000+ annual • carloads

  7. Watco Customer Diversity • Proudly serve more than 1,500 Customers Daily • Average Length of Customer Relationship • Switching 22 years • Mechanical 20 years • Railroad 10 years • Transload/Intermodal 2 years 7

  8. Watco’s Service Diversity Services Transportation (63% revenue) Mechanical (25% revenue) Terminals/Port (12% revenue) • 29 Short Line Railroad • Operations – 59% • 400 Locomotives • 4,500 Track Miles • 3,900 Railcars • 27 Switching Operations – 4% • 16 Rail Car Repair Facilities – 24% • 23 Railcar Car Repair Operations – 1% • 5 Private Railcar Repair Facilities • 20 Terminal Operations – 6% • 2 Port Facilities - 5% • 10 Warehouse Operations – 1%

  9. Watco Geographic Diversity

  10. Watco Commodity Diversity Infrastructure Metals & Minerals26%(Frac Sand, Drilling Pipe, Road Rock) Agriculture 33% Other 5% Lumber & Forest Products 6% Energy & Chemicals 22%(Coal, Crude Oil, Petro-Chemicals) Pulp & Paper 8%

  11. Kinder Morgan & Watco • On December 15, 2010, Watco Companies and Kinder Morgan Energy Partners announced a new partnership. The advantages of this partnership are: • Significant Growth Opportunities • Transaction provides an avenue for significant investment into high growth areas • Proven track record of successful investments with recent acquisitions and expansions • Entrepreneurial mindset towards growth • Significant Synergies • Over 1,500,000 carloads handled at KM & Watco facilities annually • Over 100 Class I railroad connections and 50 short-line railroad connections in the U.S. • The Terminaling and Railroad Industry are integral to each other • Exceptional Operators • Respected reputation among peers in the industry • Leaders in crude by rail terminals and operations

  12. Watco’s 10-Year Revenue Growth 10 Year CAGR = 21.8% 2012 P = preliminary 2012 actual results.

  13. Watco’s 10-Year Adj. EBITDA Growth 10 Year CAGR = 21.7% Adj. EBITDA figures are per the Company’s historical compliance certificates through 2011 and preliminary actual results for 2012, adjusted to exclude pro forma EBITDA from acquisitions to provide an accurate portrayal of the margin trends in Watco’s base business.

  14. Watco’s Future • Keys to understanding our future • Understand our past successes – courage to change for success today & tomorrow • Understand the future of our industry is very bright • Understand we must continue to improve, earning the right to grow with our Customers • Understand the importance of living by our Watco Customer First Foundation Principles • Understand & implement the Watco Performance System • Well positioned for future growth

  15. Thank You for Listening! Questions?

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