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Annual Public Meeting

Annual Public Meeting. August 24, 2012. Agenda. Forward Looking Statements Chair’s Reports - Jane L. Peverett, Chair, Board of Directors, B.C. Ferry Authority Donald P. Hayes, Chair, Board of Directors, British Columbia Ferry Services Inc. President’s Report

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Annual Public Meeting

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  1. Annual Public Meeting August 24, 2012

  2. Agenda • Forward Looking Statements • Chair’s Reports -Jane L. Peverett, Chair, Board of Directors, B.C. Ferry Authority • Donald P. Hayes, Chair, Board of Directors, British Columbia Ferry Services Inc. • President’s Report • Mike Corrigan, President & Chief Executive Officer • Financial Report • Robert P. Clarke, Chief Financial Officer • Discussion • Bruce Williams, Moderator • Closing Remarks

  3. Caution Regarding Forward Looking Statements • This presentation contains certain “forward looking statements”. These statements relate to future events or future performance and reflect management’s expectations regarding our growth, results of operations, performance, business prospects and opportunities and industry performance and trends. They reflect management’s current internal projections, expectations or beliefs and are based on information currently available to management. Some of the market conditions and factors that have been considered in formulating the assumptions upon which forward looking statements are based include traffic, the Canadian Dollar relative to the US Dollar, fuel costs, construction costs, the state of the local economy, fluctuating financial markets, demographics, tax changes, and the requirements of the Coastal Ferry Services Contract. • Forward looking statements included in this presentation include statements with respect to: economic conditions, and traffic levels; our short-term and long-range business plans, capital expenditure levels, and asset renewal programs for vessels and terminals; our cable ferry initiative, and our LNG plans; our performance measures targets; the additional payments to be received from the Province over the following four fiscal years, the Province’s role regarding service levels and a long-term vision for connecting coastal communities, and our expectations regarding the amount of efficiencies to be achieved from service level reduction initiatives; and our expectations regarding the impacts of Bill 47. In some cases, forward looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider various factors including, but not limited to, the risks and uncertainties associated with traffic volume and tariff revenue risk, safety and security, asset risk, accident risk, tax risk, environmental risk, regulatory risk, labour disruption risk, limitations of vessel repair facilities, risk of default under material contracts and aboriginal land claims. • Actual results may differ materially from any forward looking statement. Although management believes that the forward looking statements contained in this presentation are based upon reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this presentation, and British Columbia Ferry Services Inc. assumes no obligation to update or revise them to reflect new events or circumstances except as may be required by applicable law.

  4. Chair’s Report Jane L. Peverett Chair, Board of Directors B.C. Ferry Authority

  5. Tabling of Reports The Annual Report of B.C. Ferry Authority, including audited financial statements for its fiscal year ended March 31, 2012

  6. Compliance with Bill 20 • B.C. Ferry Authority is in full compliance with the Coastal Ferry Act, as amended by the Miscellaneous Statutes Amendment Act (No.3) 2010 (“Bill 20”)

  7. Board of DirectorsB.C. Ferry Authority • Jane L. Peverett (Community-at-large) • Bohdan I. Bodnar (Southern Mainland appointment area) • Christopher M. Causton (Province of British Columbia) • Roderick D. Dewar (Southern Vancouver Island appointment area) • Robin W. Kenyon (Province of British Columbia) • Randolph K. Morriss (Central Vancouver Island & Northern Georgia Strait appointment area) • A. Daniel Miller (Community-at-large) • John Radosevic (Organized labour) • Stephen E. Smith (Northern Coastal & North Island appointment area)

  8. High Standards of Accountability • Public Disclosure • Audited Financial Statements • Meeting Outcomes • By-Law Amendments • Compensation Plans • Appointment and Remuneration of Directors • Compliance with Legislated Obligations Independently Assessed • Annual General Meetings

  9. Chair’s Report Donald P. Hayes Chair, Board of Directors British Columbia Ferry Services Inc.

  10. Tabling of Reports • The Annual Report of British Columbia Ferry Services Inc., including audited financial statements for its fiscal year ended March 31, 2012 • The Annual Report of British Columbia Ferry Services Inc. to the British Columbia Ferry Commissioner, pursuant to Section 66 of the Coastal Ferry Act for the fiscal year ended March 31, 2012 • The Business Plan of British Columbia Ferry Services Inc. for the current fiscal year

  11. Board of DirectorsBritish Columbia Ferry Services Inc. • Donald P. Hayes, Chair • Holly A. Haston-Grant • Brian G. Kenning, Chair of Audit & Finance Committee • Gordon R. Larkin • Maureen V. Macarenko • P. Geoffrey Plant, QC • Wayne H. Stoilen, Chair of Safety, Health, Environment & Security Committee • Graham M. Wilson, Chair of Human Resources & Compensation Committee

  12. High Standards of Accountability • Public Disclosure - Quarterly and Annual Audited Financial Statements - Customer Satisfaction Surveys - Annual Business Plans • Compliance with the Coastal Ferry Act and the Coastal Ferry Services Contract independently assessed • Annual Public Meetings • Regulatory Oversight

  13. Commissioner’s Report • Findings of British Columbia Ferries Commissioner’s report on review of BC Ferries issued January 2012: • BC Ferries is efficient and well run • Challenges to fare affordability and financial sustainability • Solution requires stakeholder involvement and long term vision

  14. Accomplishments • Highest on-time performance record ever at 91% • Exceptional service reliability at 99.8% • Customer satisfaction rating also very strong at 88%

  15. Priorities • Safety is our number one priority • We continue to concentrate on operating the service to a world-class safety standard, while delivering solid economic value for ferry users across the fleet • Committed to developing and supporting our employees • Continuing to build a better BC Ferries • Renewing our assets • Investing in our infrastructure

  16. President’s Report Mike Corrigan President & Chief Executive Officer British Columbia Ferry Services Inc.

  17. Year in Review • Carried 20.2 million passengers and 7.8 million vehicles on over 185,000 sailings last year • Invested $122.2 million in capital expenditures

  18. Morfitt Follow-Up Safety Review • January 24, 2012, former B.C. Auditor General George Morfitt released comprehensive follow-up safety review on the operational safety audit conducted five years ago • The 73-page report reviewed the status of 41 recommendations made by Morfitt in the original 2007 report

  19. Morfitt Follow-Up Safety Review “There has been, since our 2007 report, a significant improvement in the safety culture and practices within the company. We found that awareness about, and actions taken in regards to, safety have increased substantially since we carried out our last review. Considering that many of our recommendations were of a complex nature and necessarily would take a considerable time to implement, the progress to date made by the company in respect of the recommendations is highly commendable.”

  20. Commissioner’s ReviewJanuary 24, 2012 Key Findings: Well Run and Efficient

  21. Key Accomplishments: Safety • Completed phase two of SailSafe, a joint safety initiative with the BC Ferry & Marine Workers’ Union • Former B.C. Auditor General George Morfitt released a comprehensive report after conducting a follow-up review on the operational safety audit conducted five years ago • Continued reduction in time loss injuries • Performed 28 marine rescues throughout coastal British Columbia

  22. Key Accomplishments: Training • Corporate University Exchange Award for Standardized Education and Assessment (SEA) program. • Opened new state-of-the-art bridge simulator training facilities at Swartz Bay, Departure Bay and Tsawwassen in October 2011. • Over 200 Bridge Team Members have attended the Bridge Operations, Skills and Systems (BOSS) 1 course. • Represents over 50 per cent of the Bridge Teams in the fleet. The remainder will be scheduled over the course of the year.

  23. Bridge Simulator

  24. Key Accomplishment: Extended Collective Agreement • Reached an agreement with the BC Ferry & Marine Workers’ Union for a three year extension of the Collective Agreement to October 31, 2015

  25. Key Accomplishments: Customer Service • Reached fleetwide on-time performance record of 91% per cent, which is the highest level yet • In partnership with Parks Canada, continued to offer the Coastal Naturalist Program in the summer • Introduced new menu items to offer more healthy choices and drive sales • Increased quality of merchandise in gift shops • Offered the popular $39.95 car and driver CoastSaver promotion on weekends in June 2011

  26. CoastSaver Promotion

  27. Overall customer satisfaction 4.19 out of 5 High marks for: Safety of ferry operations Staff courtesy and professionalism Loading and unloading procedures Selection in onboard giftshops Cleanliness of lounges Continuing Strong Customer Satisfaction

  28. Key Accomplishments: Terminals • Completed a $8.7 million project to replace the marine structures at Berth 5 at Tsawwassen • Constructed a new pedestrian overpass at Horseshoe Bay to improve safety for customers accessing the Village

  29. Horseshoe Bay Overhead Walkway

  30. Key Accomplishments: Terminals • Opened a new foot passenger waiting room at Nanaimo Harbour • Undertook a $19 million project at Swartz Bay for the upgrade of Berths 4 and 5 • Invested $16.9 million into the marine structures at Gravelly Bay on Denman Island and Shingle Spit on Hornby Island

  31. A view of Denman Island Worksite

  32. New Terminal at Klemtu • Commenced operations at new terminal in Klemtu in August 2011 • Federal and Provincial Governments built the facility to accommodate the Northern Expedition • Improves safety of operations • Allows BC Ferries to utilize Northern Expedition year round

  33. Klemtu Terminal

  34. Key Accomplishments: Vessels • Continued with implementation of a multi-year $63.1 million sewage and waste water treatment program to upgrade 27 vessels and 8 terminals • The Queen of Burnaby underwent $5 million asset improvement as well as a $3 million refit • Continued with the $15 million major life extension project on the 33-year old Queen of Chilliwack

  35. Terminal Investments • Invested $2.7 million in berth modifications at the Brentwood Bay/Mill Bay terminals and a further $2.7 million in vessel modifications on the MV Klitsa • Built a new public float at the Langdale terminal for use by private boaters to address long-standing safety and security concerns

  36. Key Accomplishments: Financial Integrity • Credit ratings at June 30, 2012: - A (DBRS) with a stable trend - A+ (Standard & Poor’s) with a negative outlook

  37. Key Accomplishment: Stakeholders • Consulted regularly with our Ferry Advisory Committees. Established a 13th committee for users of the Mill Bay – Brentwood Bay route • Sponsored the BC Bike Race, Sport BC, the Powell River Kings Junior “A” Hockey Club and the Victoria Highlanders Football Club • Employees pledged more than $85,000 to the 2011 United Way Campaign • Raised $50,000 for Jeneece Place and $50,000 for First Tee of Greater Vancouver YMCA through BC Ferries Media Charity Golf Classics

  38. Charitable Giving Jeneece Place is a home away from home on Vancouver Island that supports families with medical needs

  39. Started March 2009 1 customer and 2 trucks August 2012 20+ drivers 30+ tractors trucks Several new customers Key Accomplishments: Expanding the Business

  40. Commercial Services • Continued to expand our drop-trailer business • Providing a value added service • Adding new customers • Continually look to expand drop trailer segment • Major Milestones • Carried 50,000 trailers by May 2012 • Average over 575 trailers per week • Grew revenues in 2012 by $2.6 million to $6.6 million

  41. BC Ferries Vacations • Opened May 2010 • Offer 70 unique coastal vacations packages representing all regions • Packages include round trip ferry, accommodations and activities • 38,000+ people have travelled on a BCFV package since opening

  42. BC Ferries Vacations: Fiscal 2012 • Grew gross revenues in second year by over $1 million to $2,400,000 • Positive net earnings in fiscal 2012 of $80,000 • Over 8,800 visits to Vacation Centre • Over 500,000 BCV Web Visits

  43. Comox Airport Advertisement

  44. BC Ferries Vacations Destination Distribution • Vancouver Island continues to be the most popular destination (3100 bookings) with Victoria as the leading city in the region • North Coast and Cariboo Chilcotin continued to grow, with the northern packages gaining in awareness and popularity • Growth to the Southern Gulf Islands a direct result of increased inventory • Coast Mountains growth a result of Whistler being added to the Circle Tour itinerary

  45. Automated Customer Experience “ACE” • $40 million replacement/upgrade program • Update and improve end-to-end customer experience • Replace aging Point-of-Sale and Reservations systems • Improve our ability to understand customer travel patterns and requirements that will help us define improved products and services • Consolidate all card payment processing into a single system to improve security and compliance • Provide automated tools at terminals to support enhanced ticketing capabilities and our ever evolving safety and security requirements (turnstiles leading to fare paid and embarkation zones, automated vehicle measuring systems, baggage tagging systems, embarkation handheld audit tools and coin change dispensers)

  46. Cable Ferry • BC Ferries issued a Request for Proposals (RFP) to qualified ASP respondents on May 17, 2012. Proposals will pertain to designing, building and operating the cable ferry system • BC Ferries is currently conducting a detailed engineering assessment, including cable design and hull modeling • Regardless of the operator, BC Ferries is responsible for providing the contracted service • A final decision about the cable ferry is expected to be made in the fall of 2012

  47. Liquefied Natural Gas • BC Ferries has been studying the feasibility of using liquefied natural gas (LNG) • LNG is currently 60 per cent cheaper than marine diesel and reduces emissions • Green technology could be introduced for newbuilds as well as major retrofits of some existing vessels • Looking to convert the Queen of Capilano to LNG in 2014/15 (six-month refit window required) • Consider LNG for newbuilds --- approximately four years out with the replacement of the Queen of Burnaby and Queen of Nanaimo • Reviewing the feasibility for LNG conversions on seven or eight of its existing vessels

  48. Key Cost Drivers

  49. Coastal Ferry Services Contract – PT3 • On June 13, 2012, the Province and BC Ferries finalized amendments to the CFSC for PT3 • Targeted savings from service levels: -$4 million on majors (confirmed) -$26 million on all routes (to be determined) • Inclusion of Route 3 in Major Route Group • $15 million efficiency target for BC Ferries

  50. Additional Payments from Province • $79.5 million to reduce pressure for future fare and price cap increases over PT3 • First payment of $25 million was received April 20, 2012 as contribution to equity • Further $54.5 million is expected to be received in annual payments in fiscal 2013 through fiscal 2016

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