Three Issues Facing the Rail Industry

SSouthwestern Rail Conference Dallas, Texas, January 28, 2010

June 17, 2009June 17, 2009

Executive SummaryExecutive Summary

Overview of Iowa Pacific and SubsidiariesOverview of Iowa Pacific and Subsidiaries

Three Issues Facing the Rail IndustryThree Issues Facing the Rail Industry

Question and AnswerQuestion and Answer

Overview of Iowa Pacific and SubsidiariesOverview of Iowa Pacific and Subsidiaries All subsidiaries 100% owned by IPH except BARSAll subsidiaries 100% owned by IPH except BARS

Permian Basin RailwaysPermian Basin Railways owns 6 railroads owns 6 railroads– Texas-New Mexico Railroad (2002)Texas-New Mexico Railroad (2002)– West Texas & Lubbock Railway (2002)West Texas & Lubbock Railway (2002)– Arizona Eastern Railway (2004)Arizona Eastern Railway (2004)– San Luis & Rio Grande Railroad (2005)San Luis & Rio Grande Railroad (2005)– Chicago Terminal Railroad (2006)Chicago Terminal Railroad (2006)– Mt. Hood Railroad (2008)Mt. Hood Railroad (2008)

Central Car RepairCentral Car Repair (2002) provides AAR repair services to the railroads (2002) provides AAR repair services to the railroads and contract repair services to other railroads and private ownersand contract repair services to other railroads and private owners

Isla Largo, LLCIsla Largo, LLC (2002) owns and leases rail equipment (2002) owns and leases rail equipment

High Iron Travel CompanyHigh Iron Travel Company (2006) operates private car and special train (2006) operates private car and special train excursions, and handles customer entertainment functions for the railroadsexcursions, and handles customer entertainment functions for the railroads

British American Railway Services British American Railway Services owns four subsidiariesowns four subsidiaries– Dartmoor RailwayDartmoor Railway– Weardale RailwayWeardale Railway– RMS LocotecRMS Locotec– Devon and Cornwall RailwayDevon and Cornwall Railway

Review of Business StrategyReview of Business Strategy“We should be called the Kennel Club because we only buy the dogs.”“We should be called the Kennel Club because we only buy the dogs.”

Objective: Achieve long-term growth and stability through Objective: Achieve long-term growth and stability through acquisitions and “same-store” business developmentacquisitions and “same-store” business developmentAcquisition driversAcquisition drivers– Poor financial performance of target (“we’re the ‘workout’ Poor financial performance of target (“we’re the ‘workout’

guys”)guys”)– Motivated seller (“a dollar down and a dollar a week”)Motivated seller (“a dollar down and a dollar a week”)– Long-term revenue and EBITDA growth prospects (we are Long-term revenue and EBITDA growth prospects (we are

patient investors)patient investors)– Diversification of customer, commodity, geographyDiversification of customer, commodity, geography

Business Development tacticsBusiness Development tactics– Invest in infrastructure of railroad and customerInvest in infrastructure of railroad and customer– Improve and add servicesImprove and add services– Provide or arrange for equipmentProvide or arrange for equipment– ““Stay in front of the customer” – a strong sales presenceStay in front of the customer” – a strong sales presence

Other IPH UpdatesOther IPH UpdatesBARS subsidiary Devon and Cornwall Railway recently BARS subsidiary Devon and Cornwall Railway recently received its UK Freight License, which permits operation received its UK Freight License, which permits operation freight trains across the 10,000 UK networkfreight trains across the 10,000 UK network

Other IPH UpdatesOther IPH Updates

$17 million upgrade project in Texas and New Mexico $17 million upgrade project in Texas and New Mexico nearing completionnearing completion

Other IPH UpdatesOther IPH Updates

IPH was selected to operate the publicly owned line IPH was selected to operate the publicly owned line between Saratoga Springs and North Creek, NYbetween Saratoga Springs and North Creek, NY

Other IPH UpdatesOther IPH Updates

Weardale Railway completed a $2 million line-reopening Weardale Railway completed a $2 million line-reopening project, and is operating a non-subsidized commuter project, and is operating a non-subsidized commuter service between Stanhope and Bishop Auckland, as part of service between Stanhope and Bishop Auckland, as part of planning permission for a new coal terminalplanning permission for a new coal terminal

IPH Passenger ServicesIPH Passenger ServicesFour US and two UK railroads run Four US and two UK railroads run passenger servicespassenger services

IPH has developed a fleet of excellent IPH has developed a fleet of excellent passenger carspassenger cars

In addition to scenic train rides, IPH In addition to scenic train rides, IPH markets numerous special event trainsmarkets numerous special event trains

High Iron Travel operates special trains High Iron Travel operates special trains nationwide, and leases cars for use on nationwide, and leases cars for use on Amtrak special trainsAmtrak special trains

Three Thorny IssuesThree Thorny IssuesSubsidized Truck CompetitionSubsidized Truck Competition

Disintegration of the Carload NetworkDisintegration of the Carload Network

Cost and Control of Access to Rail InfrastructureCost and Control of Access to Rail Infrastructure

Subsidized Truck CompetitionSubsidized Truck Competition

Disintegration of the Carload NetworkDisintegration of the Carload Network

Cost and Control of Access to Rail Cost and Control of Access to Rail InfrastructureInfrastructure

Cost and Control of Access to Cost and Control of Access to Rail InfrastructureRail Infrastructure

What is an equitable way to develop What is an equitable way to develop the optimum use of US rail the optimum use of US rail infrastructure? infrastructure?

QuestionsQuestions