1. Brazil Heavy Haul Railway Status and Future Projects Heavy Haul Conference Newcastle Australia September 27-28, 2014

2. Agenda Brazilian railways current status On going projects (under construction) Future projects Priority future projects (shorter term) Regulatory environment 3. Brief History First railway founded in 1854 to transport coffee in Rio de Janeiro Railways grew during the first half of 20th century, 34.000 km by 1940. In 1957, RFFSA (Federal Railway Network) incorporated all railways in Country with a few exceptions. In the sixties introduction of automobile industry caused railways to became even less competitive. In 1997-98 RFFSA was split in 11 regional networks, undertaken by private concessionaires for 30 years. A few consolidations and changes in stock control resulted in the current scenario, with five main vertical concessionaire groups:VALE, MRS,ALL,VLI andTLSA. 4. In recent years: Freight Railway Concessionaries moved 490 million tons in 2013, 2% more than in 2012. Iron ore and coal were responsible for 75,7% .Agricultural products were responsible for 15%. The 11 Concessionaries invested 4,67 billion BRL in 2013. From 2014 to 2016, the investment forecast is 6.0 billion BRL. Changes on the Regulatory Environment (2011): Production targets per segment, User-Investor, Right ofWay. OpenAccess & Independent Railway Operator (2013/14). 1.00 AUD = 2,1188 BRL .(*) Call for Expression of Interest Procedure 5. Brazil Railway Current Network AM AC RR PA RO AP MA PI CE RN PB PE AL SE BA MG ES RJSP PR SC RS MS MT TO GO DF RAILWAY CONCESSIONS Irish Gauge (1.6m): 4.057km Metric: 23 489 km Mixed: 336 km Total: 28.190 km 6. Source: CIA Country Area (Km) Population Railways (Km) Railway/Area USA 9.826.675 310.232.863 226.427 0,0230 India 3.287.263 1.173.108.018 64.015 0,0195 China 9.596.961 1.330.141.295 86.000* 0,0090 Russia 17.098.242 139.390.205 87.157 0,0051 Australia 7,741,220 22,507,617 38,445 0,0049 Canada 9.984.670 33.759.742 46.688 0,0047 Brazil 8.514.877 201.103.330 28.190 0,0034 * Estimated Railway Networks - Compared 7. On Going Projects 8. Transport Matrix - Brazil 30% 29% 35% 2025 Transport Matrix - Compared Source: Ministry of Transportation 9. Eliseu Martins Pecm Natal Ilhus GuanambiCampinorte Anpolis Estrela DOeste Correntina Caetit Suape Barreiras On Going Projects Under construction: 2.545 km Duplications: 892 km + 383 km = 1275 km Total: 3820 km Green Field Projects Duplication Projects Source: Ministry of Transportation 10. Future Projects 11. Barcarena Aailndia Santarm Miritituba SinopLucas do Rio Verde Sapezal Porto Velho Figueirpolis Barreiras Eliseu Martins Pecm Natal Salvador Ilhus Guanambi Campinorte Anpolis Corinto Vitria Rio de Janeiro Estrela DOeste Dourados Paranagu Santos Rio Grande Estreito Aguiarnpolis Correntina Xambio Campo dos Goytacazes Cuiab Panorama Cascavel Foz do Iguau Porto Alegre Caetit Corumb Uruguaiana Rondonpolis Alto Araguaia Chapec Passo Fundo Santa Maria Suape Rio Branco Cruzeiro do Sul Palmas Belo Horizonte Future Projects PIL-2012 (Logistics Investment Plan): 11,714 km Green Field Projects Duplication Projects PIL Source: Ministry of Transportation 12. Barcarena Aailndia Santarm Miritituba SinopLucas do Rio Verde Sapezal Porto Velho Figueirpolis Barreiras Eliseu Martins Pecm Natal Salvador Ilhus Guanambi Campinorte Anpolis Corinto Vitria Rio de Janeiro Estrela DOeste Dourados Paranagu Santos Rio Grande Estreito Aguiarnpolis Correntina Xambio Campo dos Goytacazes Cuiab Panorama Cascavel Foz do Iguau Porto Alegre Caetit Corumb Uruguaiana Rondonpolis Alto Araguaia Chapec Passo Fundo Santa Maria Suape Rio Branco Cruzeiro do Sul Palmas Belo Horizonte PIL Priority Projects Source: Ministry of Transportation PIL Phase I: 5,559 km On Going Projects Duplication Projects PIL Priority Projects Ready for Concession 13. PIL Concessions: Priorities READY FOR CONCESSION: Lucas do RioVerde - MT) Campinorte - GO: 883 km. Investment: R$ 5.4 billion PMI * STUDIES FOR CONCESSION Railway Lenght (km) Investment Forecast (BRL Bi) Anpolis - GO Corinto - MG 775 4.82 Belo Horizonte - MG Corinto - MG Guanambi - BA 845 5.94 Aailndia - MA Barcarena - PA 457 2.89 Estrela DOeste - SP Dourados - MS 659 4.70 Sinop - MT Miritituba - PA 990 6.05 Sapezal - MT PortoVelho - RO 950 5.81 * Call for Expressions of Interest Source: Ministry of Transportation 14. REGULATORY ENVIRONMENT 15. Federal Government & Transport MINISTRY OF TRANSPORTATION ANTT VALEC DNIT EPL Regulates and Enforces undertaking contracts. Responsible for Engineering, Construction, and Operation of new railways Responsible for current Infrastructure, and improvements.. Responsible for National Logistics planning 16. ANTT Resolutions Resolution Topic Oportunity 3964/2011 User rights protection - REDUF Railway User - Investor 3965/2011 Right of way and mutual traffic Telecom & signaling Interoperability Harmonization of cross border operations 3966/2011 Production and Safety Targets Systems for safety improvement and capacity increase 4057/2014 Regulatory Agenda 2013/2014 ThematicAxis 6.4 Signaling and Communications standardization 17. Decree 8.129 of 23 Oct, 2013 Establishes the OpenAccess policy for the Federal Railway Subsystem and specifiesValecs role on the development of the rail transport system. Creates the IRO (Independent Railway Operator) Vertical and Horizontal concessions will co-exist at least until 2028. 18. Maintenance Fare OPEN ACCESS New Railway Concession Model Fonte: Nota Tcnica rANTT UNION A FARE for track wear and tear and maintenance. VALEC IRO: Independent Railway Operator IRO 1 IRO n END USER CONCESSIONARY Assignment of the Right of Use Assignment of the Right of Way Fare Sales Price FARE for the Right of Use. Remunerates invested capital Concession to explore the infrastructure 19. Union MINISTRY OF TRANSPORTATION HORIZONTAL CONCESSIONARY VALEC VERTICAL CONCESSIONARY END USER I. R. O. IRO Regulation Concession to explore the infrastructure Authorization to provide services Transport Agreement Fare Assignment of the Right of Use Operational Capacity Assignment of the Right of Use Traffic Capacity Assignment of the Right of Use Unused Capacity Fare FareFare Transport Agreement Fare Operational Agreement Fare Operational Agreement Fare 20. THANK YOU! Sergio Coutinho e-mail: sergio@guedelha.com Phone: +55 11 3368-8457 http://br.linkedin.com/in/sguedelha