USA PCC MISSION World expectation on Panama s capacity to manage and operate the Panama Canal. Main Differences in Business Models.

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1 Panama Canal Expansion: Increase in Route Value and Service to World Maritime Industry 1999 World expectation on Panama s capacity to manage and operate the Panama Canal. Alberto Alemán Zubieta CEO/Administrator Panama Canal Authority Main Differences in Business Models USA PCC MISSION USA PCC Foreign enclave Managed by its principal user Responded to US interests Non-profitable agency Budget administration Ample capacity Near monopoly PANAMA ACP Inalienable patrimony of the Republic of Panama Administered by its owners Profitable and competitive enterprise Resource Management Operates near capacity Faces increase competition Ensure the safe and efficient operation of the Canal; Take all appropriate steps to achieve a seamless transition to Panamanian control of the Canal on December 31, September 7, December 31, 1999 PANAMA ACP MISSION To produce maximum sustained benefit from our geographic position. Transition in Business Model USA PCC Panama Model ACP Business Model Break-Even Operation Managed by its principal user For Profit, and Efficient Operation Managed by its Owner 1

2 ACP Panama Canal Business Model The Legal structure is based on: The Constitution of the Republic of Panama The Organic Law of the Panama Canal Authority ACP regulations. Some of the key elements of the Canal Business Model are: The Canal constitutes an inalienable patrimony of the Panamanian Nation. The Canal has to be efficient and profitable The Canal has its own patrimony and the right to manage it. Special employment regime based on the principles of merit and equal opportunity. Special procurement and contracting regime. Code of Ethics and Conduct. Special procedure for dispute resolution. Strikes are prohibited. Panama Canal ACP Business Model The Canal s current legal framework changes the business philosophy to one oriented to enhance the value of the route by providing a safe, reliable and efficient service to its customers while generating a return to its owner, The Republic of Panama. Panama Canal Change in Business Model Historical Background 2000 Change in the reservation system rules 2002 Tolls are modified for the first time under Panamanian administration. Differentiated market segment by type of vessel is established. Dry bulk carriers Container ships Liquid bulk Refrigerated cargo Vehicle carriers Passenger ships General cargo Others Panama Canal Change in Business Model Historical Background 2005 Change in the admeasurement system of container vessels. The phased-in implementation over three years, is as follows: May 2005 $42 per TEU. May 2006 $49 per TEU. May 2007 $54 per TEU. April 2006 Implementation of a daily reservation slot made available through an auction process to the best bidder Proposal to Modify the Regulations for the Admeasurement of Vessels for the Panama Canal and the Panama Canal Tolls The proposal announced on February 2 includes: Administrative changes in the admeasurement Rules New admeasurement method for passenger ships Toll adjustment by segment Transits 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000,000 5,000 0 Transits vs. PCUMS Tonnage FY FY2006 PCUMS Tonnage of Commercial Transits 23, Fiscal Year , PCUMS Tonnage in millions 2

3 CAPITAL INVESTMENT 1,329 55% Growth of Panamax Vessel Transits 0 (30.5m) + Beam FY1995 FY2006 Dredging Locomotives % of Total Transits 50% 45% 40% 35% 30% 25% 20% 27.1% 3, % 29.0% 30.7% 4,125 3,816 3, % 4, % 44.5% 42.6% 40.4% 38.5% 35.4% 36.3% 4, ,424 4,566 4,737 5,329 5,633 6,160 Hydraulic Conversion Technology Track system Tug Boats Fiscal Year Transits Growth in Transits of Vessels >900 (274.3m) Overall Length FY FY AF95 AF96 AF97 AF98 AF99 AF00 AF01 AF02 AF03 AF04 AF05 AF06 Fiscal Year Canal Waters Time (hrs) Available Slots 40.0 Average Canal Waters Time With reservation Without reservation Accidents Accidents FY1996 FY PCUMS Net Tons per Market Segment (in millions - FY / 2007 proj) Containerships Dry Bulk Liquid Bulk General Cargo Reefers Cruise Vehicle carriers Others (proj.) 3

4 Interoceanic Route and the Canal s Value for Panama and the World 296 The improved existing Canal could sustainably handle up to million annual PC/UMS tons Pospanamax Locks and Vessel Dimensions Existing Locks New Locks Animation of Water Saving Basins 45.6m (149.6 ) WSB 1 WSB 2 WSB 3 Calado 16.7 m (55 ) 12,600 TEU 54.7m (180 ) Chamber Length 305m (1,000 ) Max. Vessel LOA 294.3m (965 ) Chamber Length 427m (1,400 ) Max. Vessel LOA 385.8m (1,265 ) 4

5 Program Components Dredging of the Sea Entrance Navigation Channels Pacific Entrance (6.5 M m 3 Dredging) 1 Contract 225m (740 ) Water saving basins used in Germany help reduce water usage Program Components Dredging of the Sea Entrance Navigation Channels Atlantic Entrance (Dredging - 14 M m 3 ) 1 Contract Program Components Pospanamax Locks Pacific and Atlantic Locks (29.66 M m 3 Dry Excavation) 1 Contract Width: 225m (740 ) Program Components Dredging of Gatun Lake and Culebra Cut Navigation Channels Program Components Pacific Locks North Access Channel Deepening and Widening of Gatun Lake and Culebra Cut Navigation Channels (Dredging - 23 M m 3 ) Pacific Locks North Access Channel 46M m 3 5 Contracts 5

6 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T Conceptual Design Activity Contracting Legal Advisor Program Schedule Advisors General Legal Advisor Financial Advisor Program Management Services Physical Modeling Risk Advisor Environment Access Channel EIS Pospanamax Locks (Category III) EIS Dredging of Pacific Entrance (Category II) EIA Cartagena PAC 1 (Category II) Archeological Salvage & Rescue Contract 1 Contract 2 Contract 3 Contract 4 Contract 5 Deepening & Widening of Gatun Lake Dredging Deepening of the Culebra Cut Dredging of the Atlantic Entrance Channels Dredging of the Pacific Entrance Channels Design and Build Pospanamax Locks Increase the Max. Op. Level of Gatun Lake Specifications & Design Bidding & Contracting Execution Main Logistics Hubs Max Sustainable Capacity of Expanded Canal SHANGHAI SHENZHEN BUSAN HONG KONG LA/LB NY/NJ HAMPTON RDS. SAVANNAH FREEPORT KINGSTON ROTTERDAM ALGECIRAS HAMBURG DUBAI SINGAPORE Main Logistics Hubs Main Logistics Hubs ROTTERDAM ROTTERDAM SHANGHAI SHENZHEN BUSAN HONG KONG LA/LB NY/NJ HAMPTON RDS. SAVANNAH FREEPORT KINGSTON ALGECIRAS HAMBURG DUBAI SHANGHAI SHENZHEN BUSAN HONG KONG LA/LB NY/NJ HAMPTON RDS. SAVANNAH FREEPORT KINGSTON ALGECIRAS HAMBURG DUBAI SINGAPORE PANAMA SINGAPORE PANAMA 6

7 Main Logistics Hubs Main Tanker Routes through the Panama Canal SHANGHAI SHENZHEN HONG KONG SINGAPORE BUSAN LA/LB NY/NJ HAMPTON RDS. SAVANNAH PANAMA FREEPORT KINGSTON ROTTERDAM ALGECIRAS HAMBURG DUBAI East Coast US - Asia East Coast US West Coast South America West Indies West Coast US Asia - East Coast US West Coast South America East Coast US East Coast South America West Coast US Value of the Interoceanic Route and the Panama Canal Service Manzanillo International Terminal (MIT) Colon Container Terminal Osaka Nagoya Shanghai Kwangyang Qingdao Pusan Keelung Yantian Hong Kong Colombo Kobe Chabang Hakata Kaohsiung Singapore Brisbane Sydney Melbourne Yokohama Tanjung Priok Tokyo Shimizu Doniambo Source: ACP Database and Compair Data Rotterdam Bremerhaven Tilbury Felixstowe Hamburg Halifax Thamesport Dunkerque Seattle NJ/NY Zeebrugge Wilmington Le Havre Newport News Antwerp Oakland Charleston Baltimore Port Said Miami Los Angeles. Savannah Everglades Long Beach New Orleans Marseilles Colon Kingston Veracruz Manzanillo La Spezia Manzanillo (Mx) Cartagena Buenaventura Maracaibo La Guaira Puerto Limón Guanta Balboa Puerto Cabello Manta Guayaquil Callao Tahiti Arica Santos Iquique Paranagua Coquimbo Itajai Antofagasta Valparaíso San Antonio Auckland San Vicente Ports are interconnected through Weekly Port Container Services using the Panama Route Panama Ports Company Cristobal Panama Ports Company - Balboa Port Development in Panama Banking Center Optic Fiber Duct CRISTOBAL EVERGREEN CONTAINER TERMINAL MANZANILLO CONTAINER TERMINAL TELFERS ISLAND PORT OF ALBROOK - DIABLO AND AIRPORT EXPANSION PORT OF BALBOA Tocumen Airport Trans-Isthmian Pipeline TRANS-ISTHMIAN ROAD OPTIC FIBER DUCT ALBROOK AIRPORT Inter-American Highway Railroad Colon Free Zone Special Economic Area Panama-Pacific Former Howard Military Base 7

8 Panama: America s Most Important Logistics andtransportationhub Panama Canal Expansion: Increase in Route Value and Service to World Maritime Industry Alberto Alemán Zubieta CEO/Administrator Panama Canal Authority 8