Enabling the Canadian Wood Pellet Supply Chain

Fiona Murray | Vice-President, Industrial ProductsSeptember 18, 2018

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OUTLINE

Safety Moment

Investing to Build Capacity

Enabling the Wood Pellet

Supply Chain

Environmental Benefits of

Shipping Rail

Look. Listen. Live.

Global West 25% Global East 5%

Global South 3%

Canada/U.S. Trade 34%

Domestic Canada 17%

Domestic U.S. 16%

Moving the Economy

End-Markets

25% Intermodal

17% Petroleum & Chemicals

17% Grain & Fertilizers

13% Forest Products

12% Metals & Minerals

6% Automotive

5% Coal

5% Other Revenues

Based on H1 2018 revenues

4

Strong Capital Program for Safety, Fluidity & Productivity

2010 2011 2012 2013 2014 2015 2016 2017 2018F

(in millions $ Cdn)

2,703

Positive Train Control (PTC)

Equipment

Productivity,

including IT

Track and railway

infrastructure maintenance

2,706

2,297

2,017

1,8251,7121,718

21%* 19% 18% 19% 19% 21%

* Reflects % of revenues

2,752

23%

3,500

21%

~C$20BCapital investments over the last 10 years

Record capital envelope of C$3.5B planned for 2018

(~ 25% of revenues)

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• 130 leased locomotives in

service

• 260 new locomotives over the

next 3 years

• 60 gradually in service

starting in H2-2018

• Over 1,000 lumber

centerbeams and nearly 1,000

box cars in 2018 (owned and

leased)

• 1,000 new generation grain

hopper cars (2019-20)

Track InfrastructurePeople Rolling Stock

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• Major capacity projects in

2018

• New / extended

sidings and double-

track

• Yard expansions in

Edmonton area, and

Winnipeg

• Aiming to complete all 2018

capacity investments in Q4

• Adding to a growing base of

newly qualified conductors

• ~400 in each of Q1 and

Q2

• A further ~1,000 more

expected in H2-2018

• Ratified five-year labour

agreement with ~1,800

locomotive engineers in

Canada

• New productivity enabling

technologies

Plan to Improve ServiceExecution well underway across each element

Building Capacity & Improving Resiliency

• ~$400 million for new track infrastructure,

particularly in Western Canada

• 891 track miles

• 2.6M rail ties

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$400 M in Track Investments by Q4, 2018

Expanding and double tracking to

address specific capacity pinch points 8

Taverna-Prince Rupert

4 New Sdgs; 3 Sdg Ext

$72M

Winnipeg-Edmonton

54 Miles DT

$128M

Toronto-Winnipeg

1 Sdg Ext

$8M

Edmonton-Vancouver

12 Miles DT; 1 Sdg Ext

$60M

Chicago-Winnipeg

6 Miles DT; 2 Sdg Ext

$42M

Siding Extension

New Long Sidings

Double Track (DT)

Watson Island New Sdg

Guilford New Sdg

Vancouver

Prince Rupert

Taverna

Kamloops

Saskatoon

Winnipeg

Prince George

Superior

Edmonton

Melville

Fond du Lac

Hornepayne

TorontoSarnia

Chicago

Rose Lake New Sdg

Loos New Sdg

Spruce Grove-Carvel 12 Miles DT Artland-Chauvin

12 Miles DT

Tofield-Lindbrook8 Miles DT

Wainwright-Fabryan8 Miles DT

Waldron-Cana 10 Miles DT

Welby-Spy Hill 8 Miles DT

Hawthorne Hill 6 Miles DT (Phase 1)

Encombe Sdg Ext

Nichol Sdg Ext

Deway Sdg Ext

VavenbySdg Ext

Van Lynn (Ranier) Sdg Ext

LoureiroSdg Ext

Nestle Sdg Ext

Scotford

$17.7M

Ranier

$5.1M

Blair

$5.4M

Swan Landing

$2.6M Melville

$6MWalker

$27M

Fulton

$13.9M

Symington

$26.7M

Harvey/Joliet

$8.5M

Greater Toronto I/M

$27.3M

2018 Yard Investments

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Swan Landing

1 track in service, second on target for Sept

Walker Bypass

on target for Sept completion

Walker Extention

on target for Oct/Nov completion

Scotford Bypass

on target for Sept/Oct completion

Scotford-IBS

on target for Nov completion

Melville

on target for Sept/Oct completion

Symington

on target for Nov/Dec completion

Rainier

in service

Whitehall/Blair

phase 2 of 3 in service

Fulton

targeting end of year

$104.3Mtotal investments

• Locomotives added to fleet in Q4, 2017

• Took delivery of 22 new ACs

• Purchased 12 pre-production ACs

• 130 leased locomotives currently online – will remain

on lease into 2019

• Purchase of 260 new GE AC locomotives

• 60 new GE locomotives gradually coming into service

over H2 2018

• Additional 200 GE locomotives coming into service over

2019-2020

• Investment in existing fleet – Overhaul program in

place for next 3 years

2018 Locomotive Investments

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• CN hired ~3,500 people in 2017

• Expect to hire approx. another 2000 in 2018

• We are adding to a growing base of newly qualified

conductors

• ~400 in each of Q1 and Q2

• A further ~1,000 more expected in H2-2018

• 6-9 month training process

New hires follow weeks of in-house training. They must then

complete qualifying trips as an extra person on a train crew.

Once they are certified, they are assigned to the field in a two

person crew.

• Targeting ~1,250 more qualified conductors

for 2019 winter relative to last winter (on track)

Hiring & Training

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Crew Supply – Key Forest Products Locations in West(net of hiring and attrition)

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Location Q1 (actual) Q2 (actual ) Q3 (ongoing) Q4 (planned ) Buffer vs Demand

Edmonton 469 505 528 582 19

Edson 18 17 17 18 1

Pr. George(includes BCR)

184 234 239 245 28

Smithers 103 139 150 174 24

Vancouver(includes North Van, Squamish)

307 303 303 320 20

N. Battleford* 24 22 25 34 0

Terrace 29 30 33 39 2

Wms. Lake 13 12 12 13 1

*Expanded capacity at CN transload will assistData as of Aug 15, 2018

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Leveraging Technology to Improve Safety, Efficiency and Productivity

Mobile device for carmenMobile device

for conductorsSmart Network

Automation of

track inspection

Test Car

Automation of train

inspection

Supply Chain: Wood Pellets

CN Ships Over 2.3M Tonsof Wood Pellets Annually

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Sh

ort

To

ns (

millio

ns)

CN Wood Pellet Shipment Growth

* Projected

** Forecasted

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We Provide Direct Access to Export Facilities & Consumption Markets

CN-served ports

Quebec

New Orleans

Mobile

Prince Rupert

Vancouver

Trois-Rivieres

Montreal

HalifaxSaint John

Belledune

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Destination Markets:

Europe 90% 75%

Asia 10% 25%

0

100

200

300

400

500

600

700 Prince Rupert Volumes(carloads / units - 000’s)

Woodpellets

Intermodal

Coal

Grain

The Prince Rupert Edge – representing 7% of CN revenuesTruly a part of CN’s unique growth franchise

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• Closest North American deep-sea port

to Asia

• Deepest natural harbour in North

America (channel depth: 35 meters)

• Lowest rail grades of all the West

Coast railroads to cross the Rockies,

give CN a natural cost advantage to

and from the center of the continent

Q1 2019 opening

Q4 2018 opening

Next expansion

2020-21

Next expansion

2020-22

Mid-2020

opening

We Transport Wood Pellets in Bulk and in Bags

Pellet

Mills

Industrial

Customers

Bulk Distribution

Centers and

Bagging Facilities

Bulk Vessels at

Ports for Export

Retail Outlets

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Intermodal

Bulk

How CN Helps Pellet Producers

Origin Transload Inbound Flow of Raw Material

Equipment SourcingSite Selection

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Export Terminal Customs BrokerageOutbound Logistics Design

Delivering Safely

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TECHNOLOGY

Coaching,

mentoring and

monitoring

PROCESSPEOPLE

Train and track

reliability

Safety analysis

ONBOARDING

Two training centers

deliver boot camps,

on-the-job training and

safety orientations

Delivering Responsibly

75%GHG Reduction Moving Freight by Rail

Instead of Truck

4XRailroads are Approximately Four Times

More Fuel Efficient Than Trucks

468 miles

One Train Can Move on Average a Ton of

Freight 468 Miles on a Single Gallon of Fuel

300 Trucks

A Single Freight Train Can Replace Over

300 Big Trucks

Providing an environmentally friendly way to move goods

Sources: The Railway Association of Canada; The Association of American Railroad

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Leading in SustainabilityOur sustainability performance has continued to earn us a place

among the world’s best for several years running

Sustainability Yearbook

(2014-2018), Bronze

Class distinction (2018)

Listed member

(2009-2017)

Member of the World Index

(2012-2017)

Listed member

(2010-2017)

One of the Best 50 Corporate

Citizens in Canada

(2009-2017)

Listed member

(2009-2017)

One of Canada’s Top

100 Employers

(2014-2018)

Climate Change Action Leader -

Climate A list, Supplier Climate A list

(2017)

One of the Ten Best

Companies to Work For

(2015-2016)

Progressive Aboriginal Relations (PAR)

Program Certified Companies

(2016)

Exceptional workplace

diversity and inclusiveness

programs (2017)

Ranked first in the industrials

group annual review of corporate

governance practices in Canada

(2016)

Global Top 50 Silver Award (2017)

and Best Investors Relations in the

Industrials Sector

(2013-2017)

Outstanding commitment to

employment equity (2017)

Best Overall

Corporate

Governance (2016)

Military Friendly Employer

Canada (2017)

Military Friendly

Employer U.S.

(2015-2017)

Employer Brand Research

Top 5 Winner (2017)

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In Summary

• Investing record amounts in

capacity, fluidity and safety

• Supply chain enabler with

direct access to ports on

three coasts

• Dedicated to growing with

our pellet partners

• A clear rail industry leader

in sustainability