Watco CompaniesOverview

January 25, 2013Southwestern Rail Conference

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Improve Customer Satisfaction Right Service Right Time In the Right Condition – Delivered SAFELY At the Right Price

Improve Profitability Revenue Growth Rate EBITDA Growth Return on Assets > WACC% Free Cash Flows Economic Value Add (EVA)

Do Both Over the Long-Term Building Relationships with:

• Customers• Watco Team• Communities• Vendors• Investors

Watco Customer First Foundation Principles

Roll Tide Roll

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Watco Customer First Foundation PrinciplesWhen Successfully Applied

Custome

r Satisfaction

• Customer Confidence, Trust and Loyalty

• Volume Growth• Service Growth• Expand Relationship

Profitabili

ty

• Operating Leverage• Increase Volumes and Lower Unit Cost• Capital Management• Cash Flow Return On Invested Capital

Long Term Relationship

• Customer Growth• Team Performance• Public-Private Partnership• Capital Access

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Watco Performance System - Goals

Safety – 0 injuries / accidents every day

Service – Deliver accurate & timely service every day

People – Find, keep & develop the best Team possible every day

Profitability – Generate the most sustainable, long-term value every day

Capital – Maintain & use the right type & least amount of assets every day

Growth – Earn the right to grow by small improvements every day

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Watco Growth PerformanceListen-Understand-Grow

Listen

Under

stan

dG

row

Listen to our Customers – Listen and learn our Customers needs, then work with our operations teams to meet and exceed those needs with Watco

Services.

Understand Customers logistics

supply chains “beginning to end”.

Raw material in… to finished product out.

Grow organically with each Customer.

What can we do differently to capture

more of their transportation

dollar?

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4,500 track miles3,200 Team Members400 locomotives3,900 railcars26 states served750,000+ annual

carloads

Watco – What We Do!

One of the largest car repair service providers in U.S. Largest privately owned short line railroad operator in U.S.One of the fastest growing terminal operatorsInternational service in Canada and Western Australia

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Watco Customer Diversity

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Proudly serve more than 1,500 Customers Daily

Average Length of Customer Relationship

• Switching 22 years• Mechanical 20 years• Railroad 10 years• Transload/Intermodal 2 years

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Watco’s Service Diversity

Services

Transportation (63% revenue) Mechanical (25% revenue) Terminals/Port (12% revenue)

29 Short Line Railroad Operations – 59%

400 Locomotives4,500 Track Miles3,900 Railcars27 Switching Operations – 4%

16 Rail Car Repair Facilities – 24% 23 Railcar Car Repair Operations – 1% 5 Private Railcar Repair Facilities

20 Terminal Operations – 6%2 Port Facilities - 5%10 Warehouse Operations – 1%

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Watco Geographic Diversity

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Watco Commodity Diversity

Other 5%

Pulp & Paper 8%

Lumber & Forest Products

6%

Energy & Chemicals 22%

(Coal, Crude Oil, Petro-Chemicals)

Agriculture 33%

Infrastructure Metals & Minerals

26%(Frac Sand, Drilling Pipe, Road Rock)

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Kinder Morgan & Watco

On December 15, 2010, Watco Companies and Kinder Morgan Energy Partners announced a new

partnership. The advantages of this partnership are:

Significant Growth Opportunities

• Transaction provides an avenue for significant investment into high growth areas

• Proven track record of successful investments with recent acquisitions and expansions

• Entrepreneurial mindset towards growth

Significant Synergies

• Over 1,500,000 carloads handled at KM & Watco facilities annually

• Over 100 Class I railroad connections and 50 short-line railroad connections in the U.S.

• The Terminaling and Railroad Industry are integral to each other

Exceptional Operators

• Respected reputation among peers in the industry

• Leaders in crude by rail terminals and operations

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$77.7 $97.7

$119.0 $137.6

$163.1

$218.7

$297.3 $270.6

$318.1

$379.8

$558.1

$-

$100

$200

$300

$400

$500

$600

2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012P

Reve

nue

($ in

mill

ions

)

Watco’s 10-Year Revenue Growth

10 Year CAGR = 21.8%

2012 P = preliminary 2012 actual results.

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$15.4 $17.0 $19.8 $21.0

$27.8

$37.8 $43.1

$47.9

$67.7

$79.0

$109.9

5.0%

10.0%

15.0%

20.0%

25.0%

$-

$20

$40

$60

$80

$100

$120

2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012P

EBIT

DA

Mar

gin

(%)

EBIT

DA

($

in m

illio

ns)

EBITDA EBITDA Margin

Watco’s 10-Year Adj. EBITDA Growth

10 Year CAGR = 21.7%

Adj. EBITDA figures are per the Company’s historical compliance certificates through 2011 and preliminary actual results for 2012, adjusted to exclude pro forma EBITDA from acquisitions to provide an accurate portrayal of the margin trends in Watco’s base business.

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Watco’s Future

Keys to understanding our future

Understand our past successes – courage to change for success today & tomorrow

Understand the future of our industry is very bright

Understand we must continue to improve, earning the right to grow with our Customers

Understand the importance of living by our Watco Customer First Foundation Principles

Understand & implement the Watco Performance System

Well positioned for future growth

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Thank You for Listening!

Questions?