Title - Verdana 32pt. - BC Ferries · BMO 13 th Annual Infrastructure & Utilities Conference February 2016 . 1 FORWARD LOOKING STATEMENTS. This presentation and other information

Investor Update BMO 13th Annual Infrastructure & Utilities Conference

February 2016

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FORWARD LOOKING STATEMENTS This presentation and other information provided contains certain “forward looking statements”. These statements relate to future events or future performance and reflect management’s expectations regarding our growth, results of operations, performance, business prospects and opportunities and industry performance and trends. They reflect management’s current internal projections, expectations or beliefs and are based on information currently available to management. Some of the market conditions and factors that have been considered in formulating the assumptions upon which forward looking statements are based include traffic, the Canadian Dollar relative to the US Dollar, fuel costs, construction costs, the state of the local economy, fluctuating financial markets, demographics, tax changes, and the requirements of the Coastal Ferry Services Contract. Forward looking statements included in this document include statements with respect to: economic conditions, traffic levels,and fuel prices; our short-term and long-range business plans, and capital expenditureand financing activity forecasts; our Fare Flexibility and Digital Experience Initiative, Salish Class vessels, Baynes Sound Connector, LNG plans, and Spirit Class mid life upgrades; and expectations regarding our drop trailerand BC Ferries Vacations businesses. In some cases, forward looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider various factors including, but not limited to, the risks and uncertainties associated with: vendor non-performance; capital market access; interest rate, foreign currency, fuel price, and traffic volume fluctuations; the implementation of major capital projects; security, safety, and environmental incidents; confidential or sensitive information breaches; changes in laws; vessel repair facility limitations; economic regulatory environment changes; tax changes; and First Nation claims. Actual results may differ materially from any forward looking statement. Although management believes that the forward looking statements contained in this presentation and other information provided are based upon reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this presentation, and British Columbia Ferry Services Inc. assumes no obligation to update or revise them to reflect new events or circumstances except as may be required by applicable law. In addition to providing measures prepared in accordance with IFRS, we present certain supplemental non-IFRS measures. These include, but are not limited to, vehicle and passenger traffic,and number of sailings. These measures do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental non-IFRS measures are provided to assist readers in determining our ability to generate cash from operations and improve the comparability of our results from one period to another. We believe these measures are useful in assessing operating performance of our ongoing business on an overall basis.

Disclaimer

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I. Introduction

II. Corporate Update

III. Contractual & Regulatory Overview

IV. Financial Update

V. Summary

Table of Contents

I. Introduction

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• 4 Major Routes – connecting Vancouver Island and Sunshine Coast to the Lower Mainland of British Columbia (64% of passenger traffic and 60% of vehicle traffic)

• 2 Northern Routes –service the Province’s mid & north coast and Haida Gwaii

• 18 Other Routes – connect the Gulf Islands and small communities on Vancouver Island and Lower Mainland

Overview of Operations

BC Ferries’ Infrastructure

Routes

Terminals

Vessels

• Operate a fleet of 35 vessels of varying size • Average age of vessel fleet (weighted by

gross tonnage) is approx. 22 years

• 5 major and 42 minor terminals • Major terminals are: Tsawwassen; Swartz

Bay; Horseshoe Bay; Duke Point; and Departure Bay

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Michael J. Corrigan, President & CEO

• Appointment effective 01/01/12 • Joined BC Ferries in 2003 • Former positions: Chief Operating

Officer and EVP of Business Development

Officers of the Company

Janet Carson

VP, Marketing & Travel Services

Mark Wilson

VP, Engineering

Alana Gallagher

Treasurer

Cynthia Lukaitis

VP & Corporate

Secretary

Captain D.W. James

Marshall

VP, Fleet Operations

Corrine Storey

VP, Customer

Services

Pierre Vorster

VP & Chief Information

Officer

President & CEO

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Dennis Dodo

Chief Financial

Officer

Glen Schwartz

EVP, HR & Corporate

Development

Mark Collins

VP, Strategic Planning & Community Engagement

Management Team

II. Corporate Update

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Fiscal Year 2015 in Review

• Carried 19.8 million passengers and 7.7 million vehicles on over 171,000 sailings

• Invested $150 million in capital expenditures for new vessels, vessel upgrades, modifications, terminals and information technology

• Generated $78 million in food and retail sales which contributes valuable non-tariff revenue and assists with fare affordability

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• Key Economic Factors: Lower Canadian Dollar; Lower Fuel Prices

Employee Safety Performance

8

0

3,000

6,000

9,000

12,000

15,000

0

50

100

150

200

250

300

350

400

450

500

2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

# of D

ays L

ost

# of T

ime L

oss I

njur

ies

Employee Time Loss Injuries

Days Lost

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Revenue Make Up

Break out of FY2015 Total Revenue ($841M)

• Tariff and reservation revenue on the three large routes from Vancouver Island to Greater Vancouver represented half of total revenue in FY2015

Tariff Revenue - Van. Island to

Vancouver Routes 50%

Tariff Revenue - All Other Routes

18% Catering, On-board

& Other 11%

Federal & Provincial Fees 21%

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Traffic

• Traffic has been strong this fiscal – up more than 4% from FY2015 • On a rolling 12 month total, we surpassed 20M passengers in June

and we are now at levels last seen in August 2011

Current Trends - Passengers

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Onboard Ancillary Revenue

FY2015: $78.3 million in ancillary revenue (food and retail)

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4.95

4.88

4.86

4.91

5.11

5.18

5.22

4.60

4.70

4.80

4.90

5.00

5.10

5.20

5.30

F2010 F2011 F2012 F2013 F2014 F2015 F2016(F)

Aver

ae P

asse

nger

Spe

ndFleetwide Average Passenger Spend (APS)

Five Year Extension

• In 2015, BC Ferries reached an agreement with the BC Ferry & Marine Workers’ Union

• Five year extension (Oct 31, 2015 to Oct 31, 2020) • Modest wage increases averaging 1.71% per year

• Approximately 3,500 employees are covered by the Collective Agreement

Collective Agreement Update

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“The five-year agreement provides for fair and modest wage and benefit increases for our employees while continuing to provide an efficient and dependable service.” “This agreement will mark 17 years of labour stability at BC Ferries.”

- Mike Corrigan, BC Ferries’ President and CEO

Drop Trailer/Commercial Services

Year Over Year Increases Fiscal 14 Fiscal 15

Commercial Revenue 3.8% 3.5%

Drop Trailer Revenue 14.4% 13.5%

Drop Trailer Throughput

(units) 14.8% 10.0%

Drop Trailer Net Contribution 15.9% 17.5%

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Milestone – Carried our 150,000th drop trailer this year

• Net Contribution is approaching $10m

BC Ferries Vacations

BC Ferries Vacations

Fiscal 2013

Fiscal 2014

Fiscal 2015

Gross Sales Revenue $3.0m $3.3m $4.3m

Gross Margin $670k $959 $1.4m

Net Contribution $268k $437k $718k

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III. Contractual and Regulatory Overview

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Governance Structure

BC Ferries (Service Provider)

Provide Safe & Efficient Service

Provincial Government

Sets Service Levels 60-Year Contract

BC Ferries Commissioner Holds BC Ferries Accountable

Regulator

Customer

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Regulated Fares

• Price Caps: Maximum average fare increases

• Coastal Ferry Act: Requires the Commissioner to set price caps sufficient to enable the ferry operator to meet debt obligations and maintain access to reasonable borrowing rates

• Coastal Ferry Contract: Province sets service levels and associated subsidy • Province to provide $155.4M annually in subsidy • Additional support for medical and school related travel • Federal subsidy increases at CPI in perpetuity, ~$29M p.a.

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Final Performance Term 4 (PT4) Price Caps • PT4: Four years from April 2016 to March 2020

• PT4 Price Caps

• 1.9% per annum for the four year period

• Target Ratios as determined by Commissioner • Equity not lower than 17.5% of total capitalization • Debt Service Coverage Ratio of 2.5 or higher

• Fuel Set Price Determined by Commissioner

• Fuel Set Price starting at $0.915/Liter, increasing 2% per annum • ~70% of forecast diesel consumption has been hedged through

the middle of performance term 4 – at an indicative all-in price that is less than the set price

• We are comfortable with the 1.9% price caps and our ability to

meet the target ratios

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IV. Financial Update

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Financial Integrity

Credit Ratings – S&P “AA-” stable – DBRS “A” stable

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•Historical EBITDA & Net Earnings •($ millions)

•Historical Revenue and Expenses •($ millions)

786.4 800.2 841.1

565.9 577.4 579.8

0

200

400

600

800

1000

FY2013 FY2014 FY2015

Revenue Expenses

220.5 222.8

261.4

15.5 18.0 49.1

0

100

200

300

FY2013 FY2014 FY2015

EBITDA Net Earnings

FY2013 FY2014 FY2015

EBITDA / Revenue

28% 28% 31%

Net Earnings / Revenue

2.0% 2.2% 5.8%

ROE 4.6% 5.2% 12.6%

Age of the Fleet

Current Vessel Age by Decade

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1950's 1 Vessel

1960's 10 Vessels

1970's 8 Vessels

1980's 3 Vessels

1990's 5 Vessels

2000's 7 Vessels

2010's 1 Vessel

• Vessel replacement dominates the 12 year capital plan (14 new vessels)

Capital Expenditure Forecast

12 Year Capital Plan (FY2016 to FY2027)

•Future Capital

Expenditures

• 12 year forecast for capital expenditures is $3.1 billion

• Incremental borrowing of ~$500 million is expected over the next four years

• Next issue in calendar 2017

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Vessels Terminals Other

69% 21% 10%

209

410

231

344

212

133 143

418

357

205 188 167

$0

$100

$200

$300

$400

$500

$600

C$

mill

ion

s

Newbuild Program Cable Ferry (Baynes Sound Connector)

• Nov 2015 – completion of trials and transfer of title to BC Ferries

• Feb 2016 – training to be complete and vessel will begin service

• Forecast to save approximately $2M per year for 40 years

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Baynes Sound Connector

during trials on Route 21 in fall 2015

Newbuild Program Three Salish Class Ferries

• Awarded $165 million contracts to Remontowa Shipbuilding S.A. in Gdansk, Poland in July 2014

• 3 vessels (145 car capacity) in-service in 2016 and 2017 – First vessel, Salish Orca, to arrive

in Victoria in August 2016

• Dual-fuel vessels (Liquefied Natural Gas & Diesel)

• Standardization & interoperability

• Queens of Burnaby & Nanaimo retire

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Launch of the first of three vessels, “Salish Orca”, in Gdansk (November 2015)

Spirit Class Mid Life Upgrades

• Two largest vessels in the fleet,

originally constructed in the mid 1990s

• Conversion to dual fuel (LNG/Diesel) propulsion is planned – Current diesel fuel consumption is 8.5 to

11 million litres per year per ship

• Overhaul or replacement of systems and equipment to prepare each vessel for the second half of its useful life

• Improved opportunities for ancillary revenue

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Spirit of British Columbia - Fall 2017 to Spring 2018 Spirit of Vancouver Island - Fall 2018 to Spring 2019

Major IT Projects – Delivery Timeline

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April 2017

October 2017

Current System Limited pricing flexibility

Point of Sale – New

Website – New

Booking Engine – New

October 2016

Completion of Major IT projects will enable the implementation of a Fare Flexibility & Revenue Management Strategy

• Expected to increase traffic without diluting yield

Today

Debt Portfolio & Key Ratios

•Bonds Outstanding

•Historical Leverage Ratio

•Bank Debt*

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•Historical Debt Service Coverage Ratio

* As at Dec 31, 2015

March 31, 2015: 3.0X March 31, 2015: 79.1%

Amount Maturity Coupon(C$MM) (%)

200 April 28, 2044 4.289%200 October 23, 2043 4.702%200 January 11, 2038 5.581%250 March 20, 2037 5.021%250 October 13, 2034 6.250%

Type Amount(C$MM)

Credit Facility Limit 155KfW Loans Outstanding 165

KfW Loan Commitment 136

1.5x

2.0x

2.5x

3.0x

3.5x

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

DSCR

75%

80%

85%

90%

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Leverage Ratio

V. Summary

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Summary

• Vehicle and passenger traffic are up and continue to be strong

• Regulated price caps, Provincial subsidy and contracted service levels are set for the next four years

• A five-year extension of the collective

agreement is in place until Oct. 2020

• Next phase of capital plan is underway – Fixed price contracts for new, LNG burning,

standardized vessels – Planned conversions to dual fuel (LNG) – Major IT projects enabling flexible fares

and revenue management

• $500M of incremental borrowing forecast over next four years

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Investment Highlights

Essential Service

High Barriers to Entry

Business with Monopolistic Characteristics

Supportive Legislation

Strong Credit Ratings “AA-” and “A”

Strong Provincial Support

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Questions