Robert E. MartínezRobert E. MartínezNorfolk Southern CorporationNorfolk Southern Corporation

Indiana Logistics SummitIndiana Logistics Summit

IndianapolisIndianapolis

November 14, 2006November 14, 2006

Markets, Transportation Markets, Transportation Markets, Market Change and Markets, Market Change and

Transportation Policy;Transportation Policy;andand

The Economics of RailThe Economics of Rail

Railroads are Highly Capital Railroads are Highly Capital IntensiveIntensive

Source: JPMorgan Estimates and Company Reports.

5 Yr Average 2006EBNI 16% 13%UNP 15% 15%CSX 16% 18%NSC 12% 12%CNI 17% 19%CP 18% 18%Rail Average 16% 16%

Truckload Average 12% 11%

LTL Average 8% 13%

Parcel Average 7% 7%

Logistics Average 2% 1%

Capex as % of Revenue

Capex/Revenue in Industrial Capex/Revenue in Industrial SectorsSectors

Source: JPMorgan Estimates and Company Reports.

Sector 3 Yr Average 2006E

Auto 4.0% 4.0%

Forest Products 7.0% 6.7%

Chemicals 4.4% 4.7%

Metals and Mining 6.5% 8.4%

The railroad industry has not The railroad industry has not been earning its cost of capitalbeen earning its cost of capital

Source: Surface Transportation Board

0%

4%

8%

12%

16%

20%

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04

Cost of Capital

Return on Investment

NS Principles on Public/Private NS Principles on Public/Private PartnershipsPartnerships

No safety degradationNo safety degradation Voluntary on both sidesVoluntary on both sides Public sector pays for public or societal Public sector pays for public or societal

benefitsbenefits Norfolk Southern pays for railroad benefitsNorfolk Southern pays for railroad benefits Benefits, costs and risks are shared Benefits, costs and risks are shared

proportionatelyproportionately

NS Principles on Public/Private Partnerships NS Principles on Public/Private Partnerships (cont’d)(cont’d)

NS commits to performance standards in NS commits to performance standards in return for public participationreturn for public participation

Planning must be coordinated among all Planning must be coordinated among all stakeholders to ensure prudent investmentsstakeholders to ensure prudent investments

Planning must be executed in a manner Planning must be executed in a manner consistent with rail regulatory requirements, consistent with rail regulatory requirements, ownership rights, and market conditionsownership rights, and market conditions

The project must produce a more balanced The project must produce a more balanced transportation policy transportation policy

NS Business Mix by RevenueNS Business Mix by RevenueQ3 05 – Q2 06 Revenue: $9.107 BillionQ3 05 – Q2 06 Revenue: $9.107 Billion

Agriculture11%

Metals12%

Chemicals11%

Automotive11%

Intermodal21%

Coal25%

Paper9%

Long Term Conventional Intermodal Long Term Conventional Intermodal Volume GrowthVolume Growth

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

2000 2001 2002 2003 2004 2005 2006 Jan-Oct

(4.0%)

(2.0%)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

U.S. & Canada Volume % Growth

Y-T-D 2006 vs. Y-T-D 2005

33 NS Terminals

19 Private / Port Terminals

8,300 Route Miles

Chicago -Ashland Ave. Hub

Atlanta-Austell Hub

Harrisburg - Rutherford Hub

Intermodal Network

33 NS Terminals

19 Private / Port Terminals

8,300 Route Miles

Hub and Spoke Network

– how it works -

(From So-Cal)

(From So-Cal)

(From PNW)

Charlotte

Charleston

Savannah

Jacksonville

Miami

New York

Baltimore

Norfolk

Philadelphia

Oakland/Richmond, CA

Los Angeles,San Bernardino,Ports

Ports of Seattle and Tacoma

AtlantaHuntsville

BostonAlbany

Clovis, NM

Chicago

Union Pacific

Burlington Northern Santa Fe

Norfolk Southern

Kansas City Southern

Norfolk Southern IntermodalNorfolk Southern IntermodalTranscon NetworkTranscon Network

El Paso Dallas

Memphis

Buffalo

Columbus

ClevelandDetroit

Louisville

Cincinnati

Pittsburgh

Panama CanalPanama Canal

Suez CanalSuez Canal

Charlotte

Norfolk / Ports of Hampton Roads

East Coast Port ServicesEast Coast Port Services

ColumbusCincinnati

Louisville

Detroit

Toronto

Montreal

Dallas

Huntsville

Memphis

Birmingham

New Orleans

Pittsburgh

Cleveland

St. Louis

Kansas City

Chicago

Atlanta

Jacksonville

SavannahCharleston

Miami

Elizabeth Marine

Terminal

Fully C lea red D ouble S tackR outes on N S

Fully C lea red D ouble S tackR outes on C onnecting R a ilroads

Inte rm odal R ou tes w ith R estric tionsto S ingle S tack on C onnectingR a ilroads

Inte rm odal R ou tes w ith R estric tionto S ingle S tack

W ill B e C lea red fo r 19’3” (D oub le S tackIn one H igh -C ube & O ne Low -C ubeC onfigu ra tion

Term ina ls

Canada

New Orleans

Charleston

Savannah

Jacksonville

Miami

Atlanta

Columbus

Greensboro

FrontRoyal

Buffalo

Detroit

Louisville

Cincinnati

Memphis

KansasCity

St. Louis

Charlotte

Pittsburgh

New York/New Jersey

Philadelphia/Morrisville

Baltimore

Cleveland Harrisburg

Norfolk/Hampton Roads

Huntsville

Peoria

Toledo

Georgetown

Boston/Ayer

Taylor

Bethlehem

Dallas

AlexandriaDecatur

Toronto

Montreal

Waterville

Minneapolis

Binghamton

Meridian

Albany

Chicago

The Norfolk Southern Intermodal System Map

Doublestack Clearances

Central Corridor Double-Stack Project: Central Corridor Double-Stack Project: The current clearance envelope The current clearance envelope through western Virginia, West Virginia and Kentucky only accommodates railcars through western Virginia, West Virginia and Kentucky only accommodates railcars up to 19’1” multi-levels. No double-stack cars can be accommodated due to the up to 19’1” multi-levels. No double-stack cars can be accommodated due to the

height, as well as the square profile of the conveyance. height, as well as the square profile of the conveyance.

Columbus

The Port of Virginia

Harrisburg

Kenova

Prichard

Roanoke

Chicago Cleveland

Heartland Corridor

The Heartland CorridorThe Heartland Corridor

Portsmouth

Norfolk

664

664264

264

464

164

CIDMMA

PMT

NITNITNITNIT

APM

CRMSRP Project (Median Rail)CRMSRP Project (Median Rail)

CIMT(Proposed)

Columbus

Rickenbacker

Ashville

HuntingtonKenova

Prichard

WilliamsonWelch

Bluefield

RoanokePetersburgPetersburg

RichmondRichmond

Washington, DCWashington, DC

Christiansburg

Portsmouth

To Chicago, Detroit, & Points West

VA

OH

WV

KYPortsmouthPortsmouth

COMPONENTCOMPONENT LEGENLEGENDD

Central Corridor Double-Stack InitiativeCentral Corridor Double-Stack Initiative

Prichard Intermodal TerminalPrichard Intermodal Terminal

Roanoke Region Intermodal TerminalRoanoke Region Intermodal Terminal

Rickenbacker Intermodal TerminalRickenbacker Intermodal Terminal

Commonwealth Railway Mainline SafetyCommonwealth Railway Mainline SafetyRelocation Project (CRMSRP)Relocation Project (CRMSRP)