#1SEABURY MARITIME Invest Puerto Rico Logistics Research / Feasibility Study October, 2019 INVEST PUERTO RICO#2Table of Contents Section 1. Introduction Section 2. Grounding in Logistics and Location Page 3 Page 9 Section 3. Logistics-based Business Attraction Opportunities for Puerto Rico Page 28 Section 4. Recommendations Appendix Contact Information SEABURY MARITIME Page 55 Page 64 2#3Section 1. Introduction#4Introduction - The Team The Seabury Maritime Team We are a team of logistics and supply chain experts that have been contracted by InvestPR to conduct a Logistics Research/Feasibility Study for Logistics-based business opportunities for Puerto Rico " Seabury Maritime was established in 2016 as an amalgamation of Seabury Capital's maritime investment banking practice and Paul F. Richardson Associates. Seabury Capital is a leading global advisory and professional services firm that provides diversified business support to transportation related industries, whereas PFRA was founded in 1977 and executed numerous assignments for a variety of customers on an international basis. ■ Strategic Rail Finance is a trusted advisor to ports, shortlines, shippers, transloaders, rail-served industrial parks, and government agencies for 25 years. SRF has completed projects in 43 US states and Canadian provinces. SRF also advises on rail business development, land use, operations, equipment, industrial development, and policy development. " Gilbert Sachs Group aims to maximizes effectiveness and efficiency of customers' logistics and supply chain by generating sustained savings through lasting process improvement. SEABURY MARITIME STRATEGIC RAIL FINANCE GROWING NORTH AMERICAN INFRASTRUCTURE GSG GILBERT SACHS GROUP The Charge The Focus SEABURY MARITIME The Seabury Maritime team has been provided the unique opportunity to research, view, and assess transportation and logistics related business opportunities on the island of Puerto Rico in an effort to increase the scale of the economy both on a domestic and an international basis. From our team's backgrounds in the logistics and supply chain space, we are charged with providing the InvestPR team with recommendations based upon our expertise in the specified and related industries. Our team has focused our study for InvestPR around three poignant questions: 1. 2. What strengths and weaknesses exist for Puerto Rico in the area of logistics? How can Puerto Rico minimize negative impacts and build on strengths in logistics? 3. In which logistics-dependent sectors can Puerto Rico best create jobs and build its tax base?#5Team Construction Project Sponsor: Project Director: Intermodal Expert: Individual Team Member Introductions Patrick Bird - Managing Director, Seabury Maritime Gary Pedersen - Operations Director, Seabury Maritime John Elliott - Senior Vice President, Strategic Rail Finance Jonathan Gilbert - Senior Consultant, Gilbert Sachs Group Supply Chain / Logistics Expert: The Seabury Maritime Group of Experts Patrick Bird Gary Pedersen John Elliott Project Sponsor Project Director SEABURY MARITIME SEABURY MARITIME SEABURY MARITIME Senior Vice President STRATEGIC RAIL FINANCE GROWING NORTH AMERICAN INFRASTRUCTURE Analyst Jonathan Gilbert Jack Joyce GSG Principal Analyst GILBERT SACHS GROUP SEABURY MARITIME 5#6We Visited... Rafael Cordero Santiago Port of the Americas Demaco Terminal, Guayanilla Roosevelt Roads Naval Station José Aponte de la Torre Airport SEABURY MARITIME POTATUR 6#7Summary of Visit Timeframe ☐ 9/16 9/17 9/18 9/19 Day 1 Day 2 Day 3 Day 4 Initial Meeting with InvestPR Team Tours of the South and West side of the Island Tours of the Northeast and East side of the Island Roundtable discussion held with 23 PR stakeholders Complete Study & Reporting Our Findings 8/26/19 10/28/19 Interviews Ponce, Rafael Cordero Santiago Ports of the Americas - General Manger of Ponce and Exec. Director of the Authority Demaco Terminal - The Principal owners and management team Roosevelt Roads Executive Director of the Local Development Authority 23 stakeholders from various companies and agencies - Conducted roundtable discussion with robust participation - Follow-up questions were initiated Invest Puerto Rico - Six team members, with whom we worked in close collaboration with throughout our trip SEABURY MARITIME P Tours Day 2 - Tuesday, September 17th - - Ponce: Rafael Cordero Santiago Ports of the Americas Guayanilla: Demaco Terminal, Demaco Corporation HQ Mayaguez Rincon Aguadilla: Rafael Hernandez Airport Day 3 - Wednesday, September 18th Ceiba: Roosevelt Roads o Ferry Terminal and Adjacent Piers 。 Naval Station, including Dry Dock o José Aponte de la Torre Airport Documents We poured over a number of documents to strengthen our understanding of the legislative and economic customs of Puerto Rico Government and Legislative Policies o Jones Act - - O Stevens Act o Act 20, 22, 73, 273, 399 Agency Programs Trade Statistics Economic Indicator Reports Infrastructure Plans o Roosevelt Roads Master Development Plan 7#8What Does Success Look Like? Constructive Thinking for Agile Business ☐ ☐ Being an island economy, Puerto Rico is highly dependent (uniquely dependent for a United States territory) on the transportation and logistics sector to sustain its way of life ■ Puerto Rico is a modern economy, and like all other modern economies of the world, it's transportation infrastructure is compromised of a system of roads, highways, airports, ports and harbors, and railway systems that serve the almost 4-million people on Island As it stands, transportation on the Island is heavily funded from both local and federal government funds To maximize operational efficiencies of the movement of goods and services, and ultimately conserve money and free time for other business endeavors, Puerto Rico will need to look toward implementing cooperative operating structures between private business and government entities. We will show how this can be done (through examples happening elsewhere in the world) later in this presentation The Seabury Maritime team has committed to providing InvestPR with the requisite information, analysis, and constructive business ideas to think about logistics and transportation as a primary driver of economic production in Puerto Rico. This presentation aims to demonstrate our findings. Input Research Interviews Tours SEABURY MARITIME Insight and Experience from Industry Experts 'Vector force in a certain direction Goal - Vector Identification The Goal Identification of a few high-potential vectors¹ for InvestPR 8#9Section 2. Grounding in Logistics and Location#10Counting Zeros Understanding relationships between freight weight, freight value, and mode grounds all other thinking in logistics SHIPMENT WEIGHT Tons Pounds MODE Air Freight Trucking Rail Water 0.0001 0.20 0.001 0.01 0.1 1.0 2 20 200 2,000 10 20,000 100 200,000 1,000 2,000,000 10,000 20,000,000 100,000 200,000,000 Air Freight 747 Jet Parcel Services LTL Trucking 1 Truck Load 1 Rail Car 50 Trucks 12 Rail Cars Barge Unit Train Small ship Ocean ship ☐ Understanding Scale and Proportion Understanding the role of logistics in any given industry starts with comprehending orders of magnitude of freight weight and volume The range of shipment sizes literally span nine orders of magnitude, from 0.0001 ton parcels moved by ground or air mail to 100,000+ ton shipments moved by ocean-going bulk ships Some modes, have natural ceilings below the floor of other modes - - - A 747 cargo jet will carry about as much freight as one rail car A train of 100 rail cars barely fills a small ship Container shipping aggregates thousands of smaller shipments of 10 or 20 tons each into ship-sized units Some commodities, like bulk grain or iron ore, require locations with direct access to bulk shipping (rail and water) because inefficiency of transportation by any other mode erases the value of the product itself Relation to Business Attraction Strategies Unit cost for transportation increases Every time a product is touched Every time a product changes modes, cost increases The smaller the shipment size The further the product moves Seek locate businesses where location allows minimum touches, minimum mode changes, maximum shipment size, and minimum distance traveled for both its process inputs and output to customers The relative value of a cargo correlates strongly to its weight and mode of transportation. So, air freight efficiency will generally benefit companies dealing in small, light objects with very high value density ($100's or $1,000's per pound). Marine freight efficiency will typically deal with heavy objects with very low value (pennies or dollars per pound). SEABURY MARITIME 10#11Threefold Factoring of Transport in a Regional Economy 1 Any and all of these three can drive-or drag-a regional economy Transportation as a stand- alone service industry 2 Transportation intrinsic to another industry 3 Transportation intrinsic to the cost of living Example: a coastal container transfer terminal C&IM HER 1111111 111 E LE Example: an integrated rail yard, grain elevator, and flour mill Example: NYC trash transportation from islands by barge For business attraction in Puerto Rico, consider opportunities in all three categories as ways to retain and increase wealth in the island economy SEABURY MARITIME 11#12Island Logistics are Foundational to Economic Growth "There are essentially only two ways that an economy can grow. Either it can increase its production for the outside world or it can produce for itself what it otherwise would buy from the outside. The first of these is an expansion of exports. The second is import substitution." Persky et al. (1993, p. 18) Local production retains dollars in the local economy Exports are a source of dollars for the economy Imports and excessive transport costs drain dollars from the economy Puerto Rico's economy will continue shrinking until it either exports more products of higher value (generating more cash inflow) or locally creates products that replace imports (slowing and reducing cash outflow). The island territory's unique logistics constraints and logistics opportunities will largely determine its economic future. SEABURY MARITIME 12#13Input/Output and Location Quotient Analysis I/O Quotients Sample I/O - Chemical Plant vs. Data Center ☐ ■ Each industry spends their dollar differently, purchasing the inputs required to produce their products input Synthetic Materials Water Items consumed in production: Various feedstocks, Energy Cost to transform the inputs: Labor, Cost of Capital investment Transportation: to bring inputs and deliver outputs ☐ Taxes: including regulatory compliance costs Two sample I/O for North American chemical plants vs. data centers (right) shows how differently they relate to supply chains, and how differently they impact a region's economy Each economic region (e.g. island, or metro area) has a location quotient for each main industry, which is simply measures an industry's relative concentration in that region. Industry concentration levers the I/O quotients to predict demand for a product in that region, thereby creating supply chain strengths and Industrial location theory and practice focuses on minimizing total costs of production, which often requires co-location with suppliers or customers. This trend combines with concentration of specially skilled labor creates localized industry clusters Industry clusters tend to over-produce products required locally, thus generating product exports and currency import (thereby becoming a means of local wealth generation) Business attraction strategy should focus the intersection of a particular industry's requirements and Puerto Rico's respective advantages (e.g. locally available feedstocks, lower relative transportation costs, better tax or regulatory environment) Business attraction strategy can also seek to complement and locally extend the supply chains of existing businesses. Start by asking business leaders, what do you buy, from whom, and where? What inputs cost more than they should because they're on an island? (see the Salad Dressing example, right) SEABURY MARITIME Organic Materials Chemical Cleaners Land Energy output input output IT Equipment Chemical Product DCPI VS. Computing Land Energy Hypothetical Example in Supply Chain Inquiry: Salad Dressing ☐ ☐ ☐ ☐ What does the Salad Dressing company purchase from others? (answer: vinegar, vegetable and olive oils, herbs, spices, cardboard boxes, plastic bottles and caps, and bottle labels). Which inputs have an outsized transportation cost inside them? How can that supply chain be increasingly localized for value retention? What inputs could be shipped in larger volumes or different form to reduce transportation costs? Which inputs are overpriced due to island logistics (vs. mainland)? IDEA: Can we reduce overall cost of salad dressing by shipping resin beads in bulk and making bottles and caps locally? Are there others nearby importing plastic bottles? Would there be a bottle supplier eager to secure these customers with a local bottle manufacturing facility? 13#14Industry Depend upon Various Transport Modes In addition to unique relationships to other transport modes and government, each mode supports certain dependent industries 483: Water transportation 484: Truck transportation 5412OP Misc professional, scientific, and technical services 0.0018 484 Truck transportation 111CA Farms 0.0013 327 Nonmetallic mineral products 0.0609 0.0422 GFG Federal general government 0.0012 321 Wood products 0.0258 GFE Federal government enterprises 0.0012 311FT Food and beverage and tobacco products 0.0212 311FT Food and beverage and tobacco products 0.0011 322 Paper products 0.0173 331 Primary metals 0.0006 337 Furniture and related products 0.0168 483 Water transportation 0.0006 331 Primary metals 0.0166 481 Air transportation 0.0005 212 Mining, except oil and gas 0.0162 212 Mining, except oil and gas 0.0004 111CA Farms 0.0153 327 Nonmetallic mineral products 0.0004 313TT Textile mills and textile product mills 0.0153 484 Truck transportation 0.0003 213 Support activities for mining 0.0114 486 Pipeline transportation 0.0003 23 Construction 0.0112 482 Rail transportation 0.0003 3361MV Motor vehicles, bodies and trailers, and parts 0.0110 4870S Other transportation and support activities 0.0003 339 Miscellaneous manufacturing 0.0104 325 Chemical products 0.0002 323 Printing and related support activities 0.0099 213 Support activities for mining 0.0002 315AL Apparel and leather and allied products 0.0096 22 Utilities 0.0002 332 Fabricated metal products 0.0095 55 Management of companies and enterprises 0.0002 325 Chemical products 0.0094 23 Construction 0.0002 333 Machinery 0.0091 GSLG State and local general government 0.0002 326 Plastics and rubber products 0.0089 ☐ Industries most dependent upon Marine Transport are farms, food manufacturing, primary metals, mining, minerals, chemicals, utilities, and construction Industries most dependent upon Air Transport (generally) are mostly service related, along with printing and publishing and some manufacturing Many, diverse industries depend upon trucking, which is so ubiquitous in North America as to almost become a non-differentiator Certain industries almost cannot exist without rail: utilities (for coal and oil), primary metals (for ore), paper (for pulp and finished goods movement) 481: Air transportation 482: Rail transportation ☐ GFE Federal government enterprises 0.0107 212 Mining, except oil and gas 0.0368 514 Information and data processing services 0.0070 331 Primary metals 0.0272 562 Waste management and remediation services. 0.0060 22 Utilities 0.0245 521CI Federal Reserve banks, credit intermed, and relateds 0.0057 327 Nonmetallic mineral products 0.0140 323 Printing and related support activities 0.0054 484 Truck transportation 0.0123 GFG Federal general government 0.0053 322 Paper products 0.0110 511 Publishing industries (includes software) 0.0050 325 Chemical products 0.0067 5415 Computer systems design and related services 0.0046 311FT Food and beverage and tobacco products 0.0058 484 Truck transportation 0.0044 GFE Federal government enterprises 0.0054 561 Administrative and support services 0.0043 482 Rail transportation 0.0048 5412OP Misc professional, scientific, and technical services 0.0035 213 Support activities for mining 0.0046 512 Motion picture and sound recording industries 0.0031 321 Wood products 0.0045 337 Furniture and related products 0.0027 326 Plastics and rubber products 0.0044 523 Securities, commodity contracts, and investments 0.0025 111CA Farms 0.0040 321 Wood products 0.0024 332 Fabricated metal products 0.0026 ☐ 532RL Rental and leasing services and lessors of intangible assets 0.0023 337 Furniture and related products 0.0019 4870S Other transportation and support activities 0.0023 335 Electrical equipment, appliances, and components 0.0018 332 Fabricated metal products 0.0023 3361MV Motor vehicles, bodies and trailers, and parts 0.0017 713 Amusements, gambling, and recreation industries 0.0021 323 Printing and related support activities 0.0014 326 Plastics and rubber products 0.0021 333 Machinery 0.0012 SEABURY MARITIME Application to Business Attraction Look for import replacement and export opportunities by attracting bulk-shipping dependent industry to on-dock and near-dock sites Rail-dependent industries overlap with marine- dependent industry, and on an island without railroads these activities could locate on-dock or near dock where bulk transportation is cheapest or rail- borne commodities on the continent could be shipped to the island in bulk vessels Air services on an island will naturally be more robust than in an mainland city of similar size. Therefore, air travel will likely not be a limiting factor and could become an attractive feature with advantageous connecting locations 14#15Principles in Supply Chain Analysis & Design ☐ ☐ Building Competitive Supply Chain Capabilities Building competitive supply chain capabilities requires understanding the unique advantages of each location being considered Site location studies go deep into country risk, customs and duties, logistics costs, capabilities, and capacity For companies looking to establish trade in the Caribbean and South America, Puerto Rico enjoys significant supply chain advantages in the Caribbean ■ ☐ Country Risk: Superior rule of law, US defenses, and use of the US dollar for financial transactions virtually eliminates country risk Trade Efficiency: No customs or duties for inbound cargo from the US mainland; ample FTZ areas allow imports without immediate entry cost Geographic Advantage: Centrality to the Caribbean market means short trade routes to many other island economies Geographic Advantage: Puerto Rico is also well placed to service South American demand for North American shippers Transportation Links: Frequent sailings and adequate port capacity ensure security of supply Workforce: Specialized skills, especially in pharma and chemical production mean that Puerto Rico can support production and distribution For Puerto Rico, the challenge is finding companies that have these unique needs ☐ Competing in the broader market where these factors are less important will not be a winning strategy Instead, Puerto Rico must focus on companies that can clearly benefit from the Island's unique capabilities Competitive Requirements (Choose: 1 Superior / 1 Advantaged/2 Parity) Companies build their supply chains to create differentiated offerings and drive competitive advantage. This example shows a firm that sets different supply chain goals for each of its sales channels. SEABURY MARITIME Performance Category Channel → International Wholesale Reseller Solutions/End Users Delivery Reliability Responsiveness/Speed Flexibility Cost S P P S P A S P P P P ↑ A A Working Capital Д P P Stocking Policy Implications Concentrate on managing unreliable lead-time items; hold more safety stock Concentrate on managing long lead-time items; hold less safety stock Concentrate on managing long lead- time items; hold more safety stock Concentrate on managing unreliable lead-time items; hold more safety stock 15#16☐ Principles in Supply Chain Analysis & Design cont'd More Than Cost is at Stake Supply chain leaders trade off reliability, responsiveness, flexibility, and cost to locate facilities Companies design supply chains to fulfill customer requirements Different markets can require vastly different supply chain strategies Locations of production/inventory relative to demand are optimized through network analysis " Supply Chain Drivers Supply chain strategy is driven by analysis of: Customer requirements Heuristic and linear programming models are used to locate sites, trading off costs vs. service levels " Understanding how companies make these decisions can help drive more effective use of EDA resources Competitive market positioning and value proposition Availability of working capital Physical characteristics of demand (location, transport options, etc.) Availability of capital Other additional factors Network Analysis Showing Supply Chain Service Areas and Routes Companies build distribution networks that balance DC operating and transportation costs. The | optimal solution adds locations until the marginal cost of a new facility outstrips the transportation savings it can provide. I SEABURY MARITIME Washingt ཀཐཱཏོ Montana North akota Orega Nevada Wyoming South Dakota ado United States New Mexico Texas Baja California Sonora Chihuahua Coahuila Baja California Sur Sinaloa Durango Nuevo León Tamaulipas Misso Ma nsin ermont ngan New Yo Ne onnecticut Mi Kentucky Опо Ian ssee th na arolina am Rhod New Jersey Delaware Maryland District of Columbia 16#17General Cargo Info - Puerto Rico Fact File ☐ ISO code: PRI Imports Prohibited Cargo Language: Spanish, English Currency: US Dollars (USD) ☐ Time zone: GMT-4 ■ Dialling code: +1 787 Capital city: San Juan ☐ Area: 13,790 sq km Population: 3,620,897 Weights & measures: Metric system ☐ Electricity supply: 120v. 60Hz Commodities and Trading Partners Exports: Chemicals, electronics, apparel, canned tuna, rum, beverage concentrates, medical equipment ■ Imports: Chemicals, machinery and equipment, clothing, food, fish, petroleum products ☐ Principal trading partners - exports: United States: 90.3 % " United Kingdom: 1.6% Dominican Republic: 1.4% Netherlands 1.4 % Principal trading partners - imports: United States: 55 % Ireland: 23.7% Japan: 5.4% SEABURY MARITIME ☐ ■ ☐ ■ Meat or any products thereof (dried, canned etc). Narcotics and some medication containing prohibited substances (see source website for more details). Absinthe (or other alcohols containing artemisia absinthium). Plants, seeds, vegetables, fruits. Soil, livestock or animal pests. Biological (bacteria cultures, fungi specimens, viruses and others for research and etc, Permissible only with APHIS permit). Unprepared fish and fish eggs. Imports from embargoed countries (Iran, Cuba, Myanmar, Sudan) and leather souvenirs. Endangered wildlife species and products thereof (for example clothing and accessories). Cultural artefacts from Byzantine period, Pre-Columbian period, Khmer sculptures (unless with permission). Dog and cat fur. Items infringing trade and copyright regulations. Exports ☐ Narcotics and some medication containing prohibited substances. Absinthe (or other alcohols containing artemisia absinthium). Biological material (bacteria cultures, fungi specimens, viruses and others for research and etc. permissible only with APHIS permit). Endangered species that have not been outlined by CITES convention. Items infringing trade and copyright regulations. 17#18Import/Export & Trade Balance Economics General Trade Economics In Puerto Rico ☐ Puerto Rico had one of the most robust economies in the Caribbean until 2006 In 1948, GNP per capita in Puerto Rico was $1,478 (in 1990 dollars) ☐ By 1994, GNP per capita increased to $6,361 (in 1990 dollars) Chemicals Commodities ■ Over the past 12 years, however, the Island has seen negative annual growth ☐ The industrial sector greatly exceeds agriculture as the focal point of economic activity and income Tourism has, historically, been an important source of income on the Island The first quarter of 2019 saw great resurgence in the post-Maria tourism industry Total demand for independent rentals is up by 72% in the same period ☐ Principal Imports Partners United States (55.6%) Machinery and Equipment Ireland (13.4%) Food Singapore (6.1%) Petroleum Products Motor Vehicles The year-end forecast for 2019 shows booking is nearly 25% higher than 2018 levels Chemicals Puerto Rico's merchandise trade surplus is particularly strong, with exports nearly 50% greater than imports Electronics ☐ Current account surplus is roughly 10% of GDP Rum Switzerland (2.9%) South Korea (2.8%) Principal Exports Commodities Partners United States (76.5%) Belgium (6.1%) Puerto Rico's dependency on oil for transportation and electricity generation, as well as its dependency on food imports and raw materials, makes Puerto Rico volatile and highly reactive to changes in the world economy and climate Beverage Concentrates SEABURY MARITIME Initial Meeting with InvestPR Team Medical Equipment Netherlands (3.4%) Italy (1.7%) Spain (1.6%) 18#192018 Freight Stats for Puerto Rico The Puerto Rico Ports Authority ☐ ப The Puerto Rico Ports Authority (PRPA) is the government agency empowered with all necessary rights to develop, own, upgrade, operate, and manage Puerto Rico's air and maritime infrastructure in order to promote the economy and the well-being of its people - The PRPA owns 13 airports (10 fully operational) - o All 10 operational regional airports are operated by the PRPA The PRPA oversees nine seaports one the Island О The overwhelming majority of throughput occurs at Port of San Juan The PRPA has a strategy to develop and promote Puerto Rico as a transportation center with world class air and maritime serviced in order to effectively compete in the international trade marker The PRPA's additional mandate is to promote capital income and the creation of new industries in Puerto Rico, in effect, creating effective strategies to develop and expand commercial opportunities in port facilities 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Marine Freight (thousands of kg) San Juan, PR (Port) Aguadilla, PR (Port) SEABURY MARITIME Fajardo, PR (Port) Mayaguez, PR (Port) Ponce, PR (Port) San Juan International... Total Freight Throughput (kg) Exports 499,263,088 Imports 4,030,152,200 Grand Total 4,529,415,28 Air Freight (thousands of lbs) 120,000 100,000 80,000 Export 60,000 Import 40,000 20,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 19#20Container Stats CONUS/Puerto Rico - Ocean Container Carriers moving to/from Puerto Rico and Continental United States (CONUS) 9% Wood and paper 1% Minerals and ores 21% Metals and machinery 10% Chemicals 1% Textiles and Clothing -30% Consumer Products 27% Foodstuffs and beverages Major Cargoes in the Southbound CONUS/Puerto Rico Trade 2017 2% Textiles and clothing 11% Wood and paper 0% Minerals and ore Major Cargoes in the Northbound CONUS/Puerto Rico Trade 2017 19% Metals and machinery 35% Consumer Products 15% Foodstuffs and beverages 18% Chemicals Container Carriers Tote Maritime and Crowley are the primary container carriers who serve the shipping needs of Puerto Rico from the US mainland Puerto Rican Ports Container Traffic By Year TEU 900,000 824,946 806,102 800,000 752,254 773,900 720,307 733,997 715,450 700,000 Crowley transmits more than four million units between the commonwealth and the US mainland per year Tote Maritime is the preferred carrier for perishable commodities from the US mainland to Puerto Rico 600,000 500,000 400,000 О Both services are most active at Port San Juan 300,000 200,000 73.8% Container moves by US Flag vessels 26.2% Container moves by Foreign vessels 100,000 43% Vessel Calls by USA Flag vessels 57% Vessels Calls by foreign vessels SEABURY MARITIME 2010 2011 2012 2013 2014 2015 2016 Domestic Foreign Source: Journal of Commerce The Port/Import Reporting Service (PIERS) Data Source: Reeve & Associates and Estudios Tecnicos, Inc. report "Impact of the U.S. Jones Act on Puerto Rico Source: U.S. Army Corps of Engineers, Waterborne Commerce Statistics 20 20#21Puerto Rican Seaport Infrastructure Snapshot of Seaport Infrastructure Locations on Island +sabela Aguadilla Muelle Arecibo Rincon Pubb San Sebastián (12: + Mayagüez Cabo Rejo Водчего Puerto de San Juan (muelle de Turismo (Cruceros) Muelle Fajardo Aleck Doradu Sa Mana + Bayan on Carolina (5 Yunque Vaticano 90 Utuado 149) (123) + agu is Hom + Cayey Juana Díaz auco Pon + Salinas Guayana Muelle Culebras Flenco, 59. Rico Pu Muelle Vieques Muelle Yabucoa Guánica Port of the Americas Muelle Guayama - Las Mareas SEABURY MARITIME VIRGI 21#22Seaports on Island San Juan General Information Puerto de San Juan (Tourism dock (Cruises)): - - Spring 1: Use of cruise ships in transit and home-port with a capacity of few passengers such as the Seadream. It is used to dock frigates or military ships. Spring 2: Boat Terminal. The facilities were transferred to the Maritime Transport Authority (ATM) and are responsible for their maintenance. Spring 3: Use of cruise ships in transit. Royal Caribbean has preferential use of the pier. Spring 4: Dock for use of cruise ships in transit and home-port. Carnival and its subsidiaries have preferential use of docks. Pan American Docks: I (East), II (West) - Use of cruise ships in transit and home-port. ☐ - Royal Caribbean and its subsidiaries have preferential use of the pier. Loading Docks: Grounding Gate Area Spring 10: The largest export dock. It is estimated that it exceeds $ 100 million in exports. It is used by different transport companies to mobilize goods, equipment and materials to mobile casino no deposit required the smaller islands. They are known as gondoliers. They use schooner-style boats that dock Mediterranean and Ro-Ro style. The load is carried on pallets. Spring 11: Used mostly for the cargo receipt of construction materials. Spring 12: Used mostly for the cargo receipt of construction materials. Spring 13: Used mostly for the cargo receipt of construction materials. Spring 14: Used mostly for the receipt of 90% of the load of construction materials, among them: rod, structural steel, wood, among others. Navy Frontier Dock: Used mostly for cruise ships, car-carriers and docking of luxury boats (yachts) Isla Grande area: Crowley Pier - The ramp is used to unload containers, its operation is Ro-Ro. Spring 15: Containerized cargo, car cargo and tugboat docking. Spring 16: Containerized cargo, car cargo and tugboat docking. Elsewhere in Puerto Rico - Main Island Muelle Arecibo: Electric Power Authority (AEE) is the main operator. Use: Transmission of fuel by pipeline to the PREPA Cogeneration Plant. Guánica: Operations of unloading and loading of chemicals and asphalt, handling of fossil and chemical fuels and unloading and loading of propane gas through pipes to tanks. Used by the companies Demaco and Better Roads; the Tallaboa pier, by Pro Caribe. Muelle Guayama - Las Mareas: Facilities for the receipt and transportation of oil and derived products. The AES dock is for exclusive use, it has conveyors to the generating plant. Tugboat service and port practical 24 hours a day. Muelle Yabucoa: Facilities for the receipt of crude oil and fuel shipment. Buckeye-Shell Oil have preferential use Muelle Fajardo: Terminal Lanchas. Passengers On Vieques: Muelle Vieques: Vieques terminal. Passengers On Flamenco: Muelle Culebras: Passenger boat terminal SEABURY MARITIME 22#23Marine Freight Services ☐ Ocean Container Carriers - Trailerbridge* Tote* Crowley* San Juan National Shipping Company of Americas* Tropical Shipping CMA-CGM CROWLEY BB Trailer Bridge TOTE Maritime ☐ - Maersk Sealand Hapag Lloyd Bulk Shipping - Crimson Shipping* Moran Towing* United Ocean Services* Cruise Operators - AIDA Cruises Azamara Club Cruises - Carnival Costa Crociere M moran Ponce - Port of the Americas Bulk Operations specializing in: Scrap Metal Clinker Cement Molasses Coal Slag - Gypsum Wood Sulfur Sand CMA CGM SeaDream Yacht Dream Silversea Viking Ocean Cruises - Windstar Cruises Royal Caribbean Other Operations: RoRo (Roll-on / Roll-off) Military Cargo Cruise Operators: Royal Caribbean Celebrity Cruises - Crystal Cruises - Holland America Line - INCL MSC Cruises Norwegian Cruise Lines VIKING CRUISES Exploring abe World in Comp NORWEGIAN CRUISE LINE Royal Caribbean INTERNATIONAL Regent Seven Seas Princess Cruises Oceania Cruises MSC CRUISES OCEANIA CRUISES Carnival FUN FOR ALL. ALL FOR FUN. Royal Caribbean INTERNATIONAL SEABURY MARITIME * - denotes US Flag / Jones Act Carrier Celebrity ☑ Cruises® Designed for you™ 23#24Puerto Rican Airport Infrastructure Snapshot of Airport Infrastructure Locations on Island Rafael Hernández Airport Aguadilla (BQN) Aeropuerto Regional Antonio Nery Juarbe Pol Arecibo (ABO) Fernando Ribas Dominicci/ Isla Grande Airport Isla Grande (SIG) Luis Muñoz Marín International Airport San Juan (SJU) 區 Rinco +sabela Aguadilla Pur bo Eugenio María de (小) Hostos Airport Mayagüez (MAZ) San Sebastiá (12: jayagüez Aleck Mana Utuado 149) (123) porte Sal 4 Bayan on (5 + Carolia Yunge Watiera 90 Cayey agu is Hom Cabo Rejo Boqueró Juana Díaz auco Pon+ Salinas Guayana SEABURY MARITIME Mercedita International Airport Ponce (PSE) + Humacao Regional Airport Humacao (X63) Benjamín Rivera Noriega Airport Culebra (CPX) Aeropuerto José Aponte Ceiba (NRR) + VIRGI Fle enco, 50, Pu Rico Antonio Rivera Rodríguez Airport Vieques (VQS) 24#25Airports On Island ☐ Luis Muñoz Marín International Airport San Juan (SJU) San Juan ☐ ☐ By far the largest passenger and cargo terminal in San Juan - it is the busiest airport in the Caribbean by passenger traffic, as it's the main gateway The airport serves as a focus city for JetBlue Airways, being the largest carrier in the airport Passengers " In 2017, Luis Muñoz Marín International Airport handled 8,407,404 passengers ☐ Quite far from the record established in 2005, of 10,768,698 passengers The top ten destinations from San Juan Airport are US Airports Orlando, New York, Fort Lauderdale, Miami, Atlanta, Newark, Philadelphia, Charlotte, Tampa Bay, and Boston Elsewhere in Puerto Rico - Main Island Rafael Hernández Airport Aguadilla (BQN): Freight, commercial passenger flights, free trade zone, base for federal agencies such as: USCBP, USCG and USDA. Air rescue training base, aviation history museum, airline maintenance base, commercial asset development Eugenio María de Hostos Airport Mayagüez (MAZ): General aviation, aeronautical education, development of commercial assets, tourism. Mercedita International Airport Ponce (PSE): Cargo, support to the Port of Ponce, commercial flights and passenger chartered, development of commercial assets. Humacao Regional Airport Humacao (X63): General aviation, recreational events and development of commercial assets. Aeropuerto José Aponte Ceiba (NRR): General aviation, commercial and chartered passenger flights, aeronautical education, regional cargo, aeronautical maintenance, events and commercial development of assets. Fernando Ribas Dominicci/Isla Grande Airport Isla Grande (SIG): General aviation, commercial and chartered passenger flights, regional cargo, support to the Convention District, aviation school and airline maintenance. Aeropuerto Regional Antonio Nery Juarbe Pol Arecibo (ABO): General aviation, recreational events and development of commercial assets. Vieques and Flamenco ☐ Antonio Rivera Rodríguez Airport Vieques (VQS) and Benjamín Rivera Noriega Airport Culebra (CPX): ☐ Commercial aviation, commercial flights and passenger chartered, development of commercial assets, tourism. SEABURY MARITIME 25#26Air Freight Services ☐ Luis Muñoz Marin International Airport San Juan (SJU) Passenger Airlines - Air Canada Air Sunshine - AirTran Airways - - - Insel Air - JetBlue Airway - American Airlines American Eagle Cape Air Continental Airlines Copa Airlines Delta Airlines Direct Air LIAT PAWA Dominicana Spirit Airlines Sun Country Airlines United Airlines US Airways Vieques Air Link Virgin Airways - Iberia Freight Airlines - ABX Air - - - Ameriflight Amerijet International Capital Cargo Int'l Airlines Centurion Air Cargo - DHL - - FedEx Express FedEx Feeder (Mountain Air) Roblex Aviation - Tampa Cargo - Tradewinds Airlines UPS Airlines ☐ Rafael Hernandez Airport Aguadilla (BQN) Passenger Airlines Continental Airlines JetBlue Airways PAWA Dominicana Spirit Airlines Freight Airlines Ameriflight Atlas Air CaribEx Worldwide/CaribEx Int'l Airlines CaribEx Worldwide/CaribEx Int'l Airlines operated by Skyway Enterprises Contract Air Cargo Corporate Air FedEx Express FedEx Feeder operated by Mountain Air Cargo Merlin Ventures Ltd Merlin Express Mountain Air Cargo Roblex Aviation Tradewinds Airlines CaribEx WORLDWIDE jetBlue AIR CANADA FedExⓇ Express jetBlue American Airlines CENTURION CARGO FedExⓇ AMERIFLIGHT DELTA Express SEABURY MARITIME AMERIFLIGHT MAC MOUNTAIN AIR CARGO, INC. ATLAS AIR 26#27Regulatory Context State of the Island ☐ Puerto Rico is subject to the same U.S. customs regulations and tariffs that are applicable to all other ports on the U.S. mainland and in Alaska and Hawaii. There is no Customs surcharge for Puerto Rico. ■ Per Export.gov shipments to Puerto Rico, as a U.S. territory, are not considered exports so duties are not applied. Puerto Most goods arriving at the port are liable for Puerto Rico sales and use taxes that are calculated and paid before the items leave port ("PICO system") Goods shipped between Puerto Rico and the CONUS must file Electronic Export Information (EEI). The EEI is is the electronic data filed in the US Customs and Border Automated Export System (AES). This information is mandated to be filed through the Automated Export System or ACE AESDirect and is an electronic declaration of merchandise. The information is used to help compile U.S. export and trade statistics. It is also used by other government agencies for trade enforcement purposes. Jones Act - Maritime Cabotage Stevens Amendment - Air Cabotage Background The Jones Act requires all goods shipped between two U.S. points (Jacksonville to San Juan, for example) be carried on American built, American crewed, and American owned vessels. The Act does not require goods from overseas be shipped to Puerto Rico on U.S.-flag vessels, does not slap taxes on foreign ships servicing Puerto Rico, and has not prevented the distribution of aid to Puerto Rico. Argument The Jones Act increases the cost of goods and services shipped to and from Puerto Rico ■ Suggested action by those in opposition. Repeal of the Jones Act Background Federal law does not allow U.S. carriers to use excess capacity of their foreign partners to move international cargo. The foreign carrier must make the full trip by itself. It is prohibited from transferring cargo to or from a U.S. carrier flying the international leg of the journey. In 2004, a USDOT exemption for Alaska in the FAA authorization passed the Stevens Act. This allowed landed cargo in Alaska, on its way to and from the lower 48 states, to be shuffled among planes and carriers at that time without being subject to federal regulations. Argument Puerto Rico is well-placed geographically; it is relatively easy to fly to the US, Europe, South America, Central America, and the Caribbean. A "Stevens Amendment for Puerto Rico" would help economic development on the Island, allowing: the entry of new air cargo companies, a greater usage of its capacity for the benefit of the international transport, and the creation of new jobs. Additionally, the foreign airlines would not be penalized for stopping in Puerto Rico, which creates a mutual profitable relationship. ☐ Suggested action by those in favor. Adoption of similar regulations as the Stevens Act. SEABURY MARITIME 27#28Section 3. Logistics-based Business Attraction Opportunities#29Opportunity Sites Cayman Islands (UK) 1920 Gergen 60 Cuba ISLA DESECHEO ISLA DE MONA SEABURY MARITIME Jamaica Puerto Rico Relative to Caribbean Neighbors Navassa Islands (US) Haiti Turks and Caicos Islands (UK) Dominican Republic ATLANTIC OCEAN PUERTO RICO Opportunity Sites with Quality Infrastructure in Place Aguadilla MAYAGUEZ Mayaguez LARES UTUADO SAN JUAN BAYAMON GUAYNAD PUERTO RICO CAGUAS Guayanilla PONCES Ponce British Virgin Islands (UK) US Virgin Islands (US) Sint Maarten (Neth Netherlands Anguilla (UK) Saint Martin (France) Saint Barthelemy (France) Saint Kitts and Nevis Montserrat (UK) Antigua and Barbuda CAROLINA FAJARDO Guadeloupe ISLA DE CULEBRA Roosevelt Roads GUAYAMA ISLA DE VIEQUES 29#30Opportunity Sites Continued Opportunity Sites Expanded Upon... SAN JUAN AGHADILLA Aguadilla ISLA DESECHEO ISLA DE MONA MAYAGUEZ Mayaguez *UTUADO PUERTO RICO Guayanilla PONCE Ponce GUANASO CAROLINA FALL CAGUAS GUAYAMA Roosevelt Roads ISLA DE CULEBRA ISLA DE VIEQUES Puerto Rican Commerce is "San Juan-Dominant" The vast majority of the Island's commerce is centralized in the Puerto Rican capital of San Juan The population of the metropolitan area makes up roughly 80% of the overall population of Puerto Rico; these areas include Bayamón, Guaynabo, Cataño, Canóvanas, Caguas, Toa Alta, Toa Baja, Carolina, and Trujillo Alto. All in, there is roughly 2.6 million inhabitants This same 80% is marginally higher in terms of the working population on a daily basis, as Island residents come from all over the island for jobs which are located in the San Juan region. Thus it is reasonable to infer that a substantial portion of the Island's GDP is created out of the San Juan area 11 Other Potential Business Regions on Island This dynamic creates a natural opportunity for business growth in other regions of the Island, especially due to "ready-use" infrastructure Also, due to the general size of the Island, 3,525 sq. miles (slightly larger than the state of Delaware), another benefit is accessibility Distance and Time (by road) from San Juan: Ponce Guayanilla Mayaguez Aguadilla Roosevelt Roads 122 km, 1 hour and 20 minute drive 141 km, 1 hour and 45 minute drive 193 km, 2 hour and 20 minute drive 132 km, 2 hour drive 72 km, 1 hour and 15 minute drive SEABURY MARITIME 30#31Opportunity Catalogue Manufacturing and Distribution 1 Steel Manufacturing Other Transportation-based Opportunities 1 Air Hub and Operations 2 Cold Chain Transshipment Hub 2 Liquified Natural Gas (LNG) 3 Transshipment Hub 4 Micro Pharma Plant 5 Chemical Distribution 6 Specialty Cargo Transshipment 3 Roosevelt Roads 4 Graving Dock 5 Port Community System 6 Reuse of Dredge Material 7 Household and C&DD Materials 7 Research and Training Facility 8 Glass Manufacturing SEABURY MARITIME 8 31#32Logistics-based Business Attraction Opportunities Manufacturing and Distribution STOLT TANKERS#33Steel Manufacturing Opportunities Steel Mini-Mill for Manufacturing Steel Reinforcement Bar and Wire Mesh ☐ ☐ Puerto Rico's construction industry relies heavily upon cement concrete construction, which consumes large amounts of steel bar and mesh for reinforcement. Demand will increase with storm reconstruction activity and with modern building codes Steel (and other primary metals) depend heavily upon bulk transportation and energy. - - The underutilized Port at Ponce could be used for raw materials input and finished goods export via ocean barge or small vessels to other islands Existing undeveloped land around the Port of Ponce is close to local workforce, warehousing, and other amenities The existing industrial area of south western Puerto Rico has power production and transmission assets Primary metals has one of the highest multipliers of any industry (at $2.65 of national economic benefit for every $1.00 of revenue) which will likely increase in the context of a transportation- dependent industry and an island with high transportation costs. Leveraging Puerto Rico's Strengths Puerto Rico has reliable local demand, which is supplemented by those of nearby islands A larger island with a built-in market makes it a natural location for Caribbean region production Sources of local scrap (generated by the island) might no longer be exported (e.g. Schnitzer Steel operation in Ponce) but would be consumed locally, adding value to a local "waste" product "American" steel requirements in federal construction projects could create CONUS market for steel products manufactured in Puerto Rico backhauled on vessels otherwise supplying the island Build out the supply chain for Puerto Rico's builders Moving Ahead Requires... Preparing for and launching a business attraction campaign. ☐ Local alignment. Prioritize near-dock land in Ponce for industrial development (versus container handling). Inventory utilities, local roads, and other characteristics of the potential site (e.g. ground bearing capacity). Confirming the capabilities of the Port of Ponce Identify the total import volume of reinforcement steel to the island and nearby markets Determine the price differential in steel "retail" prices in Puerto Rico versus other markets Identify potential local customers (distributors, large consumers) Identify all "mini-mill" owners in the US and linked import-export partner countries. Begin direct outreach with the target investment companies SEABURY MARITIME 33#34Cold Chain Hub of the Caribbean ■ Puerto Rico as a Cold Chain Hub With over $66Billions of exports from the pharmaceutical industry in order to reduce the insurance risk, increase the confidence and branding for shipping our Biopharmaceutical goods we need to incentivize the supply chain to become a IATA Certified Pharmaceutical Cold Chain Hub Branding PR as a IATA Certified Pharmaceutical Hub as Miami Airport requires the incentives and promotion to corporate and local management. Invest PR can facilitate this role. This IATA Certification will complement the PR AIR HUB DOT status once approved. Certification: - - Requirements for Success A minimum of 7 companies from transportation, warehousing, airlines need to be certified. This certification process will require changes in operations, tracking, increase documentation and validations, that could increase the cost of doing business. If the companies service the industry they should be in compliance, but not certified. Cold Chain Network Design What is Cold Chain Network Design ? ...(2) Spoke Destination HUB HUB HUB Spoke Supplier Customer SEABURY MARITIME Spoke Spoke Spoke HUB Spoke Identifying the locations and capacity of warehouses and number of trucks to meet the demand, which reduces overall investment, operating expenses and wastage from end-to-end. 0 2013 Optisk india (P) Ltd, All rights reserved 34#35Ponce - Transshipment Hub ☐ Port of Ponce as an International Shipping Hub Discussions have revolved around the Port of Ponce as an international shipping hub for the Caribbean. The main trends in the Caribbean maritime sector are the increasing vessel sizes and consolidation among shipping lines. These trends are expected to continue. In fact, double transshipment moves inside the Caribbean basin (which already occur) are likely to become more prevalent as shipping lines aim to optimize the use of the larger vessels. In order to do so, shipping lines will call only at several large and conveniently situated ports with the largest vessels. " Consequently, medium-sized vessels will serve several regional hubs, and small vessels will be employed to serve small regional ports. As such, regional transshipment activity will likely increase and a new regional hub would possibly emerge among the smaller ports. This dynamic will create intense competition Competition in the Caribbean for container handling is fierce. There are identified 11 main port development projects identified in the Caribbean which will add about 21 Million TEU capacity in the coming decade. Yucatan Channel Windward Passage Mona Passage Panama Canal Global Seaborne Routes Core Routes Secondary Routes Global Sea Routes Dover Strait Oresund 145 Dardanelles Bosphorus Gibraltar Suez Canal Cape of Good Hope Ysugaru Strait Taiwan Strait Strait of Hormuz Luzon Strait Bob-el-Mondeb Strait of Malacca Sunda Strait Makassar Strait Torres Strait Lombok Source: Dr. Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University Transshipment Stats in Caribbean Freeport Lind Mariel PSA HPH 1.5 Caucedo DP WORLD However, The major game changer in the container shipping sector is the expansion of the Panama Canal The Panama Canal Expansion increases the capacity of the Canal from 5,100 TEU to 13,200 TEU vessels Kingston CMA CGM 1.5 Colon EVERGREEN 2.8 1.3 Cartagena HPH SSAMarine 1.5 San Juan CROWLEY Port of Spain Transshipment TEU in 2013 2.8 Million TEU Transshipment Container Throughput CAGR 2009 - 2013 > 15% 0% to -5% 5% to 10 Unknown 10% to 153% <-5% 0% to 5% New Development SEABURY MARITIME Source: Caribbean Development Bank - 2018 Transforming the Caribbean Port Services Industry towards the efficiency frontier 35#36☐ Ponce - Transshipment Hub (cont'd) Increased Vessel Sizes Side effects of increased vessel sizes transiting through the Panama Canal Knock-on or cascade effect: This effect is basically the knock-on effect that the introduction of Ultra Large Container Ships (ULCS) elicits on the type of vessels deployed in other trades around the world. The deployment of ULCS on the North Europe/Far East trade is pushing current smaller classes into the Far East/South America trades and the Trans Pacific trades. Thereafter those trades are also affected and their vessels move on to other trades. Growing importance for transshipment: With the increased vessel size and the corresponding increased call sizes, these vessels put a lot of pressure on port infrastructure and handling equipment. Transshipment is used to serve the smaller spoke ports from the main hubs (hub & spoke) and the feeder vessels are used to fill the main liner vessels. ■ Shipping Consolidation The trend for the consolidation of Shipping lines leads to a higher concentration of container handling. The container shipping industry has seen a large number of mergers and alliances forming over the past decades. The recent economic downturn drove another consolidation wave as shipping lines were forced to reduce costs and to further optimize the deployment of ships and the services offered to their customers. Consolidation amongst shipping lines affects the services offered in their destinations. In an alliance, shipping lines reassess their services and the ports they serve, in an attempt to optimize the combined market coverage. Combined with the trend of increasing vessel sizes, this is likely to lead to concentration of transshipment activity, as alliances aim to optimize utilization to/from the transshipment hub ports. Snapshot of Regional Transshipment Trade "Deep Sea Trade Small Island Service Regional Transshipment Continental Service ■1 The Opportunity Increasing vessel sizes and the continued consolidation of shipping will lead to a greater use of transshipment in the Caribbean basin. The Opportunity: Review the changes in transshipment trends as a result of larger vessel transits and increased capacity control by ocean carriers Further review Ponce's strength in its ability to attract Deep Sea Liner Trade as Primary Transshipment Hub as compared to its neighboring ports Come to a long-term agreement with the shipping lines, or even better, have the shipping lines co-invest in the facility. As such, a level of guarantee is created on future volumes. Embrace technology to accommodate hub and spoke operations that accommodate both Main liner and Feeder operations. SEABURY MARITIME Source: Caribbean Development Bank - 2018 Transforming the Caribbean Port Services Industry towards the efficiency frontier 36#37Modular Micro-Pharma Manufacturing Plant ☐ ■ Construction of Micro-Pharma Manufacturing Plant An interesting line of business for Puerto Rico to pursue would be the construction of a modular Micro-Pharma manufacturing plant (Flex/continued- processing/skids, etc) for both domestic and more importantly export & services to developing countries. Due to limited skills and infrastructure, there exists a need in developing countries for the local manufacturing of pharmaceutical products. This development will improve access and cost. This opportunity could represent a high economic impact for local companies with pharmaceutical expertise in the equipment and facility design, product development, regulatory, construction, installation, controls, commissioning, validation, transportation, logistics, consulting, training, investment and others service area sectors. Puerto Rico will lead and be recognized globally by its Pharmaceutical knowledge base and will attract business tourism for training purposes. Requirements for Success Develop a business plan and market study Preliminary discussion with potential partners & clients USAID - WHO PAHO - Gates Foundation Obtain funding for design and development of prototype (EDA, local construction companies) ☐ Submit proposals to potential clients (letters of Intent) Obtain export decree & other incentives SEABURY MARITIME Skid Manufacturing Example 37#38Chemical Distribution into the Caribbean and S. America ☐ ☐ ☐ ☐ Chemical Transshipment, Forward Inventory, and Redistribution Chemical transshipment, forward inventory, and redistribution could be a compelling offering for Puerto Rico Position Puerto Rico as a hub for chemical shipping in the Caribbean; attract chemicals and other liquid bulk cargo to the Island for repackaging and redistribution. Sources could include international producers, and with a Jones Act waiver, US mainland producers. Create a transload site in the South of the Island utilizing pre-existing infrastructure at Guayanilla, including 26 million gallons of capacity in 34 existing tanks, with 12 pipelines to the Guayanilla docks. The port at Guayanilla can accommodate vessels of up to 800 foot in length. - Chemical tankers a generally small due to the nature of demand for chemical cargoes and the need to serve smaller ports. This means that the shallower 37' channel at Guayanilla is likely appropriate for this type of traffic. Build capability to receive product in bulk via chemical tanker and ship in bulk or repackage into liquid bulk ISO containers, IBC (intermediate bulk container) totes, or drums Target redistribution markets in the Caribbean and South America, and local demand on Puerto Rico Leverage Puerto Rico's substantial history in petroleum and chemical production, processing, and logistics Leveraging Puerto Rico's Strengths Developing chemical logistics offerings on the South Coast plays to Puerto Rico's strengths - Provides a productive use for underutilized capacity at Guayanilla and possibly Ponce if ISO container shipping is implemented Leverages labor and skills that already exist in the area Revives a local economy that has suffered since the closure of the chemical plants and the refinery Allows for redevelopment of brownfield sites for appropriate uses Establishing repackaging operations brings job creation opportunities and construction demand through investment in chemical packaging lines and other infrastructure Pursuing this initiative will create local jobs and potentially make Puerto Rico manufacturers more competitive through access to lower-cost inputs SEABURY MARITIME STOLT TANKERS Moving Ahead Requires... Evaluating demand and testing interest among chemical shippers Gaining commitments from chemical manufacturers and distributors Dredging Guayanilla to 37', as committed, to allow larger ships to call Establishing or expanding existing FTZs to accommodate chemicals Consider adding waivers for other liquid bulk commodity shipments Immediate next steps should include: Studying the demand for specific chemicals on the Island and in the Caribbean and South American markets Exploring the feasibility of adding a liquid bulk chemical exemption for chemical shipments from the US mainland to PR Starting initial discussions with chemical manufacturers and distributors about the opportunity 38#39Specialty Cargo Transshipment and Forward Deployment Specialized Forward Inventory and Distribution Services Specialized forward inventory and distribution services are a natural fit for Puerto Rico Drive investment in specialized logistics capabilities: Medical Devices - Support forward deployment of inventory to meet Caribbean demand - Drive inventory reduction strategies with regional logistics hub concepts Create additional specialized cold storage and cold distribution hub capabilities for food, pharma, and chemical logistics - Establish contract manufacturing and contract packaging services to provide value-add capabilities phase ☐ ☐ Target pharmaceutical and medical device supply chains with a specially designed PSA-certified hub offering on Puerto Rico Create capabilities to support Value Add within existing or new FTZs to facilitate localization, kitting, assembly, labeling, and other logistics activities on the Island Leveraging Puerto Rico's Strengths The Island's existing infrastructure makes Puerto Rico a natural choice for expanded pharma and medical device logistics services Service providers are trained and capable of handling the specialized requirements of these types of supply chains Puerto Rico is geographically well-positioned to service Eastern Caribbean air cargo needs - As the easternmost US large commercial airport with frequent flights to the US mainland, SJU can act as a convenient hub for specialized Caribbean cargo moving to and from the US mainland There is a stated need for localized inventory to support anticipated future emergency relief efforts throughout the Caribbean Moving ahead requires... Evaluating demand and testing interest among pharma and medical device shippers in the Caribbean Basin; including governmental, NGO and private industry actors Establishing or expanding existing FTZs as needed Gaining commitments and locating financing where matches are found Immediate next steps should include: Studying the demand for specific products on the Island and in the Caribbean and South American markets Launching conversations with stakeholders, shippers and providers - USAID and NGO organizations have expressed interest SEABURY MARITIME 39#40Management of Household and C&DD Materials Household and C&DD Waste ☐ Consider the US Maritime Administration (MARAD) Marine Highway System for the movement of both Household and Construction & Demolition Debris (C&DD). MARAD's Marine Highway Program has one major goal - expand the use of America's navigable waters. MARAD works closely with public and private organizations to: - develop and expand marine highway service options and facilitate their further integration into the current U.S. surface transportation system, especially where water-based transport is the most efficient, effective and sustainable option highlight the benefits, increase public awareness and promote waterways as a viable (in some cases a superior) alternative to "landside" shipping and transportation options ■ Achieving Marine Highway status provides opportunities for MARAD Grants. For example, recently there was a DOT MARAD Notice of Funding Opportunity for America's Marine Highway Projects in the amount of $7,000,000. The purpose of the appropriation is to make grants available to previously designated Marine Highway Projects that support the development and expansion of documented vessels, or port and landside infrastructure. ☐ A good example of this process in work is a case study from New York City Marine Highway Routes MS (AK) America's Marine Highway Routes M-5 M-4 M-STANT M-HE M-346 M-39 M-70 M-10 M-90 M-90 ■ M-95 Opportunities Coordinate efforts of the Marine Highway Initiative with entities such as the EDC and Puerto Rico Recycling Partnership. https://www.prrecycles.org/ Build on strengths and engagements of these organizations to consider new opportunities related to existing efforts for: - Construction & Demolition Debris - Education & Outreach 1 Electronics Recycling Glass, Metal and Plastic Containers Organics Paper - Scrap Metal - Special Wastes Trash Free Waters SEABURY MARITIME Source: https://www.maritime.dot.gov/grants/marine-highways/marine-highwayc Puerto Rico PRRP Recycling Partnership 40#41Management of Household and C&DD Materials cont'd ☐ Example - NYC An example of a Marine Highway service engaged in the movement of waste materials is in the city of New York. The program involves the collection of trash from various Marine Transfer Stations (MTS). The trash is then stuffed into specialty configured containers. These containers are then loaded onto barges for transport to another facility for disposal. The system comprises of multi-modal transportation system involving truck, barge and rail movement (as well as terminal handling). The public befits includes: - - - - create and sustain jobs in U.S. vessels, ports and shipyards relieve landside congestion reduce maintenance costs and improve the U.S. transportation system's overall state-of-repair (wear and tear on roads and bridges) drive the mandatory use of emerging engine technologies improve U.S. economic competitiveness by adding new cost- effective freight and passenger transportation capacities improve environmental sustainability of the U.S. transportation system by using less energy and reducing air emissions (such as greenhouse gases) per passenger or ton-mile of freight moved improve public safety and security by providing alternatives for the movement of hazardous materials outside heavily populated areas improve transportation system resiliency and redundancy by providing transportation alternatives during times of disaster or national emergency improve national security by adding to the nation's strategic sealift resource create new market for recycling operations and waste material management SEABURY MARITIME M-2 Marine Highway Designation for Puerto Rico MARINE HIGHWAY M-2 Applicant: San Juan Port Commission Supporters: The Ports of Ponce and marine/port facilities in Mayaguez, Ceiba (former US Naval Station Roosevelt Roads), Yabucoa, Guanica, Guayama, Guayanill, and Arebico. Landside Route Served: Route-2 Route Description: The M-2 Route includes the Caribbean Sea, and connecting commercial navigation channels, ports, and harbors around the perimeter of Puerto Rico via San Juan, Mayagüez, and Ponce. Attributes: Puerto Rico is served by just 250 miles of interstate highway and 169 miles of noninterstate facilities. By 2020 this system is expected to handle approximately 492 million vehicle-miles of travel. According to the Federal Highway Administration, almost $1.4 billion will be required over the next 20 years to address congestionsourced problems. Adding to this is the fact that 90 percent of Puerto Rico's cargo arrives by water (approximately 14 million tons), and 18 percent of its traffic is attributable to M-2 trucks originating from the Port of San Juan alone. There is no rail system to supplement goods movement by truck; as such, water represents the only potential alternative. This marine highway Route which circles the island and connects the vital sea ports such as Ponce (Port of Las Americas), Mayaguez, Ceiba, Yabucoa, Guanica, Guayama, Guayanilla, and Arecibo offers the potential to provide relief for the movement of people and freight, especially into and out of the island's sea ports. Source: https://www.maritime.dot.gov/grants/marine-highways/marine-highway 41#42Glass Manufacturing Plant ☐ Puerto Rico Once Manufactured Glass Packaging Reducing Waste and Building Employment One idea to bring back to the Island's business sector would be capturing post-consumer recycled glass and remaking it into new containers - this, in turn, would reduce waste and build employment Puerto Rico knows this industry well, as it was once a producer of glass packaging A local glass plant could capture post-consumer recycled glass and combine it with locally sourced silica to make glass once again on the Island Product could be used for packaging and other inputs to manufacturing on the Island When Owens-Illinois closed its Alta Vega plant in 2008, it was servicing demand from Bacardi and Cerverceria India Access to lower-cost energy, perhaps LNG, could make Puerto Rico more competitive in this arena Leveraging Puerto Rico's Strengths There is demand for glass packaging on the Island and it is expensive to import glass from other sources Glass is a relatively low-value commodity and shipping empties over long distances is inefficient and wasteful High packaging costs impact manufacturers and may be making production on Puerto Rico less competitive There are no Island-wide recycling programs, which means that glass waste is landfilled today rather than being captured and reused Puerto Rico's existing landfills are filling up, and there are concerns about how to add capacity in the future Diversion of post-consumer glass could provide needed inputs for glass manufacturing and reduce demand for landfill space Moving Ahead Requires... Studying demand for glass packaging on the Island Speaking with users of glass to determine where they get packaging, current costs, and opportunities for improvement Exploring the implementation of recycling protocols on the Island with the appropriate solid waste management agencies and contractors Who would be interested in running in these types of programs? - - How would recycled materials be segregated and transported? What would it cost? - What types and quantities of materials could be recovered? How would this initiative impact the current landfill situation? - What other benefits could be derived? SEABURY MARITIME 42#43Summary of Opportunities Manufacturing and Distribution Difficulty Time to Length of Value Investment Level Financial Benefit Greater than High Very High 3 Years Opportunity Steel Manufacturing High Cold Chain Hub High Less than 3 Years Moderate High Transshipment Hub Greater than High Low Very High 5 Years Micro Pharma Plant Moderate Less than 3 Years Moderate High Chemical Distribution Low Less than 2 Years Low High Specialty Cargo Transshipment Moderate Less than 5 Years Moderate High Household and CC&D Materials Low Less than 1 Year Low High Glass Manufacturing Less than 2 Moderate Moderate High and Packaging Years SEABURY MARITIME 43#44CORAGG Logistics-based Business Attraction Opportunities Other Transportation-based Business 4 SAN JUAN 1140 SJUS SAND A Tacoma Seattle THE NORTHWEST SEAPORT ALLIANCE 614#45Opportunity Catalogue Manufacturing and Distribution 1 Steel Manufacturing Other Transportation-based Opportunities 1 Air Hub and Operations 2 Cold Chain Transshipment Hub 2 Liquified Natural Gas (LNG) 3 Transshipment Hub 4 Micro Pharma Plant 5 Chemical Distribution 6 Specialty Cargo Transshipment 3 Roosevelt Roads 4 Graving Dock 5 Port Community System 6 Reuse of Dredge Material 7 Household and C&DD Materials 7 Research and Training Facility 8 Glass Manufacturing SEABURY MARITIME 8 45#46Air Hub Operations and Opportunities for Sea Air Service ☐ ☐ Taking Advantage of Puerto Rico's Airport Capacity Puerto Rico has ample airport capacity and is well-positioned to serve other nearby markets with passenger and air cargo services The goal is to make the Island an air hub for the Eastern Caribbean with complementary air cargo and passenger focused services Ways to address the aviation market: - Develop cost-competitive feeder airline service to adjacent islands and tie to existing mainline air carrier service Identify cargo transshipment opportunities for intra-Caribbean distribution and evaluate the feasibility of promoting inter-island passenger services Establish a transit zone for passengers that would allow changing flights without requiring US entry or customs - Create a Tech Stop location for enroute aircraft refueling and maintenance and create a supporting FTZ for jet fuel Connect airports to ferry services sailing from Ceibo, Mayaguez, and Aguadilla for additional reach SAN JUAN HANS7 " - Create better, more reliable ground transportation services for Aguadilla passengers When new aviation routes are introduced, promote cargo in unison with passenger volume. Belly freight can subsidize lower volume passenger lanes. Look to Boston, Miami, Las Vegas, Ft Lauderdale for examples of how co-marketing cargo and passenger services can help add connectivity with competitive fares and cargo rates. Utilize any remaining capacity at SJU San Juan first, looking to BQN Aguadilla and RVR Ceibo next for future expansion Leveraging Puerto Rico's Strengths Puerto Rico is well-positioned to service Eastern Caribbean airline passengers and cargo - - As the easternmost US large commercial airport with frequent flights to the US mainland, SJU can act as a convenient hub for Caribbean travelers and cargo moving to and from the US mainland Inter-island air services can provide additional connectivity throughout the Caribbean, allowing passengers to move more freely between islands Without Cuba, the addressable market is over 33 million people Building passenger capacity and adding routes will also provide cargo capacity, making Puerto Rico more competitive in freight Airlines cross-subsidize cargo and passenger operations depending on the balance of traffic and available revenue opportunities Moving Ahead Requires... Evaluating consumer demand and testing interest among airlines Developing an action plan to better connect airports to ferry services and inland locations on the Island Determining the feasibility of a transit zone for inter-island services eliminating the need for passengers to clear US immigration and customs Researching airline demand and interest in a PR tech stop Immediate next steps should include: Identifying and interviewing airlines about their interest in growing inter-island Caribbean services, starting with JetBlue Developing passenger trip and cargo demand models for inter-island and US mainland - Caribbean services Forming a team to address passenger ground transport needs Researching current work at GAO relating to these topics SEABURY MARITIME 46#47☐ ☐ ☐ Liquified Natural Gas (LNG) Opportunities LNG Transshipment, Forward Inventory, and Redistribution Focus on reducing the cost of bringing LNG from the Mainland to Puerto Rico via tanker vessel. Create a LNG bunkering and/or transload site in the South of the Island. Install tankage at Ponce and/or Guayanilla, receive inbound LNG; repackage or transload and redistribute into the Caribbean, South America, and other points on the Island. A viable option for Puerto Rico to address clean energy needs and create a sustainable transshipment and redistribution economy (all while supporting the local Island economy) is to establish a site in the South of the Island that accommodates LNG bunkering and/or transloading. Gas demand in China and the Middle East is expected to grow, and demand in the US is expected to grow (although less than previous years). Forecasts in the EU is for growth, as well. Production to meet the growing demand is set to increase the most in the United States, which Puerto Rico can use to its advantage due to its association with the Jones Act. Reducing the cost of bringing LNG from the Mainland to Puerto Rico via tanker vessel becomes a compelling opportunity. Small scale LNG could be the most viable option for the island Small scale LNG is the process of delivering LNG in small quantities to areas otherwise note connected to the greater natural gas supply chain (often remains liquid) Main uses: Marine fuel, heavy road transport fuel, power generation in off-grid locations Leveraging Puerto Rico's Strengths Puerto Rico has plenty of unused capacity in its current port infrastructure to be able to accommodate an LNG bunkering facility, tanking facility, or receiving inbound gas Install tankage at Ponce and/or Guayanilla, receiving inbound LNG with the potential to repackage or transload and redistribute to the Caribbean market, South America, and other points on the Island Tote Maritime has built a facility for LNG bunkering in Jacksonville Tote is one of Puerto Rico's primary ocean service providers - Important Note: - There is already a waiver precedent set by congress for shipment ☐ ☐ Moving Ahead Requires... Dredging Guayanilla to 37', as committed, to allow larger ships to call Establish or expand existing FTZs to accommodate natural gas Receiving a waiver - The PR Shipping Association would support pursuing a waiver and help facilitate which would require evidence that there is no other option but to get that waiver. DR is already positioning for transshipment of LNG, so Puerto Rico will need to move quickly Explore the possibility of Small Scale LNG on Island: Speak to appropriate authorities to explore the possibility of building a small liquefaction facility Study the market size and production forecast to determine economic feasibility of LNG from the Mainland. According to Eduardo Pagan, the waiver was "relatively easy" to get, but was never used. SEABURY MARITIME 47#48Roosevelt Roads Redevelopment of Disused Naval Base ☐ Former US Navy Installation that has drawn much attention due to its infrastructure and natural surroundings. Master Plan for site was shared by Invest Puerto Rico. From our due diligence, we discovered the following additional information (Per the Roosevelt Roads website http://www.rooseveltroads.pr.gov/): - An RFP for a Master Developer was created. This RFP constitutes the second phase of a three-phase process to solicit and select a Master Developer capable of redeveloping the entire project at the former Naval Station Roosevelt Roads ("NSRR"), consisting of approximately 3,000 acres of developable land, or the nine (9) zones presented in the 2014 Development Zones Master Plan for the Roosevelt Roads Redevelopment. Results: This process was finalized and it was awarded to Clark Realty Capital but no contract was signed. Also, the LRA signed a long-term lease with Mid-Atlantic Shipyards (MAS) on December 4, 2015 for the development of a multi-tenant shipyard in the dry-dock area (38 acres) at RR. о Puerto Rico aims big in their bid to burst onto the shipyard map. о MidAtlantic Shipyards is looking to turn this property (below), which is a disused naval base, into a multi-tenant facility with a focus on repair, while Jones Act shipbuilding remains possible. Photo Rendering of the Proposed Project SEABURY MARITIME Roosevelt Roads Dry Dock, LLC ROOSEVELT ROADS DRY 000 DOCK, LLC 48#49San Juan “Graving Dock" Rare Infrastructure Alongside the Port of San Juan ☐ The San Juan graving dock served numerous vessels during the 1950s, 1960s, and 1970s that required repairs or scheduled maintenance. Among the vessels serviced at the dock were U.S. Navy submarines, Greek merchant ships, oil tankers belonging to Esso and other oil companies, vessels of Alcoa Shipping, and cruise ships of the Cunard and passenger lines. 39 Cruising tourism into and out of San Juan increased during the 1960s and 1970s, from 77,500 passengers in 1966 to 211,200 in 1972.40 Because of its size, however, the San Juan graving dock could not be used for the newer larger vessels. In 1978 the operation of the graving dock passed from Sucesores de Abarca to Perez Y Cia. which operated it until June 1, 1999, when the government of Puerto Rico purchased the graving dock from the federal government and the Puerto Rico Ports Authority assumed the operation of the graving dock. A facility to accommodate this service is located on the southwest corner of the Isla Grande peninsula and situated to the east of San Juan Bay (Exhibit 2). The graving dock is located on the waterfront at the end of an industrial area. In the vicinity of the graving dock are other piers for shipping lines, warehouses and the abandoned facilities of an iron works foundry. The graving dock is situated along Piers 15 and 16. Shop buildings, storehouses, and other industrial structures are situated adjacent (or in close proximity) to the graving dock. The structure is a 672.5 ft. x 91 ft. wide pressure relieved type, one section drydock originally constructed between 1939 and 1941 (Exhibit 1). It is a concrete structure supported directly on soil. A railroad track utilized for portal crane purposes surrounds the graving dock on the shoreward side. The facility includes an underslab hydrostatic pressure relief drainage system, perimeter culverts and one pump house. A connecting tunnel runs from the pump house to the graving dock. These components create a system of flooding, draining and dewatering this drydock. Other key components of the industrial operation of this facility include the removable steel caisson and the flooding sluice gate. Exhibit 1 Exhibit 2 SEABURY MARITIME + EL Source: http://lcweb2.loc.gov/master/pnp/habshaer/pr/pr1500/pr1521/data/pr1521data.pdf FORMER US. NAVAL RESERVATION GRAVING DOCK TURNING BASIN PUERTO NUEVO TURNING BASIN 49#50San Juan "Graving Dock" cont'd Rare Infrastructure Alongside the Port of San Juan ☐ ■ In 2016, a proposed Mega Yacht Marina and Shipyard was announced. This new marina and Mega Yacht re-fit and repair facility would target the largest yachts in the world that range in size from 218-600 feet, with crews that can number over 80 persons on a single yacht. The name of this venture was called "Port Caribe". The shipyard component of the project is south of the airport, located on Pier 15 in the Isla Grande sector of San Juan. The dry dock maintenance, repair and overhaul facility includes an existing graving dock and will be available for about 20-40 vessels on the hard and between 125-175 boats in water. Identified key benefits of San Juan: - - - - Puerto Rico is already the service hub for the Caribbean when it comes to marine service providers (i.e. Caterpillar and MTU engines). Local labor will work facilities; the majority of workers on these yachts are Puerto Ricans. Local artisans and craftsmen will be engaged, as well. Great Economic impact on local consumption of materials, like fuel and yacht stores. Tax incentives offered in Puerto Rico for both marine tourism and the industrial sectors help support the required capital. The Caribbean region lacks a maritime-industrial center that provides necessary services to Mega Yachts. This presents an opportunity for this type of operation and creates a new market that will benefit Puerto Rico's commercial and economic sectors. In August 2018, it was reported that The Puerto Rico Public-Private Partnership Authority was conducting a preliminary evaluation of an unsolicited proposal submitted by an undisclosed firm to develop a mega yacht marina and dry dock in San Juan It is estimated that a small, "very practical" dry dock facility would require a minimum $10 million investment Pler 15 Proposed Site Pier 16 SEABURY MARITIME Source: https://newsismybusiness.com/authority-considering-unsolicited/ Photo Rendering 50#51■ Establish a Port Community System Embracing Technology to Meet Future Ocean Freight Demands As a result of the research involved with this project there has been an identified need for a Port Community System (PCS) A Port Community System (PCS), or single window system, is an electronic platform that connects the multiple systems operated by a variety of organizations that make up a seaport community. It is shared in the sense that it is set up, organized and used by firms in the same sector in this case, a port community. A Port Community System: Is an open electronic platform enabling intelligent and secure exchange of information between public and private stakeholders in order to improve the competitive position of the sea and air ports' communities. Optimizes, manages and automates port and logistics processes through a single submission of data and connecting transport and logistics chains Northwest Seaport Alliance (NWSA) An example of such a system is the one implemented by the Northwest Seaport Alliance (NWSA) (https://www.nwseaportalliance.com/). The Northwest Seaport Alliance is a marine cargo operating partnership of the ports of Tacoma and Seattle. The first of its kind in North America, the NWSA is the fourth-largest container gateway. Regional marine cargo facilities also are a major center for bulk, breakbulk, project/heavy-lift cargoes, automobiles and trucks. Located in the Pacific Northwest in Washington state, The Northwest Seaport Alliance offers shorter U.S.-to- Asia transits, as well as a deep connection to Alaska. System Higlights - Directory of Ocean Carriers, Warehouse and Trucking providers by service offering Vessel Schedules Seattle Pacific towan THE NORTHWEST SEAPORT ALLIANCE Tacoma MASHINGTON OREGON TIPS System (PANYNJ) Another such example is the TIPS system developed by the Port Authority of New York and New Jersey (PANYNJ) (http://www.panynj.gov/). The Port Authority of New York and New Jersey (PANYNJ) is a joint venture between the U.S. states of New York and New Jersey, established in 1921 through an interstate compact authorized by the United States Congress. The Port Authority oversees much of the regional transportation infrastructure, including bridges, tunnels, airports, and seaports, within the geographical jurisdiction of the Port of New York and New Jersey. " System Highlights Port and Terminal Information Import Container Availability, Export Booking Inquiry and Empty Container Information Vessel Schedules - Conduit for Business Inquiry SEABURY MARITIME 51#52☐ Reuse of Dredge Material to Make Lightweight Aggregate ■ Addressing Maritime and Infrastructure Industry An idea for the ports and infrastructure sectors of Puerto Rico is to organize resources to create an affordable and environmentally acceptable way for ports to manage dredged sediments (especially silty clay material) An added benefit to this process would be to produce a reliable source of high-quality, lightweight aggregate (LWA) to support the infrastructure needs of the Island Driving investment for this process in Puerto Rico would enable transshipment opportunities in the Caribbean region, creating a lightweight, readily transportable, and cost-effective option for general building material and post-tropical storm rebuilding The sediment reuse approach: Install a hydraulic dredge or mechanical excavator in the existing dredged material storage facility - - Pump or convey the extracted sediment to the LWA reuse manufacturing plant, either stationary or on a mobile platform Produce LWA using a rotary kiln ☐ ■ Sell the ASTM (American Society for Testing and Materials)-grade LWA to local or regional users LWA reuse has defined economics, eliminates risk of finding more sites, creates family wage jobs, and preserves land for higher value uses Leveraging Puerto Rico's Strength The Island's existing infrastructure makes Puerto Rico a natural choice for the reuse of dredging material for LWA Ports on Island (such as Ponce) have plenty of capacity to accommodate the process Dredging has been well-needed on the Island around existing port infrastructure for some time; this process would bring in a private operator to dredge the harbors, and in the process, use the dredged material to serve other Island needs Puerto Rico is geographically well-placed to service the rest of the Caribbean with this material There is a need on the Island for ready, quickly-made, cost-effective lightweight building material - Especially when rebuilding from Island storms becomes necessary SEABURY MARITIME ■ Moving Ahead Requires... Studying the demand for dredging operations and associated demand for lightweight aggregate building material on Island and in the overall Caribbean region Speaking with port operators and port authority personnel who would be able to accommodate the process of dredging on the Islands ports, and determine the best available site Exploring the possibility of reusing the dredging material by selling the LWA to construction and other infrastructure firms on Island Where is the appropriate site? Who would the end users be? Will there be demand in the Caribbean market beyond Puerto Rico, opening up the opportunity for transshipment 52#53Puerto Rico as a Research and Training Center ☐ National Disaster Preparedness As an island, consideration must be given to Puerto Rico's unique requirements when engaged with relief efforts that stem from unfortunate natural disasters. ■ Planning ahead is a main requirement for the Puerto Rican population to be able to, going forward, rebound from extreme weather as quickly as possible ■ The goal would be to, in the face of extreme weather, make existing supply chains aware of relief networks and their capabilities and capacity ■ The foundation for this approach is based on a study conducted by consulting firm CNA. The study highlights case studies about Hurricane Harvey, Irma and Maria and their impact on supply chain resilience. The Opportunity Opportunity - Puerto Rico as the Caribbean based Research and Training Center for a hybrid program concentrating on National Disaster Preparedness and Supply Chain Research. Requirements - Develop and deliver training and educational programs related to homeland security and disaster management, with a specific focus on natural hazards, coastal communities, and the special needs and opportunities of islands and territories with a concentration on supply chain management. The Result - Supply Chain resilience in the face of extreme weather, both as a domestic asset and a regional economic opportunity for proper training for other islands US DEPA RTMENT OF HOMELAN CURITY FEMA USDA SEABURY MARITIME MENT Partners for Training, Products and Services TSUNAMI INFORMATI TIONAL INTERN SUN ITIC ON CENTER DE PUERTO RICO RECINTO ITIC.JOC CDEMA CARIBBEAN DISASTER EMERGENCY MANAGEMENT AGENCY Resilient States Safer Lives UNESCO SCO.ORG NIC AND OCEANIC A NATIONAL UNIVERS TMMINIST NOAA U.S. DEPARTMENT OF COMMERCE 1903 RIO GOVER OF PUERTO NDPTC NATIONAL DISASTER PREPAREDNESS TRAINING CENTER RICO. at the UNIVERSITY of HAWAI'I" Source: CNA Analysis solutions: Supply Chain Resilience and the 2017 Hurricane Season GOVERNMENT OF PUERTO RICO Department of Economic Development and Commerce NDRM Natural Disaster Risk Management in the CARIFORUM Council of Supply Chain CSCMP Management Professionals The World's Leading Source for the Supply Chain Profession."" 53#54Summary of Opportunities Difficulty Opportunity Air Hub Operations Low Other Transportation-based Business Time to Length of Value Less than 3 Years Investment Level Financial Benefit Low High Greater than Liquified Natural Gas High High 3 Years Very High Greater than Roosevelt Roads High High Very High 3 Years San Juan "Graving Dock" Moderate Less than 1 Year Low High Port Community System Low Less than 1 Year Moderate Moderate Reuse of Dredge Material Moderate Less than 2 Years High Very High Research and Training Center Less than 2 Low Low Moderate Years SEABURY MARITIME 54#55Section 4. Q&A and Actionable Plans#56Major Questions Answered InvestPR is primarily interested in answering the following major questions 1 Can Puerto Rico successfully attract new business in this market segment? 2 Yes. See Section 3 in the current presentation. We believe there are opportunities driven by logistics in the following areas: - Steel manufacturing - - Cold chain logistics - Transshipment - Chemical distribution - Waste Management - Glass Manufacturing - Micro-Pharma production plants What are the low hanging fruit and impediments to attracting logistics-centered firms to Puerto Rico? Impediments: High operating costs, inefficient business practices, and adverse regulation are the primary impediments to successful development. See Section 2 of this presentation for more impediments. Feasible Opportunities: Seabury has identified the following initiatives as more feasible: - Air hub operations - LNG bunkering 3 What's the profile of these businesses? - Redevelopment of port assets - Port Community System - Dredge material re-use program 4 5 6 Please see Section 3 of the attached presentation for details on sectors, job creation opportunities, and scale of the proposed new businesses. What does Invest PR need to do to ensure PR remains a competitive offering for these businesses in the near- and long-term? Please see Section 4 of the attached presentation (just after) for details on how to capitalize on the opportunities in Section 3. Can Puerto Rico's development of the logistics sector be driven by private sector investment? There is ample opportunity for private sector investment if the ROI can be shown and risk properly managed. There are also PPP opportunities, especially for public assets and redevelopment projects. Section 4 provides details on how financing can be obtained. Can Puerto Rico's development of the logistics sector be driven by private sector investment? Puerto Rico can drive investment by championing PPP projects and focusing on Community Development and Small Business Investment Banking. Please see Section 4 for more details on the slide market "InvestPR FUND." SEABURY MARITIME 56#57SWOT Analysis Defining Strengths, Weaknesses, Opportunities, and Threats STRENGTHS Being an island economy, Puerto Rico relies on the logistics sector to sustain its way of life; thus, it knows the industry and its advantages well Developed infrastructure including roads, ports, and plenty of storage space • Low cost of use • Territory of the United States • Educated and skilled workforce . Jones Act for Maritime Extreme weather patterns disrupting the flow of goods Regulatory changes have the potential to disrupt standard practices, both from a local and US Federal perspective Loss of human capital due to higher wages outside of island THREATS SEABURY MARITIME • WEAKNESSES Fragmented industry as a whole; many small, local players acting independently of one another Cost to move goods is often more expensive relative to other island economies, who do not have to deal with United States cabotage laws Dependency on air and water transport for the inbound and outbound movement of goods and services SWOT Analysis • Potential for market leader in the Caribbean for key industry areas Existing infrastructure already established in place for near-term future development Roll-up opportunities in several sub-sectors of the industry as a whole OPPORTUNITIES 57#58Act on Obvious Business Attraction Candidates Systematically Pursue Businesses, Starting with Steel and Chemicals ☐ Identify the domestic and natural export markets ▪ Identify bankable customers in the local market Identify feedstock availability and existing commodity flows Characterize the best local location and amenities - utilities and site characteristics - suitable sites with heavy freight logistics (deep water, heavy roads, power) existing facilities for handling, storing feedstocks and products Directly promote Puerto Rico - to targeted international steel makers to targeted international chemical companies avoid generalized site selector ■ Be the company's guide and champion in politics and approvals The cost and risks in delay to study the "best" business attraction campaign likely exceeds the risk in just pursuing an obviously "good" business attraction campaign SEABURY MARITIME 58#59Identifying More Business Attraction Candidates Import / Export Economic Analysis and Industry Survey ■ Partner with a local university economics department ☐ Develop capacity of graduate students through the research effort who can also serve as InvestPR interns and potential future employees ■ Perform a combined location analysis and dependencies analysis of existing Puerto Rican industries Identify transportation dependencies and exposure to island-specific overpricing Develop a systematic interview process with local agriculture, manufacturing, chemical, pharma, and other industries to create an island-wide supply chain opportunities analysis ■ Combine the studies with import-export records to identify additional candidates for business attraction Calculate location quotients for each major industry to identify gaps in the island supply chain Estimate the economic leakage from the island created by these gaps Estimate the economic impact of closing the various gaps Use interviews to both supplement/illustrate the economic data and identify partners for specific actionable steps Never stop planning while you work on business attraction... and never stop working on business attraction to plan ... "just do it" SEABURY MARITIME 59#60Business Matchmaking ☐ Identify Strategic Partners and Strategic Buyers for Island Businesses Recognize that Puerto Rico's businesses themselves are business attraction assets - most new business ventures are not "greenfield” activities, rather, they are built through joint ventures, mergers, and acquisitions ■ For businesses from the US mainland, Puerto Rico offers a natural springboard to Caribbean and Central American markets... existing Puerto Rican businesses become the catalyst through JV's, mergers, and acquisitions - bilingual work force - cultural and social connections to the Caribbean and Central American markets, - - US work rules, law, and US citizen workforce geographic proximity and excellent logistics connections for regional warehousing and distribution ■ Invest Puerto Rico can develop a "match making" service to connect domestic businesses to similar US mainland businesses to both develop their marketing and distribution pathways to the Puerto Rican market and grow into the broader Caribbean market SEABURY MARITIME 24 island nations and territories of the Caribbean are a $500B market with 42 million residents plus millions of tourists 60#61InvestPR Partnerships InvestPR website could further promote access to the other constituents engaged with promoting Puerto Rico GOB PUERTO * AUTORIDAD PUERTOS de PUERTO RICO GOBIERNO DE PUERTO RICO DEPARTAMENTO DE DESARROLLO ECONÓMICO Y COMERCIO INVEST PUERTO RICO PUERTO RICO HOTEL & TOURISM ASSOCIATION DISCOVER Cuerto Rico While this initiative or the industries mentioned above are not engaged directly in supply chain services, they either touch on or benefit from such services. As businesses are developed and grow they intimately rely on supply chain to assist in meeting their goals. SEABURY MARITIME 61#62InvestPR FUND Identify Strategic Finance Partners to help capitalize Puerto Rican businesses doing import replacement and export activity ■ The apparent lack of industrial community development finance capacity in Puerto Rico has left many federal agencies (e.g. EDA, USDA) without a strong counterparty for many federal loan and loan guarantee programs ■ Banks will want to leverage and de-risk their loans to Puerto Rican businesses while earning community reinvestment act (CRA) credits and developing their own portfolio ☐ Consider partnering with a well-established Community Development Financial Institution (CDFI) or Small Business Investment Company (SBIC) to utilize their back office, underwriting, capital raising, and technical skills with Invest Puerto Rico handling marketing and intake functions Insulate any investment fund from the territory's junk-bond credit ratings and maintain independent governance of the fund ■ Invest Puerto Rico can, over time, develop its own discretionary income from the Fund to pay for broader program staff and marketing/outreach budgets in pursuit of its broader mission SEABURY MARITIME Develop an affiliated Invest Puerto Rico Fund to advance. your business attraction mission. It's in your Name! 62#63Moving Forward ☐ Integration and Expansion of Business Opportunities In reviewing the companies, infrastructures and existing sources available in Puerto Rico our recommendation is for Invest Puerto Rico to continue working with the Seabury Maritime, Strategic Rail Finance and Gilbert Sachs Group to identify potential new business opportunities by aligning each businesses best practices. Our experience in writing and executing Business Plans, Merger and Acquisitions brokering, and private business Capital Raise activities provides for great insight into how to formulate and create new business opportunity in Puerto Rico. Global Contacts Business Plans Mergers & Strategic Capital Acquisitions Advisory Raises SEABURY MARITIME Puerto Rico SEABURY MARITIME GSG GILBERT SACHS GROUP A STRATEGIC RAIL FINANCE GROWING NORTH AMERICAN INFRASTRUCTURE 63#64Appendix Contact Information#65Contact Information Gary Pedersen Director, Maritime Operations T +1 732 652 9108 M +1 908 723 4764 652 9107 E [email protected] Seabury Maritime PFRA 333 Thornall Street Edison, NJ 08837 United States of America John Elliott Partner, Senior Vice President T +1 215 564 3122 M +1 814 490 0689 E [email protected] Strategic Rail Finance 1700 Sansom Street, St. 500 Philadelphia, PA 19103 United States of America Jonathan Gilbert Principal T +1 516 630 0365 M +1 561 630 0365 E [email protected] Gilbert Sachs Group 1803 W Community Drive Jupiter, FL 33458 United States of America SEABURY MARITIME 65