Remarks by George Adams, Chairman, Vancouver Port Authority, to address VPA 2005 Annual General Meeting, June 27, 2006

Remarks by Captain Gordon Houston, President & Chief Executive Officer, Vancouver Port Authority, to address VPA 2005 Annual General Meeting, June 27, 2006

Remarks by Tom Winkler, Vice President and Chief Financial Officer, Vancouver Port Authority, to address VPA 2005 Annual General Meeting, June 27, 2006


Remarks by George Adams, Chairman, Vancouver Port Authority, to address VPA 2005 Annual General Meeting, June 27, 2006

Ladies and Gentlemen, good afternoon and welcome to this, the seventh Annual General Meeting of the Vancouver Port Authority. My name is George Adams, and I am the Chairman of the Board of Directors of the V.P.A. I will serve as Chairman of todays meeting.

This annual meeting is held, in accordance with the statutory requirements of the Canada Marine Act. The specified annual financial statements of the Corporation, set out in the form prescribed in the Act, are contained in the Annual Report, copies of which are available. The Annual Report contains also the report of the independent auditor.

Joining me on the stage today are Captain Gordon Houston, the President and Chief Executive Officer of the Vancouver Port Authority, and Tom Winkler, the Vice President and Chief Financial Officer. They will be presenting a summary of the ports activities during 2005.

Before that I will make a few comments of my own.

With the coming into force of the Canada Marine Act In 1999, the Vancouver Port Authority became a non-shareholder, for-profit corporation and our Board of Directors has been providing stewardship to the V.P.A. since this time.

The directors are accountable for the overall management of the Vancouver Port Authority and for overseeing the activities of the Authority.

In fulfilling their responsibilities, directors are required to act honestly and in good faith whilst keeping the best interests of the port authority paramount. In fulfilling their role and in their deliberations, the directors take consideration of all legitimate interests of suppliers, customers, communities, governments, employees and other port stakeholders.

We are very fortunate having available to us the extensive and balanced range of knowledge and expertise in both business and community service that our directors bring to the Board. They readily provide their wealth of experience and wide knowledge to strategic planning, to the consideration of issues and to our decision making.

We have a Board of 9 directors. One director is appointed by the federal government, one by the BC Provincial government, one by the governments of the three Prairie Provinces and one by the eight municipalities which surrounding the port. The remaining five directors are appointed by the federal government under Orders in Council following nomination by a committee of port users.

Generally speaking, directors are appointed for a three-year term which may be renewed but for one occasion only.

As I introduce each of our current directors, I would ask them to stand and to remain standing until all have been introduced. I would ask the audience to please withhold your applause, if any, until all directors have been introduced.

Being mindful of your time, I will not describe the backgrounds and expertise of the directors. This information is readily available on the VPA's website.

Firstly, our newest director - Trevor Klassen was appointed by the governments of the three Prairie Provinces on March 1st of this year. Trevor serves on the Governance Committee.

Sarah Morgan-Silvester was appointed by the Provincial government of British Columbia in 2004. Sarah chairs the Governance Committee and serves also as a member of the Audit Committee.

Marilyn Baker was appointed by the municipalities in 2005. Marilyn is a member of both the Governance Committee and of the Human Resources and Compensation committees.

Kazuko Komatsu was appointed by the federal government in 2005. She is a member of the Audit Committee and of the Human Resources and Compensation Committee.

The five directors nominated by port users and appointed under Orders in Council are John Willcox, Bob Wilds, Greg Arason, Ken Matchett and myself. Unfortunately, Bob Wilds could not be with us today and he sends his regrets.

John Willcox, is the Vice-Chairman of the Board of Directors, the Chairman of the Audit Committee and a member of the Governance Committee.

Bob Wilds chairs the Human Resources and Compensation Committee and serves as a member of the Audit Committee.

In March of this year both John Willcox and Bob Wilds were appointed to a second term.

Greg Arason, who was appointed in 2004, is a member of the Governance Committee and of the Human Resources and Compensation committee. He also represents the Board on the Port Advisory Committee.

Ken Matchett who was appointed in 2005, serves on the Audit committee and on the Human Resources and Compensation Committee. Ken serves also as the Board's liaison with the Ports Environmental Committee.

Finally, I was appointed to the Board in 2004 and was elected by the Board as their Chairman in 2005.

Ladies and gentlemen, this is the Board of Directors of the Vancouver Port Authority.

Trevor Klassen, our newest director, replaced the Hon. Ed Schreyer who served on our Board for three years. I am pleased to have this opportunity to thank Ed publicly for his dedication to the port and to our industry and for providing his considerable contribution as a director of the VPA. Eds wide experience, wisdom and insight were valuable, he gave generously of his time and was unstinting in offering his advice and suggestions.

Much of the detailed work of the Board is delegated to the three standing committees of the Board, namely Audit, Governance and Human Resources and Compensation. This enables the full Board to concentrate on matters of policy and strategic issues.

It would be a serious omission if I failed to recognize the valuable work done by each of the committees and the efforts of the members of each committee. In particular, I take this opportunity to recognize and express my appreciation for the dedication of each Committee Chairman and for the time and effort they devote to our cause.

As you will hear from both Gordon Houston and Tom Winkler and will read in the Annual Report, the Vancouver Port Authority experienced considerable success in 2005. Gordon will refer also to certain challenges, encountered on the way to those achievements.

From time to time it is necessary to remind ourselves that life, without challenges, would be rather boring. The strength of every organization is its people. A significant test of that strength is how an organization handles and copes with challenges. I can assure you that by this measure, the Vancouver Port Authority is extremely strong.

Our achievements in 2005 are attributable in a large part to a team of hard-working, professional, dedicated and talented employees. On behalf of the Board, I extend thanks and appreciation to Gordon Houston, to his executive team and to each of the employees of the Vancouver Port Authority whose contributions have advanced us towards the achievement of our goals and have helped strengthen our competitive position.

To meet the challenges of building a better port, the VPA relies on strong partnerships. Our successes and achievements reflect also the accomplishments of our stakeholders. Their faith, support and encouragement help the port your port in the constant quest for progress and improvement.

Our mandate, namely to "promote and safeguard Canada's competitiveness and trade objectives", is set out in the Canada Marine Act. That mandate, coupled with our mission to Be a leader in the sustainable growth of cargo and passengers through Canadas Pacific Gateway in the best interest of Canadians serves to drive our business objectives and to underscore our accomplishments.

While addressing the needs of Canadas role in the global economy, expanding our business interests and fine-tuning our operations, we are committed to sustainable social, environmental and financial practices these commitments are constant and fundamental to all of our considerations and activities.

Thank you.

Remarks by Captain Gordon Houston, President & Chief Executive Officer, Vancouver Port Authority, to address VPA 2005 Annual General Meeting, June 27, 2006

Thank you Chairman. It is a pleasure to see everyone here this afternoon.

The Port of Vancouver, the Pacific gateway and Asia-Pacific trade have never been as important as they are today.

You frequently see media stories about the Port of Vancouver's investments in facilities, the challenges we face, and the economic impacts of trade through our port. Port activities affect the people of BC and beyond.

And there are more opportunities for greater economic prosperity in the future.

But my job today is to look back on 2005. And I can sum up the year as one of growth, progress and action.

In 2005, the Port of Vancouver partnered with stakeholders, customers and communities to achieve our collective goals.
These achievements position the Port of Vancouver for future growth and shared opportunity.

That is not to say that we did not face challenges last year. However with other stakeholders we were able to turn many of these challenges into opportunities and used them to improve our operations.

Progress and action arise from strong, determined leadership and strong partnerships. Together with our partners, we are on our way to becoming one of the world's great ports.

After working with the provincial and federal governments over the past several years to address the dire need to expand the Pacific gateway, we saw government make commitments to gateway initiatives.

In October, the Government of Canada announced the Pacific Gateway Strategy. This $590 million dollar initiative will realize the development of vital transportation infrastructure, more secure and efficient border services, and deeper links with the Asia-Pacific region.

Today, annual trade through the Port of Vancouver amounts to more than $43 billion dollars in value. This activity generates more than 69,000 total jobs and $3 billion dollars in total direct wages across Canada. The Federal Pacific Gateway Strategy, the Provincial Gateway Program and the British Columbia Ports Strategy will fuel greater employment, generate greater economic benefits and help to create stronger communities in BC and across our nation.

Statistics I shared during last year's Annual General Meeting still hold true and are worth repeating. They help illustrate what "growth" means to the Port of Vancouver and to our region.

The B.C. Ports Strategy forecasts that bulk, breakbulk, cruise and container traffic on Canada's west coast will grow. This growth will create 45,000 new direct jobs across Canada and contribute an additional $3.1 billion to Canada's GDP each year. More jobs and economic benefits mean stronger communities.

Last year the Port of Vancouver handled 76.5 million tonnes of cargo - a 4 per cent increase in total exports and imports over 2004.

Bulk cargo - such as coal, grain, sulphur and potash - represents the port's primary sector and accounts for 77 per cent of total traffic. Bulk shipments grew 4 per cent to 58.7 million tonnes.
We experienced marked increases in total liquid bulk shipments, up 10 per cent to 7.7 million tonnes and reflect greater demand from the U. S. for crude petroleum.
Break-bulk cargo increased 2 per cent to 3.4 million tonnes. And container shipments set a new record of 1.77 million TEUs, an increase of 6 per cent over 2004.

With respect to the Deltaport Third Berth Project, in February 2005 the Environmental Assessment Office accepted the application for review. We continue to work with the environmental agencies and the community to identify and address issues and challenges.

It is our intention to expand and operate Deltaport in a way that mitigates environmental impacts. It is also our hope that this expansion will strengthen Delta over the next 20 years through the generation of $90 million dollars in wages, $48 million in business opportunities and annual social benefits realized from the port's additional tax payments. These will amount to $2.2 million dollars, bringing the total to $8.8 million in taxes paid to the Corporation of Delta each year.

Other partners made significant investments to expand the Port of Vancouvers capacity last year. Canadian Pacific Railway completed its $160 million dollar Western Corridor Expansion Program in the fall of 2005. This program increased capacity by 12 per cent and improved the movement of goods to the Port of Vancouver to meet increasing demand.

In addition, the VPA and CPR signed a cooperation agreement last year to further enhance the gateway. Together we'll work to develop marketing and advocacy programs that will enhance competitiveness, operational efficiencies and customer service.

The VPA launched its Supply Chain Strategy in 2005. This strategy is to address issues affecting the Gateway's ability to increase freight, develop the strategic priorities for addressing issues, and to create a framework for measuring and monitoring success.

The Strategy's primary goal is to achieve sustainable growth in all cargo sectors by developing the most reliable and consistent supply chain in North America.

Last year we lead discussions with Lower Mainland communities for road improvement initiatives; began monitoring truck dwell times; and initiated service performance monitoring through the use of technology.

Perhaps the port's most visible challenge in 2005 occurred in June when some container truck drivers, withdrew their services from the Port. This action affected cargo movement and the impacts were felt across the country. This prompted the federal and provincial governments to create a joint task force to review the Lower Mainland's container trucking industry.

The VPA responded to the Task Force Report by implementing our Strategic Trucking Program, designed to improve operational practices and provide our customers with stable trucking services for the future. Components of the program include investments in new technology and processes, extended truck gate hours and a mandatory truck reservation system.

Security remains vital to the efficient and safe movement of goods and passengers through our port. As we fulfilled obligations under the new international law on port security, we worked with our partners in the port community, the Canada Border Services Agency, law enforcement, Transport Canada and the Department of National Defence.

Upgrades were made to the port's control rooms, investments and plans were made to implement a marine surveillance program, and we began to develop a Port Resources Exchanges Centre. All these will enable the timely risk assessment of port operations by gathering information and data provided by terminal operators, and the port's trucking, rail and shipping partners.

These investments and initiatives speak to action, collaboration and growth. They will help the port welcome greater trade with more than 90 trading economies around the world.

We have long recognized China's potential to be a powerful economic force. Last year the Port of Vancouver marked the 10-year anniversary of its sisterport relationship with the Port of Guangzhou by welcoming a delegation from Guangdong Province. This event solidified and celebrated the prosperous mutual trade relationship we've built over the last decade.

In the cruise sector, the Port of Vancouver serves as the homeport for Vancouver-Alaska cruises, the world's third most popular cruise market.
Last year London-based Berlitz travel publishing company named the Port of Vancouver as the most passenger-friendly cruise port in North America, citing top marks received for friendliness and luggage handling.

The locally-developed US Direct Program debuted in June 2005 and handled 22 per cent of Vancouver's cruise passengers. The Program helps streamline processing through customs and decreases transit times for passengers.

The Vancouver Port Authority worked with industry stakeholders, other BC port authorities, and coastal communities to diversify and increase cruise business. New itineraries featured six cruises to various BC ports.
These cruises were a success and will be offered again this fall.
We are also proud of the progress made in the area of sustainability in 2005. Our sustainability programs helped us fulfill not just our economic obligation to community, but also our environmental and social responsibilities.

In the context of continuing growth, we cannot lose sight of the importance of maintaining a healthy environment. As a core value of our organization, the VPA has taken a number of bold steps toward this objective. For example, in addition to being the first port in North America to have a dedicated environment department; and we have just been awarded LEEDS-CI Gold - an award for Energy and Environmental Design for our new offices at Canada Place.

On air emissions, the VPA is actively supporting the establishment of a North-American low-sulphur zone for ships. This is a step that would decrease sulphur emissions from ships by 50 per cent. The VPA also has been testing and using fuel additives, which reduce emissions from both ships and shore-based equipment. We announced changes to our Truck Licensing System to ensure container trucks serving the port meet safety and environmental standards. Terminals also are reducing air emissions by using fuel-catalysts and testing hybrid power systems.

Finally, there is social sustainability. Clearly the port makes a significant contribution to the well-being of many Canadians. In fact, almost 70,000 Canadians are employed in jobs related to the Port of Vancouver. The hundreds of millions in tax revenue that the port generates help support health care, education and our high quality of life. While this is a tremendous benefit to our society, we can still do more. Thats why we have joined CBSR (Canadian Business for Social Responsibility). Thats why we support the creation of a stronger partnership with communities. To identify ways for port-related communities to participate more fully in the wealth generated from future growth.

In addition to our extensive outreach initiatives, the VPA manages an active community investment program based on the three pillars of "education", "community" and environment. Whether engaged in our Partners in Education Scholarship Program, our long time involvement with the United Way or our sponsorship of and donations to a number of community events, the VPA is committed to being a part of the community.

We apply the same values to our employee programs as we do to our environmental and community programs. In 2005, the Vancouver Port Authority was proud to have been named as one of Canada's Top 100 Employers by Canadian business magazine Maclean's.

While the VPA is diligently exercising responsible business practices, we are also working to protect the environment, to support communities and to help sustain the local and national economy.

In closing, I wish to thank our partners in business for the action you've taken this past year and for your attendance today. We have achieved a great deal and made significant progress because of our collaborative efforts. We are well positioned to capture greater trade opportunities, providing we continue to move forward with the same determination and commitment. Thank you for your attention.

Remarks by Tom Winkler, Vice President and Chief Financial Officer, to address VPA 2005 Annual General Meeting, June 27, 2006

Thank you Gordon and Good Afternoon, Ladies and Gentlemen!

It is my pleasure today to present an overview of Vancouver Port Authoritys 2005 financial results. Our external auditors, KPMG, provided an audit opinion that the consolidated financial statements present fairly, in all material respects, the financial position of the Authority as at December 31, 2005.

KPMG have been re-appointed by the Board of Directors to undertake the audit for the year 2006.

Comparative Year End Figures

The financial results in 2005 compare favourably with the strong performance realized in 2004. 2005 Net Income increased sharply to $30.9 million from $23.8 million in 2004. The slight reduction in operating revenues reflect the annualized impact of VPAs divestiture of its joint venture interest in Coast 2000 on August 1, 2004 and decreased cruise revenues. Operating expenses dropped significantly in 2005 primarily related to VPAs relocation from rented offices to its own premises at Canada Place. In addition expenses relating to VPAs joint venture have been eliminated.

Cash flows generated through operations increased from $47 million in 2004 to $54 million in 2005 providing a strong platform to fund future capital programs.

Continued profitability for VPA is paramount to meet the requirement in the Canada Marine Act for financial self-sufficiency and to enable VPA to remain competitive through continuous investment in our port infrastructure.


Operating Revenues

Operating revenues have increased by approximately 52% over the past decade, from $65 million in 1996, to $99 million in 2005. This increase in revenue has been fueled primarily by record growth in container volumes with the bulk, break-bulk and cruise market sectors providing a significant supporting revenue base. Fee increases over this ten-year period have been minimized to enhance our competitive position and stimulate economic growth. The nearly 200% increase in container volumes over this period validates the effectiveness of this pricing strategy.

Operating Expenses

VPA has worked hard to control operating expenses which have increased by 43% over the past decade. On this graph, you can see that expenses have increased sharply in the years 2001 to 2003 particularly when contrasted to the relatively flat period between 1996 and 2000. Amortization expense has increased by over $7 million annually reflecting VPAs significant investments in port infrastructure made during 2000 and 2001. Security and insurance expenditures have spiraled over this period reflecting new economic and social realities that needed to be addressed. Management is confident that these costs have peaked, as evidenced by the results in 2005, and will continue with initiatives to control expenses at sustainable levels. While management is committed to the containment of expenditures by effectively managing and controlling costs, there is recognition of the need to invest in our communities and environment for long-term sustainable growth.


Capital Expenditures

Over the past 10 years VPA has spent nearly $400 million on capital expenditures to provide new and upgraded facilities and infrastructure for our customers, improvements in safety and security for our stakeholders and enhancements to the environment. The annual levels of spending have fluctuated between $4 million and $97 million reflecting corresponding periods of investment activity, which expanded terminal capacities and improved efficiencies to meet projected customer demand. VPA has entered another phase of significant capital expenditures with major capital programs well underway for capacity expansions of Centerm and Vanterm and the phased implementation of extensive Port Security infrastructure.

Debt Management

Outstanding Debt peaked in 1996 at $137.6 million coinciding with our investment of $179 million towards the development of the Deltaport container terminal. Subsequently, outstanding debt has trended down, as cash flows have been sufficient to fund VPAs capital investment program. The remaining outstanding debt totaling $26.6 million at Dec 31, 2005 is financing provided by the Export Development Corporation.

Moving Forward

Our future continues to look promising but certainly not without challenges. In order to maintain support from government, communities and stakeholders, we must grow in a financially, socially and environmentally sustainable manner.

The VPA will continue to maintain favourable financial performance in an extremely competitive and cost sensitive marine environment. All profits generated are reinvested in your Port. The VPA does not depend on taxpayers dollars. We are financially self-sufficient, using our profits to continuously improve this port and its facilities for customers and stakeholders.

The VPA will continue to invest significant amounts of capital to provide customers with additional capacity, improved efficiencies and services and upgraded facilities and infrastructure.

The VPAs capital expenditures over the next five years are forecasted to exceed $400 million. These investments will be funded from both working capital and an increase in our outstanding debt.

Operating revenues are projected to increase steadily as continued growth is anticipated in all commodity sectors. VPA management will continue to maintain a focus on controlling expenditures in order to sustain good profit margins and strong positive cash flow.

Our financial performance will also be affected by investments in our communities and environment over the coming years. For the port to succeed into the future, we will need the support of those around us. That demands we continue to make the necessary investments to protect the environment. It also requires us to be more creative in our partnerships with the communities most affected by port-related activities. While these initiatives will generate additional expenditures, they represent the investment of doing business today, as well as an essential component of the social license we require to grow and thrive into the future.

Financial, social and environmental sustainability are essential for VPA to transform our Vision of being the Port of Choice on the West Coast of North America into reality.
Thank you.



For more information, please contact:

Anne McMullin,
Director, Corporate Communications and Public Affairs
Vancouver Port Authority
(604) 665-9069 (office)
(604) 665-9073 (fax)
(604) 218-1403 (cellular)
anne.mcmullin@portvancouver.com

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