Business News: Kansas City Southern Statement Regarding Mexican Economic Competition Commission Preliminary Report

KANSAS CITY, MO (STL.News) – Kansas City Southern (KCS) (NYSE:KSU) confirmed that on Thursday, March 21st, 2019 the Investigation Authority (Investigation Authority) of the Mexican Federal Competition Commission (COFECE) published an extract of its preliminary report (Preliminary Report) regarding its assessment of effective competition in the market of freight railway transportation services regarding certain chemical and petrochemical products (Relevant Product) shipped in certain specific routes with an origin or destination in the southern region of the State of Veracruz (Market).

The scope of the Preliminary Report is limited to 31 routes with specific points of origin and destination in the Market and each route is tied to a specific Relevant Product. Kansas City Southern de Mexico (KCSM) is only involved in rendering freight transportation services in limited portions of 7 (seven) routes.  During 2018, KCS’ revenue associated with these routes represented less than $3 million of revenue.

The issuance of the Preliminary Report has no impact on KCSM’s current business, operations, or rights under the concession.  KCSM will file a brief challenging the Preliminary Report and offering evidentiary support for its challenge.  The Panel of the Commission must issue a final report by mid-October taking into account the Preliminary Report, as well as the arguments, challenges and evidence rendered by KCSM and other parties within the scope of that report.

If the Panel of COFECE confirms a lack of effective competition in any of the routes (narrowed by product) included in the Preliminary Report, then the Railway Regulatory Agency would initiate the specific procedure arising from the railway regulatory law that could include, among others, imposition of remedies in the form of mandatory trackage rights on KCSM and other concessionaries, for specific products, routes or segments thereof, in addition to the mandatory trackage rights already provided in their corresponding concession titles. The Agency may also impose the service conditions and rates for these mandatory trackage rights.  However, before any such action, the Agency must first evaluate the evidence and arguments offered by the applicable concessionaires.  In this case, a hearing with the Railway Regulatory Agency would be held with the corresponding concessionaries, and the concessionaries can offer their own remedies if they wish.

Should the final report issued by the Panel of COFECE affirm the Preliminary Report and the Railway Regulatory Agency consider specific remedies for such findings, KCSM will exercise all of its rights under its concession and the law to ensure that any actions considered by the Agency are workable and consistent with KCSM’s rights under law and under its concession.

Headquartered in Kansas City, Mo., Kansas City Southern (KCS) (NYSE: KSU) is a transportation holding company that has railroad investments in the U.S., Mexico and Panama.  Its primary U.S. holding is The Kansas City Southern Railway Company, serving the central and south central U.S. Its international holdings include Kansas City Southern de Mexico, S.A. de C.V., serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal. KCS’ North American rail holdings and strategic alliances with other North American rail partners are primary components of a unique railway system, linking the commercial and industrial centers of the U.S., Mexico and Canada.  More information about KCS can be found at www.kcsouthern.com.