PACIFIC PILOTAGE AUTHORITY West Pender Street Vancouver, B.C. V6E 4A4 (604)

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1 West Pender Street Vancouver, B.C. V6E 4A4 (604) SUMMARY OF THE CORPORATE PLAN Includes: OPERATING BUDGET 2013 CAPITAL BUDGET 2013 Vision Statement: To be a world leader in marine pilotage

2 Executive Summary PACIFIC PILOTAGE AUTHORITY A proud milestone was reached on June 1, 2012 as the Authority celebrated its 40 th anniversary. The Pacific Pilotage Authority was created by the Pilotage Act in 1972 and in the forty years to date has completed 508,000 pilotage assignments. The ongoing global economic concerns seem to have become the new norm and are continuing into Even so, assignments completed in the year of 2011 were at the highest level we have seen in the last 10 years. Following on this, 2012 assignments through the first six months are within 2% of this record 2011 year. The Authority s financial results are as usual, traffic driven, so a strong financial performance in 2011 was recorded with $65.8 million in revenues and a net income of $2.5 million. The year of 2012 has seen some minor traffic decreases and is forecast to end at $62.9 million in revenues and a nil net income. These net income numbers have had launch replacement revenue removed to provide a more accurate representation of revenues derived from operations. In Port Metro Vancouver the actual increase in tonnage handled year over year, 2011 vs. 2010, was 3%. This port increased their throughput to 122 million tonnes and with 78% of our annual trips in this region we benefited from their stable traffic base. The northern areas of our jurisdiction, Prince Rupert and Kitimat, continue to show great promise as they are the closest North American ports to Asia. Liquid natural gas vessels that carry the product also use it to power themselves so this proximity to the end destination is a favourable factor in location of terminals. Kitimat is also the proposed location for the Enbridge Northern Gateway Pipeline terminus. The Port of Prince Rupert reported an increase in tonnage year over year, 2011 vs. 2010, of 18%. This port increased their throughput to 19 million tonnes. They also have ambitious plans to expand their container and coal facilities within this corporate plan period. Asian demand continues to drive private sector planning and major investments in Western Canada s resource sectors such as coal, grain, sulphur, potash, oil, gas, etc. It is the responsibility of the Authority to ensure we are ready to service these developments when they become operational. To this end we continue to monitor planned developments, trade patterns, proposed terminals, government strategies, etc. With respect to the Authority s mandate of providing a safe, reliable and efficient marine pilotage service in the coastal waters of British Columbia, our 2011 safety record of 99.96% (five minor incidents out of 13,200 assignments) continues to reflect our safety emphasis. An Enterprise Risk Management (ERM) program has been rolled out to all employees and continues to encompass all of our operations. Scenario planning involving related parties has been used to plan actions and mitigations for some of the high ranked risks

3 The marine industry and stakeholders we serve place great emphasis on stability and avoiding service level disruptions. As an example, the recent one week railway strike was estimated to cost the Canadian economy in excess of half a billion dollars. To this end, the Authority has signed a long-term service agreement with a duration of five years with our primary contractor, the British Columbia Coast Pilots Ltd. During the past year the Authority also signed a seven year collective agreement with our launch masters and engineers and extended a six year agreement covering dispatchers and office employees by one additional year. The Authority is committed to following the spirit and intent of the government s ongoing cost containment and deficit reduction measures. The Authority has conducted a thorough review of all discretionary spending and has incorporated all opportunities for operational efficiencies into the corporate plan. At the same time we have to balance our responsibilities to the Canadian economy and stakeholders by ensuring our operation is capable of responding to any service level required. As part of the Authority s ongoing strategic planning sessions we continue to actively monitor all projects proposed in our jurisdiction by working with the proponents to ensure there is a mutual understanding of each other s needs and concerns, and to ensure that we understand the impact on our assignments and pilot count. Our ultimate long term vision is to be recognized as a world leader in marine pilotage and looking ahead our effort is focused on achieving this vision

4 Mandate The mandate of the Authority is to establish, operate, maintain, and administer in the interest of safety, an efficient pilotage service within the regions set out in respect of the Authority, on a basis of financial self-sufficiency. Profile of the Authority Background The Pacific Pilotage Authority was established February 1, 1972, pursuant to the Pilotage Act, , Chapter 52. The Pacific Pilotage Authority is a Schedule III, Part I (FAA) Crown corporation comprised of a Chair and six Board members appointed by Governor-in-Council. The Authority is not an agent of the Crown. Powers To carry out its responsibilities the Authority has made regulations, approved by Governor-in- Council, pursuant to the Pilotage Act for: 1. Establishing compulsory pilotage areas; 2. Prescribing the ships or classes of ships that are subject to compulsory pilotage; 3. Prescribing classes of pilot s licences and classes of pilotage certificates that may be issued; 4. Prescribing the tariffs of pilotage charges to be paid to the Authority for pilotage services. In addition, the Authority is empowered by the Pilotage Act to: 1. Employ such officers and employees, including licenced pilots, as are required; 2. Contract with a body corporate for the services of licenced pilots; 3. Make by-laws respecting the management of its internal affairs; 4. Purchase, lease, or otherwise acquire land, buildings, pilot launches and such other equipment and assets as may be required and to dispose of any such assets acquired

5 Corporate Objectives The Authority's Corporate Objectives are: 1. To provide safe, reliable and efficient marine pilotage and related services in the coastal waters of British Columbia, including the Fraser River; 2. To provide the services within a commercially-oriented framework, by maintaining financial self-sufficiency, through a combination of cost management and tariffs that are fair and reasonable; 3. To achieve the highest productivity of the Authority's resources in the interest of safe navigation; 4. To implement sustainable practices within the Authority and contribute to government's environmental, social and economic policies as they apply to the marine industry on the Pacific coast of Canada; 5. To assume a leadership role in the marine industry we serve, by facilitating decisions resulting in improvements to navigational safety and the efficiency of marine operations. Vision Statement The Authority s vision statement is To be a world leader in marine pilotage. Mission Statement The Pacific Pilotage Authority is dedicated to providing safe, efficient pilotage by working in partnership with pilots and the shipping industry to protect and advance the interests of Canada. Corporate Values Management and Board members review the Authority s Corporate Values annually to ensure their continued relevance and applicability. The Corporate Values are: 1. Honesty/Integrity - We will ensure honesty and integrity in everything that we do. We share responsibility for being effective, accountable and acting appropriately. We consider the outcome of decisions for all those affected before we implement change. We act with visible integrity and openness, and support each other in these actions. 2. Positive Stakeholder Relations - We will work hard to maintain positive relations with all stakeholders including the shipping industry, the pilots and their respective organizations, our employees, the communities in which we operate and all other related individuals and organizations

6 3. Service Quality - We strive for excellence in all our activities. We continuously learn, develop and improve. We take pride in our work and in the services we provide to our clients and partners. 4. Accountability/Responsibility - We are accountable, as individuals, team members and as an organization for our actions and our decisions. We make effective and efficient use of the resources provided to us. We adhere to our policies and procedures, our mission and objectives, and to the Regulations governing us. When our commitment to innovation is at odds with existing procedures, we will work within the system to achieve positive change and improvement. 5. Adaptability and Innovation - We value innovation and creativity. We encourage and support originality and diversity of thought. As individuals and as teams, working with our internal and external partners, we welcome new ideas and methods to enhance our service and the use of our resources. Description of Operations The Authority is responsible for providing safe, reliable and efficient marine pilotage in the coastal waters of British Columbia, including the Fraser River. The Authority has established five areas subject to compulsory pilotage. When a vessel intends to enter compulsory pilotage waters on the British Columbia coast, it will initiate an order for a pilot at a specified time, date and boarding station. A pilot either contracted to or employed by the Authority will carry out this assignment. Pilots are boarded on vessels by pilot launch or helicopter and are disembarked in similar fashion when a vessel leaves pilotage waters. The head office of the Authority is in Vancouver, British Columbia. Pilots are dispatched to their assignments through a central dispatch office in Vancouver and a traffic coordination office in Victoria. During 2012, a workforce of one hundred contract pilots will provide coastal pilotage services. Additionally, there are seven employee pilots who pilot vessels on the Fraser River. To provide pilots with water transportation to and from ships, the Authority operates pilot launches at three permanent boarding stations. These stations are Victoria, Prince Rupert and Steveston which have employee-crewed launches

7 Additionally, a contract launch is operated at Pine Island (northern tip of Vancouver Island). This station will perform approximately 350 pilot transfers during 2012, of which the majority will be cruise ship traffic. The cruise industry is the major user of this station since it allows their vessels a high degree of flexibility with regard to the Alaska cruises. The Nanaimo Port Authority is also a contract launch operation carrying out pilot changes off Snake Island in the Nanaimo area. On the west coast of Vancouver Island at Cape Beale, the Authority has a designated boarding station which services the Port Alberni region. The Authority has the ability to service this station by helicopter or by repositioning a Victoria based launch when required

8 The Authority s jurisdiction covers the entire coastline of British Columbia. Due to the vast size and the fact our coastal pilots are licenced for the entire coast we feel our operation is virtually unique in the world. The most northern port we service is Stewart, with the shaded area to its left representing Alaska. In the southern area below Vancouver, the shaded area represents Washington State

9 Corporate Governance Corporate governance is the process of establishing and monitoring, the policies and procedures which will ensure the appropriate stewardship of the business and affairs of the Authority, including financial viability. There are seven members on the Authority s Board of Directors, comprising, a Chair, two pilot representatives, two shipping industry representatives and two representatives of the public interest. This structure provides effective channels of communication and represents a good balance between the major stakeholders. All members are Governor-in-Council (GIC) appointees and serve at the request of the Minister of Transport, Infrastructure and Communities. The Canada Marine Review Panel has recommended that the present Board structure be included in the Pilotage Act. The Authority complies with the Treasury Board guidelines on corporate governance practices. This includes Board self assessments, a nomination committee for prospective Directors and the development of Director s skills criteria. In addition, the Board has constituted several other committees to focus on the major areas of the Authority. These committees are chaired by a Board member, have terms of reference and mandates and report directly to the Board on a regular basis. Audit Committee - the Chair and three Board members are also designated as members of the Audit Committee. The Audit Committee meets seven times per annum and members are expected to be financially literate. Its mandate includes responsibility for all financial matters, external audit, internal audit and insurance. Governance, Nominating and Human Resources Committee (GNHR) this committee meets on an as needed basis or at the call of the committee Chair. Its mandate is to provide a focus on corporate governance, recommend candidates for Board membership as well as the Chair and CEO positions. This committee also oversees the Board s selfassessment process, training and skills requirements, annual assessment of the Chair and succession planning of the Authority s management team. Pilot Training and Examination (PTEC) this committee meets four times per annum. Its mandate is to conduct pilot examinations and review ongoing training programs for pilots. It is composed of Authority management, BC Coast Pilots and one external examiner. Pilot Launch and Transportation Safety Committee this committee meets at least twice a year or more frequently as required. The committee is responsible for establishing safety standards and monitoring the safe operation of pilot launches, water taxis, airplanes and helicopters utilized in the transfer of Pilots to and from ships. It also - 8 -

10 ensures that the Authority adheres to regulations and safe practices issued by Transport Canada. It is composed of BC Coast and Fraser River pilots, Authority management and pilot launch personnel. Safety and Operating Review (SORC) - this committee meets up to five times a year. Its mandate is to review and assess pilotage practices and areas of concern and to seek solutions which result in improved safety and efficiency. It is composed of Authority management, BC Coast Pilots and members of the Chamber of Shipping. Enterprise Risk Management (ERM) and Emergency Preparedness this committee meets four times per annum. Its mandate is to achieve a consistent approach to risk management throughout all operational areas of the Authority, enhance the culture of risk awareness throughout the Authority and its partners, and manage the level of residual risk that is within the Authority s tolerance levels. The role of the committee consists of documenting the Authority s risks, categorizing and ranking them, and making non-binding recommendations to the Authority s Board of Directors. The Committee is comprised of representatives from the BC Coast Pilots, the Fraser River Pilots, the dispatch department, the launch operations, the accounting department and the management team

11 The Authority s organization chart indicates the official reporting structure. The Authority has prepared succession plans for the senior management positions. These plans outline the recruitment process, skills criteria and timelines in the event of personnel change. Launch Stations and Office Facilities In Victoria the Authority leases property from the Greater Victoria Harbour Authority, at Ogden Point, in order to accommodate the pilot launches, floats and a workshop. In addition to the launch operation there is also a dispatch office owned by the Authority that was substantially renovated in The Authority relocated to the current Vancouver head office facilities on December 1, 1999 and has renewed the office lease through to December 31, With a long-term office lease in place the Authority substantially renovated its office premises during

12 Pilot Launches The Authority s pilot launch fleet consists of five specially designed pilot launches. The three newer vessels are using water jet propulsion systems while the Pacific Pilot #2 and #4 use traditional propeller and shaft drive trains. The Authority has implemented an enhanced planned maintenance program, which will ensure all service and safety demands are met in a timely, orderly and cost effective fashion. All launches are on a four-year Transport Canada inspection cycle. Pilot Launches Station Date Built Size Pacific Pilot #2 Victoria m Pacific Pilot #4 Prince Rupert m Pacific Pathfinder Prince Rupert m Pacific Navigator Steveston m Pacific Scout Victoria m Government Policies The Authority continues to comply with the requirements of the Human Rights Commission, the Canadian Multiculturalism Act, the Employment Equity Act, the Official Languages Act, the Equal Opportunity Program, the Federal Identity Program, the Canadian Environmental Assessment Act, the Financial Administration Act Section X and the Access to Information and Privacy Act. Enterprise Risk Management An Enterprise Risk Management (ERM) program has been incorporated as part of the Authority s strategy and is well advanced in cultivating a culture of enterprise risk awareness throughout the organization. All areas have been incorporated into this program, including contract and employee pilots, launches, dispatch and administration, along with the Board and management. The ERM Committee is chaired by a Board member and includes representation from each of the areas mentioned above. The Committee reports to the Board, meets quarterly, conducts scenario planning and re-evaluates the risk register with a view to identifying new risks and mitigation measures. As a general rule, the risks rated high are reviewed at least once every three months, risks rated medium are reviewed at least once every six months and risks rated low are reviewed at least once every year

13 The Authority categorizes risks on the basis of the following chart. Similar to the risk themselves, the risk limits are reviewed on a regular basis. Impacts Financial Operational Strategic Reputation Disruption of Human Property Vessel(s) Environmental Business Extreme 5 Above $10 million cash impact on the Authority Multiple deaths And multiple people with serious longterm injury Intensive care Damage to property is such that it ceases operations for a period of time exceeding one month or financial loss exceeds $10 million Vessel sinks or sustains so much damage that it is a constructive total loss Incident causes sustained long term harm to environment (i.e. damage lasts greater than a month) Sustained front page adverse national media coverage International media coverage Threatens long-term viability of Authority (Operational cessation or major operational issues lasting more than one month) Very High 4 Impact on the Authority between $5 and $10 million Single death And multiple people with serious longterm injury Intensive care Damage to facilities is such that operations cease for up to one month or financial loss of $5million - $10 million Vessel sustains damage significant enough to result in towing to dry dock and loss of operations of up to one month Incident causes sustained medium term harm to environment (i.e. damage lasts up to one month) Front page adverse national media coverage and intermittent international coverage Threatens viability of Authority in the medium Term (Operational cessation or major operational issues lasting up to one month) High 3 $1million- $5million cash impact Some people with serious long-term injury and multiple minor injuries Damage to facilities is such that the operations cease for up to two weeks or financial loss of $1million - $5 million Vessel sustains significant damage with dry docking and loss of operations for two weeks. Incident causes medium term harm to environment (i.e. damage lasts up to two weeks) Intermittent adverse national media coverage Threatens viability of Authority in the short Term (Operational cessation or major operational issues lasting up to two weeks) Medium 2 Between $500,000 to $1million cash impact One person with serious long-term injury Some minor injuries Damage to facilities cause operations to cease for up to one week or financial impact of $500,000 - $1 million Vessel sustains damage resulting in loss of operations for one week. Incident causes short term harm to environment (i.e. damage lasts no greater than one week) Sustained front page adverse local media coverage Board and Ottawa receive complaints from Chamber of Shipping and major clients Operational issues lasting up to one week but no cessation of business Low 1 Up to $500,000 cash impact Single or multiple minor injuries requiring on site first aid and\or off-site treatment. Damage to facilities cause operations to cease for up to 72 hours or a financial impact up to $500,000 Minor damage with no effect or damage resulting in a loss of operations of no more than 72 hours. Incident causes minimal or intermittent harm to environment over a period of time (i.e. damage lasts no greater than a day) Intermittent adverse local media coverage Complaints received from Chamber of Shipping and/or clients No operational issues or operational issues lasting up to 72 hours During 2011 the program was revamped and the risk register expanded to include categories as the Authority had previously grouped certain risks together. It is felt the new approach is a more detailed and logical way to display our risks and is not an expansion of risks

14 The following chart shows the current risks and ranking status as of August Risk Table Priority Risk Title & Background Category Sub-Category Likelihood (residual) Impact (residual) Risk Rating 1 Pilot Protocols and Participation in an Incident Strategic None LOW EXTREME HIGH 2 Future Recruitment of Suitable Qualified Pilots Strategic None LOW EXTREME HIGH 3 Maintaining Good Stakeholder Relationships with the Shareholder Strategic None MEDIUM VERY HIGH HIGH 4 Maintaining Good Stakeholder Relationships with the Marine Industry Strategic None MEDIUM VERY HIGH HIGH 5 Maintaining Good Stakeholder Relationships with Pilots Strategic None MEDIUM VERY HIGH HIGH 6 Telecommunications failure (Voice and Data systems) Operational Technology LOW VERY HIGH HIGH 7 Failure of Key IT Applications Operational Technology LOW VERY HIGH MEDIUM 8 Changing Economic and Financial Conditions & Political Issues Affecting Traffic Volume External Financial LOW VERY HIGH MEDIUM 9 Communication During an Incident (Media) Incidents Communication VERY LOW VERY HIGH MEDIUM 10 Economic Health of BC Coast Pilots Ltd. External Vendors VERY LOW VERY HIGH MEDIUM

15 Priority Risk Title & Background Category Sub-Category Likelihood (residual) Impact (residual) Risk Rating 11 Training of Coastal Pilots Organizational Training LOW HIGH MEDIUM 12 Management Succession Organizational Human Resources LOW HIGH MEDIUM 13 Drugs and Alcohol Operational OH&S LOW HIGH MEDIUM 14 Recruiting and Training of Launch Crew Organizational Training LOW HIGH MEDIUM 15 Internal and External Fraud Financial Fraud LOW HIGH MEDIUM 16 Financial & Administration Systems Financial None LOW HIGH MEDIUM 17 Labour Management Fraser River Pilots Organizational Human Resources LOW HIGH MEDIUM 18 Delay of Vessel due to the Authority Operational None LOW HIGH MEDIUM 19 IT Vendor Issues Operational Technology LOW HIGH MEDIUM 20 General Safety of Pilots Operational OH&S HIGH MEDIUM MEDIUM

16 Priority Risk Title & Background Category Sub-Category Likelihood (residual) Impact (residual) Risk Rating 21 General Safety of Authority Launch Crews Operational OH&S MEDIUM MEDIUM MEDIUM 22 Changes and/or Shortcomings / Errors within Industry External None MEDIUM MEDIUM MEDIUM 23 Delay of Vessel due to External Issues Operational None HIGH LOW MEDIUM 24 Labour Management International Longshore & Warehouse Union Organizational Human Resources LOW HIGH LOW 25 Labour Management - Launch Crews Organizational Human Resources LOW HIGH LOW 26 Recruiting and Training of River Pilots Organizational Training VERY LOW HIGH LOW 27 HR Management for the Authority Organizational Human Resources VERY LOW HIGH LOW 28 Disaster and Emergency Planning Operational Hazard VERY LOW HIGH LOW 29 Incident Management Coordination Across Borders Incidents Incident Management VERY LOW HIGH LOW 30 Communication During an Incident (Government) Incidents Communication VERY LOW HIGH LOW 31 Traffic Management During a Cross Border Incident Incidents Incident Management VERY LOW HIGH LOW 32 General Safety of Authority Office Staff and Guests Operational OH&S LOW MEDIUM LOW 33 Pandemic Operational OH&S LOW MEDIUM LOW

17 Priority Risk Title & Background Category Sub-Category Likelihood (residual) Impact (residual) Risk Rating 34 New Technology and Subsequent Training - Pilot Organizational Technology LOW MEDIUM LOW 35 Main Office Security Operational Security LOW MEDIUM LOW 36 Compliance with Regulations and Legislation Legal & Regulatory Compliance LOW MEDIUM LOW 37 New Technology and Subsequent Training - Authority Organizational Technology LOW MEDIUM LOW 38 Security of Physical Assets Operational Security LOW MEDIUM LOW 39 Hazardous/Dangerous or Toxic Cargo External Hazard LOW MEDIUM LOW 40 Accounts Receivable Financial None LOW MEDIUM LOW 41 Recruitment and Training of Administration Staff Organizational Training LOW LOW LOW 42 Incident Management Coordination within Canada Incidents Incident Management VERY LOW MEDIUM LOW 43 Coordinating Multiple Investigations as a Result of a Cross-Border Incident Incidents Incident Investigation VERY LOW MEDIUM LOW 44 Special Events Planning Operational Hazard VERY LOW MEDIUM LOW 45 Ports and/or Terminals Significantly Changing the Way they do Business External None MEDIUM LOW LOW 46 Management of Variable Costs External Financial LOW LOW LOW

18 Priority Risk Title & Background Category Sub-Category Likelihood (residual) Impact (residual) Risk Rating 47 Financial Reserve/Tariff Financial None LOW LOW LOW 48 Accounts Payable Financial None VERY LOW LOW LOW 49 Issues with Operating in Shared Waterways Emerging None Un-rated Un-rated Un-rated 50 Pilots Boarding Vessels Via Helicopter Hoisting Emerging None Un-rated Un-rated Un-rated 51 Political Interference Emerging None Un-rated Un-rated Un-rated Sources of Funding Tariff In order to finance its activities, the Authority charges users for its services through a tariff. Consistent with pilotage objectives, the tariff is intended to be fair, reasonable and sufficient to allow for a safe and efficient service. The Authority continues to place great emphasis on the full engagement process by consulting at length with industry prior to a tariff application being initiated. The Authority has filed a tariff application which was pre-published in the Canada Gazette, Part I on June 23, No comments or notices of objections were received. The Authority benefited from increased traffic levels in 2011 mainly due to Asian demand for commodities. The number of trips in 2011 exceeded that of 2010 by 7% and resulted in a financial surplus for the year. This has allowed the Authority to delay implementation of a 2012 tariff adjustment to October 1, This offers nine months of cost relief to industry as the adjustment would only be in effect for three months of the year. Additionally, the 2013 tariff adjustment is delayed to April 1, 2013, offering an additional three months of cost relief to industry. It should be noted that in each of these years, 2012 and 2013, the Authority still has to fund a 4% contract increase due to the BCCP, which was negotiated with the assistance of an arbitrator in a final offer selection process

19 Personnel Resources The Authority has 57 full time employees: 7 Fraser River pilots, 11 dispatchers, 26 pilot launch personnel and 13 management and administrative personnel. The Authority contracts with the British Columbia Coast Pilots Ltd. for coastal pilotage services. Currently, there are one hundred (seasonally adjusted) active pilot members of the BCCP who provide coastal pilotage services. The required complement of coastal pilots is established annually in relation to the projected assignments and announced retirements. Replacement and Training of Pilots The Authority holds pilot exams on an annual basis to assess candidates who have the necessary experience and skills to perform the job. In addition, pre-exam sessions have been held to inform prospective candidates of the necessary requirements. The Authority also promotes a Familiarization Program, which is intended to supplement a candidate s coast wide knowledge, prior to writing the pilot exam. This program will allow a candidate to ride along with a senior pilot in an area of the coast the candidate may not be familiar with. The Authority and BCCP have also participated in marine hiring fairs with the intention of increasing the hiring pool of suitable candidates with regard to the marine pilotage profession. In order to ensure a highly qualified and skilled pilot workforce, the Authority places major emphasis upon selection and training of pilots. The pilot exam process consists of three parts. Firstly, a three hour written exam on general ship knowledge based on the 500 tonne Master Near Coastal exam. Next, a three and one-half hour exam paper on local knowledge and then a three and one-half hour oral exam session. Depending on a candidate s background, the apprenticeship for a coastal pilot takes place over a minimum period of six and one-half months through to a maximum of twenty-four months. During the official apprenticeship period the candidate will attend training courses for ship handling in France, ship simulation in Baltimore, USA and tethered tug training in Seattle, USA. These training facilities are state of the art and offer manned model handling and full mission bridge simulators. Additionally the candidates are trained in the use of the PPUs and related software. The Authority reviews these training facilities on a regular basis to ensure they are up to our training standards and the instruction level is effective and valid

20 At present, the cost for training each apprentice is approximately $135,000, which includes remuneration, travel and course fees and is borne entirely by the Authority. The increase to a twenty-four month apprenticeship period will increase the cost to $340,000 per pilot. The Authority expects to train and licence four coastal pilots during the 2013 plan year. The Authority has projected the coastal pilots demographics through the plan years and is anticipating starting apprentices in each of the plan years. The Authority is budgeting funds during each of the plan years to continue funding the Skills Enhancement Program for senior pilots. The intent of this program is to train senior pilots at approved training facilities to enhance their skills in ship handling using manned models. The Authority is also forecasting additional funds through the plan years to cover ongoing training for pilots on Integrated Bridge Systems (IBS) and Azipod propulsion systems. For the plan year 2013, the Authority is budgeting coastal training expenses of $450,000 and Fraser River pilot training of $30,000. Objectives, Strategies and Performance Measures On an annual basis, the Authority engages in strategic planning sessions involving the Board of Directors and management. The most recent session endorsed the key objectives and strategies which are summarized below. Strategic Goals for 2012 Strategic Goal Strategy Description Measurements #1.1 Create a culture of quality service Implementation of Pilot Assessment Program Standardized procedures #1.2 Continue to cultivate enterprise risk awareness Ensure mitigation plans in place and tested for Continue to integrate company-wide high risks #2.1 Maintain financial self-sufficiency Financial reserve of 5% of annual revenues #2.2 Maintain a culture of cost management Maintain overhead costs at 8.5% or less of revenues Manage the balance between financial sustainability and a competitive tariff structure Annual increase in operational costs maintained at CPI or less #2.3 Improve the Authority s competitive edge Review and monitor Review pilotage in

21 pilotage fees to retain competitive edge #3.1 Effective and efficient dispatch procedures Implement and integrate an ISO system #3.2 Effective and efficient launch operations Implement and integrate an ISO system #4.1 Create a culture of sustainability Communicate sustainability policy #5.1 Primary source for marine-related Implement information improvements to the computer database to improve efficiency of information flow to stakeholders #5.2 Raise the profile of the Authority in the marine industry and coastal communities Management to take on leadership roles within the marine community remote ports to ensure a cost effective service Tracking of delays Computerized maintenance system Implement practices and procedures Utilize database and website to provide marine related information to users required to make informed decisions on pilotage Continue Community Outreach program Measurement of 2011 Strategic Goals The Authority measures its strategic goals on an annual basis. Strategic Goal #1.1 - Create a culture of quality service Strategy Description Measurement (a) Implementation of Pilot Assessment Program Assessments are now being carried out for all pilots with up to three years of service A course to train ten volunteer pilots in peer assessment was completed during the year 1.1(b) Standardized procedures to improve the predictability of pilotage services Port working committees in place at PMV, Nanaimo and Prince Rupert Terms of reference and scope have been agreed to Tug bollard pull requirements and costing commenced for Delta Port (PMV) Strategic Goal #1.2 Continue to cultivate enterprise risk awareness Strategy Description Measurement (a) Ensure that mitigation plans for all risks designated as HIGH are completed Scenario exercise for occupational health and safety completed with report and recommendations Scenario exercise for pilot liability completed along with report and recommendations

22 Outcomes incorporated into risk register where appropriate 1.2(b) Continue to integrate the results of risk assessments departmentally and company -wide ERM intranet site and address accessible to all employees ERM included as a permanent agenda item for all staff meetings Strategic Goal #2.1 Maintain the Authority s financial self-sufficiency Strategy Description Measurement (a) Ensure that the Authority maintains a financial reserve of not less than 5% of annual revenues Financial reserve of 8% in place at December 31, 2011 Strategic Goal #2.2 Maintain the culture of cost management throughout the Authority Strategy Description Measurement (a) Maintain the Authority s overhead cost at 8.5% or less of annual revenues Actual overhead cost of 7.7% in place at December 31, (b) Maintain the Authority s annual increase in operational costs at or below the consumer price index (CPI) for Canada Actual increase for launch operations was 7.4% compared to a CPI target of 2.9% was negatively impacted by launch moorage lease renewals Strategic Goal #2.3 Improve the Authority s competitive edge Strategy Description Measurement (a) Review pilotage fees for comparable West Coast ports and make recommendations to retain competitive edge Cost comparison resulted in a Board motion to freeze fuel charges and discontinue PPU charge as of May 1, 2011 Strategic Goal #3.1 Ensure that the Authority s dispatch procedures are effective and efficient Strategy Description Measurement (a) Implement and integrate an ISO system ISO consultant selected for dispatch by December 31, (b) Tracking of job delays Computer system modified and delay module tested for 2012 implementation Strategic Goal #3.2 Ensure that the Authority s launch operations are effective and efficient Strategy Description Measurement (a) Implement and integrate an ISO system ISO consultant selected

23 3.2(b) for launch operations by December 31, 2014 Implement computerized maintenance system for pilot launches Computer system identified and initial data input into system Strategic Goal #3.3 Enhance the overall productivity of the Authority through innovation, training and investment in technology Strategy Description Measurement (a) 3.3(b) Formalize the training program for apprentice and senior pilots Implement a standardized training program for all staff Apprentice training courses have been moved to a new facility in France Syllabus from training facility in France received and under review by Pilot Training and Exam Committee (PTEC) Not completed, in progress Strategic Goal #4.1 Create a culture of sustainability throughout the Authority Strategy Description Measurement (a) Communicate the sustainability policy Deferred to 2012 throughout the Authority 4.1(b) Communicate and implement the sustainability practices and procedures specifically related to our stakeholders and the environment in which we operate Deferred to 2012 Strategic Goal #5.1 To become a primary source for marine-related information within our area of jurisdiction Strategy Description Measurement (a) 5.1(b) Begin the process to implement stage II of the computer database in order to improve the efficiency of the information flow to our clients and stakeholders Utilize the Authority s database and website to provide industry with the marine-related information they require to make informed decisions on pilotage Internet ordering of pilotage services developed and tested for 2012 implementation Electronic source cards deferred to 2012 Coastal tide windows (calculates vessel arrival and departure times based on tides) program put onto website Traffic page visits being tracked monthly Strategic Goal #5.2 To raise the profile of the Authority in the marine industry and coastal communities Strategy Description Measurement (a) Management to take on leadership roles Management regularly participated on seven

24 5.2(b) within the marine community at every opportunity Continue the Community Outreach Program marine community committees and organizations Management met with 20% of its customer base Job fairs attended by management in conjunction with BCCP The Authority met with the ports in our jurisdiction Operating Budget 2013 Commentary The 2013 Budget is based upon a tariff revision comprising of: a 2.9% increase in the unit and hourly rates effective on April 1, 2013; a 2.5% increase for travel rates effective April 1, 2013; a 2.5% increase for launch rates effective April 1, 2013; cancellation of the launch replacement and PPU fees. The highlights of the 2013 budget are as follows: 1. The Authority is forecasting a small loss of $600,000 based upon 11,000 coastal and 1,050 River trips. This loss is mainly attributable to the proposed helicopter boarding expenditure of $1.0 million which is discussed in highlight The launch replacement program was fully funded in the third quarter of 2012 so the 2013 budget eliminates the launch replacement charge. Based on the average invoice issued by the Authority this is a reduction to industry of 5%. 3. From a traffic standpoint, the Authority has focused on commodity sectors and their trends. 4. BCCP fees will increase by 4% during the plan year as per the service agreement in place. 5. For the Authority s employee crewed launches, wages will increase by 2.5% as per the labour contracts in place. Launch revenues have been increased by a similar percentage which is very close to current CPI rates. 6. Travel expenses are forecast to increase by 2.5% in line with current CPI rates. 7. A tariff charge for fuel at Pine Island has been included. This will match revenues with costs as the contract provider at this station currently charges the Authority a fuel surcharge per job

25 8. The BCCP payout ratio (BCCP cost divided by pilotage revenue) is forecast at 88%. 9. The budget anticipates four coastal apprentice pilots starting in the 2012 plan year and being licenced during Additionally four more apprentices are budgeted to start in the fall of Training for senior pilots totals $450, The Authority has budgeted $1.0 million (included in operating projects expense) to fund a helicopter boarding operation during This operation is intended to determine the feasibility of boarding pilots by helicopter aboard LNG and tanker ships which are planning to transit Douglas channel, in and out of Kitimat. This expenditure is contingent on future discussions and analysis. 12. The Authority has budgeted for $150,000 for operating projects. This expense account is intended to cover any special projects and initiatives that will require funding in the budget year. 13. Wage increases for the Authority s unionized employees, dispatchers and office, are shown as 2.5% which reflects current labour agreements. 14. All other costs, such as travel and general administration are forecast at a 2.5% annual increase to account for inflation. 15. The Authority has included a new expense fee with Transport Canada regulatory services with regard to the filing of tariffs and regulations. This new fee of $110,000 is included in the 2013 Budget under administrative expenses

26 Capital Budget 2013 Commentary PACIFIC PILOTAGE AUTHORITY The Authority s threshold for capitalization is $10,000 per expenditure. The capital expenditures for the budget year of 2013 total $730,000. Buildings and Floats The Authority is budgeting $50,000 for the upgrade of the Prince Rupert floats. This includes the renovation of the workshop currently located on the floats. Pilot Launches, Engines and Gear Sets The Authority is budgeting $200,000 for an overhaul of the Pacific Scout s engines. This vessel is due for an engine overhaul based on the operating hours logged to date. Communication and Other The Authority has budgeted $15,000 for furniture and office equipment. Computers and Software The budget includes $250,000 for training video software. This software is intended to be used by coastal pilots who wish to refresh their knowledge of a certain port. This expenditure is contingent on future discussions and analysis. A further enhancement of the electronic data interchange with pilots is planned for 2013 while enhanced electronic delivery of invoices and source cards to customers is deferred to The budget includes funds to replace one-third of the PPUs used by the pilots. As these machines are approaching the end of their lifespan the oldest machines will be replaced in The following years have budgeted for the other two-thirds of machines. This strategy will ensure an orderly and planned replacement program based on machine age. The budget includes $50,000 for launch fleet management software. This software will track repair issues, operating hours, repair maintenance cycles, etc. Leasehold Improvements The Authority is budgeting $10,000 for minor office renovations

27 Statement of Operations For the Years Ended December 31 (000's) ACTUAL FORECAST PLAN PLAN PLAN PLAN PLAN INCOME Coastal pilotage $46,212 $44,420 $47,170 $49,060 $52,240 $54,330 $56,340 River pilotage 2,425 $2,400 2,560 2,620 2,690 2,760 2,820 Travel 6,683 6,350 6,470 6,630 6,940 7,110 7,360 Launch 8,694 8,640 8,570 8,780 9,200 9,430 9,770 Launch replacement fee 1,486 1, Portable pilotage unit fee Interest and other TOTAL INCOME 65,797 62,940 64,890 67,210 71,190 73,750 76,410 OPERATING EXPENSES BCCP contract 39,748 39,700 41,490 43,150 45,950 47,790 49,560 BCCP apprentice wages and training BCCP senior pilot training BCCP PPU software and support Operating projects , River wages, benefits and other 2,188 2,260 2,300 2,360 2,420 2,490 2,570 Transportation and travel 5,181 5,070 5,130 5,230 5,450 5,560 5,760 Launch wages, operating and repairs 7,917 7,620 7,990 8,150 8,310 8,480 8,650 Launch bank loan interest Launch and PPU amortization TOTAL OPERATING EXPENSES 56,778 56,930 60,180 61,230 64,470 66,660 68,880 ADMINISTRATIVE EXPENSES Salaries and benefits 1,805 1,720 1,800 1,850 1,900 1,960 2,020 Dispatch salaries and benefits 1,522 1,510 1,560 1,600 1,640 1,690 1,740 Office rental, accom. and supplies Travel, training and miscellaneous Telephone and communications Board meetings and travel Legal, consulting and other Transport Canada service fee Computer Computer and equipment amortization TOTAL ADMINISTRATIVE 4,970 4,990 5,310 5,400 5,550 5,710 5,870 TOTAL EXPENSES 61,748 61,920 65,490 66,630 70,020 72,370 74,750 NET INCOME (LOSS) FOR YEAR $4,049 $1,020 ($600) $580 $1,170 $1,380 $1,660 ADJUSTED NET INCOME (LOSS) $2,514 $0 ($600) $580 $1,170 $1,380 $1,660 (Launch Replacement and Portable Pilotage Unit Revenues deducted) The 2013 net loss is mainly attributable to the proposed helicopter boarding expenditure of $1.0 million. Further details are reflected in the Operating Budget 2013 Commentary

28 Balance Sheet For the Years Ended December 31 (000's) ACTUAL FORECAST PLAN PLAN PLAN PLAN PLAN ASSETS: CURRENT ASSETS Cash and cash equivalents $6,113 $5,878 $5,428 $6,708 $7,678 $8,868 $11,268 Accounts receivable 5,975 5,600 5,800 5,800 5,800 5,900 6,000 Prepaid expenses TOTAL CURRENT ASSETS 12,428 11,778 11,528 12,808 13,778 15,068 17,568 LONG TERM ASSETS Long term investments 5,248 6,250 6,250 6,250 7,250 8,250 8,250 FIXED ASSETS Buildings and floats Pilot boats 12,759 13,232 13,432 13,432 13,432 13,432 13,432 Engines and gears Communication and other Computers and software 2,031 2,072 2,527 2,882 3,087 3,187 3,407 Leasehold improvements TOTAL CAPITAL COST 15,555 16,507 17,237 17,617 17,897 18,067 18,307 Accumulated amortization 4,778 5,828 6,878 7,928 8,978 10,028 11,078 TOTAL FIXED ASSETS 10,777 10,679 10,359 9,689 8,919 8,039 7,229 TOTAL ASSETS $28,453 $28,707 $28,137 $28,747 $29,947 $31,357 $33,047 LIABILITIES: CURRENT LIABILITIES Accounts payable and accrued liabilities $6,740 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 Bank indebtedness TOTAL CURRENT LIABILITIES 6,740 6,000 6,000 6,000 6,000 6,000 6,000 LONG TERM LIABILITIES Employee severance benefits ,012 TOTAL LONG TERM LIABILITIES ,012 EQUITY OF CANADA Retained earnings 16,776 20,825 21,845 21,245 21,825 22,995 24,375 Net income (loss) for year 4,049 1,020 (600) 580 1,170 1,380 1,660 TOTAL EQUITY 20,825 21,845 21,245 21,825 22,995 24,375 26,035 TOTAL LIABILITIES AND EQUITY $28,453 $28,707 $28,137 $28,747 $29,947 $31,357 $33,

29 Statement of Cash Flows PACIFIC PILOTAGE AUTHORITY For the Years Ended December 31 (000's) ACTUAL FORECAST PLAN PLAN PLAN PLAN PLAN OPERATING ACTIVITIES: Cash receipts from customers $65,408 $63,205 $64,570 $67,090 $71,070 $73,530 $76,190 Cash paid to employees and suppliers (59,973) (61,338) (64,210) (65,350) (68,710) (71,040) (73,420) Other income received Interest paid (138) Employee severance payments (157) (258) (200) (200) (230) (250) (250) Cash flows provided by operating activities 5,338 1, ,660 2,250 2,360 2,640 INVESTING ACTIVITIES: Purchase of investments (7,924) (7,002) (6,000) (6,000) (7,000) (7,000) (6,000) Proceeds on disposal of investments 5,735 6,000 6,000 6,000 6,000 6,000 6,000 Acquisition of property and equipment (209) (952) (730) (380) (280) (170) (240) Cash flows from (used in) investing activities (2,398) (1,954) (730) (380) (1,280) (1,170) (240) FINANCING ACTIVITIES: Repayment of bank loan (3,632) Bank indebtedness Cash flows from (used in) financing activities (3,632) Increase (decrease) in cash and cash equivalents (692) (235) (450) 1, ,190 2,400 Cash and cash equivalents, beginning of year 6,805 6,113 5,878 5,428 6,708 7,678 8,868 Cash and cash equivalents, end of year $6,113 $5,878 $5,428 $6,708 $7,678 $8,868 $11,

30 Statement of Capital Expenditures For the Years Ended December 31 (000's) FO RECAST PLAN PLAN PLAN PLAN PLAN BUILDINGS AND FLO ATS Victoria floats and office building Prince rupert floats 50 Web cams for 3 launch stations 60 PILO T BO ATS Pacific Pathfinder - radar 23 Pacific Pathfinder - engine overhaul 450 Pacific Scout - engine overhaul 200 ENGINES Spare engines and gears for PPA fleet 206 CO MMUNICATIO N AND O THER Furniture and office equipment CO MPUTERS AND SO FTWARE BCCP training video software Dispatch and billing Software Portable Pilotage Units Launch fleet management software 50 LEASEHO LD IMPRO VEMENTS Vancouver TO TAL CAPITAL EXPENDITURES $952 $730 $380 $280 $170 $