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TRANSCRIPT
Province of Alberta Fort McMurray
Investor Meetings
September, 2017
Catherine Rothrock Chief Economist & Executive Director,
Treasury Board and Finance
and
Tim Pierce Director Financing
Capital Markets, Treasury Board and Finance
Road to Recovery
• Nearly all sectors of Alberta economy rebounding
• Return to growth in 2017
– Exports, reconstruction in Fort McMurray, public infrastructure
• A moderate recovery
– Lingering effects of downturn on corporate profits and household
incomes
– Full recovery in real GDP expected in 2019
2
Global growth picking up
3
Annual Real GDP Growth
Sources: International Monetary Fund and Alberta Treasury Board and Finance calculations
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2014 2015 2016 2017f 2018f
(%) Emerging Markets
Advanced Economies
Global Real GDP Growth
Interest rates rising slowly
4
Central Bank policy target rates, monthly
Source: Haver Analytics
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
(%)
US Canada
Households driving Canadian growth…
5
Contributions to quarter-over-quarter annualized growth
in Canadian Real GDP by Expenditure
Source: Statistics Canada
-8
-6
-4
-2
0
2
4
6
8
10
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016 2017
(Percentage Points) Household Consumption GovernmentInventories Residential StructuresNon-Residential Investment Net ExportsReal GDP
…and energy sector no longer a drag
6
Contributions to quarter-over-quarter annualized growth
in Canadian Real GDP by Industry
Source: Statistics Canada
-0.6-0.4-0.20.00.20.40.60.81.01.21.4
(%) Non-energy Other EnergySupport activities for Mining and OAG Non-conventionalConventional
Energy
Will recent strength in Canadian dollar
continue?
7
Canadian and US exchange rate
Source: US Federal Reserve Bank, Bank of Canada
65
70
75
80
85
90
95
100
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
(US cents/CA$) Canadian dollar exchange rate
July 15th, 2015
Bank of Canada cuts
overnight rate to 0.50%
January 21st, 2015
Bank of Canada cuts overnight
rate to 0.75%
Federal Reserve rate increases December 16th, 2015 0.25-0.50% December 14th, 2016 0.50-0.75% March 15th, 2017 0.75-1.00% June 14th, 2017 1.00-1.25%
Bank of Canada rate increases July 12th, 2017 0.50-0.75%
September 6th, 2017 0.75-1.00%
Muted outlook for oil prices
8
West Texas Intermediate
Sources: Alberta Energy, Alberta Treasury Board and Finance, Q1 2017
0
20
40
60
80
100
120
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18f Jan-19f Jan-20f
(US$/bbl)
Broad-based recovery in activity
9
Contribution to year-over-year change in the Alberta
Activity Index
Source: Statistics Canada and Alberta Treasury Board and Finance
-8
-6
-4
-2
0
2
4
6
8
10
12
(Percentage Points)
EnergyGeneral Business ActivityHousehold ActivityLabour MarketAlberta Activity Index
Energy drives exports
10
Year-over-year growth in Alberta exports
Source: Statistics Canada
-60
-40
-20
0
20
40
60
80
100
(%) Total Exports
Energy Exports
Exports ex. Energy
Solid drilling activity
050
100150200250300350400450500
(Rigs Drilling)
Range 2010-2014201520162017
11
Number of Alberta active
rigs drilling
Source: Canadian Association of Oilwell Drilling
Contractors (CAODC)
Total number of metres
drilled
Source: Alberta Energy Regulator
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
(Metres) Range 2010-2014201520162017
Energy investment stabilizing, production
continue to grow
12
Alberta Energy Investment and Oil Production
Source: Statistics Canada and Alberta Treasury Board and Finance; e-estimate, f-forecast
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0
10
20
30
40
50
60
70
(Mbpd) ($billion) Oil Sands Investment (Left)
Conventional Oil and Gas Investment (Left)
Production (Right)
Private sector spending drags construction
activity
13
Non-residential building construction investment
Sources: Statistics Canada
-20
-15
-10
-5
0
5
10
15
20
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016 2017
(y/y % change) Industrial buildings
Commercial buildings
Institutional & governmental buildings
Growth in non-residential investment
Estimated wildfire impact on Alberta
indicators
14
Source: Alberta Treasury Board and Finance
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Real GDPGrowth
EmploymentGrowth
Real ExportGrowth
(%)
2016 2017 2018
Fort McMurray rebuilding supports
housing activity
15
Fort McMurray housing starts as % of Alberta
0
2
4
6
8
10
12
14
0
50
100
150
200
250
300
350
(%) (units)
Housing Starts (Left)
% of Provincial Total (Right)
Natural increases and immigration drive
population gains
16
Change in the Alberta population by component
Sources: Statistics Canada and Alberta Treasury Board and Finance Budget 2017, f-forecast
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
-20
0
20
40
60
80
100
120
140
(%) (Thousands) Natural Increase (Left) Net International (Left)
Net Interprovincial (Left) Population Growth (Right)
Labour market re-balancing
17
Composition of employment change since July 2016 low*
Sources: Statistics Canada
*Employment change between July 2016 and Aug 2017
-20
0
20
40
60
(Thousands)
Gradual recovery in labour market
18
Alberta Labour Market Indicators
Source: Statistics Canada and Alberta Treasury Board & Finance, f-forecast
0
1
2
3
4
5
6
7
8
9
2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f
1,500
1,700
1,900
2,100
2,300
2,500
(%) (000s)
Employment (Left) Unemployment Rate (Right)
Service sector leads earnings recovery
19
Alberta average weekly earnings
Source: Statistics Canada
-6
-4
-2
0
2
4
6
8
10
Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17
(y/y % change) Total Goods sector
Service sector
Housing sector holding up
20
Annualized Alberta housing start & existing home sales*
Source: Canadian Real Estate Association, Canada Mortgage and Housing Corporation
*3-month moving average
20
25
30
35
40
45
50
55
60
65
Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17
(Thousands) Housing starts Existing home sales
Fiscal assumptions
Actual Q1 fiscal
Update Budget 2017
Fiscal Year (Apr- Mar 31) 2015-16 2016-17 2017-18 2017-18 2018-19 2019-20
WTI Oil (US$/bbl) 45 48 49 55 59 68
Light-Heavy Differential
(US$/bbl) 13.40 13.93 12.20 16.00 18.00 18.60
Natural Gas (CDN$/GJ) 2.21 2.01 2.60 2.90 2.90 3.00
Exchange Rate (US/CDN$) 76.3 76.2 77.0 76.0 77.5 78.0
2016 Calendar year 2017 Calendar year 2018 Calendar year
Calendar year
Q1 fiscal
Update Budget
Q1 fiscal
Update Budget
Q1 fiscal
Update Budget
Real GDP Growth (%) -3.5 -2.8 3.1 2.6 2.3 2.2
Employment Growth (%) -1.6 -1.6 1.3 0.9 1.6 1.4
Unemployment Rate (%) 8.1 8.1 7.8 8.0 7.3 7.6
21
Source: Alberta Treasury Board & Finance
Financing requirements
Direct and Indirect
22
Borrowing Requirements
(1) Includes new and re-financing of maturing term debt. Includes amounts borrowed on behalf of
the Balancing Pool; $833 million in 2018-19; $699 million in 2019-20.
2017-18 Borrowing
($ billions) Agencies(1) Capital
Refinancing
& Fiscal
2017-18
Forecast 6.2 5.0 4.9
2018-19
Target 4.4 5.8 8.4
2019-20
Target 2.7 6.1 10.3
0
2
4
6
8
10
12
14
16
18
(Bill
ion
s)
Expected
GBP Issued
USD Issued
CAD Issued
Borrowing Platform
Increasing Global Access and Liquidity
23
Target issuance
60% -
70%
30% -
40%
Domestic
International
Domestic borrowing
• Maintain larger domestic benchmark sized
issues ($3-$5B)
• Monitor secondary market liquidity
• Infrequent domestic MTN issuance
Foreign borrowing
• Liquid US$ Global Issues
– SEC Registered, large US$ benchmarks
• US$ CP program launched
• Sterling and Euro Benchmarks in 2017-18
• MTN and structured issues in other
currencies, including under the new AUD
program as opportunities arise
Financial management
Maturity profile & liquidity(1)
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
(Bill
ion
s)
Issued by Alberta Current Benchmarks
24
(1) As of September 8, 2017. Excludes Money Market amounts.
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