#1Alberta Government Province of Alberta Investor Meetings September 2016 Lowell Epp, Assistant Deputy Minister, Treasury and Risk Management#2Canada Quick facts 10th largest economy in the world • Ranked 7th least risky country in the world(1) • • • • - - - - GDP of US$1.6 trillion in 2015 Major industries include natural resources and manufacturing Population of 36M; highest growth rate in G8 during last decade Moderate unemployment rate at 6.9% Federation; Federal Government, 10 Provinces and 3 Territories Provinces have significant autonomy Responsible for health care, primary and post-secondary education Considerable taxing powers, including personal income, corporate income, value added/sales, fuel and payroll taxes Provincial ownership of natural resources (1) Euromoney Country Risk score Alberta 2#3. Economic structure Alberta's (AB) economy at a glance AB's share of the national population is about 12% In 2014, AB contributed almost 20% to national GDP and 25% to exports • Between 2000 and 2014, the province experienced broad-based industry growth that outpaced the rest of Canada Share of nominal GDP by industry, 2015 Transportation and warehousing 5% Public administration 5% Health care and social assistance 6% Other 17% Mining, quarrying, and oil and gas extraction 18% Finance and Real estate 15% Construction 12% Professional, scientific and Trade technical 10% services 6% Manufacturing 7% From 2000-14, AB was the economic engine for Canada: Growing by about 60% Source: Statistics Canada Alberta 3#4Economic structure AB's oil reserves ranked 3rd in the world 2015 Global Oil Reserves Venezuela Saudi Arabia Canada Iran Iraq Kuwait UAE Russia Oil Sands 298 268 172 158 144 102 98 98 80 Libya 48 USA 38 0 50 100 150 200 250 300 Estimated Proved Reserves (Billions) AB's reserves are massive and open to private investment Source: Alberta Energy, International Energy Agency, Alberta Energy Regulator, OGJ Alberta#5Economic structure Outlook for oil prices WTI Oil Price (US$/bbl) 120 100 80 60 40 20 Alberta 2004 2005 2006 2007 2008 2009 WTI Oil Forecast for 2016-17F to be US$45/bbl Source: Alberta Energy, f-forecast 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f October 2015 Outlook Budget 2016 Outlook March 2014 Outlook August 2016 Outlook 5#6Economic structure Oil production growing despite price drop AB Oil Production and Western Canadian Select Heavy Oil Benchmark Price (US$/bbl) 100 80 60 40 20 20 0 2005 2006 -Western Canada Select (Left) -Alberta Oil Production (Right) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f (Q1) (Million bpd) 4.0 3.5 3.0 2.5 2.0 1.5 2017f (Q1) 2018f (B) 2019f (B) Despite the downturn, production continues to rise Sources: Alberta Energy and Statistics Canada, f-forecast, Q1-first quarter update, B-2016 Budget Alberta 6 1.0#7Economic structure Oil and gas investment to remain lower Alberta oil and gas investment ($Billion) 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 Conventional Oil Sands 2013 2014 Investment in oil has shifted towards maintenance Source: Statistics Canada, e-estimate, f-forecast, Q1-first quarter update, B-2016 Budget Alberta 2015e 2016f (Q1) 2017f (Q1) 2018f (B) 2019f (B) 7#8Economic structure Market access remains key Canadian & U.S. Crude Oil Pipelines and Proposals ENBRIDGE GATEWAY Proposed: +525,000 b/d KINDER MORGAN TRANS MOUNTAIN Existing: 300,000 b/d Proposed: +590,000 b/d TRANSCANADA KEYSTONE Existing: 591,000 b/d SPECTRA EXPRESS - PLATTE SYSTEM Existing (Express only): 280,000 b/d ENB SPEARHEAD SOUTH Existing: 193,000 b/d ENB FLANAGAN SOUTH Existing: 585,000 b/d ENB/ENTERPRISE SEAWAY Existing: 850,000 b/d TRANSCANADA GULF COAST EXTENSION Kitimat Edmonton Hardisty Burnaby Anacortes TRANSCANADA KEYSTONE XL Proposed: +830,000 b/d Cromer Clearbrook Sandpiper Superior nesota Guernsey St. Paul Line 6, 14 Westover Sarnia White Cliffs Pony Express Flanagan 6P Warren Chicago Lima Centurion Cushing Wood Patoka River Catlettsburg Pegasus Caplin Комел р El Paso. Slaughter. Midland Crane ⚫ Québec City Montréal Portland Existing: 700,000 b/d Proposed: +130,000 b/d Longhor Port Arthur Ho-Ho Houston Freeport ⚫New Orleans St. James Continue to work to improve market access Source: Canadian Association of Petroleum Producers Alberta ENBRIDGE MAINLINE Existing: 2.85 million b/d Proposed: +370,000 b/d TRANSCANADA ENERGY EAST Proposed: +1.1 million b/d Saint John ENBRIDGE LINE 9 Existing: 300,000 b/d ENBRIDGE SOUTHERN ACCESS Existing: 935,000 b/d Proposed: +265,000 b/d 8#9Economic structure Long-standing economic prosperity Nominal GDP per capita ($ Thousands) 100 90 80 70 60 50 40 30 20 10 0 Rest of Canada Range Rest of Canada Average -Alberta 1984 1987 Alberta 1990 1993 1996 1999 2002 AB has strong fundamentals with highest Nominal GDP per capita in Canada Sources: Statistics Canada, Alberta Treasury Board and Finance and TD Economics (July 6, 2016) 2005 2008 2011 2014 2017f 9#10Economic structure AB's economy is very capital intensive 2015 Investment by Province¹ AB QC ON 2 8 8 3/3 2 5 BC SK MB NL Maritimes $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 ($ billions) $1 out of every $3 spent on capital in Canada is invested in AB (1) Based on Public and Private Investment in Canada. Source: Statistics Canada. Alberta 10#11Economic structure AB's population expected to grow Change in the Alberta population by component 140 120 100 80 60 40 (Thousands) 3.5 3.0 2.5 2.0 1.5 (%) 1.0 0.5 0.0 -0.5 20 0 -20 2004 2005 2006 2007 Population Growth (Right) Population gains driven by natural increases and immigration Sources: Statistics Canada and Alberta Treasury Board and Finance, f-forecast, Q1-first quarter update, B-2016 Budget Alberta 11 2008 Natural Increase (Left) Net International (Left) Net Interprovincial (Left) 2009 2010 2011 2012 2013 2014 2015 2016f (Q1) 2017f (Q1) 2018f (B) 2019f (B)#12(%) 9 8 7 6 5 4 -1 -3NTOT N 2 1 0 -2 2000 2001 Economic structure Unemployment rate gradually eases Alberta Labour Market Indicators 2002 2003 2004 Unemployment Rate -Employment Growth -Labour Force* Growth T 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f (Q1) Weak labour market anticipated to improve moving forward Source: Statistics Canada and Alberta Treasury Board and Finance, f-forecast, Q1-first quarter update, B-2016 Budget Alberta 2017f (Q1) 2018f (B) 2019f (B) 12#13Q1 Update Key metrics The net fiscal impact of the Wood Buffalo wildfire is forecast at an estimated $500 million for 2016-17 Actuals Budget Q1 Forecast Budget Targets 2014-15 2015-16 2016-17 2016-17 2017-18 2018-19 Consolidated Revenue 49.5 42.5 41.4 42.1 45.0 49.6 Consolidated Expense 48.4 48.9 51.1 52.3 53.6 56.0 Risk Adjustment (0.7) (0.7) (1.5) (2.0) Consolidated Surplus/ (Deficit) 1.1 .1 (6.4) (10.4) (10.9) (10.1) (8.4) Alberta 13#14Q1 Update Assumptions¹ Actual Budget Q1 Forecast Budget 2016 Targets Fiscal Year (Apr- Mar 31) 2015-16 2016-17 2016-17 2017-18 2018-19 WTI Oil (US$/bbl) 45.00 42.00 45.00 54.00 64.00 Light-Heavy Differential 13.40 15.20 14.10 17.50 18.50 (US$/bbl) Natural Gas (CDN$/GJ) 2.21 2.40 1.90 2.80 3.00 Exchange Rate 76.3 73.5 77.0 75.5 77.5 (US cents/CDN$) Calendar year 2015E 2016B 2016F 2017T 2018T Real GDP Growth (%) -3.7 -1.4 -2.7 1.9 2.8 Employment Growth (%) 1.2 -1.7 -1.7 0.9 2.1 Unemployment Rate (%) 6.0 8.0 8.0 7.5 6.5 Population Growth (%) 1.8 1.2 1.5 1.0 1.3 (1) A Actual, B=Budget, T=Target, F= Q1 Forcast. Source: Statistics Canada, Alberta Energy, Alberta Treasury Board and Finance Alberta 14#15Q1 Update Wood Buffalo Regional Fire • • • • More than 88,000 residents evacuated, 1,500 residential and commercial structures destroyed, and hundreds more damaged Evacuation lasted May 3 to June 1st, but many services did not return until later in the month - Insurable losses estimated by the IBC (1) to be $3.6B, exceeding both the 2013 AB Floods and 1998 Ontario/Quebec ice storm Estimated 0.6% net impact on GDP in 2016 2016-17 forecast includes a net $500M fiscal impact of the wildfire - Disaster Recovery Program expense of $647M, partially offset by federal assistance of $452M - $300M in lower non-renewable resource, corporate and personal income tax revenues Likely at least 40M barrels of oil sands production deferred over 2 months (1) Insurance Bureau of Canada Alberta 15#16Revenue (billions) Fiscal management Revenue sources (1) $55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 2010-11A 2011-12A 2012-13A 2013-14A I Non-Renewable Resource Revenue IGOC Transfers 2014-15A Net Income from Gov Business Enterprises Other (1) A Actual, E= Estimate, T-Target. Alberta 2015-16A 2016-17E I Income and Other Taxes 2017-18T I Investment Income I Premiums, Fees and Licences 2018-19T . Non-Renewable Resource Revenue can be large, but variable Combined other sources provide stability and support growth 16#17Fiscal management Budget 2016 sensitivities 2016-17 (1) Net Impact 2016/17 Non-Renewable Resource Change (2016-17) Revenue $2.1F Land Other Sales $135 $132 Oil Price (WTI US$/bbl) -$1.00 -$130M Light/Heavy Oil Price Differential +$1.00 -$70M Natural Gas Price -10 Cents -$25M Natural Gas & Byproducts $362 (Cdn$/GJ) Exchange Rate +1 Cent -$85M (US¢/Cdn$) Crude Oil $395 Bitumen $1,084 Interest Rates +1% -$230M Primary -1% -$170M Household Income (1) Based on current price and rate assumptions, show effect for a full 12-month period and can vary significantly at different price and rate levels. Energy price sensitivities do not include potential impact of price changes on revenue from land sales. Alberta 17#18Fiscal management AB's fiscal capacity AB's Tax Advantage estimated at $7.5B(1) SK BC NL ON NB MB PE NS $7.5 QC $0 $4 $8 (billions of dollars) Sales Tax $8.9 $11.3 $12.1 $16.1 $12 $16 $16.4 $17.6 $18.5 $19.4 $20 ■Other Taxes / Carbon Charges (1) Reflects total additional provincial tax and carbon charges that individuals and businesses would pay if Alberta had the same tax system and carbon charges as other provinces (Mar 24/16). Includes personal income, corporate income, sales, fuel, tobacco, payroll, liquor, land transfer and other minor taxes, as well as health premiums, liquor markups and full implementation of announced provincial carbon charge. Alberta 18#19Fiscal management Low debt burden Debt to GDP 60% 50% 40% 30% 20% 18% 10% 8% 6% 36% 40% 52% 35% 34% 41% 17% 0% BC AB SK MB ON QC NB NS PE NL (1) Debt to GDP calculated by Alberta Treasury Board and Finance. Ratios are based upon available public accounts; include public debt and P3 liabilities, but exclude unfunded pension liability and debt of government business enterprises. (2) AB, BC, SK and NS ratios based on fiscal year 2015-2016. MB, ON, QC, NB, PE and NL ratios are based on 2014-2015 fiscal year. Alberta 19#20Fiscal management Climate Leadership Plan (CLP) • A provincial carbon levy to encourage reduced carbon emissions and to reinvest to diversify the energy industry $9.6B in gross revenues over 5 years - $6.2B to be invested in renewable energy, green infrastructure (such as public transit) and energy efficiency initiatives - $3.4B Climate Leadership Adjustment Rebate in the forms of consumer rebates, small business tax reduction, energy transition funding Legislated limit on oil sands emissions Phase out of coal-fired emissions by 2030 Alberta 20 20#21Fiscal management Capital Plan . ($ billions) $8 $6 $4 $2 $0 IIIII 2016-17E 2017-18T $34.8B over 5 yrs ■ Core 2018-19T 2019-20P 2020-21P ■ CLP Additional $4.4B will be self-financed by Alberta Health Services, post secondary institutions and school boards over 5 yrs (1) E= Estimate, T=Target, P= Projected. Alberta 21#22• • Financial management Heritage Fund & Endowments Book Value ($ billions) $16 $12 $8 $4 $0 LLL 2015-16 ■ Heritage Fund 2016-17 Endowments Heritage Fund assets remain untouched 2017-18 ■Contingency Contingency Account exhausted in late 2016-17 Alberta 22 22#23Financial management Maturity profile & liquidity (1) Billions $6 $5 $4 $3 $2 Issued by Provincial Corporations ■Issued by Alberta 23 23 $1 $0 2016/17 2018/19 2020/21 2022/23 2024/25 2026/27 2028/29 2030/31 (1) As of Aug 26, 2016 Well spread out maturity profile with low reinvestment risk Alberta 2032/33 2034/35 2036/37 2038/39 2040/41 2042/43 2044/45 2046/47#24Financial management Borrowing program Borrowing by Purpose 2016-17 Total Borrowing Requirements ($ billions per Q1 Update) 2016-17 Estimate $15.8 $3.7 $5.0 2017-18 Target $19.8 2018-19 Target $16.6 $7.1 ■Capital Plan ■Fiscal Plan Provincial Corporations Alberta 24#25Financial management Borrowing platform Maintain strength of borrowing platform in domestic market and build on strength in international markets Domestic market • Ensure liquidity - Maintain larger domestic benchmark sized issues ($3-$4B) - - Infrequent domestic MTN issuance Monitor secondary market liquidity • Control domestic supply - Target issuance of 30%-40% or more to international markets More frequent large US$ benchmarks - Opportunistic multi-currency issues. Alberta 25#26Financial management Borrowing platform continued Foreign currency borrowing US$ Global Issues in 3, 5, 7, and 10 years - - - Expect more frequent issuance as SEC Registered program comes online in late 2016. US$ CP program online with SEC Registration Continued Euro placements in longer terms with potential for larger benchmark issues • MTN and structured issues in other currencies, including under the new AUD program as opportunities arise Successful international issuances support growth in international borrowing program Alberta 26#27Summary • • • • • Strong economic base Demonstrated resiliency to past commodity price shocks Continued high level of fiscal capacity Strong bond ratings Multi-currency, multi-market borrowing platforms Strong secondary liquidity Alberta 27#28Appendix ATB Financial (1) · • • Provincially owned corporation created in 1938 - Mandate is to provide Albertans with access to financial services and enhance competition in the AB financial services marketplace – Predominantly operates in AB and deposits guaranteed by the province. Board is operationally independent of government - Appointed by the Lieutenant Governor in Council Oversight by Alberta Superintendent of Financial Institutions, Investment Industry Regulatory Organization of Canada, Alberta Securities Commission and Auditor General Total Assets of $46.8B and Total Liabilities of $43.6B - - Total Risk Weighted Assets of $33.9B - Liabilities include $31B in deposits and $5.5B in collateralized borrowings (1) As of March 31,2016 Alberta 28#29Appendix Well funded public sector pensions Public Sector Pensions Fiscal Year Ending Mar 31 Net Pension Assets (billions) Aggregate Funded Status Liability for Province's employer share (billions) Total Government Unfunded Pension Liabilities (billions) 2012 2013 2014 2015 2016 $38.5 $44.4 $52.2 $60.1 $67.1 78.4% 81.5% 87.1% 93.8% $1.5 $1.8 $1.8 $1.7 99.4% $1.5 $10.6 $10.9 $11.6 $11.2 $10.6 $8.1B of total unfunded liability from a settlement with teachers to deal with an issue stemming from 1992 pension reform Unfunded Pension Liability's absolute value has remained fairly static, but Aggregate Funded Status has greatly improved Alberta 29 29#30Information and contact Websites Province of Alberta Alberta Treasury Board and Finance Budget 2016 Economy and Statistics Debt Information Contact Steve Thompson Executive Director, Capital Markets Province of Alberta 8th Floor, 9820 107 St NW Edmonton, AB T5K 1E7 780-644-5011 alberta.ca finance.alberta.ca budget.alberta.ca finance.alberta.ca/aboutalberta finance.alberta.ca/business/borrowing Disclosure Statement This presentation was compiled by the Alberta Department of Treasury Board and Finance. The information in this presentation is for general information purposes only and does not constitute an offer to sell or a solicitation of offers to purchase securities. Certain forward-looking information or forward-looking statements have been included in this presentation for such general information purposes. These statements are based on the Province of Alberta's current estimates or projections which the Province believes are reasonable. Such statements are not guarantees of future performance, and accordingly, you should not place undue reliance on them. Forward-looking information or statements involve known and unknown risks, uncertainties and other factors which could cause the state of the Province's economy to differ materially from the forecasts and economic outlook expressed or implied by any forward-looking information or statements. Forward-looking information or statements speak only as of the date they are made. Alberta undertakes no obligation to update any forward- looking information or statements to reflect new information, future events or otherwise, except as may be required under applicable law. While the information in this presentation, when posted or released, was believed to be reliable as of its date, no warranty is made as to the accuracy or completeness of this document or the information it contains. Alberta 30