#1INVESTOR PRESENTATION Wallonie service public SPW JUNE 2020#2Table of contents 1 RÉGION WALLONNE AT A GLANCE 2 FINANCIAL SNAPSHOT 3 FUNDING MANAGEMENT 4 BOND ISSUANCES 3 9 16 20 Wallonie service public SPW 2#31. REGION WALLONNE AT A GLANCE#4Région wallonne in a nutshell Population and territory 3,633,795 inhabitants Economy and infrastructures € 94,438m GDP (€ 27,710 per inhab) 3.0 2.5 2.0 1.5 10 1.0 16,901 km² (55.1% of Belgian territory) French, German 741km of waterways GDP growth rate evolution 2015-2020F A 81,207km of roads 2 airports (Charleroi, Liège) 41 years median age Région wallonne in Europe Amsterdam London 1,605km of rail network 0.5 0.0 Paris Luxembourg Frankfurt 2015 2016 2017 2018 2019 2020 Wallonia (Source: IWEPS) ⚫Belgium Euro Zone Wallonie service public SPW 4#5Région wallonne - Commercial dynamics ☐ ☐ ப Total exports in 2018 (€48Mds) Others 19% Canada 1% Poland 2% Luxembourg France 29% 36% Export dynamics by economic sector in 2018 3% Spain 4% 15% 10% 7% 6% Italy 5% UK 6% Germany 15% Netherlands 7% USA 8% Sources ICN, IWEPS Chemicals & pharmaceutical products Metals Mechanical, electrical and electronic products Plastic & rubber 26% Wallonie service public SPW Other Food and beverage Source Walloon region More than 50% of the region's exports are generated from 3 countries: France, Germany and the US. Exports to the US have spiked by +53.1% in 2018 as a result of strong customer spending, notably in pharmaceuticals (+73.9%) and Food & Beverages (+47.9%), representing 90% of the region's US shipments. Notice the concept of export covers only international trade and therefore does not cover trade between Belgian regions. In this case, we speak of inter-regional flows rather than exports. 5#61 2 Région wallonne - Key political acts The Sixth State Reform (2014) The Sixth State Reform enhances the fiscal autonomy of the federated entities and transfers the majority of powers from the federal level to the regional / community levels. Increased fiscal autonomy: regional personal income tax (IPP regional) and fiscal expenses (ex: mortgage credits). List of new transferred powers: family benefits, healthcare, labour market, road safety, tenancy regulation, driving education, technical inspection, houses of justice ... Special Finance Act (1989, 1993, 2014) Article 49 of the Special Finance Act organizes and supervises the delegation of debt management in the federated entities. For example, the role of the CSF (Conseil Supérieur des Finances) is to evaluate the financial plans of the federated entities, to formulate recommendations and in some cases to decide to cap the entity's lending capacity. Article 54 §2 of the Special Finance Act specifies that in case of an insufficient payment or in the event of delay in the payment of the amounts due by the federal state, the Communities and the Regions can contract a loan guaranteed by the Federal State and interest costs are taken on by the Federal State. Wallonie service public SPW 6#7Région wallonne - Scope of competencies Equipment and Transport Natural Resources Local authorities Quality of life Mobility - Waterways - Sport Facilities - Heritage Environment - Water - Conservation of Nature - Agriculture Municipalities Buildings - Provinces Public Center for Social Assistance School - Town and Country Planning - Housing - Integration of Disabled People - Social Action Health - Energy - Rural Renovation - Waste Economic activities Economy - Employment - Professional Training - Foreign Trade - International Relationships - Development Cooperation - Research - Technologies - Tourism - Taxation - EU Structural Funds Wallonie service public SPW 7#8Région wallonne - Institutions and public service entities Parliament of Wallonia The legislative assembly of Région wallonne is composed of 75 members who are directly elected by universal suffrage for a five years term. They sit in plenary sessions and in committees with the aim to: ☐ Adopt decrees (regional laws); ☐ Express positions (resolutions) on social issues; ☐ Exercise supervision over the Government (through questions). Government of Wallonia The Government is led by the Minister-President, currently supported by 7 ministers, each in charge of several domains of activity. In order to execute its missions, the Government delegates the operational activities to: SPW (Service Public de Wallonie) the regional administration UAP (Unités d'Administration Publiques wallonne) - a number of Public Administration Units Wallonia Administration (SPW - UAP) SOFICO Société Publiqu De Gestion de ta SPW General Secretary SPW Budget, Logistic & TIC SPW Tax system SPW Mobility & Infrastructures TEC SPW Agriculture, Natural Resources & Environment La société wallonne des eaux SPAQUE ISSEP SPW Territory, Housing, Heritage & Energy AAA Fonds du Logement CWAPE Wanmission Socie des familles nombreuses de Wallonie pour l'Energie SOCIOED Loredanede social wallonne du logement SPW Interior & Social Action AVIQ Agence pour une Vie de Qualité Familes Santé Handicap CRAC SPW Economy, Employment & Research IFAPME Sowalfin LE FOREM ► Logo's of Public Administration Units are placed in their areas of competence Wallonie service public SPW 8#92. FINANCIAL SNAPSHOT 4.61 7.LL 1967#10Focus on Région wallonne's expenditures Région wallonne expenditures evolution (in €m) 15 791 16 041 16 330 16 914 16 884 13 589 8 831 9 448 2017 2018 2019 2020 2021 2022 2023 2024 Reported Budget Forecasts The 2020 budget is based on the macroeconomic forecasts of the Federal Planning Bureau of November 2019: growth rate of 1.1% (GDP) and inflation rate of 1.4%. ☐ Numbers for 2021 up until 2024 were forecasted by the Walloon Government in 2019. 2019 (realized) 2020 (initial) Expenditures breakdown by source (2019-2020) 3% 1% 0.4% 4% 73% 5% 5% 8% 10% ■ Health 33% I ■ Employment & Training ■Local authorities & social actions ■Mobility & infrastructure 13% 17% ■Debt amortization & costs 3% 2% 1.8% 71% 4% 5% 33% 6% 8% 8% ■Parliament, Government services, Admin ■Land use planning, housing, heritage & energy ■Economy & Research Agriculture, natural resources & environment. ■New investment plan ■Others Wallonie service public SPW ☐ In order to start reducing its recurrent deficit, Région wallonne has launched a unique exercise to assess and justify all current / new budget expenditures. This exercise, called zero based budgeting, started in January 2020 and is expected to produce incremental results, starting mid 2021 (see definition slide 14). 17% 13% Remark: since 2019, regional expenses & revenues are impacted by the implementation of the 6th State Reform, empowering the Regions for part of Belgian Social Security budget (Health & Family Allowances). 10 10#11Focus on Région wallonne's revenues Région wallonne revenues evolution (in €m) Split of revenues by sources (2019) Proceeds from Borrowings 7% Non-tax Revenue 6% 13 196 13 741 13 835 14 155 14 564 14 715 7 859 8 739 2017 2018 2019 2020 2021 2022 2023 2024 Reported Budget Forecasts Regional Tax Revenue 21% Transferred Revenue from Federal State 66% The 2020 budget is based on the macroeconomic forecasts of the Federal Planning Bureau of November 2019: GDP growth rate of 1.1% and inflation rate of 1.4%. □ For revenues 2020 and forecasts 2021 up until 2024, same remark as for expenditures. The Sixth State reform has provided greater tax autonomy to Région wallonne. Indeed, the reform grants the regional government increased flexibility to modify the rates applied to a portion of personal income tax, allowing them to manage, within certain limits, the taxation levels. The flexibility of the new institutional structure gives the opportunity to the Region to mitigate any budget shortfall by adjusting the level of taxes. Wallonie service public SPW 11#12Zero based budgeting What is the zero based budgeting exercise ? Expenditures will be 100% screened: 15 billion expenditures to be analyzed within the next 18-24 months. All tax cuts will be screened: 1.8 billion tax deductions Every service within the Region (SPW - UAP) will be involved in the exercise. Main goals with zero based budgeting ☐ Improve the quality of public expenditures. Check every expenditure in terms of timely spending. Devote more resources to sustainable investments Break away from the method of budgeting with credits based on previous year's spending. Be in a position to make choices and improve the budgetary balance - - First decision taken following the elaboration of budget 2020 - Methodology put in place with help of external consultants - Implementation to start at the latest in September 2020 Referring to the structural reform support program, the European Commission is advising the Region on the added value of completing a spending review - Impact not yet included in the forecasted figures (2020-2024) Wallonie service public SPW 12#13Robust liquidity position underpinned by strong debt and treasury management Région wallonne debt overview In €m Direct Debt (1) Wallonie service public SPW 2017 2018 2019 8,962 10,271 11,719 % of LT Regional Debt 86% 89% 91% Indirect Debt (SPABS + SWDE + FADELS) (*) (2) 1,426 1,266 1,106 % of LT Regional Debt 14% 11% 9% Long Term Regional Debt (3) = (1) + (2) 10,388 11,537 12,825 Debit balance on the current account (4) 377 1,008 937 Contribution of the Public Administration Units (Cash pooling) (5) 845 1,288 1,807 Short Term Regional Debt (6) = (4) - (5) (468) (280) (871) Total Regional Debt (7) = (3) + (6) 9,920 11,257 11,954 □ Région wallonne has sought to diversify its funding sources over the years to increase the number of counterparties and mitigates at all times its liquidity positions. □ Région wallonne has established secured and committed facilities that allow fast and continuous access to capital markets through : One European medium-term notes program (EMTN); ➤ Two Medium-term notes programs (MTN). □ To further enhance the professional management of its debt and treasury positions, Région wallonne relies since June 2019 on a dedicated organization (the Debt Cell) inside public administration (SPW). (*) SPABS: Société Publique d'Admnistration des Bâtiments Scolaires; SWDE: Société Wallonne des Eaux; FADELS: Fonds d'Amortissement des Dettes du Logement Social. Total Regional Consolidated Debt 21,287 21,635 23,190 (**) (**) Maastricht concept - 2019 provisional figures to be confirmed in May 2020 Long-term regional debt evolution 31.12.2017 31.12.2018 11% 30% 24% €10,388m 23% 5% 8% ■ Medium Term Notes ■ Bank Loans ■ Stand Alone 31.12.2019 9% 21% 8% 14% €11,537m 24% 47% €12,825m 3% 8% 23% 6% 6% 20% ■BT Swapped ■ Schuldschein ■ Euro Medium Term Notes 13#14Overview of Regional Consolidated Debt In order to assess the credit profile of Région wallonne as a borrower, the credit rating agencies (such as Moody's) do have a look at the so-called consolidated debt (Maastricht concept), by adding to the regional direct debt the regional indirect debts (SEC 2010), made of guaranteed debt of the consolidated organic companies, debt from alternative financing mechanism and financial leasing. Direct Debt Amortization and balance to finance €12bn Regional Debt Debt taken over by the region Indirect Debt €23.2bn Regional Consolidated Debt (SEC 2010 Format) Consolidated Indirect Debt (SEC 2010) Wallonie service public SPW FADEL/SWDE / SPABS Debts Guaranteed debt from consolidated organizations Debt from alternative financing mechanism Financial Leasing 14 14#15Key ratings considerations MOODY'S vigeqiris Date of credit opinion: March 2019 Next review date: March 15th, 2020 Long Term Rating: A2 - Stable Outlook Prime-1 short-term rating of its Treasury notes Credit Strengths ▲ Positive impact of the Sixth State Reform on leverage and tax autonomy Robust liquidity position resulting from strong debt and treasury management Credit Challenges Relatively large cumulated financing deficit, although on the path to fiscal consolidation Fragile economy compared with that of Belgium Date of report: April 2018 ESG rating: 55/100 Région wallonne ranks 4th out of 30 among European Local Authorities sector Région wallonne demonstrates a consistent performance, with scores above the sector average in all six assessed domains The local authority's performance is ranked advanced in Community Development and good in four other domains: Environment, Human Resources, Human Governance Rights and The performance in Procurement and Services is only limited Wallonie service public SPW 15#163. FUNDING MANAGEMENT 4.61 7.LL 1967#17Focus on Region's funding gap (initial & with COVID-19 effect) Wallonie service public SPW Funding gap evolution over 2018-2020 Funding Needs 2020 (initial) In EUR million 2018 (1) 2019 2020 (EUR million) (2) (3) Revenues (excl. proceeds Funding gap (*) 8,063.93 11,313.44 12,836.89 from borrowings) Expenditures (incl. 9,447.63 13,589.39 15,628.72 Amortization of matured debts Funding needs -2,050.03 -741.80 Funding gap (1) Amortization of matured debts -2,791.83 Initial COVID-19 expenditures amortizations) Funding needs -1,383.70 -2,275.95 -2,791.83 (1) 2018 figures are confirmed (executed) (2) 2019 figures are still provisional (to be confirmed) (3) 2020 figures are budgetary-based, with significant buffer in expenditures and before zero-based budgeting exercise (definition slide 12) - Budget buffer 2020 (initial) Pre-financing in 2019 Up-to-date financing in 2020 Residual funding needs 281.00 Funding needs Budget buffer 2020 (initial) Funding Needs 2020 (incl. COVID-19) (EUR million) -2,050.03 -741.80 -1 500.00 -4,291.83 281.00 150.15 Pre-financing in 2019 150.15 1 304.00 Up-to-date financing in 2020 4 014.00 -1 056.68 (*) including EUR millions 350.00 for Transition Investment Plan Residual funding needs (1) EUR 350 million for Transition Investment Plan allocated to cover initial COVID-19 expenditures (156.32) □ Significant increase of expenditures in 2019 versus 2018, due to the impact of the 6th reform (transfer of competences in health sector and family allowances), preventing a planned return to the equilibrium for the ESA 2010 budget balance. ☐ Significant reduction of forecast revenues planned for 2020 due to non-compensated impact of the tax shift measures implemented at Federal State level. COVID-19 pandemic and unprecedented related economic crisis will inevitably affect funding needs of Région wallonne in 2020. When looking to COVID-19 related expenditures and impact on 2020 regional revenues, additional funding needs are currently estimated to EUR 1,500 million (taking into account Belgian GDP decrease around 8% - latest numbers available from National Bank of Belgium), of which EUR 700 million are already Social Bond qualified eligible expenditures (cf. pages 25 to 28) . 17#18Outstanding debt key figures Regional direct debt key ratios as of 31/12/2019 Regional direct debt value (€ million) Implicit rate (all-in) Average lifespan (years) Duration (years) - Fixed rate ratio Number of banking counterparties 11 719 2.15% 13.58 10.94 87.48% 34 Ratios about operations concluded in 2019 Ratios about current operations in 2020 Total borrowed amount (€ million) 2 209 Total borrowed amount (€ million) 4 014 Number of deals 31 Number of deals 30 Weighted average rate (all-in) 1.05% Weighted average rate (all-in) 0.745% Average lifespan (years) 19.96 Average lifespan (years) 21.63 Weighted average spread vs OLO (all-in) 33.11 Weighted average spread vs OLO (all-in) 45.52 Fixed rate ratio 99.09% Fixed rate ratio 100.00% Number of banking counterparts 17 Number of banking counterparts 16 Wallonie service public SPW 18#19€ MILLION 1 600.00 1 400.00 1 200.00 1000.00 800.00 600.00 400.00 200.00 0.00 Annual redemption profile of long term debt (€ million) Amortization Schedule of the long-term debt (€ million) 1024 2037 2038 2042 ISOZ 2054 2056 ☐ The Debt Cell implemented a dynamic and proactive approach to manage the redemption profile of the long term debt of Région wallonne, following a set of rules approved by the Regional Treasury Council: Define and respect a maximum annual amount of matured debts to be amortized (around € 900 million per year); Smoothen the debt curve through use of diversified financial instruments (Private Placements, Schuldschein, Banks Loans, Benchmark size Issues); Evaluate each reverse enquiry interest taking into consideration the existing curve with regards to the proposed maturity and size; Manage the curve taking into account the willingness of Région wallonne to be recurrent in issuing benchmark size issues. 2064 2066 2067 سار 2116 19 Wallonie service public SPW#204. BOND ISSUANCES#21Inaugural Sustainability Bond - May 2019 Nominal Amount Maturity Date Coupon Margin against OLO 2026 Bond (7y) EUR 500 million 3 May 2026 0.25% OLO+30bps 2034 Bond (15y) EUR 500 million 3 May 2034 1.25% OLO +36bps Subscription successfully spread between 131 Investors from 17 different countries Sustainability bond proceeds are used to finance and refinance new and ongoing eligible green and/or social projects, with disbursements up to 1 year prior to the notes issuance and up to year end of launching date Protection of resources, land, biodiversity, soil decontamination & climate change adaptation 1% Green projects (40%) Renewable energy 4% Sustainable mobility 49% Energy efficiency & low carbon buildings 46% Access to Essential Services & Basic Public Infrastructur e 2% Social projects (60%) Affordable Housing 50% Education & Employment Generation 47% Socio- Economic Advancement & Empowerment 1% Wallonie service public SPW 21 21#22Second Sustainability Bond - April 2020 Nominal Amount Maturity Date Coupon Margin against OLO 2030 Bond (10y) EUR 500 million 8 April 2030 0.5% OLO + 45bps 2034 Bond Tap + EUR 200 million (total : EUR 700 million) 3 May 2034 1.25% OLO + 48bps Sustainability bond proceeds are used to finance and refinance new and ongoing eligible green and/or social projects, with disbursements up to 1 year prior to the notes issuance and up to year end of launching date Sustainable food & consumption 2% Green projects (70%) Renewable energy 1% Pollution prevention & control 16% Energy efficiency & low carbon buildings 28% Protection of resources, land, biodiversity, soil decontamination & climate change adaptation 17% Sustainable mobility 36% Social projects (30%) Education & Employment Generation 100% Wallonie service public SPW 22 22#23Inaugural Social Bond - May 2020 Nominal Amount Maturity Date Coupon Margin against OLO 2025 Conventional Bond (5y) EUR 1 billion 5 June 2025 0.05% OLO + 40bps COVID-19 related expenditures (58%) Access to Essential Services & Basic Public Infrastructure 26% Socio- Economic Advancement & Empowerment 74% 2040 Social Bond (20y) EUR 1 billion 3 May 2040 1.05% OLO +55bps Other Social related expenditures (42%) Access to Essential Services & Basic Public Infrastructure 17% Affordable Housing 79% Socio- Economic Advancement & Empowerment 4% Wallonie service public SPW 23#24Debt Cell Walloon Region - Contact details Wallonie service public SPW DEVEUX Etienne - Managing Expert DESSAUCY Cédric - Middle office DORIGATO Marie - Middle office / UAP 0032 (0)81 77 25 20 0032 (0)81 77 25 10 0032 (0)81 77 25 16 @ [email protected] [email protected] FIZAINE Christian - Middle office 0032 (0)81 77 25 17 MAASKANT Serge - Back office 0032 (0)81 77 25 09 WALCH Arnaud - Front office 0032 (0)81 77 25 02 [email protected] [email protected] [email protected] [email protected] ([email protected]) https://www.wallonie.be/en/finance 24 24#25Wallonie IMPORTANT NOTICE service public SPW This presentation has been prepared by Région wallonne for informational and background purposes only, and is subject to change, updating, completion or revision without notice at the discretion of Région wallonne and any information contained therein may change materially. No person is under any obligation to update or keep current the information contained herein and any opinions expressed in relation thereto are subject to change without notice (including the forward looking statements). In this document, references to "presentation" mean this document, any oral presentation, the question and answer session and any written or oral material discussed or distributed in this context. The presentation comprises written material/slides which provide information on Région wallonne. Although the information in this presentation has been obtained from sources which Région wallonne believes to be reliable, Région wallonne and its representatives do not expressly or impliedly represent or warrant its accuracy, fairness, completeness of reasonableness and such information may be incomplete or condensed. No reliance should be placed on the fairness, accuracy, completeness or correctness of, the information or opinions contained herein. Due to rounding, numbers presented in these materials may not add up precisely to the totals provided and percentages may not exactly reflect the absolute figures. This investor presentation contains certain statements which may constitute "forward-looking statements" based on current beliefs and expectations about future events. These statements are not guarantees or predictions of future performance, and are notably subject to risks, assumptions, uncertainties, and changes in economic conditions globally. Therefore, actual results or developments may materially differ from those expressed or suggested in the statements contained in this presentation. Any forward-looking statement contained in this presentation speaks as of the date of this presentation. Région wallonne and its representatives expressly disclaim any obligation or undertaking to revise or update any of these statements or any information contained herein in light of new information or future events. Région wallonne and its representatives will not accept any liability (in negligence or otherwise) what so ever for any loss arising, directly or indirectly, from the use of this presentation or the information provided in this presentation or otherwise arising in connection with this presentation. This presentation does not form the basis of, and should not be relied on in connection with, any contract to purchase or subscribe for any securities of the Région wallonne. Any decision to invest in the securities of the Région wallonne in the framework of an offering must be based on your own research in respect of Région wallonne, any prospectus or offering circular (or memorandum) and information included by reference therein, including, but not limited to, the associated benefits and risks thereof, as well as the conditions of the placement. Investors must themselves assess, together with their advisors whether securities of Région wallonne are suitable for them, considering their personal income and financial situation. In case of doubt with respect to the risks involved in purchasing such securities, investors must abstain from investing. This presentation does not constitute any form of financial opinion or recommendation or investment advice. This presentation is for preliminary informational purposes only and does not constitute or form part of an offer or invitation to proceed to an acquisition of or subscription for the securities of Région wallonne and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any offer of securities, if made, will be made by means of a prospectus or offering circular (or memorandum) which would contain material information not contained herein, and which shall supersede and replace these materials and the information herein in its entirety. Investors should not subscribe for any securities unless they receive such a prospectus or offering circular (or memorandum), which they should carefully review, conduct such investigations as they deem necessary and consult their own financial, legal, accounting, regulatory and tax advisors in order to make an independent determination of the suitability and consequences of an investment in the securities of Région wallonne. Without limiting the foregoing, this presentation does not constitute an offer or invitation to proceed to an acquisition of or subscription for the securities of Région wallonne in the United States or in any other jurisdiction where such offer or invitation is not allowed without registration or qualification under the applicable legislation of the relevant jurisdiction, or where such offer or invitation does not meet the required conditions under the applicable legislation of the relevant jurisdiction. The securities referred to herein have not been, and will not be, registered under the Securities Act of 1933, as amended, or the securities laws of any state of the U.S. or other jurisdiction and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws. This presentation is being submitted to selected recipients only and neither this presentation nor any other offering materials may be distributed, published or made available to the public in Belgium. This presentation may not be reproduced or passed on (in whole or in part) to any other person than the selected recipients. Neither this presentation nor any offering materials may be used in relation to any investment service in Belgium unless all conditions of Directive 2014/65/EU, as implemented in Belgium, are satisfied. Neither this presentation nor any offering materials can be used to publicly solicit, provide advice or information to, or otherwise provoke requests from, the public in Belgium in relation to the offering. Any offering in Belgium is made exclusively on a private basis in accordance with Article 2 of Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. This presentation is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction or country. Any failure to comply with these restrictions may constitute a violation of such laws or regulations. The distribution of this presentation in other jurisdictions than Belgium, may be restricted by laws or regulations applicable in such jurisdictions. All persons in possession of this presentation must inform themselves about, and comply with, any such restrictions. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. [In the context of Région wallonne EMTN Programme: Full information on Région wallonne and the offer of any security issued by it in the context of the EMTN Programme is only available in the Offering Circular and the documents incorporated by reference therein]. By participating in this presentation or by accepting any copy of the materials presented, you irrevocably agree to be bound by all of the foregoing limitations. © May 2020 - Région wallonne. All rights reserved. 25 25