Province of British Columbia Panda Bond Market

Transcription

1 Province of British Columbia Panda Bond Market CALIFORNIA November 2017 Ministry of Finance Website:

2 British Columbia Opening New Capital Markets British Columbia Mainland China Domestic Panda Bond 2016 India Offshore Masala Hong Kong Offshore RMB Dim Sum Market &

3 British Columbia s Interest in Panda Bond Market Support internationalization of RMB and Canada s RMB trade and investment hub Support China-Canada-British Columbia economic and peoples relationship First foreign government to be approved by NAFMII to issue in CIBM Access to third largest bond market in the world Promising initiatives to open market and welcome foreign investors and issuers Diversify province s investor base Early-mover in the market 3

4 British Columbia s Panda Program Terms Issuer Registered amount under the Programme Term of the bonds Custodian institution Joint lead underwriters Bookrunner Specifications Province of British Columbia CNY 6 billion Not exceeding 10 years; inaugural issue not to exceed 5 years Shanghai Clearing House Bank of China Limited, HSBC Bank (China) Company Limited Bank of China Limited Approval date December 3, 2015 Expiration date December 3, 2017 Remainder under program CNY 3 billion 4

5 British Columbia s 1st Panda Bond Pricing date 21 January 2016 Settlement date 25 January 2016 Maturity date 25 January 2019 Interest payable Annual Coupon 2.95% Price Issue size Joint lead underwriters Bookrunner CNY 3 billion (C$577 million as at 8 th Nov, 2017) Bank of China Limited, HSBC Bank (China) Company Limited Bank of China Limited 5

6 British Columbia s Return to the Panda Bond Market Tenor Size 3-year CNY 1 billion Announce tenor, size to market (T-3) 17 November 2017 Set pricing range (T-1) 21 November 2017 Book build and pricing date (T) 22 November 2017 Settlement date (T+1) 23 November 2017 Joint lead underwriters Bookrunner Bank of China Limited, HSBC Bank (China) Company Limited Bank of China Limited 6

7 The Compelling Canada Story One of only two G-7 country to receive AAA credit rating One of the world s soundest banking system according to World Economic Forum Government of Canada securities among the world s most sought-after investments Lowest net debt-to-gdp ratio in G 7 7

8 Credit rating comparisons AAA AA+ AA AA- A+ A A- BBB BB B- CCC BC Canada Germany United States* United Kingdom* France* Japan* Italy* Greece** *Credit rating downgrades between 2009 and Source: Standard and Poor s 8

9 Economic Activity in Canada Average annual real GDP growth, , per cent BC Canada US Germany UK France Japan Italy -0.4 Sources: Statistics Canada for BC real GDP growth; OECD for other countries real GDP growth 9

10 Quick Facts on British Columbia 4.8 million population 364,764 sq. mi on west coast of Canada; third-largest province; size of France and UK combined Borders the Pacific Rim Strategic ports for North America trade Parliamentary system of government 2015 nominal gross domestic product: C$250 Billion (13% of Canadian economy) 10

11 Jurisdictional Authority in Canadian Federation Federal Provincial Federal/Provincial Foreign Policy Health Agriculture National Defence Education Employment Criminal Law Social Welfare Housing Citizenship Property and Civil Rights Environment Immigration Natural Resources Economic Development Trade Local Affairs Income Security Aboriginal Issues Justice Indirect Taxation Transportation Communication Direct Taxation 11

12 BC s Diversified Economy Share of BC GDP at basic prices (chained $2007) by major industry, 2016 Manufacturing & Utilities 9.0% Natural Resources 6.9% Wholesale & Retail Trade 10.8% Transportation & Warehousing 5.8% Public Admin, Health Care & Education 17.0% Construction 8.6% Other Services 17.8% Finance, Insurance & Real Estate 24.2% Source: Statistics Canada (may not add to 100 per cent due to rounding) 12

13 BC real GDP (annual per cent change) Prudent Economic Forecast Ministry of Finance Economic Forecast Council Sources: BC Ministry of Finance, Economic Forecast Council 13

14 Private Sector Economic Growth Expectations Forecast annual growth in 2017 real GDP (per cent) Canada AB BC ON QC MB SK PE NS NB NF Source: Private Sector Average (subset of the Economic Forecast Council: BMO, RBC, CIBC, TD, Scotiabank and IHS Markit) as of September 22,

15 BC Employment 2,500 BC employment (000s, sa) 2,400 2,300 Jun 2008: 2,256 Aug 2017: 2,480 2,200 Mar 2009: 2,184 2, Source: Statistics Canada 15

16 7,500 7,000 6,500 6,000 5,500 5,000 BC retail sales ($ millions, sa) Jun 2008: 4,957 BC Retail Sales Jul 2017: 7,199 4,500 4,000 Dec 2008: 4, Source: Statistics Canada 16

17 BC Housing Starts 60,000 BC housing starts (annualized units, sa) 50,000 40,000 30,000 *Hist. avg: 29,465 20,000 10,000 Year-to-date to Aug 2017: 40, * Historical average (January 1990 to December 2016) 2017 Source: Canada Mortgage and Housing Corporation 17

18 Owner s Equity as a Share of Residential Assets (per cent) Canada 2017 Q2: 74.3% US 2017 Q2: 58.4% Sources: Statistics Canada, St. Louis Federal Reserve 18

19 BC Exports 4,000 BC international merchandise exports ($ millions, sa) 3,500 Oct 2008: 3,050 3,000 2,500 Jul 2017: 3,265 2,000 1,500 May 2009: 1, Source: BC Stats 19

20 Japan 9.6% China 15.2% BC Annual share of international goods exports by province, 2016 Other Asia 9.7% Other 11.2% Alberta Asia 7.2% BC Trade Diversity Other 6.5% Asia 3.4% Ontario Other 15.7% US 54.3% US 86.3% US 80.9% Source: BC Stats (may not add to 100 per cent due to rounding) 20

21 Three-year Operating Plan $ millions Actual 2016/17 Budget Estimate 2017/18 Plan 2018/19 Plan 2019/20 Revenue 51,459 52,407 52,557 53,677 Expense excluding Contingencies Vote (48,722) (51,261) (51,729) (52,720) Contingencies Vote (600) (300) (350) Total Expense (48,722) (51,861) (52,029) (53,070) Surplus before forecast allowance 2, Forecast allowance - (300) (300) (350) Surplus... 2,

22 Affordable Debt Taxpayer-supported debt to GDP 2016/ BC* Ontario Quebec Canada UK US Japan Source: Moody s; *BC Budget 2017 September Update 22

23 Operating Debt Elimination $ billions Budget Budget 2017 Update /17 17/18 18/19 19/20 23

24 Maintaining Debt Affordability Per cent Per cent Budget 2017 Update Debt to GDP Budget Budget 2017 Update Budget 2017 Debt to Revenue /16 16/17 17/18 18/19 19/20 15/16 16/17 17/18 18/19 19/20 24

25 Taxpayer Supported Interest Cost per Dollar of Taxpayer Supported Revenue / / / / / / / / / / / / / / / / Source: 2017 British Columbia Financial and Economic Review 25

26 Infrastructure Spending Allocations Three-year infrastructure spending totals $23.1 billion ($billions) BC Hydro Education 2.6 Post-Secondary Institutions 3.1 Health Other Transportation 26

27 Priority Investments Over $1.8 billion in new ministry investments over 3 years in support of: improving affordability enhancing services building a strong, sustainable economy 27

28 Improving Competitiveness Reducing health care premiums by 50% PST on electricity phased out beginning with a 50% cut in the coming months and eliminated April 1, Small business corporate income tax rate reduced to 2% from 2.5% effective April 1, Restore tax treatment for credit unions. Innovation Commissioner / Emerging Economy Task Force 28

29 Risks to the Fiscal Plan Wildfires Softwood lumber and NAFTA New compensation mandate Increasing interest rates 29

30 Prudence Remains Important Contingencies Vote totals $1,250M over the ensuing 3 years Forecast Allowance totals $950M over the ensuing 3 years Prudent economic growth outlook 30

31 Competitive Corporate Income Tax % of taxable income UK BC / Can Italy Germany Japan France US Combined central and sub-central corporate income tax rates for 2016 (source: OECD Tax Database) Combined BC/federal 2018 rate 31

32 Competitive Personal Income Tax 2017 provincial personal income taxes Single individual earning $125,000 18,857 13,087 10,269 10,291 BC AB ON QC Source: BC Ministry of Finance 32

33 British Columbia s Public Sector Pension Risk Management Defined Benefit/Defined Contribution hybrid plan design Joint trusteeship Sound funding and actuarial policies set by the trustees Strong pension plan governance % funded on a funded or actuarial basis 33

34 Gross Market Debt Outstanding by Source as of October 31, 2017 CNH Public 0.9% Europe Public / Private 4.6% INR 0.2% USA Public 8.1% Canada CPP & Other 9.2% Gross Debt Outstanding: $60.8 Billion Australis Public 1.5% Canada Private 12.8% Canada Public 62.7% Market debt does not include guaranteed and non-guaranteed debt of SUCH sector and P3s. 34

35 $3.5 billion borrowing program for 2017/18; $1.3 billion remaining $5.3 billion to $6.9 billion in outer years Manageable borrowing program Debt Management Will rely on province s significant access to domestic and international capital markets 35

36 Green Bond Program Objectives: Establish a credible & sustainable mechanism to fund green entities and projects in BC s public sector. Build on BC s existing financial management & environmental leadership. Follow international best practices Access a wider range of investors Open the domestic provincial bond market to support growth of low carbon economy Next Steps: Finalize internal program governance May consider issuance in 2018/19 36

37 BC s Strong Credit Ratings Moody s Investor Service Aaa Stable Standard and Poor s AAA Stable Fitch AAA Stable DBRS AA(high) Stable 37

38 Disclaimer NOT FOR DISTRIBUTION DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES. This document has been prepared by the Province of British Columbia (the "Issuer") solely for information purposes. This document may not be taken away, reproduced or redistributed, in whole or in part, to any other person without the prior written consent of the Issuer and each of Bank of China Limited and HSBC Bank (China) Company Limited (the "Joint Lead Underwriters"). This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to purchase or subscribe any securities of the Issuer in any jurisdiction or an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, reliability, accuracy, completeness or correctness of such information or opinions contained herein. The presentation should not be regarded by recipients as a substitute for the exercise of their own judgment. The information contained in this document should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation. None of the Issuer or the Joint Lead Underwriters is under any obligation to keep current the information contained in this document and any opinions expressed in it are subject to change without notice. None of the Issuer or the Joint Lead Underwriters nor any of their respective affiliates (as the case may be), advisers or representatives accept any liability whatsoever (whether in contract, tort, strict liability or otherwise) for any direct, indirect, incidental, consequential, punitive or special damages howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. Certain statements in this document may constitute "forward-looking statements". These statements reflect the Issuer's beliefs and expectations about the future and are subject to risks and uncertainties. These forward-looking statements are based on the Issuer s current plans, estimates and forecasts, and accordingly, actual results may differ materially from these forward-looking statements. You are cautioned not to rely on such forward-looking statements. The Issuer does not undertake to revise forward-looking statements to reflect future events or circumstances. The information contained in this document has not been independently verified. This document contains data sourced from and the views of independent third parties. In replicating such data in this document, the Issuer makes no representation, whether express or implied, as to the accuracy of such data. The replication of any views in this document should be not treated as an indication that the Issuer agrees with or concurs with such views. All rights reserved. This document contains confidential and proprietary information and no part of it may be reproduced, redistributed or passed on, directly or indirectly, to any other person (whether within or outside your organisation / firm) or published, in whole or in part, for any purpose.

39 Appendix 39

40 Canadian Mortgage Rules Maximum amortization period of 25 years for insured mortgages Minimum down payment of 5 per cent for any insured mortgage for homes priced below $500,000 An additional 10 per cent down payment is required for the portion of a home price between $500,000 and $1,000,000 Maximum refinancing of 80 per cent of the value of the home Interest rate stress test required for all insured mortgages Maximum borrowing of 65 per cent of the value of the property through a non-amortizing home equity line of credit Federally-backed mortgage insurance is available only for homes with a purchase price of less than $1 million Insurance is mandatory for down payments below 20 per cent New borrowers qualifying interest rates at least 2% higher than their actual mortgage rate 40

41 Infrastructure Investments at Record Levels Capital Spending ($ millions) Budget 2017 Update Fiscal Plan 7,081 6,580 6,309 6,044 5,670 5,895 6,032 6, ,490 2,701 2,635 7,968 3,154 Self-supported 3,362 2,470 2,744 2,765 2,519 2,488 2,573 2,725 3,719 4,110 3,565 3,279 3,151 3,407 3,459 3,659 4,956 4,855 4,814 Taxpayer-supported 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 41

42 Pension Plan Positions Pension Plan Number of Members (thousands) Most recent Valuation Funding Basis (millions) Accrued Basis (millions) Public Service 119 Mar 31, 2014 $ % Teachers 94 Dec 31, 2014 $ % College 26 Aug 31, 2015 $ % Municipal 321 Dec 31, 2015 $2, % $ % ($704) 96% $ % $1, % 42

43 Federal Contributions as a Percentage of Total Revenues % /05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 Source: BC Ministry of Finance 2017 British Columbia Financial and Economic Review 43