Province of Alberta Investor Meetings Asia October Stephen J. Thompson, CFA Executive Director, Capital Markets Treasury Board and Finance

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1 Province of Alberta Investor Meetings Asia October 2018 Stephen J. Thompson, CFA Executive Director, Capital Markets Treasury Board and Finance

Alberta, Canada Canada 10th largest economy and 9th least risky country in the world (1) Federal Government, 10 Provinces and 3 Territories Provinces have significant autonomy Provincial ownership of

2 Alberta, Canada Canada 10th largest economy and 9th least risky country in the world (1) Federal Government, 10 Provinces and 3 Territories Provinces have significant autonomy Provincial ownership of natural resources Responsible for health care and education Direct taxing powers include personal income, corporate income, mining taxes and royalties, value added/sales, fuel and payroll taxes No federal guarantee on provincial debt, however federal government provides significant and predictable financial support to Alberta 2 (1) Euromoney Country Risk score

3 Alberta's economy at a glance Alberta s contribution to national GDP and exports in 2016 was around 15.5% At 4.3 million people (2), Alberta represents about 12% of the national population Young, skilled population with highest employment rate (around 67%) in Canada, despite significant layoffs in 2015 and 2016 Share of 2017 of GDP by industry Transportation and warehousing 5% Public administration 5% Health care and social assistance 6% Professional, scientific and technical services 5% Other 17% Finance and Real estate 16% Mining, quarrying, and oil and gas extraction 21% Construction 10% Trade 9% Manufacturing 6% 3 (1) Statistics Canada (2) Estimated April 1, 2018

4 Alberta s oil reserves ranked 3rd in the world 2016 global oil reserves, estimated proved reserves (billions bbl) United States Libya Russia United Arab Kuwait Iraq Iran Canada Saudi Arabia Venezuela Oil Sands Source: U.S. Energy Information Administration, Alberta Energy Regulator

5 Alberta in second year of recovery Rebound surpassing expectations Real GDP growth in 2017 estimated to be 4.9% following twoyear recession Driven by rising oil production, broad-based strength across industries Growth moderating in 2018 as recovery more entrenched Real GDP growth forecast to be 2.7% Exports and consumer spending to drive growth A prolonged recovery Lingering effects of downturn on corporate profits and investment Full recovery in real GDP not until 2019, nominal GDP in 2020 Government revenue not forecast to reach pre-recession levels until

6 ($billion) (million barrels per day) Energy investment stabilizing: Production continues to grow Alberta energy investment Oil Sands Investment (Left) Conventional Oil and Gas Investment (Left) Production (Right) 6 Source: Statistics Canada and Alberta Treasury Board and Finance; e-estimate, f-forecast

7 (000s) (%) Labour market re-balancing Alberta labour market indicators 2, , , , , , f 2019f 2020f 2021f Employment (left) Unemployment Rate (right) Source: Statistics Canada and Alberta Treasury Board & Finance, f-forecast

8 Solid population growth Change in Alberta's population by component (Thousands) 140 Natural Increase (Left) Net Interprovincial (Left) Net International (Left) Population Growth (%) Source: Statistics Canada and Alberta Treasury Board & Finance, f-forecast

9 Alberta remains Canada s most prosperous province Nominal GDP per capita ($thousands) Rest of Canada Range Rest of Canada Average Alberta 9 Sources: Statistics Canada, Alberta Treasury Board and Finance and TD Economics, f-forecast

10 Alberta's tax advantage British Columbia Saskatchewan Ontario New Brunswick Manitoba Nova Scotia Prince Edward Island Quebec Newfoundland & Labrador ($billion) Other Taxes / Carbon Charges Sales / Value Added Tax 10 (1) Alberta Treasury Board and Finance

11 Deficit declines over time 2 0 Consolidated fiscal surplus (deficit) ($billions) (1.4) -4-6 (4.3) (9.1) (7.8) (7.9) (7.0) -12 (10.8) e f f f f f f Path to Balance three pillars Strong and diversified economy Stable spending and cost containment Reducing reliance on resource revenue 11 Source: Alberta Treasury Board and Finance, e-estimate, f-forecast

12 Low debt burden Projected net debt-to-gdp (1) Quebec 43% Ontario 38% British Columbia 15% Alberta 8.7% Projected net debt-to-gdp expected to peak at 13.1% in ; below the current net debt-to-gdp ratio of any other province (2) 12 (1) RBC: Public accounts basis. Numbers are based on reports from individual governments and, due to accounting differences, are not strictly comparable between provinces. Sources include: Fiscal reference tables (Department of Finance Canada), various provincial budgets, budget updates and public accounts. As of April 10, (2) Alberta s ratio calculated by Alberta Treasury Board and Finance based on forecast Budget 2018 forecasts.

13 ($ Billions) Borrowing platform Total Borrowing (Term debt) Forecasted term debt issuance $9.6 $ $13.7 $17.6 $ Direct Borrowing Provincial Corporations Estimate Forecast Forecast 13

14 Borrowing strategy Target issuance 60% 40% Domestic International Ensure domestic liquidity Maintain larger domestic benchmark sized issues ($3-$5B) Limited domestic MTN issuance Promote secondary market liquidity Control domestic supply Target issuance of 40% in foreign currency markets Frequent US$ benchmarks Arbitrage driven global currency issues 14

year benchmark issued in 2018 Sterling benchmarks across curve driven by investor demand MTN and

15 Borrowing strategy continued Foreign currency borrowing Liquid US$ Global Issues in 3, 5, 7, and 10 years SEC Registered, large US$ benchmarks US$ CP program launched in September 2017 Inaugural Euro 7 year benchmark issued in 2018 Sterling benchmarks across curve driven by investor demand MTN and structured issues in multiple currencies, including GMTN and AUD programmes driven by arbitrage and investor demand 15

16 Credit ratings Long Term Short Term S&P A+ (Outlook stable) A-1+ Moody s Fitch Aa1 (Outlook negative) AA (Outlook stable) P-1 F1+ (Outlook stable) DBRS AA (Negative trend) R-1 (high) (Negative trend) 16

17 Summary Strong economic base; real GDP growth was to 4.9% in 2017 and is forecast to be 2.7% in 2018 Demonstrated resilience to past commodity price shocks Continued high level of fiscal capacity Strong bond ratings Multi-currency, multi-market borrowing platforms Strong secondary liquidity 17

18 Appendix

19 Path to balance A strong and diversified economy 19 The Alberta government has taken a number of steps to promote the growth of a more diversified economy These include: Securing approval of the Line 3 replacement and TMX Diversifying Alberta s energy sector and encouraging valueadded production by investing in the Petroleum Diversification Program, petrochemical feedstock infrastructure and partial upgrading Introducing three tax incentives the Alberta Investor Tax Credit, the Capital Investment Tax Credit and the Interactive Digital Media Tax Credit Creating 3,000 new post-secondary technology spaces and new scholarship programs to support emerging sectors

20 Path to balance - Stable expense growth below population growth and inflation Operating expense growth (%) Inflation + Population Growth Operating Expense Sources: Government of Alberta Annual Reports and Budget 2018, e-estimate, f-forecast

21 Path to balance - Capital spending to return to normal levels Capital plan - Consolidated basis ($millions) 10,000 Budgeted Actuals 8,000 6,000 4,000 2, Sources: Budget 2018 and Government of Alberta Annual Reports a - actual, f - forecast, t - target

22 Path to balance - Revenue surpasses pre-recession level in Government of Alberta revenues by source ($billions) Income and Other Taxes All Other Non-Renewable Resource Revenue Source: Treasury Board and Finance

23 Path to balance - A reduced reliance on resource revenue Non-renewable resource revenue as share of total government revenue (%) Year Average (96-97 to 16-17) 23 Source: Government of Alberta Annual Reports, e-estimate, f-forecast

24 Path to balance Fiscal metrics Energy and exchange rate assumptions Forecast Estimate Target Target Projection Projection Projection Revenue Tax Revenue Non-Renewable Resource Revenue Other Revenue Operating Expense % change CPI inflation population growth % Total Expense Surplus (Deficit) (9.1) (8.8) (7.9) (7.0) (4.3) (1.4) 0.7 Capital Plan Net Financial Debt % GDP

25 Appendix Assumptions Energy and exchange rate assumptions Actual Q1 Forecast Target Target Projection Projection Projection WTI Oil (US$/bbl) Light-Heavy Differential (US$/bbl) Natural Gas (Cdn$/GJ) Exchange Rate (US /Cdn$) Economic assumptions Actual Forecast 2017 Q * Real GDP (% change) Nominal GDP (% change) Employment (% change) Unemployment Rate (%) Source: Alberta Treasury Board and Finance Budget 2018, * First Quarter Fiscal Update and Economic Statement

26 Appendix Sensitivities Fiscal Sensitivities to Key Assumptions in Budget, (1) (millions of dollars) Change Net Impact ( ) Oil Price (WTI US$/bbl) -$ Light-Heavy Differential (US$/bbl) +$ Natural Gas Price (Cdn$/GJ) -10 Cents +10 (2) Exchange Rate (US /Cdn$) +1 cent -198 Interest Rates +1% -226 Primary Household Income -1 % (1) Sensitivities are based on current assumptions of prices and rates and show the effect for a full 12 month period. Sensitivities can vary significantly at different price and rate levels. The energy price sensitivities do not include the potential impact of price changes on the revenue from land lease sales (2) Lower natural gas prices increase net royalty revenues due to the positive impact on bitumen royalties (due to lower costs) which more than offsets the decline in natural gas and by-product royalties.

27 Alberta leads provinces in private sector investment 2018 Private sector investment intentions by province AB NL SK MB BC QC ON Maritimes 27 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 (billions) Source: Statistics Canada

28 Exports continue to drive recovery Contribution to change in Alberta real GDP by expenditure (percentage points) Exports Imports Total Domestic Demand* Real GDP e 2018f 2019f 2020f 2021f 28 Sources: Statistics Canada and Alberta Treasury Board and Finance; e-estimate, f-forecast * Includes total household, business and government spending

29 Manufacturing investment to surge Change in Alberta manufacturing investment ($billions) Other Petroleum, Chemical and Related Food & Beverage Total Manufacturing e 2018i 29 Sources: Statistics Canada, e-estimate, i-intentions

30 Federal support to provinces Main transfer programs to provinces Canada Health Transfer (CHT) Canada Social Transfer (CST) Equalization Transfer Grows in line with federal annual escalator (3%) and changes to Alberta s share of the national population Grows in line with federal annual escalator and changes to Alberta s share of the national population Ensures provinces have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation Receiving provinces are free to spend the funds according to their own priorities Determined by provinces' fiscal capacity relative to the Canadian Average 28 Alberta estimates to receive $8.2 billion in federal transfers in , including CHT and CST payments but no equalization

31 Well funded public sector pensions Public Sector Pensions Fiscal Year Ending Mar Net Pension Assets (billions) $44.4 $52.2 $60.1 $67.1 $73.1 Aggregate Funded Status 81.5% 87.1% 93.8% 99.5% 100.3% Liability for Province s employer share (billions) Total Government Unfunded Pension Liabilities (billions) $1.8 $1.8 $1.7 $1.5 $1.2 $10.9 $11.6 $11.2 $10.6 $10.0 $7.9B of total unfunded liability from a settlement with teachers to deal with an issue stemming from 1992 pension reform Aggregate Funded Status has greatly improved, while unfunded Pension Liability s absolute value has remained fairly static 31

32 Pipeline access critical for expanding production Pipeline and refinery capacity and western Canada heavy oil production (Mbpd) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Total Western Canada Heavy Oil Production Current Pipeline Western Canada Refinery Capacity Rail Commitment Keystone XL Expansion TransMountain Expansion Enbridge Line 3 Expansion + Clipper f 2019f 2020f 2021f 2022f 2023f 32 Source: Alberta Energy, f-forecast

33 33 Economic structure Market access remains key Proposed Canadian and U.S. crude oil pipelines (1) 30 Continue to work to improve market access (1) Canadian Association of Petroleum Producers; 2017 Crude Oil Forecast, Markets and Transportation - Note picture has been altered from original to remove the proposed Energy East pipeline from the image in CAPP s 2017 report

34 Climate Leadership North America s most ambitious plan Climate Leadership Plan Eliminates coal-fired electricity emissions by 2030 Legislated 30% renewable electricity generation by 2030 Methane reduction of 45% by 2025 Economy-wide carbon pricing Cap on oil sands emissions Oil sands companies reducing emissions aggressively Significant corporate investment accelerating pace of change Consultation with and participation by Indigenous peoples Oil sands companies purchased $3.2 billion from Indigenous business in and spent $41 million on consultations Committed to regulatory oversight and transparency Best and most transparent regulatory system in the world 34

35 2018/ / / / / / / / / / / / / / / / / / / / /49 Maturity profile & liquidity (1) ($billions) $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $- 35 (1) As at Sep 14, Excludes Money Market amounts.

36 Information and contact Website investor.alberta.ca Contact Stephen Thompson, CFA Executive Director, Capital Markets Province of Alberta 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. 36

Province of Alberta Investor Meetings London June Lowell Epp Assistant Deputy Minister, Treasury and Risk Management

Province of Alberta Investor Meetings London June 2018 Lowell Epp Assistant Deputy Minister, Treasury and Risk Management Alberta, Canada 10th largest economy and 9th least risky country in the world (1)