46
Investor Presentation May 2018
Investor Presentation May 2018
I. Main Facts & Figures
II. Key Strengths
III. Public Finances
IV. Consolidated Debt
V. Flanders in a nutshell
2
3
Main Facts & Figures
Capital Brussels
Language Dutch
Surface 13 684 km²
Population 6 509 894 (1/1/2017)
Density 485 hab./km² (2016)
Currency Euro
N° of Companies 509,660 (subject to VAT)
Nominal GDP (PPS) EUR 228 bn (2016)
GDP/Capita (PPS) EUR 35 100 (2016)
Real GDP growth rate 1.4% (2016)
Unemployment rate 4.4% (2017)
PPS = purchasing power standards
Key Data
4
Main Facts & Figures High GDP per Capita (2016)
Source: Eurostat
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
Flanders EU-28 Belgium Germany France Netherlands United Kingdom
5
Main Facts & Figures Strong Economic Fundamentals
Flanders benefits from very strong economic fundamentals.
Flanders France Germany Netherlands EU - 28
Unemployment Rate (2017) 4.4% 9.4% 3.8% 4.9% 7.6%
Real GDP Growth Rate (average
2011 – 2016) 1.3% 1.0% 1.6% 1.0% 1.2%
Source: Eurostat - Labour Force Survey, Study Office of the Governement of Flanders
• In 2016 the real GDP growth rate was 1.4% in Flanders which was much higher compared to
the other regions (Walloon Region 1.1% and Brussels Region 0.8%)
6 I. Main Facts & Figures
II. Key Strengths
III. Public Finances
IV. Consolidated Debt
V. Flanders in a nutshell
7
Key Strengths Located in the Heart of Europe
Flanders lies at the center of the EU’s
wealthiest and most populated area;
Highly developed transport and
communications systems so that
companies can take full advantage of this
fact;
Strong stimulus for companies to locate
in Flanders – central location;
Source: Healey & Baker study
8
Key Strengths A Unique European Hub
Flanders offers companies rapid and efficient supply
and distribution links with other major European
centers and beyond.
Leading ports Antwerp, Ghent, Ostend, Zeebrugge
Airport freight & logistic hubs
Brussels, Ostend
Extensive inland waterway system
Linking into the European system
High density of freeways Connecting directly to other European countries
High density rail network Dedicated freight lines to other parts of Europe
Source: Healey & Baker study
9
Key Strengths An Economy based on Trade and Services (2016)
Real Estate and Business Services 23.8% Wholesale and Retail 13.6% Transport 6.4% Health Services 4.6% Other 24.9%
Construction 6.1% Chemicals 3.2% Iron, Metal & Steel 2.1% Food & Tobacco 2.7% Other 11.6%
Source: Institute of National Accounts
primary sector; 0,9%
secondary sector; 25,8%
tertiary sector; 73,3%
Flemish GDP-Sector contribution
10
Key Strengths Strong Export-Driven Economy
The Flemish economy is strongly export oriented: Flanders’ exports represent 83.2% of Belgium’s
total export in volume;
Flemish exports grow steadily over time (+4.99% in 2017);
The region’s most successful export products are chemicals, transport equipment, machines and
equipments, pharmaceuticals and minerals.
Source: Institute for the National Accounts
2,6%
83,2%
14,2%
Regional Distribution of Belgian exports (%) (2017)
Brussels
Flanders
Wallonie
0
50
100
150
200
250
300
350
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Flemish Exports (EUR billion)
11
Key Strengths Diversified Base of Trading Partners
The EU28 is the most important Flemish export market and the 3 neighbouring countries (Germany, France
and the Netherlands) are Flanders main trading partners. Also emerging economies like India and China are
steadily becoming more important for Flemish exports.
Source: Institute of National Accounts
0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
14,00%
16,00%
18,00%
Germany France Netherlands UK Italy USA Spain India China Poland
Top 10 of Flemish Export Markets in 2017 (as % of total)
Key Strengths
12
Foreign Direct Investment Figures & Trade Partnerships Flanders has a proven track record of welcoming foreign
businesses to its region.
Source: Flanders Investment and Trade Office
Top 10 biggest investors in 2017
1 USA 21,4%
2 Netherlands 11,6%
3 Germany 10,7%
4 France 8,4%
5 China 6,5%
6 Japan 6,1%
7 Sweden 4,7%
8 United Kingdom 4,2%
9 Switzerland 3,7%
10 Italy 1,9%
Greenfield: 40,93%
Expansions: 33,49%
Mergers&Acquisitions:
25,58%
Type of Investments (2017)
Manufaturing: 33,20%
Logistics: 24,65%
R&D: 20,00%
HQ: 1,40%
Sales & Marketing:
16,28%
Type of Activities (2017)
13
Key Strengths Low Unemployment Rate
Source: Statistics Belgium EAK, Eurostat, Labour Force Survey Website Steunpunt Werk: http://www.steunpuntwerk.be/ Other graphs on labour market see appendix
10,7
4,4 4,0 3,9
4,4
13,5
9,7 12,2
14,9
10,8
8,2
0
5
10
15
20
25
(%)
Flemish Region Walloon Region Brussels Capitol Region EU 15 countries
14
Key Strengths R&D budget evolution (in million euro)
Source: Department of Economy, Science and Innovation
0
500
1000
1500
2000
2500
Research and Development (R&D) Education and Training (E&T) Scientific and Technological Services (STS)
15
I. Main Facts & Figures
II. Key Strengths
III. Public Finances
IV. Consolidated Debt
V. Flanders in a nutshell
16
Public Finances Return to a balanced budget
• Several budgettary challenges in last years • Financial-economical crisis: Deficit in 2009 and 2010, but within 2 years return to
balanced budget • Stricter European budgetary surveillance: considerable negative impact on budget from
2013, but gradually integrated in budget (completed in 2016) • Sixth state reform:
• Financial autonomy raised to 34% (levy surtax on Personal income tax) • more competences and increase in financial means (approx. 9,7 bn EUR for 2015) • Recurrent contribution of 1,55 bn EUR to consolidation of public finances of
federal government and social security • Enhancement of federal tax shift (> 300 mln EUR)
• Budget 2016 : deficit of 468 mln EUR, in realisation deficit reduced to 127 mln EUR • Budget 2017: surplus of 2 mln EUR, in realisation surplus of 470 mln EUR
• Budget 2018: Balanced budget
17
Public Finances Revenues by Segment
2014 - the 6th State Reform • Large increase in revenues • Major transfer of powers and resources
Comparison budget 2016 / 2017: Increase of 2.7 bn € reasons? 1. Increase of the regional taxes and grants from the federal level 2. Expansion of the consolidation perimeter
Budget 2018: Revenues at the same level as in the budget 2017
In k
euro
0
5.000.000
10.000.000
15.000.000
20.000.000
25.000.000
30.000.000
35.000.000
40.000.000
45.000.000
2014 ACT 2015 ACT 2016 ACT 2017 ACT AB 2018
Institutions within scope of consolidation Lottery funds Own non-tax non-allocated incomeOwn non-tax allocated income Regional taxes Specific allocations SFARegional and Community resources SFA Gross additional personal income tax charge
18
Public Finances
Key revenues 2018: 56% Regional and Community resources from Federal level 33,2% own fiscal instruments:
• 15,4% regional taxes • 17,8% additional personal income tax charge ( = surcharges)
Revenues by Segment
19
Public Finances Regional Taxes
Key regional taxes of Flanders: Registration tax Inheritance tax Road tax for cars
In keuro
37%
2%
17% 4%
7%
23%
6% 4%
Regional taxes AB 2018
- Registration tax
- Tax on real estate
- Road tax (cars)
- Tax on first use of car
- Heavy goods vehicles charge
- Inheritance tax
- Donation tax
- Other taxes
- Registration tax 2.432.946
- Tax on real estate 156.461
- Road tax (cars) 1.097.369
- Tax on first use of car 247.848
- Heavy goods vehicles charge 444.267
- Inheritance tax 1.507.653
- Donation tax 388.699
- Other taxes 281.327
6.556.570
20
Public Finances Breakdown of Public Spending
Also in the expenditures we see a large increase, as a result of the Sixth State Reform, in the adjusted budget 2018 (2018 AB) compared to the realizations 2014 (ACT).
The largest increases are situated in Welfare, Public Health and Family and in Employment and Social Economy.
0 4.000.000 8.000.000 12.000.000 16.000.000
Culture, sport, youth, media
Economic development, science and innovation
Other
Finance and Budget
Mobility and Public Works
Chancellory and general government
Work, professional training and social economy
Welfare, Public Health and Family
Education and Training
2018 AB 2014 ACT
21
Public Finances
Key competences in the Flemish budget: Education welfare, public health, family
Breakdown of Public Spending
30%
27%
9%
8%
8%
6%
3% 5% 3% 1%
Breakdown of the expenditures 2018 AB Education and training
Welfare, public health and family
Chancellory and general government
Mobility and public works
Work, professional training and social economy
Finance and budget
Economic development, science and innovation
Environment
Culture, sport, youth, media
other
22
Public Finances Realisations
Budgetary targets and results (in mio euro)
Despite budgetary difficulties in 2009-2010 (financial and economic crisis) and 2013-2014 (stricter European surveillance) the Flemish Community has taken immediately the necessary measures to set the budget back on track.
Budget surplus in 2017: 470 million euro
-1.500
-1.000
-500
0
500
1.000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
budget
realisation
23 I. Main Facts & Figures
II. Key Strengths
III. Public Finances
IV. Consolidated Debt
V. Flanders in a nutshell
24
Consolidated Debt Overview of the Strategy
• Diversified financing strategy: Combination of banking and non-banking financing tools; • Large and diversified access to short term liquidity: Belgian Commercial Paper programme combined
with a short term credit line of EUR 3.25bn; • Conservative Risk management:
• Conservative interest rate risk management : indexation linked to fixed rates or simple floating rates in the Euro zone (Euribor…); distribution fixed rate / floating rate adjusted depending on the long term economic trends; 95% of the outstanding debt at fixed rate as of 31/12/2017
• Complete hedging of currency risk: no currency risk incurred by the Flemish Community; • Systematic hedging at the issuance via swaps in EUR; • Conservative approach on derivatives: No structured products;
• Issuance of bonds as main medium and long term financing tool: Flanders is a recognized issuer in the
capital markets. Purpose is to build a reference benchmark curve;
• Diversification of the investor base;
25
Consolidated Debt Consolidated Debt position
In 2016 there was an increase of 4,86 billion EUR. This is mainly due to the take over of the imputed
loans from the federal level (Hospital infrastructure). Without this take over the consolidated debt would have slightly decreased.
In 2017 the consolidated debt decreased with 420 million euro while an increase of 920 million euro was expected in the budget 2017.
in mio EUR 2015 2016 2017
Direct and indirect debt 4.126,00 4.642,12 5.313,89
VMSW (social housing) 6.313,15 6.282,50 6.112,95
VWF (social housing) 3.005,41 2.842,66 2.705,57
EKM's (social housing) 596,9 590,59 595,41
VIPA (including debt infrastructure hospitals and rest homes) 1.846,55 1.760,22 1.670,24
DBFM "Schools of Tomorrow" 369,7 393,88 181,96
PPP debt 782,84 779,06 756,93
Hospital infrastructure 0 4.963,21 4.726,93
Rest 1.909,36 1.554,19 1.321,86
TOTAL 18.949,91 23.808,43 23.385,74
26
Consolidated Debt Direct Debt position
By the end of 2017 92% of direct debt was financed with the EMTN programme (EMTN + Schuldschein).
Further increase of duration: from 3 years and 10 months at the end of 2015, over 10 years and 4 months at the end of 2016 to 12 years and 10 months at the end of 2017.
95% Fixed 5% Floating
Average duration (end 2017): 12 years and 10 months
31/12/2015 31/12/2016 31/12/2017
EMTN 3.201,50 3.516,50 4.836,50
Schuldschein 37,5 37,5
Bank loans 150,44 97,8 95,16
BCP 755 250 0
Current account 17,27 738,73 262,27
FRGE 5,88
Amoras 50,42
Ground lease 26,16
TOTAL 4.124,21 4.640,53 5.313,89
91%
1%
2% 0% 5% 1%
Direct debt instruments 2017
EMTN
Schuldschein
Bank loans
BCP
Current account
Rest
27
Debt Redemption Schedule
Consolidated Debt
0,00 €
200 000 000,00 €
400 000 000,00 €
600 000 000,00 €
800 000 000,00 €
1 000 000 000,00 €
1 200 000 000,00 €
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25
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Bank loans
Schuldschein
EMTN
Maturities LT direct debt till 2048
28
Consolidated Debt Bond Financings 2017
In 2017 the Flemish Community succesfully launched a benchmark of 1.00 billion euro with a maturity of 25 years and a 0.25 billion euro tap on the 2026 BM
Private placements on EMTN-program: 70 million euro
EMTN/SCHULDSCHEIN ISSUE DATE MATURITY
DATE MATURITY AMOUNT (in EUR) COUPON (%) YIELD (%)
1
EMTN – BE0001764183 (tap) 2/06/2017 13/10/2026 10 250,000,000 0.375 0.795
2 EMTN – BE0002284538 2/06/2017 2/06/2042 25 1,000,000,000 1.875
3 EMTN – BE0001773275 23/02/2017 23/02/2038 21 20,000,000 1.656
4 EMTN – BE6295854697 14/06/2017 14/06/2019 2 50,000,000 0.000 -0.440
Consolidated Debt
29
Distribution Stats Benchmark 2017
Tap Oct 2026 Bonds 2042 Bonds
Split by Geography Split by Geography
Split by Investor Type Split by Investor Type
Germany & Austria
33%
UK 6%
Benelux 51%
Scandinavia 6%
Other 4%
Germany & Austria
UK
Benelux
Scandinavia
Other
France 8%
Germany & Austria
64%
Benelux 22%
Other 6%
France
Germany & Austria
Benelux
Other
Fund 31%
Insurance Companies
6%
Banks/Treasury 45%
CB/Agency 11%
Others 7%
Fund Managers
Insurance Companies
Banks/Treasury
CB/Agency
Others
Insurance & Pension Funds
51%
Fund Managers 38%
Banks/Treasury 10%
Other 1%
Insurance &Pension Funds
Fund Managers
Banks/Treasury
Other
29
30
Consolidated Debt Bond Financings 2018
In the first months of 2018 the Flemish Community already did several private placements on the EMTN-program for a total amount of 295 million euro.
EMTN/SCHULDSCHEIN ISSUE DATE MATURITY
DATE MATURITY
AMOUNT (in EUR)
COUPON (%) YIELD (%) Spread vs
OLO
1 EMTN – BE6301937411 1/02/2018 1/02/2020 2 125,000,000 0 -0.318 15
2 EMTN – BE0001780346 28/02/2018 28/02/2048 30 60,000,000 1.863 9
3 EMTN – BE0001781351 28/02/2018 1/03/2038 20 30,000,000 1.603 8
4 EMTN – BE6303737959 28/03/2018 28/03/2058 40 80,000,000 1.874 9
31
Consolidated Debt Financing needs 2018 - 2020
Financing 2018 (in million euro)
in Mio EUR 2018 2019 2020
VMSW 1,000.00 1,225.41 1,135.09
VWF 350.00 323.23 311.49
School Invest 88.53 35.53 49.88
BAM 87.50 262.50 275.1
TOTAL New funding 1,526.03 1,846.67 1,771.57
Loan redemptions 758.71 58.41 322.67
TOTAL 2,284.74 1,905.08 2,094.24
2018
EIB 0
BM issue 1,500.00
BCP 150.00
Private placements 400.00
Balance 234.74
32
Consolidated Debt Financial instruments
EMTN (updated 5th September 2016)
Flanders has a EUR10 bn EMTN programme, with public issues and/or a series of private
placements
Currently only fixed interest issues
Programme allows flexibility on rates, currencies, redemptions, etc…
Currently outstanding: EUR 4,381.5 mln EMTN and 37.5 mln Schuldschein
Arranger: ING
Dealers: ING, BNP Paribas Fortis, KBC, Belfius, HSBC, Société Générale, LBBW
ECB-eligible
PSPP eligible
Commercial Paper
Flanders has a EUR 1.5 bn BCP-programme
Arranger: KBC
Dealers: KBC, Belfius
Currently outstanding: EUR 0 mln
STEP-compliant
Cashier : ING creditline of EUR 3.25 bn
33 I. Main Facts & Figures
II. Key Strengths
III. Public Finances
IV. Consolidated Debt
V. Flanders in a nutshell
34
Flanders in a nutshell Credit rating
Long term credit rating • Moody’s: Aa2 stable (Belgium: Aa3 stable) Short term credit rating • Moody’s: P-1
ISSUER MOODY'S FITCH STANDARD & POORS
FLEMISH COMMUNITY Aa2 Stable
BELGIUM FEDERAL STATE Aa3 Stable AA- Stable AA Stable
FRENCH COMMUNITY OF BELGIUM Aa3 Stable
WALLOON REGION A2 Stable
BRUSSELS CAPITAL REGION AA Stable
35
Flanders in a nutshell Key Points and Major Strengths
A wealthy, diversified and strong economy, with one of the highest European GDP per capita combined with a low and stable unemployment rate. Flanders is considered as Belgian economic engine;
Strong track record of Budgetary discipline and continued commitment to fiscal consolidation;
Modest debt burden and ample access to liquidity;
Strong credit rating of Aa2 Stable by Moody’s; above the rating of the Belgian federal state.
36
Questions ? Questions by email are also possible
36
For more information please also consult:
http://www.financeflanders.be
37
Contacts
Koen Algoed
Secretary – general
Flemish Community, Department of Finance and Budget
+32 493 31 63 02
Hugues Mommens
Senior advisor, head of financial operations
Flemish Community, Department of Finance and Budget
+32 493 51 22 94
Luc Keereman
Senior advisor
Flemish Community, Department of Finance and Budget
+32 493 31 63 07
38
Contacts (2)
Kristien Hantson
Advisor
Flemish Community, Department of Finance and Budget
+32 493 31 63 08
Heidi Debedts
Assistant to the director
Flemish Community, Department of Finance and Budget
+32 492 15 38 48
For more information please also consult:
http://www.financeflanders.be
39
Disclaimer
This presentation has been prepared by Flanders for informational purposes only. Although the information in this presentation has been obtained from sources which Flanders believes to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This presentation report is not intended to provide the sole basis for any evaluation of the transactions discussed herein. All estimates and opinions included in this presentation constitute our judgment as of the date of the presentation and may be subject to change without notice. Changes to assumptions may have a material impact on any recommendations made herein. Flanders will not accept any liability whatsoever for any loss howsoever arising, directly or indirectly, from the use of this presentation or the information provided for in this presentation or otherwise arising in connection with this presentation. This presentation is confidential and is provided to you for information purposes only and does not constitute a public offering or an investment service in Belgium. 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 2004/39/EC, as implemented in Belgium, are satisfied. Neither this document 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 3 of the Belgian law of 16 June 2006 on the public offering of investment instruments and the admission of investment instruments to the trading on a regulated market. © May 2018 Flanders. All rights reserved.
40
APPENDIX
41
Flanders in a Nutshell Key Investment Highlights
One of the strongest regions in Europe
Solid Financial Situation
Positive track record of Budgetary discipline
Moderate direct debt levels
Flanders has a wealthy, diversified and strong economy with one of Europe’s highest GDP per capita; unemployment rate close to Germany and solid economic growth
Flanders is collecting a greater part of its revenues via own fiscal instruments; which is positive in the context of economic growth and increasing GDP per capita levels
Fiscal flexibility: Flanders can levy more taxes rapidly if needed
Fiscal Autonomy Through the 6th state reform, Flanders has received a greater range of competences and benefits from an increased tax autonomy (own fiscal instruments)
Over recent years, Flanders has demonstrated its ability to reduce deficits while maintaining economic growth and social welfare.
Despite ESA 2010 rules, moderate levels of debt combined with a sound financial management strategy (no debt wall)
42
Flanders Part of the Federal State Belgium
Federal State
10 Provinces
3 Regions:
Flanders
Wallonia
Brussels
589 Towns and Cities
3 Communities:
Flemish
French
German
Since the 2nd State Reform
in 1980, the Flemish
Community and the
Flemish Region
immediately decided to
merge their competences.
As a result, Flanders has
one Flemish Parliament,
one Flemish Government
and one public
administration, responsible
for community and
regional matters.
Belgium Federal Structure
43
Flanders Part of the Federal State Belgium Competence Distribution
Federal State “powers related to public interest”
Public Finances
Defense
Security
Justice
Social Security
Public Health
Domestic & International
politics
Transport & Communication
Flemish Community
“powers related to language
and culture”
Education
Culture
Public health (prevention)
Welfare
Language issues
Child protection
Family Affairs
Flemish Region
“powers related to territory
and economy”
Economic development & co-
operation
Public infrastructure
Town & country planning
Environment
Energy
Employment
Agriculture
Foreign Trade
Regional transport
Control & organization of
local governments
Contribution to the consolidated debt (Maastricht in million euro)
44
2013 2014 2015 2016 2017
Federal Gov and Soc Security 345.167,00 354.636,00 361.995,00 366.083,00 371.154,57
Communities and Regions 45.756,00 48.705,00 48.939,00 57.214,00 57.284,23
Local entities 22.803,00 24.163,00 23.964,00 23.915,00 23.915,00
Total 413.727,00 427.503,00 434.898,00 447.212,00 452.353,80
2013 2014 2015 2016 2017
Walloon Region 18.284,80 19.435,50 20.360,30 21.271,00 21.339,23
Brussels Region 4.278,20 4.219,10 3.893,50 3.799,00 4.146,06
Flemish Community 16.710,80 18.285,20 17.341,10 18.187,10 18.157,27
French speaking Community 5.916,50 5.958,10 6.408,10 7.075,20 7.105,50
Interregional 366,70 460,80 476,00 6.428,90 6.056,65
Rest 198,90 346,00 459,80 452,50 479,52
Total 45.755,90 48.704,70 48.938,80 57.213,70 57.284,23
Consolidated debt of Belgium
Contribution to the consolidated debt
45
Regional & Local debt
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
Austria Belgium Germany Spain Switzerland
Regional & Local debt (% GDP - 2015)
Regional Government
Local Government
