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00:00Here in New York, we're going on a trip out west now to Manitoba and British Columbia.
00:06And let's start with the trade environment and the economic environment
00:12and talk about what are the things that the governments of Manitoba and B.C. are doing to strengthen their competitiveness in this moment.
00:23And Sam, we'll start with you.
00:25Thank you very much, Derek.
00:26I'm happy to participate virtually here, and I'm very sorry that I wasn't able to attend this year in person.
00:34Certainly, in relation to trade, it's a critically important item for the province of British Columbia.
00:44Diversification is going to be of paramount importance.
00:47We're very fortunate.
00:50A very modest percentage of our exports are going to the United States.
00:54So we've long enjoyed solid trading relationships with Asia, China.
00:59But there's efforts now that the government is undertaking to expand upon the trade and diversification to other areas in Asia, such as South Korea, Japan.
01:09And this is also going to be accomplished through the feet on the ground and trade offices that we have in the various continents.
01:19And so with the focus on that, I think we're positioned well to continue to grow the economy over the medium and the long term.
01:26Thank you for having us here, and thank you to National and Bloomberg for organizing this conference.
01:36Just picking up on Sam's point on diversification, trade corridors.
01:42Manitoba, from a geographic location, we're in the heart of North America.
01:50So we have access to markets in Canada, coast to coast, U.S. and Mexico.
01:59So from a logistics distribution perspective, that is an asset for us.
02:06And a key asset is Central Port Canada.
02:09This is the largest inland trimodal port that has integrated rail, road, and air transportations, which allows for just from a supply chain operations, makes Manitoba very competitive.
02:32And then there is the port of Churchill.
02:36We're talking about diversifying trade partners and trade corridors.
02:42The port of Churchill is the only deep water Arctic port with access to the Canadian National Railway.
02:52And it's also the only port in close proximity to Europe.
02:58So the port is seen as a strategic asset for Manitoba, but it's also been recognized by Prime Minister Carney as a strategic asset for Canada as a whole when it comes to trade diversification.
03:15It seems like a good moment to talk, I guess, more broadly about infrastructure.
03:23You mentioned a couple of really important points that make Manitoba's economy actually one of the most resilient economies in Canada, I think, relatively stable.
03:33What are some of the – and there's tons of talk, as we've heard earlier today, out of Ottawa about the need to invest in infrastructure.
03:43What are the Manitoba government's priorities?
03:46How do they sort of lay out over the next number of years in terms of infrastructure investment?
03:50Yeah, so the team for this year's budget was Building One Manitoba.
03:56And the centerpiece of the budget is a $3.7 billion strategic infrastructure plan.
04:06This is the largest investment, capital investment, in Manitoba.
04:14And the focus is on growing the economy, improving health care in Manitoba, education, housing.
04:24There's some investments when it comes to Manitoba hydro.
04:28So I talked about the Port of Churchill, Central Port, included in that infrastructure budget or investments related to infrastructure is investments in Central Port and investments in the Port of Churchill.
04:46There's investments that are allocated towards stabilizing the rail line that goes all the way to the Port of Churchill.
04:54There's also investments in building the roads and bridges and building an airport up north.
05:02When it comes to building health care, there's plans to open an emergency room in South Winnipeg, building personal care homes, and also focus on education and building schools.
05:21Sam, there's also an aggressive building plan, I think, in B.C.
05:25Tell us a little bit more about some of the highlights.
05:29Yes, happy to.
05:30Similar to Manitoba and virtually all of the other provinces, there's going to be a very important focus on build-out of capital plans for the usual areas.
05:41Health care is certainly one of the largest items in our budget, and that will consist of construction and enhancements to some of the hospitals, both located on the mainland in British Columbia, but also on Vancouver Island.
05:56Additionally, the build-out of the transportation sector is going to be very, very important, and this isn't just sort of preventative capital maintenance projects.
06:09We were impacted a couple of years ago with a severe atmospheric river, and as a result of that, many of the highway, certain of the highways and the rail links were out of service for some time.
06:24So it's being, taking proactive actions to build upon and enhance the corridor for transportation.
06:34Housing and student housing, as an example, with the universities and college, will also be a priority for the government.
06:42And there's been great progress that's been made, both in various areas throughout the province, both on Vancouver Island and on the mainland.
06:54The partnership that British Columbia will have also with the federal government will be important as well.
07:01And this one, with the announcements of the top five Building Canada projects, it will be very, very critical for the province to have the supporting infrastructure
07:16and allowing us to have the ability to get products to the markets without prolonged disruptions within the supply chain or due to unexpected circumstances due to adverse weather and natural disasters.
07:31All right. Let's talk about how you guys are going to finance all this.
07:35It's obviously a different borrowing environment than the one we had when we were here at this event a year ago.
07:42It's a much steeper yield curve.
07:45How do you, you know, how are you adjusting your financing plans as a result?
07:49You know, where are you seeing the most value for your taxpayers?
07:53And we'll start that one with you, Sam.
07:56Yes, thank you.
07:57We've certainly had very elevated borrowing requirements over the past couple of years.
08:03And as per our first quarterly update, the trend is going to be continuing.
08:09This year, we have a revised borrowing number of gross borrowing requirement of just over $35 billion.
08:15And I'm very, very pleased to say that we're more than well on our way to completing this program through a combination of our strong domestic issuance program that we have in Canada.
08:27The program has been very, very successful.
08:32We usually will continue to focus on building liquid benchmark bonds with preferred terms of 10 years and 30 years.
08:39But also featuring very, very prominently this year, similar to last year, was our offshore program, where we've had tremendous success in tapping the global capital markets on very, very cost-effective terms.
08:55Just in the calendar year of 2025, for example, we've had three very successful U.S. dollar global issues for three-year terms, five-year terms, and 10-year terms.
09:05And it's been underpinned by some very, very effective investor relations activities that we've been involved with, both in Europe and in North America.
09:17So I think going forward, we'll again look at the diversification of markets and investors in order to achieve the greatest cost savings for the taxpayers of the province.
09:30Nicoletta, same question to you.
09:32How does the yield curve affect your thinking, and how's your strategy evolving as an issuer?
09:39I mean, for this year, we're planning on borrowing $5.9 billion.
09:44That's what we were forecasting at budget.
09:47We looked again at these numbers with the first quarter release.
09:52Still forecasting to borrow $5.9 billion.
09:54I mean, that's within our range for the last few years and what we're forecasting out for the next three years, which is between $5.5 billion to $6.5 billion.
10:07I mean, the way we approach our borrowing program is that we borrow in the domestic market.
10:13We consider that our main market, issue in 10 and 30 years, build benchmarks in those terms.
10:25For us, with the size of our borrowing program, benchmark means $2 billion to $2.5 billion that we look at building on those two points of the curve.
10:37We also want to remain flexible when it comes to the domestic market and have the ability to pivot, either issuing on the shorter part of the curve.
10:50We've done five years in the past, and that's because we responded to investor demand.
10:55We've also gone longer than 30 years in the domestic markets.
11:01Manitoba Hydro, our largest crown corporation, has longer-dated assets, so that term, longer than 30 years, fits their portfolio really well.
11:13We also want to set ourselves in a position where there is flexibility in terms of the markets that we access.
11:21We've borrowed as much as 30% to 40% of our borrowing in international markets last year was just 40%.
11:31U.S. being our primary international markets, we had a very successful 10-year, $1 billion transaction last year in the U.S.
11:44We're monitoring that market for issuance this year.
11:49Given the size of our program and how we approach international markets and that we look at where we can find ourselves in the domestic market versus international markets,
11:59we're continually monitoring, but we want to keep our presence in the U.S. market.
12:06We also have European medium-term note program, and we've used our primary for private placements, and we're seeing significant interest and demand that's reflected to us for European private placement.
12:22But what we're working on right now is to increase that program, so it gives us the opportunity to look at Euro benchmark transaction.
12:34That's something that we could look at in the future.
12:38However, given the size of our borrowing program, we won't be able to do both Euro and U.S. at the same time.
12:45So we may look at alternating between those currencies.
12:50We also are monitoring the Australian market, similar to the other provinces.
12:57We had a very successful $600 million Aussie transaction last year.
13:03We'll continue to monitor those markets and look at opportunity.
13:10And international markets allows us to complement the domestic market, to take pressure off the domestic issuance,
13:19and reduce the frequency to which we go to the domestic market, and it does help with our cost of funding.
13:28Sam, do you want to speak also as well about how you see the foreign currency issue and strategy evolving for B.C.?
13:39Yes, and I would also echo just some of the latter points that Nicoletta just mentioned with regards to the benefits that an effective offshore program has had,
13:49both when we've returned to the domestic markets and creating some pricing tension in relation to subsequent competitively priced domestic bonds.
13:59But in relation to other market opportunities in foreign currencies, we've had a longstanding approach.
14:07We would be very diligent in making decisions on the timing of our offshore issuance and looking to obtain a positive, like an arbitrage opportunity.
14:18So to be able to issue at a particular term at a lower level after taking into consideration the all-in hedging costs for the deal.
14:28We've had success also this year in the Euro markets.
14:36We've broken new ground on two occasions with a successful 15-year Euro deal, and just recently at the end of September, a 20-year Euro deal.
14:44And those ones had a very, very high-quality investor book with the great orders that came in from banks, from asset managers, pensions, insurance companies, central banks, official institutions.
15:00And build out of the benchmarks within those in between, but very, very key terms, I think is very, very useful, rather than sort of the reliance upon shorter terms of five years and 10 years.
15:16Similar to Manitoba, we've also had success in the past with smaller sized Euro offerings that were done on a private placement basis.
15:25However, we much prefer to have those large orders where you have one or two investors coming into a public format.
15:33And we have been able to move some of the longstanding investors that have previously participated in privates into our public deals when we are going into the Euro markets.
15:46Nicoletta, if I can, since you mentioned the Port of Churchill, maybe I could just ask you a quick view on how you see that project evolving, sort of what the next steps are.
15:59There's never, in my memory, been so much excitement about what might happen at the Port of Churchill, at least, you know, in the national discussion.
16:06So what will happen there, Sarah, over the next number of years?
16:13Yeah, I mean, there's funding allocated in the current year's budget to develop the Port of Churchill.
16:20The province is working with Arctic Gateway Group.
16:25This is owned by 29 First Nations, plus Indigenous communities.
16:32And the goal with the Port of Churchill is to have it open year round.
16:37Currently, it's open about four months out of the year.
16:41And it is used to ship things like grain to Europe from that port.
16:48So if the port was to be open year round, which investments are being planned to reach that goal,
16:57what it would mean is increasing shipments.
17:01Critical minerals is in demand right now.
17:05So that's one thing that could be shipped out of the Port of Churchill's.
17:11There's talks of the province of Saskatchewan talking about shipping fertilizer, for example, to Europe out of that port.
17:20So I feel like the opportunities are endless when it comes to the Port of Churchill's.
17:24We just need to make the investments.
17:27And Prime Minister Carney, you know, recognized the Port of Churchill's as a project of national importance.
17:34We hope to see that develop in the near future.
17:39And we will have to leave it there.
17:41Sam, thank you for joining us from BC.
17:43Nicoletta, thank you so much.
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