PART THREE PublicProject Finance and Credit Enhancement

1
PART THREEPublic/Project Finance and Credit
Enhancement
Investor Day 2005
Jacques GUERBER Group Head of Public/Project
Finance and Credit Enhancement
Robert COCHRAN Chairman and CEO of FSA
Bruno DELETRE Managing Director of Dexia Credit
Local
2
Business lines overview (1)2004 another year
of strong commercial performance
CAGR 13.7
CAGR 8.5
9.9
(Bn)
(BnUS)
8.6
Excludes amounts relating to FSA-insured GICs
and consolidated VIEs
3
Business lines overview (2) in a record low
risk environment for Dexia as a whole
Credit enhancement
Banking activities
annualized
Excluding impact of charges for Legio Lease
at Dexia Bank Nederland
4
Strong growth of net income
CAGR 11.1
(M)
Underlying Net Income in EUR. Negative impact
of the decline of the US dollar, in particular
for FSA
5
Business line is set for new progressions

• Financial Security Assurance Inc. (FSA)
• Banking activities in domestic base (FR BE)
• Banking activities in international markets
• Product range developments
• Outlook

6
Financial Security Assurance Inc. (FSA)
Robert Cochran Chairman and CEO of FSA
7
2004 originations above record level of 2003
Gross PV originations
Financial Products
67.1
(M US)
3.6
927
895
-2.1
International
31.9
U.S. ABS
-10.3
U.S. Muni
Non-GAAP term however, management considers it
an important measure in analyzing the financial
results of the Company
8
Contributing to a strong growth of outstandings
CAGR 2001 - 2004
Net Par Outstanding
13.7
319
8.6
290
44.2
263
(Bn US)
1.9
217
22.0
Excludes amounts relating to FSA-insured GICs
and consolidated VIEs
9
Leading to a robust revenue growth
CAGR 2001 - 2004
595
18.3
515
(M US)
462
11.2
360
69.6
16.5
US GAAP balances Represents financial
products segment NIM (financial products net
interest income less net interest expense)
10
and excellent financial results in 2004
US GAAP balances
11
Book Value and Adjusted Book Value Per
ShareSince the Merger with Dexia, FSAs ABV Has
Grown at a high double digit rate
per Share
ABV
Compound Annual Growth Rate 31.12.99
31.12.04 ABV 16.7 BV 15.8
BV
12/99
12/94
12/97
12/96
12/95
12/98
12/03
12/00
12/01
12/02
12/04
Adjusted book value (ABV) per share of 110.90 at
December 31, 2004 Book value of 76.76
after-tax net deferred premium revenue, net of
deferred acquisition cost, of 21.25 PV of
future installment premiums and net interest
margin of 13.83 fair-value adjustments for
insured credit default swaps of .94.
Growth rates include dividends
12
Monoline Financial Guaranty Insurance
Industry2004 Markets Shares New Originations
(Gross Par Insured)
(1) Source Thomson Financial. Represents only
primary issuances (no secondary). Percentages
based on Thomson Financial giving full credit for
entire transaction to each participating insurer.
Total volume shown is actual par insured. (2)
Source Company reports (Includes ABS, MBS, CDOs
and CDSs). (3) Other monoline financial
guarantors.
13
High credit quality of originationsCategorized
by Shadow Rating - Net Par Insured in 2004
Municipal 36.5 BnUS
Overall Combined (Incl. ABS Muni) 92.4 BnUS
(1)

• The pie charts on this page demonstrate the high
  quality of FSAs underlying transactions,
  expressed as shadow ratings.
• FSA utilizes layered loss reinsurance for many of
  its ABS transactions. Layered loss reinsurance
  reduces risk to FSA, which is often reflected in
  a higher shadow rating assigned to FSA for a
  given transaction.
• Single-A or better credits constituted 91 of
  municipal business, 90 of ABS business and 91
  of total FSA new business originated in 2004.

As of 31.12.04. Statutory basis. Internal FSA
ratings expressed in industry terms. (1) Reflects
benefit of layered loss reinsurance. Includes
amounts related to FSA-insured GICs
14
Improving further credit quality of the
portfolio Categorized by Shadow Rating Net
Par Outstanding

• The pie charts on this page demonstrate the high
  quality of FSAs underlying transactions,
  expressed as shadow ratings.
• FSA utilizes layered loss reinsurance for many of
  its ABS transactions. Layered loss reinsurance
  reduces risk to FSA, which is often reflected in
  a higher shadow rating assigned to FSA for a
  given transaction.

As of 31.12.04. Statutory basis. Internal FSA
ratings expressed in industry terms. (1) Reflects
benefit of layered loss reinsurance. Includes
amounts related to FSA-insured GICs
15
And leading to the strongest AAA capital
basein the industry - SP Margin of Safety

• SPs Margin of Safety Model shows FSA can
  withstand claims in excess of 160 of those
  incurred in a Triple-A depression.

Source SP, June 2004 (as of 31.12.03).
SP depression model format for details refer
to FSA website
16
Economic environment - threats and opportunities

• Interest rates
• - Rising
• Reduce volume, but
• Increase credit spreads, investment income and
  future refundings
• - Falling
• Increase volume and refundings but
• Decrease future investment income and credit
  spreads
• Credit Spreads
• Current spreads at historic tights
• Wider spreads create more value-added
  opportunity, but
• Cause mark to market losses until maturity
• Market Demand
• Public sector
• Securitization
• Infrastructures

17
Strengths of Dexia Ownership

• Enhanced stability
• A broad capital base
• Dexia shares FSAs conservative credit culture
• Opportunities for growth
• Better visibility in the European market
• Synergies (joint transactions, new products,)
• Since 2000, Dexia and FSA have underwritten
• 336 joint transactions
• representing 65.1 billion US par insured
• generating 461 millions US gross PV premium for
  FSA

18

• FSA
• Outlook / Medium-Term Objectives

19
Public and Project Finance

• Banking activities
• Commercial Development to date
• Competitive environment
• Broadening of the offer / Innovation
• Focus on Project Finance
• New Markets

Jacques GUERBER Group Head of Public/Project
Finance and Credit Enhancement
Bruno DELETRE Managing Director of Dexia Credit
Local
20
Business lines overview 2004 another year of
strong commercial performance
CAGR 8.5
(Bn)
8.6
21
France Volumes growdespite high market share
and flat O/S debt of local authorities
Long-Term outstandings
CAGR 2001-2004
(Bn)
2.9
57.7
55.2
53.6
53.0
1.7
11.3
1.1
22
Belgium Volumes growth despite high market
share and flat O/S debt of local authorities
Long-Term outstandings
CAGR 2001-2004
(Bn)
2.0
27.8
27.0
26.6
26.3
-10.1
9.9
1.9
23
Italy Strong growth especially in Corporate and
Project Finance
Long-Term outstandings
CAGR 2001-2004
(Bn)
25.0
28.5
55.6
24.8
20.2
14.6
22.6
24
Spain Momentum builds up rapidlyin a new market
Long-Term outstandings
CAGR 2001-2004
(Bn)
28.8
4.9
73.7
3.9
2.9
2.3
25.5
25
United Kingdom a leading playerin the pioneer
country of PFIs
Long-Term outstandings
CAGR 2001-2004
(BnUK)
25.6
3.3
26.8
2.5
1.8
1.6
s.q.
x10
Private Finance Initiative (Public Private
Partnership)
26
America a powerful increase in a very deep
market
A unique combination of offer between Dexia and
FSA
Long-Term outstandings
CAGR 2001-2004
(BnUS)
33.5
36.5
-7.2
30.4
22.2
15.3
38.9
27
Growth of outstandings stems mainly from new
markets
(Bn)
Long-Term outstandings
193.0
177.7
167.1
151.2
28
And from other local players in historic
markets(France Belgium)
Long-Term outstandings
CAGR 2001-2004
(Bn)
2.6
85.5
82.2
80.3
79.3
-5.9
10.8
1.3
29
Dexia competitive environmentDifferent types of
competitors address different customer segments

• Investment banks
• DEPFA
• Large domestic Banks

Very big clients
Competition

• Local retail/savings banks
• Public institutions
• Large domestic banks

Middle market
Competition

• Local retail/savings banks
• Public institutions

Small clients
Competition
30

• Innovation and commercial franchise
• are the two keystones of Dexias success
• in Public Finance

31
Dexia offers a wide spectrum of value-added and
innovative products and services

• Financial Engineering
• Structured loans
• Debt management
• Capital Markets solution
• Project Finance
• Asset gathering and payment services
• Insurance services (excluding Credit Enhancement)

32
Financial EngineeringStructured loans

• A unique expertise developed in France since 1994
• Several thousands transactions totalling nearly
  50 Bn

Long-Term originations of structured loans
(Bn)
33
Financial EngineeringStructured loans
(continued)

• Dexia know-how in Financial engineering
  technology is exportable
• e.g. Germany

(Bn)
34
Financial EngineeringDebt management
Debt management volumes
(Bn)
14.6
10.1
8.7
6.4
35
Financial EngineeringCapital Markets Solutions
- Dexia in the League Tables
36
Financial EngineeringCapital Markets Solutions
- Dexia in the League Tables
37
Financial EngineeringCapital Markets Solutions
Focus on some transactions

• In May 2004, Dexia Capital Markets was mandated
  by the  Communauté Française de Belgique  as
  joint Bookrunner and Joint Lead Manager for its
  EMTN program
• A program of 300 M with a 10-year maturity

• In November 2004, the City of Rome issued a 400
  M bond with a final maturity of 2033
• Dexia Capital Markets acted as Joint Bookrunner
  and Joint Lead Manager

38
Project Finance (1)
Outstandings as of December 31, 2004
United Kingdom 1,498 M
Belgium 212 M
Sweden 80 M
France International Head Office 2,628 M
Slovakia 161 M
United States 978 M
Australia-Asia 228 M
Spain 650 M
Italy 3,079 M
excluding Asset Finance for countries where
Dexia has no local presence
39
Project Finance (2)Dexia can act as Advisor
Arranger Underwriter
High Speed Line Infraspeed Netherlands
Tubes Lines / Metronet London Underground UK
Delfluent Water Treatment Netherlands
Infrastructure Journal Renewables Arranger of the
Year 2004
Infrastructure Journal Renewables Arranger of the
Year 2003
Emasesa Water Treatment Supply Seville, Spain
Sistemas Energeticos Cando Wind Power Spain
Nuove Acque Water concession Italy
Fluvanna Gas-fired power plant Virginia, USA
Santiago-Valparaiso Toll road Chile
Lake Bonney Wind Power Australia
Qatargas 2 LNG Qatar
40
Project Finance (3)A selective approach

• Priority given to "Infrastructures"
• (Transport, Environment, "PFI Accommodation")

Continue to develop in Renewable Energy,
Continue to diversify in Oil/Gas
Prudent recovery in thermal energy. Opportunist
interventions in Telecoms
Continue to ignore all other sectors No appetite
for emerging countries other than oil gas
41
Project Finance (4)Private Public Partnerships
(PPP) spread out in Europe
42
Asset Gathering and Banking Services develop
Customer assets
(Bn)
CAGR 17.5
19.0
43
Insurance Services too
Insurance premium collected
(Bn)
CAGR 14.2
CAGR 34.2
15.5
38.0
44

• Geographic expansion is the other driver of
  growth
• Acquisitions
• Greenfield operations
• On the strengths of retail networks

45
Geographic expansion

• Central and Eastern Europe
• Australia
• Canada
• Japan
• Mexico

46
Geographic expansionCentral and Eastern Europe
47
Geographic expansionAustralia

• A Triple-A Sovereign
• Opportunities mainly in infrastructures financing
  (Project Finance Business)
• 6th largest market in 2003,
• 3rd largest market in First Half 2004
• Dexia established since 2004
• A few transactions completed in 2004

48
Geographic expansionCanada

• A very vast market, fully decentralized
• Total debt outstanding 360 BnCAD as of Dec 31,
  2003
• Mostly desintermediated 40 BnCAD new Bond issues
  in 2003
• Large demand for infrastructures (development of
  PPP)
• Dexia has already written business in Canada
• 1.7 BnCAD assets as of Dec 31, 2004, mostly in
  Local Public Sector
• 2 deals on primary market with School Boards in
  2004 totalling 140 MCAD
• Project Finance transactions in the pipeline for
  2005
• New Rep. office opened in Montreal

49
Geographic expansionMexico

• A market with many opportunities
• Total debt outstanding 123 BnMXP (8.3 Bn) as of
  Mar 31, 2004
• Debt is mostly secured by pledge on federal
  subsidies
• Developing bond market for Local Authorities (13
  of total debt as of March 31, 2004)
• Large investments needs in infrastructure sector
  (water treatment, transport, )
• Dexia has already written business in Mexico (130
  MUS assets as of December 31, 2004)
• Innovative deal with the city of Tlalnepantla in
  2003 letter of credit pledged on water fees
• New subsidiary to open in mid-2005

50
Geographic expansionJapan A growing market
1000 Bn Yens
Local Public Sector Debt
Total Debt of Local Authorities / GDP
51
Conclusions and Outlook
52
Local Public Sector finance market
53
Development largely driven by organic growth
Innovation
Based on
Broadening of client base
Geographic expansion
54
Dexia is the only global player to offer full
range of products/services to the local public
sector
Dexia
Debt Management
Dexia Finance
Dexia
Structured Loans
Project Financing
Payment services / Short term lendings
Insurance Services
Local public sector
Dexia Insurance
Dexia Bank
Dexia Sofaxis
Dexia CLF Banque
Asset Management
Long term Loans
Dexia AM
Dexia
Credit Enhancement
Capital Markets Solutions
FSA
Dexia Capital Markets
55
Medium term objectives / outlook

• Hypotheses
• Constant dollar
• IFRS from 2004
• Underlying only (excluding non-recurring items)

56
Discussion
Since the acquisition of FSA, Dexia is the
recognized world leader in Public Finance