NTMA delivers 2019 midyear update and publishes its 2018 Annual Report

  • Elimination of debt “chimneys” over the course of 2018, 2019 and 2020 an important step in stabilising Ireland’s borrowing requirements and delivering a smooth long-term maturity profile
  • Favourable yield environment contributing to significant reductions in the State’s interest bill – annual debt servicing costs due to fall to €5 billion this year and likely to fall to €4.5 billion in 2020 resulting in savings for the State of €3 billion per annum versus peak in 2014
  • 2018 issuance of Ireland’s first-ever Sovereign Green Bond an important step in achieving greater investor diversification
  • However, Ireland’s debt levels remain high, creating significant exposure to rising interest rates in the medium term
  • Investor concerns include Brexit, potential changes to the global Corporation Tax regime, and Italy

1 July 2019

The National Treasury Management Agency (NTMA) has today published its 2018 Annual Report and delivered a midyear update for 2019.

Comment by the NTMA Chief Executive, Conor O’Kelly:

“As we look past Ireland’s unusually high refinancing requirements or “chimneys” out to 2020, we must remain conscious of the challenges ahead, including the risks arising from Ireland’s elevated debt levels.

Eliminating these “chimneys” - which at their peak were €60 billion over the period 2018 and 2020 - is an important step in further stabilising Ireland’s borrowing patterns and making our long-term maturity profile smoother. Taking a medium term view, once the last of the chimneys is eliminated in 2020 the annual redemption profile will be as smooth as any time in our history.

We will be in this position because Ireland has taken advantage of the low interest rate environment to issue long-term debt, locking in the benefits of this low-cost borrowing for years to come.

Since 2015, we’ve issued €67 billion of long-term debt with an average maturity of over 14 years. This means that over 50% of Ireland’s total outstanding marketable debt has been refinanced in the past four years.

This strategy is delivering substantial savings for the State and we estimate that our annual debt servicing cost will fall to €5 billion this year and is likely to fall to €4.5 billion in 2020, representing an annual saving of €3 billion on peak levels seen in 2014.

As part of our issuance, in 2018, Ireland was one of the first European sovereigns to issue a Green Bond. This was a landmark transaction that raised €3 billion, but, just as importantly, helps diversify and broaden our investor base and further mitigate future funding risks.

However, our debt remains high at over €200 billion, which leaves Ireland exposed to the risk of increased debt service costs in the medium term. It is worth pointing out that this year’s interest bill will still be three times the annual average over the period from 2003 to 2008 despite the cost of borrowing being four times lower.

It is also worth pointing out that Ireland is unusual in an international context in that we rely on overseas investors for approximately 90% of our funding – significantly more than other countries.

These investors are conscious of potential risks to Ireland’s ability to borrow that include Brexit, international tax changes, and fiscal challenges in Italy”.

Comment by the Minister for Finance, Paschal Donohoe TD:

“I welcome today’s publication of the NTMA’s Annual Report and Accounts for 2018. I commend Conor O'Kelly and his team for the NTMA's performance in 2018 across all its business units and encourage them to continue striving to deliver at the same level, both in 2019 and into the future.”

NTMA business units – key points:

  • The Ireland Strategic Investment Fund (ISIF) had a strong start to 2019 recouping in full the investment losses from global markets that were recorded in 2018. At current market valuations, the Fund has now generated investment gains of €850 million to date since inception in December 2014.
  • The Fund has developed and is implementing a revised strategy to align with the Priority Themes identified in the Minister’s recent ISIF review – Regional Development, Housing, Indigenous Businesses, Climate Change and investment in sectors adversely affected by Brexit.
  • The Fund expects to reduce its pace of capital deployment during 2019, reflecting two factors: its more focused investment strategy and the growing availability of capital from private sector sources for commercial investments in Ireland right now. The Fund’s strategy is to continuously adapt its investments to economic conditions to ensure that its capital goes where it is most additional.
  • The Fund will continue to reduce its exposure to global markets following Government measures to reallocate a part of ISIF’s capital to other initiatives in the Irish economy, including through funding Home Building Finance Ireland and the Land Development Agency and providing capital for the Government’s proposed “Rainy Day Fund” to enhance the State’s contingency planning.
  • The Fund committed €773 million across 21 investments during 2018, bringing ISIF’s total investment commitment to date to Irish projects and businesses to €4.4 billion.
  • The Fund continued to act as a catalyst for attracting private sector co-investment into Ireland, with the total committed to these projects and businesses growing to €12.5 billion to date since inception (inclusive of ISIF’s €4.4 billion). This means ISIF continues to exceed its original co-investment target of €1 for every euro invested by ISIF, generating a current run rate of €1.80 co-investment for every euro invested.
  • The National Development Finance Agency is supporting delivery of PPP Projects in the education, health, justice and housing sectors with an estimated total capital value of €1.7 billion. It is providing financial advice on PPPs and other infrastructure projects with an estimated total capital value of €6 billion., including the delivery of 1,500 new social housing units. During 2018 it managed the delivery of PPP Schools Bundle 5 while protecting the State and taxpayer from financial risk arising from the liquidation of key market counterparties.
  • NewERA continues to serve Government departments and State authorities by providing corporate finance and shareholder advisory services to Ministers in respect of commercial enterprises within their remit. The number of assignments on which NewERA has provided analysis and/or recommendations rose to 132 during 2018.
  • The State Claims Agency was managing over 10,000 active claims against State bodies, with an estimated outstanding liability of €3.15 billion, at the end of 2018. Its remit extended to 146 State bodies or authorities at the end of 2018. The SCA’s role includes managing complex and sensitive cases taken against State bodies by individuals and their families and requires the SCA to act in a professional, ethical and compassionate manner in discharging its statutory responsibilities.
  • The NTMA’s role in managing the alleged Apple State Aid recovery process is a complex, high-value project that carries significant financial and operational risks. It is critical work on behalf of the State and the NTMA has been in a position to perform this role using its existing skill base and infrastructure, avoiding substantial costs that would have arisen for the State if alternative avenues involving the private sector had been used.
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