NTMA Results and Business Review 2014

8 January 2015 - The National Treasury Management Agency (NTMA) today reported results for 2014 and provided a review of activities across the range of its business functions.

NTMA Chief Executive Conor O'Kelly, who took up his position earlier this week, said the recent commencement of the NTMA (Amendment) Act was a welcome development. The legislation replaces the separate boards and committees that arose from several extensions to the Agency's remit over the years with a single over-arching board structure.1

The new legislation also formally established the Ireland Strategic Investment Fund (ISIF), which absorbed the assets of the National Pensions Reserve Fund (NPRF), and placed NewERA on a statutory footing as a dedicated centre of corporate finance expertise to Government. Mr O'Kelly said it would be a priority in early 2015 to finalise an investment strategy to underpin the ISIF mandate, which is to invest on a commercial basis to support economic activity and employment in Ireland.

Turning to the NTMA's funding and debt management programme Mr O'Kelly said: "Last year saw the NTMA, under the leadership of John Corrigan, make a full return to the bond markets with regular auctions and the issue of two new long-term benchmark bonds. Ireland's position was further improved with the early repayment in December of €9 billion of its IMF loan facility using cheaper, long-term market funding. The NTMA plans to issue €12-15 billion of long-term bonds over the course of this year (2015) which includes provision for further IMF repayments. The €4 billion sale of a new 7-year benchmark bond yesterday represents a strong start in this regard."

The NTMA also worked closely with the Department of Finance in 2014 on the establishment of the Strategic Banking Corporation of Ireland (SBCI). The SBCI will provide low-cost, flexible finance for Irish small and medium-sized businesses (SMEs). The NTMA assigns staff to the SBCI and provides it with business and support services and systems.

Bond market activity

In January 2014 Ireland issued its first government bonds following its exit from the EU/IMF Programme the previous December. There was strong investor demand for the new 10-year benchmark bond, with €3.75 billion raised through a syndicated sale2. The NTMA also raised €4.25 billion through a series of auctions of this bond during the rest of the year.

In November the NTMA raised €3.75 billion from the sale by syndication of a new 15-year benchmark bond. During the year the NTMA also conducted a buyback and switch which reduced the outstanding balance of the April 2016 bond by €2 billion (20 per cent).

In December the NTMA completed the first tranche of early repayment of Ireland's IMF loan facility, with €9 billion or almost 40 per cent of the overall IMF loan facility repaid. Further early repayments are planned for 2015.

The €11.75 billion bond market funding sourced by the NTMA during 2014, together with a €7.4 billion rundown in cash and other short-term investment balances, was applied to fund an Exchequer deficit of €8.2 billion, to refinance €2.7 billion of maturing long-term debt and to repay €9 billion of borrowings from the IMF. The weighted average interest rate on the €11.75 billion of bond market funding raised in 2014 was 2.84 per cent.

The NTMA held Exchequer cash and other short-term investment balances of €11.1 billion at end 2014, down from €18.5 billion at end 2013. Exchequer debt service costs in 2014 were €8.2 billion.

Irish sovereign bonds continued their sustained rally in 2014 with the yield on the 10-year benchmark bond closing at 1.23 per cent at year-end compared with 3.54 per cent in January 2014. Ireland continued to converge with core European countries as the yield spread on the 10-year bond over the equivalent German bond narrowed to 75 basis points at year-end from 166 basis points in January 2014.

In October, the Department of Finance estimated that General Government Debt (GGD)3 would be €203.2 billion or 110.5 per cent of Gross Domestic Product (GDP) at end 2014. It expected Ireland's net debt4 (General Government Debt is a gross measure) to be 90.8 per cent of GDP at end 2014.

Investing in Ireland

The Ireland Strategic Investment Fund (ISIF) was formally established on 22 December 2014 and absorbed the assets of the National Pensions Reserve Fund (NPRF). The ISIF's initial portfolio includes investment commitments in Ireland totalling €1.4 billion in areas such as infrastructure, venture capital and long-term finance for SMEs.

In light of the Government's stated intention to refocus the Fund's investment towards Ireland, since mid-2011 the Fund has been focused on capital preservation while maintaining its capacity to participate in market gains consistent with the Fund's statutory mandate.

The Fund's Discretionary Portfolio (the Fund excluding investments made at the direction of the Minister for Finance for public policy reasons) was valued at €7.1 billion on 31 December 2014 and delivered a return of 4.3 per cent in 2014.

At 31 December 2014 the Directed Portfolio was valued at €15.0 billion - consisting of investments made at the direction of the Minister of Finance in AIB (€11.7bn)5 and Bank of Ireland (€1.4bn)6 and cash (€1.9bn).

Delivering major infrastructure

2014 saw progress on several major Public Private Partnership (PPP) projects in which the National Development Finance Agency (NDFA) had a key role:

  • The N17/N18 road PPP project (a 57-km stretch of motorway in Galway) reached financial close in April 2014 and construction is underway. This was the first Irish PPP to include institutional investor debt funding since the start of the financial crisis and was voted European PPP Deal of the Year at the 2014 Project Finance International awards. (NDFA was financial advisor)
  • Construction of Schools PPP Bundle 3 - providing a total of 5,700 school places at eight schools in Donegal, Galway, Leitrim, Limerick, Westmeath, Waterford and Wexford - was completed on time and on budget in April 2014. (NDFA was procuring authority and financial advisor)
  • Financial close on Schools PPP Bundle 4 - providing 3,000 pupil places at 4 schools in Clare, Cork, Louth and Tipperary - was achieved on 22 December 2014 with construction commencing this week. (NDFA is the procuring authority and financial advisor)
  • The N7 Newlands Cross PPP road project opened to traffic in November 2014, three months ahead of schedule. The N11 part of this project is on schedule for delivery in 2015. (NDFA was financial advisor)
  • The Dublin Waste to Energy PPP project reached financial close during 2014 and construction is underway. (The NDFA was financial advisor)

The NDFA, in addition to being the financial advisor on the PPP component (totalling €1.4 billion) of the stimulus package announced by the Government in July 2012, is responsible for procuring all the non-road PPP projects in the package: the PPP component of the new DIT campus at Grangegorman, schools, primary healthcare centres and courthouses. The procurement competitions for these projects are all underway.

The NDFA is also delivering 15 non-PPP school projects on behalf of the Department of Education & Skills with a combined value of c. €80 million. Three "design and build" contracts were awarded in early 2014 and construction is underway at all sites.

Advising on State assets

Through the NewERA unit, the NTMA provided advice and project management services to the Government in relation to the sale of the Ervia (formerly Bord Gáis Éireann) energy business, which was completed in June 2014 at an enterprise value of up to €1.1 billion. NewERA also provided advice to Government in relation to the sale of non-strategic generation capacity by the ESB which enabled special dividends of €197 million to be paid to Government in 2014. An additional special dividend was also approved by the Board of ESB in 2014 to meet its commitment of delivering special dividends totalling €400 million to Government.

NewERA has developed, in conjunction with the relevant Government Departments, a Shareholder Expectations Framework intended to provide clarity and guidance for each of the commercial State entities within its remit in relation to the Government's strategic priorities, policy objectives and financial performance and reporting requirements. Shareholder Expectations letters based on this Framework have now been issued by the respective Ministers to ESB (in 2013) and to EirGrid, Bord na Móna and Coillte (in 2014).

NewERA continues to work with relevant Departments to develop proposals for investment to support economic activity and employment, in particular in the areas of afforestation/biomass supply chain and energy efficiency. It is also overseeing the implementation process to give effect to the Government decision on a partial merger of Coillte and Bord na Móna.

Managing claims against the State

Acting as the State Claims Agency (SCA), the NTMA carries out claims and risk management functions on behalf of the State. In April 2014 the SCA's remit was significantly extended with the delegation to it by Government of the management of personal injury and third-party property damage claims in respect of an additional 61 public bodies, doubling the total number within its remit from 56 to 117.

The SCA's Legal Costs Unit, tasked with dealing with the negotiation and settlement of third-party costs arising from certain tribunals of inquiry, has secured reductions of €10.5 million (52 per cent) on the 133 tribunal-related legal expense claims resolved by the Unit since it became operational in February 2013. A further 35 claims are currently being managed by the SCA.

The SCA also achieved negotiated legal costs savings, totalling €10 million in respect of Bills of Costs submitted by plaintiffs' solicitors in personal injury cases taken against the State.

The number of claims under the SCA's active management at end 2014 rose by 18 per cent from a year earlier to 7,303 claims. The estimated liability against all active claims at end 2014 was €1.47 billion.

In 2014, the SCA settled 2,082 cases at a total cost of €95 million.

The SCA, in conjunction with key stakeholders, went live in 2014 with the National Adverse Event Management System (NAEMS), an end-to-end risk management tool. This tool will support client authorities to better manage their risks so as to reduce the incidence of claims. Ireland will be one of the first countries worldwide to have a single ICT system to support the management of risk across its public service, including the healthcare system.


  1. NAMA and the Strategic Banking Corporation of Ireland, to which the NTMA assigns staff and provides business and support services and systems, will continue to be governed by their own separate boards.
  2. Syndications, which are managed by a group of banks appointed and overseen by the NTMA, are often used to issue a new bond and involve larger amounts of issuance. Auctions are managed directly by the NTMA, occur more frequently than syndications and are typically used for selling additional amounts of existing bonds.
  3. General Government Debt (GGD) is a measure of the total gross consolidated debt of the State compiled by the Central Statistics Office and is the measure used for comparative purposes across the European Union. The National Debt is the net debt incurred by the Exchequer after taking account of cash balances and other financial assets. Gross National Debt is the principal component of GGD. GGD also includes the debt of central and local government bodies. GGD is reported on a gross basis and does not net off outstanding cash balances and other related assets - unlike the National Debt.
  4. The Central Statistics Office (CSO) produces a measure of General Government Net Debt (net GGD) which is calculated by deducting from General Government Gross Debt the value of the financial assets corresponding to the categories of financial liabilities which comprise General Government Gross Debt. The assets include: Exchequer cash and liquid assets, NPRF/ISIF cash and investments (currency and deposits, bonds and loans), IBRC cash and loan assets and other cash and assets held by Central Government.
  5. The NTMA, as it has in previous years in respect of the Directed Portfolio, engaged an external firm to provide an independent fair market valuation of the Fund's directed investment in AIB in line with generally accepted accounting principles. Following this exercise the AIB ordinary and preference shares held within the Fund's Directed Portfolio have been valued on a preliminary basis at €11.7 billion.
  6. The Fund's ordinary share holding in Bank of Ireland was valued at its market price.
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