Annual Report
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Annual Report 2007-2008 In 2008, Queensland Treasury Autonomous and accountable Corporation (QTC) celebrates its Created to provide a range of independent financial services to the Government and its twentieth year of operations. public sector entities, QTC was established on With its inaugural Chairman, Sir Leo Hielscher AC, 1 July 1988. It brought together the financial and Chief Executive, Stephen Rochester, at the operations of its predecessor, the Queensland helm, QTC has navigated Queensland through Government Development Authority, the the challenges of the financial markets, and Investment Branch of the Queensland maintained its course providing low cost Treasury department, and the debt of the funding and independent financial and risk Brisbane City Council and the Queensland management advice to ten State Treasurers and Electricity Commission. their respective governments. QTC was formed as a separate entity QTC determines its own worth by the value it (a ‘corporation sole’), reporting to the Treasurer has created for its customers and for the State. and Queensland Parliament via the Under Over the past twenty years, QTC has maintained Treasurer, with responsibility for implementing its AAA credit rating and generated more than the Government’s fiscal policy through the $1.7 billion in savings for customers in the raising services it provides. of their capital requirements alone. While total In 1991, QTC became an autonomous and savings are not completely quantifiable, they accountable central financing authority, when are estimated to be much greater. Today, QTC responsibility for the State’s wholesale and employs 160 people and has more than $43 billion medium- to long-term investments was transferred of debt on issue. to the Queensland Investment Corporation. This is the story of QTC’s journey so far. In August 1991, Sir Leo Hielscher AC was appointed Chairman and the QTC Capital Markets Board was established. QTC is unique in the Australian government marketplace, with an operating model designed to provide the services of a corporate treasury (ie, debt funding, short- to medium-term investments, and financial and risk management advice), not to maximise profits for itself. While QTC is required to operate profitably, its objective is to maximise value for the State and its entities. QTC makes it more efficient and less risky for the State and its public sector bodies to benefit from the considerable advantages associated with operating in global wholesale debt and investment markets, without having to access those markets themselves. It acts in the interests of Queensland and its public sector customers, aiming to provide truly professional advice. QTC’s customers are the departments, Government-owned corporations, statutory authorities and local governments of Queensland. Extracting economies of scale In the initial years, QTC focused on consolidating the State’s debt, taking on the role as Queensland’s single debt issuer, rationalising the number of approaches to the debt markets and eliminating competition between the various issuing local and semi-government authorities. The economies of scale generated by this consolidation, together with QTC’s commitment to open and transparent communication with the markets, translated into well sought after, liquid debt products that have ultimately provided customers with the lowest cost of funds. In its early days, QTC achieved many firsts. It was the first to establish a global transferable note (TRN) program, specifically targeted at offshore investors, and to issue global bonds at yields below those achievable in the domestic market. Expanding economies of scope Concurrently, it established multi currency Building on its success in delivering value to medium-term note programs in Europe and the customers from its debt funding economies of scale, United States to supplement the Global TRN QTC broadened its capabilities and established Program and, in 1992, became the lowest priced an independent corporate advisory service in Australian semi-government issuer, a position it 1994. Introducing these complementary services still holds today. allowed QTC to achieve economies of scope in the provision of quality, independent financial Similarly, QTC’s Cash Fund, which was established and risk management advice. to assist customers with the management of their short-term cash balances, has consistently Customer demand for these advisory services out performed the UBS Bank Bill Index (ie, the has grown enormously, and QTC now offers a industry benchmark for comparing cash funds) full range of services including financial and risk and delivered competitive returns for customers’ management advice, financial modelling and short- to medium-term investments. credit analysis. QTC continues to evolve in response to the QTC has advised, in some capacity, on most of demands of the changing financial markets the State’s key infrastructure projects. It played a In 1995, QTC arranged a cross border lease and the dynamic environment in which its lead role in negotiating the merger of Suncorp, for Stanwell Corporation Limited’s turbines, customers operate. the Queensland Industry and Development with a transaction size of $1.365 billion. It was, Corporation, and Metway Bank, joining public at the time, the largest cross border lease ever and private corporations and bringing them into undertaken, and generated a benefit to the State public ownership. of $94 million. The success of this project led to It has also advised on the sale of some of other cross border lease arrangements for major Queensland’s major assets, including Dalrymple assets, including power lines and rolling stock. Bay Coal Terminal and the State’s retail electricity In its role as the State’s provider of corporate assets, and also on the recent acquisition by treasury services, QTC has strived to provide the State Government of the previously local valuable and independent insight and analysis government-owned water assets. into crucial areas of financial risk for the State. With greater understanding of its customers’ requirements, QTC has customised its lending products, establishing client specific debt pools for larger borrowers to give them complete flexibility and increased capacity to manage the risks inherent in their debt portfolios. To provide more targeted support on customers’ major projects, QTC established a secondment program in 2002, and has now placed QTC employees in more than 100 key strategic and operational roles within customers’ businesses since that time. In one of its most significant projects to date, QTC completed a major review of the financial sustainability of 109 of Queensland’s local governments in July 2007. The review In particular, QTC has taken a long-standing provided valuable information that the Local position on the criticality of managing risk when Focusing on customers Government Reform Commission used to procuring infrastructure. Neither for nor against In 1996, having achieved significant economies of assist it in determining the boundaries for the public private partnerships, QTC has been scale and scope for customers, QTC reconsidered historic amalgamation that reduced existing championing the crucial issue of risk management its strategic approach and embraced a customer local governments from 156 to 72. and its evaluation in these major deals since the loyalty operating model. QTC has had many achievements in its late 1990s. Addressing these issues in major Recognising QTC’s ongoing success and viability first 20 years of operations, funding vital projects is even more relevant today with the was contingent on its ability to add real value infrastructure for the State’s development Government’s commitment to its significant to customers’ businesses, QTC set about on terms and conditions second only to those infrastructure program. developing a comprehensive understanding of achievable by the Commonwealth Government In 2007, QTC collaborated with Government customers, their businesses, challenges and future of Australia, and providing advice on key stakeholders and contributed to the development directions. This understanding, which is an projects that have added real value to the of the Supported Debt Model. This model is evolving journey, is used to develop and deliver lives of everyday Queenslanders. a financing variant of the traditional privately- customised financial and risk management financed public private partnership model, and solutions for customers. By maintaining its relationships with the provides governments with a viable and responsible In 1997, QTC established its Central Treasury financial markets, understanding its customers’ option to use public private partnerships to Management course to assist customers’ needs and staying true to its corporate treasury achieve their infrastructure objectives, despite the understanding of the concepts, financial increasingly challenging market environment. services provider role, QTC intends to continue instruments and practices involved in managing this success for many years to come. Similarly, to provide targeted support to the debt and interest rate risk. In 2002, QTC hosted procurement of local government infrastructure its first Corporate Financial Management development, QTC joined with the Local course, to assist customers in considering the Government Association of Queensland in 2005 key issues in financial management including to establish LG Infrastructure Services Pty Ltd. determining capital