National Treasury Management Agency Annual Report & Financial Statements 2019 THE NTMA IS A STATE BODY WHICH PROVIDES ASSET AND LIABILITY MANAGEMENT SERVICES TO GOVERNMENT. ITS PURPOSE IS TO MANAGE PUBLIC ASSETS AND LIABILITIES COMMERCIALLY AND PRUDENTLY. CONTENTS INTRODUCTION Chairperson’s Statement 4 Chief Executive’s Review 6 BUSINESS REVIEW Funding and Debt Management 8 Ireland Strategic Investment Fund 20 National Development Finance Agency 30 NewERA 38 State Claims Agency 48 GOVERNANCE AND CORPORATE INFORMATION Agency Members 60 Governance Statement and Agency Members' Report 62 Committee Reports 68 Risk Management 71 Management Team 75 FINANCIAL STATEMENTS 79 PORTFOLIO OF INVESTMENTS – ISIF 209 EXPLORE ONLINE SOCIAL MEDIA Visit our website to find Follow us and out more: www.ntma.ie join the conversation FUNDING IRELAND NTMA AND DEBT STRATEGIC AT A MANAGEMENT INVESTMENT GLANCE FUND The NTMA is responsible The NTMA controls and manages for borrowing on behalf of the the Ireland Strategic Investment Fund 2019 Government and managing (ISIF) which has a statutory mandate the National Debt in order to to invest on a commercial basis in a ensure liquidity for the Exchequer manner designed to support economic and to optimise debt service costs activity and employment in the State. over the medium term. Long-Term Issuance Investment Performance €15BN €1BN €14.4bn of benchmark bond issuance at accumulated returns since inception a weighted average yield of 0.9% and a by end-2019, investment returns of weighted average maturity of 16.4 years. +5.1% in 2019. The balance was in private placements - two 100-year notes and a new inflation linked bond maturing in 2045. Syndicated Tap of Ireland's Investing in Ireland First Sovereign Green Bond €13BN €2BN the total commitment to Ireland raised at a yield of 0.229%. The including co-investment by private transaction saw demand from more sector partners. ISIF committed €442m than 130 individual accounts. in 2019 across 21 investments bringing the total ISIF commitment to €4.6bn. Falling Debt Economic Impact Service Costs Responding to the housing crisis €5.0BN 3,000 NEW HOMES was the cash interest cost of the National sold by end-2019, 6,500 new homes Debt in 2019, a decline of almost 13% under construction and funding compared to 2018 and more than advanced for a further 5,500. 30% below the 2014 peak. Read more page 8 Read more page 20 NATIONAL NewERA STATE CLAIMS DEVELOPMENT AGENCY FINANCE AGENCY Acting as the National Development Through NewERA, the NTMA Acting as the State Claims Agency Finance Agency (NDFA), the provides a dedicated centre of (SCA), the NTMA manages personal NTMA provides financial advisory, corporate finance expertise to injury and property damage claims procurement and project delivery Government, providing financial against the State and State authorities services to State authorities on advice to Ministers regarding their and provides related risk management public infrastructure projects. shareholdings in major commercial services. It also manages claims for State bodies. legal costs against the State and State authorities, however so incurred. Delivering Projects Growth in Activity Estimated Outstanding Liability €1.3BN 138 €3.6BN the estimated total capital value of the number of Portfolio company the State Claims Agency was managing a range of education and housing assignments on which NewERA 11,580 active claims with an estimated projects being delivered by the provided financial analysis and, outstanding liability of €3.6bn at NDFA. where appropriate, recommendations end-2019. to Government Ministers. Providing Financial Advice Dividends Settling Claims €5.7BN €261M 54% providing financial advice on PPP in combined dividends were received over half of cases resolved by the (procurement, construction and operations) by the Exchequer from bodies within State Claims Agency in 2019 were and other infrastructure projects in different NewERA’s remit in 2018/19. resolved without court proceedings sectors including housing, climate action, being served. transport and education with an estimated capital value of €5.7bn. Social Housing PPP Advice – Capital Expenditure Reducing Legal Costs 1,500 €2.2BN 39% new social homes will be delivered by the of capital investment spend in the State Claims Agency settled 830 State through the Social Housing PPP 2018/19, more than three quarters bills of costs received from third Programme. The delivery is divided into of which related to the energy parties for €68m – a reduction of three distinct project bundles with and water sector companies. 39% on the amount claimed. construction of homes nationwide. Read more page 30 Read more page 38 Read more page 48 Introduction CHAIRPERSON'S STATEMENT Our Annual Report this year is published at a time of unprecedented challenge. COVID-19 has taken lives, placed an enormous burden on our health system and wider society, and triggered an economic shock with far-reaching consequences for jobs, livelihoods, employers and the State. The people who are charged with managing this public health emergency deserve great credit. I want to express the NTMA’s appreciation for the work being done throughout the country by healthcare workers, the emergency services, community groups, volunteers and everyone who has played a part in addressing the challenge we share. I also want to acknowledge the efforts being made throughout the NTMA – by the Board, the Management Team and by our colleagues at every level in the Agency – to ensure all aspects of the Agency’s critical work on behalf of the State and citizens continue uninterrupted in what I know are exceptionally difficult circumstances. The NTMA has always recognised the importance of contingency planning; of investment in robust technology and operational platforms; and of investing in our people and their continuous learning. The value and importance of these priorities is clearer than ever today as the Agency, along with every individual and every organisation in the State deals with the challenges posed by the COVID-19 crisis. The Agency has a strong track record in creating value for the State, during both good times and bad. The challenge which the organisation faces today is to continue to do so, in the most extraordinary environment the Agency has yet faced. The investment in technology has proved invaluable in the current crisis as the Agency's remote working infrastructure is tested in an unprecedented manner. All of the Board members and I have huge admiration for the manner in which everyone across the organisation has responded to the crisis and continued to be so productive despite the challenging environment. 4 Introduction Business Review Business Governance and Corporate Information Our systems and processes have been stress tested in real ISIF increased its green investment commitments, taking time and the fact that the Agency has continued to deliver the total amount committed to €349m by the end of 2019. across all its mandates is a testament to the investment in NewERA continued to play a leading role in driving climate people and processes. action and facilitating the sharing of best practice in climate Our 2019 Annual Report sets out the progress the Agency measures throughout its portfolio companies and semi-State made during the year in delivering on its wide variety of bodies, while the NDFA successfully implemented major mandates: Funding and Debt Management, Ireland Strategic climate-friendly initiatives in projects in which it had a Financial Statements Investment Fund (ISIF), NewERA, the National Development procurement or advisory role. Finance Agency (NDFA) and the State Claims Agency (SCA). I will conclude by drawing attention to the NTMA’s formal The Board and I will do all we can to provide leadership, reporting on the Agency’s gender pay gap for the second guidance, challenge and support to the Chief Executive year. While the data we report this year highlight the extent and Management Team in their efforts to continue the of the challenge we face in closing the gender pay gap, they progress outlined in this Report. also serve to demonstrate our commitment to improvement. My assurance to all our stakeholders is that the NTMA The Board and Management Team are excited about the will continue to tackle every challenge that comes our way Agency's Inclusion and Diversity programme, and are with commitment, innovation and a strong desire to provide committed to greater equality throughout the organisation long-term value for Irish citizens. We recognise that the Portfolio of Investments - ISIF and, while we recognise that the steps we take to achieve this NTMA, thanks to its range of mandates and expertise, is in a will take some time to deliver results, we will not use time as unique position to support Ireland’s recovery efforts and all an excuse. The task is urgent and we want our improvements our energy and efforts will be deployed with this goal at the to be meaningful, tangible and implemented quickly. heart of everything we do. On behalf of the Board, I thank Mary Walsh, who retired from Of course, we also remain mindful of the many significant the Board in December 2019, for her significant contribution challenges that existed before the emergence of COVID-19 and wise counsel to the Board over the past five years. 2019 and which will continue to require effective management. also saw the appointment of two new Board members, Brian These include the challenges posed by climate change, the O’Kelly and Rachael Ingle and I wish to take the opportunity to transition to a low-carbon economy, Brexit, housing and formally welcome them both to the Board. infrastructure deficits. Finally, I would like to express my appreciation to my fellow Given the particular long-term importance of climate change, Board members, the Chief Executive and the Management I am pleased to say that the NTMA has continued to make Team, and everyone throughout the NTMA for their hard significant progress in supporting measures to address work and for the diligence, skill and innovation that they climate change across a range of our business units.