History - 2008-2011

Image: Queensland Treasury Corporation Annual Report 2008–2009.

On 1 July 2008, the Queensland Government transferred to QTC approximately $21 billion of the State’s long-term financial assets, held to meet future superannuation and other long-term obligations of the State. This transfer removed the volatility in the Queensland State Budget as a result of the fluctuation in returns from the investment of these assets.

In return for this transfer, QTC entered into a financial arrangement to provide a fixed rate note to the General Government sector, at a rate initially set at 7.5 per cent per annum, which is the actuarially assessed long-term average rate of return for a managed diversified portfolio of investments.

While QTC was expected to incur accounting profits or losses in the future due to the volatility in investment returns in the market, the return on the assets was expected to match the long-term average of 7.5 per cent per annum. As the transfer had no effect on cashflow, there was no impact, positive or negative, on QTC’s capacity to meet its financial obligations. The liability for superannuation was not transferred to QTC, but remained with the Queensland Government. As there was also no impact from a whole-of-Government perspective, the transfer did not affect the State’s or QTC’s credit rating or outlook.

Image: QTC reception signage at 61 Mary Street, 2009.

In late 2007 and early 2008, as QTC observed what appeared to be the effective end of traded fixed interest markets and saw the signs of an undefined but pending crisis, QTC adjusted its funding strategies and built up liquidity to secure funding for the State. This buffer allowed QTC to handle the unanticipated shocks of the second half of the 2008-09 financial year.

The most significant of these shocks came in February 2009, when rating agency Standard & Poor’s downgraded QTC’s long-term credit rating from AAA to AA+. In May, Moody’s also downgraded QTC’s long-term credit rating from AAA to Aa1.

On 16 June 2009, following an extended period of severe market turmoil resulting from the global financial crisis, strong competition for term funding from commercial institutions that had already secured a guarantee from the Australia Government, and feedback from its major investors and members of its distribution group, QTC took the significant decision to accept the Australian Government’s offer of a guarantee for its existing AUD benchmark bond lines, with maturities between 12 months and 15 years. QTC formally took up the guarantee in September 2009.

In January 2010, in recognition of the time-limited nature of the Australian Government guarantee offer, QTC implemented a strategy to begin rebuilding its yield curve of bonds with the exclusive guarantee of the State Government of Queensland, and issued $4 billion AUD benchmark bonds maturing in 2014. At the time, this transaction was reported to be the largest ever AUD domestic syndicated benchmark bond line launch by a semi-government authority.

In February 2010, as conditions generally improved in global financial markets, the Australian Government announced that it would no longer offer to guarantee new state government borrowings after 31 December 2010. Following this announcement, QTC focused its funding strategy on transitioning from issuing AUD benchmark bonds covered by both the Australian Government Guarantee and the State’s own Government Guarantee, to issuing bonds exclusively guaranteed by the State Government of Queensland (consistent with the proven funding arrangements that existed prior to the onset of the global financial crisis).

QTC’s ongoing strategy to respond to strong investor demand and build its yield curve of State Government guaranteed benchmark bond lines provided investors with a viable alternative of well-established, liquid benchmark bonds that complemented QTC’s existing Australian Government-guaranteed benchmark maturities.

Image: The Major Projects Team worked on the State’s South East Queensland Schools Project, which was the pilot project for the Supported Debt Model. Courtesy of the Department of Education, Training and the Arts.

In 2008, QTC established a new Major Projects Team to support its client-focused team with large-scale projects. The development of this team provided QTC with a concentrated focus on providing its clients with financial risk management advice and services, with dedicated resources to assist in the assessment, procurement and delivery of major infrastructure projects across the State.

This team provided the foundation for QTC’s joint initiative with Queensland Treasury, the Infrastructure Projects Assessment Team (IPAT). Established in July 2011, IPAT combined QTC and Queensland Treasury resources to better ensure public sector infrastructure projects were properly analysed, procured and delivered.

In turn, the Queensland Government’s Projects Queensland unit, formed in 2012, was built around core personnel of the former IPAT, to bring together a team of financial specialists from Queensland Treasury and Trade and QTC. A number of QTC employees were seconded to Projects Queensland, to deliver positive infrastructure outcomes by driving cooperative funding models to maximise private investment, while promoting and protecting the State’s interests.

Image: A QTC meeting to discuss clients’ needs.

The 2009-10 financial year saw the progression of one of the largest organisation-wide initiatives undertaken by QTC to date: the design and transition to a new customer-centric operating model and structure.

This restructure provided QTC a better alignment of its capabilities to meet its clients’ needs. By matching its service structure more closely to its clients’ needs profiles, QTC achieved a closer level of collaboration with its clients, in turn resulting in better strategic financial and risk management for its clients and the State. Clients benefited from improved access to the QTC services they needed, as well as QTC’s refocused delivery of targeted, customer-specific advisory services.

While QTC’s mandate and strategic direction remained unchanged, the organisational realignment around four client-focused, multi-disciplinary teams fundamentally changed the way QTC worked with its clients and within the organisation, bringing together teams comprising a range of disciplines and encouraging greater interaction and collaboration within and across teams.

Image: Courtesy of Queensland Rail. Shown on page six of the Queensland Treasury Corporation Annual Report 2010–2011.

The Queensland Government’s privatisation program undertaken in 2010 and 2011 saw the privatisation of several public assets. This program was unprecedented in size, scale and complexity for an Australian state government.

QTC played a key role in supporting the privatisation of Queensland Rail’s coal and freight transport business (Australia’s largest IPO in a decade), Queensland Motorways Ltd (40 year lease), the Port of Brisbane (99 year lease), the Abbot Point Coal Terminal (99 year lease) and management of Queensland’s forestry plantations (99 year licence).

The program delivered $15 billion to the State, funding the natural disaster recovery program and repaying State debt. As the State’s corporate treasury provider, QTC’s assistance included the secondment of senior staff to lead the Government’s sales teams, the provision of tailored capital structure and debt management advice, the development of financial risk management, interest rate risk management and cash management solutions; the management of the State’s debt repayment requirements in the most cost effective manner and the management of cash inflows to maximise returns for the State. Two of QTC’s most senior staff members provided project leads to the asset divestment program for the successful sale of Forestry Plantation Queensland ($612 million, June 2010), QR National ($4.6 billion, November 2010) and the Abbot Point Coal Terminal ($1.83 billion, May 2011).

In November and December 2010, significant flooding events occurred across much of the State of Queensland. In early January 2011, substantial rainfall also caused damaging flooding to the north-west of the State’s capital city, Brisbane, which ultimately culminated in considerable flooding across parts of the south-eastern corner of Queensland. January 2011 also brought a category five tropical cyclone, Cyclone Yasi, to the coast off Cairns in the north of the State.

The efforts of 12 Queensland councils to rebuild communities impacted by Tropical Cyclone Yasi and the devastating floods of late 2010 and early 2011 were boosted with assistance from Local Government Infrastructure Services (LGIS), a joint venture between QTC and the Local Government Association of Queensland.

Between them, the 12 councils sustained around $800 million in damage to facilities and infrastructure. LGIS was engaged directly by the councils to provide in-field assistance to complete damage assessments and prepare funding applications in line with Queensland Reconstruction Authority (QRA) requirements, to support the councils in their applications for reimbursement under the Australian Government’s National Disaster Relief and Recovery Arrangements. These joint Australian and state governments’ arrangements were instrumental in Queensland’s solid recovery from the natural disasters, and through the arrangements’ provision of 75 per cent of the cost of reconstruction, significant progress was made to repair the damage to public infrastructure.

The Lockyer Valley Regional Council also engaged QTC to analyse the financial implications of the Australian-first Strengthening Grantham development. This involved the relocation of more than 100 families from the devastated Lockyer Valley community of Grantham to a new town in a safer location, while enabling them to retain their sense of community.