30 year Irish bonds issued at very low rates

OssianSmyth · 06-02-2015 04:23PM #1

This week the NTMA borrowed €4bn over 30 years at 2.088%

This the longest debt ever issued by Ireland. A €1bn project may now be financed at €45m/year

http://www.ntma.ie/news/ntma-raises-e4-billion-from-sale-of-new-30-year-benchmark-bond/

The next multi-year capital plan is being drawn up now but I guess the temptation will be to fund increased current spending to win next year's general election rather than consider the long term.

What should be included in the capital programme?

L1011 · 06-02-2015 04:29PM

DU, whatever they do in lieu of MN, Galway bypass and M20 would be difficult to remove from the list, for political reasons.

A lot of what is actually needed - water and sewage treatment, school building renewal etc is politically unsexy or tied to bring done with inefficient PPPs.

Personally I'd like to see better until I utilities provision - fibre, gas and power - to more marginal areas. Can be sold to voters as well as enhancing competitiveness and providing growth potential

plodder · 06-02-2015 10:12PM

DU and the original MN plan.

That's amazing though to see 30 year bonds at 2%.

Victor · 07-02-2015 12:23AM

Note that many PPPs are used for off balance sheet borrowing.

OssianSmyth wrote: »

This week the NTMA borrowed €4bn over 30 years at 2.088%

This the longest debt ever issued by Ireland. A €1bn project may now be financed at €45m/year

Surely a A €1bn project should be be financed at €20.88m/year. If the capital repayment is the difference, not that bonds are only repaid at the end of term.

Carawaystick · 07-02-2015 12:24AM

We got 6 month money for free last week.

our pensions are feiced though...

Deedsie · 07-02-2015 08:55AM

M7 Widening scheme, M20 and Metro North would be the most important and beneficial schemes to get underway.

The M7 is a link for most of our major cities to Dublin and the congestion around Naas is unacceptable. Finish this road off first and foremost.

bk · 07-02-2015 11:07AM

Two important projects people forget:

- National Broadband Plan, Fiber To The Home (FTTH) for all rural homes. Originally it was going to cost 1 billion, half from government, half from industry. But now Eircom are saying it will cost less then that due to dropping costs of FTTH gear. Note that given the rural nature of this project, the Government should be able to tap EU regional structural funds to pay their side of it.

An incredibly important project IMO, finally everyone in Ireland has high quality broadband, and the rural/urban divide closed. Very important for a "knowledge based" economy like ours. Also it can help deliver government, banking, etc. services to rural people and help offset the closing of rural banks, post offices, etc. Also good to help reduce the need to drive and get people teleworking.

- Second runway at Dublin Airport. Tourism is so important to our country and we need quality infrastructure to attract people. Passenger numbers are exploding at Dublin Airport, up 15% in just January! And are expected to explode over the next year with all the announced new routes. Add to that if IAG does manage to buy Aer Lingus, they will likely divert UK Regional traffic through their DUB hub, rather then then already maxed out Hesthrow.

The existing runway is in tatters and badly needs to be rebuilt and lengthened. But obviously that can only be done when the second runway is built and operational. DUB will likely be well on it's way to 30 million passengers by the time both runways are operational.

I mention these projects as no way else has, of course I think, DU, MN, M20 and even BRT are vital projects too.

Tedddy · 07-02-2015 11:14AM

1.Dart Underground
2.M20
3.Metro North
4.New Runway Dublin Airport
5.M7 widening
6.Galway Bypass

xper · 07-02-2015 11:12PM

bk wrote: »

Two important projects people forget:

- National Broadband Plan,...

- Second runway at Dublin Airport.

Tedddy wrote: »

1.Dart Underground
2.M20
3.Metro North
4.New Runway Dublin Airport
5.M7 widening
6.Galway Bypass

The parallel runway at Dublin airport is not in competition with these other projects. It is to be funded from within the DAA who get no public money.

OssianSmyth · 08-02-2015 08:18AM

Victor wrote: »

Surely a A €1bn project should be be financed at €20.88m/year. If the capital repayment is the difference, not that bonds are only repaid at the end of term.

You're right. I was working out repayments as an annuity.

AugustusMinimus · 08-02-2015 03:02PM

Have to wonder where BRT or potentially even light rail for Cork would come into the equation. Population density will increase over the next 20 years given the whole docklands development and there's certainly scope for a grade separated BRT system or maybe even light rail.

Idbatterim · 08-02-2015 04:11PM

The parallel runway at Dublin airport is not in competition with these other projects. It is to be funded from within the DAA who get no public money.

correct, which is brilliant, as it is far less of a political football, we wont be hearing about Dublin getting something that the village of ballygobackwards doesnt have. The regulator has pushed the passenger numbers from 23.5-25 million before it can be built, probably thinking this would result in it being put back a few more years, when in fact with the large growth at Dublin, they may hit 25,000,000 this year. In which case his decision wont have cost any time... Also I doubt he will up the numbers required again, its futile, DAA want and need this new and longer runway and crucially the money isnt coming from public funds with all the problems that that creates...

In relation to the M7 widening, I am hearing about this a lot. What is the proposal, to go from 2-3 lane each way? If 3 lane is needed now, would it not make sense to make it 4 lane if possible, or if new bridges etc are being built, build them to a sufficient width to be able to take a fourth lane at some stage in the future?

jank · 09-02-2015 04:07AM

Personally I would put Metro West ahead of Metro North due to the way the M50 is almost at capacity already post-widening.

cheves · 09-02-2015 04:57AM

train from dublin airport

bk · 09-02-2015 12:01PM

xper wrote: »

The parallel runway at Dublin airport is not in competition with these other projects. It is to be funded from within the DAA who get no public money.

Same is largely true of the National Broadband Plan. 50% from industry, 50% from the government. But the government end should largely be covered by EU regional development funds.

The EU has set a goal of everyone getting a minimum of 30Mb/s by 2020 as their major infrastructure goal, so EU funding for one of the most rural areas of the EU should be relatively straight forward.

cheves wrote: »

train from dublin airport

That is what Metro North is.

loyatemu · 09-02-2015 12:29PM

jank wrote: »

Personally I would put Metro West ahead of Metro North due to the way the M50 is almost at capacity already post-widening.

can't see MW having any noticeable effect on the M50.

Pete_Cavan · 09-02-2015 05:22PM

The problem we have now is that the government has slashed capital budgets and seems to have decided that, where possible, large capital projects will now be funded through PPPs, while they avoid taking any real action to cut current expenditure and are happy enough to fund it through bonds if necessary. Even relatively small projects, such as the construction of schools or garda stations, are being rolled together to create a €100m PPP. This means that the capital budget for the Department of Education or Defence can be drastically cut (for ever), while the cost of servicing the PPP contract become the concern of the NDFA. The NDFA, as part of the NTMA, finances this through issuing bonds, although the money is presumably thrown into the exchequer pot and distributed to various blackholes and PPP payments as well. In the future if we need to implement austerity again, we will have only small capital budgets to cut but have PPP debt which must be serviced. PPP concession projects are fine if the contractor can recover costs either entirely or substantially through direct user charges.

In this time of low bond yields we should cut out the middle man, issue a bond to fund a particular project and commission it through a traditional construction, D&B or DBO contract. I think a project like DU is ideal for funding with long terms bonds like those issued last week. The project does not suit the PPP model and the government will otherwise never be able to make the contributions needed for the project from capital budgets. It has been said that the extension of the Dart network would push Irish Rail (CIE as a whole?) into profitability. Running an operating profit and directing most of the annual subvention to servicing the debt for the DU tunnel is a much better situation than a perpetual loss making and cutting services to reduce costs (which probably make the situation worse).

As I said in another thread, the M20 should not be funded through PPP as it is behind numerous other projects and will take too long to get off the ground. A bond sale similar to that last week could fund both DU and the M20 and the benefits accruing from the projects would easily cover the costs over the next 30 years and longer.

Metro North is ideal for a PPP concession contract because it can operate independent of IR and Luas. Fares paid by passengers can be ringfenced to pay the PPP consortium. If MN was built as planned, there would be little fear that passenger numbers would be too low, some half arsed “optimised” version on the other hand…

jank · 10-02-2015 01:38AM

Interestingly there is talk on this side of the world with 30 year Australia Bond rates at about 2%, people are piping up asking the government to sell bonds to fund the next generation of infrastructure needs for Australia.

antoobrien · 10-02-2015 02:24PM

Public transport
BRTs for Cork, Galway & Limerick

Rail
Double track Athlone - Portarlington & Galway - Athenry for increased access to the West, with similar upgrades to the Sligo line as necessary (don't know that line).
Dart underground.

Roads
Letterkenny - Sligo (N15)
Sligo - Tuam (N17, multiple projects)
Limerick - Cork (M20)
Cork - Waterford (N/M25, multiple projects)
Waterford - Rosslare
M7 Widening
Motorway Service Areas

Utilities
National broadband plan
The various grid enhancement projects
Moneypoint (coal burning power plant) replacement
Water and sewage schemes

Geuze · 11-02-2015 01:41AM

bk wrote: »

That is what Metro North is.

Surely what we need is a train from DUB airport, not a metro.

What I mean is: don't mix plane pax with commuters.

Or build the line, but offer a mix of services, some direct, non-stop, other stopping.

murphaph · 11-02-2015 11:51AM

Geuze wrote: »

What I mean is: don't mix plane pax with commuters.

The airport itself is a huge employer. Anyway, Dublin airport is not far from the city at all really, and longer distances see commuters "mixed" with passengers all the time. I'd say express trains are actually the exception.

bk · 11-02-2015 12:51PM

Geuze wrote: »

Surely what we need is a train from DUB airport, not a metro.

What I mean is: don't mix plane pax with commuters.

Or build the line, but offer a mix of services, some direct, non-stop, other stopping.

If you know anything about the configuration of trains around Dublin city center then you would know that we will never see that in our lifetimes.

And really there is zero need for it. Dublin Airport is just 12km from the city center, very close by international standards and there would be little benefit in routing intercity trains to it.

If there was a demand for this, it would be better for Irish Rail to just stop at Park West station and have a linking non stop bus service from their to Dublin Airport, all with integrated ticketing.

This would give pretty much the same journey time to the airport as going through the city to get to the airport, at a fraction of the Billions it would cost to build a tunnel and quad lining to do it!

It just doesn't make logical sense.

Metro North is a far more important and feasible project. It serves not just the airport, but Swords, the 6th largest population area in Ireland and Irelands largest town. A M50 park and ride, North Side of Dublin City, the area with the highest population density in the whole of Ireland, etc.

MayoSalmon · 25-02-2015 09:25AM

10 Year bonds below 1% now

Records interest rates & ECB QE should equate to massive infasturture investment you would imagine?!!

dubhthach · 25-02-2015 12:05PM

MayoSalmon wrote: »

10 Year bonds below 1% now

Records interest rates & ECB QE should equate to massive infasturture investment you would imagine?!!

1billion to do FTTH for 90% of premises in state would cost less then 10million year to service. Anyone know how much they are paying 3 (or other vendors) for rural broadband scheme?

antoobrien · 25-02-2015 12:09PM

dubhthach wrote: »

1billion to do FTTH for 90% of premises in state would cost less then 10million year to service. Anyone know how much they are paying 3 (or other vendors) for rural broadband scheme?

Three got ~€220 for the NBS.

Vodafone are investing €450m with the ESB in their FTTB scheme.

loyatemu · 25-02-2015 12:12PM

can we just issue several billions worth of long term debt? aren't we supposed to be bringing the national debt down?

dubhthach · 25-02-2015 12:16PM

Sure but they aren't planning on hitting 90% of premises in the state, that and it won't be open-access state owned system (akin to the MAN's), still at least they'll be able to piggy back off alot of ESB Telecoms existing infrastructure (as well as the various MAN's) for their backhaul/middle tier.

€223 million, jaysuz, though I will say with the rollout of LTE and the fact that the core network is going all IP that ye end up with each mast eventually needing a fibre connection.

hfallada · 26-02-2015 06:18PM

loyatemu wrote: »

can we just issue several billions worth of long term debt? aren't we supposed to be bringing the national debt down?

We do it constantly without any media reporting it. The NTMA, which also runs NAMA is responsible for managing the national debt and tons other government finance related programs eg the state bonds you buy in the post office.

NTMA constantly buys high interest debts with bonds they sold at lower rates of interest. They constantly do it to reduce the burden of the national debt

loyatemu · 26-02-2015 08:59PM

hfallada wrote: »

We do it constantly without any media reporting it. The NTMA, which also runs NAMA is responsible for managing the national debt and tons other government finance related programs eg the state bonds you buy in the post office.

NTMA constantly buys high interest debts with bonds they sold at lower rates of interest. They constantly do it to reduce the burden of the national debt

yeah that's different though, as they're just rolling over old debts at lower rates of interest. My question is can we just issue €3 billion of new long term debt to pay for infrastructure projects without p!ssing off Frau Merkel and Signor Draghi... AIUI long term debt never really gets paid off it just gets rolled over and reduced by inflation, but we already have a huge national debt.

L1011 · 26-02-2015 09:36PM

loyatemu wrote: »

AIUI long term debt never really gets paid off it just gets rolled over and reduced by inflation, but we already have a huge national debt.

We were actually slowly reducing the actual (rather than debt:GNP ratio) amount over time, and its pretty much a given that we'll have to again in some level based on how high it has got.

dowlingm · 27-02-2015 01:06AM

discussion of what could be funded from debt is pointless if divorced from recognition of existing debt levels. The interest on new debt may be low but first and foremost the ability to roll over existing debt, avoiding default, needs to be covered. Any remaining fiscal room is likely to be attacked by "social partners" of all stripes rather than made available for investment.

The annoying thing is that the Euro stability programme denied even healthy economies with low net debt/GDP the right to run a large counter cyclical deficit financed stimulus programme, but put repayments of private debt to German banks at hazard and tremendous sums can be put on the debt ledger.

30 year Irish bonds issued at very low rates

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