Financial Solutions for Clients
Corporate Objective – Provision of high-quality, cost-effective products and services to the Western Australian public sector.
WATC successfully delivered the State’s borrowing requirements for 2016/17 and continued to facilitate sound financial management across the Western Australian public sector. In achieving this, key highlights included:
a $4.2 billion increase in client debt totalling $44.9 billion at 30 June 2017
the provision of client debt management strategies to support client objectives and State balance sheet management requirements
successfully achieving the target requirement for managing the refinancing risk of the State
increased utilisation across the Western Australian public sector of WATC’s interest cost projection service
the provision of resources to assist clients in the effective use and ongoing management of debt finance
in excess of $168 million of foreign exchange transactions in 11 different currencies on behalf of clients
over $4.85 billion in investments managed on behalf of clients at 30 June 2017
investment portfolios managed on behalf of clients continuing to outperform established benchmarks
continued client support and participation in foreign exchange education seminars, building awareness of foreign exchange risk management
WATC-hosted client presentations by leading financial markets economists well attended by clients
supporting, and contributing to, key State and client initiatives through a broad range of advisory engagements
client feedback affirming the high quality, capability and value add of WATC’s advisory services
improving service delivery for clients with the development of an online client portal.
As Western Australia’s central financial services provider, WATC provides a comprehensive suite of high quality, cost-effective financial products and services, comprising:
Debt Finance
Investments
Foreign Exchange
Treasury Services
Advisory Services.
These offerings are designed to promote, support and deliver sound financial risk management for WATC’s clients and the Western Australian public sector. Working closely with its clients, WATC ensures that the most appropriate application of these products and/or services achieve each client’s individual business requirements.
During 2016/17, work commenced on a new client-focused initiative to improve the delivery of WATC’s products and services through the development of an online portal. The new client portal will provide clients with 24/7 access to relevant account information and functionality to initiate transaction requests for all WATC products and services. The majority of the development work on the client portal has been completed, with clients contributing to the key design features and functionality.
At 30 June 2017, a number of clients are trialling a test environment of the client portal and have provided positive feedback. The production version of the client portal is expected to be available for use by clients in the first quarter of 2017/18.
In conjunction with the development of the client portal, WATC is redesigning and consolidating its suite of client reports, which will improve the information provided to clients and assist streamlined access to relevant information. These new reports will be progressively rolled out to clients via the client portal.
The following includes details on activity and development of WATC’s financial products and services during 2016/17.
Debt Finance
WATC assists clients develop, review and maintain effective debt management strategies through the provision of a range of loan products and related financial services. Designed to provide clients with access to cost-effective funding, while concurrently providing flexibility to structure loans to satisfy specific financing needs, WATC’s suite of loan products includes:
- Working Capital Facility
- Short-term loans
- Term floating rate loans
- Term fixed rate lending, including:
- interest-only loans
- amortising loans
- zero-coupon loans
- structured loans to meet individual client needs
- Capital indexed lending.
In addition, the broad range of supporting financial services includes:
- an interest rate swap facility, which enables clients to exchange a future stream of floating rate interest payments for a stream of fixed interest payments, or vice versa, enhancing flexibility in debt maturity diversification and interest rate risk management
- portfolio management services, to manage interest rate risk in a manner appropriate to clients’ business needs through an administratively efficient debt management system
- interest cost projection services, to assist clients with budgeting, project evaluation, and managing and reporting of future debt levels and associated interest costs, supporting informed decision-making when considering debt finance options
- individual debt management strategies meeting clients’ corporate business objectives and WATC’s target metrics for managing the refinancing risk of the State as a whole.
At 30 June 2017, all of WATC’s debt finance clients were in the process of implementing or maintaining debt management strategies that aligned with the overall target requirement for managing the refinancing risk of the State, or had been granted exemptions following thorough evaluation of their business requirement to structure their debt outside the State’s overall target requirement. Furthermore, the effectiveness of WATC working in partnership with its clients in this area is evidenced by successfully achieving WATC’s target for net client debt maturing within 12 months at 30 June 2017.
Evolution of Debt Finance to State Government
In the 2016/17 financial year, total borrowings by state government authorities increased $4.2 billion to $43.9 billion. This equated to growth of 10.5 per cent, down from 16.6 per cent in 2015/16.
Figure 3 shows the distribution of WATC debt finance across broad client sectors and its evolution since 30 June 2013. The increase in borrowings over 2016/17, and predominantly for the full period shown, was by the Treasurer on behalf of the State to fund expenditure within the general government sector, supporting service provision and the development of infrastructure within public health, education, law and order, recreation, roads and other important public services.
Figure 3: Debt Finance by Broad Sector – Evolution of Debt Outstanding – 30 June 2013 to 30 June 2017
During 2016/17, borrowing by the electricity utilities fell slightly (1.6%), the first decrease for many years. In addition, the downward trend in borrowing by port authorities continued. Total borrowing by the housing sector fell quite sharply (17.9%) due to the partial sale of the Keystart loan portfolio completed during the year. The trend over recent years of gradual increases in borrowing by the Water Corporation and the Public Transport Authority continued in 2016/17.
During 2016/17, borrowing by the electricity utilities fell slightly (1.6%), the first decrease for many years. In addition, the downward trend in borrowing by port authorities continued. Total borrowing by the housing sector fell quite sharply (17.9%) due to the partial sale of the Keystart loan portfolio completed during the year. The trend over recent years of gradual increases in borrowing by the Water Corporation and the Public Transport Authority continued in 2016/17.
Debt Finance to Local Government and Public Universities
WATC continued to be the financier of choice to the State’s local governments, providing loan funds to finance a range of community infrastructure projects across the State, including:
- administration facilities and libraries
- recreation, sporting and aquatic facilities
- underground power
- roadworks
- commercial and residential land development
- aged care facilities.
Although exceeded by repayments on existing loans, 2016/17 saw funding for 93 new loans for a combined value of $82.7 million provided to Western Australian local governments. The net impact resulted in total debt outstanding to local governments decreasing by 3.4 per cent, or $24.6 million, to $703.3 million at 30 June 2017.
WATC worked closely with its local government client base during 2016/17 to further enhance the value add of its service offering to this sector. Key initiatives included:
- continuation of formal presentations and dissemination of a series of information papers relevant to local government on interest rate markets, debt financing and debt management, with the aim to assist local governments in the effective use and ongoing management of debt and to support informed decision making when considering debt finance options.
- an Indicative Debt Capacity Calculator designed to assist local governments assess their future capacity for prudent usage of debt finance as part of their long term financial planning process. The Calculator was developed in partnership with the Department of Local Government and Communities and is available to local governments through the Department’s website.
WATC also lends to Western Australia’s public universities to support their infrastructure development requirements and provides the full range of financial services to this sector. Borrowings by the universities increased by 6.4 per cent, or $19.5 million, to $324.0 million at 30 June 2017.
Investments
WATC provides clients with state government guaranteed, at call and fixed term investment products, including:
- an Overnight Cash Deposit Facility – funds can be invested on an overnight basis at a competitive interest rate closely linked to the RBA target cash rate.
- Term Deposits – funds can be invested for any term from 7 days to 365 days at a fixed rate.
WATC provided advice on investment of funds and produced guidelines to assist clients in developing their own sound and robust investment policies.
During 2016/17, clients continued to take advantage of WATC’s investment products. At 30 June 2017, WATC held $177.3 million of client investment funds from 35 entities.
Foreign Exchange
As accessing and trading with overseas markets becomes easier, Western Australian public sector agencies are increasingly exposed to foreign exchange (FX) risk through day-to-day operations and procurement projects. WATC understands the challenges that FX risk can present for the Western Australian public sector and provides advisory and transactional services to support its clients in identifying, understanding and effectively managing this risk.
WATC works closely with each client to understand their individual business requirements, identify FX risks and ensure they have the necessary information to make informed decisions on how to manage those risks. This includes providing clients with support and guidance to establish and implement internal FX risk management policies that are appropriate for their business and align with the broader government FX framework. WATC also works with the State’s policy makers to review the government’s FX framework that guides the management of FX risk across the entire Western Australian public sector.
WATC provides analytical and transactional FX services including:
- analysis to quantify the financial impact of FX risk within procurement projects and day-to-day operations
- designing hedging strategies to manage FX risk associated with day-to-day operational requirements
- support throughout the life of procurement projects, including:
- analysis for inclusion in the business case
- guidance on procurement strategies
- evaluation of FX exposure within respondent bids
- design and implementation of hedging strategies to manage FX risk during the procurement process and over the life of the project
- implementation and ongoing management of hedging strategies including:
- trade execution
- settlement (payment and confirmation)
- reporting
- transaction valuations.
During 2016/17, WATC transacted in excess of A$168 million in 11 different currencies on behalf of 17 clients.
WATC also conducts FX education seminars as a way of providing staff across all operational levels of the public sector with an understanding of FX risk, how it can impact their business and how it can be managed. Since launching the seminars in 2013, WATC has presented to more than 850 people across the Western Australian public sector.
Treasury Services
WATC plays an important role in the management of public sector finances by providing the Western Australian public sector with access to a comprehensive range of treasury management services.
By engaging WATC to provide treasury management services, clients do not have to maintain the systems and resources required to oversee their investment and treasury operations. WATC’s clients have access to the experience, expertise, specialised systems, pricing and oversight that comes with the scale of operations undertaken by WATC in both domestic and offshore financial markets.
WATC has built strong relationships with each of its treasury management services clients and works closely with them to ensure their portfolios and operations are managed in accordance with their individual business requirements and policy frameworks.
Clients engaging WATC’s treasury management services to manage their investment portfolios have access to transaction execution, settlement, credit risk management, reporting and accounting services. These investment portfolios achieved returns that outperformed established benchmarks.
At 30 June 2017, WATC managed in excess of $9.9 billion in investment funds in its own name and that of its clients. This included over $4.6 billion for the Public Bank Account and the Western Australian Future Fund.
WATC has managed the Public Bank Account investment portfolio since 1989 and was appointed to manage the Western Australian Future Fund in November 2012. Since then, WATC has been engaged to manage investment portfolios for Lotterywest (2013) and Landgate (2015).
WATC has provided treasury management and support services for borrowing, investment and foreign exchange to Horizon Power since 2013.
Advisory Services
WATC assists Western Australian public sector agencies to make informed financial decisions through a range of financial analysis and advisory services, including high-quality corporate finance advice, financial analysis and financial risk management.
WATC partners with clients to identify their financial and analytical requirements and develops tailored solutions for both unique and complex financial problems. Using a combination of co-operative expert workshops and data gathering, brainstorming and methodology ideation, and advanced financial modelling using the most current financial markets theory and practice, WATC creates logical and well supported methods and conclusions for clients that add value and can be practically implemented.
WATC maintains strong expertise and experience in financial matters through a continuing combination of financial training, financial research and applying WATC’s collective experience to solve client’s financial problems, which is aligned with a highly co-operative approach when working with clients. WATC’s expert knowledge and financial experience covers:
- debt structure analysis and advice
- financial risk modelling and simulation
- asset and project investment evaluation
- asset valuation, including retention versus sale analysis
- project financing and alternative financing options
- business case development
- procurement advice and financial contract structuring
- cost of capital analysis
- asset-liability modelling
- investment policy development
- general financial analysis, modelling and advice.
Key achievements and client engagements during the 2016/17 financial year included:
Department of Corrective Services – Commercial Advisory Roles
WATC continued to assist the Department of Corrective Services (DCS), known as the Department of Justice from 1 July 2017, with two major commercial advisory roles.
In 2016, DCS appointed a private operator to run a metropolitan women’s prison complex. WATC assisted throughout the original procurement and contract establishment process, including analysing and recommending commercial and financial terms, financial performance incentives and key performance measures and indicators. WATC also assisted with the subsequent ongoing contract monitoring and management to ensure effective financial management of the contract. The contract contains performance incentives that reward smooth and efficient running of the prison, effective reintegration of former prisoners back into society on release and reductions in rates of return due to reoffending.
DCS also requested WATC’s assistance with analysing commercial terms of an existing privately run men’s prison. The private contractor submitted a proposal to extend the contract for a number of years and WATC was requested to analyse and model the proposal to determine whether or not it presented good value to the State compared to the costs and efficiencies the State could achieve if it ran the prison itself. WATC provided recommendations to DCS as to which measures could be used to make better comparisons between private operating costs and State costs. The WATC analysis identified which of the various private and public operational options presented the best value for money for the State, allowing the client to provide informed advice to Government.
Government Trading Enterprise – Investment Management
WATC was requested to assist an agency in the procurement process to select a professional, independent fund manager who would provide investment management services and manage the agency’s long-term investment portfolio. WATC provided expert advice to the client regarding market processes and protocols within the funds management industry, analysed the bidders, compared and contrasted the important features of each tender bid and explained these to the client, and assisted in the final selection and negotiation with the preferred bidder. A fund manager was appointed and is now investing and managing the client’s funds as per the mandate agreed.
Government Agency – Financial Performance Assessment
WATC was requested to perform a financial assessment of a company partly owned by the government agency as a long-term investment. WATC analysed the financial performance of the subsidiary, including the market outlook and expected financial future direction. WATC summarised the financial performance and identified areas of over- and under-performance, compared projected performance to actual performance with reasons behind any divergence, examined how the financial projections had changed over time and the key reasons for changes, identified commercial risks going forward and identified appropriate risk mitigation strategies. This allowed the agency to make an informed financial and strategic decision about the future of the subsidiary and the level of resources that could be committed to supporting this investment.
Government Trading Enterprise – Budget Modelling and Sensitivity Analysis
WATC constructed a flexible and transparent funding model to inform and support a government trading enterprise’s budget submissions. The model quantified the client’s revenues, profit and loss position, distributions and closing cash balances position over the forward years. The model allows the client to more efficiently and effectively produce the desired outputs needed to support their budget process and identify areas of financial risks to their business going forward, as well as providing a greater ability to perform sensitivity testing and scenario “what if” analysis.
Government Trading Enterprise – Optimising the Investment Portfolio
WATC worked with a government trading enterprise to define its optimal long-term investment portfolio, portfolio benchmarks and suitable investments to achieve their long-term goals. This required a deep knowledge of the agency’s use of the portfolio’s funds, expected timing of withdrawals and the risk tolerance of the agency for variability in the rate of return and minimisation of any potential for loss over time.
Public Transport Authority – Treasury Manager
WATC assisted the Public Transport Authority (PTA) with the secondment of a senior financial consultant to take on the role of Treasury and Investment Planning Manager for the PTA for several months. While in the role, the WATC consultant managed the treasury function including cash and debt portfolio management and foreign exchange hedging, prepared the PTA’s review of fees and charges for 2017/18 and reviewed business cases for inclusion in the PTA’s 2017/18 budget.
Local Governments – Regional Councils – Procurement Project
Two local government regional councils were considering options to either acquire or build a resource recovery facility or enter into a long-term waste supply agreement under which the regional councils would deliver waste to a privately established merchant resource recovery facility to process waste from multiple sources.
The regional councils commenced a procurement process to evaluate and acquire a resource recovery facility or service to improve the sustainability of waste management practices within their local government areas.
WATC worked with the clients to assess the financial robustness of the bidders, reviewed the financial models underpinning the costs to both the regional council principals and the bidders and identified and highlighted potential commercial risks associated with each tender submission. The WATC analysis was completed within the tight timeframes specified in the tender process and the clients were able to make informed financial decisions as part of their overall procurement process.
Department of Fisheries – Fisheries Adjustment Scheme Analysis
Following a series of adverse environmental changes, a number of fisheries in the North West of Western Australia were closed for several seasons to allow stocks to replenish. Fishery licence holders in those areas faced financial stress with the closure of the fisheries and this challenged their ability to repay existing commitments under the Fisheries Adjustment Schemes Act 1987 (FAS). Industry participants requested fee relief and loan restructuring from the State.
WATC assisted the Department of Fisheries, known as the Department of Primary Industries and Regional Development from 1 July 2017, by assessing the appropriateness of providing fee relief and restructuring of the outstanding loans, analysing the impacts under various scenarios, reviewing the current FAS financial arrangements and developing specific FAS loan restructure proposals for each of the fisheries affected.
Other Roles
During 2016/17, WATC carried out a number of other advisory roles, including:
- assessing the commercial viability of projects
- assessing the value of assets and investments
- establishing logical principles for assessment of asset values under retention or sale scenarios
- assessing the value of assets if sold or retained by government, or of new assets to be invested in by government
- developing a framework for calculating the Social Return on Investment (SROI) of housing projects.
Client Feedback on Advisory Services
As part of the quality assurance framework for WATC’s advisory services, following the completion of each advisory services engagement, clients are requested to provide feedback on their experience.
For the engagement feedback received during the 2016/17 financial year, 100 per cent of clients rated ‘satisfied’ or better with WATC’s advisory services. Of this feedback, over 86% of clients rated ‘very satisfied’ or ‘extremely satisfied’. Key attributes of each engagement rated by clients include their satisfaction:
- with the quality of advice provided
- with WATC’s overall capability and service provided
- that WATC has added value to the client’s project.
The positive feedback received from clients provides validation that WATC continues to deliver financial solutions for the benefit of the Western Australian public sector.
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WATC assists clients develop, review and maintain effective debt management strategies through the provision of a range of loan products and related financial services. Designed to provide clients with access to cost-effective funding, while concurrently providing flexibility to structure loans to satisfy specific financing needs, WATC’s suite of loan products includes:
- Working Capital Facility
- Short-term loans
- Term floating rate loans
- Term fixed rate lending, including:
- interest-only loans
- amortising loans
- zero-coupon loans
- structured loans to meet individual client needs
- Capital indexed lending.
In addition, the broad range of supporting financial services includes:
- an interest rate swap facility, which enables clients to exchange a future stream of floating rate interest payments for a stream of fixed interest payments, or vice versa, enhancing flexibility in debt maturity diversification and interest rate risk management
- portfolio management services, to manage interest rate risk in a manner appropriate to clients’ business needs through an administratively efficient debt management system
- interest cost projection services, to assist clients with budgeting, project evaluation, and managing and reporting of future debt levels and associated interest costs, supporting informed decision-making when considering debt finance options
- individual debt management strategies meeting clients’ corporate business objectives and WATC’s target metrics for managing the refinancing risk of the State as a whole.
At 30 June 2017, all of WATC’s debt finance clients were in the process of implementing or maintaining debt management strategies that aligned with the overall target requirement for managing the refinancing risk of the State, or had been granted exemptions following thorough evaluation of their business requirement to structure their debt outside the State’s overall target requirement. Furthermore, the effectiveness of WATC working in partnership with its clients in this area is evidenced by successfully achieving WATC’s target for net client debt maturing within 12 months at 30 June 2017.
Evolution of Debt Finance to State Government
In the 2016/17 financial year, total borrowings by state government authorities increased $4.2 billion to $43.9 billion. This equated to growth of 10.5 per cent, down from 16.6 per cent in 2015/16.
Figure 3 shows the distribution of WATC debt finance across broad client sectors and its evolution since 30 June 2013. The increase in borrowings over 2016/17, and predominantly for the full period shown, was by the Treasurer on behalf of the State to fund expenditure within the general government sector, supporting service provision and the development of infrastructure within public health, education, law and order, recreation, roads and other important public services.
Figure 3: Debt Finance by Broad Sector – Evolution of Debt Outstanding – 30 June 2013 to 30 June 2017
During 2016/17, borrowing by the electricity utilities fell slightly (1.6%), the first decrease for many years. In addition, the downward trend in borrowing by port authorities continued. Total borrowing by the housing sector fell quite sharply (17.9%) due to the partial sale of the Keystart loan portfolio completed during the year. The trend over recent years of gradual increases in borrowing by the Water Corporation and the Public Transport Authority continued in 2016/17.
During 2016/17, borrowing by the electricity utilities fell slightly (1.6%), the first decrease for many years. In addition, the downward trend in borrowing by port authorities continued. Total borrowing by the housing sector fell quite sharply (17.9%) due to the partial sale of the Keystart loan portfolio completed during the year. The trend over recent years of gradual increases in borrowing by the Water Corporation and the Public Transport Authority continued in 2016/17.
Debt Finance to Local Government and Public Universities
WATC continued to be the financier of choice to the State’s local governments, providing loan funds to finance a range of community infrastructure projects across the State, including:
- administration facilities and libraries
- recreation, sporting and aquatic facilities
- underground power
- roadworks
- commercial and residential land development
- aged care facilities.
Although exceeded by repayments on existing loans, 2016/17 saw funding for 93 new loans for a combined value of $82.7 million provided to Western Australian local governments. The net impact resulted in total debt outstanding to local governments decreasing by 3.4 per cent, or $24.6 million, to $703.3 million at 30 June 2017.
WATC worked closely with its local government client base during 2016/17 to further enhance the value add of its service offering to this sector. Key initiatives included:
- continuation of formal presentations and dissemination of a series of information papers relevant to local government on interest rate markets, debt financing and debt management, with the aim to assist local governments in the effective use and ongoing management of debt and to support informed decision making when considering debt finance options.
- an Indicative Debt Capacity Calculator designed to assist local governments assess their future capacity for prudent usage of debt finance as part of their long term financial planning process. The Calculator was developed in partnership with the Department of Local Government and Communities and is available to local governments through the Department’s website.
WATC also lends to Western Australia’s public universities to support their infrastructure development requirements and provides the full range of financial services to this sector. Borrowings by the universities increased by 6.4 per cent, or $19.5 million, to $324.0 million at 30 June 2017.
Investments
WATC provides clients with state government guaranteed, at call and fixed term investment products, including:
- an Overnight Cash Deposit Facility – funds can be invested on an overnight basis at a competitive interest rate closely linked to the RBA target cash rate.
- Term Deposits – funds can be invested for any term from 7 days to 365 days at a fixed rate.
WATC provided advice on investment of funds and produced guidelines to assist clients in developing their own sound and robust investment policies.
During 2016/17, clients continued to take advantage of WATC’s investment products. At 30 June 2017, WATC held $177.3 million of client investment funds from 35 entities.
Foreign Exchange
As accessing and trading with overseas markets becomes easier, Western Australian public sector agencies are increasingly exposed to foreign exchange (FX) risk through day-to-day operations and procurement projects. WATC understands the challenges that FX risk can present for the Western Australian public sector and provides advisory and transactional services to support its clients in identifying, understanding and effectively managing this risk.
WATC works closely with each client to understand their individual business requirements, identify FX risks and ensure they have the necessary information to make informed decisions on how to manage those risks. This includes providing clients with support and guidance to establish and implement internal FX risk management policies that are appropriate for their business and align with the broader government FX framework. WATC also works with the State’s policy makers to review the government’s FX framework that guides the management of FX risk across the entire Western Australian public sector.
WATC provides analytical and transactional FX services including:
- analysis to quantify the financial impact of FX risk within procurement projects and day-to-day operations
- designing hedging strategies to manage FX risk associated with day-to-day operational requirements
- support throughout the life of procurement projects, including:
- analysis for inclusion in the business case
- guidance on procurement strategies
- evaluation of FX exposure within respondent bids
- design and implementation of hedging strategies to manage FX risk during the procurement process and over the life of the project
- implementation and ongoing management of hedging strategies including:
- trade execution
- settlement (payment and confirmation)
- reporting
- transaction valuations.
During 2016/17, WATC transacted in excess of A$168 million in 11 different currencies on behalf of 17 clients.
WATC also conducts FX education seminars as a way of providing staff across all operational levels of the public sector with an understanding of FX risk, how it can impact their business and how it can be managed. Since launching the seminars in 2013, WATC has presented to more than 850 people across the Western Australian public sector.
Treasury Services
WATC plays an important role in the management of public sector finances by providing the Western Australian public sector with access to a comprehensive range of treasury management services.
By engaging WATC to provide treasury management services, clients do not have to maintain the systems and resources required to oversee their investment and treasury operations. WATC’s clients have access to the experience, expertise, specialised systems, pricing and oversight that comes with the scale of operations undertaken by WATC in both domestic and offshore financial markets.
WATC has built strong relationships with each of its treasury management services clients and works closely with them to ensure their portfolios and operations are managed in accordance with their individual business requirements and policy frameworks.
Clients engaging WATC’s treasury management services to manage their investment portfolios have access to transaction execution, settlement, credit risk management, reporting and accounting services. These investment portfolios achieved returns that outperformed established benchmarks.
At 30 June 2017, WATC managed in excess of $9.9 billion in investment funds in its own name and that of its clients. This included over $4.6 billion for the Public Bank Account and the Western Australian Future Fund.
WATC has managed the Public Bank Account investment portfolio since 1989 and was appointed to manage the Western Australian Future Fund in November 2012. Since then, WATC has been engaged to manage investment portfolios for Lotterywest (2013) and Landgate (2015).
WATC has provided treasury management and support services for borrowing, investment and foreign exchange to Horizon Power since 2013.
Advisory Services
WATC assists Western Australian public sector agencies to make informed financial decisions through a range of financial analysis and advisory services, including high-quality corporate finance advice, financial analysis and financial risk management.
WATC partners with clients to identify their financial and analytical requirements and develops tailored solutions for both unique and complex financial problems. Using a combination of co-operative expert workshops and data gathering, brainstorming and methodology ideation, and advanced financial modelling using the most current financial markets theory and practice, WATC creates logical and well supported methods and conclusions for clients that add value and can be practically implemented.
WATC maintains strong expertise and experience in financial matters through a continuing combination of financial training, financial research and applying WATC’s collective experience to solve client’s financial problems, which is aligned with a highly co-operative approach when working with clients. WATC’s expert knowledge and financial experience covers:
- debt structure analysis and advice
- financial risk modelling and simulation
- asset and project investment evaluation
- asset valuation, including retention versus sale analysis
- project financing and alternative financing options
- business case development
- procurement advice and financial contract structuring
- cost of capital analysis
- asset-liability modelling
- investment policy development
- general financial analysis, modelling and advice.
Key achievements and client engagements during the 2016/17 financial year included:
Department of Corrective Services – Commercial Advisory Roles
WATC continued to assist the Department of Corrective Services (DCS), known as the Department of Justice from 1 July 2017, with two major commercial advisory roles.
In 2016, DCS appointed a private operator to run a metropolitan women’s prison complex. WATC assisted throughout the original procurement and contract establishment process, including analysing and recommending commercial and financial terms, financial performance incentives and key performance measures and indicators. WATC also assisted with the subsequent ongoing contract monitoring and management to ensure effective financial management of the contract. The contract contains performance incentives that reward smooth and efficient running of the prison, effective reintegration of former prisoners back into society on release and reductions in rates of return due to reoffending.
DCS also requested WATC’s assistance with analysing commercial terms of an existing privately run men’s prison. The private contractor submitted a proposal to extend the contract for a number of years and WATC was requested to analyse and model the proposal to determine whether or not it presented good value to the State compared to the costs and efficiencies the State could achieve if it ran the prison itself. WATC provided recommendations to DCS as to which measures could be used to make better comparisons between private operating costs and State costs. The WATC analysis identified which of the various private and public operational options presented the best value for money for the State, allowing the client to provide informed advice to Government.
Government Trading Enterprise – Investment Management
WATC was requested to assist an agency in the procurement process to select a professional, independent fund manager who would provide investment management services and manage the agency’s long-term investment portfolio. WATC provided expert advice to the client regarding market processes and protocols within the funds management industry, analysed the bidders, compared and contrasted the important features of each tender bid and explained these to the client, and assisted in the final selection and negotiation with the preferred bidder. A fund manager was appointed and is now investing and managing the client’s funds as per the mandate agreed.
Government Agency – Financial Performance Assessment
WATC was requested to perform a financial assessment of a company partly owned by the government agency as a long-term investment. WATC analysed the financial performance of the subsidiary, including the market outlook and expected financial future direction. WATC summarised the financial performance and identified areas of over- and under-performance, compared projected performance to actual performance with reasons behind any divergence, examined how the financial projections had changed over time and the key reasons for changes, identified commercial risks going forward and identified appropriate risk mitigation strategies. This allowed the agency to make an informed financial and strategic decision about the future of the subsidiary and the level of resources that could be committed to supporting this investment.
Government Trading Enterprise – Budget Modelling and Sensitivity Analysis
WATC constructed a flexible and transparent funding model to inform and support a government trading enterprise’s budget submissions. The model quantified the client’s revenues, profit and loss position, distributions and closing cash balances position over the forward years. The model allows the client to more efficiently and effectively produce the desired outputs needed to support their budget process and identify areas of financial risks to their business going forward, as well as providing a greater ability to perform sensitivity testing and scenario “what if” analysis.
Government Trading Enterprise – Optimising the Investment Portfolio
WATC worked with a government trading enterprise to define its optimal long-term investment portfolio, portfolio benchmarks and suitable investments to achieve their long-term goals. This required a deep knowledge of the agency’s use of the portfolio’s funds, expected timing of withdrawals and the risk tolerance of the agency for variability in the rate of return and minimisation of any potential for loss over time.
Public Transport Authority – Treasury Manager
WATC assisted the Public Transport Authority (PTA) with the secondment of a senior financial consultant to take on the role of Treasury and Investment Planning Manager for the PTA for several months. While in the role, the WATC consultant managed the treasury function including cash and debt portfolio management and foreign exchange hedging, prepared the PTA’s review of fees and charges for 2017/18 and reviewed business cases for inclusion in the PTA’s 2017/18 budget.
Local Governments – Regional Councils – Procurement Project
Two local government regional councils were considering options to either acquire or build a resource recovery facility or enter into a long-term waste supply agreement under which the regional councils would deliver waste to a privately established merchant resource recovery facility to process waste from multiple sources.
The regional councils commenced a procurement process to evaluate and acquire a resource recovery facility or service to improve the sustainability of waste management practices within their local government areas.
WATC worked with the clients to assess the financial robustness of the bidders, reviewed the financial models underpinning the costs to both the regional council principals and the bidders and identified and highlighted potential commercial risks associated with each tender submission. The WATC analysis was completed within the tight timeframes specified in the tender process and the clients were able to make informed financial decisions as part of their overall procurement process.
Department of Fisheries – Fisheries Adjustment Scheme Analysis
Following a series of adverse environmental changes, a number of fisheries in the North West of Western Australia were closed for several seasons to allow stocks to replenish. Fishery licence holders in those areas faced financial stress with the closure of the fisheries and this challenged their ability to repay existing commitments under the Fisheries Adjustment Schemes Act 1987 (FAS). Industry participants requested fee relief and loan restructuring from the State.
WATC assisted the Department of Fisheries, known as the Department of Primary Industries and Regional Development from 1 July 2017, by assessing the appropriateness of providing fee relief and restructuring of the outstanding loans, analysing the impacts under various scenarios, reviewing the current FAS financial arrangements and developing specific FAS loan restructure proposals for each of the fisheries affected.
Other Roles
During 2016/17, WATC carried out a number of other advisory roles, including:
- assessing the commercial viability of projects
- assessing the value of assets and investments
- establishing logical principles for assessment of asset values under retention or sale scenarios
- assessing the value of assets if sold or retained by government, or of new assets to be invested in by government
- developing a framework for calculating the Social Return on Investment (SROI) of housing projects.
Client Feedback on Advisory Services
As part of the quality assurance framework for WATC’s advisory services, following the completion of each advisory services engagement, clients are requested to provide feedback on their experience.
For the engagement feedback received during the 2016/17 financial year, 100 per cent of clients rated ‘satisfied’ or better with WATC’s advisory services. Of this feedback, over 86% of clients rated ‘very satisfied’ or ‘extremely satisfied’. Key attributes of each engagement rated by clients include their satisfaction:
- with the quality of advice provided
- with WATC’s overall capability and service provided
- that WATC has added value to the client’s project.
The positive feedback received from clients provides validation that WATC continues to deliver financial solutions for the benefit of the Western Australian public sector.
Previous: Economic EnvironmentNext: Financial Markets Activity
WATC provides clients with state government guaranteed, at call and fixed term investment products, including:
- an Overnight Cash Deposit Facility – funds can be invested on an overnight basis at a competitive interest rate closely linked to the RBA target cash rate.
- Term Deposits – funds can be invested for any term from 7 days to 365 days at a fixed rate.
WATC provided advice on investment of funds and produced guidelines to assist clients in developing their own sound and robust investment policies.
During 2016/17, clients continued to take advantage of WATC’s investment products. At 30 June 2017, WATC held $177.3 million of client investment funds from 35 entities.
Foreign Exchange
As accessing and trading with overseas markets becomes easier, Western Australian public sector agencies are increasingly exposed to foreign exchange (FX) risk through day-to-day operations and procurement projects. WATC understands the challenges that FX risk can present for the Western Australian public sector and provides advisory and transactional services to support its clients in identifying, understanding and effectively managing this risk.
WATC works closely with each client to understand their individual business requirements, identify FX risks and ensure they have the necessary information to make informed decisions on how to manage those risks. This includes providing clients with support and guidance to establish and implement internal FX risk management policies that are appropriate for their business and align with the broader government FX framework. WATC also works with the State’s policy makers to review the government’s FX framework that guides the management of FX risk across the entire Western Australian public sector.
WATC provides analytical and transactional FX services including:
- analysis to quantify the financial impact of FX risk within procurement projects and day-to-day operations
- designing hedging strategies to manage FX risk associated with day-to-day operational requirements
- support throughout the life of procurement projects, including:
- analysis for inclusion in the business case
- guidance on procurement strategies
- evaluation of FX exposure within respondent bids
- design and implementation of hedging strategies to manage FX risk during the procurement process and over the life of the project
- implementation and ongoing management of hedging strategies including:
- trade execution
- settlement (payment and confirmation)
- reporting
- transaction valuations.
During 2016/17, WATC transacted in excess of A$168 million in 11 different currencies on behalf of 17 clients.
WATC also conducts FX education seminars as a way of providing staff across all operational levels of the public sector with an understanding of FX risk, how it can impact their business and how it can be managed. Since launching the seminars in 2013, WATC has presented to more than 850 people across the Western Australian public sector.
Treasury Services
WATC plays an important role in the management of public sector finances by providing the Western Australian public sector with access to a comprehensive range of treasury management services.
By engaging WATC to provide treasury management services, clients do not have to maintain the systems and resources required to oversee their investment and treasury operations. WATC’s clients have access to the experience, expertise, specialised systems, pricing and oversight that comes with the scale of operations undertaken by WATC in both domestic and offshore financial markets.
WATC has built strong relationships with each of its treasury management services clients and works closely with them to ensure their portfolios and operations are managed in accordance with their individual business requirements and policy frameworks.
Clients engaging WATC’s treasury management services to manage their investment portfolios have access to transaction execution, settlement, credit risk management, reporting and accounting services. These investment portfolios achieved returns that outperformed established benchmarks.
At 30 June 2017, WATC managed in excess of $9.9 billion in investment funds in its own name and that of its clients. This included over $4.6 billion for the Public Bank Account and the Western Australian Future Fund.
WATC has managed the Public Bank Account investment portfolio since 1989 and was appointed to manage the Western Australian Future Fund in November 2012. Since then, WATC has been engaged to manage investment portfolios for Lotterywest (2013) and Landgate (2015).
WATC has provided treasury management and support services for borrowing, investment and foreign exchange to Horizon Power since 2013.
Advisory Services
WATC assists Western Australian public sector agencies to make informed financial decisions through a range of financial analysis and advisory services, including high-quality corporate finance advice, financial analysis and financial risk management.
WATC partners with clients to identify their financial and analytical requirements and develops tailored solutions for both unique and complex financial problems. Using a combination of co-operative expert workshops and data gathering, brainstorming and methodology ideation, and advanced financial modelling using the most current financial markets theory and practice, WATC creates logical and well supported methods and conclusions for clients that add value and can be practically implemented.
WATC maintains strong expertise and experience in financial matters through a continuing combination of financial training, financial research and applying WATC’s collective experience to solve client’s financial problems, which is aligned with a highly co-operative approach when working with clients. WATC’s expert knowledge and financial experience covers:
- debt structure analysis and advice
- financial risk modelling and simulation
- asset and project investment evaluation
- asset valuation, including retention versus sale analysis
- project financing and alternative financing options
- business case development
- procurement advice and financial contract structuring
- cost of capital analysis
- asset-liability modelling
- investment policy development
- general financial analysis, modelling and advice.
Key achievements and client engagements during the 2016/17 financial year included:
Department of Corrective Services – Commercial Advisory Roles
WATC continued to assist the Department of Corrective Services (DCS), known as the Department of Justice from 1 July 2017, with two major commercial advisory roles.
In 2016, DCS appointed a private operator to run a metropolitan women’s prison complex. WATC assisted throughout the original procurement and contract establishment process, including analysing and recommending commercial and financial terms, financial performance incentives and key performance measures and indicators. WATC also assisted with the subsequent ongoing contract monitoring and management to ensure effective financial management of the contract. The contract contains performance incentives that reward smooth and efficient running of the prison, effective reintegration of former prisoners back into society on release and reductions in rates of return due to reoffending.
DCS also requested WATC’s assistance with analysing commercial terms of an existing privately run men’s prison. The private contractor submitted a proposal to extend the contract for a number of years and WATC was requested to analyse and model the proposal to determine whether or not it presented good value to the State compared to the costs and efficiencies the State could achieve if it ran the prison itself. WATC provided recommendations to DCS as to which measures could be used to make better comparisons between private operating costs and State costs. The WATC analysis identified which of the various private and public operational options presented the best value for money for the State, allowing the client to provide informed advice to Government.
Government Trading Enterprise – Investment Management
WATC was requested to assist an agency in the procurement process to select a professional, independent fund manager who would provide investment management services and manage the agency’s long-term investment portfolio. WATC provided expert advice to the client regarding market processes and protocols within the funds management industry, analysed the bidders, compared and contrasted the important features of each tender bid and explained these to the client, and assisted in the final selection and negotiation with the preferred bidder. A fund manager was appointed and is now investing and managing the client’s funds as per the mandate agreed.
Government Agency – Financial Performance Assessment
WATC was requested to perform a financial assessment of a company partly owned by the government agency as a long-term investment. WATC analysed the financial performance of the subsidiary, including the market outlook and expected financial future direction. WATC summarised the financial performance and identified areas of over- and under-performance, compared projected performance to actual performance with reasons behind any divergence, examined how the financial projections had changed over time and the key reasons for changes, identified commercial risks going forward and identified appropriate risk mitigation strategies. This allowed the agency to make an informed financial and strategic decision about the future of the subsidiary and the level of resources that could be committed to supporting this investment.
Government Trading Enterprise – Budget Modelling and Sensitivity Analysis
WATC constructed a flexible and transparent funding model to inform and support a government trading enterprise’s budget submissions. The model quantified the client’s revenues, profit and loss position, distributions and closing cash balances position over the forward years. The model allows the client to more efficiently and effectively produce the desired outputs needed to support their budget process and identify areas of financial risks to their business going forward, as well as providing a greater ability to perform sensitivity testing and scenario “what if” analysis.
Government Trading Enterprise – Optimising the Investment Portfolio
WATC worked with a government trading enterprise to define its optimal long-term investment portfolio, portfolio benchmarks and suitable investments to achieve their long-term goals. This required a deep knowledge of the agency’s use of the portfolio’s funds, expected timing of withdrawals and the risk tolerance of the agency for variability in the rate of return and minimisation of any potential for loss over time.
Public Transport Authority – Treasury Manager
WATC assisted the Public Transport Authority (PTA) with the secondment of a senior financial consultant to take on the role of Treasury and Investment Planning Manager for the PTA for several months. While in the role, the WATC consultant managed the treasury function including cash and debt portfolio management and foreign exchange hedging, prepared the PTA’s review of fees and charges for 2017/18 and reviewed business cases for inclusion in the PTA’s 2017/18 budget.
Local Governments – Regional Councils – Procurement Project
Two local government regional councils were considering options to either acquire or build a resource recovery facility or enter into a long-term waste supply agreement under which the regional councils would deliver waste to a privately established merchant resource recovery facility to process waste from multiple sources.
The regional councils commenced a procurement process to evaluate and acquire a resource recovery facility or service to improve the sustainability of waste management practices within their local government areas.
WATC worked with the clients to assess the financial robustness of the bidders, reviewed the financial models underpinning the costs to both the regional council principals and the bidders and identified and highlighted potential commercial risks associated with each tender submission. The WATC analysis was completed within the tight timeframes specified in the tender process and the clients were able to make informed financial decisions as part of their overall procurement process.
Department of Fisheries – Fisheries Adjustment Scheme Analysis
Following a series of adverse environmental changes, a number of fisheries in the North West of Western Australia were closed for several seasons to allow stocks to replenish. Fishery licence holders in those areas faced financial stress with the closure of the fisheries and this challenged their ability to repay existing commitments under the Fisheries Adjustment Schemes Act 1987 (FAS). Industry participants requested fee relief and loan restructuring from the State.
WATC assisted the Department of Fisheries, known as the Department of Primary Industries and Regional Development from 1 July 2017, by assessing the appropriateness of providing fee relief and restructuring of the outstanding loans, analysing the impacts under various scenarios, reviewing the current FAS financial arrangements and developing specific FAS loan restructure proposals for each of the fisheries affected.
Other Roles
During 2016/17, WATC carried out a number of other advisory roles, including:
- assessing the commercial viability of projects
- assessing the value of assets and investments
- establishing logical principles for assessment of asset values under retention or sale scenarios
- assessing the value of assets if sold or retained by government, or of new assets to be invested in by government
- developing a framework for calculating the Social Return on Investment (SROI) of housing projects.
Client Feedback on Advisory Services
As part of the quality assurance framework for WATC’s advisory services, following the completion of each advisory services engagement, clients are requested to provide feedback on their experience.
For the engagement feedback received during the 2016/17 financial year, 100 per cent of clients rated ‘satisfied’ or better with WATC’s advisory services. Of this feedback, over 86% of clients rated ‘very satisfied’ or ‘extremely satisfied’. Key attributes of each engagement rated by clients include their satisfaction:
- with the quality of advice provided
- with WATC’s overall capability and service provided
- that WATC has added value to the client’s project.
The positive feedback received from clients provides validation that WATC continues to deliver financial solutions for the benefit of the Western Australian public sector.
Previous: Economic EnvironmentNext: Financial Markets Activity
As accessing and trading with overseas markets becomes easier, Western Australian public sector agencies are increasingly exposed to foreign exchange (FX) risk through day-to-day operations and procurement projects. WATC understands the challenges that FX risk can present for the Western Australian public sector and provides advisory and transactional services to support its clients in identifying, understanding and effectively managing this risk.
WATC works closely with each client to understand their individual business requirements, identify FX risks and ensure they have the necessary information to make informed decisions on how to manage those risks. This includes providing clients with support and guidance to establish and implement internal FX risk management policies that are appropriate for their business and align with the broader government FX framework. WATC also works with the State’s policy makers to review the government’s FX framework that guides the management of FX risk across the entire Western Australian public sector.
WATC provides analytical and transactional FX services including:
- analysis to quantify the financial impact of FX risk within procurement projects and day-to-day operations
- designing hedging strategies to manage FX risk associated with day-to-day operational requirements
- support throughout the life of procurement projects, including:
- analysis for inclusion in the business case
- guidance on procurement strategies
- evaluation of FX exposure within respondent bids
- design and implementation of hedging strategies to manage FX risk during the procurement process and over the life of the project
- implementation and ongoing management of hedging strategies including:
- trade execution
- settlement (payment and confirmation)
- reporting
- transaction valuations.
During 2016/17, WATC transacted in excess of A$168 million in 11 different currencies on behalf of 17 clients.
WATC also conducts FX education seminars as a way of providing staff across all operational levels of the public sector with an understanding of FX risk, how it can impact their business and how it can be managed. Since launching the seminars in 2013, WATC has presented to more than 850 people across the Western Australian public sector.
Treasury Services
WATC plays an important role in the management of public sector finances by providing the Western Australian public sector with access to a comprehensive range of treasury management services.
By engaging WATC to provide treasury management services, clients do not have to maintain the systems and resources required to oversee their investment and treasury operations. WATC’s clients have access to the experience, expertise, specialised systems, pricing and oversight that comes with the scale of operations undertaken by WATC in both domestic and offshore financial markets.
WATC has built strong relationships with each of its treasury management services clients and works closely with them to ensure their portfolios and operations are managed in accordance with their individual business requirements and policy frameworks.
Clients engaging WATC’s treasury management services to manage their investment portfolios have access to transaction execution, settlement, credit risk management, reporting and accounting services. These investment portfolios achieved returns that outperformed established benchmarks.
At 30 June 2017, WATC managed in excess of $9.9 billion in investment funds in its own name and that of its clients. This included over $4.6 billion for the Public Bank Account and the Western Australian Future Fund.
WATC has managed the Public Bank Account investment portfolio since 1989 and was appointed to manage the Western Australian Future Fund in November 2012. Since then, WATC has been engaged to manage investment portfolios for Lotterywest (2013) and Landgate (2015).
WATC has provided treasury management and support services for borrowing, investment and foreign exchange to Horizon Power since 2013.
Advisory Services
WATC assists Western Australian public sector agencies to make informed financial decisions through a range of financial analysis and advisory services, including high-quality corporate finance advice, financial analysis and financial risk management.
WATC partners with clients to identify their financial and analytical requirements and develops tailored solutions for both unique and complex financial problems. Using a combination of co-operative expert workshops and data gathering, brainstorming and methodology ideation, and advanced financial modelling using the most current financial markets theory and practice, WATC creates logical and well supported methods and conclusions for clients that add value and can be practically implemented.
WATC maintains strong expertise and experience in financial matters through a continuing combination of financial training, financial research and applying WATC’s collective experience to solve client’s financial problems, which is aligned with a highly co-operative approach when working with clients. WATC’s expert knowledge and financial experience covers:
- debt structure analysis and advice
- financial risk modelling and simulation
- asset and project investment evaluation
- asset valuation, including retention versus sale analysis
- project financing and alternative financing options
- business case development
- procurement advice and financial contract structuring
- cost of capital analysis
- asset-liability modelling
- investment policy development
- general financial analysis, modelling and advice.
Key achievements and client engagements during the 2016/17 financial year included:
Department of Corrective Services – Commercial Advisory Roles
WATC continued to assist the Department of Corrective Services (DCS), known as the Department of Justice from 1 July 2017, with two major commercial advisory roles.
In 2016, DCS appointed a private operator to run a metropolitan women’s prison complex. WATC assisted throughout the original procurement and contract establishment process, including analysing and recommending commercial and financial terms, financial performance incentives and key performance measures and indicators. WATC also assisted with the subsequent ongoing contract monitoring and management to ensure effective financial management of the contract. The contract contains performance incentives that reward smooth and efficient running of the prison, effective reintegration of former prisoners back into society on release and reductions in rates of return due to reoffending.
DCS also requested WATC’s assistance with analysing commercial terms of an existing privately run men’s prison. The private contractor submitted a proposal to extend the contract for a number of years and WATC was requested to analyse and model the proposal to determine whether or not it presented good value to the State compared to the costs and efficiencies the State could achieve if it ran the prison itself. WATC provided recommendations to DCS as to which measures could be used to make better comparisons between private operating costs and State costs. The WATC analysis identified which of the various private and public operational options presented the best value for money for the State, allowing the client to provide informed advice to Government.
Government Trading Enterprise – Investment Management
WATC was requested to assist an agency in the procurement process to select a professional, independent fund manager who would provide investment management services and manage the agency’s long-term investment portfolio. WATC provided expert advice to the client regarding market processes and protocols within the funds management industry, analysed the bidders, compared and contrasted the important features of each tender bid and explained these to the client, and assisted in the final selection and negotiation with the preferred bidder. A fund manager was appointed and is now investing and managing the client’s funds as per the mandate agreed.
Government Agency – Financial Performance Assessment
WATC was requested to perform a financial assessment of a company partly owned by the government agency as a long-term investment. WATC analysed the financial performance of the subsidiary, including the market outlook and expected financial future direction. WATC summarised the financial performance and identified areas of over- and under-performance, compared projected performance to actual performance with reasons behind any divergence, examined how the financial projections had changed over time and the key reasons for changes, identified commercial risks going forward and identified appropriate risk mitigation strategies. This allowed the agency to make an informed financial and strategic decision about the future of the subsidiary and the level of resources that could be committed to supporting this investment.
Government Trading Enterprise – Budget Modelling and Sensitivity Analysis
WATC constructed a flexible and transparent funding model to inform and support a government trading enterprise’s budget submissions. The model quantified the client’s revenues, profit and loss position, distributions and closing cash balances position over the forward years. The model allows the client to more efficiently and effectively produce the desired outputs needed to support their budget process and identify areas of financial risks to their business going forward, as well as providing a greater ability to perform sensitivity testing and scenario “what if” analysis.
Government Trading Enterprise – Optimising the Investment Portfolio
WATC worked with a government trading enterprise to define its optimal long-term investment portfolio, portfolio benchmarks and suitable investments to achieve their long-term goals. This required a deep knowledge of the agency’s use of the portfolio’s funds, expected timing of withdrawals and the risk tolerance of the agency for variability in the rate of return and minimisation of any potential for loss over time.
Public Transport Authority – Treasury Manager
WATC assisted the Public Transport Authority (PTA) with the secondment of a senior financial consultant to take on the role of Treasury and Investment Planning Manager for the PTA for several months. While in the role, the WATC consultant managed the treasury function including cash and debt portfolio management and foreign exchange hedging, prepared the PTA’s review of fees and charges for 2017/18 and reviewed business cases for inclusion in the PTA’s 2017/18 budget.
Local Governments – Regional Councils – Procurement Project
Two local government regional councils were considering options to either acquire or build a resource recovery facility or enter into a long-term waste supply agreement under which the regional councils would deliver waste to a privately established merchant resource recovery facility to process waste from multiple sources.
The regional councils commenced a procurement process to evaluate and acquire a resource recovery facility or service to improve the sustainability of waste management practices within their local government areas.
WATC worked with the clients to assess the financial robustness of the bidders, reviewed the financial models underpinning the costs to both the regional council principals and the bidders and identified and highlighted potential commercial risks associated with each tender submission. The WATC analysis was completed within the tight timeframes specified in the tender process and the clients were able to make informed financial decisions as part of their overall procurement process.
Department of Fisheries – Fisheries Adjustment Scheme Analysis
Following a series of adverse environmental changes, a number of fisheries in the North West of Western Australia were closed for several seasons to allow stocks to replenish. Fishery licence holders in those areas faced financial stress with the closure of the fisheries and this challenged their ability to repay existing commitments under the Fisheries Adjustment Schemes Act 1987 (FAS). Industry participants requested fee relief and loan restructuring from the State.
WATC assisted the Department of Fisheries, known as the Department of Primary Industries and Regional Development from 1 July 2017, by assessing the appropriateness of providing fee relief and restructuring of the outstanding loans, analysing the impacts under various scenarios, reviewing the current FAS financial arrangements and developing specific FAS loan restructure proposals for each of the fisheries affected.
Other Roles
During 2016/17, WATC carried out a number of other advisory roles, including:
- assessing the commercial viability of projects
- assessing the value of assets and investments
- establishing logical principles for assessment of asset values under retention or sale scenarios
- assessing the value of assets if sold or retained by government, or of new assets to be invested in by government
- developing a framework for calculating the Social Return on Investment (SROI) of housing projects.
Client Feedback on Advisory Services
As part of the quality assurance framework for WATC’s advisory services, following the completion of each advisory services engagement, clients are requested to provide feedback on their experience.
For the engagement feedback received during the 2016/17 financial year, 100 per cent of clients rated ‘satisfied’ or better with WATC’s advisory services. Of this feedback, over 86% of clients rated ‘very satisfied’ or ‘extremely satisfied’. Key attributes of each engagement rated by clients include their satisfaction:
- with the quality of advice provided
- with WATC’s overall capability and service provided
- that WATC has added value to the client’s project.
The positive feedback received from clients provides validation that WATC continues to deliver financial solutions for the benefit of the Western Australian public sector.
Previous: Economic EnvironmentNext: Financial Markets Activity
WATC plays an important role in the management of public sector finances by providing the Western Australian public sector with access to a comprehensive range of treasury management services.
By engaging WATC to provide treasury management services, clients do not have to maintain the systems and resources required to oversee their investment and treasury operations. WATC’s clients have access to the experience, expertise, specialised systems, pricing and oversight that comes with the scale of operations undertaken by WATC in both domestic and offshore financial markets.
WATC has built strong relationships with each of its treasury management services clients and works closely with them to ensure their portfolios and operations are managed in accordance with their individual business requirements and policy frameworks.
Clients engaging WATC’s treasury management services to manage their investment portfolios have access to transaction execution, settlement, credit risk management, reporting and accounting services. These investment portfolios achieved returns that outperformed established benchmarks.
At 30 June 2017, WATC managed in excess of $9.9 billion in investment funds in its own name and that of its clients. This included over $4.6 billion for the Public Bank Account and the Western Australian Future Fund.
WATC has managed the Public Bank Account investment portfolio since 1989 and was appointed to manage the Western Australian Future Fund in November 2012. Since then, WATC has been engaged to manage investment portfolios for Lotterywest (2013) and Landgate (2015).
WATC has provided treasury management and support services for borrowing, investment and foreign exchange to Horizon Power since 2013.
Advisory Services
WATC assists Western Australian public sector agencies to make informed financial decisions through a range of financial analysis and advisory services, including high-quality corporate finance advice, financial analysis and financial risk management.
WATC partners with clients to identify their financial and analytical requirements and develops tailored solutions for both unique and complex financial problems. Using a combination of co-operative expert workshops and data gathering, brainstorming and methodology ideation, and advanced financial modelling using the most current financial markets theory and practice, WATC creates logical and well supported methods and conclusions for clients that add value and can be practically implemented.
WATC maintains strong expertise and experience in financial matters through a continuing combination of financial training, financial research and applying WATC’s collective experience to solve client’s financial problems, which is aligned with a highly co-operative approach when working with clients. WATC’s expert knowledge and financial experience covers:
- debt structure analysis and advice
- financial risk modelling and simulation
- asset and project investment evaluation
- asset valuation, including retention versus sale analysis
- project financing and alternative financing options
- business case development
- procurement advice and financial contract structuring
- cost of capital analysis
- asset-liability modelling
- investment policy development
- general financial analysis, modelling and advice.
Key achievements and client engagements during the 2016/17 financial year included:
Department of Corrective Services – Commercial Advisory Roles
WATC continued to assist the Department of Corrective Services (DCS), known as the Department of Justice from 1 July 2017, with two major commercial advisory roles.
In 2016, DCS appointed a private operator to run a metropolitan women’s prison complex. WATC assisted throughout the original procurement and contract establishment process, including analysing and recommending commercial and financial terms, financial performance incentives and key performance measures and indicators. WATC also assisted with the subsequent ongoing contract monitoring and management to ensure effective financial management of the contract. The contract contains performance incentives that reward smooth and efficient running of the prison, effective reintegration of former prisoners back into society on release and reductions in rates of return due to reoffending.
DCS also requested WATC’s assistance with analysing commercial terms of an existing privately run men’s prison. The private contractor submitted a proposal to extend the contract for a number of years and WATC was requested to analyse and model the proposal to determine whether or not it presented good value to the State compared to the costs and efficiencies the State could achieve if it ran the prison itself. WATC provided recommendations to DCS as to which measures could be used to make better comparisons between private operating costs and State costs. The WATC analysis identified which of the various private and public operational options presented the best value for money for the State, allowing the client to provide informed advice to Government.
Government Trading Enterprise – Investment Management
WATC was requested to assist an agency in the procurement process to select a professional, independent fund manager who would provide investment management services and manage the agency’s long-term investment portfolio. WATC provided expert advice to the client regarding market processes and protocols within the funds management industry, analysed the bidders, compared and contrasted the important features of each tender bid and explained these to the client, and assisted in the final selection and negotiation with the preferred bidder. A fund manager was appointed and is now investing and managing the client’s funds as per the mandate agreed.
Government Agency – Financial Performance Assessment
WATC was requested to perform a financial assessment of a company partly owned by the government agency as a long-term investment. WATC analysed the financial performance of the subsidiary, including the market outlook and expected financial future direction. WATC summarised the financial performance and identified areas of over- and under-performance, compared projected performance to actual performance with reasons behind any divergence, examined how the financial projections had changed over time and the key reasons for changes, identified commercial risks going forward and identified appropriate risk mitigation strategies. This allowed the agency to make an informed financial and strategic decision about the future of the subsidiary and the level of resources that could be committed to supporting this investment.
Government Trading Enterprise – Budget Modelling and Sensitivity Analysis
WATC constructed a flexible and transparent funding model to inform and support a government trading enterprise’s budget submissions. The model quantified the client’s revenues, profit and loss position, distributions and closing cash balances position over the forward years. The model allows the client to more efficiently and effectively produce the desired outputs needed to support their budget process and identify areas of financial risks to their business going forward, as well as providing a greater ability to perform sensitivity testing and scenario “what if” analysis.
Government Trading Enterprise – Optimising the Investment Portfolio
WATC worked with a government trading enterprise to define its optimal long-term investment portfolio, portfolio benchmarks and suitable investments to achieve their long-term goals. This required a deep knowledge of the agency’s use of the portfolio’s funds, expected timing of withdrawals and the risk tolerance of the agency for variability in the rate of return and minimisation of any potential for loss over time.
Public Transport Authority – Treasury Manager
WATC assisted the Public Transport Authority (PTA) with the secondment of a senior financial consultant to take on the role of Treasury and Investment Planning Manager for the PTA for several months. While in the role, the WATC consultant managed the treasury function including cash and debt portfolio management and foreign exchange hedging, prepared the PTA’s review of fees and charges for 2017/18 and reviewed business cases for inclusion in the PTA’s 2017/18 budget.
Local Governments – Regional Councils – Procurement Project
Two local government regional councils were considering options to either acquire or build a resource recovery facility or enter into a long-term waste supply agreement under which the regional councils would deliver waste to a privately established merchant resource recovery facility to process waste from multiple sources.
The regional councils commenced a procurement process to evaluate and acquire a resource recovery facility or service to improve the sustainability of waste management practices within their local government areas.
WATC worked with the clients to assess the financial robustness of the bidders, reviewed the financial models underpinning the costs to both the regional council principals and the bidders and identified and highlighted potential commercial risks associated with each tender submission. The WATC analysis was completed within the tight timeframes specified in the tender process and the clients were able to make informed financial decisions as part of their overall procurement process.
Department of Fisheries – Fisheries Adjustment Scheme Analysis
Following a series of adverse environmental changes, a number of fisheries in the North West of Western Australia were closed for several seasons to allow stocks to replenish. Fishery licence holders in those areas faced financial stress with the closure of the fisheries and this challenged their ability to repay existing commitments under the Fisheries Adjustment Schemes Act 1987 (FAS). Industry participants requested fee relief and loan restructuring from the State.
WATC assisted the Department of Fisheries, known as the Department of Primary Industries and Regional Development from 1 July 2017, by assessing the appropriateness of providing fee relief and restructuring of the outstanding loans, analysing the impacts under various scenarios, reviewing the current FAS financial arrangements and developing specific FAS loan restructure proposals for each of the fisheries affected.
Other Roles
During 2016/17, WATC carried out a number of other advisory roles, including:
- assessing the commercial viability of projects
- assessing the value of assets and investments
- establishing logical principles for assessment of asset values under retention or sale scenarios
- assessing the value of assets if sold or retained by government, or of new assets to be invested in by government
- developing a framework for calculating the Social Return on Investment (SROI) of housing projects.
Client Feedback on Advisory Services
As part of the quality assurance framework for WATC’s advisory services, following the completion of each advisory services engagement, clients are requested to provide feedback on their experience.
For the engagement feedback received during the 2016/17 financial year, 100 per cent of clients rated ‘satisfied’ or better with WATC’s advisory services. Of this feedback, over 86% of clients rated ‘very satisfied’ or ‘extremely satisfied’. Key attributes of each engagement rated by clients include their satisfaction:
- with the quality of advice provided
- with WATC’s overall capability and service provided
- that WATC has added value to the client’s project.
The positive feedback received from clients provides validation that WATC continues to deliver financial solutions for the benefit of the Western Australian public sector.
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WATC assists Western Australian public sector agencies to make informed financial decisions through a range of financial analysis and advisory services, including high-quality corporate finance advice, financial analysis and financial risk management.
WATC partners with clients to identify their financial and analytical requirements and develops tailored solutions for both unique and complex financial problems. Using a combination of co-operative expert workshops and data gathering, brainstorming and methodology ideation, and advanced financial modelling using the most current financial markets theory and practice, WATC creates logical and well supported methods and conclusions for clients that add value and can be practically implemented.
WATC maintains strong expertise and experience in financial matters through a continuing combination of financial training, financial research and applying WATC’s collective experience to solve client’s financial problems, which is aligned with a highly co-operative approach when working with clients. WATC’s expert knowledge and financial experience covers:
- debt structure analysis and advice
- financial risk modelling and simulation
- asset and project investment evaluation
- asset valuation, including retention versus sale analysis
- project financing and alternative financing options
- business case development
- procurement advice and financial contract structuring
- cost of capital analysis
- asset-liability modelling
- investment policy development
- general financial analysis, modelling and advice.
Key achievements and client engagements during the 2016/17 financial year included:
Department of Corrective Services – Commercial Advisory Roles
WATC continued to assist the Department of Corrective Services (DCS), known as the Department of Justice from 1 July 2017, with two major commercial advisory roles.
In 2016, DCS appointed a private operator to run a metropolitan women’s prison complex. WATC assisted throughout the original procurement and contract establishment process, including analysing and recommending commercial and financial terms, financial performance incentives and key performance measures and indicators. WATC also assisted with the subsequent ongoing contract monitoring and management to ensure effective financial management of the contract. The contract contains performance incentives that reward smooth and efficient running of the prison, effective reintegration of former prisoners back into society on release and reductions in rates of return due to reoffending.
DCS also requested WATC’s assistance with analysing commercial terms of an existing privately run men’s prison. The private contractor submitted a proposal to extend the contract for a number of years and WATC was requested to analyse and model the proposal to determine whether or not it presented good value to the State compared to the costs and efficiencies the State could achieve if it ran the prison itself. WATC provided recommendations to DCS as to which measures could be used to make better comparisons between private operating costs and State costs. The WATC analysis identified which of the various private and public operational options presented the best value for money for the State, allowing the client to provide informed advice to Government.
Government Trading Enterprise – Investment Management
WATC was requested to assist an agency in the procurement process to select a professional, independent fund manager who would provide investment management services and manage the agency’s long-term investment portfolio. WATC provided expert advice to the client regarding market processes and protocols within the funds management industry, analysed the bidders, compared and contrasted the important features of each tender bid and explained these to the client, and assisted in the final selection and negotiation with the preferred bidder. A fund manager was appointed and is now investing and managing the client’s funds as per the mandate agreed.
Government Agency – Financial Performance Assessment
WATC was requested to perform a financial assessment of a company partly owned by the government agency as a long-term investment. WATC analysed the financial performance of the subsidiary, including the market outlook and expected financial future direction. WATC summarised the financial performance and identified areas of over- and under-performance, compared projected performance to actual performance with reasons behind any divergence, examined how the financial projections had changed over time and the key reasons for changes, identified commercial risks going forward and identified appropriate risk mitigation strategies. This allowed the agency to make an informed financial and strategic decision about the future of the subsidiary and the level of resources that could be committed to supporting this investment.
Government Trading Enterprise – Budget Modelling and Sensitivity Analysis
WATC constructed a flexible and transparent funding model to inform and support a government trading enterprise’s budget submissions. The model quantified the client’s revenues, profit and loss position, distributions and closing cash balances position over the forward years. The model allows the client to more efficiently and effectively produce the desired outputs needed to support their budget process and identify areas of financial risks to their business going forward, as well as providing a greater ability to perform sensitivity testing and scenario “what if” analysis.
Government Trading Enterprise – Optimising the Investment Portfolio
WATC worked with a government trading enterprise to define its optimal long-term investment portfolio, portfolio benchmarks and suitable investments to achieve their long-term goals. This required a deep knowledge of the agency’s use of the portfolio’s funds, expected timing of withdrawals and the risk tolerance of the agency for variability in the rate of return and minimisation of any potential for loss over time.
Public Transport Authority – Treasury Manager
WATC assisted the Public Transport Authority (PTA) with the secondment of a senior financial consultant to take on the role of Treasury and Investment Planning Manager for the PTA for several months. While in the role, the WATC consultant managed the treasury function including cash and debt portfolio management and foreign exchange hedging, prepared the PTA’s review of fees and charges for 2017/18 and reviewed business cases for inclusion in the PTA’s 2017/18 budget.
Local Governments – Regional Councils – Procurement Project
Two local government regional councils were considering options to either acquire or build a resource recovery facility or enter into a long-term waste supply agreement under which the regional councils would deliver waste to a privately established merchant resource recovery facility to process waste from multiple sources.
The regional councils commenced a procurement process to evaluate and acquire a resource recovery facility or service to improve the sustainability of waste management practices within their local government areas.
WATC worked with the clients to assess the financial robustness of the bidders, reviewed the financial models underpinning the costs to both the regional council principals and the bidders and identified and highlighted potential commercial risks associated with each tender submission. The WATC analysis was completed within the tight timeframes specified in the tender process and the clients were able to make informed financial decisions as part of their overall procurement process.
Department of Fisheries – Fisheries Adjustment Scheme Analysis
Following a series of adverse environmental changes, a number of fisheries in the North West of Western Australia were closed for several seasons to allow stocks to replenish. Fishery licence holders in those areas faced financial stress with the closure of the fisheries and this challenged their ability to repay existing commitments under the Fisheries Adjustment Schemes Act 1987 (FAS). Industry participants requested fee relief and loan restructuring from the State.
WATC assisted the Department of Fisheries, known as the Department of Primary Industries and Regional Development from 1 July 2017, by assessing the appropriateness of providing fee relief and restructuring of the outstanding loans, analysing the impacts under various scenarios, reviewing the current FAS financial arrangements and developing specific FAS loan restructure proposals for each of the fisheries affected.
Other Roles
During 2016/17, WATC carried out a number of other advisory roles, including:
- assessing the commercial viability of projects
- assessing the value of assets and investments
- establishing logical principles for assessment of asset values under retention or sale scenarios
- assessing the value of assets if sold or retained by government, or of new assets to be invested in by government
- developing a framework for calculating the Social Return on Investment (SROI) of housing projects.
Client Feedback on Advisory Services
As part of the quality assurance framework for WATC’s advisory services, following the completion of each advisory services engagement, clients are requested to provide feedback on their experience.
For the engagement feedback received during the 2016/17 financial year, 100 per cent of clients rated ‘satisfied’ or better with WATC’s advisory services. Of this feedback, over 86% of clients rated ‘very satisfied’ or ‘extremely satisfied’. Key attributes of each engagement rated by clients include their satisfaction:
- with the quality of advice provided
- with WATC’s overall capability and service provided
- that WATC has added value to the client’s project.
The positive feedback received from clients provides validation that WATC continues to deliver financial solutions for the benefit of the Western Australian public sector.
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