Queensland Motorways
(Brisbane, Australia)
“Asset In-Kind Contributions” (AIK) to pension plans is an asset transfer strategy that is rare in U.S. public finance, however, this pension funding tool has significant precedent in corporate finance and with non-U.S. public plans. A good case in point is the State of Queensland, Australia’s AIK of Queensland Motorways to the Queensland Defined Benefit Fund (DB Fund).
On May 31, 2011, the Queensland Motorways, a 70 km toll road network in the Brisbane metropolitan area, was transferred for AUD$3.1 billion, pursuant to exclusive negotiations with QIC, the DB Fund’s asset manager. QIC transformed a government department into an enterprise focused on efficiency, sustainable earnings, and growth by upgrading management, culture, systems, stakeholder engagement, earnings efficiency and risk management that resulted in immediate 37% improvement in net income. QIC further optimized the asset by bolstering its regional toll road network via acquisitions and improvements. This generated additional savings from synergies and scale and provided social and political benefits for stakeholders.
Three years later, QIC sold the transformed motorways for AUD$7.1 billion—a gain of AUD$3.8 billion or 2.1 times initial investment.