Refining NZ 2017 Annual Report

RESOLVE
RESILIENCE
PRIDE
ANNUAL REPORT 2017

RESOLVE
RESILIENCE
PRIDE
2017 WAS A DEFINING YEAR FOR OUR COMPANY AND ONE
FROM WHICH WE CAN TAKE GREAT CONFIDENCE.
OUR SYSTEMS, PROCESSES AND OUR PEOPLE PROVED THEIR
RESILIENCE WHEN TESTED, AND NOT ONLY DID WE MEET OUR
SOCIAL AND ENVIRONMENTAL OBLIGATIONS, WE ALSO
ACHIEVED A STRONG RESULT.
2018 BRINGS NEW CHALLENGES AND OPPORTUNITIES;
WITH A CLEAR STRATEGY, FOCUSED LEADERSHIP
AND COMMITMENT TO OPERATIONAL EXCELLENCE WE ARE
WELL-PLACED TO IMPROVE PERFORMANCE AND SHARPEN
OUR COMPETITIVENESS FURTHER STILL. WE ARE INDEED AN
EXCITING BUSINESS WITH A SUSTAINABLE FUTURE.

The Directors are responsible for the preparation of the
consolidated financial statements and other information
included in this Annual Report. The consolidated financial
statements authorised for issue by the Board of Directors
and dated on 27 February 2018 have been prepared in
conformity with generally accepted accounting practice
to give a true and fair view of the financial position of the
Group and the results of its operations and cash flows.
The Company appoints an independent auditor to audit
the consolidated financial statements prepared by the
Directors and to express an opinion on these consolidated
financial statements. The independent auditor’s report,
which sets out their opinion and the basis of that opinion,
is set out on page 119 of the Annual Report.
The Annual Report of The New Zealand Refining
Company Limited is signed on behalf of the Board by:
DIRECTORS’
STATEMENT
CONTENTS
02 Chairman and Chief Executive Officer’s Report
06 Performance Highlights 2017
08 10 Days of Pride
15 The Way We Do Business
18 Our Strategy
20 Our Performance 2017
32 Our Action Plan
35 Governance
54 Shareholder Information
56 Board of Directors
60 Leadership Team
64 Consolidated Financial Statements
119 Independent Auditor’s Report
124 Trend Statement
125 Glossary
126 GRI Index
128 Corporate Directory
128 Financial Calendar
S C Allen
Director
15 March 2018
M Tume
Director
REFINING NZ
ANNUAL REPORT 2017
01

From a financial viewpoint our
performance was marked by
outstanding plant reliability, healthy
refining margins, strong cash
generation from operations,
and a culture of teamwork, all of
which allowed the business to
post a Net Profit after Tax (NPAT)
of $78.5m for the year ended
31 December 2017 (2016: $47.5m).
In the given circumstances this was a
remarkable achievement that speaks
volumes for our talented team of
700 staff and contractors. This was
a highly visible event that caused
disruption for air travellers. We are
grateful to the specialist suppliers,
pipeline experts and in particular our
customers who worked with our
team on supply alternatives including
a temporary truck loading facility at
the Refinery for bridging of jet fuel
to Auckland.
Before going further into the 2017
financial results, we should
acknowledge two changes to our
annual reporting. Firstly, in-depth
coverage of our environmental, social
and governance responsibilities which
are detailed on pages 15 to 63.
Secondly, our Corporate Governance
section which has been rewritten to
align with the NZX Corporate
Governance Code which came into
effect in October 2017.
HEALTH, SAFETY AND
ENVIRONMENT
While our Health and Safety
performance in 2017 was impacted
by injuries early in the year we
finished strongly having gone the last
three months without a TRC*.
We finished the year with a total of
seven recordable injuries to staff
and contractors (including two lost
time incidents)
which gave us a TRCF* of 0.89 and
an LTIF* of 0.26. There were four
Tier 2* process safety incidents
across the year, including a small fire
on a processing unit in April, which
was quickly managed without injury
by our Emergency Services and
operations crew.
As one of the few high hazard
industrials in the country we are
highly conscious of our health and
safety and are always looking to
improve our performance. Process
safety is an ongoing focus for our
Health and Safety action plan. In 2017
we continued with implementing the
recommendations of the 2015 DuPont
review: clearly identifying process
safety critical roles across the
organisation; implementing a new
permit to work system; and rolling
out an additional system of isolation
(Log Out Tag Out) to safeguard
process plant for maintenance
(see page 21 for further detail).
Looking ahead, we are expecting
to submit a Safety Case to the
regulator in Q2 2018. This will outline
our major hazards and the robust
safety management systems we
have in place to continue to run
our Refinery safely.
In 2017 we reported four
environmental incidents with the
most notable being the RAP leak in
September which counted as a
product release (outside of consent).
While this was the case, as noted
earlier, our response to this external
event was commended by the
regional council. Remediation work
around the pipe repair site was
completed before Christmas while the
last piece of remediation work on an
adjacent farm drain is expected to be
completed in Q2 2018.
We continue to invest in improving
our environmental performance
through strengthening our waste
water treatment systems, particularly
against major weather events. In the
past four years around $23m has
been invested in a series of
improvements on site. In 2017 we
took a further step forward with the
installation of a new bio-treater plant
(see page 23 for more detail).

2017 was a challenging year for the Refinery, defined by the
September rupture on the Refinery to Auckland Pipeline (RAP).
The Company has been encouraged by the recent finding of the
Northland Regional Council that the Refinery had no causative role
in the rupture. It is pleasing that after reviewing the external expert
reports and having witnessed first-hand our containment and
recovery processes, the Council decided not to prosecute and at
the same time commended Refining NZ for its response.
More detail about that response is covered on pages 8 to 13
of this report.
* See Glossary page 125

CHAIRMAN AND
CHIEF EXECUTIVE
OFFICER’S REPORT
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
0203

BUSINESS ENVIRONMENT
An outstanding operational
performance underpinned by a
world-class unplanned downtime
of 0.60% (2016: 0.85%) allowed the
Company to capitalise on healthy
refining margins and to generate a
significant lift in operating revenue
to $411.6m, up 16% on the previous
year (2016: $353.6m).
Refining margins remained in a range
of USD 7 to USD 11 per barrel for
much of the year, with only January
and December dropping to below
USD 6 per barrel. The Company’s
GRM averaged USD 8.02 per barrel
(2016: USD 6.47 per barrel) at the
top of its historical USD 4 – USD 6 per
barrel range, supported by global
demand growth.
Our financial performance in 2017
highlights the continued strength of
our growth strategy. The Company
maintained its uplift over the
Singapore Complex Margin averaging
USD 4.27 per barrel (2016: USD
3.22), helped by, amongst other
factors, freight costs and the
increased use of natural gas at the
Refinery. Strong cash generation from
operations resulted in a FCF* of
$103m (2016: $47m) and has allowed
us to further reduce total net
borrowings* to $152.4m despite the
New Zealand dollar averaging USD
0.71 for the year (2016: USD 0.70).
Our ability to maintain borrowings
within the target average gearing ratio
of 20% prepares us well for the major
planned maintenance shutdown in
Q2 2018.
The 10-day outage on the RAP was
operationally challenging. However,
the subsequent commissioning of
a second pump at the Kumeu
Intermediate Pumping Station in
November and the lift in the RAP’s
operating pressure to 75 bar in early
December means that more fuel
product is being delivered to Wiri than
before the rupture. We expect the
RAP to return to full pressure in Q2/
Q3 2018, pending approval of the
pipeline certifier, Lloyds Register.
Despite the pipeline rupture, our
annual crude intake remained
strong at 41.7m barrels (2016:
42.7m barrels).
STRATEGY
The Company maintains its
aspiration to be the manufacturing
and supply partner of choice for
New Zealand. To achieve that
aspiration we are continuing to pursue
a series of smaller growth initiatives
that will grow revenue and contribute
to the ongoing competitiveness of
our Refinery.
In 2017 we nearly doubled our access
to natural gas following the installation
of the First Gas compressor at
Henderson. Increased access to
natural gas is doubly beneficial in that
it allows us to make more product for
our customers, while cleaner burning
natural gas has lessened our local
environmental impact.
We continued our consultation on
the crude shipping project in the lead
up to lodging a resource consent
application in August 2017. A total
of 50 submissions were received.
We have continued to consult with
tangata whenua and other key
submitters, and at the time of writing
are awaiting the outcome of the
resource consent hearing.
As noted above, in November phase
two of the three phase RAP capacity
upgrade project was completed with
the commissioning of a second pump
at the Kumeu Intermediate Pumping
Station. Each phase of the upgrade
adds an additional 5% capacity, with
all three phases amounting to a 15%
uplift in overall capacity. Phase three
of the capacity upgrade is due to be
undertaken in 2019.
The post implementation review
carried out on the $365m Te Mahi
Hou project confirmed that the
Continuous Catalytic Regeneration
(CCR) Platformer unit commissioned
in late November 2015 is meeting all
of the key performance indicators set
out in the project business case.
2018 SHUTDOWN
The planned maintenance shutdown
starting in Q2 is a major undertaking
for our business. Our dedicated
shutdown team has spent the past
two years planning and marshalling
resources and expertise from across
the Refinery, specialist crews from
across New Zealand and overseas to
ensure the shutdown is completed
safely, on time and to budget. The
scale of this shutdown is such that for
the first time in 14 years it will include
a short period of complete shutdown
of the Refinery’s processing units.
DIVIDEND POLICY
At the Board meeting last month the
Directors approved a new dividend
policy for the Company. Refining NZ’s
dividend policy is to pay 80% of
FCF* as ordinary dividends subject to
the Board’s due consideration of the
Company’s medium-term asset
investment programme, 20%
targeted average gearing level and
future circumstances including the
profitability, growth opportunities, and
the financial and taxation position of
Refining NZ.
Dividend payments are expected to
be split into an interim dividend paid
in September and a final dividend
paid in March. It is the intention of
the Board to attach imputation credits
to dividends to the extent that they
are available.
SHAREHOLDER RETURNS
The Company’s Directors have
resolved to pay a fully imputed final
dividend of 12 cents per share to be
paid on 22 March 2018 with a record
date on 15 March 2018. With an
interim dividend of 6 cents paid
in September 2017, the total dividend
payment for the year is 18 cents.
BP SHAREHOLDING
In March 2017, as part of a global
portfolio review, BP sold shares in the
Company amounting to 11.09% of
Refining NZ’s issued share capital.
BP remains a significant shareholder
with an equity stake of 10.1%, and
the processing arrangements with
BP remain unaffected.
BOARD AND MANAGEMENT
CHANGES
In March 2017, Director Andrew
Warrell resigned and was replaced
by Riccardo Cavallo. In June 2017
Matthew Elliott resigned as a
Director and was replaced by
Deborah Boffa. Thank you to Andrew
and Matthew for their respective
contributions and we welcome
Riccardo and Deborah to the
Refining NZ Board.
At the Board meeting last month,
Sjoerd advised the Directors
of his decision to resign from his
role as CEO and his intention to
remain in the role until the end of
July 2018. The Board appreciates
the leadership provided by Sjoerd and
the outstanding contribution over the
length of his tenure, building a culture
that is now strongly evident in the
performance and resilience of the
business. His leadership during the
rupture on the RAP has been widely
recognised as a crucial factor in the
rapid resolution of that crisis.
The Board is pleased that Sjoerd
will remain in the business for the
next few months to see through the
succession process and critical work
programmes, including the 2018
planned maintenance shutdown
and the government inquiry into
the pipeline incident.
FUTURE OUTLOOK
Despite trying circumstances we
have achieved a strong result for
the year through our continued
operational reliability, ability to
capitalise on healthy margins, quality
fuel production and a well-developed
culture of team work amongst our
staff and contractors.
Continuing to play to these core
strengths sets us up for the
successful completion of the planned
maintenance shutdown in Q2 2018.
At the same time continuing to pursue
a series of attractive growth initiatives
will ensure we keep pace with the
demand for quality fuel products
driven by Auckland growth, and
will underpin the competitiveness
of our refinery, and the ongoing
sustainability of our refining business.
Simon Allen – Chairman
Sjoerd Post – CEO
OUR FINANCIAL PERFORMANCE
IN 2017 HIGHLIGHTS THE CONTINUED
OF OUR GROWTH STRATEGY.
* See Glossary page 125* See Glossary page 125

”
”
STRENGTH
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
0405

PERFORMANCE
HIGHLIGHTS 2017
103
M
$47M IN FY16
FREE CASH FLOW
$
Gross refining margin Unplanned downtime Crude Intake Free Cashflow Total Dividend
$
41.7
CRUDE INTAKE
42.7M BARRELS IN FY16
M BARRELS
Gross refining margin Unplanned downtime Crude Intake Free Cashflow Total Dividend
$
PER
SHARE
9 CENTS IN FY16
18
TOTAL DIVIDEND
C
Gross refining margin Unplanned downtime Crude Intake Free Cashflow Total Dividend
$
0.60
UNPLANNED DOWNTIME
2016 0.85%
%
16
OPERATING REVENUE
%
65
NET PROFIT AFTER TAX
%
Note: Arrow direction denotes the year-on-year change in performance.
8.02
GROSS REFINING MARGIN (GRM)
2016 USD6.47 PER BARREL
USD
Gross refining margin Unplanned downtime Crude Intake Free Cashflow Total Dividend
$
PER
BARREL
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
0607

JEFF STAGG
DIRECTOR, CPS
DAYS
OF
PRIDE
10
“
IT’S NOT SO MUCH ABOUT
WHAT WE DID THAT MAKES ME
PROUD, BUT ABOUT WHAT IT
TOOK TO DO IT.
”
SJOERD POST
CEO, REFINING NZ
“
I WOULD LIKE TO RECORD THAT THE
ORGANISATION AND WORKS UNDERTAKEN
ON SITE ARE THE BEST I HAVE SEEN IN
OVER 20 YEARS OF DEALING WITH
ENVIRONMENTAL POLLUTION EVENTS.
THE PLUME CONTAINMENT METHODOLOGY
IS TEXT BOOK AND THE MANAGEMENT
OF THE PLUME DOWN THE SURFACE DRAIN
WHICH HAS ARRESTED THE PLUME
WITHIN 600M OR SO, IS EXEMPLARY.
”
DAY
0
THURSDAY, 14 SEP
– Jet fuel leak spotted and isolated,
work begins to contain it.
– Recovery operation begins, with
cordon in place.
– Work begins to enable access for
heavy machinery.
– Family living nearby moved to
motel as a precaution.
– Working with oil companies to
minimise impact on fuel supplies.
DAY
1
FRIDAY, 15 SEP
– Leak is largely contained.
– Excavation begins to assess the
damage.
– Provided alternative
accommodation to
remaining residents.
DAY
2
SATURDAY, 16 SEP
– Repair crew works to remove
water from the excavation site.
– Work continues to recover
hydrocarbons.
On the afternoon of Thursday 14 September 2017,
a leak was discovered on the RAP. Over the next 10 days
as our team worked through the repair and recovery
process, their collective pride in our Refinery was clear
for all to see.
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
0809

“
RIAAN, OUR ENVIRONMENTAL GUY TOLD
US THE PLAN – WE NEED SANDBAGS AND
150MM PVC PIPE TO MAKE A DAM THAT
ALLOWS THE WATER TO FLOW THROUGH
BUT HOLD THE KERO BACK. BRILLIANT.
”
DAVE BONTHRON
SENIOR OPERATOR, REFINING NZ
“
FLYING OVER I SAW THIS BROWN PATCH
OF LIQUID SITTING OVER THE TOP OF THE
GROUND WHERE OUR PIPE RUNS.
”
GREG BRACEY
PIPELINE CONTROLLER, REFINING NZ
“
THERE WERE A COUPLE OF
BEEFIES AND HORSES IN THE
PADDOCK AND I THOUGHT
WE NEEDED TO FENCE THEM
OFF TO PROTECT THEM. I
COULDN’T FIND ANYTHING
SO I WENT OFF TO THE LOCAL
HARDWARE STORE AND
BOUGHT POSTS AND WIRE
AND FENCED THEM OFF.
”
KARL MORGAN
OPERATOR, REFINING NZ
“
THE CONDITIONS WERE COLD WINDY
AND WET FOR A LOT OF THOSE DAYS AND
NIGHTS. EVERYONE HERE MUCKED IN.
FROM THE CLEANER TO THE CONTRACTOR
TO THE SAFETY WATCH – THEY WORE
THEIR HEARTS ON THEIR SLEEVE.
”
DAMIAN SOUTHORN
EMERGENCY SERVICES & INCIDENT RESPONSE MANAGER,
REFINING NZ
“
IT’S A CREDIT TO ALL THE TRAINING, DRILLS
AND EXERCISES WE’VE DONE FOR EVENTS LIKE
THIS. THE EXTERNAL AGENCIES WERE HAPPY
FOR US TO KEEP GOING INSTEAD OF STEPPING
IN THEMSELVES.
”
“
SUPERVISORS, ENGINEERS,
MANAGERS AND FOREMEN ALL
WORKED TOGETHER AS ONE.
”
WENDY NUKU
TBS SUPERVISOR, REFINING NZ
DAY
3
SUNDAY, 17 SEP
– Most of leaked fuel has been
contained or recovered through
a series of culverts and dams.
– Excavation around pipeline
confirms extent of damage and
repair methodology confirmed.
– Preparations for replacing
2.3m length of damaged
pipeline begins.
DAY
4
MONDAY, 18 SEP
– Site preparation almost complete
including creation of 260m
access road.
– Stopple areas are excavated,
made free of water and
decontaminated.
– Air quality monitoring indicates
no health hazard to community.
DAY
5
TUESDAY, 19 SEP
– Engineers complete first of four
major welds for replacing the
ruptured section of pipe.
– The first of two inline stopple
plugs completed.
– New section of pipe is hydrotested
before delivery to the site.
– Conducted coating insulation
testing on both pipelines (Refining
NZ and the gas pipeline).
– Construction of temporary jet fuel
tanker-loading station for ‘bridging’
completed at Marsden Point.
DAY
6
WEDNESDAY, 20 SEP
– Stopple works including welding
are completed.
– Trial of tanker-loading facility
successful and made available
for operation.
DAY
7
THURSDAY, 21 SEP
– Damaged section of pipeline
removed.
– Completed welding new section
of pipeline.
– Replacement section passes
initial weld inspections.
– Pipeline insulation testing
confirms integrity of pipeline.
– Images of ruptured pipeline
show severity of damage caused
by digger.
PETER GUBB
REFINING MANAGER, REFINING NZ
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
1011

From the moment we discovered a
leak on the RAP the actions we took
were deliberately focused on making
the site safe for our team to work in
while minimising the impact on the
environment, on residents, and our
customers who depend on the RAP
for a regular supply of fuel products.
The leak was initially picked up through real-time
monitoring in the Refinery control room, the pipeline was
immediately shut down and our Incident Management
Team swung into action. An aerial flyby of a rural property
in Ruakaka, eight kilometers south of the Refinery,
confirmed the leak.
Over the course of the 10-day outage, good organisation,
execution of incident pre-plans and clear lines of reporting
translated to everyone at the leak site working safely,
knowing exactly what they were meant to be doing at
any one moment and working to an agreed timeframe.
The site was separated into two work areas: Sector 1
was the location of the pipeline leak and Sector 2 was
a nearby farm drain where an estimated 124,000 litres
of jet fuel had spilled.
Additionally, gas monitors were fixed in place across
the site and our health and safety team were on hand
to check gas levels. With the team working two shifts
over 24 hours, keeping everyone well rested with
sufficient breaks away from the work site was critical.
Working in a kauri swamp was an extreme challenge
requiring the water logged ground to be stabilised so
that diggers and trucks could gain access and operate
safely on solid ground. The construction of the access road
to the site alone required around 300 truckloads of metal.
At the farm drain our environment team set to work on
containing the jet fuel spill and protecting the environment
from any further damage. Trained to respond to marine
oil spills, the team quickly put their skills and resources
into holding jet fuel in the drain. About 800 truckloads
of contaminated swamp water was then processed back
at the Refinery to remove hydrocarbons. Tangata whenua
observers from local hapu, Patuharakeke, and Regional
Council staff were at the site to check the methods we
were using and confirmed that we had successfully
prevented jet fuel from spreading to the Ruakaka estuary.
The council investigation later commended the Refinery
for an outstanding response.
We were especially conscious of the impact on neighbours
and the Ruakaka community. From the get-go our Special
Assistance Team was out knocking on doors, posting
updates in letterboxes, speaking with families and where
needed, providing alternative accommodation.
A briefing session was held for neighbours and regular
updates were provided to tangata whenua, Ruakaka
residents and to the wider world via our Facebook page.
While pipe repairs were underway we worked closely
with our customers to install a temporary jet fuel truck
loading facility at the Refinery. At the same time we kept
a host of industry and political stakeholders, including the
Minister of Energy and Resources, informed with twice
daily updates on our progress.
The pipeline is expected to return to full pressure in
mid-2018, following validation of the intelligent pipeline
integrity gauge data, and signoff from the pipeline certifier.
DAY
8
FRIDAY, 22 SEP
– Jet fuel bridging commences.
– Preparations for restarting
pipeline begin.
DAY
9
SATURDAY, 23 SEP
– Completion of physical repairs to
the pipeline and integrity checks to
restart pipeline.
– A fuel ship carrying 3.5m litres of
jet fuel, and diesel, petrol and fuel
oil departs for Auckland.
– ‘Bridging’ of jet fuel from the
Refinery is continuing with further
road tankers loading.
DAY
10
SUNDAY, 24 SEP
– Pipeline restarted
– First batch of jet fuel begins to
arrive at Wiri at 10.09am through
repaired pipeline.
– Settling, re-certification and
transport to the airport for use
will take a further 30 hours.
– Refining NZ continues the process
of stabilising pipeline production
over the next few days.
Remediation to Council agreed standard, was completed
around the pipeline leak before Christmas 2017, while
remediation of the farm drain is to be completed in
Q2 2018. A significant proportion of the remediation
costs is funded from insurance.
The mark of success is not only what was achieved in
a short space of time, but also how we delivered on our
broader responsibilities to our environment, our people and
community, shareholders and customers. Judging by the
number of supportive comments on our Facebook pages,
the way we conducted ourselves left a positive mark.
The pipeline leak was a disruption for travellers and
quickly dubbed a ‘fuel crisis’ by the media. This highly
visible event was a defining moment for everyone in the
Company. Our processes and procedures were tested
and found to be robust, while our response to the event
engendered an enormous sense of pride in our people.
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ANNUAL REPORT 2017
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ANNUAL REPORT 2017
1213

THE WAY WE
DO BUSINESS
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
1415
REFINING NZ
ANNUAL REPORT 2017
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REFINING NZ
ANNUAL REPORT 2017
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SUPPLY
CUSTOMERS
ANNUAL OUTPUT
CRUDE OIL IMPORTED TO REFINING NZ
OVERSEAS REFINERIES
REFINED TO MULTIPLE PRODUCTS
AT MARSDEN POINT
ANNUAL INPUT
REFINING NZ
OUR PRODUCTIONDISTRIBUTION
OUR SHARE OF
NZ FUEL DEMAND
TRUCK
LOADING
5%
REFINERY TO
AUCKLAND
PIPELINE
52%
40%
42M BARRELS
6.5B LITRES
COASTAL
DISTRIBUTION
3%
EXPORT AND
BUNKER FUEL
REFINING NZ
CUSTOMERS
58%
85%
67%
PETROL
JET FUEL
DIESEL
BY-PRODUCTS
2.2B LITRES
2.1B LITRES
1.4B LITRES
ANNUAL SUPPLY TO NZ
FUEL DEMAND
70%
30%
DIRECT IMPORT OF REFINED
PRODUCTS TO NZ
The future use of fossil fuels for road transport is a
topic that is attracting a lot of interest around the world;
and the development and growth of electric vehicle
technologies is something we are keeping a close eye
on. Currently, there is a wide range of views about the
pace at which a transition to electric transport will occur
and we fully acknowledge the need to remain vigilant.
Our Management team maintains an ongoing review
of market signals of possible disruptions to the business
and provides regular updates to the Board.
With change comes opportunity. In a world of rising
carbon prices and with the shift to de-carbonise energy
use, we continue to study new business opportunities as
they arise. In this respect, we see potential in leveraging
our capabilities, equipment and knowledge to produce
lower carbon fuels. We are looking closely at options to
produce bio-jet fuel and bio-diesel for the New Zealand
market, and we believe that, as a key player in the
fuels market, we have a real contribution to make in
the development of these alternative fuels.
Our continued aspiration is to be the fuels manufacturing and supply partner of choice
for New Zealand. We operate in a highly competitive market which is facing disruption
from emerging alternative technologies including electric vehicles.
THE WAY WE
DO BUSINESS
We also acknowledge the role we can play in helping
New Zealand achieve its ambitions for a low carbon future
and have already signalled to the Government our desire
to be at the table with the other key players who will be
instrumental in driving the next phase of evolution in the
fuels market.
Refining NZ operates New Zealand’s only oil refinery
at Marsden Point near Whangarei. Our core business
is processing a wide range of crude oil types, primarily
imported from key offshore markets, producing high
quality transport fuels for the New Zealand market in
addition to bitumen for roading, sulphur for farm fertiliser
and CO
2 for, amongst others, carbonated drinks. We are
the country’s leading supplier of refined petroleum
products, supplying approximately 70% of the total
domestic market. Refining NZ competes against
overseas refiners many times larger that offer direct
imports of refined products. Refining NZ makes a
significant contribution to the fuel supply chain in
New Zealand as well as playing a significant role in
the Northland economy.
Our primary function as a toll refiner is refining crude oil
for our customers, but we also play a critical role in the
distribution of fuel products by means of the RAP. Auckland
represents just over 40% of total country demand and the
pipeline is by far the most efficient means of moving fuel to
this fast growing region, irrespective of where the product
is sourced. Our customers are responsible for distribution
to 10 port terminals across the country and for distribution
into the Northland region from a truck loading terminal
opposite the Refinery.
OUR ROLE IN FUELLING NZ
REFINING NZ
ANNUAL REPORT 2017
17
REFINING NZ
ANNUAL REPORT 2017
16

OUR STR ATEGY
We understand the importance of strong relationships which
underpin the ability of our business to create value in the short,
medium and long-term. We are committed to supporting and
strengthening the communities to which we are connected.

Our wide network of stakeholders includes investors, suppliers,
customers, employees and neighbours as well as iwi and hapu.
Engaging proactively with these stakeholders is an integral part
of the way we work, and essential for understanding their
expectations, needs and concerns.
As part this year’s annual reporting process, we ran an
independent process to assess what our stakeholders
considered to be the most important and material issues for

the Company to focus on as part of ensuring our long-term
success. The 14 topics identified through that process have
been validated through the discussions with both internal and
external stakeholders and have been integrated into our
business strategy as shown in the diagram to the left.
The 14 topics also have relative degrees of priority, in terms of
the significance of their impact and the extent to which they
influence stakeholder decisions relating to the Company.

This is shown in the material issues matrix graphic to the left.
However, it is important to recognise that the Company’s
performance on these issues should not be viewed in an
isolated way. The issues are interconnected and often progress
in one area can lead to performance changes in another.
Ultimately, we need to improve our performance in all these
areas to ensure our long-term success.
Consistent with our values of honesty, integrity and respect,
Refining NZ has a long tradition of communicating in a
transparent way with all those people and organisations with
whom we have important relationships. In that same spirit and
recognising the growing importance to shareholders of our
social and environmental performance, we have structured this
report to provide in-depth commentary on those issues which
were identified as the most important and material topics.

To ensure we are following accepted international best practice,
this report has been prepared in accordance with Global
Reporting Initiative (GRI) Standards: Core option.
When setting and executing our strategy we are mindful of our broader responsibilities as a major
employer in the region and as a NZX listed company. This is reflected in our business strategy
which is built around five strategic pillars, each of which is aligned with a set of 14 priority areas.
These areas reflect what we see as the most important issues for the business across the full range
of environmental, social and governance performance topics.
FOCUSSING ON WHAT MATTERS
MATERIAL ISSUES
Process safety
Personal safety and wellbeing
Business continuity and emergency response
Energy efficiency
Emissions to air, water and ground
Greenhouse gas/climate change
Quality and reliability of products
1
2
3
4
5
6
7
Financial performance
Governance and Board independence
Risk management
Culture and diversity
Training and development
Community and iwi engagement
Contribution to regional economy
8
9
10
11
12
13
14
Influence on stakeholder assessments and decisions
Significance of our economic, environmental and social impacts
HIGH
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DELIVER A WORLD-CLASS HEALTH AND SAFETY PERFORMANCE
We are one of a few high-hazard units in the country and have robust management processes in place to keep
our refinery running safely.
DELIVER A WORLD-CLASS ENVIRONMENTAL PERFORMANCE
We are conscious of our responsibility for minimising the impact of our operations on the surrounding
environment, and are continually looking to lift our environmental performance. To achieve this, we have facilities
and management processes to minimise the impact of our activities.
BUILD ON THE QUALITY AND RELIABILITY OF OUR CUSTOMER PROMISE
As a toll refiner we can influence our customers’ decision whether to make a product at Marsden Point or to import from
refineries overseas. We provide a compelling customer proposition based on three elements: Quality, Reliability and Price.
IMPROVE OUR COMPETITIVENESS
If we are to deliver value for our customers we need to maintain the relentless focus on our cost base and understand
how we can produce more of the high-value products from the same barrel of crude oil. Harnessing innovative ideas from
both inside and outside the business continues to provide new opportunities to improve our business delivery.
EMBED A HIGH PERFORMANCE CULTURE
Culture, shared values, staff feeling recognised and rewarded and given the opportunities to develop to their
potential, are core to the people and capability strategy. The workforce is becoming demonstrably more diverse across
a number of fronts, hence inclusivity is another main theme in the people agenda.
REFINING NZ
ANNUAL REPORT 2017
19
REFINING NZ
ANNUAL REPORT 2017
18

OUR PERFORMANCE 2017
OUR PERFORMANCE BY THE NUMBERS
DELIVER A WORLD-CLASS
HEALTH AND SAFETY PERFORMANCE
CASE STUDY
DUPONT SAFETY REVIEW
CASE STUDY
We are operating a high-hazard site and
therefore safety is paramount to the way
we do business and our everyday activities.
This applies to personal safety as well as
occupational health and process safety.
The critical importance we place on safety is reflected
in the way we manage safety issues. At the core is
our Central Safety Committee (CSC). This Committee
is chaired by our CEO and includes the Leadership
Team alongside subject matter experts, employee and
key on-site contractor representatives. The Committee
sets overarching safety principles and reviews ongoing
performance. Below the CSC we have established
six sub-committees tasked with the implementation
and continuous development of our safety
management systems.
We constantly strive to improve our safety performance
using a risk based approach. In 2017 we did not record a
Tier 1 process safety incident. Tier 1 incidents represent
the most significant process safety event as defined by
the American Petroleum Institute, an international standard
setting body (refer to the glossary on page 125 for a
definition of a Tier 1 incident). We have an ongoing
programme of risk reduction on the site. As an example,
installing the latest seal technology on pumps used to
transfer flammable or toxic substances reduces their
safety risk and increases their operational reliability.
Since the 2015 review of our health and safety
management systems by internationally
recognised safety experts, DuPont, we have
continued to chart our progress against the
DuPont ‘Bradley curve’, which sets out a four
step cultural strength pathway (reactive,
dependent, independent and interdependent).
DuPont’s review in 2017 recognised that we
had made further progress on this pathway
with an independent culture of process safety
evidenced throughout our safety management
systems, in our processes and daily practices
as well as the personal knowledge and the
value our people place on process safety.
In 2017 we continued with the implementation
of two initiatives recommended by the 2015
DuPont review: the roll out of an additional
system of isolation Log Out Tag Out (LOTO) to
safeguard process plant for maintenance, and a
new permit to work system.
Our operations and maintenance teams rely
on the isolation of processing and related units
to carry out planned maintenance, safely and
securely, which is critical to the continued
management of process safety. Where
previously information about isolation points
was held across the Refinery, the LOTO system
has allowed us to build a detailed central library
or database of these isolations.
As part of that rollout, isolation information
from across the Refinery has been collated
and our operations team trained in how to add
information, including electronic drawings for
each isolation point, to this central library.
With the LOTO library at their fingertips, our
operations and maintenance teams can now
successfully track, identify and collate data
on more than 2,500 isolation points across
the Refinery.
The ability to quickly and effectively issue and
track permits to work is essential in a major
shutdown where there are hundreds of
permitted pieces of work underway at any
one time, and where the effectiveness of our
maintenance crews is helped by maximising
the amount of time they have on the tools.
In 2017 we continued the streamlining of
permit issuing with a new permit to work
system. Critical to that streamlining has been
the collation of all permits in a central database
(Maximo) where permit issuers can track and
approve them. At the same time, we have
added an industry accepted Job Risk Analysis
form that clearly identifies for the permit issuer,
all the risks associated with the proposed piece
of work.
There are currently around 9,000 permits in the
database and that number increases every day
as we continue our preparation for our planned
maintenance shutdown in Q2 2018.
– Seven recordable cases which resulted in two lost time injuries.
– Improved personal safety performance in the second half of the year.
– Tier 2 process safety events included a small fire on a processing unit in April, which was quickly managed without injury by our
Emergency Services and Operations crew.
20172016201520142013
Total recordable case frequency (TRCF) #/200,000 hrs
0.89
0.511.320.861.48
Lost time injury frequency (LTIF) #/200,000 hrs
0.26
0.250.100.190.25
Tier 1 process safety incidents
0
1111
Tier 2 process safety incidents
4
0422
Number of major emergency exercises
(internal and external)
17
131477
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
2021

OUR PERFORMANCE BY THE NUMBERS
DELIVER A WORLD-CLASS
ENVIRONMENTAL PERFORMANCE
Since 2014, Refining NZ has invested
around $23m on improving our environmental
performance across the site.
As part of that significant investment in
2017 we continued with the upgrade
of the bio treater aeration system, a critical
piece of plant that treats contaminated waste
water from the refining process. Hundreds of
aerator jets force oxygen through the waste
water breaking down hydrocarbons efficiently.
The treated water can then be safely discharged
to the harbour. In September this was utilised
for the treatment of jet fuel contaminated water
from the RAP leak site in Ruakaka.
This two-year project was completed in May
2017 at a cost of $2.8m. The new bio treater
has significantly lifted our capacity to treat
waste water and importantly has strengthened
our ability to manage major weather events that
place added pressure on our treatment capacity.
A BREATH OF FRESH AIR FOR OUR
WATER TREATMENT
CASE STUDY
Given the nature and size of our business,
Refining NZ has a significant environmental
footprint. We operate a mature industrial
complex with most of our environmental
performance improvements being incremental
as we continually improve our processes.
Energy efficiency is a critical component of our
environmental management system. Any gains we
make in this area also improve our economic
competitiveness through reduced expenditure, with
energy being the most significant cost to our business.
Beyond our fenceline our emissions to air, water
and ground have the potential to impact our local
environment. We regularly report on our environmental
performance to the Regional Council as well as to local
hapu, Patuharakeke who contribute their experience
to our environmental monitoring. As part of our
environmental commitments, we continue to invest in
improving our environmental performance through
projects to prevent hydrocarbons leaving the site.
We have achieved significant reductions in sulphur
dioxide emissions per unit of fuel production as a result
of the increased use of natural gas as a cleaner source
of energy to run our processes.
We are committed to helping New Zealand meet its
climate change obligations. As a material environmental
issue, our carbon emissions impact more at a national
than regional or local level. We have a Negotiated
Greenhouse Agreement with the Government which runs
until 2022 and obliges us to continue reduction of our
carbon emissions. Going forward, we are committed to
working with the new Government on climate change to
understand how we can continue to play our part.
– Higher consumption of natural gas in 2017 has reduced SO2 and CO2 emissions.

20172016201520142013
Releases outside consent#
4
5234
Direct CO
2 emissionskg CO2/t of product
200
201227228225
Hydrocarbon fuel usagePetajoules
14.2
14.115.314.514.8
– Ex-crude (refinery produced fuel)Petajoules
11. 4
11. 513.512.613
– Natural gasPetajoules
2.8
2.61. 81. 91. 8
Electricity usagePetajoules
1.22
1.211.030.960.97
Water usageMillion tonnes
1.70
1.681.651.601.59
Sulphur dioxide (SO
2) emissionsTonnes
3,695
4,3324,0553,8853,854
Flare
Amount of flare as
mass % of feedstock
0.02
0.090.020.080.03
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
2223

OUR PERFORMANCE BY THE NUMBERS
BUILD ON THE QUALITY
AND RELIABILITY OF OUR
CUSTOMER PROMISE
CASE STUDY
RAP CAPACITY UPGRADE
RAP CAPACITY UPGRADE
CASE STUDY
The RAP is the most efficient option to bring
large quantities of fuel products to the Auckland
region, whether these products are refined
at Marsden Point or imported directly as
refined products. Increasing the capacity on
the RAP is therefore crucial to meeting
Auckland’s fuel needs which have grown
significantly, boosted by a 32% lift in jet fuel
demand growth in the last two years as
international visitor numbers continue to grow.
Our capacity upgrade aims to lift capacity on
the pipeline in three stages, with an expected
increase in overall throughput of around 15%
by 2019. This upgrade has been underpinned
by a major engineering study carried out by
pipeline experts from Worley Parsons, Canada.
Phase one, completed in August 2017
increased the pipeline’s operating pressure
within the Maximum Allowable Operating
Pressure (MAOP) envelope for the pipeline.
In November 2017, phase two saw the
successful installation of a second pump
at our intermediate pumping station at Kumeu.
The resulting 5% capacity increase generated
by this pump means that the Refinery is now
providing more product via the RAP than
before the pipeline leak in September.
Looking ahead, phase three due in 2019
will increase motor capacity on pumps at the
Refinery and at the Wellsford intermediate
pumping station. And there is more in store,
with initial discussions with pipeline experts
indicating that RAP throughput could be lifted
a further 40% with three additional pumping
stations. This should allow us to keep pace
with the growth of fuel needs in the Auckland
region for the long term.
Competing successfully with the best in Asia
Pacific starts with playing to our many strengths
and continuing to do what we are good at.
We have a history of investing in plant reliability
and the production of cleaner quality fuels
which meet the specific requirements of the
New Zealand market. We maintain a quality
management system to the requirements of
ISO 9001 which is externally audited on
a regular basis.
Our ultimate goal is to deliver to our customers in full,
on time and to specification. To deliver on this promise
we invest in various parts of the Refinery, including
product storage. Then we have a strong focus on
maintaining our equipment to keep unplanned downtime
to a minimum. As a result, our operational availability
compares well with refineries of a similar size and
complexity in the region.
– 2017 Refinery throughput was reduced by 0.7 million barrels due to ullage constraints during the RAP incident.
– Pipeline rupture also impacted unplanned downtime on the RAP.

20172016201520142013
Throughput refineryMillion barrels
41.7
42.742.639.740.6
Throughput RAPMillion barrels
19.8
20.118.41 7. 91 7. 6
Operational availability%
98.0
96.997.793.595.6
Unplanned refinery downtime%
0.6
0.90.30.21. 1
Unplanned RAP downtime%
4.6
0.90.60.90.5
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
2425

OUR PERFORMANCE BY THE NUMBERS
CASE STUDY
RAP CAPACITY UPGRADE
MAKING WAY FOR BIGGER CARGOES
CASE STUDY
Refining NZ is proposing changes to
Whangarei’s harbour entrance which would
allow larger crude cargoes to be brought into
Marsden Point. Larger ships come to the
Refinery under loaded because the shipping
channel is not deep enough. Loading them to
full capacity (around one million barrels) would
require deepening and realigning the shipping
channel through dredging.
Over the last four years we have proactively
engaged the community about the crude
shipping project through a series of public
consultations in and around Whangarei.
In 2017 the heart of our public consultation
centred on ‘The Deeper Story’ website
www.deeperstory.co.nz and our pop-up
information container.
In April 2017 the container was situated in
key locations as part of a concerted campaign
to increase the public’s knowledge and
understanding of the crude shipping project.
Our application for a resource consent was
lodged with the Northland Regional Council
in late August 2017, with around 50 submissions
received from the public. Since then the
Refinery has continued to consult with local
hapu and iwi as well as other key submitters
around their submissions.

If we are successful with our resource
consent application, the project would likely
take place in 2019 subject to Board approval,
and may include additional storage capacity
for crude oil at the Refinery.
IMPROVE OUR
COMPETITIVENESS
Our key competitors are mega refineries in the
Asia Pacific region with economies of scale as
their advantage. Refining NZ’s location is our
competitive edge, enabling us to respond to the
specific product and quality requirements of our
New Zealand based customers. The structural
advantage of being close to the markets
demanding our fuels allows us to supply
New Zealand with fuel more efficiently.
We regularly tap the knowledge of our team to generate
business improvement ideas capable of lifting our
performance across many aspects of our refining
business, the fuels supply chain and our offering to
customers. A longer running project was the installation
of automated process control, which optimised the
operation of our petrol making unit leading to efficiency
gains. As an example of our work with suppliers, we
negotiated an agreement with First Gas (formerly Vector)
to boost compression on the northern pipeline. Thanks to
the investment of our partner, our access to natural gas
supplied from Taranaki nearly doubled in 2017. As an often
price competitive source of energy in the refining process,
this presents a significant margin opportunity for us.

20172016201520142013
Gross refinery marginUSD/barrel
8.02
6.479.204.964.58
Free Cash Flow*NZD $m
103
47139(141)(147)
Capital expenditureNZD $m
95
81129220201
– sustainNZD $m
85
74517381
– growthNZD $m
10
778147120
Net profit/(loss) after tax NZD $m
79
4715110(5)
Crude priceUSD/barrel
54
445299109
Exchange rateUSD/NZD
0.71
0.700.700.820.82
* See Glossary page 125
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
2627

DIRECTORSLEADERSHIP
TEAM
WORKFORCETOTAL
#%#%#%#%
NZ European-Pakeha
457.1337.524262.4
24961.8
Non-NZ European
228.6450.0681 7. 5
7418.4
Maori and NZ European
----246.2
246.0
Maori
114.3--194.9
204.9
Asian
----143.6
143.5
Pacific Islander
--112.551. 3
61.5
Indian
----51. 3
51.2
African
----51. 3
51.2
Other*
----61. 5
61.5
Total
71008100388100403100

20172016201520142013
Number of staffHeadcount (end of year)
396
386394397400
Number of contractorsHeadcount (end of year)
293
17896117165
Contribution to regional economy% of Northland GDP
No data
8.48.07. 86.9
GENDER
The following table provides the gender composition of
Refining NZ’s permanent workforce. By way of comparison,
figures for the past year are also included.
Directors
Leadership Team
Workforce
Total
- 29 71
- 11 89
11 54 35
11 52 37
- - 100
- 10 90
12 50 38
11 48 41
Directors
Leadership Team
Workforce
Total
31 December 2016
31 December 2017
OUR PERFORMANCE BY THE NUMBERS
UNDER
30
%
30 - 50

%
OVER
50
%
31 DECEMBER 2017
HEADCOUNT %
31 DECEMBER 2016
HEADCOUNT %
EMBED A HIGH
PERFORMANCE CULTURE
Directors
Females 2 29 1 14
Males 5 71 6 86

Leadership Team
Females 1 12 1 10
Males 7 88 9 90

Workforce
Females 68 18 65 17
Males 320 82 311 83
We provide a dynamic, progressive and
technically advanced environment for 396 highly
skilled employees. As at 31 December 2017,
293 contractors work alongside our team. In our
recruiting as well as in the development of our
staff, we put a strong emphasis on alignment
with our values:
We foster this culture and in a more formal sense it is
anchored in our Code of Conduct and our Diversity and
Inclusion policy.
We believe the breadth and depth of diversity provides
the fertile ground for innovation, better decision making,
reduced risk and improved results. A number of positive
interventions have been put in place to support a diverse
workforce. These have been deliberate and targeted
initiatives to lift awareness and affect sustainable change.
This has included unconscious bias training for senior
leaders who are critical in attracting and retaining talent
in the organisation. This has challenged our recruitment
practices and how we project ourselves as an organisation
to our community.
We have facilitated targeted training for our aspiring
women leaders, participating in the Global Women
Activate Programme and the Darden intensive MBA
programme. Some physical changes to the site have also
contributed to how we support diversity, with the newly
built Parents’ Room being utilised immediately and
therefore satisfying a need.
The collation and on-going evolvement of demographic
data has allowed us to illuminate the diversity of our
workforce and helps us better plan our support and
development programmes.
Our commitment to people goes well beyond our own
staff and the various contractors working alongside us on
site. We engage closely and regularly with the community
in our neighbourhood and across the Whangarei district.
Having established channels for reporting on our
performance provides an opportunity to walk our
neighbours through critical parts of our operations and
safety management processes such as flaring, which
allows hydrocarbons to be vented safely when process
units are shutting down and starting up. We believe that
transparent communication with our community fosters
open dialogue and has helped to build positive relationships.
While we are a large private employer in our region,
our contribution to the regional economy is not limited
to direct employment. We contribute to a strong
manufacturing and engineering knowledge hub in
Northland which supports a highly skilled workforce in the
region. The number of contractors we engage with varies
each year and depends on the number of capital and
maintenance projects.
ETHNICITY
Refining NZ collects information from all employees on
which ethnicity they chose to identify with. We allow
employees to select other or chose not to respond.
The ethnicity of Refining NZ’s employees and Board as at
31 December 2017 is as follows:
AGE PROFILE
The age profile of Refining NZ’s
permanent employees and Board
is as follows:
NZ European-Pakeha
Non-NZ European
Maori and NZ European
Maori
Asian
Pacific Islander
Indian
African
Other*
•
•
•
•
•
•
•
•
•
ETHNICITY
2017
New Zealand
United Kingdom
Australia
South America
Other
•
•
•
•
•
NATIONALITY
2017
* Other includes Maori and Pacific Islander, Maori and non-NZ European.
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
2829

At Refining NZ we are conscious that ownership
of workplace culture is an essential part of
making our business tick. After a strategy
planning session with well-respected corporate
anthropologist Michael Henderson, we invested
in a cultural transformation programme under
Michael’s guidance.
Labelled the 1
st
XV, a cross section of employees
were chosen to undertake the Cultural One
Team Programme which encompasses training
on awareness, appreciation, action and
achievement over a 12-month period.
Already our 1
st
XV has started to share the
models and frameworks around understanding
culture with managers and work teams to build
our competence and confidence to deliver the
course material.
The team is excited and optimistic about what
the culture plan will deliver to create a culture
worth embodying in our organisation.
The return of Hive Day was another avenue for
celebrating culture and diversity through sharing
our business strategy with staff, contractors
and their families. To reinforce understanding a
Hive Day passport was produced with a series
of questions to capture key activities across the
business. Due to its success Hive Day was
repeated and was an essential part of the
shareholder day held in January 2018.
CASE STUDY
HIGH PERFORMANCE CULTURE
HIGH PERFORMANCE CULTURE
CASE STUDY

THE TEAM IS EXCITED AND
OPTIMISTIC ABOUT WHAT
THE CULTURE PLAN WILL
DELIVER TO CREATE A CULTURE
WORTH EMBODYING IN OUR
ORGANISATION.
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
3031

OUR
ACTION PLAN
LIFT OUR HSE PERFORMANCE
−We are continuing our work to embed safety as a
core value, with the addition of individual wellbeing to
that value. The ongoing support of our various safety
oriented steering committees is critical to this piece of
work. At the same time, we are progressing on multiple
fronts to complete the recommendations from the
independent DuPont safety review of 2017.
−A substantial piece of work is planned to finalise
our Safety Case under the new health and safety
regulations. In parallel, we will be engaging our
community around our key hazards and the
systems and processes we have in place to
manage those hazards.
−Our major project investment in cleaning and
preventing hydrocarbons leaving the site continues
in 2018 which includes bolstering the resilience of our
water treatment systems. We are also working with
the regional authority to ensure the continuation of
our environmental consents beyond 2022.
GROW OUR REVENUE BASE
In 2018 we will continue to progress a number of key
growth ideas from our development funnel.
−Increasing capacity on the RAP
The third phase of the RAP capacity project to
upgrade RAP pumps at Marsden Point and Wellsford
will get underway in 2018 and be completed in 2019.
This phase will add an extra 5% capacity to the RAP.
−Reconfiguring our jet tank farm
To meet the country’s rapidly growing jet fuel
demand we have been working with our customers
to facilitate ongoing imports of jet fuel to the Refinery
for distribution down the RAP. Reconfiguration of
our jet tank farm is required to provide sufficient
dedicated unloading facilities and storage for
those jet fuel imports.
−Sulphur solidification
Currently we sell sulphur in liquid form to our client in
the fertiliser industry. In close alignment with client
needs, we will construct and commission a sulphur
forming plant in 2018. This will bring an additional step
in this value chain to the Refinery and will allow us to
sell sulphur in solid form. This short pay-back project
will bring added safety benefits as it reduces transport,
handling and processing of liquid sulphur.
IMPROVE OUR ORGANISATIONAL
PERFORMANCE
In 2018 our journey to high performance continues
across five key areas:
−Rollout of Company values
Our culture is underpinned by our Company values.
In 2018 we will roll out our new value of “safety and
wellbeing” and take this as an opportunity to further
anchor and celebrate our values.
−Supporting our talented people
Under the umbrella of our overall leadership
development model, we continue to support our
managers to develop as leaders through mentoring,
succession planning and targeted development.
−Promoting diversity
We continue to work with an external provider to
raise awareness of unconscious bias and will build
on this through an inclusivity training programme
for senior managers.
Recruiting new talent provides an entry-level
opportunity to raise our level of diversity, recognising
that our business is stronger and our decision-making
more robust, when our teams comprise different
backgrounds with a variety of work experiences.
−Structuring better ways of working
Reorganisation across operations and engineering
is underway to promote an even greater level of
co-operation across these two key business units.
The aim is to lift performance and allow talented
individuals to realise their potential.
We remain focused on removing complexity in
the technology space, through standardisation
and by working with our strategic alliance partners
to exploit opportunities from innovation and access
to new technology.
We continue to employ Lean principles to lift individual
and team performance through eliminating waste,
identifying better ways of working and visual
management of key team objectives.
−Engagement feedback
We engage with our employees in annual Pulse
Surveys, facilitated by Aon Hewitt, providing valuable
feedback on the management and staff engagement
aspects, including leadership and communication.
Results of the surveys are shared with each business
unit which then focus on the engagement drivers to
develop improvement action plans.
Our most notable activities planned for 2018 relate to the major plant shutdown in the first
half of the year and our work towards making way for bigger crude cargoes into Whangarei
harbour. The two major projects fall in line with our strategy and are supplemented by focus
areas in our health, safety and environmental (HSE) performance, scoping and implementing
revenue growth opportunities and improving our organisational performance.
In April and May 2018 we are undertaking a major
refinery shutdown lasting approximately eight weeks.
The planned maintenance shutdown is a major event
which has required two years of planning by our
dedicated shutdown team.
The key difference to other shutdowns at the Refinery
is the sheer scale: this will be the first time in 14 years
that we have had a full shutdown of processing units
across the Refinery to allow us to carry out a statutory
inspection and repairs that we otherwise would not be
able to do. This work is critical to the ongoing safe and
reliable running of our Refinery for years to come. In
parallel to preparing for the shutdown, we have been
working closely with our customers to ensure that the
country’s fuel stocks are well managed in and around
the duration of the shutdown.
The scale of this shutdown requires that we do things
quite differently to what we have done in previous
planned maintenance shutdowns.
A broad range of skills and trades will be required to
execute the shutdown successfully. This includes
skilled workers not normally associated with work at
a refinery such as drone pilots to perform inspections
and abseilers to do work at height. A good portion of
this additional workforce can be sourced locally.
However, for specialised skills we have gone further
afield and engaged contractors from Taranaki, Tauranga,
Australia and further abroad to ensure a high quality
of resource across all the skills we require.
SHUTDOWN 2018
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
3233

The profitability of a refining business is largely dependent on refiners’ margins and the USD
exchange rate. These variables are largely outside our control and can have significant volatility.
As a result it is difficult for the Company to provide absolute forecasts of profitability; instead
we provide a profit matrix. This indicates our expected 2018 net profit after income tax and year
end borrowings for given margin and foreign exchange rates.
PROFIT MATRIX
USD
EXCHANGE RATE 0.60 0.65 0.70 0.75 0.80
GRM (USD/barrel)
21 7 (5) (16) (25)
58 41 26 14 3
94 75 58 43 30
131 109 89 72 58
168 142 121 102 85
208 228 244 256 272
165 182 201 218 233
128 148 165 180 195
92 114 133 150 165
55 80 102 121 137
5.00
42 Production, million barrels
90 Non processing fee revenue, $m
93 Depreciation, $m
Net profit after tax
Borrowings
6.00
7. 0 0
8.00
9.00
GOVERNANCE
REFINING NZ
ANNUAL REPORT 2017
34
REFINING NZ
ANNUAL REPORT 2017
35

GOVERNANCE
REGULATORY FRAMEWORK
The New Zealand Refining Company Limited (“the
Company’, “Refining NZ”) operates in New Zealand
and is listed on the NZX’s Main Board. It is subject to
regulatory control and monitoring by both the NZX
and the Financial Markets Authority (“FMA”).
GOVERNANCE AT REFINING NZ
Our Corporate Governance framework sets out our
Board’s practices and processes to provide accountability
to shareholders for Refining NZ’s actions and performance.
Through this framework the Board creates the strategic
direction and objectives for the business, identifies and
manages our risks, strengthens our business culture and
strives to continuously improve our performance.
The Board is committed to maintaining the highest
standards of corporate governance, business behaviour
and accountability. It regularly reviews and assesses
the Company’s governance structures and processes
to ensure that they are consistent with best practice.
It also supports best practice reporting and has structured
this statement to report against the NZX Corporate
Governance Code (“NZX Code”).
The Board considers that it has followed the
recommendations in the NZX Code during the financial
year ending 31 December 2017, except as stated in this
section. In this regard, non-compliance during the year
prior to implementation of governance practices reflecting
the new NZX Code was the result of Refining NZ following
the old NZX Corporate Governance Best Practice Code as
detailed in last year’s annual report.
In this section we provide an overview of our governance
framework. For further guidance on our governance
framework, including Board Charters, the Company
Constitution and our corporate governance policies,
please refer to the “Investor Centre" section of our website
at www.refiningnz.com. References in this section to the
website are to the Investor Centre page.
This governance statement was approved by the Board
on 27 February 2018 and is current as at that date.
Refining NZ’s Board sets clear and consistent
expectations of all Directors, and Refining NZ people
(employees, contractors and other agents) through
the Code of Conduct.
Refining NZ’s framework for ethical behaviour includes
a day-to-day business focus and recognises our
responsibilities to shareholders, customers, and
employees, those with whom we do business, our
neighbours and society at large.
CODE OF CONDUCT
Refining NZ’s Code of Conduct sets out clear and
consistent expectations for Directors, employees and
representatives of the Company and is available on our
website and the intranet.
The Code of Conduct reflects recommendation 1.1 of the
NZX Code (although a different conflict of interest policy
applies), requiring all Refining NZ Directors, employees
and representatives to:
– act with high standards of honesty, integrity and fairness
in all aspects of their involvement with the Company;
– undertake their duties with care and diligence;
– uphold the integrity and good name of the Company; and
– not knowingly participate in illegal or unethical activity.
The Code of Conduct goes further than recommendation
1.1 of the NZX Code and requires conflict of interest to be
avoided. A more detailed conflicts policy applies to
Directors and it is set out in the Board Charter and the
Independent Directors Committee Charter.
The Code details the escalation process including the right
to contact the Disclosure Officer. Employees who expose
serious wrongdoing are protected against retaliatory action
in accordance with the Protected Disclosures Act 2000
and the Company’s Whistle-Blowing Policy.
Compliance is monitored through a semi-annual
confirmation by the Leadership Team and the Chief
Executive to the Board confirming adequacy of disclosure
and transparency with the Board, integrity of reporting,
legislative compliance and financial reporting controls
(“general assertion statement”). In the case of serious
breaches, disciplinary action, including dismissal, is
considered by Management.
In 2017 we identified an opportunity to conduct an
annual training programme, including an “on-line”
Code of Conduct training module which is planned
for roll out in 2018.
The Code of Conduct is reviewed bi-annually.
SECURITIES TRADING
To ensure compliance with the law around insider trading,
the Company has issued a Securities Trading Policy
applicable to Directors, officers and all employees. A Director
or member of the Leadership Team can only enter into
securities transactions if prior approval has been given.
A listing of Directors’ and Leadership Team members’
shareholdings is included with their profiles on pages
56 to 63 of this Annual Report.
A copy of the policy is available on our website.
DIRECTORS SHOULD SET HIGH STANDARDS OF ETHICAL
BEHAVIOUR, MODEL THIS BEHAVIOUR AND HOLD
MANAGEMENT ACCOUNTABLE FOR THESE STANDARDS
BEING FOLLOWED THROUGHOUT THE ORGANISATION.
“
”
ETHICAL
STANDARDS
PRINCIPLE
1
REFINING NZ
ANNUAL REPORT 2017
37
REFINING NZ
ANNUAL REPORT 2017
36

BOARD ROLE AND RESPONSIBILITIES
The Board is responsible for setting the Company’s
strategic direction and for providing oversight of the
management of the Company, with the aim of increasing
shareholder value and ensuring the obligations of the
Company are properly met. The Board is accountable
to shareholders for the performance of the Company,
with day-to-day management of the Company delegated
to the Chief Executive (see Board role and responsibilies
chart below).
The respective roles of the Board and Management
(the Leadership Team) are set out in the Board’s Charter
available on our website.
THE MAIN FUNCTIONS OF THE BOARD INCLUDE :
−reviewing and approving the strategic, business
and financial plans prepared by Management;
−monitoring performance against the strategic;
business and financial plans;
−appointing, providing counsel to and reviewing
the performance of the Chief Executive;
−approving major investments and divestments;
−ensuring ethical behaviour by the Company;
Board, Management and employees; and
−assessing its own effectiveness in
carrying out its functions.
The Board monitors these matters by receiving reports
and plans from Management, maintaining an active
programme of site visits and through its annual work
programme.
The Board uses committees to address certain issues that
require detailed consideration by members of the Board
who have specialist knowledge and experience. The Board
retains ultimate responsibility for the functions of its
committees and determines their responsibilities.
The Board has a statutory obligation to reserve responsibility
for certain matters. It also deals directly with issues
relating to the appointments to the Board, strategy,
business and financial plans.
All Board authority conferred on the Leadership Team
is delegated through the Chief Executive.

BOARD COMPOSITION AND APPOINTMENT
The Board currently consists of seven Directors:
Simon Allen (the Chair), Vanessa Stoddart, Mark Tume
and Paul Zealand are Independent Directors as at the
balance date. Michael Bennetts, Deborah Boffa and
Riccardo Cavallo are not Independent. Independence
is assessed according to the NZX Main Board Listing
Rules criteria.
The number of Directors is determined by the Board, in
accordance with the Company’s Constitution, to ensure
that it is able to provide a range of knowledge, views and
experience relevant to the Company’s business. Under the
Company’s Constitution, the Company is obliged to have
at least three Independent Directors.
Major shareholders (BP, ExxonMobil and Z Energy) do not
have a constitutional right to appoint Directors, although
it is accepted that they are entitled to representation.
The Nominations and Remuneration Committee, using
the same criteria as for all other Directors, considers
nominations for these representatives (“Representative
Directors”) as if they were non-representative Directors.
Each year the Board will appoint a Chairman from among
the Independent Directors who is responsible for
representing the Board to shareholders. The roles of
Chairman of the Board, Chair of the Audit, Risk and
Finance Committee and Chief Executive must all be
held by different people.
The Board is responsible for appointing Directors subject
to shareholders approval at the Annual Shareholders’
Meeting. The Nominations and Remuneration Committee
manages the appointment process for new Directors and
the re-election of existing Directors in order to make a
recommendation to the Board. When considering an
appointment, the Committee will undertake a thorough
check of the candidate and his or her background.
Where the Board determines a person is an appropriate
candidate, shareholders are notified and provided with all
material information that is relevant to the decision on
whether to elect or re-elect a Director.
TO ENSURE AN EFFECTIVE BOARD THERE SHOULD
BE A BALANCE OF INDEPENDENCE, SKILLS, KNOWLEDGE,
EXPERIENCE AND PERSPECTIVES.


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BOARD COMPOSITION
AND PERFORMANCE
BOARD ROLE AND
RESPONSIBILITIES
PRINCIPLE
2
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3
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4
2
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2
Business Transformation





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I
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I
O
N
Process Safety Management
Asset Management and Project Execution
Energy Markets and Supply Chain
Oil Refining Operations
Government Policy and Direction
Human Resource Management
Financial Management and Reporting
Public Company Board Experience
Market Economics
Customer Perspective
Think strategically / innovatively
MALE FEMALE
9+ years
3 - 9 years
0 - 3 years
100%
75%
50%
25%
INDEPENDENT
NON-
INDEPENDENT
BOARD
CHARACTERISTICS
# Number of experts in the field
KEY
“
”
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
3839

Directors will generally hold office for an initial three-year
term following their appointment, subject to any obligation
to retire by rotation in accordance with the Company’s
Constitution and the NZX Listing Rules. If a Director is
appointed by the Board to fill a casual vacancy, that
Director will hold office until the next Annual Meeting,
but will be eligible for election at that meeting.
On their appointment, Directors:
−attend an induction programme aimed at deepening
their understanding of the business and the
environment and markets in which the Company
operates; and
−enter into a written agreement with Refining NZ,
establishing the terms of their appointment.
DIRECTORS’ SKILLS AND TRAINING
The Board maintains a skills matrix setting out the mix of
skills and diversity of the Board. The skills matrix is used to
evaluate whether the collective skills and experience of the
Directors meet Refining NZ’s requirements both currently
and into the future. The skills matrix defines the following
skills and competencies against which each of the
appointed Directors is periodically evaluated:
−think strategically and innovatively;
−business transformation;
−customer perspective;
−market economics;
−public company Board experience;
−financial management and reporting;
−human resources management;
−government policy and direction;
−oil refining operations;
−energy markets and supply chain;
−asset management and project execution; and
−process safety management.
The Board has determined that it has a minimum of one
Director who would be considered “experts” in respect of
each skill/competency.
The Directors undertake appropriate training to remain
current on how to best perform their duties as Directors.
BOARD TENURE
The Refining NZ Board does not have a tenure policy
although it supports the philosophy that regular
refreshment introduces new thinking, perspectives,
skills and experience to the Board table.
DIRECTOR, BOARD AND COMMITTEES’
PERFORMANCE
The Directors, the Board and all Committees annually
evaluate their own performance, processes and
procedures to ensure that they are appropriate to assist
the Board in effectively fulfilling its role and meeting
its duties.
Board meetings open with scheduled ‘board only’ time.
Reflecting on the meeting and consideration of any
matters requiring disclosure are formal agenda items at
the end of each board meeting.
In 2016, a formal evaluation was conducted with the
assistance from an outside facilitator, the Boardroom
Practice, leading experts at Board evaluation and
comparison. Individual Directors undertake a peer and
self-assessment based on a methodology agreed by the
Board. The last Board and Committee self-assessments
were undertaken in 2017.
The current mix of skills and experience is considered
appropriate for the responsibilities and requirements of
governing Refining NZ.
DIVERSITY
Refining NZ recognises the value in diversity of thinking
and skills, and seeks to ensure that the Board and
workforce both comprise members reflecting diversity.
The Company’s Diversity and Inclusion Policy is available
on the website.
For further information on diversity, please see page 29 in
this report.
COMMITTEES OF THE BOARD
Board Committees at Refining NZ are established to
perform particular work on an on-going basis. There are
four Board Committees: the Audit, Risk and Finance
Committee; the Nominations and Remuneration
Committee; the Independent Directors Committee;
and the Health, Safety, Environment and Operations
Committee.
Each Committee operates in accordance with a written
Charter approved by the Board and reviewed periodically
by the respective Committee. The Committee Charters
are available in the corporate governance section of the
Company website: www.refiningnz.com.
AUDIT, RISK AND FINANCE COMMITTEE
Mark Tume (Chair),
Simon Allen and Paul Zealand
The Audit, Risk and Finance Committee (“ARFC”)
members are all Independent Directors. All members of
the Committee have the appropriate financial expertise
and understanding of the Company’s industry and are
considered to be ‘audit committee financial experts’.
The role of the ARFC is defined by the ARFC Charter
and is to oversee financial reporting, the treasury function,
and the Company’s risk management and assurance
programmes.
The Committee keeps under review the scope and results
of audit work, the cost effectiveness, performance,
independence and objectivity of the auditors. Members of
the Committee review the financial statements and the
NZX announcement of the financial results. For more
information about auditing and reporting Refining NZ’s
financial performance, see Principles 4 and 7.
The ARFC meets with the internal and external
auditors (either together or separately) as the ARFC
Chair considers appropriate.
NOMINATIONS AND REMUNERATION COMMITTEE
Vanessa Stoddart (Chair),
Simon Allen and Paul Zealand
The Nominations and Remuneration Committee comprises
three Independent Directors.
The role of the Nominations and Remuneration Committee
is defined by the Nominations and Remunerations Charter.
In respect of nominations, the responsibilities of the
Committee are to identify and nominate, for the approval
of the Board, candidates to fill Board vacancies (including
development of succession planning) and the position of
Chief Executive as and when they arise; to regularly review
the structure, size and composition (including the skill,
knowledge and experience) of the Board and to make
recommendations to the Board regarding any changes.
In respect of remuneration, the Committee reviews and
makes recommendations to the Board regarding the
Company’s remuneration policy, including changes in
Directors’ fees. The Committee provides oversight of the
Company’s Business Performance Factor which sets the
base for any individual incentive payments under the
Individual Performance Incentive Scheme and the award
of shares to participating employees under the “DC12”
Employee Share Scheme.
The Nominations and Remuneration Committee also
makes recommendations to the Board regarding the
remuneration package of the Chief Executive, including the
payment of any Short-Term Incentive Payment and the
remuneration packages of the Leadership Team who are
profiled on pages 60 to 63.
The Committee reviews the People Strategy on an annual
basis including changes to organisation structure, the
capability development strategy and succession planning
processes including succession planning for executive
roles, diversity and inclusiveness initiatives and other
strategic people priorities that arise from time to time.
BOARD
COMMITTEES
PRINCIPLE
3
THE BOARD SHOULD USE COMMITTEES WHERE THIS WILL
ENHANCE ITS EFFECTIVENESS IN KEY AREAS, WHILE STILL
RETAINING BOARD RESPONSIBILITY.
“
”
REFINING NZ
ANNUAL REPORT 2017
REFINING NZ
ANNUAL REPORT 2017
4041

INDEPENDENT DIRECTORS COMMITTEE
Simon Allen (Chair), Vanessa Stoddart,
Mark Tume and Paul Zealand
The four Independent Directors form the Committee.
The role of which is defined in the Independent
Directors Committee Charter.
The three largest shareholders of the Company are also
major customers, either directly or through wholly
owned subsidiaries, and have representation on the
Board which could lead to a conflict of interest. Clause
8.16.1 of the Constitution allows for the Independent
Directors to act as the Board in respect of matters that
pose a conflict of interest if raised at the full Board.
The role of the Independent Directors is:
– to act as the Board in relation to those matters
to be decided by the Board in which all of the other
Directors have an interest, including related party
transactions, which disqualifies them from forming
part of the quorum and voting; and
– to act as a Committee of the Board to deal
with matters delegated or referred to it by the
Board or the Management, including ensuring that
issues concerning the major customers, and in
particular any conflicts of interest, including related
party transactions, are dealt with in a transparent
manner for the benefit of the Company as a whole.
HEALTH, SAFETY, ENVIRONMENT
AND OPERATIONS COMMITTEE
Paul Zealand (Chair), Simon Allen, Michael Bennetts,
Deborah Boffa, Riccardo Cavallo, Vanessa Stoddart
and Mark Tume
The Board maintains appropriate oversight over matters
relating to health and safety, including both personal safety
(occupational health) and process safety (major accident
hazard risk exposure) and environment.
On 27 February 2018 the Board established the Health,
Safety, Environment and Operations (HSEO) Committee to
provide the oversignt previously conducted by the Board.
All Directors were appointed as members of the
Committee and the role of the Committee is defined in the
HSEO Committee Charter.
The Committee is responsible for, among others:
– reviewing, monitoring and making recommendations to
the Board on Refining NZ’s health, safety, environment
and operational risk management framework, policies
and HSEO targets;
– seeking assurance that the Company is effectively
structured and resourced to manage HSEO risks;
– reviewing selected HSEO related incidents and
considering the appropriateness of actions to minimise
the risk of recurrence; and
– reviewing Management’s emergency response and
crisis management preparedness.
TAKEOVER PROTOCOLS
The Board has adopted a Takeover Protocols Policy which
sets out the rules and procedures followed in case of a
takeover offer for the Company:
−on receipt of a communication that a takeover offer
is likely, the Directors will consider the continuous
disclosure obligation of the Company under the
NZX Listing Rules 10.1;
−upon receipt of a notice of intention to make a takeover
offer (“Takeover notice”) Refining NZ will notify the
NZX and appoint an independent advisor. The
independent advisor’s role will be to prepare a report
on the merits of the offer, providing an expert opinion,
to Refining NZ shareholders;
−an independent takeover panel will be established to
oversee the process; and
−shareholder communication would include the formal
takeover offer, target company statement and the
independent advisor’s report.
BOARD
MEETING
BOARD MEETING
RAP INCIDENT
AUDIT, RISK
AND FINANCE
COMMITTEE
NOMINATIONS AND
REMUNERATION
COMMITTEE
INDEPENDENT
DIRECTORS
MEETING
SITE SAFETY
ENGAGEMENTS
S Allen7/77/74/53/33/35
M Bennetts7/75/7---2
D Boffa3/36/7---2
R Cavallo5/55/7---1
V Stoddart7/76/7-3/33/32
M Tume6/74/75/5-3/31
P Zealand6/77/75/53/33/35
M Elliott – resigned June 20174/4--1/1-2
A Warrell – resigned March 20171/1-----
Note: a number of informal meetings are held in between scheduled formal meetings.
MEETING ATTENDANCE
Director attendances at board and sub-committee meetings during 2017 were as follows:
REFINING NZ
ANNUAL REPORT 2017
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ANNUAL REPORT 2017
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CONTINUOUS DISCLOSURE
Refining NZ is committed to keeping its shareholders
informed and places a high degree of importance on open
communication and transparent reporting and to providing
comprehensive continuous disclosure to shareholders and
other stakeholders, in compliance with the NZX Listing
Rules. Refining NZ has adopted a Continuous Disclosure
Policy which sets out principles to be followed to provide
timely advice to the market of material events and
developments affecting the Company as they occur and to
ensure a robust investor and media relations programme
operates to ensure all market participants have equal
opportunities to receive information issued by the
Company.
The policy applies to:
−all Refining NZ Directors;
−all employees of the Company and its subsidiaries; and
−contractors, consultants, advisers and other service
providers to the Company, where they are under a
relevant contractual obligation.
This Policy aims to ensure Refining NZ meets all statutory
and NZX Listing Rule obligations, as well as adopting "best
practice" for identification of, and timely disclosure of,
material information.
MAJOR DECISIONS
Directors’ commitment to timely and balanced disclosure
is set out in its Continuous Disclosure Policy and includes
advising shareholders on any major decisions. Where
voting on a matter is required the Board encourages
investors to attend the meeting or to send in a proxy vote.
Shareholders may raise matters for discussion at the
Annual Shareholders’ Meeting (ASM) either in person or
by emailing the Company with a question to be asked.
FINANCIAL REPORTING
The ARFC plays a central role in Refining NZ’s
commitment to transparent reporting of its financial
performance as outlined in the ARFC Charter.
The Leadership Team is responsible for implementing and
maintaining appropriate accounting and financial reporting
principles, policies, and internal controls designed to
ensure compliance with accounting standards and
applicable laws and regulations.
Refining NZ’s external auditor, PricewaterhouseCoopers,
is responsible for planning and carrying out each external
audit in line with applicable auditing standards. They are
accountable to shareholders through the ARFC and the
Board respectively. The Board retains overall responsibility
for financial reporting.
The ARFC makes sure that it and the full Board are
sufficiently informed about good-practice financial
reporting and Refining NZ’s operations to know whether
financial reporting is fit for purpose. This means it
represents a balanced viewpoint, is factual and complete
and is effectively implemented.
The CEO provides an annual assertion statement to the
Board, confirming that Refining NZ’s financial records have
been properly maintained, and that the financial
statements comply with Generally Accepted Accounting
Practice and give a true and fair view of Refining NZ’s
financial position and performance.
The Half Year (Interim) Reports and the Annual
Reports are posted on the Company’s website
www.refiningnz.com.
NON-FINANCIAL REPORTING
The Company’s non-financial reporting is provided
annually and reports on material environmental, economic
and social sustainability risks against the Global Reporting
Initiative, a standard recognised by the Sustainable Stock
Exchange Initiative. For the non-financial reporting refer
to pages 15 to 63.
The Company has adopted a Director and Executive
Remuneration Policy for remuneration of the Board and
Leadership Team. Refining NZ’s remuneration framework
and policies are overseen by the Nominations and
Remuneration Committee in line with the Nominations and
Remuneration Committee Charter. The policy is available
on the website.
REMUNERATION
Refining NZ aims to attract and retain appropriately
qualified and experienced individuals. Refining NZ applies
a fair and equitable approach to remuneration and reward
practices, taking into account internal and external
relativities balanced against the commercial environment.
The Board will take independent advice and establish
market rates and medians against New Zealand
businesses of comparable size and complexity, having
regard to industry specific and generic roles. Individual
performance, company performance and market relativity
are key considerations in setting remuneration levels.
DIRECTORS’ REMUNERATION
The Board determines the level of remuneration paid to
Directors within the amounts approved by shareholders
(that is, from the approved collective pool). The current
approved fee pool limit is $ 850,000 and was approved by
shareholders at the Annual Meeting in April 2012.
Directors’ remuneration is set at a level to remain
comparable with other companies in New Zealand,
taking into account the expertise, skills and responsibilities
of Directors. The Directors of the subsidiary company,
Independent Petroleum Laboratory Limited (IPL), do not
receive remuneration.
The remuneration and other benefits, excluding
reimbursements, received by the individual Directors of
the Company during the year were as follows:
REPORTING AND
DISCLOSURE
REMUNERATION
PRINCIPLE
4
PRINCIPLE
5
2017 2016
ANNUAL FEES ANNUAL FEES
$ $
BOARD OF DIRECTORS

Chairman 170,000 170,000
Independent Director 88,000 88,000
Non-independent Director 72,000 72,000
AUDIT, RISK AND
FINANCE COMMITTEE

Chairman 25,000 25,000
Member 12,500 12,500
NOMINATIONS AND
REMUNERATION COMMITTEE

Chairman 10,000 10,000
Member 5,000 5,000

POSITIONAPPOINTEDBOARD FEES
$
AUDIT, RISK AND
FINANCE COMMITTEE
FEES
$
NOMINATIONS
AND RENUMERATION
COMMITTEE FEES
$
TOTAL FEES
$
S AllenChairman4 Dec 2014170,000--170,000
M BennettsZ Energy10 May 201072,000--72,000
D BoffaBP23 Aug 201725,630--25,630
R CavalloMobil12 Apr 201752,077--52,077
M Elliott* BP3 May 201236,000-2,50038,500
V StoddartIndependent20 May 201388,000-10,00098,000
M TumeIndependent1 Aug 200788,00025,000-113,000
A Warrell* Mobil14 Mar 201214,203--14,203
P ZealandIndependent29 Aug 201688,00012,5005,000105,500
* A Warrell resigned as Director on 13 March 2017. M Elliott resigned as Director on 29 June 2017.
THE BOARD SHOULD DEMAND INTEGRITY IN FINANCIAL AND
NON-FINANCIAL REPORTING, AND IN THE TIMELINESS AND
BALANCE OF CORPORATE DISCLOSURE.
THE REMUNERATION OF DIRECTORS AND EXECUTIVES
SHOULD BE TRANSPARENT, FAIR AND REASONABLE.
“
”
“
”
REFINING NZ
ANNUAL REPORT 2017
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ANNUAL REPORT 2017
4445

The Directors do not participate in any profit-based
incentive system. No Director of the Company has
received, or become entitled to receive, a benefit
(other than a benefit included in the total emoluments
received or due and receivable by Directors shown in this
report), including shares, remuneration paid by subsidiary
company or other payments from services provided
(including Directos and Officers insurance cover). The
Chairman does not receive additional fees for being on a
Committee. No loans have been made to Directors.
CHIEF EXECUTIVE REMUNERATION
The Chief Executive’s employment commenced on
14 January 2013. At the Board meeting held on
27 February 2018, the Chief Executive advised the
Directors of his decision to resign from his role as
CEO and his intention to remain in the role until the
end of July 2018.
The Chief Executive’s remuneration is approved by
the Board and is reviewed annually. Total remuneration
is made up of two components:
−fixed remuneration – base salary of $987,650
per annum; and
−short-term performance incentive (STI) – an incentive
up to 60% of base salary per plan year subject to the
achievement of agreed Key Performance Indicators
(KPIs). Short-term performance incentives are deemed
“at risk” payments designed to motivate and reward
performance in the financial year. The KPIs relate to
areas of health and safety, plant reliability, leadership,
financial and in-full on-time in-spec product delivery.
The weightings applied are as follows:



Each category of KPI is “scored” against the agreed
targets for those KPIs. There are various performance
levels within each KPI category; below target, on-target,
and above target. The individual category scores are
weighted and combined to determine the Chief Executive
Performance Factor (CEPF). Maximum CEPF equals 60%
of Base Salary, on-target performance is an STI equivalent
to 40% of Base Salary.
In addition to the STI the Board can award a discretionary
bonus in the case of over performance of KPIs.
The Chief Executive participates in the Employee Share
Purchase Scheme as outlined on page 47.
SCENARIO CHARTS – CHIEF EXECUTIVE
PERFORMANCE PAY FOR 2018
Subsequent to year end, the Chief Executive has
announced his resignation from the role. As a result the
Chief Executive will be entitled to base salary up to his
termination date, a pro rata short term performance
incentive payment based on performance against KPIs up
to his termination date, as well as all other contractual
entitlements pursuant to his contract of employment
which also provides for a discretionary payment for over
performance up to his termination date.
LEADERSHIP TEAM AND OTHER
EMPLOYEES’ REMUNERATION PROFILE
The Leadership Team and employees with Individual
Employment Agreements (IEAs) are remunerated with
a mix of base salary and benefits, and short-term
performance incentives. The remuneration of the Chief
Executive and selected Leadership Team members was
externally benchmarked in 2017. The determination of
fixed remuneration is based on responsibilities, individual
performance and experience, and market data. At-risk/
variable remuneration comprises individual performance
rewards, based on:
−achievement of Company business performance targets
(BPTs) which include: the frequency of personal safety
incidents (total recordable case frequency), the number
of process safety incidents (Tier 1 and Tier 2), level of
operating costs, unplanned downtime and delivery
in-full, on-time, in-spec to our customers;
−individual performance factors (IPFs) based on
achievement of individual performance objectives; and
−values and behaviours demonstrated by the individual.
EMPLOYEE SHARE PURCHASE SCHEME
The Company established the Employee Share Purchase
Scheme (ESPS) in the 2015 financial year which has been
approved by the Commissioner of Inland Revenue as a
section DC 12 share scheme under the Income Tax Act
2007. The purpose of the scheme was to recognise the
important contribution of the employees to the Company’s
future and to assist the Company in retaining and
motivating employees.
A trust has been created under the scheme for the
purpose of purchasing the Company’s shares on the
New Zealand Stock Exchange (“the NZX”) and holding
those shares until they vest with each participating
employee over a three-year period. For further details
on the ESPS refer to note 21 of the consolidated financial
statements.
The Company estimates the annual operating costs of
the scheme of approximately $30k and the cost of the
contribution of approximately $300-400k per year.
FINANCIAL
YEAR
BASE SALARY
$000
OTHER
$000
SUBTOTAL
$000
PAY FOR PERFORMANCE (STI)
$000
% STI AGAINST
MAXIMUM
TOTAL
REMUNERATION
$000
KPI BASEDDISCRETIONARY
2017982451,027405150941,582
201695841999540-931,539
201594041981438-781,419
201494240982400-711,381
20139 1180991400-741,391
KPI CATEGORY WEIGHTING
%
Health and safety (personal and process) 40
Financial 25
Leadership 25
Plant reliability 5
In-full, on-time, in-spec product delivery 5
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ANNUAL REPORT 2017
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“
”
EMPLOYEE REMUNERATION
The following table shows the number of employees
and former employees (including members of the
Leadership Team), not being Directors, who, in their
capacity as employees, received remuneration and
other benefits during 2017 of at least $100,000. The
remuneration figures include all monetary payments
actually made during the year and contributions
made by the Company as a part of the share
scheme; the remuneration excludes amounts paid
post 31 December 2017 that relate to performance
during the 2017 financial year. No employees
appointed as a Director of IPL, a subsidiary company
of Refining NZ, receive or retain any remuneration or
other benefits for holding this office.
This analysis (see chart) is compiled on a cash basis;
variable performance rewards (linked to individual
and business performance for a financial reporting
period) are paid subsequent to balance date and
reported as part of the remuneration banding for the
following year.
The ratio between employee remuneration (median)
and Chief Executive’s total remuneration for the 2017
financial year (on a cash basis) was 2017:1:10
(2016:1:11).
RISK MANAGEMENT AND ASSURANCE
The Board is responsible for reviewing and managing risk.
The Board delegates day-to-day management of the risk
to the Chief Executive Officer. Business risk assessments
are conducted by the Leadership Team and reported to the
Board of Directors.
Business risks are assessed using the “Bow Tie” risk
management methodology. The methodology identifies
the “threats” which, if not curtailed or controlled, could
manifest as an actual risk event. Against each threat, a
number of preventative and mitigating barriers are identified.
Preventative barriers are those systems, processes and
procedures which are designed to arrest the initiating event
so that the risk event does not occur. Should the actual
event arise, mitigating barriers are designed to limit the
consequences of a risk event occurring.
The Leadership Team and the Board obtain assurance over
the adequacy of the Company’s management system
(covering preventative and recovery or mitigating barriers
or controls) from a variety of sources. The Company has:
−an enterprise-wide audit programme conducted by
Refining NZ and external auditors, which verifies
that operational controls (barriers) are operating as
documented and assesses the efficiency and
effectiveness of internal controls. During 2017 the
Company was subject to 22 audits by external parties,
including five audits conducted by the Company’s
internal auditor, BDO Northland, and 13 audits by
in-house operational auditors. The summary results
from audits were reported to the Leadership Team and
the ARFC of the Board;
−detailed operational reports and effective
monitoring controls covering both leading and
lagging indicators; and
−independent risk assessments carried out
by third parties.
HEALTH AND SAFETY
Refining NZ is designated a high hazard facility in
accordance with regulation 19(2) of the Health and Safety
at Work Regulations 2016. Health, Safety, Security and
Environment (HSSE) risks are an area of significant and
continued focus covering both personal and process
safety and environmental effects. Refining NZ’s Health
and Safety and Environmental policies are published
on the Company’s website (www.refiningnz.com) and
the intranet.
Refining NZ’s Board approves the annual HSSE plan,
receives assurance and performance reports, and
oversees the management of the major hazard facility.
The Company’s approach and progress on health and
safety initiatives can be found on pages 20 to 21.
RISK
MANAGEMENT
PRINCIPLE
6
DIRECTORS SHOULD HAVE A SOUND UNDERSTANDING OF THE
MATERIAL RISKS FACED BY THE ISSUER AND HOW TO MANAGE
THEM. THE BOARD SHOULD REGULARLY VERIFY THAT THE
ISSUER HAS APPROPRIATE PROCESSES THAT IDENTIFY AND
MANAGE POTENTIAL AND MATERIALS RISKS.
AMOUNT OF
REMUNERATION
NUMBER OF
EMPLOYEES
$000
20172016
100-109
17
22
110 - 119
18
19
120-129
22
19
130-139
22
38
140-149
36
33
150-159
33
19
160-169
34
32
170-179
23
29
180-189
23
21
190-199
22
12
200-209
9
9
210-219
6
8
220-229
2
6
230-239
2
5
240-249
4
3
250-259
3
1
260-269
1
1
270-279
1
-
280-289
-
2
290-299
1
1
300-309
1
-
310-319
-
1
320-329
1
-
330-339
-
-
340-349
-
1
350-359
-
1
380-389
1
-
400-409
1
-
420-429
1
-
1,430-1,439
-
1
1,540-1,549
1
-
REFINING NZ
ANNUAL REPORT 2017
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ANNUAL REPORT 2017
4849