Refining NZ announces Strategic Review

15 April 2020 NZX Announcement


Refining NZ announces Strategic Review

Refining NZ today announced the commencement of a Strategic Review to determine the
optimal business model and capital structure for its assets that will maximise “through the cycle” returns
to shareholders, and deliver secure, competitive fuel supply to New Zealand.

Announcing the review, Chairman, Simon Allen said: “Refining NZ has quickly responded to the current
COVID-19 situation but is challenged by structural conditions resulting in low refining margins globally and
oversupply in the Asia region. It is appropriate for us to review the fundamentals of the business
and the Company’s future within the New Zealand fuel supply chain.
“The Company has a significant investment in infrastructure critical to the New Zealand fuel supply chain,
alongside a refinery that can provide critical skills and capabilities to the economy as it transitions to a
lower carbon future. The Strategic Review will allow us to determine the best future use of these assets
to support secure, competitive fuel supply to New Zealand, now and into a lower carbon future.”
The Strategic Review will look at opportunities to improve the competitiveness of refining
operations and options to separate the refining and infrastructure assets or convert to a fuel
import business model. The review will also look at the capital structure required for the preferred
option to maximise value for shareholders.

The Chief Executive Officer, Naomi James, said: “Refining NZ’s assets play a critical role in the supply of
transport fuel in New Zealand and the Company’s infrastructure position provides a strong competitive
advantage, particularly in the supply of fuels to Auckland and surrounding areas. As well as the
Company’s role in the fuel supply chain, Refining NZ is a major employer and makes an important
contribution to the Northland economy. We know that the future for this business will need to look
different and are open to all options to operate a high-performing, competitive refining and
infrastructure business, and to alternative future import business models.

“Taking the step to commence this Strategic Review now ensures we can put in place the right plans for
the Company’s future as we come through COVID-19 and play our role in supporting the recovery of the
New Zealand economy. We will be working closely with our customers, government and other
stakeholders through this process to make sure we consider all the options to provide a secure,
competitive fuel supply to New Zealand now and into the future as requirements change.”

The Strategic Review is being led by the Chief Executive Officer, with support from external
advisors. Refining NZ expects to provide an update on the Strategic Review process in June 2020.

More detail on the Strategic Review and opportunities available for the refinery and the infrastructure
assets is available in the attached presentation.

For information: Greg McNeill, Communications and External Affairs Manager
M: 021 873 623; E: greg.mcneill@refiningnz.com

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REFINING NZ
STRATEGIC REVIEW PRESENTATION
15 April 2020
Strategic Review

REFINING NZ
STRATEGIC REVIEW PRESENTATION
2
DISCLAIMER
•This presentation does not constitute an offer or invitation by The New Zealand Refining Company Limited (hereafter referred to as “Refining NZ”) or any of its subsidiaries (together “the Group”) or
any other person to acquire any securities in Refining NZ or any part of the Group’s business or assets.
•This presentation contains forward looking statements concerning the strategy, plans, projections, assumptions, expectations,forecasts, prospects, potential exposure to the market and business
risks, financial condition, results and operations of the Group.
•Forward looking statements are subject to the risks and uncertainties associated with the refining environment, including price/refining margin and foreign currency fluctuations, regulatory changes,
environmental factors, production results, site and infrastructure operations, demand for Refining NZ’s products or services andother conditions. Forward looking statements are based on
management’s current expectations and assumptions, which may or may not prove to be correct, reasonable or reliable, and involveknown and unknown risks and uncertainties that could cause
actual results, performance or events to differ materially from those expressed or implied in these statements.
•Forward-looking statements are all statements other than statements of historical fact, including (without limitation) any statement regarding strategy, financial condition, plans, projections,
assumptions, expectations, prospects, estimates, forecasts, management targets, potential exposure to market and business risks,and any other statement or estimate regarding the future
prospects or performance of the Group, its business or its assets.
•Readers should not place undue reliance on forward looking statements. Forward looking statements should be read in conjunction with Refining NZ’s financial statements available on its website:
https://www.refiningnz.com/. This presentation is for information purposes only and does not constitute legal, financial, tax, financial product advice or investment advice or a recommendation to
acquire Refining NZ’s securities, and has been prepared without taking into account the objectives, financial situation or needsof individuals. Before making an investment decision, you should
consider the appropriateness of the information having regard to your own objectives, financial situation and needs and consult an NZX Firm or solicitor, accountant or other professional adviser if
necessary. Any reliance by any person on any information in this presentation is a matter for that person’s own judgement andnoliability is accepted by any member of the Group or any of their
officers, directors, agents, employees or advisors for any such reliance.
•In light of these risks, results could differ materially from those stated, implied or inferred from the forward looking statements contained in this presentation. Refining NZ does not guarantee future
performance and past performance information is for illustrative purposes only. To the maximum extent permitted by law, the directors of Refining NZ, Refining NZ and any of its related bodies
corporate and affiliates, and their offices, partners, employees, agents, associates and advisers do not make any representationor warranty, express or implied, as to accuracy, reliability,
reasonableness, or completeness of the information in this presentation, or likelihood of fulfilment of any forward looking statement or any event or results expressed or implied in any forward looking
statement, and disclaim all responsibility and liability for these forward looking statements and the information (or omission therefrom) in this presentation (including, without limitation, liability for
negligence).
•Except as required by law or regulation (including the NZX Main Board Listing Rules), Refining NZ undertakes no obligation toprovide any additional or updated information whether as a result of
new information, future events or results or otherwise.
•Forward looking figures in this presentation are unaudited and may include non-GAAP financial measures and information. Not all of the financial information (including any non-GAAP information)
will have been prepared in accordance with, nor is it intended to comply with: (i) the financial or other reporting requirements of any regulatory body or any applicable legislation; or (ii) the accounting
principles generally accepted in New Zealand or any other jurisdiction with IFRS. Some figures may be rounded and so actual calculation of the figures may differ from the figures in this presentation.
Non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities. Non-
GAAP financial information in this presentation is not audited or reviewed.
•Each forward looking statement speaks only as of the date of this presentation, 15 April 2020.

REFINING NZ
STRATEGIC REVIEW PRESENTATION
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INTRODUCTION
-Refining NZ is announcing a Strategic Review aimed at determining the optimal business model and capital structure
for its assets that aims to maximise “through the cycle” returns to shareholders and deliver secure, competitive fuel
supply for New Zealand
-Refining NZ has quickly responded to the challenges of COVID-19, reaching a short-term agreement with
customers, on the basis ofwhich, the refinery plans to operate on a cash neutral basis in 2020, in part by deferring
significant shutdown and capital expenditure until 2021
-Regardless of COVID-19, Refining NZ has been challenged by low refining margins globally and the outlook for
oversupply in the Asian region, leading to further import competition into New Zealand
-Refining NZ has a unique mix of critical skills, capabilities and infrastructure that form a core part of New Zealand’s
transport fuel supply chain. The aim of the Strategic Review is to determine the optimal use of these assets and the
unique skills and capabilities of our people to support secure, competitive fuel supply to New Zealand, now and into
a lower carbon future
-The Strategic Review will consider opportunities to improve the competitiveness of refining operations, the
separation of the refining and infrastructure assets and options to convert to a fuel import business model, plus the
capital structure required to maximise value for shareholders
-Refining NZ’s new CEO Naomi James will lead the Strategic Review, working closely with staff, external advisers
and stakeholders. An update on the Strategic Review process is expected in June 2020

REFINING NZ
STRATEGIC REVIEW PRESENTATION
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STRATEGIC REVIEW
Why is Refining NZ undertaking a Strategic Review?
The processing agreements were entered into in 1995, however since
this date there have been significant changes in the nature of the
market
Refining NZ has invested to expand processing capacity, improve
product quality, reduce emissions and maintain facilities, but these
investments have not delivered an acceptable return over the last 10
years
Significant new supply has come online in China, Korea,Singapore
and India, and these larger integrated refining facilities in low cost
economies are producing large volumes of low cost product putting
significant downward pressure on regional margins
Low margins have been compounded by significant increases in the
market price of electricity in New Zealand, meaning that at the fee floor
in the processing agreements Refining NZ does not cover its cash
costs
While COVID-19 is impacting operations in the short term, Refining NZ
believes that the market conditions that have necessitated the review
are structural
Refining NZ will work with its major customers and stakeholders to
consider all options to provide a secure, competitive fuel supply to New
Zealand now and into a lower carbon future
Refining NZ Return on Invested Capital, 2006-2019
1
Refining NZ Gross Refining Margin, 2006-2019
8.37
8.14
11.30
4.16
6.17
6.11
5.77
4.58
4.96
9.20
6.47
8.02
6.31
5.34
20062007200820092010201120122013201420152016201720182019
USD/bbl
21.5
13.2
15.7
3.3
7.1
5.1
4.8
(0.2)
1.0
13.7
5.2
7.8
3.3
1.0
20062007200820092010201120122013201420152016201720182019
ROIC (%)
1) 2006 was the first year for full adoption of NZ IFRS, comparing returns on capital in earlier years
would be misleading

REFINING NZ
STRATEGIC REVIEW PRESENTATION
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STRATEGIC REVIEW
Refining NZ owns a portfolio of strategic assets in key
locations
Refining NZ’s assets play a critical role in the supply of transport fuel in New Zealand and the Company’s infrastructure position
provides a strong competitive advantage, particularly in the supply of fuels to Auckland and surrounding areas
The assets owned by Refining NZ are highly integrated in New Zealand’s fuel supply chain, including the Wiriterminal (servicing the
wider Auckland region, Waikato and Auckland Airport), the truck loading facility at Marsden Point (which serves the Northlandregion)
and coastal ships (that serve more southern domestic markets)
Refining NZ’s land is adjacent to Northport, which is growing in strategic importance for broader importing activity into NewZealand’s
North Island. Access is expected to be improved following the Government announcements of upgrades to the rail network
Some of Refining NZ’s assets and capabilities could facilitate New Zealand’s transition to a lower carbon economy, including hydrogen
and biofuels

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STRATEGIC REVIEW PRESENTATION
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STRATEGIC REVIEW
The Strategic Review will consider options to improve
refinery financial performance
Crude slate and
yield
▪Opportunities for improvement include
‒Optimisationof crude scheduling and diet
‒Sourcing lower cost energy
‒Advanced process controls to maximise
higher value product yield and optimised
energy consumption
‒Reduce maintenance costs through
efficiencies and improved process
alignment
‒Optimisation of turnaround cycles and
duration
▪This will be compared to alternative models
e.g. an import terminal
Hydrogen
production
▪New Zealand’s largest producer of hydrogen
–potential for green hydrogen
▪Expectation is that hydrogen will be a key
component of the future energy mix
▪Provides unique capabilities for future
transition to lower carbon fuels
Energy cost
Immediate opportunities
Bio fuels
▪Critical alternative for aviation and heavy
trucking
▪Access to land, water and renewable energy
Lower cash
break-even
Examples of opportunities to support New
Zealand’s transition to a lower carbon economy
Currently, our view is that the refinery is not able to earn its cost of capital through the cycle due to the changes in the underlying cost of
operations and regional competitive conditions combined with the structure of the processing agreements
A fundamental change in the competitiveness of refining operations and the economicsof Refining NZ’s business model is required
Solar energy
▪Progress MarangaRa solar farm project

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STRATEGIC REVIEW PRESENTATION
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STRATEGIC REVIEW
The Strategic Review will consider opportunities to unlock
value from Refining NZ’s infrastructure assets
StorageRefineryLand
More volatile refinery earnings stream
Infrastructure –less volatile earnings stream
Key Auckland
metro market
and Auckland
Airport
PipelineJetties
Refining NZ’s refinery and infrastructure assets are all currently owned and operated by a single vehicle, and commercial terms with
customers are primarily governed by the processing agreements
The company believes that the value of the infrastructure assets is not appropriately reflected in it’s share price and part of the Strategic
Review will seek to address this
Laboratory

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STRATEGIC REVIEW
Strategic review considerations
Refining NZ will consider different options to determine the optimal business model and capital structure for its assets thatwill maximise
“through the cycle” returns to shareholders, and deliver secure, competitive fuel supply to New Zealand
Continue current refinery model
Strategic
Review options
Alter refinery operating model
Separate refining and infrastructure assets
Convert to an import terminal
▪Improvements within the current refining operating model
(e.g. cost efficiencies, crude purchasing and selection)
▪Adjustments to the processing agreements, distribution
arrangements
▪Changes to structure and funding profile e.g. entities with
different risk profiles and returns
▪Conversion from refining to terminal operations under
new commercial arrangements
Future Growth options
▪The Strategic review will evaluate growth potential
under different operating models
▪This will include an evaluation of New Zealand’s
fuel distribution network
▪New Zealand currently has geographically
dispersed fuel terminals, ports, pipelines, truck
loading and airport fuel facilities, and a coastal
shipping network
▪Opportunities may exist to improve existing
networks or reorganize control and coordination of
fuel supply
▪Refining NZ also has options
to progress its MarangaRa
solar farm project and other
low carbon energy options

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STRATEGIC REVIEW PRESENTATION
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NEXT STEPS
RefiningNZ has appointed external advisers to assist with the Strategic Review
We are considering all available options to create value for shareholders and
support secure, competitive fuel supply to New Zealand, now and into a lower
carbon future
We are actively engaging with employees, customers, Government and other
stakeholders
Refining NZ expects to update the market on the Strategic Review in June
2020