2020HY Interim Results
DRAFT
Refining NZ Group
Interim Financial Statements
2020
Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
1
Consolidated Income Statement 2
Consolidated Statement of Comprehensive Income 3
Consolidated Balance Sheet 4
Consolidated Statement of Cash Flows 6
Consolidated Statement of Changes in Equity 7
Basis of Preparation 9
Notes to the Interim Financial Statements 11
Directory 27
Consolidated Income Statement
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
2
GROUP GROUP
30 JUNE 30 JUNE
2020 2019
NOTE
$000 $000
INCOME
Revenue
4
116,154 169,413
Other income
4
2,964 2,179
TOTAL INCOME
4,5
119,118 171,592
EXPENSES
Purchase of process materials and utilities
43,737 51,220
Materials and contractor payments
11,478 15,776
Wages, salaries and benefits
30,903 29,653
Administration and other costs
17,618 20,893
TOTAL EXPENSES
103,736 117,542
EARNINGS BEFORE DEPRECIATION, IMPAIRMENT,
FINANCE COSTS AND INCOME TAX
15,382 54,050
Depreciation and disposal costs
47,300 52,137
Impairment of assets
3
218,903 -
TOTAL DEPRECIATION, DISPOSALS AND IMPAIRMENT
266,203 52,137
NET (LOSS)/PROFIT BEFORE FINANCE COSTS
(250,821) 1,913
FINANCE COSTS
Finance income
(146) (24)
Finance costs
6,552 6,767
NET FINANCE COSTS
6,406 6,743
NET LOSS BEFORE INCOME TAX
(257,227) (4,830)
Income tax
(70,879) (1,327)
NET LOSS AFTER INCOME TAX
(186,348) (3,503)
ATTRIBUTABLE TO:
Owners of the Parent
(186,348) (3,503)
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE
SHAREHOLDERS OF THE NEW ZEALAND REFINING COMPANY
LIMITED
CENTS CENTS
Basic earnings per share
(59.60) (1.12)
Diluted earnings per share
(59.50) (1.12)
THE ABOVE CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT IS TO BE READ IN CONJUNCTION WITH
THE ACCOMPANYING NOTES.
Consolidated Statement of Comprehensive Income
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
3
GROUP GROUP
30 JUNE 30 JUNE
2020 2019
NOTE
$000 $000
NET LOSS AFTER INCOME TAX
(186,348) (3,503)
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to the Income
Statement
Defined benefit plan and medical scheme actuarial loss
14
(19,927) (10,558)
Deferred tax on defined benefit plan and medical scheme 5,580 2,956
Total items that will not be reclassified to the Income
Statement
(14,347) (7,602)
Items that may be subsequently reclassified to the
Income Statement
Movement in cash flow hedge reserve
(1,327) (1,539)
Deferred tax on movement in cash flow hedge reserve
372 431
Total items that may be subsequently reclassified to the
Income Statement
(955) (1,108)
TOTAL OTHER COMPREHENSIVE LOSS, AFTER INCOME
TAX
(15,302) (8,710)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD, AFTER
INCOME TAX
(201,650) (12,213)
ATTRIBUTABLE TO:
Owners of the Parent
(201,650) (12,213)
THE ABOVE CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IS TO BE READ IN CONJUNCTION
WITH THE ACCOMPANYING NOTES.
Consolidated Balance Sheet
AT 30 JUNE 2020 (UNAUDITED)
4
GROUP GROUP
30 JUNE 31 DECEMBER
2020 2019
NOTE
$000 $000
ASSETS
Cash and cash equivalents
29,809 5,255
Trade and other receivables
124,557 145,063
Income tax receivable
1,780 5,895
Derivative financial instruments
2,586 4,421
Inventories
4,063 3,340
TOTAL CURRENT ASSETS
162,795 163,974
NON-CURRENT ASSETS
Inventories
15,553 19,410
Derivative financial instruments
- 205
Property, plant and equipment
10
925,096 1,171,301
Right-of-use assets
10
3,245 4,028
Intangibles
10
17,353 22,137
TOTAL NON-CURRENT ASSETS
961,247 1,217,081
TOTAL ASSETS
1,124,042 1,381,055
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
13
139,614 171,018
Derivative financial instruments
3,351
3,997
Lease liabilities
282 248
Employee benefits
14
8,825 7,861
TOTAL CURRENT LIABILITIES
152,072 183,124
NON-CURRENT LIABILITIES
Derivative financial instruments
4,226
5,017
Borrowings
9
279,552 246,616
Lease liabilities
3,705 3,206
Employee benefits
14
61,695 40,894
Provisions
12
11,119 12,643
Deferred tax liabilities
15
56,388 132,811
TOTAL NON-CURRENT LIABILITIES
416,685 441,187
TOTAL LIABILITIES 568,757 624,311
NET ASSETS 555,285 756,744
Consolidated Balance Sheet
AS AT 30 JUNE 2020 (UNAUDITED)
5
GROUP GROUP
30 JUNE 31 DECEMBER
2020 2019
NOTE
$000 $000
EQUITY
Contributed equity 266,057 265,771
Treasury stock (895) (960)
Employee share entitlement reserve 521 681
Cash flow hedge reserve (3,643) (2,688)
Retained earnings 293,245 493,940
Total Equity 555,285 756,744
For and on behalf of the Board, 16 August 2020.
S C Allen
J B Miller
Director
Director
THE ABOVE CONDENSED CONSOLIDATED INTERIM BALANCE SHEET IS TO BE READ IN CONJUNCTION WITH THE ACCOMPANYING
NOTES.
Consolidated Statement of Cash Flows
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
6
GROUP GROUP
30 JUNE 30 JUNE
2020 2019
NOTE
$000 $000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
108,799 167,765
Payment for supplies and expenses
(63,999) (73,801)
Payments to employees
(28,874) (30,326)
CASH GENERATED FROM OPERATIONS
15,926 63,638
Interest received
146 24
Interest paid
(6,808) (5,995)
Net GST paid
(120) (905)
Income tax received/(paid)
4,523 (8,830)
NET CASH INFLOW FROM OPERATING ACTIVITIES
13,667 47,932
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
(21,954) (29,782)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
(21,954) (29,782)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings
32,900 250
Dividends paid to shareholders
8
- (14,067)
Lease payments
(59) (381)
Purchase of treasury stock
- (283)
NET CASH (OUTFLOW)/ INFLOW FROM FINANCING
ACTIVITIES
32,841 (14,481)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 24,554 3,669
Cash and cash equivalents at the beginning of the period 5,255 779
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 29,809 4,448
THE ABOVE CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS IS TO BE READ IN CONJUNCTION
WITH THE ACCOMPANYING NOTES
Consolidated Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
7
CONTRIBUTED
EQUITY
TREASURY
STOCK
SHARE
SCHEME
ENTITLEMENT
RESERVE
CASH FLOW
HEDGE
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
NOTE $000 $000 $000 $000 $000 $000
AT 1 JANUARY 2019
265,771 (969) 732 (460) 504,562 769,636
COMPREHENSIVE INCOME
Net loss after income tax - - - - (3,503) (3,503)
Other comprehensive income
Movement in cash flow hedge reserve - - - (1,539) - (1,539)
Defined benefit actuarial loss 14 - - - - (10,558) (10,558)
Deferred tax on other comprehensive income - - - 431 2,956 3,387
TOTAL OTHER COMPREHENSIVE LOSS, AFTER INCOME TAX - - - (1,108) (7,602) (8,710)
TRANSACTIONS WITH OWNERS OF THE PARENT
Equity-settled share-based payments - - 121 - - 121
Shares vested to employees - 292 (292) - - -
Treasury shares purchased - (283) - - - (283)
Unclaimed dividends written back - - - - - -
Dividends paid 8 - - - - (14,067) (14,067)
TOTAL TRANSACTIONS WITH OWNERS OF THE PARENT - 9 (171) - (14,067) (14,229)
AT 30 JUNE 2019 265,771 (960) 561 (1,568) 479,390 743,194
Consolidated Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
8
CONTRIBUTED
EQUITY
TREASURY
STOCK
SHARE
SCHEME
ENTITLEMENT
RESERVE
CASH FLOW
HEDGE
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
NOTE $000 $000 $000 $000 $000 $000
AT 1 JANUARY 2020 265,771 (960) 681 (2,688) 493,940 756,744
COMPREHENSIVE INCOME
Net loss after income tax - - - - (186,348) (186,348)
Other comprehensive income
Movement in cash flow hedge reserve - - - (1,327) - (1,327)
Defined benefit actuarial loss 14 - - - - (19,927) (19,927)
Deferred tax on other comprehensive income - - - 372 5,580 5,952
TOTAL OTHER COMPREHENSIVE LOSS, AFTER INCOME TAX - - - (955) (14,347) (15,302)
TRANSACTIONS WITH OWNERS OF THE PARENT
Equity-settled share-based payments - - 191 - - 191
Shares vested to employees - 351 (351) - - -
Shares issued 286 (286) - - - -
Unclaimed dividends written back - - - - - -
Dividends paid 8 - - - - - -
TOTAL TRANSACTIONS WITH OWNERS OF THE PARENT 286 65 (160) - - 191
AT 30 JUNE 2020 266,057 (895) 521 (3,643) 293,245 555,285
THE ABOVE CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY IS TO BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
Basis of Preparation
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
9
Reporting entity
The New Zealand Refining Company Limited (‘Parent’, ‘Company’ or ‘Refining NZ’), is a profit-oriented
company registered under the Companies Act 1993 and an FMC Reporting Entity for the purposes of
the Financial Markets Conduct Act 2013. Refining NZ is listed, and its ordinary shares are quoted on
the NZX Main Board Equity Market (“NZX Main Board”) and it has subordinated notes quoted on the
NZX Debt Market.
The condensed consolidated interim financial statements (hereinafter “financial statements”) for the
six months ended 30 June 2020 presented are those of Refining NZ together with its subsidiaries (‘the
Group’).
Basis of preparation
These financial statements as at and for the six months ended 30 June 2020 comply with the
generally accepted accounting practice in New Zealand (‘NZ GAAP’) and have been prepared in
accordance with New Zealand Equivalents to International Accounting Standard (‘NZ IAS‘) 34: Interim
Financial Reporting and International Accounting Standard (‘IAS‘) 34: Interim Financial Reporting and,
consequently, do not include all the information required to be disclosed in annual consolidated
financial statements. These financial statements should be read in conjunction with the annual
consolidated financial statements for the year ended 31 December 2019.
Accounting policies
The accounting policies used in the preparation of these financial statements are consistent with
those used in the previously published consolidated financial statements as at and for the six months
ended 30 June 2019 and the audited consolidated financial statements as at and for the year ended
31 December 2019. There were no new standards, interpretations and amendments effective from 1
January 2020 that would have a material impact on the Group.
Use of judgements and estimates
The preparation of financial statements requires directors to make certain judgements, estimates and
assumptions that affect the application of accounting policies and reported amounts of assets,
liabilities, income and expenses.
The following areas involve estimates and assumptions that can significantly affect the amounts
recognised in the condensed consolidated financial statements:
• Impairment assessment of assets – refer to Note 3 for further details.
• Useful lives of the property, plant and equipment – the Group reassessed the remaining useful
lives of assets associated with the distribution segment (including the Refinery to Auckland
Pipeline) as at 31 December 2019. No changes to the useful lives of assets at 30 June 2020 were
identified pending the outcome of the Strategic Review as outlined in Note 1.
Basis of Preparation
FOR THE SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED)
10
• Going concern - these financial statements have been prepared on a going concern basis.
Management and the Board consider that this is appropriate based on the Group’s current cash
position and available credit facilities, and that the Board has no reason to believe that Refining
NZ will not meet covenants and other obligations under its facility agreements, for the next
twelve months. Refining NZ’s forecasts indicate the Group has the ability to continue to operate
as a going concern despite the challenges arising from the current low margin environment and
COVID-19, based on the steps taken to have cash neutral operations to date, and customers
continuing to meet their Fee Floor obligations for the next twelve months (refer to Note 2).
• Recoverability of tax losses – in the six months ended 30 June 2020, Refining NZ generated a tax
loss of $27.5 million, increasing the Group’s cumulative tax losses to $44.8 million A deferred tax
asset in respect of these unutilised tax losses has been recognised.
On the assumption that at least a 49% continuity of shareholding is maintained, Management
and the Board believe that future taxable profits will be available against which the tax losses
can be recovered and therefore the deferred tax asset can be realised (refer to Notes 1 and 2).
Any adverse change in future profits, or significant change in the shareholding of Refining NZ,
could limit the Company’s ability to realise the deferred tax asset.
Estimates are designated by a symbol in the notes to these consolidated interim financial
statements.
Notes to the Interim Financial Statements
11
1 Strategic review
On 15 April 2020, the Refining NZ Board announced a Strategic Review to determine the optimal
business model and capital structure for its assets to maximise “through the cycle” returns to
shareholders and deliver secure, competitive fuel supply to New Zealand.
The first phase of the Strategic Review was to assess all the options, including: 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.
On 25 June 2020, the Company announced that it would take two business model options forward
into the next phase of detailed planning and analysis. To improve the near-term viability of its current
business model, Refining NZ is developing plans to simplify refinery operations and structurally
reduce operating costs. In parallel the company is continuing to evaluate a possible future staged
transition to an import terminal, including exploration of a commercial framework with customers,
overseen by the Independent Directors.
The Company expects to provide a further update on the Strategic Review process around the end of
Quarter 3 2020.
These financial statements have been prepared based on existing Group operations under the current
Processing Agreements. However, the potential outcomes from the Strategic Review, which are not
solely within the Company’s control, may be substantially different from such existing operations and
may therefore impact the financial performance and financial position of the Company in the future.
2 COVID-19 Pandemic
On 11 March 2020 the World Health Organisation declared a global pandemic as a result of the outbreak
and spread of COVID-19. The New Zealand Government subsequently raised its Alert Level to 4 (full
lockdown of non‑essential services) for an initial four-week period. As an essential service, the Group
continued to operate during the lockdown, and subsequently throughout COVID-19 Alert Levels 3, 2 and 1.
In response to the significant fuel demand reduction resulting from travel and transport restrictions, and
the consequential reduction in revenue through weak global refining margin and lower refinery
throughputs, Refining NZ has implemented the following measures:
• Reduced refinery production
Refining NZ agreed with its customers to change the way it operates the refinery whereby the
refinery’s processing facilities were operated on a rotating basis, to enable the refinery to produce at
substantially lower rates to help balance fuel supply across New Zealand. This has continued post 30
June 2020 as outlined in Note 17.
• Reduced non-essential activity on-site
All safety critical work has continued during COVID-19, however all non-essential activity on-site was
suspended including the deferral of the planned maintenance turnaround of the main crude distiller
and the gasoline manufacturing unit from May 2020 to March 2021.
Notes to the Interim Financial Statements
12
• Increased and extended debt facilities (Refer to Note 9)
Refining NZ extended and expanded its existing bank facilities, increasing the weighted average term
to over three years and adding $50 million of additional capacity, which brought the total available
debt funding facilities to $400 million (including the company’s $75 million subordinated notes on
issue). Subsequent to 30 June 2020 the Company further extended its facilities as outlined in Note 17.
The impacts on the Group can be summarised as follows:
• Total refinery throughput for the six months ended 30 June 2020 was 15.4 million barrels, 27%
lower than the same period in 2019 and circa 40% lower from the time the pandemic was
declared.
• Our customers were invoiced the pro rata Fee Floor amounting to $70 million during the six
months ended 30 June 2020. The actual processing fee earned from operations was below the
pro-rated fee floor, resulting in $38.9 million being paid by Customers as an interim fee floor
payment as outlined in Note 4.
• Pipeline revenues were 11% lower than the same period in 2019 at $16.3 million, reflecting the
impact of reduced demand for transport fuels, particularly jet fuel into Auckland International
Airport. Pipeline volumes were circa 41% lower from the time that the pandemic was declared
compared to the same period in 2019.
• The Group accessed the Government wage subsidy totalling $4.5 million as outlined in Note 4.
• The capital budget for 2020 has been reduced from $70 million to $35 million.
• Operating costs for the six months ended 30 June 2020 were circa $8 million or 9% lower than
budget due to reduced electricity and other costs as a result of reducing non-essential activity on
site.
• The Company has operated on a cash neutral basis since lockdown (Alert Level 4), achieving a
net debt position of $250 million as at 30 June 2020.
Notes to the Interim Financial Statements
13
In addition to the above, the impact of COVID-19 on the Refining NZ’s balance sheet include:
Item COVID-19 impact assessment
Cash and cash equivalents
The Group maintained cash and cash equivalent balances of
between $20-30 million.
Trade and other receivables
Trade receivables reflect a reduced excise duty receivable from
customers due to reduced liftings of refined product in June 2020
following the COVID-19 demand destruction (refer to Note 13). Our
customers continued to pay Processing Fees at the Fee Floor to the
Company in the six months ended 30 June 2020 (Refer to Note 4).
Income tax
The Company generated tax losses of $27.5 million in the six months
ended 30 June 2020. Total tax losses available to the Group to
offset against future taxable income amount to $44.8 million. (Refer
to key judgements and estimates under Basis of Preparation.)
Derivative financial instruments
COVID-19 has impacted commodity markets. Derivatives are
recognised at fair value, hence the impact on the financial and
commodity markets is included in the derivative instruments’
valuation.
Inventories
Obsolescence assessment has been conducted with regards to
inventories. Refer to Note 3 for further details.
Property, plant and equipment
Impairment assessment has been conducted with regards to
property, plant and equipment. Refer to Note 3 for further details.
Right-of-use assets
Impairment assessment has been conducted with regards to right-
of-use assets. Refer to Note 3 for further details.
Intangibles
Included are New Zealand Units (NZUs) held by the Parent company,
recognised at historical cost and tested for impairment with
reference to market value of carbon units. No impairment
recognised on NZUs.
Trade and other payables
Trade and other payables reflect a lower excise duty payable to the
NZ Customs as at 30 June 2020 due to reduced liftings of refined
product in June 2020 following the COVID-19 transport fuels
demand destruction. Trade and other payables are lower due to
non-essential activity being reduced, with a corresponding reduction
in capital and operating costs. Trade and other payables include $1.6
million COVID-19 wages subsidy received prior to 30 June 2020 but
deferred as income as it relates to wages paid post balance date.
Borrowings
Refining NZ extended and expanded its existing bank facilities. Refer
to Note 9 for further details.
Notes to the Interim Financial Statements
14
Lease liabilities
No impact – refer to right-of-use assets.
Employee benefits
Lower investment returns earned by the Pension Fund following
COVID-19 and amended assumptions underpinning the valuation,
particularly a lower yield curve impacting the discount rate,
contributed to the actuarial loss reported to 30 June 2020 (refer to
Note 14 for further details).
Provisions
Present value of provisions updated for the impact of financial and
commodity markets on interest rates.
Deferred tax liabilities The Group has incurred tax losses in the period and recognised an
impairment of assets which reduced the deferred tax liability. Refer
to Note 15 for further details.
Notes to the Interim Financial Statements
15
3 Impairment assessment
The carrying value of the Group’s assets were tested for impairment as at 30 June 2020,
resulting in an impairment of assets of $219 million (or $158 million net of deferred tax). In
addition, the stock obsolescence provision has been increased by $3.3 million as at 30 June
2020.
Key judgements underpinning this assessment include:
• Strategic Review
As set out in Note 1, the outcome of Strategic Review is not yet known and the business model
options referred to are still being developed, so their parameters remain uncertain. As such,
the Board and Management have conducted the impairment assessment as at 30 June 2020
based on the Group’s existing business model and the existing Processing Agreements, with
updates to reflect the Company’s response to COVID-19 (see Note 2).
• The Company will reassess carrying values once the outcome of the Strategic Review is decided.
Resource consents
The Company’s resource consents for activities at its Marsden Point site are on track to be
renewed prior to expiry in May 2022. It is the opinion of Management and the Board that the
risks of not renewing resource consents on a commercially acceptable basis is relatively low.
• New Zealand Emissions Trading Scheme (NZ ETS)
In April 2020 the Government approved the making of regulations to bring the Company in to
the NZ ETS as an Emissions Intensive Trade Exposed (EITE) business with an industrial allocation
of carbon units, with effect upon the expiry of the Negotiated Greenhouse Agreement with the
Crown on 31 December 2022.
Under the regulations the Company’s industrial allocation entitlement will be based on 90% of
the Company’s 2006-2009 emissions data submitted in accordance with the Climate Change
Response Act 2002. The Climate Change Response (Emissions Trading Reform) Amendment Act
2020 provides for a 1% per year phase out of rates of assistance over 2021 to 2030, meaning
that the applicable rate of assistance at the time the Company enters the NZ ETS in 2023 would
be 87%. This is the basis on which we have completed the 30 June 2020 impairment testing.
However, the Government has signalled that further regulatory reforms (resulting from a
review of industrial allocation policy and electricity factors), may result in different allocative
baselines in the future, including a change in the number of carbon units that the Company is
ultimately allocated when it enters the NZ ETS in 2023 and therefore the financial impact on
the business may change.
Notes to the Interim Financial Statements
16
• COVID-19 global pandemic
COVID-19 has had a significant impact on current demand for transport fuels and therefore
demand for refined products, resulting in significant market uncertainty. How long a recovery
will take is uncertain and some independent experts are forecasting that the recovery from
COVID-19 will be slow, impacting the longer-term demand forecasts for transport fuels,
particularly jet fuel.
• Market outlook – refining margins
An increased supply of refined product and lower than expected demand for transport fuels in
the Asia Pacific region has resulted in a reduced outlook for refining margins generally and the
initiation of a Strategic Review as outlined in Note 1.
The global drop in oil demand triggered by COVID-19 and the expectation of a slow recovery in
oil and refined products demand, particularly jet fuel, has further exacerbated the oversupply
in the global refining market. This has resulted in very weak refining margins in the six months
ended 30 June 2020, and significant uncertainty regarding refining margins in the future.
• Future NZ transport fuel demand
The Climate Change Response (Zero Carbon) Amendment Act 2019 has set a target for New
Zealand to reduce its net emissions of all greenhouse gases (except biogenic methane) to zero
by 2050. The pace of transition to alternative fuels and the manner by which that transition
may occur, remains highly uncertain.
Any significant change in demand for refined products in New Zealand could therefore impact,
favourably or unfavourably, on future assessments of the carrying value of the Group’s assets.
There is significant volatility and uncertainty in the market as a result of COVID-19, and the impacts
on future demand for transport fuels and the outlook for refiner’s margins cannot be reliably
predicted. Management and the Board have used their refining industry experience and independent
expert forecasts, where appropriate, to determine the base assumptions adopted in the impairment
testing as at the current reporting date.
The approach to the impairment testing, including the key assumptions and sensitivities, reflecting
the market uncertainty, are outlined below:
Cash Generating Unit
The Group identifies two cash generating units being: Refining NZ’s assets and the assets of its
subsidiary, Independent Petroleum Laboratory Limited (“IPL”).
Recoverable amount
The recoverable amount of the assets was determined on a value in use basis using a discounted cash
flow methodology. In determining the recoverable amount, the Company considered fair value less
cost of disposal. Based on the impairment assessment carried out, the recoverable amount of the
Company’s assets was determined at $842 million which resulted in an impairment loss of $219
million being recognised as at 30 June 2020 ($158 million net of deferred tax) and allocated to
refining assets.
Notes to the Interim Financial Statements
17
Key assumptions
The key assumptions used in the impairment testing include:
• Refining and pipeline volumes
Refinery’s and pipeline’s throughputs were assumed at an average of circa 41 million barrels and
circa 18.5 million barrels per annum, respectively, in the 10-year period to 2030. Near-term
production volumes have been adjusted for the impacts of COVID-19 driven demand
destruction; longer-term, Refining NZ used demand forecasts developed by independent
industry experts.
The base assumption is that the refinery would operate at the production levels outlined above
until 2030, followed by a period of reduced production to 2035, and then conversion to an
import terminal, noting that the outlook for transport fuels demand remains highly uncertain.
• Refining margins and pipeline fees
Consistent with the impairment testing approach used as at 31 December 2019, the Company
has used refining margin forecasts issued by independent expert market commentators in June
2020. These independent forecasts indicate margins ranging between US$4.40 per barrel to
US$6.80 per barrel in the 10 years to 2030, with a long-term average of US$5.30. per barrel,
including the estimated impact of margin enhancing initiatives, identified though external
benchmarking, expected to deliver an average uplift of US$0.80/bbl.
This represents a significant decline in the outlook for margins - around US$2 per barrel - when
compared to margin forecasts issued in January 2020 and adopted by Management and the
Board for impairment testing purposes as at 31 December 2019. Previously, a range of US$4.90
per barrel to US$8.10 per barrel with a median of US$7.40 per barrel had been forecast by the
same independent experts, which indicates the extreme volatility and uncertainty in the market.
Pipeline revenue in the 15-year period to 2035 is determined with reference to the current
pipeline arrangements to 2035, and then subsequently as a combination of estimated pipeline,
terminal and wharfage fees.
• Exchange rate
Forward rates as at the end of the reporting period have been applied, with a range of 0.65 to
0.61 over the forecast period.
• Operating costs and capital spend
Operating costs (excluding pass through costs such as natural gas and carbon) and capital spend
are assumed at an average of approximately $150 million and $60 million per annum,
respectively, in the 10 years to 2030, with a reduction of the costs beyond 2031 as the refinery
reduces its production and subsequently converts to an import terminal.
• Discount rate
A nominal post-tax weighted average cost of capital of 7.7% has been used, as assessed by
external advisors.
Notes to the Interim Financial Statements
18
• Carbon cost
The Company will enter the NZ ETS as an Energy Intense Trade Exposed (EITE) business at the
expiry of the Negotiated Greenhouse Agreement on 31 December 2022. The base assumption is
that Refining NZ will receive an industrial allocation of 87% in 2023 with a 1% per year phase out
until 2030 and 2% beyond 2030.
• Forecast period and terminal value
Due to the long-term, cyclical nature of the business, a 30-year forecast period with no terminal
value has been adopted, rather than a shorter modelling period with a terminal value allowed
for.
Sensitivities
The following chart outlines a range of possible sensitivities associated with each of the key
assumptions, across the full period modelled, noting that changes in a combination of the key
assumptions could also have a significant impact upon the recoverable amount assessed.
Notes to the Interim Financial Statements
19
4 Income
FOR THE SIX MONTHS ENDED 30 JUNE GROUP GROUP
30 JUNE 30 JUNE
2020 2019
$000 $000
Comprises:
Processing fees 69,991 117,282
Natural Gas recovery 16,099 19,714
Other refining related income 7,852 8,915
REFINING REVENUE 93,942 145,911
Pipeline and terminalling fee revenue 17,150 18,288
Wiri land and terminal lease income 3,263 3,263
DISTRIBUTION REVENUE 20,413 21,551
Other operating revenue 1,799 1,951
TOTAL REVENUE 116,154 169,413
Other income 2,964 2,179
TOTAL INCOME 119,118 171,592
The processing fee revenue is subject to a fee floor, which comes into effect if the total processing fee
for a calendar year is below a minimum value. This is set at approximately $140 million for 2020. At
30 June 2020 the actual processing fee earned from operations was below the pro-rated fee floor,
resulting in $38.9 million being paid by Customers as an interim fee floor payment.
The pro rata fee floor payment by Customers to 30 June 2020 could be offset by processing fee
revenue earned for the remainder of the year, if processing fees earned from operations were to
exceed the annual fee floor. However, this is not considered likely given the current oversupply of
refined product and the impact of COVID-19 on both refiner’s margins and planned refinery
operations for the balance of the year (refer to Note 2).
Included in other income is $2.9 million of COVID-19 wages subsidy paid by the New Zealand
Government (2019: nil) in respect of the period ended 30 June 2020. An additional $1.6 million
COVID-19 wages subsidy received prior to 30 June 2020, was deferred and is included as part of Trade
and Other Payables.
Notes to the Interim Financial Statements
20
5 Segment information
Management reviews the Group’s internal reporting in order to assess performance and allocate
resources including the definition of the operating segments - oil refining and infrastructure.
• Oil refining – the Company operates the Marsden Point oil refinery as a toll processor.
• Infrastructure – the Company owns infrastructure to support the distribution of manufactured
products to its customers, including the Refinery to Auckland Pipeline which transfers product to
the Wiri Oil terminal located in South Auckland. In addition, the segment includes laboratory
testing services undertaken by Independent Petroleum Laboratory Limited.
• Inter-segment – represents transactions between segments carried out on normal commercial
terms.
Management primarily uses revenue and adjusted earnings before finance costs, tax, depreciation
and amortisation (or “Adjusted EBITDA”) of the Parent Company as measures to assess the
performance of the operating segments. For Non-GAAP information refer to Note 18.
Assets and liabilities information, depreciation, finance income and costs and taxes are managed by
Management on an overall group basis and therefore not presented as part of the segment
information.
The presentation of segments in this interim financial report has changed from the 2019 interim and
full year consolidated financial statements to align with the way that Management now monitors the
segmental financial performance as outlined above.
Segment results
30 JUNE 2020 OIL REFINING INFRASTRUCTURE TOTAL
$000 $000 $000
External customer 96,504 22,614 119,118
Inter-segment - 2,402 2,402
TOTAL INCOME
(*)
96,504 25,016 121,520
Adjusted EBITDA 841 18,870 19,711
30 JUNE 2019 OIL REFINING INFRASTRUCTURE TOTAL
$000 $000 $000
External customer 146,055 25,537 171,592
Inter-segment - 2,818 2,818
TOTAL INCOME
(*)
146,055 28,355 174,410
Adjusted EBITDA 34,273 21,432 55,705
(*) prior to consolidation eliminations
Notes to the Interim Financial Statements
21
For a reconciliation between the Non-GAAP measure, Adjusted EBITDA, to the reported net loss after
tax refer to Note 18.
6 Related parties
The Group enters into transactions with related parties. Details of related parties and the types of
transactions entered into during the period ended 30 June 2020 are consistent with those disclosed in
the audited financial statements for the year ended 31 December 2019.
7 Equity
The issued capital of the Company is represented by 312,893,643 ordinary shares (2019: 312,576,453)
issued and fully paid less 587,871 (2019: 417,644) treasury shares held by CRS Nominees Limited (the
Trustee).
On 17 April 2020, the Company granted 1,250,000 Performance Share Rights (PSRs) for nil
consideration to the Chief Executive Officer (CEO), being the retention component under a Share
Rights Plan. The PSRs have service conditions only and will vest four years after date of
commencement of employment, subject to the continued employment of the CEO. The total
recognised cost of the PSRs to 30 June 2020 was $0.04 million, with a corresponding increase in Share
Scheme Entitlement Reserve.
On 11 June 2020, the Company issued 317,190 ordinary shares, at an issue price of 0.90 cents per
share, pursuant to the Employee Share Purchase Scheme. The shares are held on trust by the Trustee
until they are withdrawn by the participants following a restricted period of 3 years.
8 Dividends
No final divided from the 2019 financial results was paid in 2020. The Board has resolved to not
declare an interim 2020 dividend based on the financial results to 30 June 2020 (in 2019, an interim,
fully imputed dividend of 2 cents per share was paid).
9 Borrowings
In March 2020, Refining NZ extended and expanded its existing bank facilities, increasing the
weighted average term to over three years and adding $50 million of additional capacity, which
increased the total available debt funding facilities to $400 million. The total available funding
includes $75 million subordinated notes on issue that expire on 1 March 2034, with two rollover
dates (on 1 March 2024 and 1 March 2029) when Refining NZ has the right to either fully redeem the
subordinated notes or run an election process offering new conditions.
Notes to the Interim Financial Statements
22
The chart below outlines the maturity profile of the facilities as at 30 June 2020.
(*) The carrying value of the subordinated notes as at 30 June 2020 amounts to $74.6 million. The
difference between the carrying value and the $75 million face value is due to interest
and issue costs.
Subsequent to balance date, $40 million of the facilities maturing in the “2-3 years” category was
extended by a further two years. Refer to Note 17.
The carrying amounts of bank borrowings approximate their fair value. The borrowings are
unsecured. The Parent borrows under a negative pledge arrangement which requires certain
certificates and covenants. All these requirements have been met and no breaches of these
covenants are forecast for the next twelve months.
Notes to the Interim Financial Statements
23
10 Property, plant and equipment, right-of-use assets and
intangibles
During the six months ended 30 June 2020 the Group acquired property, plant and equipment and
the right-of-use assets with a cost of $20.8 million and $0.6 million, respectively. The decrease in
intangibles is associated with the New Zealand Units surrendered in relation to the 2019 year.
The amount of borrowing costs capitalised during the reporting period was $0.7 million (30 June
2019: $1.0 million). The weighted average rate used to determine the amount of borrowing costs
eligible for capitalisation was 5.4% (30 June 2019: 5.9%).
At 30 June 2020, the Company impaired its assets by $219 million, which accounts for the large
reduction in the carrying value of refining assets.
11 Capital commitments
Capital expenditure contracted for in relation to property, plant and equipment at the end of the
period but not yet incurred amounted to $4.5 million (31 December 2019: $28.1 million).
12 Provisions
This includes the jetty restoration provision of $10.2 million (31 December 2019: $11.8 million). At 30
June 2020 the Company has reassessed the value of the future expenditures associated with the
restoration of the seabed which the jetty is situated at Marsden Point, the term of the lease and
amended the inflation (from 2% as at 31 December 2019 to 1.5% as at 30 June 2020) and discount
rate assumptions (from 1.83% as at 31 December 2019 to 2.47% as at 30 June 2020).
These changes resulted in a net decrease in the provision and the corresponding asset by $1.7 million.
An increase in the provision as a result of the passage of time (unwinding of discount) of $0.1 million
was recognised as a finance cost.
13 Trade and other receivables and payables
Trade and other receivables and trade and other payables both include excise duties of $103.2 million
(31 December 2019: $127.6 million). Changes to excise duties have no direct impact on the results of
the Group as they are collected from the customers and are paid to the New Zealand Customs Service
on the same day of each month.
Notes to the Interim Financial Statements
24
14 Employee benefits
Employee benefits comprise defined benefit pension and medical plan, wages, salaries, annual leave,
and long-service leave and retirement bonus.
The defined benefit plan and the medical scheme are accounted for in accordance with NZ IAS 19
“Employee Benefits”. Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to equity in other comprehensive income in the period
in which they arise. Past-service costs are recognised immediately in the Consolidated Income
Statement.
The actuarial assumptions used in the 30 June 2020 valuation are consistent with those adopted as at
31 December 2019. The discount rate adopted at 30 June 2020 was 1% (31 December 2019: 2.0%)
and is set with reference to redemption yields on bonds. A decrease in the bond yield will increase
Defined benefit pension plan and medical plan liabilities for financial reporting purposes, but not
necessarily impact upon the funding requirements of the Company.
The total amount recognised in other comprehensive income is as follows:
GROUP GROUP
30 JUNE 30 JUNE
2020 2019
$000 $000
Actuarial losses (9,062) (16,392)
Actual return on plan assets less interest income (3,604) 7,854
Contributions tax (7,261) (2,020)
TOTAL RECOGNISED IN OTHER COMPREHENSIVE INCOME
INCLUDING CONTRIBUTIONS TAX (19,927) (10,558)
15 Deferred tax liabilities
The Deferred tax liability has reduced during the six months ended 30 June 2020, primarily as a result
of the recognition of the impairment of assets (tax effect of $61 million as outlined in Note 3),
recognition of the tax loss for the period (tax effect of $8 million) and increased defined benefit plan
liability (tax effect of $6 million). The Group’s cumulative tax losses as at 30 June 2020 were $44.8
million. Deferred tax liabilities are reported net of the deferred tax asset recognised in respect of
these losses (Refer Basis of Preparation).
16 Contingent assets and liabilities
The Group has no contingent assets or liabilities at 30 June 2020. (2019: nil)
Notes to the Interim Financial Statements
25
17 Events after balance date
The following events occurred after balance date:
• Bank Facility Extended (Refer to Note 9)
On 13 July 2020, the Company entered into a binding agreement to extend $40 million of an
$80 million bank facility set to mature in March 2022, out to March 2024. The weighted
average term of the Company’s debt funding facilities of $400 million (including the
company’s $75 million subordinated notes on issue) is now 5.3 years.
• Refinery Mode of Operation (Refer to Note 2)
On 3 July 2020, the Company started temporarily shutting down the refinery, to place all the
processing units on standby for a period of six weeks, in order to balance fuel supply across
the country. During this period, Refining NZ’s customers will continue to pay the fee floor
under the Processing Agreements.
• COVID-19 Pandemic
On 12 August 2020, the New Zealand Government raised its Alert Level to 3 for Auckland and
Level 2 elsewhere. Refining NZ, as an essential service provider, expects to continue to
operate, however the impact of the Alert Levels being increased on the transport fuels
demand remains uncertain.
18 Non-GAAP disclosures
Refining NZ’s standard profit measure prepared under New Zealand Generally Accepted Accounting
Practice (NZ GAAP) is net profit/(loss) after tax. Refining NZ has used non-GAAP measures when
discussing financial performance in this Half-Year Report. The Directors and Management believe
that these measures provide useful information as they are used internally to evaluate segmental and
total Group performance, to establish operating and capital budgets as well as being used for bank
covenant purposes.
Non-GAAP profit measures are not prepared in accordance with NZ IFRS (New Zealand equivalents to
International Financial Reporting Standards) and are not uniformly defined, therefore the non-GAAP
profit measures included in this report are not comparable with those used by other companies.
They should not be used in isolation or as a substitute for GAAP profit measures as reported by
Refining NZ in accordance with NZ IFRS. Terms are defined as follows:
Reported EBITDA: Reported Net Profit/(Loss) before depreciation, disposal costs, impairment,
finance costs and taxation
Adjusted EBITDA Reported EBITDA adjusted for other non-cash expenses and used for bank
covenant purposes.
Notes to the Interim Financial Statements
26
GROUP GROUP
30 JUNE 30 JUNE
2020 2019
NOTE
$000 $000
Reported net loss for the period (GAAP)
(186,348) (3,503)
Add back:
Income tax
(70,879) (1,327)
Net interest expense
6,406 6,743
Impairment of assets
3
218,903 -
Depreciation
47,300 52,137
Reported EBITDA
15,382 54,050
Add back non-cash expenses:
Stock obsolescence provision
3,269
278
Defined benefit pension fund cost
1,720 1,842
Interest income
146 24
Adjusted EBITDA
20,517 56,194
Directory
27
Registered Office Chairman
Marsden Point S C Allen (Independent Director)
Ruakaka
Mailing Address Independent Directors
Private Bag 9024 J B Miller
Whangarei 0148 V C M Stoddart
Telephone: +64 9 432 5100 P A Zealand
Website Non-Independent Directors
www.refiningnz.com D C Boffa
R Cavallo
Share Register N L Jones
Computershare Investor Services Limited
Private Bag 92119 Chief Executive Officer
Auckland 1142 N M James
Telephone: +64 9 488 8777
enquiry@computershare.co.nz General Counsel & Company Secretary
C D Bougen
Bankers
ANZ Bank New Zealand Limited
Bank of New Zealand
MUFG Bank, Limited
Bank of China (New Zealand) Limited
Legal Advisers
MinterEllisonRuddWatts
Chancery Green
Auditor
Ernst & Young
Managing your shareholding online
To change your address, update your payment instructions and to view your registered details
including transactions, please visit: www.computershare.co.nz/investorcentre
Please assist our registrar by quoting your CSN or shareholder number.
Directory
28
---
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Results for announcement to the market
Name of issuer The New Zealand Refining Company Limited
Reporting Period 6 months to 30 June 2020
Previous Reporting Period 6 months to 30 June 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$119,118 (30.6%)
Total Revenue $119,118 (30.6%)
Net profit/(loss) from
continuing operations
($186,348) (5,220%)
Total net profit/(loss) ($186,348) (5,220%)
Interim Dividend
Amount per Quoted Equity
Security
NZ$ Nil
Imputed amount per Quoted
Equity Security
NZ$ Nil
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.74 $2.35
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer to attached NZX announcement commentary
Authority for this announcement
Name of person
authorised
to make this announcement
Chris Bougen, Company Secretary
Contact person for this
announcement
Ellie Martel
Contact phone number
+64 (0)20 4174 7226
Contact email address ellie.martel@refiningnz.com
Date of release through MAP
17/08/2020
Unaudited financial statements accompany this announcement.
---
Summary
• An outstanding safety and operational performance in 1H20 with no recordable injuries or Tier 1 or 2
process safety incidents including through COVID-19, when the refinery was operated on a rotating
basis.
• Refinery and RAP throughputs were 27% lower than the prior corresponding period due to COVID-19
travel restrictions, with land fuel volumes recovering to near normal levels by period end, while jet
remained weak.
• The Fee Floor protected the Company against low refining margins and COVID-19 impacts on
throughput, with Processing Fee revenue of NZ$70 million, including Fee Floor payments of NZ$39
million.
• Significant (circa $70 million) reduction made in 2020 opex and capex plans, reducing the Company’s
2020 cash break-even to Fee Floor levels from Q2.
• Income was down $52.5 million (30.6%) on prior corresponding period largely due to lower margins
and throughput, while EBITDA was down $38.7 million (71.5%), with cost reductions partly offsetting
the lower revenue.
• Net debt at 30 June was $250 million, reflecting cash neutral operations since April 2020.
• Early action to strengthen the balance sheet providing significant debt headroom and no material
near-term maturities following extension and increase of bank lines.
• Strategic Review well progressed, with short- and longer-term options identified.
Commentary
Refining NZ has safely navigated the on-going impacts of COVID-19 and volatile refining markets, while
resetting its 2020 cost base to operate cash neutral in the current low-margin environment.
Chief Executive Naomi James said: “It is a significant achievement to have safely navigated the impacts
of COVID-19 and volatile refining markets, while resetting Refining NZ’s 2020 cost base to operate cash
neutral in the current low-margin environment and taking early action to make the balance sheet robust
to an extended period of low margins.
“This achievement was made possible by the wider team at Refining NZ who have impressed me with
their ability to immediately respond to the scale of the challenge, while maintaining a relentless focus on
the imperative of safe operations”.
Half year
1
2020 2019 Change
Income
NZ$ m
119.1 171.6 (30.6%)
EBITDA
2
NZ$ m
15.4 54.1 (71.5%)
Adjusted EBITDA
3
NZ$ m
20.5 56.2 (63.5%)
Capex
NZ$ m
(22.0) (29.8) (26.2%)
NPAT
NZ$ m
(186.3) (3.5) <nm>
Free cash flow
NZ$ m
(8.3) 18.2 <nm>
Interim dividend
cps
0 2 <nm>
Income was down $52.5 million (30.6%) on the prior corresponding period due to lower margins and
throughput, while Adjusted EBITDA was down $35.7 million (63.5%), with cost reductions partly
offsetting the lower revenue. Free cash flow in the first six months was an outflow of $7.9 million, all
within the first quarter, followed by cash neutral operations since April 2020. The Company reported a
Net (Loss)/ Profit after Tax (NPAT) of ($186.3) million (1H19 NPAT: ($3.5) million) for the six months
ended 30 June 2020, which included the previously announced non-cash impairment of its refining
assets amounting to $158 million, after tax.
1 The financial statements have been prepared based on existing Group operations under the current Processing Agreements.
The potential outcomes from the Strategic Review, which are not solely within the Company’s control, may be substantially
different from such existing operations and may therefore impact the financial performance and financial position of the
Company in the future.
2
EBITDA = Reported Net Profit/(Loss) before depreciation, disposal costs, impairment, finance costs and taxation.
3
Adjusted EBITDA = EBITDA adjusted for other non-cash expenses and used for bank covenant purposes.
Strong safety and operational performance
The business achieved excellent process and personal safety performance with no Tier 1 or Tier 2
process safety events or recordable injuries. There has been no Tier 1 or Tier 2 events in the last 2
years.
The refinery continued to operate as an essential service throughout COVID-19 Alert Levels and Refining
NZ established a Co-ordinated Incident Management System structure to implement business continuity
plans during this time. Refining NZ successfully adapted work practices and behaviours during the
COVID-19 lockdown, to ensure everyone on site continued to work safely and their health and wellbeing
was protected.
Chief Executive Naomi James said: “We acted quickly and decisively in response to COVID-19 working in
partnership with our customers to manage stocks and ensure reliable supply across the country by
operating the plant in rotating mode to reduce refinery production, as well as reducing non-essential
activity on-site.”
“The Refining NZ team have had a relentless focus on safe operations through this period, reducing
production to around 50% of normal levels as the COVID-19 travel restrictions impacted demand,
enabling our customers to manage stock levels, while ensuring continuity of supply. This mode of
operation was unprecedented for the refinery and our ability to operate safely in this changed mode
reflects our highly capable workforce and strong operational discipline,” said Naomi James.
Refinery and pipeline throughputs for the six months ended 30 June 2020 were 27% lower than the
same period in 2019 and circa 40% lower from the time that the pandemic was declared. Throughput on
the refinery was 15.4 million barrels (1H19: 21.2 million barrels) and pipeline 7.5 million barrels (1H19:
10.3 million barrels) in the six months ended 30 June 2020.
“Diesel and petrol demand had recovered to pre-COVID levels, prior to the latest lockdown measures
announced by the New Zealand Government on 12 August, while jet demand remains weak at around
40%. This continues to impact on the way in which we operate the plant and our revenue, given the
reduced supply of jet fuel into Auckland Airport,” said Naomi James.
“We continue to work closely with our customers to help manage fuel supply in this uncertain market.
After operating the processing units on a rotating basis for three months to reduce production, we are
now restarting the refinery after a 6-week temporary shutdown, from early July, in order to balance fuel
supply across the country.”
Fee Floor protection from margin and demand downside
The Company operated at the Fee Floor in the first half of the year given the weak global refining
margins and low refinery throughput, as a result of COVID-19.
“Global refining margins weakened towards the end of 2019 from the excess refining capacity,
particularly in the Asia-Pacific region. This continued into the first quarter, before the impacts of COVID-
19, which exacerbated the situation and further weakened refining margins. Because the Fee Floor
guarantees a minimum level of processing fee income each year, it provided a protection against the
impacts from both low margins and the reduced refinery throughputs”, said James.
Processing fee revenue earned in the first half, prior to Fee Floor payments, was $31 million (1H19: $117
million). In addition, Refining NZ’s customers made Fee Floor payments totaling $39 million, increasing
the Gross Refining Margin (GRM) from USD 1.81 per barrel to USD 4.10 per barrel.
The average Singapore Complex Margin (SCM) in the six months ended 30 June 2020 was a negative
USD 1.60 per barrel (1H19: USD 0.21 per barrel); the uplift earned by Refining NZ over the SCM, was USD
3.42 per barrel (1H19: USD 5.10 per barrel). Uplift over the SCM was volatile in the half, impacted by
higher crude freight rates and discounting of crude as the significant oversupply and build in crude oil
inventories caused by COVID-19 led to the use of shipping as floating storage.
Reset 2020 cost base to reduce cash-breakeven to Fee Floor levels
COVID-19 had a significant impact on Refining NZ’s revenue through the weak global refining margins
and the lower refinery and pipeline throughputs.
“At the start of this year, our cash break-even level was significantly higher than the Fee Floor in our
Processing Agreements. In response to the low margin environment and COVID-19 impacts on demand,
we have reviewed all expenditure planned for 2020 and reduced it by around $70 million. This
represents a circa 25% reduction in forecast opex and capex and has reset our 2020 cash-breakeven to
Fee Floor levels. We achieved this reset through both short-term measures – stopping and deferring all
non-essential work and reducing variable costs with lower throughput – as well as longer-term,
structural changes which will reduce our cost base on an ongoing basis through, as an example, a reset
of our turnaround philosophy and asset management strategies”, said James.
Operating costs reported in the first half of the 2020 year were $8 million (7%) lower than the prior
corresponding period in 2019 (excluding natural gas pass-through). Operating the plant in rotating
mode, resulted in significantly lower variable costs, particularly electricity.
Capital invested in the 1H20 amounted to $22.0 million (1H19: $29.8 million), largely in relation to tank
maintenance. Capex guidance for the year has been reduced a further $5 million for the year to $35
million, a 50% reduction in previous guidance of $70 million.
Strengthened balance sheet position with significant headroom and no near-
term maturities
In the first half, Refining NZ extended and expanded its existing bank facilities, increasing the weighted
average term of total debt to over five years and adding $50 million of additional capacity, which
brought the total available debt funding facilities to $400 million (including the company’s $75 million
subordinated notes on issue).
Refining NZ continues to meet its gearing and interest cover covenants in the current low margin
environment while operating at the Fee Floor.
Naomi James said “Refining NZ acted early as the COVID-19 situation was developing to strengthen its
balance sheet, which now provides us with the runway for value creation through the Strategic Review.
“The Company has no significant maturities until 2023 and continues to meet covenants, as a result of
the proactive steps taken by management and the Board to reset the cash-breakeven level of the
business and operate within the Fee Floor in the current low margin environment.
“The ability to extend these facilities in the current business environment is a demonstration of the
commitment and support of the company’s banks,” said James.
Given the challenging low margin and demand environment the Company is operating in, the Company’s
Directors have resolved that it is prudent to not pay an interim dividend to shareholders.
Strategic Review well-progressed
In April, Refining NZ commenced a Strategic Review to determine the optimal business model and
capital structure for its assets to maximise “through the cycle” returns to shareholders, and deliver
secure, competitive fuel supply to New Zealand.
The first phase of the Strategic Review was completed in line with planned timing and an update was
provided to the market on June 25. The Company is now developing plans to simplify refinery
operations and structurally reduce operating costs, making the business robust to an extended period of
low-margins.
In parallel the Company is engaging with customers to evaluate a possible future staged transition to an
import terminal.
Naomi James said, “Simplification of our refinery creates the time and optionality to continue refining
operations in the near-term while we assess the potential option to transition to an import terminal in
the future. We continue to work closely with our customers to assess the longer-term options and with
Government and other stakeholders to ensure there is a planned and coordinated approach to future
changes.”
A further update on the Strategic Review process is expected to be made around the end of the third
quarter.
Outlook
Refining NZ expects GRM to remain volatile in the near term. Singapore Complex Margins are expected
to improve in the second half, but remain weak, compared with historic levels. Refining NZ’s uplift is
expected to continue to be volatile due to COVID-19 impacts to oil and refined product demand and
current high levels of inventory globally, which are expected to take an extended period of time to
unwind.
Following the temporary shutdown in July and August, the refinery will operate in a low production
mode to meet improved fuel demand based on customer requirements. New Zealand demand for jet
fuel is expected to remain impacted by COVID-19 through this year.
The Company has operated on a cash neutral basis since the COVID-19 lockdown and plans to extend
this through the remainder of the year, when factoring in the Processing Fee Floor and reduced RAP
income
4
. Higher variable costs when the refinery returns to low production mode will be offset by lower
cash costs and terminal revenue during the temporary refinery shutdown in July and August.
"I acknowledge that shareholder returns on our capital base are unacceptable and must be addressed.
In the current low margin and volatile environment, our focus is on keeping our cash break-even level at
the Fee Floor, to ensure the Company can withstand an extended period of low margins. Action taken
this year and planning underway to simplify and maintain this lower cash breakeven level into next year,
ensures we have the runway to determine the right future path for the business, which enables a return
to profitability and the payment of dividends for shareholders”, said James.
Refining NZ will host a results presentation call for investors and analysts at 11:00am, Monday 17
August 2020. Please contact Lizzie Thompson at lizzie.thomson@refiningnz.com for dial in details.
Ellie Martel,
Government and External Affairs Manager
E: Ellie.Martel@refiningnz.com
T: +64 (0)20 4174 7226
4
Prior to any Strategic Review implementation costs.
---
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
use
17 August 2020
2020 INTERIM RESULTS PRESENTATION
For the six months ended 30 June 2020
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
2
DISCLAIMER
•This presentation contains forward looking statements concerning the financial condition, results and operations of The New Zealand Refining Company Limited
(hereafter referred to as “Refining NZ”).
•Forward looking statements are subject to the risks and uncertainties associated with the refining environment, including price and foreign currency fluctuations,
regulatory changes, environmental factors, production results, demand for Refining NZ’s products or services and other conditions. Forward looking statements
are based on management’s current expectations and assumptions and involve known 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 include among other things, statements concerning the potential exposure of Refining NZ to market risk and statements expressing
management’s expectations, beliefs, estimates, forecasts, projections and assumptions. Forward looking statements are identifiedby the use of terms and
phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”, “objectives”, “outlook”, “plan”, “probably”, “project”, “risks”, “seek”,
“should”, “target”, “will” and similar terms and phrases.
•Readers should not place undue reliance on forward looking statements. Forwardlooking statements should be read in conjunction with Refining NZ’s financial
statements released with this presentation. 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 needs of 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.
•In light of these risks, results could differ materially from those stated, implied or inferred from the forward looking statements contained in this announcement.
RefiningNZ 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 officers, partners, employees, agents, associates and
advisers do not make any representation or warranty, express or implied, as to accuracy, reliability 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 (including, without limitation, liability for negligence).
•Except as required by law or regulation (including the NZX Listing Rules), Refining NZ undertakes no obligation to provide 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 (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 announcement,17 August 2020.The financial statements referenced in this presentation have
been prepared based on existing Group operations under the current Processing Agreements, as at 16 August 2020.The potential outcomes from the Strategic
Review, which are not solely within the Company’s control, may be substantially different from such existing operations and may therefore impact the financial
performance and financial position of the Company in the future.
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
•Outstanding safety and operational performance
•Refinery and RAP throughput impacted by COVID-19
•Fee Floor protected the Company against low refining
margins and COVID-19 impacts
•Reset the 2020 cost base to reduce cash-breakeven to Fee
Floor levels
•Early action to strengthen the balance sheet –significant
debt headroom and no material near-term maturities
•Strategic Review well progressed
HY 20 HIGHLIGHTS
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
4
SAFET Y & ENVIRONMENT
1For a full definition please refer to Glossary in Appendix 1
Incident free operations during period of significant disruption
•No recordable injuries during 2020 –last recordable incident in
Oct 2019
•No Tier 1or Tier 2
[
process safety events
•Successfully operated with frequent cycling of process units (due
to a significant reduction in demand associated with COVID-19) –
reflecting a highly capable workforce and strong operational
discipline
•Workforce flexibility and rapid changes in workplace practices
ensured a healthy workplace and no operational interruption
during COVID-19 lockdown
•TheE TuTangatasafety culture programmeis a finalist in the
2020 New Zealand Workplace H&S Awards
0.0
0.2
0.4
0.6
0.8
1.0
0
2
4
6
8
10
20162017201820192020 YTD
#/200k hours
Number
TOTAL RECORDABLE CASES
[1]
Other TRC (medical treatment, restricted work cases), LHS
Lost time injuries, LHS
LTIF, RHS
TRCF, RHS
0
1
2
3
4
5
6
20162017201820192020 YTD
PROCESS SAFETY INCIDENTS
[1]
Number (for calendar year)
Tier TwoTier One
CONCAWE 2019 Tier 1 + Tier 2,5.24
CONCAWE 2019 Tier 1,2.05
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
5
DEMAND
HY 19HY20Change
Refinery Throughput
Mbbl
21.215.45.8 ▼
27%
RAP Throughput
Mbbl
10.37.52.8 ▼
27%
Operational availability
%
99.996.83.1 ▼
3%
Effective operational response to unprecedented demand reduction
•Unprecedented fuel demand destruction, due to COVID-19 travel
restrictions
•Substantially lowered production rates and adopted strategies to
minimisejet fuel production. Operational availability adjusted to
align with reduced demand
•Gasoline and diesel demand have largely recovered to pre-
COVIDlevels, however jet fuel demand remains weak at ~40% v
pcp
•Restarting refinery in August after temporary 6-week shutdown to
balance fuel supply
0%
50%
100%
150%
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
% of 2019 average
RAP DELIVERIES BY MONTH, JAN-19 TO JUN-20
DieselJetPetrol
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
6
* The Singapore Complex Margin is calculated using PlattsDubai crude and Singapore product prices, VLCC freight to Singapore, and the International Energy Agency’s Dubai complex refinery yields adjusted for fuel & loss.
US$/BARREL
HY 19HY 20Change
Singapore Complex Margin*0.21(1.60)(1.81)
Freight2.001.61(0.39)
Product quality0.650.760.11
Plant availability(0.14)(0.22)(0.08)
Crude cost and yield2.591.29(1.30)
Refining NZ uplift5.113.42(1.69)
RNZ GRM5.311.82(3.49)
REFINING MARGINS
Volatile, depressed refining margins due to COVID-19
•Negative Singapore Complex Margin due to COVID-19 impacts
on oil and refined product demand
•Volatility in uplift over Singapore Complex Margin, impacted by
higher crude freight rates and discounting of crude as COVID-19
caused significant oversupply, oil inventory build and use of
shipping as floating storage
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
7
FINANCIAL
1.For further information, please refer to our Interim Financial Statements, available at http://www.refiningnz.com/investor-centre.aspx
2.For a reconciliation of these Non-GAAP measures, please refer to Appendix 3 and refer to our Interim Financial Statements for further detail
3.Cashflow associated with Capex
4.For a full definition please refer to the Glossary in Appendix 1
5.Net debt as at 31 December 2019
Reset the cost base while operating at the Fee Floor
•Significant decline in revenue due to low margins and
throughput –COVID-19 impacts
•Fee Floor in operation protecting against full extent of
margin and demand decline
•Net loss after tax impacted by non-cash impairment of
$158 million (net of tax)–revised refining margin
assumptions reflecting excess global capacity and
COVID-19 impacts
•Free cash flow neutral and net debt flat since April
2020
HY 19HY20Change
Revenue -Refinery
[1]
NZ$M
146.196.549.6 ▼34%
Revenue -Infrastructure
[1]
NZ$M
25.5
22.62.9 ▼11%
EBITDA
[2]
NZ$M
54.115.438.7 ▼72%
Adjusted EBITDA
[2]
NZ$M
56.220.535.7 ▼64%
Capex
[3]
NZ$M
29.822.07.8 ▼26%
Free cash flow
[4]
NZ$M
18.2
(8.3)26.5 ▼nm
Net Profit/(Loss) after tax
NZ$M
(3.5)(186.3)(182.8)▲nm
Net Debt
[4][5]
NZ$M
241.4249.78.3▲3%
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
8
56
(56)
(32)
2
39
314
20
-40
-30
-20
-10
0
10
20
30
40
50
60
70
NZ$m
Fee floor
Refining
margin
HY 2019
HY 2020
Net cost
reduction
Refining
volume
FX
RAP
Revenue
1.The above chart excludes any movementin pass through costs such as natural gas, sulphur and carbon. See our Financial Statements for further detail, available at http://www.refiningnz.com/investor-centre.aspx
2.For a definition of Adjusted EBITDA, please refer to the Glossary in Appendix I. For a reconciliation of this Non-GAAP measure,please refer to Appendix 3 and our Interim Financial Statements.
Decline in revenue partly offset by Fee Floor payments and cost
reductions
ADJUSTED EBITDA VARIANCES TO HY19
•Lower variable costs (cyclic
mode)
•Stopped non-essential
activity
•Campaign maintenance
approach
•Wages subsidy
GRM
▼66%
HY 20: US$1.82/bbl
HY19:US$5.31/bbl
Processing Fee Revenue ▼(27%)
NZ$86 m
Refinery volumes
▼27%
HY 20: 15.5 Mbbl
HY 19:21.2 Mbbl
Fee floor
equivalent of
US$4.10/bbl
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
9
(32)
(35)
0
50
100
150
200
250
300
NZ$m
Opex
FY20
FEBRUARY
GUIDANCE
FY20
LATEST
Capex
Opex
Capex $70
Opex
Capex $35
c$70M REDUCTION IN 2020 OPEX AND
CAPEX
Provides foundation for operating cash neutral from Q2 in 2020
The above chart excludes any movement in pass through costs such as natural gas, sulphur and carbon and prior to any Strategic Review implementation costs.
•Deferral of platformer and crude distillation shutdown into
2021
•Optimisationof capital budget, in line with latest asset
management strategy
•Reduced variable costs from lower refinery production
•Reduction in the number of people on site, focused on
essential activity
•Lower electricity costs, ~20% of our cost base, during the
cycling of our process plant
▼25%
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
10
FINANCIAL
1 Net tangible asset backing per share (NTA) calculates as the Group’s net assets, excluding intangible assets and derivativefinancial assets and liabilities.
2 Gross refining margin is a 6-monthly actual margin earned by Refining NZ, prior to any Fee Floor adjustments.
Strong net tangible asset backing
•Share price over the previous 12 months has tracked the decline
in GRM, well below the post-impairment NTA of $1.74 per share
•Impairment testing has been undertaken based on existing
refining business model and Processing Agreements before
Strategic Review outcomes
•Revised refining margin assumptions reflecting excess global
capacity and COVID-19 impacts has resulted in $158m
impairment after tax
•Transparent disclosure in financial statements of basis for
impairment assessment, given margin uncertainty in current
environment and changes in cost base and Strategic Review
underway
•Valuation of infrastructure assets underway as part of Strategic
Review work
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
11
BALANCE SHEET STRENGTHENED
Maintaining cash neutral position
•February 2020 matrix guidance withdrawn:
-Steps taken to maintain cash neutral position
-$70 million reduction in FY20 planned expenditure
•Covenant compliant:
-12 months to 30 June 2020, includes 8 months at the Fee Floor
-Further covenant headroom expected in 2021 as interest rate
swaps mature
1.Refer to Appendix 3 for an outline of covenants
Gearing
Max 45%
CovenantActual
30 June 2020
25%
Interest cover
Min4x9x
Total Interest cover
Min 2x6x
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
12
BALANCE SHEET STRENGTHENED
Creating runwayfor value creation through Strategic Review
•Increased and extended debt facilities:
•$50m of additional lines
•extended maturities on $120m debt
•5.3 years average tenor and no significant maturities in near
term
•c$150m of facility headroom/cash as at 30 June 2020
•Average interest rate of 5.4% in HY20, down from 5.9% for HY19,
due to lower fixed rate debt and lower floating rates
25%
56%
19%
Available funding
Floating debt:
Senior debt –<2% p.a.
Fixed debt:
Subordinated Notes -5.1%p.a.
Senior debt (interest rate swaps) –c6% p.a.
1.This chart outlines borrowings profile after taking into account a post 30 June 2020 extension of $40M bank facilities from 2022 to 2024
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
13
STRATEGIC REVIEW
Focused on unlocking the full value of our assets
Simplify refinery
operations
Future staged
transition to an
import terminal
▪Focused on achieving a structural reduction in complexity and operating cost within the
existing Processing Agreement
▪Permanent reset of cash-breakeven level to Fee Floor level –making business robust to
an extended period of low-margins
▪Creates time and optionality to assess potential import terminal option
▪Plans expected to be finalisedaround the end of Q3, ahead of implementation in Q4
▪Significant latent value in our highly strategic infrastructure assets, which provide an
efficient and reliable supply chain to the large Auckland market
▪Exploring a commercial framework with customers, overseen by the Independent
Directors
▪Focus on self-funded transition through level and timing of transition costs, balance
sheet efficiency and tariff structure
▪Any transition would ultimately require shareholder approval (excluding customer
shareholders)
Phase I complete, with two options taken forward to Phase II (detailed planning)
–next update around end of Q3
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
14
OUTLOOK
•GRM expected to remain volatile in the near term
•COVID-19 impacts & recovery, USA-China tensions andChinese exports
•Singapore Complex Margin forecast to improve from H1, but remain weak
•Refining NZ uplift expected to remain volatile due to COVID-19 and global inventory levels
•Refinery to return to low production mode after temporary shutdown in July/August. NZ jet demand expected to remain low through2020
•Expect processing fees to remain at Fee Floor level though H2 2020
•Focus on keeping cash-breakeven level at the Fee Floor, while progressing Strategic Review detailed planning
Uncertain market conditions persist, exacerbated by COVID-19
500
600
700
800
4,000
5,000
6,000
7,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
mmb
mmb
Global Hydrocarbon Stock Levels
Actual Crude Stock Level (LHS)Forecasted Crude Stock Level (LHS)
Actual Product Stock Level (RHS)Forecasted Product Stock Level (RHS)
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
•Challenging and volatile market conditions persist,
exacerbated by COVID-19
•Maintain cash break-even through 2020 at Fee Floor
•Strategic Review well progressed–simplification plans to
be finalisedend Q3 for implementation
LOOKING AHEAD
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
use
17 August 2020
2020 INTERIM RESULTS PRESENTATION
For the six months ended 30 June 2020
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
17
APPENDIX 1GLOSSARY
•Concawe–an organisationthat benchmarks safety performance for member companies and JV’s in the EU, Norway and Switzerland. The
latest benchmarking study was carried out in respect of 2019 performance, covering 42 member organisations.
•LTIF–Lost time injury frequency (rolling 12 month per 200,000 hours)
•TRCF –Total recordable case frequency (rolling 12 month per 200,000 hours)
•Tier 1 Process Safety Event (API 754)–A tier 1 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material,
including non-toxic and non-flammable, from a process which results in one or more of the following: A LTI and/or fatality; A fire or explosion
resulting in greater than or equal to $25,000 of direct cost to the company; A release of material greater than the thresholdquantities given in
Table 1 of API 754 in any one-hour period; A officially declared community evacuation or community shelter-in-place.
•Tier 2 Process Safety Event (API 754)–A tier 2 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material,
including non-toxic and non-flammable, from a process which results in one or more of the following: A recordable injury; A fireor explosion
resulting in greater than or equal to $2,500 of direct cost to the company; A release of material greater than the threshold quantities given in
Table 2 of API 754 in any one-hour period.
•Net debt –Net debt comprises total borrowings less cash and cash equivalents
•Reported EBITDA–Earnings Before Interest, Tax, Depreciation and Impairmentis a non-GAAP measure.Please refer to Appendix II for a
reconciliation
•Adjusted EBITDA -Reported EBITDA adjusted for other non-cash expenses, and used for bank covenant purposes
•Free Cash Flow –net cash generated from operations less investing activities
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
2020 HY RESULTS PRESENTATION
APPENDIX 2NON-GAAP MEASURES
Refining NZ’s standard profit measure prepared under New Zealand Generally Accepted Accounting Practice (NZ GAAP) is net profit/(loss) after
tax.Refining NZ has used non-GAAP measures when discussing financial performance in this Half-Year Report.The Directors and Management
Team believe that these measures provide useful information as they are used internally to evaluate segmental and total Groupperformance, to
establish operating and capital budgets as well as being used for bank covenant purposes.
Non-GAAP profit measures are not prepared in accordance with NZ IFRS (New Zealand equivalents to International Financial Reporting
Standards) and are not uniformly defined, therefore the non-GAAP profit measures included in this report are not comparable withthose used by
other companies.They should not be used in isolation or as a substitute for GAAP profit measures as reported by Refining NZ inaccordance with
NZ IFRS.
GROUPGROUP
30 JUNE30 JUNE
20202019
$000$000
Reported net loss for the period (GAAP)
(186,348)(3,503)
Add back:
Income tax(70,879)(1,327)
Net interest expense6,406 6,743
Impairment of assets218,903 -
Depreciation
47,300 52,137
Reported EBITDA15,382 54,050
Add back non-cash expenses:
Stock obsolescence provision
3,269
278
Defined benefit pension fund cost1,720 1,842
Interest income146 24
Adjusted EBITDA20,517 56,194
REFINING NZ
2020 INTERIM RESULTS
PRESENTATION
2020 HY RESULTS PRESENTATION
APPENDIX 3COVENANTS
Refining NZ’s banks have been grated the benefit of a Negative Pledge Deed, which sets out a number of covenants that the Company agrees to
comply with.These are outlined as follows:
Senior Interest Cover RatioThe ratio of Negative Pledge EBITDA
[1]
to Interest Expense for the Refining NZ Group which is to be not less than 4.0
times. Interest expense includes the majority of interest on debt but does not include any interest or Deferred Interest paid with respect
to the Subordinated Notes.
Total Interest Cover RatioThe ratio of Negative Pledge EBITDA (Adjusted EBITDA) to Total Interest Expense for the Refining NZ Group which is to
be not less than 2.0 times. Total interest expense is the Interest Expense plus any interest or Deferred Interest paid with respect to the
Subordinated Notes.
A gearing ratioThe ratio of bank deb to the sum of bank debt plus shareholder equity for Refining NZ which is required to be not
greater than 45%.
The senior interest and total interest cover ratios are tested semi-annually and are only breached if they are not met on two consecutive test
dates. The gearing ratio is tested at all times.
1.Negative Pledge EBITDA has the same meaning as “Adjusted EBITDA” as set out in Appendix 1 and 2
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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