Annual Shareholders’ Meeting 2021 – Presentation Materials

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
use
29 June 2021
2020 ANNUAL RESULTS
PRESENTATION
R E F I N I N G N Z
A N N U A L S H A R E H O L D E R S M E E T I N G

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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 any member of the Group 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 the Group’s products or services and other
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 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 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 andbusiness 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 securities of any member of the Group and has been prepared without taking intoaccount the objectives, financial situation
or needs of individuals. Before making an investment decision, you should consider the appropriateness of the information havingregard to your own objectives, financial
situation and needs and consult an NZX Firm or solicitor, accountant or other professional adviser if necessary. Any reliancebyany person on any information in this
presentation is a matter for that person’s own judgement and no liability is accepted by any member of the Group or any of theirofficers, 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. No member of the
Group guarantees future performance and past performance information is for illustrative purposes only. To the maximum extentpermitted by law, the directors of each
member of the Group, the members of the Group and their affiliates, and their respective offices, partners, employees, agents, associates and advisers do not make any
representation or 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 allresponsibility and liability for these forward
looking statements and the information (or omission therefrom) in this presentation (including, without limitation, liabilityfor negligence).
•Except as required by law or regulation (including the NZX Main Board Listing Rules), no member of the Group undertakes any 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
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.

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
33
BOARD OF DIRECTORS
RICCARDO CAVALLO
Manager of Refining
ExxonMobil
LINDIS JONES
Chief Financial Officer
Z Energy
JAMES MILLAR
Independent Director
LUCY NATION
Vice President of Regions,
Cities and Solutions for Asia
Pacific
bp
VANESSA STODDART
Independent Director
PAUL ZEALAND
Independent Director
SIMON ALLEN
Independent Director
NAOMI JAMES
Chief Executive Officer
Speakers

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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AGENDA
AGENDA
CHAIRMAN’S ADDRESS
CEO’S ADDRESS
RESOLUTIONS
GENERAL BUSINESS

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
SIMON ALLEN
CHAIRMAN’S ADDRESS

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ANNUAL GENERAL MEETING | 29 JUNE 2021
66
FY20 PERFORMANCE
Refining NZ has safely navigated the most challenging business environment in its 60-year history and established the pathway to
future value creation for shareholders
Best safety performance on record
P
Effective operational response to unprecedented COVID-19 demand impacts
Reset the 2020 cost base to cash-breakeven at the Fee Floor
Strengthened balance sheet and lowered net debt
Strategic Review undertaken to assess refinery and infrastructure options
Simplified operations to make refinery robust to extended period of low margins
Long term plan to unlock unrealized infrastructure value
P
P
WIP
P
P
P

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
77
STRATEGIC REVIEW
CASE FOR CHANGE
Structural oversupply in refining capacity
Refinery is globally subscale with energy
costs impacting competitiveness
Decarbonisation of the New Zealand
economy
Customer preference for import supply
chain
STRATEGIC REVIEW OUTCOME
Simplify refining operations, to maintain
cash neutral operations at the Fee Floor
in 2021
Proposed conversion to import terminal
operations in 2022, with substantial
progress made with customers on
commercial framework
STRATEGIC REVIEW CONTEXT
Significant decline in GRM, exacerbated
by COVID-19
Refinery returns consistently below the
cost of capital
Highly consultative process, including
customers, Government and other
stakeholders
Optimal business model to maximise“through the cycle”
returns to shareholders

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ANNUAL GENERAL MEETING | 29 JUNE 2021
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IMPORT TERMINAL INVESTMENT
HIGHLIGHTS
1
Critical and highly efficient infrastructure
Long–term customer contracts
Projected stable earnings and dividends
Supporting decarbonization of NZ economy
1
Potential import terminal conversion remains subject to shareholder and lender approvals, negotiation of Terminal Services Agreements with customers, completion of
FEED and detailed planning and a final investment decision (FID) by the Refining NZ Board.
Critical infrastructure delivering strong, stable earnings
through long term customer agreements
Refining NZ Board expects to issue Notice of Meeting and Explanatory Booklet shortly for shareholder vote in August 2021
Future opportunities to participate in energy
infrastructure changes
Self-funded from existing balance sheet capacity

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
NAOMI JAMES
CEO ADDRESS

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ANNUAL GENERAL MEETING | 29 JUNE 2021
1010
2020 PERFORMANCE HIGHLIGHTS
Safely navigated COVID-19 impacts and reset cost base
FY 19FY20
PersonalTRCF
[1]
0.270
Process
Tier 1
[1]
00
Tier 2
[1]
00
Releases outside of consent15
Throughput
Mbbl
42.729.9
RAP Throughput
Mbbl
20.814.7
Operational availability
%
99.798.2
Cashflow from operations
NZ$M
11732
Net debt
NZ$M
241231
Operating costs
[2]
NZ$M
184161
Capital Expenditure
[3]
NZ$M
7834
PSafeoperations
PReset cost base to Fee Floor levels
PDeliver to customer plan
$
1.For a full definition please refer to the Glossary in Appendix 1
2.Excludes natural gas & other passthrough costs, but includes strategic review, restructuring costs and non-cash inventory write off of c.$11 million
3.Payments for property, plant and equipment (cashflow basis)

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
1111
1
The Singapore Complex Margin is calculated using Platts Dubai crude and Singapore product prices, VLCC freight to Singapore, andthe International Energy Agency’s Dubai complex
refinery yields adjusted for fuel & loss.
REFINING MARGINS
Second lowest GRM on record
•Low Asian refining margins due to excess capacity exacerbated by COVID-19 demand impacts
•Refining NZ uplift impacted by volatility in shipping costs, yield impacts of cyclic mode and “hot stand-by”
•Petrol and diesel recovered to pre-COVID levels by year end, jet demand continues to be impacted by border restrictions

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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Refinery simplified to enable cash neutral operations at the Fee
Floor in 2021
Operational
People
Process Unit
Configuration
•18% reduction in primary crude
intake
•Bitumen productionceased
•Strong focus on risk and
management of change through
the transition
•Asset maintenance strategy -
campaign approach, predictive
maintenance
•Asset Life Cycle -repair versus
replace, 2-yearly turnaround cycle
•Operating expenses c.$50m lower
than in 2019
•Capital expenditure guidance of
c.$50m for 2021
•Organisation-wide restructure (c.25% reduction in staff)
•Significant transitional support for impacted employees to find
work or retraining within 6 months (skills workshops, jobs expo,
well-being initiatives)
REFINERY SIMPLIFICATION

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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1.Under the current refinery model, Marsden Point typically holds large inventories of crude oil and intermediate product components, making up around 18 days’ cover for New Zealand’s fuel demand.
2.Refinery to Auckland pipeline.
3.Truck Loading Facility (TLF) adjacent to Marsden Point is not owned by Refining NZ.
4.Refining NZ leases land from the oil companies (bp, Mobil and Z Energy) and owns most of the Wiri terminal plant located on thisland. The land and plant is in turn leased to Wiri Oil Services Limited
(WOSL). The leases expire in February 2025 with no right of renewal. At the end of the lease term ownership of the Wiri terminal plant currently owned by Refining NZ reverts to the oil companies.
IMPORT TERMINAL OVERVIEW
Safe, reliable and efficient fuel supply to Auckland and
Northland markets (c.40% of total New Zealand market)
Jetty
Storage tanks
1
RAP
2
Wiri terminal
4
Truck Loading
Facility
3
Import Terminal System (ITS)
2 jetties with multi-product capability
Combined c.180m litresof
pumpable volume
Multi-product pipeline from
Marsden Point to Wiri terminal in
Auckland (c.170km)
Yellow shaded area
is an illustrative
overlay of the
import terminal on
the existing
Marsden Point site

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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PRODUCT DEMAND
Jet demand expected to underpin long-term import
terminal utilisation
•Petrol and diesel demand expected to begin to
decline in the next decade with transition from
internal combustion engines to electric vehicles
•Jetfueldemand growth rates forecastto return to
historical trends
•Potential to import, blend and produce biofuels
1
at
Marsden Point
1
Based on Hale & Twomey’s forecast, issued in January 2021, which reflects a faster transition away from fossil fuels than previously expected, now factoring in New Zealand’s commitment to zero net
greenhouse gas emissions by 2050. The Hale & Twomey forecast reflects a change in consumer sentiment and actions attributabletoCOVID-19. Further growth and sustained demand for jet fuel is
expected to underpin long-term ITS utilisation, in contrast to a long-term decline, initially in petrol and then diesel. The Hale & Twomey forecasts are for fossil fuels only and make no assumptions on bio-
fuel substitution. The Business New Zealand Energy Council (BEC) Tui and Kea scenario implied year on year growth rates have been applied to anticipated Auckland+Northlandpetrol and diesel
volumes from 2023 (Hale & Twomey) and to jet from 2026 (to accommodate Covid-19 jet demand recovery).

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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Horizon 1
Existing technology /
market
Reserve fuel storage
(security of supply)
Other imports
Solar farm (Maranga Ra)
Large scale grid battery
Horizon 2
Investment / market
development required
Bio-fuel imports, blending
and production, (SAF /
biodiesel)
LNG imports
Horizon 3
New market /
technology
Hydrogen imports,
production & storage
Waste to energy
REPURPOSING OPPORTUNITIES
Marsden Point as an Energy Hub
New Zealand energy challenges to solve:
•Reliable, secure fuel supply if NZ no longer has a local refinery
•Gas shortages, NZ gas supply declining
•Unaffordable electricity & gas prices –supply, transmission, distribution
•Firming / storage solutions for increasingly renewable electricity supply and
phase out of thermal electricity generation
•Competitive green fuel supply, including for heavy transport and aviation

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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COMMERCIAL ARRANGEMENTS
Stable earnings supported by take-or-pay agreements and
relatively fixed operating and capital costs
•Non-binding, in principle agreements with bp and Z Energy. Negotiations continuing with Mobil.
•Proposed commercial terms include:
•Long-term (10 year+) agreements
•Combination of fixed and volume based fees, escalated over time, averaging $95 million p.a. across the initial 10 year term (on a
real basis)
•Take-or-pay commitments deliver minimum revenue, to support debt funding of conversion costs
•Provision for third party access to utilised infrastructure capacity
•Front End Engineering & Design (FEED) and detailed planning underway to confirm costs estimates –no material changes to previous
guidance
•Significant tax losses from decommissioning mean there is unlikely to be tax payable for many years

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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TIMELINE TO CONVERSION
Conversion target date by mid-2022
Complete customer negotiations
Shareholder & lender approvals and funding
Completion of FEED and detailed planning
Final investment decision targeted by end Q3, which
would enable conversion by mid-2022

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ANNUAL GENERAL MEETING | 29 JUNE 2021
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A PLANNED TRANSITION

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
SIMON ALLEN
CHAIRMAN

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
RESOLUTIONS
ANNUAL MEETING

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
ELECTION AND RE-ELECTION
OF DIRECTORS
RESOLUTIONS 1 -3

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
“That Mr LindisJones, who retires by rotation in accordance with clause 8.9 of the Constitution, be re-elected as a
Director of the Company.”
RESOLUTION 1

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
RESOLUTION 1
FORAGAINSTDISCRETIONARYTOTALABSTAIN
Proxies and
Postal votes
177,016,0941,561,7591,927,760180,505,6131,173,814
RESOLUTION 1

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
“That Ms Vanessa Stoddart, who retires by rotation in accordance with clause 8.9 of the Constitution, be re-elected
as a Director of the Company.”
RESOLUTION 2

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
RESOLUTION 2
FORAGAINSTDISCRETIONARYTOTALABSTAIN
Proxies and
Postal votes
177,696,156829,3071,993,810180,519,2731,160,154
RESOLUTION 2

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
“That Ms Lucy Nation, who retires by rotation in accordance with clause 8.8 of the Constitution, be elected as a
Director of the Company.”
RESOLUTION 3

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
RESOLUTION 3
FORAGAINSTDISCRETIONARYTOTALABSTAIN
Proxies and
Postal votes
177,507,728988,2721,993,810180,489,8101,189,617
RESOLUTION 3

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
AUDITOR
FEES AND EXPENSES
RESOLUTION 4

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
“That Directors be authorised to fix the fees and expenses of Ernst & Young as auditor to the Company for the
financial year ending 31 December 2021.”
RESOLUTION 4

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
RESOLUTION 4
FORAGAINSTDISCRETIONARYTOTALABSTAIN
Proxies and
Postal votes
178,353,451248,8171,921,810180,524,0781,155,349
RESOLUTION 4

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
GENERAL
BUSINESS

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
OUR SHAREHOLDERS ARE KEY STAKEHOLDERS
We welcome your further feedback on our Strategic
Review
Please email us at corporate@refiningnz.com

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
3333
APPENDIX 1
Glossary
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
threshold quantities 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 fire or 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.
EBITDA –Net Profit Before Finance Costs and added back Depreciation and
disposal costs
Gross Refining Margin (excluding Fee Floor/Margin Cap) / Singapore Complex
Margin -The Gross Refining Margin is calculated in USD as the difference between the
value of products and the cost of feedstock for each refining customer. The value of
products use Singapore quoted prices adjusted for New Zealand quality and the cost of
importing those products to New Zealand. Feedstocks are valued using the notional
market values adjusted for the cost of getting the feedstock to the refinery. The Gross
Refining Margin incorporates the cost of hydrocarbon used as fuel and incurred as
process losses.
Typically, Refining NZ has an uplift over the Singapore complex margins of around USD
3.00 to 4.00 per barrel. The value of the uplift varies due to fluctuations in freight rates,
product quality premium, crude market premium and operational performance. Product
quality premium are the cost differentials between products made to New Zealand
quality and products made to the quality that applies to quoted prices in Singapore.
Crude market premium are the cost differences between the crude types actually
processed at Refining NZ and Dubai (used as basis for the Singapore complex
margins). Refining NZ’s crude diet comprises of crudes that price off Dubai as well as
crudes that price off different markers such as Brent. The fluctuations of these price
markers relative to each other impact the uplift.

REFINING NZ
ANNUAL GENERAL MEETING | 29 JUNE 2021
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29 June 2021
2020 ANNUAL RESULTS
PRESENTATION
R E F I N I N G N Z
A N N U A L S H A R E H O L D E R S M E E T I N G

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1

The New Zealand Refining Company Ltd
60
th
Annual Meeting of Shareholders
Tuesday 29
th
June 2021 at 2:00 pm
Held at Level 4 Lounge, South Stand, Eden Park, Reimers Ave, Kingsland,

CEO Naomi James address

Thank you, Simon; it’s great to be able to meet with those of you in the room
today, in-person this year.

This year is our sixtieth anniversary as a company. In normal times, we would be
celebrating those sixty years. Instead, our focus today is on acknowledging the
company’s resilience in surviving the last year which has been the most
challenging in our Company’s history, and planning carefully for the company’s
future.

We met the challenges of 2020 by focusing on the three things we had to get
right:
- Operate safely
- Meet our commitments to customers
- And reset our cost base to operate cash neutral
Your company achieved excellent performance in each of these key areas.

We had our best safety performance on record, with no Tier one or two process
safety incidents and no recordable personal safety incidents.

We met our commitments to customers.

This safety and operational performance was particularly exceptional in a year
that required us to do things we had not done before. Operating the refinery units

2

on a rotating basis and temporarily shutting down the refinery to rebalance fuel
supply with the COVID-19 impacts on fuel demand.

Finally, we acted swiftly to reset our cost base to fee-floor levels – reducing
planned expenditure in 2020 by eighty million dollars. Our strong financial
management resulted in the Company’s net debt closing some ten million dollars
lower at the end of the 2020 financial year, despite margins remaining below the
Fee Floor through the year.

We wouldn’t have achieved any of this, without the incredibly capable and
committed workforce we have at Marsden Point. I want to acknowledge both the
results our people have delivered and the fact they have achieved this in the face
of an uncertain future.

The challenging market faced in 2020 came through both margin and fuel
demand.

Refining margins were weak at the start of the year due to growth in the supply of
refined product from larger, low-cost refineries in the Asia-Pacific region which
exceeded the growth in demand for transport fuels.

The global drop in demand triggered by COVID-19, particularly for jet fuel,
weighed heavily on the already oversupplied market and placed yet more
pressure on margins.

The result was a negative average Singapore Complex Margin across the year
of minus one point six-five US dollars per barrel.

The Gross Refining Margin earned was one point six-three US dollars per barrel

3

– the second lowest since the 1995 Processing Agreements came into effect.

Demand for fuel dropped by fifty per cent during the period New Zealand was in
Level four lockdown. Petrol and diesel recovered to more normal levels later in
year, however jet demand remained impacted by the ongoing border travel
restrictions, resulting in refinery throughput at seventy per cent of 2019 levels.

Having reset our cost base, the Fee Floor in the Processing Agreements
protected us to a significant extent from these lower margin and demand levels,
with our customers contributing around ninety million dollars in Fee Floor
payments. The Fee Floor is the minimum level of processing fees our customers
pay for operation of the refinery, irrespective of actual refining margins or
throughput, and this was in operation for the whole of 2020 and through the 2021
year to date.

At the beginning of this year, the Company moved to a Simplified Refinery model
in order to maintain cash neutral operations at the Fee Floor in 2021.

The Simplified Refinery model has seen primary crude intake reduced by around
eighteen per cent, with total refined fuel production levels similar to levels at the
time of commencement of the Processing Agreements in 1995. It has also seen
the cessation of bitumen production at Marsden Point.

An organisational restructure reduced the workforce by twenty-five per cent. We
set ourselves the target of supporting all our employees impacted by these
changes to find new work or training opportunities, which we have largely
achieved, with support ongoing today for only a couple of employees.

Simplification of refinery operations has provided our Company the time to fully

4

assess and plan for a transition from refinery to import terminal operations, which
I will turn to now.

Simon has already covered our Strategic Review process to determine the
optimal future operating model for our business.

I will cover in some more detail what an import terminal operation would involve.
- Utilising our deep water harbour and jetty infrastructure, our customers
would import refined fuel to Marsden Point, instead of the crude oil they
import today for refining.
- Fuel would be stored at the Marsden Point site in existing tanks at what
would be the largest fuel terminal in New Zealand, with one hundred and
eighty million litres of shared capacity and capacity to provide additional
storage.
- We would continue quality fuel testing services both at the Marsden Point
site and around New Zealand, through our IPL business.
- Fuel from Marsden Point would be distributed primarily to the Auckland
and Northland markets, which make up around forty per cent of New
Zealand fuel demand, through the one hundred and seventy kilometre
Refinery to Auckland Pipeline and the truck loading facility adjacent to the
Marsden Point site.
- Our existing customers would continue to be our foundation customers,
with long-term contracts and take-or-pay commitments supporting the
investments made through a conversion from refinery to import terminal.
- And if in the future unutilised capacity existed, we would have the ability to
bring in new customers.

The import terminal operation would primarily use existing finished product
storage tanks, with upgrades required to piping, tank compound bunds, and fire

5

protection systems for site safety and to ensure operational efficiency.

As you can see from the image of the site on the slide, the Import Terminal will
only require a small portion of our current facilities and site footprint. This
presents the Company with an opportunity for a number of different site
repurposing options, some of which I will outline in more detail shortly.

The proposed Import Terminal, and the opportunities for using the site, are
underpinned by our long-term commitment to Marsden Point, reflected in the
granting this year, of a thirty five-year Resource Consent to operate as a heavy
industrial site. This consent, our deep harbour and jetty access, industrial
electricity and gas connections, and proximity to the largest population base in
New Zealand all support our commitment to ongoing operations at Marsden Point
over the long term.

As part of our Strategic Review, we have looked closely at future fuel demand in
New Zealand and the Climate Change Commission’s important work to develop
advice for Government on New Zealand’s first carbon budgets and plans to
achieve these.

As you can see from the forecasts, our product mix is expected to be weighted
towards jet and diesel in the future. The Climate Change Commission’s report
this year has highlighted a near-term focus on decarbonisation of transport
through electric light vehicles, with decarbonisation of heavy transport and
aviation fuels occurring over a longer period of time. The Commission’s report
identified that aviation fuels are particularly challenging to decarbonise and there
is currently no commercially viable sustainable aviation fuel supply in New
Zealand.

6

As an import terminal, Refining NZ’s existing infrastructure and repurposing of the
Marsden Point site has the potential to support a transition to biofuels and
sustainable aviation fuels.

There is a strong link between the energy challenges facing New Zealand today
and the opportunities that exist for the Marsden Point site in the future.

Through a transition from local refining to imports, we need to ensure we hold
sufficient fuel stock in-country, a role that has been performed up to now by our
refinery with its crude and intermediate product stocks.

We face significant challenges in reliable and affordable gas and electricity supply
today. A shift to imports will both reduce our exposure to, and demand for, gas
and electricity and make a significant contribution to New Zealand’s near-term
emissions reduction. Finding solutions which deliver affordable and reliable
supply of electricity and transport fuels, as well as reduced emissions, is the key
problem to solve in achieving a decarbonisation of New Zealand’s energy sector.

We are open to all options for the Marsden Point site, whether that’s strategic fuel
storage, the import, blending or production of biofuels or electricity supply and
storage. Our focus will be on identifying opportunities where our infrastructure
can both support the decarbonisation of New Zealand’s economy and provide a
re turn on investment for our shareholders.

The Company continues to work with customers to negotiate long-term
arrangements for the import terminal model. Importantly, we have reached in-
principle agreement with bp and Z Energy on key commercial terms, including
price. Negotiations with Mobil are on-going.

7

The in-principle agreements we have reached include:
• Long-term commitments of at least ten years;
• A combination of fixed and volume-based fees, as well as take-or-pay
commitments to deliver minimum revenues, and support the debt-funding
of conversion costs;
• Fees averaging an estimated ninety-five million dollars across the initial
ten-year term on a real basis; and
• The ability for new customers to access underutilised infrastructure, such
as the RAP, or storage tanks.

Current Front-end Engineering and Design and detailed planning work is ongoing
and work to date has not resulted in any material change to our previous
guidance on costs.

Finally, we expect to generate significant tax losses from decommissioning of
refining assets, which will be available to offset future earnings, subject to the
loss carry forward rules.

I look forward to sharing more detail on these commercial arrangements and the
financial implications for the Company, including for you as shareholders when
we issue the notice of meeting and explanatory booklet ahead of a shareholder
vote in the coming weeks.

As you can see from the timeline behind me, we are currently targeting a final
investment decision by the end of Q-three this year.

In the meantime, we are progressing our customer negotiations and working on
obtaining lender approvals and expect to shortly issue the Notice of Meeting and
Explanatory booklet for a shareholder vote in August.

8


On these estimated timeframes, the likely time for the conversion to be completed
would be in the first half of 2022.

Before concluding, I wanted to take a moment to reflect on our journey to reach
this point, and to put on record my gratitude for the enormous work that has been
put in by a huge number of people across the Company and the support we have
had from a range of stakeholders.

I liken this process to a jigsaw puzzle, in that we have been working hard over the
last year to find a long-term sustainable future for our business, and bring
together a range of sometimes competing priorities.

I want to acknowledge firstly the support of our customers as we worked through
options for our business, responded to the near-term challenges presented by
COVID-19 and worked together on new long-term arrangements. These are
always robust commercial discussions – as they should be – but throughout we
have all remained focused on the need to keep the market supplied and safely
operate what is a major hazardous facility.

I want to acknowledge our lenders who have supported us with additional lines
through COVID-19 and continue to support us with the import terminal proposal,
including funding for the transition.

I want to acknowledge the engagement we have had with Government, working
together to ensure the key issues to manage through a transition are considered
and addressed.

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I also want to thank the members of the Refinery Transition Working Group
formed last year, which provided support for our employees impacted by the
simplification changes. This group is now focused on ensuring a planned
transition for future changes at Marsden Point, which mitigates the impact of
changes on refinery workers and the regional economy.

Finally, and of critical importance is our workforce and contractors who continue
each and every day to focus on what’s needed to operate our refinery safely and
reliably, while planning for a very different future which will involve significant
change for everyone at Marsden Point.

A just transition means a well-planned and managed transition, and my
management team and I are focused on each piece of the puzzle as we go
forward. We believe this is both the right thing to do and critical to setting our
Company up for a long-term sustainable future, which delivers value for our
shareholders.


The pieces of this complex puzzle are now coming together and I am looking
forward to sharing more details with you of what’s involved in the coming month.

Simon, back to you.

ENDS

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1

The New Zealand Refining Company Ltd
60
th
Annual Meeting of Shareholders
Tuesday 29
th
June 2021 at 2:0 0 pm
Held at Level 4 Lounge, South Stand, Eden Park, Reimers Ave, Kingsland,

Chairman Simon Allen’s address

2020 was unique in the Company’s and this country’s history, with the COVID-19
pandemic requiring an immediate response to maintain the Company’s near-term
resilience.

In the immediate onset of the COVID-19 pandemic we acted quickly and
decisively, working with our customers to manage stocks and supply across the
country. We agreed to change the way in which the refinery operated, to enable
the refinery to produce at substantially lower rates to help balance fuel supply
across the country.

The complex operational changes made during this period were completed while
maintaining an exemplary safety performance on site.

In an environment that requires constant vigilance in regard to hazards even
during normal times, this is a very significant achievement by both our employees
and our contractors working on site. I want to put on record here today the
Board’s acknowledgement and appreciation of the support received from
employees at all levels, to navigate the challenges presented by these
unprecedented circumstances.

Turning to the Company’s financial results, which reflect the challenging year that
we have all had. Not only has the Company been dealing with the impacts of the
COVID-19 pandemic, but a structural change in the refining sector meant that we

2

also faced historically low levels of refining margins.

As a result, we acted quickly to reset the cost base, with a reduction of
approximately eighty million dollars in 2020 planned expenditure, to keep costs
within the Fee Floor and thus enable the Company to operate on a cash neutral
basis. We took a range of measures to strengthen the balance sheet, including
increasing and extending our bank facilities.

The net loss after tax of one-hundred and ninety-eight point three million dollars
reflected the impact of lower volumes and refinery margins, together with a non-
cash impairment charge of one-hundred and fifty eight million dollars after tax
against the value of the Company’s refining assets, reflecting a decline in the
outlook for refining margins.

At the same time as addressing the immediate requirements, the Board
commenced a Strategic Review process, to develop a clear plan for sustainable
shareholder returns in the future.

In April 2020, following the commencement of Naomi as our new CEO, the Board
initiated a strategic review to determine the optimal business model and capital
structure for the Company.

The context included a significant fall in gross refining margin or GRM at the end
of 2019. This was further exacerbated by the impacts of COVID-19 from early
2020 and returns from the refinery below the cost of capital over the previous ten
years.

Forecasts prepared by independent expert market commentators suggested that
it could be several years before a rebalancing of regional transport fuels supply

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and demand results in a meaningful recovery in GRM.

And there are structural challenges to the competitiveness of the refinery
compared to newer Asian refineries, due to the relatively small scale and higher
cost of operating in New Zealand, which includes significant increases in
electricity and gas costs.

We were also necessarily conscious of the global movement towards, and New
Zealand’s focus on, reducing carbon emissions, with the emergence of new
challenges and opportunities expected in the transition to low-carbon transport
fuels over time.

With our very substantial investment in critical infrastructure which supports New
Zealand’s fuel supply, and with the need to realise full value and deliver more
sustainable returns for shareholders, we considered the Strategic Review
necessary to determine the best future use of those assets.

The initial outcome of the Strategic Review, announced in June 2020, was to
develop plans to simplify the refinery operations in the short-term to maintain
cash neutral operations at the Fee Floor, and in parallel explore with Customers
the commercial case for converting to an import terminal.

Given the range of stakeholders involved and the long-term horizon for decision-
making and implementation that future changes would involve, the Strategic
Review process has been highly consultative.

The Board recognises that financial returns to shareholders have not been
satisfactory for some years. We are committed to delivering on the outcomes of
the review, to realise full value for the Company’s assets and deliver more

4

sustainable returns ‘through the cycle’ while continuing to support secure,
competitive fuel supply for the country and a fair and well managed transition for
employees and other Stakeholders.

Our combined efforts have brought the Company to a position in which short-term
viability has been maintained - despite a major shock to both volumes and
margins, and therefore revenues -and in which the options for strategic change
have been clearly identified and advanced.

Now, to the import terminal.

Throughout this process, we have always maintained that our priorities were to
realise full value for the Company’s assets and deliver more sustainable returns
‘through the cycle’, and to support our workforce, and the wider community
through what, if approved, will be a significant change to Refining NZ’s
operations.

Our customers have all expressed a desire for the Company to convert to an
import terminal model. For our customers, an import terminal would offer
certainty and stability on the cost of accessing the infrastructure and mitigating
the need for Fee Floor payments.

For Refining NZ Shareholders, new long-term agreements with each of the
existing refinery Customers (bp, Mobil and Z Energy), would generate
significantly more stable earnings compared with the inherent volatility of oil
refining to deliver superior “through the cycle” returns to shareholders.

The Company is in regular dialogue with the New Zealand Government on the
potential conversion to an import terminal, to ensure that Refining NZ is well

5

positioned to continue its role in operating infrastructure that is critical to New
Zealand.

An import terminal would offer safe, reliable, and efficient fuel supply primarily to
the Auckland and Northland markets. This proposal would also offer New
Zealand’s largest transport fuel storage capacity, and through the Refinery to
Auckland pipeline, continue to supply nearly all of the jet fuel directly to Auckland
International Airport. The import terminal would therefore be critically linked to
New Zealand’s largest expected export earner: tourism – underpinning long-term
asset utilisation.

As you may have seen in recent weeks with the Climate Change Commission’s
final Advice to Government on carbon budgets, and decarbonisation of the New
Zealand economy is a key priority for New Zealand.

As it currently operates, the Marsden Point oil refinery is one of New Zealand’s
largest carbon emitters. A conversion to an import terminal would result in a
significant reduction in Refining NZ’s emissions, by almost one million tonnes of
C02 per annum.

Naomi will expand on this shortly, but I did also want to point out that a transition
to an import terminal, will offer the Company potential opportunities to support the
wider decarbonization of the New Zealand energy market through repurposing of
the existing infrastructure. And we expect the one-off costs of conversion to an
import terminal to be self-funded.

In terms of where we are in this process, you will have seen notification recently
that the Company has concluded a non-binding, in-principle agreement on key
commercial terms with the second of our three customers, Z Energy.

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Negotiations remain ongoing with Mobil.

Ultimately, any decision to proceed with conversion to an import terminal will be
subject to a vote by the non-customer shareholders.

Your Board expects to issue the Notice of Meeting and Explanatory Booklet,
including an Independent Appraisal Report, shortly for a shareholder vote in
August. This will set out the Board’s assessment and recommendations on the
import terminal proposal and provide you with the information to make this
important decision on our Company’s future.

I look forward to sharing with you soon our plans for the Company’s future, which
would generate significantly more stable earnings, deliver superior through the
cycle returns to shareholders and strongly position the Company to participate in
a decarbonising of the New Zealand energy markets.

I would now like to hand over to CEO Naomi James.

ENDS