HY2021 Financial Results
CONDENSED CONSOLIDATED
INTERIM FINANCIAL
STATEMENTS
For the six months ended 30 June 2021
REFINING NZ
1
Consolidated Income Statement 2
Consolidated Statement of Comprehensive Income 3
Consolidated Balance Sheet 4
Consolidated Statement of Changes in Equity 6
Consolidated Statement of Cash Flows 8
Basis of Preparation 9
Notes to the Interim Financial Statements 11
Directory 30
Consolidated Income Statement
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
2
GROUP GROUP
30 JUNE 30 JUNE
2021 2020
NOTE
$000 $000
INCOME
Revenue
4
115,271 116,154
Other income
4
159 2,964
TOTAL INCOME
4,5
115,430 119,118
EXPENSES
Purchase of process materials and utilities
35,555 43,737
Materials and contractor payments
8,216 11,478
Wages, salaries and benefits
12
16,133 30,903
Administration and other costs
14,022 17,618
TOTAL EXPENSES
73,926 103,736
EARNINGS BEFORE DEPRECIATION, IMPAIRMENT,
FINANCE COSTS AND INCOME TAX
41,504 15,382
Depreciation and disposal costs
41,781 47,300
Impairment of assets
3
- 218,903
TOTAL DEPRECIATION, DISPOSALS AND IMPAIRMENT
41,781 266,203
NET LOSS BEFORE FINANCE COSTS
(277) (250,821)
FINANCE COSTS
Finance income
(47) (146)
Finance costs
5,469 6,552
NET FINANCE COSTS
5,422 6,406
NET LOSS BEFORE INCOME TAX
(5,699) (257,227)
Income tax
(785) (70,879)
NET LOSS AFTER INCOME TAX
(4,914) (186,348)
ATTRIBUTABLE TO:
Owners of the Parent
(4,914) (186,348)
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE
SHAREHOLDERS OF THE NEW ZEALAND REFINING COMPANY
LIMITED
CENTS CENTS
Basic earnings per share
(1.57) (59.60)
Diluted earnings per share
(1.56) (59.50)
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 2021 (UNAUDITED)
3
GROUP GROUP
30 JUNE 30 JUNE
2021 2020
NOTE
$000 $000
NET LOSS AFTER INCOME TAX
(4,914) (186,348)
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to the Income
Statement
Defined benefit plan and medical scheme actuarial
gain/(loss)
12
15,615 (19,927)
Deferred tax on defined benefit plan and medical scheme (4,372) 5,580
Total items that will not be reclassified to the Income
Statement
11,243 (14,347)
Items that may be subsequently reclassified to the
Income Statement
Movement in cash flow hedge reserve
9,433 (1,327)
Deferred tax on movement in cash flow hedge reserve
(2,641) 372
Total items that may be subsequently reclassified to the
Income Statement
6,792 (955)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), AFTER
INCOME TAX
18,035 (15,302)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE
PERIOD, AFTER INCOME TAX
13,121 (201,650)
ATTRIBUTABLE TO:
Owners of the Parent
13,121 (201,650)
THE ABOVE CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IS TO BE READ IN CONJUNCTION
WITH THE ACCOMPANYING NOTES.
Consolidated Balance Sheet
AS AT 30 JUNE 2021 (UNAUDITED)
4
GROUP GROUP
30 JUNE 31 DECEMBER
2021 2020
NOTE
$000 $000
ASSETS
Cash and cash equivalents
34,500 43,289
Trade and other receivables
11
123,631 160,894
Income tax receivable
677 677
Derivative financial instruments
14,392 8,766
Inventories
3,027 4,431
TOTAL CURRENT ASSETS
176,227 218,057
NON-CURRENT ASSETS
Inventories
13,551 14,176
Derivative financial instruments
3,325 371
Property, plant and equipment
9
864,624 887,134
Right-of-use assets
9
5,215 3,335
Intangibles
9
19,239 9,968
Deferred tax assets
13
31,906 34,857
TOTAL NON-CURRENT ASSETS
937,860 949,841
TOTAL ASSETS
1,114,087 1,167,898
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
11
129,162 162,752
Derivative financial instruments
326
725
Borrowings
8
10,000 -
Lease liabilities
69 202
Employee benefits
12
7,633 11,269
TOTAL CURRENT LIABILITIES
147,190 174,948
NON-CURRENT LIABILITIES
Derivative financial instruments
853
974
Borrowings
8
254,638 274,611
Lease liabilities
6,225 3,940
Employee benefits
12
19,803 44,819
Provisions
7,724 7,802
Deferred tax liabilities
13
100,151 96,874
TOTAL NON-CURRENT LIABILITIES
389,394 429,020
TOTAL LIABILITIES 536,584 603,968
NET ASSETS 577,503 563,930
Consolidated Balance Sheet
AS AT 30 JUNE 2021 (UNAUDITED)
5
GROUP GROUP
30 JUNE 31 DECEMBER
2021 2020
NOTE
$000 $000
EQUITY
Contributed equity 266,333 266,057
Treasury stock (900) (896)
Employee share entitlement reserve 985 779
Cash flow hedge reserve 12,090 5,298
Retained earnings 298,995 292,692
Total Equity 577,503 563,930
The Board of Directors of The New Zealand Refining Company Limited authorised these financial
statements for issue on 18 August 2021.
For and on behalf of the Board:
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 Changes in Equity
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
6
CONTRIBUTED
EQUITY
TREASURY
STOCK
EMPLOYEE
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 12 - - - - (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) - - -
Treasury shares purchased 286 (286) - - - -
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
Consolidated Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
7
CONTRIBUTED
EQUITY
TREASURY
STOCK
EMPLOYEE
SHARE
SCHEME
ENTITLEMENT
RESERVE
CASH FLOW
HEDGE
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
NOTE $000 $000 $000 $000 $000 $000
AT 1 JANUARY 2021 266,057 (896) 779 5,298 292,692 563,930
COMPREHENSIVE INCOME
Net loss after income tax - - - - (4,914) (4,914)
Other comprehensive income
Movement in cash flow hedge reserve - - - 9,433 - 9,433
Defined benefit actuarial gain 12 - - - - 15,615 15,615
Deferred tax on other comprehensive income - - - (2,641) (4,372) (7,013)
TOTAL OTHER COMPREHENSIVE LOSS, AFTER INCOME TAX - - - 6,792 11,243 18,035
TRANSACTIONS WITH OWNERS OF THE PARENT
Equity-settled share-based payments - - 478 - - 478
Shares vested to employees - 272 (272) - - -
Shares issued 276 (276) - - - -
Unclaimed dividends written back - - - - (26) (26)
TOTAL TRANSACTIONS WITH OWNERS OF THE PARENT 276 (4) 206 - (26) 452
AT 30 JUNE 2021 266,333 (900) 985 12,090 298,995 577,503
THE ABOVE CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY IS TO BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
Consolidated Statement of Cash Flows
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
8
GROUP GROUP
30 JUNE 30 JUNE
2021 2020
$000 $000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
114,036 108,799
Payment for supplies and expenses
(57,369) (63,999)
Payments to employees
(28,719) (28,874)
CASH GENERATED FROM OPERATIONS
27,948 15,926
Interest received
47 146
Interest paid
(4,808) (6,808)
Net GST paid
(813) (120)
Income tax received
- 4,523
NET CASH INFLOW FROM OPERATING ACTIVITIES
22,374 13,667
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
(20,811) (21,954)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
(20,811) (21,954)
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayment of)/proceeds from bank borrowings
(10,000) 32,900
Lease payments
(352) (59)
NET CASH (OUTFLOW)/ INFLOW FROM FINANCING
ACTIVITIES
(10,352) 32,841
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (8,789) 24,554
Cash and cash equivalents at the beginning of the period 43,289 5,255
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 34,500 29,809
THE ABOVE CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS IS TO BE READ IN CONJUNCTION
WITH THE ACCOMPANYING NOTES
Basis of Preparation
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (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 its subordinated notes are quoted on the
NZX Debt Market.
The condensed consolidated interim financial statements (hereinafter ‘financial statements’) for the
six months ended 30 June 2021 presented are those of Refining NZ together with its subsidiaries (‘the
Group’). Subsidiaries are all entities over which the Group has control and includes Independent
Petroleum Laboratory Limited, Maranga Ra Holdings Limited and Maranga Ra Limited.
Basis of preparation
These financial statements as at and for the six months ended 30 June 2021 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 2020.
Financial instruments are carried at amortised cost or fair value, and there were no changes in
valuation techniques during the period. Derivatives are measured at fair value, using fair value
measurement hierarchy consistent with the 2020 financial statements, which approximates their
carrying value.
Accounting policies
The accounting policies used in the preparation of these financial statements are consistent with
those used in the previously published unaudited condensed consolidated interim financial
statements as at and for the six months ended 30 June 2020 and the audited consolidated financial
statements as at and for the year ended 31 December 2020. There were no new standards,
interpretations and amendments effective from 1 January 2021 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 judgements, estimates and assumptions that can significantly affect the
amounts recognised in the financial statements:
• Going concern - these financial statements have been prepared on a going concern basis. The
Corporate Lead Team and the Board consider that this is appropriate based on the Group’s
Basis of Preparation
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
10
current cash position and available credit facilities, and that the Board expects that the Group
will be able to continue in operation, and meet covenants under its facility agreements over the
next twelve months.
Refining NZ’s forecasts for the next twelve months 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, due to the implementation of a simplified refinery from 2021 which
enables the Company to run cash neutral at the Fee Floor under the refinery business operating
model.
On 6 August 2021, shareholders voted in favour of the proposal to convert the Marsden Point
site into a dedicated import terminal, with a Final Investment Decision by the Refining NZ Board
targeted to occur in the third quarter of 2021 (refer to Note 15), which would enable a
conversion to occur by mid-2022. If a Final Investment Decision is taken to proceed with the
conversion to an import terminal, the Company has sufficient liquidity to debt fund the expected
conversion costs in the next twelve months. Once fully operational, the import terminal business
is expected to generate positive free cash flows.
(Refer to Note 1 for further information relating to the impacts of Strategic Review outcomes
and Note 14, Contingencies, in relation to customer notices of dispute).
• Impairment assessment of assets – refer to Note 3 for further details.
• Useful lives of the property, plant and equipment – the Group last reassessed the remaining
useful lives of its refining assets in 2020 and distribution assets (including the Refinery to
Auckland Pipeline) in 2019. No further changes to the useful lives of assets at 30 June 2021 were
identified, pending any Final Investment Decision to be taken on the proposed conversion of the
Marsden Point site into a dedicated import terminal. (Refer to Notes 1 and 3 for further
information relating to the impacts of Strategic Review outcomes
and property, plant and
equipment impairment assessment).
• Recoverability of tax losses – in the six months ended 30 June 2021, Refining NZ generated a tax
loss of $9.1 million, increasing the Group’s cumulative tax losses to $64.0 million. A deferred tax
asset in respect of these unutilised tax losses has been recognised.
On the basis that at least 49% continuity of shareholding is maintained, or if there were to be a
breach of shareholder continuity, that the Company could satisfy the Business Continuity Test
(dependent on “there being no major” or a “permitted major change in the business”), the
Corporate Lead Team and the Board believe that future taxable profits will be available against
which the losses can be offset and therefore the deferred tax asset realised. Any adverse change
in future profits, or significant change in the shareholding and business of Refining NZ, could
limit the Company’s ability to realise the deferred tax asset. Refer to Note 1 for further
information in relation to the impacts of Strategic Review outcomes.
Estimates are designated by an symbol in the notes to these consolidated interim financial
statements.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
11
1 Strategic review
In 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.
In June 2020, the Company announced that it would take two business model options
forward: a Simplified Refinery (to improve the near-term viability of its current business
model), while 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).
Simplified Refinery model
Under the Simplified Refinery model, which was implemented from January 2021, refining
capacity was reduced to circa 34 million barrels per annum (being a reduction of circa 18%)
with total refined fuels production levels similar to levels at the time of commencement of
the Processing Agreement in 1995 and bitumen production ceased. An organisational
restructure was finalised prior to 31 December 2020, at a cost of circa $6 million to reduce
the workforce by around 25%, with circa 90 employees leaving the Company either through
redundancies, retirements, or resignations during November 2020 through to April 2021.
Under the Simplified Refinery model, lower labour costs and a reduction in other costs are
intended to enable the Company to extend cash neutral operations in 2021 under a scenario
where processing fee income is at the Fee Floor (of circa $141 million) and refinery operations
are uninterrupted.
Refining NZ’s customers, bp Oil New Zealand Limited, Mobil Oil New Zealand Limited, and Z
Energy Limited have all issued notices of dispute under the Processing Agreement, in relation
to the simplification of Marsden Point oil refinery operations as detailed in Note 14.
Import Terminal model
The customer negotiations, overseen by the Independent Directors, in relation to the
potential future staged transition to an import terminal (hereinafter, the Import Terminal
System or ITS) commenced in 2020 and continued into 2021, culminating in agreed non-
binding term sheets with bp and Z Energy in February 2021 and May 2021, respectively.
These term sheets document the key commercial terms for the provision of ITS services and
form the basis of the on-going negotiations with Mobil.
The Company convened a Special Meeting of Shareholders on 6 August 2021 to consider an
import terminal conversion proposal in order to be in a position to convert to an import
terminal and commence operations by mid-2022. Shareholders voted in favour of the import
terminal conversion proposal (as a major transaction and change in nature of business) and
related party transactions (being terminal services agreements and related agreements to be
entered into with the Company’s three major customers).
Despite the receipt of shareholder approval, the decision to convert to an import terminal still
remains subject to:
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
12
- Final Investment Decision by the Refining NZ Board, after considering the Front-End
Engineering and Design (FEED) assessment by management, which is targeted to
occur by the end of the third quarter of 2021.
- Entry into Terminal Services Agreements (TSAs) and Transition Agreements with all
existing Customers; and
- Satisfying the conditions precedent for conversion funding provided by Refining NZ’s
lenders.
If these conditions are ultimately not satisfied then Refining NZ will not be able to proceed
with the conversion to an import terminal and would remain a Simplified Refinery under the
existing Processing Agreements, although there is a dispute risk with Customers as outlined in
Note 14 and these agreements may be terminated by Customers at any time on 12 months’
notice.
Impact on Financial Reporting to 30 June 2021
Pending a Final Investment Decision being taken to convert the Marsden Point site into a
dedicated import terminal, these financial statements have been prepared based on the
existing Group operations and the Processing Agreements which continue to operate until
final agreement is reached with customers.
Potential Future Impacts on Financial Reporting
If a Final Investment Decision is taken to proceed with the conversion to an import terminal,
the Company will be required to record a non-cash impairment of the refining assets (part of
property, plant and equipment and inventories) that will not be used in the import terminal
operations and intends to revalue the remaining property, plant and equipment that will be
used in the import terminal operations to their fair value.
The carrying value of refining property, plant and equipment (both those not required and
those required for import terminal operations) as at 30 June 2021 was approximately $865
million. The carrying value of these assets at the time of Final Investment Decision will be
subject to depreciation recognised, and expenditure capitalised, from 1 July 2021 up until the
Final Investment Decision. In addition, the carrying value of inventories as at 30 June 2021
amounts to approximately $17 million, some of which may not be required for import
terminal operations.
Included in the carrying amount of the remaining property, plant and equipment referred to
above are assets that will be used in the import terminal operations (primarily the pipeline
from Marsden Point to Auckland, Marsden Point jetties and fuel storage facilities) which had
a carrying value of approximately $200 million.
In accordance with the accounting standards the impairment of the refining assets will be
recorded through the income statement, while any revaluation of import terminal assets to
their fair value will be recorded directly through other comprehensive income. The overall net
impact of the impairments and revaluations is likely to result in a change (increase or
decrease) in equity, which is not possible to estimate currently. Valuation work will be
undertaken to fair value the import terminal assets following Final Investment Decision.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
13
2 COVID-19 Pandemic
In March 2020 the World Health Organisation declared a global pandemic as a result of the outbreak
and spread of COVID-19. Global refining margins remain weak in 2021 due to the on-going fuel
demand reduction – particularly jet fuel – resulting from travel and transport restrictions. Group
revenue for the six months ended 30 June 2021, continues to be impacted by weak refiner’s margins
and lower pipeline throughputs:
• Our customers were invoiced the pro rata Fee Floor amounting to $70 million during the six
months ended 30 June 2021 (consistent with the previous corresponding period). The actual
processing fee earned from operations was below the pro-rated fee floor, resulting in $29
million (30 June 2020: $38.9 million) being paid by Customers as fee floor payments as
outlined in Note 4.
• Pipeline throughputs in the six months ended 30 June 2021 were 7.1 million barrels, around
5% lower than the previous corresponding period and 30% lower than in the 2019
corresponding period (pre-COVID-19) predominantly due to reduction in demand for jet fuel
into Auckland International Airport.
As outlined in Note 1, the Company simplified refinery operations from the beginning of 2021, which
is intended to enable the Company to operate cash neutral when processing fee income is at the Fee
Floor and refinery operations are uninterrupted. The Company operated cash neutral in the six
months ended 30 June 2021, with net debt closing at $230 million (31 December 2020: $231 million).
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
14
3 Impairment assessment
Property, plant and equipment is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The Company
continued to assess its assets for impairment applying a similar approach to 31 December 2020:
• 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.
Based on the impairment assessment carried out, the recoverable amount of the
Company’s assets was determined at a value exceeding the carrying value of the cash
generating unit, hence no impairment was recognised as at 30 June 2021.
A summary of the key judgements underpinning the 2020 impairment assessment (as fully outlined
in Note 12 of the FY20 Financial Statements), updated to June 2021 include:
Summary of Key Judgements
December 2020
June 2021 Update
Strategic review and import terminal conversion
There is inherent uncertainty associated with
the potential conversion to an import terminal
and its timing and the potential outcomes from
the commercial negotiations with the
Company’s customers, which are not solely
within the Company’s control, are
unknown.
The Processing Agreements are long-term
“evergreen” contracts which, subject to any
termination right arising at law, continue
unless renegotiated or terminated by mutual
consent or by a customer on one year’s notice.
On 6 August 2021, shareholders approved the
proposal to convert from a toll oil refining
operation to an import terminal operation
(based on the in-principle commercial
agreement reached with bp and Z Energy, and
which forms the basis of on-going negotiations
with Mobil).
Following the receipt of shareholder approval,
the import terminal conversion proposal
remains subject to several approvals and
agreements being entered into, as well as a
Final Investment Decision by the Refining NZ
Board (refer to Note 1).
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
15
December 2020
June 2021 Update
Strategic review and import terminal conversion (continued)
No customer had given notice of termination of
the Processing Agreements and any decision to
proceed with a conversion to an import terminal
will require new agreements with the Company’s
customers to be voted on by non-customer
shareholders.
The value in use impairment assessment was
based on the Group’s existing business model as
a simplified refinery and the existing Processing
Agreements.
If these conditions are ultimately not satisfied,
then Refining NZ will not be able to proceed
with the conversion to an import terminal and it
would remain a Simplified Refinery under the
existing Processing Agreements as outlined in
Note 1.
The value in use impairment assessment as at 30
June 2021 has therefore been completed based
on the existing business model as a simplified
refinery (consistent with the December 2020
approach).
New Zealand Emissions Trading Scheme (NZ ETS) and Climate Change Response (Zero Carbon)
Amendment Act 2019
The Government has signalled regulatory
reforms which 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.
A significant increase in carbon unit prices, or a
change in the allocation of units to the Company
when it enters the NZ ETS may have a material
financial impact on the future performance of
the Company.
No significant change.
In June 2021, the Climate Change Commission
released its final report on New Zealand’s
carbon budgets for the next 15 years which
were largely consistent with the draft budgets
released in January 2021.
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.
No significant change.
Uncertainty remains as to how long a recovery
will take with independent experts continuing to
forecast that the recovery from COVID-19 will be
slow, impacting the longer-term demand
forecasts for transport fuels, particularly jet fuel.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
16
December 2020
June 2021 Update
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.
Refer to Note 1, Strategic Review.
No significant change.
The very weak refining margins experienced in
the 2020 financial year continued in the six-
month period ended 30 June 2021, with
significant uncertainty regarding future refining
margins.
Future NZ transport fuel demand
The Climate Change Response (Zero Carbon)
Amendment Act 2019 set a target for New
Zealand to reduce its net emissions of all
greenhouse gases (except biogenic methane) to
zero by 2050.
There remains significant volatility and
uncertainty in the market as a result of COVID-19
oversupply in the global refining market and
proposed Government policy to address climate
change risks and the impacts on future demand
for transport fuels, and the outlook for refiner’s
margins cannot be reliably predicted.
The pace of transition to alternative fuels and
how that transition may occur, remains
uncertain.
In June 2021, the Climate Change Commission
released its final report on New Zealand’s
carbon budgets for the next 15 years which
were largely consistent with the draft budgets
released in January 2021 and with the demand
forecasts prepared by external experts prepared
for the Group and used for the impairment
assessment.
In June 2021, the Government issued a
consultation paper on the Sustainable Biofuels
Mandate which proposes a 3.5% reduction in
domestic transport fuel emissions from biofuel
uptake by 2025.
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 regardless of whether the Company
continues to operate as a refinery or as an
import terminal.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
17
The Key Assumptions used in the impairment testing as at 31 December 2020 (refer to Note 12 of
the FY20 Financial Statements), compared to the June 2021 assumptions are as follows:
Summary of Key Assumptions
December 2020
June 2021 Update
NZ transport fuel demand
Refining NZ uses demand forecasts formulated
by an independent expert, which reflects a
faster transition away from fossil fuels, driven
by New Zealand’s commitment to zero net
greenhouse gas emissions by 2050.
Jet fuel demand forecasts have a wide range
due to the uncertainty around COVID-19
recovery and viable alternative sources of
energy for air travel, however independent
expert forecasts used by the Company have
demand forecast to recover to pre-COVID-19
levels by 2025 and grow until circa 2040.
Gi ven the long-term uncertainty with respect to
alternative fuels, including biofuel demand
which could replace some of the decline in
crude oil derived fuel production, potential
contribution of biofuel demand to revenue has
not been considered for impairment
assessment purposes at this time.
No significant change.
The independent demand forecasts, used in
the December 2020 assessment, are
considered to be largely in line with the
Climate Change Commission’s Advice for
Government issued in June 2021.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
18
December 2020
June 2021 Update
Refining and pipeline volume
The base assumption is that the refinery will operate
until 2035, followed by a conversion to an import
terminal, noting that the outlook for transport fuels
demand remains highly uncertain.
The Processing Agreements are long-term
“evergreen” contracts which, subject to any
termination right arising at law, continue unless
renegotiated or terminated by mutual consent or by
a customer on one year’s notice. As at the date of
these financial statements, no customer has given
notice of termination and therefore the assumed
date for conversion to an import terminal in 2035, is
aligned to the timeframe by which the refinery’s
production is forecast to exceed domestic petrol
demand.
No significant change.
Refer to commentary under Key
Judgements, Strategic review and import
terminal conversion set out above.
The refinery and pipeline throughputs are
assumed at an average of circa 34 million
barrels and circa 18.5 million barrels
respectively, in the 15-year period to 2035.
Refining margins and pipeline fees
Consistent with previous impairment assessments,
the Company has used refining margin forecasts
developed based on the latest crude and product
pricing issued by independent expert market
commentators used by Refining NZ. Given the
current uncertainty in outlook, a downside to these
forecasts has been incorporated into the gross
refining margins used for this impairment
assessment.
No significant change.
Whilst margins are not expected to recover
to above the Fee Floor equivalent until
2023, margins are expected to average to
circa US$6.3 per barrel through the refinery
forecast period to 2035.
Pipeline revenue in the 15-year period to
2035 is determined with reference to the
current Processing Agreement to 2035, and
then subsequently as a combination of
estimated pipeline, terminal and wharfage
fees.
Exchange rate
US dollar forward rates have been applied with a
range of 0.70 to 0.73 over the forecast period.
No significant change.
The latest US dollar forward rates have been
applied with an average of circa US$0.70
through to 2035.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
19
December 2020
June 2021 Update
Operating costs and capital spend
Operating costs (excluding pass through costs
such as natural gas and one-off conversion costs)
and capital spend associated with an operation of
the simplified refinery are assumed at an average
of approximately $135 million and $55 million
per annum, respectively, in the 15 years to 2035.
No significant change.
An average of approximately $140 million and
$50 million per annum, respectively, in the 15
years to 2035.
Discount rate
A nominal post-tax weighted average cost of
capital has been used as assessed by external
advisors at 7.7% in the 15 years to 2035 (period
of the refinery operation) and 6% beyond 2035
(import terminal operation).
No significant change.
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 the Company will receive an industrial
allocation of 87% in 2023 with a 1% per year
phase out until 2030 and 2% beyond 2030.
Carbon unit prices used are based on
independent expert forecasts.
No significant change.
Carbon unit prices used are based on
independent expert forecasts and are
consistent with the December 2020
impairment assessment.
Import terminal conversion
An import terminal is assumed to commence its
operation from 2036, with an estimated average
revenue of circa $90 million per annum in real
terms through to 2050. Operating and capital
costs are estimated at an average of circa $35
million per annum in real terms.
No significant change.
An import terminal is assumed to commence
its operation from 2036, with an estimated
average revenue of circa $80 million per
annum in real terms through to 2050.
Operating and capital costs are estimated at
an average of circa $35 million per annum in
real terms.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
20
The Group considered a range of possible sensitivities associated with each of the key assumptions,
across the full period modelled and based on a range of potential outcomes for each of these
assumptions.
It should be noted that changes in a combination of the key assumptions could also have a significant
impact upon the recoverable amount assessed.
*The sensitivity shown for EITE industrial allocations under the ETS and carbon unit prices is intended
to show both the impact of a change in the industrial allocation made to the Company (from 87% on
entry to the NZ ETS 2023) as well as the impact of a change in carbon costs. For illustrative purposes,
a sensitivity has been shown based on a 60% allocation in 2023 and a 1% per year phase out of rates
of assistance over 2021 to 2030, and a carbon cost of $70/t (being a doubling of the containment
reserve trigger in the ETS as proposed by the advice from the Climate Change Commission).
December 2020
June 2021 Update
Forecast period and terminal value
Due to the long-term, cyclical nature of the
business, a 30-year forecast period has been
adopted with a terminal value.
No significant change.
Due to the long-term, cyclical nature of the
business, a 30-year forecast period has been
adopted with a terminal value taking into
account a negative 2.5% growth rate.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
21
4 Income
FOR THE SIX MONTHS ENDED 30 JUNE GROUP GROUP
30 JUNE 30 JUNE
2021 2020
$000 $000
Comprises:
Processing fees 69,602 69,991
Natural Gas recovery 11,822 16,099
Other refining related income 8,855 7,852
REFINING REVENUE 90,279 93,942
Pipeline and terminalling fee revenue 20,204 17,150
Wiri land and terminal lease income 3,263 3,263
DISTRIBUTION REVENUE 23,467 20,413
Other operating revenue 1,525 1,799
TOTAL REVENUE 115,271 116,154
Other income 159 2,964
TOTAL INCOME 115,430 119,118
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 $141 million for 2021. At
30 June 2021, the actual processing fee earned from operations was below the pro-rated fee floor,
resulting in $29 million being paid by Customers as an interim fee floor top-up payment (30 June
2020: $38.9 million).
The pro rata fee floor payment by Customers to 30 June 2021 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 resulting in a low near-term margin outlook.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
22
5 Segment information
The Corporate Lead Team reviews the Group’s internal reporting 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 (RAP) 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.
The Corporate Lead Team primarily uses revenue and adjusted earnings before finance costs, tax,
depreciation and amortisation (or ‘A djusted EBITDA’) of the Parent Company as measures to assess
the performance of the operating segments. For a reconciliation between the Non-GAAP measure,
Adjusted EBITDA, to the reported net loss after tax refer to Note 16.
Assets and liabilities information, depreciation, finance income and costs and taxes are managed on a
Group basis and are therefore not presented as part of the segment information.
Segment results
30 JUNE 2021
OIL REFINING INFRASTRUCTURE TOTAL
$000 $000 $000
External customer 90,279 25,151 115,430
Inter-segment - 2,066 2,066
TOTAL INCOME
(*)
90,279 27,217 117,496
Adjusted EBITDA 14,632 19,909 34,541
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 1,647 18,870 20,517
(*) prior to consolidation eliminations
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
23
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 2021 are consistent with those disclosed in
the audited financial statements for the year ended 31 December 2020.
7 Equity
The issued capital of the Company is represented by 313,484,559 ordinary shares (2020: 312,893,643)
issued and fully paid, less 968,907 (2020: 519,859) treasury shares held by CRS Nominees Limited (the
Trustee). All ordinary shares rank equally with one vote attached to each ordinary share.
In addition to the 1,250,000 Performance Share Rights (PSRs) granted in 2020 to the Chief Executive
Officer (CEO), 3,110,672 PSRs were granted on 1 April 2021 under the Share Rights Plan to the CEO
and Management
in recognition of and reward for performance in 2020 and to retain and incentivise
key members of Management through the implementation of Strategic Review outcomes in coming
years
. The PSRs were issued for nil consideration with service conditions only and will vest two years
after the grant date (i.e. April 2023), subject to grantees’ continued employment with the Company.
On 1 April 2021, the Company issued 590,916 ordinary shares, at an issue price of 46.75 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 employees following a restricted period of three years.
The total cost of the share rights under the Share Rights Plan and Employee Share Purchase Scheme
recognised in the six months to 30 June 2021 was $0.1 million (30 June 2020: $0.1 million) with a
corresponding increase in Share Scheme Entitlement Reserve.
8 Borrowings
In June 2021 Refining NZ received committed credit approved terms for:
• An extension of a $25 million facility maturing in September 2021 to March 2023, and
• Two bank facilities of $15 million each (totalling to $30 million) to provide liquidity support for
the potential import terminal conversion (subject to documentation and satisfying conditions
precedent) (“Conversion Funding”). The two facilities mature in December 2022 and March
2023.
On 18 August 2021, the Company entered into a binding agreement in relation to the conversion
funding as disclosed in Note 15.
As at 30 June 2021 the total available debt funding facilities amounted to $380 million (including the
Company’s $75 million subordinated notes on issue). This will increase to $410 million following the
satisfaction of conditions precedent in relation to the import terminal conversion funding.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
24
The table below outlines the maturity profile of the facilities as at 30 June 2021 (excluding credit
approved conversion facilities of $30 million), noting that the September 2021 expiring facility was
extended subsequent to balance date as referred to above):
MATURITY GROUP GROUP
DATE
30 JUNE 31 DECEMBER
2021 2020
$000 $000
BORROWINGS
Current borrowings:
Revolving cash advances
Mar-22
10,000 -
Total current bank borrowings
10,000 -
Non-current borrowings:
Revolving cash advances
Mar-22
- 35,000
Revolving cash advances
Mar-23
70,000 70,000
Revolving cash advances
Jun-24
25,000 25,000
Revolving cash advances
Mar-25
85,000 70,000
Subordinated notes*
Mar-34
74,638 74,611
Total non-current borrowings
254,638 274,611
TOTAL BORROWINGS
264,638 274,611
UNDRAWN FACILITIES
Revolving cash advances
Sep-21
25,000 25,000
Revolving cash advances
Mar-22
30,000 5,000
Revolving cash advances
Mar-23
35,000 35,000
Revolving cash advances
Jun-24
15,000 15,000
Revolving cash advances
Mar-25
10,000 25,000
TOTAL UNDRAWN BORROWING FACILITIES 115,000 105,000
(*) The difference between the carrying value and the $75 million face value is due to unamortised
issue costs and accrued interest. While the expiry of the subordinated notes is on 1 March 2034, the
first election date is in March 2024, when the Company may elect to either redeem the notes or to
offer new conditions to the noteholders.
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
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
25
9 Property, plant and equipment, right-of-use assets and
intangibles
During the six months ended 30 June 2021 the Group acquired property, plant and equipment with a
cost of $19 million. Increase in the right-of -use assets is associated with lease modifications, resulting
in an increase in both the right-of -use asset and finance liability balance. The increase in intangibles is
associated with the New Zealand Units (carbon units) received in advance for the whole 2021 year.
There were no borrowing costs capitalised during the reporting period (30 June 2020: $0.7 million
capitalised at the weighted average rate of 5.4%).
10 Capital commitments
Commitments are related to asset purchases contracted as at the reporting date but not provided for
in the financial statements. As at 30 June 2021 the capital commitments amounted to $4.4 million (31
December 2020: $20.2 million).
11 Trade and other receivables and payables
Trade and other receivables and trade and other payables both include excise dut ies of $94.8 million
(31 December 2020: $135.8 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.
12 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 employee benefits have reduced as at 30 June 2021 primarily due to the following:
• Updated actuarial assumptions
The actuarial assumptions used in the 30 June 2021 valuation were consistent with those
adopted as at 31 December 2020 except for the discount rate adopted at 30 June 2021, set
with reference to redemption yields on bonds, was 2.5% (31 December 2020: 1.7%) resulting
in a reduction in defined benefit pension and medical plan liability.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
26
• Defined Benefit Pension Fund Cash-Out
In May 2021, the Company offered pensioner members of the defined benefit pension plan
the choice of converting some or all of their pension benefits to a one-off cash lump sum. In
total 63 pension fund members accepted the offer and a total of $18.8 million was paid out in
June 2021. In addition, seven former members of the fund were paid redundancy benefits of
$4.5 million.
Total settlement payments in relation to the cash-out offer and redundancies amounted to
$23.4 million and these payments extinguished defined benefit obligations of $27.5 million,
resulting in a settlement gain of $4.1 million (or $6.1 million including contributions tax)
recognised in the consolidated income statement.
• Medical Plan Cash-Out
Beneficiaries of the medical plan were offered the choice of converting their entitlements to
post-retirement health insurance benefits to a one-off cash lump sum. In 2021 six retirees
accepted the cash out and a total of $0.6 million was paid out to the beneficiaries, resulting in
a settlement gain of $2.7 million recognised in the consolidated income statement.
The total settlement gain on Defined Benefit Pension Fund and Medical Plan of $6.8 million
(or $8.9 million including contributions tax) is netted off the wages, salaries and benefits
expense in the consolidated income statement.
The total amount recognised in the Income Statement and Other Comprehensive Income is as
follows:
GROUP GROUP
30 JUNE 30 JUNE
2021 2020
$000 $000
Service cost (884) (1,059)
Net interest cost (34) (146)
Settlement gain 6,762 -
Contributions tax 1,574 (568)
PLAN INCOME/(EXPENSE) IN INCOME STATEMENT 7,418 (1,773)
Actuarial gains/(losses) 5,495 (9,062)
Actual return on plan assets greater/(lower) than discount rate 5,038 (3,604)
Contributions tax 5,082 (7,261)
TOTAL RECOGNISED IN OTHER COMPREHENSIVE INCOME
WITH CONTRIBUTIONS TAX 15,615 (19,927)
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
27
13 Deferred tax
The deferred tax asset has decreased during the six months ended 30 June 2021 as a net result of the
reduction in employee benefit liabilities (particularly defined benefit pension plan and medical
scheme as disclosed in Note 12) and an increase in the tax losses during the reporting period (as
disclosed under the Use of judgements and estimates). The increase in the deferred tax liability is
associated predominantly with the movement in hedging contracts.
14 Contingencies
In 2020 Refining NZ received contractual dispute notices from each of its three oil company
customers in relation to the refinery simplification (refer to Note 1). Refining NZ also issued its own
dispute notice in 2020, in which the Company makes a separate claim that the total fee “floor”
payable by all of the customers should be higher. The detail of the dispute notices is fully disclosed in
the Company’s financial statements for the year ended 31 December 2020.
Refining NZ will seek the release of these unresolved disputes relating to the refinery operations with
effect from conversion of the refinery to an import terminal as part of the commercial arrangements
with Customers.
15 Events after balance date
The following events occurred after balance date:
• Shareholder Vote
On 6 August 2021 Refining NZ held a Special Meeting of shareholders at which the Company’s
shareholders voted in favour of the proposed conversion of the Marsden Point Site into a
dedicated import terminal.
The following two resolutions were passed by the shareholders:
o Approval of the import terminal conversion proposal as a major transaction and change in
nature of business.
o Entry into new contracts with customers as related party transactions.
Despite the receipt of shareholder approval, the decision to convert to an import terminal still
remains subject to:
- Final Investment Decision by the Refining NZ Board, after considering the Front-End
Engineering and Design (FEED) assessment by management, which is targeted to occur by
the end of the third quarter of 2021.
- Entry into Terminal Services Agreements (TSAs) and Transition Agreements with all existing
Customers; and
- Satisfying the conditions precedent for conversion funding provided by Refining NZ’s
lenders.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
28
• Bank Facilities Extended and additional funding secured (Refer to Note 9)
On 18 August 2021, the Company entered into a binding agreement to extend a $25 million
facility set to mature in September 2021, out to March 2023 and secured an additional $30
million of bank facilities to support the potential import terminal conversion. The weighted
average term of the Company’s debt funding facilities of $410 million, including the
Company’s $75 million subordinated notes on issue and import terminal conversion funding
(referred to above), is circa 4.2 years.
16 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 these financial statements. The Directors and the Corporate Lead
Team 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 and disposal costs,
impairment of assets, finance costs and income tax.
Adjusted EBITDA Reported EBITDA adjusted for other non-cash expenses and used for bank
covenant purposes.
Notes to the Interim Financial Statements
FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
29
GROUP GROUP
30 JUNE 30 JUNE
2021 2020
NOTE
$000 $000
Reported net loss after tax for the period (GAAP)
(4,914) (186,348)
Add back:
Income tax
(785) (70,879)
Net finance costs
5,422 6,406
Impairment of assets
3
- 218,903
Depreciation and disposal costs
41,781 47,300
Reported EBITDA
41,504 15,382
Add back non-cash expenses:
Stock write-offs
682
3,269
Defined benefit pension fund (including settlement)
12
(7,418) 1,720
Non-cash share rights cost
7
115 -
Interest income
47 146
Loss on disposal
(389) -
Adjusted EBITDA
34,541 20,517
Corporate Directory
30
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 R Cavallo
N L Jones
Share Register L Nation
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
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.
REFININGNZ.COM
---
Template
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 17 October 2019
Results for announcement to the market
Name of issuer The New Zealand Refining Company Limited
Reporting Period 6 months to 30 June 2021
Previous Reporting Period 6 months to 30 June 2020
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$115,430 (3.1%)
Total Revenue $115,430 (3.1%)
Net profit/(loss) from
continuing operations
$(4,914) (97.4%)
Total net profit/(loss) $(4,914) (97.4%)
Interim/Final Dividend
Amount per Quoted Equity
Security
No interim dividend declared
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.73 $1.74
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
Laura Malcolm
Contact phone number +64 (0)21 0236 3297
Contact email address communications@refiningnz.com
Date of release through MAP
19/08/2021
Unaudited financial statements accompany this announcement.
---
REFINING NZ
HY 2021 RESULTS
PRESENTATION
1
REFINING NZ
2021
I N T E R I M R E S U L T S B R I E F I N G
REFINING NZ
HY 2021 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 ofterms 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 accountthe 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 otherprofessional adviser if necessary.
•In light ofthese 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 ofthe 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
roundedand 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,19 August 2021.The financial statements referenced in this presentation have
been prepared based on existing Group operations under the current Processing Agreements, as at18 August 2021.
REFINING NZ
HY 2021 RESULTS
PRESENTATION
HY 21 PERFORMANCE
STRATEGIC REVIEW
UPDATE
REFINING NZ
HY 2021 RESULTS
PRESENTATION
4
PERFORMANCE SUMMARY VS PLAN
Safe, reliable and compliant operations
Turnaround 2021 executed safely, on time and within budget
Cash break-even operations at the Fee Floor
1
Conclude import terminal negotiations with customers
Progress required shareholder and lender approvals and detailed planning
Long term plan to unlock infrastructure value
1
Cash neutral excludes Strategic Review restructuring and implementation costs
P
P
Create the time to negotiate with customers
P
P
Refining NZ has maintained cash neutral operations at the Fee Floor, and received a shareholder mandate to proceed with an
import terminal conversion
REFINING NZ
HY 2021 RESULTS
PRESENTATION
5
HY2021 PERFORMANCE HIGHLIGHTS
Safely delivered cash neutral operations at the Fee Floor
HY21HY 20
PersonalTRCF
[1]
00.31
Process
Tier 1
[1]
20
Tier 2
[1]
00
Releases outside of consent91
RefineryThroughput
Mbbl
13.115.4
RAP Throughput
Mbbl
7.17.5
Operational availability
%
92.396.8
Cashflow from operations
NZ$M
2214
Net debt
[2]
NZ$M
230231
Operating costs
[3]
NZ$M
6288
Capital Expenditure
[4]
NZ$M
2122
PSafe operations
PCashneutral at the Fee Floor
PDeliver to customer plan
$
1.For a full definition please refer to the Glossary in Appendix 1
2.Comparative for net debt as at 31 December 2021
3.Excludes natural gas passthrough costs, but includes strategic review and restructuring costs
4.Payments for property, plant and equipment (cashflow basis)
REFINING NZ
HY 2021 RESULTS
PRESENTATION
6
SAFE OPERATIONS
A record performance with no recordable incidents in over 19 months
•19 months of operations with no recordable incidents, including
through the 2021 turnaround, reflecting a record personal safety
performance for Refining NZ
•Two Tier 1
[1]
process safety events:
•A fire (which was quickly extinguished with no significant
damage to the plant) occurred in the hydrocracking unit
when shutting down the plant for turnaround
•An LPG pipeline leak was quickly isolated and repaired
•Actions taken to further strengthen existing controls
•Site resource consent, covering refinery and import terminal
operations, renewed for 35 years
•Releases outside of consent involved the unauthorised use of
non-compliant fire-fighting foam during recent fire training
exercises
•Independent investigation into the incident
•Steps promptly taken to mitigate effects of foam discharge
•On-site controls further strengthened
•Ongoing testing to determine if any further treatment or
remediation is required
1For a full definition please refer to Glossary in Appendix 1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0
2
4
6
8
10
20172018201920202021
#/200k hours
Number
TOTAL RECORDABLE CASES
[1]
Other TRC (medical treatment, restricted work cases) LHS
Lost time injuries LHS
TRCH, RHS
LTIF, RHS
0
2
00
2
4
3
00
0
0
1
2
3
4
5
6
20172018201920202021
PROCESS SAFETY INCIDENTS
Number (for calendar year)
Tier TwoTier One
REFINING NZ
HY 2021 RESULTS
PRESENTATION
7
DELIVER TO CUSTOMER PLAN
HY21HY 20Change
Refinery Throughput
Mbbl
13.115.42.3▼
15%
RAP Throughput
Mbbl
7.17.50.4▼
5%
Operational
availability
%
92.396.84.5▼5%
Simplified refinery model implemented from beginning of the year
•Simplified refinery model implemented from January 2021, with
Refinery capacity reduced by circa 18%
[1]
•Gasoline and diesel demand have largely recovered to pre-
COVIDlevels, however demand for jet fuel remains weak at c.40%
of pre-COVID levels
•Lower operational availability reflects the impact of a four-week
maintenance turnaround successfully completed in March 2021,
including the first statutory inspection of the CCR unit
1Equivalent of c.34 million barrels per annum with total refined fuels production levels similar to levels at the time of commencement of the Processing Agreement in 1995 and the cessation of bitumen production
REFINING NZ
HY 2021 RESULTS
PRESENTATION
8
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.
US$/BARREL
HY 20HY 21Change
Singapore Complex Margin
(SCM)
1
(1.60)(2.09)(0.49)
Freight1.611.740.13
Product quality0.760.74(0.02)
Plant availability(0.22)(0.42)(0.20)
Crude cost and yield1.293.241.95
Refining NZ uplift3.425.281.86
RNZ GRM1.823.191.37
REFINING MARGINS
Weak refining margins due to excess capacity exacerbated by
COVID-19 demand impacts
•Negative Singapore complex margins continued in HY21
•Stronger Refining NZ uplift due to the lower price for
crudes processed by Refining NZ relative to the Dubai
crude price coupled with a lower fuel oil make
•Fee Floor contributions of c.$29 million (HY20: $39 million)
REFINING NZ
HY 2021 RESULTS
PRESENTATION
9
HY2021 FINANCIAL SNAPSHOT
1.For further information, please refer to our HY21 Financial Statements, available at http://www.refiningnz.com/investor-centre.aspx
2.For a reconciliation of these Non-GAAP measures, please refer to Appendix 2 and our HY21 Financial Statements for further detail
3.Payments for property, plant and equipment (cashflow basis)
4.For a full definition please refer to the Glossary in Appendix 1
5.HY20 Net Loss after tax impacted by half-year impairment of c.$158 million (net of tax)
Maintained cash break-even operations at the Fee Floor
•Fee Floor in operation since 1H20, protecting
against the full extent of margin and demand
decline
•Refinery revenue lower due principally to reduced
natural gas supply (c.$4.3 million)
•Infrastructure revenue includes c.$5 million in
terminal fees from the import of refined products
during the turnaround
•Four-week maintenance turnaroundsafely
completed, to schedule and below budget, at a
total cost of $21 million (including $12 million in
HY21)
•Maintained cash neutral operations at the Fee
Floor after implementing simplified refinery
changes, including cost of turnaround
•No dividend
HY 21HY 20Change
Revenue -Refinery
[1]
NZ$M
90.396.5▼
6%
Revenue -Infrastructure
[1]
NZ$M
25.122.6
11%
EBITDA
[2]
NZ$M
41.515.4
169%
Adjusted EBITDA
[2]
NZ$M
34.520.5
68%
Capital Expenditure
[3]
NZ$M
21.022.0▼
5%
Free cash flow
[4]
NZ$M
1.2(8.3)
nm
Net Profit/(Loss) after tax
NZ$M
(4.9)(186.3)
97%
Net Debt
[4]
NZ$M
230.1231.3
▼
nm
REFINING NZ
HY 2021 RESULTS
PRESENTATION
10
A significant improvement in EBITDA through refinery simplification
HY21 v HY20 EBITDA COMPARISON
HY 21HY 20
Processing Fee
NZ$M
70.070.0
RefineryThroughput
Mbbl
13.115.4
GRM
US$/bbl
3.191.82
RAP Throughput
Mbbl
7.17.5
Pipeline Fee
NZ$M
14.916.3
Terminal Fee
NZ$M
5.30.9
Non-cash release includes:
Pension Fund settlement gain $6.2m
Medical Scheme settlement gain $2.7m
Stock Provision HY20$2.7m
REFINING NZ
HY 2021 RESULTS
PRESENTATION
HY 21 PERFORMANCE
STRATEGIC REVIEW
UPDATE
REFINING NZ
HY 2021 RESULTS
PRESENTATION
12
STRATEGIC REVIEW HIGHLIGHTS 1H21
In-principle agreement with bp and Z Energy on commercial terms
Shareholder approval for the Import Terminal Conversion with 99% vote in favour (including Mobil)
Initial assessment complete of potential Marsden Point repurposing options
P
Front End Engineering Design and detailed planning well progressed
On trackfor Final Investment Decision end of Q3/21and terminal conversion by mid-2022
P
P
P
P
P
Significant progress made to deliver Strategic Review outcomes
Lender consent for Conversion and funding secured
REFINING NZ
HY 2021 RESULTS
PRESENTATION
13
TIMELINE FOR STRATEGIC REVIEW
Import terminal
assessment/planning
(July 2020-now)
Final Investment Decision
(FID) / Binding customer
agreements
(Target –end Q3 2021)
Front-end engineering & design and detailed planning
Customer term sheet & TSA
negotiations
Refinery run-down planning
and execution
Refinery decommissioning
(2 years)
Site repurposing
(10+ years)
Ongoing terminal works
(5-6 years)
Import terminal works
Site repurposing opportunity identification
Shareholder and lender
approvals
Workforce development
Workforce transition
(2 years)
Import terminal
commencement
(Target –by mid-2022)
Customer consultation & negotiation
Workforce engagement, planning and consultation
Simplified Refinery
implementation
(July 2020 -Jan 2021)
Strategic Review
Phase 1
(April-June 2020)
Consultation with Government, employees, Iwi and community on our future
Refinery Transition Working group formed to support transition
Clear timeline to final decision and for transition
REFINING NZ
HY 2021 RESULTS
PRESENTATION
14
REPURPOSING OPPORTUNITIES
Horizon 1
Existing technology / market
Private & strategic fuel storage
VLSFO imports
Bitumen imports
Solar farm -On-grid/off-grid
+battery/firming
Horizon 2
Investment / market
development required
Biofuels terminal services
Sustainable aviation fuels
production
Horizon 3
New market /
technology
Marsden Point has the potential to contribute to the energy challenges New
Zealand needs 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
Green hydrogen
Initial opportunity assessment undertaken, with options
identified for further consideration
1
1
Options listed are subject to ongoing work to assess potential feasibility. Disciplined approach to allocation of capital for options that can deliver an above cost of capital return.
REFINING NZ
HY 2021 RESULTS
PRESENTATION
15
REFINING NZ
2021
I N T E R I M R E S U L T S B R I E F I N G
REFINING NZ
HY 2021 RESULTS
PRESENTATION
16
APPENDIX 1GLOSSARY
•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 anyone-hour period.
•Net debt –Net debt comprises total borrowings less cash and cash equivalents
•Operating “cash neutral” –maintaining a “flat” net debt position (i.e. total lender debt, including subordinated notes, less and cash/funds held on deposit),
after paying all operating, capital and funding costs out of the company’s revenue receipts. This excludes Strategic Review restructuring costs.
•Reported EBITDA–Earnings Before Depreciation and Disposal Costs, Impairment of assets, Finance costs and Income Tax in 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 ANNUAL RESULTS
PRESENTATION
17
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 Full-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
20212020
NOTE$000$000
Reported net loss after tax for the period (GAAP)(4,914)(186,348)
Add back:
Income tax(785)(70,879)
Net finance costs5,4226,406
Impairment of assets3-218,903
Depreciation and disposal costs41,78147,300
Reported EBITDA41,50415,382
Add back non-cash expenses:
Stock write-offs6823,269
Defined benefit pension fund (including settlement)12(7,418)1,720
Non-cash share rights cost7115-
Interest income47146
Profit/(loss) on disposal(389)-
Adjusted EBITDA34,54120,517
REFINING NZ
2020 ANNUAL RESULTS
PRESENTATION
18
REFINING NZ
2021
I N T E R I M R E S U L T S B R I E F I N G
---
HY21 INTERIM
RESULTS
NZX Release
19 August 2021
Summary
• The simplified refinery plan, implemented from the beginning of the year, enabled the
Company to safely operate cash neutral at the Fee Floor, with net debt at $230 million as at
30 June 2021 (FY20: $231 million).
• The Company’s record personal health and safety performance continued with no
recordable injuries during the period. Two tier 1 process safety incidents were responded to
quickly with no significant damage to the plant and actions taken to prevent reoccurrence.
• The planned maintenance turnaround, including the first statutory inspection of the CCR,
was completed safely, to plan and below budget.
• An average Gross Refining Margin of US$3.19 per barrel was earned (HY20: US$1.82), and
circa $29 million of Fee Floor subsidies paid by Customers in the six months ended 30 June
2021 (HY20: $39 million).
• A $25 million reduction in total operating costs through refinery simplification and
optimisation of the balance sheet, increasing EBITDA by circa 169% to $41.5 million (HY20:
$15.4 million).
• A reported net loss after tax of $4.9 million (HY20: ($186.4) million, including a non-cash
impairment of $158 million).
• The Company continues to prepare for a final investment decision around the end of Q3/21,
following 99% of shareholders voting in support of an import terminal conversion and lender
consent being given.
Financial snapshot
Half year (NZ$ m) 2021 2020 Change
$ %
Income 115.4 119.1 (3.7) (3.1%)
EBITDA
1
41.5 15.4 +26.1 +169%
Adjusted EBITDA
2
34.5 20.5 +14.0 +68%
Capex (21.0) (22.0) +1.0 +5%
NPAT (4.9) (186.3) +181.4 +97%
Free cash flow 1.2 (8.3) +9.9 <nm>
Refining NZ today released its interim financial results, reporting an EBITDA of $41.5 million –with
simplified refinery changes enabling the Company to operate cash neutral at the Fee Floor. Net debt
closed flat at $230 million (FY20: $231 million).
The Simplified Refinery operating model, implemented from the start of the year, reduced the
Company’s refining capacity by circa 18% and bitumen production was ceased. Chief Executive Officer
Naomi James commented that the operational change was necessary to enable the Company to operate
cash neutral at the Fee Floor, while providing the time to assess the import terminal option and
negotiate commercial arrangements with customers.
“In setting the plan for 2021, we had to find a way to continue to safely operate the refinery through an
extended period of low margins, earning the Fee Floor under the Processing Agreements, while not
losing cash and destroying shareholder value.
“Our customers have all expressed a desire to transition to an import terminal model and we needed
time to negotiate long-term commercial arrangements which were both fair to our customers but also
delivered fair value for shareholders from our infrastructure, and ensured we had time to ready our
workforce and community for this significant change. The Simplified Refinery has enabled us to do that,
and we are pleased to have received the strong support of our shareholders and lenders to move to an
import terminal model”, said Ms James.
Ms James added: “We don’t expect a change from refinery to import terminal will involve much change
for New Zealanders as we already import a large portion of New Zealand’s fuel needs. However, this is a
significant change for our people, and the Marsden Point Community, and we thank all those from
across the wider Northland region, who have engaged with us throughout our strategic review process
over the past 16-months as we worked to find the best operating model for our business moving
forward.”
1
EBITDA = Reported Net Profit/(Loss) before depreciation, disposal costs, impairment, finance costs and taxation.
2
Adjusted EBITDA = EBITDA adjusted for other non-cash expenses and used for bank covenant purposes.
3
Includes non-cash
impairment of refining assets of $158 million after tax.
The safety of Refining NZ’s workplace and the health and wellbeing of its people are core company
values and at the heart of the on-site culture and despite the changes that have taken place through
simplification, our commitment to delivering safe operations has never wavered.
Ms James said “We were extremely pleased to continue our strong health and safety track record
throughout the period which is a testament to the safety culture on display every day. The result was
particularly pleasing given that we undertook a maintenance turnaround during the period.
Maintenance turnarounds are complex to plan and execute and to be able to complete it safely, within
the scheduled timeframe and under budget, further evidences the skill and commitment of our people.”
The first statutory inspection for the CCR Platformer (Te Mahi Hou Project) and routine inspection and
maintenance for the crude distillation unit and associated plant was successfully completed. During the
turnaround, all other processing units not undergoing maintenance were temporarily shut down and
customers imported refined fuel into Marsden Point during this period.
Two process safety incidents were recorded during the period with both responded to quickly, resulting
in no significant damage to the plant. The Company recorded unauthorized releases outside of consent
when non-compliant firefighting foam was used during recent fire training exercises. Ms James said
“We are extremely disappointed that this incident has occurred after we stopped the use of such foams
for training purposes a number of years ago. We quickly commissioned an independent investigation to
determine what had occurred. The Company has taken action to mitigate the effects of the discharge
and to further strengthen on-site controls, and there is on-going testing to determine if any further
treatment or remediation is required.”
Refinery throughput for the six months was 13 million barrels compared with 15.4 million barrels in the
six months ended 30 June 2020, reflecting the reduced capacity from the refinery simplification and the
impact of the planned four-week maintenance turnaround. Pipeline throughput was 7.1 million barrels
compared with 7.5 million barrels in the prior corresponding period, with the lower volumes
predominantly reflecting the reduction in demand for jet fuel into Auckland International Airport due to
ongoing COVID-19 border restrictions.
Singapore complex margins (SCM) remained negative throughout the first half of 2021, averaging
negative US$2.09 per barrel (HY20 negative US$1.60); the uplift earned by Refining NZ over the SCM
was strong at USD5.28 per barrel (HY20 USD3.42 per barrel). The uplift is primarily due to the lower
price for crudes processed by Refining NZ relative to the Dubai crude price, coupled with a lower fuel oil
make.
Processing fee revenue prior to Fee Floor payments was $41 million, compared to $31 million in the
prior period. In addition, Refining NZ customers were invoiced $29 million in Fee Floor payments,
compared to $39 million in the same period in 2020. In the 18 months ended 30 June 2021, our
Customers have made Fee Floor subsidy payments amounting to circa $118 million.
“Very little has changed in the broader environment in which we operate. Refining margins continue to
be weak and excess refining capacity in the Asia Pacific region remains. We have seen little
improvement in the supply/demand balance and expert analysis agree that we should not expect a
significant improvement in margins in the near term.” said Ms. James.
Operating costs, excluding natural gas costs passed through to customers and one offs, were around $22
million lower than the previous corresponding period, when the full refinery was operating in cyclic
mode following the COVID-19 outbreak. The implementation of the simplified refinery model accounted
for approximately $13 million of the total cost reduction through changes to maintenance philosophies,
reduced variable costs and a circa 25% reduction in staff numbers. The Company also recorded a non-
cash settlement gain of approximately $9 million following the “cash out” of defined benefit pension
fund and medical retirees’ obligations, as part of the Company’s plan to optimize the balance sheet.
Following shareholder approval at the 6 August Special Meeting, the Board is now progressing to a Final
Investment Decision around the end of quarter three of this year which would enable a conversion to
occur by mid-2022. The vote received strong shareholder support, with 99 per cent voting in favour of
the proposed import terminal, including all of our Oil Company shareholders; we are working to
conclude a binding agreement with all 3 customers ahead of this final investment decision.
We continue to work with our workforce to support them in preparing for this change. We are working
with our local community leaders and central Government through the Northland Refinery Transition
Working Group to identify opportunities for jobs and economic activity that can help reduce the impact
of a closure of the refinery on the Northland region. Refining NZ has completed its initial assessment of
repurposing opportunities for the Marsden Point site and identified a number of site repurposing
opportunities where further work will be progressed.
Looking ahead to the remainder of this year, Refining NZ will continue to focus on operating the
simplified refinery safely and meeting its commitments to customers under the Processing Agreements
while operating within the Fee Floor. With the expected transition to the import terminal next year, to
be underpinned by new long-term agreements with each of BP, Mobil and Z Energy, the company is
expected to generate significantly more stable earnings compared with the inherent volatility of oil
refining, deliver superior “through the cycle” returns to shareholders and be strongly positioned to
participate in a decarbonisation of the New Zealand transport and energy market, including through
opportunities to repurpose its Marsden Point industrial site.
Results call
Refining NZ will host a results presentation call for investors and analysts at 11:00am, Thursday 19
August 2021. To access the audioconference link and to register to view the presentation, go to
www.refiningnz.com.
Laura Malcolm,
Communications Advisor
E: communications@refiningnz.com
T: +64 (0)21 0236 3297
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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