South Port NZ Ltd – 2021 Annual Meeting

2021 ANNUAL MEETING NZX AND MEDIA STATEMENT


29 October 2021

South Port focused on building resources to meet
existing and future demand

The Chairman, Mr Rex Chapman, opened the Annual Shareholders’ Meeting at Bluff today
with the introduction of South Port’s new logo and Māori motto which was recently adopted by
the Port following extensive consultation with Te Rūnunga o Awarua.

“Our purpose is ‘to facilitate the best logistic solutions for the region’ and we felt it was time for
the Company to have a logo and motto that would reflect Bluff’s distinctive characteristics,
heritage and future as well as our purpose,” said Mr Chapman.

“Te Pūkorokoro o Murihiku epitomises who we are, where we are from and what we do – our
whaka pepeha. Te Pūkorokoro o Murihiku is a phrase that was inspired by the opening of
Bluff’s Island Harbour in December 1960 by the then Governor General of New Zealand, Lord
Cobham who stated that “trade is the breath of life to a great exporting country, and a country
breathes through its ports”.”

“Our new motto metaphorically refers to the Port of Bluff as the trachea or windpipe of
Southern New Zealand. Those that ply our channel with the ebb and flow of its tide, will
understand why this description of the Port as a windpipe is very appropriate.”

“Within Te Ao Māori, “the Bluff” is symbolically referred to as Te Taurapa o Te Waka o Aoraki
or Te Taurapa o Te Waka a Māui, the sternpost of the South Island. Incorporating this aspect
of a waka into South Port’s logo therefore speaks to our specific location. The incorporation
of dual taurapa represent vessels safely entering and exiting Awarua.”

“The other element incorporated is the waharua kōpito. Versions of this pattern feature in
traditional Māori garments and on marae complexes. In the Port’s case it represents a point
where people or events interact with and reshape one another, i.e. Bluff is a place where the
land meets the sea, southern New Zealand meets the world, and the past meets the future.”

“We wish to publicly acknowledge the koha of our logo and motto and record our thanks to the
Awarua Rūnanga. We would also like to acknowledge Dr Michael Stevens, Ngāi Tahu
Historian, for his valuable input into the process. An official hui and gifting ceremony were
scheduled to be held in August before lockdown intervened and it will now be rescheduled
when alert levels will allow this gathering to take place.”

FINANCIAL AND OPERATING HIGHLIGHTS

“This year’s after-tax profit is slightly ahead of the guidance provided at the time of our interim
report in February at $10.71M, being a 13.6% increase on the previous year,” said
Mr Chapman. “This result is significant on two counts, firstly, it is a record for the Port, being
the first time the Company has broken the $10M mark and secondly, the result was achieved
on a much smaller percentage increase in total cargo which was only up 5.5% compared to
the 13.6% increase in profit.”

SOUTH PORT NEW ZEALAND LIMITED

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“Our bulk cargoes have again proven to be, and will likely remain, the backbone of the
Company’s business with containerised cargo accounting for 15% and bulk cargo 85% of our
total tonnage of 3,454,000MT, which is a similar percentage split to previous years,” said
Mr Chapman.

Chief Executive, Mr Nigel Gear said, “A record container handling volume of 53,750 TEU was
achieved, a 13% increase on the previous period. What was more impressive is that we
handled this volume on an 8% reduction in container vessels calling at the Port.”

“The construction of the reefer tower completed during the financial year provides much
needed additional capacity to handle refrigerated containers on the Port.”

“Due to the increase in container volumes being shipped through the Port an expansion of the
terminal area has been achieved through the demolition of a shed which will increase our
container storage capacity by 24%.”

An increase of 54% was achieved in logs through the Port and a 19% increase in woodchips
in comparison to the previous period. While the log increase is impressive, it is important to
remember that during the previous financial year, forestry operations ceased during the
March/April lockdown period.

Along with all New Zealand ports, South Port is experiencing strong growth in log volumes.
This year 730,000 tonnes of logs were exported out of the Port which is a record for this cargo
and coincided during a period of very high demand for wood fibre worldwide and in particular
for New Zealand grown radiata in China.

As discussed in previous years, the Company’s 20-year Asset Management Plan has now
reached a peak in its higher expenditure levels, reflecting the age of the Port’s infrastructure.
Expenditure is expected to reduce in the coming years. The Company has been fortunate over
the period of this higher maintenance spend to have had consistent profit levels which has
allowed the Board to maintain the dividend at a consistent record dividend level of 26 cents per
share.

However, this year, the Board resolved to increase the year-end dividend by one cent which
represents a 4% increase. The decision to increase the dividend reflects the Port’s earnings
being approximately $1.3M more than had been originally forecast.

Covid-19 Response

Earlier in the year the Government introduced a Health Order that mandated that all port staff
who interact at the border are required to be 100% vaccinated. The Company had already
largely achieved that target before it was mandated, and 100% of the Port’s Tier 1 workers
are fully vaccinated.

87% of the Port’s permanent employees are now fully vaccinated and expect that percentage
will continue to increase and surpass 90%. All new employees are required to be fully
vaccinated as a condition of their employment. As we know, vaccination rates at these levels
and above will significantly reduce the risk associated with COVID in our workforce and
community.

Mr Gear said, “Our systems were put to the test when the container vessel, Mattina, operated
by Mediterranean Shipping Company, entered the Port with crew members showing flu-like
symptoms. Once testing of the crew was undertaken and the delta variant of COVID was
detected, the vessel was quarantined and controlled thereafter by Customs, Ministry of Health
and the Port, very successfully.”

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NEW ZEALAND ALUMINIUM SMELTER (NZAS)

At the Annual Meeting last year, we had received the news that the NZAS would wind down
its operation with its eventual close in August 2021. Fortunately, late last year the Smelter
negotiated a new power agreement with Meridian giving it a reprieve until December 2024.

The Smelter’s cargos represent approximately 31% of the Company’s volume and currently
contributes approximately $2M to its net profit after tax, or approximately 20%. There is a licence
fee in place expiring in 2043 which allows the Smelter to use the Tiwai Wharf which protects a
proportion of the revenue received from the Smelter. While the Smelter remains an important
contributor to the Port, as a proportion of our total cargo, the Smelter’s proportion is decreasing
steadily over time as the Smelter’s cargos remain reasonably static while our other cargos increase.

This year marks 50 years of the Smelter’s operation at Tiwai Point. During that time our two
Companies have enjoyed an excellent working relationship and we have valued the Smelter,
not only as a customer, but also an important contributor to Southland’s economic, social and
cultural prosperity.

With the expiry of the current power agreement in December 2024, the Smelter’s future is far
from certain. We believe that the Smelter’s future deserves a more optimistic outlook than
has previously been the case. Aluminium with its lightweight properties is a metal of the future
in a low carbon world. NZAS is best in class in the purity of the metal it produces. Tiwai Point
aluminium is produced from green energy at a time when the demand for green products is in
high demand, and in the case of green metals, there is limited supply.

HYDROGEN

The potential closure of the Smelter in December 2024 has spawned a number of possible
alternative uses for the approximately 600 MW of electricity that would be released to the
market on the closure of the Smelter. The good news for Southland and South Port is that the
consensus by all stakeholders, Government and generators, that this electricity can be
retained to be utilised in the South rather than being made available to the national grid.

Late last year coinciding with the extension to the NZAS electricity supply agreement, Contact
and Meridian announced a joint study to investigate the potential of a large-scale renewable
hydrogen production facility in Southland. From that joint study, Meridian and Contact have
invited registrations of interest (ROI) from parties worldwide interested in being involved in this
project. The ROI has closed, and it has been reported that more than 80 international and
domestic businesses have registered their interest in the Southern Green Hydrogen Project
as it is now known.

The project and ROI have confirmed that the global demand forecast for green hydrogen is
very high. In simple terms, hydrogen is quite possibly the only decarbonisation solution for
countries with scarce renewable energy resources and sectors that have no other renewable
energy alternatives.

In August this year Fortescue Future Industries as a subsidiary of Fortescue Metals Group Ltd
of Australia announced that it had signed a collaboration agreement with Murihiku Hapu to
work together to assess and potentially develop a large scale renewable green hydrogen
project in Southland.

“All of these are exciting opportunities which gives us a glimpse of a new age based on green
carbon alternative energy sources and products. The opportunity for South Port is that
Southland’s renewable energy sources both existing and potential will allow these green fuels
and products to be produced in quantities that can be exported through South Port,” said
Mr Chapman.

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“We believe that there is scope for a green economy in Southland based around green energy
and a place for both green aluminium and green hydrogen.”

AQUACULTURE

Promised growth in aquaculture in Southland has had a long gestation period but there are
now signs of some very promising progress. A smolt hatchery is soon to be constructed at
the Ocean Beach site near Bluff.

Ngāi Tahu Seafoods and Sanford have both lodged resource consents for water space off the
coast of Stewart Island. The Ngāi Tahu proposal – Hananui being the more advanced
prospect.

Mr Chapman said, “Ngāi Tahu Holdings has recently increased its shareholding in Sanford
from 4.6% to 19.9% which might indicate future collaboration between these two parties in
their aquaculture projects.”

“As previously reported, salmon farming on the scale anticipated by these proposals would
provide cargo and other marine servicing opportunities for the Company.”

PORT DEVELOPMENT

Channel
Completion of this project would see our operating draft increasing from the current 9.7 metres
to up to 10.7 metres. The resource consent application has been lodged with Environment
Southland and is in the course of being processed. Assuming the necessary consent is
secured within a 12-month timeframe, this project could commence in 2023 with the increased
draft being utilised late 2023 or early 2024.

Tug - Rakiwai
The Port’s new $10M, 65 tonne bollard pull tug arrived at the Port in early September after a
long journey from the Damen Shipyard in Vietnam. In consultation with the Awarua Rūnanga
she has been given the name Rakiwai. Rakiwai is the name for the crater lake that sits on the
summit of Hananui (Mount Anglim) the highest peak at Rakiura, Stewart Island. This follows
the custom of naming Bluff’s tugs after Southland lakes.

With a bollard pull of 65 tonnes, Rakiwai has more than double the power of the Monowai
which she replaces, and this will improve our capability in this operational area.

Town Wharf
Mr Gear said, “the fuel berth upgrade, including an accessway, pipeline corridor and discharge
platform was progressing well with a completion likely in the second quarter of 2022.”

INDUSTRY UPDATE

All New Zealand ports have had their hands full over the past year dealing with the supply
chain issues brought about by Covid-19 and the unexpected increase in global demand for
goods. For New Zealand’s largest import port, Auckland, these issues have been
compounded by the implementation and commissioning of their automated container terminal
which has caused further congestion and disruption for them.

The Government has announced an intention to encourage greater use of coastal shipping as
a strategic priority, but how this will be achieved is yet to be identified.

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OUTLOOK

Mr Chapman commented that, “the ongoing disruption and congestion in the shipping supply
chain has been widely reported in the media. Along with the ongoing presence of COVID, we
are operating in uncertain times.”

“For the next 12 months we don’t expect market fundamentals will change, and don’t expect
that the container supply chain will improve during that timeframe. Bulk cargos which remain
the core of our business are expected to be consistent.”

“Despite all this uncertainty, we must take a longer view in making our investment decisions.
We are continuing to invest capital in our infrastructure and in modernising our mobile plant.
The entrance channel project will provide a pathway for growth for the Company for many
years to come, as will the other opportunities mentioned, hydrogen and aquaculture.”

“Our shorter-term view over the coming year is that our earnings are likely to remain consistent
with our 2021 reported earnings, which as mentioned, were at a record level.”

“With that expectation and in the absence of any unforeseen circumstances, the Directors will
be endeavouring to maintain the current level of dividend payment.”



FOR FURTHER INFORMATION PLEASE CONTACT:
Mr Nigel Gear
Chief Executive
South Port New Zealand Ltd
Tel: 0274 94 3322
Email: ngear@southport.co.nz

Mr Rex Chapman
Chairman
Mobile: 027 454 8455
Email: rex.chapman@cplaw.co.nz