FY23 Financial Results
NZX RELEASE
29 February 2024
Channel Infrastructure (NZX: CHI), New Zealand’s largest fuel infrastructure business, has today
released its financial results for the year ended 31 December 2023 (FY23).
Highlights
• Full year throughput of 3.4 billion litres, slightly ahead of Envisory’s fuel demand outlook,
driven by growing jet fuel demand
• Fixed and variable terminal fees exceeded the minimum contractual take-or-pay level,
reflecting strong throughput and higher ancillary charges
• $87.2 million EBITDA from continuing operations and $61.8 million Normalised Free
Cash Flow for first full financial year at the top end of August guidance
• Declared an unimputed final ordinary dividend of 6.3 cents per share and a special
dividend of 1.5 cents per share, bringing the total FY23 dividend to 12 cents per share
representing a dividend yield of 8.3%1
• Conversion project is now substantially complete, with firefighting upgrades expected to
complete this year and bund upgrade work expected to continue until 2027
• Over 100 million litres of private storage now in service, with 45 million litres of jet
storage commissioned in Q3 FY23
• Refreshed strategy released, with a focus on being a world-class energy infrastructure
company and provider of infrastructure solutions to meet New Zealand’s changing fuel
and energy needs
• Evaluating brownfield growth opportunities, including Government and additional
customer storage requirements, providing increased fuel supply chain resilience for New
Zealand.
All numbers relate to the twelve months ended 31 December 2023 (FY23) unless stated
otherwise. Comparisons will be made to the year ended 31 December 2022 (FY22) which
represents only nine months of import terminal operations.
1
Based on share price as at 31 December 2023 of $1.45 and includes special dividends declared
Key Financial Results
FY23
$m
FY22
(9 months of
operations)
$m
Continuing Operations
Revenue 130.7 88.2
EBITDA 87.2 57.5
Net profit before income tax 34.1 23.1
Stay-in-business capex 10.5 11.8
Normalised Free Cash Flow 61.8 58.0
Total ordinary dividend 10.5 cps 5.0 cps
Special dividend 1.5 cps 2.0 cps
Discontinued Operations
EBITDA 2.7 24.0
Net (loss)/profit before income tax (5.0) 2.4
Commenting, Chair James Miller said “Over the past two-years, the Channel team has
successfully executed on the plan we set back in 2021, including the conversion project.
Therefore 2023 was the right time to refresh our company strategy to ensure we were identifying
and pursuing the best opportunities. We remain focused on being a world-class operator of
resilient infrastructure to support New Zealand’s energy transition well into the future.”
“Channel Infrastructure is well positioned with strong and stable cash flows and uniquely
strategic assets that provide the key fuel supply route to Auckland. In 2023 we are incredibly
proud to have delivered our shareholders a dividend yield of 8.3%
2
, alongside a free cash flow
yield of 11.3% and a Total Shareholder Return of 9.2%.”
CEO Rob Buchanan said “During 2023 we saw a continued strong recovery in aviation demand,
with jet fuel volumes now approaching pre-Covid levels. As the critical infrastructure supply route
for jet fuel to Auckland Airport, aviation demand, which is forecast to continue to grow for the
foreseeable future, will underpin our core business over the longer term, and with our refreshed
company strategy in place, we are well placed to maximise the opportunities ahead of us. The
2
Based on share price as at 31 December 2023 of $1.45 and includes special dividends declared
trajectory for the future of jet fuel remains positive with a significant number of new long-haul
flight routes to and from New Zealand starting to operate.”
“During 2023, we set ourselves the ambition to be world-class operators of our assets as well as
charting a way forward to grow the company. We continue to make investment into our assets
and capabilities, supporting the long-term resilience of our assets and positioning us as the
partner of choice as we look to deliver on growth opportunities at Marsden Point and beyond.”
Strong financial result in line with August guidance
In its first full financial year of operations, Channel Infrastructure’s continuing operations
delivered Revenue of $130.7 million (August guidance $128 - $130 million). Fixed and variable
terminal fees exceeded the minimum contractual take-or-pay level, with strong throughput and
higher ancillary charges resulting in FY23 EBITDA of $87.2 million (August guidance $84 - $88
million). With an EBITDA to Free Cash Flow conversion of 71%, Normalised Free Cash Flow was
$61.8 million. Stay-in-business capital expenditure was $10.5 million (FY22: $11.8 million)
reflecting four tanks that undertook maintenance turnaround during the year in line with the long-
term Asset Management Plan (FY22: three tanks). Growth capital expenditure increased from
$15.8 million in FY22 to $30.6 million in FY23 reflecting the peak in private storage work and the
parallel construction on the related firefighting and bund upgrades.
Net Debt as at 31 December was c.$315 million3 (FY22: $257 million), with leverage at 3.6 times
Net Debt to EBITDA. The company successfully issued $100 million of unsecured,
unsubordinated retail bonds in November 2023, to refinance the subordinated notes.
Fuel volumes approaching pre-Covid levels
In 2023, Channel Infrastructure successfully received and discharged 70 import shipments and
delivered c.3.4 billion litres of fuel to Auckland and Northland. This was slightly ahead of the
Envisory fuel demand outlook4, driven by a 72% increase in jet fuel throughput as the strong
recovery in jet fuel demand continued, while petrol and diesel volumes remained stable. Fuel
volumes are now approaching pre-Covid levels, with Q4 FY23 volumes c.93%5 of pre-Covid levels
and jet fuel volumes in Q4 FY23 representing c.92%4 of pre-Covid levels.
The Conversion project is substantially complete
The permanent decommissioning of the refinery plant and workforce transition are both complete
with 99% of employees who left the business having been supported into new job opportunities
or retraining. The remaining conversion work largely relates to firefighting upgrade work to be
completed this year and bund upgrade work which will continue to 2027. Despite the pandemic,
supply and labour shortages, major weather events and the high inflationary environment,
conversion costs remain in budget with $163 million spent as at 31 December 2023. With the
significant increase in construction costs impacting the expected cost of the tank bund upgrades,
3
Excludes fair value adjustments associated with retail bond CHI030
4
Forecasts prepared by independent energy consultants Envisory and included in the FY22 results presentation
5
Q4 2023 versus Q4 2019
it is expected that the total spend will now be towards the upper end of the initial 2021 budget of
$200 - $220 million.
Over 100 million litres of Private Storage commissioned since conversion
The initial Private Storage conversion project is largely complete. Since conversion, over 100
million litres of private storage has been commissioned with the final 45 million litres of jet fuel
storage successfully commissioned in the third quarter of FY23, and this will have a full year
revenue impact in FY24. Total private storage contributed $11.1 million
6
of revenue in FY23, up
from $2.7 million in FY22. This project remains within budget with $42 million (against a total
budget of $45 - $50 million) spent to 31 December 2023. Firefighting and bund upgrade work is
ongoing and with increasing construction cost inflation it is anticipated that the total cost of the
project will be towards the upper end of the budget.
Progress made towards becoming a world-class operator
Channel’s ambition is to become a world-class operator of its assets, by further improving safety
culture and systems, lifting customer focus and operational discipline through targeted,
incremental investment in the reliability, resiliency and capabilities within the business. This
investment, which amounts to around 1% of additional operating cost, will ensure Channel can
continue to support New Zealand’s fuel supply chain well into the future and position Channel as
an infrastructure company of choice for our customers. In 2023, Channel made progress towards
this ambition with a site-wide safety culture programme put in place and the delivery of a long-
term asset management plan.
Pursuing growth opportunities
During the year, Channel made significant progress towards freeing up further land at Marsden
Point for repurposing opportunities and realising value from decommissioned refinery plant, with
the entry into an option agreement in July 2023 to sell certain permanently decommissioned ex-
refining equipment to Seadra Energy Limited (Seadra) for an agreed sum of US$33.875 million.
Seadra has invested significant time and resource in an ongoing due diligence process, and has
submitted to Channel a health, safety and environment plan for the deconstruction work. Seadra
has paid option payments of US$4.5 million and has until 7 July 2024 to exercise this option.
Channel continues to evaluate the multiple growth opportunities available at Marsden Point. In
2023, Channel submitted a response to the Government onshore diesel storage tender. Channel
also continues to look for other opportunities to assist its customers with their supply chain and
meeting their fuel storage needs.
Given Channel’s infrastructure is critical to the jet fuel supply chain, aviation is set to make up an
increasingly large part of the future business, and the company has a key role to play in utilising
its infrastructure to enable the decarbonisation of aviation in New Zealand. Sustainable Aviation
Fuel (SAF), which utilises existing aircraft and airport infrastructure is expected to be the most
technically viable route to achieve decarbonisation for long-haul travel. This presents an exciting
6
Includes revenue from initial and additional private storage contracts
opportunity for Channel to receive and store imported SAF through its existing infrastructure in
the future, and to investigate the manufacture of SAF at its Marsden Point site. Throughout FY23,
we continued to work with Fortescue on the pre-feasibility study to investigate the economic
viability of the development of an eSAF production facility at Channel’s Marsden Point site.
Board declares Final Ordinary Dividend of 6.3cps and a Special Dividend of 1.5 cps
With continued strong normalised Free Cash Flow of $61.8 million and net debt to EBITDA ratio
of 3.6 times as at 31 December 2023, well within the targeted range of 3-4 times, the Board has
declared a final unimputed ordinary dividend of 6.3 cents per share. Today the Board has also
declared a special dividend of 1.5 cents per share. The Board is focused on disciplined use of
shareholders’ capital and the special dividend reflects the high cash flow generation of the
business, which is sufficient to fund the remaining conversion work, balanced against the near-
term pipeline of growth projects.
The total FY23 dividend is an aggregate 12 cents per share representing a dividend yield of 8.3%
7
.
Following Mobil Oil New Zealand Limited’s sale of their 14.2% shareholding in Channel
Infrastructure in mid-December 2023, Channel’s remaining imputation credit balance was
forfeited as a result of the operation of the shareholder continuity provisions of the Income Tax
Act. The final ordinary and special dividend will be paid on 28 March 2024, with a record date of
14 March 2024. The Board is committed to delivering stable ordinary dividends over time, while
maintaining credit metrics consistent with a shadow investment grade credit rating of BBB+.
Dividend policy is to pay-out 60-70% of normalised Free Cash Flows
8
.
FY24 Guidance and Outlook
Looking forward to FY24, Channel Infrastructure expects FY24 EBITDA from continuing
operations in the range of $91 – 95 million. Revenue will benefit from continued growth in jet fuel
volumes, the PPI escalator of 2.1% and a full year contribution from private storage. It is expected
that operating expenditure for FY24 will continue at FY23 levels reflecting the inflationary
environment and investment in world-class operating capabilities representing c.1% of operating
expenditure. Normalised Free Cash Flow is expected in the range of $62 million to $66 million
for FY24 reflecting higher stay-in-business capital expenditure of between $11-12 million
(compared to $10.5 million in FY23) as Channel continues to invest in the resiliency of its assets.
7
Based on the 31 December 2023 share price of $1.45 and includes special dividend declared.
8
Adjusted for net cash generated from operations less maintenance capex, excluding conversion costs and growth
capex). The dividend policy is subject to the Board’s due consideration of the Company’s medium-term asset
investment programme; a sustainable financial structure for Channel Infrastructure, recognising the targeted
investment grade rating; and the risks from short and medium term economic and market conditions and estimated
financial performance.
FY24
Guidance
$m
FY23
Actual
$m
Continuing Operations
EBITDA $91-95m $87.2m
Stay-in-business capital expenditure $11-12m $10.5m
Normalised Free Cash Flow $62 - $66m $61.8m
- ENDS -
Conference Call
Channel Infrastructure’s Chief Executive Officer, Rob Buchanan and Chief Financial Officer, Alexa
Preston will give a presentation on the company’s financial and operational performance at
10:30am today.
To access the audio call dial 09 929 1687 (New Zealand) or 02 9007 3187 (Australia) and ask to
be connected to the Channel NZ annual results briefing. To pre-register for direct access to the
call go to https://s1.c-conf.com/diamondpass/10036361-q7bf5d.html
Authorised by:
Chris Bougen
General Counsel and Company Secretary
Contact details
Investor Relations contact:
Anna Bonney
investorrelations@channelnz.com
Media contact:
Laura Malcolm
communications@channelnz.com
About Channel Infrastructure
Channel Infrastructure’s vision is to be a world-class infrastructure company, delivering resilient
infrastructure solutions to help meet changing fuel and energy needs.
Channel Infrastructure’s assets are a critical part of the Northland and Auckland fuel supply chain,
supporting the delivery of around 40% of New Zealand’s transport fuel demand and all of the jet
fuel to the Auckland International Airport. Utilising the deep-water harbour and jetty infrastructure
at Marsden Point, as well as 280 million litres of storage tanks, and the 170-kilometre pipeline
from Marsden Point to Auckland we receive, store, test and distribute fuel owned by our
customers. Channel Infrastructure’s wholly-owned subsidiary, Independent Petroleum Laboratory
Limited, provides fuel quality testing services at Marsden Point and around New Zealand.
Channel Infrastructure will seek to support New Zealand’s decarbonisation ambitions, by utilising
our strategically-located assets and our expertise in supply chain infrastructure. The Company
remains focused on its future growth opportunities at the Marsden Point site and beyond,
including additional fuel storage to support fuel security and studies underway with partners on
hydrogen and sustainable aviation fuel opportunities.
For more information on Channel Infrastructure, please visit: www.channelnz.com
---
Financial Results
For the 12 months ended 31 December 2023
29 February 2024
Important Information
2
•This presentation contains forward looking statements concerning the financial
condition, results and operations of Channel Infrastructure NZ Limited (hereafter
referred to as “CHI”).
•Forward looking statements are subject to the risks and uncertainties associated
with the fuels supply environment, including price and foreign currency fluctuations,
regulatory changes, environmental factors, production results, demand for CHI’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 CHI to market risk and statements expressing management’s
expectations, beliefs, estimates, forecasts, projections and assumptions. Forward
looking statements are identified by the use of terms and phrases such as
“anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”, “objectives”,
“outlook”, “plan”, “probably”, “project”, “risks”, “seek”, “should”, “target”, “will” and
similar terms and phrases.
•Readers should not place undue reliance on forward looking statements. Forward
looking statements should be read in conjunction with CHI’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 CHI’s securities and has been prepared
without taking into account the objectives, financial situation or needs of individuals.
Before making an investment decision, you should consider the appropriateness of
the information having regard to your own objectives, financial situation and needs
and consult an NZX Firm or solicitor, accountant or other professional adviser if
necessary.
•In light of these risks, results could differ materially from those stated, implied or
inferred from the forward-looking statements contained in this announcement. CHI
does not guarantee future performance and past performance information is for
illustrative purposes only. To the maximum extent permitted by law, the directors of
CHI, CHI 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), CHI
undertakes no obligation to provide any additional or updated information
whether as a result of new information, future events or results or otherwise.
•Forward looking figures in this presentation are unaudited and may include non-GAAP
financial measures and information. Not all of the financial information (including any
non-GAAP information) will have been prepared in accordance with, nor is it intended
to comply with: (i) the financial or other reporting requirements of any regulatory body;
or (ii) the accounting principles generally accepted in New Zealand or any other
jurisdiction with IFRS. Some figures may be rounded, and so actual calculation of the
figures may differ from the figures in this presentation. Non-GAAP financial
information does not have a standardised meaning prescribed by GAAP and therefore
may not be comparable to similar financial information presented by other entities.
Non-GAAP financial information in this presentation is not audited or reviewed.
•Each forward-looking statement speaks only as of the date of this announcement, 29
February 2024.
Highlights and Operating
Update
Rob Buchanan
Chief Executive Officer
4
2023 Financial Highlights
$61.8m
Normalised Free Cash Flow
(August indicative range: $59 -$62m)
$87.2m
EBITDA from continuing operations
(August Guidance: $84-$88m)
$34.1m
Net Profit Before Tax from Continuing
Operations
10.5cps Total Ordinary Dividend
1.5cpsSpecial Dividend
(August indicative range: 9.5 -11.5cps)
$130.7m
Total Revenue
(August Guidance: $128 -$130m)
$10.5m
Stay-in-business capex
(August Guidance: $9-$11m)
Full year throughput of 3.4 billion litres, slightly ahead ofEnvisory’sfuel demand outlook, driven by
growing jet fuel demand
Terminal fees exceededthe take-or-pay revenue level, reflecting strong throughput andhigher ancillary
charges
$87.2m EBITDA and $61.8m Normalised Free Cash Flow from first full year of operations as an import
terminal
Conversion project substantially complete, with firefighting upgrades expected to complete this year
and bund upgrade work expected to continue until 2027
Over 100 million litres of private storage now in service with 45 million litres of jet storage
commissioned in Q3 FY23
Refreshed strategy to be a world-class energy infrastructure companyfocused on delivering
infrastructure solutions to meet New Zealand’s changing fuel and energy needs
Evaluating additional growth opportunities including Government and customer storage requirements,
providing increased fuel supplychainresiliencefor New Zealand
2023 Highlights
5
0
1
2
3
4
201820192020202120222023BLHSF
Benchmark
2021/22
Total Recordable Injury Frequency
TRIFBenchmark
Continued investment in safety culture
[1]Tier 1 or 2 Process Safety Event per API 754 –A tier 1 event is a release of material above specific thresholds or that resultsin an LTI or fatality or damage of $100,000 or more; A Tier 2 event isa release of material
above specific thresholds or that results in a recordable injury; or damage of $2,500 or more.
[2]TRIF –Total Recordable Injury Frequency per 200,000 hours (rolling 12-monthly average)
[3]NZ Business Leaders Health & Safety Forum Benchmark (recordableinjuries per 200,000 hours)
•Safety is a foundation of our world-class operator ambition with a
focus onoperational discipline and safety critical risk
management
•Partnered with Safety Futures in 2023for implementation of their
Safety Leadership for Supervisors and Managers program across
front-line leadership team
•Independent peerreview of site safety management system
completed
•Tracking lead safety indicators across site including the
numberofproactive safety engagements, talks and toolboxes
undertaken on site
•No Lost Time Injuries, and one process safety incident in
2023resultingfromcorrosion of ex-refinery product line
6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
201820192020202120222023CONCAWE
Benchmark
2022
Process Safety Incidents
Tier 1Tier 2
[1]
[1]
[2]
[3]
6
Conversion and Private Storage substantially complete
[1] Gross provision of $68.9m, net of scrap value which is estimated to be $15.2m
7
Terminal and private storage cost phasing
-
25
50
75
100
125
150
175
FY21-FY22FY23FY24 - FY27FY32-34
$M
SpentCommittedRemaining
Terminal conversion: $220m
Demolition
[1]
(expected c.10 years): c.$53.7m
Initial Private storage contract: $50m
Additional terminal capacity: c.$7m
Demolition
Costs currently assumed to occur between FY32-FY34
Demolition provision increased by $6m to reflect updated cost
estimate
Will reevaluate provision based on outcome of asset sale process
Private
storage
Over 100 million litres of private storage commissioned since
conversion including45 million litres of jet fuel storage in Q3 FY23
$41m spent to date against a budget of $45-50m with bunding and
firefighting work remaining. Expect this to come in at upper end of
budget due to severe weather impacts in 2023and construction
cost inflation
Shutdown
and
conversion
Shutdown and conversion substantially complete,on time and on
budget,in environmentof a pandemic, supply and labour shortages,
major weather events, and high inflation
Workforce
transition
Workforce transitioncomplete.99% of employees who left the
business have been supported into new job opportunities or retraining
Terminal
upgrades
Firefighting upgrade work to complete this year and bund upgrade
work to continue to 2027
Total
conversion
costs
$163m spent to date. Based on all known costs total spend expected
towards the upper end of $200 -$220m given original budget set in
2021 and construction cost inflation impacting onremaining upgrade
workwhich will continue to 2027
Demolition
Fuel volumes approaching pre-Covid levels
[1] For the 12 months ended 31 December 2022
[2] Q4 2023 versus Q4 2019
[3]9 months of terminal operations
•FY23 Pipeline and Truck Loading Facilityvolumes up 19% on FY22
[1]
•continued strong recovery in aviation demand now c.92%
[2]
of pre-
Covid volumes
•diesel and petrol volumes stable
•Q4 FY23Pipeline and Truck Loading Facilityvolumes c.93% pre-
Covidlevels on a quarterly run rate basis
[2]
•70 shipments received and discharged in 2023 (2022:56
[3]
)
•2023 slightly ahead ofEnvisory’sfuel outlook reflectinghigher jet demand.
Envisoryremain comfortable with long-term outlook
•EV uptake ahead of assumptions, may slow now clean car rebate
dropped,and EV road user charges implemented
•diesel volume expected to be relatively stable over this decade
•increased number oflong-haulflight routes, however capacity
remains seasonal and planeload factors and passenger numbers
are still growing
8
139
146
200
244
280
299
314
365
264
275
264
275
282
274
261
283
222
257
258
280
249
249
263
251
0
200
400
600
800
1,000
Q1 2019Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023
ML
Pipeline and Truck Loading Facility volumes
JetDieselPetrol
1,550
730
1,258
1,037
1,078
1,099
1,110
1,017
1,013
3,697
2,824
3,370
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY19FY22FY23Envisory FY23
ML
Pipeline and Truck Loading Facility volumes
JetDieselPetrol
Available for repurposing
Former hydrocracking complex –subject to Conditional Asset Sale Agreement with Seadra Energy
•Freeing up more space for further repurposing and site
restoration opportunities
•Seadra Energy has purchased option (US$4.5m
ofoption payments received to date) to buy the
decommissioned hydrocracking assets for
US$33.875m
[1]
. Option expires on 7 July 2024.
•Progressing options to sell remaining
decommissioned refinery plant
•1/3 of 180ha land of Marsden Point currently occupied
with in-service import terminal operations
•Site Plan being developed to assist with the assessment
of the highest and best use of land
Potential units for sale
Strategic real estate with significant repurposing potential
[1]
Purchase price includes the option payments but prior to any transaction costs9
Good progress ontransition and climate change targets
2022 TARGET
KEY ACHIEVEMENTS
PROGRESS TO DATE
Just
Transition
At least 90% of employees seeking new
employment find new roles, or have
been retrained, within 6 months
•Extensive program of workforce transition support over past 2 years
•99% of employees who left the business during the transition being
supported into new job opportunities or retraining
Net Zero
Net Zero Scope 1 and 2
emissions by 2030
•Scope 1 and 2 emissions have reduced from 1,257,173 tCO
2
ein
2019 to 4,037tCO
2
e in 2023 -equivalent to a >99% reduction in
emissions
•Direct emissions are now primarily from electricity consumption
and the use of fuel for vehicles and equipment on site
•New electricity supply contract from 2024 sourced from renewable
generation with Energy Attribute Certificates attached
Customer
Scope 3
emissions
[1]
Our infrastructure is utilised to support the
decarbonisation of the transport sector
and facilitate end user
emissions
[1]
reduction by 2030
•Fortescue study into production of e-SAF in pre-feasibility phase
Complete
Near
Complete
In Progress
[1]In accordance with the GHG Protocol Scope 3 Accounting and Reporting Standard category boundaries, emissions associated with therefined transport fuels that Channel stores and distributes but does not sell to the end user are not a
Channel Scope 3 emission. End user Emissions are emissions (upstream and downstream) that result from the end use consumption(combustion) of transport fuels that Channel distributes via its owned and operated infrastructure but does not
take ownership of and therefore does not sell to the end user.
10
Financial Update
Alexa Preston
Chief Financial Officer
Continuing operations delivered Revenue of $130.7m,EBITDA of $87.2m andnormalisedfree cash
flow
[1]
of$61.8mat the top end of August guidance
Fixed and variable terminal fees exceeded take-or-pay, reflecting strong throughput and higher
ancillary charges
Private and additional storage fees increased from $2.7m in FY22 to $11.1m in FY23
Continued focus on effective cost control in an inflationary environmentalongside investment to
support world-class delivery and infrastructure resilience
Successful $100m senior, unsecuredretail bond issue,toreplace subordinated notes, completed in
November 2023
Dividend yield of 8.3%
[2]
and NormalisedFree Cash Flow yield of 11.3%
[2]
Financial Highlights
[1] Normalised Free Cashflow comprises cashflow generated from operations less maintenance capex (excluding conversion costs and growth capex)
[2] Based on the 31 December 2023 share price of $1.45 (and dividend yield includes the 1.5 cps special dividend declared)
12
Strong financial result in line with guidance
•FY23 Revenue of $130.7mreflects the first full year of terminal
operations
•70 import shipments received and discharged
•significant increase in throughput volumes with a total of 3.4
billion litres being delivered via the pipeline and truck loading
facility
•Operating costs reflect a full year of terminal operations and
disciplined management of inflationary pressures. Higher
operating costs in 2H 2023 than for the previous corresponding
period relates to the timing of spend
•Continued strong EBITDA margin of 67%
•Financing costs increased in line with capex and conversion
spend as debt approaches its peak, and due to the non-cash
accelerated amortisation of $1.3m of subordinated note
establishment costs relating to notes exchanged in the
November 2023 bond issue
13
Profit & Loss from continuing operations
Period ended 31 December
($m)
FY23
(12 months)
FY22
(9 months)
2H23
(6 months)
2H22
(6 months)
Revenue130.788.266.358.4
Operating costs(43.5)(30.8)(22.7)(20.6)
EBITDA87.257.443.637.8
EBITDA margin %67%65%66%65%
Depreciation(35.4)(24.6)(19.2)(16.3)
Net Financing costs(17.6)(9.8)(10.4)(6.2)
Net profit before tax34.123.114.015.3
Income tax(6.5)(6.5)(0.8)(4.3)
Net profit after tax27.616.613.211.0
Revenue reflects above take-or-pay and private storage
14
Revenue from continuing operations
Period ended 31 December ($m)
FY23
(12 months)
FY22
(9 months
[1]
)
2H23
(6 months)
2H22
(6 months)
Terminal fees -fixed47.833.924.122.7
Terminal fees -variable59.736.430.324.5
Take-or-pay top up-5.0-2.6
Private storage
[3]
11.12.76.02.5
Wiri lease and other6.65.23.43.4
Laboratory testing5.55.02.62.7
Total Revenue130.788.266.358.4
•Terminal Fees exceeded take-or-pay commitments due to strong
throughput and ancillary charges
•PPI adjustment of 6.3% applied to FY23 revenues, increasing
terminal and private storage fees by c.$6m
•Variable terminal fees reflect the significant increase in volume
throughput for FY23 (up 19% year on year)
•Private and additional storage contributed $11.1m with the final
45 million litres of the initial 100 million litre private storage
project coming into service in Q3 2023
•Laboratory testing revenue reflects increased customer testing
volumes
[1] All revenue is for the nine months ended 31 December 2022, except for Laboratory testing which is a full 12 months of revenue
[2] All revenue is in 2023 terms and does not include any price indexation. Outlook uses Envisory base case assumptions and subject to change based on Envisory fuel demand outlook
[3] Includes revenue from additional storage contracts
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
Annual Revenue ($M)
Contracted revenue outlook assuming Envisoryfuel demand outlook -
(2023 terms, excluding PPI Indexation
[2]
)
Terminal revenue - fixedTerminal revenue - variable
Private / additional storage revenueWiri lease
ToP threshold
Disciplined cost management in an inflationary environment
Electricity and utility costs
•Energy and utility costs increased 2H23 versus 2H22 reflecting:
•higher variable supply costs in FY23
•partly offset by lower transmission costs reset from April 2023
•New supply contract from 1 January 2024 expected to deliver savings of
$2m per annum partially offset by an increase in electricity distribution
charges from 1 April 2024
•Continue to investigate opportunities to reduceconnection charges in
FY24
Other costs
•Continued focus on cost control, but inflation impacting cost base
•An increase in other costs in 2H 23 compared with 2H22 reflects timing
differences and the phasing of spend
[1]
Note, employees involved in refinery decommissioning, and transition are included in conversion costs (refer to ‘Discontinuedoperations’ and Provisions notes in the financial statements). Also excludes employees involved in capital
projects
15
Operating costs from continuing operations
Period ended 31 December ($m)
FY23
(12 months)
FY22
(9 months)
2H23
(6 months)
2H22
(6 months)
Energy and utility costs 11.16.45.04.3
Materials and contractor payments8.57.34.44.6
Salaries, wages and benefits
[1]
11.58.05.75.6
Administration and other costs 12.49.27.56.1
Total expenses 43.530.822.620.6
-
25
50
75
100
125
150
175
202420252026202720282029
$M
Bank debtSubordinated notesRetail bonds (CHI020)Retail bonds (CHI030)
-
25
50
75
100
125
150
175
200
225
250
275
300
Mar 24Sep 24Mar 25Sep 25Mar 26Sep 26Mar 27Sep 27Mar 28Sep 28Mar 29Sep 29
$M
Retail bonds (CHI030)Interest rate swapsRetail bonds (CHI020)
Strong balance sheet,with leverage remaining in target range
•Successful issue of $100m unsecured, unsubordinated retail bonds in
November 2023, replacingsubordinated notes. Balance of subordinated
notes not exchanged in the bond offer ($54.9m) will be redeemed on 1 March
2024
•Imputation credit balance(worth $3.9 million)forfeited following sell down by
Mobil in December 2023 due to loss of shareholder continuity. Available tax
losses as at 31 December 2023 not impacted by the Mobil selldown
[4]
•Remain on track towards target of credit metrics consistent with a shadow
BBB+ credit rating
16
Key balance sheet metrics
As at 31 DecemberFY23FY22
Net Debt $315m
[1]
$257m
Liquidity headroom $90m
[2]
$121m
Leverage (vs target 3-4 times)3.6x3.4x
Gearing (vs covenants 55%/60%)38.6%33%
Weighted average debt maturity 3.7 years
[3]
3.5 years
[1] Calculated as total borrowings (bank, fixed rate bonds and subordinated notes) less cash and cash equivalents. Excludes the fairvalue movement of retail bond CHI030
[2] $90m headroom is net of $54.9m required to redeem the remaining CHI010 subordinated notes on 1 March 2024
[3] Excludes the subordinated notes that are to be repaid 1 March 2024
[4]Refer to investor day presentation dated 4 July 2022 slide 47
6.75% p.a.
5.8% p.a.
3.6% p.a.
Fixed debt profile
Debt maturity profile as at 31 December2023 ($m)
Strong and Stable Cash Flows
•Strong operating cash flow of $90m fully funded the conversion spend and capex in
FY23
•Significant conversion spend undertaken in FY23, with a total of c.$57m spend
remaining over FY24-FY27
•Normalised Free Cash Flow
[1]
of $61.8m, representing an EBITDA to Free Cash Flow
conversion of 71% and Free Cash Flow yield of 11.3%
•Declared anunimputed
[2]
ordinary final dividend of6.3cps and a special dividend of
1.5 cps, bringing total FY23 dividend to12cps (representing dividend yield of8.3%
[3]
)
•Special dividend reflects the high cash flow generation of the business, which is
sufficient to fund the remaining terminal upgrade work, balanced against the near-
term pipeline of growth projects
17
[1] Net cash generated fromoperations less maintenance capex, excluding conversion costs and growth capex
[2] Channel’s remaining imputation credit balance was forfeited as a result of the operation of the shareholder continuity provisions of the Income Tax Act 2007
[3] Based on the 31 December 2023 share price of $1.45 and includes special dividend declared
257
315
(90)
50
11
28
17
42
-
50
100
150
200
250
300
$'M
Net Debt Movement
Continued investment for resilience and growth
18
•Import terminal system capex lower in FY23 as FY22 included tank
conversion and bund works
•Four tanks undertook maintenance turnaround in FY23 (FY22: 3) in line with
long term Asset Management Plan
•Growth capex reflects a peak in private storage works with the completion
of private storage commissioning and parallel construction on the related
fire fighting and bund upgrades in FY23
Capital expenditure
Period ended 31 December ($m)FY23FY22
Import Terminal System1.94.5
Tank maintenance8.67.3
Total stay-in-business capital expenditure10.511.8
% of revenue8%13%
Growth capital expenditure30.615.8
Conversion costs25.613.6
Total capital expenditure66.741.2
FY24 EBITDA Guidance
$91-95m
(FY23: $87.2m)
19
FY24 Guidance and outlook
FY24 Stay-in-business capex
$11-12m
(FY23: $10.5m)
•FY24 Revenue will benefit from continued growth in jet fuel volumes, PPI escalator of 2.1% and private storage
at a full year run rate. FY24 last full year of Wiri lease revenue (expires February 2025)
•Operating expenditure expected to be broadly flat at FY23 levels, with disciplined cost management of
inflationary pressures, and investment in world-class capabilities representing c.1% of total operating
expenditure
•Stay-in-business capex in line with analyst day guidance, will reflect the long-term Asset Management Plan
including several significant tank turnarounds which are due to be undertaken in FY24 and growth capex will
reflect the completion of the private storage bunding upgrades
•FY24 EBITDA and stay-in-business capex guidance indicatesNormalisedFree Cash Flow of $62m to $66m
•Continue to progress growth opportunities:
•evaluating additional growth opportunities including Governmentand customer storage requirements as
well as upgrades to the import terminal system
•progress pre-feasibility study with Fortescue
•continue to actively pursue opportunities for growth outside the Marsden Point site
•continuerefinery asset sale process with interested parties, including Seadra due diligence to complete
with option expiry date of 7 July 2024
•The Board is committed to delivering stable ordinary dividends over time, while maintaining credit metrics
consistent with a shadow investment grade credit rating of BBB+. Dividend policy is to pay-out 60-70% of
normalised Free Cash Flows
[1]
[1] adjusted for net cash generated from operations less maintenance capex, excludingconversion costs and growth capex.The dividend policy is subject
to the Board’s due consideration of the Company’s medium term asset investment programme; a sustainable financial structure for Channel
Infrastructure, recognising the targeted investment grade rating; and the risks from short and medium term economic and market conditions and
estimated financial performance.
Strategy Update
Rob Buchanan
Chief Executive Officer
Safe, reliable, and cost-efficient
terminal operation and maintenance
-Long-term Asset Management Plan in place
-Modern workplace and cloud transformation delivered simplifyingoperations and technology systems
-Independent review of site safety management system completed
-Implemented new Safety Culture programme and leadership training
-Strong terminal performancewith limited demurrage
On-budget and on-time completion of
the remaining conversion project
works
-Completed decommissioning of refinery plant to plan and budget
-Conversion projectsubstantiallycomplete with firefighting and bund upgrade work expected tocontinue until 2027
Work with Customers and Government
to improve supply chain resilience
-Government’s onshore diesel storage tender submitted
-Working with customers in respect of supply chain enhancementand storage opportunities
Deliver on near-term growth
opportunities
-Deliveredrefreshed strategy to help fuel New Zealand's future to 2050 and beyond
-Final 45 million litres of jet storage commissioned in Q3 2023 more than doubling storage, to over 100 million litres, at
Marsden Point
-Green hydrogen and eSAF scoping study complete and commenced pre-feasibility study
Deliver increasing returns to
shareholders through dividends in an
inflationary environment
-$100m unsecured, unsubordinated Retail Bond completed in November, oversubscribed
-Received US$4.5m of non-refundable option paymentsreceived to date for potential sale of decommissioned assets.
Continue to explore the sale of remaining assets
-Received $5m from the sale of NZ carbon credits
-Delivered a total shareholder return of 9.2%over 2023
-Total ordinary dividend of 6.3 cps and a special dividend of 1.5 cps declared, representing a total FY23 dividend of 12.0
cents per share and a dividend yield of 8.3%
[1]
All 2023 priorities delivered
21
[1] Based on share price as at 31 December 2023 of $1.45 and includes special dividends declared
Strong safety
systems and culture
Resilient
infrastructure
Long-term asset
management
Customer focused
People and
capability
development
Future focused
Continuous
Improvement
Adaptive
Repurposing
Marsden Point
Support transitionof
aviationto lower
carbon fuels
Marsden Point
Energy Hub
Brownfield
opportunities at
Marsden Point
Consolidator of
fuels infrastructure
Supply chain
optimisation for our
customers
Reducing
environmental
impacts
Community
engagement and
iwi relations
Just transition
Transparency and
disclosure
Target credit
metrics consistent
with a BBB+ shadow
credit rating
Deliver above
WACC returns
Cost management
Stable dividends
OUR VISION
OUR STRATEGIC PRIORITIES
NZ’s Infrastructure
Partner of Choice
Grow Through Supporting
the Energy Transition
MoreSustainable Future
World-class energy infrastructure company
OUR PURPOSE
Delivering resilient infrastructure solutions to meet changingfuel and energy needs
World-Class
Operator
High Performance
Culture
Grow from
the Core
Support Energy
Transition
Good Neighbour,
Good Citizen
Disciplined Capital
Management
Refreshed strategy: helping fuel NZ's future to 2050 and beyond
22
23
Supportinglong-term asset resilience and positioning Channel as a partner of choice for fuel infrastructure
Progress towards world-class
Systems
and Processes
Regular customer
satisfaction surveys
Safety culture
programin place
Improving ship
turnaround efficiency
Optimisingprocedures
for import terminal
operation
Infrastructure
and Performance
Long term asset
management plan
Optimisingassets
for import product
Complete re-branding,
refresh facilities
and security systems
People and
Capabilities
Increasing resourcing
in key areas
Streamlining internal
Improvements
to training systems
Building leadership
capabilities
High Performance
Culture
Regular employee
engagement surveys with
actions implemented based
on feedback
Increased scores for
employee engagement
23
Pursuing growth opportunities
Supporting fuel resilience in New Zealand
•Channel welcomes the Government’s focus on enhancing New Zealand’s fuel security,
committed to working with Government to ensure fuel supply chain resilience
•Submitted a response to support the Government’s Onshore Diesel Storage tender to
support fuel supply chain resilience for all New Zealanders
•Will look to support customers with additional storageas they seek to create supply
chain efficiencies and progress towards meeting minimum stock level obligations
Looking to unlock growth opportunities outside of the Marsden Point Site
•Fuel markets undergoing transition
•Demonstrating world-class operations is key to positioning for these opportunities
•Look for revenue certainty and above WACC returns
Opportunity tosupport Aviation decarbonisation
•Opportunity toreceive and storeimported SAF or manufacture SAF(if feasible)
•Pre-feasibility study with Fortescue continueswith discussions focused on Channel
being an infrastructure provideror operator, with site and import system a key enabler,
rather than a lead sponsor
24
More sustainable
future
Protect our environmentTier 1 or 2 process safety incidents
Financial disciplineDeliver 2024 plan and meet EBITDA guidance
Meaningful relationshipsCustomer assessment of Channel performance based on
customer survey against key performance criteria
Grow through
supporting the
energy transition
Net zero Scope 1 & 2 emissionsReduce Scope 1 & Scope 2 emissions
Supply resilienceContract new storage volume
$91 -$95m
50%lower
[1]
2024 measures of delivery aligned to refreshed strategy
25
MEASURE
TARGET
STRATEGIC PILLAR
New Zealand’s
infrastructure
partner of choice
Safely home, every day
Lost Time Injuries
Diverse and engaged team
Lift in employee engagement score
Reliable infrastructure
Pipeline reliability
Zero
+4 percentage points
[1]
>98%
[1]
Compared to FY23
+10%
[1]
Zero
+10%
[1]
More sustainable
future
Appendix
Discontinued Operations
•FY23 Revenue from discontinued operations principally reflects revenue
from scrap metal sales, proceeds from historical legal claims and gains on
the sale of NZ carbon credits
•Operating costs reflect costs associated with the sale of decommissioned
assets, legal costs associated with settlement of historical litigation claims,
and costs associated with legacy refining operations such as retiree pension
and medical scheme costs
•FY23 Conversion costs include an adjustment following the reassessment
of the demolition provision
27
Profit & Loss from discontinued operations
Period ended 31 December ($m)FY23FY22
Revenue6.9 70.0
Operating costs(4.2)(46.0)
EBITDA2.724.0
Depreciation and disposal costs-(7.9)
Conversion costs(5.9)(3.0)
Impairment of assets-(5.0)
Net finance costs (1.8)(5.7)
Net (loss)/profit before tax(5.0)2.4
Income tax1.4(7.0)
Net (loss)/profit after tax(3.6)4.6
---
Creating a
world-class
energy
infrastructure
company
Annual
Report
2023
Welcome To This Report
Annual Report Overview
This 2023 Annual Report outlines the operational and
financial
performance of Channel Infrastructure NZ
Limited for the 12 months ended 31 December 2023.
Comparative financial information reflects continuing
operations of the fuels' import terminal for nine
months ended 31 December 2022 and the discontinued
operations of the refinery for the three months ended
31 March 2022, limiting the comparability of the
financial results. This Annual Report also includes an
overview of the Company’s Strategy and Corporate
Governance Framework and includes the annual
Remuneration Report.
In this report, references to “Channel Infrastructure”,
"
Channel" the “Company”, the “Group”, “we”, “us”, “our”
refer to Channel Infrastructure NZ Limited (NZX: CHI),
unless otherwise stated. All dollar figures are in New
Zealand dollars (NZD) unless otherwise stated.
Channel Infrastructure has used non-GAAP (Generally
Accep
ted Accounting Principles) measures when
discussing financial performance in this report. The
directors and management believe that these measures
provide useful information as they are used internally to
evaluate business performance, to establish operational
goals and to allocate resources. Non-GAAP measures
are not prepared in accordance with New Zealand
International Financial Reporting Standards (NZ IFRS)
and are not uniformly defined, therefore the non-GAAP
meas
ures reported in this document may not be
comparable with those that other companies report
and should not be viewed in isolation or considered
as a substitute for measures reported by Channel
Infrastructure in accordance with NZ IFRS. The non-GAAP
measures Channel Infrastructure has used are EBITDA,
EBITDA margin and Normalised Free Cash Flow (FCF).
The definitions of these can be found on page 106 of
this report.
Reporting Suite
The 2023 Annual Report is published in conjunction with
the 2
023 Sustainability Report which provides information
on our approach, progress and performance in relation
t
o Channel Infrastructure’s most material environmental,
social and governance (ESG) issues as well as our
climate related physical and transition risks, measures
and targets. Channel Infrastructure is a climate reporting
entity for the purposes of the Financial Markets Conduct
Act 2013 (FMCA 2013), and the Sustainability Report has
been prepared in compliance with Part 7A of the FMCA
2013, NZ XRB's Climate-related Disclosure Standards
(NZ CS), the NZX Corporate Governance Code and
the ESG Guidance Note (refer to
www.nzx.com). It is
also prepared in accordance with the Global Reporting
Initiative Standard (GRI): Core Option and referenced to
specific
United Nations' Sustainable Development Goals
(SDGs) where appropriate, to acknowledge our global
partnership in addressing sustainability and climate
change concerns.
This Annual Report, the 2023 Sustainability Report and
Channel Infr
astructure’s Governance Statement together
form an integrated suite of reports and should be read
in conjunction with each other, and where possible, we
have drawn links between each. They are all available
for download at: www.channelnz.com, along with several
underlying documents and policies referred to throughout
this report.
Directors' Statement
The Directors are pleased to present Channel
Infr
astructure NZ Limited’s Annual Report and Financial
Statements for the year ended 31 December 2023.
This Annual Report is dated
28 February 2024 and is
signed on behalf of the Board by:
JB Miller
Chair of the Board
AM Molloy
Chair, Audit and
Finance C
ommittee
2
Channel Infrastructure NZ Limited | 2023 Annual Report
Contents
About Us
4
2023 Highlights
8
Numbers at a Glance
10
Letter from the Chair
12
Letter from the CEO
16
Our Strategy
20
Board of Directors
28
Corporate Lead Team
30
Financial Commentary
34
Governance
42
Remuneration Report
46
Shareholder and Bondholder Information
54
Statutory Disclosures
60
Consolidated Financial Report
64
Glossary
106
Corporate Directory
107
3
Channel Infrastructure NZ Limited | 2023 Annual Report
About Us
WIRI FUEL
TERMINAL
*
IMPORT TERMINAL SYSTEM (ITS)
Channel Infrastructure receives imported
refined fuel, owned by our customers to
supply around 40% of NZ’s transport fuels.
Our Import Terminal handles
more transport fuels than our
customers’ 10 terminals in the
next three largest ports in
New Zealand combined.
Two deep water jetties capable of
berthing extra large refined fuel
transport ships (40% larger than
vessels at other NZ ports).
Marsden Point to Auckland
pipeline can transport
10 million litres of fuel per day.
Our pipeline is the
lowest-carbon supply route
for transport fuels to Auckland.
170KM PIPELINE
Channel Infrastructure is New Zealand’s leading fuel
infrastructure company, based at Marsden Point in Northland.
We own and operate infrastructure essential to enable the
supply of transport fuels to Northland and Auckland, supplying
around 40% of New Zealand’s transport fuel demand and all
of the jet fuel to Auckland International Airport.
OVERSEAS
REFINERIES
Transport fuels refined
overseas and imported
by our customers - bp,
Mobil and Z Energy,
into Marsden Point.
MARSDEN POINT
More than 3 billion litres
of transport fuels annually.
c.280m litres
1
of product storage.
New Zealand’s largest fuel testing
laboratory, IPL, a subsidiary of
Channel Infrastructure.
PETROL
AND DIESEL
Distribution to Northland
via Truck Loading Facility.*
Our pipeline also supplies petrol and
diesel direct to Auckland, New Zealand's
largest market, keeping Aotearoa moving.
PETROL AND DIESEL
Channel Infrastructure is the only supply
route for jet fuel directly to Auckland
International Airport, which consumes
80% of New Zealand’s jet fuel demand.
JET FUEL TO AUCKLAND
INTERNATIONAL AIRPORT
SUPPLY INTO
NORTHLAND
SUPPLY INTO
AUCKLAND
Marsden Point
Auckland
LARGEST FUEL TERMINAL IN NEW ZEALAND
Auckland’s fuel storage
facility with truck loading
facilities and a pipeline to
fuel storage at Auckland
International Airport.
Throughput: Each year we
handle enough fuel to fill over
28,300 planes to LA.
Long-term customer contracts,
with strong credit counterparts
bp, Mobil and Z Energy
(100% owned by Ampol).
Contracts with a fixed and variable fee
structure which both incentivises utilisation
and provides some protection from significant
market disruptions.
PPI indexation of all terminal
fees which protects us in an
inflationary environment.
A COMPANY WITH A STRONG BALANCE SHEET, STABLE EARNINGS AND CASHFLOWS
OUR CRITICAL INFRASTRUCTURE
1
Excludes additional storage contracted November 2022
4
Channel Infrastructure NZ Limited | 2023 Annual Report
About Us
WIRI FUEL
TERMINAL
*
IMPORT TERMINAL SYSTEM (ITS)
Channel Infrastructure receives imported
refined fuel, owned by our customers to
supply around 40% of NZ’s transport fuels.
Our Import Terminal handles
more transport fuels than our
customers’ 10 terminals in the
next three largest ports in
New Zealand combined.
Two deep water jetties capable of
berthing extra large refined fuel
transport ships (40% larger than
vessels at other NZ ports).
Marsden Point to Auckland
pipeline can transport
10 million litres of fuel per day.
Our pipeline is the
lowest-carbon supply route
for transport fuels to Auckland.
170KM PIPELINE
Channel Infrastructure is New Zealand’s leading fuel
infrastructure company, based at Marsden Point in Northland.
We own and operate infrastructure essential to enable the
supply of transport fuels to Northland and Auckland, supplying
around 40% of New Zealand’s transport fuel demand and all
of the jet fuel to Auckland International Airport.
OVERSEAS
REFINERIES
Transport fuels refined
overseas and imported
by our customers - bp,
Mobil and Z Energy,
into Marsden Point.
MARSDEN POINT
More than 3 billion litres
of transport fuels annually.
c.280m litres
1
of product storage.
New Zealand’s largest fuel testing
laboratory, IPL, a subsidiary of
Channel Infrastructure.
PETROL
AND DIESEL
Distribution to Northland
via Truck Loading Facility.*
Our pipeline also supplies petrol and
diesel direct to Auckland, New Zealand's
largest market, keeping Aotearoa moving.
PETROL AND DIESEL
Channel Infrastructure is the only supply
route for jet fuel directly to Auckland
International Airport, which consumes
80% of New Zealand’s jet fuel demand.
JET FUEL TO AUCKLAND
INTERNATIONAL AIRPORT
SUPPLY INTO
NORTHLAND
SUPPLY INTO
AUCKLAND
Marsden Point
Auckland
LARGEST FUEL TERMINAL IN NEW ZEALAND
Auckland’s fuel storage
facility with truck loading
facilities and a pipeline to
fuel storage at Auckland
International Airport.
Throughput: Each year we
handle enough fuel to fill over
28,300 planes to LA.
Long-term customer contracts,
with strong credit counterparts
bp, Mobil and Z Energy
(100% owned by Ampol).
Contracts with a fixed and variable fee
structure which both incentivises utilisation
and provides some protection from significant
market disruptions.
PPI indexation of all terminal
fees which protects us in an
inflationary environment.
A COMPANY WITH A STRONG BALANCE SHEET, STABLE EARNINGS AND CASHFLOWS
OUR CRITICAL INFRASTRUCTURE
*Not included in Channel Infrastructure import terminal system
5
Channel Infrastructure NZ Limited | 2023 Annual Report
Expanding the Marsden
Point terminal
Growth in
other terminal
infrastructure
Hydrogen
Sustainable
aviation fuel
180 ha
of land
c. 400 million litres
unutilised tank
capacity
Sufficient pipeline
capacity to meet
projected future
demand.
Import Terminal System and
Contracted Storage
Available for Repurposing
SIGNIFICANT LAND, TANKS AND FACILITIES AVAILABLE FOR REPURPOSING
OUR LONG TERM GROWTH OPPORTUNITIES WILL
SUPPORT NZ’S RESILIENCY AND DECARBONISATION
FUTURE
for example
Jet fuel
Diesel
Petrol
Sustainable aviation fuel
Renewable gasoline
Renewable diesel
Hydrogen
Renewable electricity
Electiciy Storage
Firming
As a provider of critical infrastructure, we have a focussed
growth strategy that will enable us to realise shareholder value
and support New Zealand's wider decarbonisation ambitions.
MARSDEN
POINT TODAY
Jet fuel
Diesel
Petrol
Using less than
50% land and tank
capacity
35 year consents
for industrial site
operations
High capacity
electricity and gas
connections
Deep water harbour
and jetty access
Proximity to Auckland,
NZ's largest fuels
demand centre
CAPACITY FOR GROWTH
JETTIES
NORTHPORT
MARSDEN POINT TO
AUCKLAND PIPELINE
OFFICES
6
Channel Infrastructure NZ Limited | 2023 Annual Report
Expanding the Marsden
Point terminal
Growth in
other terminal
infrastructure
Hydrogen
Sustainable
aviation fuel
180 ha
of land
c. 400 million litres
unutilised tank
capacity
Sufficient pipeline
capacity to meet
projected future
demand.
Import Terminal System and
Contracted Storage
Available for Repurposing
SIGNIFICANT LAND, TANKS AND FACILITIES AVAILABLE FOR REPURPOSING
OUR LONG TERM GROWTH OPPORTUNITIES WILL
SUPPORT NZ’S RESILIENCY AND DECARBONISATION
FUTURE
for example
Jet fuel
Diesel
Petrol
Sustainable aviation fuel
Renewable gasoline
Renewable diesel
Hydrogen
Renewable electricity
Electiciy Storage
Firming
As a provider of critical infrastructure, we have a focussed
growth strategy that will enable us to realise shareholder value
and support New Zealand's wider decarbonisation ambitions.
MARSDEN
POINT TODAY
Jet fuel
Diesel
Petrol
Using less than
50% land and tank
capacity
35 year consents
for industrial site
operations
High capacity
electricity and gas
connections
Deep water harbour
and jetty access
Proximity to Auckland,
NZ's largest fuels
demand centre
CAPACITY FOR GROWTH
JETTIES
NORTHPORT
MARSDEN POINT TO
AUCKLAND PIPELINE
OFFICES
7
Channel Infrastructure NZ Limited | 2023 Annual Report
0.9
TRCF
Total Recordable
Case Frequency
(2022: 1.8)
70
Ships received
and discharged
Realising value of infrastructure
Available capacity
c.280ML
1
storage including 45ML
private jet storage
commissioned in 2023
$28M
net profit after tax
(continuing operations)
30-40%
Normalised FCF
available for
deleveraging
or growth
2023 Highlights
Twelve months of terminal operations
Safe, reliable & efficient
Investment criteria
1
Tier 1 or 2 process
safety incidents
(2022: 0)
Above WACC
returns
Contracted
Revenue
115ML
Refined Fuels
NZ’s largest ever
import cargo
received
1
Excludes additional storage contracted November 2022
8
Channel Infrastructure NZ Limited | 2023 Annual Report
A Year of Firsts
2023 is Channel Infrastructure’s first full year of import terminal operation and our first
year of mandatory reporting climate related disclosures.
A Year of Firsts
2023 is Channel Infrastructure’s first full year of
import terminal operation and our first year of
reporting climate related disclosures
Good neighbour, good citizen
NZ Climate
Reporting
Standards
First report
issued by CHI
ESG
Framework
Developed to
underpin refreshed
Company Strategy
Keeping Aotearoa moving
3,370ML
Delivered to market
from Marsden Point
Teminal
1,258ML
72% PCP
1,099ML
2% PCP
1,013ML
PCP
no change
JET FUEL
DIESEL
PETROL
Pipeline utilisation
83%
(average FY23)
Highest jet fuel demand since 2019
Climate Change
Resilience
Limited impact from
Cyclone Gabrielle
and other significant
weather events
98%
Reliability
of our
Marsden Point
Groundwater
Network
9
Channel Infrastructure NZ Limited | 2023 Annual Report
Numbers at a Glance
Twelve months of terminal operations
Stable financial performance
Strong cashflow and balance sheet
$87M
67%
EBITDA
margin
91%
subject to
indexation
71%
EBITDA to FCF
conversion
$131M
RevenueEBITDA
3.6
x EBITDA
$315M
1
As at 31 December
2023
Net debtNet assets
$1.32
per share
Leverage
1
Excludes Fair Value Hedge Movements
10
Channel Infrastructure NZ Limited | 2023 Annual Report
Delivering to shareholders
Final DividendSpecial Dividend
6.3
CPS
1.5
CPS
8.3%
Dividend Yield
2
TSR
9. 2 %
Total shareholder
return
2
Based on the 31 December 2023 Share price of $1.45 (dividend yield includes the 1.5cps special dividend declared)
11
Channel Infrastructure NZ Limited | 2023 Annual Report
James Miller
Chairman
Letter from
the Chair
12
Channel Infrastructure NZ Limited | 2023 Annual Report
Channel Infrastructure is focused on being a world-class operator
of resilient infrastructure to support New Zealand’s energy
transition well into the future.
Over the past two-years, the Channel team has
s
uccessfully executed on the plan we set ourselves
back in 2021. The delivery of this plan, including the
terminal conversion project is a real testament to our
highly capable and dedicated team. The company is
well positioned with strong and stable cash flows and
uniquely strategic assets that provide the key fuel supply
route to Auckland, with growing demand for jet fuel
set to underpin the future of our business. With the
conversion of the refinery to a fuel import terminal, and
commissioning of the initial jet fuel storage contract
behind us, 2023 was the right time to refresh our strategy
to ensure we were identifying and pursuing the best
opportunities as we help fuel New Zealand.
A central pillar of our refreshed strategy is our ambition
t
o establish world-class infrastructure operations through
targeted, incremental investment in the reliability and
resiliency of our assets to ensure we can continue
to support New Zealand’s fuel supply chain well into
the future. In under two years of operation as an
import terminal, we have already made progress towards
achieving a world-class operating standard, lifting our
customer focus and operational discipline, and we have
clear objectives across our infrastructure, systems and
processes, and capabilities to drive us further towards
the standard of our international peers.
Becoming a world-class infrastructure operator not only
s
upports the long-term resilience of our assets, but
positions Channel as a partner of choice for a broader
role in New Zealand’s future energy supply chain as
we look to grow at Marsden Point and beyond. As an
example, we have already increased diesel storage by
7
5% and jet fuel storage by 150% over the past two
years, and are ready to invest when appropriate to
further support the government's aims for fuel security for
New Zealand.
At the same time as we play our part in ensuring
r
esilience in the fuel supply chain, we have our eyes cast
towards the future, and New Zealand’s decarbonisation
pathways. These present the most exciting longer-term
opportunities for Channel Infrastructure. While Petrol and
Diesel have clear pathways to reach decarbonisation,
the aviation sector still has a long way to go to
transition to lower-carbon fuel solutions, and given
the importance of our infrastructure to supplying New
Zealand’s aviation gateway, we will have a key role to
play in this transition. Liquid Sustainable Aviation Fuel
(SAF) is emerging as the most technically viable way to
bring down aviation emissions for medium- to long-haul
travel. With Marsden Point’s deep water port, attractive
electricity connections, 35-year operating consents, and
pipeline to Auckland, we have the unique opportunity
to support this shift, to a lower carbon jet fuel supply
chain, via either the receipt and storage of imported
SAF through our infrastructure, or by enabling domestic
manufacture of SAF if this becomes feasible in the future.
Key to our refreshed strategy is to ensure we are ready to
leverage our critical role in the liquid aviation fuel supply
chain, so we are part of this journey.
Channel Infrastructure welcomes the Government’s focus
on enhancing Ne
w Zealand’s fuel security, and we
are committed to working with Government to ensure
13
Channel Infrastructure NZ Limited | 2023 Annual Report
supply chain resilience. The
refinery is now fully
decommissioned, but we have significant unutilised tank
storage with which to support fuel security initiatives
for New Zealand. Conversely, Channel Infrastructure is
one of seven respondents in respect of climate change
proceedings that have now been allowed to proceed by
the Supreme Court. A key challenge for the company
will be navigating the potentially conflicting objectives
of the Government’s ambitions for fuel security on one
hand, while responding to the recent climate change
proceedings on the other.
Being a good neighbour and good citizen
i
s a strategic priority
We have already achieved significant progress on
our ES
G scorecard over the past two-years, and
this remains a priority for the Board. Today, we
have released our third Sustainability Report, 'Resilient
infrastructure for a decarbonising world', and the first
that is aligned with the New Zealand climate-related
disclosure standards. We have chosen to report our
climate-related disclosures as part of our broader
Sustainability Reporting requirements, recognising the
interrelated nature of climate change risks, impacts,
and opportunities to our broader sustainability and
organisation operations.
Refreshed Governance structure and
capabilit
ies to deliver refreshed strategy
Reflecting
the Board’s ongoing commitment to strong
and effective governance, during 2023 we restructured
our Health, Safety, Environment and Operations board
sub-committee. This committee comprises directors with
specialist expertise in these critical areas to increase
their time and focus on the continued improvement
of asset management, resilience, emergency response
and oversight of health, safety and environmental risks.
We already have a strong focus on safety systems
and culture, which provides a robust foundation for the
company. This committee will be instrumental as we
deliver on our refreshed strategy and adapt our safety
culture, assets, and systems to deliver world-class energy
infrastructure operations.
In December last year, we were pleased to welcome
Andr
ew Brewer to our Board. Andrew, who in
February 2024 has announced his retirement from
Ampol, significantly bolsters our Board capacity as a
terminal and infrastructure specialist with his significant
experience in world-class terminal operations, as well
as deep knowledge of health and safety practises,
and operational excellence. We also farewelled Lindis
Jones, who stepped down from the Board upon Andrew's
appointment. We want to take this opportunity to thank
Lindis for his insights into the downstream fuels industry in
New Zealand and outstanding contribution to the Audit
& Finance Committee during his more than five years’
service to the Board.
Continued growth in total
s
hareholder return
The Board has declared a final
ordinary dividend of 6.3
cents per share and a special dividend of 1.5 cents per
share, which will be paid on 28 March 2024, with a record
date of 14 March 2024. This brings the total FY23 dividend
to 12.0 cents per share. In 2023 we are incredibly proud
to have delivered our loyal shareholders a dividend yield
of 8.3%
1
, alongside a free cash flow yield of 11.3%
1
and a
Total Shareholder Return of 9.2%.
I have no doubt that 2024 will be another exciting
y
ear for us, as the team sets the foundation for our
refreshed strategy which we firmly believe will create
value for our shareholders, customers, local community
and New Zealand.
1
Based on the
31 December 2023 share price of $1.45 (and dividend yield includes the 1.5 cps special dividend declared)
14
Channel Infrastructure NZ Limited | 2023 Annual Report
15
Channel Infrastructure NZ Limited | 2023 Annual Report
Rob Buchanan
Chief Executive Officer
Letter from
the CEO
16
Channel Infrastructure NZ Limited | 2023 Annual Report
2023 has been another year of execution and delivery. We have
a clear plan and capable team, working hard to unlock the
potential of our strategic assets and keep New Zealand moving.
Strong operational performance
underpinne
d by strong growth in jet
fuel demand
In our
first full financial year of operations as New
Zealand’s largest fuel import terminal, we successfully
received and discharged 70 import shipments and
delivered some 3,370 million litres of fuel to Auckland and
Northland. This was ahead of the fuel demand outlook
that we provided to shareholders at the beginning of
2023, driven by stable diesel and petrol volumes and
a continued strong recovery in jet fuel demand. We
are now seeing fuel volumes overall approaching pre-
covid levels, with aviation demand reaching 92% of pre-
covid demand
1
.
We continue to prioritise safety, culture,
t
he environment, and our community
The health, safety, and wellbeing of our people
r
emains core to everything that we do at Channel
Infrastructure. As a high-hazard site, we are committed
to ensuring that we get ‘everyone safely home, everyday’
and during the year we focused on the upskilling of
our leaders across the business in health and safety
leadership. Operating a safe workplace is foundational
to our ambition to be a world-class operator of
our infrastructure.
As we focus on ensuring we have a high-performance
cultur
e it was pleasing to see a significant increase in
employee engagement over 2023. I believe this increase
reflects the near completion of the conversion project,
which br
ought an end to a period of significant change
for our people, as well as belief in our long-term strategy
and opportunities as a business.
The way we do business by being a good neighbour
and citiz
en is incredibly important to us, with a focus
on reducing environmental impacts and continued
engagement with the community in which we operate.
We now source all our electricity requirements from
renewable sources and have made significant progress
towards eliminating our Scope 1 and 2 emissions, and are
committed to playing our part in bringing down overall
emissions within the fuels supply chain, as the global
transition to renewable fuels unfolds.
We continue to make investment in our environmental
s
ystems, with an example being the work we undertook
during the year to remove over 200 tonnes of sediment
and sludge from our stormwater systems. I am pleased to
report that these improvements saw our Marsden Point
facility perform well during
significant rainfall events we
faced in 2023. We are also working closely with our
community and local iwi to protect the coastline upon
which we operate, with involvement in local initiatives
remaining the cornerstone of these relationships as we
go forward. You can read more about the work we are
doing to create a more sustainable future for our wider
community in our 2023 Sustainability Report released
alongside this Annual Report.
1
Q4 2023 versus Q4 2019
17
Channel Infrastructure NZ Limited | 2023 Annual Report
The Conversion project is now
lar
gely de-risked
The physical conversion of our site from a refinery to
an impor
t terminal, and the commissioning of the initial
100 million litres of private storage was a multi-year
infrastructure project with an initial budget set back in
2021. The team at Marsden Point have largely completed
this project to plan and anticipate its completion at the
upper end of the original budget. This was achieved
despite a pandemic, supply and labour shortages, major
weather events and a high inflation environment. This
is a significant achievement that we are very proud of.
The permanent decommissioning of the refinery plant
is complete, the workforce transition is substantially
complete with 99% of employees who left the business
being supported into new job opportunities or retraining,
and the terminal upgrade and private storage conversion
is also largely complete, with the firefighting upgrades
expected to complete this year and the bund upgrades
work expected to continue until 2027.
In September, we successfully completed the
commis
sioning of the 45 million litres of private jet storage
which more than doubled our on-site jet fuel storage.
This significantly adds to New Zealand’s overall jet fuel
resilience at a time when we are seeing air travel demand
return sharply.
Strong financial result
Ahead of our transition we provided investors with
de
tailed 2023 guidance to provide insight into the
financial profile of the new business model. In our first
full year of operations as an import terminal, I’m pleased
to report we beat these original forecasts and achieved
results at the upper end of the upgraded guidance we
provided in August last year.
Reflecting
our stable and predictable financial profile,
revenue was $130.7 million, with fixed and variable
terminal fees exceeding 'take-or-pay' fees due to strong
volumes and ancillary services, EBITDA from continued
operations was $87.2 million and Normalised Free Cash
Flow was $61.8 million as a result of a disciplined
approach to cost and capital management. This reflects
an impressive 67% EBITDA margin and an EBITDA to
Free Cash Flow conversion of some 71%. We continue
to target credit rating metrics consistent with a BBB+
shadow credit rating and net debt finished the year at
$315 million
2
.
During the year we continued to invest in resilience
and gr
owth with stay-in-business capex of $10.5 million
reflecting four tanks undergoing maintenance turnaround
works during the year. Growth capex of $30.6 million
(excluding the conversion costs) reflects the peak of the
private storage works and the start of the fire fighting
and bund upgrades in FY23.
In November last year we issued a $100 million s
enior,
unsecured bond to replace our subordinated notes.
The net proceeds from the fixed rate bonds provided
diversification of funding that aligns with an infrastructure
business. Debt facilities now sit at $460 million, with
significant headroom available, and significant hedge
protection in the next few years.
Looking forward to FY24, Channel Infrastructure expects
FY
24 EBITDA from continued operations in the range of
$91–95 million and stay-in-business capital expenditure
in the range of $11-12 million reflecting the long-term
Asset Management Plan, indicating a Normalised Free
Cash flow of $62-66 million.
Delivering on our strategic priorities
During 2023 we delivered our refreshed strategy, which
s
ees us setting an ambition to be world-class operators
of our assets as well as charting a way forward to
grow the company. Our achievements to improve safety
leadership and employee engagement are an important
part of this. We have also had a strong focus on
increasing our customer focus through regular customer
satisfaction surveys, and completing the first iteration of
our long-term strategic asset management plan. This
will ensure that we have the capabilities to provide the
most efficient and resilient services, deliver on growth
opportunities at Marsden Point and unlock opportunities
beyond the site.
During the year we made significant progress towards
fr
eeing up further land at Marsden Point for repurposing
opportunities and realising value from decommissioned
refinery plant, with the conditional sale agreement
of certain permanently decommissioned ex-refining
equipment to Seadra Energy Limited.
We continue to look for other opportunities to
as
sist our customers with their supply chain resilience,
including opportunities that allow us to repurpose the
approximately 400 million litres of unutilised storage
capacity we have at Marsden Point. As part of this, we
are looking to support both the Government and our
customers in meeting their fuel storage needs.
The opportunity to provide increased fuel storage
op
tions for our customers, and potentially the
Government, underlines the critically important role our
business can play in supporting a resilient fuels supply
chain for New Zealand.
As we explore how Channel can support the
decarbonis
ation pathway for aviation, our work with
Fortescue Limited continues. A pre-feasibility study is
now underway investigating the development of a
2
Excludes the fair value adjustment bonds
18
Channel Infrastructure NZ Limited | 2023 Annual Report
300MW, c.60 million litr
es per-year eSAF production
facility (c.3% of New Zealand’s demand), with the eSAF
to be distributed via the existing Marsden Point to
Auckland International Airport supply chain. This project
is supported by an EECA grant given the potential for
large-scale demand response for NZ, enabling electricity
to be released to the grid when needed. Work with
Fortescue continues and is focused on developing the
commercial model for this project.
The Board and Management conducted a strategic
r
efresh during 2023, and we are firmly focused on growing
value for our shareholders, customers, local community
and New Zealand. To do this we must maximise the
opportunities before us and ensure we are playing our
part in supporting a secure supply chain for the fuels
needed to keep New Zealand moving. You will find detail
on our refreshed strategy and priorities on pages 24 to 26
of this report.
Thank you
I am proud of all we have achieved so far, and would like
to recognise the achievements and efforts of the team
at Channel Infrastructure who delivered on all of our 2023
priorities. I’m confident that our refreshed strategy will
ensure we fuel New Zealand well into the future.
I would also like to thank our people, customers,
communit
y, bondholders and shareholders for their
ongoing support. Together we can work towards
delivering resilient infrastructure solutions to meet the
changing fuel and energy needs of New Zealand.
And
finally, I’d like to take this opportunity to honour Napo
Henare, our Kaumātua, who was the heart and soul of
our organisation. As Kaumātua, he was a beacon of
cultural support, providing invaluable guidance to our
people. Napo's profound insights and thoughtful counsel
enriched the entire organisation. His legacy is important,
forging a deeper connection to the whenua we inhabit,
instilling in us a profound respect for cultural practices
like blessings, hangi and the use of Te Reo. Napo sadly
passed away in February 2023 and we are indebted to
Napo for his enduring impact on the company.
19
Channel Infrastructure NZ Limited | 2023 Annual Report
Our Strategy
20
Channel Infrastructure NZ Limited | 2023 Annual Report
21
Channel Infrastructure NZ Limited | 2023 Annual Report
2023 Strategic Priorities
Leverage Existing Capability
Safe reliable, low-cost operations
High Performance Culture
Transform to Deliver Value
Competitive cost of capital
Realise infrastructure value
Position for Future Growth
Support lower carbon
fuels transition
Grow and diversify
Strategic Pillar
22
Channel Infrastructure NZ Limited | 2023 Annual Report
Transform to Deliver Value
Competitive cost of capital
Realise infrastructure value
Position for Future Growth
Support lower carbon
fuels transition
Grow and diversify
New long-term Asset Management
Plans in place to manage investment
across the life of our assets
Terminal operations and Information
Technology systems simplified
with new systems and processes
embedded and effective
Continue to build terminal culture
and capability
Review options for $75 million subordinated
notes due for renewal in March 2024
Release legacy value through sale
of surplus assets and inventory
Remaining contracted private
storage brought online
Complete refinery facility
decommissioning to plan and budget
Fortescue Future Industries (FFI) to complete
study of the potential for hydrogen production
at Marsden Point
Continue to assess SAF options for Marsden Point
Utilise Marsden Point facilities to support
the Government’s 70 million litre domestic
diesel fuel reserve and minimum domestic
stockholding obligation
Reduce electricity costs through long-term supply
Work with customers and Government
to improve fuel resilience, ahead of expected
strong growth in jet fuel demand
Long-term asset management
plan in place including asset
replacement
Modern Workplace and
Cloud Transformation
successfully delivered
Employee engagement ‘Your
Voice’ survey and improvement
program lifting engagement by
20 points in 2023
$100 million Retail Bond placed
in November, over subscribed
US$33.875 million conditional
agreement reached for
decommissioned asset
Delivered additional c.45 ML
of private jet storage
Permanently decommissioned
the refinery safely to plan and
to budget
Scoping study complete
and progressing
to pre-feasibility study
Onshore Diesel Storage
tender submitted
Long-term fixed price variable
volume contract for supply
of renewable electricity from
January 2024
Final 45 ML of jet storage
commissioned in Q3 2023 more
than doubling storage, to over
100 ML, at Marsden Point
HighlightsOur Focus
23
Channel Infrastructure NZ Limited | 2023 Annual Report
World-class energy infrastructure company
Delivering resilient infrastructure solutions
to meet changing fuel and energy needs
OUR VISION
OUR PURPOSE
OUR STRATEGIC PRIORITIES
OUR VALUES
World-class
Operator
High Performance
Culture
Disciplined
Capital
Management
Good Neighbour,
Good Citizen
Strong safety
systems and culture
Resilient
infrastructure
Long-term asset
management
Customer focused
People and
capability
development
Future focused
Continuous
Improvement
Adaptive
Target credit
metrics consistent
with a BBB+ shadow
credit rating
Deliver above
WACC returns
Cost management
Stable dividends
Reducing
environmental
impacts
Community
engagement
and iwi relations
Just transition
Transparency
and disclosure
New Zealand’s Infrastructure
Partner of Choice
One TeamHonestyInnovation
Care
Grow from
the Core
Support Energy
Transition
Brownfi eld
opportunities
at Marsden Point
Consolidator of
fuels infrastructure
Supply chain
optimisation for
our customers
Repurposing
Marsden Point
Support transition
of aviation to
lower carbon fuels
Marsden Point
Energy Hub
Grow through supporting
the Energy Transition
More sustainable future
Our refreshed
strategic framework
24
Channel Infrastructure NZ Limited | 2023 Annual Report
Our refreshed Strategy
Helping fuel NZ's future to 2050 and beyond
With the conversion of the
refinery to a fuel import terminal and the commissioning of an additional 100ML storage at
Marsden Point largely complete, it was the right time to refresh our strategy to ensure we identified and pursued the
best opportunities as well as help fuel New Zealand.
STRATEGIC PILLARWHAT WE WILL DELIVEROUR FOCUS FOR 2024
New Zealand's Infrastructure Partner of Choice
World-
cla
ss operator
Trusted as a safe and reliable operator of
critical infr
astructure
Customer-focused outcomes
Fit for purpose management systems
and pr
ocesses
The right infrastructure which is safe,
r
eliable and of assured integrity
Disciplined investment in our people
and as
sets
Ongoing prioritisation of safety
cultur
e to ensure everyone gets
safely home, everyday
Lift in customer assessment of
Channel perf
ormance
Operational discipline
High performance
cultur
e
Attracting, supporting and maintaining a
diverse and engaged workforce
Clear succession planning and
t
alent management
Maintaining an agile and
r
esilient workforce
A focus on wellbeing
Ongoing lift in
emplo
yee engagement
25
Channel Infrastructure NZ Limited | 2023 Annual Report
STRATEGIC PILLARWHAT WE WILL DELIVEROUR FOCUS FOR 2024
Grow through supporting the Energy Transition
Grow from
t
he Core
Unique and highly strategic assets at
Marsden Point with multiple brownfield
growth opportunities
Opportunity to grow beyond
Mar
sden Point
Contract additional
s
torage volume
Progress
ex-refinery asset sales
Support Energy
Transition
Repurpose unutilised land at Marsden
P
oint and leverage strategic assets
Other potential energy opportunities to
s
upport the transition
Strategic site master
planning comple
te
FFI pre-feasibility study
More sustainable future
Disciplined
C
apital
Management
Efficient allocation of capital to achieve
strategic objectives, while maintaining
stable dividends and targeting credit
metrics consistent with a shadow BBB+
credit rating
Capital allocation framework set to
deliv
er returns to shareholders
Invest in infrastructure projects that
deliver above WACC returns, and
contracts that provide revenue certainty
Focus on maintaining an
effective cost
management culture
Deliver EBITDA guidance of
$91-9
5 million within credit metrics
consistent with a shadow BBB+
credit rating
Good Neighbour,
Good Cit
izen
Committed to maintaining a
high s
tandard of environmental
performance and reducing our impact
on the surrounding environment
Engaging with the local community
Recognising Iwi responsibilities as
t
angata whenua and kaitiaki over the
land upon which we operate, and
partnering to maintain the cultural health
of the site
Incorporating ESG into long-term
bus
iness model planning
Reduce Scope 1 and 2 emissions
Reduce waste to landfill
26
Channel Infrastructure NZ Limited | 2023 Annual Report
27
Channel Infrastructure NZ Limited | 2023 Annual Report
Board of
Directors
28
Channel Infrastructure NZ Limited | 2023 Annual Report
QUALIFICATIONTENURECOMMITTEES
James Miller
Chair
BCom
FCA
5 yearsIndependent
Dir
ectors (Chair)
Audit & Finance
People & Culture
Andrew Brewer
Director
BEng (Hons)
BSc
Post Grad. Dip.
In Management
Appointed
6 December
2023
Health, Safety,
En
vironment
& Operations
Andrew Holmes
Director
BSc (Hons)
MBA
2 yearsIndependent Directors
Health, Safety,
En
vironment
& Operations
People & Culture
Anna Molloy
Director
BEng
BCom
CFA
2 yearsIndependent Directors
Audit & Finance (Chair)
Lucy Nation
Director
BEng
Grad Dip.
Applied Finance
and In
vestment
3 yearsHealth, Safety,
Environment
& Operations
People & Culture
Vanessa Stoddart
Director
BCom/LLB (Hons)
PGDip
P
rofessional Ethics
10 yearsIndependent Directors
People & Culture (Chair)
Paul Zealand
Director
BSc (Hons)
MBA
7 yearsIndependent Directors
Audit & Finance
Health, Safety,
En
vironment &
Operations (Chair)
29
Channel Infrastructure NZ Limited | 2023 Annual Report
Corporate
Lead
Team
30
Channel Infrastructure NZ Limited | 2023 Annual Report
Rob Buchanan
CEO
B.Com, M.Bus
Rob was previously GM Growth & Trading at Manawa Energy, where he had
r
esponsibility for the company’s renewables development, energy trading and
commercial and industrial sales functions.
With a passion for helping energy and infrastructure companies create value
while navigating challenging s
trategic issues and changing industry dynamics,
Rob is excited about taking forward the company’s plans for growth, which will
deliver further value to Channel Infrastructure’s shareholders.
Prior to Manawa Energy, Rob had an almost 20-year career in investment
banking, advis
ing companies in New Zealand, Australia and Europe most
recently as Head of Mergers & Acquisitions at Forsyth Barr in New Zealand.
Prior to this Rob worked in the investment banking business of ABN AMRO
Bank, working across Australasia and Europe. Rob holds a Bachelor of
Commerce and Master of Business (with Distinction) from the University of
Otago, and has completed an Executive Certificate in Management and
Leadership from the MIT Sloan School of Business.
Alexa Preston
CFO
BBus, CA
Alexa was appointed Chief Financial Officer of Channel in October 2023
leading Channel Infr
astructure Finance, Human Resources and IT functions.
Alexa has more than 20 years’ experience in senior management,
finance,
commercial, investment banking and advisory roles. Prior to joining Channel,
she held the position of Finance Lead Partner - Group Performance and
Investor Relations at Spark New Zealand Limited.
Alexa brings a unique combination of finance and commercial experience,
and is r
esponsible for finance, investor relations, treasury, taxation, audit and
assurance, IT and insurance.
Alexa is a Chartered Accountant and began her career with
P
ricewaterhouseCoopers. She has held senior roles with Grant Samuel &
Associates, KPMG, NZME Limited and Spark New Zealand Limited.
Jack Stewart
GM Operations
BE (Mech)
Jack is GM Operations at Channel Infrastructure and is responsible for
oper
ations, maintenance, project works and the delivery of terminal services
to our customers.
Jack has worked at Marsden Point for over 20-years, joining the business as
a mechanical engineer at the s
tart of his career. He has performed a broad
range of leadership roles over the past 20-years, including in the areas of
engineering, maintenance, project management, operations, health & safety
and environment. Prior to the business transition, Jack was Refining NZ’s Chief
Operating Officer, and has led the business through the transition from refinery
to terminal operations as Project Director for the Conversion Project.
31
Channel Infrastructure NZ Limited | 2023 Annual Report
Chris Bougen
General Counsel and
C
ompany Secretary
LLB (Hons), LLB, LLM
Chris is Channel Infrastructure’s General Counsel and Company Secretary
and is r
esponsible for managing the Group’s legal affairs, governance, and
company secretarial functions.
Chris joined Refining NZ in 2020 and has been heavily involved in the
pr
eparations for Refining NZ’s transition to Channel Infrastructure, including
securing the overwhelming support of shareholders for this change.
Chris has extensive experience in both private practice and in-house legal
r
oles across the energy and heavy industrial sectors in New Zealand, with
experience advising on a wide range of commercial matters as well as
providing legal support for major corporate and governance matters. Prior
to joining Refining NZ, Chris worked for Fletcher Building and for a leading
national law firm.
Peter Van Cingel
Business
De
velopment Manager
BE(Mech) (Hons)
Peter is Channel Infrastructure’s Business Development Manager
and is r
esponsible for Channel’s growth strategy and business
development activities.
Peter joined Refining NZ in 2002, and has held a broad range of roles in
the s
upply chain, commercial, strategic, and business development areas.
Peter has been central to the negotiation of new long-term terminal services
and private storage agreements with Channel’s customers. Prior to joining
Refining NZ, Peter held roles in the upstream oil industry, in Europe, Russia,
and the Middle East, as well as supply chain management, procurement and
business improvement.
Steve Levell
General Manager IPL
DipEng, CMS
Steve is General Manager IPL, the fuel testing business which is a wholly-
o
wned subsidiary of Channel Infrastructure.
Steve joined
Refining NZ in 2012 and has held a broad range of leadership
roles, including business improvement, before taking the IPL General Manager
role in 2021. Steve has a strong engineering background and prior to joining
Refining NZ held a number of Technical and Leadership positions in the Petro/
Chemical and Scientific research sectors.
32
Channel Infrastructure NZ Limited | 2023 Annual Report
33
Channel Infrastructure NZ Limited | 2023 Annual Report
Financial
C
ommentary
34
Channel Infrastructure NZ Limited | 2023 Annual Report
Channel’s financial results for the year ended 31 December 2023, reflect 12 months financial performance of the
new fuels import terminal business (reported as “continuing” operations).
Import terminal delivers stable
financial profile
2023 Highlights2024 Outlook
FY24 EBITDA
guidance
$91-95M
FY24 stay-in-business
capex
$11-12M
FY23
Revenue
$131M
Dividend
Final 6.3 cps and
Special 1.5 cps
payable 28 March 2024
dividend yield 8.3%
Strong financial performance
delivering EBITDA margin of
67%
71%
EBITDA to FCF
Conversion
35
Channel Infrastructure NZ Limited | 2023 Annual Report
Income Statement
Continuing Operations
The results from continuing operations include 12 months import terminal fees earned under the Terminal Services
Agr
eements and Private Storage Agreements and Wiri land and terminal lease, and the associated operating costs, as
well as the results of Independent Petroleum Laboratory for the full year ended 31 December 2023.
$ MILLION
Revenue130.7
Operating Costs43.5
EBITDA
87.2
Depreciation35.4
Financing costs
17.6
Net
Profit before tax
34.1
Income tax expense6.5
Net
Profit after tax from continuing operations
27.6
91%
of FY23 revenue was subject to
PPI inde
xation
67%
A strong EBITDA margin
(Continuing Oper
Wiri L eas e
Privat e Stor age
Laborat or y t es ting and other
Terminal fee s - fix ed
Terminal fee s - v ariable
47.8
5.5
6.6
59.7
11.1
12.4
11.5
8.5
11.1
Energy and utilities
Salary and wages
Administration and other
Materials and contract ors
36
Channel Infrastructure NZ Limited | 2023 Annual Report
Revenue
Channel Infrastructure's primary source of revenue comes
fr
om the fees earned under the Terminal Services
Agreements, of which 45 per cent is fixed and the
remainder is throughput related fees, for the Marsden
Point to Auckland pipeline ("the Pipeline"), pipeline to
the Truck Loading Facility and wharfage. Fees under the
Terminal Services Agreements are subject to take-or-pay
commitments, set at $100 million per annum (real) for the
first three years ($75 million pro-rated for the nine months
to 31 December 2022).
All fees are subject to PPI escalation with a one-year
lag (i.
e. 2023 inflation applying to 2024 fees charged)
which provides a high degree of protection in the current
inflationary environment.
Additional revenue is earned through Private and
Additional S
torage Agreements. Private and additional
storage fees are capacity-based (i.e. independent of
throughput), with revenue of $11 million in 2023. 2023
saw the last 45 million litres of the planned 100 million
litres of private storage come into service with the last
tank conversion completed in September 2023. 2024
will reflect the first full year contribution from Private
storage fees.
The $6 million per annum o
f Wiri lease fees will continue
until February 2025 when the lease expires.
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Terminal revenue - fixed
Wiri lease
Terminal revenue - variable
Private/additional storage revenue
20
40
60
80
100
120
140
-
ToP threshold
NZ$M
37
Channel Infrastructure NZ Limited | 2023 Annual Report
Operating Costs
Channel Infrastructure's largest costs are electricity and
utilitie
s and payroll, together making up 52 per cent of
total operating costs.
Electricity supply is a key operating cost for our
bus
iness and from 1 January 2024, Channel has a fixed
price variable volume contract which includes Energy
Attribute Certificates, certifying that electricity has been
generated from renewable sources, and is for a period of
six years with the right to extend for a further 2.25 years
to 31 March 2032 at the option of Channel.
Labour costs
reflect the salary and other employee costs
of import terminal, laboratory and corporate staff.
Administration and other costs comprise insurance, IT,
r
ates and governance and compliance costs.
Materials and contractor payments relates to the cost of
s
ite and asset maintenance.
Depreciation
The depreciation cost of c.$35 million per annum included
W
iri asset depreciation of c.$6 million.
Financing Costs
The
effective interest rate applying in the twelve months
ended 31 December 2023 was 5.6 per cent (higher
due to line fees paid on undrawn bank facilities), with
approximately 63 per cent of Channel Infrastructure’s
debt costs fixed as at 31 December 2023, providing
funding cost certainty and protection in the high interest
rate environment. The refinancing of the subordinated
no
te has completed the alignment of our debt structure
with an infrastructure business.
Discontinued Operations
A net loss after tax of $3.6 million is r
eported from
discontinued operations in 2023 which reflects the results
from refining activities. This includes $7 million of revenue
recognised in relation to scrap metal sales, proceeds
from historical legal claims and the gain on sale from
carbon credits. Total expenses amounted to $12 million,
comprising: operating costs of $4 million, conversion
costs and impairment of assets of $6 million and non-
cash financing costs of $2 million.
38
Channel Infrastructure NZ Limited | 2023 Annual Report
Cashflow and Dividends
Strong operating
cashflows from continuing operations
funded a significant portion of conversion spend and
growth capex, with net debt increasing to $315 million.
This represents gearing of 39 per cent and Net Debt to
EBITDA of 3.6 times.
Strong cash flows and leverage in the target range of 3 to
4 time
s has enabled the Board to declare an unimputed
final ordinary dividend of 6.3 cents per share and a
special dividend of 1.5 cents per share that will be paid
on 28 March 2024. The total FY23 dividend was 12.0 cents
per share (representing a dividend yield of 8.3%).
Conversion
Costs
Stay in
Bus iness
Capex
Growth
Capex
Net
Financing
Dividend
257
315
11
28
42
17
5090
39
Channel Infrastructure NZ Limited | 2023 Annual Report
Balance Sheet
Net Assets
Net assets of the Company decreased by 4 per cent to
$499 million
or $1.32 per share.
Provisions and employee benefits
Provisions associated with the conversion to an import
t
erminal have reduced by $19 million, with $27 million
spent on shutdown and decommissioning and workforce
transition which were completed across the year. An
increase to the discount rate has resulted in a $1 million
reduction in overall conversion provisions, offset by an
incr
ease to the demolition and restoration provision of
$6.8 million and provision discount unwinding of $2 million.
Employee benefits also reduced by $3 million in line with
workforce reductions through the transition.
Working Capital
Net working capital (after excluding conversion provisions
and the r
epayment of subordinated notes) is positive
$25 million.
Borrowings
In November 2023, Channel Infrastructure issued
$100 million o
f unsecured, unsubordinated, fixed rate
retail bonds for a term of six years, maturing on
14 November 2029. The net proceeds from the retail
bonds provided diversification of funding that aligns with
an infrastructure business, and were applied towards
repaying a portion of existing bank debt and toward
redeeming $54.9 million of subordinated notes that
were not exchanged on the Issue Date under the
Exchange Mechanism.
Total available debt facilities are currently $460 million
with no maturitie
s within 12 months
1
and a
weighted average debt maturity of 3.7
2
years as at
31 December 2023.
Bank DebtRetail bonds (CHI020)
Subordinated notesRetail bonds (CHI030)
NZ$M
202520272026202920282024
150
200
100
50
The Group’s net debt as at 31 December 2023 was
$315 million, resulting in total headroom of $90 million
3
which provides sufficient capacity to fund the remainder
o
f conversion costs and investment in private storage.
Tax Losses
The Company generated significant tax losses through
the con
version to an import terminal. As at 31 December
2023, the Company held tax losses amounting to
c.$474 million which will be used to offset against future
assessable income.
1
The subordinate notes have been
refinanced with $100 million of retail bonds, and the subordinated notes are to be redeemed on 1 March 2024.
2
Average tenor excludes the subordinated notes that are to be redeemed on 1 March 2024.
3
$90m headroom is net of $54.9m required to redeem the remaining CHI010 subordinated notes on 1 March 2024
40
Channel Infrastructure NZ Limited | 2023 Annual Report
41
Channel Infrastructure NZ Limited | 2023 Annual Report
Governance
42
Channel Infrastructure NZ Limited | 2023 Annual Report
Channel Infrastructure NZ Limited operates in New Zealand and
i
s listed on the NZX’s Main Board. It is subject to regulatory
control and monitoring by both the NZX and the Financial
Markets Authority (“FMA”). Our corporate governance framework
sets out our Board’s practices and processes to provide
accountability to shareholders for Channel Infrastructure’s actions
and performance.
This section of the Annual Report provides summary
inf
ormation on our current corporate governance
framework. The Company’s full Governance Statement,
including detailed reporting against the NZX Corporate
Governance Code, together with our governance policies
can be viewed on the ”Investor Centre” section of our
website: www.channelnz.com.
The Governance Statement is annually reviewed
and appr
oved by the Board and is current as at
28 February 2024.
The Board considers that it has followed the
r
ecommendations in the NZX Corporate Governance
Code during the financial year ended 31 December 2023.
Responsibilities of the Board and
it
s Committees
The Board is responsible for setting the Company’s
s
trategic direction and for providing oversight of the
management of the Company, with the aim of increasing
shareholder value and ensuring the obligations of the
Company are properly met. The Board is accountable to
shareholders for the performance of the Company, with
day-to-day management of the Company delegated
to the Chief Executive Officer. The approach to risk
management is set out in the Sustainability Report and
Go
vernance Statement, and the Governance Statement
contains a summary of the categories of risk identified
as currently being the key material enterprise risks to
Channel Infrastructure’s business.
The Board uses committees to address certain issues
that r
equire detailed consideration by members of the
Board who have specialist knowledge and experience.
The Board retains ultimate responsibility for the functions
of its committees and determines their responsibilities.
There are currently four Board committees:
• The Audit and Finance Committee comprising three
members, all of which are Independent Directors,
• The People and Culture Committee comprising four
member
s, of which three are Independent Directors,
• The Independent Directors Committee comprising all
five
Independent Directors, and
• The Health, Safety, Environment and Operations
C
ommittee comprising of four members, of which two
are Independent Directors.
43
Channel Infrastructure NZ Limited | 2023 Annual Report
The respective roles of the Board, its committees and
management (the C
orporate Lead Team) are set out in
the Board’s and relevant committees’ charters.
The committees annually evaluate their own performance
agains
t their charters to ensure that they are appropriate
to assist the Board in effectively fulfilling its role and
meeting its duties. The Board also undertakes a periodic
evaluation of its performance, and in 2022, the Board
engaged Propero Consulting to prepare an evaluation
report to assist the Board in continuing to effectively
perform as a Board.
Independence of Directors
The Board currently consists of seven Directors:
• James Miller (Chair), Andrew Holmes, Anna
Mollo
y, Vanessa Stoddart and Paul Zealand are
Independent Directors.
• Andrew Brewer and Lucy Nation are not Independent.
The Board Chair is an Independent Director, responsible
f
or representing the Board to shareholders.
Independence is assessed according to the NZX Main
Boar
d Listing Rules criteria. No shareholder has any
constitutional right to appoint Directors.
The two largest shareholders of the Company are also
ma
jor customers, either directly or through wholly-owned
subsidiaries, and have representation on the Board which
could lead to a conflict of interest. Clause 8.16.1 of the
Constitution allows for the Independent Directors to act
as the Board in respect of matters that pose a conflict
of interest if raised at the full Board. The role of the
Independent Directors is to:
• Act as the Board in relation to those matters to
be decided by the Board in which all of the other
Directors have an interest which disqualifies them from
forming part of the quorum and voting, and
• Act as a committee of the Board to deal with
mat
ters delegated or referred to it by the Board
or management, including ensuring that issues
concerning the major customers, and in particular any
conflicts of interest, are dealt with in a transparent
manner for the benefit of the Company as a whole.
Meeting Attendance
Director attendances at Board and committee meetings
during 2
023 were as follows:
BOARD
MEETING
1
AUDIT AND
FINANCE
COMMITTEE
PEOPLE AND
CULTURE
COMMITTEE
INDEPENDENT
DIRECTORS
COMMITTEE
HEALTH,
SAFETY,
ENVIRONMENT
AND
OPERATIONS
COMMITTEE
2
DUE
DILIGENCE
COMMITTEE
SITE
WALKS
3
J MillerIndependent Chair8/84/46/75/51/15/53
A HolmesIndependent8/87/75/55/55/53
NL JonesNon-independent7/74/41/12
AM MolloyIndependent8/84/45/51/15/54
L NationNon-independent7/87/75/53
V C M StoddartIndependent7/87/75/51/13
P A ZealandIndependent8/83/43/55/54
1 Includes
27 April 2023 Annual Shareholders’ Meeting.
2 From 27 April 2023 the HSEO Committee transitioned to a seperate sub-committee (one meeting attended by all members prior to the change) and
the Committee now includes Andrew Brewer from 6 December 2023.
3 Combination of physical walks and virtual engagements.
44
Channel Infrastructure NZ Limited | 2023 Annual Report
45
Channel Infrastructure NZ Limited | 2023 Annual Report
Remuneration
Report
Remuneration
Report
46
Channel Infrastructure NZ Limited | 2023 Annual Report
Director and Corporate Lead
T
eam Remuneration
The Company has adopted a Director and Executive
R
emuneration Policy for remuneration of the Board
and Corporate Lead Team. Channel Infrastructure’s
remuneration framework and policies are overseen by the
People and Culture Committee in accordance with the
People and Culture Committee Charter.
Remuneration
Channel Infrastructure aims to attract and retain
appr
opriately qualified and experienced individuals.
Channel Infrastructure applies a fair and equitable
approach to remuneration and reward practices,
considering internal and external relativities balanced
against the commercial environment.
The Board takes independent advice and establishes
mark
et rates and medians against New Zealand
businesses of comparable size and complexity,
having regard to industry specific and generic roles.
Individual performance, company performance and
market relativity are key considerations in setting
remuneration levels.
Channel Infrastructure is committed to pay equity, and
as the bus
iness transitioned to an import terminal, the
Company completed a pay equity review of the new
organisation. In August 2023, the pay equity gap was
19 per cent. Channel remains committed to closing the
gap and actively monitors remuneration levels especially
during the appointment of staff into new roles to ensure
that w
omen are actively supported into broader and
more senior roles in the Company.
Directors’ Remuneration and
Fe
e Review
The Board determines the level of remuneration paid
t
o Directors from a total fee pool that is authorised
by shareholders.
As had been previously signalled, following the
con
version from a
refinery to an import terminal business,
the Board commenced a review of Directors’ fees in
late 2022. The Board undertook a detailed review of
fees to assess the appropriateness of the fees paid
to Directors and ensure that the Company’s Director
remuneration practices are consistent with market
trends, the objective of attracting and retaining high
calibre individuals as Directors and ensure Directors
are appropriately compensated for their workload on
the various Board sub-committees under the Channel
Infrastructure governance framework.
At the Annual Shareholders Meeting in April 2023,
s
hareholders authorised an increase in the total Director
fee pool from $900,000 to $927,000.
The remuneration and other
benefits, excluding
reimbursements, received by the individual Directors
of the Company during the 2023 financial year were
as follows:
APPOINTEDRESIGNEDBOARD FEES
AUDIT AND
FINANCE
COMMITTEE
FEES
PEOPLE AND
CULTURE
COMMITTEE
FEES
INDEPENDENT
DIRECTORS
COMMITTEE
FEES
HEALTH,
SAFETY,
ENVIRONMENT
AND
OPERATIONS
COMMITTEE
FEESTOTAL FEES
J Miller
Independent
Chair1 Nov 2018186,776----186,776
A Brewer
Non-
independent6 Dec 2023------
A HolmesIndependent4 Apr 202275,000-5,00020,0003,389103,389
NL Jones
Non-
independent20 Mar 20186 Dec 202375,00012,500---87,500
AM MolloyIndependent4 Apr 202275,00030,000-20,000-125,000
L Nation
Non-
independent1 Feb 202175,000-5,000-3,38983,389
VCM
S
toddartIndependent20 May 201375,000-20,00020,000-115,000
PA ZealandIndependent29 Aug 201675,00012,500-20,00016,776124,276
47
Channel Infrastructure NZ Limited | 2023 Annual Report
The Directors do not participate in any
profit-based
incentive system. No Director of the Company has
received, or become entitled to receive, a benefit
(other than a benefit included in the total emoluments
received or due and receivable by Directors shown in this
report), including shares, remuneration paid by subsidiary
company or other payments from services provided
(including Directors and Officers insurance cover). The
Chair does not receive additional fees for being on a
committee. No loans have been made to Directors. The
Directors of subsidiary companies (refer to page 61) are
not remunerated in those positions.
Chief Executive
Officer Remuneration
Rob Buchanan commenced his employment as Chief
Ex
ecutive Officer in March 2023. Rob Buchanan’s total
remuneration package includes:
• A fixed salary of $550,000 per annum;
• A short-term performance incentive (STI) payment
bas
ed on achievement of agreed key performance
indicators (KPIs). The STI is an incentive with an “on
target” incentive of 35 per cent of base salary per
plan year, with the potential for this to increase to
45 per cent depending on performance. Short-term
incentive payments are deemed “at risk” payments
designed to motivate and reward performance in the
financial
year. The STI is paid in the year following the
performance period;
• A long-term incentive (LTI) plan in the form of:
– A grant of initial share rights equivalent to $500,000
that ar
e due to vest on 31 January 2028 subject to
achievement of a minimum “on target” performance
agains
t annual controllable KPIs during the vesting
period as determined and assessed by the Board at
the end of that period;
– Share rights equivalent to 45 per cent of
bas
e salary on the first anniversary of the
commencement date of his employment and with
measures and targets to be agreed with the Board
on each subsequent anniversary;
– The Chief Executive Officer’s LTI entitlement
(including the initial s
hare rights) is capped at
$8 million and thereafter subject to negotiation
• An entitlement to six months base salary (in addition
t
o six months' notice or payment in lieu) in the
event of termination due to redundancy, and an
entitlement to 12 months’ base salary, including notice,
for termination of employment on a “no-fault” basis or
resignation within three months of a change of control
of Channel Infrastructure.
The total remuneration paid to the Chief Executive Officer
during the year ended
31 December 2023 comprised the
following components:
• Fixed remuneration - base salary equivalent to
$550,000 per annum
• Other
benefits of $36,383 (accommodation, Kiwisaver
and mileage).
The Chief Executive
Officer’s KPIs, with respect to the
short-term incentive, agreed for the 2023 financial year
relate to:
KPI CATEGORYWEIGHTING
Delivery against the Company scorecard (safe, reliable and compliant terminal operations, delivery of conversion
pr
oject commitments, financial performance from the terminal, meeting customer commitments, building people
and system capability and growing shareholder value)
50%
Delivery against personal scorecard (effective CEO transition, positioning Channel for growth, terminal systems and
cultur
e embedded with an engaged workforce and supporting New Zealand's decarbonisation)
50%
A short-term incentive in respect of the 2023 year
will be paid in early 2
024, amounting to $247,500
recognising Mr Buchanan’s performance against the KPIs
outlined above.
The table below provides a summary of share rights
issued to the current Chief Executive Officer.
COSTS RECOGNISED (FINANCIAL YEAR)
PERFORMANCEGRANTVESTINGNUMBER OF2023TOTAL
YEARDATEDATESHARE RIGHTS$000$000
2023 Initial share rights
31 Jan 202331 Jan 2028337,9756363
48
Channel Infrastructure NZ Limited | 2023 Annual Report
Remuneration of outgoing CEO, Naomi James
Ms James exited the business on 1 April 2023. Her
r
emuneration package for the part year included:
• A short-term performance incentive (STI) payment
of $111,631 based on achievement of agreed key
performance indicators (KPIs)
1
.
• A base salary equivalent to $995,000 per annum;
• A six month redundancy entitlement of $497,500 and
accrued leav
e of $105,896.
• Share rights entitlements refer to Note 20 in the
financial
statements
• Other
benefits of $21,772 (accommodation, Kiwisaver
and mileage)
Five-Year Summary – Chief
Ex
ecutive Remuneration
For the purposes of historical comparison, set out below
is a s
ummary of the costs recognised in each of the
past five years, in relation to the Chief Executive Officer’s
remuneration package.
COSTS RECOGNISED IN
YEAR $000
FINANCIAL
YEARCEO
BASE
SALARYOTHER
TOTAL FIXED
REMUNER-
ATION
SHARE
RIGHTS
SHORT TERM
INCENTIVE KPI
BASED
EMPLOYEE
SHARE
SCHEME
TOTAL
VARIABLE
REMUNER-
ATION
TOTAL
REMUNER-
ATION
FY2023
Rob Buchanan5063754363248-311854
FY2023
Naomi James249625
1
874192112-3041,178
FY2022
Naomi James995411,0361,04164721,6902,726
FY2021
Naomi James995461,04141764711,0652,106
FY2020
Naomi James77347820206--2061,026
FY2020
Paul Zealand187-187----187
FY2020
Mike Fuge1304134----134
FY2019
Mike Fuge90032932----932
1 Other costs include redundancy, final leave accrual and accommodation and mileage
2022 Workforce Changes are
no
w complete
As a result of the business change that occurred in 2022,
nine emplo
yees left Channel during 2023 and two will
depart early in 2024, closing out the Workforce transition.
The Company provided employees with a minimum
of six months’ notice and six months redundancy.
Redundancies amounting to $1.0 million were paid in
2023 (2022: $22 million) and leave entitlements were
paid out amounting to $0.2 million (2022: $7 million).
Redundancy and leave payments are included in the
employee remuneration table set out on page 52.
The business continued to deploy a wide range of
t
ailored workforce transition support services to help our
people into new jobs or training opportunities once their
employment with us came to an end.
Within six months of exit, 99 per cent of our
staff
impacted by the change who were seeking
new employment had found new employment or
were retraining.
1
Applicable performance KPIs related to delivery of FY22 results, continued achievement of terminal transition milestones, seemless CEO transition and
s
afe operations.
49
Channel Infrastructure NZ Limited | 2023 Annual Report
Corporate Lead Team and Other
Emplo
yees' Remuneration Profile
The Corporate Lead Team and employees with Individual
Emplo
yment Agreements (IEAs) are remunerated with a
mix of base salary, benefits, and short-term performance
incentives. The determination of fixed remuneration
is based on responsibilities, individual performance,
experience, and market data. We believe that setting
fixed remuneration in this way is necessary to attract
and retain appropriately qualified and experienced
individuals to drive delivery of the Company's strategy
and rewards ongoing performance. At risk, variable
remuneration, comprises short-term incentives based
on the KPIs in the Company Scorecard and individual
performance. The Company Scorecard included health,
safety and environment (HSE), customer, financial and
balance sheet performance metrics, with an above
target outcome recorded against these KPIs, which takes
into account our three strategic pillars. STI payments in
respect of 2023 performance will be made in 2024.
As previously disclosed, in 2021, key business leaders were
aw
arded with two tranches of share rights (in the form of
shares in the Company) to incentivise and retain selected
individuals in key management roles critical to the safe
delivery of the conversion project. The first tranche of
share rights vested on 1 January 2023 in accordance
with their terms and 1,931,890 shares in the Company
were issued to the awardees of the share rights on
4 January 2023. The second tranche of share rights
vested on 28 February 2023 and were issued on that date
to awardees of the share rights. The Board issued these
shares having determined that the vesting condition in
relation to the safe, on time, on budget and to-plan
conversion to import terminal operations in 2022 have
been satisfied.
Employee Share Purchase Scheme
The Company has established the Employee Share
Pur
chase Scheme which is tax exempt in accordance
with section CW26C of the Income Tax Act 2007 (as
amended). The purpose of the Employee Share Purchase
Scheme is to recognise the important contribution of all
employees to the Company’s future and to assist the
Company in retaining and motivating employees.
A trust has been created under the Employee Share
Pur
chase Scheme for the purpose of holding Company
shares on behalf of each participating employee over a
three-year period. For further details on the scheme, refer
to the consolidated financial statements included in this
latest Annual Report.
The Company estimates that the annual cost of
oper
ating the scheme is approximately $31,000. The
value of the awards under the Employee Share Purchase
Scheme amounted to $1,270 for each eligible employee
in 2023.
The funds, totalling $90,131 for the award, were provided
t
o CRS Nominees Limited (Trustee), as Trustee of
the Employee Share Purchase Scheme, to pay the
subscription price in cash for the issue of the shares
as fully paid ordinary shares. The shares are held
by the Trustee for the participating employees until
they are withdrawn by the participants following a
restricted period of three years from the acquisition date,
unless released earlier in certain limited circumstances
(for example death, sickness, redundancy etc). The
participating employees may vote the shares and receive
dividends, if paid.
The total financial assistance given in 2023 in the form of
adv
ances to the Trustee to acquire the shares and fund
the annual costs of operating the Scheme amounted to
$121,131 (2022: $560,848).
50
Channel Infrastructure NZ Limited | 2023 Annual Report
Employee Remuneration
The following table shows the number of employees and
f
ormer employees (including members of the Corporate
Lead Team), not being Directors, who, in their capacity
as employees, received remuneration and other benefits
during 2023 of at least $100,000.
The remuneration figures
include all monetary payments
made during the year, including redundancy payments
and contributions made by the Company as part
of the employee share scheme. No employees
appointed as a Director of any subsidiary company of
Channel Infrastructure NZ Limited receive or retain any
remuneration or other benefits for holding this office.
The analysis (see table) is compiled on a cash basis; the
v
ariable performance rewards (linked to individual and
business performance for a financial reporting period) in
respect of the 2023 financial year, will be paid in March
2024 and reported as part of the remuneration banding
for the 2024 year.
The ratio between employee remuneration (median)
and Chie
f Executive Officer's total annualised, on-target
remuneration for the 2023 financial year (on a cash basis)
was 1:5
1
(2022: 1:9).
1
Excludes those employees made redundant in 2022 who received a short term incentive only in 2023
51
Channel Infrastructure NZ Limited | 2023 Annual Report
20232022
AMOUNT OF REMUNERATION $000NO. OF EMPLOYEESNO. OF EMPLOYEES
NO. WHICH
INCL
UDE REDUNDANCY
100-1091175
110-1191284
120-129564
130-13931412
140-149974
150-159973
160-169898
170-17981512
180-1895118
190-19931311
200-209299
210-2192116
220-229263
230-239199
240-249-33
250-259-1010
260-2691109
270-279186
280-289142
290-299242
300-309-66
310-319176
320-329-55
330-339142
340-349-44
350-359-54
360-369-22
370-379-43
380-389-44
390-399-66
400-409-22
410-419-1-
420-429-44
440-449-33
460-469-55
470-479111
480-489-22
490-499-22
500-599264
600-699-11
1,600-1,69911-
52
Channel Infrastructure NZ Limited | 2023 Annual Report
53
Channel Infrastructure NZ Limited | 2023 Annual Report
Shareholder
and
Bondholder
Information
54
Channel Infrastructure NZ Limited | 2023 Annual Report
Top Twenty Shareholders - as at 31 December 2023
ShareholdersTotal shares held% of total
1Z Energy Limited47,999,98012.7
2BP New Zealand Holdings Limited31,572,6408.3
3HSBC Nominees (New Zealand) Limited*
1
31,093,4758.2
4Accident Compensation Corporation*25,467,9066.7
5Forsyth Barr Custodians Limited25,389,2026.7
6Custodial Services Limited21,780,7265.8
7BNP Paribas Nominees (NZ) Limited*21,475,8055.7
8FNZ Custodians Limited13,109,3263.5
9Citibank Nominees (New Zealand) Limited*12,167,2753.2
10TEA Custodians Limited Client Property Trust Account*8,632,1532.3
11New Zealand Depository Nominee Limited7,620,4142.0
12Public Trust Class 10 Nominees Limited*5,816,0481.5
13BNP Paribas Nominees (NZ) Limited*4,867,6471.3
14Washington H Soul Pattinson And Company Limited4,854,4581.3
15Hamish Alexander Jones4,703,4081.2
16HSBC Nominees (New Zealand) Limited A/C State Street*4,504,8341.2
17Wairahi Investments Limited3,900,0001.0
18JP Morgan Chase Bank NA NZ Branch-Segregated Clients Acct*3,239,8420.9
19PT (Booster Investments) Nominees Limited3,035,9730.8
20Investment Custodial Services Limited2,455,9930.6
283,687,10574.9
1 The shareholder spread below groups shares held by NZCSD (denoted by * in the table above) as a single legal holding
Shareholder Statistics - as at 31 December 2023
SHAREHOLDERS
No of
financial products
No of shareholders% holderShares% of shares
1 - 4992566.062,2360.0
500 - 9992646.2180,9840.1
1,000 - 1,99952112.3665,2600.2
2,000 - 4,9991,01524.13,130,1420.8
5,000 - 9,99970016.64,708,4211.2
10,000 - 49,9991,15327.323,871,7676.3
50,000 - 99,9991794.210,501,8822.8
100,000 - 499,9991072.519,798,0305.2
500,000 - 999,999140.311,776,8533.1
1,000,000 - upwards230.5304,060,46680.3
Total4,232100378,756,041100
55
Channel Infrastructure NZ Limited | 2023 Annual Report
Top Twenty Bondholders CHI010 5.10% Notes - as at 31 December 2023
BondholderTotal bonds held% of total
1TEA Custodians Limited Client Property Trust Account*
1
21,032,00038.3
2FNZ Custodians Limited8,015,00014.6
3Forsyth Barr Custodians Limited2,361,0004.3
4JP Morgan Chase Bank NA NZ Branch-Segregated Clients Acct*1,800,0003.3
5Public Trust*1,400,0002.6
6JBWere (NZ) Nominees Limited1,124,0002.0
7RGTKMT Investments Limited1,000,0001.8
8Hobson Wealth Custodian Limited995,0001.8
9
Nicholas Peter Gordon & Richard Anthony Johnston & Andrea
L
ee Gordon888,0001.6
10FNZ Custodians Limited611,0001.1
11Craig John Thompson500,0000.9
12Jill Gordon500,0000.9
13Woolf Fisher Trust Incorporated500,0000.9
14Forsyth Barr Custodians Limited477,0000.9
15Dale Patricia Stechman290,0000.5
16Custodial Services Limited284,0000.5
17Carlton Cornwall Bowls Incorporated250,0000.5
18Nicholas Peter Gordon & Andrea Lee Bull250,0000.5
19Wharetukura Limited247,0000.4
20Forsyth Barr Custodians Limited207,0000.4
42,731,00077.8
1 The bondholder spread below groups bonds held by NZCSD (denoted by * in the table above) as a single legal holding
Bondholder statistics - as at
31 December 2023
BONDHOLDERS CHI010
No of
financial products
No of bondholders% holderBonds% of bonds
1 - 4,999----
5,000 - 9,999399.0219,0000.4
10,000 - 49,99929167.55,963,00010.9
50,000 - 99,9995312.32,815,0005.1
100,000 - 499,999358.15,178,0009.4
500,000 - 999,99961.43,994,0007.3
1,000,000 - upwards71.636,732,00066.9
Total43110054,901,000100
56
Channel Infrastructure NZ Limited | 2023 Annual Report
Top Twenty Bondholders CHI020 5.80% Bonds- as at 31 December 2023
BondholderTotal bonds held% of total
1Forsyth Barr Custodians Limited44,271,00044.3
2FNZ Custodians Limited11,324,00011.3
3Citibank Nominees (New Zealand) Limited*
1
10,500,00010.5
4Investment Custodial Services Limited3,150,0003.2
5Forsyth Barr Custodians Limited2,805,0002.8
6TEA Custodians Limited Client Property Trust Account*1,187,0001.2
7Custodial Services Limited1,185,0001.2
8NZX WT Nominees Limited810,0000.8
9JBWere (NZ) Nominees Limited735,0000.7
10FNZ Custodians Limited634,0000.6
11I J Investments Limited500,0000.5
12Mohua Limited500,0000.5
13Hobson Wealth Custodian Limited481,0000.5
14Catherine Jane Gibb403,0000.4
15Nicholas Peter Gordon330,0000.3
16Forsyth Barr Custodians Limited310,0000.3
17Avalon Family Trustee (Mrm) Limited300,0000.3
18Forsyth Barr Custodians Limited300,0000.3
19James Brackenridge Gordon260,0000.3
20Andrew Brodie Thomson & Razimah Ismail250,0000.3
80,235,00080.2
1 The bondholder spread below groups bonds held by NZCSD (denoted by * in the table above) as a single legal holding
Bondholder Statistics - as at
31 December 2023
BONDHOLDERS CHI020
No of
financial products
No of bondholders% holderBonds% of bonds
1 - 4,999----
5,000 - 9,9998011.3450,0000.5
10,000 - 49,99948968.710,340,00010.3
50,000 - 99,9999012.75,072,0005.1
100,000 - 499,999405.66,537,0006.5
500,000 - 999,99950.73,179,0003.2
1,000,000 - upwards71.074,422,00074.4
Total711100100,000,000100
57
Channel Infrastructure NZ Limited | 2023 Annual Report
Top Twenty Bondholders CHI030 6.75% Bonds- as at 31 December 2023
BondholderTotal bonds held% of total
1Forsyth Barr Custodians Limited27,952,00028.0
2Custodial Services Limited15,693,00015.7
3FNZ Custodians Limited11,072,00011.1
4HSBC Nominees (New Zealand) Limited*
1
10,000,00010.0
5Citibank Nominees (New Zealand) Limited*5,380,0005.4
6Hobson Wealth Custodian Limited4,757,0004.8
7BNP Paribas Nominees (NZ) Limited*3,000,0003.0
8Forsyth Barr Custodians Limited1,997,0002.0
9JBWere (NZ) Nominees Limited1,653,0001.7
10Investment Custodial Services Limited920,0000.9
11ANZ Custodial Services New Zealand Limited*700,0000.7
12Public Trust*650,0000.7
13Masfen Securities Limited620,0000.6
14TEA Custodians Limited Client Property Trust Account*620,0000.6
15Custodial Services Limited600,0000.6
16CML Shares Limited562,0000.6
17Richard Barton Adams & Allison Ruth Adams500,0000.5
18Selenium Corporation Limited500,0000.5
19Sterling Holdings Limited500,0000.5
20NZX WT Nominees Limited416,0000.4
88,092,00088.1
1 The bondholder spread below groups share held by NZCSD (denoted by * in the table above) as a single legal holding
Bondholder Statistics - as at
31 December 2023
BONDHOLDERS CHI030
No of
financial products
No of bondholders% holderBonds% of bonds
1 - 4,999----
5,000 - 9,99910422.8694,0000.7
10,000 - 49,99927360.05,902,0005.8
50,000 - 99,999419.02,664,0002.7
100,000 - 499,999184.03,064,0003.1
500,000 - 999,999102.26,172,0006.2
1,000,000 - upwards92.081,504,00081.5
Total455100100,000,000100
58
Channel Infrastructure NZ Limited | 2023 Annual Report
59
Channel Infrastructure NZ Limited | 2023 Annual Report
Statutory
Disclosures
60
Channel Infrastructure NZ Limited | 2023 Annual Report
Directors’ and
Officers’ Insurance
The Company has granted indemnities to its Directors,
C
orporate Lead Team members, and persons whom
it has appointed as Directors of its subsidiaries in
relation to potential liabilities and costs they may incur
in those roles. The indemnities are subject to certain
limitations that are prescribed by law and they do not
cover settlements or admissions prejudicing a successful
defence of a claim without the Company’s consent as
well as the indemnified person’s advisor costs after the
defence of a claim has been assumed by the Company,
unless they are reasonably necessary.
The Company has arranged Directors’ and Officers’
Liability Insurance for its Directors, Corporate Lead Team
and per
sons whom it has appointed as Directors of
its subsidiaries, which provide them with insurance in
respect of certain liabilities and costs they may incur in
those roles. This insurance is limited to cover that is not
prohibited by law.
Independent Professional Advice
With the approval of the Chair, Directors are entitled to
s
eek independent professional advice on any aspect of
their Director’s duties, at the Company’s expense.
Use of Company Information
The Board did not receive any notices from any Director
o
f the Company or its subsidiaries during the year,
requesting to use Company information received in their
capacity as a Director, which would not otherwise have
been available to them. Further, no disclosures were
made of information disclosures under s145(2) of the
Companies Act 1993
Donations
The Company and its subsidiaries made donations of
$12,5
00 during the year ended 31 December 2023 (2022:
$13,273). No political donations were made.
Substantial product holders - as at 31 December 2023
1
No. of
or
dinary shares
Z Energy Limited47,999,980
BP New Zealand Holdings Limited31,572,640
Accident Compensation Corporation25,467,906
Channel Infrastructure Subsidiary Directors
SUBSIDIARY NAME OF DIRECTORS
Independent Petroleum Laboratory Limited
Rob Buchanan, Chris Bougen
Channel Terminal Services Limited
Rob Buchanan, Chris Bougen
CHI Future Developments Limited
Rob Buchanan, Chris Bougen
Maranga Rā Holdings Limited
Rob Buchanan, Chris Bougen
1
As at
31 December 2023, the total number of voting securities on issue was 378,756,041
61
Channel Infrastructure NZ Limited | 2023 Annual Report
Directors' interests in Channel Infrastructure quoted financial products
Set out below are the relevant interests (as defined in the Financial Markets Conduct Act 2013) of the Company’s directors in its
quo
ted financial products as at 31 December 2023:
NAMENUMBER OF ORDINARY SHARESNUMBER OF BONDS
James Miller117,574
1
30,000
Paul Zealand87,000
2
Nil
Anna Molloy25,00030,000
Vanessa StoddartNilNil
Andrew HolmesNilNil
Andrew BrewerNilNil
Lucy NationNilNil
1Beneficial
interest through ordinary shares held by Custodial Services Limited for Mr JB & Mrs GM Miller
2 Relevant interest arising due to significant shareholding in Zoenergy Limited.
NAME
DATE
OF TRAN
SACTION
NATURE OF TRANSACTIONNATURE OF RELEVANT INTERESTCONSIDERATION
NUMBER OF
ORDINAR
Y SHARES
James Miller25 September
2023On-market purchase of
ordinary shares
Beneficial owner (through
ordinary shares held by
Custodial Services Limited for Mr
JB & Mrs GM Miller)
$35,65622,425
26 September
2023On-market purchase of
ordinary shares
Beneficial owner (through
ordinary shares held by
Custodial Services Limited for Mr
JB & Mrs GM Miller)
$31,60020,000
$31,20020,000
27 September
2023On-market purchase of
ordinary shares
Beneficial owner (through
ordinary shares held by
Custodial Services Limited for Mr
JB & Mrs GM Miller)
$31,00020,000
$1.541
Anna Molloy8 March
2023
On-market purchase of
or
dinary shares
Registered holder and
beneficial
owner
$37,00025,000
NAME
DATE
OF TRAN
SACTION
NATURE OF TRANSACTIONNATURE OF RELEVANT INTERESTCONSIDERATION
NUMBER
OF BONDS
James Miller14 November
2023Subscription for
bonds (CHI030)
Beneficial owner (through bonds
held by Custodial Services
Limited for Mr JB & Mrs GM Miller)
$30,00030,000
Anna Molloy14 November
2023
Subscription for
bonds (CHI0
30)
Registered holder and
beneficial
owner
$30,00030,000
62
Channel Infrastructure NZ Limited | 2023 Annual Report
General notice of director's interests
No disclosures were made of interests in transactions
under s140(1) o
f the Companies Act.
Directors have made general disclosures of interests in
accor
dance with s140(2) of the Companies Act. Current
interests as at 31 December 2023, including those which
ceased during the year, are tabulated below.
James MillerRyman Healthcare Limited (appointed 1 June 2023)
Vista Group International Limited
Mercury Energy Limited
Director
Director
Director
Andrew Brewer
(appointed
6 December 2023)
Ampol Limited Australia
Ampol Holdings NZ Limited
Z Energy Limited
Z Energy 2015 Limited
Ampol Australia Petroleum Pty Ltd
Ampol QSR Pty Ltd
Centipede Holdings pty Limited
Emerald Fields Trading Inc Phillipines
Ocean Tankers Corporation Phillipines
Seaoil Phillipines Inc
Zeal Achiever Limited British Virgin Islands
Employee/Executive
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Andrew HolmesScaling Green Hydrogen CRC Advisor Board
Urban Analytica
Chair
Chair
Anna MolloyANZ New Zealand Investments Limited
Winton Land Limited (ceased as a director on 22 August 2023)
Director
Lucy NationCurtin Institute for Energy Transition Advisory Board (appointed
28 August
2023)
Australian Hydrogen Council
BP Australia Pty Ltd
BP Alternative Energy Australia Pty Ltd
BP Low Carbon Energy Australia Pty Ltd
Advisor Board Member
Deputy Chair/Director
Director
Director
Director
Vanessa StoddartTe Whatu Ora Health NZ
OneFortyOne Plantations Holdings Pty Limited
Financial Markets Authority
Waste Management NZ Limited
Iron Duke Partners
Board member
Director
Board member
Director
Advisory Board
Paul ZealandInfrastructure Holdings Limited (appointed 17 January 2023)
Port Nelson Limited
Genesis Energy Limited (NZ)
Lochard Energy Limited (AU)
Zoenergy Ltd (NZ)
Director
Chair
Director
Director
Director/Shareholder
63
Channel Infrastructure NZ Limited | 2023 Annual Report
Consolidated
Financial Report
64
Channel Infrastructure NZ Limited | 2023 Annual Report
Contents
Consolidated Income Statement66
Consolidated Statement of Comprehensive Income67
Consolidated Balance Sheet68
Consolidated Statement of Changes in Equity70
Consolidated Statement of Cash Flows72
Notes to the Consolidated Financial Statements73
Independent Auditor’s Report103
65
Channel Infrastructure NZ Limited | 2023 Annual Report
Consolidated Income Statement
FOR THE YEAR ENDED
31 DECEMBER 2023
GROUPGROUP
20232022
NOTE
$000$000
CONTINUING OPERATIONS
INCOME
Revenue
130,703
88,237
TOTAL INCOME
2,3
130,703
88,237
EXPENSES
Energy and utility costs
11,136
6,372
Materials and contractor payments
8,546
7,277
Salaries, wages and
benefits
11,477
7,964
Administration and other costs
12,384
9,172
TOTAL EXPENSES43,543
30,785
EARNINGS BEFORE DEPRECIATION, FINANCE COSTS AND INCOME TAX
24
87,160
57,452
DEPRECIATION
8
35,409
24,610
NET PROFIT BEFORE FINANCE COSTS AND INCOME TAX51,751
32,842
Finance income
(286)
(183)
Finance costs
17,907
9,947
NET FINANCE COSTS17,621
9,764
NET PROFIT BEFORE INCOME TAX34,130
23,078
Income tax5
6,483
6,524
NET PROFIT AFTER INCOME TAX FROM CONTINUING OPERATIONS27,647
16,554
Net loss after income tax from discontinued operations1
(3,583)
(4,594)
NET PROFIT AFTER INCOME TAX24,064
11,960
ATTRIBUTABLE TO:
Owners of the Parent24,064
11,960
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE SHAREHOLDERSCENTS
CENTS
Basic and diluted earnings per share from continuing operations6
7.4
4.5
Basic and diluted earnings per share6
6.4
3.2
The above Consolidated Income Statement is to be read in conjunction with the notes on pages 73 to 102.
66
Channel Infrastructure NZ Limited | 2023 Annual Report
Consolidated Statement of
C
omprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2023
GROUPGROUP
20232022
NOTE
$000$000
NET PROFIT AFTER INCOME TAX24,064
11,960
OTHER COMPREHENSIVE INCOME
Items that will not be
reclassified to the Income Statement
Defined
benefit plan and medical scheme actuarial gain
2,784
2,397
Deferred tax
(780)
(671)
Total items that will not be
reclassified to the Income Statement
2,004
1,726
Items that may be subsequently
reclassified to the Income Statement
Movement in cash
flow hedge reserve
(4,930)
8,913
Deferred tax
1,380
(2,496)
Total items that may be subsequently reclassified to the Income Statement(3,550)
6,417
TOTAL OTHER COMPREHENSIVE (LOSS) / INCOME, AFTER INCOME TAX(1,546)
8,143
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, AFTER INCOME TAX22,518
20,103
ATTRIBUTABLE TO:
Owners of the Parent
22,518
20,103
The above Consolidated Statement of Comprehensive Income is to be read in conjunction with the notes on
pages 73
to 102.
67
Channel Infrastructure NZ Limited | 2023 Annual Report
Consolidated Balance Sheet
AS AT
31 DECEMBER 2023
GROUPGROUP
20232022
NOTE
$000$000
CURRENT ASSETS
Cash and cash equivalents
4,870
2,386
Trade and other receivables15
25,887
23,047
Income tax receivable
87
-
Derivative
financial instruments
450
33
Inventories
5,514
5,057
TOTAL CURRENT ASSETS36,808
30,523
NON-CURRENT ASSETS
Derivative
financial instruments
10,058
14,143
Intangibles9
1,785
5,909
Property, plant and equipment8
906,360
876,054
Other assets10
18,114
19,714
Right-of-use assets
330
585
TOTAL NON-CURRENT ASSETS936,647
916,405
TOTAL ASSETS973,455
946,928
LIABILITIES
CURRENT LIABILITIES
Trade and other payables17
20,117
16,609
Derivative
financial instruments
603
934
Borrowings13
55,779
-
Lease liabilities
79
62
Employee
benefits18
2,880
3,602
Provisions14
18,526
34,693
TOTAL CURRENT LIABILITIES97,984
55,900
NON-CURRENT LIABILITIES
Borrowings13
264,843
259,583
Lease liabilities
556
557
Employee
benefits18
3,220
5,878
Provisions14
67,503
70,498
Deferred tax liabilities5
40,138
36,020
TOTAL NON-CURRENT LIABILITIES376,260
372,536
TOTAL LIABILITIES474,244
428,436
NET ASSETS499,211
518,492
68
Channel Infrastructure NZ Limited | 2023 Annual Report
GROUPGROUP
20232022
NOTE
$000$000
EQUITY
Contributed equity
318,123
314,504
Revaluation reserve
422,771
422,771
Treasury stock
(1,317)
(1,462)
Employee share entitlement reserve7
1,081
4,240
Cash
flow hedge reserve19
6,575
10,125
Retained earnings
(248,022)
(231,686)
TOTAL EQUITY499,211
518,492
The Board of Directors of Channel Infrastructure NZ Limited authorised these financial statements for issue on
28 February 2024.
For and on behalf of the Board
J B Miller
Chair of the Board
A M Molloy
Chair of the Audit and Finance Committee
The above Consolidated Balance Sheet is to be read in conjunction with the notes on pages 73 to 102.
69
Channel Infrastructure NZ Limited | 2023 Annual Report
Consolidated Statement of
Changes in Equity
FOR THE YEAR ENDED
31 DECEMBER 2023
CONTRIBUTED
EQUITY
REVALUATION
RESERVE
TREASURY
STOCK
EMPLOYEE
SHARE
SCHEME
ENTITLEMENT
RESERVE
CASH FLOW
HEDGE
RESERVE
RETAINED
EARNINGSTOTAL EQUITY
NOTE
$000$000$000$000$000$000$000
AT 1 JANUARY 2022313,974422,771(1,168)1,5863,708(245,383)495,488
COMPREHENSIVE INCOME
Net
profit after income tax-----11,96011,960
Other comprehensive income
Movement in cash
flow
hedge reserve19----8,913-8,913
Defined
benefit actuarial gain18-----2,3972,397
Deferred tax on other
compr
ehensive income
----(2,496)(671)(3,167)
TOTAL OTHER COMPREHENSIVE
GAIN, AFTER INCOME TAX
----6,4171,7268,143
TRANSACTIONS WITH OWNERS
OF THE PARENT
Equity-settled share-
bas
ed payments
---2,890--2,890
Shares vested to employees--236(236)---
Treasury shares issued530-(530)----
Unclaimed dividends
writ
ten back
-----1111
TOTAL TRANSACTIONS WITH
OWNERS OF THE PARENT
530-(294)2,654-112,901
AT 31 DECEMBER 2022
314,504422,771(1,462)4,24010,125(231,686)518,492
70
Channel Infrastructure NZ Limited | 2023 Annual Report
CONTRIBUTED
EQUITY
REVALUATION
RESERVE
TREASURY
STOCK
EMPLOYEE
SHARE
SCHEME
ENTITLEMENT
RESERVE
CASH FLOW
HEDGE
RESERVE
RETAINED
EARNINGSTOTAL EQUITY
NOTE
$000$000$000$000$000$000$000
AT 1 JANUARY 2023
314,504422,771(1,462)4,24010,125(231,686)518,492
COMPREHENSIVE INCOME
Net
profit after income tax
-----24,06424,064
Other comprehensive income
Movement in cash
flow
hedge reserve19
----(4,930)-(4,930)
Defined
benefit actuarial gain18
-----2,7842,784
Deferred tax on other
compr
ehensive income
----1,380(780)600
TOTAL OTHER COMPREHENSIVE
LOSS, AFTER INCOME TAX
----(3,550)2,004(1,546)
TRANSACTIONS WITH OWNERS
OF THE PARENT
Equity-settled share-
bas
ed payments
---605--605
Shares vested to employees
3,529-235(3,764)---
Treasury shares issued
90-(90)----
Dividends provided or paid
-----(42,417)(42,417)
Unclaimed dividends
writ
ten back
-----1313
TOTAL TRANSACTIONS WITH
OWNERS OF THE PARENT
3,619-145(3,159)-(42,404)(41,799)
AT 31 DECEMBER 2023318,123422,771(1,317)1,0816,575(248,022)499,211
The above Consolidated Statement of Changes in Equity is to be read in conjunction with the notes on pages 73
to 102.
71
Channel Infrastructure NZ Limited | 2023 Annual Report
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED
31 DECEMBER 2023
GROUPGROUP
20232022
NOTE
$000$000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
132,226
163,197
Payment for supplies and expenses
(62,516)
(104,836)
Payments to employees
(14,543)
(57,680)
Interest received
286
183
Interest paid
(17,398)
(13,494)
Net GST paid
(869)
(2,518)
Income tax received/(paid)
(471)
1,018
NET CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES
16
36,715
(14,130)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
7,256
-
Proceeds from sale of intangible assets
5,089
2,413
Payments for property, plant and equipment
(63,060)
(59,143)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES(50,715)
(56,730)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of loans and borrowings
(21,000)
(39,000)
Proceeds from bond issuance
79,901
98,111
Lease payments
(1)
(1,945)
Dividends paid
(42,416)
11
NET CASH INFLOW FROM FINANCING ACTIVITIES16,484
57,177
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS2,484
(13,683)
Cash and cash equivalents at the beginning of the period
2,386
16,069
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD4,870
2,386
The above Consolidated Cash Flow Statement is to be read in conjunction with the notes on pages 73 to 102.
72
Channel Infrastructure NZ Limited | 2023 Annual Report
Notes to the Consolidated
Financial S
tatements
FOR THE YEAR ENDED 31 DECEMBER 2023
Reporting Entity
Channel Infrastructure NZ Limited (previously The New
Z
ealand Refining Company Limited, trading as Refining
NZ) (‘Parent’, ‘Company’ or ‘Channel Infrastructure’)
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.
Channel Infrastructure is listed, and its ordinary shares
are quoted under the ticker CHI on the NZX Main Board
Equity Market (‘NZX Main Board’) and its subordinated
notes (ticker CHI010) and corporate bonds (ticker CHI020
& CHI030) are quoted on the NZX Debt Market.
The consolidated
financial statements for the year ended
31 December 2023 presented are those of Channel
Infrastructure together with its subsidiaries (‘the Group’).
Subsidiaries are all entities over which the Group has
control and includes Channel Terminal Services Limited,
Independent Petroleum Laboratory Limited, Maranga Rā
Holdings Limited and CHI Future Developments Limited.
Basis of Preparation
These consolidated
financial statements for the year
ended 31 December 2023 comply with:
• The Financial Markets Conduct Act 2013,
• Generally Accepted Accounting Practice in New
Z
ealand (‘NZ GAAP’),
• New Zealand equivalents to the International Financial
R
eporting Standards (‘NZ IFRS’) and other authoritative
pronouncements of the External Reporting Board, as
appropriate for for-profit entities, and International
Financial Reporting Standards (IFRS).
The consolidated
financial statements are prepared on
the historical cost basis, except for property, plant and
equipment, investment properties, derivative financial
instruments and plan assets (included in the net defined
benefit pension plan liability) which are measured at
fair value.
The consolidated
financial statements are prepared on
a GST exclusive basis and presented in New Zealand
dollars ($) which is the Group’s functional currency,
and the financial information has been rounded to the
nearest thousand dollars ($000), unless otherwise stated.
Climate change
In preparing the consolidated
financial statements
management has considered the impact that climate
change and the transition to a low carbon economy may
hav
e on the business. Further information can be found
in the 2023 Sustainability Report, 'Resilient infrastructure
for a decarbonising world'. Management will continue to
monitor, assess and account for the impact of climate
change in future years.
Use of Judgements and Estimates
The preparation of
financial statements requires
directors and management to make certain judgements,
estimates and assumptions that affect the application
of accounting policies and reported amounts of assets,
liabilities, income and expenses. The areas that involve
estimates and assumptions that can significantly affect
the amounts recognised in the consolidated financial
statements include:
•
Fair value of property, plant and equipment –
the Group adopts the fair value model as the
measurement base for property, plant and equipment
(refer Note 8). Management and the Board has
assessed the fair value of property, plant and
equipment and concluded that it does not differ
materially from its carrying value.
•Assets held for sale – the Group continues to report
decommis
sioned refinery assets that are subject to
a conditional sale agreement, as property, plant and
equipment, rather than as assets held for sale. (Refer
to Note 8 for further details).
•Provisions –
the Group continues to recognise several
provisions in relation to the conversion of the refinery
into a dedicated fuels import terminal operation (refer
to Note 14 for further details).
•Recoverability of tax losses – the Group's
accumulat
ed tax losses amount to c.$474 million at
31 December 2023. A deferred tax asset in respect of
these unutilised tax losses is recognised, having regard
to the Shareholder and Business Continuity Tests and
an assessment of future taxable profits available
against which the tax losses can be recovered, and
therefore the deferred tax asset realised.
•Discontinued operations – the Group continues to
pr
esent the results from discontinued operations
associated with the refining operations which ceased
in Mar
ch 2022. For further details including judgements
relating to the processing fees refer to Note 1.
73
Channel Infrastructure NZ Limited | 2023 Annual Report
Significant
Accounting Policies
The material accounting policies applied in the
pr
eparation of these consolidated financial statements
have been consistently applied to all periods presented.
The Group has changed the way that it classifies certain
operating expenses in the current reporting period; the
2022 comparatives have been updated to be consistent
with the new classification and to improve comparability
between reporting periods.
There were no new or amended accounting standards
mandat
ory for the year ended 31 December 2023 that
were considered to have a material impact to the Group.
The XRB has issued a number of other standards,
amendment
s and interpretations which are not yet
effective, and which have not been early adopted by
Channel Infrastructure. These standards, amendments
or interpretations are not expected to have a material
impact on the consolidated financial statements of the
Group in the current or future reporting periods and on
forseeable future transactions.
74
Channel Infrastructure NZ Limited | 2023 Annual Report
1 Discontinued Operations
The Group's results from discontinued operations relate to refining
operations which ceased in March 2022.
In the 12 months ended 31 December 2023 the results included revenue from scrap metal sales, proceeds from historical
legal claims
, the gain on sale of NZU's (carbon credits) and on-going costs associated with refining operations,
including for example, one off legal costs associated with settlement of historical litigation claims, retiree medical
scheme costs and costs associated with the sale of permanently decommissioned refining plant. Conversion costs
reflect those costs attributed to the transition to an import terminal and include the reassessment of long-term
provisions (including demolition) due to cost re-estimation and/or changes in discount rates.
The comparatives include processing fees, pipeline fees and other refining income earned under the Processing
Agr
eements, and Wiri land and terminal lease income to 31 March 2022. Processing fees earned to March 2022 were
determined by the Company in accordance with the terms of the Processing Agreements with each customer. The
Company is currently in dispute in relation to 2022 processing fees associated with the cessation of refining activities.
The Company has reviewed its maximum exposure in relation to the dispute including for consideration of movements
of applicable oil benchmarks, and assesses its maximum exposure to be c.$3 million (2022: c$11 million).
GROUPGROUP
20232022
NOTE
$000$000
INCOME
Revenue3
6,866
69,950
TOTAL INCOME6,866
69,950
EXPENSES
Purchase of process materials and utilities
-
19,390
Materials and contractor payments
-
4,708
Salaries, wages and
benefits
1,029
15,193
Administration and other costs
3,121
6,705
TOTAL EXPENSES4,150
45,996
EARNINGS BEFORE DEPRECIATION, IMPAIRMENT, CONVERSION COSTS, FINANCE
COSTS AND INCOME TAX
2,716
23,954
Depreciation and disposal costs
-
7,907
Conversion costs
5,879
2,968
Impairment / (revaluation) of assets
-
5,043
TOTAL DEPRECIATION, DISPOSALS, CONVERSION COSTS AND IMPAIRMENT5,879
15,918
NET (LOSS) / PROFIT BEFORE FINANCE COSTS AND INCOME TAX(3,163)
8,036
Finance income
-
(42)
Finance costs
1,813
5,719
NET FINANCE COSTS1,813
5,677
NET (LOSS) / PROFIT BEFORE INCOME TAX(4,976)
2,359
Income Tax
(1,393)
6,953
NET LOSS AFTER INCOME TAX(3,583)
(4,594)
75
Channel Infrastructure NZ Limited | 2023 Annual Report
20232022
$000$000
CASH FLOWS (USED IN) / FROM DISCONTINUED OPERATIONS
Net cash used in operating activities
(35,622)
(59,308)
Net cash from/(used in) investing activities
12,345
(11,563)
Net cash used in
financing activities
-
(1,860)
NET CASH FLOWS USED IN DISCONTINUED ACTIVITIES FOR THE PERIOD(23,276)
(72,731)
2 Segment Reporting
(a)Identification and description of reportable segments and reporting measures
Management reviews the Group’s performance of operating segments primarily based on revenue and adjusted
earnings be
fore depreciation, finance costs and income tax (‘Adjusted EBITDA’). For a reconciliation between the
Non-GAAP measure, Adjusted EBITDA, to the reported EBITDA refer to Note 24. Assets and liabilities information,
depreciation, finance income and costs and income taxes are managed on a Group basis and are therefore not
presented as part of the segment information.
The Group has
identified one reportable segment, Infrastructure, which comprises the dedicated fuels import terminal
system (including jetty infrastructure at Marsden Point, storage tanks, and Marsden Point to Auckland pipeline), and
Wiri land and terminal leases and the fuel testing laboratory. The prior reporting period includes nine months of the
Infrastructure segment and three months of the Oil Refining segment (until 31 March 2022). The refining business was
discontinued and is classified as discontinued operations (as disclosed under Note 1 ).
(b) Segment results
31 December 2023InfrastructureOil RefiningTotal
$000$000$000
CONTINUING OPERATIONS
External customer
130,703-130,703
Inter-segment
---
TOTAL REVENUE FROM CONTINUING OPERATIONS130,703-130,703
DISCONTINUED OPERATIONS
External customer
-6,8666,866
Inter-segment
---
TOTAL REVENUE FROM DISCONTINUED OPERATIONS-6,8666,866
TOTAL REVENUE130,7036,866137,569
ADJUSTED EBITDA
1
87,2433,61090,853
1 Adjusted EBITDA is adjusted earnings before depreciation, impairment, conversion costs, finance costs and income tax
76
Channel Infrastructure NZ Limited | 2023 Annual Report
31 December
2022InfrastructureOil RefiningTotal
$000$000$000
CONTINUING OPERATIONS
External customer88,237-88,237
Inter-segment---
TOTAL REVENUE FROM CONTINUING OPERATIONS
88,237-88,237
DISCONTINUED OPERATIONS
External customer53969,41169,950
Inter-segment---
TOTAL REVENUE FROM DISCONTINUED OPERATIONS
53969,41169,950
TOTAL REVENUE
88,77669,411158,187
ADJUSTED EBITDA
1
57,45227,01884,470
1 Adjusted EBITDA is adjusted earnings before depreciation, impairment, conversion costs, finance costs and income tax
3 Income
Import terminal and associated fees are recognised over time as services are delivered. An output method
is applied t
o measure progress of the services provided. The revenue is recognised in the amounts invoiced,
applying the practical expedient in NZ IFRS 15, reflecting actual throughput, adjusted for minimum fee (take-or-pay)
when applicable.
Rental income from operating leases (including Wiri terminal rental) is recognised on a straight-line basis in
accor
dance with the substance of the relevant agreements.
There is no
significant judgement involved in the price determination and allocation with respect to terminal fees. The
Group does not have contracts with customers where significant financing components, non-cash considerations or
consideration payable to customers, obligations for refunds or specific warranties would exist.
The negative processing fee revenue recorded in the 12 months ended 31 December 2023, reflects changes to pricing
benchmark
s and the assessed impact to the gross refining margin reported in the prior comparative period. Other
refining related income includes income relating to historical legal claims in relation to refining operations and the gain
on sale from NZU's (carbon credits) of $2.1 million (2022: $1.3 million).
GROUPGROUP
20232022
$000$000
CONTINUING OPERATIONS
Import terminal revenue
118,589
78,535
Wiri land and terminal lease income
5,907
4,519
Laboratory and other revenue
5,483
5,183
Other operating revenue
724
-
TOTAL REVENUE FROM CONTINUING OPERATIONS130,703
88,237
DISCONTINUED OPERATIONS
Processing fees
(1,388)
47,112
Natural Gas recovery
-
4,737
Pipeline and terminalling fee revenue
-
5,987
Wiri land and terminal lease income
-
1,506
Other
refining related income
8,254
10,608
TOTAL REVENUE FROM DISCONTINUED OPERATIONS6,866
69,950
TOTAL REVENUE137,569
158,187
77
Channel Infrastructure NZ Limited | 2023 Annual Report
4 Related Parties
(a) Shareholders and other related parties
The Group entered into transactions with related parties, primarily import terminal and related revenue under the
T
erminal Services and Private Storage Agreements.
The nature, transactions and balances with the related parties are as follows:
•Import Terminal Services –
Channel Group provides import terminal and pipeline services to each of the Group’s
three shareholder customers, namely bp New Zealand Holdings Limited (BP), Mobil Oil New Zealand Limited (Mobil)
and Z Energy Limited under long-term Terminal Services Agreements and Private Storage Agreements. In 2023 c.87
per cent (2022 c.89 per cent) of the Group’s total revenue was earned with shareholder customers. For credit terms
refer to Note 19.
•Lease income –
relates to income associated with the Wiri fuel terminal infrastructure that is owned by the Parent
Company and leased to Wiri Oil Services Limited. There has been no impact from the conversion to an import
terminal on these lease arrangements, which remain in place until their expiry in February 2025 and continue to be
classified as non-cancellable operating leases with no further right of renewal (meaning that at the end of the lease
term ownership of the Wiri fuel terminal assets reverts to Wiri Oil Services Limited).
•Purchases of Goods and Services –
prior to commencement of the import terminal operations, the Group
purchased sulphur, a by-product of the refining process from our customer shareholders, which was then on-sold
t
o third parties. From April 2022 sulphur is no longer produced by the Company. In addition, amongst underwriters
of Channel's material damage and business interruption insurance policy are companies related to Channel's
shareholders and therefore a portion of the insurance premium is paid to those companies.
Revenue, purchases and other charges from related parties
Revenue
1
PurchasesOther charges
TRANSACTION
VALUES FOR THE YEAR
ENDED 31 DECEMBER
BALANCES
OUTSTANDING AS AT
31 DECEMBER
TRANSACTION
VALUES FOR THE YEAR
ENDED 31 DECEMBER
BALANCES
OUTSTANDING AS AT
31 DECEMBER
TRANSACTION
VALUES FOR THE YEAR
ENDED 31 DECEMBER
BALANCES
OUTSTANDING AS AT
31 DECEMBER
202320222023202220232022202320222023202220232022
$000$000$000$000$000$000$000$000$000$000$000$000
BP
36,292
42,558
8,756
7,613
-
327
-
-
74
70
-
-
Mobil
2
34,815
38,538
3,856
2,923
57
429
-
-
-
70
-
-
Z Energy
48,216
59,691
4,615
4,714
440
1,403
-
230
-
-
-
-
Wiri Oil
7,342
7,127
95
70
22
-
-
-
-
-
-
-
TOTAL126,665
147,914
17,322
15,320
519
2,159
-
230
74
140
-
-
1 Revenue excludes excise duty.
2 Mobil had no representation on the Board of Directors of the company during 2023 and ceased being a shareholder of the company in
December 2
023.
78
Channel Infrastructure NZ Limited | 2023 Annual Report
(b) Directors’ fees and key management personnel compensation
Directors’ fees and key management personnel remuneration paid during the financial year were as follows:
GROUPGROUP
20232022
NOTE
$000$000
Salaries and other short-term employee benefits
4,342
4,626
Post-employment
benefits
118
128
Share-based payments20
309
1,625
KEY MANAGEMENT PERSONNEL COMPENSATION4,769
6,379
Directors' fees
825
838
KEY MANAGEMENT PERSONNEL COMPENSATION & DIRECTORS' FEES5,594
7,217
Salaries and other short-term employee benefits in 2023 include payments made to Rob Buchanan and the former
CEO Naomi James. Rob Buchanan joined the company on 31 January 2023 and Naomi James stepped down as CEO
on 6 March 2023 departing the business 1 April 2023.
Key Management personnel is limited to members of the Corporate Lead Team.
79
Channel Infrastructure NZ Limited | 2023 Annual Report
5 Taxation
(a) Income tax expense
GROUPGROUP
20232022
$000$000
CONTINUING OPERATIONS
Net
profit before income tax expense
34,130
23,078
Tax at the New Zealand corporate income tax rate of 28% (2022: 28%)
9,556
6,462
Tax
effect of amounts which are either non-deductible or taxable in calculating
taxable income:
Income not assessable for tax
(1,063)
-
Expenses not deductible for tax
1,552
-
Adjustments in respect of current income tax in respect of previous years
(3,562)
62
INCOME TAX EXPENSE6,483
6,524
Represented by:
Current tax expense
(290)
62
Deferred tax recognised in the income statement
6,773
6,462
INCOME TAX EXPENSE6,483
6,524
(b) Deferred tax
NET DEFERRED TAX
ASSET / (LIABILITY)
RECOGNISED IN
PROFIT OR LOSS
RECOGNISED IN OTHER
COMPREHENSIVE
INCOME
NET
DEFERRED TAX
ASSET / (LIABILITY)
DEFERRED
TAX ASSET
DEFERRED
TAX LIABILITY
1 JAN 202231 DEC 2022
$000$000$000$000$000$000
Property, plant
and equipment(99,494)(112,982)(210)(212,686)-(212,686)
Provisions42,377(14,920)-27,45727,457-
Employee
benefits11,979(7,455)(671)3,8533,853-
Financial instruments(1,443)-(2,286)(3,729)-(3,729)
Intangibles873(77)-796796-
Right-of-use assets(168)(32)-(200)-(200)
Leases887(429)-458458-
Inventory6,427(282)-6,1456,145-
Tax losses19,516122,370-141,886141,886-
TOTAL
(19,046)(13,807)(3,167)(36,020)180,595(216,615)
80
Channel Infrastructure NZ Limited | 2023 Annual Report
NET DEFERRED TAX
ASSET / (LIABILITY)
RECOGNISED IN
PROFIT OR LOSS
RECOGNISED IN OTHER
COMPREHENSIVE
INCOME
NET
DEFERRED TAX
ASSET / (LIABILITY)
DEFERRED
TAX ASSET
DEFERRED
TAX LIABILITY
1 JAN 202331 DEC 2023
$000$000$000$000$000$000
Property, plant
and equipment
(212,686)8,017-(204,669)-(204,669)
Provisions
27,457(2,414)-25,04325,043-
Employee
benefits
3,853(542)(780)2,5312,531-
Financial instruments
(3,729)(424)1,380(2,773)-(2,773)
Intangibles
796(558)-238238-
Right-of-use assets
(200)33-(167)-(167)
Leases
458(280)-178178-
Inventory
6,145(3)-6,1426,142-
Supplementary
dividend cr
edits
---659659-
Tax losses
141,886(9,206)-132,680132,680-
TOTAL(36,020)(5,377)600(40,138)167,470(207,609)
The Group generated
significant tax losses through the conversion to an import terminal and has estimated unused
tax losses of c.$474 million (2022: $507 million) available to carry forward. A deferred tax asset in respect of these
unutilised tax losses has been recognised. On the basis that at least a 49 per cent continuity of shareholding is
maintained, management and the Board believe that future taxable profits will be available against which the tax
losses can be recovered and therefore the deferred tax asset can be realised. Also, at 31 December 2023 a deferred
tax asset of $0.7 million has been recognised relating to unused supplementary dividend credits.
Any adverse change in future earnings and
profitability or significant change in the shareholding of Channel
Infrastructure, could limit the Company’s ability to realise the deferred tax asset. Specifically, in case of shareholder
continuity breach occurring, the carry forward of tax losses would be subject to the Business Continuity Test.
For property, plant and equipment, deferred tax typically arises from differences in capitalisation rules and
depr
eciation rates between tax and accounting.
6 Earnings Per Share
Earnings per share is calculated by dividing the profit from continuing and discontinued operations, attributable to
shareholders of the Company, by the weighted average number of ordinary shares on issue during the year. The
Company’s share-based payments described in Note 20 have no material dilutive effect on the earnings per share.
TOTALTOTAL
NOTE
20232022
Profit after tax from continuing operations attributable to
shareholders of the Company($000)
27,647
16,554
Loss after tax from discontinued operations attributable to
s
hareholders of the Company
($000)
(3,583)
(4,594)
Profit
after tax attributable to shareholders of the Company
($000)
24,064
11,960
Weighted average number of shares on issue000's7
374,695
371,629
BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Cents
7.4
4.5
BASIC EARNINGS PER SHARE
Cents
6.4
3.2
81
Channel Infrastructure NZ Limited | 2023 Annual Report
7 Equity and Dividends
Contributed Equity.
The issued capital of the Company as at 31 December 2023 is represented by 378,756,041 ordinary
shares (2022: 372,725,917) issued and fully paid, less 436,951 (2022: 1,031,802) treasury shares held by CRS Nominees
Limited. All ordinary shares rank equally with one vote attached to each ordinary share.
Movements in the contributed equity comprise:
Issued and Fully Paid Shares
1 January 2023
372,725,917
Vesting of share rights issued in 2021
In January and February 2023, the Company issued two tranches of shares with respect to the share rights issued
in 2
021 to incentivise and retain selected key management for the safe delivery of the conversion project:
• The
first tranche of share rights vested on 1 January 2023 in accordance with their terms and 1,931,890 shares in
the Company were issued to the awardees on 4 January 2023.
• The second tranche of share rights vested on 28 February
2023 in accordance with their terms and 1,377,389
shares in the Company were issued (including 282,253 shares to the former CEO).
3,309,279
Vesting of former CEO’s share rights
On
23 February 2023 the Board determined that the unvested share rights of former Chief Executive Officer
(CEO), Naomi James, would vest upon cessation of her employment as CEO on 6 March 2023 as the outcomes
contemplated by the vesting conditions were delivered. Accordingly, on 7 March 2023 the Company issued
2,661,773 ordinary shares to Ms James.
2,661,773
Employee Share Purchase Scheme
On 17 April 2023, the Company issued 59,072 ordinary shares, at an issue price of $1.527 per share, pursuant to
the Emplo
yee Share Purchase Scheme. The shares are held on trust by CRS Nominees as Trustee until they are
withdrawn by the employees following a restricted period of three years.
59,072
Issued and Fully Paid Shares
31 December 2023
378,756,041
Revaluation reserve. Revaluation reserve represents an accumulated revaluation gain on property, plant and
equipment v
alued at fair value. Please refer to Note 8 for further details.
Treasury stock.
Treasury stock represents the value of shares acquired by CRS Nominees Limited on-market, or shares
issued by the Company, in respect of the Employee Share Purchase Scheme.
Employee share entitlement reserve. The employee share entitlement reserve is used to recognise the fair value of
s
hares granted but not vested to employees (as part of the Employee Share Purchase Scheme) or to the Chief
Executive or key management within the Share Rights Schemes. Amounts are transferred to share capital when the
shares vest to the employee.
Cash
flow hedge reserve. The cash flow hedge reserve comprises the effective portion of the cumulative net change
in the fair value of hedging instruments used in cash flow hedges pending subsequent recognition in the Consolidated
Income S
tatement (refer to Note 19).
82
Channel Infrastructure NZ Limited | 2023 Annual Report
Dividends
20232022
Dividend declared and paid$mcents per share$mcents per share
Special dividend (FY2022)72.0--
Final dividend (FY2022)195.0--
Interim dividend (FY2023)164.2--
Dividend paid4211.2--
Final dividend declared246.3
Special dividend declared61.5
On
28 February 2024, the Directors approved the payment of the final dividend of 6.3 cents per share and a special
dividend of 1.5 cents per share. The dividends will not be imputed and are expected to be paid on 28 March 2024.
The shareholder continuity requirement for imputation purposes was breached in December 2023. As at 31 December
2023, imputation credits available to shareholders are $Nil (2022:$20.3 million).
83
Channel Infrastructure NZ Limited | 2023 Annual Report
8 Property, Plant and Equipment
Property, plant and equipment are included in the Common Terms Deed as detailed in Note 13.
Revaluation of property, plant and equipment
All property, plant and equipment is recognised at fair value less accumulated depreciation, except capital work in
pr
ogress which is recognised at historical cost.
Any surplus on revaluation of property, plant and equipment is recognised directly in the Revaluation Reserve unless it
offsets
a previous decrease in value recognised in the Consolidated Income Statement, in which case it is recognised
in the Consolidated Income Statement. A deficit on revaluation of property, plant and equipment is recognised in
the Consolidated Income Statement in the period it arises where it exceeds any surplus previously transferred to the
Revaluation Reserve.
Channel Infrastructure import terminal assets were revalued in 2021 at fair value by PwC, a qualified independent
v
aluer, using the 2021 Envisory fuel demand forecasts. The carrying value of import terminal assets as at 31 December
2023 was not considered to be materially different to their fair value, as such no adjustment to the carrying value was
made in 2023. The actual rate of future fuel transition remains uncertain, and may occur faster or slower than modelled
by Envisory, and the fair valuation of assets is sensitive to fuel volumes through our import terminal facilities. If import
terminal volumes were to be 10 per cent higher or 10 per cent lower than assumed in the forecasts, the fair value of our
import terminal assets would increase by c.$65 million or decrease by c.$55 million.
The carrying amount of the import terminal system under the cost model was $291 million as at 31 December 2023.
Depreciation
Depreciation is provided on a straight-line basis on all property, plant and equipment other than freehold land and
capit
al work in progress which are not depreciated. The remaining useful lives of the Group’s property, plant and
equipment are reviewed annually. The remaining lives of the import terminal system assets for the current and prior
year are outlined below:
USEFUL
LIVES
(YEARS)
Buildings2-30 years
Jetties14-45 years
Tanks20-45 years
Other Assets1-80 years
Marsden Point to Auckland Pipeline and other assets5-45 years
84
Channel Infrastructure NZ Limited | 2023 Annual Report
FREEHOLD LAND
AND
IMPROVEMENTS
REFINING
PLANT
IMPORT
TERMINAL
SYSTEM
CAPITAL WORK
IN PROGRESSTOTAL
$000$000$000$000$000
AT 1 JANUARY 2022
Cost15,61933,700795,54224,275869,136
Accumulated depreciation and impairment losses-----
NET BOOK AMOUNT15,61933,700795,54224,275869,136
YEAR ENDED 31 DECEMBER 2022
Opening net book value15,61933,700795,54224,275869,136
Additions---47,01147,011
Disposals--(1,955)-(1,955)
Depreciation charge--(33,238)-(33,238)
Impairment of assets-(4,900)--(4,900)
NET BOOK AMOUNT AFTER IMPAIRMENTS15,61928,800760,34971,286876,054
Transfers--27,909(27,909)-
Revaluation-----
CLOSING NET BOOK AMOUNT15,61928,800788,25843,377876,054
AT 31 DECEMBER 2022
Revalued amount15,61928,800821,49643,377909,292
Accumulated depreciation--(33,238)-(33,238)
NET BOOK AMOUNT
15,61928,800788,25843,377876,054
YEAR ENDED 31 DECEMBER 2023
Opening net book value
15,61928,800788,25843,377876,054
Additions
--1,92263,83665,758
Disposals
--(112)-(112)
Depreciation charge
--(35,340)-(35,340)
Impairment / revaluation
-----
NET BOOK AMOUNT AFTER IMPAIRMENTS15,61928,800754,728107,213906,360
Transfers
--55,708(55,708)-
Revaluation
-----
CLOSING NET BOOK AMOUNT15,61928,800810,43651,505906,360
AT 31 DECEMBER 2023
Revalued amount
15,61928,800845,77651,505941,700
Accumulated depreciation
--(35,340)-(35,340)
NET BOOK AMOUNT15,61928,800810,43651,505906,360
85
Channel Infrastructure NZ Limited | 2023 Annual Report
Conditional sale agreement for decommissioned assets
On
8 July 2023, the Company entered into an Asset Sale Agreement with US-based Seadra Energy Incorporated
(“Seadra”), granting Seadra an option to purchase permanently decommissioned parts of the former refinery. Under
the agreement, Seadra had an initial period of up to six months to consider the purchase of certain assets from the
hydrocracking complex, in consideration for an option payment of US$4.0 million (NZ$6.5 million), and had the ability
to renew the option to purchase for an additional six months for a further payment of US$0.5 million (NZ$0.8 million).
In December 2023 Seadra extended the option to purchase and has until 7 July 2024 to confirm whether it will pursue
the purchase.
Should Seadra elect to exercise the option to purchase, subject to meeting certain conditions, the purchase price
f
or the assets agreed between the parties is US$33.875 million (NZ$53.4 million translated using the exchange rate
at 31 December 2023), including the option payments, but prior to any transaction costs, with the balance of the
purchase price to be paid in instalments throughout the expected 12-month deconstruction period. Non-current
assets are classified by the Group as assets held-for-sale if their carrying amount will be recovered principally through
a sale transaction rather than through continuing use and a sale is considered highly probable within 12 months. The
Board has considered all information available and exercised their judgement to determine that the assets proposed
to be sold to Seadra should not be classified as non-current assets held for sale as at 31 December 2023. This is based
on the Board’s knowledge and experience regarding the challenges to developing technically feasible and financially
viable projects involving second-hand refining plant globally, and specifically noting the conditional nature of this
agreement. The net book value after impairments of all decommissioned refinery plant (including the assets proposed
t
o be sold to Seadra) is NZ$28.8 million.
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Channel Infrastructure NZ Limited | 2023 Annual Report
9 Intangibles
Intangibles include:
• $1.8 million (2
022: $1.8 million) site consent costs associated with the 35-year resource consent renewed in 2021.
• $Nil (2022: $4.1 million) carbon cr
edit units (NZU's). The Group sold c.73,000 NZU's in December 2023 for $5.1 million,
recognising a gain on sale of $2.1 million. The NZU's were issued under the New Zealand Emissions Trading Scheme
(NZ ETS) by the Crown to the Parent company pursuant to the Company’s Negotiated Greenhouse Agreement
(NGA), which came to an end with the cessation of refining activities from April 2022.
10 Other Assets
Other assets include:
• $5.7 million (2022: $6.2 million) investment properties - land leased by Parent (refer to Note 11 for further details) and
held at fair value through profit and loss. A revaluation of the investment property was undertaken in December
2023 by a qualified independent valuer.
• $12.4 million (2
022: $13.5 million) precious metal (platinum) - platinum purchased in December 2022 as part of the
platinum lease settlement, which is expected to be recovered and sold within 12 months. Platinum is held at fair
value through
profit and loss (discontinued operations) and measured at its quoted market price.
11 Operating Leases
Lease income from operating leases, where the Group is a lessor, are recognised as income on a straight-line basis
over the period of the lease.
The Group has the following leases where it acts as a lessor:
• Lease of land and terminal assets located at Wiri, South Auckland, to Wiri Oil Services Limited (refer to Note 4) under
a non-cancellable oper
ating lease which expires in February 2025 with no further right of renewal. The annual Wiri
terminal and land lease income and land lease cost are recognised on a straight-line basis over the period of lease
and amounted to $6.5 million and $0.5 million, respectively, in 2023 (2022 $6.5 million and $0.5 million);
• Lease of some surplus land at Marsden Point – the lease expires in 2042.
GROUPGROUP
20232022
$000$000
Lease payments receivable from operating leases where the Group is a lessor
- No later than one year
6,674
6,652
- One to
five years
2,066
8,536
- Beyond
five years
1,835
1,962
TOTAL10,575
17,150
12 Contractual Commitments
Commitments are related to asset purchases and other ongoing contractual commitments as at the reporting
dat
e but not provided for in the consolidated financial statements. As at 31 December 2023, the total contractual
commitments amounted to $29 million (31 December 2022: $34 million), and are primarily related to import terminal
conversion project costs.
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Channel Infrastructure NZ Limited | 2023 Annual Report
13 Borrowings
In November 2023, the Company issued $100 million o
f unsecured, unsubordinated, fixed rate bonds for a term of six
years, maturing on 14 November 2029. In connection with this issue, the Company purchased $20.1 million subordinated
notes in exchange for bonds on a one-for-one basis at a face value of $1.00. All subordinated notes purchased by the
Company have been cancelled. This has reduced the total number of subordinated notes on issue from 75.0 million to
54.9 million.
Further to the exchange mechanism on issue of the bonds, the Company has elected to redeem all of the remaining
s
ubordinated notes on 1 March 2024, being the first election date under the Trust Deed. For each subordinated note
redeemed on 1 March 2024 the Company will pay an amount equal to the principal amount of the subordinated note
($1.00) plus the final semi-annual interest payment.
In the prior year the Company issued $100 million o
f unsecured, unsubordinated, fixed rate bonds for a term of five
years, maturing on 20 May 2027.
The Group’s total funding facilities are $460 million which include
s $54.9 million of subordinated notes to be redeemed
1 March 2024, with no other maturities within 12 months. At 31 December 2023 the average tenor is 3.7 years
(31 December 2022: 3.5 years, calculated on the basis that the subordinated notes are redeemed at the first election
date of 1 March 2024).
At 31 December
2023, the fair value of the Retail bond maturing in November 2029 is $104.5 million compared
to its carrying amount of $100.7 million. The fair values of other borrowings are not materially different from their
carrying amounts.
The borrowings are unsecured. The Parent can determine which revolving cash advance facility will be drawn upon
mee
ting funding requirements. The Parent borrows under a Common Terms Deed which requires certain certificates
and covenants.
The table below outlines the maturity profile of the facilities as at 31 December 2023:
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Channel Infrastructure NZ Limited | 2023 Annual Report
GROUPGROUP
MATURITY DATE
20232022
$000$000
BORROWINGS
Current borrowings:
Subordinated notes
1
Mar-24
55,779
-
Total current borrowings55,779-
Non-current borrowings:
Revolving cash advancesNov-25
65,000
50,000
Revolving cash advancesNov-26
-
16,000
Revolving cash advancesNov-27
-
20,000
Subordinated notes
1
Mar-24
-
74,791
Retail bonds
2
May-27
99,173
98,792
Retail bonds
2
Nov-29
100,670
-
Total non-current borrowings264,843
259,583
TOTAL BORROWINGS320,622
259,583
UNDRAWN FACILITIES
Revolving cash advancesNov-25
-
15,000
Revolving cash advancesNov-26
75,000
59,000
Revolving cash advancesNov-27
65,000
45,000
TOTAL UNDRAWN BORROWING FACILITIES140,000
119,000
1 The
difference between the carrying value of the subordinated notes and their face value is due to unamortised issue costs and accrued interest. The
Company has elected to redeem the notes at the first election date of 1 March 2024. In the prior year, the maturity date of the notes was disclosed as
the expiry date of 1 March 2034.
2 The difference between the carrying value of the retail bonds and their face values is due to unamortised issue costs and accrued interest.
GROUPGROUP
20232022
$000$000
Total borrowings
320,622
259,583
Less: Cash and cash equivalents
(4,870)
(2,386)
NET DEBT315,752
257,197
14 Provisions
Provisions are liabilities of uncertain timing and amount, recognised where the Group has an obligation (legal or
cons
tructive) whose settlement will require an outflow of resources and can be reliably measured.
All provisions are recognised in amounts reflecting
the present value of future expected cash outflows. In estimating
the provisions, the Group assumed a long-term inflation rate of 2.0 per cent (2022: 2.0 per cent) and discount rates
between 4.20 per cent and 5.20 per cent (2022: between 4.50 per cent and 5.12 per cent), respectively.
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Channel Infrastructure NZ Limited | 2023 Annual Report
SHUT DOWN
AND DECOMMISSIONING
DEMOLITION
AND RESTORATION
WORKFORCE AND
OTHER PROVISIONS
TOTAL
$000$000$000$000
AT 1 JANUARY 202283,36869,37832,691185,437
Additions - conversion related-5,5003,7329,232
Additions - other----
Utilisation(45,111)-(30,826)(75,937)
Adjustment for change in discount rate(876)(13,991)(1,083)(15,950)
Finance costs9811,1322962,409
AT 31 DECEMBER 2022
38,36262,0194,810105,191
Current31,4981003,09534,693
Non-current6,86461,9191,71570,498
SHUT DOWN
AND DECOMMISSIONING
DEMOLITION
AND RESTORATION
WORKFORCE AND
OTHER PROVISIONS
TOTAL
$000$000$000$000
AT 1 JANUARY 2023
38,36262,0194,810105,191
Additions - conversion related
-4,912-4,912
Additions - other
-1,922-1,922
Utilisation
(23,214)(143)(3,556)(26,913)
Adjustment for change in discount rate
7(1,472)159(1,306)
Finance costs
5041,661582,223
AT 31 DECEMBER 202315,65968,8991,47186,029
Current
15,6591,3961,47118,526
Non-current
-67,503-67,503
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Channel Infrastructure NZ Limited | 2023 Annual Report
The key provisions as at
31 December 2023 include:
•Refinery shutdown and decommissioning – Costs associated with the decommissioning of redundant refining assets
which are not suitable for immediate repurposing.
•Demolition and restoration – Costs associated with the demolition of select refining
assets, assumed to occur 10
years after the import terminal conversion, as well as jetty demolition at the end of the lease period.
The Company also recognised a provision associated with environmental obligations resulting from Channel
Infr
astructure's commitments, as part of the resource consents obtained in April 2021, to continue maintaining
the current level of environmental standards. Environmental measures at Marsden Point include operation of a
groundwater hydraulic containment system and hydrocarbon recovery program reducing the extent of legacy
contamination over time as part of the ongoing remediation of the site.
As a condition of the resource consent, Channel Infrastructure has also committed to work with the Northland Regional
C
ouncil ahead of time (during the 20th year of consent or at least 12 months prior to the cessation of terminal
operations) to set out the actions necessary to maintain compliance for the discharges of contaminants. Given the
unknown nature of the future activities that may be agreed with the Northland Regional Council, no liability has been
recognised in the Consolidated Balance Sheet other than the cost associated with ongoing environmental monitoring
activities over a period of 20 years. (Refer to Note 21)
15 Trade and Other Receivables
GROUPGROUP
20232022
NOTE
$000$000
Trade receivables
17,792
19,005
Other receivables and prepayments
8,095
4,042
TOTAL TRADE AND OTHER RECEIVABLES25,887
23,047
Trade receivables are due from customers, non-interest bearing and are normally settled on seven to 21-day terms.
D
ue to the short-term nature of trade receivables, their carrying amount is considered the same as their fair value.
Trade and other receivables-related party balances are disclosed in Note
4.
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Channel Infrastructure NZ Limited | 2023 Annual Report
16 Cash and Cash Equivalents
The Group’s cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid
in
vestments that are readily convertible to known amounts of cash.
Reconciliation of net cash flow from operating activities to reported profit:
GROUPGROUP
20232022
$000$000
NET PROFIT AFTER INCOME TAX24,064
11,960
Adjusted for non-cash transactions:
Depreciation and disposal costs
35,409
32,517
Impairment/(revaluation) of assets
-
5,043
Movement in deferred tax
4,118
16,974
Add movement in deferred tax on items included in other
compr
ehensive income
600
(3,167)
Movement in provisions
(19,162)
(80,246)
Less (increase)/decrease in provisions relating to property, plant and equipment
(1,922)
1,955
Employee share scheme entitlement
605
2,890
Decrease in intangibles
4,124
21,150
Less proceeds from sale of intangibles
(5,089)
(2,553)
Interest and other non-cash movements
(5,027)
6,957
Adjusted for movements in working capital items
(Increase)/decrease in trade and other receivables
(2,840)
116,800
Increase/(decrease) in trade and other payables
3,508
(135,833)
Less increase/(decrease) in trade and other payables relating to property,
plant and equipment and int
angibles
(533)
(1,200)
Decrease in employee
benefits liabilities
(3,380)
(11,135)
Less employee entitlements included in other comprehensive income
2,784
2,397
(Increase)/decrease in income tax receivable
(87)
684
(Increase)/decrease in inventories
(457)
677
NET CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES36,715
(14,130)
In the Consolidated Statement of Cash Flows, the deposits placements and withdrawals and bank borrowings receipts
and r
epayments are presented on a net basis as their turnover is quick, amounts are large, and the maturities are
relatively short.
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Channel Infrastructure NZ Limited | 2023 Annual Report
The below sets out an analysis of the Group’s liabilities for which cash
flows have been, or will be, classified as financing
activities in the statement of cash flows:
GROUPGROUP
20232022
$000$000
Current borrowings
55,779
-
Non-current borrowings
264,843
259,583
TOTAL BORROWINGS320,622
259,583
Opening borrowings
259,583
199,698
Repayments of loans and borrowings
(21,000)
(39,000)
Proceeds from bond issuance
79,901
98,111
Non-cash movements
2,138
774
CLOSING BORROWINGS320,622
259,583
17 Trade and Other Payables
GROUPGROUP
20232022
NOTE
$000$000
Trade payables
11,824
16,609
Goods services tax payable
1,037
-
Deferred income
7,256
-
TOTAL TRADE AND OTHER PAYABLES20,117
16,609
Trade payables are unsecured, non-interest bearing and are usually paid within 30 days of recognition.
Trade and other payables-related party balances are disclosed in Note
4.
Deferred income relates to two option payments totalling US$4.5million, received from US-based Seadra Energy
Incorpor
ated (“Seadra”) for an option to purchase certain decomissioned assets. The option payments will be
recognised in the income statement when the decomissioned assets are sold, or in the event Seadra does not exercise
it's purchase option. Refer to Note 8 for further information.
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Channel Infrastructure NZ Limited | 2023 Annual Report
18 Employee Benefits
Liabilities for employee benefits comprise the following:
20232022
CURRENTNON-
CURRENT
TOTALCURRENTNON-
CURRENT
TOTAL
$000$000$000$000$000$000
Defined
benefit pension plan
-146146
-2,6792,679
Medical plan
2033,0743,277
1933,1993,392
Wages, salaries, annual leave and
s
ick leave
2,677-2,677
3,409-3,409
TOTAL2,8803,2206,100
3,6025,8789,480
Defined benefit pension plan
The Parent contributes to a
defined benefit pension fund which has been closed to new members since 2002. As at
31 December 2023 there was one active member contributing to the Plan (2022: 2). In addition, there are 98 pensioner
members receiving regular pension payments in accordance with the Trust Deed (2022: 98).
Under the plan the Parent has an obligation to pay contributions if the fund does not hold sufficient assets to pay all
pens
ioners the benefits they are entitled to. Key risks that could expose the Group to a shortfall include investment
returns and life expectancy.
The latest triennial actuarial review, completed as at 31 March 2022, reported an actuarial surplus (actuarial value
o
f assets was greater that the present value of accrued benefits using expected investment returns), therefore no
immediate contribution to the fund was required. In 2023 the Company contributed $279,000 to fund the benefit of the
remaining member and to cover the administration expenses of the Plan. (2022: $225,000).
While the fund is fully funded, the Parent recognises a liability in the statement of financial position, which is calculated
annually b
y independent actuaries using the projected unit credit method with present value of the estimated future
cash outflows using interest rates of Government bonds (rather than expected investment returns). The modified
duration of the defined benefit liability was approximately nine years (2022: nine years).
Medical plan (scheme closed since 1996)
The Parent pays health insurance premiums in respect of eight beneficiaries (2022: nine) until their death. This scheme
w
as closed in 1996 and has not been offered to new employees since. The medical plan is accounted for in a similar
manner to the defined benefit plan outlined above, with an accounting valuation performed by an independent
actuary at each balance date. Expected contributions to the medical plan in 2024 are $213,000.
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Channel Infrastructure NZ Limited | 2023 Annual Report
19 Financial Risk Management
The Group is exposed to a variety of financial risks (market, credit and liquidity) in the normal course of the business.
Ris
k management is performed by management who evaluate and hedge certain financial risks, including currency risk
and interest rate risk under a treasury policy that is approved by the Board of Directors. The following is a summary of
the Group’s exposure to financial risk and the management of those:
FINANCIAL RISKEXPOSUREMANAGEMENT OF RISK AND S
ENSITIVITY
Market risk
Electricity
price ris
k
Changes in market pricesPrice fluctuation risk managed using Contracts for Differences and/or physical
supply contracts.
Sensitivity: From
1 January 2023 the Group had a fixed price variable volume
contract for the supply of renewable electricity therefore the income statement
is not sensitive to changing market prices.
Currency riskMovement in foreign
e
xchange rates
Currency risk managed through material purchases of property, plant
and equipment and operating items are hedged using forward currency
exchange contracts.
Sensitivity:
As at 31 December 2023 the Group held US dollar foreign exchange
contracts and the impact of US dollar appreciation/depreciation by +/-10 per
cent on before-tax profit/loss and other comprehensive income is -/+$1.3m
(2022: +$1.2m).
Interest rate riskMovement in interest ratesInterest rate risk managed through a range of
fixed rate borrowings and interest
rate swaps.
Sensitivity:
At 31 December 2023, impact of inter-bank interest rates changing
by +/-75 basis points on before tax profit/loss and other comprehensive income
is -/+$0.04m and +/-$1.1m respectively (2022: -/+$0.1m and +/-$2.5m).
Liquidity risk
Risk that the Group will not
be able t
o meet its financial
obligations as they fall due
The Group monitors rolling forecasts of liquidity requirements to ensure it
has sufficient cash to meet operational needs while maintaining sufficient
headroom on the Group’s undrawn borrowing facilities. No surplus cash
is held by the Group over and above the balance required for working
capital management.
Credit risk
Risk of loss to the Group due to
cus
tomer or counterparty default
The Group is exposed to credit risk if counterparties fail to make payments in
respect of payment of trade receivables as invoices fall due. Most common
payment terms are on the 20th of the following month.
The receivables from the shareholder customers (as disclosed in the related
par
ty Note 4) present a concentration of credit risk, however, management has
assessed the credit quality of these customers as being high (Exxon Mobil AA-;
BP plc A-, Ampol Baa1 ). Based on the analysis of the historical payments of the
Group’s customers and with reference to their credit rating and short payment
terms, the Group assessed the expected credit losses in respect to 31 December
2023 receivables to be immaterial. No collateral is held over trade receivables.
Overdue trade receivable balances at 31 December
2023 totalled $6.3 million
(2022: $5.2 million), and no provision for doubtful debt was recognised.
Risk of derivative counterparties
and cas
h deposits being lost
For banks, only parties with a minimum long-term credit rating of A+ or A1 are
accep
ted. For investments gross limits are set for financial institutions and the
usage of these limits is determined by assigning product weightings to the
principal amount of the transaction.
Transactions are spread across several counterparties to avoid concentrations
o
f credit exposure. No credit limits were exceeded during the reporting
period and management does not expect any losses from non-performance
by counterparties.
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Channel Infrastructure NZ Limited | 2023 Annual Report
Non-Derivative Financial Liabilities
The following table sets out the maturity analysis for non-derivative financial liabilities based on the contractual terms
as at balance dat
e. The amounts presented are the contractual undiscounted cash flows and are based on the expiry
of the bank facility or maturity of the subordinated notes.
The liquidity analysis set out below discloses cash outflows resulting from the financial liabilities only and does not
cons
ider expected net cash inflows from financial assets (including trade receivables) or undrawn debt facilities which
provide liquidity support to the Group. Contractual cash flows associated with bank borrowings include interest for the
period until the debt rollover date (typically within six months from the balance date) and subordinated notes and
retail bonds include interest in the period until 14 November 2029.
CONTRACTUAL CASH FLOWS
CARRYING
AMOUNT
LESS THAN 6
MONTHS
BETWEEN 6
MONTHS -1
YEAR
BETWEEN 1-2
YEARS
BETWEEN 2-5
YEARS
OVER 5
YEARS
TOTAL CASH
FLOWS
GROUP 2023NOTE
$000$000$000$000$000$000$000
NON-DERIVATIVE
FINANCIAL LIABILITIES
Trade payables17
(11,824)(11,824)----(11,824)
Lease liabilities
(635)(34)(71)(63)(144)(626)(938)
Bank borrowings13
(65,000)(1,015)-(65,000)--(66,015)
Subordinated notes13
(55,779)(56,301)----(56,301)
Retail bonds13
(199,843)(6,275)(6,275)(12,550)(128,950)(106,750)(260,800)
TOTAL NON-DERIVATIVE
FINANCIAL LIABILITIES(333,081)(75,449)(6,346)(77,613)(129,094)(107,376)(395,878)
CONTRACTUAL CASH FLOWS
CARRYING
AMOUNT
LESS THAN 6
MONTHS
BETWEEN 6
MONTHS -1
YEAR
BETWEEN 1-2
YEARS
BETWEEN 2-5
YEARS
OVER 5
YEARS
TOTAL CASH
FLOWS
GROUP 2022NOTE
$000$000$000$000$000$000$000
NON-DERIVATIVE
FINANCIAL LIABILITIES
Trade payables17(19,334)(19,334)----(19,334)
Lease liabilities(619)(25)(61)(74)(110)(662)(932)
Bank borrowings13(86,000)(1,197)--(86,000)-(87,197)
Subordinated notes13(74,791)(1,913)(1,913)(3,825)(11,475)(99,863)(118,989)
Retail bonds13(98,792)(2,900)(2,900)(5,800)(114,500)-(126,100)
TOTAL NON-DERIVATIVE
FINANCIAL LIABILITIES
(279,536)(25,369)(4,874)(9,699)(212,085)(100,525)(352,552)
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Channel Infrastructure NZ Limited | 2023 Annual Report
Derivative Financial Liabilities
The table below details the liquidity risk arising from derivative liabilities held by the Group at balance date. Derivative
financial
liabilities are split into the gross settled derivatives which include foreign exchange forward contracts with
the inflow being based on the foreign currency converted at the closing spot rate, and the net settled derivatives
which include interest rate swaps (with the floating rate being based on the most recent rate set) and contracts
for differences.
CONTRACTUAL CASH FLOWS
CARRYING
AMOUNT
LESS THAN 6
MONTHS
BETWEEN 6
MONTHS -1
YEAR
BETWEEN 1-2
YEARS
BETWEEN 2-5
YEARS
OVER 5 YEARSTOTAL CASH
FLOWS
GROUP 2023
$000$000$000$000$000$000$000
DERIVATIVE
FINANCIAL INSTRUMENTS
Net settled derivatives9,7932,1631,6894,4335,264-13,549
Gross settled derivatives
Outflows
--(12,568)---(12,568)
Inflows
--12,668---12,668
Total gross
settled derivatives112-100---100
TOTAL DERIVATIVE
FINANCIAL LIABILITIES9,9052,1631,7894,4335,264-13,649
CONTRACTUAL CASH FLOWS
CARRYING
AMOUNT
LESS THAN 6
MONTHS
BETWEEN 6
MONTHS -1
YEAR
BETWEEN 1-2
YEARS
BETWEEN 2-5
YEARS
OVER 5 YEARSTOTAL CASH
FLOWS
GROUP 2022
$000$000$000$000$000$000$000
DERIVATIVE
FINANCIAL INSTRUMENTS
Net settled derivatives
13,2091,1983344,7196,81956113,631
Gross settled derivatives
Outflows-(611)(12,516)---(13,127)
Inflows-57912,676---13,255
Total gross
settled derivatives
33(32)160---128
TOTAL DERIVATIVE
FINANCIAL LIABILITIES
13,2421,1664944,7196,81956113,759
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Channel Infrastructure NZ Limited | 2023 Annual Report
Hedging
Derivatives are only used for hedging purposes and not as speculative investments. The Group designates certain
deriv
atives as hedges of a particular risk associated with a recognised asset or liability or a highly probable
forecast transaction.
Hedge
effectiveness
Hedge
effectiveness is determined at inception of the hedge relationship, and through periodic effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
The gain or loss relating to the ineffective portion is recognised immediately in other operating gains/losses in the
Consolidated Income Statement.
Cash
flow hedges
The Group manages its market risk by designating cashflow hedges. The effective portion of changes in the fair
v
alue of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the cash flow
hedge reserve.
The net movement in the cash
flow hedge reserve comprises:
20232022
$000$000
Level 1 input
financial instruments
Electricity futures settled in the year
-
1,275
Ineffective
hedges - recycled to income statement
-
(57)
Level 2 input
financial instruments
Movement in value of interest rate swaps held throughout the year
(3,956)
7,875
Interest rate swaps entered into during the year
-
-
Contracts for
differences entered into during the year
(290)
1,393
Contracts for
differences settled in the year
-
(1,573)
Contracts for
differences held throughout the year
(764)
-
Ineffective
hedges - recycled to income statement
80
-
Gross movement in cash
flow hedge reserve
(4,930)
8,913
Deferred tax1,380
(2,496)
Net movement in cash
flow hedge reserve
(3,550)
6,417
Fair value hedges
The Group designates as fair value hedges derivative financial instruments on fixed rate borrowings where the fair
v
alue of the debt changes as a result of changes in interest rates. The carrying amount of the hedged items are
adjusted for gains and losses attributable to the risk being hedged. The hedging instruments are also measured at
fair value.
Fair value measurement
Financial instruments are measured at fair value using the following fair value measurement hierarchy:
• Level 1 – Quoted prices from the Australian Securities Exchange (ASX) for electricity futures,
• Level 2 – Inputs other than quoted prices included within level 1 that are observable for:
– Interest rate swaps: fair value calculated as the present value of the estimated future cash flows based on
ob
servable yield curves,
– Forward foreign exchange contracts: fair value determined using forward exchange rates at the balance date,
with the r
esulting value discounted back to present value, and
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Channel Infrastructure NZ Limited | 2023 Annual Report
– Contracts for
differences: fair value determined using the inputs from active market (ASX) for electricity futures,
adjusted for respective location factors.
The fair value of derivative
financial instruments approximates their carrying value. The full fair value of a hedging
derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than
12 months.
Hedging activity
The
effects of the derivative financial instruments on the Group’s financial position and performance are as follows:
Cash
flow hedges
FOREIGN EXCHANGE
FORWARD CONTRACTS
AUDUSD
INTEREST
RATE SWAPS
ELECTRICITY
CONTRACTS
FOR DIFFERENCES
PLATINUM
COMMODITY
PRICE
31 DECEMBER 2023
Carrying amount – net asset/(liability)
($000)
-1128,794339(603)
Notional amount (equivalent of NZ$000)
-12,668115,000(339)11,860
Maturity date
-20242026-202820242024
Hedge ratio
--1:11:1-
Change in fair value of hedging
ins
trument ($000)
-50(3,956)(1,054)(603)
AU$/NZ$US$/NZ$US$
Weighted average hedged rate
-0.63401.5%$149.7/MWhUS$960/Toz
31 DECEMBER 2022
Carrying amount – net asset/(liability)
($000)(29)6212,7501,393(934)
Notional amount (equivalent of NZ$000)611(12,676)115,0003,77412,639
Maturity date202320232026-202820242023
Hedge ratio1:1-1:11:1-
Change in fair value of hedging
ins
trument ($000)(29)627,875(3,483)(934)
AU$/NZ$US$/NZ$US$
Weighted average hedged rate0.93830.63671.5%$143.2/MWhUS$996/Toz
For all hedges the quantity of the hedging instrument matched the quantity of the hedged items therefore the hedge
r
atios were 1:1 (note, the platinum commodity price hedge is an economic hedge, however not designated as a hedge
under NZ IFRS 9).
Electricity derivatives are used to hedge highly probable cash flows associated with purchases of electricity at spot
mark
et and an ineffective portion of the hedge may occur due to a volume mismatch and location factor. During the
financial year the hedge ineffectiveness from these cash flow hedges amounted to nil (2022: $0.06 million).
Fair value hedges
For this hedge, the notional amount of the hedging instrument matched the designated notional amount of the
hedged it
em therefore the hedge ratio is 1:1. Potential sources of ineffectiveness relate to a change in the expected
timing of repayment of the hedged item.
During the year the hedge
ineffectiveness from the fair value hedge amounted to nil.
99
Channel Infrastructure NZ Limited | 2023 Annual Report
20232022
HEDGING
INSTRUMENT
HEDGED ITEM
HEDGING
INSTRUMENT
HEDGED ITEM
$000$000$000$000
INTEREST RATE
DERIVATIVES
BORROWINGS
Fair value hedge:
-
Notional amount
1
50,000-
--
Carrying amount - net asset/(liability)
1,263(51,263)
--
Accumulated amount of fair value hedge adjustments on
the hedged it
em included in the carrying amount of the
hedged item
-(1,263)
--
Change in fair value of hedging instrument
1,263-
--
Change in fair value of hedged item
-(1,263)
--
Maturity date
2027-
--
Hedge ratio
1:1-
--
Weighted average hedge rate
Floating-
--
1 Notional amount is $60 million during the intiial s
ettlement period to February 2024
20 Employee share-based payments
The Company operates the following share schemes:
A Chief Executive Share Rights Scheme in the form of:
• A grant of initial share rights equivalent to $500,000 that will vest on 31 January 2028, subject to the achievement of
a minimum “
on target” performance against annual controllable KPIs during the vesting period.
• Share rights equivalent to 45 per cent of base salary on the first anniversary of the commencement date and each
anniv
ersary thereafter, with each tranche having a three-year vesting period and with measures and targets to be
agreed with the Board.
• The number of share rights granted equals the gross value of the award divided by the volume weighted average
price o
f the Company's shares for the 20 trading days prior to the grant date. Subject to vesting conditions, share
rights convert to the Companys shares based on a zero exercise price.
• The Chief Executive
Officer’s LTI entitlement, including the initial share rights, is capped at $8 million, and thereafter
subject to renegotiation.
• In the year ended
31 December 2023, the Company recognised an expense of $0.3 million (2022: $1.0 million) in
relation to the Chief Executive share rights scheme. The expense is measured at its fair value (determined based
on the Company’s share price and taking into account share liquidity discount and expected dividends) and
recognised over the vesting period. The weighted average remaining life of the current scheme is 4.1 years.
• The former Chief Executive
Officer’s LTI entitlement vested upon cessation of employment as CEO 6 March 2023
(1,482,991 shares).
Management Share Rights Scheme
• An award of share rights in the form of shares to incentivise and retain key members of management (including the
f
ormer Chief Executive) through the delivery of the conversion to import terminal operations in 2022.
• The number of share rights granted equals the gross value of the award divided by the volume weighted average
price o
f the Company's shares for the 20 trading days prior to the grant date.
• The share rights vested in accordance with their terms in 2023 and shares in the Company were issued to the
aw
ardees based on a zero exercise price.
100
Channel Infrastructure NZ Limited | 2023 Annual Report
• In 2023 the Company recognised an expense of $0.1 million (2
022: $1.1 million) in relation to the Management share
rights scheme.
An Employee Share Scheme (“ESS” or “Scheme”)
The Scheme
qualifies as an “Exempt ESS” under section CW26C of the Income Tax Act 2007 and is classified for
accounting purposes as equity-settled transactions. In 2023 Eligible employees were offered in total $1,271 worth of
shares during the year of award. The shares are either purchased on market or issued, and held by CRS Nominees
Limited, during a three year vesting period. In 2023 the Company recognised an expense of $0.25 million (2022:
$0.8 million) in relation to the Scheme.
Information regarding the number of shares and share rights awarded under the scheme is as follows:
2023
2022
CEO SHARE
RIGHTS SCHEME
MANAGEMENT
SHARE
RIGHTS SCHEME
EMPLOYEE
SHARE SCHEME
CEO SHARE
RIGHTS SCHEME
MANAGEMENT
SHARE
RIGHTS SCHEME
EMPLOYEE
SHARE SCHEME
AT 1 JANUARY1,482,9914,488,066945,369
1,250,0004,488,0661,066,478
Granted
335,828-59,072
232,991-502,440
Vested
(1,482,991)(4,488,066)(701,128)
--(606,762)
Lapsed
-(6,026)
--(16,787)
AT 31 DECEMBER335,828-297,287
1,482,9914,488,066945,369
Percentage of total ordinary
s
hares (%)
0.09%0.00%0.08%
0.34%1.21%0.29%
21 Contingencies
From time to time, the Group has legal claims and exposures that arise from contracts and the Group's business in
r
espect of which no provision has been made. Where it is more likely than not that such a litigation will result in an
outflow of resources that is already reasonably estimated, a provision is recorded.
Apart from the contingency disclosed in Note
14, relating to conditions attached to the site resource consents, the
Group had no contingent liabilities as at 31 December 2023.
22 Events after balance date
Dividends Declared
On
28 February 2024 the Board declared an unimputed ordinary final dividend of 6.3 cents per share and an
unimputed special dividend of 1.5 cents per share as detailed in Note 7.
101
Channel Infrastructure NZ Limited | 2023 Annual Report
23 Auditor’s fees
GROUPGROUP
20232022
$000$000
Auditor's fees comprises:
Audit of
financial statements
276
294
Audit of
financial statements - prior year
-
48
Reimbursement of travel and accommodation
13
10
Other assurance services:
Agreed upon procedures - AGM scrutineering
6
5
Half-year agreed upon procedures
20
20
Other services:
Greenhouse gas inventory pre-assessment review
55
-
AUDITOR'S FEES370
377
24 Non-GAAP disclosures
Channel Infrastructure's standard profit measure prepared under New Zealand Generally Accepted Accounting
P
ractice (NZ GAAP) is net profit/(loss) after tax. Channel has used non-GAAP measures when discussing financial
performance in this report. The Directors and the management believe that these measures provide useful information
as they are used internally to evaluate segmental and total Group performance, to establish operating and capital
budgets as well as being used for bank covenant purposes.
Non-GAAP profit
measures are not prepared in accordance with NZ IFRS (New Zealand equivalents to International
Financial Reporting Standards) and are not uniformly defined, therefore the audited 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 Channel in accordance with NZ IFRS. Terms are defined
as follows:
Reported EBITDA
from Continuing
Operations:
Reported earnings before depreciation, finance costs and income tax for continuing
operations as presented in the Consolidated Income Statement.
Reported EBITDA
from Discontinuing
Operations:
Reported earnings before depreciation, impairment, conversion costs, finance costs and
income tax for discontinued operations as presented in Note 1.
Adjusted EBITDA:
Reported EBITDA adjusted for other non-cash and one-off in nature expenses.
GROUPGROUP
20232022
$000$000
Reported EBITDA from continuing operations
87,160
57,452
Reported EBITDA from discontinued operations
2,716
23,954
Total Reported EBITDA89,876
81,406
Add back non-cash and
one-off expenses:
Post-employment
benefit plan expense
372
1,282
Employee share scheme and share rights cost
605
1,782
Adjusted EBITDA90,853
84,470
102
Channel Infrastructure NZ Limited | 2023 Annual Report
A member firm of Ernst & Young Global Limited
Independent auditor’s report to the Shareholders of Channel Infrastructure
NZ Limited
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Channel Infrastructure NZ Limited (the “Company”) and
its subsidiaries (together the “Group”) on pages 66 to 102, which comprise the consolidated balance
sheet of the Group as at 31 December 2023, and the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended of the Group, and the notes to the consolidated
financial statements including a summary of material accounting policies.
In our opinion, the consolidated financial statements on pages 66 to 102 present fairly, in all material
respects, the consolidated financial position of the Group as at 31 December 2023 and its
consolidated financial performance and cash flows for the year then ended in accordance with New
Zealand Equivalents to International Financial Reporting Standards and International Financial
Reporting Standards.
This report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken
so that we might state to the Company’s shareholders those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s shareholders,
as a body, for our audit work, for this report, or for the opinions we have formed.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Ernst & Young provides agreed upon procedures to the Group in relation to scrutineering at
shareholder meetings and in relation to half-year financial reporting and Green House Gas (GHG)
inventory pre-Assessment services. We have no other relationship with, or interest in, the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, but we do not provide a separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is provided in that context.
A member firm of Ernst & Young Global Limited
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our assessment of the risks
of material misstatement of the financial statements. The results of our audit procedures, including
the procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Import Terminal Services Revenue
Why significant How our audit addressed the key audit matter
The Group generated Import Terminal Services
(ITS) revenue of $118.6m in FY23, which
amounted to over 90% of total revenue.
ITS revenues are material related party
transactions with the Group’s shareholding oil
companies, who are also its major customers.
The revenue is based on long term contracts,
which cover multiple services and include take
and pay clauses.
Disclosures related to revenue are included in
notes 2 and 3 of the financial statements.
In obtaining sufficient audit evidence we:
► Evaluated the Group’s process for recording
ITS revenue, including whether the revenue
recognition is in accordance with NZ IFRS 15
Revenue from Contracts with Customers (NZ
IFRS 15).
► Used digital audit techniques to assess the
correlation of revenue, trade receivables and
cash.
► Confirmed the total annual I TS revenue with
each customer.
► Tested payments received from the
shareholding oil companies during the year
and agreed post year-end cash receipts from
each of the shareholding oil companies to the
outstanding receivables at year end.
We also assessed the Group’s disclosures in
relation to revenue with regard to NZ IFRS 15
and NZ IAS 24 Related Party Disclosures.
Information other than the financial statements and auditor’s report
The directors of the Company are responsible for the annual report, which includes information other
than the consolidated financial statements and auditor’s report which is expected to be made available
to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained during the audit, or otherwise
appears to be materially misstated. If, based upon the work we have performed, we conclude that
103
103
Channel Infrastructure NZ Limited | 2023 Annual Report
A member firm of Ernst & Young Global Limited
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our assessment of the risks
of material misstatement of the financial statements. The results of our audit procedures, including
the procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Import Terminal Services Revenue
Why significant How our audit addressed the key audit matter
The Group generated Import Terminal Services
(ITS) revenue of $118.6m in FY23, which
amounted to over 90% of total revenue.
ITS revenues are material related party
transactions with the Group’s shareholding oil
companies, who are also its major customers.
The revenue is based on long term contracts,
which cover multiple services and include take
and pay clauses.
Disclosures related to revenue are included in
notes 2 and 3 of the financial statements.
In obtaining sufficient audit evidence we:
► Evaluated the Group’s process for recording
ITS revenue, including whether the revenue
recognition is in accordance with NZ IFRS 15
Revenue from Contracts with Customers (NZ
IFRS 15).
► Used digital audit techniques to assess the
correlation of revenue, trade receivables and
cash.
► Confirmed the total annual I TS revenue with
each customer.
► Tested payments received from the
shareholding oil companies during the year
and agreed post year-end cash receipts from
each of the shareholding oil companies to the
outstanding receivables at year end.
We also assessed the Group’s disclosures in
relation to revenue with regard to NZ IFRS 15
and NZ IAS 24 Related Party Disclosures.
Information other than the financial statements and auditor’s report
The directors of the Company are responsible for the annual report, which includes information other
than the consolidated financial statements and auditor’s report which is expected to be made available
to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained during the audit, or otherwise
appears to be materially misstated. If, based upon the work we have performed, we conclude that
A member firm of Ernst & Young Global Limited
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our assessment of the risks
of material misstatement of the financial statements. The results of our audit procedures, including
the procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Import Terminal Services Revenue
Why significant How our audit addressed the key audit matter
The Group generated Import Terminal Services
(ITS) revenue of $118.6m in FY23, which
amounted to over 90% of total revenue.
ITS revenues are material related party
transactions with the Group’s shareholding oil
companies, who are also its major customers.
The revenue is based on long term contracts,
which cover multiple services and include take
and pay clauses.
Disclosures related to revenue are included in
notes 2 and 3 of the financial statements.
In obtaining sufficient audit evidence we:
► Evaluated the Group’s process for recording
ITS revenue, including whether the revenue
recognition is in accordance with NZ IFRS 15
Revenue from Contracts with Customers (NZ
IFRS 15).
► Used digital audit techniques to assess the
correlation of revenue, trade receivables and
cash.
► Confirmed the total annual I TS revenue with
each customer.
► Tested payments received from the
shareholding oil companies during the year
and agreed post year-end cash receipts from
each of the shareholding oil companies to the
outstanding receivables at year end.
We also assessed the Group’s disclosures in
relation to revenue with regard to NZ IFRS 15
and NZ IAS 24 Related Party Disclosures.
Information other than the financial statements and auditor’s report
The directors of the Company are responsible for the annual report, which includes information other
than the consolidated financial statements and auditor’s report which is expected to be made available
to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained during the audit, or otherwise
appears to be materially misstated. If, based upon the work we have performed, we conclude that
104
104
Channel Infrastructure NZ Limited | 2023 Annual Report
A member firm of Ernst & Young Global Limited
there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
Directors’ responsibilities for the financial statements
The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the
consolidated financial statements in accordance with New Zealand Equivalents to International
Financial Reporting Standards and International Financial Reporting Standards, and for such internal
control as the di rectors determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing on
behalf of the entity the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with International Standards on Auditing
(New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is
located at the External Reporting Board’s website: https://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors-responsibilities/audit-report-1/. This description forms part of our auditor’s
report.
The engagement partner on the audit resulting in this independent auditor’s report is Simon O’Connor.
Chartered Accountants
Auckland
28 February 2024
A member firm of Ernst & Young Global Limited
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our assessment of the risks
of material misstatement of the financial statements. The results of our audit procedures, including
the procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Import Terminal Services Revenue
Why significant How our audit addressed the key audit matter
The Group generated Import Terminal Services
(ITS) revenue of $118.6m in FY23, which
amounted to over 90% of total revenue.
ITS revenues are material related party
transactions with the Group’s shareholding oil
companies, who are also its major customers.
The revenue is based on long term contracts,
which cover multiple services and include take
and pay clauses.
Disclosures related to revenue are included in
notes 2 and 3 of the financial statements.
In obtaining sufficient audit evidence we:
► Evaluated the Group’s process for recording
ITS revenue, including whether the revenue
recognition is in accordance with NZ IFRS 15
Revenue from Contracts with Customers (NZ
IFRS 15).
► Used digital audit techniques to assess the
correlation of revenue, trade receivables and
cash.
► Confirmed the total annual I TS revenue with
each customer.
► Tested payments received from the
shareholding oil companies during the year
and agreed post year-end cash receipts from
each of the shareholding oil companies to the
outstanding receivables at year end.
We also assessed the Group’s disclosures in
relation to revenue with regard to NZ IFRS 15
and NZ IAS 24 Related Party Disclosures.
Information other than the financial statements and auditor’s report
The directors of the Company are responsible for the annual report, which includes information other
than the consolidated financial statements and auditor’s report which is expected to be made available
to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained during the audit, or otherwise
appears to be materially misstated. If, based upon the work we have performed, we conclude that
105
105
Channel Infrastructure NZ Limited | 2023 Annual Report
Glossary
Adjusted EBITDA
Reported EBITDA adjusted for non-cash expenses and one-off
expenses, and used for
covenant purposes
Annualised Dividend Yield
Based on a dividend declared and annualised, and share price as at
31 December 2023
of $1.45 per share
CHI
Channel Infrastructure NZ Limited
CO
2
Carbon Dioxide
EBITDA or Reported EBITDA
Earnings before depreciation, impairment, conversion costs,
finance costs and
income tax
EBITDA Margin
EBITDA divided by revenue from continuing activities
Free Cash Flow (FCF)
Calculated as net cash
flow from operating activities less payments for property, plant
and equipment with each of these items determined in accordance with GAAP
IPL
Independent Petroleum Laboratories Limited, a wholly-owned subsidiary of Channel
Infrastructure NZ Limited
Lost Time Injury Frequency Rate (LTIFR)
The sum of work-related injury cases per 200,000 hours worked, where the injured
per
son is deemed medically unfit for any work as a result of the injury
ML
Million litres
MT
Million tonnes
Net Debt
Calculated as total borrowings (bank,
fixed rate bonds and subordinated notes) less
cash and cash equivalents
Normalised EBITDA
Reported EBITDA excluding one-off conversion costs
Normalised Free Cash Flow
Calculated as cash
flow from operations less maintenance capex (excluding conversion
costs and growth capex)
PPI
Producers Price Index
Total Recordable Case (TRC)
The number of lost time incidents, restricted work cases, medical treatment cases
and f
atalities
Total Recordable Case Frequency
Rate (TRCF)
The number of lost time incidents, restricted work cases, medical treatment cases and
f
atalities per 200,000 person hours worked
Tier 1 process safety event
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 Lost Time
Injury (LTI) and/or fatality; a fire or explosion resulting in greater than or equal to
$100,000 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; an officially
declared community evacuation or community shelter-in-place
Tier 2 process safety event
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
106
Channel Infrastructure NZ Limited | 2023 Annual Report
Corporate Directory
Registered
Office
Marsden Point
Ruakākā
Chair
J B Miller (Independent Director)
Mailing Address
Private Bag 9024
Whangārei 0148
Telephone: +64 9 432 5100
Independent Directors
A Holmes
A M Molloy
V C M Stoddart
P A Zealand
Website
www.channelnz.com
Non-Independent Directors
A Brewer
L Nation
General enquiries
corporate@channelnz.com
Investor Enquiries
investorrelations@channelnz.com
Chief Executive
Officer
R C Buchanan
Auditor
Ernst & Young
General Counsel & Company Secretary
C D Bougen
Bankers
ANZ Bank New Zealand Limited
ASB Bank Limited
Bank of New Zealand Limited
China Construction Bank (New Zealand) Limited
Westpac New Zealand Limited
Share Register
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142
Telephone: +64 9 488 8777
enquiry@computershare.co.nz
Managing your shareholding online
To change your address, update your payment instructions and to view your registered details including
tr
ansactions, please visit: www.computershare.co.nz/investorcentre Please assist our registrar by quoting your CSN
or shareholder number.
Feedback
As always, we welcome your feedback on this report. Please send any comments or suggestions
t
o investorrelations@channelnz.com.
107
Channel Infrastructure NZ Limited | 2023 Annual Report
---
Results announcement
Results for announcement to the market
Name of issuer
Channel Infrastructure NZ Limited
Reporting Period
12 months to 31 December 2023
Previous Reporting Period
12 months to 31 December 2022
Currency
Amount (000s) Percentage change
Revenue from continuing
operations
$130,703 48%
Total Revenue
$137,569 (13%)
Net profit/(loss) from
continuing operations
$27,647 67%
Total net profit/(loss)
$24,064 101%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.078
Imputed amount per Quoted
Equity Security
$0.00
Record Date
14/03/2024
Dividend Payment Date
28/03/2024
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.29 $1.34
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@channelnz.com
Date of release through MAP
29/02/2024
Audited financial statements accompany this announcement.
---
Distribution Notice
Section 1: Issuer information
Name of issuer
Channel Infrastructure NZ Limited
Financial product name/description
Channel Infrastructure NZ Limited ordinary shares
NZX ticker code
CHI
ISIN (If unknown, check on NZX
website)
NZNZRE0001S9
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies
Record date
14/03/2024
Ex-Date (one business day before the
Record Date)
13/03/2024
Payment date (and allotment date for
DRP)
28/03/2024
Total monies associated with the
distribution
$23,861,631
Source of distribution (for example,
retained earnings)
Income available for distribution
Currency
NZD
Section 2: Distribution amounts per financial product
Gross distribution
$0.06300000
Gross taxable amount
$0.06300000
Total cash distribution
$0.06300000
Excluded amount (applicable to listed
PIEs)
N/A
Supplementary distribution amount
$ 0.00000000
Section 3: Imputation credits and Resident Withholding Tax
Is the distribution imputed
No imputation
If fully or partially imputed, please
state imputation rate as % applied
N/A
Imputation tax credits per financial
product
N/A
Resident Withholding Tax per
financial product
$0.02079000
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
N/A
Start date and end date for
determining market price for DRP
N/A N/A
Date strike price to be announced (if
not available at this time)
N/A
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
N/A
DRP strike price per financial product
N/A
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
N/A
Section 5: 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@channelnz.com
Date of release through MAP
29/02/20224
---
Distribution Notice
Section 1: Issuer information
Name of issuer
Channel Infrastructure NZ Limited
Financial product name/description
Channel Infrastructure NZ Limited ordinary shares
NZX ticker code
CHI
ISIN (If unknown, check on NZX
website)
NZNZRE0001S9
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year Quarterly
Half Year Special X
DRP applies
Record date
14/03/2024
Ex-Date (one business day before the
Record Date)
13/03/2024
Payment date (and allotment date for
DRP)
28/03/2024
(Payment to be aggregated with full year dividend payable on
same date)
Total monies associated with the
distribution
$5,681,341
Source of distribution (for example,
retained earnings)
Income available for distribution
Currency
NZD
Section 2: Distribution amounts per financial product
Gross distribution
$0.01500000
Gross taxable amount
$0.01500000
Total cash distribution
$0.01500000
Excluded amount (applicable to listed
PIEs)
N/A
Supplementary distribution amount
$ 0.00000000
Section 3: Imputation credits and Resident Withholding Tax
Is the distribution imputed
No imputation
If fully or partially imputed, please
state imputation rate as % applied
N/A
Imputation tax credits per financial
product
N/A
Resident Withholding Tax per
financial product
$0.00495000
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
N/A
Start date and end date for
determining market price for DRP
N/A N/A
Date strike price to be announced (if
not available at this time)
N/A
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
N/A
DRP strike price per financial product
N/A
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
N/A
Section 5: 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@channelnz.com
Date of release through MAP
29/02/20224
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.