Slide 1: Investor Presentation
REFINING NZ ANALYST PRESENTATION INVESTOR PRESENTATION 21 AUGUST 2019
Slide 2: Disclaimer
REFINING NZ ANALYST PRESENTATION DISCLAIMER • This presentation contains forward looking statements concerning the financial condition, results and operations of The New Zealand Refining Company Limited (hereafter referred to as “Refining NZ”). • Forward looking statements are subject to the risks a
Slide 3: Agenda
REFINING NZ ANALYST PRESENTATION AGENDA PERFORMANCE LOOKING AHEAD STRATEGIC INITIATIVES STRATEGIC DIRECTION
Slide 4: Performance
REFINING NZ ANALYST PRESENTATION AGENDA PERFORMANCE Excellent safety and operational performance LOOKING AHEAD Refinery margins weaker than expected Strong contribution from distribution segment STRATEGIC INITIATIVES Positive free cash flow resulting in 2 cps dividend STRATEGIC DIRECTION
Slide 5: Highlights: Excellent operational and safety performance
HIGHLIGHTS REFINING NZ Excellent operational and safety performance ANALYST PRESENTATION HY 18 HY 19 Personal LTIF [1,2] 0.47 0.14 Tier 1 (>US$25k) [2] 2 0 Process EBITDA Tier 2 (>US$2.5k) [2] 2 0 Gross Refining Margin 5.31 54 Releases outside consent 1 1 PER USD BARREL NZD M 5.65 per barrel in HY18
Slide 6: E Tu Tangata: Delivers excellent safety performance
E TU TANGATA REFINING NZ Delivers excellent safety performance ANALYST PRESENTATION Standing in the gap for the safety and wellbeing of our workmates: • Hauora Hikoi and Korero – fostering a culture of safety • Over 4,000 walks and talks delivered in 1H19 • High performing individuals recognised wit
Slide 7: EBITDA up 8%
EBITDA UP 8% REFINING NZ Fully imputed interim dividend of 2 cps ANALYST PRESENTATION (*) Includes terminalling and handling fees. (**) Includes Government inquiry, strategic review and site consent renewal The above chart excludes any movement in pass through costs such as natural gas, sulphur and
Slide 8: Strong uplift over low Singapore margin
STRONG UPLIFT OVER LOW Driven by optimised product make and strong operational SINGAPORE MARGIN uptime REFINING NZ ANALYST PRESENTATION UPLIFT HY 18 HY 19 Delta US$/BARREL Freight 2.16 2.00 (0.16) Product quality 0.95 0.65 (0.30) Plant availability (2.60) (0.14) 2.46 Crude cost and yield 1.91 2.60 0
Slide 9: Business segments
BUSINESS SEGMENTS REFINING NZ Investing in capability, reliability, cleaner fuels ANALYST PRESENTATION 1 Refer Glossary (Appendix I) 1961 1962 1964 1986 2005 2009 2015 RNZ Construction First fuel Hydrocracker Future Fuels Point Forward Te Mahi Hou Established begins produced installed project projec
Slide 10: Refining: Cyclical, but good cash flows over the longer term
REFINING REFINING NZ Cyclical, but good cash flows over the longer term ANALYST PRESENTATION REFINING REVENUE AND EBITDA Processing fee based on gross refining margin NZ$000 EBITDA Revenue and linked to USD exchange rate 700,000 600,000 Despite cyclical historical results, strong cash flow allowing
Slide 11: Distribution: Stable and growing returns expected
DISTRIBUTION REFINING NZ Stable and growing returns expected ANALYST PRESENTATION DISTRIBUTION REVENUE AND EBITDA NZ$000 Multi-product pipeline supplying Auckland EBITDA Revenue 60,000 Transports 52% of refinery’s production and 37% of NZ’s fuels demand 50,000 40,000 We have invested to meet signifi
Slide 12: Laboratory: Growing revenue beyond the refinery
LABORATORY REFINING NZ Growing revenue beyond the refinery ANALYST PRESENTATION IPL REVENUE AND EBITDA Specialist fuels, biofuels and other lab testing services NZ$000 EBITDA RNZ Revenue Other Revenue 10,000 Established in 1999, and fully owned by Refining NZ since 2016 8,000 Services provided to le
Slide 13: Looking Ahead
REFINING NZ ANALYST PRESENTATION Asian demand growth is expected to outstrip refining capacity additions (until at least 2029) PERFORMANCE FGE expects: LOOKING AHEAD – Mogas margins to improve in 2020 (caveat: Chinese exports and a global slowdown) STRATEGIC INITIATIVES – Jet and diesel margins to s
Slide 14: Gasoline: Market finely balanced
GASOLINE REFINING NZ Market finely balanced ANALYST PRESENTATION Singapore Light Distillate Inventories (mmb) Weaker gasoline margins in 1H19: High stocks, reduced 18 17 demand and Chinese exports 16 15 14 FGE OUTLOOK: 13 12 11 • 2019 global gasoline demand growth > supply growth 10 9 8 • Weaker US
Slide 15: Jet fuel and diesel: RNZ expects to benefit from IMO2020
JET FUEL AND DIESEL REFINING NZ RNZ expects to benefit from IMO2020 ANALYST PRESENTATION Middle Distillates S/D Balance (y-o-y Change) 1,500 FGE OUTLOOK: 1,300 • Global middle distillate demand to outstrip supply growth 1,100 • Middle distillate margins strengthening as low sulphur stocks build ahea
Slide 16: High sulphur fuel oil: IMO2020 impacts but expect recovery
HIGH SULPHUR FUEL OIL REFINING NZ IMO2020 impacts but expect recovery ANALYST PRESENTATION Fuel Oil S/D Balance (y-o-y change) 750 FGE OUTLOOK: 250 • High sulphur fuel oil margins buoyed by: Middle East power kb/d demand, residue upgrade projects, sanctions, lighter global -250 crude slate -750 • Lo
Slide 17: Asia refining capacity additions lag demand growth
ASIA REFINING CAPACITY ADDITIONS Forecasts support refinery utilisation and margins LAG DEMAND GROWTH (with IMO2020 and Chinese export caveats) REFINING NZ ANALYST PRESENTATION Incremental CDU Capacity vs Demand Growth 1,200 87% 1,000 86% 85% 800 84% 600 Kb/cd 83% 400 82% 200 81% 0 80% -200 79% -400
Slide 18: Singapore product margin outlook
SINGAPORE PRODUCT MARGIN OUTLOOK REFINING NZ Forecast supportive of RNZ’s GRM ANALYST PRESENTATION Selected Product Cracks (Singapore) vs Dubai 25 (US$/bbl) FGE OUTLOOK: 20 • Gasoline margin is expected to improve but then pressured at end of the decade by higher engine efficiency and eventually by
Slide 19: NZ jet fuel demand: Strong growth projected
NZ JET FUEL DEMAND REFINING NZ Strong growth projected ANALYST PRESENTATION Million Litres Jet Fuel New Zealand Demand 3,500 Demand projection aligned with Auckland Airport outlook 3,000 2,500 Refinery to Auckland Pipeline – key asset to meet growing 2,000 Auckland demand 1,500 RNZ continues to inve
Slide 20: 2019 profit matrix remains unchanged
2019 PROFIT MATRIX REMAINS UNCHANGED REFINING NZ ANALYST PRESENTATION 2H 2019 EXPECTATIONS • Strong throughputs • Capital spend on budget • Opex managed LONGER TERM • Baseline opex of $180m in 2020 (excluding inflation) or $182-185m with strategic initiatives Pass through costs include natural gas,
Slide 21: Long term sustain capital funding plan
LONG TERM SUSTAIN CAPITAL FUNDING PLAN Capital spend under control REFINING NZ ANALYST PRESENTATION Asset management process Next 3 years: Expected higher • Phase I of long term strategic asset than average due to tank management plan nearing completion programme, mandatory first inspection of Te Ma
Slide 22: Strategic Initiatives
REFINING NZ ANALYST PRESENTATION AGENDA PERFORMANCE Sulphur project well into construction LOOKING AHEAD Short payback projects are delivering Dredging optimisation continues STRATEGIC INITIATIVES “Maranga Ra” solar farm – final investment STRATEGIC DIRECTION decision expected in Q4 2019
Slide 23: Delivering value: Sulphur forming
DELIVERING VALUE REFINING NZ Strengthens our capability to make cleaner fuels ANALYST PRESENTATION SULPHUR FORMING Facility under construction Commissioning Q4 2019 Roof being installed on Plant Building Equipment in Plant Building Silo upper section coating completed Silo support structure being as
Slide 24: Filling the funnel
FILLING THE FUNNEL REFINING NZ Objective of pursuing attractive, short payback projects ANALYST PRESENTATION IDEAS INITIATIVES IN PROGRESS GRM uplift 2019 2020 2021 (US cents Steam system optimisation Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 per barrel) Export fuel oil infrastructure RAP automation (Phase II) 0.5
Slide 25: Dredging: Optimisation continues
DREDGING REFINING NZ Optimisation continues ANALYST PRESENTATION Estimated cost $45m–55m (no tank) vs previous $60m–70m Economics remain attractive Project optimisation discussions continue with customers Reviewing phasing of tank maintenance to accelerate Current GRM dredging and avoid cost of new
Slide 26: Maranga Ra "Rising Sun" solar farm
MARANGA RA – “RISING SUN” REFINING NZ 26MW solar farm – New Zealand’s largest ANALYST PRESENTATION Located on land adjacent to the refinery – a 31ha Estimated cost of ~$36m – 39m [1] Supply ~10% of refinery’s consumption Attractive infrastructure returns Expected cost savings of $3 – $4 million p.a.
Slide 27: Strategic Direction
REFINING NZ ANALYST PRESENTATION AGENDA Delivering now – Preparing for the future PERFORMANCE Sustainability – contributing to a lower emissions economy LOOKING AHEAD – Investment in emissions reduction STRATEGIC INITIATIVES – Ready and willing to invest further STRATEGIC DIRECTION Community – progr
Slide 28: Sustainability: Contributing to a lower emissions economy
SUSTAINABILITY REFINING NZ Contributing to a lower emissions economy ANALYST PRESENTATION Track record of investment in emissions reduction • 20% reduction in carbon intensity since 2008 • Investment in cleaner fuels – 24,000 tonnes p.a. sulphur removed from fuels since 2005 Ready and willing to inv
Slide 29: Community: Programme of pro-active engagement
COMMUNITY REFINING NZ Programme of pro-active engagement ANALYST PRESENTATION Charitable contributions match safety milestones • Food for Life (healthy lunches to low decile schools) • Tai Tokerau Emergency Housing Charitable Trust Promoting solar in the community • Solar installed at local marae, k
Slide 30: Regulatory update
REGULATORY UPDATE Proactive engagement REFINING NZ ANALYST PRESENTATION NZ ETS – post Negotiated Greenhouse Agreement 2022 Site resource consents’ renewal – expiry 2022 Government inquiries: • Pipeline outage and resilience • Market fuel study – ComCom 30
Slide 31: Appendix 1: Glossary
REFINING NZ ANALYST PRESENTATION APPENDIX 1 Glossary • LTIF – Lost time injury frequency (rolling 12 month per 200,000 hours) • TRCF – Total recordable case frequency (rolling 12 month per 200,000 hours) • Tier 1 Process Safety Event (API 754) – A tier 1 Process Safety Event (PSE) is an unplanned or
Slide 32: Investor Presentation
REFINING NZ ANALYST PRESENTATION INVESTOR PRESENTATION 21 AUGUST 2019