Channel Infrastructure Nz Limited · NZX:CHI
Channel Infrastructure Nz — FY2022 Earnings Presentation
39 slides from Channel Infrastructure Nz's earnings presentation, Feb 24, 2023
Slide 1: Financial Results
Financial Results For the 12 months ended 31 December 2022 24 February 2023
Slide 2: Important Information
Important Information • This presentation contains forward looking statements concerning the • In light of these risks, results could differ materially from those stated, financial condition, results and operations of Channel Infrastructure NZ implied or inferred from the forward-looking statements
Slide 3: Delivering on our strategy
Delivering on our strategy Safely and successfully transitioned from refinery to terminal operations, with 56 import shipments discharged and over 2.2b litres of terminal throughput Conversion project remains to plan and budget - with 65% now spent or committed, the project is significantly de-riske
Slide 4: Highlights and Operating Update
Highlights and Operating Update Naomi James Chief Executive Officer
Slide 5: All 2022 key priorities delivered
All 2022 key priorities delivered 5 5
Slide 6: Strong safety and environmental record continues through transition
Strong safety and environmental record continues through transition Strong safety performance maintained Planned workforce transition Significantly reduced environmental impact • Zero Tier 1 or Tier 2 process safety incidents in 2022 • 135 employees at the end of 2022 (2021: 294), with • Reduction i
Slide 7: Limited impacts from Cyclone Gabrielle
Limited impacts from Cyclone Gabrielle • Site well prepared ahead of arrival of Cyclone Gabrielle • Stormwater systems have managed intensive periods of rainfall in recent months • Coastal boundary and seawall resilient to storm surges – further review of coastal erosion management strategies planne
Slide 8: Material progress made towards climate change targets
Material progress made towards climate change targets TARGET PROGRESS TO DATE Just Transition At least 90% of employees • Extensive program of workforce transition support seeking new employment • 97% of staff who left in 2022 have found their next opportunity find new roles, or have been retrained,
Slide 9: Strong recovery from COVID fuel demand impacts through 2022
Strong recovery from COVID fuel demand impacts through 2022 1 • Jet demand recovered to 70% of pre-COVID levels prior to most recent weather impact • Diesel demand remained strong throughout 2022 • Improving petrol demand as COVID restrictions lifted and people return to the office [1] Rolling 28-da
Slide 10: Increasing asset utilisation and storage capacity as demand recovers
Increasing asset utilisation and storage capacity as demand recovers Pipeline and TLF volumes (ML) • 56 import shipments discharged at Marsden Point since 1 April 2022 • Product delivered to the Auckland and Northland markets 280 258 in Q4 2022 up 11% on previous quarter – highest since Q1 2020 257
Slide 11: Conversion project tracking to budget
Conversion project tracking to budget Conversion cost phasing • $114m project spend to the end of 2022 Terminal conversion: $200-220m $m Demolition (expected 10 years+): c.$50m • Project is now significantly de-risked with c$143m (65% of 150 budget[1]) spent or committed/contracted • Refinery decomm
Slide 12: Conversion project well progressed
Conversion project well progressed COMPLETED TO DATE STILL TO COME Shutdown and Decommissioning • Final checks and handover of decommissioned plant • Permanent decommissioning of refinery largely complete • Implement monitoring and inspection of • Waste equipment and materials removed for recycling,
Slide 13: Over half of private storage commissioned, with new contracts adding additional revenue
Over half of private storage commissioned, with new contracts adding additional revenue Growth capex phasing • Over half of original contracted private storage commissioned with c55ML of capacity available to date Private storage: $45-50m Additional terminal capacity: c$7m • Two crude tank conversio
Slide 14: Financial Update
Financial Update Jarek Dobrowolski Chief Financial Officer
Slide 15: Financial Highlights
Financial Highlights Transition to import terminal delivers first profit in three years of $17m (from continuing operations) Strong EBITDA margin from continuing operations of 65%, demonstrating improved financial performance under the new operating model Net assets up 5% from $1.33 to $1.39 per sha
Slide 16: Import terminal delivers strong profit
Import terminal delivers strong profit • Strong revenue delivered for 9 months of terminal operations, including $75m[2] Year ending 31 December 2022[1] ($m) terminal fees from new Terminal Services Agreements • Operating costs reset for terminal business Revenue 88.2 • Strong EBITDA from Continuing
Slide 17: Revenue largely fixed with inflationary protections
Revenue largely fixed with inflationary protections Revenue [1] (continuing operations) • Take-or-Pay commitments ($75m for 9 months) underpinned revenue while jet demand ($m) continues to recover • Take-or-Pay top up of $5m for 2022 – take-or-pay volume equivalent to c2.5 billion litres for 9 month
Slide 18: Operating costs reset for simpler terminal operation
Operating costs reset for simpler terminal operation Operating costs[1] Electricity costs (continuing operations) ($m) • Electricity consumption reduced through transition: • consumption of 25GWh over 9 months from 1 April to 31 December 2022 3.9 • c.$120/MWh fully hedged cost of supply in 2022 7.4
Slide 19: Leverage remains within the targeted range
Leverage remains within the targeted range 300 Net debt movement 14 • Strong cash flows generated from operations, funded more than 3/4 15 250 10 of conversion spend 14 Net Growth financing[3] • Net debt increased to $257m as expected with the conversion spend, 200 Stay-in- capex business including
Slide 20: Successful reset in funding structure and costs
Successful reset in funding structure and costs Debt maturity profile as at 31 December 2022 $M Bank debt Subordinated notes Retail bonds • Diversified funding sources and extended tenor 175 • Successful $100m unsecured retail bonds issued in May 2022 150 • Refinanced $205m of bank debt, achieving t
Slide 21: FY23 EBITDA guidance range upgraded in November 2022
FY23 EBITDA guidance range upgraded in November 2022 FY23 guidance upgraded in November 2022[1]: Indicative FY23 Financial metrics[1] • $106.3m terminal take or pay fees, expect to remain at ToP levels based on forecast aviation capacity Previous Updated • Revenue reflects expected commissioning of
Slide 22: Strategy Update and Outlook
Strategy Update and Outlook Naomi James Chief Executive Officer
Slide 23: Strategic priorities materially progressed in 2022
Strategic priorities materially progressed in 2022 Leverage Existing Capability Transform to Deliver Value Position for Future Growth Safe, reliable, • Revised Safety Case for new Competitive • Successful $100m inaugural bond Support lower • First Sustainability Report low-cost import terminal accep
Slide 24: Strategic focus and priorities for 2023
Strategic focus and priorities for 2023 Leverage Existing Capability Transform to Deliver Value Position for Future Growth Safe, reliable, • New long-term Asset Competitive • Review options for $75m Support lower • Fortescue Future Industries (FFI) low-cost Management Plans in place to cost of capit
Slide 25: Hale & Twomey fuel demand outlook updated with more detailed, bottom-up modelling
Hale & Twomey fuel demand outlook updated with more detailed, bottom-up modelling • Hale & Twomey long-term fuel outlook[1] updated (last outlook January 2021[2]) • First update since COVID recovery pathway has become more clear • Jet fuel forecasts utilised long- term passenger number forecasts d
Slide 26: Stronger demand expected for Channel's infrastructure over the long term
Stronger demand expected for Channel’s infrastructure over the long term • Updated Hale & Twomey fuel outlook confirms a faster jet fuel demand recovery, and materially higher jet and diesel demand over the long-term • Strong growth in demand for jet fuel is expected to continue reaching pre-COVID l
Slide 27: Slower diesel substitution forecast
Slower diesel substitution forecast Petrol • Hale & Twomey outlook for petrol demand to peak in near-term - reflecting increasing electrification of the Light Vehicle fleet, and a gradual shift in travel behaviour • Recent government incentives delivering faster electrification of light vehicle flee
Slide 28: Faster than expected recovery in jet fuel
Faster than expected recovery in jet fuel • Initial recovery in demand more than just a temporary release of ‘pent up travel demand’ from closed borders: • near doubling[1] in Auckland jet fuel demand as borders reopened from February 2022 • Auckland International Airport expects recovery in passeng
Slide 29: Improving supply chain resilience is a priority for New Zealand
Improving supply chain resilience is a priority for New Zealand • Minimum domestic stockholding obligation (DSO) proposed by NZ Government has a key role to play in improving resilience • Fuel storage capacity has increased through transition from refinery to import supply chain • Marsden Point fuel
Slide 30: Government fuel security measures represent a significant opportunity
Government fuel security measures represent a significant opportunity • In November 2022, the NZ Government announced its final resiliency plan designed to ensure fuel supply resilience by holding more stocks onshore • Government procurement of 70ML strategic diesel reserve • Minimum onshore fuel st
Slide 31: RFI process has identified options for long-term electricity supply
RFI process has identified options for long-term electricity supply • RFI undertaken seeking proposals for long-term supply • Range of offers received – from physical supply, development of Maranga Ra solar project, through to fully off-grid options • Competitive interest for the provision of a long
Slide 32: Delivering to shareholders
Delivering to shareholders • Dividend recommenced less than a year post-conversion – ahead of indications at the time of the August 2021 shareholder vote • Strength of cash flows, de-risked conversion project, refinanced debt facilities and leverage within the targeted range provided Board with conf
Slide 33: CEO transition
CEO transition • CEO transition began November 2022 following the successful transition to Channel Infrastructure • Rob Buchanan will become CEO on 6 March 2023 • Rob Buchanan joined the team on 31 January 2023, with Naomi James departing the company on 1 April 2023 33
Slide 34: 2023 priorities
2023 priorities Safe, reliable, and cost-efficient terminal operation and maintenance On-budget and on-time completion of the remaining conversion project works Work with Customers and Government to improve supply chain resilience Deliver on near-term growth opportunities (strategic diesel reserve,
Slide 35: Delivering on our strategy
Delivering on our strategy Safely and successfully transitioned from refinery to terminal operations, with 56 import shipments discharged and over 2.2b litres of terminal throughput Conversion project remains to plan and budget - with 65% now spent or committed, the project is significantly de-riske
Slide 36: Q&A
Channel Infrastructure NZ Q&A
Slide 37: Appendices
oA/ 2 ) Channel Infrastructure NZ Appendices
Slide 38: Continuing operations – H1 vs H2
Continuing operations – H1 vs H2 Year ending 31 December 2022[1] H1 H2 FY22 ($m) Revenue 29.8 58.4 88.2 Operating costs (10.1) (20.6) Debt Maturity Profile (30.7) EBITDA 19.7 37.8 57.5 Depreciation (8.3) (16.3) (24.6) Financing costs (3.6) (6.2) (9.8) Net profit before tax 7.8 15.3 23.1 Income tax (
Slide 39: Discontinued operations
Discontinued operations • Revenue received under Processing Agreements which concluded end March 2022: Year ending 31 December 2022 ($m) ($m) • $47m processing fees • $6m pipeline fees Revenue 70.0 • Debt Maturity $17m Profileincome (including sulphur, natural gas and carbon of other refining Operat
Channel Infrastructure NZ — FY2022 Earnings Presentation on 6ix