Channel Infrastructure Nz Limited · NZX:CHI
Channel Infrastructure Nz — H1 2022 Earnings Presentation
30 slides from Channel Infrastructure Nz's earnings presentation, Aug 25, 2022
Slide 1: Financial Results
Financial Results For the six months ended 30 June 2022 25 August 2022
Slide 2: Important Information
Important Information • This presentation contains forward looking statements concerning the or inferred from the forward-looking statements contained in this financial condition, results and operations of Channel Infrastructure NZ Limited announcement. CHI does not guarantee future performance and
Slide 3: Highlights and Operating Update
Highlights and Operating Update Naomi James Chief Executive Officer
Slide 4: Successful delivery on strategy
Successful delivery on strategy Completed safe transition from refinery to terminal operations First quarter of terminal operations successfully completed with 19 import shipments discharged Conversion project remains on-plan and to budget Successful retail bond issue completed and bank refinancing
Slide 5: Strong safety and environmental record continues
Strong safety and environmental record continues • Maintained strong safety performance through transition to import Health & Safety Performance Tier 2 [2] Tier 1 [1] terminal 6 TRIF [3] Benchmark [4] • No Tier 1 or 2 process safety incidents 5 • Two recordable personal safety incidents 4 3 • Revise
Slide 6: Jet capacity returning to New Zealand
Jet capacity returning to New Zealand Pipeline throughput (% of pre-COVID) 1.4 Jet • Jet demand at highest level since COVID hit 1.2 • Currently above 50% pre-COVID and continuing to recover as borders open and aviation capacity returns 1 Diesel 0.8 • Diesel demand remained strong reflecting economi
Slide 7: Increasing asset utilisation and storage capacity as demand recovers
Increasing asset utilisation and storage capacity as demand recovers Pipeline and TLF volumes (ML) Pipeline Utilisation (%) 1,000 100% 800 80% 600 146 60% 139 400 275 40% 264 200 20% 222 257 0 0% Petrol Diesel Jet • 19 import shipments discharged at Marsden Point in Q2 2022 Terminal capacity (ML) 30
Slide 8: Conversion project continues to track to plan and budget
Conversion project continues to track to plan and budget Conversion timeline 2022 Today 2023 2024 2025 • Conversion project costs tracking to plan Q1 Q2 Q3 Q4 SHUTDOWN • Key terminal facilities online from 1 April with additional DECOMMISSIONING storage capacity to be added through to mid-2023 WORKF
Slide 9: Financial Update
Financial Update Jarek Dobrowolski Chief Financial Officer
Slide 10: Terminal delivers strong cash flow
Terminal delivers strong cash flow Strong EBITDA margin of 66% delivered in the first quarter of terminal operations Significant cash flows funded 2/3rds of conversion spend in H1 Net assets up 5% from $1.33 to $1.40 per share Tax losses crystalised with $467 million of losses available as at 30 Jun
Slide 11: Import terminal delivers strong EBITDA
Import terminal delivers strong EBITDA • Strong revenue delivered by new Terminal Services Continuing operations[1] Agreements from Q2, with EBITDA margin of c.66% (infrastructure business) ($m) • Terminal asset useful lives review resulted in lower ongoing Debtdepreciation Maturity Profile annual d
Slide 12: Revenue underpinned by contract protections
Revenue underpinned by contract protections Revenue Operating costs (continuing operations) (continuing operations) ($m) ($m) Take-or-Pay & fixed Debt Maturity Profile revenue Wiri lease Laboratory testing Terminal fees - fixed Energy and utilities Labour costs Site operations and other Terminal fee
Slide 13: Q1 Refinery financial performance
Q1 Refinery financial performance • Revenue received under Processing Agreements which concluded Discontinued operations end March 2022: ($m) (refining business) •Debt$47m processing Maturity Profile fees Revenue 69.0 • $6m pipeline fees • $16m sulphur, natural gas pass-through, carbon and other Ope
Slide 14: Strong cash flows funded 2/3rds of conversion spend
Strong cash flows funded 2/3rds of conversion spend 250 Net debt movement 3 6 • c.$63m spent on the conversion in H1 200 Net financing Capex [2] • Strong cash flows generated from operations, funded 2/3rds of 63 conversion spend 41 150 Operating Conversion • Net debt increased c.17% to $215m Cashflo
Slide 15: Net assets up 5% from $1.33 to $1.40 per share
Net assets up 5% from $1.33 to $1.40 per share 31 December 2021 30 June 2022 Net working capital ($m) ($m) • Reduction in trade receivables and payables – excise duty is no Cash 16 8 longer collected (and paid on behalf of customers) following the commencement of import terminal operations Receivabl
Slide 16: Execution of debt refinancing strategy well progressed
Execution of debt refinancing strategy well progressed Debt maturity profile as at 30 June 2022 • Existing debt facilities of $375m sufficient to fund conversion costs, with $160m of liquidity headroom available and no significant near-term maturities 80 70 • Execution of refinancing strategy to div
Slide 17: Strategy Update and Outlook
Strategy Update and Outlook Naomi James Chief Executive Officer
Slide 18: A long-term sustainable operating model with strong aspirations for growth
A long-term sustainable operating model with strong aspirations for growth OUR VISION New Zealand’s leading fuel infrastructure company OUR STRATEGIC PRIORITIES Realise Support lower Safe, reliable, low High performance Competitive cost Grow and infrastructure carbon fuels cost operations culture of
Slide 19: Good progress made towards carbon targets
Good progress made towards carbon targets TARGET PROGRESS TO DATE At least 90% of employees • Extensive program of workforce transition seeking new employment support now largely complete Just transition find new roles, or have been retrained, within 6-months • Greater than 90% of staff who have lef
Slide 20: Potential for faster than expected recovery in jet
Potential for faster than expected recovery in jet [3] • Auckland jet fuel demand driven by number of flights and distance to destination • More than 75% of New Zealand international flights depart from Auckland[1] • Strong growth in jet fuel recovery as borders reopened from February 2022 • 70% inc
Slide 21: Near-term opportunities exist to grow our terminal footprint
Near-term opportunities exist to grow our terminal footprint • Significant capacity available at Marsden Point • Near-term opportunities: • Domestic stockholding policy – estimated 50–70ML of additional diesel storage required in NZ • Terminal consolidation & optimization – industry changes, biofuel
Slide 22: Electricity RFI process commenced to reset electricity costs
Electricity RFI process commenced to reset electricity costs • Electricity remains a material cost • Currently electricity around ¼ of operating costs • Electricity transmission and distribution costs in Northland a key impediment to renewable growth • Forward electricity prices significantly higher
Slide 23: Performance in line with FY22 guidance
Performance in line with FY22 guidance Previous guidance H1 Update Q1 Processing Fee revenue expected $47m earned to exceed the Fee Floor by c.$5 to $10m Import terminal fees to commence from $25m received in Q2 1 April with Take-or-Pay commitments of c$75m in FY22 FY22 Operating costs (excluding $5
Slide 24: Strong Cash Flow in H1 increases confidence in return to dividends for FY22
Strong Cash Flow in H1 increases confidence in return to dividends for FY22 • Board has reconfirmed dividend policy pay-out of 60-70% of Free Cash Flow (being adjusted net cash generated from operations less maintenance capex) • First opportunity for dividend in March 2023 after FY22 results provide
Slide 25: Tracking towards top end of FY23 EBITDA guidance range
Tracking towards top end of FY23 EBITDA guidance range • Terminal fees to be indexed from 1 January 2023 based on 12- months PPI to 30 September 2022, pro-rated for 9 months Indicative FY23 Financial metrics • 9 months PPI to June 2022 of 6.6% implies additional (in nominal terms, includes contracte
Slide 26: Capital guidance framework released at Investor Day
Capital guidance framework released at Investor Day Long-term contracts delivering strong cash flow Returns to shareholders Deleveraging Dividend Policy of 60-70% of free cash flow (excludes growth Focused growth Target leverage of 3-4 capex) times EBITDA Return to dividends Criteria for investment:
Slide 27: Strong free cashflow enabling returns to shareholders and growth
Strong free cashflow enabling returns to shareholders and growth FY23 Financial Metrics ($m) Normalised EBITDA [1] 76 84 Indicative dividend range $30-40m Less: capital expenditure [2] 12 5 (equivalent of 8 to 11cps)[4] Less: financing costs [3] 18 15 Leaving $15m to $20m available for deleveraging
Slide 28: Continued focus on driving shareholder value
Continued focus on driving shareholder value Increasing fuel demand as COVID restrictions ease and aviation capacity returns Reset of cost of capital well progressed Conversion costs and FY22 guidance on track Confidence in return to dividends from March 2023 Tracking to top end of FY23 EBITDA guida
Slide 29: Q&A
op) Channel Infrastructure NZ Q&A
Slide 30: oA 7p)
oA 7p) Channel Infrastructure NZ
Channel Infrastructure NZ — H1 2022 Earnings Presentation on 6ix