hy 2021 results presentation refining nz

REFINING NZHY 2021 RESULTS

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REFINING NZ

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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 and uncertainties associated with the refining environment, including price and foreign currency fluctuations,

regulatory changes, environmental factors, production results, demand for Refining NZ’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 Refining NZ 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 Refining NZ’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 Refining NZ’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.

Refining NZ does not guarantee future performance and past performance information is for illustrative purposes only. To the maximum extent permitted by law,

the directors of Refining NZ, Refining NZ 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), Refining NZ 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,19 August 2021. The financial statements referenced in this presentation have

been prepared based on existing Group operations under the current Processing Agreements, as at 18 August 2021.


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HY 21 PERFORMANCE

STRATEGIC REVIEW

UPDATE


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PERFORMANCE SUMMARY VS PLAN

Safe, reliable and compliant operations

Turnaround 2021 executed safely, on time and within budget

Cash break-even operations at the Fee Floor 1

Conclude import terminal negotiations with customers

Progress required shareholder and lender approvals and detailed planning

Long term plan to unlock infrastructure value

1 Cash neutral excludes Strategic Review restructuring and implementation costs

P

P

Create the time to negotiate with customers

P

P

Refining NZ has maintained cash neutral operations at the Fee Floor, and received a shareholder mandate to proceed with an

import terminal conversion


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HY2021 PERFORMANCE HIGHLIGHTS Safely delivered cash neutral operations at the Fee Floor

HY 21 HY 20

Personal TRCF [1] 0 0.31

ProcessTier 1 [1] 2 0

Tier 2 [1] 0 0

Releases outside of consent 9 1

Refinery Throughput Mbbl 13.1 15.4

RAP Throughput Mbbl 7.1 7.5

Operational availability % 92.3 96.8

Cashflow from operations NZ$M 22 14

Net debt [2] NZ$M 230 231

Operating costs [3] NZ$M 62 88

Capital Expenditure [4] NZ$M 21 22

PSafe operations

PCash neutral at the Fee Floor

PDeliver to customer plan

$

1. For a full definition please refer to the Glossary in Appendix 1

2. Comparative for net debt as at 31 December 2021

3. Excludes natural gas passthrough costs, but includes strategic review and restructuring costs

4. Payments for property, plant and equipment (cashflow basis)


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SAFE OPERATIONS A record performance with no recordable incidents in over 19 months

• 19 months of operations with no recordable incidents, including

through the 2021 turnaround, reflecting a record personal safety

performance for Refining NZ

• Two Tier 1[1] process safety events:

• A fire (which was quickly extinguished with no significant

damage to the plant) occurred in the hydrocracking unit

when shutting down the plant for turnaround

• An LPG pipeline leak was quickly isolated and repaired

• Actions taken to further strengthen existing controls

• Site resource consent, covering refinery and import terminal

operations, renewed for 35 years

• Releases outside of consent involved the unauthorised use of

non-compliant fire-fighting foam during recent fire training

exercises

• Independent investigation into the incident

• Steps promptly taken to mitigate effects of foam discharge

• On-site controls further strengthened

• Ongoing testing to determine if any further treatment or

remediation is required

1 For a full definition please refer to Glossary in Appendix 1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0

2

4

6

8

10

2017 2018 2019 2020 2021

#/200k hoursNumber

TOTAL RECORDABLE CASES[1]

Other TRC (medical treatment, restricted work cases) LHS

Lost time injuries LHS

TRCH, RHS

LTIF, RHS

0

2

0 0

2

4

3

0 0

0

0

1

2

3

4

5

6

2017 2018 2019 2020 2021

PROCESS SAFETY INCIDENTSNumber (for calendar year) Tier Two Tier One


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DELIVER TO CUSTOMER PLAN

HY 21 HY 20 Change

Refinery Throughput Mbbl 13.1 15.4 2.3▼ 15%

RAP Throughput Mbbl 7.1 7.5 0.4▼ 5%

Operational

availability% 92.3 96.8 4.5▼ 5%

Simplified refinery model implemented from beginning of the year

• Simplified refinery model implemented from January 2021, with

Refinery capacity reduced by circa 18%[1]

• Gasoline and diesel demand have largely recovered to pre-

COVID levels, however demand for jet fuel remains weak at c.40%

of pre-COVID levels

• Lower operational availability reflects the impact of a four-week

maintenance turnaround successfully completed in March 2021,

including the first statutory inspection of the CCR unit

1 Equivalent of c.34 million barrels per annum with total refined fuels production levels similar to levels at the time of commencement of the Processing Agreement in 1995 and the cessation of bitumen production


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81 The Singapore Complex Margin is calculated using Platts Dubai crude and Singapore product prices, VLCC freight to Singapore, and the International Energy Agency’s Dubai complex refinery yields adjusted for fuel & loss.

US$/BARRELHY 20 HY 21 Change

Singapore Complex Margin

(SCM)1 (1.60) (2.09) (0.49)

Freight 1.61 1.74 0.13

Product quality 0.76 0.74 (0.02)

Plant availability (0.22) (0.42) (0.20)

Crude cost and yield 1.29 3.24 1.95

Refining NZ uplift 3.42 5.28 1.86

RNZ GRM 1.82 3.19 1.37

REFINING MARGINSWeak refining margins due to excess capacity exacerbated by

COVID-19 demand impacts

• Negative Singapore complex margins continued in HY21

• Stronger Refining NZ uplift due to the lower price for

crudes processed by Refining NZ relative to the Dubai

crude price coupled with a lower fuel oil make

• Fee Floor contributions of c.$29 million (HY20: $39 million)


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HY2021 FINANCIAL SNAPSHOT

1. For further information, please refer to our HY21 Financial Statements, available at http://www.refiningnz.com/investor-centre.aspx

2. For a reconciliation of these Non-GAAP measures, please refer to Appendix 2 and our HY21 Financial Statements for further detail

3. Payments for property, plant and equipment (cashflow basis)

4. For a full definition please refer to the Glossary in Appendix 1

5. HY20 Net Loss after tax impacted by half-year impairment of c.$158 million (net of tax)

Maintained cash break-even operations at the Fee Floor

• Fee Floor in operation since 1H20, protecting

against the full extent of margin and demand

decline

• Refinery revenue lower due principally to reduced

natural gas supply (c.$4.3 million)

• Infrastructure revenue includes c.$5 million in

terminal fees from the import of refined products

during the turnaround

• Four-week maintenance turnaround safely

completed, to schedule and below budget, at a

total cost of $21 million (including $12 million in

HY21)

• Maintained cash neutral operations at the Fee

Floor after implementing simplified refinery

changes, including cost of turnaround

• No dividend

HY 21 HY 20 Change

Revenue - Refinery [1] NZ$M 90.3 96.5 ▼ 6%

Revenue - Infrastructure [1] NZ$M 25.1 22.6 11%

EBITDA [2] NZ$M 41.5 15.4 169%

Adjusted EBITDA [2] NZ$M 34.5 20.5 68%

Capital Expenditure [3] NZ$M 21.0 22.0 ▼ 5%

Free cash flow [4] NZ$M 1.2 (8.3) nm

Net Profit/(Loss) after tax NZ$M (4.9) (186.3) 97%

Net Debt [4] NZ$M 230.1 231.3 ▼ nm

http://www.refiningnz.com/investor-centre.aspx


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A significant improvement in EBITDA through refinery simplificationHY21 v HY20 EBITDA COMPARISON

HY 21 HY 20

Processing Fee NZ$M 70.0 70.0

Refinery Throughput Mbbl 13.1 15.4

GRM US$/bbl 3.19 1.82

RAP Throughput Mbbl 7.1 7.5

Pipeline FeeNZ$M

14.9 16.3

Terminal FeeNZ$M

5.3 0.9

Non-cash release includes:

Pension Fund settlement gain $6.2m

Medical Scheme settlement gain $2.7m

Stock Provision HY20 $2.7m


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HY 21 PERFORMANCE

STRATEGIC REVIEW

UPDATE


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STRATEGIC REVIEW HIGHLIGHTS 1H21

In-principle agreement with bp and Z Energy on commercial terms

Shareholder approval for the Import Terminal Conversion with 99% vote in favour (including Mobil)

Initial assessment complete of potential Marsden Point repurposing options

P

Front End Engineering Design and detailed planning well progressed

On track for Final Investment Decision end of Q3/21 and terminal conversion by mid-2022

P

P

P

P

P

Significant progress made to deliver Strategic Review outcomes

Lender consent for Conversion and funding secured


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TIMELINE FOR STRATEGIC REVIEW

Import terminal

assessment/planning

(July 2020-now)

Final Investment Decision

(FID) / Binding customer

agreements

(Target – end Q3 2021)

Front-end engineering & design and detailed planning

Customer term sheet & TSA negotiations

Refinery run-down planning and execution

Refinery decommissioning (2 years)

Site repurposing (10+ years)

Ongoing terminal works(5-6 years)

Import terminal works

Site repurposing opportunity identification

Shareholder and lender approvals

Workforce developmentWorkforce transition

(2 years)

Import terminal

commencement

(Target – by mid-2022)

Customer consultation & negotiation

Workforce engagement, planning and consultation

Simplified Refinery

implementation

(July 2020 - Jan 2021)

Strategic Review

Phase 1

(April-June 2020)

Consultation with Government, employees, Iwi and community on our future

Refinery Transition Working group formed to support transition

Clear timeline to final decision and for transition


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REPURPOSING OPPORTUNITIES

Horizon 1

Existing technology / market

Private & strategic fuel storage

VLSFO imports

Bitumen imports

Solar farm - On-grid/off-grid +battery/firming

Horizon 2

Investment / market development required

Biofuels terminal services

Sustainable aviation fuels production

Horizon 3

New market / technology

Marsden Point has the potential to contribute to the energy challenges New

Zealand needs to solve:

• Reliable, secure fuel supply if NZ no longer has a local refinery

• Gas shortages, NZ gas supply declining

• Unaffordable electricity & gas prices – supply, transmission, distribution

• Firming / storage solutions for increasingly renewable electricity supply and

phase out of thermal electricity generation

• Competitive green fuel supply, including for heavy transport and aviation

Green hydrogen

Initial opportunity assessment undertaken, with options

identified for further consideration1

1 Options listed are subject to ongoing work to assess potential feasibility. Disciplined approach to allocation of capital for options that can deliver an above cost of capital return.


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REFINING NZ



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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 uncontrolled release of any material, including non-toxic and

non-flammable, from a process which results in one or more of the following: A LTI and/or fatality; A fire or explosion resulting in greater than or equal to

$25,000 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; A

officially declared community evacuation or community shelter-in-place.

• Tier 2 Process Safety Event (API 754) – A tier 2 Process Safety Event (PSE) is 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 quantities given in Table 2 of API 754 in any one-hour period.

• Net debt – Net debt comprises total borrowings less cash and cash equivalents

• Operating “cash neutral” – maintaining a “flat” net debt position (i.e. total lender debt, including subordinated notes, less and cash/funds held on deposit),

after paying all operating, capital and funding costs out of the company’s revenue receipts. This excludes Strategic Review restructuring costs.

• Reported EBITDA – Earnings Before Depreciation and Disposal Costs, Impairment of assets, Finance costs and Income Tax in a non-GAAP measure. Please

refer to Appendix II for a reconciliation

• Adjusted EBITDA - Reported EBITDA adjusted for other non-cash expenses, and used for bank covenant purposes

• Free Cash Flow – Net cash generated from operations less investing activities

REFINING NZ2020 ANNUAL RESULTS

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APPENDIX 2 NON-GAAP MEASURES

Refining NZ’s standard profit measure prepared under New Zealand Generally Accepted Accounting Practice (NZ GAAP) is net profit/(loss) after

tax. Refining NZ has used non-GAAP measures when discussing financial performance in this Full-Year Report. The Directors and Management

Team 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 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 Refining NZ in accordance with

NZ IFRS.

GROUP GROUP

30 JUNE 30 JUNE

2021 2020

NOTE $000 $000

Reported net loss after tax for the period (GAAP) (4,914) (186,348)

Add back:

Income tax (785) (70,879)

Net finance costs 5,422 6,406

Impairment of assets 3 - 218,903

Depreciation and disposal costs 41,781 47,300

Reported EBITDA 41,504 15,382

Add back non-cash expenses:

Stock write-offs 682 3,269

Defined benefit pension fund (including settlement) 12 (7,418) 1,720

Non-cash share rights cost 7 115 -

Interest income 47 146

Profit/(loss) on disposal (389) -

Adjusted EBITDA 34,541 20,517

REFINING NZ2020 ANNUAL RESULTS

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REFINING NZ


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