INFRATIL INVESTOR DAY 2010

Transcription

1 INFRATIL INVESTOR DAY 2010 Downstream in New Zealand Mike Bennetts 11 March 2010

2 Introduction At the time of this presentation Shell NZ and a consortium including Infratil and NZ Super continue in negotiations to acquire Shell s downstream assets. Negotiations are subject to a number of conditions and issues, some of which are material and outstanding. If these conditions and issues are satisfied then the targeted completion date is 1 April

3 Introduction: Mike Bennetts 25 years experience in downstream oil and gas Most recently as CEO of BP s Integrated Supply and Trading, Eastern Hemisphere Prior roles in Europe, Southern Africa, Asia Pacific and NZ - Chief of Staff - Commercial Director - Sales & Marketing Director - Market Development Manager - Various downstream line and project roles Resume available on 3

4 Overview of the New Zealand downstream oil industry Sourcing Refining Storage and distribution Sales Crude NZRC Refinery to Auckland pipeline Wiri storage Wiri to airport pipeline Airport refuelling infrastructure (Auckland) Airport refuelling infrastructure (other airports) Airlines Coastal shipping Road transport Retail sites Consumers Refined products 12 national storage locations Truck stops Businesses Not owned by local oil majors Barges and port refuelling infrastructure Ship owners Shared by oil majors Individually owned, fee based sharing Individually controlled, seldom shared Bitumen storage 4 Road contractors

5 NZ retail demand (million litres) NZ mogas pump price (cpl) The industry is structurally attractive Demand is inelastic Highly volatile crude prices largely passed through to end users % 3,121 3,044 3,074-1% 3,100 2, /1/04 1/1/05 NZ mogas pump price (NZD/bbl) Dubai crude price (NZD/bbl) 1/1/06 1/1/07 1/1/08 1/1/09 Competitive environment likely to be beneficial to a new local owner Competitive environment likely beneficial to a new local owner Evidence of a growing consumer preference for local companies, e.g. Kiwibank Home grown R&D and innovation has mostly disappeared during the past decade Mobil s announced 15% intent to exit both infrastructure and customer facing activities Believe BP and Caltex have limited willingness to step out their investments in New Zealand 21% Signals interpreted as the beginning of an industry restructure 27% 5

6 SNZ is an attractive entry point to the industry Sourcing Demand forecasting, procurement, inventory and risk management SNZ provide a supply service at terms consistent with existing practice Fluctuations in inventory levels to be covered by working capital facilities Treasury policy and capability for hedging of foreign exchange exposures Refining 70% of SNZ s product requirements are sourced from NZ Refining Company Buying 17.1% share of NZRC during a period of bottom of cycle margins Contract terms provide a benefit relative to importing refined products Refinery to Auckland pipeline provides lowest cost distribution option Storage and distribution Sales National network of storage and distribution facilities Significant competitive advantage arising from economies of scale Coastal shipping and terminal facilities at 12 locations around NZ SNZ owned assets supplemented by shared industry facilities SNZ is the market leader in most market segments Well located nationwide network of retail sites and truck stops Retail site volumes approximately 5mL pa compared to industry of 2.7mL pa Unique loyalty programs of FlyBuys and supermarket dockets 6

7 Post-settlement, we will be focused on four priority areas 1 Momentum 2 Transition 3 Strategy 4 Organisational Development 7

8 The new standalone company will have an experienced and diverse management team Multiple reporting lines offshore replaced by a local CEO and integrated management team Incumbents remain in commercial leadership roles Almost all of the vacant functional roles are already staffed by external recruits from different sectors Selected use of consultants during the transition period 8

9 Possible to grow earnings and cash, without materially changing the risk profile Sourcing Better monetise the intrinsic value of the crude and product short Increase economies of scale through shared sourcing, e.g. freight Refining Explore increased optimisation within NZRC tolling arrangements Make build or buy decisions on an integrated margin basis Storage & distribution Increase import terminal storage to enable improved freight economics and open up contango plays Invest in technology to eliminate complexity and manual processes Sales Invest in proven customer offers like car wash and co-located QSR Make decisions based on local context and an integrated business model Options around carbon pricing and risk management for third parties 9

10 Many benefits will accrue to NZ Inc and local stakeholders Both tangible and softer benefits Profits retained in New Zealand SNZ and NZRC dividends will flow to NZ shareholders, and the public via NZ Super Fund closer proximity of capital providers and operations is expected to result in a more pragmatic approach to investing in the business More local jobs and staff training On-shoring of many roles currently performed overseas front-line roles such as the customer service centre, presently based in Manilla highly skilled knowledge based roles such as Asset Management and Marketing Training and skill development required for front-line staff to deliver new customer offers Increased capital spend with local businesses Upgrading core corporate IT systems and on retail POS systems Potential reimaging of all physical assets nationwide design, engineering, construction New infrastructure (e.g. import terminals) and potentially upgraded convenience offer Local R&D activity On-shoring of R&D in products and services, which are tailored to the NZ market Concept trials and pilot programmes conducted locally, rather than offshore by Shell Improved customer offers Innovative new offers for business customers, unconstrained by Shell global policy Upgraded retail offer through broadening and/or deepening options 10

11 In the short term, change will not be obvious to customers Medium term use of the Shell brand for service stations and truckstops But with de-imaging of commercial assets and corporate communications Marketing initiatives and competitive pricing of fuels will remain Shell s fuel technology will continue to be available Safety and operational integrity remains based on Shell s policies and procedures Note: Shell is not selling any of its oil and gas production and exploration assets or activities 11