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Jet fuel to be pumped to Auckland Airport today, Z Energy sees no impact on earnings

Monday 25th September 2017

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Z Energy says the first parcel of jet fuel will be pumped to Auckland International Airport later today now the refinery to Auckland pipeline, or RAP, is back up and running and it does not expect to change its full-year guidance after the disruption.

Restrictions were imposed last week after damage to the pipeline between the Marsden Point refinery and the Auckland depot disrupted fuel supply, prompting a joint industry and government response. Whangarei-based New Zealand Refining has said it expects to miss out on between $10 million and $15 million of pipeline and refining income after the disruption. 

On Sunday, Energy and Resources Minister Judith Collins said the fuel would be ready to load on planes from early on Tuesday. 

Z chief executive Mike Bennetts today said the parcel of jet fuel will be followed by more over the course of the week and petrol and diesel stocks will start to build, taking pressure off the truck bridging task.

"The industry will be reviewing airline allocations on a daily basis now and looks forward to resuming normal supply," he said.

Bennetts said Z is working to understand the potential impact on its financial performance given the uncertainty of how quickly the pipeline will get back to full capacity and will update the market with its half-year result on Nov. 9. However, "it remains unlikely that Z's full-year earnings guidance would change," he said. 

For the current financial year, the company has forecast earnings, based on replacement cost operating earnings before interest, tax, depreciation and financial adjustments, of between $445 million and $475 million. It's 2017 earnings on that basis were $419 million.

Air New Zealand has also said it doesn't expect annual earnings to be impacted by the fuel disruption. 

Bennetts noted that over the course of the outage the only inconvenience to Auckland motorists was a deliberate removal of 95 octane fuel from a small number of low volume sites, a temporary truckstop outage for a matter of hours and one equally short outage of 91 supply.

Z also said it would participate in any inquiry following the event. "This outage has highlighted how large part of the New Zealand economy rely on critical pieces of infrastructure and there is an important national conversation to be had around the cost/benefit of contingency investment," said Bennetts. 

The company's shares last traded at $7.40 and have increased 1.9 percent so far this year. 


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