The New Zealand Shareholders Association came out today firmly in favour of the NZ Refining Company’s proposal to build a CCR plant at Marsden Point. Calling the initiative “an important strategic step” NZSA Chairman John Hawkins went on to say that he thought retail shareholders would accept some short term reduction in returns in order to gain significant long term benefits.
The $365m upgrade project has been touted as a superior option to a cheaper $105m plant life extension program. Hawkins said the numbers quoted by the company for the CCR upgrade were compelling and there appeared to be limited risk
involved as the technology was well proven. The Association is puzzled why Board approval for the upgrade was not unanimous and is disappointed that the directors concerned have not seen fit to explain their opposition given the very strong business case, he said. Hawkins added that it was very important that all shareholders vote or appoint a proxy, since the project required a 50% shareholder vote of approval to proceed. This decision could well depend on retail shareholders views, he said.
The NZSA believed that Refining had too many oil company appointed directors. These change frequently and add considerable governance complexity and cost, said Hawkins, while questioning what level of contribution short term appointees could bring to the company. He added that this tended to create the perception that the oil company appointed directors could be conflicted, and may not always act in the interests of all shareholders. Therefore, on principle, the NZSA will not be supporting the election of Mr Wall (BP) or Mr Warrell (Mobil).
While acknowledging that the refining business was near the bottom of the cycle, Hawkins said that given the very disappointing recent shareholder returns, the NZSA could not support fee increases for individual directors. He added that
having been assured by Chairman David Jackson that no increase will be paid this year, the NZSA was prepared to accept the proposed fee pool increase to give headroom for future board composition changes. Hawkins said because of the Board structure in this company, the independent directors have a much higher workload and should have a fee differential. We are encouraged that NZ Refining has already moved some way on this, he added.