PORTPORT TARANAKITARANAKI LIMITEDLIMITED ANNUALANNUAL REPORTREPORT 20172017 CONTENTS Our Story 02 Chairman’s report 06 Our directors

08 Chief executive’s report CONTENTS 10 Our financial performance 13 Statement of corporate intent 14 Development and investment 16 Executive leadership team OUR STORY Our Place 18 Our community 20 Our health and safety OUR PLACE Our People 22 Chris Dillon 24 Chris Musgrave 26 Carlie Yukich and Sally Hoogeveen OUR PEOPLE 28 Ricky Hann 30 Paul Campbell

Financial Statements

33 Financial statements FINANCIAL 62 Independent auditor’s report 64 Comparative review 65 Directory

3 PORT TARANAKI LIMITED ANNUAL REPORT 2017 011 CONTENTS

found to be unsustainable without the volume of the total production of oil and gas in Taranaki. I containers from Fonterra’s Taranaki factories. am confident, however, that when commercial conditions change there is more petroleum to be The use of the former turbine hall of the now found and produced in Taranaki. defunct New Plymouth power station site for the storage of feed for the agricultural sector has This past year saw a change in the ownership CHAIR’S made valuable use of this asset. of the Kapuni field, historically the first major discovery of petroleum in Taranaki, bringing CONTENTS The petroleum industry has been part of the REPORT about the demise of what was the largest background to the development of the port operator of petroleum facilities in New Zealand since the first discovery of oil on the Moturoa - originally known as Shell BP and Todd Oil foreshore in the 1880s. The second era of Services Ltd and latterly as Shell Todd Oil Services petroleum exploration in Taranaki commenced Ltd. Shell Todd Oil Services Ltd has been a loyal in the 1950s and Taranaki still remains the and valuable customer of the port for more than only area of New Zealand to have discovered This is my final report as chairman of the of natural gas into methanol and liquefied 60 years and we thank them for their business. commercial quantities of this valuable resource. OUR STORY board as I am retiring from the board in petroleum gas (LPG) underpinning this trade. We look forward to working in the future with Port Taranaki’s development of the Newton King September. I have been a member of this their successor operating companies in the What is the port’s relationship with these two key Tanker Terminal in the 1970s was a direct result of Kapuni, Maui and Pohokura fields. board for 23 years, seven as chairman. industries today? the development of the Kapuni and Maui fields. I have had a close association with the We have witnessed during the past two In the mid-1990s, following the development of The upstream oil and gas industry has undergone business of the port for over 40 years and years a pulling back in exploration and oil the Kiwi Co-op Dairies Ltd plant at Hawera, the considerable change during the past 40 years. I feel privileged to have been closely field development activity as the petroleum port invested considerable capital in buildings, Initially there was tremendous activity throughout involved in the business community industry adapts to the marked reduction in the

hard stand infrastructure and mobile plant to Taranaki in relation to the discovery and OUR PLACE international price of crude oil, the current natural of Taranaki through an exciting era of enable the packing and export of containers of development of the Kapuni onshore field and the gas supply and demand curves in New Zealand, development and change. milk powder. This container trade was really just a very significant discovery and development of and the on-going development of vast natural This past year has been another year of continuation of the historical export of Taranaki’s the offshore Maui field. These developments led gas resources in the USA, the Middle East and consolidation and re-positioning of the butter and cheese. It was a new way to export to construction of storage tanks, pipelines and Australia. The reduction in activity has had an company’s operations in accordance with its milk. The formation of the Fonterra Co-operative associated infrastructure at the port to enable inevitable flow-on effect of reducing the port’s strategic plan. Taranaki has recently experienced Group Ltd, and its national logistics solution the export of condensate, crude oil and LPG. offshore support activity. a dynamic and complex business environment, to export its products through other ports, has The subsequent development of the “think big

particularly for the dairy and petroleum meant that today there are no longer container projects” established in Taranaki to manufacture What have these changes in trade, in all instances OUR PEOPLE industries which in turn are so important to the vessels calling at our port. Recently, Fonterra put products from natural gas produced further resulting from decisions taken by our customers, performance of our business. I am aware that up for sale its iconic old cool store buildings on exports, particularly urea and methanol. As a meant for Port Taranaki? O ur S tory result of the increase in urea use by New Zealand our entire team has worked extremely hard to Breakwater Road, further underlining the break The most obvious change as a result of our farmers it is no longer exported, rather it is achieve the outcome reported in this document with the past. The results of these changes are customers’ decisions has been a reduction in the imported. Methanol produced by Methanex at and on behalf of the board I thank them. that there is no longer the export of any dairy total number of ships calling at Port Taranaki. product across the wharves at Port Taranaki and Waitara and Motunui continues to be the most Our company has played, and will continue to important petroleum-based export both in terms The board and management of the company

it is probable that soon there will be little visual FINANCIAL play, a critical role in the Taranaki economy. The have in recent times needed to adapt the evidence in the city of New Plymouth of this of volume and value and is, in effect, the means progress of our province on the back of pastoral operation of the business to meet the challenges once fundamental trade, a trade that was a key by which New Zealand exports natural gas. The farming and the export to the world of meat and of these changing times; to work more closely reason for the development of our port more initial oil and gas discoveries were followed by dairy products established a strong foundation to meet the needs of existing customers and to than 150 years ago. further seismic and drilling campaigns and the for our business. Today we are benefitting from on-going discovery and development of further seek out new customers. A recent example of the export of logs being harvested from farm The link to our farming industry continues fields both onshore and offshore, including the company taking pro-active steps to increase plantations and substantial exotic forests in through the import of feed for the agricultural the Pohokura field coming on-stream in 2006, trade was the purchase and refurbishment of Taranaki and well beyond. The past 40 years sector and our former container berth on the which has supported the on-going manufacture four storage tanks at the Omata tank farm, an of petroleum production has seen this industry Blyde terminal has become a dedicated yard of methanol. The on-going development of the associated pipeline to the Newton King tanker become the largest volume and value exporter, for the ever increasing storage and export of major oil and gas discoveries during the past 40 with the further products from the processing radiata pine logs. The export container trade was years has, however, seen an overall decline in

02 PORT TARANAKI LIMITED ANNUAL REPORT 2017 03 CONTENTS

terminal and a loading arm on the terminal, produce across the wharves at Port Taranaki to an contribution to the board and our shareholder personally thank everyone for the support I have all of which have now been leased to BP with increasingly hungry world. for the past 10 years. In November 2016 the received during the past seven years. I wish the the intended result being the importation into board welcomed the appointment of Taranaki board, management and workforce all the very Port Taranaki is, as with all successful companies, Taranaki by ship, rather than by road tanker, of regional councilor, Charlotte Littlewood, as a new best for the future and will watch with interest the ultimately a business based on its people. I all petrol and diesel necessary to fuel the member of the board. future strategic direction of the company in the am especially proud of the progress we have Taranaki economy. ever-changing port industry. made to ensure the health and safety of all who I thank the board, Guy Roper and his senior For a company to be sustainable it must be able work within our gates, and within the wider leadership team for their support and willingness CONTENTS to adapt so as to ensure that it continues to community. Hundreds of logging trucks and to vigorously debate the issues of the day, provide value not only for its customers but also other vehicles, and up to five thousand people, and to take the often difficult steps necessary for its shareholders and the wider community. pass through our main gate each week! to prepare the company for the business of tomorrow. We are fortunate to have people right Employees can also take pride in being part of Our people and our customers will continuously across the company, in our shareholder, and the John Auld a successful company. During my years on the need to adapt to change brought about by new wider Taranaki community who are committed Chair board the Taranaki Regional Council has always technologies such as the recent purchase and to its future progress and prosperity. I wish to been extremely supportive of all that has been installation of ShoreTension™ units to safely OUR STORY done to promote progress for the company. moor vessels alongside our berths. Our decision to purchase a new harbour tractor tug, which is For Port Taranaki the wider community is more being built in Turkey, so as to be better able to intimately connected than is normally the case handle bigger vessels in often severe weather for a company, as the community is the ultimate conditions, was fully justified on safety and owner of the business and the business occupies efficiency grounds. a very public space on the Ngamotu foreshore.

For the company to be sustainable it must, in my While it is now many years since the erection OUR PLACE view, focus on its core purpose and be a good of our security fence, in compliance with corporate citizen by taking a long-term view. international trade regulations that restrict public access to our wharves, the main breakwater I am confident that the company is well and operational areas, we are committed to positioned to meet the opportunities and ensuring the provision of access to the harbour challenges of the future; it has a history of for swimming, boating and yachting. The adaptability, well maintained assets, valuable connection through the lee breakwater as an berth side land, especially following the strategic

integral part of the city’s highly successful coastal OUR PEOPLE purchase of the former power station site, and walkway has recently been recognised as a key most importantly the people with the skills, asset provided to the city. Safe and easy public

O ur S tory experience and vision to compete for access to family friendly Ngamotu Beach is seen profitable business. as part of the heritage of New Plymouth citizens. Our board is well aware that the world in which By the same token it is of critical importance Port Taranaki operates is continuously changing. that New Plymouth ensures that high in its land It will be necessary to identify, manage and take use planning priorities is the protection of the FINANCIAL new business risks. Opportunities for the use of business interests of Port Taranaki, both now and the only deep water port on the west coast of in the future. New Zealand will arise from further development Ensuring best environmental outcomes across of historical trades and also from new business the port’s property, harbour and the surrounding undertakings that are yet to emerge. For example, sea, including the Sugar Loaf Islands Marine I feel sure that climate change will provide not Protected Area, remains a key outcome for only challenges but also opportunities. Our the board. temperate climate, water availability and water quality, fertile land, and innovative people will I note that the chairman of our Audit and Risk likely give rise to other land uses requiring the Committee, Peter Horton, is also shortly to retire. handling, storage and export of new types of I thank him for his service and his professional

04 PORT TARANAKI LIMITED ANNUAL REPORT 2017 05 OUR DIRECTORS CONTENTS CONTENTS OUR STORY

JOHN AULD PETER DRYDEN PETER HORTON RICHARD KROGH CHARLOTTE LITTLEWOOD DAVID MACLEOD GRAEME MARSHALL ROGER TAYLOR OUR PLACE JOHN AULD LLB CHAIR PETER HORTON CA CHARLOTTE LITTLEWOOD MFIN, BA(HONS) GRAEME MARSHALL

A commercial barrister who has specialised in the Peter has been a Port Taranaki director since 2007, Charlotte was elected on to the Taranaki Regional Graeme has worked in the port industry for energy sector, particularly the development of and chairs the Audit and Risk Committee. Peter Council in October 2016 and was subsequently almost 40 years, holding senior management Taranaki’s petroleum sector, John is the longest was an elected member of the Taranaki Regional appointed to the Port Taranaki board in roles at Port of Napier Ltd and Port of Tauranga serving member on the board. He was appointed Council for nine years. November 2016. Ltd, and having consulted to Timaru Container in 1994 and has been chair since September 2010. Terminal, Primeport Timaru and Northport. That He is a former managing partner of PwC New Charlotte has worked in a variety of project experience has been utilised on the Port Taranaki He has had a long career in corporate governance Plymouth, and consults to a range of businesses management, strategy and research roles across

board since 2014. OUR PEOPLE in Taranaki as a director of companies involved specialising in corporate governance, strategy Powerco Ltd, the Ministry for Social Development Graeme is chair of the Biosecurity Ministerial in petroleum exploration, electricity and gas planning and succession planning. in Wellington and the Department for Work and Advisory Committee, and a board member of Kiwi O ur S tory distribution, chemical manufacturing, and Pensions in London. She has also held a number professional services. RICHARD KROGH BE(HONS) ELECTRICAL of governance roles in the community. Vine Health (KVH), and Bay of Connections. DEPUTY CHAIR John is chair of the Real Estate Agents Authority She is a member of the Institute of Directors and ROGER TAYLOR BA, MCOM, CA, MNZM and the George Mason Charitable Trust. Richard joined the board in 2012 and has the New Zealand Association of Economists. Roger is a former partner of Ernst & Young and extensive experience in the infrastructure and

now provides corporate financial consulting and FINANCIAL PETER DRYDEN BAg Sc energy sectors, including as the former chief DAVID MACLEOD JP litigation support. An experienced senior executive and director, executive of Powerco Ltd. Appointed to the Port Taranaki board of directors Roger joined the Port Taranaki board in 2009 Peter was appointed to the Port Taranaki board Richard is a director and deputy chair of First Gas in 2001, David is chair of the Taranaki Regional and has a number of strings to his bow, including in May 2016. Peter was Dow AgroSciences Ltd, director and deputy chair of Top Energy Ltd, Council, Port Taranaki’s sole shareholder. being a council member for Victoria University managing director Australia and New Zealand and a director of PKW Farms GP Ltd, Ngawha David was raised on a dairy farm, trained as of Wellington, and chair of the Nelson School for nine years until 2016, and is now a company Generation Ltd, The Lines Company Ltd, an electrician and established an electrical of Music Trust. He is a member of the Chartered director and advisor. Energia Ltd, and various associated and contracting business. His directorships include Accountants of Australia and New Zealand. He is a chartered member of the Institute of subsidiary companies. Fonterra Co-operative Group, PKW Farms GP Ltd, Directors in New Zealand, and has been a director Richard is a chartered member of the Institute of PKWF 2013 Ltd, Predator Free 2050 Ltd, Matau and chair of several companies in Australia and Directors in New Zealand and is a member of the Technologies Ltd, and AJ Greaves Electrical Ltd. New Zealand. Institute of Professional Engineers in New Zealand.

06 PORT TARANAKI LIMITED ANNUAL REPORT 2017 07 CONTENTS

to new ways of operating. As part of this, years away, we are preparing to win the work to staff have been actively contributing to our provide offshore support for exploration business improvement initiative, which aims to and production. better meet our customers’ needs through the The three cruise ship visits during the summer implementation of new processes and adoption created a lot of interest and excitement of innovative technology. CHIEF throughout ‘the world’s second best region to Staff have also been at the forefront of our visit’. We want more people to discover what CONTENTS EXECUTIVE’S industry-leading health and safety procedures. Taranaki has to offer and are in discussions with The safety culture at Port Taranaki is now Cruise New Zealand to get more cruise ship visits REPORT inherent, and the success of our busy Risk to Port Taranaki in the coming years. Manager reporting system is evidence of that. During the year chief financial officer Chris Staff need to manage risk and the importance Ferguson (Todd Group) and head of operations of having a plan should disaster strike have been and infrastructure Alistair Simmers (Methanex) highlighted by last November’s 7.8 Kaikoura moved to two of our key bulk liquids customers. OUR STORY earthquake. We have a robust emergency While disappointed to lose them, we are pleased response plan in place and key members of our to have an ongoing relationship that can response team are trained in the Coordinated facilitate business. Incident Management System (CIMS). We also We have welcomed to our Executive Leadership have a business continuity plan, should disaster Team head of marine services Neville Fox, and strike, to assist recovery of operations at the port. head of infrastructure, projects and programme

The disruption to CentrePort in Wellington and manager Mark Webb, who have both been OUR PLACE State Highway 1 has caused ongoing transport valuable additions. Allan Melhuish has taken concerns, and we continue to investigate options on a combined role of CFO and head of for Port Taranaki to provide a logistical link for commercial, and Delys Tansley has widened her trade between the North and South islands. brief to now be head of human resources, safety While we were not physically affected by the and operations. Both have taken on the new quake, it has come at considerable cost to our responsibilities with aplomb. business as we have faced a significant increase Finally, I would like to thank our staff and in our insurance premium. Securing full cover OUR PEOPLE customers for their contribution and support insurance was difficult and it is a challenge throughout the year.

O ur S tory other port companies around the country are now facing. I record with sadness the passing of Stu Mills in August 2017. For 32 years was a valued member While trade activity has been stable in the past of our Cargo team. He formed some close year, there are positive signs of growth. The importance of being adaptable has and continue to provide world-class logistics relationships at Port Taranaki and I know that

been brought into focus in the past year solutions for our customers, with a focus on We have worked closely throughout the year his friends and colleagues, present and past, are FINANCIAL with Methanex NZ, our largest customer, who as earthquakes and flooding have caused service excellence, market competitiveness, and feeling the loss. have invested in upgrading facilities at the port major disruptions to New Zealand’s maximum utilisation of our assets. We will continue to work hard and provide and have undertaken an upgrade on key Motunui transport network, and challenging premium logistics solutions as we strive to make With trade volumes established in a range of five plant that will support production for a further a real difference to the Taranaki economy. economic conditions have prompted million to 5.5 million tonnes a year, we have a five years. Our refurbishment of the tank farm on consolidation in a number of sectors. base to forecast our business needs and we are Centennial Drive is nearing completion, allowing able to structure our resources to support this, The long-term planning we have established at lessee BP Oil New Zealand Ltd to ship in larger allowing us to ensure the needs of our customers Port Taranaki through our asset management parcels of fuel, including petrol, and store it here are being met. for distribution. plan, which is now in place, and the internal Guy Roper changes we have made to our business have put Our staff have played a key role, and I thank There are also signs of future activity in the oil Chief Executive us in good stead to weather these disruptions them for accepting the challenge of adapting and gas industry. Although possibly still two

08 PORT TARANAKI LIMITED ANNUAL REPORT 2017 09 CONTENTS

largely because of strong log exports, the volume a welcome 29% increase in log revenue. As of imports fell by 15% compared with 2015-2016 well as stacking logs higher to accommodate as demand for feed in the agricultural sector this growing business, we are also investigating weakened significantly. developing more land at the former power station site to store logs. We are also examining Favourable on-farm feed conditions and cashflow means to extend our forestry catchment area constraints in the dairy sector have resulted in a

and service the growing demand by developing a CONTENTS 16.6% drop in volume and a 24.6% reduction in combined road-rail transport mode for logs. With revenue for our dry bulk business. The forecast rail facilities on-hand we have the infrastructure lift in the milk price to more than $6/kg is to make this practical and economically viable. welcomed and is forecast to boost a recovery in dry bulk trade and will also help boost the Despite a $2.5 million cost to undertake biennial Taranaki economy. maintenance dredging work – one of the challenges of being a west coast port, and a cost As New Zealand’s key oil and gas port, the oil most other ports do not face – we have been and gas industry remains our largest sector, and OUR STORY smarter about what we do and prudent with the continuing challenging oil commodity price expenditure. This has led to a 6.5% reduction environment has had an impact on our business. in costs across the business and ensures we While methanol volumes were strong during the are in step with our reduction in revenue and year, this was offset by lower crude, condensate profit. Business improvement and efficiency and LPG volumes. As a result, revenue from bulk programmes are set to continue in 2017-2018. liquids was down 2.2%. Our offshore business saw virtually no exploration related work and was In the past year, we have also changed banking OUR PLACE down 38.0% year-on-year. There are, however, partners to ASB, and have welcomed their OUR FINANCIAL PERFORMANCE early and positive signs of future activity in support and insight during a smooth transition. offshore exploration and we will be ready to support that when the work begins. The past financial year has proved are the focus within a new capital management EBITDA 2013-2017 challenging for Port Taranaki with both plan our board has adopted, in conjunction with Our shipping numbers were down by 10% revenue and profitability down compared the TRC. The new long-term strategic approach because of a number of factors, in particular the $25.8M will see a term of consolidation after an extended international trend of bigger vessels exchanging with the previous 12 months. $23.3M

period of investment. larger parcels of cargo, therefore requiring OUR PEOPLE Reduced shipping activity, lower oil commodity fewer visits. Although ships have increased in Financial results 2016-2017 overview $19.4M $19.6M prices and a fall in the stock feed market all size, we have the infrastructure and capacity to $19.0M O ur S tory contributed to the 2016-2017 result. • Revenue decreased 6.7% from $44.7 million accommodate them. In the oil and gas sector, (2015-2016) to $41.7 million (down $3 million) lower LPG production resulted in fewer visits, However, the outlook for the new financial year while the weakening market for stock feed saw is stable, with revenue, profit and cargo volumes • Net profit after tax was down 18.6% from $8.9 customers consolidate volumes and enter vessel forecast to be in line with the 2016-2017 results million to $7.2 million ($0.7 million attributable sharing arrangements to reduce costs. As our log EBITDA across all sectors. We will remain flexible and to an accounting charge for a prior year’s FINANCIAL business has increased at record levels, average adaptable with a focus on making a return on our deferred taxation adjustment) liftings of logs has also increased. shareholder’s funds and making a real difference • Earnings before Interest, Tax, Depreciation Our log business continues to grow to the Taranaki economy. and Amortisation (EBITDA) decreased 3.3% exponentially. Favourable market conditions, low from $19.6 million to $19.0 million (down Our stated intent is to increase our dividend to inventory levels in China, and large numbers of our shareholder the Taranaki Regional Council $0.6 million) harvest-ready trees in our catchment area have 2013 2014 2015 2016 2017 (TRC) to a level of $8 million per annum during • Operating costs reduced by 6.5% to $29.0 combined to produce another year of record the next three years, further helping offset rates million (down $2.0 million) growth. Following on from the previous year’s for the betterment of the Taranaki community. record volume of 358,000 JAS, for the 2016-17 Total trade fell 1.4% from 5.2 million tonnes in the year 486,000 JAS passed across Port Taranaki’s To meet targets within the Statement of previous financial year to 5.08 million tonnes. wharves – an increase of 35.9%. This has provided Corporate Intent, our expenditure and investment While exports increased by 1% year-on-year

10 PORT TARANAKI LIMITED ANNUAL REPORT 2017 11 CONTENTS STATEMENT OF CORPORATE INTENT

A comparison of the performance targets in the Statement of Corporate Intent for the period 1 July 2016 to 30 June 2019 against actuals for the period 1 July 2016 to 30 June 2017 as required by Section 164 (4) (a) of the Port Companies Act 1998 is shown below. CONTENTS

2016 / 2017 TARGET ACTUAL ACHIEVED

Freight Tonnes (m) 5.51 5.08 No

EBITDA on Average Total Assets (EBITDA/ATA) >10.5% 10.3% No

Return (NPAT) on Average Total Assets (NPAT/ATA) >4.5% 3.9% No

Return (NPAT) on Average Shareholder's Funds (NPAT/ASF) >6.0% 5.3% No OUR STORY Equity Percentage (ASF/ATA) 72.0% 74.0% Yes

Interest Coverage Ratio (EBITDA/Total Interest) >3.5x 16.1 Yes

Dividends $m (minimum p.a) 4.92 4.92 Yes

H&S Total Recordable Injury Frequency Rate <1.0 4.8 No

H&S Lead Indicator Risk Manager Events reported >1.5/FTE 16 Yes OUR PLACE H&S Non Incident to Incident Ratio 8:1 8:1 Yes

Environment Incidents of Harbour Pollution Nil Nil Yes

Environment Compliance with all Resource Consents Yes Yes Yes

EBITDA - Earnings Before Interest, Tax, Depreciation and Amortisation ATA - Average Total Assets

NPAT - Net Profit After Tax OUR PEOPLE ASF - Average Shareholder Funds O ur S tory FINANCIAL

12 PORT TARANAKI LIMITED ANNUAL REPORT 2017 13 CONTENTS

NKTT has been completed in the past financial incident occur. We purchased a ballast tank year. Funded in partnership with the users of on Ngamotu Road, and are upgrading the tank NKTT, the 35-40 year-old structures supporting and installing pipes and pumps to bring it up to the petrochemical pipelines were replaced with standard and ensure world’s best safety practice. painted galvanised steel and a design that is less The growth in our log business has resulted susceptible to corrosion. in demand for greater storage space. We are CONTENTS As ships have increased in size, the power investigating developing more land at the former needed to manoeuvre them in port has also power station site – sealing part of the site and increased. To address that, we have made a upgrading the stormwater system and lighting significant $12 million investment in a new tug – to accommodate our log customers. With for Port Taranaki. We spent many months, both our log trade expected to develop, our ability to in New Zealand and internationally, studying create storage is a key strength to expanding our and investigating designs for a tug that meets catchment area and optimising the supply chain.

the operating requirements of our customers OUR STORY Aligning with our aim to maximise the use of and the marine team. The Kīnaki, as the tug has our infrastructure, we are converting the Craig been named, is being built by Turkish tug-building Norgate Store to fulfil a customer’s requirement company Sanmar Shipyards, and is expected for increased animal feed storage. This will to be in operation at Port Taranaki in May 2018. provide a customer with a more efficient The state-of-the-art 25m in-harbour tractor tug operation and provide it with the ability to expand has a bollard pull in excess of 60 tonnes and will its reach beyond Taranaki. replace the 45-year-old Kupe. It will have greater OUR PLACE pulling power than the other two tugs in our The step was teken in the year to extinguish the fleet, the Tuakana and the Rupe, providing our encumbrance over the former New Plymouth OUR DEVELOPMENT AND INVESTMENT customers with greater assurance when entering power station land. or exiting Port Taranaki. Our development and investment projects reflect Port Taranaki’s development and investment wharf, the Newton King Tanker Terminal (NKTT), With safety a priority, alongside our investment in our position as a leader in the shipping, trade, and decisions are made with a focus on ensuring has provided greater efficiency for our oil and ShoreTension™ on NKTT, we are also upgrading logistics industry, providing service excellence we deliver service excellence for our gas customers. The intrinsically safe units were the fire water system on the terminal, providing and world-class assets to make a real difference specifically designed for the hazardous customers, optimise the supply chain, and greater water capacity at the site should an to the Taranaki economy. OUR PEOPLE conditions in which they operate and have fully utilise our assets. enabled oil and gas tankers to remain berthed

O ur S tory The former Chevron tank farm on Centennial during disruptive long period wave events. Drive is nearing completion for our lessee BP. We continue to refine and develop the use of Our significant investment in the purchase and ShoreTension™ as we target a reduction in port refurbishment of the tank farm enables BP to exclusions to less than 1%. reduce costs by shipping in and storing larger

In line with our focus on providing high-quality FINANCIAL parcels of petrol and diesel for distribution assets, we are in the process of ensuring the throughout the region. The work has included longevity of our key assets – the wharves a new truck-loading gantry, a new control – by investing $4.5 million in a three-year system, new tank-gauging systems and the refurbishment project. We are spending $1.5 replacement of pumps and valves. Our health million a year over three years to hydro-blast and safety team has worked closely with BP the old concrete, repair the reinforcing bar and contractors during the project, providing and repack the concrete. Stage one has been safety governance, auditing plans, and providing completed, and stage two is in progress. The feedback and guidance. project is expected to be completed in 2018.

The installation of two additional sets of In addition to the under wharf refurbishment, a Rod Mischewski ShoreTension™ units on our petrochemical pipe support replacement programme on the

14 PORT TARANAKI LIMITED ANNUAL REPORT 2017 15 CONTENTS

From left to right: Mark Webb, Delys Tansley, CONTENTS Guy Roper, Allan Melhuish, Neville Fox. OUR STORY

joining Port Taranaki, Delys held a number of MARK WEBB MBA, BTech (Chem), BSc, M.IPENZ OUR EXECUTIVE LEADERSHIP TEAM senior executive roles in a range of industries. INFRASTRUCTURE AND PROJECTS PROGRAMME

During her time with Turners and Growers, MANAGER OUR PLACE BBS, CA his new combined role of chief financial officer she completed her MBA with distinction. Delys GUY ROPER The newest member of the ELT and in a CHIEF EXECUTIVE and head of commercial. As well as leading the also has change management experience from newly created role, Mark has a wide brief that Business Services team, which covers accounting, her time at Orica New Zealand and TransAlta Since being appointed Port Taranaki CEO in includes the delivery of the Port Taranaki asset risk and compliance, information technology, New Zealand. April 2015, Guy has overseen the company’s management plan, long-term infrastructure treasury, and procurement functions of the move to providing world-class logistics solutions, and landside planning, delivering efficiencies business, Allan drives the company’s commercial NEVILLE FOX with a focus on customer service and excellence, in asset management and procurement of activities, which involve working closely with the HEAD OF MARINE SERVICES

and industry-leading health and safety. A services and plant, and implementing new OUR PEOPLE port’s customers, marketing, pricing, and the chartered accountant, Guy was Port Taranaki’s South African-born and with a wealth of technology. A qualified chemical engineer, Mark sustainable growth of the business. Before joining commercial manager before taking on the CEO experience in marine offshore engineering has extensive general, operational, financial,

O ur S tory the company in 2015, Allan held senior roles in role. He has had extensive leadership experience work and onshore marine management roles and change management experience in the the energy industry with experience in leading in general cargo, containers, livestock and oil and gas industry, having worked for the in the dairy industry and held a number of teams, strategy, acquisitions, contract negotiation tanker operations, Neville joined Port Taranaki in Natural Gas Corporation, Vector, and as senior senior roles with Fonterra, including commercial and management, project delivery and new December 2016. He provides leadership across consultant for OSD, where he was seconded as director in global sales. For three years he was business. Allan also has experience in investment the marine team, from pilots and masters of tugs transition general manager in the establishment based in Switzerland where he headed Fonterra’s banking, strategy consulting and government. FINANCIAL account team managing sales to Nestle’s global and launches, to marine engineers and support of First Gas. Mark was on the Gas Association operation. Guy was raised in Taranaki and has had DELYS TANSLEY BBS, MBA personnel, with a focus on safety and operating of NZ board for five years and was also on the experience as a director on a number of dairy HEAD OF HUMAN RESOURCES, SAFETY AND performance. Before joining Port Taranaki, Neville governance board for the development of the industry related boards. Guy is a trustee of the OPERATIONS spent 10 years working for marine services NZS/AS 2885 Gas and Liquid Petroleum health and safety standards. TSB Community Trust. Delys joined Port Taranaki in mid-2014 as head provider MMA Offshore Ltd, the last five as of human resources and safety. Her role has general manager international fleet operations ALLAN MELHUISH recently expanded to also include operations. In in Singapore. Neville served as marine engineer BE(Hons) Electrical and Electronic, PGDipBA, BCA(Hons) addition to human resources and safety, Delys foreign-going for Safmarine and Unicorn Shipping CFO AND HEAD OF COMMERCIAL now leads wharf services, cargo services, Lines before taking up technical and general Allan’s commercial and financial knowledge of security and communications, petrochemicals manager roles in Australia with strong links to the Port Taranaki have been brought together in (tanker terminal) and the permit office. Before oil and gas sector.

16 PORT TARANAKI LIMITED ANNUAL REPORT 2017 17 CONTENTS

Operating beside the Nga Motu Marine Reserve consulted with the hapu when naming our new and close to where the public play, we have an tug Kīnaki, which will be in operation next year. obligation to also look after our environment. Kīnaki is the name of one of two mouri or stones Our harbour is home to a number of endangered situated within the breakwater of Port Taranaki. A native species which use the area as a breeding mouri is the material symbol of a life principle and ground and as a shelter from the high energy source of emotions.

waves that batter the coast. We are continually CONTENTS The Port Taranaki Facebook page, with news, investigating ways to improve our practices to events, photos and videos of the goings on at the reduce the impact on our environment. port, is popular and encourages interaction with In the past year, that hard work and investment our nearly 6,500 followers. has paid off, with the Taranaki Regional Council We also connect with our community through raising our environmental performance rating sponsorship and donations, subsidised rentals, from ‘good’ in 2015 to ‘high’ in 2016. The rating and by providing a venue for community events. means there have been no breaches of our We host the monthly Seaside Market, are the OUR STORY resource consents, and harbour water samples New Plymouth Yacht Club’s principal sponsor are clear of contaminants. and we provide the facility and logistical support We encourage our community to be active for the annual ITU Triathlon World Cup race and in the port’s environment. We have a close the Weet-bix Kids’ TRYathlon. We support the association with the Nga Motu Marine Reserve annual Flannagan Cup open water swim and Surf Society and the Department of Conservation Life Saving Taranaki, and provide parking permits through Seaweek and the installation and to community groups. OUR PLACE monitoring of little blue penguin nesting boxes OUR COMMUNITY on port land. We host school tours on port land Our major community support is as principal to view the penguins, reef herons and the seal sponsor of the Port Taranaki Bulls rugby team, colony at Mikotahi Rock, which is within our which again performed strongly to reach the Port Taranaki plays an important role with protecting and enhancing the natural and operations area. Our staff have also been involved semi-finals of the 2016 Mitre 10 Cup – the in Taranaki, combining business with social environment we operate in. with the Nga Motu Marine Reserve Society’s provincial rugby national championship. We community through our city location, Because of our unique status, we have proposed Project Hotspot, recording sightings of rare and have been a long-time sponsor and supporter excelllent operational and recreational the New Plymouth District Council include a threatened coastal species. of Taranaki rugby and are proud to be associated facilities, daily interaction with the port zone as part of its proposed district plan, with this team, which represents our region OUR PEOPLE Building relationships is key to connecting with environment, and ownership by the which is to be publicly notified later this year. We admirably on and off the rugby fields of New the community.

O ur P lace Taranaki Regional Council. believe that a standalone port zone is preferable Zealand. The 2017 season is the third of our to address our specific requirements and would We work closely with our neighbour Ngati Te three-year principal sponsorship and we look With this comes a responsibility to enhance the better suit the long-term needs of our customers Whiti as they develop plans to establish a marae forward to further success from the amber economic and social wellbeing of the region and the community as opposed to being grouped on land adjacent to Ocean View Parade, and and blacks. through astute business management and under a major facility zone regime designed to investment and development decisions, robust recognise significant infrastructure in the district FINANCIAL environmental policies and practices, building under a common approach. relationships with our lessees, neighbours, and With the mix of business and recreation activity the Ngati Te Whiti hapu, and sponsorship and at Port Taranaki, safety is a priority, whether it support of clubs, service groups, sports teams be on the water or on the land – commercial and events. or recreational. We work hard to be an industry As New Zealand’s only deep water port on the leader through our stringent policies, procedures, west coast and the nation’s premier oil and online induction and extensive training. gas port, we are a key asset for Taranaki and On average, more than 4,000 employees, the country as a whole. We need to retain the contractors and customers enter our operational ability to develop and grow to facilitate regional area each week, and hundreds more access the economic prosperity, while striking a balance public areas along Ocean View Parade.

18 PORT TARANAKI LIMITED ANNUAL REPORT 2017 19 CONTENTS

five risks, such as the possibility of an explosion “Port Taranaki has developed advanced and on our petrochemical terminal. integrated safety management systems ... that are industry leading and a good example to all “We have reviewed potential causes, controls, other operators”. consequences and indirect consequences of our top five risks. The review has given us clear Our board of directors is actively involved in indications of our level of confidence around health and safety on site. The board’s Health and CONTENTS each risk and improvement actions required to Safety Governance Committee, which sets our be implemented.” strategic direction, ensures we have adequate resources and monitors our performance against We have aligned ourselves with other ports in our plans. regards to minimum safety standards, and with the Be Safe Taranaki Group to ensure we share The directors, along with the executive leadership and simplify site access rules and training across team, make regular on-site visits to view and gain the region. knowledge of specific areas of operations, from which they can assess risk and base decisions, OUR STORY We continue to lead the way with our drug and such as for funding of new equipment. alcohol testing policy, site-wide smoke free Staff engagement is central to developing a policy, our stringent permit to work procedures, safety-first culture. Our Risk Manager in-house and our thorough online induction. safety reporting process continues to grow as External assessment and acknowledgement of staff become aware of potential risks, hazards, our health and safety standards is also validation incidents or near misses, no matter how small,

of our work. Our marine transport and services and report it, allowing us to investigate ways to OUR PLACE operations have been assessed as “low risk” by reduce or eliminate that risk. OUR HEALTH AND SAFETY Maritime New Zealand’s Marine Operator Safety “I am excited about the amount of engagement System (MOSS) audit. from our people, port users and customers,” says With nearly 600 staff, contractors, assign responsibility in these shared areas Our port safety, culture, compliance history, Delys. We have so many more new ideas and customers, and other stakeholders entering and who has ownership of safety. Having a operating practice, experience and capability, insights, so we can make much higher quality framework in place provides clarity and improves Port Taranaki’s operations area each day, the and organisation meet all the requirements. interventions. That is what will help us to take a communication and safety,” says Port Taranaki health, safety and wellbeing of every person In the maritime officer’s report it was noted lead position in port safety.”

head of human resources, safety and operations OUR PEOPLE is paramount. Consulting, co-ordinating Delys Tansley. and communicating with PCBUs (persons

O ur P lace conducting a business or undertaking) and Record log exports have resulted in our log yards workers is more important than ever. becoming bigger, busier and in need of greater health and safety procedures. We have fenced off As a PCBU, one of our many responsibilities log yard areas, updated signage and introduced is managing safety in shared areas – and the consequences should unauthorised people enter

minimum standards we have set and monitor is the yards. FINANCIAL part of this. We are pleased to report that overall “The log yards bring a different set of hazards and these standards have been well accepted. risks, and our procedures align with our work to A major undertaking has been the development improve our wharf side safety procedures. The of a wharf side operational framework to ensure log yard improvements have ensured efficiency, there are clear accountabilities in shared working through controlled travel in and out of the area, areas. Our new framework has been developed and the safety of those working in the area,” in coordination with stevedores, log marshalling Delys says. companies and transport operators. Minimising risk is at the heart of our health and “A lot of work has been done in a number of safety work, and we have undertaken a risk areas to determine how we coordinate and assessment of our business, pinpointing the top

20 PORT TARANAKI LIMITED ANNUAL REPORT 2017 21 CONTENTS CHRIS DILLON

Chris Dillon is working to connect the village Having worked in the banking industry for to the world. close to 25 years in commercial and customer relationship management roles and, more The village, as he refers to it, is Port Taranaki,

recently, at Taranakipine as the markets manager CONTENTS through which customers can trade goods and for New Zealand and the United States, Chris has services with the world, driving growth and a wealth of relevant experience enabling him to prosperity in the region. understand what businesses need to succeed. “The success of our business is through the While Chris is based at Port Taranaki’s offices, he success of our customers, and we want to spends a lot of time travelling within the region help them by making it easy for them to do and beyond. He is looking to geographically business,” says the Port Taranaki customer extend Port Taranaki’s growing logging business, relationship manager. OUR STORY and encourage greater use of the port’s dry bulk “We want to best utilise the resources and hub, while working to ensure maximum assets we have at Port Taranaki, and we want to utilisation of port-owned land and buildings promote the region and make connections that through tenancies. lead to new business for ourselves and “I see myself as an enabler – joining Port our customers.” Taranaki with its customers and communicating The customer relationship manager role has customers’ needs across multiple departments of been established after a survey of port customers the port. And it’s about getting out and listening OUR PLACE revealed that rather than communicate with to customers’ stories, finding solutions for them multiple people across the operational and – working together to help them succeed and commercial areas of Port Taranaki, there was a ultimately benefit the Taranaki economy.” preference for one point of contact.

As that dedicated point of contact for customers TOTAL TRADE VOLUMES 2013-2017 and prospective customers, Chris has a wide Million tonnes and diverse brief. On any given day, he can bring OUR PEOPLE together a supplier, agent and Port Taranaki 6.00 representative to discuss the intricacies and

O ur P eople 5.50 logistics of grain storage at the port’s dry bulk

hub, before travelling to the region’s hinterland to 5.00 meet with a logging exporter. 4.50 “The port is such a diverse and multi-functional

business. It has a large customer base that not 4.00 FINANCIAL only includes the importers and exporters that use our operational area, but also users of our 3.50

world-class marine services and tenants of port- - owned land and buildings,” Chris says. 2012 2013 2014 2015 2017

“So understanding everyone’s need and ensuring they are being met as far as practicable is important. One of our three company pillars is ‘customer intimacy’ – we need to know our customers, and, most importantly, build their trust, understand their business and provide the right solution to enable them to succeed.”

22 PORT TARANAKI LIMITED ANNUAL REPORT 2017 23 CONTENTS CHRIS MUSGRAVE

Chris Musgrave is an encyclopaedia of Westgate and went out of its way to quickly maritime rules and regulations – all 93 construct a purpose-built cradle and arrange of them. on-water transport of the launch to Napier.

The launch fleet also includes Mikotahi, and CONTENTS “Because of the environment we work in, health Rawinia, which is a dedicated offshore services and safety, and understanding best practice support vessel. in terms of marine operations, is crucial for operational compliance and excellence,” the Port To provide customers with greater assurance Taranaki marine supervisor says. “As an oil and when entering or exiting Port Taranaki, the oldest gas port we are externally audited more often of the port’s three tugs, 45-year-old Kupe, is to be than most other ports, so we have to have broad replaced with a state-of-the-art 60-tonne bollard pull tug, Kīnaki. The new tug is being built by

subject knowledge and strict processes and OUR STORY procedures in place.” Turkish company Sanmar Shipyards and will join Rupe, and Tuakana in operation at Port Taranaki Chris has been in charge of the 19-strong in May 2018. marine services team for the past 18 months, a role that involves supervising all the operational With health and safety a priority, Chris is proud requirements of the port’s floating marine that Port Taranaki has been assessed as a low risk services, including tug masters, launch masters operation by Maritime New Zealand in its recent and deckhands. He has a wealth of experience Maritime Operator Safety System (MOSS) audit. OUR PLACE in the marine industry having worked in the The port’s safety culture, compliance history, fishing industry, then 10 years in marine-seismic operating practice, experience and capability, surveying around the world, before coming to and organisation meet all the requirements of its Port Taranaki in a health and safety advisory role. Maritime Operator Plan (MTOP), providing safety assurance to staff, contractors, customers and The marine services team provides everyday tug, the public. launch and pilotage services to ships coming and going in the harbour, and also provides vital “The offshore industry consider health and safety

offshore support to the offshore industry, such before cost, so this result gives them peace of OUR PEOPLE as maintenance support, transferring staff and mind,” Chris says. “They know our systems are transporting cargo to and from oil platforms good and we’re operating to them – we’ve had O ur P eople and ships. great buy-in from staff, which has led to this great result.” “We have truckloads of experience both inshore and offshore, which is the key to doing the Having clear systems in place is also crucial job well,” Chris says. “We have built up a good should an emergency occur, such as an offshore

relationship with clients, who often ask for oil spill. FINANCIAL specific skippers because of that relationship and “We are the most readily prepared port in the previous jobs well done. country for a spill and able to respond locally “Often we are asked to do a spot job that may regionally and nationally if called upon,” Chris include 30-35 hours out at sea, so it’s important says. “We have a very close relationship with we have that experience on-hand and are ready Maritime New Zealand and the Taranaki Regional to go. If a client asks for something we need to Council and have regular exercises to keep fresh.” be flexible and able to follow through and do it.”

With service excellence a strength, earlier this year Port Taranaki answered an urgent request from Napier Port for the use of reserve launch

24 PORT TARANAKI LIMITED ANNUAL REPORT 2017 25 CONTENTS CARLIE YUKICH - SALLY HOOGEVEEN

Port Taranaki’s position as an industry says Carlie. “It has added value for businesses and leader in health and safety is built on the the numbers are growing.” company’s determination for “continuous Sally is the port’s representative on the Be

improvement”, says Carlie Yukich. Aligned project, established by Be Safe Taranaki, CONTENTS The port’s health and safety procedures and to standardise safety and training requirements projects are crucial to ensuring the wellbeing of across the major manufacturing and contracting dozens of staff, contractors, lessees, shipping sites in Taranaki, while Carlie is the secretary for agents, logging companies, and transport the Taranaki branch for the New Zealand Institute companies who come on site each day. of Safety Management, which is the body of health and safety professionals, where new And keeping up to date with industry and technology, ideas and philosophies are shared. legislated health and safety policies and OUR STORY Carlie attends quarterly National Port Forum procedures, developing and implementing health and safety meetings, where she works with projects, and standardising documents to provide representatives from a range of authorities such clarity across the many industries that work at as Maritime New Zealand and WorkSafe New the port, is the busy, but satisfying job of senior Zealand, and in July, Port Taranaki established health and safety advisor Carlie Yukich and health the Contractor Partnership Forum, to fill a gap and safety co-ordinator Sally Hoogeveen. in communication with the 28 mostly local “Individual health and safety projects might end, contractors who work for Port Taranaki, providing OUR PLACE but there’s never an end to improving safety,” says a platform for education and consultation. Carlie. “We are continuously refining and fine- Carlie has also been working on interface tuning, rationalising documents, incorporating agreements with the 13 pipeline owners at Port new technology, and working on improvement Taranaki, and developing wharf side operational projects to make our operations safer.” standards to ensure there is a health and safety “We’re trying to change a bit of the perception framework around shared working areas. about the role of health and safety,” says Sally. “Overall, it is about collaboration, information OUR PEOPLE “We provide support and want to be seen as a sharing, having a clear understanding of resource for health and safety information. Safety

O ur P eople responsibility, and building relationships to is the responsibility of everyone on site.” improve health and safety to ensure that With the port a hub of activity across many everybody on site returns safely home everyday,” industries and businesses, forming relationships says Carlie. and developing clear communication with all “And the high standard of health and safety at

stakeholders is vital to ensuring health and safety FINANCIAL the port has also influenced other companies to practices are followed and successful. improve their practices,” says Sally. As such, through a number of groups both locally The theme of “continuous improvement” also and nationally, Carlie and Sally provide a vital link. stretches to their own professional development. The Port Safety Advisory Group (PSAG) has been As part of Port Taranaki’s focus on training and a success in bringing together the multiple users professional development of staff, Sally is working and lessees of the port and providing a platform towards a level three National Certificate in for consultation, as well as an opportunity for Occupational Health and Safety, with a training health and safety education. plan specific to her role at the port, while Carlie “It has become valuable for building relationships is studying towards a Masters in Advanced and the relationships are now more proactive,” Leadership Practice through Massey University.

26 PORT TARANAKI LIMITED ANNUAL REPORT 2017 27 CONTENTS RICKY HANN

Communication, building relationships and systems monthly and have back-up emergency understanding customers’ needs are the systems in place.” key to successfully operating New Zealand’s Supporting customers by understanding their

premier oil and gas shipping terminal, says needs and providing top quality assets and service CONTENTS Port Taranaki petrochemical and security excellence is a focus of the port’s development manager Ricky Hann. and investment, and the NKTT has been central to that. “We are a unique port in that we have 10 different pipeline users transporting product across our In the past year, funded in partnership with petrochemical berth,” Ricky says of the port’s the port’s NKTT customers, a programme of Newton King Tanker Terminal (NKTT), which work has been completed to replace the 35-40

transfers more than four million tonnes of bulk year-old structures that support the pipelines. OUR STORY liquids a year. The port is also ensuring the longevity of the wharves, including the NKTT, in a three-year “So making sure our customers get their ships refurbishment project to replace the concrete in and out when they need to, and to also fit in and repair the reinforcing bar inside. Intrinsically maintenance and project work, requires a lot of safe ShoreTension™ mooring units, specifically liaising and open communication with customers designed for the hazardous conditions, have and between customers. Shipping schedules also been installed on NKTT, and the fire water

can change frequently, and at short notice, so OUR PLACE system on the terminal is being upgraded to it’s important we have a good relationship with provide greater water capacity at the site should customers to be able to deal with any logistical an incident occur. problem and make a plan to address it.” “We get good feedback from customers on our Ricky, who has career experience in the oil and performance on an operational level, and have gas industry in New Zealand and Australia across built a good reputation for finding solutions for a wide range of products, including all those that them. It’s all about that personal connection and pass through Port Taranaki, has been in charge of

ensuring a win-win result for everyone involved,” OUR PEOPLE the operation of NKTT for two years. Ricky says. Safety is the priority, particularly as at busy times

O ur P eople between 20 and 30 customers, contractors BULK LIQUIDS TRADE VOLUMES and staff can be working alongside pipelines containing hazardous and flammable material. 2013-2017

Every ship, no matter how often it berths at Million tonnes NKTT, is subject to an initial hour-long safety 5.0 FINANCIAL inspection – a written checklist to ensure industry best practice is followed – and further safety 4.5 checks are then carried out every six hours the ship is in port. 4.0

“We take safety very seriously and each product 3.5 comes with unique challenges,” Ricky says. “All the Port Taranaki team that work on the NKTT 3.0 have had extensive hydrocarbon and tanker 2.5 loading experience and are up-to-date with crisis management procedures. They take part in an - annual safety exercise and we test our safety 2013 2014 2015 2016 2017

28 PORT TARANAKI LIMITED ANNUAL REPORT 2017 29 CONTENTS PAUL CAMPBELL

Paul Campbell’s Port Taranaki is like a giant The port’s container transfer and reuse site also jigsaw puzzle in which all the pieces must fit comes under Paul’s sphere, and he says it’s a together seamlessly. valuable part of the company’s customer service. CONTENTS Those pieces are the logs, containers, cool store “With our wharfside location, we’re able to take product, dry bulk, trucks, ships, and rail that costs out for importers and exporters by linking make use of the port’s facilities and, as cargo customers directly with the shipping lines and services manager, it is Paul’s job, and that of his rail and road transport. This helps them avoid small team of three, to bring them all together – paying container detention charges and ensures ensuring there is storage space on-site, transport containers are available on-site and cleaned and connections are available, cargo comes in ready when needed. We also have Customs and the Ministry for Primary Industries on hand

and goes out on time, and every operation is OUR STORY completed safely. for inspection of cargo, and storage space for product to be unloaded and stored here.” “It’s about managing the space on the ground and facilitating operations at the port, making Port Taranaki has bulk storage areas on-site and sure our operations are working for the works closely with customers to develop the customers,” he says. stores to fit their use.

Working with dozens of customer contacts every “If we have a customer who requires floor

day, it’s no surprise Paul’s phone runs red hot and space for a particular purpose to enhance their OUR PLACE his email folder is forever full. But after 25 years business, we work on adapting our stores to cater in the industry – 15 of those at Port Taranaki in for that. It’s about giving customers service that various roles including log supervisor, bulk dry you’d expect to get yourselves.” supervisor, and in customer services – he has built up a large store of knowledge, experience LOGS TRADE VOLUMES and communication skills to ensure customers’ 2013-2017 needs are met.

Million tonnes OUR PEOPLE “Listening to customers is crucial, being flexible and taking on-board what could improve their 0.50

O ur P eople operations. Such as for our growing log business, 0.45 it’s creating more storage space, having log storage close to the berths, and improving ship 0.40 loading times for efficiency and productivity, which saves customers money. 0.35 FINANCIAL Paul also works closely with the port’s health 0.30 and safety team through the company’s in- house Risk Manager programme to record and 0.25 investigate customers’ feedback and challenges 0.20 regarding safety.

“We are very focused on health and safety. For - 2013 2014 2015 2016 2017 the likes of our log business, our storage areas are growing which creates safety concerns, so we have fenced off yard areas and updated signage, warning people of the dangers.”

30 PORT TARANAKI LIMITED ANNUAL REPORT 2017 31 CONTENTS FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 CONTENTS CONTENTS

Statement of profit and loss and other comprehensive income 34

Statement of changes in equity 34

Statement of financial position 35 OUR STORY

Statement of cash flows 36

Statement of accounting policies 37-43

Notes to the financial statements 44-61

Independent auditor’s report 62 OUR PLACE

Comparative review 64 OUR PEOPLE

FINANCIAL

32 PORT TARANAKI LIMITED ANNUALANNUAL REPORTREPORT 20162017 33 CONTENTS FINANCIAL STATEMENTS FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

Statement of profit and loss and other comprehensive income Statement of financial position

NOTE 2017 NZ$ 2016 NZ$ NOTE 2017 NZ$ 2016 NZ$ Revenue from operations 2 41,668,249 44,658,373 Current Assets Operating expenses 2 (29,009,863) (31,017,540) Cash and cash equivalent 3,286,516 343,238 CONTENTS Operating profit before finance income and expenses 12,658,386 13,640,833 Trade and other receivables 6 5,113,327 9,837,855 Inventories 618,737 613,942 Finance income 2 17,756 30,577 9,018,580 10,795,035 Finance expenses 2 (1,194,918) (1,372,144) Non Current Assets Net finance expense (1,177,162) (1,341,567) Other intangible assets 8 665,043 734,912 Property, plant and equipment 7 177,971,860 167,591,160

Profit Before Taxation 11,481,224 12,299,266 Deferred tax asset 5 - 908,624 OUR STORY 178,636,903 169,234,696 Income tax expense 3 (4,264,246) (3,429,888) Profit for the period (attributable to owners of the company) 7,216,978 8,869,378 Total Assets 187,655,483 180,029,731

Other comprehensive income (items that may be reclassified Current Liabilities subsequently to Profit or Loss when specific conditions are met) Trade and other payables 9 4,137,877 4,618,353 Provisions 10 1,227,510 1,410,104

Revaluation of property, plant and equipment 13 - 8,805,626 OUR PLACE Borrowings 11 14,094 30,862 Change in cash flow hedge reserve 16 690,995 (1,440,666) Taxation payable 4 531,031 1,496,905 Other comprehensive income for the period, net of income tax 690,995 7,364,960 5,910,512 7,556,224 Total comprehensive income for the period Non Current Liabilities (attributable to owners of the company) 7,907,973 16,234,338 Derivative financial instruments 16 1,255,456 1,946,451 Deferred tax liability 5 414,519 - Statement of changes in equity Borrowings 11 41,815,822 35,178,155 Provisions 10 758,000 831,000 OUR PEOPLE Issued Retained Revaluation Cash Flow 44,243,797 37,955,606 Capital Earnings Reserve Hedge Total Equity NOTE NZ$ NZ$ NZ$ Reserve NZ$ NZ$ F inancial S tatements As at 1 July 2015 26,000,000 48,289,546 48,976,802 (505,785) 122,760,563 Equity Changes in Equity for 2016 Issued capital 12 26,000,000 26,000,000 Profit and total comprehensive Asset revaluation reserve 13 57,782,428 57,782,428 income for the period - 8,869,378 8,805,626 (1,440,666) 16,234,338 Cash flow hedge reserve 16 (1,255,456) (1,946,451) Retained earnings 14 54,974,202 52,681,924 FINANCIAL Dividends 15 - (4,477,000) - - (4,477,000) 137,501,174 134,517,901

As at 30 June 2016 26,000,000 52,681,924 57,782,428 (1,946,451) 134,517,901 Total Equity and Liabilities 187,655,483 180,029,731

Changes in Equity for 2017

Profit and total comprehensive For and on behalf of the Board income for the period - 7,216,978 - 690,995 7,907,973 Director Director Dividends 15 - (4,924,700) - - (4,924,700)

Dated: 17 August 2017 As at 30 June 2017 26,000,000 54,974,202 57,782,428 (1,255,456) 137,501,174

The accompanying notes form part of these financial statements The accompanying notes form part of these financial statements

34 PORT TARANAKI LIMITED ANNUAL REPORT 2017 35 CONTENTS FINANCIAL STATEMENTS STATEMENT OF ACCOUNTING POLICIES FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

Statement of cash flows GENERAL ACCOUNTING POLICIES rate of the day. Any gain or loss is recognised in the Statement of Profit or Loss and Other NOTE 2017 NZ$ 2016 NZ$ Port Taranaki Limited (the “Company”) is a sea port Comprehensive Income (Profit or Loss) in the company incorporated under the Companies Act 1993 Cash Flows for Operating Activities reported financial period in which they arise. and domiciled in New Zealand. CONTENTS Receipts from customers 48,761,790 50,790,373 (c) Financial Instruments The Company’s parent and sole shareholder is The Interest received 17,756 30,577 Taranaki Regional Council. (c) (i) Derivatives 48,779,546 50,820,950 The Company’s registered office is 2 - 8 Bayly Road, A derivative is a financial instrument or contract Moturoa, New Plymouth 4310. whose value changes in response to the change in Payments to suppliers and employees (27,805,800) (32,137,119) The financial statements for the Company were a specified interest rate, financial instrument price, Interest paid (1,201,698) (1,364,756) authorised for issue by the directors on 17 August 2017. commodity price, foreign exchange rate, credit Income tax paid (3,906,978) (3,581,285) index or other variable. It requires no investment The principal activities of the port are described in and is settled at a later date. (32,914,476) (37,083,160) Note 1. OUR STORY Net cash provided by operating activities 17 15,865,070 13,737,790 The Company uses derivative financial Statement of Compliance instruments to hedge its exposure to foreign exchange, commodity and interest rate risks These are the financial statements of the Company Cash Flows from Investing Activities arising from operational, financing and presented in accordance with the Port Companies investment activities. The Company does not Sale of property, plant and equipment and software Act 1988 and the Companies Act 1993, prepared in hold or issue derivative financial instruments for (net of disposal costs) 4,353,854 72,975 accordance with the Financial Reporting Act 2013, and trading purposes. Derivatives that do not qualify 4,353,854 72,975 in accordance with New Zealand Generally Accepted for hedge accounting are accounted for as Accounting Practice (NZ GAAP). They comply with trading instruments.

New Zealand equivalents to International Financial OUR PLACE Purchase of property, plant and equipment and software (18,343,165) (15,021,861) Reporting Standards (NZ IFRS), International Financial The Company may enter into foreign currency Capitalised interest on purchase of property, plant and equipment (629,626) (393,098) Reporting Standards (IFRS) and other applicable forward exchange contracts, to hedge foreign (18,972,791) (15,414,959) Financial Reporting Standards. The Company is a profit currency transactions when purchasing major oriented entity. fixed assets and when payment is denominated Net cash (used in)/provided by investing activities (14,618,937) (15,341,984) in foreign currency. Gains and losses on such Basis of Preparation contracts are recognised in the Profit or Loss each Cash Flows from Financing Activities The financial statements are presented in New Zealand year at balance date or date of completion by Proceeds from borrowings 6,621,845 5,154,682 dollars, which is the Company’s functional and restating the liability to fair value at balance date or at the time of settlement. Interim dividend (2,462,350) (2,238,500) reporting currency, rounded to the nearest dollar. OUR PEOPLE Final dividend (2,462,350) (2,238,500) They are prepared on the historical cost basis apart Cash Flow Hedges from land and derivatives which are stated at their Net cash (used in)/provided by financing activities 1,697,145 677,682 Changes in the fair value of the derivative hedging fair value. F inancial S tatements instrument designated as a cash flow hedge are The accounting policies set out below have been recognised directly in equity to the extent that the Net Increase/(Decrease) in Cash and Cash Equivalents 2,943,278 (926,512) applied consistently to all periods presented in these hedge is effective. To the extent that the hedge is financial statements. ineffective, changes in fair value are recognised in Cash and Cash Equivalents at the Beginning of the Year 343,238 1,269,750 the Profit or Loss with finance expenses. SIGNIFICANT ACCOUNTING POLICIES If the hedging instrument no longer meets the FINANCIAL Cash and Cash Equivalents at the End of the Year 3,286,516 343,238 (a) Cash and Cash Equivalents criteria for hedge accounting, expires, or is sold, terminated or exercised, then hedge accounting is Cash and cash equivalents comprise cash on discontinued prospectively. The cumulative gain or hand, cash in banks and investments in money loss previously recognised in the hedging reserve market instruments. Bank overdrafts are shown remains there until the forecast transaction occurs. within current liabilities in the Statement of When the hedged item is a nonfinancial asset, Financial Position. the amount recognised in the hedging reserve is (b) Foreign Currency Monetary Balances transferred to the carrying amount of the asset when it is recognised. In other cases the amount Transactions in foreign currencies are converted recognised in the hedging reserve is transferred at the exchange rate ruling at the date of the to the Profit or Loss in the same period that the transaction. At balance date all foreign currency hedged item affects the Profit or Loss. monetary assets and liabilities are translated to New Zealand dollars using the prevailing spot

The accompanying notes form part of these financial statements

36 PORT TARANAKI LIMITED ANNUAL REPORT 2017 37 CONTENTS

At year end the Company had one derivative Loans and Receivables If in a subsequent period, the amount of the revaluation of land is charged as an expense in financial instrument in place as per Note 16, as impairment loss decreases and the decrease can the Profit or Loss to the extent that it exceeds Trade receivables, loans, and other receivables well as 2 short term forward exchange contracts be related objectively to an event occurring after the balance, if any, held in the revaluation reserve that have fixed or determinable payments that are (2016: one derivative, 6 short term forward the impairment was recognised, the previously relating to a previous revaluation of that asset. On not quoted in an active market are classified as exchange contracts). recognised impairment loss is reversed through the the subsequent sale or retirement of a revalued ‘loans and receivables’. Loans and receivables are Profit or Loss to the extent that the carrying property, the attributable revaluation surplus measured at amortised cost using the effective (c) (ii) Financial Assets and Liabilities amount of the investment at the date the remaining in the revaluation reserve, is transferred interest method less impairment. impairment is reversed does not exceed what directly to retained earnings.

Financial Assets CONTENTS Interest is recognised by applying the effective the amortised cost would have been had the After recognition as an asset, an item of property, Investments are recognised and derecognised interest rate. impairment not been recognised. plant and equipment other than land shall on trade date where the purchase or sale of an be carried at its cost less any accumulated investment is under a contract whose terms Impairment of Financial Assets Other Financial Liabilities depreciation and any accumulated impairment require delivery of the investment within the Financial assets, other than those at fair value Other financial liabilities, including borrowings, and losses. timeframe established by the market concerned, through the Profit or Loss are assessed for trade and other payables are initially measured at and are initially measured at fair value, net of indicators of impairment at each balance sheet market value, net of transaction costs. Maintenance Dredging transaction costs. Subsequent to initial recognition, date. Financial assets are impaired where there is Other financial liabilities are subsequently The cost of maintenance dredging incurred is investments in associates are accounted for under objective evidence that, as a result of one or more measured at amortised cost using the effective expensed over the period of benefit through to the the equity method in the financial statements. events that occurred after the initial recognition of OUR STORY interest method, with interest expense recognised commencement of the next dredging campaign. Other financial assets are classified into the the financial asset, the estimated future cash flows on an effective yield basis. The value of the unexpired portion of maintenance following specified categories: financial assets of the investment have been impacted. dredging at balance date is reflected in property, ‘at fair value through the Profit or Loss’, ‘held The effective interest method is a method of For financial assets, objective evidence of plant and equipment. to maturity investments’, ‘available for sale’ calculating the amortised cost of a financial liability financial assets, and ‘loans and receivables’. The impairment could include: and of allocating interest expense over the relevant Subsequent Costs classification depends on the nature and purpose a) significant financial difficulty of the issuer or period. The effective interest rate is the rate that of the financial assets and is determined at the counterparty; or exactly discounts estimated future cash payments Subsequent costs are included in the asset’s time of initial recognition. through the expected life of the financial liability, carrying amount or recognised as a separate asset, b) default or delinquency in interest or principal or, where appropriate, a shorter period, to the net as appropriate, only when it is probable that the Financial Assets at Fair Value Through payments; or OUR PLACE carrying amount of the financial liability. future economic benefits associated with the Profit or Loss c) it is becoming probable that the borrower will item will flow to the Company and the cost can (d) Inventories be measured reliably. All other costs are charged A financial asset may be designated as at fair enter bankruptcy or financial re-organisation. to the Profit or Loss during the financial period in value through the Profit or Loss upon initial Stocks of maintenance materials and supplies are Certain categories of financial assets, such which they are incurred. recognition if: as trade receivables, that are assessed not valued at the lower of weighted average cost or net realisable value. a) such designation eliminates or significantly to be impaired individually are subsequently (f) Intangibles assessed for impairment on a collective basis. reduces a measurement or recognition (e) Property, Plant and Equipment Intangible assets acquired by the Company Objective evidence of impairment for a portfolio inconsistency that would otherwise arise; or comprise computer software and are stated at of receivables includes the Company’s past Owned Assets cost less accumulated amortisation and b) the financial asset forms part of a group of experience of collecting payments, as well as OUR PEOPLE impairment losses. financial assets or financial liabilities or both, observable changes in national or local economic All items of property, plant and equipment which is managed and its peak performance is conditions that correlate with default on except land are stated at cost less accumulated Subsequent expenditure on capitalised intangible

F inancial S tatements evaluated on a fair value basis, in accordance receivables and expected uncollectible items. depreciation and impairment. assets is capitalised only when it increases the with the Company’s documented risk After recognition as an asset at date of transition future economic benefits embodied in the specific management or investment strategy, and For financial assets carried at amortised cost, to NZ IFRS an item of land whose fair value can be asset to which it relates. All other expenditure is information about the grouping is provided the amount of the impairment is the difference measured reliably is carried at a revalued amount, expensed as incurred. internally on that basis; or between the asset’s carrying amount and the being its value at the date of the revaluation less present value of estimated future cash flows, (g) Impairment of Non Financial Assets c) it forms part of a contract containing one discounted at the financial asset’s original effective any subsequent accumulated impairment losses. FINANCIAL or more embedded derivatives and NZ IAS interest rate. Revaluations are made with sufficient regularity to Assets are reviewed for impairment at each 39 ‘Financial Instruments: Recognition and ensure that the carrying amount does not differ reporting date for events or changes in Measurement’ permits the entire combined The carrying amount of the financial asset is materially from that which would be determined circumstances that indicate that the carrying contract (asset or liability) to be designated at reduced by the impairment loss directly for using fair value at balance date. amount may not be recoverable. An impairment fair value through the Profit or Loss. all financial assets with the exception of trade loss is determined as the amount by which the Any revaluation increase arising on the revaluation receivables, where the carrying amount is reduced asset’s carrying value exceeds its recoverable Financial assets at fair value through the Profit of land is credited to a revaluation reserve, except through the use of an allowance account. When amount. The recoverable amount is the higher of or Loss are stated at fair value, with any resultant to the extent that it reverses a revaluation decrease a trade receivable is considered uncollectible, an asset’s fair value, less costs to sell, and value gain or loss recognised in the Profit or Loss. The for the same asset previously recognised as it is written off against the allowance account. in use. For the purposes of assessing impairment, net gain or loss recognised in the Profit or Loss an expense in the Profit or Loss, in which case Subsequent recoveries of amounts previously assets are grouped at the lowest levels for which incorporates any dividend or interest earned on the increase is credited to the Profit or Loss to written off are credited against the allowance there are separately identifiable cash inflows (cash the financial asset. Fair value is determined in the the extent of the decrease previously charged. account. Changes in the carrying amount of the generating units). manner described in Note 16. allowance account are recognised in the Profit A decrease in carrying amount arising on the or Loss.

38 PORT TARANAKI LIMITED ANNUAL REPORT 2017 39 CONTENTS

Recoverable amount is the higher of fair value term benefits policy. No benefit is payable to an (i) Provisions date, and any adjustment to tax payable in respect less costs to sell and value in use. In assessing employee upon leaving the Company for any of previous years. A provision is recognised in the Statement of value in use, the estimated future cash flows are milestone worked towards but not achieved, Financial Position when the Company has a Deferred tax is provided using the comprehensive discounted to their present value using a pre- however the probability of attaining vested status is present legal or constructive obligation as a result balance sheet liability method, for temporary tax discount rate that reflects current market determined and applied in calculating the expected of a past event, and it is probable that an outflow differences between the carrying amount of assets assessments of the time value of money and the liability amount. of economic benefits will be required to settle and liabilities for financial reporting purposes risks specific to the assets for which the estimates the obligation. If the effect is material, provisions and the amounts used for taxation purposes. of future cash flows have not been adjusted. If Retirement Allowance

are determined by discounting the expected Deferred taxation assets attributable to tax CONTENTS the recoverable amount of an asset (or cash- The Company has a retirement policy in place future cash flows at a pre-tax rate that reflects losses or deductible temporary differences are generating unit) is estimated to be less than its which provides for a retirement allowance. current market assessments of the time value of recognised when realisation is probable. Deferred carrying amount, the carrying amount of the Actuarial calculations are made to assess both the money and, where appropriate, the risks specific taxation liabilities attributable to taxable temporary asset (cash-generating unit) is reduced to its amount projected to be paid (in accordance with to the liability. differences are amounts of income taxes payable recoverable amount. An impairment loss is the Company’s policy) and the probability that the in future periods. However, deferred tax assets recognised in the Profit or Loss immediately, employee will qualify for the allowance.. (j) Trade and Other Payables and liabilities are not recognised if the temporary unless the relevant asset is carried at fair value, differences giving rise to them arise from the initial in which case the impairment loss is treated as (h) (ii) Short Term Benefits Trade and other accounts payable are recognised recognition of assets and liabilities (other than as a revaluation decrease. when the Company becomes obliged to make Short term benefits represent the Company’s net future payments resulting from the purchase a result of a business combination) which affects OUR STORY Where an impairment loss subsequently reverses, obligation with respect to benefits for services of goods and services. Subsequent to initial neither taxable income nor accounting profit. the carrying amount of the asset (cash-generating performed that are expected to be paid in the recognition, trade payables and other accounts Deferred tax assets and liabilities are calculated unit) is increased to the revised estimate of its ensuing 12 months. These accruals are calculated payable are recorded at amortised cost. Given the using the tax rates expected to apply when the recoverable amount, but only to the extent that based on existing remuneration rates expected to nature of these liabilities amortised cost equals assets are recovered or liabilities settled, based on the increased carrying amount does not exceed be in place when the benefits are paid. their notional principal. those tax rates which are enacted or substantively the carrying amount that would have been enacted at balance sheet date. Short term employee benefits for the Company determined had no impairment loss been (k) Interest Bearing Borrowings include: vested leave, sick leave, long service leave The measurement of deferred tax liabilities and recognised for the asset (cash-generating unit) and retirement allowance provision. assets reflects the tax consequences that would in prior years. A reversal of an impairment loss is All loans and borrowings are initially recognised at fair value, net of transaction costs. Subsequent follow from the manner in which the Company

recognised in the Profit or Loss immediately, unless OUR PLACE Vested Leave expects, at the reporting date, to recover or settle the relevant asset is carried at fair value, in which to the initial recognition, loans and borrowings the carrying amount of its assets and liabilities. case the reversal of the impairment loss is treated Where an employee has rendered service to the are carried at amortised cost with any difference Current and deferred tax is recognised as an as a revaluation increase. Company and has attained the right to paid leave, between the initial recognised amount and the the undiscounted amount expected to be paid, is redemption value being recognised in the Profit expense in the Profit or Loss except when it (h) Employee Benefits recognised as a current liability as all accumulated or Loss over the period of the borrowing using relates to items of other Comprehensive Income. leave is expected to be used within 12 months the effective interest method, except that they are Deferred taxation assets and liabilities can be offset (h) (i) Long Term Benefits of balance sheet date. The remuneration rates capitalised in accordance with (q) below. when they relate to income taxes levied by the same taxation authority. The Company’s net obligation in respect to expected to be in place when the benefits are All interest bearing borrowings are measured future benefits that can extend up to the date of paid is applied to the time owed for entitlements at amortised cost using the effective interest (m) Dividends to holiday pay earned, and alternate days owing retirement for all existing employees are long term rate method which allocates the cost through OUR PEOPLE benefits. They relate to benefits that employees where statutory days have been worked, and the expected life of the borrowing. Amortised Provisions for dividends are recognised in the have earned in return for their service in the long service leave where the milestone has cost is calculated taking account of any period in which they are authorised and approved. been achieved.

F inancial S tatements current and prior periods, although they may or establishment costs. (n) Goods and Services Tax (GST) may not have vested at balance sheet date. The Sick Leave Borrowings are classified as current liabilities (either obligation is calculated using an actuarial method All items in the Statement of Financial Position advances and deposits or current portion of term and is discounted to its present value. The discount The Company measures the amount of additional are stated exclusive of GST with the exception of debt) unless the Company has an unconditional rate the Company uses is the market yield on payments that are expected to arise solely from the receivables and payables, which include GST. All right to defer settlement of the liability for at least long term New Zealand Government bonds as fact that the benefit accumulates. The accrual is for items in the Profit or Loss are stated exclusive of 12 months after the balance sheet date. at balance sheet date. The probability of the GST. Cash flows are included in the Statement of the amount estimated it will cost the Company for FINANCIAL Company’s obligation to pay the future benefit is any employee taking leave in excess of their annual (l) Income Tax Cash Flows on a gross basis. The GST component then determined actuarially. entitlement. It is calculated based on the average of cash flows arising from investing and financing expected daily rate of all employees, and the actual Income tax on the Profit or Loss for the year activities which is recoverable from, or payable to Long term employee benefits for the Company average number of sick days taken collectively by comprises current and deferred tax. Income the taxation authority is classified as operating include: Long service leave, and retirement employees in excess of annual entitlement in the tax is recognised in the Profit or Loss except cash flows. allowances. previous three years. to the extent that it relates to items of other (o) Revenue Recognition Long Service Leave Comprehensive Income, in which case it is The current portion of the sick leave provision, the recognised in other Comprehensive Income. Revenue is measured at the fair value of the The Company has long service milestones of 15, long service leave provision, vested annual leave Current tax is the expected tax payable on the consideration received or receivable. 25, 30 and 35 years of service. Leave entitlement and retiring allowance provision are presented as taxable income for the year, using tax rates accrued towards milestones not yet achieved current employee benefit provisions. enacted or substantively enacted at balance sheet are calculated in accordance with the long

40 PORT TARANAKI LIMITED ANNUAL REPORT 2017 41 CONTENTS

Rendering of Services accounted for as a change in accounting estimate various other factors that are believed to be reasonable Effective for Expected to be in accordance with NZ IAS 8. under the circumstance, the results of which form the The Company recognises revenue for the annual reporting initially applied basis of making the judgments. Actual results may differ periods beginning in the financial rendering of services when the amount can be on or after year ending (s) Amortisation from these estimates. measured reliably, it is probable that the economic benefits associated with the transaction will flow to Amortisation is charged to the Profit or Loss on The fair value of financial instruments that are not - NZ IFRS 9 - Financial Instruments 1 January 2018 30 June 2019 the entity, the transaction can be measured reliably a straight line basis over the estimated useful traded in an active market (for example, over the life of the intangible assets unless the estimated and the costs incurred or to be incurred can be counter derivatives) is determined by using valuation - NZ IFRS 15 - Revenue from useful life is indefinite. There are no indefinite life measured reliably. techniques. The Company uses its judgment to select Contracts with Customers 1 January 2017 30 June 2018 CONTENTS intangible assets held at balance sheet date. Other a variety of methods and make assumptions that are - NZ IFRS 16 - Leases 1 January 2019 30 June 2020 Interest Revenue intangible assets are amortised from the date they mainly based on market conditions existing at each are available for use. The estimated useful lives are Interest revenue is accrued on a time basis, by balance sheet date. The carrying value of the derivative as follows: Application of the Standards, Amendments and reference to the principal outstanding and at the financial instruments are disclosed in Note 16. Interpretations is not expected to have a material effective interest rate applicable, which is the Computer Software 2 to 5 years The estimates and underlying assumptions are impact on the financial statement account balances rate that exactly discounts estimated future cash reviewed on an on going basis. Revisions to of the Company but may require additional receipts through the expected life of the financial (t) Operating Leases accounting estimates are recognised in the period financial statement disclosures. All other Standards, asset to that asset’s net carrying amount. An operating lease is one where the lessor retains in which the estimate is revised if the revision affects Amendments and Interpretations are not applicable or

significant risks and rewards of ownership of the only that period, or in the period of the revision and OUR STORY (p) Research and Development expected to have a material effect. leased asset. future periods if the revision affects both current and Expenditure on research activities, undertaken with future periods. CHANGES IN ACCOUNTING POLICIES i) Payments made under operating leases are the prospect of gaining new scientific or technical recognised in the Profit or Loss on a straight The Board of Directors and management have made Accounting policies have been applied consistently knowledge and understanding, is recognised in line basis over the term of the lease, except judgments that relate to the estimated useful life of with those in the previous year. the Profit or Loss when incurred. Expenditure on where another systematic basis is more plant property and equipment, its fair value, and the developing the application of any research findings representative of the time pattern in which value of receivables. The judgements are disclosed in will only be capitalised if able to demonstrate all of economic benefits from the leased asset Statement of Accounting Policies (r) and (s), and Notes the following conditions: It is technically feasible are consumed. to the Financial Statements, Note 7 carrying amount, to complete so it will be available for sale or use;

revaluations and other disclosures. OUR PLACE intended to be completed; able to be used or sold; ii) Rental income from operating leases is will generate probable future economic benefits; recognised on a straight line basis over the If the estimated useful life of depreciable assets was 5% there are adequate technical, financial and other term of the relevant lease. longer/shorter the operating profit for the year would resources to complete the development to use have increased/decreased for the following classes by: or sell; and can be measured reliably during its (u) Statement of Cash Flows Buildings $ 51,678 development. Cash flows from operating activities are presented Port installations $ 83,179 using the direct method. (q) Borrowing Costs Plant, equipment and fittings $ 93,102 Definitions of terms used in the Statement of Cash Bulk tanks $ 6,261 The Company recognises as an expense within Flows: Floating plant $ 45,854 the Profit or Loss all borrowing costs incurred, with OUR PEOPLE the exception of interest costs incurred during - Cash means cash on deposit with banks, net of Maintenance dredging $ 52,790 construction/assembly of major capital projects, outstanding bank overdrafts. Capital dredging $ 22,563 which are capitalised as part of the initial cost of F inancial S tatements - Investing activities comprise the purchase and the respective assets. CHANGES IN ACCOUNTING ESTIMATES sale of property, plant and equipment, 2017 and 2016: There had been no changes to investment properties and investments. (r) Depreciation accounting estimates. Property, plant and equipment other than land - Financing activities comprise the change in are depreciated on a straight line basis over their equity and debt capital structure of the ADOPTION OF NEW AND REVISED Company and the payment of cash dividends. ACCOUNTING STANDARDS estimated useful lives. FINANCIAL

Depreciation periods are: - Operating activities include all transactions In the current year the Company has adopted all of Buildings 5 to 45 years and events that are not investing or financing the Standards and Interpretations issued by the activities. Port installations 5 to 66 years External Reporting Board (the XRB) that are relevant to its operations and effective for the current Plant, equipment and fittings 2.5 to 25 years CRITICAL ACCOUNTING JUDGMENTS reporting period. Floating plant 3 to 25 years AND ESTIMATES Bulk Tanks 5 to 25 years At the date of authorisation of the financial report, the In the application of NZ IFRS the Board of Directors Maintenance dredging 2 years following Standards and Interpretations were on issue and management are required to make judgments, but not yet effective: Capital dredging 50 years estimates and assumptions about carrying values The residual values, and the useful lives of assets of assets and liabilities that are not readily apparent are reviewed at least annually and, if expectations from other sources. The estimates and associated differ from previous estimates, the change shall be assumptions are based on historical experience and

42 PORT TARANAKI LIMITED ANNUAL REPORT 2017 43 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

Notes to and forming part of the financial statements

01. PRINCIPAL ACTIVITIES 03. INCOME TAX EXPENSE/(CREDIT)

The Company facilitates export and import activities through Port Taranaki. 2017 NZ$ 2016 NZ$ CONTENTS a) Income Tax recognised in the Profit or Loss 02. PROFIT FROM OPERATIONS Current tax expense 2,941,104 3,673,383 Deferred tax on temporary differences prior period adjustment 746,074 - 2017 NZ$ 2016 NZ$ Deferred tax on temporary differences 577,068 (243,495) a) Revenue Total income tax expense/(credit) per Profit or Loss 4,264,246 3,429,888 Port operating revenue 41,668,249 44,658,373

Interest revenue 17,756 30,577 Income tax is calculated at an effective tax rate of 28 percent of the estimated assessable profit for the year.

Total revenue 41,686,005 44,688,950 OUR STORY b) Reconciliation of Accounting Profit Before Tax and Income Tax Expense/(Credit) b) Profit before taxation Profit before taxation 11,481,224 12,299,266 Profit before tax for the year has been arrived at after charging the following: Employee benefits 13,028,829 13,548,356 Income tax expense calculated at 28% 3,214,743 3,443,795 Employee benefits - termination 84,788 986,011 Tax effect of non deductible expenses in profit before tax 2,278 3,193 Defined contribution plans 604,869 700,060 Timing differences prior period 746,074 - Cost of services used 470,923 445,565 Timing differences current period 291,082 - OUR PLACE General expenses 3,996,179 4,123,961 Prior period adjustments impacting income expense under/(over) 10,069 (17,100) Interest expenses 1,194,918 1,372,144 Total income tax expense per Profit or Loss 4,264,246 3,429,888 Maintenance dredging - depreciation (Note 7) 1,055,799 990,000 Repairs and maintenance 3,452,767 4,273,547 04. TAXATION REFUNDABLE/(PAYABLE) Depreciation and amortisation (Notes 7 and 8) (excludes maintenance dredging) 6,314,437 5,983,323 2017 NZ$ 2016 NZ$ Net loss/(gain) on disposal of PP&E 1,272 (33,283) Opening balance (1,496,905) (1,404,807) Prior year tax paid/(refund) 1,506,974 1,181,285 OUR PEOPLE Included in general expenses were the following expenses: Prior period adjustment (10,069) 223,523 Change in estimated doubtful debts - (8,000) Current taxation payable (2,931,035) (3,896,906) F inancial S tatements Translation adjustments comprising: Provisional taxation paid 2,400,004 2,400,000 Net loss/(gain) on foreign currency bank balances 142,828 19,066 Total taxation refundable/(payable) (531,031) (1,496,905) Audit fees 75,027 73,004

Included in employee benefits were the following expenses: FINANCIAL Payments to directors J S Auld 77,000 75,000 P J Dryden 39,500 4,536 P D Horton 46,000 45,000 E R Krogh 50,625 49,725 C L Littlewood 23,042 - D N MacLeod 39,500 37,500 G J Marshall 39,500 37,500 M C Norgate (Deceased) - 3,685 R N Taylor 39,500 37,500 Total directors fees 354,667 290,446

44 PORT TARANAKI LIMITED ANNUAL REPORT 2017 45 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

05. DEFERRED TAX ASSET/(LIABILITY) 2017 NZ$ 2016 NZ$ Movement in the provision for impairment

Depreciation/ Provisions/ Receivables/ Cash Flow CONTENTS Balance 1 July - 8,000 Amortisation Payables Prepayments Hedge Total NZ$ NZ$ NZ$ Reserve NZ$ NZ$ Increase/(Decrease) in impairment provision recognised in Profit or Loss - (8,000) As at 30 June 2015 (731,193) 1,394,082 2,240 - 665,129 Balance 30 June - - (Charged)/Credited to Profit or Loss in the Statement of Comprehensive Income 540,065 (294,330) (2,240) - 243,495 In determining the recoverability of a trade receivable the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk lies in trade debtors where 32.00%, or 24 (2016: 26.39%, 19) by number of trade debtors, represent 87.94% As at 30 June 2016 (191,128) 1,099,752 - - 908,624 (2016: 88.59%) of the total amount of trade debtors. 0.95% (2016: 7.00%) of trade receivables were overdue but not

Prior Period Adjustment * (1,511,571) 220,490 - 545,006 (746,075) impaired at balance sheet date. 0% (2016: 0%) of trade receivables were considered impaired. OUR STORY

As at 1 July 2016 (1,702,699) 1,320,242 - 545,006 162,549 07. PROPERTY, PLANT AND EQUIPMENT

(Charged)/Credited to Profit or Loss in 2017 NZ$ 2016 NZ$ the Statement of Comprehensive Income 49,342 (432,932) - (193,478) (577,068) Land Carrying amount at 1 July 87,803,125 74,313,000 As at 30 June 2017 (1,653,357) 887,310 - 351,528 (414,519) Additions - 4,684,500 OUR PLACE There are no income tax losses carried forward. Revaluations - 8,805,625 Carrying amount at 30 June 87,803,125 87,803,125 * In the current year the Company reviewed the deferred tax calculation. As part of the reassessment, certain areas of judgement resulted in an adjustment to deferred tax in the current period. Buildings 06. TRADE AND OTHER RECEIVABLES As at 30 June previous year Cost 30,263,342 26,117,400 2017 NZ$ 2016 NZ$ Accumulated depreciation (14,135,501) (13,226,019) a) Current

Net book value previous year 16,127,841 12,891,381 OUR PEOPLE Trade receivables 4,001,330 4,770,348 Doubtful debt provision - - Carrying amount at 1 July 16,127,841 12,891,381 F inancial S tatements Net trade receivables 4,001,330 4,770,348 Additions 2,318,374 4,203,060 Other receivables 1,111,997 5,067,507 Disposals (15,272) (1,037) Total trade and other receivables 5,113,327 9,837,855 Reclassification (3,495) - The fair value of trade and other receivables approximates their carrying value. Depreciation (1,033,567) (965,563)

The average credit period on sales of services is 37 days (2016: 31 days). The Company reserves the right entirely Carrying amount at 30 June 17,393,881 16,127,841 FINANCIAL at its discretion to apply an interest charge at 2.5% per month compounding on overdue accounts. If credit has been granted, then payment for services rendered is due by the 20th of the month following invoice. The Company has provided in full for any receivables over 90 days old which are considered potentially unrecoverable. All other debtors are provided for based on estimated irrecoverable amounts determined by reference to past default experience.

Included in the Company’s trade receivable balance are debtors with a carrying amount of $0.320m (2016: $0.356m) which are past due at the reporting date. The average age of the $0.320m (2016: $0.356m) receivables is 46 days (2016: 48 days).

46 PORT TARANAKI LIMITED ANNUAL REPORT 2017 47 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

2017 NZ$ 2016 NZ$ 2017 NZ$ 2016 NZ$ Maintenance dredging Plant, equipment and fittings CONTENTS As at 30 June previous year As at 30 June previous year Cost 2,125,099 2,125,099 Cost 29,325,806 26,992,492 Accumulated depreciation (1,307,950) (317,951) Accumulated depreciation (19,322,732) (17,842,968) Net book value previous year 817,149 1,807,148 Net book value previous year 10,003,074 9,149,524

Carrying amount at 1 July 817,149 1,807,149 Carrying amount at 1 July 10,003,074 9,149,524 Additions 2,493,770 - Additions 2,445,117 2,600,175

Depreciation (1,055,799) (990,000) Disposals (3,881) (263,803) OUR STORY Carrying amount at 30 June 2,255,120 817,149 Reclassification (103,987) - Depreciation (1,862,036) (1,482,822) Port installations Carrying amount at 30 June 10,478,287 10,003,074 As at 30 June previous year Cost 46,799,511 44,887,059 Floating plant Accumulated depreciation (30,485,869) (28,893,192) As at 30 June previous year Net book value previous year 16,313,642 15,993,867 Cost 17,586,781 17,535,006 Accumulated depreciation (8,767,490) (7,850,406) OUR PLACE Carrying amount at 1 July 16,313,642 15,993,867 Net book value previous year 8,819,291 9,684,600 Additions 1,313,293 1,906,416 Disposals - (53,101) Carrying amount at 1 July 8,819,291 9,684,600 Reclassification 107,482 - Additions 142,615 51,774 Depreciation (1,663,570) (1,533,540) Depreciation (917,081) (917,083) Carrying amount at 30 June 16,070,847 16,313,642 Carrying amount at 30 June 8,044,825 8,819,291

Capital dredging OUR PEOPLE Bulk tanks As at 30 June previous year As at 30 June previous year

F inancial S tatements Cost 22,563,001 22,563,001 Cost 1,159,733 999,999 Accumulated depreciation (4,153,645) (3,702,385) Accumulated depreciation (324,306) (208,333) Net book value previous year 18,409,356 18,860,616 Net book value previous year 835,427 791,666

Carrying amount at 1 July 18,409,356 18,860,616 Carrying amount at 1 July 835,427 791,666

Depreciation (451,259) (451,260) FINANCIAL Additions 92,500 159,734 Carrying amount at 30 June 17,958,097 18,409,356 Depreciation (125,224) (115,973) Carrying amount at 30 June 802,703 835,427 Capital works in progress Carrying amount at 1 July 8,462,257 12,126,633 Additions 17,684,947 10,138,769 Transferred upon completion (8,982,229) (13,803,145) Carrying amount at 30 June 17,164,975 8,462,257

Total property, plant and equipment 177,971,860 167,591,160

48 PORT TARANAKI LIMITED ANNUAL REPORT 2017 49 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

Accumulated Carrying 8. INTANGIBLE ASSETS - Computer Software As at 30 June 2015 Cost Depreciation Amount

Land (Including revaluations) 87,803,125 - 87,803,125 2017 NZ$ 2016 NZ$ CONTENTS Buildings 32,562,949 (15,169,068) 17,393,881 As at 30 June previous year Maintenance dredging 4,618,869 (2,363,749) 2,255,120 Cost 4,299,131 5,386,765 Port installations 48,220,287 (32,149,440) 16,070,847 Accumulated amortisation (3,564,219) (4,610,584) Bulk tanks 1,252,233 (449,530) 802,703 Net book value previous year 734,912 776,181 Plant, equipment & fittings 31,663,055 (21,184,768) 10,478,287 Floating plant 17,729,396 (9,684,571) 8,044,825 Carrying amount at 1 July 734,912 776,181 Capital dredging 22,563,001 (4,604,904) 17,958,097 Additions 176,559 197,563 OUR STORY Capital works in progress 17,164,975 - 17,164,975 Amortisation (246,428) (238,832) Total plant, property and equipment 263,577,890 (85,606,030) 177,971,860 Carrying amount at 30 June 665,043 734,912

Revalutions Accumulated Carrying As at 30 June 2017 Cost Depreciation Amount Land was revalued at 30 June 2016 by Mr Ian Baker, a registered valuer with Telfer Young (Taranaki) Ltd, New Computer software 4,475,690 (3,810,647) 665,043 Plymouth. Telfer Young have been contracted by Port Taranaki as independent valuers. The revalued amount of land used in this report amounts to $87.8M using the Direct Sales Comparison Approach methodology.

Land assets have been valued on their highest and best use taking into account the existing zoning, potential for 9. TRADE AND OTHER PAYABLES OUR PLACE utilisation and localised port market. All land holdings are used or held for port operational requirements and as such are valued under the requirements of NZ IAS 16 using fair value (market value). 2017 NZ$ 2016 NZ$ a) Current liabilities The carrying amount of land had it been recognised under the cost model is as follows: Related parties payables and accruals - - 2017 NZ$ 2016 NZ$ Employee benefits 340,772 636,889 30,020,697 30,020,697 Interest payable - - Trade payables and accruals 3,797,105 3,981,464 Other disclosures Total trade and other payables 4,137,877 4,618,353 OUR PEOPLE (i) There are no material items of property, plant or equipment which are not in current use. Terms of credit are payment on the 20th of the month following invoices unless other terms are specified by (ii) There have not been impairment losses recognised in the current period (2016: $0). suppliers. The Company has financial risk management systems in place to ensure that all payables are paid within F inancial S tatements (iii) $629,626 (2016: $393,098) of borrowing costs were capitalised. the credit timeframe.

(iv) There are no restrictions in titles relating to property, plant and equipment or items pledged as security for liabilities. b) Non current liabilities Trade payables and accruals - -

4,137,877 4,618,353 FINANCIAL

50 PORT TARANAKI LIMITED ANNUAL REPORT 2017 51 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

vi) 2017: As at 1 December 2017 the Company terminated banking arrangements with Westpac Banking 10. PROVISIONS - Employee Benefits Corporation and commenced banking arrangements with ASB Bank Limited with security by way of a negative pledge.

2017 NZ$ 2016 NZ$ CONTENTS 2016: The sole security interest, fixed charge and agreement to mortgage was to Westpac Banking Corporation a) Current liabilities for a priority amount of $80 million. The security interest was in Port Taranaki’s Personal Property (present and Sick leave 60,000 60,000 after acquired) and the fixed charge and agreement to mortgage is granted over Other Property (present and Retiring allowance 146,000 157,000 future rights). Other Property is defined as any other land or assets not deemed Personal Property. Personal Property can be considered to be any property other than land. Annual leave 962,102 1,104,145 vii) The weighted average interest rate is based on the applicable fixed rates and floating rates as at balance date. Long service leave 59,408 88,959 The weighted average interest rate for the current liability in 2017 is 0.00% (2016: 0.00%) as this is solely Total current liabilities - provisions 1,227,510 1,410,104 interest payable. OUR STORY b) Non current liabilities 12. ISSUED CAPITAL Retiring allowance 586,000 643,000 2017 NZ$ 2016 NZ$ Long service leave 172,000 188,000 Balance 30 June 26,000,000 26,000,000 Total non current liabilities - provisions 758,000 831,000 The total number of shares authorised, issued and fully paid at 30 June 2017 was 52,000,000 (30 June 2016 was Total provisions 1,985,510 2,241,104 52,000,000). The shares have no par value. All shares rank equally in terms of voting rights, rights to fixed dividends and rights to share in any surplus on

The provision is affected by a number of estimates including the expected employment period of employees winding up of the Company. There is no right of redemption attached to these shares. OUR PLACE and the timing of employees utilising the benefits. Benefits are recalculated annually, retiring allowance and long service leave by an actuary, and all non current portions are discounted using the appropriate government bond rate matched to the year the provision is due as applicable at balance sheet date. All movements are recorded in 13. ASSET REVALUATION RESERVE operating expenses. The asset revaluation reserve arises from the revaluation of land. Where revalued land is sold, that portion of the asset revaluation reserve which relates to that asset and is effectively realised, is transferred directly to retained 11. BORROWINGS earnings. 2017 NZ$ 2016 NZ$ 2017 NZ$ 2016 NZ$ a) Current liabilities Balance 1 July 57,782,428 48,976,802 OUR PEOPLE Secured loans 14,094 30,862 Revaluation increments/(decrements) - 8,805,626 Weighted average interest rate 0.00% 0.00% Balance 30 June 57,782,428 57,782,428 F inancial S tatements

b) Non current liabilities 14. RETAINED EARNINGS Secured loans 41,800,000 35,200,000 2017 NZ$ 2016 NZ$ Plus deferred loan facility fee 15,822 (21,845) Balance 1 July 52,681,924 48,289,546 Total non current secured loans 41,815,822 35,178,155 FINANCIAL Weighted average interest rate 3.03% 3.18% Profit for the period 7,216,978 8,869,378

Other disclosures Dividends (Note 15) (4,924,700) (4,477,000) i) The non current loans are due within 4 years. Balance 30 June 54,974,202 52,681,924 ii) The carrying amount for current and non current loans and their fair values are disclosed in Note 16. iii) The carrying amount for current and non current loans is denominated in New Zealand dollars. iv) The secured loans are obtained under a $55 million (2016: $50 million) funding facility provided by ASB Bank Limited (2016: Westpac Banking Corporation). As at 30 June 2017 $13.2 million (2016: $14.8 million) was undrawn. The borrowings in the Statement of Financial Position include accrued interest. v) During the year there had not been any defaults or breaches of bank covenants.

52 PORT TARANAKI LIMITED ANNUAL REPORT 2017 53 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

15. DIVIDENDS PAID The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Derivative financial instruments - Cash flow hedge

2017 NZ$ 2015 NZ$ Interest rate swap CONTENTS Paid September 2,462,350 2,238,500 The nature of the risk is the variability of the hedged item resulting from the changes on BKBM interest rates Paid February 2,462,350 2,238,500 associated with on-going term borrowings.

Total dividends paid 4,924,700 4,477,000 Fair value is stated at the indicative market value obtained from the calculation agent.

All dividends were paid in cash and fully imputed. Effective commencement date 24 June 2013 Rate 3.86% Term 84 months 16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Expiry date 24 June 2020

Notional value $30,000,000 OUR STORY a) Capital risk management

The Company‘s policy is to maintain a stable and strong capital base, defined as total shareholders’ equity, so as 2017 NZ$ 2016 NZ$ to maintain investor and creditor confidence and to sustain the future business development of the Company and Cash flow hedge reserve safeguard its ability to remain a going concern. Balance 1 July (1,946,451) (505,785) The Company regularly monitors its capital requirements using various measures that consider debt facility financial Revaluation increments/(decrements) 690,995 (1,440,666) covenants. The key measures being interest cover and the debt/(debt + equity) ratio. Balance 30 June (1,255,456) (1,946,451) The Company has complied with its capital management policy during the reporting periods and is in full compliance with its debt facility financial covenants. Cash and cash equivalents, foreign currency balances, receivables and short term payables long term liabilities OUR PLACE and accruals:

The carrying value of these items is equivalent to the fair value. b) Categories and fair value of financial instruments

The estimated fair values of financial instruments are as follows: Interest bearing loans

The fair value of the current loans and term loans are estimated based upon the market prices available for similar 2017 Carrying 2017 Fair 2016 Carrying 2016 Fair debt securities obtained from the lender at balance sheet date. Amount Value Amount Value NZ$ NZ$ NZ$ NZ$ OUR PEOPLE Financial Assets c) Financial risk management objectives Loans and receivables The Treasury and Risk department of the Company provides treasury services to the Company, monitoring and F inancial S tatements Foreign currency bank balances 3,216,951 3,216,951 378,295 378,295 reviewing financial risk through internal management reporting. These risks include market risk (including currency Cash and cash equivalents 69,565 69,565 (35,057) (35,057) risk and fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk. Receivables 5,113,327 5,113,327 9,837,855 9,837,855 The Company seeks to minimise the effects of these risks by adhering to a treasury policy reviewed by the Derivative financial instruments (1,255,456) (1,255,456) (1,946,451) (1,946,451) Company’s Board of Directors. The treasury policy provides written guidelines on foreign exchange risk, interest Financial Liabilities rate risk and credit risk. Surplus funds are either applied against Company borrowings minimising surplus liquidity or

invested short term until required. FINANCIAL At amortised cost Payables and accruals current 4,137,877 4,137,877 4,618,353 4,618,353 The Company does not enter into, or trade financial instruments, including derivative financial instruments for speculative purposes. Payables and accruals non current - - - - Interest bearing loans 41,829,916 41,819,438 35,209,017 33,455,332

54 PORT TARANAKI LIMITED ANNUAL REPORT 2017 55 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

d) Market risk Weighted average Less than 1-3 3 months 1 -5 5+ The Company’s activities expose it to interest rate movement risk principally, and occasionally to foreign exchange effective 1 month months to 1 year years years Total CONTENTS risk when capital assets are purchased in foreign currency. Adherence to the Company’s treasury risk policy interest rate % NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ endeavours to minimise risk by: Trade and other payables 0.00 2,709,797 110,356 1,317,724 - - 4,137,877 i) Ensuring a minimum of 50% of the Company’s interest bearing debt is fixed term or fixed by way of Provisions 0.00 102,293 204,586 920,633 335,000 423,000 1,985,512 financial derivative. Variable interest rate instruments 3.032 - 316,836 950,507 43,174,980 - 44,442,323 At balance date the financial derivative exposure was limited to an interest swap listed in (b) above. Derivative financial instruments inflows/outflows 2.010 - 140,614 421,842 2,249,824 - 2,812,280 ii) Ensuring that any capital asset purchase of $250,000 or greater, sourced in foreign currency, is fully hedged within two days of unconditional purchase. 2,812,090 772,392 3,610,706 45,759,804 423,000 53,377,992

At balance date the foreign currency exposure was limited to foreign currency bank balances listed in (b) above. OUR STORY Weighted As at 30 June 2017, if interest rates at that date had been 100 basis points lower with all other variables held average Less than 1-3 3 months 1 -5 5+ effective 1 month months to 1 year years years Total constant, post-tax profit for the year would have been $385,000 (2016: $326,000) higher, arising as a result of lower interest rate % NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ interest expense on average variable rate borrowings. Trade and other payables 0.00 2,404,661 261,143 1,952,549 - - 4,618,353 Provisions 0.00 117,509 235,017 1,057,578 347,000 484,000 2,241,104 e) Credit risk management Variable interest rate instruments 3.185 - 280,288 840,864 36,416,373 - 37,537,525 Derivative financial instruments Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to inflows/outflows 2.400 - 112,800 338,400 1,804,800 - 2,256,000

the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining OUR PLACE sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The 2,522,170 889,248 4,189,391 38,568,173 484,000 46,652,982 Company’s exposure and the credit worthiness of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Interest risk tables - financial assets

In the normal course of its business the Company incurs credit risk from trade debtors and financial institutions. The The following table details the Company’s expected maturity for its non-derivative financial assets. The tables below extent of concentration of credit risk lies in trade debtors. Refer to Note 6. have been drawn up based on the undiscounted contractual assets including interest that will be earnt on those assets except where the Company anticipates that the cash flow will occur in a different period. As the amounts Except, as currently provided for, the Company does not expect the non performance in respect of any outstanding included in the table are contractual undiscounted cash flows these amounts will not reconcile to the amounts obligations at balance date. disclosed in the Statement of Financial Position. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Company’s maximum exposure to credit risk without taking account of any collateral obtained. Weighted OUR PEOPLE average Less than 1-3 3 months 1 -5 5+ No security is held on any of the above amounts. effective 1 month months to 1 year years years Total

F inancial S tatements interest rate % NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ Cash and cash equivalents variable 3,286,516 - - - - 3,286,516 f) Liquidity risk management Trade and other receivables 0.00 3,999,403 340,382 773,542 - - 5,113,327 Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate 7,285,919 340,382 773,542 - - 8,399,843 liquidity risk management framework for the management of the Company’s short, medium and long-term funding Weighted

and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, FINANCIAL banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and average Less than 1-3 3 months 1 -5 5+ by monitoring working capital turnover. Included in Note 11(iv) is a list of additional undrawn facilities that the effective 1 month months to 1 year years years Total interest rate % NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ Company has at its disposal to further reduce liquidity risk. Cash and cash equivalents variable 343,238 - - - - 343,238

Trade and other receivables 0.00 9,198,500 190,960 448,394 - - 9,837,855 Liquidity and interest risk tables - financial liabilities 9,541,738 190,960 448,394 - - 10,181,093 The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities. As the amounts included in the table are contractual undiscounted cash flows these amounts will not reconcile to the amounts disclosed in the Statement of Financial Position.

56 PORT TARANAKI LIMITED ANNUAL REPORT 2017 57 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

g) Fair value 2017 NZ$ 2016 NZ$ Increase/(Decrease) in liabilities:

Fair value hierarchy CONTENTS Provisions (255,594) (459,597) The Company’s assets and liabilities which are measured at fair value are categorised into one of three levels Trade and other payables 74,206 (2,872,942) as follows: Taxation payable (3,906,978) 92,098 Level one - the fair value is determined using unadjusted quoted prices from an active market for identical assets 615,545 (2,749,006) and liabilities. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker industry company, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. Plus/(Less) items classified as investment activities:

Level two - the fair value is derived from inputs other than quoted prices included in level one that are observable Movement in fixed asset creditors (662,103) 920,873

for the asset or liability, either directly (i.e. as prices) or indirectly (derived from prices). Financial instruments in this OUR STORY level include interest rate swaps and options and valuation of land. Net cash provided by operating activities 15,865,070 13,737,790 Level three - the fair value is derived from inputs that are not based on observable market data. The Company’s policy is to recognise transfers between fair value hierarchy levels as at the date of the event or 18. OPERATING LEASES change in circumstances that caused the transfer. There were no transfers between level one, two and three during the year (2016: nil). 2017 NZ$ 2016 NZ$ Valuation of level two a) Non Cancellable Operating Leases as Lessee Lease commitments due as follows: Fair value of level two derivatives is determined using the methodology described in Note 7 Revaluations OUR PLACE subheading and Note 16b. Within 1 year 56,478 44,382 Between 1-5 years 205,340 177,528

2017 NZ$ 2016 NZ$ Greater than 5 years 60,676 60,554 Items carried at fair value Total lease commitments as leasee 322,494 282,464 Interest rate swap (Note 16b) (1,255,456) (1,946,451) 51,312 49,707 Land valuation (Revaluations subheading Note 7) 87,803,125 87,803,125 Lease payments under operating leases recognised as an expense during the year.

17. RECONCILIATION OF PROFIT - for the period to Net Cash Flows from Operating Activities Operating lease payments represent rentals payable by the Company for the lease of land and buildings. OUR PEOPLE All operating lease contracts contain market review clauses in the event that the Company exercises its option to 2017 NZ$ 2016 NZ$ renew. The Company does not have an option to purchase any of the leased assets at the end of the lease periods.

F inancial S tatements Profit after taxation 7,216,978 8,869,378 2017 NZ$ 2016 NZ$ b) Non Cancellable Operating Leases as Lessor Plus/(Less) non-cash items: Future minimum lease payments under non cancellable leases are as follows: Depreciation, amortisation & impairment 7,370,236 6,973,323 Within 1 year 2,052,527 2,688,090 Decrease/(Increase) in deferred tax balances 1,323,142 (243,495) Between 1-5 years 4,963,783 5,075,864 FINANCIAL Net loss/(Profit) on disposal of property, plant and equipment 1,272 (33,283) Greater than 5 years 4,880,624 5,930,728 8,694,650 6,696,544 Total lease commitments as lessor 11,896,934 13,694,682

The Company leases a range of land and buildings to a number of customers. The majority of leases include rights Changes in net assets and liabilities of renewal for periods of up to seven years, with several land leases containing rights of renewal from 20 up to 50 years. There were no contingent rents recognised as income in the 2017 and 2016 years. (Increase)/Decrease in assets: Trade and other receivables 5,399,701 (1,003,961) Derivative financial instruments (690,995) 1,440,666 Inventories (4,795) 54,730

58 PORT TARANAKI LIMITED ANNUAL REPORT 2017 59 CONTENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 FOR THE YEAR ENDED 30 JUNE 2017

19. IMPUTATION CREDIT ACCOUNT 21. COMMITMENTS

2017 NZ$ 2016 NZ$ 2017 NZ$ 2016 NZ$ CONTENTS The imputation credits available for use in subsequent reporting periods are: 26,145,029 22,387,751 Estimated capital expenditure contracted for at balance date but not provided 6,957,835 6,991,182 for includes; Fire Water, Wharf Refurbishment Phase 2, Kinaki Tug, Chevron Tank Farm Projects. 20. RELATED PARTY TRANSACTIONS

The Company has a related party relationship with its parent, directors and executive officers. 22. EVENTS SUBSEQUENT TO BALANCE DATE

a) Transactions with parent There are no events subsequent to balance date.

2016: On the 18th of August 2016 the Company entered into a contract for Maintenance Dredging. Under this OUR STORY The Company was a 100% owned subsidiary of the Taranaki Regional Council (TRC) at all times during the year. contract the Company has guaranteed a value of dredging of $2.04 million per campaign (i.e. biannually). The contract commences October 2017, and the Company’s first campaign under this contract would be Feb/March Apart from dividends (see Note 15) the following transactions occurred between the Company and TRC during 2019. The Company would have 5 campaigns during the contract for a total guaranteed value of $10.2m. the year.

23. CONTINGENT LIABILITIES 2017 NZ$ 2016 NZ$ i) Sale of goods and services to parent 45,723 40,366 There are no contingent liabilities. ii) Purchase of goods and services from parent 53,804 65,847

2016: The Company is a participating employer in the National Provident Fund (NPF) DBP Contributors scheme OUR PLACE (“the Scheme”) which is a multi- employer defined benefit scheme. If the other participating employers ceased to b) Transactions with subsidiaries participate in the Scheme, the employer could be responsible for the entire deficit of the Scheme. Similarly, if a number of employers ceased to participate in the Scheme, the Company could be responsible for an increased 2017 and 2016: The Company had no subsidiaries. share of the deficit.

24. OTHER ANNUAL REPORT DISCLOSURES c) Transactions with key management personnel

i) The compensation of the executives, being the key management personnel of the Company is set out below: The shareholder has resolved not to require disclosure of the matters listed in section 211 (1), (e) and (g) of the Companies Act 1993.

Short term employee benefits 1,586,665 1,919,203 OUR PEOPLE Other long term benefits (1,000) (6,000) Termination benefits - 64,990 F inancial S tatements Post employment benefits 2,000 (3,000) Total transactions with key management personnel 1,587,665 1,975,193

ii) Sale of goods and services to key management - -

iii) Purchase of goods and services from key management 56,414 200,315 FINANCIAL

60 PORT TARANAKI LIMITED ANNUAL REPORT 2017 61 CONTENTS

INDEPENDENT AUDITOR’S REPORT could reasonably be expected to influence the disclosures, and whether the financial statements decisions of readers taken on the basis of these represent the underlying transactions and events in CONTENTS TO THE READERS OF PORT TARANAKI LIMITED’S FINANCIAL STATEMENTS FOR THE financial statements. a manner that achieves fair presentation.

YEAR ENDED 30 JUNE 2017 We did not evaluate the security and controls over the We communicate with the Board of Directors The Auditor-General is the auditor of Port Taranaki We have fulfilled our responsibilities in accordance with electronic publication of the financial statements. regarding, among other matters, the planned scope Limited (the company). The Auditor-General has the Auditor-General’s Auditing Standards. As part of an audit in accordance with the Auditor- and timing of the audit and significant audit findings, appointed me, Melissa Youngson, using the staff and including any significant deficiencies in internal control We believe that the audit evidence we have obtained General’s Auditing Standards, we exercise professional resources of Deloitte Limited, to carry out the audit of that we identify during our audit. is sufficient and appropriate to provide a basis for judgement and maintain professional scepticism the financial statements of the company on his behalf. our opinion. throughout the audit. Also: Our responsibilities arise from the Public Audit

Act 2001. OUR STORY Opinion Responsibilities of the Board of Directors for • We identify and assess the risks of material misstatement of the financial statements, whether We have audited the financial statements of the the financial statements Independence due to fraud or error, design and perform audit company on pages 34 to 61, that comprise the The Board of Directors is responsible on behalf of procedures responsive to those risks, and obtain We are independent of the company in accordance statement of financial position as at 30 June 2017, the the company for preparing financial statements that audit evidence that is sufficient and appropriate with the independence requirements of the Auditor- statement of profit or loss and other comprehensive are fairly presented and that comply with generally to provide a basis for our opinion. The risk of not General’s Auditing Standards, which incorporate the income, statement of changes in equity and statement accepted accounting practice in New Zealand. detecting a material misstatement resulting from of cash flows for the year ended on that date and independence requirements of Professional and Ethical fraud is higher than one resulting from error, as the notes to the financial statements that include The Board of Directors is responsible for such internal Standard 1 (Revised): Code of Ethics for Assurance fraud may involve collusion, forgery, intentional accounting policies and other explanatory information. control as it determines is necessary to enable it to Practitioners issued by the New Zealand Auditing and OUR PLACE prepare financial statements that are free from material omissions, misrepresentations, or the override of Assurance Standards Board. In our opinion, the financial statements of the misstatement, whether due to fraud or error. internal control. company: Other than the audit, we have no relationship with, or In preparing the financial statements, the Board of • We obtain an understanding of internal interests in, the company. • present fairly, in all material respects: Directors is responsible on behalf of the company for control relevant to the audit in order to design assessing the company’s ability to continue as a going audit procedures that are appropriate in the • its financial position as at 30 June 2017; and concern. The Board of Directors is also responsible circumstances, but not for the purpose of • its financial performance and cash flows for the for disclosing, as applicable, matters related to expressing an opinion on the effectiveness of the year then ended; and going concern and using the going concern basis of company’s internal control.

accounting, unless there is an intention to liquidate the OUR PEOPLE • comply with generally accepted accounting • We evaluate the appropriateness of accounting Melissa Youngson, Partner practice in New Zealand in accordance with New company or to cease operations, or there is no realistic policies used and the reasonableness of accounting For Deloitte Limited Zealand equivalents to International Financial alternative but to do so. estimates and related disclosures made by the Board On behalf of the Auditor-General F inancial S tatements Hamilton, New Zealand Reporting Standards. The Board of Directors’ responsibilities arise from the of Directors. Our audit was completed on 17 August 2017. This is the Port Companies Act 1988. • We conclude on the appropriateness of the use date at which our opinion is expressed. Responsibilities of the Auditor for the audit of of the going concern basis of accounting by the Board of Directors and, based on the audit The basis for our opinion is explained below. In the financial statements evidence obtained, whether a material uncertainty

addition, we outline the responsibilities of the FINANCIAL Our objectives are to obtain reasonable assurance exists related to events or conditions that may Board of Directors and our responsibilities relating about whether the financial statements, as a whole, are cast significant doubt on the company’s ability to to the financial statements, and we explain our free from material misstatement, whether due to fraud continue as a going concern. If we conclude that independence. or error, and to issue and auditor’s report that includes a material uncertainty exists, we are required to Basis of opinion our opinion. draw attention in our auditor’s report to the related disclosures in the financial statements or, if such We carried out our audit in accordance with Reasonable assurance is a high level of assurance, disclosures are inadequate, to modify our opinion. the Auditor-General’s Auditing Standards, which but it is not a guarantee that an audit carried out Our conclusions are based on the audit evidence incorporate the Professional and Ethical Standards and in accordance with the Auditor-General’s Auditing obtained up to the date of our auditor’s report. the International Standards on Auditing (New Zealand) Standards will always detect a material misstatement However, future events or conditions may cause the issued by the New Zealand Auditing and Assurance when it exists. Misstatements are differences or company to cease to continue as a going concern. Standards Board. Our responsibilities under those omissions of amounts or disclosures, and can arise standards are further described in the Responsibilities from fraud or error. Misstatements are considered • We evaluate the overall presentation, structure and of the auditor section of our report. material if, individually or in the aggregate, they content of the financial statements, including the

62 PORT TARANAKI LIMITED ANNUAL REPORT 2017 63 CONTENTS COMPARATIVE REVIEW DIRECTORY

2017 2016 2015 2014 2013 DIRECTORS

OPERATIONS John Auld, Chair

Peter Dryden CONTENTS Trade (millions of freight tonnes) Imports 0.69 0.81 0.88 0.86 0.75 Peter Horton Exports 4.39 4.34 4.73 4.65 3.82 Richard Krogh, Deputy Chair Total 5.08 5.15 5.61 5.51 4.57 Charlotte Littlewood David MacLeod Vessel arrivals (over 100GT) 431 522 776 899 679 Graeme Marshall Roger Taylor Total gross tonnage (GT)(millions) 5.12 5.59 6.47 7.49 6.55 OUR STORY EXECUTIVE LEADERSHIP TEAM Permanent full-time employees 112 111 116 122 121 Guy Roper, Chief Executive FINANCIAL ($millions) Allan Melhuish, CFO and Head of Commercial

Revenue 41.69 44.69 49.36 55.26 44.97 Delys Tansley, Head of Human Resources, Safety and Operations Neville Fox, Head of Marine Services

Total interest expense 1.19 1.37 1.39 1.94 1.46 Mark Webb, Infrastructure and Projects Programme Manager OUR PLACE

Earnings before interest, subvention payments AUDITORS and taxation (EBIT) 12.66 13.64 17.27 18.30 12.16 Deloitte Limited on behalf of the Auditor-General Taxation 4.26 3.43 4.61 4.63 3.24 Net profit after taxation 7.22 8.87 11.37 11.74 7.46 BANKERS

Dividends 4.92 4.48 4.07 3.70 2.95 ASB Banking Corporation

Capital expenditure and acquisitions 21.95 14.34 11.75 12.06 21.03 OUR PEOPLE SOLICITORS Equity 137.50 134.52 122.76 117.27 108.56 F inancial S tatements Govett Quilliam Interest bearing debt 41.83 35.21 30.00 32.02 36.71 Total tangible assets 186.99 179.29 162.68 160.51 152.27 CONTACT DETAILS

Earnings per share (¢) 13.88 17.06 21.86 22.59 14.35 Port Taranaki Centre

Ordinary dividends per share (¢) 9.47 8.61 7.83 7.12 5.67 2-8 Bayly Road FINANCIAL Net assets per share (¢) 264 259 236 226 209 PO Box 348 New Plymouth 4340 Equity (%) 73.98 74.90 75.10 72.25 70.61 New Zealand Return on equity (%) 5.31 6.89 9.26 10.02 6.87 Telephone: 64 6 751 0200 Return on assets (%) 3.93 5.16 6.99 7.31 4.90 Website: www.porttaranaki.co.nz

Operating cashflow 15.87 13.74 18.37 18.80 15.34 Email: [email protected] Interest cover (times covered by net profit after taxation) 3.96 5.02 6.57 5.81 4.94 Photographs - pipGuthrie Photographer, www.pipphoto.co.nz Content - West Quinn, Communications and Writing Design - Digital Fuel, www.digitalfuel.co.nz

64 PORT TARANAKI LIMITED ANNUALANNUAL REPORTREPORT 20162017 65