Arotahi ki ngā tukuhanga
Focused on delivery
Z ENERGY ANNUAL REPORT For the year ended 31 March 2021 transition to alow carbon future. by optimising our core business so we can To solve what matters for amoving world is: strategy Our We are tightly focused on:
Managing capital scale Monetising Holding market share costsReducing
deliver new customer offers. terminals to improve returns and share, optimise the use of our structural costs, hold our market in FY22 aswe continue to reduce We expect to increase earnings dividends Resumed FY21 schedule of ahead 6 months dividends paying to returned Z has establishing a new way of working through through way a new of working establishing and sheet our balance recapitalising of concerted crisis management, aperiod was half first the halves: different of markedly ayear been has It towe shareholders. have made commitments the against delivering and communities; and customers people, our of wellbeing and safety the things: two on squarely Covid-19 focused Zhas Through stronger, leaner, more resilient business. a we have built challenge, this of face the in but, business, our on impact areal had It’s to Z. and Zealand, to New challenge amomentous delivered Covid-19 in the second half of the year. of the half second in the margins affected discounting retail and prices oil rising as million), $235–$245 of (guidance of $238 million, movements and Fair Amortisation valueDepreciation, Taxation, Interest, Before Earnings We have delivered Replacement Cost customers. our for we haveand delivered strengthened our culture and our business resilience, our improved have collectively we year challenging very this Through our engagement service provider, Peakon. by measured globally, as organisations of percent top10 the below just to be we proud are and all-time an at high, is engagement Z’s staff ofyear this At end the industry changes. structural from financially toup benefit company the setting and business core the optimising costs, cutting on focused lockdown conditions. The second half has Focused ondelivery Chair andCEOreport: Arotahi kingātukuhanga Te pūrongo ate HēmanameTe Taiurungi: on four areas of continued improvement: of continued areas four on tightly focused Zremains performance, current of improving terms In future and flexible is more that alower-cost business have built we FY21 Over experience. customer the improving and customers our for offers introducing innovative, digital-enabled by revenue we have increased (CX)experience and digital capabilities customer our Through enhancing customer our toWe build have continued strengthen Z’s balance sheet. further will and debt down paying on to focus We continue will forecast. than dividend payments six months earlier we have resumed result financial this With carefully. capital manage we will time same At the offers. customer new deliver to improve and returns terminals of our use the optimise share, market our hold costs, structural to reduce we continue as FY22 in earnings to increase we expect Covid-19 no further Assuming lockdowns, margins. compressing further substantially, have increased prices oil competition has continued and crude retail intense challenging: were of FY21 quarter final the in conditions trading Additionally, volumes. Retail impacting with repeatedregional short lockdowns and Covid-19 disruptions by continued affected still are fuel) jet and marine (primarily volumes fuel Commercial and reduced fuel delivery costs. delivery costs. fuel reduced and example, through marketing suspended of Covid-19 —for aresult as million $14 one and million, by $49 costs recurring annually structural, We reduced our strategy. or capabilities our operations, of our integrity the expenditure without compromising base operating to our changes structural and strategic we made year the Over
Reducing costs Reducing Managing capital Monetising scale Holding market share Reducing costs ‑ focused strategy. strategy. focused
‑ focused. focused. ‑ off costs of of costs off
Z ENERGY Pg 1 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 2 Pg at the Port of Tauranga. Port the at arrangements to industry exit intention gave of its notice Zalso March, In and competitors. distributors customers, including participant, to any industry fuel offering and arrangement industry of an out terminal Nelson its taking by approach this piloted successfully supply to competitors. Z has already fuel bulk for gate price’ a ‘terminal to offer operators terminal fuel bulk requires which Act Fuel Industry the passed Parliament 2020, August In value. more Zto for realise opportunities may provide industry fuel Zealand’s New in occurring changes of significant A number efficiency. and resulting scale its for rewarded appropriately to is be objective chain Z’s supply climate change solution. of the apart to be commitment clear the and programme, loyalty a refreshed offers, customer enabled of digitally stations, an increasingly dynamic set refuelling retail and of commercial network asuperior pricing, competitive Z has a strong customer proposition: share. market fuel its in decline the flattened has and markets all in volume for competed Zhas year the Over markets. core our in vigorously compete and scale of our economies the on build and We country. the preserve will across pricing competitive and offers customer toitself deliver convenience,dynamic Zbacks operation, aleaner,With focused to shareholders. returns sustain will that business resilient acompetitive, to ensure scale our leverage and business core our as we opportunities optimisereduction cost on to focus continue Zwill FY21. from reductions on building reductions, cost ongoing structural, in $21 million afurther deliver we will FY22 In CHAIR ANDCHIEFEXECUTIVE’SREVIEW Monetisingscale Holdingmarket share 18 over an million by $330 reduced debt ofyear, this see will November which in of debt million $150 down to paying committed Zis debt. bank pay down to proceeds raise equity the Z used for their strong support. May/June 2020. investors We our thank in announced raise capital equity $347 million awell-supported following sheet We balance have astrong and reliable dividends to shareholders. Z is committed to supporting sustainable underway, already initiatives structural and operational the through From FY22, earnings. FY21 of our respect in to shareholders share per of 14 cents adividend to declare able is and provisions these from release early the why is that Zrenegotiated and investors equity our for had this that aware effect of the We acutely are 1H22. payments to shareholders until after dividend to pause agreed providers, debt and partners banking our with agreement financing of the apart as and, FY20 for dividend final Covid-19, its Zcut of to uncertainty the response In because of long because underperformed have historically which assets from returns commercial fair to deliver to begin network terminal fuel national its of scale and efficiency the year. over next the Zexpects country the across gate pricing terminal introduce will and country the in assets storage of fuel network largest the Z has New Zealand’s economic interests. economic New Zealand’s management that better serves terminal fuel to its approach commercial independent, drive amore Zwill others. of assets the on to rely companies discouraged investment and encouraged These industry arrangements have industry arrangements. Managingcapital ‑ month period. period. month ‑ standing standing for ensuring Z is well Zis ensuring for accountable be will Julian role this In Manager, Transition. General as role new to a Risk and Manager, Strategy General the from moved has Hughes Julian team. Executive to its changes announced company the context, changing to arapidly to respond roles right the in people right the Z has of ensuring part as 2021, February In well Zis capabilities and network assets, our in investments previous our Through change. structural of significant a period through going is industry fuels liquid The Z’s changingcontext commercial basis. a on priced to be fuels enable and to supply wants it fuels the Z to choose enable will It expenses. operating and of earnings volatility the reduce and margins to refining remove Z’s exposure will terminal import to afuel Shifting commercial basis. a on outcome this delivering NZ quickly in Refining Z supports of crude oil. refiner asub-scale than rather terminal import afuel NZ’s as is future Refining that clear it made has This review NZ’s operations. of Refining review strategic the supported Zhas FY21, Over supply chain Exiting thecrudeoil management roles. senior in 11 years after 2020 December in Anthony of Jane departure the following Officer, Customer Chief as Ulgen Figen Zappointed 2021, 1 February on to above the changes, addition In 2021. April on 1 effect took changes These of General Manager, Commercial. into position the moved has Law Nicola strategy. longer-term on business focus a reflecting Risk, and Manager, Strategy Commercial, to the position of General the position of General Manager, from moved has Williams Nicolas an import-only supply chain. to transition the supporting and chain developing a reliable biofuels supply through example for industry, changing ‑ positioned to lead these changes. changes. these to lead positioned ‑ positioned in a in positioned field across all market participants. market all across field afair, playing and ensure competitive supply of fuel security and resilience improve the may It also million. $150 working capital release of approximately aone-off generate will terminal import to afuel moving reached, agreements and completed to be needs work While around the impacts of climate change. of climate impacts the around companies of other anumber Z and against by taken individual an action legal private ongoing is there of publication, time the at and, felt to be continue climate of a warming effects the emergency, aclimate declared has The Government We’re surprised. not Z’s stakeholders. for issue material ahighly as emerged Over climate FY21, change has climate change on toContinuing lead operate them where required. way the we to change exitor look and of Z operation parts non-core examine closely we will months 12 next the Over NZ. by Refining made choices operational Zvia on imposed was this although model, import-only bitumen to moved a Zalso period the Over profitably. and safely business the core running on focus the from detracted return and inadequate generated Harbour. business The Auckland in Awanuia barge oil fuel marine of the charter its Zended year last the Over risk. much provide too or returns sufficient generate not do that operations exit we will and we to want compete, where choosing in disciplined to be We continue will Discipline inoperations toability deliver. confidence with future the We are facing in our
the way towards a low carbon future. future. waythe carbon towards alow to lead helping and to shareholders cash returning debt, down paying business, balance between strengthening our right the to strive to find Z continues revenue streams. alternative accessing as well as economy our power increasingly will that energy carbon low clean, the towards providing way we moving are another This is so. doing for rewarded be Zand from electricity their to buy customers our enabling Z Electric, we launched March, In products. of biofuel arange distribute and import as well as biodiesel sustainable of manufacture domestic the to lead able we may be plant this Through Auckland. Te Wiri, in plant biodiesel Kora Hou hibernated currently its from value to realise well-positioned to be Z expects to favourable conditions, Subject the industry. across policy mandate a for strongly advocating been Zhas and globally common are Biofuel mandates internal combustion engine vehicles. existing in use for fuels emissions low for demand mass to create expected is this When implemented, mandate. sale abiofuels announced Government the late January, In modelling. scenario own with Z’s aligned pathway closely is proposed the in scenario core the that note and work this We welcomed commitments. change climate 2050 and 2030 country’s the pathway to meeting draft first New Zealand’s on consulted and published The Climate Change Commission has Thanks again for your support. to deliver. ability our in confidence with future the we face and required was change where change we have But made ahead. times challenging be will There starting. just is recovery the and everyone for year challenging ahugely been has FY21 economy. global the and industry our in changes to structural to respond optimised is business core our ensuring shareholders and customers through for value creating on focused remain and business our in resilience to build We continue Covid-19-like will events. any future through to manage we well-positioned are have ensured years three over past the actions Our over FY21. and support commitment their for people own our and customers investors, We our thank Conclusion Abby and Mike and Abby
Z ENERGY Pg 3 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 4 Pg 18 16 15 14 10 9 8 6 5 4 1 Contents most material to them. issues the determine to accurately order in stakeholders multiple with interaction of level ahigh requires framework This (ESG) commitments. governance and social environmental, our against report and strategy approach risk, robust disclosure around how we manage to commitment and of transparency level ahigh requires The
A snapshot of our supply chain supply our of A snapshot terminal network Commercialising Z’s markets core on Focusing chain Transforming supply our that matter issues the on Focusing shareholders for value we create How values Our strategy and model business Our numbers Our we report How report CEO and Chair 47 46 44 42 38 27 26 24 22 20 disclosures. recommended Board’s Stability Financial of the all with compliant be we will report, FY23 of Z’s publication the With reporting. of TCFD year Z’s second is This them. seek to manage we how and strategy in reflected climate our disclose to progressively us requires to TCFD reporting Z’s commitment security. financial global to protect recommendations makes that organisation international independent an is Board Stability (TCFD). Financial The Disclosures Climate on Force Task Board’s Stability Financial the and option Core (GRI) Standards: Initiative Reporting Global the to use choose we also framework, reporting
Community
The ZBoard The Corporate Governance Statement Safety and wellbeing and Safety Diversity and inclusion Environmental sustainability Environmental for to stand we choose What retail experience A quicker, competitive biodiesel plant biodiesel Te Z’s study: Case Kora Hou Commercial customers Consistent delivery for ‑ related risks, how they are how risks, related ‑ related Financial Financial related 132 129 127 122 91 84 51 investors, communities and planet. and communities investors, customers, our into —for future the well value to deliver we intend how on report our also is It 2021. of March end to year the the on Z’s report is This matter most. that issues material the on focused tightly to be and concise and clear be to report this for need of the mindful we are against, to report detail more is there mean frameworks these While future. carbon a low to transition the support we will how and implemented to be continue will strategy for, our Zstands how what understand to want clearly increasingly stakeholders and customers investors, our and reporting of integrated year fifth our strategy. to tightly linked is our is This commitments Z’s ESG against reporting to transparent commitment The Guidance Note. andCode Environmental, and Social Governance Governance Corporate NZX the of requirements the exceeds It toShareholders. Report Annual 2021 Limited’s ZEnergy constitutes document This
Company directory Index GRI Index TCFD report Auditors’ Financial Statements Additional disclosures Our Executive Team Executive Our Ngā raraunga expenditure. capital net than rather $102m, of expenditure capital total reported —we report FY20 our in reported expenditure capital the to adjustment an note Please $71m FY20: Net capital expenditure 16.5c FY20: share per Total dividend $44m FY20: Replacement cost net profit after tax FY20: -$88m Historic net profit after tax FY20 comparison Annual results 14 $366m FY20: Replacement cost EBITDAF $238m $3m $57 FY21 Our numbers $42m YEAR AT AGLANCE c m report — the FY20 volume was reported as 3,837 million litres. million 3,837 as reported was volume FY20 —the report FY20 our in volume fuel the to adjustment an note Please FY20: -49.71% FY20: Total shareholder return 1.1cpl FY20: Replacement cost net profit after tax per litre FY20: 56.6m Total transactions on Z-branded retail sites FY20: 11c FY20: Replacement cost net profit after tax 51.5 0.1 annual greenhouse gas emissions on page 30 30 page on emissions gas greenhouse annual our of arestatement about notes our to refer Please tonnes 11.6m FY20: (tCO2e)equivalent dioxide — carbon footprint Total carbon 9.4 litres million 3,968 FY20: commercial) and (retail volume Total fuel 3,086 -18.4% 1 c cpl tonnes million transactions million
litres million
per share
+53 FY20: +38 FY20: Retail net promoter score +9 FY20: Business net promoter score + +36 FY20: score promoter net Employee + 2,121 37,500 100% FY20: rate complete action Wellbeing and Safety 99% FY20: 2,451 FY20: network members Retail and contractors employees, direct Z’s FY20: 40,000 tonnes CO2-e tonnes 40,000 FY20: Carbon emissions offset 25 33 CO2-e tonnes
Z ENERGY Pg 5 ANNUAL REPORT 2021 Z Energy Limited and Subsidiaries Year end report 31 March 2021 ANNUAL REPORT 2021 Z ENERGY Pg 6 Tō tātou anga pakihi me te rautaki
Our business model and strategy
While traditional annual reports focus Z’s financial recovery from the impacts Z’s business is built around genuine largely on the past, Integrated Reporting of Covid-19 has been, while not yet diversity across every area of our team.
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 8 Pg Our values Ō tātou uara most challenging year in our history. our in year challenging most the during company committed engaged, ahighly build us they have helped simple, they remarkably are and values, have wecompany. three only While of our foundations the are Z’s values last year. over than the important more been have never values Our times. uncertain during clarity and direction provide Z can at of being toapart up as sign people all that values defined clearly Having we make. decisions the and together way work the we behave, to guide culture values-based astrong, on value high avery always placed Z has Year endreport 31March 2021 Z Energy Limited andSubsidiaries our communities. our communities. and customers our people, our with partnerships trusted we build Side by side develop. to grow and ourselves challenging as well as up other each —holding together We’re better deliverstogether unlimited potential growing and learning We believe Tū kotahi |Side by side new possibilities together. create we will so, doing In same. the do to others encourage and to us important what’s around courage with up We speak and dialogue participation by active fuelled are outcomes extraordinary We believe up |Speak Tū māia our planet. and economy our communities, our for good for aforce to be relentlessly We work innovative passionate. and bold, by being quo status the We challenge matters. really it where We distinctive are world abetter and business abetter build weWe can believe Tū kaha |Stand out of it. Shareholders should expect Zto… expect should Shareholders of it. ahead future long-term astrong, Z has scenarios. of future arange under we advantaged are ensure and future, our for options generate to returns shareholders, we deliver as time same the at discipline with sheet balance and capital our We manage will operate. we and own infrastructure essential the and strength network scale, our for returns commercial fair we generate We ensure will business. fuels reliable asafe, operating and business core our on by focusing shareholders for We value create will returns for shareholders. reliable strong, delivering on focused Z is and disruptions. Covid-19 ever impacts than now, post relevant more is ofstrategy this essence the fact, In unchanged. are it within commitments the and focus its but ago, years by Ztwo set was term long the over value we create how on Z’s strategy value. we how create demonstrate to us requires and focused future is it that is Reporting Integrated embrace to why we choose reasons the of One for shareholders How we create value kaiwhakangao Kia puta hehuakingā • • • to maximiseshareholder value capitalAllocate withdiscipline • • • customer loyalty that generates long-term Pursue a differentiated strategy • • • position Optimise ourmarket-leading and experimentation and experimentation non-organic investments investments non-organic to fund debt to leverage capacity the with sheet balance astrong Maintain growth to fund assets productive least the by selling billion to $2 business core our in employed capital Limit growth earnings with line in dividend asustainable deliver to capital and flows cash Manage human through risk investment lower to time and market Reduce drive that loyalty experiences Deliver distinctive customer digitisation and brand productivity,experience, innovation, customer in Z’s capabilities on Focus long by disrupted slowly be will that innovate amarket in and to adapt us allow that options provides Z’s scale to adjacent markets of extending capable brands trusted and recognised most Zealand’s of New one Z is reach and scale through advantage competitive provides infrastructure chain supply Z’s unrivalled ‑ term trends term trends ‑ centred design, innovation innovation design, centred • • • to future generations committed heritage andbeing New Zealand by our recognising inAotearoa good Do • • • values company ‑based and Remain apeople- to them. matters what on we operate in which communities the support Actively Customer Experience and Inclusion, and Diversity Wellbeing, and like Safety areas in especially we have record, atrack where leadership thought Provide future carbon to alower transition the by supporting can companies few that other a scale at future to asustainable Contribute future uncertain an for talent individual and capabilities organisational Develop engagement and customer satisfaction of employee levels high Maintain Kiwi company’ ‘a to world-class be ambition our and world’ amoving for matters what solve ‘to purpose to our Committed
Z ENERGY Pg 9 ANNUAL REPORT 2021 01 02 03
Our material topics Pg 11 Z ENERGY ANNUAL REPORT 2021 REPORT ANNUAL
What matters The things that really matter to Kiwi In response to Covid-19, Z elected to Summary of material topics discussed Arotahi ki have shifted abruptly over FY21. raise more capital to strengthen its in stakeholder engagement, grouped ngā take In reading the graph on the next page, balance sheet during an uncertain by value outcome areas it should be noted that, in such a rapidly time. As a result of securing the matua shifting context, what was material in necessary debt waivers to recapitalise, FY21 may again move quickly in the Z had to temporarily suspend dividend Competition & Market Share coming year. Regardless, this report payments until after 1H22. Due to Safety & Wellbeing
directly addresses the most material Z’s better-than-expected recovery Material Focusing on of stakeholders’ issues. from Covid-19, we have been able to renegotiate these debt waivers and are the issues Over the last year Kiwi have responded Cyber Security Organisational able to pay a dividend of 14 cents per & Data Privacy Resilience with concern to the unprecedented share to shareholders for FY21. Over the Product Quality Environmental that matter Covid-19 pandemic, approximately Security of Supply period, Z has strengthened its business, Sustainability $50 billion in support and stimulus cut costs, and optimised the operation Climate Change has been injected into the New Zealand of its core business. At the same time, economy, and our borders have been 10 Z has also continued to lead political Resilient Market Transparency Responsible Customer effectively closed for a full year. Economic and business advocacy around New Communities & Fairness Consumption Experience Sustainability & Production RNZ Strategic Review Concern for the safety and wellbeing Zealand’s climate change strategy and of each other and our communities has how to decarbonise the economy. never been so important for so many Governance Strategy Assurance Integrated Reporting requires us to & Stewardship people. While Covid-19 continues to rage Organisational clearly understand the most material Capability around the world, concern for safety matters for our stakeholders and to then Brand Values and wellbeing has clearly been the most address them in this report. To ensure we Capital Strategy material issue for our stakeholders. Stakeholders to Importance do understand these matters, Z engages This is linked closely with the resilience consistently and frequently with a wide Future Fuels of our organisation. range of stakeholders. We ask them to Diversity & Inclusion Climate change is increasingly important tell us what matters, and we deliberately for people. Over FY21, the Government capture this feedback in the following declared a Climate Emergency and materiality table. announced significant policy changes Wholesale Asset Profitability Z can break its stakeholder universe to mandate biofuels across the transport down into the following five broad fuel industry. The Climate Change groups, although the most material Commission published its first draft issues are becoming increasingly carbon budget, highlighting the change
connected and shared across Important that needs to be made across the multiple stakeholders: economy if New Zealand is to meet its Important Importance to Z Material climate change commitments. Our customers and Key The New Zealand transport fuel industry communities Our people is now undergoing a phase of rapid Communities became increasingly Our Our Our Our Our place assets finances capabilities and culture environment in New Zealand transformation, and legislation has been important over FY21 as, for relatively long passed introducing terminal gate pricing periods of time, people were unable to from bulk fuel storage terminals; work leave them. free fuel via Sharetank, to the Student Z is proud of the way we operated as As a result of the inherent uncertainty is underway to potentially exit crude oil The role of Z’s retail network in Volunteer Army Grocery Service to help an essential community service, safely Covid-19 represented for our refining in New Zealand and transform particular became much more them deliver essential supplies to the and reliably serving our customers and business and the economy, Z adopted Refining NZ into a fuel import terminal. important for neighbourhoods and doors of the elderly, vulnerable or those communities, over the most challenging a precautionary approach and With the scale of this change comes communities as a safe, convenient way living alone. periods of 2020. strengthened its balance sheet over some stakeholder uncertainty around to buy food and household supplies FY21, raising an additional $347 million security of fuel supply under a new We learned a lot through the Covid-19 Investors without having to confront a socially from existing and new investors. operating model. lockdowns around the changing needs distanced supermarket. Z is grateful for the support from its of our customers — particularly their A condition of raising this additional At the same time, Z continues to investors during FY21 and continues to Over the period of the national lockdown need for speed. Harnessing our previous capital was that Z was not able to implement a strategy to ensure it is engage closely with investors on the Z provided $337,000 in free fuel to investments in digital technology and pay dividends until its 1H22 result. optimising the operation of its fuel company’s strategy, short-term business our partners at St John Ambulance customer experience (CX) capabilities, Z successfully renegotiated with our terminals and monetising their scale, focus and performance. and $44,000 in free fuel to Wellington we’ve been actively developing new banks and debt providers in order to pay including by progressively operating Free Ambulance to support their customer offers that bring the two a full year dividend of 14 cents per share them independently outside of frontline work in protecting community together, for example our ‘Pay by Plate’ for FY21. long‑standing industry agreements. safety and wellbeing. We also provided technology (see page 24).
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 13 Pg Over the year, Z regularlyOver fronted the year, up to discuss these issues and a wide range of others with media. Z values its relationships with media as reaching of a way the broadest possible rangestakeholders of with the issues that matter it. to the earliest From of the companydays being formed, Z’s position has been speak to with wherever honestly and freely media it can — this position continues. In an industry that has historically been insular and closed, discussing theissues that others are not prepared canto at times be a lonely position, but this approach reflects values Z’s and its accountability its to customers and stakeholders. The following section of this report steps sequentially through the Z supply highest discussing issues of chain materiality. stakeholder Through its Chief Executive, Z is helping around conversation national a lead the role businesses of in decarbonising and supporting New Zealand reaching its 2030 Paris Accord emissions reduction targets. This role requires active advocacy at Government level, a strong presence discussing climate-related issues through themedia and a direct role in supporting theaspirations and commitments of Kiwi businesses. During lockdown the in Covid-19 FY21, Z also supported its small business terms payment extended with customers and credit options. Z published a range materialsof support to small businesses support, shared accessing government our experience on technology options and published videos with our thoughts on protecting wellbeing and leading through a crisis at: https://z.co.nz/ keeping-business-on-the-move/z- business-Covid-19-resources The media FY21 required leadership and effective economy the across from communication on a very wide range issues of across a wide range stakeholders. of Just some these of issues include: the crude refining of economic challenges oil in New Zealand, the passing of legislation change to elements the of fuel industry, ensuring secure supplies fuelof and convenience products to customers under crisis conditions and continuing advocate to publicly for climate-related solutions. cycles; available; Measuring greenhouse our gas footprint, having the data independently verified a third by party information the making and publicly grounded targets Adopting deliver will sciencein that emissions reductions substantial contribute organisations so our Newto Zealand being carbon neutral 2050. by These targets be considered will current in planning Assessing our climate change risks disclosing publicly and them; supporting people our Proactively reduceto their emissions; and supporting suppliers our Proactively emissions. reduce their to As signatories the Climate to Leaders climate on acting are Coalition, we createchange a future to that now, low-emissions,is our for positive and economy, businesses the and New all for inclusive Zealanders. are committedWe the Paris to Agreement target keep warming to below 2 degrees and further to pursue temperature the efforts limit to increase 1.5 to degrees. By being a signatory the Coalition, to actively: are organisations our • • • • • We’ve taken a number of important steps to cut costs, costs, cut to steps important of number a taken We’ve and operations our streamline capital, working up free focus on efficiency. The business sector Z — indirectly continues — play to a leadership role in representing and advocating for the growing number of concerned businesses Zealand New with climate change and committed to taking action. Z Chief Executive Bennetts Mike is the Zealand New the of Convenor founding Climate Leaders Coalition. Comprising more than 100 New of Zealand’s leading businesses, in 2019 the signatories committed the following to statement: Z also engaged with Government around areas policy of focus, particularly the need for policy support enable to liquid biofuels be to widely used in New Zealand and around the shape the of Scheme.Emissions Z produced Trading a Briefing the Incoming to Energy Minister in December 2020 outlining its business operations, its policy priorities and climate-related commitments and published it for all stakeholders read to https://z.co.nz/about-z/news/general- at: news/briefing-to-the-incoming-minister- of-energy-and-resources/ Z has also responded the Climate to Change Commission’s first draft carbon budget for New Zealand and our be can consultation the to submission https://z.co.nz/about-z/news/ at: viewed general-news/z-energys-submission-to- the-climate-change-commission/ As the owner the of largestbulk fuel storage network in New Zealand, Z also the and Government with engaged Ministry Business, of Innovation and Employment (MBIE) in support the of passing the of Fuel Industry Act, which introduces terminal pricing gate from supports and terminals storage fuel bulk competition. supply wholesale fuel more MBIE kept and MinistersWe have up with date ourto leadership in rapidly from recommendations the implementing the Commerce Commission’s 2019Market Study well before we were required to do so. As the fuel industry embarks on a new phase transformation, of particularly around the potential importing exit of and refining crude oil, Z continues to stakeholders government with engage about these changes and their possible implications for New Zealand. As evidenced in our Briefing the to Incoming Z has also Minister, continued engageto regularly with Government in support its of climate change and emissions reduction objectives, including sustainable papers on research providing aviation fuel and hydrogen at: https://z. co.nz/assets/Uploads/Submission-to- ICCC-on-Reducing-GHG-Emissions- through-Sustainable-Aviation-Fuel-SAF2. https://z.co.nz/assets/Uploads/Z- and pdf House-View-Hydrogen2.pdf Board and Workforce Diversity with local market best practice stakeholders key of understanding An interests their and Plans align to their businesses with the global goal net of GHG zero emissions by 2050. While clearly focused on profitability, profitability, focused on clearly While capital management and dividends, Z’s investors are also increasingly focused on climate change and where choosethey invest. to For example, Blackrock, the world’s largest investment fund with US$8.7 trillion in assets of end the at management under December 2020, is asking three things from the companies it invests in for 2021: https://www.blackrock.com/corporate/ literature/publication/our-2021- stewardship-expectations.pdf • • • increasingly is approach This institutional across representative investors and inthis context approach Z’s sustainabilityto and ESG is now highly strategic our to company and our future. This is fifth Z’s year integrated of reporting and remain we committed best-practice to ESG-related reporting as the most effective demonstrating of way how think about we climate change, how it might impact our business, what are committed we and to theprogress are making we a towards emissions economy. lower Central Government Central Z has engaged comprehensively with Government FY21 over on multiple issues, but primarily in supporting its response As the supplier Covid-19. to of almost half New of Zealand’s transport fuels and the operator strategic of energy infrastructure, Z was immediately designated as an essential service. Security fuel of supply — particularly to important been has services — emergency in managing a pandemic and then in beginning a lengthy economic rebuild with a focus on infrastructure investment. Z engaged formally with Government working groups contribute to ensuring to a smooth and uninterrupted liquid fuel supply chain — from fuel imports to services and emergency supplying commercial and retail customers — to support the New Zealand economy and protect the wellbeing people. of
Reducing costs Reducing share market Holding scaleMonetising capital Managing
WHAT MATTERS WHAT FY21 was an extraordinary yet year, Z still managed declare to dividend a shareholders.to are acutely We aware that a resilient balance sheet and capital strategy that supports the company through market disruption any come, to sustainable and reliable providing while dividends, is a keen area focus of for our investors. remain We committed to returns reliable sustainable, generating to our shareholders and ensuring a strong, flexible balance sheet face to opportunities and challenges the both of the next decade. In this year’s half year result in November 2020, Z clearly outlined its four areasfocus of the improve to business investors. to that results At the to committed Z announcement, following four outcomes which also form the theme report: of this No one part the of New Zealand community or economy was spared the uncertainty the last over year, Covid-19 of including our investors. In response to theuncertainty, Z overhauled its market volume fuel weekly disclosing reporting, sales data, for which the company was stakeholders. and investors by applauded Over the year we’ve taken a number importantof steps cut to costs, free up working capital, streamline our operations and focus on efficiency with the goal rapidly of resuming a solid, reliable dividend flow our to investors support. their for them rewarding and
Z ENERGY Pg 12 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 15 Pg Z now imports bitumen directly supply to itsto commercial customers, rather than again selling a by-product the of refining process. These changes a simpler, make with chain focused supply more reduced earnings volatility and stronger commercial drivers. As New Zealand embarkson a significant programme of infrastructure investment as a part of ‘BuildtheCovid-19 Back Better’ economic recovery plan, bitumen remains a very important product. continue We to actively support our customers with their bitumen needs — the only thing that is changing for customers is the source of manufacture. Investors should expect continue Z to review allto non-core elements its of operations on an ongoing basis as part itsof commitment an optimised to core business, a simplified supply chain, efficient useof capital and cost reductions. . was modest and it has been a unique element and its crew has made , off Tauranga, a preventing , off only supply bitumen. of ‑ As partAs of Z’s commitment to non-core business, core its optimising elements of our business will remain under review. coreZ’s business is the management of its supply chain, the safe and efficient operation its of terminal, truck stop assets, service the station retail and delivery fuel of commercial to customers and fuel and convenience products to retail customers. Over the period, Z exited one non-core part its of operation — the delivery of marine fuel vessels oil to in Auckland Harbour via a barge, the Awanuia The Awanuia business Z’s of since the company was formed a decade over ago. However, due changesto at Refining NZ, the production marine of fuel oil has become a discretionary activity. Within the overall business the earnings contribution from the Awanuia represented a level operational of risk requiredthat intensive management. The Awanuia an important contribution maritime to operations in New Zealand. Not only has it safely and conveniently refuelled cruise and cargo vessels for years, many but in 2011 it played a critical role in removing marine fuel oil from the grounded vessel, the MV Rena environmental catastrophe. bigger much Over the last year an Z moved to import The capability built have in supply we chain management gives Z valuable choices meet in how to customers’ demand. bitumen Te arotahi ki ngā ki arotahi Te matua mākete on Focusing core markets
Reducing costs effectively and a on commercial ‑
Our finances basis, but with due care for its assets and respect for its people — a number whomof served have the company for years.many As refining capacity in New Zealand has reduced 25 percent by the over last 12 months demand due Covid-19 to disruptions, there are a range of commercial negotiations that need to be completed between the Refinery and its customers. While Z will support Refining NZ in the work that needs beto done, it will also bring a strong commercial perspective ensuring to this period change of is managed as efficiently and effectively as possible on behalf our of customers and investors. As both a shareholder and a customer Refiningof NZ, Z supports the review process that Refining has NZ run to reach this point and will now push hard ensureto the changes that are so clearly needed are made safely and maximise customersvalue to and the country. Z supports the principle converting of Refining an import to NZ terminal cost It may seem counter-intuitive but seemIt may counter-intuitive moving an import-only to fuel supply will strengthen and deepen New Zealand’s security supply. of This has understandably been a change as stakeholders for concern at Refining NZ has become inevitable. Under an import model, Z will be in the international fuel markets much more frequently and time multiple at any vessels for different companies will be heading different to ports in ZealandNew with a range transport of fuels. It will be simpler and more convenient divert to ships different to partstheof country and easier dial to up a new shipment at short notice if required. New Zealand’s fuel will come likely from our backyard in the Asia-Pacific region rather than crude oil from the Middle East which can one take month to reach New Zealand. New Zealand will end up with a much efficient,more reliable and flexible fuel supply chain without the greater environmental risks importing of crude oil. There is the potential remove to unnecessary cost and associated carbon emissions from the industry through moving an import to terminal with requirements. energy low relatively be want to clearWe that none this of commentary a criticism way is in any of Refining or its NZ people, who are highly professionals. committed and skilled Refining has NZ invested steadily in its equipment and has run a very safe operation for years. many It has simply reached a point in time where it can no internationally. compete longer lies now in in now lies Part commitment Z’s of reducing to costs lies in ensuring Refining is converted NZ a fuelinto import terminal on commercial terms. Doing so will a major remove source earnings of volatility for Z and enable the company deliver to much more consistent and reliable earnings. It will level an uneven playing field and help deliver competitive prices and security fuel of supply for customers. It will also simplify supply Z’s chain, removing complexity and risk from operations,Z’s while at the same time reducing the amount capital of employed in the business. The refining process produces a range fuels,of if some even are not wanted or needed. Moving an import to terminal will allow sell Z to only the fuels its customers want, rather than having exportto by-products the of refining process — for example, marine fuel oil — at a loss. Importing the country’s jet fuel requirements rather than having them make regardlessto demand of will also reduce costs and ensure the development transparent and a fair, of commercial domestic jet fuel market. Exiting the crude oil refining process will enable release Z to approximately $150 million that is tied up in working capital — in crude oil on ships at sea or awaiting processing. It will also provide opportunities reduce to operating costs associated with delivery fuel of to New Zealand ports via coastal shipping. The moving Z of value to rapidly an to import model are clear and compelling, but so too are the benefits customers to and the country. Part of Z’s commitment to to commitment Z’s of Part reducing costs ensuring Refining NZ is NZ is Refining ensuring import a fuel into converted terms. commercial on terminal intensive import and ‑ WHAT MATTERS WHAT distribution terminal for refined fuels. Exiting the crude oil supply chain and instead importing New Zealand’s fuel as finished products will be a significant change the New Zealand the way to fuel industry operates. New Zealand has operated a small oil refinery near Whangārei for more than 55 years, but it no longer stacks up or best serves New Zealand’s energy security, economic goals. or environmental Refining is unable NZ compete to with more efficientlarger, refineries around theAsia-Pacific region. Globally, there is from uneconomica trend away crude oil refining operations ensuring of in favour the refined fuel supply chain is from the most efficient sources. example, of By the last way over two years Z has had subsidise to operation theof refinery due low gross to refining margins around the Asia-Pacific $48 millionregion of way by fee of floor payments. Not only has exposure Z’s crude to oil refining recently cost the company and disadvantaged has it but shareholders its Z in the market against competitors who simplyhave imported their refined fuel requirements. The economics domestic of refining improve.are unlikely to The time for New Zealand be to importing crude oil from the other side of the world is over. It no longer makes economic or operate to sense environmental a small, sub-scale refinery in the Far North New Zealand. of Z is now supporting Refining convert to NZ New Zealand’s only refinery a into much more simpler, cost-effective and less emissions Transforming our Transforming supply chain Te whakahou i te te i whakahou Te tukutuku rārangi
Z ENERGY Pg 14 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 16 Pg assets generate commercial returns. returns. commercial generate assets terminal our to ensure starts approach this as terms, commercial on fuel to bulk access for competitors from to requests favourably responded historically Z has industry. the in to others price wholesale atacommercial terminals fuel bulk from available fuel making greater competition through companies for opportunities were there found which sector fuels Zealand New of the study market Commission Commerce the from flowed legislation The Z. from support strong with Act, Industry Fuel the year, passed Last Government the changing. now that is scale, our monetising and business core our optimising on focus As we to them. committed is that capital the return for fair, commercial appropriate a have generated never terminals fuel toassets the national economy, these core of these contribution the Despite economy. New Zealand of the to operation the important critically is terminals storage fuel bulk of these operation reliable safe, The 40 percent. approximately of share market have afuel and storage, of litres million 191 representing terminals, storage fuel bulk Zealand’s New of percent 50 than more operate and We own Zealand. New in assets storage fuel important strategically most the of network largest the Z operates Z’s terminal network Commercialising tauranga tukutuku Tauhokotia te country andto Z. important than ever to our fuel terminal assets are more fuel import As New Zealand moves to a WHAT MATTERS ‑ only these model, to our country and to Z. to Z. and country to our ever than important more are assets import to moves afuel Zealand New As basis. a commercial and operate them independently on of Tauranga Port the at arrangements of industry out tanks take will its it Zconfirmed consideration, careful after 2021, March In terminals. other progressively change the operation of we might how for confidence us gives which pilot effective an been has This basis. acommercial — on commercial customers and competitors —distributors, participants industry to any fuel sells now which terminal, fuel Nelson our with arrangements industry we exited changes, of regulatory ahead 2020, In ourselves. them run and ventures joint of industry out terminals of our We have management the taken change. this for well-prepared Z is remunerated. fairly are assets our to ensure arrangements industry historic these to unwind Zto for begin impetus the provides Act Industry Fuel The do. who those from returns to inadequate led and terminals in invest not do who those rewarded has assets of terminal sharing the Historically ‑ only model, these fuel terminal terminal fuel these model, only Our assetsOur
Monetising scale Monetising
Z ENERGY Pg 17 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 19 Pg million litres million litres million litres million litres Marlborough
Blenheim
Picton 151 116 2.7 270 120 Sold fuel through a network of 151 truck stops across New Zealand FY21 Sold 116 million litres of fuel directly from our terminals fuel bulk FY21 Imported and sold 2,712,840 litres of biofuels FY21 Provided 270 million litres of aviation fuel aviation of litres million 270 Provided FY21 bitumen of litres million 120 Provided FY21
1
1
Linkwater
Kaikōura
6 5
Rai Valley
Cheviot
Little River 7
63
Richmond
1
Tai Tapu
Nelson
Christchurch
Waikuku
Amberley
Kaiapoi
Lincoln
Hanmer Springs 27
Takaka
60
6
7
Wakefield
Southbridge
Motueka
Rangiora
Culverden
Leeston Canterbury
Kirwee
1
Burnham
Oxford
Ashburton
Darfield
Murchison
73
Arthur's Pass
Timaru
7 Otago
Winchester
Temuka
Springfield
Ōamaru
Mayfield
Geraldine 1
Alma
Methven 10
6 4
Palmerston
82
1
Westport 4
Dunedin
Pleasant Point
Waimate
Fairlie 7
Cave Nelson & Tasman
8 Mosgiel
Greymouth
Hokitika
Milton
8
83
Kurow
85
6
Outram
Tekapo 8
Ranfurly West Coast West
1
8
8 Southland 4
Gore Mataura
6
Clyde
Wyndham
Alexandra
Wānaka
Cromwell
98
Riversdale
Blu
Invercargill 5
Winton
6
Queenstown
94
Te Anau
Mossburn Biodiesel plant Depot Imported crude Pipeline Refinery Service Station — Z owned Terminal — jointly owned Terminal Stop Truck 1 Key Gisborne 3 3 Wairoa Ōpōtiki Gisborne Bay & Hawke’s Bay of PlentyBay Galatea Awakeri Wellington Whakatāne Murupara Waipukurau Kāingaroa 11 Te Puke Hastings Reporoa Tauranga Papamoa Waikato Matamau Taupō Edgecumbe 3 7 Havelock North Dannevirke Rotorua Woodville Waihi Katikati Whangamata Pahiatua
2 Putaruru Tūrangi Waharoa Whitianga Tīrau Matamata Auckland Kinleith Waiouru Masterton Feilding
1 Kopu Morrinsville Hunterville 3 Carterton 4 6 13 Marton Tokoroa Greytown Paeroa Ngatea Te Aroha
3 Featherston Taupiri Te Kuiti Island Maramarua 16
1 Clevedon Palmerston North Sanson Cambridge Raetihi Shannon Paraparaumu Bombay Levin Hamilton Huntly Ōtaki Waiheke Pokeno Whangaparāoa Warkworth 23 Ōtorohanga Piopio Ngāruawāhia Marsden Point Wellsford Whanganui Kaiwaka Porirua
Pāuatahanui Waiuku Maungatūroto Whangarei Pukekohe Eltham Hāwera Stratford 5 Wellington
1 Waverley Northland Inglewood 70 Kaponga Kawakawa Paihia Kerikeri Helensville Waitara Dargaville 7 Kapuni Waipapa
15 5 Manawatū Whanganui & Ruawai
1 Taipā Kaikohe Rāhotu Taranaki Opunake New Plymouth Pungarehu Kaitaia Awanui
million litres
million litres million litres
million barrels
million barrels ‑branded service stations
1,694 WHAT MATTERS WHAT
191.3 10
9.5 1,392 Directly owns and operates 10 bulk fuel of storage total with terminals storage 191.3 million litres representing justover 40% of New Zealand tankage FY21 Imported 10 million barrels of refined oil, bitumen including FY21 Provided 1,694 million litres of fuel to Commercial customers FY21 Imported 9.5 million barrels of crude oil into Refining NZ, producing 1,566 million litres of finished petrol, diesel, aviation fuel and marine fuel oil FY21 Provided 1,392 million litres of fuel to Retail customers via 197 Z-branded and 133 Caltex FY21 While New Zealand’s transport fuel change to set looks chain supply significantly the next over two years, this is how our supply chain operated a Covid-19-disruptedover FY21. Fuel volumes from the previous year — FY20 — are provided demonstrate to the impact FY21. on Z over Covid-19 of A snapshot of chain our supply He tirohanga matua ki ki matua He tirohanga tukutuku rārangi te
Z ENERGY Pg 18 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 21 Pg and We alsoWe made hundreds phone of calls to check on our small business customers’ wellbeing and discuss how we could further support them. are committedWe continuing to championto and celebrate small moving. them keep to and businesses continuing listen to We’re our to SME needs, their understand and customers ourand offering evolve to to better suit them — across both digital and physical experiences. Since 2019, we’ve seen more and more Kiwi businesses sign Z Business up to Plus, with more SME customers with Z than before Covid-19. In 2020, small businesses were hit hard — what mattered Covid-19 by them to and their worlds changed very quickly. help, put we together a packageTo supportto small business customers extending discounts, increasing including credit terms and removing account fees through lockdown. alsoWe launched our online Z Business Hub provide to access tools,to resources and support materials and ran a webinar for customers on their and themselves after look to how businesses during a crisis. We are committed to to committed are We champion continuing to celebrate small businesses celebrate moving. them keep and to sized business Te Kora Hou Kora biodiesel plant beforeTe Z was forced place to it in hibernation due to 22). page economics (see challenging announcement Government’s the With in January 2021 that, subject to consultation, it intends introduce to a biofuel mandate for all fuel sellers in New Zealand, Z will face likely new choices around the future its of Hou Kora biodiesel plant andTe how beginto supplying a range biofuels of at scale for both our Commercial and Retail customers. on small and Focusing medium‑ Small business is the heart the of New Zealand economy and are they leading New Zealand’s post-Covid-19 economic recovery, with small business higher December 6.4 percent in jobs than priorthe March to 2020 lockdown, according data to from our business Xero. partner, Supporting our small and medium enterprises (SMEs) is an area focus of for Z. Our research has determined that SMEs primarily value ease and efficiency in running their businesses. In 2019, we launched Z Business Plus, our fuel card product designed with the needs Kiwi of small businesses in mind. Combined with the depth our of Retail and Commercial network, a compelling have we offerthat makes life as simple as possible for busy businesses. small The Commercial team has grown volume and delivered clear customer value — all within a context rising of levels of competition. started have We more drive to value from the scale our of network and Commercial optimise to continued have marine the exiting including operations, fuel barge operation and the domestic production bitumen of at Refining NZ, bitumen. finished importing and now There is more progress be to made on delivering a fully optimised Commercial business the next over two years. As the New Zealand fuel industry goes through a period significant of opportunities see further we change, addto value for our customers, including through direct terminal gate some for locations more at supply Commercial customers. Commercial customers and customers Commercial change climate Z has never stopped seeking to ways in customers support Commercial our reducingtheir own carbon emissions. While electrification promises the ability beginto decarbonise to New Zealand’s many fleet, for passenger vehicle light large Commercial customers with trucks and heavy machinery run, to the options limited.are Over the last year Z has provided lower emissions biodiesel Commercial core to customers in the Auckland region that cutwant to their emissions. Through our supplied have we stop truck Highbrook imported biodiesel as well as biodiesel hadthat we manufactured through our The sector that has most driven this growth and supported the early stages Newof Zealand’s economic recovery is primary production — agriculture, horticulture and forestry. Z expects further growthopportunities for the Commercial business as the of many infrastructure projects funded as a part stimulus theof Covid-19 package — for example roading and construction projects — kick off in 2021. Z has been disciplined in its approach to the over portfolio customer Commercial its last year as it has had apportion to its fixed cost base reduced over fuel volumes at times. Z has put effort into communicating its with andfrequently transparently customers this period over and in ensuring all its of customers were clear on how to access financial Covid-19 support and government assistance if it was required. While businesses many been have impacted Z also observes Covid-19, by an underlying resilience across our Commercial customers — through sales and payment terms, for example — as we work together on New Zealand’s economic recovery. FY21 was a year in which Z clearly demonstrated the unrivalled value itsof Commercial customer offer — particularly the convenience of its national truck stop network, the efficiencyof its supply assets and logistics and the convenience a of single fuel card system for use across retail sitesall Caltex and Z-branded and truck stops. positioned fuel to this growth. ‑ WHAT MATTERS WHAT Our environment Our place in New Zealand Z has focused tightly on consistent delivery for its Commercial customers the Securityover last year. of fuel supply was vital the to ongoing operation of the economy FY21 over and,in the first half of the year in particular, tirelessly Z worked to ensure the national fuel supply chain Covid-19. by uninterrupted was CommercialZ’s customer portfolio and the truck stop infrastructure assets that support large sectors it of is a core part our of business. Over the last year Commercial fuel volumes were seriously disrupted through the Covid-19 lockdowns and steps through various alert levels, Commercial with overall volume percent down 70 during the lockdown. national the of height Over this period, Commercial Z’s team has focused on delivering the basics: businesses, Commercial retaining growing some accounts and providing security supply of during a highly period. uncertain As the New Zealand economy recovered from the impacts faster Covid-19 of than expected many in the second half theof 2020 calendar Z has been year, well Consistent delivery for for delivery Consistent customers Commercial Tapatahi ana te tukutuku tukutuku te ana Tapatahi kiritaki ki ngā
Z ENERGY Pg 20 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 22 Pg 12 redundancies at the plant. the at 12 redundancies to leading regrettably into hibernation, plant the to put management cost in to discipline commitment of our part as decision hard the we took 2020, In it. to support policy government without work not did ofplant this economics the of sudden, All halved. oil of crude price the —and subsidies biofuel existing with countries from bydriven demand — percent 50 by nearly increased tallow of quickly, price the relatively Then, fuel. climate-friendly amore use and emissions their reduce to wanted who customers trucking large by our welcomed widely was The plant blend. abiodiesel to sell sellers fuel requiring amandate or a subsidy —either support of government form any without world the in anywhere built kind of its plant first the was It fuel specifications. Zealand’s of New all exceeds that biodiesel to a high-quality produce tallow waste inedible use can It 2018. and 2010 between million of $50 acost at built then and planned developed, was — Te spark’ ‘the —meaning Kora Hou year.CO2e per of 37,000 saving tonnes 4 percent, by emissions their to cut motorists diesel enable will blend aB5 Using ‘B5’ biodiesel blend. into a converted of diesel litres 400 million see can volume this diesel, mineral into conventional 5 percent at Blended annum. per biodiesel high-quality of pure, litres million 20 produce can which plant, production biodiesel commercial-scale only country’s the developed actively Z has Zealand. in New commitment to production biodiesel Z’s with than been this has truer No hard. be can initiatives sustainability of edge leading the at Being Z’s Te Kora plant Houbiodiesel Case study: Te Kora HouoZ He rangahau: YEAR ENDREPORT 31MARCH2021 Z ENERGYWHAT LIMITEDANDSUBSIDIARIES MATTERS emissions and combat climate change. cut to materially need will Zealand New that of biofuels volume the increasing significantly we likely are to be 2021 Over achieve this. to scale sufficient at network supply fuel national the Zhas Again, types. fuel all across amandate to meet biofuels have likely Zwill is It to import Te to competitors. plant Kora Hou its from biodiesel involve Zselling possibly will and market competitive fair a ensure will This available. are options until domestic products biofuel import and to source having suppliers fuel major likely involve will and all blends biofuel to sell having sellers likely involve fuel all will it is Z’s view made, commitments final and out, worked yet to is be detail the While on. consulted being currently of publication, time the at is, mandate abiofuels introducing around detail the and world of the parts other in common is that policy much-needed and sensible is This Zealand. New for mandate abiofuels to introduce intention its announced Government the plant, Te our at 2021, Kora Hou January In to play. role important have an biofuels that and economy, the across from emissions to cut order in to us available tools the all to use we that need is found 2021 January 31 on budget carbon draft Commission’s Change Climate New Zealand What the emissions. their cut and biofuels use to motorists all enable would that policy government for to advocate we continued setback, this Despite Our assetsOur (Phil Walter via Getty Images) Getty via Walter (Phil January 2021. Te plant, biodiesel Kora Hou Wayne Z’s at Reid Manager and Z’s Plant Operations Biodiesel Ardern Jacinda Minister Prime
Z ENERGY Pg 23 ANNUAL REPORT 2021 WHAT MATTERS ANNUAL REPORT 2021
Z ENERGY Pg 24 Kia tere ake, kia koi ake mō te kiritaki Pg 25 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL Z has contactless payments available Pay in App is the ultimate in ease, speed, across all of its retail sites, providing a and convenience, and over the last A quicker, safe shopping experience for essential quarter of the year we have been actively competitive goods and services. We are hugely proud promoting it to customers. of our Retailers and their teams who were Since launching in November 2020, retail experience immediately designated as essential Pay in App experienced customer Our workers. During a highly uncertain time, sign‑up growth of more than 40 percent our people served their fellow Kiwi with capabilities Z’s Retail network is the most visible in the first two months, and the active courage and compassion. core of our business; it is also the customer base has already doubled. part of our business that most people With what mattered to our communities The Z Pay in App was born from experience regularly. Our Retail switching very quickly to safety and the combining the best of our Caltex operations across both the Caltex basics, over the year there was a switch pay-in-app experience launched in and Z-branded networks are at the away from healthier, fresh food sales to April 2020 and our previous Fastlane heart of most Kiwi communities. more traditional ‘comfort’ foods, like pies. trial; demonstrating Z’s commitment to Over FY21 we took some decisions Z’s plans for the continued development experimenting, building, and evolving Our place in around the Z Retail offer and which sites of its fresh, healthy food range, alongside innovative offers that meet customers’ New Zealand best fit within each brand. For example, its existing and much-valued current needs in a highly functional and we transferred three Caltex-branded offer, were disrupted by Covid-19 but will delightful way. sites to the Z brand and offer. This is resume again over the next 12 months. part of optimising our Retail network Doing away with the queue and having the right customer offers Delivering safety and speed Over 2020, following the national Across 63 Z-branded retail service sites, in the right place. We also stopped with digital lockdown and periods of social the Z forecourt concierge offer due to While safety and security mattered more distancing due to Covid-19, we’ve noticed customers can now simply drive in, fill up, shifting customer preferences and an than ever for Kiwi across the country last a greater reluctance from Kiwi to queue. opportunity to reduce onsite costs. year, very quickly the focus also swung Again, by listening to what our customers and leave with payment already taken care We will continue to focus on back to speed and convenience. were telling us, through Covid-19 we’ve been able to effectively promote our of in the Z App. opportunities for shifting offers One of the areas of focus for the retail and app‑based coffee offer. between the two brands over the technology teams in Z has been to listen to coming 12 months, as well as continuing our customers’ feedback and then deliver Through the Z App customers can Customers can purchase up to fuel rewards (via Z Electric) that are distinctive customer engagement through to develop and implement loyalty solutions quickly. One way of combining pre‑order coffee, and a range of other hot 12,000 litres of fuel in a rolling 12-month automatically deposited into a customer’s our investment in digital capability. offers that are increasingly tailored both safety and speed in a new offer lay and chilled beverages, while approaching period, buying at the lowest Z-offered virtual fuel tank (Sharetank) and can to customers’ specific needs. in harnessing the digital capabilities that a retail site, prepay for it through the app With the Climate Change Commission’s price in a 30km range of their location then be effortlessly redeemed via our Z has invested in over previous years. and simply collect and go. publication of its initial draft carbon and storing them in their virtual tank in no‑touch payment method (Pay in App). Covid-19 and keeping our And so ‘Pay in App’ was born. budget in January 2021, focus looks set This is proving an increasingly popular the Z App. These litres can be exchanged Customers can even choose to offset communities safe to increase sharply on what we can all Using the Z App across our 197 Z-branded offer with sales via the app increasing for real fuel when the customer needs their purchases and rewards through Z’s role in communities across contribute to meet New Zealand’s climate retail service station sites, customers can rapidly over FY21 to more than 15 percent it at any one of 197 participating Z sites permanent New Zealand forests. New Zealand was critically important change commitments. Z will increasingly now, once they have registered, simply of Z drink sales, and revenue more than across the country, and we’ll let them in managing the response to Covid-19 market this offer to customers in FY22. drive into a service station and: doubling on a monthly basis over the last know if the price at that site is lower so Offsetting our carbon emissions over FY21 — particularly during the 12 months. they can choose whether to save their at retail sites national lockdown and the subsequent • Use ‘Pay in App’ by selecting the Pump Our new digital capabilities Sharetank litres for another day. Our customers tell us they are concerned Auckland lockdowns. and confirming their already registered All of these offers represent the evolution The Sharetank advantage about climate change but don’t know car and fuel grade profile, then confirm When a customer or anyone in their of our focus on customer experience Z’s grocery and convenience store Z continues to evolve its Sharetank what they can do at an individual level or select the payment method and fill group is ready to fill up with fuel for real, (CX) and digital capabilities. products played a vital role in providing offer to deliver ever more customer to help. amount, and fill up and go. This puts they just fill their tank and pay using their Kiwi with the goods they needed during benefit. Over FY22, Z will also begin to We have now baked our CX and digital the control back into our customers’ Sharetank balance. All it takes is a simple So in February 2020 Z launched Carbon lockdown — milk, bread and, yes, toilet promote and market the advantages of capabilities into our business and have hands. And additionally; scan of the Z App at a participating Count on the Z App — a digital service paper — in a simple, easy and safe way. New Zealand’s only virtual fuel tank. been able to end our reliance on digital • Use ‘Pay by Plate’ at 63 of these Z station. that automatically calculates the carbon With a greater focus on shopping local, and CX contract resources as part of our service stations, by simply driving Sharetank is a highly innovative digital footprint of the fuel you buy, giving you sales of convenience store staple goods In a new development, Z launched commitment to cost reductions. in and being greeted on the digital offer that enables fuel sharing while the choice to offset part or all of those are up 3.5 percent year-on-year. a retail electricity customer pilot screen on the pump; then fill up and ensuring a very competitive price. emissions through Permanent Forests Z now has a unique digital and CX offer — Z Electric, see page 27 — that We were able to rapidly deploy the leave with payment already taken care It allows customers to pre-purchase NZ Limited. capability across the company that lies rewards customers with free fuel litres Covid-19 safety infrastructure needed of. Our digital camera technology on litres of fuel to redeem at a later date at the heart of our customer strategy. via Sharetank. This is an example of This is a unique offer in the market across all of our sites — Perspex screens, site recognises the car’s number plate, and share their balance with up to five We will continue to use these capabilities effectively integrating multiple customer that provides retail customers with the signage, staff PPE — and to manage and simply charges the customer’s friends, whānau or colleagues, all within to delight our customers with new offers with digital technology. We believe opportunity to act to combat climate customers in a socially distanced way. preferred payment method once they the Z App. products, offers and services over Z is the only fuel retailer in the world change every time they fill up. This further have filled up. the next 12 months. that allows customers to earn ongoing demonstrates the opportunities for 01 02 03
Te tiaki taiao Pg 27 Z ENERGY ANNUAL REPORT 2021 REPORT ANNUAL
Our stands Z has always elected to publicly Tā tātou stand for the things we believe are whakataunga most important to our customers, Environmental communities, investors and people. tūtanga We call these things our ‘Stands’ and sustainability they are the areas in which we seek to make a distinctive contribution. Z stands for an environmentally Introducing Z Electric How we are tracking sustainable New Zealand that is an The biggest advantage that New Zealand on our targets With the challenges posed by climate Our aspirations in these Stands example to the rest of the world and What we has in combating climate change is change and Covid-19, and with global can have the greatest impact on an inspiration to Kiwi. We will move Further to Z’s sustainability policy, in that approximately 85 percent of its choose to concern continuing to mount over issues the following 10 UN Sustainable from being a part of the climate change FY17 Z set a range of sustainability electricity comes from renewable of racial and gender equality in particular, Development Goals: problem to the heart of the solution. stretch targets and areas of focus for our sources. As a result, approximately stand for these four Stands have never been more business. FY21 marked the end of the 4 percent of New Zealand’s total relevant, important and urgent across The fuels we sell and which our target period, so the table on the next emissions comes from electricity our stakeholder universe than in FY21. customers use produce approximately page maps how we have progressed 10 percent of New Zealand’s greenhouse compared to approximately 19 percent
26 against our commitments. Z’s assessment of materiality that gas emissions. As a company we have from transport. underpins this report confirms that always been committed to helping lead We have made very good progress in As New Zealand seeks to maximise the what we are choosing to stand for are New Zealand towards a low emissions most areas, though significantly reducing use of renewable electricity across our the things that genuinely matter most. future and have experimented in operational carbon emissions has been economy, Z is also committed to using adjacent technologies. particularly challenging and, while we its digital and customer experience Environmental sustainability have made material reductions, we have We were the first fuel company to capabilities, and its large customer Z will move from being a part of the not delivered against the target we set introduce an EV charger at a retail base, to trial opportunities to enter the climate change problem to the heart for ourselves. service station, we have built a electricity market. of the solution biodiesel production plant, invested This is an area in which many In 2018, Z purchased a 70 percent share in a ride-sharing service, offset all of businesses across New Zealand are Community in the wholesale spot market electricity our operational emissions and have currently struggling. While complex, A resilient and healthy Aotearoa retailer Flick Electric. Flick is a modern, introduced multiple sustainability Z is committed to reducing its own New Zealand that empowers our youth, progressive, tech-savvy electricity initiatives covering waste and energy operational emissions in line with the neighbourhoods and Z whānau company and Z’s shareholding has consumption. We have led discussion Paris Agreement to limit warming to taught us a lot about the opportunities on important issues, contributing to 1.5 degrees Celsius above pre-industrial Diversity and inclusion of widespread electrification and the industry research on biofuels, hydrogen levels. For Z, this translates to a revised challenges also facing this market. Being successful being ourselves and and electric mobility as reflected in target of 42 percent reduction in reflecting Aotearoa New Zealand our submission to the Climate Change In March 2021, Z announced the creation operational emissions over FY20–FY30. Commission’s Draft Recommendations; of Z Electric. Using the Flick systems Supporting this commitment will be Safety and wellbeing https://z.co.nz/assets/Uploads/Z-Energy- and processes, Z now has a distinctive, new climate-related metrics and targets Enhancing the lives of our people submission-to-the-Climate-Change- fully Z-branded electricity offer in focused on reducing the carbon impact and communities. Commission-March-2021-FINAL.pdf the market. We will offer competitive of the energy products Z sells. This will electricity prices and provide our current be determined in FY22. Cutting emissions gets hard once the This report has already canvassed a customers with new digitally enabled relatively simple emissions reductions range of developments and initiatives offers that bundle together their fuel opportunities have been completed underway in our business to advance and electricity requirements. these four Stands. The following section and, despite what people say, not of this report covers some of our many want to pay any more for cleaner One of the products developed at the more detailed and specific reporting energy alternatives. launch of Z Electric is the opportunity to against them. reward customers with bonus fuel litres However, we have not executed some of for their electricity spend through the our early initiatives as well as we would use of Sharetank in the Z App, which can have liked and we must and will do better. then be offset easily using Z’s Carbon We remain committed to Z moving to the Our environment Count feature also in the Z App. heart of the climate change solution. Diversifying into a branded electricity Over FY21 the issue of climate change offer will enable Z to understand the became increasingly important for our customer loyalty benefits and value investors, Government, customers and arising from moving into cleaner, more our own people. Our strategy remains sustainable energy markets — all at very focused on optimising our core business little operational cost. and transitioning to a low carbon future.
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 29 Pg industrial levels. levels. ‑industrial Z is committed to reducing its its reducing to committed Z is line in emissions operational own limit to Agreement Paris the with 1.5 degrees Celsius to warming pre above Status We’re off track and need to do more We’ve made some good progress but we need to do more emissions economy and recently advocated for more ambitious targets on biofuels in response in biofuels on targets ambitious more for advocated recently and economy emissions ‑ to theto Climate Change Commission Draft Recommendations. Through our membership with the Climate Leaders Coalition, Sustainable Business Council and Sustainable Business Network, we take a leadership position inspire to and enable Kiwi take action to and reduce their environmental impact. Carbon Count was launched in February 2020, allowing driver any in New Zealand view to and choose offset to their emissions fromtheir fuel usethrough the Z App. beenWe’ve proud partner to That Count with Trees since funding 2017, 56,698 new native trees and supporting 64 planting communities leading better to biodiversity, cleaner waterways and better physical and mental health for our New Zealand communities. Z has partnered with Permanent Forests Limited NZ ensure to that all voluntary offsets are locked in long-lived forest carbon sinks in New Zealand that both address the climate crisis and restore local landscapes. A total of 160,465 tonnes CO2-e has been offset in permanent forests since FY17. continueWe advocate to and lead for the development of policy that moves New Zealand a to low While the biodiesel plant was hibernated in FY21, Z continued offer to supportto commercial customers who are committed reducing to their carbon emissions and impact on air pollution. Z biodiesel, a B5 blend, is now also available at the Z Highbrook truck stop in Auckland all to Z Business cardholders. Our investment in climate positive car-sharing company Mevo continues. Our staff use forMevo business trips in Wellington, with 1 tonne CO2-e offset from Z businesstrips. There was a 65 percent reduction in business travel over FY21, largely due Covid-19. to The launch of Z Electric represents the next step in Z’s low carbon business transition. Z’s EV chargers continue grow to in popularity with 14,132 charges in the past saving year, over 138 tonnes of CO2-e. We are currentlyWe 2 percent below our 2012 baseline, and reduced have retail electricity 5 percent year-on-year since FY18, with a focus on efficiency. Z’s Supplier Code of Conduct is embedded in all of Z’s Standard Supplier Agreements outlining business environmental social ethical, practices. and standards expectations on and minimum It was updated in July2020 reflect to regulatory changes, for example, the Zero Carbon Amendment Act, Australian Modern Slavery Act and Z’s refreshed Safety & Wellbeing Stand. All suppliers must confirm compliance with the Code on an annual basis. Progress reduced have We our carbon emissions 18 by percent since FY17 against a target of 30 percent by FY21. Each year we voluntarily offsetthe emissions we cannotavoid in permanent NewZealand below). forests permanent local (see forests Our commitment is reduce to waste landfill to year-on-year from our operations (offices,terminals and Z retail sites) continuing move towards to being zero-waste. Waste landfill to is 19 percent below last year. aim use to We water as efficiently as possible, andthis year have startedthe installation of permanent water tanks supply to car washes in the water-constrained Auckland region, estimated 12 save to million litres of water a year once completed. Over 32.5 million litres of waterwere recycled through existing Z car wash infrastructure this year. We’re on track and doing well
: Full details can https://z.co.nz/about-z/what-matters/sustainability Full be found at : WHAT WE STAND FOR WE STAND WHAT Note Key Policy and leadership and Policy Local permanent forests permanent Local Partnerships for a low emission economy Carbon offsets Carbon Enable others reduce to their impact emerging experience Customers technologies transport Lower carbonLower products and services Customers reduce fossil fuel use Reduce retail electricity retail Reduce support decisions purchasing sustainability that Make chain Supply Reduce waste Reduce Outcome Use lessand waste less in our operations emissions carbon Reduce How we are tracking on our targets tracking are we How mustWe act in order good make to on Our what stand we sustainability for. goals and targets were developed using the UN Sustainable framework. a Goals as Development Three outcomes were set lead to contribute to us on authentically a pathway the welfare to New of Zealand’s natural environment and its people the end by FY21. of In addition, recognising and our scale size in New Zealand, our goals and targets cover operations Z’s as well as those suppliers. our of key The table below outlines our progress against these goals, with targets be to reset during FY22.
Z ENERGY Pg 28 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 31 Pg 57t 375t 778t Total Total 1,561t 1,504t 1,656t 2,468t 2,468t 2,809t to disposal Waste directed 4t 9t 13t 26t 2,782t 2,809t from disposal Waste diverted Corporate sites Corporate 84t 371t 769t 1,642t 4,286t 4,370t generated Retail sites Retail Total waste Total in metric tons (t) tons metric in
, 1 Hazardous waste comprises mainly soil and spill from site remediation works such as fuel tank replacements. The material is safely disposed of in licensed waste facilities. Total waste diverted,Total in metric tons (t) Recycled plastic, cans & glass Corporate sites Corporate Total waste Non-hazardous waste Non-hazardous Recycled cardboard & paper Recycled composting & organics Waste composition Waste Retail sites Retail Landfill waste hazardous Total Site waste data waste Site By far thebiggest area waste of generation in our business is through our retail operations. also we reduce aim to However, waste across our corporate sites, including offices andterminals. Here is how our waste site tracked over (acknowledgingFY21 significant lockdowns). Covid-19 to disruption due Waste by composition, in metric tons (t) tons metric in composition, by Waste (t) tons operation, metric in recovery disposal by from diverted Waste waste Hazardous 1 All waste is disposed via of landfill or recycled offsite.There are wasteno incineration facilities used. dataWaste is based on a combination actual of and estimated weights reported our by waste management providers. Where no data was provided for a site an uplift has been applied. FY21 3,191 -18% 3,398 2,434 29,017 37,149 475,255 852,236 9,405,371 8,039,840
1 -12% 4,127 3,371 FY20 3,369 29,785 39,605 520,708 1,031,309 9,990,103 11,582,773 FY19 -10% 4,195 3,837 4,495 29,303 40,704 902,215 902,215 555,892 555,892 11,958,268 10,459,104 10,459,104 -6% FY18 3,875 3,853 4,223 31,041 42,992 618,483 983,939 983,939 11,975,999 10,330,585 – 3,339 3,907 4,045 (FY17) 34,247 45,250 807,542 634,848 634,848 Base Year 9,488,277 9,488,277 10,976,205 2,3 There has been a restatement to ‘FY20 Scope 3 — Z product emissions from our customers’ and, therefore also ‘FY20 emissions’ Total due to MfE 2019-corrected gasoline. aviation and fuel aviation emissions for factors operationalTotal emissions excludes emissions from line losses and upstream electricity, which are included in the sum totals above for Scope 3 — Z offices and Retailsites and New Zealand Supply Chain. In FY21, emissions from air travel were amended to include radiative forcing from the reporting year FY20, therefore emissions. operational FY20 there to isrestatement a minor operationalTotal emissions intensity has decreased by 3 percent from FY17 per litre of fuel sold. Emissions are reported in tonnes of carbon dioxide equivalent(tonnes CO2-e), which, in line with the GHG Protocol Corporate Standard, includes the three main greenhouse gases: carbon dioxide, methane and nitrous oxide.MfE Emissions Factors are used in all cases where available for data sets. WHAT WE STAND FOR WE STAND WHAT Scope 3 — New Zealand supply chain emissions operational Total Scope 3 — Share of refinery % change from FY17 Scope 3 — International supply chain (rest of supply) A fullA greenhouse gas view inventory https://z.co.nz/about-z/what-matters/sustainability/ at is to available providedKPMG have an unmodified reasonable assurance opinion whether as to Greenhouse Z’s Gas statement has, in all material respects, been prepared in accordance with the Greenhouse Gas Protocol’s Corporate Standard requirements for the period 1 April 2020–31 March 2021. 1 2 3 Scope 1 — Z offices and Retail sites Scope Greenhouse gas emissions CO2-e — tonnes Scope 2 — Z offices and Retail sites Scope 3 — Z offices and Retail sites Scope 3 — Z product emissions from our customers our from emissions product Z — 3 Scope emissions Total
Z ENERGY Pg 30 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 33 Pg FY23 Climate-related risks opportunities and quantified, and financial identified impacts • FY22 Climate-related risks management and process reviewed for effectiveness Climate scenario analyses integrated into financial modelling and informs strategy Quality assurance of climate risk management and financial disclosures • • • FY21 TCFD Index canTCFD be found on pages 127–128. Climate-metrics and targets under review and agreed Qualitative risk assessments identified and transitional physical climate-related risks Climate risks integrated riskinto management processes Scenarios expanded includeto a 2 degrees Celsius and one other comparison scenario
• • • • Note: FY20 Carbon targets integrated business into planning Approach climate to risk management documented Gap analysis completed Internal alignment achieved Board approval BEC Scenarios used to inform strategy
• • • • • • Complete progress In Planned Metrics and Targets Risk Risk Management Governance Strategy Key Our four-year TCFD roadmap TCFD Our four-year A series cross-functional of internal supported by analysis and workshops external advisors informed this work. understanding better a is outcome The physical Z’s of and transitional risks and opportunities based on two different climate scenarios. The workshops considered the risks and opportunities in the short term (2020–2025), medium term (2025–2040) and long term (2040–2060).
A four-year roadmap (see page 33)A four-year set Z on a path fully towards understanding and disclosing our climate-related risks and opportunities provide to transparency the of most material climate-related financial impacts. This approach aligns Z with the to recommendation Government’s introduce mandatory climate-related financial disclosures 2023. by It also enables incorporate Z to the Climate budget carbon Commission’s Change advice set to New Zealand on a path 2050. by to net-zero focusZ’s in FY21 assess was to and material business’s the understand opportunities and risks change climate so that guidance can be provided on mitigate or adapt controlhow to for, to these risks.
WHAT WE STAND FOR WE STAND WHAT material issue for Z. for issue material The products that Z sells represent approximately 10 percent of New Zealand’s emissions and Z has been in existence during a decade in whichNew Zealand’s emissions from increased. have sector the transport In line with our integrated reporting approach, last year Z adopted the TCFD beginFramework to further to assess thebusiness’s climate-related risks and opportunities. Climate-related financial risks require an integrated business approach mitigate and to manage now and the future. into to future earnings and the value of assets. It is a It is assets. of value and the earnings future to around the world, including financial risks related related risks financial including world, the around Climate change presents many risks to businesses businesses to risks many presents change Climate TCFD Report year two Report year TCFD Pūrongo TCFD tau tuarua tau TCFD Pūrongo
Z ENERGY Pg 32 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 35 Pg Reduced employee wellbeing talent Reduced attraction and retention provide to Inability that products customer meet expectations talent Attract proactive through low a to approach carbon transition customer Enhance experience through carbonlow offerings Social • • • • • • Reputation Transitional Technology Leverage Z’s Z’s Leverage distributed footprint across NZ Optimise strategic asset planning Reduced Reduced performance of assets Operations • • • • Policy/Legal Markets Strengthen balance sheet and pay down debt debt down pay and sheet balance Strengthen supply oil crude exiting through flow cash additional Deliver streams revenue carbon low alternative, Develop Reduce operational emissions and exposure carbon to costs whilst providing options for customers do to the same Build capabilities Provide transparent ESG Reporting Invest in low carbon and products services Reduce exposure complianceto and costsregulation Increased cost of of cost Increased capital operational Increased costs due higher to carbon price litigation, Increased and regulation costs compliance asset of Re-pricing values Reduced revenue diminished through product for demand Corporate • • • • • • • • • • • • • •
Risk Cause Opportunity
Risk Consequence Business Response
Sea level rise Workforce safety safety Workforce and wellbeing Social • • Climate Wind Asset damage and and damage Asset costs maintenance Supply disruption reliance Increased third-partyon infrastructure mitigation Operations • • • • Precipitation Carry out risk assessment findings business integrated into financial and strategic planningunit determined locations high-risk of analysis quantitative Perform Increased operating operating Increased and (water costs cooling) Increased environmental and regulation costs compliance insurance Increased premiums siteby value and physical risk exposure Develop and agree an engagement plan with third-party asset owners Potential expansion of biodiesel delivery areas Ability leverage to scale reduce to supply disruption Partner with third-party asset owners mitigate to shared risks infrastructure Corporate 2020 qualitative analysis of Z’s of Z’s analysis qualitative 2020 and opportunities climate-related risks • • Physical • • • • • • • •
Temperature 2040
Tūī CCC Kea
2035 2030 BEC2060 Tūī scenario BEC2060 Tūī IPCC RCP 4.5 MfE Climate Change projections for New Zealand, 2nd edition and supporting documentation regional NIWA from
Slow transition transition Slow Climate change is recognised as one of priorities.many New Zealand leverages economic comparative traditional its advantages generate to wealth and does not transform its economy. Emissions peak 2040 by and then begin decline to as the world begins appreciate to the impacts economies Global change. have climate of failed curb to emissions the medium over term, resulting in warming 3 degrees of Celsius or more by 2100. include: scenarios Reference • • • or undesirable outcomes. The scenarios simply allow the testing plans Z’s of and current positions. The likelihood is that sitthefuture may somewhere between thetwo scenarios, but allow they us to explore what is possible help to influence how plan we for the future and what we do now.
2025
2020 2015 Year 0 BEC2060 Kea scenario Kea BEC2060 IPCC RCP 2.6 MfE Climate Change projections for New Zealand, 2nd edition and supporting documentation regional NIWA from 2,000 8,000 6,000 4,000 12,000 18,000 14,000 16,000 10,000 Kt CO2-e Transport fuel emissions CO2-e Transport Kt Rapid transition transition Rapid New Zealand aggressively transforms itself a low-emissions into economy to targets. Theremeet has been net-zero a global transition a low-emissions to economy and the Paris Agreement has implemented. been Global warming is well below 2 degrees Celsius the next over century. include: scenarios Reference • • • Projected transport fuel emissions (in kilo-tonnes carbon of dioxide equivalent) andunder Climate Change Kea, Tūī Commission ‘Our path’ scenarios. Z has commissioned further modelling to undertake sensitivity analysis and test thescenarios. Following this, Z will then complete the quantification its of own House with the expectation View, it will not materially differ thefrom CCC pathway. all scenarioLike planning, these scenarios are not predictions the of future. Nor created are they as desirable 20,000 term ‑ related risks and opportunities ‑ emissions economy to meet net-zero meet net-zero to economy emissions ‑ targets. scenario, In the ‘Slow Transition’ climate change is recognised as one of environmental and social competing many priorities and emissions peak 2040 by before beginning to decline. TCFD Report year two, two, Report year TCFD continued WHAT WE STAND FOR WE STAND WHAT On 31 January 2021, the Climate Change Commission released (CCC) their Draft Advice put to New Zealand on the path meetingto its 2050 targets under the Carbon) (Zero Response Change Climate Act. The CCC’s advice calls for a rapid transport, from emissions in decline percent fromwith a fall 2018 47 of to 2035. This includes an import ban on internal combustion engines for light vehicles in the early 2030s, continued tax with combined fuels fossil on increases and transport active for encouragement mode shift. This would result in very steep declines in fossil fuel demand post 2030. Z has since mapped the CCC ‘Our path’ forecasts line grey in the graph (the the to right) the two to BEC scenarios and (Tūī that Z hasKea) been using for long BEC scenarios Last year, Z startedLast year, use to the Business Energy Council 2060 (BEC) scenarios and for long-term Tūī) (Kea planning. These scenarios, combined with the latest climate projections provided by the Intergovernmental Panel on Climate Change (IPCC) and local New Zealand data, were used assess to Z’s climate in line with differenttemperature scenarios, including a below 2 degrees Celsius scenario. scenario,In the ‘Rapid climate Transition’ change is recognised society by as the most important priority and New Zealand transforms itself rapidly a into low Climate scenariosClimate planning. Given the CCC’s advice is still in draft stage, it is more indicative than exact, but clearly shows that the CCC’s forecasts are consistent with the Kea scenario, and therefore within previous Z’s forecasts. demand long-term
Z ENERGY Pg 34 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 37 Pg Climate metrics and targets Climate Z has further committed adopting to climate-related metrics and targets grounded in science. This includes the revised target reduce to its operational carbon emissions percent 42 by by 2030 in line with efforts to limit global warming 1.5 to degrees Celsius above pre-industrial levels. In light the of recent CCC draft carbon budgets, review Z’s climate-relatedof metrics and targets associated with the fossil fuel products it sells is being re-modelled with a clear direction be to provided 1HFY22. by up ‑ up perspective, both enterprise ‑ Risk Management been has change climate time, some For a risk for Z, identified and managed at an enterprise level through Enterprise Z’s Risk Management processes and frameworks. This approach climate to risk management is necessarily evolving more becomes change ever climate as present and complex and infiltrates beyond the enterprise business to unitlevel. Over Z has the past year, focused on achieving more granularity doingby further identify, work to at a high level, physical and transitional climate-related risks across various time horizons and at all levels the of organisation. This approach has been informed existing Z’s by Enterprise Risk Management System (ERMS) as well as TCFD guidance. This more detailed risk identification process has followed the bottom and top-down approach set out in Z’s ERMS. a top-down From perspective, principle key and emerging risks at an enterprise level have been identified through deliberate, focused discussions and analysis with members Executive Z’s of team and Auditand Risk Committee. a From bottom and business unit been risks have identified through workshops involving members the of Executive team and representativeskey from each area of Z’s business. This bottom-up work was change specifically climate focused on risk and utilised two scenarios and (Tūī prompt to Kea) the identification of transitional and physical risks across those including horizons, time several on page 35 this of report. The risk identification process has determined that climate-related risks existat both business unit and enterprise level; in addition, the process has illuminated how climate change impacts existing risks already identified and being managed. The Risk and Assurance team is now working with business units and Executives guide to them in conducting the next stage workof to assess and manage new risks or evolve risk assessments and controls already place. in Climate Strategy Climate How about Z thinks carbon and climate change has directly impacted our the decisionsstrategy, every make we and the choicesday, around make we our own activities and customer offers. The biodiesel plant at Wiri Auckland has been part the of solution providing to New Zealanders with an immediate low carbon transport fuel alternative. Z regularly engages with government on the need for meaningful, tangible transport decarbonisation policies, particularly in relation biodiesel. to On 28 January2021, the Government announced a suite transport of decarbonisation policies, including the introduction a biofuels of mandate. The package decarbonisation of policies for future investmentspaves the way in low carbon fuel and transport energy, aviation sustainable in is that whether fuel, electric mobility or hydrogen. feedbackZ’s on the draft CCC recommendations is that the right fuel for theright use case is the correct strategic consensus broad ensure to approach and get as people many as possible on that end, thelow carbon To journey. Z’s submission focused on two areas of therecommendations for the transport sector — be more ambitious on biofuels and further incentivise construction of electric vehicle charging infrastructure: https://z.co.nz/assets/Uploads/Z-Energy- submission-to-the-Climate-Change- Commission-March-2021-FINAL.pdf Transitional risks and risks Transitional opportunities risks are caused Transitional policy, by changes market and legal, technology occurring in the transition a low to carbon economy. Depending on the nature, speed and focus these of changes, transitional impacts pose may operational corporate, of levels varying and social risk or opportunity. In contrast the physical to risks identified, the consequences of opportunities and risks transitional are much more be to likely seen in the short medium to term (2020–2040). Z’s response therefore focus is to on how managewe the transitional risks in the short term. This provides an opportunity to successfully mitigate the transitional mitigation on view a with now, risks options manage to physical risks in the medium long to term (2040–2060). theMany of transitional risks and opportunities identified from the scenario analysis are not new and have a corresponding business response. This is reflected both in actions Z’s to reduce exposure carbon to costs from its own operations and develop to new, low carbon revenue streams, such as Z biodiesel and Mevo (Z Z Electric. BioD), analysis did highlightHowever, the theneed consider to time horizons in response whilst mitigation our prioritising constantly reviewing the underlying context, such as the recent draft advice from the CCC. The draft advice brings clarity the policy to and market settings that must result if the transport sector is play itsto large part in decarbonising to 2050. by Z will continue meeting net-zero its commitment transition to a low to carbon future and now has an enabling environment deliver to within. climate-related hazards related risk damage of to ‑ ‑ based Natural Hazard Exposure ‑ The next steps integrate for Z are to these findings with those the of value Review completed in FY21. This review provided ananalysis assets’ Z’s of exposure climate-related to hazards storm,(wind, lightning, floods, wildfire, hail, tornado and storm surge) and non (earthquake and tsunami) using Munich Natural HazardRe’s database ‘Nathan’ and Swiss CatNet Re for current climate conditions. The review was limited in its usefulness for predicting future climate risks, it however did identify flooding events as causing the highest climate Z’s assets. The underlying data from the physical scenario Hazard analysis and Natural Exposure Review will be used to determine thosehigh-risk locations by site value and physical risk exposure in FY22. This will enable long-term Z’s asset plans be to updated account to for climate risk. Common allsupply Z’s of to chain reliance increased the was elements on third-party infrastructure being adequately maintained and mitigated change climate projected against impacts. The roading network, stormwater systemsand port wharfs are the third-party-owned assets most critical operations, Z’s to and highlight the need and opportunity work in to partnership with others reduce to the burden long-term of climate-related risks. WHAT WE STAND FOR WE STAND WHAT Z’s physicalZ’s assets, including terminals, pipelines, truck stops and retail sites, were assessed against a range of projected changes New to Zealand’s climate in the year 2040 mid-point (the in line with BEC’s 2060 Energy Scenarios). Both acute (floods, heatwaves) and chronic (changing rainfall patterns, rising sea level) physical impacts were considered. climate-related The key risk causes assets Z’s to were identified as changing rainfall patterns, increased frequency and severity droughts, of and rising sea levels. EnterpriseZ’s Risk Management framework was used assess to the materiality each of risk identified. Material risks are shown in the infographic on the preceding page. theMany of risks identified are not new and now occur in the short term (for example, storm events causing increased and disruptions shipping demurrage the costs). However, likelihood these of events occurring are Increased currently low. likelihood occurrenceof in the medium term and(by 2040) in the long term (by 2060) creates a need integrate the to risk long-term into findings assessment asset planning. Physical risks and opportunities risks Physical TCFD Report year two, two, Report year TCFD continued
Z ENERGY Pg 36 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 39 Pg yrs Rest of NZ FY20: 18% Average age of Z employees FY20: 42 years Auckland FY20: 23% Wellington FY20: 59% 19 60 21 42 (born 1946–1964) (born 1984–1996) (born
(born 1997–present) (born 1977–1983) (born 1965–1980) Gen Z FY20: 3% Millennials FY20: 22% Xennials FY20: 34% Gen X FY20: 25% Baby Boomers FY20: 15% 3 17 22 23 35 60 Male 63% FY20: 12 European FY20: 13% 2 Middle Eastern, Latin African or American FY20: 2% 39 Absenteeism rate Absenteeism FY20: 1.92% 2.2 79 Have a tertiary education 79% FY20: 1 Female 37% FY20: Pacific Islander Pacific FY20: 2% Asian FY20: 14% 15 1 Prefer not to say FY20: 1%
51 dependants Have FY20: 52% 1 Have a disability FY20: 1% 2 Other FY20: 3% 1 Non-binary and Prefer not to say FY20: 1% 3 Māori FY20: 5% 64 NZ European FY20: 60% Here’s what Z would look like if it was a village of 100 people: a village of if it was look like Z would what Here’s WHAT WE STAND FOR WE STAND WHAT We are committedWe reflecting to the diversity of New Zealand with an diversity that so culture inclusive can be fully expressed and manifest in tangible benefits. will lead We the in developingway a Kiwi firm that successful, people being our has being ourselves. Z remains committed building to a genuinely diverse organisation where thesuccess the of company is built upon the diversity people, of thinking, backgrounds. and perspectives achieve this outcome, must we getTo thebest from all our people. This starts with every member the of Z team feeling included and comfortable bringing their best seek We self to work every to day. build a company that accurately reflects thecomposition and diversity the of communities serve. we While are making we good progress, notwe are there yet. Building a diverse and and Building a diverse inclusive Z Diversity Diversity and inclusion Ngā rerekētanga me me Ngā rerekētanga whakaurutanga te
Z ENERGY Pg 38 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 41 Pg TupuToa Part commitment Z’s of increasing to its Māori representation is through internship programme. the TupuToa vision is all about growing TupuToa’s Māori and Pacific leadersfor a greater https://www.tuputoa.org.nz/ Aotearoa: Z is a strong supporter this of programme, having partnered with for the last three years. TupuToa interns Over FY21 had we three TupuToa in the company. interns, Joseph One of Z’s TupuToa spent Ushaw, (Joey) the summer working in Z’s Innovation Refinery. his completed recently has Joey business studies degree from Auckland University with a focus of Technology, on Marketing and Entrepreneurship. Outside of work, he is an accomplished softball player and brought that competitive spirit Z. to He spent his time with us working on the launch of Z Electric, bringing new thinking and some great ideas help to bring this offerto life. TupuToa intern, TupuToa Ushaw Joseph (Joey) A gender-inclusive workplace gender-inclusive A A safe workplace Flexible work and leave representation Leadership Equal pay. Our people and culture This approach further aligns Z’s approach remuneration to with interests. shareholder Despite the challenges the of year and reduced income for members the of Z team, staff satisfactiontheir with remuneration remains high, with people generally feeling fairly paid. The Gender Tick While Z has more do work to in achieving its gender balance goals, it has the right foundations in place do to so. In FY21, Z secured Gender Tick accreditation. the YWCA, by Run the Gender Tick is awarded organisations to who pass an audit policies of and processes to determine that there is no gender bias in the organisation, at: https://www.ywca. org.nz/workplace/gendertick/ Accredited organisations also must demonstrate commitment to: • • • • • based ‑ While performance any incentives that were due be to paid in FY21 were abandoned, previous Z’s approach to changed performance-based also pay in FY21. Historically all staff incentives were calculated a mix company of by performance and individual performance. For everyone excluding the Executive and sales teams, this has been abandoned just of in favour the one aggregate measure that matters: company performance. When the time comes for most Z staffto again be considered for performance remuneration, the primary consideration will be the company’s performance measured against a balanced scorecard reflecting financial performance, safety and wellbeing and the living values. Z’s of A new programme set, to and drive track progress and performance against targets every quarter rather than annually contributed a feeling to clear of focus and accountability. value Lower stopped. was work recognisedWe that individual experiences work of differed in FY21. There was additional demand for some of our people working remotely, — circumstances personal on depending from home schooling children, living to in whānau having flatting environments, to with high health risks. put in place We policies and practices support to some thisof including our wellbeing support (see pages 44–45). Feedback from our people is that uncertain highly a under operating environment, all we lived our values. costsWe cut without cutting headcount; ourselves kept we and our people safe and looked after people’s physical and mental wellbeing; communicated we clearly and effectively andfocused people on work that really mattered. As a result all of these of initiatives, Z’s level staff of engagement over FY21 rose sharply just to below the percenttop-10 global standard, as engagement our Peakon, by measured service from a 94 percent provider, rate. response aggregated to approach A new remuneration from- ‑ up briefings during the initial ‑ Focus on wellbeing and and on wellbeing Focus resilience organisational The wellbeing people Z’s of and the company’s organisational resilience are linked, and been both have areas clear of focus for Z in FY21. posed significant operational Covid-19 challenges Z that were successfully to managed. had urgently all to our We move office-based staff a working into time same the at arrangement home as rapidly gearing up our operational teams — primarily terminal operators and retail service station staffto — operate as essential workers with appropriate protections Covid-19 environment. in a live previousZ’s investments in digital technology and capability paid off immediately, with all office-based staff effectively ablewalkto theout door with their laptop and resume immediate and effectiveremote working. The hardware and software tools provided we for our people worked seamlessly,enabling continued efficient operations. Maintaining culture and living values Z’s remotely was something the company worked hard at through carefully designed internal communications, with regular whole-of-company remote stand lockdown period and beyond. learned use to digitalTeams technology effectively with themany saying quality teamof interaction was at times more focused and more productive than person. in previously In addition our to leaders and teams supporting had we each digital other, tools that supported us across Z. Thanks to our online engagement tool werewe able stay close to what to mattered our to people, with frequent highlighting — engagement of snapshots emergingany issues and allowing rapid response concerns. any to Despite working remotely in a highly receiving environment, uncertain no annual performance incentive and with a significant cost-cutting programme underway, Z’s people thrived. People demonstrated their best leadership and focused on core issues that really mattered. People Leaders valuing diversity and mindsets, collective the translating capabilities, and aspirations their of teams positive into impact; and by together achieving Everyone environment inclusive an embracing where can anyone safely ask a question, propose a new idea and/or feedback. constructive provide Our population represents Aotearoa New Zealand are one the of mostWe inclusive workplaces in Aotearoa New Zealand. is less listeningand more holding tightly one’s own perspective than would we like. In addition specific to Diversity and Inclusion targets, our new Leadership Framework focuses on what it takes leadto in a diverse workplace and get everyone contributing at their best, including: • • These principles also underpin Z’s design. organisational to approach Our Diversity and Inclusion work programme for FY22 is focused on maintaining core Z’s strengths and what is now ‘business as for usual at Z’, example maintaining RainbowZ’s Tick accreditation and sharing our journey with date others.to the same At time, Z will continue its Diversity weave to and Inclusion commitments all of into processesZ’s and frameworks, actively celebrate diversity across all its of operations and continue experiment to increase to with ways representation in key areas. Diversity of ‘the basics’ cementing While and Inclusion, Z has committed to sharpening its focus in accelerating progress in female, Māori and Pasifika has Z particular, In representation. committed the following to two enduring outcomes against which it will measure progress quarterly: • • Against these outcomes, Z has committed the end by FY24 of closing to the gender sitting gap pay (currently at 2% excluding achieving our Executive), a any women, (men, ratio gender 45/45/10 every at non-binary) including — gender career level in Z, and making material uplifts in our representation women of in employees. Māori and roles operational WHAT WE STAND FOR WE STAND WHAT Our strategy to drive diversity diversity drive to Our strategy and inclusion In February 2021 the Executive team approved and discussed considered, Z’s Diversity and Inclusion work programme for the next three years. One the of elements discussed in confirming this plan was the need to promote and encourage diversity of thinking and a more inclusive style of leadership across the company. While our engagement data shows people feel comfortable and free share to their there openly, observations and thoughts be may barriers emerging in which there Z has clear a plan increasingly to build diversity our into business but have we not been as successful as would we like in delivering it. Z has 50:50 a gender split target but we a long get go to to therehave way with a 62:38 male female to ratio. Over FY21 there was an 8 percent increase in women in senior leadership positions percent, 42 to do continue workbut to to have we to build a pipeline talented of women for introduction and into promotion across Z. continue progress make We to on paritypay closed and have the gap to 2 percent. The largest gap outside of our most senior roles is at career level 5 (in a job scale primarily 1–9) of as a result a smallof number historically of highly paid outliers who joined Z from Caltex in 2016. will continue Work in FY22 to further reduce this gap across all levels the business.of In building a more representative business Z has more challenges in particular, In diversity. ethnic building in currently only 3 percent Z people of identify as Māori, against a national population 16.5 of percent, and 1 percent as Pasifika against 9 percent of New Zealand. Over FY21 Z has worked hard embed to Reo and tikanga Māori acrossTe the business and will we undertake a focused and deliberate programme work of in FY22 continue to us drive the towards to diversity seek. we Challenges in diversity Challenges in diversity and inclusion Diversity and inclusion, and inclusion, Diversity continued
Z ENERGY Pg 40 ANNUAL REPORT 2021
ANNUAL REPORT 2021 2021 REPORT REPORT ANNUAL ANNUAL
Z ENERGY ENERGY Z Z 43 43 Pg Pg
Z made donations of $496,200 to support champions in our community, including Z Retail team staff suffering significant financial hardship, in relation to Covid-19 FY21 $496,200 A focused Good in the Hood In 2021, Good in the Hood is back — mark 10 yearswith a twist. Z, of To usingthis year we’re Good in the Hood supportto the 10 organisations our most supported and have customers valued the last decade. over 1 June,From each these of 10 organisations will be receive in to a share $700,000, of being with votes placed as per usual with orange tokens at each Z Retail site. Retailers Z will get chooseto the four charities that they promote in their community and a lot of thefunds will filter back the regions into needed most. it’s where These 10organisations which most have resonated with our customers will be announced later 2021. in May support to continued also have We the outstanding work the of Graeme Dingle Foundation in its commitment to ‘powering up future generations’ both through Good in the Hood and in direct support.corporate to our partners at at partners our to In the context Z chose Covid-19, of not run itsto Good in the Hood community investment programme. Pulling it together 197 sites over a felt like distraction and handing out voting wastokens inconsistent with our safety and wellbeing commitments. Our teams had enoughon their plates. Instead, sought we more to directly in support champions immediately and our donated community. We $337,000 ourto partners at St John Ambulance and $44,000 Wellington to Free Ambulance support to the operation theirof ambulances during lockdown and donated free fuel the New to Zealand Student who Army Volunteer delivered food and essential supplies elderlyto and vulnerable people across our communities. In relation our to use on Retail PPE of sites, needed we some help here. During the initial national lockdown, struggledwe get to our hands on enough initial supply face of masks for frontline workers. Westpac Bank supported providing us by some from their stocks. In return for the masks we made a $20,000 donation fuel of the to via our aviation team, Trust Life Flight which provided the ability complete to 54 missions.over
WHAT WE STAND FOR WE STAND and Subsidiaries Limited Z Energy WHAT 2021 31 March end report Year of their ambulances during lockdown. their ambulancesof during St John Ambulance to support the operation operation the support to Ambulance John St We $337,000 donated Community Hapori We standWe for a resilient and healthy Aotearoa that empowers our youth, whānau. Z and neighbourhoods Z has stood always for supporting the local communities in which are based, we putbut these Covid-19 commitments into much sharper focus. When talked we about the health of our own whānau our focus immediately came onto how could we best support and keep safe those Z frontline workers in our retail service stations. Faced in our communitieswith Covid-19 and our retail operations deemed essential services, it was our frontline whānau that supported their communities and in turn required our support. retailZ’s operations provided an invaluable lifeline in communities many across New Zealand during the periods lockdown, Covid-19 of providing people and families with reliable, safe access to staple essential goods. sales convenience of Year-on-year, store products rose 3.5 by percent as customers looked for a convenient and basics and for shop to comfortable way supermarketavoid queues. With our frontline team serving the public across the country every day, our focus was also on their safety. We ensured plentiful supply personal of protective equipment (PPE) and Perspex was signage clear ensured and screens prominent at every site. All our of sites contactlesshave payments which further protected customers and our staff.
Z ENERGY Pg 42 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 45 Pg FY21: 1.07 FY21: 0.24 FY21: 0.72 FY21: 1.26 FY20: 1.43 FY20: 1.33 FY20: 0.48 FY20: 1.56 FY20: 1.18 FY20: 0.24 based decisions around ‑ 0 Tier 1 and Tier 2 process safety incidents FY20: 1 safety and wellbeing. Over FY21 Z also implemented a new digital safety management system for which operators franchise retail Z’s extendedwe cover our to corporate operations. This new simple and fast system has improved productivity, increased reporting rates and allowed operational Retail our from data for environment more to easily flow back Z and into inform our risk management programmes. Digital innovation and safety and innovation Digital digitalZ’s capabilities are further assisting in how manage we risk Our digitalinternally. systems and capabilities combined risk make information more accessible, easily interpreted and are supporting the business in making better evidence 4 0 Robberies FY20: 14 Number of spills (loss of containment) FY20: 6 Retailers franchisees: and Mini-Tankers Retailers franchisees: and Mini-Tankers Total recordableTotal case frequency* Z employees: Lost time injury frequency* Z employees: million hours Main types of work-related injury: Manual handling trips and Slips FY20: 0 4.01 Work-related fatalities Work-related FY20: Zero * TRCF are and based LTIF on 200,000 hours worked. Robberies decline benefiting is Z where of example Another from previous investments in safety and wellbeing capability and equipment is in retail site robberies. a high From 23 robberiesof in both FY17 and FY18, Z closed FY21 with four. but have That we is four too many, invested $20 up to million in our systems and equipment the last over five years and the safety and wellbeing our of people are benefiting from that. We have a larger network than others in this sector and recorded fewer robberies. The area robberies of is an interesting example the as synergies to in our digital investments. Originally in place deter to ‘drive-offs’ androbberies, our investment in quality digital CCTV equipment continues serve to this function but is also being harnessed deliver to the retail offer. Plate by Pay Number of hours worked (Z employees, retail sites, Mini-Tankers) FY20: 4.1 million hours 3 Motor vehicle incidents FY20: 2 0.90 1.15 In addition our to ‘We’ve got your back’ campaign which run internally have we for much the of last two years, in July 2020 joinedwe Retailers the NZ Against protecting to pledge committed Racism our people from racism and abuse in the https://retail.kiwi/speaking- workplace: up-for-you/diversity ourWeaving commitments Safety to and and Diversity and Community, Wellbeing, umbrella, one under together Inclusion run this campaign have we featuring a openly people talking Retail our of sample of experiences their about honestly and racism on a Z forecourt, how it made them feel and the impact it has. https://z.co.nz/ about-z/what-matters/community/weve- got-your-back/ These stories are a moving reminder all to New Zealanders as what to must we stand against. shared have our We people’s experiences within the broader retail industry onto effective dealways with verbal racial abuse and our retailers have trespassed verbally abusive customers. matters safety Operational The true mark successful of cultural safety operational around leadership measureis to performance during periods change. of With the fuel industry going through the early stages of operational on focus transformation, safety is more important than ever. independent to move increasing Z’s management its of fuel terminals and Refining starting NZ the process of potentially transforming a fuel into import terminal represent areas clear of and ongoing safety focus for Z. the sameAt time, much the of focus on optimising core Z’s business provides risk. operational reduce to opportunities For example, exiting the marine fuel oil barge operations and reducing the human response forecourts in retail on presence both preferences consumer changing to reduce costs, simplify the core business and reduce operational risk. Exiting the crude oil supply chain is another example which, if well managed, will deliver significant cost safety, and simplification benefits. This score places Z in the top 5 percent of companies as measured by our engagement Peakon. service provider, Wellbeing eNPS score Z shared this document widely with and time the at stakeholders government usedit for its own internal preparation for the possibility pandemic-related of impacts: https://z.co.nz/ chain supply assets/20150501-Supply-Chain- Resilience-Report-Final-Low-res.pdf on the horizon atWith the Covid-19 beginning the of 2020 calendar this year, provided useful material around which organiseto our crisis management team and strategic response the rapidly to evolving virus. Supported this original by document well-rehearsedand with a clear, crisis management plan in place, Z operated two crisis management teams — week on, week off — between January and May 2020. As part our of commitment resilience, to activelywe build our crisis management capability and ensure the depth have we peopleof run in crisis to management mode for extended periods — as was required over FY21. virusBy the time the emerged Covid-19 in New Zealand, processes Z’s were clear, stafftheirof were aware responsibilities, technology was tested, and the but smoothly. differently ran organisation Z already offers unlimited sick and leave madewe additional special available leave demands additional people had who for on their the lockdown period. time over Protecting diversity — and diversity Protecting our people Following the 15 March 2019 Christchurch mosque attack in which 51 people were killed, we’ve been seeking not to only foster diversity in our company and communities, but actively to protect it. As a baseline, Z has a strong Discrimination, Bullying and Harassment Policy which clearly sets out our expectations for ensuring conduct protects and celebrates diversity. The Discrimination, Bullying and Harassment Policy can be found in the Corporate Governance section of the Z Energy Investor Centre: https:// investors.z.co.nz/corporate-governance/ governance-overview +66 , Planning for a pandemic Planning for Z had actively prepared for the possibility a pandemicof — alongside a range of other crisis scenarios — and considered the implications on its supply chain. 2015,In May Z commissioned and research independent an published report based on the outbreakEbola of in Africa. Titled Lessons the From West to Relation Outbreak in Ebola African Resilience Supply Chain New Zealand’s Enabled safety system Enabled safety Our safety system drives us to proactively focus on the risks that matter improvement continual the ensures most, ourof operations, and it’s part of everything do. we It drives us meet to our responsibilities as a New Zealand company and our internal standards too. people Capable and courageous know that ourWe people our to are key success and work we together grow to capability and empower them speak to up and actively participate. back We our people 100 percent the calls make to required for safe and reliable operations. Engaged and visible leaders Z, are committed we At providing to workplaces that enable safe, productive work. engaging and Personal accountability for accountability Personal and wellbeing safety Genuine wellbeing can only be achieved when are physically we and emotionally healthy and feel safe in the work that are doing,we as well as being safe and supported in bringing our whole selves to our work. Over FY21 created we and embedded a new wellbeing framework that clearly states our commitments on wellbeing, thecapabilities required manage to wellbeing, both as a company and as individuals, and a range tools of people can use enhance to their own wellbeing. Our Safety and Wellbeing stand is enabled through focus on the following key capabilities: ‑based and directive WHAT WE STAND FOR WE STAND WHAT We standWe for enhancing the lives of our communities. people and Due primarily the health to challenges safety Covid-19, of and wellbeing was the most material issue for and Z its stakeholders the course over of FY21. As such, safety and wellbeing is this throughout covered and referenced report rather than just in this section. This is because, just sought as have we doto with our business, our approach to safety and wellbeing is integrated across all do. that we Z has been, and continues be, to on a safety and wellbeing It is a journey. journey that will never be complete — mustwe never become complacent and must we be always vigilant; but we can acknowledge where made have we progress and where there is more work beto done. In the decade since Z was formed our approach safety to and wellbeing has transformed from a very compliance approach one to in which safety and wellbeing is cultural and increasingly integrated across our business and everything do. we Z has a small, empowered safety and wellbeing team that focuses on building risk management capabilities across the business, which allows key us devolve to elements risk of management back into business. the This devolution the of traditional ‘health and safety’ functions inside Z holds every member the of team accountable for ensuring the safety and wellbeing for. we strive Safety and wellbeing at Z is now more digitally enabled, and mature culturally embedded than it has been ever in the past, and this served us well with at the verythe arrival Covid-19 of end of FY20. Safety and wellbeing Safety Haumarutanga me te hauora me te Haumarutanga
Z ENERGY Pg 44 ANNUAL REPORT 2021 01 02 03
Tō tātou poari Pg 47 Z ENERGY ANNUAL REPORT 2021 REPORT ANNUAL Corporate Governance Statement Covid-19 and its subsequent impacts Covid-19 has required a diverse yet He pūronga have demanded more from the Z Board cohesive governance team and the nā Te Poari than in any other year. It has forced challenges of the year have required The Z Board us to operate differently — in crisis all of the skills we collectively bring to Whakahaere management mode and remotely for the Z Board. much of the year — and to focus on This has been a year in which Z has broad and challenging material issues. benefited from previous commitments On 30 April 2020, Alan Dunn left Z Directors From ensuring the safety and wellbeing to a strong, values-driven culture, a the Z Board after a decade of Corporate of our people and the customers we genuinely diverse organisation and service. Alan brought a strong Governance serve during a national lockdown and strong capability in wellbeing, safety retail focus to the Z Board and has Statement subsequent lockdowns of our biggest and serving our customers. been particularly influential in the Abby Foote Mark Malpass city; to protecting the organisational continued development of the Z retail Joined The unprecedented experience of Joined as at 31 March 2021 resilience of our company; to taking offer and the development of strong 15 May 2013 30 October 2019 the downstream transport fuels concrete steps to firm up our balance customer experience capabilities industry across both the Board and sheet and cut costs during uncertain across the Z team. Z’s management has also served our times. And that is just Covid-19. company well during FY21. The Z Board and management team 46 Over the year the Board has also thank Al for his commitment to This Corporate Governance Statement focused on ensuring Z is well-positioned the Z Board. Steve Reindler Julia Raue seeks to provide insight into how we for a major reorganisation of the Joined Joined have responded to the challenges of 1 May 2017 15 February 2016 industry’s supply chain, overseen the FY21, as well as how we have governed implementation of new legislation the company in service of the issues around the operation of bulk fuel storage most material to our investors and terminals and ensured Z has the right stakeholders. This statement goes well strategy to optimise its core business, beyond the compliance requirements deliver strong returns to shareholders Mark Cross Blair O’Keeffe on our company and seeks to provide a and respond to growing political, Joined Joined high level of transparency into what the investor and community concern 28 August 2015 1 August 2018 Z Board does, how and why. around climate change. The Z Board would welcome any Again in response to uncertainty, feedback on this Statement and how Z has set new standards of corporate we may further improve the quality disclosure to stakeholders and investors Flick Energy Directors Board Committee membership of our disclosure. during Covid-19, helping stakeholders Marcel van den Assum (Chair) The Z Board makes use of a number understand the true impact on our Matt Todd of Committees to ensure a clear focus business and the New Zealand economy. Lindis Jones on particular areas of the business. The following Corporate Governance Aimee McCammon Section references these Committees Aaron Snodgrass at various points and the table under (alternate for Matt Todd) Principle 2, requirement 2.4, outlines This statement goes well beyond Scott Bishop membership of Z’s Board Committees (resigned 31 March 2021) and Director attendance as at the end the compliance requirements of FY21. on our company and seeks to provide a high level of transparency into what the Z Board does, how and why.
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 49 Pg Members the of Z Board with extensive capital market experience worked side-by-side with the Z team on the successful million $347 capital raise in and negotiate to with May/June 2020 Z’s bankers. balance Z’s strengthening to addition In sheet with additional capital during the uncertainty the Board Covid-19, of made a decision the not FY20 pay to final discretion its exercise dividend to and annual any not make to Short Term Incentive bonus payments Z people. to at conditions lockdown managing While theheight the of pandemic, Board Z’s discussions continued management and around the commitment optimise to the core business reducing by costs, holding market share, monetising scale Z’s and carefully managing capital. These four commitments were communicated the market at the to company’s 1H21 results and remain they theoperational focus for the company in FY22. Consistent with these objectives, over FY21, $63 million in costs were cut from the thebusiness. end FY21 of Towards supported had management Board the in making important decisions around thefuture shape the of company and the downstream transport fuels industry. In particular, Z committed supporting to the commercial transition Refining NZ of a fuelto import terminal, and decided to exit marine fuel oil barge operations. The Z Board and management team reflected in depth on the lessons learned lockdown through the Covid-19 in order maximise to the effectiveness itsof leadership and governance in an uncertain and rapidly changing context. The focus for the Board now is on further removing business, core the optimising paying downvolatility, debt and resuming shareholders. to payments dividend Over the year the Z Board decided to align its own processes and procedures with a new performance management system across Z. The year in the Z Board the Z Board in The year Over FY21, the Z Board led the business through the Covid-19 pandemic, while in parallel refocusing the business on delivery of results as the company and the country moved through the crisis. Covid-19 wasWhile a major Covid-19 part FY21, of with a significant and enduring impact on fuel Z’s volumes and earnings, the March 25 began on lockdown national — the last week FY20 Z’s of year and — thecountry returned Alert to 1 on Level 8 June 2020. With the first 10 weeks FY21 of in lockdown, Z was running a critical operational all and chain supply deemed were business its of elements ‘essential services’. All working the Board Z remotely, provided support the Z management to team, which was operating continuously and management crisis existing under its Alongside structures. plan pandemic team, management crisis operational Z also ran a strategic crisis team, with separate team members and structures focusto on the potential longer-term implications pandemic the of Covid-19 on thefuture for Z, for New Zealand and for chains. supply fuel transport global crisisZ’s strategy team was a focus for the Board, and Directors with skills and experience in global supply chain fuels broader the and management industry supported this team. This work also focused on scenario planning, fuel demand forecasting and the potential impacts the of pandemic on operational infrastructure. The Board’s participation in this work was reflected in pandemic Z’s response priorities. The insights generated through this work the and impacts the way the of pandemic were reported were valued by a wide range stakeholders, of including investors. and government central All these of skills are highly relevant and important future. Z’s to Over FY21, the Board focused on increasing its capability in data and customer experience, as well as customer insight, brand and digitisation. These areas focus of will continue into FY22. Last year Z reported it has been seeking an appropriately skilled and qualified new Director with particular skills in customer and data technology, digital experience since June 2019. This search was paused and will due Covid-19 now to resume. The market remains incredibly tight for people with these skills. Increasing the Board’s capability in Sustainability and Clean Energy also remains a focus for ongoing Board development. The Z Board also measures itself on how diverse are as we a group, using a tool. measurement Thought’ of ‘Diversity Using this tool, map we the diversity of both the Board and Z Executive team so fullywe understand how think and we work together and so can we be highly strategic in the recruitment processes for each group.
Focus Focus of future Board learning
Possible Possible focus of future Board appointments
Balanced These skills remain vital future Z’s as to the company resumes dividends, pays down debt and builds a more flexible and resilient organisation. BoardZ’s has particularly strong skills in listed company governance, the liquid fuels industry and infrastructure its increased has management, and capability FY21 over in organisational transformation and management of significant change.
Number of Directors with high and moderate capability
Capability building across the Board personal ongoing through occurs development and Board education programmes in targeted areas. The Board’s commitment ensuring to it has the right skills around capital management served FY21, Z well over with the Board and management working closely andeffectively together with the capital markets and debt providers around recapitalising the company. Moderate Capability Listed company governance company Listed Experience driving best practice in corporate compliance, and risk regulation, governance, ESG. and Retail transformation Retail including business retail the of understanding Deep transformation, experience customer chain, value distribution.supply and Strategic knowledge for scale oil industry fuels the in experience extensive Brings with an emphasis on integrated downstream oil. Sustainability and clean green energy Sustainability strategies limit environmental to alternative with experience including impact energy sources. energy HSE (Health and safety) including safety and health workplace in Experience regulations. and obligations legal of knowledge Customer insight data and brand and data insight Customer Brings extensive capability customer in innovation, marketing. data-driven including systems and brand field and office back – Digitisation retail. physical in technology digital of Application and development app customer-based Expertise in things.internet of Heavy industry business (or similar) (or business industry Heavy construction engineering, in experience Extensive and infrastructure and/or transport and logistics. markets capital and Finance Former CFO or senior executive with extensive cost optimisation financialknowledge strategy, of acumen. commercial and Operating model transformation – balancing balancing – transformation model Operating growth and legacy Former CEO, ideally brings large scale turnaround experience in an entity that has gone through significant change. party review. ‑ High Capability High Key GOVERNANCE Remaining a people- values-based and to committed company future generations Delivering outstanding outstanding Delivering experiences customer positioning while ourselves for future disruption Strategic context aligned to Director capability Creating value for investors focusing by on a safe and profitable business fuel core Directors’ skills matrix 31 Marchas at 2021 The Z Board takes a structured and appointments Board to approach the has Board the ensuring succession, appropriate skills required effectively to execute its The process strategy. of Board’s the reviewing and evaluating skills against what might be required in the future is ongoing and supplemented independent professional, by third How we appoint the Board we How The Z Board, The Z Board, continued
Z ENERGY Pg 48 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 51 Pg Nicolas Williams Manager, General Commercial Joined 7 June 2011 2021. February Andy Andy Baird Manager, General Retail Joined 1 April 2019 Figen Ulgen Ulgen Figen Customer OfficerChief Joined 1 February 2021 Jane Anthony left Z in December 2020 and was replaced as Chief Customer Officerby Figen Ulgen on 1 Lindis Jones Lindis Officer Financial Chief 2010 May 10 Joined Mandy Simpson Mandy Officer Digital Chief Joined 19 February 2019 Debra Blackett Debra and Counsel General Officer Governance Chief Joined 2 June 2015 Julian Hughes Manager, General Strategy and Risk Joined 16 February 2015 Tō tātou kāhui amorangi kāhui tātou Tō Team Our Executive Mike BennettsMike Officer Executive Chief Joined 1 April 2010 Binnie David Supply Manager, General 2014 September 8 Joined Helen Sedcole People OfficerChief Joined 29 January 2018
’ was Z’s Z’s ’ was optimising the agreed that ‘ core unifying single purpose. The Board and Board The team Executive Strong focus and on speed the size of the cost reduction programme Focus on industry structures and in where maximising value particular, Z is relatively advantaged Focus on the operation the of supply chain under the new regulatory regime The value data Z’s of and digital capabilities. The Board and Executive team agreed that ‘optimising the core’ was single Z’s unifying purpose and agreed the metrics that demonstrate achievement this of purpose be to built the OKR into system and management performance for tracking delivery. The priorities agreed deliver to on were: core’ the ‘optimising • • • • Again supporting the tight focus on delivery FY22, into the Z Board and agreedExecutive have a ‘performance contract’ measure to and review progress on these priorities at each Board meeting. More the Z Board broadly, maintained a rigorous focus on risk management including the new year, over risks raised the pandemicby and the evolving change climate by presented challenges and cybersecurity. GOVERNANCE Over FY21 Z rolledout a new system managingof quarterly performance and planning. This system delivers a clear set company-wide of objectives in an results integratedand key (OKRs) system performance of management and tracking delivery. This system requires fortnightly discussions on performance and delivery with each Z team Results member. are recorded in the system allowingfor tracking at both a company and an individual level and all levels in between. The Z Board now uses an aligned performance monitoring process. Based on what it had learned from governing Z virtually through Covid-19, theBoard agreed meet to quarterly for a full two-day in-person meeting (subject external to pandemic context) and meet to virtually for shorter periods in between these in-person meetings. supports meetings in-person Limiting commitmentZ’s reducing to cost, travel, and carbon emissions and provides leadership on these issues and Z’s practices. working flexible The two-day in-person meetings are scheduled allow to for an in-depth review deliveryof and performance the over past quarter and agree to planning for thenext This quarter. system is designed principally support to an overarching focus on delivery and execution. These meetings are largely decoupled from Board Committee meetings, allowing for deep focus rather than a of approach time-constrained more ‘getting through business’ across a range Boardof and Committee meetings. believe theseWe changes will put the Board in the best position most to effectively lead strategy Z’s delivery. In September, the Z Board held a two-day offsitethe with full team.Executive The Z Board, The Z Board, continued
Z ENERGY Pg 50 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 53 Pg labour, debtlabour, bondage, forced marriage, people trafficking, and child labour are not part become familiar with the Code Conduct of when starting at Z. All Z people are expected to highest risk areas and the most direct relationships hold we and then moving deeper into the indirectinto networks supporting our business. set in this document. under its ASX listing at https://modernslaveryregister.gov.au/statements/765/ https://modernslaveryregister.gov.au/statements/765/ at listing ASX its under to, securityto, threats and incidents protect to our people, information and assets. to 11 years 11 to in jail for people trafficking and slavery. with the Protected Disclosures Act 2000. with-our-suppliers/supplier-code-of-conduct/ franchised retail service station operations been have identified as a potential area risk. of neighbourhoods, stakeholders and Government, and contractors and suppliers. suppliers. and contractors and Government, and stakeholders neighbourhoods, might sound. In July horticulture Bay 2020 a Hawke’s labour contractor was sentenced model this behaviour and hold management accountable accountable management hold and behaviour model this It sets clear standards ethical of and appropriate All staff, including behaviour. Directors Investor Centre at: https://investors.z.co.nz/corporate-governance/governance-overview It indicates the expectations all of Z people in relation conflicts to interest, of acceptance of In FY21, Z extended its commitment ethical to conduct publishing by its first Modern In anticipation the of commitment modern to slavery eradication, in July 2020, and the leadership team, are expected hold to each other account to for the standards owned subsidiaries and all Directors, which define we collectively as ‘Z People’. allof individual line managers people. of The Code also sets out obligations Z’s our to commercial conduct, and company assets, information and equipment. a safe and secure business. This Policy enables and be prepare Z to able respond for, to consistent whistle-blowers, for anonymity of assurance the breaches, including ethical gifts, bribery andcorruption, and confidentiality. All Z people are provided with training and adhere the Code to Conduct. of It is a condition entering of and remaining in employment. Z’s of Z’s operations Z’s of or supply chain either directly or indirectly, noting that in New Zealand, employees and subcontractors, parents, subsidiaries and affiliates providing products or services account Z to to for applicable laws, regulations and ethical standards such as Modern the Slavery Act: https://z.co.nz/about-z/what-matters/sustainability/working- Slavery Statement under the Australian Modern Slavery Act 2018 as part Z’s obligations of for these standards being followed throughout throughout followed being standards these for Our Code Conduct of can be found in the Corporate Governance section the of Z Energy Conduct and reserves the right request to documentation that demonstrates compliance. the organisation.” Z has clearly a articulated Code Conduct, of which is one foundation Z’s of documents. Z has an overarching internal Security Policy that supports our commitment operating to Z’s Modern Z’s Slavery Statement outlines how ensuresZ exploitative practices such as forced fulfilling path to a multi-year Z will take this responsibility, starting identifying by the Z launched a new Supplier Code Conduct. of This includes an expectation all of Z commits conducting to regular assessments compliance of with its Supplier Code of This is our code ethical of but behaviour, it goes well beyond ethics. The Code Conduct of also applies secondees, to contractors, consultants, 100 percent- The Code outlines values, Z’s policies, the responsibilities Z as of the employer and those The Code Conduct of also provides a range escalation of procedures for reporting The notion modern of slavery in New Zealand is unfortunately as it not as far-removed Additionally, the CodeAdditionally, outlines some our of obligations related financial to reporting, “Directors should set high standards of ethical behaviour, behaviour, ethical of standards high set should “Directors
conflicts; in all actions; all in property; integrity blowing (for example, where actions of actions where example, (for blowing issuer’s should procedures, issuer an not action is taken); and taken); is action not potential protect and support them, whether or support whether them, and protect to influence employees and directors, and employees influence to such gifts should not be accepted); shareholders and other stakeholders; other shareholders and of theof issuer, as required law, by of corporate information, assets assets information, corporate of gifts are given that are value of in order a whistle blower complied have with the and takes account interests of of and receiving gifts (for example, where attention the to matters before them; and proactively advises any of and in a single policy or more than one policy. that every director and employee: to which the issuer’s directors and b. declares conflicts interest of h. manages breaches the of code. f. adheresf. any to procedures around giving reporting procedures for any breach any for procedures reporting regularly The standards be may contained minimum standards of ethical behaviour should be communicated the to issuer’s PRINCIPLE 1 PRINCIPLE of ethics, and describe the issuer’s namely behaviour, about expectations d. in the case directors, of gives proper employees adhere (a code to of ethics). provided be should Training employees. c. undertakes proper receipt and use g. adheres any to procedures about whistle a. acts honestly and with personal CODE OF ETHICAL BEHAVIOUR: CODE OF ETHICAL e. acts honestly and in the best interests 1.1 – The board should document The code of ethics should outline internal The code of ethics and where find to it The following section refers frequently Z Boardto Charters and the charters for Board Committees, as well as codes, policies and other core corporate documents. All these of documents can be found in the Corporate Governance section the of Z Energy Investor Centre https://investors.z.co.nz/corporate- at: governance/governance-overview compliance with environmental environmental compliance with ‑ How we meet we How these conditions Over FY21, Z has fully complied with the NZX Corporate Governance Code. During the period, no significant fine or beenmonetary has imposed sanction against government any Z by authority. Nor has Z been made that it had aware materialbroken any law. materialZ is not any of aware non regulations.laws and/or On 30 April 2020 Alan Dunn resigned from the Z Board after 10 years of service. The Board is working on filling this vacancy in line with its approach to Board appointments on pages 48–49. Z was granted a waiver from NZX Listing Rule 4.5.1 2020 on May 11 to allow a placement 30 up of to percent of Z shares without requiring approval by shareholders. by resolution ordinary This related equity Z’s to capital restructure response the Covid-19 to crisis. The waiver included a number of conditions such as requiring that existing Z shareholders would be given priority obtainingto a pro-rata allocation in the placement, an application $50,000.00 of to requirement the and shareholder, per of proportions the disclose subsequently investors other and shareholders existing that participated in the Placement and the allocation policy used determine to allocations in the Placement. The NZX ruling stated that it was satisfied that the structure the of proposed Z’s with together placement that such was plan purchase share almost all retail shareholders had a sufficient opportunityto maintaintheir share the in shareholding pro-rata purchase plan alone, and in doing so, met the policy objective underpinning the relevant listing rules. GOVERNANCE The NZX Corporate The NZX Corporate Governance Principles The NZXCorporate Governance Code was launched in 2017 and covers eight principles. These principles seek “reflectto internationally accepted corporate governance practices, which are intended protect to the interests andof provide long-term value to seeking to also while shareholders reduce the cost capital of for issuers”. The Z Board seeks go well to beyond these eight principles in its disclosure and shareholders to reporting and stakeholders. While much this content of has been covered elsewhere in this report (see ‘How report’ we on page 4) alsowe report briefly against each principle for completeness and provide to summary compliance information for those that seek it. How we comply the with we How Code Governance NZX Corporate Tā tātou tautuku ki Ngā Tikanga o Tikanga ki Ngā tautuku tātou Tā Kāwanatanga NZX Rangatōpū
Z ENERGY Pg 52 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 55 Pg backgrounds, experience and thinking. Over FY21 this balance complementary of skills independent Board evaluation. For more information on this skills matrix see page 48. look after investors’ long-term economic interests. long-term look after investors’ experience and perspectives.” skills are on the Z Board at the right time and that it actively manages Board succession. a balance of independence, skills, knowledge, knowledge, independence, of skills, a balance the time needed their to role and meet certification requirements the of NZX and ASX. role. their for appointment as Directors. responsibilities in relation business Z’s to and affairs.The Charter sets theout role, new Directors, is an integral part this of process. proved particularly valuable as the Board balanced the governance significant of risk, Potential candidates are recommended People Z’s by and Culture Committee following Board quality and capacity is, somewhat important. obviously, For context, in Directors are appointed depending on the specific needs the of Board at the time of Directors are also expected continuously to educate themselves effectively to perform It enables general Board oversight, including of management’s implementation of of implementation management’s of including oversight, Board general enables It capacity serve, to reflecting our reliance on strong, engaged, and effective boardsto composition, responsibilities and duties, procedures, powers andand authority, review and accountability the of Board, the Chief Executive Officer andthe team.Executive consultation with external recruiters and are then considered the Board. by expertise the of current Board and the future strategy and business needs be to considered for future appointments. This was updated in February 2021 as part an of diversity the and experience and skills qualifications, independence, Their appointment. theirof thinking are all actively considered and reviewed. charters the of Z Board Committees and governance other key policies and documents. operational, industry and capital structure matters. The Board makes appointments using a rigorous process, and partners in international Director recruitment, ensure to the right Centre at: https://investors.z.co.nz/corporate-governance/governance-overview at: Centre Centre at: https://investors.z.co.nz/corporate-governance/governance-overview https://investors.z.co.nz/corporate-governance/governance-overview at: Centre We are raising our regional expectations for director independence director for expectations regional director our and raising are We Z’s BoardZ’s operates under a written Charter. BoardZ’s Charter sets out how the Board exercises and discharges its powers and Z’s strategic objectives and performance. BoardZ’s Charter describes the procedure for nomination potential of candidates Z has robust processes support to this sentiment. This Charter is important in clarifying the functions governance of and management. The Charter can be found in the Corporate Governance section the of Z Energy Investor They must be free conflicts of interest. of The Board maintains skills a live matrix which records the mix experience of and The Charter outlines the procedure for nomination and appointment Directors. of The Charter can be found in the Corporate Governance section the of Z Energy Investor The Z Board seeks ensure to it is balanced with a diverse and complementary set skills, of A candidate must demonstrate appropriate qualities and experience, be able commit to Assessments Board overall of diversity and thinking styles, including the fit potential of Allnew Directors must undergo induction, familiarise themselves with the BoardZ Charter, January 2021 the world’s Blackrock, largest investor, noted that: “To ensure an effective board, there should beshould there board, effective an ensure “To
the board and management. and board the respective roles and responsibilities of procedure for the nomination and sets out the roles and responsibilities PRINCIPLE 2 PRINCIPLE COMPOSITIONBOARD operate under a written charter which of the board. The board charter should the disclose and distinguish clearly appointment of directors the to board. 2.1 – The board of an issuer should 2.2 – Every issuer shoulda have AND PERFORMANCE: individuals no ability have influence exercise any to or control dealing, over such as to the New Zealand Takeovers Code; the Newto Zealand Takeovers the Generalto Counsel and Chief Governance Officer, or confidentiallytheto to quotedto financial products other any of listed issuer; possession inside of information accept to an offer madeto all shareholders pursuant Updates role to names title for Restricted Persons whom to additional rules apply. Whistleblower service;Whistleblower a superannuation fund or managed fund; Clarity that the Policy does not extend dealings to in securities which over Z Energy Restricted Securities but also if individuals inside have information relating Addition a clause of allowing exceptions for Restricted Persons or employees in Addition a clause of known that any non-compliance the of Policy shouldbe notified Addition a clause of that the Policy applies not only information to concerning theZ Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/ to ensureto that every member the of Z team their of is aware obligations and legal it obvious securities make to it applies and all bonds Z-listed to as well as equities. requirements in relation the trading to in Z securities. The Policy applies all Directors, to Previously the name called the of Policy Policy, has been the Insider updated Trading governance-overview officers, employees and contractorsto Z, who intendto dealRestricted in Z Securities. ensuring compliance with all the regulatory market requirements upon it. Other key changes made the Policy to are: Z’s Securities Trading Policy is SecuritiesZ’s a critical part Trading this commitment. of The Policy aims Z’s BoardZ’s and management are committed the integrity to financial of markets and to The Securities Trading PolicyThe can Securitiesbe found in the Corporate Trading Governance section of • • • • •
GOVERNANCE product dealing policy which applies to PRINCIPLE 1 PRINCIPLE continued all employees and directors. CODE OF ETHICAL BEHAVIOUR: CODE OF ETHICAL 1.2 – An issuer should a financial have
Z ENERGY Pg 54 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 57 Pg 7 3 9 4 11 11 22 45 106 302 476 Total Total 1 1 0 Non Non Disclosed Disclosed Binary/Not Binary/Not Binary/Not 3 3 9 9 6 11 11 61 43 158 292 Male Male 1 1 2 2 11 Names of Directors 45 Blair O'Keeffe Blair Ben Rodgers (retired 5 June 2020) MarkCross Mark Malpass Ben Rodgers (retired 5 June 2020) Stephen Reindler Stephen Grant Glendinning Grant Glendinning Alan Dunn (retired 30 April 2020) Abby Foote 143 183 Julia Raue Julia Julia Raue Julia Julia Raue Julia Female Female Region Employee Type Employee Type Bay of Plenty of Bay Mini-Tankers Driver Mini-Tankers Nelson Fixed Term Fixed Term Bay Hawke’s Permanent Permanent Home OfficeHome Wellington Z SubsidiaryZ Otago Canterbury Z Energy 2015 Limited Z Energy LTI Trustee Limited Trustee Z Energy LTI Z Energy ESPP Limited Auckland by gender by gender sets out processes for annual review the of organisation’s performance against the to increasinglyto build diversity our into business made and have we some progress, there is more be work to done. Please refer pages to for 38–41 more information on policy and how it will be measured. The Board recognises that while Z has a clear plan Other Z subsidiary Directors can be read here: https://investors.z.co.nz/corporate-governance/governance-overview here: read be can Z is committed a culture that promotes to and values diversity and inclusiveness. Z’s commitments in the Diversity and Inclusion space. Diversity Z’s and Inclusion policy This is reflected in our Diversity and Inclusion policy which applies all Z people to and Total number employees of employment by Total contract (permanent and temporary) Total number employees of employment by Total contract (permanent and temporary) them. The issuer should disclose the requirements for the board or a relevant committee of the board set to measurable objectives for achieving policy or a summary of it. diversity policy which includes which policy diversity diversity (which, at a minimum, should address gender diversity) and to assess annually both the objectives and the entity’s progress in achieving 2.5 – An issuer should a written have - 5 5/5 5/5 5/5 5/5 5/5 4/5 SWC - - - - 3 3/3 3/3 3/3 PCC - - - - 4 4/4 4/4 4/4 ARC 7 1/1 7/7 7/7 7/7 7/7 7/7 7/7 Board Board meetings Director Mark Cross Blair O’Keeffe Blair Mark Malpass Stephen Reindler Stephen Total number ofTotal meetings held Abby Foote Alan Dunn* Alan Julia Raue Julia balance between fresh thinking and strong industry knowledge and experience. and knowledge industry strong and thinking fresh between balance including the Chair. There are no executive or non-independent Directors on the Board. the on Directors non-independent or executive no are There Chair. the including introduction foundation Z’s to document, and the ‘Z one-to-one Why’, engagement with six and eight maximum (the under the Z constitution). targetgender Continued split progress 40/40/20. of this target towards will be actively too long’ and seeks a mix levels of experience of across the Board ensure to the right within three years of appointment unless appointment specific of years circumstances three individual apply. within monitors this and plans for succession. Z is very mindful around Directors ‘staying for policies. This year the Board resolved that part the of agreement between Z and individual For details on Directors’ interests in shares and bonds, see page 85. Board profiles can be foundin the Corporate Governance section the of Z Energy Directors attended the following Board and Board Committee meetings during the year Directors will be a requirement hold to the equivalent a year’s of Director’s fee in Z shares Directors also undergo a structured induction and training process which includes an Investor Centre at: https://investors.z.co.nz/corporate-governance/board-of-directors https://investors.z.co.nz/corporate-governance/board-of-directors at: Centre Investor other is Chair the of People and Culture Committee. The Board is committed a to considered in all Director succession planning and recruitment. While there is no formal requirement around maximum Director tenure, Z actively compliance with the Z Constitution, the Board and Committee Charters, and Board each member the of Executive team and the CEO. Z currently has six Directors and typically manages the number Directors of between Z enters written into agreements with all new Directors. Attendance at Board meetings Board at Attendance There are currently six Directors that serve on the Z Board. All are independent, There are currently two women on the Board, one whom of is Chair the of Board, the These agreements establish the terms and conditions of their appointment, including including appointment, their of conditions and terms the establish agreements These *Alan Dunn*Alan retired from Z’s Board on 30 April 2020.
length of service, independence and and independence service, of length information about each director in in director each about information its annual report or onits website, including a profile of experience, GOVERNANCE terms of their appointment. BOARD COMPOSITIONBOARD PRINCIPLE 2 PRINCIPLE written agreementswritten each with newly continued ownership interests and director attendance at board meetings. board at attendance appointed director establishing the 2.4 – Every issuer should disclose 2.3 – An issuer should enter into AND PERFORMANCE:
Z ENERGY Pg 56 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 59 Pg 49 0% 0% 0% 0% 0% 0% 0% 193 256 100% 13 13 Number 22 NA NA % Board % 498 Total Total Total Total Disclosed Non Binary/Not 1% 1% 3% 2% 2% 15% 12% 64% % Employees % 1 0 0 0 100 100 Male Male Non Binary/ Non Binary/ Non Binary/ Non Binary/ Not Disclosed Not Disclosed Not Disclosed Not Disclosed 1 5 0 72 85 303 Male Male Male Male Male Male Male Female Female Female Female Female Female Ethnicity Dependants Middle Eastern/Latin American/African No disclosed Not Return to work rate to Return Retention rate Information Not Provided Māori European NZ European/PākehāNZ Pacific Islander Islander Pacific Other Ethnicity 194 13 12 17 Yes Asian (including Indian and Pakistan) Parental leave leave Parental that were still employed 12 months after their work, to return gender by parental leave ended, by gender ended, by leave parental Return to work and to Return retention rates employees of that took parental gender leave, by Total number employees of that tookTotal parental gender leave, by Total number employees of that returnedTotal work inthe to reporting period after Total number employees of that returnedTotal work after to parental ended leave Total number employees of that wereTotal entitled parental to gender leave, by The ethnicities permanent Z’s of employees and Board at 31 March 2021 The number Z permanent of employees and Board with dependants at 31 March 2021 15 23 460 0% 0% n/a 12% Total 100% 0.81:1 0.91:1 0.97:1 0.88:1 % Board % Auckland Auckland 1 Non 13% 16% 24% 60% 0.87:1 0.92:1 0.66:1 0.95:1 0.95:1 Disclosed Binary/ Not Wellington Wellington % Employees % 4 299 Male 15 19 160 Female in those roles which are predominantly based in regions outside of the main centres. This data has been extracted from Z’s payroll system. Variations across the numbers above are due to the operational side of the business, with more males employed Twenty contractorsTwenty were engaged in the predominantly year, to provide additional digital capabilities. By role By significant location of operation Age Employee Type Employee Type Part Time Exec Pay gap Leader Self of Leader People Full TimeFull Under 30 years 30–50 years 30–50 years Senior Leader On Parental Leave Average baseAverage salary woman man to Above 50 years in this section includes our Executive and whose CEO, higher remuneration influences 3. these figures significantly. these figures significantly. for their individual roles. When excluding our Executive, the gender gap pay across Z in 2. Gender pay ratios ratios Gender pay FY21 was 2 percent the methodology in total. However, that is required be to reported basic of Ratio salary and remuneration women of men to Ratio of basic of Ratio salary and remuneration women of men to for each employee category career levels excluding the Executive, as their remuneration is market rates driven by are set out below. are employed. 1. Significant locations operation of are those regions where at least 20 males and females Our primary method for tracking gender internally pay measures the gap across all The age groups permanent Z’s of employees and Board at 31 March 2021 The ratios female of male to average for pay permanent Z’s employees at 31 March 2021 Total number employees of employment by Total type time and (full part gender by time), *Notes re total employees tables
GOVERNANCE BOARD COMPOSITIONBOARD PRINCIPLE 2 PRINCIPLE continued AND PERFORMANCE:
Z ENERGY Pg 58 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 61 Pg 0% 0% 0% 0% 0% 0% 0% 0% 0% 71% 57% 29% 43% FY20 100% % Board 0% 0% 0% 0% 0% 0% 0% 0% 0% 71% 33% 67% 29% FY21 100% 0% 0% 0% 0% 0% 0% 0% 0% 50% 50% 60% 60% 40% 20% FY20 80% % Exec 0% 0% 0% 0% 0% 0% 0% 0% 20% 80% 60% 60% 40% FY21 40% 1% 1% 5% 3% 2% 2% 14% 13% 15% 37% 23% 62% 63% 60% FY20 1% 1% 1% 3% 2% 2% 12% 15% 16% 24% % Employees % 64% 39% 60% 60% FY21 Ethnicity Pacific Islander Pacific Middle Eastern/Latin American/African Māori Male European Female European/PākehāNZ Non Binary/Not Disclosed Disclosed Binary/Not Non Information Not Provided Under 30 years 30–50 years 30–50 years Gender Other Ethnicity Other Ethnicity Age Group Age Asian (including Indian and Pakistan) Above 50 years Diversity of governance bodies and employees governance of Diversity Notes Percentage individuals of age gender, by and ethnicity The age groups of Board members were incorrectly stated in the FY20 report. The standard deviation of Director age is 6.86 years. 60 40 113 285 Number Education Level None or unknown or None Post Graduate Post Secondary Tertiary learning resources and a community practice. of In addition, capability has been built system. management learning Number of employees by education level by Number of employees into clearinto road maps parts for the key our of business, prioritise what matters most implementation the of Z How has been built, initially focusing on idea management. immediate families. in partnership with Microsoft embed to Microsoft 365 and upskill our people in digital skills will be rolled out in FY22, beginning with our senior leaders. with our Segment Managers and Experience Owners in the development strategies of with our corporate workforce able seamlessly to transition working to remotely without fit for purpose this revised framework is for leading through increasingly volatile times. model designed have we this year which will allow us manage to and ideas evaluate micro-credentials training for the Wharf Terminals to Attendant role, and intends to product managers. A product management capability framework has been developed Blended learning programmes been have tailored for frontline operations staff at EAP Services Limited provides career coaching and is available all staff to andtheir Experience innovation and digitisation. (CX), learning A CX-blended is pathway and effectiveevaluationthe of that initiatives deliver on strategy. Working of (WOW)Ways principles been have further developed and embedded across Z, with coaches our WOW building agile, lean and human-centred development embeddedcapability. have We these principles within the Z How — the operating and then deliver this at pace on a rolling quarterly cadence. E-learning support to the expectations leadership. of Everyone at Z is a Leader demonstrated and Covid-19 how expand the programme if this is successful. available for all staff, over and 80 percent completed have Our previous it work so far. capabilities via a scenario-based learning programme paid off we as entered lockdown, an impact on productivity. recently have targetedWe capability for build specialist in CX roles, starting with and is now in use for development planning for product managers, supported online by Outplacement and career coaching services are provided CDL by Insight Consulting. Z delivers training and programmes through online learning modules using SAP’s Litmos revisedZ’s Leadership Framework was launched early in FY21 reflect to changing Z’s capability-ledZ’s strategy relies on all people developing their capability in Customer Terminals and the BiodieselTerminals plant. Z has partnered with Otago Polytech EduBits add to A Learning and Development programme which supports all employees develop to these
GOVERNANCE BOARD COMPOSITIONBOARD PRINCIPLE 2 PRINCIPLE continued AND PERFORMANCE:
Z ENERGY Pg 60 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 63 Pg Building the capability Z people of Robberies and risk abuse/wellbeing of staff of management risk operational Retail Safety and Wellbeing/environment risk management risk Wellbeing/environment and Safety Covid-19 — the — potentialCovid-19 for resurgence and safety implications Cyber risk — loss/exposure data customer/sensitive of Cyber risk — loss control/access of Z systems to or data Cyber risk — ransomware. Z’s processZ’s safety management framework activityZ Loyalty (Pumped, FlyBuys, data-driven programmes and offers) behaviour and attending the annual Corporate Governance Symposium. Governance Corporate annual the attending and behaviour have the appropriatehave expertise perform to their duties effectively. including attendingsessions on governing through crisis, the need for clear business including an update on asset management and strategy. structured ‘deep dive’ education sessions on the following issues: setting clear future goals and commitments; a deep the global into dive status and future of Z’s retailfuture Z’s of business. purpose, governing climate change risk, building governance capability, boardroom For FY22, areas targeted specifically for Director development include developing a a developing include development Director specifically for FY22, targeted For areas Individual Directors also pursued a range external of training and development, Individual Directors also conducted as part Z’s of safety ‘walk and talks’ (SWATS) visiting the Te Kora Hou Kora Biodieselvisiting plant, the Te and inspection the of Seaview pier facilities, operational drivers, risk management system including meeting withMini-Tanker Z coherent ESG strategy bringing together all the various activity streams across Z and development future of fuels; further deep dives on climate change risk; and work on the Charter, allCharter, Directors are expected continuously to educate themselves ensure to they Z is committed the continuous to education the of Board. According theBoard Z to This year, the developmentThis year, opportunities for the Board provided Z focused by on • • • • • • • • • • on how best to perform their duties as directors of an issuer. appropriate training remain to current 2.6 – Directors should undertake 1% 1% 1% 1% 1% 5% 5% 2% 2% 7% 4% 0% 0% 0% 0% 0% 21% 61% 18% 18% 74% 54% 54% 34% 56% 39% 65% 30% Rate Rate 46% 1 1 1 1 1 1 1 3 3 4 4 0 0 0 0 0 31 31 14 16 10 47 22 23 26 26 50 42 43 Number Number Region Region Mini-Tankers Driver Mini-Tankers Plenty of Bay Bay Hawke's Nelson OfficeHome Female Male Disclosed Binary/Not Non Female Male Disclosed Binary/Not Non Bay of Plenty of Bay Bay Hawke's Nelson Mini-Tankers Driver Mini-Tankers Home OfficeHome Under 30 years 30–50 years 30–50 years Under 30 years 30–50 years 30–50 years Wellington Wellington Gender Gender Otago Canterbury Canterbury Otago Age Groups Age Age Groups Age Above 50 years Above 50 years Auckland Auckland Auckland Auckland New employee hires and employee turnover and employee hires employee New gender and region and gender gender and region and gender Total number and employee of rate during turnover theTotal reporting period, age by group, Total number andnew of rate employeeTotal hires during the reporting period, age by group,
GOVERNANCE BOARD COMPOSITIONBOARD PRINCIPLE 2 PRINCIPLE continued AND PERFORMANCE:
Z ENERGY Pg 62 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 65 Pg https://investors.z.co.nz/corporate-governance/governance-overview inclusion within the Z Group. This is particularly relevant in the context providing of is responsible performance for the CEO’s The PCC review. approves remuneration CEO enhance its effectiveness in key areas, while still still while areas, key in effectiveness its enhance subject shareholders approval by to as required the NZX by Main Board and Debt subsequently makes recommendations the Board. to The PCC also approves annual Z’s the Board review and to the performance evaluate Board, the of overall the Board policies ensure to support they the delivery strategy Z’s of and business plans. The PCC budget. remuneration meeting procedure is outlined in the ARC Charter. parts the of business, such as Safety and Wellbeing, People and Culture, and Risk. retaining board responsibility.” retaining Market Listing Rules. Management only attend PCC meetings if the invited Committee. by The PCC Charter Board, considering performance the CEO’s review with the Board Chair. Details theseof Committees and Director attendance at their meetings is on page 56. It is the responsibility the of PCC review and to provide oversight diversity of and Investor Centre at: https://investors.z.co.nz/corporate-governance/governance-overview assurance that remuneration Z’s practices are checked for bias and in support of can be found in the Corporate Governance section the of Z Energy Investor Centre at: committee and it operates under a written charter. theof PCC’s role approving involves performance criteria for The the CEO. Board Chair the to remuneration CEO to adjustments other or payments incentive recommends and Committees, and individual Directors, and determine to appropriate Board remuneration Chair the of Board. (100 percent) the of ARC are independent Directors and the Chair the of ARC is not the Z’s commitment closing to the gender gap. pay Z’s PeopleZ’s and Culture Committee (PCC) performs the duties a remuneration of Z’s employeesZ’s only attend ARC meetings at the invitation the of Committee. Committee Z’s AuditZ’s and Risk Committee (ARC) operates under a written All charter. members The PCC guides and reviews People Z’s and Culture and Remuneration strategies. This reviewing involves and short- long-term incentive offers, and structuresZ’s and The PCC agrees on remuneration the Board the of CEO, and the Executive. This element The PCC establishes, develops and oversees a formal and transparent process for The ARC Charter can be found in the Corporate Governance section the of Z Energy The Z Board has a number Committees, of providing specialist areas focus of on core “The board should use committees where this will will this where committees use should board “The executive executive ‑
independent directors. Management Management directors. independent invitation of the audit committee. independent director and not the chair board). least At a majority of the the audit committee should be an remuneration committee which which committee remuneration remuneration committee should be should only attend remuneration should be majority independent and should operate under a written charter. PRINCIPLE 3 PRINCIPLE COMMITTEES:BOARD Membership on the audit committee 3.1 – An3.1 issuer’s audit committee committee meetings at the invitation of the remuneration committee. 3.2 – Employees should only attend 3.3 – An issuer should a have operates under a written charter comprise solely of non of solely comprise directors of the issuer. The chair of of the board. audit committee meetings at the (unless this is carried out the by whole broader Governance The Board review. also agreed that strategic choices will remain in-person Board and Committee meetings, one-on-one interviews with each the of strong collective skill set and all Directors are engaged and contributing The key strongly. using this clarity focus to diversity thought of and enhance Board cohesion. to hinder the Chair’s effective performancetheof role. to each Director privately followed individual by conversations with the Board Chair. framework in place and strong commitment best to practice. It also noted there is a recommendation for the Board was around generating more clarity on future strategy and psychologist, inDecember 2020. noted that systems, policies andprocesses are seen be to in good shape, with a rigorous Directors Executive and team members, key and reviews Board of papers, agendas, Feedback is provided the Board to as a collective, and individual feedback is given are required be to held different by people. addressed at the February Board meeting following the Board’s discussion on the an area focus of FY22. over considered independent, the Board must affirmatively determinethatthe Director does not a disqualifying have relationship or material relationship with Z Energy. evaluation process the of Board Z and Board Committees. As a condition the of Z Board and minutes. One hundred percent the of Board is independent. In order for a Director be to Charter, the BoardCharter, annually reviews and evaluates the performance the of Board, Committees Directors. individual and This had previously been identified as an area Board of focus. strategy Future was The Z Board’s People and Culture Committee is responsible for overseeing the annual This year the Z Board was reviewed independent by experts, including an organisational This process included attendance the independent by assessors at the full set of The outcome the of review was discussed with the Board in February 2021. The report Abby Foote is independent Z’s Chair the of Board. The roles Chair Z’s of and the CEO Additionally, the Chair’sAdditionally, other commitments must not be such are that likely they
independent chair of theboard. If the independent Directors. independent board and committee performance. committee and board GOVERNANCE the CEO should be different people. procedure regularly to assess director, BOARD COMPOSITIONBOARD PRINCIPLE 2 PRINCIPLE continued chair is not independent, the chair and 2.9 – An issuer should an have 2.8 – A majority of the board should be 2.7 – The board should a have AND PERFORMANCE:
Z ENERGY Pg 64 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 67 Pg be supplemented management Z’s by and external advisers at the time. its shareholders. therefore will be better able control to the response takeover process, andrespond approach any to in a professional, timely and co-ordinated Such manner. a response takeover offer. takeover offer. will ensure approach that any is properly managed in the best interests and Z of frameworks, responses, roles and responsibilities. The format for response takeover Z’s management assist to in the effective operational management of any potential pandemic response plans beproved to highly effective and accessible in developing manual is also familiar Z people. to process. response In an of the offer event or approach occurring,the material containedthePolicy in would While acknowledging is a takeover not a crisis, the Z crisis management plans and theof Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/ governance-overview CEO andCEO the CFO, as well as certain other employees who be may in a takeover involved Z adopted its Takeover ResponseZ adopted Policy in 2019 assist its to Takeover the Board and management if Z receives an offer or an approachby a potential acquirerfor a controlling in stake Z. Z has response takeover a manual for reference the Board by and relevant senior Z’s Takeover Response Policy sets out Takeover Z’s specific obligations that apply Directors, to the The purpose the of Policy ensure is to that Z is well-prepared approach for any and The Takeover Response Policy can beThe found Takeover in the Corporate Governance section independent takeover committee. takeover independent takeover offertakeover for the issuer including committee,takeover and the likely procedure be to followed if there is as disclose the scope of independent independent of scope the disclose option of establishing an independent an of implementation and composition 3.6 The – board should establish any communication between insiders insiders between communication any and the bidder. The board should advisory reports shareholders. to appropriate protocols that set out the the out set that protocols appropriate These protocols should include the the include should protocols These judgement, the ability work with other to Directors, fit with the culture Z, of and current business and an increasing focus on holistic wellbeing as well as physical health. has access adequate to resources perform to its functions effectively and efficiently. knowledge, diversity and judgement and appropriatethe of Board. size its name the ‘Safety to and Wellbeing Committee’ reflecting the changes made in the in Artificial Intelligence from Florida (USA) Institute Technology of where she held a including the Chair the of Board, and The the CEO. succession planning strategy succession, particularly senior leaders identified as potential Executive team successors. those Committees. there are appropriate processes identify to and manage risk, financial management and working with McKinsey in her home country, Turkey. progress was made at Z on developing accessible wellbeing resources and leadership. requirements. The PCC also oversees all people policies including remuneration frameworks. responsibilities and has accordingly delegated responsibilities, powers and authority to Figen adds expert proven capability executive in the areas digital of technologies, data Before immigrating New to Zealand and working as Head Analytics of and Insight at Figen holds a Bachelor Science of and Computer Engineering and a Master Science of Fulbright Scholarship. She published her PhD in Machine Learning while studying in Board and Board Committeesensure to the effective compositionof both.The PCC Investor Centre at: https://investors.z.co.nz/corporate-governance/governance-overview of theof Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/ governance-overview concern around organisational resilience and wellbeing. Over the year considerable designed and implemented effectively and are fully compliant with all legislative and listing and analytics, product management and development the Z Executive to team. detail than is possible for the Board as a whole. The Board ensures that each Committee ensuring oversight all of matters relating risk to management, including verification that controls, and the financial accounting, audit and reporting Z. of addresses continued effective composition, necessary and desirable skills,experience, considers factors such as skills, experience, qualification, tenure (if applicable), diversity, and future ability lead to and support strategy. Z’s and recruitment for the Board, Executive CEO, and other agreed people. key Strategy and policies. It provides assurance the Board to that the strategy and policies are Over FY21 the Health Safety Security and Environment (HSSE) Committee changed Countdown, Figen held senior roles executive at Intel and Microsoft in the USA, after Z on 1 February 2021, following the departure Jane of Anthony in December 2020 after years11 in senior management roles. The Board Committee charters can be found in the Corporate Governance section This was a key focusThis was a key for Z duringlockdowns the Covid-19 and is aligned with stakeholders’ The PCC Charter can be found in the Corporate Governance section the of Z Energy The People and Culture Committee (PCC) guides and reviews the People and Culture The Board has appointed three standing Board Committees assist to in carrying out its These Committees assist the Board focusing by on specific responsibilities in greater The Audit and Risk Committee (ARC) has the responsibility assisting of the Board in This year the Board asked see to talent more key as part their of commitment managing to The PCC consults as required appointments with over the CEO the Executive to team. This year Z appointed Figen Ulgen as Chief Customer Officer. Figen beganworking at The PCC directly designs and implements succession Z’s planning for the Board, The PCC identifies and recommends individuals for nomination be to members the of The People and Culture Committee (PCC) assists the Board with succession planning Japan under a Government scholarship. Government a under Japan
independent directors. independent board committees. All committees board), which should operate under a GOVERNANCE the nomination committee should be be should committee nomination the periodically report member attendance. attendance. member report periodically nomination committee to recommend recommend to committee nomination should operate under written charters. PRINCIPLE 3 PRINCIPLE COMMITTEES:BOARD whether it is appropriate any have to written least charter. At a majority of continued of each of its committees, and other board committees as standing 3.5 – An issuer should consider consider should issuer 3.5 An – 3.4 – An issuer should establish a director appointments the to board (unless this is carried out the by whole An issuer should identity the members
Z ENERGY Pg 66 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 69 Pg practice financial reporting and operations Z’s know to whether financial ‑ ‑practice financial and non-financial reporting. Non-financial reporting best best to riskto management from risk Z’s and assurance function and from management. using these frameworks. reporting is fit for purpose. properly maintained, and that the financial statements comply with generally Both the GRI and guidelines
its website. GOVERNANCE PRINCIPLE 4 PRINCIPLE DISCLOSURE: AND REPORTING NZX Code, together with other any key written continuous disclosure policy. disclosure continuous written governance documents, available on on available documents, governance ethics, boards and committee charters charters committee and boards ethics, and the policies recommended in the 4.2 – An issuer should make its code of 4.1 – An4.1 issuer’s board should a have
Z ENERGY Pg 68 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 71 Pg
$- $- Fees $10,000 $10,000 $10,000 $97,000 $20,000 $20,000 $20,000 $81,000 $185,000 $54,000 $45,000 Board Fees $180,000 $180,000 (per annum) (per Position Member Member Member Non-executive Director Non-executive Chair Chair Chair Chair Lindis Jones Lindis Matt Todd Marcel den van Assum Scott Bishop Total Aimee McCammon Aimee People and Culture Committee (PCC) Board of Directors Safety and Wellbeing Committee (SWC) Audit and Risk Committee (ARC) Flick Energy Directors’ remuneration received in FY21 in Energy Directors’ received Flick remuneration were made Flick Energy to Directors. Approved Director remuneration for FY21 for Director remuneration Approved The data in this table relates Flick Energy to Director remuneration. No other payments remuneration policy for remuneration relevant and components remuneration performance criteria. 5.2 – An issuer should a have of directors and officers, which outlines the relative weightings of $9,750 Total $117,000 $117,000 $127,000 $127,000 $127,000 $190,806 remuneration $833 $10,000 $10,000 $10,000 $10,000 $10,000 $20,000 SWC fees $833 $10,000 PCC fees $20,000 -$4,194 $10,000 $10,000 $20,000 ARC fees $8,084 $97,000 $97,000 $97,000 $97,000 $97,000 $185,000 Board fees Mark Cross Mark Mark Malpass Mark Blair O’KeeffeBlair Member, ARC Member, SWC Board of Directors Member, ARC Member, SWC Board of Directors Member, SWC Board of Directors Member, ARC Member, SWC Board of Directors PCC Member, Member, SWC Board of Directors Member, SWC Board of Directors Member, ARC Stephen Reindler Reindler Stephen Chair, Board Directors of Chair, Chair, ARC Chair, Chair, PCC SWC Chair, Abby Foote* Alan Dunn** Alan Julia Raue Directors’ fees is $1,100,000 per annum. increase in the Z Board remuneration was in 2017. these positions. fees and reasonable accommodation travel, and other expenses incurred in the course None the of Z Directors are entitled remuneration any to from Z other than Directors’ No Directors are entitled retirement any to benefits. In addition Directors’ to fees, various Board committees reflect to the additional time and involved responsibilities of of performing duties or exercising powers as Directors. additional fees are paid the Chair to and members for work carried out Directors by on transparent, fair and reasonable.” fair transparent, The current total remuneration pool for non-executive Z’s Directors at 31 March 2021 The Board determined that there would be no increase in Director The last fees this year. * Abby Foote returned $4,194 in Audit andRisk Committee fees paid in error. ** Alan Dunn retired from Z’s Board on 30 April 2020. “The remuneration of directors and executives should be should executives and directors of remuneration “The
be clearly disclosed in the issuer’s GOVERNANCE for approval in a transparent manner. manner. transparent a in approval for 5.1 – An5.1 issuer should recommend PRINCIPLE 5 PRINCIPLE REMUNERATION: director remuneration shareholders to annual report. Actual director remuneration should
Z ENERGY Pg 70 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 73 Pg 1.50 2.50 3.00 2.00 0.00 Extraordinary 1.50 1.00 2.50 2.00 0.00 Exceeds 1.50 1.00 0.50 2.00 0.00 Strong performance
0.00 0.00 0.00 0.00 0.00 Below expectations 0.00 0.00 0.00 0.00 0.00 Unacceptable
performance performance performance Below Below Exceeds Exceeds Extraordinary Individual Individual Unacceptable Strong Strong expectations Company performance Company having delivered outstanding performance in both what was achieved and how they achieved outcomes. it is delivered (behaviours) Leadership behaviours exceed expectations relative to role. role in either delivery against goals or leadershipbehaviours delivery or inconsistent behaviours Below expectations: Performance less than would normally be expected for the role either due to inconsistent Strong performance: Performance fully meets expectations for the role both in what is delivered (results) and how Exceeds: Consistently met expectations in all areas. Performance is measurably ahead of that expected for the Extraordinary: Outstanding contribution to the business made. Generally recognised beyond own team as Notes in the three-year period at least of 25th on the NZX 50. Payment is also subject the to Performance evaluation descriptors are as follows: as are descriptors evaluation Performance scheme which focuses on alignment with long-term shareholder interests using by a share-based incentive a three-year over vesting period basis on aligned an at-risk with senior officers(as disclosed NZX)theto wellas theThis as is CEO. consistent with our Short-term Incentive (STI) scheme at Z FY21 scheme at (STI) Incentive Short-term the achievement definedof performance targets. Again, there are both individual and this period. for the CEO. performance targets and the company must achieve a total shareholder (TSR) return guidelines or requirements ownership stock no are There guidelines. or requirements provided information on the performance targets Z set for and the CEO senior officers in Performance Rights Long-Term Incentive Plan (PRLTIP). This is a share-based Incentive incentive Plan (PRLTIP). Performance Rights Long-Term For shares be to issued under the scheme, participantsmust meet their individual Loans are not provided executives. to Performance measures for long-term equity and cash awards granted in the last fiscal 3. Base salary and the on-target bonus for role. year are published in our annual report each year. company targets. company discretion the of Board. and individual performance is 50% base of salary. If the individual the company’s and/or performanceoverall is below or exceeds expectations a multiplier is applied. commitment an open to and transparent relationship with our shareholders who have expressed increasing interest in remuneration reporting in recent years. also have We STI multiplierSTI matrix for and CEO Executive 2. Individual performance rating Z’s STI cash STI Z’s bonus is based on three things for our and CEO Executive: 1. Company performance ratings • • • • The Executive team and selected senior employees are also eligible for participation in a Thirty percent executives’ of is subject salary the CEO) stock to (excluding ownership The CEO Target bonus amountsThe for Target Z Energy CEO meeting expectations for both company Although it is not required In New Zealand, disclosed have we the remuneration for our Total $631,908 $661,908 $765,000 $568,908 $1,830,908 remuneration Subtotal $126,000 $189,000 $198,000 $229,500 $590,000 $ – $ – $ – $ – $ – Gross LTI Gross LTI 2018–21 period period 2018–21 paid in FY22 for Pay for performance for Pay STI $126,000 $189,000 $198,000 $229,500 $590,000 paid in FY22 for FY21 performance performance FY21 $535,500 $442,908 $442,908 $463,908 Subtotal Subtotal $1,240,908 Total remunerationTotal excludes variances based on previous 12 months accumulative annual leave hourly rates, and loan repayment and tax deduction for LTI. Breakdown of pay for performance for of pay Breakdown by companyby performance the exception the of Executive and Commercial (with Sales in this period. immediate Z also makes a 5 percent family. employer contribution KiwiSaver. to individual’s target. STI While the value the of employee payments STI are solely driven senior officers(as disclosed NZX)the to wellas theThis as is CEO. consistent with our upper quartile the of external market. This means Incentive that with our Short-term top 10 percent the of New Zealand market when people deliver results plan. above the company’s performance and be may paid out at a multiplier two to times zero of an this scheme. provided information on the performance targets Z set for and the CEO senior officers remuneration earned for the respective year performance of rather than remuneration paid as a more appropriate illustrating of way how relates pay performance. to reviews during the reporting period. remuneration specialists. An employee’s base salary is determined from a matrix their of CEO and senior officer total remuneration for FY21 remuneration senior officerCEO and total Every permanent Z employee’s remuneration package comprises a base salary, an year even thoughyear even will they not be paid 2021/FY22. May until commitment an open to and transparent relationship with our shareholders who have expressed increasing interest in remuneration reporting in recent years. also have We We believe in creatingWe a clear link between performance and report reward. We on own performance and their current position in the market and reviewed annually. all our people for working together deliver to these. complexity the of roles. Employees’ payments STI are determined following a review of employees), individual any who is underperforming is not eligible for participation in STI component, and health insurance (with Southern Cross) for themselves and their their and themselves for Cross) Southern (with insurance health and component, STI valuesSTI are calculated as a percentage base of salary and determined based on the One hundred percent employees Z of had regular performance and career development Our model STI is focused on articulating performance goals for Z overall, and rewarding (STI) annual(STI) bonus payment bonus), (cash the total rewards offer we the in are Notes 1. — no Gross payment LTI as performance hurdles were not met. 2. Gross STI — excludes any KiwiSaver contribution. 3. 4. Fixed benefits are 5% employer KiwiSaver contribution and medical insurance. 5. In April 2020, the Executive nominated not to receive a remuneration increase. 6. In May 2020, the Board chose not to pay STI for the entire organisation. CEO and senior officerremuneration Z’s remunerationZ’s position benchmark is to total fixed remuneration the to (base pay) This means this reporting includes cash bonuses earned the course over the of FY21 The base-salary model is informed and adjusted each year based on data from independent This includes both individual targets and company-wide targets. Although it is not required in New Zealand, disclosed have we the remuneration for our Fixed taxable taxable $23,908 $22,908 $22,908 $25,500 $60,908 benefits Salary Salary $510,000 and fees $420,000 $420,000 $440,000 $1,180,000
GM Supply Officer Financial Chief Position GM Retail GM GM Commercial Chief Executive Officer Executive Chief GOVERNANCE PRINCIPLE 5 PRINCIPLE REMUNERATION: continued
Z ENERGY Pg 72 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 75 Pg
FY21 actual FY21 Maximum (extraordinary) FY20 actual
LTI LTI
STI STI
(meets) FY19 actual FY21 On-plan Fixed Fixed
FY18 actual
FY21 Fixed Rem (unacceptable, below) FY17 actual 0 0 Executives’ cap annual — 3 × target bonus CEO) percent (excluding bonus of None the of annual bonus for executives can be deferred No part the of bonus is granted or will be granted guaranteed. None the of annual bonus for is the CEO or can be deferred of theof above-listed company FY21 STI measures CEO’s annualCEO’s bonus cap — 3 × target percent bonus of Our senior officers must meet individual performance targetsthat are direct subsets CEO — maximumCEO 2 × 50 of percent salary of All senior officers — maximumof 2 × 30 percentof salary. 500,000 1,500,000 1,000,000 1,000,000 Remuneration policy and disclosures and policy Remuneration RSLTIP leadership percentage RSLTIP benefits paid in the year noted, and performance payments earned in that year and paid in the following financial year. CEO STI FY21 — 50 percent of salary if Z meets company targets and FY21 — 50 percent targets of salary if Z meets company CEO STI CEO meets individual targets performance for scenario FY21 CEO pay Meets all company targets above, plus demonstrates personal leadership, staff graph shows actual remuneration for the last five years. engagement, stakeholder management, brand ambassadorship and thought leadership. thought and ambassadorship brand management, stakeholder engagement, 2,500,000 2,000,000 2,000,000 3,000,000 5,000,000 The figures in the two graphs salary below are the total current-year of and fixed The first graph shows potential remuneration based on the scenario, and the second 4,000,000 • • • • • • • • Five-year summary CEO remuneration CEO summary Five-year Term Incentive Plan (RSLTIP) Incentive Term ranking 5 or of better. Must achieve at least ‘strong performance’ otherwise each year, pro-rated failures operational significant for discretion Board operational failure Significant Safety and Wellbeing incidents, such as fatalities Significant adverse reputational incidents, such as customer reaction an to Continued employment on the vesting date Outperformance market is rewarded to additional by 200 payout up of to percent for TSR must be higher than the 50th percentile NZX of companies The company’s reputational alignment with being a world-class Kiwi company. level company of performance: RSLTIP 2018–2021 RSLTIP ‑ Long Restricted Share bonuses and determine may that no bonus will be paid in a given year. has been met. Once this threshold has been met, payment is subject the company to Key criteria:Key used repay the participant to loan balances on the vested shares. the principle that there should be strong alignment between shareholder interests and and interests shareholder between alignment strong be should there that principle the those senior Z’s of managers. targets and the company must achieve a total shareholder (TSR) return in the three-year the four strategic objectives which be always safe are to and reliable, deliver awesome was a share-based incentive scheme, not a cash focused bonus payment. TheRSLTIP performance targets. Again, these are both individual and company targets. period at least of 25th on the NZX 50. Payment is also subject the discretion to the of Board. met the required entry level benchmark #25 of within the NZX50. Z actually ranked performance rating. performance rating ‘Strong of performance’ against their individual meet those targets. To STI of payment over discretion complete retains Board The thresholds. nominated rating, the Board assesses result the key areas individually and considers additional any Long-Term Incentive Plan (RSLTIP) that ran from April 2018 March to 2021. Incentive Plan (RSLTIP) The RSLTIP Long-Term For shares vest to under the scheme, participants must meet their individual performance the total shareholder a three-year returns over period not have For the 2018 RSLTIP, Executive are set. In February/March, and the CEO the Board agree on the company objectives beto on alignment with long-term shareholder interests using by a share-based incentive over a three-year vesting period basis on aligned an at-risk with the achievement defined of achieved in the following financial The company objectives year. are targets aligned to income. fuel non-fossil grow and flow cash of heaps generate experiences, customer expectations, individuals must deliver strong performance and exhibit behaviour consistent with values Z’s and leadership framework the course over the year. of achievements beyond plan. beyond achievements Once the company objectives are set, individual objectives for and the CEO each #41, and the Board#41, determined have that no payout will be made. This is consistent with The Board holds absolute discretion on the cash bonuses paid participants, to which are The Executive team and selected senior employees were eligible for the Restricted Share To qualify payment, for any individualsTo must achieve minimum a performance overall The bonus STI is paid only if both the company and the individual achieve these The Board considers the following areas performance of when determining the overall The Board assesses them in April after year end. In determining performance an overall An STI bonusAn STI will be paid only if 85 percent the of annual target company RC EBITDAF • • • • • • • •
GOVERNANCE PRINCIPLE 5 PRINCIPLE REMUNERATION: continued
Z ENERGY Pg 74 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 77 Pg 1 1 1 1 1 1 1 1 1 1 7 2 2 2 2 5 5 5 3 8 21 15 10 32 23 35 34 29 36 40 326 Employees $160,001 $170,000 to $170,001 $180,000 to $180,001 $190,000 to $140,001 $150,000 to $150,001 $160,000 to $190,001 $200,000 to $200,001 $210,000 to $210,001 $220,000 to $220,001 $230,000 to $260,001 $270,000 to $280,001 $290,000 to $290,001 $300,000 to $310,001 $320,000 to $370,001 $380,000 to $380,001 $390,000 to $410,001 $420,000 to $420,001 $430,000 to $430,001 $440,000 to $440,001 $450,000 to $460,001 $470,000 to $530,001 $540,000 to $1,240,001 $1,250,000 to $130,001 $140,000 to $230,001 $240,000 to $240,001 $250,000 to $250,001 $260,000 to $270,001 $280,000 to $110,001 $120,000 to $120,001 $130,000 to $100,000 to $110,000 to $100,000 Total Amount remuneration of
this yearthere were no bonuses paid for the FY20. traditionally employee lower-earning roles call (like centre staff) are presently which is received notes Z during the high the proportion current year. employees of Z employees’ remuneration Z employees’ 326 Z employees (or former employees) received remuneration and other benefits benefits other and remuneration received employees) former (or employees Z 326 over $100,000over in their capacity as employees during FY21, as set out in the table below. employees. It would also normally include and short- long-term performance bonuses awarded at the end the of previous financial year and paid in this financial however year, disclosure on Executive Remuneration that reflectsperformance in FY21, not all of outsourced other to New Zealand-based organisations. (65 percent) earning $100,000 above reflects business Z’s model decisions. For example, The total number corporate of employees is 498, are permanent. which of 476 This includes salary, settlement payments and redundancy payments for all permanent This disclosure is based on actual amounts received in the year and differs thefrom
159.85 52.08 Mar-21
Mar-20
Mar-19
Mar-18 Mar-17 New Zealand NZX 50 (TSR) solicitation commitments (applying suppliers Z’s to and employees) and a ‑
Z Energy Mar-16 0 Pay gap: fixed CEO Pay remuneration Z permanent to ratio employee median fixed remuneration is 10.5:1 and STI LTI) (excludes Explanation elements key of TSR of methodology: as explained above informationAny that has been omitted: no material information is omitted none included: not benefits Any benefits: terms CEO any of Key Z has agreed Bennetts’ Mike pay to reasonable accommodation and living expenses in Wellington, and reasonable expenses travel for national (particularly travel between Wellington and Auckland). hasMike agreed nonto restraint trade of (restricting him from involvement in the downstream oil industry in New Zealand). Both these of generally apply for 12 months after the end his of employment as The restraint CEO. trade of does not apply is made if Mike redundant amountsAny withheld/clawed back: none Summary estimates any of used: none Remuneration that uses related parties: none. 50 150 100 200 Total Shareholder (TSR) Return Total v NZX 50 assumingZEL dividend reinvestment The target CEO bonus amount for strong performance both company by and individual is 50 percent base of salary. The numbers in the graphs on page 75 indicate the multiplier applied an employee’s to performance. individual and company on depending bonus disclosures Required • • • • • • • • Z granted an additional payment four to Executive team members in FY21, rewarding them for additional crisis management work. The notice period for if the the CEO Z Board terminate was to the employment contract is four weeks. Explanation of remuneration policy and items in scenario charts scenario in items and policy remuneration of Explanation Five year summary — TSR performance TSR — summary year Five For measuring total company performance, Shareholder (TSR) Return Total is the metric This determines whatfor proportion RSLTI. shares of vest. relativeZ’s TSR ranking as shown below is determined based on where Z ranks against other companies in the NZX 50 at the end the of three-year term the of scheme.
GOVERNANCE PRINCIPLE 5 PRINCIPLE REMUNERATION: continued
Z ENERGY Pg 76 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 79 Pg lost time injuries; spills ground; to robberies; fuel quality incidents; process safety behalf the of Board. broader linkages between those risks. If a riskis not deemed the right level have to hazard facilities. incidents; food safety incidents; total Z’s recordable case frequency; and motor vehicle incident frequency. individual business-unit risk profiles. The ARC account takes into specific risks and stakeholders, and much the of Board and management focus team’s the year was over theARC and managing changes any the rating enterprise to of risks. General Z’s Manager, the Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/ facilitating regular reviews and updates and the CEO to the ARC. protecting the safety and wellbeing our of people, customers, communities and our Because business, Z’s the of of nature safety and wellbeing risks are an area of More information on commitment Z’s Safety to and Wellbeing is available on pages https://investors.z.co.nz/announcements/nzx-announcements at: Centre Investor Energy Management regularly reports the Board to on principle enterprise risks through a series Each year, it approves and subsequentlyEach year, monitors the annual risk and assurance plan on It takes account into the internal and external environment, changes in the likelihood at Z, consistent with Risk Z’s Management Policy and the Board’s risk appetite, including continuous focus. Safety Z’s and Wellbeing Committee oversees health and safety risk and is responsible for all risks that could cause harm people to or the environment arising from operations Z’s and activities. economy in light risks of associated with Covid-19. enterprise plan, receives assurance and performance reports, monitors implementation Operational Z’s of Risk Management system, and oversees the management major of operational data, which is available on Investor Z’s Centre. These indicators are: a recent example this of being in which the way Z is managing climate-related risks. enterprise risks and ensure resources are being appropriately allocated the to development controls of and mitigants for these risks. riskof deep dives. These entail the Executive risk owner discussing one or two risks with a detailed risk control plan for each. assurance. The Board is responsible for effectiveness the overall riskof managementZ’s and internal control systems, setting enterprise-risk appetite, and annually reviewing enterprise risks. governance-overview and consequence ratings existing of enterprise risks, new risks, emerging risks and the controlof in place, a treatment plan is identified and implemented manage to the risk. Strategy and Risk, is responsible for providing a single framework for risk management Similarly, if additionalSimilarly, risk assessment or review is required then this will be identified; Over FY21 safety and wellbeing emerged as the most material issue concern of to Z’s SafetyZ’s and Wellbeing Committee approves an annual Safety and Wellbeing Z discloses its Safety and Wellbeing indicators quarterly the market in its to quarterly Z’s RiskZ’s Management Policyprovides clarity on roles and responsibilities for risk and 44–45. The quarterly operational data can be found in the Announcements section the of Z This year, the ARC introducedThis year, a new ‘risk watchlist’ the highest to priority principle The is CEO responsible for promoting a culture proactively of managing risks, reporting to The Risk Management Policy can be found in the Corporate Governance section of The Audit and Risk Committee (ARC) is responsible for oversight, monitoring and reviews. manages its health and safety risks and management. and performance risks, should report on its health and safety 6.2 – An issuer should disclose how it 1 1 1 1 1 1 1 2 3 3 6 21 Employees $350,001 $360,000 to $120,001 $130,000 to $130,001 $140,000 to $200,001 $210,000 to $210,001 $220,000 to $230,001 $240,000 to $270,001 $280,000 to $100,000 to $110,000 to $100,000 $110,001 $120,000 to $140,001 $150,000 to $160,001 $170,000 to Total Amount remuneration of Flick Energy employees’ remuneration employees’ Flick Energy potential and material risks.” and material potential include all remuneration and benefits. and remuneration all include in early FY22 ensure to their salaries remain appropriate for the role and skills required. suspicious transactions). transactions). suspicious wellbeing and effective risk management areas — always of strong management and financial risk, including core financial controls, treasury, delegated authorities, and from Management and the Board during FY21. In that context, the consideration safety, of protecting and enhancing the wellbeing of people. of wellbeing the enhancing and protecting reputational, people, culture and climate-related) and business risk (insurance and receive a base remuneration increase in FY21. Their remuneration will be reviewed again 5.2.requirement has appropriate processes that identify and manage and identify that processes appropriate has material risks faced by the issuer and how to manage to how and issuer the by faced risks material Risk and Assurance has a primary focus on enterprise risk (commercial, strategic, legal, However, facing into the uncertainty into However, facing the Executive and Covid-19, of nominated CEO not to Further details about remuneration CEO and benefits are available under Principle 5, and Safety and Wellbeing. and systematic approach to identifying and managing risk, and ensuring independent and and independent ensuring and risk, managing and identifying to approach systematic and objective views on the design and operational effectivenessof internal controls. accordance with Risk Z’s Management Policy during the reporting period. Naturally, governance focus been at Z — have particularly heightened the period. over We reportWe on income the CEO’s for the year performance, of as opposed the date to of payment. Safety and Wellbeing has a primary focus on operational and infrastructure risk and Covid-19 was a criticalCovid-19 principal enterprise risk requiring significant dedicated attention them. The Board should regularly verify that the issuer the that verify regularly should Board them. The Z’s RiskZ’s and Assurance system recognises two principal functions: Risk and Assurance, Z has an enterprise Risk and Assurance system, designed ensure to a proactive, consistent, Z considers that it has followed robust enterprise risk management practices in The data in this table relates Flick Energy to permanent employees only and the figures The Board completed base a review the of CEO’s remuneration in April 2020. “Directors should have a sound understanding of the of understanding a sound have should “Directors
business and the issuer’s board should should board issuer’s the and business GOVERNANCE these are being managed. being are these receive and review regular reports. how and business the facing risks management framework for its RISK MANAGEMENT PRINCIPLE 6 PRINCIPLE PRINCIPLE 5 PRINCIPLE REMUNERATION: continued 6.1 – An issuer6.1 should a risk have 5.3 – An issuer should disclose the remuneration arrangements in place for the CEO in its annual report. This should include disclosure of the base salary, short-term incentives and long-term incentives and the performance criteria used determine to performance-based payments. An issuer should report the material
Z ENERGY Pg 78 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 81 Pg by the Generalby Strategy Manager, and Risk. This committee has oversight the of implementation and operation enterprise Z’s of risk management system, and considers internal control systems and procedures. It has full access the the ARC. to Each year, information for direct access our to Corporate Communications and Investor Relations encourage them to engage with the issuer.” the engage with them to encourage shareholders and is committed communicating to with them openly and transparently. basis. continuous a on ideas and perspectives shareholders’ views, Z alsosuits maintains an investor. an accessible social media presence. https://investors.z.co.nz/corporate-governance/governance-overview at: shareholders theimpact might be. Covid-19 of In this context, Z redesigned it seeks the way to through its website but Z will also provide information when in other ways that better purposes and the GM, Strategy and Risk for other purposes. rebuilding and from resuming Covid-19 dividend flows investors. to This report is a meeting provides a form for retail investors engage to with both management and the number questions of were raised. Manager, Z’s Board Z’s Manager, Directors of and General Z’s Counsel and Chief Governance Officer. Board. hybrid Z’s ASM on 18 June attendees 2020 saw 418 (most online). general risk and control matters consistent with the Board’s risk appetite. theof ARC for functional risk and assurance purposes, the CFO for administrative With that commitment comes a commitment listening, to and Z seeks understand to happy talk shareholders. always to to We’re Investor Z’s Centre website contains contact communicate with investors, moving, for example, providing to weekly fuel volume data disclosures instead on of a quarterly basis. continuation these of areas focus. of and stakeholders can access a wide range disclosures, of reports, policies and charters beenas have referenced throughout this Corporate Governance section. engagement with institutional investors whether in person or annual Z’s virtually. All reporting Z’s of company. and corporate information is available electronically Shareholders the option receive to have communications from Z electronically. foster constructive relationships with shareholders that that shareholders with relationships constructive foster Over FY21 therewas a great deal uncertainty of across the capital markets as what to Z’s EnterpriseZ’s Risk and Assurance function reviews and reports on the effectivenessof Z’s startingZ’s position is that shareholders are the owners Z respects the of company. its Z has an Investor Communications Policy which sets out how Z will engage with Z has a comprehensive Investor Centre at www.z.co.nz/investor via which shareholders Z seeks be to open and accessible shareholders to and ensures face-to-face the contact easily can shareholders which through channels multiple provides Z The Enterprise Risk and Control Committee is a management committeechaired The Head Risk of and Assurance has direct access reports the CEO, to the Chair to Technology allowed Technology for questions beto submitted prior orattheto meetingand record a ARC determines the scope and activities Risk Z’s of and Assurance function. At its 1H21At result, Z also outlined clearly the steps and areas focus of for in Z rapidly “The board should respect the rights of shareholders and shareholders of rights the respect should board “The
be disclosed. the ability easily to communicate with the providing including issuer, the issuerthe electronically. stakeholders can access financial access financial can stakeholders PRINCIPLE 8 PRINCIPLE where investors and interested SHAREHOLDER RIGHTS RIGHTS SHAREHOLDER corporate governance information information governance corporate from communications receive to option and operational information and key issuer. about the 8.1 – An issuer should a website have 8.2 – An issuer should allow investors 7.3 – Internal7.3 audit functions should AND RELATIONS: shareholders in relation their to audit. services provided the external by auditor. of the external audit process.” audit external the of to the equivalentto policies reviewed. Relatively minor amendments were made. KPMG with its external auditors. The Policy was reviewed in August2020 following the facts and has impartial judgement on issues related the engagement. to permitted for the external auditor carry to out. prior the engagement to financial that involved oversight. The firm must not allow the provided external Z’s by auditor do not conflict with the independence element the of role. A general set principles of be to applied is provided. maintained, and that external Z’s financial reporting is highly reliable and credible. Financial Markets Authority New Zealand (FMA) report Quality — a Directors’ ‘Audit corporate-governance/governance-overview other assurance services the external by auditor that are permitted as long as these are pre-approved. The Policy also clarifies other services that are not appropriate or are retained as audit Z’s firm and a process was completed in FY21 appoint to a new audit partner. direct compensation its of audit partners for selling other services Z. to communication with external Z’s auditors providing by a formal forum for free and open communication between the Board, Risk Z’s andAssurance function, the external auditors and management. The ARC Charter indicates the different in whichways communication occurs with external Z’s auditors. Governance section the of Z Energy Investor Centre at: https://investors.z.co.nz/ Guide’ on auditor independence and reviews policies of in other listed companies. Z’s externalZ’s auditors attend all ASMs Z’s of and are available answer to questions from Z trusts and relies on KPMG’s internal processes and declarations. Z’s ExternalZ’s Auditor Independence Policy outlines the framework for the relationship The updated External Auditor Independence Policy can be found in the Corporate The Policyoutlines the general requirements for approval external of auditors. The external auditor must held not have a management position at Z within two years The Policyalso outlines the guidelines for ensuring other that any assurance services The ARC must pre-approve all statutory and regulatory audit and related assurance The ARC noted the policy was substantially consistent guidelines with FMA and similar The oversight external Z’s of audit arrangements is the responsibility the of ARC. rolesThe key the of ARC are ensuring that the independence the of external auditors is The ARC Charter states that one the of responsibilities the sustain of ARC is to A firm only may be approved if itis considered full knowledge have to the of relevant Aside from core audit services relating the statutory to and regulatory audit, there are “The board should ensure the quality and independence and quality the ensure should board “The
role. by theby external auditors the to issuer other than in their statutory be provided the by auditors the to and issuer; be impaired;be than their statutory audit roles may the issuer’s external auditors; issuer’s external the committee of any service provided service provided any of committee statutory audit role is not impaired or could reasonably be perceived to audit approval by the issuer’s audit issuer’s audit the by approval external auditors carry to out their to provideto for the monitoring and to addressto what, services if any, for sustaining communication with ensureto that the ability the of (whether type by or level) other include procedures: include GOVERNANCE framework for the issuer’s relationship b. relation the to audit. PRINCIPLE 7 PRINCIPLE with its external auditors. This should d. attend the issuer’s Annual Meeting to in shareholders from questions answer c. a. 7.2 – The7.2 external auditor should 7.1 – The board should7.1 establish a AUDITORS:
Z ENERGY Pg 80 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 83 Pg meeting ‑ to the meeting at: https://investors.z.co.nz/announcements/annual-shareholder at: meeting the to Each year the Annual Shareholders Notice Meeting of is sent shareholders to mail by and email at least 28 before days the meeting. Notices are also made available in the Announcements section the of Z Investor Centre website at least 20 working prior days notices of annual or special meetings special meetings or annual of notices posted on the issuer’s website as soon of quoted equity security holders is holders is security equity quoted of priordays the to meeting. as possible and at least 20 working 8.5 – The board should ensure that the investors and new investors who participated in the Placement so that existing Z shareholders with a broker relationship could participate shareholders would have the opportunity to maintain their pro rata shareholding shareholding rata pro their maintain opportunity to the have would shareholders under the SPP alone. SPP the under pro rata allocations in the Placement NZX Regulation was satisfied that approximately 99 percent existing of Z retail As a condition of the Waiver, the PlacementAscondition a was conducted the of Waiver, on an ‘open access’ basis, existing Z shareholdersAscondition a the of Waiver, were given priority obtain to their Z was requiredAscondition a disclose to the of Waiver, the proportions existing of in the issue 100 of million new fully paid ordinary shares. The Placement issue price investors) (Placement) followed a share by purchase plan The million (SPP). $347 raised shareholders who participated were given priority obtain to a pro rata allocation. Over shareholders, with the remaining new shares issued allocated new to investors, in up to a maximum newup of to Z shares. NZ$50,000 of 6,220 / AU$47,000 Z shareholders to existingto shareholders and new investors at a price NZ$2.90 of per share, resulting were issued at a price NZ$2.806, of being a 2.5 percent discount the five-day to volume weighted average price shares Z’s of traded on the NZX during the last five the of days resolutions at the ASM and shareholders. on voted by raise offer (Waiver). As a partraise offerof its consideration(Waiver). of applicationZ’s Waiver, forthe rely on the waiver from Listing Rule 4.5.1 granted NZX by Regulation 2020. on May 11 represented percent a discount the last to 7.6 of close price on NZ$3.14 2020, of 8 May placement of new shares. new of placement request information from Z can be found under the Shareholder Services section Z’s of Major decisions change that may business Z’s the of nature would be presented as New Zealand Dollar Australian to Dollar exchange on rate the closing date, Australian Dollar applications were capped at AU$46,710. The new shares issued under the SPP NZX Regulation confirmed that the equity capital raise complied with recommendation In total, the new shares issued through the Placement comprised 25 percent of Investor Centre at: https://investors.z.co.nz/shareholder-services/investor-faqs at: Centre Investor 8.4 the of Corporate Governance Code. a registered address in New Zealand or Australia, enabling themeach to subscribe for applied under the SPP with an average application approximately of NZ$9,239. Given the and a discount percent 7.3 of the five-day to volume weighted average price (VWAP) NZ$3.13.of The Placement was conducted on an open-access basis and existing 95 percent the of new shares issued under the Placement were allocated existing to accordance with Z Energy’s allocation policy. comprised million $57.5 in a share purchase plan and a fully underwritten $290 million SPP offer period (includingthe closing date). 2020. The equity capital raise consisted an of institutional placement (including new to Contact information, frequently asked questions, and options receive to alerts and Z was granted a waiver from Listing Rule 4.5.1 in connection with the equity capital Z Energy’s shares prior the completion to the of Placement. This means that Z did not The reasons for this include: The Share Purchase Plan (SPP) was offeredto all eligibleexisting Z shareholders with The Placement was fully underwritten at $2.75 per share, and shares were allocated As stated in this report, Z raised million $347 in additional equity capital in May/June • • • •
GOVERNANCE favourable terms, before further securities should offer further should the right on have vote to major PRINCIPLE 8 PRINCIPLE continued SHAREHOLDER RIGHTS RIGHTS SHAREHOLDER equity securities are offered to to offered are securities equity other investors. capital, issuers of quoted equity existing holders to security equity equity securities of the same class on a pro rata basis, and on no less decisions which change may the nature of the issuer in which they are invested. 8.4 – If seeking additional equity 8.3 – Quoted equity security holders AND RELATIONS:
Z ENERGY Pg 82 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 85 Pg Acquired shares for the year March to 2021 14,255 shares 10,691 shares shares 17,818 10,600 shares 53,685 shares Company Company Flick Energy Limited Energy Flick Regen Limited Merlot.Aero Limited Limited Payroll Education Guam Nominee Limited Limited Shareholders Independent Wipster Limited App Wip (NZ) LimitedCropX Sprout Agritech Limited Limited Yonix Limited Good Connecting Cogo Angel Association Limited Energy Flick Eastland Group Limited Eastland Group Limited and subsidiaries Plus Business Limited (formerly Matt Todd Holdings Limited) Limited Gisvin Limited Energy Flick Z Energy Limited The New Zealand Refining Company Limited Limited Energy Flick Augusto (Augusto, Group Augusto Ventures) New Store, Corner Entertainment, Butter Peanut Pic's Limited Energy Flick Eastland Group Limited Eastland Group Limited and subsidiaries SnodgrassAP Limited Dilworth Trust Foundation Dilworth The Limited Energy Flick Z Energy Limited Limited Energy Flick Number of shares or bonds in which a relevant interest is held Z Energy Limited — 52,040 shares Z Energy Limited — 21,191 shares Z Energy Limited — 18,000 shares Z Energy Limited — 18,100 shares Z Energy Limited — 53,685 shares Z Energy Limited — 15,000 shares Positions Shareholder shareholder and Director Director Shareholder Member Beneficiary a Deed of Indemnity of provided by Group Executive Chief Director Beneficiary a Deed of Indemnity of provided by Officer Financial Chief Director Beneficiary a Deed of Indemnity of provided by Managing Director Advisory board member Beneficiary a Deed of Indemnity of provided by Officer Financial Chief Director and Chairman Trustee and ChairmanBoard Trustee Beneficiary a Deed of Indemnity of provided by Officer Innovation Chief Beneficiary a Deed of Indemnity of provided by
Director Director Marcel den van Assum Matt Todd Jones Lindis McCammonAimee Aaron Snodgrass (Alternate for Matthew Peter Todd) Scott Bishop (Resigned 31 March 2021) Abby Foote Raue Julia Mark Cross Reindler Stephen O'Keeffe Blair Mark Malpass Directors’ interests in share transactions in share Directors’ interests The following Directors disclosed an acquisition or disposal relevant of interest in Z shares or bonds during 31 the year to March 2021: Flick Energy Directors disclosed the following interests in other in named interests Energy Directors companies disclosed 31Flick at March the following 2021: Company Company Z Energy 2015 Limited Pearl Coast Properties Pty Limited Broome International Airport Pty Limited Broome Shared Services Pty Limited HoldingsSteel Limited and Tube ProjectCMUA Delivery Ltd DisposalWaste Services (unincorporated joint venture) D & H Steel Construction Limited Clearwater Construction Limited Massey Joint University/AgResearch Food Science Centre Steering Committee Air New Zealand development at Auckland Airport Airport Limited International Auckland Air New Zealand Limited Energy Meridian Contact Energy Limited Vector Limited Z Energy 2015 Limited Candesco Limited subsidiariesSteel & Tube Auckland Grammar School Board Trustees of HoldingsSteel Limited & Tube Z Energy 2015 Limited Limited Management Asset Milford Milford Funds Limited Chorus Limited Limited Xero Equity Fund Private Puia Tapapa Investment Committee Te of Limited Management Asset Milford Z Energy 2015 Limited Limited Z Energy ESPP Trustee Limited Trustee Z Energy LTI Jade Software Corporation Limited Limited Zealand New Television Limited Group Warehouse The Southern Cross Health Society Southern Cross Pet Insurance Limited Z Energy 2015 Limited Commercial Limited Endzone 2021) March 31 (ended Agency Development Economic Central Napier Port Holdings Limited Port Napier of Limited Central Air Ambulance Rescue Limited Rescue Bay Hawke’s Helicopter Trust Z Energy 2015 Limited Sanford Limited Limited Freightways Positions Director Chair Advisor Independent Shareholder Director Member AttorneyPower of Director Member Shareholder Director Director Chair Director Director Stephen Reindler Stephen Mark Malpass Mark Mark Cross Mark Julia Raue Blair O’KeeffeBlair Abby Foote GOVERNANCE Disclosure of Directors’ of interests Disclosure Directors: Z Additional disclosures Additional Ngā puakanga tāpiri Ngā puakanga
Z ENERGY Pg 84 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 87 Pg 0 % 0 0 100 2.31 8.14 3.61 3.99 0.53 81.42 540,000 410,000 665,000 4,573,000 2,556,000 1,744,000 5,921,000 8,100,000 2,843,000 13,594,000 2,084,000 128,737,000 70,000,000 15,258,000 150,000,000 46,327,000 111,648,000 125,000,000 Number of bonds of Number Number of bonds of Number Number of bonds of Number % % % 100 100 100 5.29 5.60 0.00 8.61 7.56 51.27 6.36 4.20 4.84 10.99 0.00 0.00 26.86 18.40 57.04 22.58 25.45 44.95 2,740,820 18,785,125 42,325,211 20,767,827 11,994,869 423,523,117 520,136,969 Number of shares % 100 0.57 0.96 11.58 14.29 28.33 44.27 0 0 0 52 55 72 35 82 46 983 108 40 264 504 723 215 133 952 184 325 543 171 101 Number of bondholders of Number 7,853 2,535 5,025 2,055 Number of bondholders of Number Number of bondholders of Number 17,740 Number of shareholders of Number Size of holding 1–1,000 Size of holding 1–1,000 Totals Size of holding 1–1,000 5,001–10,000 Size of holding 1–1,000 Totals Totals 1,001–5,000 10,001–50,000 50,001–100,000 over and 100,001 1,001–5,000 100,001 and over and 100,001 50,001–100,000 1,001–5,000 5,001–10,000 100,001 and over and 100,001 1,001–5,000 Totals 10,001–50,000 5,001–10,000 50,001–100,000 10,001–50,000 5,001–10,000 10,001–50,000 50,001–100,000 over and 100,001 Distribution of ordinary bonds and bondholdersDistribution of ordinary 31 MarchAt 2021 ZEL 040 ZEL 050 ZEL 060 Distribution of ordinary shares and shareholders and shares of ordinary Distribution 31 MarchAt 2021 Nil Nil Nil Nil Nil Z ESPP interests notice Date of 27/11/20 18/05/20 8.95% 5.02% at date of notice 85,135 shares for the period ended 31 March 2023 89,189 shares for the period ended 31 March 2023 85,135 shares for the period ended 31 March 2023 103,378 shares forthe period ended 31 March 2023 398,649 sharesfor the period ended 31 March 2023 Z PRLTIP interests Z PRLTIP Percentage of shares held 39,623 shares for the period ended 31 March 2022 41,509 shares for the period ended 31 March 2022 39,623 shares for the period ended 31 March 2022 48,113 shares for the period ended 31 March 2022 185,535 shares for the period ended 31 March 2022 Z PRLTIP interests Z PRLTIP 46,524,110 26,113,002 holding (ordinary Z shares) Z (ordinary holding Number of voting products in substantial 17,946 shares17,946 for the period ended 31 March 2021 Nil 17,143 shares for the period17,143 ended 31 March 2021 19,401 shares for the period ended 31 March 2021 69,351 shares for the period ended 31 March 2021 Z RSLTIP interestsZ RSLTIP 43,893 shares 120,415 shares 120,415 367,076 shares (held shares 367,076 Kammjamby Trust) Interest as holder registered of shares David Binnie David Andrew Baird Nicolas Williams Lindis Jones Lindis Mike Bennetts Mike L1 Capital PtyL1 Ltd Executive team member Accident Compensation Corporation Compensation Accident Substantial product holders product Substantial GOVERNANCE The total number Z ordinary of shares on issue at 31 March 2021 was 520,136,969. According notices to given under the Financial Markets Conduct Act 2013, the following were substantial product holders the of company at 31 March 2021: Substantial productSubstantial holders Payments to an auditor to Payments Z audit fees are set out in note the 7 of Financial Statements. None Z Energy of 2015 Limited, Limited, or Z Energy ESPP Trustee Limited paid amounts for audit any an fees auditor, to Trustee or otherwise, duringZ EnergyLTI the period. Flick Energy Limited paid its auditors a fee $44,000 of (KPMG) plus disbursements. As permitted its by constitution, Z has entered a deed into indemnify to its Directors and its personnel who serve as Directors of related companies for potential liabilities or costs incur may they for acts or omissions in their capacity as Directors Z or of its related companies. Z has a Directors’ and Officers’Liability InsurancePolicy in place.This provides insurancethefor liabilitiestheof Directors and employees Z for of acts or omissions in their capacity as Directors or employees. Neither the indemnity nor the insurance policies cover dishonest, fraudulent, malicious, or wilfulacts or omissions. The Directors disclosed have entry the deed into indemnity of and the Directors’ and officers’ liability insurance in its interestsregister. As permitted its by constitution, Flick has entered a deed into indemnify to its Directors for potential liabilities or costs incur may they for acts or omissions in their capacity as Directors Flick. of Z has a Directors’ and Officers’Liability InsurancePolicy in placethat covers Flick’s Directors. Thisprovides insurance for the liabilities the of Directors Flick of for acts or omissions in their capacity as Directors. The insurance policies do not cover dishonest, fraudulent, malicious, or wilful acts and omissions. The Directors disclosed have entry the deedinto indemnity of and the Directors’ and officers’ liability insurance in its interestsregister. Z did not enter an employment into contract or contract for personal services during FY21 that would be classified as a underMaterial Transaction Listing Rule 5.2.2(e)(i). disclosure and insurance Indemnity Material transactions Material Donations For the year ended 31 March 2021, Z made total donations $683,040of (2020: $874,551). Flick Energy Limited made donations $3,000 of (2020: $1,496) during this period. The senior officers disclosedthefollowing relevant interests in shares at 31 March 2021: Additional disclosures (continued) disclosures Additional and Senior in shares bonds officers’ interests
Z ENERGY Pg 86 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 89 Pg 2.11 1.74 1.32 1.55 1.02 0.31 0.31 1.05 0.31 1.20 3.74 0.61 7.39 1.04 8.27 3.55 5.42 3.28 3.59 3.24 3.88 0.67 0.67 3.45 0.22 3.84 6.36 0.92 0.28 0.58 0.38 8.99 6.89 0.36 0.43 0.43 0.86 6.06 0.44 13.02 33.94 capital capital % issued % issued 871,000 215,000 913,000 725,000 425,000 269,000 250,000 334,000 924,000 465,000 308,000 646,000 300,000 300,000 840,000 460,000 600,000 9,115,000 1,571,000 1,477,000 5,175,000 1,537,000 2,715,000 8,125,000 2,321,000 2,613,000 2,297,000 5,786,000 1,005,000 Total units Total units Total 2,265,000 2,685,000 1,000,000 5,389,000 2,482,000 4,824,000 9,546,000 5,606,000 4,244,000 11,082,000 50,917,000 13,492,000 1-CUSTODY 18 NON RESIDENT DTA 1 Account Account RESIDENT CASH 4 2 4 16 DRP 1-CUSTODY 16 C 2 18 NON RESIDENT DTA RESIDENTNZ C 1 E RESIDENT CASH 3 1 1 E 3 AIL CASH 56413 NZ RESIDENTNZ 28 NR USA USA NR 12 7 Forsyth Barr Custodians Limited Custodial Services Limited Custodians Limited FNZ Custodial Services Limited Holder name Holder name Holder New Zealand Central Securities Depository Limited Custodian Limited Hobson Wealth Custodians Limited FNZ New Zealand Central Securities Depository Limited Custodial Services Limited Custodial Services Limited FNZ Custodians Limited FNZ Custodial Services Limited Custodial Services Limited Custodians Limited FNZ Forsyth Barr Custodians Limited Custodial Services Limited Investment Custodial ServicesInvestment Limited Custodial Services Limited Custodial Services Limited Custodians Limited FNZ (NZ)JBWere Nominees Limited Custodial ServicesInvestment Limited Forsyth Barr Custodians Limited Custodian Limited Hobson Wealth Custodial Services Limited Custodial Services Limited University Of Otago Foundation Trust Sui Fong Chan Forsyth Barr Custodians Limited Custodial Services Limited Hobson Wealth Custodian Limited Hobson Wealth Limited ENFT HeinzKarl Lehmann & Anne Marie Lehmann (NZ)JBWere Nominees Limited JBWere (NZ)JBWere Nominees Limited Custodial Services Limited JBWere (NZ)JBWere Nominees Limited Zhaoxi Lu Custodial Services Limited Custodial Services Limited Green Lane Research & Education Board Fund 1 1 7 7 2 2 3 3 5 5 8 8 6 9 6 9 4 4 11 11 17 17 17 12 12 13 13 15 15 18 18 14 14 16 19 16 19 10 10 20 20 Rank Rank Our 20 largest registered bondholders registered Our 20 largest 31 MarchAt 2021 ZEL 040 ZEL 050 1.71 1.18 1.37 3.37 0.75 3.53 2.42 0.37 3.05 0.62 6.39 2.08 0.55 5.64 0.34 0.86 0.99 0.50 0.60 40.34 capital % issued Holding 1,771,521 5,152,179 1,908,122 3,921,106 6,118,403 7,144,709 3,104,610 2,601,620 2,846,491 8,888,837 3,200,370 4,486,934 12,612,534 29,325,215 18,347,088 17,505,007 10,809,342 33,244,879 15,844,080 209,802,802 Account 1-CUSTODY NZ RESIDENTNZ DRP COLONIAL FIRST STATE INV COLONIAL FIRST STATE RES INST AGENCY LENDING DRP LENDING AGENCY 1 4 1 E Holder name Holder HSBC Custody Nominees Limited (Australia) New Zealand Central Securities Depository Limited CS Third Nominees Pty Limited Citicorp NomineesCiticorp Pty Limited FNZ Custodians Limited FNZ Forsyth Barr Custodians Limited J.P. Morgan NomineesJ.P. Australia Pty Limited Nominee Depository Zealand New BNP Paribas Nominees Pty Ltd JBWere (NZ)JBWere Nominees Limited National NomineesNational Limited Citicorp NomineesCiticorp Pty Limited Pt Booster Investments Nominees Limited Nominees Investments Pt Booster JBWere (NZ)JBWere Nominees Limited BNP Paribas Nominees Pty Ltd Custodial Services Limited Hobson Wealth Custodian Limited Hobson Wealth Custodial Services Limited Hawkesby Management Limited Hawkesby Forsyth Barr Custodians Limited 1 7 2 3 5 8 6 9 4 11 17 12 13 15 18 14 16 19 10 20 Rank GOVERNANCE At 31 MarchAt 2021 Additional disclosures (continued) disclosures Additional shareholders registered Our 20 largest
Z ENERGY Pg 88 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 91 Pg
Pūtea Pūrongo Pūrongo Financial as at 31 March 2021 31 March as at Statements Statements 2.51 1.59 2.74 2.52 5.87 0.32 0.35 5.50 0.28 9.94 0.56 5.60 0.36 0.24 4.96 0.34 0.84 15.14 15.31 10.34 capital % issued 451,000 422,000 346,000 438,000 698,000 300,000 400,000 3,141,000 3,153,000 6,195,000 1,986,000 7,334,000 1,045,000 Total units Total 6,870,000 7,006,000 3,430,000 12,931,000 19,140,000 12,422,000 18,926,000 Account 1-CUSTODY 4 RESIDENT CASH 3 RESIDENTNZ 2 18 16 1 C 1 E DTA NON RESIDENT DTA NON RESIDENTS CASH 28 NR USA 6 32086 Holder name Holder Forsyth Barr Custodians Limited New Zealand Central Securities Depository Limited Custodial Services Limited Hobson Wealth Custodian Limited Hobson Wealth JBWere (NZ)JBWere Nominees Limited Custodial Services Limited Custodial Services Limited FNZ Custodians Limited FNZ Custodial Services Limited Custodial Services Limited Investment Custodial ServicesInvestment Limited Custodial Services Limited Forsyth Barr Custodians Limited FNZ Custodians Limited FNZ Hobson Wealth Custodian Limited Hobson Wealth Custodial Services Limited JBWere (NZ)JBWere Nominees Limited Best Limited Farm Custodial Services Limited JBWere (NZ)JBWere Nominees Limited 1 7 2 3 5 8 6 9 4 11 17 12 13 15 18 14 19 16 10 20 Rank GOVERNANCE ZEL 060 Additional disclosures (continued) disclosures Additional bondholders (continued) registered Our 20 largest
Z ENERGY Pg 90 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 93 Pg 1 - - - - 2 $m 4 17 15 14 (2) 57 74 (15) Total (10) (63) 921 (88) 347 920 335 (131) 602 602 equity (188) (188) 1,011 ------$m 2 2 (4) 18 18 (4) (2) Non- (16) (16) interest controlling ------$m 17 (2) (2) 12 14 15 258 Asset 258 270 270 285 reserve revaluation ------$m 4 4 (1) (1) (5) (5) 17 17 16 reserve Hedging ------$m (1) (1) (5) (5) (6) (6) (2) (8) (2) share reserve Employee ------$m (13) (13) (15) (15) (91) (63) (76) (76) (63) reserve revaluation Investment - 1 ------$m 2 4 15 15 61 61 44 (17) (15) (17) (17) (72) (68) 239 238 (188) (188) earnings Retained Retained ------1 ------1 $m (10) 347 429 767 429 337 430 430 Capital 12 12 15 20 20 Notes Balance at 1 April 2019 Adjustment on initial on initial Adjustment application IFRS 16 NZ of Adjusted balance at 1 April 2019 Net loss for the year Other comprehensive income comprehensive Other Revaluation of investment of Revaluation Disposal of revalued assets revalued Disposal of Revaluation of assets of Revaluation Transactions with owners recorded directly in equity: Share-based payments and own shares acquired Total comprehensive comprehensive Total income for the year Dividends to equity holders equity to Dividends Supplementary dividends to to dividends Supplementary equity holders Tax credit on supplementary on credit Tax dividends Total transactionsTotal with owners recorded directly in equity Balance at 31 March 2020 Balance at 1 April 2020 Net profit/(loss) for the year Other comprehensive income comprehensive Other Revaluation of investment of Revaluation Disposal of revalued assets revalued Disposal of Revaluation of assets of Revaluation Transactions with owners recorded directly in equity: shares Issue of Total comprehensive comprehensive Total income for the year Equity raiseEquity costs Share-based payments and own shares acquired Total transactionsTotal with owners recorded directly in equity Balance at 31 March 2021 of changes in equity Statement 2021 ended 31 March year the for - 2 3 9 4 (2) 14 35 $m 96 50 50 (18) (16) (16) (47) (37) (72) (63) (43) (88) 144 (131) (115) 484 (125) 2020 1,150 5,112 4,987 3,093 - - - 1 1 11 17 17 17 (4) (4) (2) 61 57 74 78 32 28 38 $m 85 43 (15) (10) 143 273 2021 1,149 1,765 3,520 3,435 5 8 6 9 17 13 15 10 3, 7 12, 13 Notes Expenses Purchases crude, of product and electricity expenses lease Net expenses Total Operating expenses Operating Depreciation amortisation and Impairment provision restoration and decommissioning in Increase Share loss of associate of companies (net tax) of expense financing Net Revenue Excise, carbon and other taxes Gain on sale property, of plant and equipment taxation before profit/(loss) Net Primary distribution valueFair movements in interest derivatives rate Taxation expense/(benefit) Taxation year the for profit/(loss) Net company the of owners the to attributable profit/(loss) Net interest non-controlling to attributable loss Net income comprehensive Other Items that will not be reclassified profit to or loss adjustment land and buildings of Valuation investments of Revaluation Disposal of revalued assets revalued Disposal of items that will notTotal be reclassified profit to or loss Items that are or be may reclassified subsequently profit to or loss Cash flow hedge and cost hedging of Other comprehensive income/(loss) net of tax of net income/(loss) comprehensive Other taxation after income/(loss) comprehensive Total company the of owners to attributable income/(loss) comprehensive Total interest non-controlling to attributable loss comprehensive Total Basic and diluted earnings per share (cents) AND SUBSIDIARIES LIMITED Z ENERGY 2021 31 MARCH REPORT YEAR END Statement of comprehensive income of comprehensive Statement 2021 ended 31 March year the for
Z ENERGY Pg 92 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 95 Pg - - - - 1 1 2 17 71 13 (5) 19 24 111 43 96 $m (51) (51) (15) (63) (43) 182 (88) (92) 159 159 (80) 144 (171) 202 (135) (104) (253) (203) (985) 2020 5,156 (3,889) - - - - - 1 1 5 (5) (3) (2) 19 57 22 70 39 26 (11) 90 $m (17) (13) (10) (47) (38) 122 122 (69) 162 143 143 (80) 347 (231) (143) 2021 (995) 3,542 (2,393) 9 21 18 18 10 10 20 20 20 Notes Change in taxation in Change Net cash flow from operating activities Change in accounts payable, accruals and other liabilities Adjustments reconcile to profit net to cash inflow from operating activities Depreciation amortisation and Impairment Share loss of associate of companies (net tax) of Net profit/(loss) for the year Change in ETS units Other activities financing and non-cash, of net investing liabilities, and assets in Changes prepayments and receivable accounts in Change Change in inventories Cash at end of year Cash flows from operating activities customers from Receipts Net increase/(decrease) in cash in increase/(decrease) Net Cash balances at beginning year of Interest received employees and suppliers to Payments Dividends received Dividends Excise, carbon and other taxes paid paid Interest Taxation received/(paid) Taxation Net cash inflow from operating activities Proceeds from sale property, of plant and equipment Lease payments received from leases Cash flows from investing activities sale assets for held Proceeds from Cash flows from financing activities financing from flows Cash shares Issue of raisingEquity costs Net cash outflow from investing activities lease liabilities of Payment Purchase of property, plant and equipment and plant property, of Purchase activities financing from inflow/(outflow) cash Net Purchase investments of Purchase of intangible assets intangible of Purchase Net proceeds/(repayment) from bank facility Repayment of bonds of Repayment Purchase of shares of Purchase Dividends paid owners to the of company Reconciliation of net profit for the year to cash flows from operating activities operating from cash flows to the year for net of profit Reconciliation of cash flows Statement 2021 ended 31 March year the for - - 4 2 19 14 16 19 91 10 74 74 32 26 24 70 48 $m 153 941 158 819 297 282 748 285 628 565 942 602 602 600 2020 1,501 1,032 2,104 2,443 3,045 - - 1 8 (2) 13 21 15 16 77 72 33 25 38 42 94 $m 162 158 816 169 601 570 283 497 859 299 280 605 2021 1,011 1,011 1,013 1,109 1,942 1,083 1,844 2,953 9 9 11 17 17 12 12 13 13 15 18 18 19 19 19 19 10 10 10 Notes Andrew Mark Cross and Audit Risk CommitteeChair, Net assets Net Lease liability non-current liabilities Total Total liabilities Total Long-term borrowing Deferred tax Derivative financialDerivative instruments Represented by: Represented assets Current cash equivalents and Cash prepayments and receivable Accounts receivable tax Income assets Non-current equipment and plant Property, Shareholders’ equity Equity attributable owners to the of company Non-controlling interest equity Total Inventories sale for Assets held assets use of Right Goodwill Derivative financialDerivative instruments Other current assets assets current Total Provisions Intangible assets Intangible Investments assets non-current Other liabilities Current Accounts payable, accruals and other liabilities Derivative financialDerivative instruments Total current liabilities current Total Non-current liabilities Other liabilities Total non-current assets Total assets Total Provisions borrowingsShort-term Lease liability Income tax payable tax Income financialDerivative instruments AND SUBSIDIARIES LIMITED Z ENERGY 2021 31 MARCH REPORT YEAR END Statement of financial position Statement 2021 31 March at Chair Abigail Foote Kate Approved onApproved behalf Board the of 2021 on 5 May
Z ENERGY Pg 94 ANNUAL REPORT 2021 Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 96 Pg 97 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL Notes to the financial statements for the year ended 31 March 2021
(1) Basis of accounting (3) Critical accounting estimates and judgements
Reporting entity The preparation of financial statements requires management to make the following judgements, estimates and assumptions Z Energy Limited is a profit-oriented company registered in New Zealand under the Companies Act 1993 and a FMC Reporting that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Entity for the purposes of the Financial Markets Conduct Act 2013. Z Energy Limited is listed, its ordinary shares quoted on the Refining NZ strategic review (notes 13, 15, 25) NZX Main Board equity security market (NZX Main Board), on the Australian Stock Exchange (ASX) and has bonds quoted on the NZX debt market. On 25 June 2020, Refining NZ announced as part of their strategic review (previously announced on 15 April 2020), that two business model options would be taken forward; a Simplified Refinery model and an Import Terminal System (ITS) model. The financial statements presented are those of Z Energy Limited (the Company, Parent) together with its subsidiaries, interests Both of these models impact Z as a customer and as a shareholder in Refining NZ. in associates and jointly controlled operations (Z or the Group). Refining NZ implemented the Simplified Refinery model on 1 January 2021, reducing available refining capacity by Basis of preparation circa 18% to circa 34 million barrels per annum. These financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand On 17 December 2020, Z issued a notice of dispute under its Processing Agreement with Refining NZ in response to the (NZ GAAP) and part 7 of the Financial Markets Conduct Act 2013. They comply with the New Zealand equivalents to International Simplified Refinery model as the proposition did not allow Refining NZ’s customers to access the full capacity of the refinery Financial Reporting Standards (NZ IFRS) as appropriate for profit-oriented entities and with International Financial Reporting and made no financial adjustment for the reduced capacity. Z received a notice of dispute from Refining NZ under the Processing Standards (IFRS). Z has reported as a Tier 1 entity under the External Reporting Board (XRB) Accounting Standards Framework, Agreement on 18 December 2020 seeking retrospective payment of additional funds up to $70m per annum relating to historic as a listed entity. increases to the fee floor and changes to the capacity of the refinery. These disputes remain unresolved, and in conjunction with The measurement basis adopted in the preparation of these financial statements is historical cost, modified by the revaluation the strategic review, there is a range of potential outcomes that Z does not have complete control over. of certain assets, investments and financial instruments as identified in the accompanying notes. The functional and reporting Financial impact currency used to prepare the financial statements is New Zealand dollars, rounded to the nearest million ($m), unless otherwise Z has assessed the financial impact and disclosure requirements in compliance with NZ IFRS, predominantly NZ IAS 36 stated. The financial statements have been prepared on a GST-exclusive basis except billed receivables and payables, which Impairment of Assets (NZ IAS 36), NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets (NZ IAS 37) and NZ IAS 10 include GST. Events after the Reporting Period (NZ IAS 10). Z has assessed the significant uncertainty of both the outcomes of the Processing Basis of consolidation Agreement disputes and likelihood of a decision by Refining NZ on whether or not to proceed with the conversion to an ITS. This assessment has resulted in Z expensing the processing fee and the fee floor top up for January, February and March 2021. Consistent accounting policies are employed in preparing and presenting the Group financial statements. Intra-group As at 31 March 2021, the fee floor top up amounts for January and February had been paid to Refining NZ. balances and any unrealised income or expenses arising from intra-group transactions are eliminated in preparing the Group financial statements. A change to the ITS model could impact Z on an on-going basis by simplifying the supply chain, which may lead to a reduction in working capital requirements and changes to operating expenditure incurred by the Group. In addition, there are likely to be some one-off conversion impacts, in particular a write-down in the value of any unrefined stock held at the refinery at the time (2) Changes in accounting policies of conversion to an ITS. The accounting policies have been applied consistently to all years presented in these Group financial statements, with the The impact on the Refining NZ Processing Agreement intangible asset has been assessed in note 13. exception of the early adoption of the amendment to NZ IAS 1 ‘Classification of liabilities as current or non-current’ (NZ IAS 1) There will be no impact on the treatment of the investment in RNZ, this will continue to be recognised at the NZX-listed from 1 April 2020 and NZ IFRS 16 Leases (NZ IFRS 16). The early adoption of the amendment to NZ IAS 1 had no impact on share price at balance date, disclosed in note 15. classification of Z’s debt facilities. Z has applied the NZ IFRS 16 practical expedient that permits lessees not to assess whether rent concessions that occur as a direct consequence of the Covid-19 pandemic are lease modifications. The impact is disclosed The impact of events after balance date is disclosed in note 25. in note 3. Climate Change Commission On 31 January 2021, the Climate Change Commission released its draft advice for the emissions budgets, plans and targets that will enable New Zealand to meet two commitments: the 2030 emissions reduction targets as per the Paris Agreement and to be net carbon zero by 2050. A wide range of advice was issued, including transport, heat industry and power, the Emissions Trading Scheme (ETS), forestry and waste. If the draft advice is adopted by Government, transport emissions would be impacted significantly through a variety of initiatives including greater use of public transport, electrifying the vehicle fleet and increased use of low carbon fuels e.g. biofuels and hydrogen. Z has accounted for its assets and liabilities included within the Statement of financial position in a manner consistent with the draft advice, with no revaluation changes required as at 31 March 2021. Once the advice has been finalised by the Climate Change Commission, Z will reassess if there is any impact on valuations within the Statement of financial position. Provisions (note 17) Liabilities are estimated for decommissioning and restoration (D&R) of certain sites of operation. Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 98 Pg 99 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (3) Critical accounting estimates and judgements (4) Replacement cost reconciliation (continued) Replacement cost (RC) is a non-GAAP measure used by the downstream fuel industry to report earnings. RC removes the impact of changes in crude oil and refined product prices on the value of inventory held by Z. Z manages the Group’s performance based Measurement of fair value (notes 12, 15 and 19) on RC. The difference between Historical Cost (HC) earnings and RC earnings is a cost of sales adjustment (COSA), foreign Some of the Group’s accounting policies and disclosures require the measurement of fair values. Land and land improvements exchange, commodity gains and losses and the associated tax impact. are adjusted based on a land inflation index marker (see note 12). Income statement on RC basis Goodwill (note 13) 2021 2020 $m $m Goodwill is an indefinite-life intangible asset and is tested annually for impairment by estimating the future cash flows that the Group is expected to generate. Estimating future cash flows requires key judgements including expected fuel volume growth Revenue 3,520 4,987 or decline, expected future margins, and the discount rate for valuing future cash flows. Expenses Covid-19 pandemic Purchases of crude, product and electricity 1,755 3,005 Excise, carbon and other taxes 1,149 1,150 While some economic impacts of the Covid-19 pandemic have manifested during the year, there remains some uncertainty Primary distribution 50 of the ongoing impact on the Group’s business. 43 Operating expenses (net of foreign exchange and commodity gains/losses on fuel purchases) 334 416 Covid-19 Provisions Total expenses 3,281 4,621 The Group has recorded the following provisions to account for the impacts of the Covid-19 pandemic on the 31 March 2021 RC operating EBITDAF* 239 366 financial results: Share of loss of associate companies (net of tax) 1 - Doubtful Convenience Finished Secondary debts stores product costs distribution 2021 RC EBITDAF 238 366 $m $m $m $m $m Below RC EBITDAF expenses Recognition in the Operating Operating Cost of Operating Depreciation and amortisation 143 144 Statement of comprehensive income expenses expenses goods sold expenses Net financing expense 38 50 Balance at 1 April 2020 17 7 9 - 33 Impairment - 96 Created - 2 1 5 8 Lease depreciation 20 19 Utilised - - (8) (4) (12) Lease interest income (1) (1) Released (10) (9) (2) (1) (22) Lease interest expense 13 17 Balance at 31 March 2021 7 - - - 7 Fair value movements in interest rate derivatives (10) 3 The provisions have been updated to reflect the current estimate of the impact of the Covid-19 pandemic. Movements in the Gain on sale of property, plant and equipment - (2) provision balances since 1 April 2020 relate to actual expenses billed, movement in doubtful debts to reflect current debtor Increase in decommissioning and restoration provision 1 9 balances and latest fuel prices, release of provisions no longer required due to reassessment of expected costs and the Total below RC EBITDAF expenses 204 335 identification of additional distribution costs incurred as a result of the Covid-19 pandemic. RC net profit before taxation 34 31 Doubtful debts Taxation expense/(benefit) 31 (13) The remaining provision is for doubtful debts for the expected impact of recessionary decline caused by the Covid-19 pandemic RC net profit after taxation 3 44 on the debtor balances existing as at 31 March 2021. * Earnings, before interest, taxation, depreciation (including gains and (losses) on sale of fixed assets), amortisation, impairment, fair value movements in interest-rate Commercial customers derivatives and movements in decommissioning and restoration provision (EBITDAF). Z has performed an assessment of credit risk on its largest Commercial customers and provided for these based on a risk weighting. The criteria for the risk rating includes: Reconciliation from statutory net profit after tax to RC net profit after tax • Probability of enduring demand for that customer’s business 2021 2020 $m $m • The ability of the business to access alternative sources of funding Statutory net profit after tax 57 (88) • Z’s understanding and experience with the customer COSA 10 88 Retail customers and sub-tenants Net foreign exchange and commodity (gains)/losses on fuel purchases (61) 68 Z has recorded provisions to account for the estimated financial impact of any defaults. Tax expense on COSA (3) (24) Wage subsidy RC net profit after tax 3 44 The Group received $3.4m of wage subsidies which have been recognised as an offset to salaries and wages within operating expenses, in line with NZ IAS 20 Government Grants. Rent concessions The Group received $0.5m of rent relief as a direct consequence of the Covid-19 pandemic. The Group has applied the NZ IFRS 16 practical expedient as a lessee not to treat the rent relief as a lease modification. $0.5m of rent relief has been recognised in the Statement of comprehensive income and the lease liability has been reduced by $0.5m. Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021 Z ENERGY Pg 100
Pg 101 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (5) Non-controlling interest (7) Audit fees Z owns 70% of Flick Energy Limited (Flick) with 30% owned by non-controlling interest (NCI). Z consolidates 100% of Flick’s Included in operating expenses are fees paid to the auditors (presented in whole dollars): results and presents the portion of profit/(loss) and other comprehensive income attributable to NCI. 2021 2020 $ $ Flick results for the year ended 31 March 2021 Flick Flick 2021 2020 Audit fees $m $m Audit and review of financial statements 348,900 344,000 NCI Percentage 30% 30% Audit and review of 2020 financial statements additional fee 30,000 - Assets Agreed upon procedures — licence fee return 4,500 6,000 Cash 3 4 Cost of stock adjustment review 10,250 10,000 Other current assets 31 2 Total audit fees 393,650 360,000 Intangible assets 2 3 Audit-related fees Other non-current Assets 1 1 Greenhouse Gas Statement reasonable assurance 30,000 - 9 Total assets 38 Total audit-related fees 30,000 - Liabilities Total audit and audit-related fees 423,650 360,000 Trade payables (9) (1) Deferred tax - - Provisions - - (8) Net financing expenses Income tax payable (8) - 2021 2020 Other non-current liabilities - (1) $m $m Total liabilities (17) (2) Financing income Interest income from derivatives 24 40 Net assets 21 7 Interest income from cash 1 1 Net assets attributable to NCI (30%) 6 2 Other finance income 1 1
Revenue 47 39 Total financing income 26 42 Net loss (8) (7) Financing expense Other comprehensive income - - Interest expense on bonds 14 20 Total comprehensive income (8) (7) Interest expense on derivatives 25 42 Interest expense on secured bank facilities 2 5 Total comprehensive income attributable to NCI (30%) (2) (2) Interest expense on USPP notes 16 19 Flick goodwill write-down attributable to NCI - (11) Financing fees 1 1 Other losses attributable to NCI on consolidation (2) (3) Other finance expense 6 5 Total comprehensive loss attributable to NCI (4) (16) Total financing expense 64 92 (6) Revenue Net financing expense 38 50 Revenue from major business activities — fuel and convenience retail Revenue comprises the fair value of consideration received or receivable for the sale of fuel, convenience retail or other, which contains electricity income, in the ordinary course of the Group’s activities. The Group’s performance obligations are typically satisfied when the Group has supplied the product to the customer, the customer has accepted the product and the collectability of the related receivable is reasonably assured. Fuel invoices are raised following delivery and settled in accordance with agreed payment terms. Some international customers are required to pay prior to delivery. Transaction price is based on agreed contract rates and delivered volumes and is allocated on delivery. Convenience revenue is recognised at the time of sale. Transaction price is based on the ticketed or contract price. 2021 2020 $m $m Fuel 3,399 4,870 Convenience retail 65 64 Other 56 53 Total revenue 3,520 4,987 Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 102 Pg 103 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL 2021 2020 (9) Taxation $m $m Taxation expense or benefit is determined as follows: Deferred tax expected to be settled within 12 months (22) (12) 2021 2020 Deferred tax expected to be settled after 12 months (72) (62) $m $m Deferred tax (94) (74) Net profit/(loss) before taxation 85 (125) Less share of loss of associate companies (net of tax) 1 - Imputation credits available for use in subsequent reporting periods are $106m (2020: $118m). Net profit/(loss) before taxation excluding share of earnings from associates 86 (125) Taxation expense/(benefit) on profit for the year at the corporate income tax rate of 28% (2020: 28%) 24 (35) (10) Leases Taxation adjustments: Leases as a Lessee Non-deductible expenditure - 11 Under NZ IFRS 16, Z recognises right-of-use assets and lease liabilities for most property leases. Reinstatement of depreciation on buildings 5 (12) Over-provision in prior periods (1) (1) On inception of a new lease, the lease liability is measured at the present value of the remaining lease payments, discounted Taxation expense/(benefit) 28 (37) using Z’s incremental borrowing rate at that date. The right-of-use assets are measured at an amount equal to the lease liability, and are depreciated over the estimated remaining lease term on a straight-line basis. Z presents the right-of-use assets and lease Comprising: liabilities separately on the face of the Statement of financial position. Current taxation 8 32 Z applies the following practical expedients when applying NZ IFRS 16: Deferred taxation 20 (69) • A single discount rate to a portfolio of leases with similar characteristics; Taxation expense/(benefit) 28 (37) • Exemption to not recognise right-of-use assets for low-value leases; and Deferred tax • Exemption to not recognise right-of-use assets for leases with less than 12 months remaining. Deferred tax assets and liabilities are presented as a net deferred tax asset/(liability) in the Statement of financial position. The movement in deferred tax assets and liabilities is provided below. Nature of lease payments as a lessee Z as the lessee has various non-cancellable leases predominantly for the lease of land and buildings. The leases have varying In March 2020, the Government re-introduced the deductibility of depreciation on buildings for tax purposes, for buildings terms, escalation clauses and renewal rights. On renewal, the terms of the lease are renegotiated. not primarily used for residential accommodation. This amendment applied from 1 April 2020 and the depreciation rate is 2% diminishing value. The impact of this change was assessed at 31 March 2020 to increase the tax base for these assets, Information about leases for which Z is a lessee is presented below: reducing the difference between the carrying cost and the tax base. Both the deferred tax liability and tax expense reduced 2021 Right-of-use assets $m by $12m. This has been reassessed in the current year with an increase in both the deferred tax liability and tax expense of $5m. The comparative balances have not been restated. Balance at 1 April 2020 282 Depreciation charge for the year (20) Property, Derivative plant and Intangible Employee Finance Other financial Other Additions to right-of-use assets 9 equipment assets benefits lease provisions instruments items Total Adjustments to existing right-of-use assets 9 $m $m $m $m $m $m $m $m Derecognition of right-of-use assets - Balance at 1 April 2019 (41) (115) - 4 2 6 1 (143) Balance at 31 March 2021 280 Recognised in the Statement of comprehensive income 12 28 1 (1) 5 11 4 60 Right‑of‑use assets related to leased properties that do not meet the definition of investment property are represented Over-provision in prior as property, plant and equipment. periods in the Statement of 2021 2020 comprehensive income (2) - - - - - (1) (3) Amounts recognised in profit or loss $m $m Reinstatement of depreciation on buildings 12 ------12 Leases under NZ IFRS 16 Lease depreciation 20 19 Balance at 31 March 2020 (19) (87) 1 3 7 17 4 (74) Interest expense on lease liabilities 13 17 Balance at 1 April 2020 (19) (87) 1 3 7 17 4 (74) Lease expense on short-term leases 1 3 Recognised in the Statement of comprehensive income 7 3 - - (3) (17) (3) (13) 2021 2020 Over-provision in prior Maturity analysis $m $m periods in the Statement of comprehensive income (5) - (1) 3 - - 1 (2) Leases liabilities as lessee Reinstatement of Between 0 to 1 year 16 13 depreciation on buildings (5) ------(5) Between 1 to 5 years 80 74 Balance at 31 March 2021 (22) (84) - 6 4 - 2 (94) More than 5 years 203 212 Lease liabilities as lessee 299 299 Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 104 Pg 105 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (10) Leases (continued) (12) Property, plant and equipment
Leases as a Lessor Property, plant and equipment (PPE) is measured at fair value based on periodic valuations, less accumulated depreciation and any impairment after the date of revaluation. Z acts as a lessor for subleases on sites that Z leases. Z assesses each sublease based on the right-of-use asset and expected useful life of the head lease, and where a sublease is for a significant part of the expected life of the lease, Z derecognises part An independent revaluation of all land and buildings (including terminal plants) is undertaken by an independent valuer every of the right-of-use asset and records this as sublease receivable. Sublease receivables are measured using the present value five years using a level 3 fair value methodology in line with the fair value hierarchy. In the years between independent valuations, of the future sublease income, discounted using Z’s incremental borrowing rate at that date. Subleases which are not classified the carrying value of land is adjusted annually by a land inflation index provided by an independent valuer based on recent sales, as being for a significant part of the expected life of the lease or of marginal costs are classed as operating leases. as underlying land values are considered the significant determinant of fair value changes for Z. An assessment of other PPE fair values is also performed annually by Z to assess the underlying assumptions for each asset class and determine whether any Z has receivables from leases as a lessor relating to the lease of premises as shown below: revaluation is required. Additions to PPE after the most recent valuation are recorded at cost. 2021 2020 Operating lease income as a lessor $m $m The last independent revaluation was recorded at 31 March 2017, with the next revaluation scheduled for 31 March 2022. Income from subleasing right-of-use assets 1 1 Depreciation is provided on a straight-line basis. The major depreciation periods (in years) are: 2021 2020 Buildings 9–35 Total lease expenses/(income) as lessor and lessee $m $m Plant and machinery 2–35 Land improvements 14–35 Lease interest income (1) (1) Terminal plant 5–35 Lease depreciation 20 19 Lease interest expense 13 17 Year ended 31 March 2021 Net lease expenses 32 35 Constr- Land and uction improve- Plant and Terminal 2021 2020 in progress Buildings ments machinery plant Total Total (11) Inventories Cost/valuation $m $m $m $m $m $m $m Balance at beginning of year 34 118 319 405 211 1,087 1,046 Inventory is stated at the lower of cost or net realisable value (NRV). The cost of inventories is based on the first-in-first-out Additions 46 - - - - 46 51 principle. NRV is the estimated selling price in the ordinary course of business less applicable variable selling expenses. Inventory Disposals - - (1) (13) - (14) (12) write down at 31 March 2021 was $3m (2020: the impact of Covid-19 drove a significant fall in commodity prices resulting in a Transfers between asset classes (50) 3 3 28 16 - - $53m write down of the closing value of crude and refined products as NRV fell below cost for certain products). The write down Right of use asset ------(8) is recorded in cost of goods sold. Assets held for sale ------(4) Valuation adjustment - - 15 - - 15 14 Balance at end of year 30 121 336 420 227 1,134 1,087
Accumulated depreciation and impairment Balance at beginning of year - (29) (13) (189) (37) (268) (216) Depreciation - (8) (3) (38) (14) (63) (62) Disposals - - - 13 - 13 10 Balance at end of year - (37) (16) (214) (51) (318) (268)
Carrying amounts At 1 April 2020 34 89 306 216 174 819 At 31 March 2021 30 84 320 206 176 816 Included in buildings ($13m) and plant and machinery ($1m) are assets held under finance leases (2020: buildings $16m and plant and machinery $1m). For each revalued class, the carrying amount that would have been recognised had the assets been carried on a historical cost basis are: buildings $48m (2020: $48m); land and improvements $132m (2020: $132m); terminals $149m (2020: $145m); plant and machinery $184m (2020: $191m). Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 106 Pg 107 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (12) Property, plant and equipment (continued) (13) Intangible assets The following table shows the valuation technique used in measuring the fair value of PPE, as well as the significant Goodwill unobservable inputs used. Valuation Goodwill is the excess of purchase consideration and net identifiable assets acquired. Goodwill is not amortised, but it is Inter-relationship between adjustments tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, Asset Valuation techniques during full Significant key unobservable inputs between full by estimating future cash flow considering expected fuel volumes, margin and discount rates. class revaluation unobservable inputs and fair value measurement revaluation Chevron acquisition goodwill Land and Direct capitalisation approach based on Throughput rental rate The estimated fair value Land and land Buildings a sustainable market rental is capitalised (cents/litre) 1.15-2.35 would increase (decrease) if: improvements are On 1 June 2016, Z acquired 100% of the share capital of Chevron New Zealand (renamed Z Energy 2015 Limited), an importer, at an appropriate rate of return or yield (Retail) - throughput margins were adjusted based distributor and seller of transport fuel and related products. The acquisition has strengthened the Group’s fuel network within derived from comparable asset sales. Throughput rental higher (lower). on a land inflation New Zealand. Z recognised $158m of goodwill as part of the purchase price allocation. As at 31 March 2021, an annual impairment The market rental is built up from: rate (cents/litre) 1.00 index marker. - shop rental rates were test of the goodwill was undertaken. The impairment test considered the impacts of Covid-19 on the carrying amount of - fuel throughput margin (truck stop) higher (lower). Land and buildings - estimated shop rental (for non-fuel sales) Shop rental $125-$450 - capitalisation rates were are assessed the goodwill. per square metre for impairment The value ascribed to the land is allocated lower (higher). The recoverable amount of the cash generating unit (CGU) containing the goodwill has been calculated based on the present using a value estimated based on recent Capitalisation rate annually. comparable land sales with the residual 5%-10% value of future cash flows expected to be derived from the CGU (value in use). This was calculated using a Z Board approved value being allocated to buildings. 20 year discounted cash flow valuation (DCF). Significant assumptions within the DCF include: Terminal Depreciated replacement cost approach Cost estimates sourced The estimated fair value Assessed for • Discount rate of 6.3% (real terms), which is the current weighted average cost of capital (WACC) estimated by Z and adjusted plant, and is based on the gross current replacement from contracting would increase (decrease) if: impairment. for lease financing plant and cost, reduced by factors providing for machinery suppliers - cost was higher (lower); • Terminal value growth rate of -5% machinery age, physical depreciation, and technical and cost analysis of - remaining useful life was and functional obsolescence considering recent projects higher (lower); • Future sales volumes which have been estimated based on management’s internal view of industry volumes, informed by an asset’s total estimated useful life and - technical and functional the growth rate assumptions within the Tūī and Kea Energy forecast fuel use scenarios developed by the BusinessNZ Energy anticipated residual value (if any). obsolescence was Council for the period to 2060 (‘BEC2060 Scenarios’) and compared to consensus industry analyst forecasts. The demand lower (higher). profile is more pessimistic than Tūī until around 2030, but more optimistic in the long-run out to 2040. Finance Net present value of contracted rental Discount rate 6.5%. The estimated fair value Assessed for A 20 year DCF has been used instead of a five-year DCF due to the industry life cycle. The headroom between the carrying leases cash flow at lease commencement over Rental payments are would increase (decrease) if: impairment. (buildings) the remaining term of the lease. sourced from lease - Discount rate was amount and the recoverable amount of the CGU has decreased due to the current market conditions, however, there is agreements. lower (higher); still sufficient headroom to conclude that no impairment is required. The discounted cash flows are most sensitive to - Net rental of the lease was the following assumptions: higher (lower); Would the indicated - Remaining term of the Reduction in valuation Increase in valuation sensitivity result in lease was longer (shorter). Change in key assumptions $m $m impairment? Z considers the effects of the Covid-19 pandemic has not had a significant impact on the fair value of land and buildings Discount rate [+/-0.50%] (152) 167 No or terminal plant and machinery. Retail margins [-/+ 1cpl] (138) 138 No Capital expenditure [+/- $10m] per annum (115) 115 No Highest and best use Market demand change [Kea] (771) 102 No Z holds properties where the current market value in use is lower than the highest and best alternative use. However, Z holds these properties as part of its strategic network and, therefore, does not currently intend to change the use of these assets. Z will continue to monitor market conditions on an ongoing basis and make necessary judgement on the need for impairment The assets are recorded at their highest and best alternative-use valuation. of the goodwill. Assets held for sale Brands There are no assets held for sale at 31 March 2021. Brands were acquired as part of the Chevron acquisition and are amortised over six years on a straight-line basis. Contracts and customers acquired Contracts acquired include customer contracts, supply agreements and leases acquired as part of the Chevron acquisition and Flick customers as part of the Flick acquisition. These contracts are amortised over 3 to 21 years on a straight-line basis. As at 31 March 2021, Z undertook an impairment test on the current value of both the Flick and Chevron customer contracts as per the requirements of NZ IAS 36. Despite the challenging electricity market conditions, no adjustment was deemed necessary for the Flick customer contracts as these were appropriately supported by the DCF at 31 March 2021. Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 108 Pg 109 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (13) Intangible assets (continued) Other intangibles Other intangibles include software, franchise rights, domain name and contacts acquired. Acquired computer software licences Chevron customer contracts are capitalised based on the costs incurred to acquire and bring to use the specific software. These costs are amortised over On 1 June 2016, Z acquired the Caltex NZ business from Chevron. Included in this purchase was an allocation of $345m for the three years on a straight-line basis. Contacts acquired are amortised over the useful life of the asset which is up to the lease’s intangible assets relating to the Caltex retail customer contracts. These were valued at the net present value of future cash flows first right of renewal date. Intangible assets with indefinite lives and intangible assets not yet available for use are tested for and amortised over 21 years on a straight-line basis. impairment annually and whenever there is an indication that the asset may be impaired. Under NZ IAS 36, contracts acquired are finite life intangible assets that have a measurable life which can be amortised over a Year ended 31 March 2021 measurable period. Accordingly, accounting standards require this type of asset to be tested for impairment when there is an Software in Contracts Emissions 2021 2020 indicator of impairment due to triggering of a significant event, for example a decline in performance. If this indication is present, progress Goodwill Brands acquired units Other Total Total $m $m $m $m $m $m $m $m an entity is required to make a formal estimate of recoverable amount. Balance at beginning of year 4 158 14 281 261 68 786 668 On the basis that the Covid-19 pandemic has had a significant impact on retailers, an impairment test was carried out as at Additions 14 - - - 136 5 155 336 31 March 2021 using the method and assumptions set out below. Transfers between asset (14) - - - - 14 - - Cash flow projections are based on Z’s forecasts for the year ending 31 March 2022 (FY22 Plan). In estimating the cash flow classes projections beyond FY22, Z has based subsequent years on the fuel volume change implied by management’s internal view of Utilised - - - - (191) - (191) - industry volumes, derived from consensus industry analyst forecasts. This demand profile is slightly more pessimistic than the Reacquired/(leased) - - - - 37 - 37 (37) BEC2060 Tūī scenario until around 2030, but more optimistic in the long run out to 2040, consistent with the demand profile Sale of units - - - - (52) - (52) - used in the Chevron acquisition goodwill DCF model. Impairment ------(96) The assumptions for the 31 March 2021 calculation are as follows: Amortisation - - (7) (32) - (41) (80) (85) • 19-year DCF (previously 20 years, reflecting the roll-forward one year since the previous valuation) with no terminal value Balance at end of year 4 158 7 249 191 46 655 786 • Retail gross margin based on FY22 plan and management’s long-term margin assumptions Cost 4 193 37 445 191 203 1,073 1,124 Accumulated impairment - (35) - (61) - - (96) (96) • Discount rate of 6.5% (real terms), which is the current weighted average cost of capital (WACC) estimated by Z Accumulated amortisation - - (30) (135) - (157) (322) (242) • Future sales volumes which have been estimated based on management’s internal view of industry volumes, informed by the growth rate assumptions within the Tūī and Kea Energy forecast fuel use scenarios developed by the BusinessNZ Energy Balance at end of year 4 158 7 249 191 46 655 786 Council for the period to 2060 (‘BEC2060 Scenarios’) and compared to consensus industry analyst forecasts. The demand profile is more pessimistic than Tūī until around 2030, but more optimistic in the long run out to 2040. (14) Emissions trading scheme Using these assumptions, the recoverable amount as at 31 March 2021 was determined to be $273m, which is $85m more than the carrying amount of $187m, therefore no impairment is required. The Group is required to deliver emission units to a Government agency to be able to sell products that emit pollutants. A provision is recognised in the Statement of financial position and is measured at the average cost of units acquired to Refining NZ processing agreement satisfy the emissions obligation. 2020 On 1 June 2016, Z acquired the Caltex business from Chevron. Included in this purchase was an allocation of $46m for the 2021 Stock of units Units millions Units millions intangible asset relating to the Processing Agreement (The Agreement) Chevron had with Refining NZ. The Agreement was for the processing of crude oil to refined product and distribution of product through the Refinery to Auckland Pipeline (RAP). Balance at beginning of year 10 - The Agreement was valued using a discounted cashflow model of the local refining advantage over importing finished product. Units acquired and receivable 4 6 This was based on Chevron’s then refining capacity allocation of total refinery throughput of ~120kbbl/day. A valuation timeframe Units sold (2) - of June 2016–31 March 2030 was used and the asset value amortised straight line over this term. At 31 March 2021, the amortised Units reacquired/(leased) 1 4 value is $30m. Units surrendered (7) - Under NZ IAS 36, intangibles acquired are finite life intangible assets that have a measurable life which can be amortised over Balance at end of year 6 10 a measurable period. Accordingly, accounting standards require this type of asset to be tested for impairment when there is 2021 2020 an indicator of impairment due to triggering of a significant event, for example a change to the processing agreement. If this Obligation Units millions Units millions indication is present, an entity is required to make a formal estimate of recoverable amount. Obligation payable at 31 March 9 10 The event of Refining NZ undertaking the strategic review has triggered an impairment test to be carried out at 31 March 2021. Management has assessed possible outcomes of the strategic review and disputes, including the potential for Refining NZ The Emissions Trading Scheme obligation of $303m (2020: $246m) is included within accounts payable, accruals and other transitioning to an ITS, and carried out discounted cash flow valuations for various scenarios. Key assumptions used in the liabilities and is valued at cost where units have been acquired to settle the Group’s obligation. Any shortfall in units needed ‘continued refining’ model are a discounting period ending 2035 and refining margins averaging ~5.90 USD/bbl, consistent with to settle the obligation is measured at fair value. Refining NZ’s view on timeframes and refining margins. Key assumptions used in the ITS model are an initial 10-year discounting period with no terminal value and forecast cost differential of ensuring product is available at the locations required. Based on the various potential outcomes of this assessment there has been no impairment identified at 31 March 2021. Emissions trading scheme Units acquired are carried at cost less any accumulated impairment. Refer to note 14 for the number of units held. Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021 Z ENERGY Pg 110
Pg 111 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (15) Investments (17) Provisions The Group’s investment in Refining NZ is recognised at the NZX-listed share price at 31 March 2021 of $0.47 (2020: $0.78) giving Decommissioning and restoration (D&R) costs are recognised at the estimated future cost. The estimated future cost is rise to a $15m reduction in the fair value for the financial year which is accounted for in other comprehensive income. calculated using amounts discounted over the estimated useful economic life of the assets. For the majority of assets, the 2021 2020 discount rate applied is the Treasury 30-year risk-free rate (currently 2.6%) and the inflation rate is the Treasury 30-year CPI rate $m $m (currently 1.97%). Exceptions to this are the Caltex Retailer-owned Retailer-operated (RORO) sites, which use the six-year risk‑free rate (currently 0.63%) and the six-year CPI rate (currently 1.87%), and Caltex truck stops which use the 12-year risk-free rate Investment in NZ Refining (fair value hierarchy level 1) 23 38 (currently1.38%) and the 12-year CPI rate (currently 1.93%). These rates are revised annually. Investment in associates 19 10 Total investments 42 48 D&R costs expected to be settled within one year are classified as current liabilities. D&R costs expected to be settled between 1 and 30 years are classified as non-current liabilities. The Group wholly owns or has a partial interest in the below associates and subsidiaries: Estimated remediation costs of sites are recognised on an accrual basis at the time there is a formal plan or obligation, legal 2021 2020 Associates and subsidiaries % Holding % Holding or constructive, in place. The remediation costs are expected to be settled between 1 and 30 years, depending on the location. Drylandcarbon One Limited Partnership Associate 37% 37% Z engages a third party to provide an estimate of the D&R obligations for Z. Estimates are reviewed every three years, with the Mevo Limited Associate 32% 32% next review due in February 2022. The current D&R obligations are between $40k–$45k for above-ground tanks and $65k–$75k Loyalty NZ Limited Associate 25% 25% for below-ground tanks. Wiri Oil Services Limited (WOSL) Associate 44% 44% Other provisions include people-related costs and general business provisions. Coastal Oil Logistics Limited (COLL) Associate 50% 50% Decommissioning, Flick Energy Limited Subsidiary 70% 70% restoration and Z Energy 2015 Limited (formerly Chevron New Zealand) Subsidiary 100% 100% remediation Other Total For the year ended 31 March 2021 $m $m $m Z Energy ESPP Trustee Limited Subsidiary 100% 100% Z Energy LTI Trustee Limited Subsidiary 100% 100% Balance at beginning of year 92 1 93 Created 2 - 2 Utilised (2) (1) (3) (16) Investment in joint operations Released (1) - (1) Unwind of discount 2 - 2 The Group has participating interests in four unincorporated jointly controlled operations relating to the storage and distribution of petroleum products. The revenues and expenses are allocated in the financial statements of a proportionate share on a Balance at end of year 93 - 93 performance/usage basis rather than the share of the joint arrangement. Current 21 - 21 The Group has rights to the assets and obligations for the liabilities relating to the jointly controlled operations. At 31 March 2021, Non-current 72 - 72 there were no contingent liabilities for the jointly controlled operations (2020: nil). The value of assets in these interests is $13m Balance at end of year 93 - 93 (2020: $13m). 2021 2020 Principal activity % Holding % Holding (18) Borrowings Joint User Hydrant Installation Fuel storage 33% 33% Joint Interplane Fuelling Services Fuel distribution 50% 50% Financing arrangements Jointly Owned Storage Facility Fuel storage 50% 50% The Group’s debt includes bank facilities, bonds and US Private Placement (USPP) notes secured against certain assets Joint Ramp Service Operations Agreement Fuel distribution 0% 50% of the Group. The facilities require Z to maintain securities and operate within defined performance and gearing ratios. Wiri to Auckland Airport Pipeline Fuel distribution 40% 40% The arrangements also include restrictions over the sale or disposal of certain assets without lender agreement. The Group has complied with all debt covenant requirements imposed by lenders for the year ended 31 March 2021, with the exception of the covenants temporarily waived for the year ended 31 March 2021. Bank facilities and bonds are recorded initially at fair value, net of transaction costs. After initial recognition, bank facilities and bonds are measured at amortised cost. Any difference between the initial recognised amount and the redemption value is recognised in the Statement of comprehensive income over the period of the borrowing. USPP notes are recorded initially at fair value, net of transaction costs, and are revalued monthly for spot risk. Bank facilities’, bonds’ and USPP notes’ issue expenses, fees and other costs incurred in arranging finance are capitalised and amortised over the term of the relevant debt instrument or debt facility, using the effective interest method. Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 112 Pg 113 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (18) Borrowings (continued) (19) Financial risk management Banking facilities The Group has a Treasury Management Committee to review and set treasury strategy within policy guidelines and report on Interest rates are determined by reference to prevailing money market rates at the time of draw-down, plus a margin. market risk positions and exposures. The Group has developed a comprehensive, enterprise-wide risk management framework Interest rates paid during the year ranged from 1.5% to 2.3% (2020: 1.5% to 3.0%). that guides management and the Board in identifying, assessing and monitoring new and existing risks. Management reports 2021 2020 to the Audit and Risk Committee and the Board on the relevant risks and the controls and treatments for those risks. $m $m Summary of the Group’s exposure to financial risk and the management of those: Secured bank facilities available 530 530 Financial risk Exposure Product Management of risk Balance at end of year (facilities drawn down) 19 250 Market risk Current 19 70 Foreign Movement in foreign Bills Libor Quarterly resetting notional (based on the actual FX spot rate of the Non-current - 180 exchange exchange rates (Basis swap) NZD/USD) on the 8-,10- and 12-year basis swaps offset with the 1-year Balance at end of year 19 250 risk basis swap, reviewed annually for renewal. Forward Reduce price fluctuations risk of foreign currency commitments, mainly The facilities comprise a $180m revolving-term debt facility drawn to $0m plus a $350m working capital facility drawn to $19m, exchange associated with purchasing hydrocarbons. both maturing in December 2021. contract Cross currency Hedge variability risk in cash flows arising from price fluctuations of foreign Bonds interest rate currency of the USD USPP notes. 2021 2020 swaps (CCIRS) To mitigate profit or loss volatility, the CCIRS is designated into a fair value $m $m hedge and cash flow hedge relationship. Balance at beginning of year 343 477 Sensitivity Foreign-currency: At 31 March 2021, if the New Zealand dollar had strengthened/weakened by 10% against the Bonds repaid - (135) to FX currencies with which the Group has foreign-currency risk (with all other variables held constant), after-tax profit would change by $3m higher/$7m lower (2020: $16m higher/$20m lower) and the change in other comprehensive Amortisation 1 1 income for the year would be $0 higher/$2m lower (2020: $2m higher/$1m lower). Balance at end of year carrying value 344 343 Interest Movement in Interest rate Minimise the cost of debt (interest) and manage the volatility to the rate risk interest rates swaps (IRS) Groups earnings. Current 150 - Cross currency The CCIRS is designated into a fair value hedge and cash flow hedge Non-current 194 343 interest rate relationship to mitigate profit or loss volatility. Balance at end of year carrying value 344 343 swaps Bills Libor Reduce exposure on the basis cost of the CCIRS. Fair value of bonds 362 340 (Basis swap) Sensitivity to At 31 March 2021, if bank interest rates at that date had been 100 basis points higher/lower (with all other variables USPP notes interest rate held constant), after-tax profit would change by $6m higher/$2m lower (2020: $4m higher/$3m lower) and the change 2021 2020 in other comprehensive income for the year would be $2m higher/$0m lower (2020: $2m higher/$3m lower). $m $m Commodity Changes in crude and Commodity Match commodity purchase and sales. Balance at beginning of year 509 393 price and product prices swaps timing risk Movement in fair value hedge (35) 60 Sensitivity At 31 March 2021, if forward electricity prices at that date had been $25/MWH higher/lower (with all other variables held Movement in foreign-exchange revaluation (67) 56 to electricity constant), after-tax profit would change by $0m higher/$0m lower (2020: $0m higher/$0m lower) and the change in other Balance at end of year carrying value 407 509 prices comprehensive income for the year would be $8m higher/$8m lower (2020: $0m higher/$0m lower). Current - Liquidity risk Non-current 407 509 Risk that the Group will Active management of cash flow, access to committed funds and lines not be able to meet its of credit and the maturity profile of its financial obligations. Balance at end of year carrying value 407 509 financial obligations as they fall due Fair value of USPP notes 456 574 Credit risk Risk of loss to the Limited exposure due to credit checks carried out on new customers, credit Group due to customer terms and standard payment terms. Less than 2% of the Group’s receivables or counterparty default are overdue (2020: 7%). Risk of derivative Bank facilities are maintained with A or above rated financial institutions, counterparties and cash with a syndicate of 5 bank counterparties to ensure diversification. deposits being lost The CCIRS is classified as level 2 in fair value hierarchy and are hedge accounted. All other products are level 2 and accounted for as fair value through the Statement of comprehensive income. The fair value of the CCIRS and IRSs excludes accrued interest. All other derivatives do not contain interest components. Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 114 Pg 115 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL Statement (19) Financial risk management (continued) 6 months or 6 to 12 Contractual of financial less months 1 to 2 years 2 to 5 years 5+ years cash flows position Recognition and measurement of derivatives At 31 March 2020 $m $m $m $m $m $m $m Derivative financial instruments are recognised initially at fair value at the date they are entered into (trade date). After initial Non-derivative financial liabilities recognition, derivative financial instruments are stated at fair value at each Statement of financial position date. The resulting Working capital loan 70 - - - - 70 70 gain or loss is recognised in the Statement of comprehensive income immediately, unless the instruments are designated in Accounts payable 304 - - - - 304 304 an effective hedge accounting relationship. Lease liabilities 15 15 29 86 336 481 299 Liquidity risk Long-term loan 1 1 182 - - 184 180 The following tables analyse the Group’s financial liabilities into relevant maturity groupings based on the earliest possible Bonds 7 7 163 213 - 390 343 contractual maturity date at year end. The amounts in the tables are contractual undiscounted cash flows, which include USPP notes 9 9 18 54 503 593 509 interest through to maturity. Non-derivative Statement financial liabilities 406 32 392 353 839 2,022 1,705 6 months or 6 to 12 Contractual of financial less months 1 to 2 years 2 to 5 years 5+ years cash flows position Derivative financial instruments At 31 March 2021 $m $m $m $m $m $m $m IRS (3) (4) (7) (12) - (26) (25) Non-derivative financial liabilities Commodity hedges 37 - - - - 37 (37) Working capital loan 19 - - - - 19 19 CCIRS 4 4 7 21 43 79 130 Accounts payable 151 - - - - 151 151 Basis swap - (17) 2 6 27 18 - Lease liabilities 16 16 31 117 291 471 299 Derivative financial instruments 38 (17) 2 15 70 108 68 Bonds 7 155 8 205 - 375 344 USPP notes 8 8 15 175 289 495 407 Discussions on refinancing bank-debt facilities will normally begin at least six months before maturity with facility terms agreed Non-derivative at least three months before maturity. financial liabilities 201 179 54 497 580 1,511 1,220 Interest rate risk analysis Derivative financial instruments Less than 1 to 2 2 to 5 5+ Total IRS (4) (4) (6) (6) - (20) (20) 1 year years years years Notional Commodity hedges 32 10 6 - - 48 48 At 31 March 2021 $m $m $m $m $m CCIRS 3 3 5 8 1 20 26 Interest-rate exposure borrowing 150 - 321 252 723 Basis swap 1 1 9 - (2) 9 3 Cross-currency swaps 378 - (126) (252) - Derivative Interest-rate swaps (380) 200 (55) 125 (110) financial instruments 32 10 14 2 (1) 57 57 Net interest-rate exposure 148 200 140 125 613
Less than 1 to 2 2 to 5 5+ Total 1 year years years years Notional At 31 March 2020 $m $m $m $m $m Interest-rate exposure borrowing - 330 195 378 903 Cross-currency swaps 378 - - (378) - Interest-rate swaps (130) - 5 125 - Net interest-rate exposure 248 330 200 125 903 Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 116 Pg 117 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL In these hedge relationships, the main source of ineffectiveness is the effect of the counterparty and Z’s own credit risk (19) Financial risk management (continued) on the fair value of the CCIRS. Offsetting of financial instruments Electricity Price Hedges Z enters into derivative transactions under International Swaps Derivatives Association (ISDA) master agreements. To mitigate profit and loss volatility, some electricity derivatives are designated into cash flow hedge relationships. Z determines The ISDA agreements do not meet the criteria for offsetting in the Statement of financial position for accounting purposes. the existence of an economic relationship between the hedging instrument and the hedged item based on the amount and timing This is because Z does not have any current legally enforceable right to offset recognised amounts. Under the ISDA agreements, of their respective cash flows, reference nodes, maturities and volumes. Z assesses whether the derivative designated in each the right to offset is enforceable only on the occurrence of future events such as a default on the bank loans or other credit hedging relationship is expected to be and has been effective in offsetting the changes in cash flows of the hedged item. events. The potential net impact of this offsetting is disclosed in: ‘Amount after applying rights of offset under ISDA agreements’. Z does not hold and is not required to post collateral against its derivative positions. In these hedge relationships the main source of ineffectiveness is where the volume of electricity sold at fixed price is lower than Amount after Amount after the volume of the derivative contracts. Other sources of ineffectiveness include location factor differences (location of hedging Derivative applying rights of Derivative applying rights of and consumption nodes) and credit risk. position offset under ISDA position offset under ISDA The effect of Z’s hedge accounting policies in managing its foreign-exchange risk, interest-rate risk and electricity price risk 2021 agreements 2020 agreements $m $m $m $m related to the underlying hedging instrument is presented in the tables below. The details of the hedging instruments and items at 31 March 2021 are recognised in the Statement of financial position within derivative financial instruments and borrowings as follows: Derivative assets 115 64 185 69 Derivative liabilities (58) (7) (117) (1) Accumulated Life to date fair value hedge change in Derivative financial assets/(liabilities) 57 57 68 68 Nominal adjustment Carrying value value used for amount Carrying to carrying of derivatives calculating Accumulated (hedging amount amount (hedging hedge cost of hedging Hedge accounting instrument) (hedged item) (hedge item) instrument) ineffectiveness reserve The nature and the effectiveness of the hedge accounting relationship will derive where the gains and losses on re-measurement At 31 March 2021 $m $m $m $m $m are recognised. The CCIRS derivatives are designated as either: Cash flow hedge and fair value hedge • Fair value hedges: the derivative is used to manage the variability in the fair value of recognised liabilities, to hedge Interest-rate risk and the interest-rate risk (the hedged risk) arising from the USD USPP notes (the hedged items). foreign-currency risk The following changes are recognised in profit or loss: 8 years, rate 3.83% $90m USD (136) (7) 9 10 (1) - The change in fair value of the hedging instruments; 10 years, rate 4.04% $90m USD (136) (8) 9 10 (1) - The change in fair value of the underlying hedged items attributable to the hedged risk. 12 years, rate 4.14% $90m USD (135) (8) 8 9 (1) Once hedging is discontinued, the fair value adjustments to the carrying amount of the hedged item arising from the hedged Commodity hedge risk is amortised through profit or loss from that date through to maturity of the hedged item. Commodity price risk and timing risk • Cash flow hedges: derivatives are used to manage the variability in cash flows of highly probable forecast transactions, to Outstanding notional hedge the variability in cash flows arising from interest rate and foreign currency exchange rate movements of the USD USPP Volumes 354,866 MWh - - 31 31 - notes (the hedged items). Total (407) (23) 57 60 (3) The following changes are recognised in profit or loss (interest costs): The hedged item is recognised in Borrowings and the hedging instrument is recognised in Derivative financial instruments - any gain or loss in relation to the ineffective portion of the hedging instrument - fair value changes in the hedging instrument previously accumulated in other comprehensive income, transfer to profit Hedge ineffectiveness for the year ended 31 March 2021 was $1m (2020: $0m). or loss when the underlying transactions are recognised in the Statement of comprehensive income. Life to date Accumulated change in Once hedging is discontinued, any cumulative gain or loss previously recognised in other comprehensive income is recognised fair value hedge Carrying value value used for in profit or loss (interest costs) either: Nominal amount Carrying adjustment to of derivatives calculating Accumulated - at the same time as the forecast transaction, or (hedging amount carrying amount (hedging hedge cost of hedging - immediately if the transaction is no longer expected to occur. instrument) (hedged item) (hedge item) instrument) ineffectiveness reserve At 31 March 2020 $m $m $m $m $m Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. Cash flow hedge and fair value hedge Interest-rate risk and Z designates the entire CCIRS to hedge its foreign-currency risk and interest-rate risk and applies a hedge ratio of 1:1, except for foreign-currency risk the cross-currency basis elements of the CCIRS that are excluded from the designation and are separately accounted for as a 8 years, rate 3.83% $90m USD (165) (14) 39 39 - cost of hedging. This cost is recognised in other comprehensive income in a cost of hedging reserve. The Group’s Treasury Policy 10 years, rate 4.04% $90m USD (170) (19) 44 44 - is for the critical terms of the CCIRS contracts to align with the hedged item. 12 years, rate 4.14% $90m USD (174) (24) 47 48 (1) Z determines the existence of an economic relationship between the hedging instrument and the hedged item based on the Commodity hedge currency, amount and timing of the respective cash flows, reference interest rates, tenors, repricing dates, maturities and notional Commodity price risk amounts. Z assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in and timing risk offsetting the changes in cash flows of the hedged item using the hypothetical derivative method. Outstanding notional Volumes 70,842 MWh - - 1 1 - Total (509) (57) 131 132 (1) Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021
Z ENERGY Pg 118 Pg 119 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (20) Share capital and distributions (21) Share-based payments Equity raise Z Energy Restricted Share Long-Term Incentive Plan (RSLTIP) & Z Energy Limited — Performance Rights On 15 May 2020, Z issued 100 million shares raising $290m and on 5 June 2020 an additional 20 million shares were issued Long-Term Incentive Plan (PRLTIP) raising $57m. Z provides the RSLTIP for selected senior employees. Under the RSLTIP, ordinary shares in the Parent are purchased on-market Price per share Total by Z Energy LTI Trustee Limited (the Trustee). Participants purchase shares from the Trustee with funds lent to them by the $ $m Total shares Parent. Z stopped making new offers under the RSLTIP after the year ended 31 March 2019. In the year ended 31 March 2020, the Group moved to a new stock settled share rights scheme for selected senior employees (PRLTIP). Under the scheme Institutional Placement (15 May 2020) 2.900 290 100,000,000 performance rights have been granted at no cost to the holder. For each performance share right that vests, one share will Share Placement Plan (5 June 2020) 2.806 57 20,476,853 be issued. Costs capitalised in equity - (10) - Under the RSLTIP the number of shares that vest will depend on Z’s total shareholder return ranking within a peer group of the Total authorised and issued capital at end of year - 337 120,476,853 NZX 50 over a three-year period, although a reduced period may be used in some cases. If the individual is still employed at Costs capitalised in equity the end of the vesting period, the employee is provided a cash bonus which must be used to repay the loan and the shares are then transferred to the employee. Under the PRLTIP the number of shares that vest will depend on Z’s total shareholder return $12m of costs were recognised in the equity raise of which $10m have been recognised as a deduction to equity, $1m capitalised ranking within a peer group of the NZX 50 over a three-year period, although a reduced period may be used in some cases. to borrowing costs and $1m has been expensed in operating expenses. If the individual is still employed at the end of the vesting period, the shares are then transferred to the employee. 2021 2020 Ordinary shares (fully paid) $m $m Balance at Balance at Vested and the start of Granted Exercised Forfeited the end of exercisable Total authorised and issued capital at beginning of year 430 430 year during year during year during year year at end of year Movements in issued and fully paid ordinary shares 337 - Plan Exercise Number of Number of Number of Number of Number of Number of shares shares shares shares shares shares Total authorised and issued capital at end of year 767 430 type Grant date Vesting date price 2021 2021 2020 RSLTIP 22 May 2018 31 March 2021 $6.93 212,320 - - (212,320) - - Shares Shares PRLTIP 11 April 2019 31 March 2022 $6.25 584,603 - - (54,306) 530,297 - Issued capital millions millions PRLTIP 8 June 2020 31 March 2023 $2.97 - 1,404,067 - (72,973) 1,331,094 - Total issued capital at end of year 520 400 796,923 1,404,067 - (339,599) 1,861,391 - The par value of one share is $1. Weighted average exercise price $0.00 $5.97 $3.90
Z Energy LTI Trustee Limited holds 199,125 shares at a cost of $2m for Z’s Restricted Share Long-Term Incentive Plan (RSLTP) 2020 (2020: 811,823, $4m). Z holds Treasury stock of 106,935 shares at a cost of $1m (2020: 339,884, $2m) and 1,861,391 shares at RSLTIP 22 May 2017 31 March 2020 $6.99 181,293 - - (181,293) - - a cost of $8m for Z’s Performance Rights Long-Term Incentive Plan (PRLTP). RSLTIP 22 May 2018 31 March 2021 $6.93 219,590 - - (7,270) 212,320 - $m cents per share PRLTIP 11 April 2019 31 March 2022 $6.25 - 590,644 - (6,041) 584,603 - Dividends 400,883 590,644 - (194,604) 796,923 - 2019 Final dividend (paid May 2019) 122 30.5 Weighted average exercise price $0.00 $6.96 $6.43 2020 Interim dividend (paid December 2019) 66 16.5
Directors resolved not to pay a final dividend in respect of the 2020 financial year. In addition and as a result of the temporary covenant waivers and temporary adjustments to covenant definitions agreed with its debt providers, Z was restricted from distributing funds to shareholders until after 30 September 2021. The temporary covenant waivers were successfully renegotiated in March 2021 allowing Z to recommence distributions to shareholders. Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021 ANNUAL REPORT 2021 Z ENERGY Pg 120
Pg 121 Z ENERGY
ANNUAL REPORT 2021 REPORT ANNUAL (21) Share-based payments (continued) (23) Commitments Measurement of fair values Commitments relate to property, plant and equipment of $23m (2020: $19m) and DrylandCarbon One Limited Partnership investment commitment of $28m (2020: $39m). The fair value of the RSLTIP has been determined using the framework of the Black-Scholes and Margrabe option pricing models for the schemes vesting 2017–2020. For the RSLTIP and PRLTIP schemes vesting after 2020, a Monte Carlo Simulation has been used. (24) Contingent assets and liabilities Plan type PRLTIP PRLTIP RSLTIP RSLTIP Refining NZ contingent asset Vesting date of scheme On 17 December 2020, Z issued a notice of dispute under the Processing Agreement with Refining NZ regarding the reduction 31 March 31 March 31 March 31 March in processing capacity effective 1 January 2021 and that no financial adjustment had been made to reflect the reduced capacity. 2023 2022 2021 2020 Z has expensed the Refining NZ fee floor top up for January, February and March 2021 and these have been paid without prejudice. No receivable has been recognised for these payments. These payments are a possible receivable that could arise due Weighted average share price at grant date $3.11 $6.18 $7.45 $8.00 to the notice of dispute with Refining NZ however as at 31 March 2021 the dispute was unresolved, with no action beyond issuing Contractual life 2.81 years 2.77 years 2.85 years 2.86 years a dispute notice taken. Therefore, an asset was unable to be recognised on the basis of an outcome that is pending and subject Risk-free rate 0.25% 1.0% 2.0% 2.1% to the inherent uncertainty of any future litigation. Standard deviation of Z’s TSR 28%-40% 19%-22% 25%-27% 18%-25% Standard deviation of peers’ TSR 14%-90% 9%-48% 18%-21% 20%-22% Post 31 March 2021 Z paused progressing its dispute notice pending completion of the ITS negotiations. Correlation between Z’s TSR and peers’ TSR (average) 0.33-0.42 0.12-0.15 0.15-0.16 0.16-0.19 Refining NZ contingent liability Estimated fair value per share $0.89 $2.52 $3.78 $4.22 On 18 December 2020, Z received a notice of dispute from Refining NZ seeking retrospective payment of additional funds and Assumptions have been made that the participants will remain employed with Z and will achieve the minimum performance levels changes to the capacity of the refinery. No liability has been recognised at 31 March 2021 for the dispute that the fee floor payable in each period to the vesting date. Dividends paid on shares are not material to the value of the shares granted under the RSLTIP. by all customers in combination should be $70m per annum higher as substantial uncertainty exists with the dispute. The dispute is currently unresolved and the pathway to resolution is unclear. If the dispute advances to litigation, any potential damages The fair value of the share-based payments is recognised as an expense, with a corresponding increase in equity, over could be impacted by multiple factors including gross refining margins over an as yet undefined time period. The likelihood of the the vesting period of the plan. The expense relating to the RSLTIP in the year ended 31 March 2021 was a credit of $0.7m outcome is unknown, uncertainty exists if any cost will be incurred by Z and these cannot be reliably measured. (2020: $11,000) due to the 31 March 2021 plan not vesting. The expense relating to the PRLTIP in the year ended 31 March 2021 was $0.9m (2020: $0.5m). Post 31 March 2021 Refining NZ has paused progressing its dispute notice pending completion of the ITS negotiations. Employee benefits payable, excluding share based payments, are $16m (2020: $7.6m). Flick guarantees contingent liability Z currently guarantees a total potential exposure relating to Flick Energy Ltd of up to $18m as per the table below. (22) Related parties 2021 2020 Counterparty $m $m Certain Z Directors have relevant interests in several companies with which Z has transactions in the normal course of business. Westpac 7 5 Some Z Directors are also non-executive directors of other companies. Any transactions undertaken with these entities have Mercury 4 4 been entered into as part of ordinary business. Meridian 4 - Key management personnel have been defined as the Directors, the CEO and the Executive team for the Group. Genesis 3 3 Executive members also participate in the Group’s Restricted Share Long-Term Incentive Plan (refer to note 21). Total exposure 18 12 Included in operating expenses are directors’ fees of $1m (2020: $1m). 2021 2020 The Group has no other guarantees. (2020: The Group guaranteed an exposure of up to USD1m ($2m) to a financier of one of the Transactions with related parties received/(paid) $m $m Group’s associate companies). Refining NZ — processing fees, Customs and excise duties 567 791 Associates — sale of goods and services - Coastal Oil Logistics Ltd — distribution 9 2 (25) Events after balance date Associates — purchase of goods and services Refining NZ strategic review - Coastal Oil Logistics Ltd — distribution (46) (34) As at the date of approval of these financial statements the strategic review was still ongoing with no confirmed conclusion. - Wiri Oil Services Ltd (7) (11) Negotiations between Z and Refining NZ are ongoing. - Loyalty Ltd (6) (7) Refining NZ dispute Key management personnel As at the date of approval of these financial statements, the March floor top up has been paid. The dispute with Refining NZ - Short-term employee benefits (7) (6) is yet to be resolved. Z has paused its dispute notice pending completion of the ITS negotiations and Refining NZ has paused Balances at the end of period progressing its dispute notice pending completion of the ITS negotiations. - Refining NZ — processing fees, Customs and excise duties 42 52 Dividend On 5 May 2021, the Directors approved a fully imputed dividend of 14 cents per share, which is equal to $73m, to be paid on 2 June 2021 (2020: nil).
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 123 Pg
fy our key key our of the of the
The group The group
ignificance in our audit audit our in ignificance
looking assumptions to to assumptions looking
looking assumptions we we assumptions looking used in the valuation model by by model valuation the in used
s . performance ’s group rate
as a body may better understand the the understand better may a body as
gross margin per litre per margin gross
undertaken in the context of and solely and solely of context in the undertaken
the requirements of the accounting accounting the of requirements the
cial were
and matters those below We summarise
shareholders
and commer and
and terminal growth growth and terminal
cly available market data for comparable entities, adjusted by by adjusted entities, comparable for data market available cly Retail fuel market demand Retail rates growth and terminal Discount
We worked with our valuation specialists to analyse the group’s group’s the analyse to specialists valuation our with worked We discount using rates discount developed independently to comparing publi they which in industry the and group the to specific factors risk operate. key varying by model the of sensitivity the considered We identi to this did We above. listed those such assumptions, financial consolidated the in disclosures the assessed We from obtained issue the of understanding our using statements against and testing our standards. We considered the appropriateness of the valuation method method valuation the of appropriateness the considered We for goodwill of test the perform to group the by applied standards. accounting the of requirements the against impairment inform to forecasts group previous of accuracy the assessed We model. in the incorporated forecasts of evaluation our - forward of consistency the checked We performance past strategy, and plan stated group’s the our and trends, industry on information published group, in industry the in these of feasibility the regarding experience - The key forward operate. which they follows: as are checked in inconsistency or bias of risk higher at assumptions those procedures. additional focus to and application – – – in order that the that order in
— — — — — — How the matter was addressed in our audit our in addressed was matter How the included: procedures audit Our
atters as a whole and we do not not we do and whole a as statements financial consolidated on the opinion audit tory
ss those matters ss those
statu
used for for used
. rofit. rofit. of the consolidated consolidated the of
3
looking assumptions assumptions looking 1 -
Key audit m audit Key
f the relevant cash generating units units generating cash relevant the f for the purpose of of our for purpose the statements financial consolidated the of elements separate on ons opini discrete express process by which we arrived at our audit opinion. Our procedures Our opinion. audit our at arrived we which by process inputs, including assumptions made made assumptions including inputs, modelling Complex group. by the forward using potential for risk greater to prone are inconsistent and error, bias, conditions These application. by us, scrutiny additional necessitate the address to in particular sources of objectivity and consistent assumptions, application. of the measure is a key view, in our this because, benchmark We the chose s most of were judgement, professional our in that, matters those are matters audit Key period. current in the statements financial consolidated the of matter audit key The goodwill of Assessment Refer to Note statements financial for goodwill of testing The group’s impairment Matter Audit Key a is the auditing of complexity the due to to group the by used judgements amount recoverable the determine o Z is the CGU relevant The (CGU’s). group. Energy to models complex used The group the of assessment their perform models The amount. recoverable internal and external of a range used also evaluates its own performance on replacement cost profit and we have benchmarked against this measure measure this against benchmarked we have and profit cost replacement on performance own its evaluates also p cost historical and addre to procedures audit
. We ) ’ for
ted ted s (NZ) total revenue. revenue. total
the of udit ISA
‘ consolida (
cash flows cash
s, both individually individually s, both group of comprehensive comprehensive of
of financial position position financial of
and
d other explanatory explanatory d other
; consolidated financial financial consolidated statements accompanying which comprise: which
. the a the for esponsibilities ; and ended then (including International Independence Independence International (including changes in equity changes
including a summary of significant significant of summary a including
, 31 2021 March 31 consolidated year consolidated statement consolidated
otes the , income the n an policies accounting information the the as at — — the audited have We statements financial —
on
and . s and to evaluate the effect of misstatement of effect the evaluate and to s determined with reference to a benchmark of a benchmark to reference with determined
the for materiality The whole. a as
and its
further described in the auditor’s r in the auditor’s described further
consolidated consolidated 15 million
section of our report. our of section
Professional and Ethical Standard 1 International Code of of Code 1 International Standard Ethical and Professional with accordance in
NZ) are (
s consolidated financial statements financial consolidated 31 March 2021
tioners (Including International Independence Standards) (New Zealand) issued by the the by issued Zealand) (New Standards) Independence International (Including tioners
. Subject to certain restrictions, partners and employees of our firm may also deal deal also may firm our of employees and partners restrictions, certain to Subject . Limited Z Energy ce Z Energy Limited Z Energy of ’s Group the respects material ll of udit in accordance with International Standards on Auditing (New Zealand) (New Auditing on Standards International with accordance in udit
New Zealand Equivalents to to Equivalents Zealand New and its subsidiaries (the 'group') (the and subsidiaries its
) ’ audit of the of audit
121:
as a whole was set at $ at set was a whole as to
Materiality Basis for opinion
; and date that on ended
92
company ’ resent fairly in a resent in fairly omply with with omply
KPMG, a New Zealand Partnership and a member firm of the KPMG global organisation of organisation global KPMG the of firm member a and Partnership Zealand New a KPMG, c financial position as at at as position financial the for flows cash and performance financial year Standards Reporting Financial International Standards Reporting Financial International p
accompanying the opinion, n our i. Opinion I statements financial (the pages ii. 2021 consolidated financial statements financial consolidated and adjustment stock cost of the to in relation group the to services other provided also has firm Our assuran gas greenhouse group. the of business the of activities trading of course ordinary the within terms normal on group with the relationship other no has The firm group. the of auditor as independence our impaired not have matters These group. the in, interest or with, statements financial consolidated on the and statements © company English private a Limited, International KPMG with affiliated firms member independent reserved. rights All guarantee. by limited The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the the determine us to helped Materiality materiality. of application our by influenced was audit our of scope The procedure audit our of extent and timing nature, We conducted our a our We conducted believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. our for a basis provide to appropriate and sufficient is obtained we have evidence audit the that believe group the of independent are We PractiEthics for Assurance for Board Standards Ethics International and the Board Standards Assurance and Auditing Zealand New Accountants Professional for Ethics of Code International Accountants’ To the shareholdersTo the on the Report these with accordance in responsibilities ethical other our fulfilled have we and , Code’) (‘IESBA Standards) Code. IESBA and the requirements ISA under bilities responsi Our Independent Auditor’s Report
AUDITORS’ REPORT AUDITORS’ Auditors’ report Auditors’
Z ENERGY Pg 122 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 125 Pg
Our
in the in the
Annual Annual does not not does
.
to be to
.
or's Report. or's
Company Company
. period the Refining quired to state to them in the in the them to state to quired se of the refinery. the se of carrying value of the of asset value the carrying NZ with Refining contact
as a body. Our audit work has been been has work audit Our a body. as
egrity of the value in use calculation model, model, calculation use in value the of egrity term volume forecasts for consistency with with consistency for forecasts volume term er the group has appropriately considered those those considered appropriately has group the er eport to report such matters to the Directors the to matters such report to r with The New Zealand Zealand The with New
shareholders those matters we are re we are matters those
or’s unt rate using publicly available market data for comparable comparable for data market available publicly using rate unt contract ss any form of assurance conclusion thereon. conclusion of assurance ss any form udit a We assessed the int the assessed We formulae. calculation underlying the of accuracy the including use in value in the used period discounting the reviewed We and contract the of terms the against model calculation u of period the of expectations - long We checked during prepared models valuation other group’s the analyse to specialists valuation our with worked We developed an independently to comparing by rate discount disco and the group the to specific factors risk by adjusted entities, in. it operates industry key varying by model the of sensitivity the considered We at higher mptions assu those identify to this did We assumptions. additional focus to and application in inconsistency or bias of risk procedures. the whether the other information information other the whether consider and available becomes it when — — — — — shareholders How the matter was addressed in our audit our in addressed was matter How the included: procedures audit Our calculation the in used inputs and methodology valuation the found We the of amount recoverable the of consid We appropriate. the support that key assumptions so, we f are required I
, are responsible for the other information included in the entity’s the in included information other the for responsible are , group
ation ndependent ndependent Annual Report Report Annual rm discounting
e
nfo
recoverable amount of of amount recoverable f this i of the consolidated consolidated the of the to state might we at
3 aterially inconsistent with the consolidated financial statements, or our knowledge obtained knowledge our or statements, financial consolidated with the inconsistent aterially on behalf of the of behalf on
, eport and for no other purpose. To the fullest extent permitted by law, we do not accept accept not do we law, by permitted extent fullest To the purpose. no other for and auditor’s report Chairman’s report, Chief Executive’s report, disclosures relating to to relating disclosures report, Executive’s Chief report, Chairman’s the include may information r term demand for fuel in in fuel for demand term so th e Other i o Use
the group’s contract with with contract group’s the ent ent New Zealand Chevron of on acquisition recognised
Oth
- long , or otherwise appear misstated. appear otherwise or report is made solely to the to solely the is made report auditor’s independent Independent Audit Independent this of date the after us to available made be to expected is Report Annual ndepend it contains is m is contains it The Directors This n undertake matter audit key The the of Assessment Limited 1 Note to Refer statements. financial recoverable the of assessment The of amount Company Refining Zealand The New Audit a Key is NZ’) (‘Refining Limited of due complexity the Matter to by used the judgements the auditing recoverable the determine to group asset. this of amount group’s the of consideration Our of value carrying the of assessment on the focussed has contract the and assumptions significant in applied group the judgements amount recoverable the determining and assumptions These of asset. the th to relate judgements period relevant a and Zealand, New and judgements Such rate. discount of risk higher a carry assumptions required which error and bias us. by scrutiny additional The Report. statements financial consolidated on the opinion Our . information statutory and governance corporate and we do expre not information other cover any the read is to responsibility audit, i
term retail retail term assumptions that
term forecasted sales to sales forecastedterm -
ring to an independently an independently to ring term retail demand for fuel in New New in fuel for demand retail term
rends and the historical accuracy of of accuracy historical and the rends thodology and inputs used used in the and inputs thodology
.
.
- long as such ions, performance of the group, and our experience regarding regarding experience our and group, the of performance We checked the consistency of short of consistency the checked We past operate. they which in industry in the these of feasibility the - long around assumptions the challenged We published to comparing by Zealand New in fuel for demand t industry on information their group, the of knowledge our used We forecasts. relevant industry our and customers, and business performance, past experience. the analyse to specialists valuation our with worked We compa by rate discount group’s data market available publicly using rate discount developed the to specific factors risk by adjusted entities, comparable for in. operates it industry and the group key varying by model the of sensitivity the considered We assumpt We assessed the integrity of the value in use calculation calculation use in value the of integrity the assessed We calculation underlying the of accuracy the including model, formulae. identify to this did We litre. per margin gross retail and Zealand in inconsistency or bias of risk higher at assumptions those procedures. additional focus to and application — — — — — appropriately considered those key assumptions that support the the support that assumptions key those considered appropriately asset the of value carrying We found the valuation me valuation the found We customer retail the of amount recoverable the of calculation has group the consider We appropriate. be to contracts Our audit procedures included: procedures audit Our How the matter was addressed in our audit our in addressed was matter How the calculation the in used inputs and methodology valuation the found We consider We appropriate. be to CGU the of amount recoverable the of key those considered appropriately has group the New Chevron the to relating goodwill for value carrying the support acquisition Zealand
term - term term - ns and ns and
of the consolidated consolidated the of
3 s asset. red additional scrutiny us. by scrutiny additional red
judgements relate to short to relate judgements long volumes, sales forecasted in New fuel for demand retail litre, per margin gross retail Zealand, Such rate. discount a relevant and carry a and assumptions judgements which error and bias of risk higher requi Our consideration of the group’s group’s the of consideration Our of value carrying the of assessment has contracts customer retail the significant the on focussed the and judgements assumptions the determining in applied group these of amounts recoverable assumptio These assets. financial statements. financial recoverable the of assessment The retail group’s the of amount a is Audit Key contracts customer of due complexity the Matter to by used the judgements the auditing recoverable the determine to group thi of amount Assessment of the recoverable amount of retail customer contracts recognised on acquisition of of on acquisition recognised contracts customer retail of amount recoverable the of Assessment Zealand New Chevron 1 Note to Refer The key audit matter audit key The
AUDITORS’ REPORT AUDITORS’ Auditors’ report (continued)Auditors’
Z ENERGY Pg 124 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 127 Pg Further information Further Z’s climate-relatedZ’s risks and opportunities were assessed in a series workshops of in FY21. and physical risks were considered Transitional the short over term (2020–2025), medium term (2025–2040) and long term (2040–2060). The material risks and opportunities are identified section in the TCFD of this report. The impact climate-related of risks and opportunities and business Z’s response are outlined in the ‘Qualitative Analysis climate-related Z’s of risks and opportunities’ infographic section in the TCFD this report. of Z is undertaking further quantify work to the impacts identified integrate these to financialinto planning. Z has used scenarios and the BEC 2060 Kea indicators Tūī as key help to model fuel demand and assess organisational These strategy. are being updated to include the draft information presented the Climate by Change Commission. The Z Board has committed responding to the challenge to climate of change in Environmental Z’s Sustainabilityan integrated way. Stand and carbon targets were andapproved performance the Board by in 2017, is reviewed The Board annually. agreed approach Z’s in FY20, with progress TCFD to against the roadmap specifically reviewed in FY21. A core function the of Board is oversight Enterprise Z’s of Risk Management System including (ERMS), monitoring all enterprise Z’s of risksincluding climate change, and systems internal of control. Monitoring risks, of controls and opportunities for climate change is performed through the Board Audit and Risk Committee (ARC). The ARC meets quarterly review all to risks Z’s and conducts a substantive review twice a year. The Chief overallhasresponsibility Executive officer(CEO) forthe managementof Z. management Day-to-day operations Z’s of is delegated the General to Managers are responsible for The ELT who (ELT). up the Executive make Leadership Team providing direction and assurance on ERMS, Z’s with each principal risk assigned to member. ELT an General Z’s Strategy Manager, and Risk is the responsible business owner for managing climate-related risks and opportunities identified within the ERMS. as a whole approves climate-related risksThe ELT and opportunities identified within business Z’s including strategy, climate-related Z’s metrics and targets whichare included in company performance targets. Disclose the actual and potential impact of climate-related risks and opportunities on the organisation’s business, strategy and financial planning where such information is material Disclose the organisation’s governance around climate-related risks risks climate-related around governance organisation’s the Disclose and opportunities Page no. Page 32–37 3, 32–37 32–37 3, 46, 50, 63, 78–79 78–79 13, 37, In progress
related risks and related scenarios, including ‑ ‑ Complete disclosure Complete
Key Describe the impact climate- of related risks and opportunities on the organisation’s businesses, and financialstrategy planning Describe the resilience the of taking strategy, organisation’s considerationinto different climate a 2 degree Celsius or lower scenario Describe management’s role in assessing and managing climate opportunities Strategy Describe the climate-related risks and opportunities the organisation has identified the short, over medium and long term Te Kuputohu TCFD Kuputohu Te on Climate-related Financial Disclosures Force Task Index (TCFD) These are recommended the 11 Force disclosures on Climate-related from the Task Financial Disclosures, show to with an overlay disclosures: planned and Z’s completed Disclosure Governance Describe the Board’s oversight climate-relatedof risks and opportunities
or to to or
free free
are
is located at at is located
1/ - report - as a whole as a whole
liquidate to intend either
generally generally with accordance in
consolidated financial consolidated set of financial financial of set consolidated
independent independent this work, audit our for
a
;
disclosing, as applicable, matters related related matters applicable, as disclosing,
responsibilities/audit - consolidated financial
. and as a as body
udit the of a for the for
eport.
consolidated financial statements financial consolidated udit ofudit these consolidated financial statements (being New Zealand Equivalents to International Financial Financial International to Equivalents Zealand New (being practitioners/auditors - consolidated financial statements financial consolidated auditor’s r auditor’s
: to enable the preparation of preparation the enable to n the shareholdersn the Directors lternative but to but do so to lternative misstatement when exists. when it misstatement are responsible for: responsible are
e have formed. formed. e have , port that includes our our opinion. includes port that e w
assurance s ndependent ndependent for-
i - . company
opinion auditor’s r auditor’s
control internal ry esponsibilities for the and International Financial Reporting Standards Reporting Financial International and
fairly presented and free from material misstatement, whether due to fraud or error; and error; or fraud to due whether misstatement, material from and free presented fairly
f our responsibilities for the a the for responsibilities our f the whether about assurance ble
arise from fraud or error. They are considered material if, individually or in the aggregate, aggregate, in the or individually if, material considered are They error. or fraud from arise
on o or any of the the of any or that is ndependent ndependent
, on behalf of the of behalf on ,
Responsibilities the of statements Auditor’s r
1 , report
scription forms part of our our of part forms scription
will always detect a material a material ISAs detect always NZ will Directors statements ; or error to due whe fraud ther misstatement, from material Zealand New in practice accounting accepted they unless accounting of basis concern going the using and concern going to istic no real have or a operations, cease to issue an i the preparation and fair presentation of the of presentation fair and preparation the Standards) Reporting necessa implementing includes This concern. going a as continue to ability the assessing reasona obtain to A further descripti de This Edwards Graeme is report auditor's independent in this resulting audit on the partner The engagement of behalf on and For Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance accordance in conducted audit an that a guarantee not is but assurance, of level high a is assurance Reasonable with can Misstatements these of basis e th on taken users of decisions economic the influence to expected be reasonably could they statements financial consolidated http://www.xrb.govt.nz/standards the External Reporting Board (XRB) website at website (XRB) Board Reporting External the
KPMG Wellington 202 5 May auditor’s auditor’s is: Our objective — — — — statements The — to anyone other tha other anyone to responsibility assume or
AUDITORS’ REPORT AUDITORS’ Auditors’ report (continued)Auditors’
Z ENERGY Pg 126 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 129 Pg None 31 March 2020 Financial year from 1 April 31 to March Also applies 'Governance to & Stewardship' material disclosure Supporting Details Supporting Operates in New Zealand only
8 4 4 4 4 –3 11 11 1 N/A Page 18–19 10–13 10–13 10–13 10–13 10–13 13, 28 14–25 4, 6–7 87, 96 46–84 129–131 5, 30, 61 5, 38–41 27, 34–37 2–3, 14–25 2–3, 5, 92 18–19, 30, 122–126 Front cover Front cover 14–15, 18–19 1–3, 93 14–15, 45, 52, 113, 122 13, 27, 28,13, 42, 41, 27, Inside back cover back Inside Inside back cover back Inside Entities includedEntities in the consolidated financial statements Claims reporting of in accordance with the GRI Standards Values, principles, standards, and norms of behaviour 102 - 42 Identifying and selecting stakeholders stakeholders selecting and Identifying 42 - 102 engagement stakeholder to 43 - Approach 102 102 - 44 topics and Key concerns raised practice Reporting 102 - 45 102 - 46 Defining report content and topic boundaries List material of topics102 - 47 102 - 48 Restatements information of 102 - 49 Changes in reporting 102 - 50 Reporting period 102 Date most of - 51 recent report 102 Reporting - 52 cycle 102 - 53 Contact point for questions regarding the report 102 - 54 102 impacts, - 15 Key risks, and opportunities Ethics, & Integrity Values 102 - 16 Stakeholder engagement engagement Stakeholder 102 - 40 List stakeholder of groups Collective102 bargaining - 41 agreements 102 - 55 GRI content index 102 - 56 External Assurance GRI Disclosures: Description General Standard Disclosures 102 - 1 Name the of organisation 102 - 2 Activities, brands, products, and services 102 - 3 Location headquartersof 102 - 4 Location operations of 102 - 5 Ownership and legal form 102 - 6 Markets served 102 - 7 Scale the of organisation 102 - 8 Information on employees and other workers 102 - 9 Supply chain 102 - 10 Significant changes the organisation to and its chain supply approach or principle Precautionary 11 - 102 102 - 12 External initiatives 102 - 13 Membership associations of Strategy 102 Statement - 14 from senior decision-maker Governance 102 - 18 Governance structures Te Kuputohu GRI Kuputohu Te Index (GRI) Global Reporting Initiative related risks ‑ lose how the organisation identifies, assesses and manages manages and assesses identifies, organisation the how lose Further information Further Scope 1, Scope 2, and Scope 3 greenhouse gas emissions are disclosed. progressZ’s against its FY17–FY21 carbon targets and future FY30 target are described in the Environmental Sustainability section this of report. Metrics highlighted in this report include a combination quantitative of data including greenhouse gas emissions, carbon intensity and carbon emissions for our obligatory and voluntary offsets, and qualitative data including climate riskreviews. reviewZ’s climate-related of metrics and targets associated with the fossil fuel products it sells is being re-modelled with a cleardirection be to provided FY22 by half-year. Z has taken a bottom-up and top-down approach identifying to transitional and physical climate-related guidance. risks in line with TCFD Further detail is provided under ‘Risk Management’ section in the TCFD of this report. Z has developed a business response in the form current of or future controls for climate-relatedthe key risks identified. This is shown in the ‘Qualitative Analysis climate-related Z’s of risks and opportunities’ infographic section in the TCFD this report. of The process for identifying, assessing and managing climate-related risks is in line with Enterprise Z’s Risk Management System More (ERMS). information on Z’s ERMS can be found in the ‘Corporate Governance Statement’ section this of report, specifically in Principle 6. Disclose the metrics and targets used assess to climate-related risks and material is information such where opportunities Disc climate Page no. Page 30 27–28 37 32–37, 78–79 37, 78–79 32–37, 78–79
related risks and related risks ‑ ‑ Z fully disclosed against seven of the 11 recommended disclosures in this report. Disclosures that are identified as being ‘complete’ are reviewed on an annual basis to
Describe the targets used by the organisation manage to climate opportunities and performance against targets Disclose Scope 1, Scope 2 and if appropriate Scope 3 greenhouse emissionsgas (GHG) and the related risks Describe the organisation’s processes for managing climate Describe how processes for and assessing identifying, managing climate-related risk are organisation’sintegrated the into riskoverall management Metrics and Targets Disclose the metrics used the by organisation assess to climate- related risks and opportunities in line with its strategyand risk process management TCFD (continued) TCFD TCFD INDEX TCFD Note: ensure information is up to date, relevant and fit for purpose. Disclosure Risk Management Describe the organisation’s processes for identifying and assessing climate-related risks
Z ENERGY Pg 128 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 131 Pg No substantiated complaints or data breaches data or complaints substantiated No scores promoter net Retail Business & 100% retail sites allocated funding for and engaged in local community activities Supporting Details Supporting 3 5 9 71 61 61 42 42 58 63 46 60 6–7 Page 48–50, 6348–50, Percentage employees of receiving regular performance and career development reviews Programmes for upgrading employee skills and assistance programs transition Ratio of basic of Ratio salary and remuneration women of to men Non-compliance with laws and regulations in the social economic and area Substantiated complaints concerning breaches of customer privacy and losses customer of data Operations with local community engagement, programmes assessments,impact development and Market Transparency & Fairness & Transparency Market Approach Management 103- Customer Experience and Brand Values Approach Management 103- Own measure Customer – NPS Score 419 - 1 419 Cyber Security & Data Privacy Approach Management 103- - 1 418 Diversity & Inclusion & Diversity Approach Management 103 - 405 - 1 Diversity governance of bodies and employees 405 - 2 Communities Resilient Approach Management 103- - 1 413 GRI Disclosures: Description (continued) Disclosures Standard Topic Material Capability Organisational Approach Management 103 - 404 - 2 404 - 3 Supporting Details Supporting Note also relevant for the following material disclosures: Competition & Market Share, Strategic RNZ Review, Wholesale Asset Profitability Capital Strategy, 0 litres biodiesel produced, 2,712,840 litres B5 of sold No supplier relationships were terminated due to negative environmental impacts Z corporate employees. This excludes retail site staff 31 14 72 27 27 57 22 28 62 59 45 45 45 30 30 30 30 44 44 6–7 Page 32–37 28, 53 28, 53 44–45 44–45 5, 14–16 6–7, 10–13 Hazard identification, risk assessment, and incident investigation Negative environmental impacts in the supply taken actions and chain Benefits provided employees full-time to that are not provided temporary to employees or part-time New suppliers that were screened using environmental criteria Financial implications and other risks and change climate to due opportunities GRI Disclosures: Description Standard Disclosures Topic Material Economic Sustainability Approach Management 103 - 403 - 6: Promotion health worker of 403 injuries - 9: Work-related Asset Integrity and Process Safety Approach Management 103 - G4 - OG13: Process Safety Events 308 - 2 401 - 2 401 - 3 Parental leave Wellbeing & Health, Safety Occupational Approach Management 103 - 201 - 1 Direct economic value generated and distributed 201 - 2 Environmental Sustainability Approach Management 103- 306 type by - 2 Waste and disposal method Quality Product production, & consumption Responsible & Security of Supply Approach Management 103- 308 - 1 Resilience Organisational Approach Management 103- 401 - 1 New Employee hires and employee turnover 403 - 2: 306 - 2 Significant Spills Climate Change Climate Approach Management 103 - 305 - 1 Direct (Scope GHG 1) emissions 305 - 2 Energy indirect (Scope 2) GHG emissions 305 - 3 Other indirect (Scope GHG 3) emissions 305 - 4 GHG emissions intensity 305 - 5 Reduction GHG of emissions Fossil Fuel Substitutes (Future Fuels) (Future Substitutes Fuel Fossil Approach Management 103- G4-DG14 GRI GRI INDEX (continued) Index (GRI) Global Reporting Initiative
Z ENERGY Pg 130 ANNUAL REPORT 2021
ANNUAL REPORT 2021 REPORT ANNUAL
Z ENERGY Z 133 Pg This report printed on FSC® certified paper using vegetable-based inks. TMF CorporateTMF Services (Aust) Pty Limited Australia registeredAustralia business number 448 438 164 Registered office — Australia Registered office — c/- 16, Street,Level 201 Elizabeth NSWSydney 2000, Australia PO A2224, Box SouthSydney NSW 1235, Australia +61 2 8988 5800 Auditor KPMG Tower Maritime Quay Customhouse 10 PO 996 Box Wellington 6140 Lawyers Tripp Chapman Quay Customhouse 10 Wellington 6140 Watts Rudd Ellison Minter 18/125 The Terrace Wellington 6011 Bankers ANZ Bank New Zealand Limited 215-229 Lambton Quay Wellington Bank of New Zealand 80 Queen Street Auckland Shanghai and Hong Kong Banking Corporation HSBC Tower 195 Lambton Quay Wellington MUFG Bank 22,Level 151 Queen Street Auckland Corporation Banking Westpac 188 Quay Street Auckland
Share Registrar Share Link Market Services — New Zealand PO 91976 Box Auckland 1142 Zealand New +64 9 375 5998 linkmarketservices.co.nz Link Market Services — Australia Locked Bag A14 SouthSydney NSW1235 Australia +61 2 8280 7111 (Resigned 31 December 2020) Andy Baird Retail Manager, General Binnie David Supply Manager, General Blackett Debra and Counsel General Chief Governance Officer Julian Hughes General Strategy and Risk Manager, 31 March 2021)(to Transition Manager, General 1 April 2021)(from Helen Sedcole PeopleChief Officer Simpson Mandy Digital OfficerChief Ulgen Figen CustomerChief Officer (Appointed 1 February 2021) Nicolas Williams Commercial Manager, General 31 March 2021)(to General Strategy and Risk Manager, 1 April 2021)(from Nicola Law Commercial Manager, General (Appointed 1 April 2021) Executive team Bennetts Mike OfficerChief Executive Jones Lindis Officer Financial Chief Jane Anthony CustomerChief Officer
(Chair) Company Company directory COMPANY DIRECTORY COMPANY Directors Abigail Kate Foote Andrew Mark Cross Blair Albert O’Keeffe Raue Margaret Julia MalpassMark Roy Reindler Stephen Contact us Contact phone: enquiries general For 355 and select0800 ‘0’ 474 or [email protected] email: Facebook: Z Energy Energy Z LinkedIn: Registered and head office — New Zealand 3 Queens Wharf Wellington 6011 z.co.nz Ngā Pārongo
Z ENERGY Pg 132 ANNUAL REPORT 2021 z.co.nz