Plain-text annual report
Solving
what
matters for
a moving
world
2017
Annual Report
Standing in the
future of what can
be and working
backwards from
there informs how
you do things now.
The financials
are part of it, but
there’s a broader
story we want to
tell as well.
Peter Griffiths
Chair, Z Energy
5
Kia ora and
welcome
to our first
integrated
annual report
The board is very satisfied with this
year’s strong results. Z has delivered
historical cost net profit after tax
of $243 million. Z also measures its
performance on a replacement cost
basis. The replacement cost operating
EBITDAF of $419 million (excluding one-
off integration expenses) was achieved
as we maintained a strong focus on
our safety performance, our corporate
reputation, and the engagement
of our people.
The financial outcomes, however, are
just part of the year’s performance.
There’s a broader story we want to
tell. It’s not a longer story. It’s a more
concise and a more relevant story that
links back to our business model.
In this year’s annual report, we’ve chosen
to adopt the principles of Integrated
Reporting* because investors and
other stakeholders are increasingly
interested in sustainable value creation.
The Framework helps explain how
a business creates value over time, and
provides transparency on every aspect
of its activity. We think is best-
practice reporting.
At the core of our business model
is integrated thinking, which drives
everything we do. When we’re making
decisions, we’re asking: How do we
manage risk? What will it cost? What
return will we receive? How does it tie
into our long-term view? How does
it align with what we stand for as a
company?
Z’s acquisition of the Caltex New Zealand
business in June 2016 is a great example
of how integrated thinking has enabled
Z to achieve improved results. We’re
around 70 percent bigger than we
were at the beginning of the year and
already we’re seeing tangible results –
not just from owning new assets, but
from how we’ve brought these two
companies together.
All of the board wish to particularly
recognise the efforts of the CEO and the
executive team this year. The challenge
of integrating the two businesses was
carried out well ahead of schedule with
skill and care. Our latest employee
engagement survey shows encouraging
results from both our new Caltex
colleagues and Z heritage employees.
This is a key indicator of positive future
results.
External recognition is one way to
measure our standing in the wider
New Zealand community. In December
2016, Z won the Deloitte Top 200:
Company of the Year, and Mike Bennetts
was recognised as CEO of the year.
In early 2017, Z was placed third in
the Colmar Brunton Corporate
Reputation Index.
This recognition acknowledges Z’s
commitment to executing clear strategy
for the benefit of all stakeholders,
and our commitment to the distinctive
way we seek to communicate.
The decision to adopt reinforces
those commitments.
Whatever else we’re doing, operating
safely is always at the front of our
minds. During 2017, we completed
the development and roll-out across
the expanded company of our
renewed safety-management system.
We understand our risk profile and
track a range of leading and lagging
indicators across the enterprise.
Of particular concern is the increase
in the number of robberies at our retail
sites. To counter this trend, we have
several initiatives under way to keep site
staff safe and to make our sites more
resistant to attacks.
Having focused on integration and
value capture this year, our sights are
firmly on the future with a refreshed
strategy. Almost without exception,
every business today is facing the
effects of disruption to its activities.
Z is acutely aware of this, and we are
constantly looking at how we can
create new value with the knowledge,
relationships, and advantaged assets
we now have.
(particularly electricity), internet
connectivity, and the pressures of
climate change. While prediction is
risky, we expect solid ongoing demand
for liquid transport fuels out to 2030.
This will provide the baseline for our
business on which we will build other
related capacities.
We don’t want to slow down the
adoption of new technology to protect
our bottom line. Rather, we are looking
for innovations that will contribute
to a more efficient and lower-carbon
economy. Z supports the government’s
plan to increase the number of electric
vehicles (EVs) from the current 3,000
to 64,000 by 2021.
However, this will still be only a
modest portion of the 3.7 million
vehicles predicted to be on Kiwi roads.
By comparison, the full deployment
of our biodiesel production capacity
planned for 2018–19 will have a similar
carbon impact as the increase in
EVs. How we choose to participate
in the lower-carbon market and our
contribution to elevating New Zealand’s
environmental performance are two
key elements of our strategy, which is
covered in this report.
We reckon the Z journey has been
exciting and rewarding – this year in
particular. We’re confident that we
can continue to deliver improved
financial returns while living up to
our values and commitments. As a
key element of that, we’re a company
committed to full disclosure. At Z,
we call it ‘sharing everything’.
This is our report dated 10 May 2017 for
the financial year to 31 March 2017.
Peter Griffiths
Chair, Z Energy
Demand for our core products will
be impacted by alternative fuels
Abigail Foote
Chair, Audit and Risk Committee
*This year’s report is guided by the principles of the Framework and focuses on the six capitals: human, intellectual, natural, manufactured, social, and financial.
Visit www.theiirc.org for more information on integrated reporting.
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7
26
Our people
and culture
32
Our
capability
36
Our
environment
42
Our assets
48
Our place in
New Zealand
54
Our finances
About Z . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Our leaders . . . . . . . . . . . . . . . . . . . .
12
Our material issues . . . . . . . . . . . . .
22
Our people and culture . . . . . . . . .
26
Our financial statements . . . . . . .
58
Corporate Governance . . . . . . . . .
98
Solving what matters for a
moving world . . . . . . . . . . . . . . . . . . . . . . . . 8
Our year in brief . . . . . . . . . . . . . . . . . . . . 10
A summary from CEO . . . . . . . . . . . . . . . 12
Meet our board . . . . . . . . . . . . . . . . . . . . . 14
Meet our executive team . . . . . . . . . . . . 16
Our company . . . . . . . . . . . . . . . . . .
18
How we create value . . . . . . . . . . . . . . . . 18
Our supply chain . . . . . . . . . . . . . . . . . . . . 20
Our capability . . . . . . . . . . . . . . . . . .
32
Independent auditor’s report . . . . . . . . 92
Supplementary financial information . 97
GRI Index . . . . . . . . . . . . . . . . . . . . .
124
Our environment . . . . . . . . . . . . . . .
36
Company Directory . . . . . . . . . . .
126
Our assets . . . . . . . . . . . . . . . . . . . . .
42
Our place in New Zealand . . . . . . .
48
Our finances . . . . . . . . . . . . . . . . . . .
54
8
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
9
Back to contents
Solving
what
matters
for a
moving
world
Seven years ago, New Zealand company
Infratil Limited and the Guardians of
New Zealand Superannuation got
together and bought a global company’s
New Zealand downstream fuel business.
Z is now a publicly listed company
on the Australian and New Zealand
stock exchanges.
From one end of New Zealand to the
other, we supply fuel to retail customers
and large commercial customers
including airlines, trucking companies,
shipping companies, and vehicle fleet
operators. We also provide bitumen to
roading contractors.
In June 2016, Z purchased Chevron
New Zealand, making Z the wholesale
fuel supplier to the network of
Caltex-branded service stations.
The Caltex-branded retail network
remains independently owned and
operated, with the operators
setting their own retail-fuel prices.
Z’s aim is to bring our purpose to life
for our customers, shareholders, and
stakeholders. That purpose is simply to
‘solve what matters for a moving world’.
We sell around 45 percent
of New Zealand’s total
transport fuel.
We’ve built New Zealand’s
first commercial-scale
biodiesel plant.
We’re a top 10 publicly listed
company with around 9,000
shareholders and 6,500
bondholders.
We’re a member of three
loyalty schemes – Fly Buys,
Air New Zealand Airpoints,
and AA Smartfuel.
We work with over 41,000
commercial customers in
aviation, shipping, fishing,
trucking, farming, and
heavy industry.
We directly employ over
420 people and indirectly
a further 2,500 through our
Z retail network.
We’re listed on the
New Zealand (NZX) and
Australian (ASX) stock
exchanges.
We’ve paid over $174 million
in corporate taxes (including
GST) in FY17.
We serve over 170,000
customers every day at our
Z retail service stations.
We own a 15 percent stake in
New Zealand’s only refinery,
at Marsden Point.
About Z 10
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
11
Back to contents
Our year in brief
“The Caltex acquisition,
the settlement, and the
cutover were all done
incredibly smoothly.”
“It was like trying to put a
person on the moon in terms
of the planning that went into
it, and we got the person on
the moon and safely home.”
“At one minute to midnight,
we’d burnt the routers and
said ‘see you later’ to a whole
lot of integrated aspects of
the business. A minute later,
we switched them on and it
all just worked.”
“We’ve integrated two
companies and now we’re
working on a unified
strategy for the future.”
“We took a lot of ground
in health and safety last
year, improving our systems
in particular, on top of the
Caltex acquisition.”
“We want to really understand
the end-to-end customer
experience – where are we
annoying people and where
can we generate value for
our customers?”
“You don’t know when, you
don’t know what sites, you
don’t know how they’ll turn
up. Are they going to try and
ram you with a car, smash a
window, present a firearm?
We’ve had all of that.”
“At the start of the pilot,
around 40 percent of
Z front-line people were
enrolled in KiwiSaver;
by the end, 100 percent
were enrolled.”
$243m $176m
Historical cost net profit after
tax (net profit)
Replacement cost net profit
after tax
$785m
Cost of purchase for Chevron
New Zealand ($857m including
the working capital adjustment)
3,795 million
litres
Total fuel volume
(retail and commercial)
$419m
Replacement cost operating
EBITDAF profit ($392m
including Caltex integration
expenses)
35m
Vehicle traffic across
our Z-branded retail sites
29 .3cents
Total dividend per share
$174m
Corporate income tax
(including GST)
44 cents
Replacement cost
net profit after tax per share
4 .6 cents
Replacement cost
net profit after tax per litre
$77m
Capital expenditure
7
Electric vehicle charging
stations in the Z network
157
Truck stops in
the Z network
100%
Health, safety, security,
and environment actions
close-out rate
About Z 12
About Z
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
13
Back to contents
A momentous
year
A summary from
CEO Mike Bennetts
Kia ora koutou o te whānau a Z Energy
The Caltex acquisition in June 2016
was a momentous undertaking. I’m
incredibly proud of the way our people
have worked to achieve the systems
cutover and the seamless integration of
the two businesses. Without disruption
to our core business, we were able to
meet our obligations and stay true to Z’s
values: be straight up; have the passion;
back people; share everything; be bold.
Given the sheer scale of the integration,
our investors put extraordinary
confidence in us. To reward that
confidence with such a successful result
was very pleasing for the team.
Our new colleagues from the Caltex
business have brought new skills and
wisdom to Z. They are passionate about
the opportunity to develop a brand and
an offer in the New Zealand context.
In a world where big companies are often
seen as bad companies, Z will not be a
big bad company. We are committed to
remaining a good corporate citizen. We
will take a balanced, measured, and well-
informed view in everything we do.
The next iteration of our
strategy will be capability led
Until now, Z’s strategies have been
largely investment led: we’ve spent
money to make money. The business
now has what we need. Our focus for
the future is to build the capability that
will drive the business and generate
enterprise value up to and beyond 2020.
Cultural capability is equally important
to us because leadership determines
performance, and outstanding
leadership leads to outstanding results.
At Z, everyone’s a leader whether they’re
a leader of self or a leader of people.
Climate change is a material issue
We accept the overwhelming scientific
evidence on climate change and
acknowledge that climate change is one
of the biggest material issues facing our
company, our industry, our communities,
and the world. Z supplies a product
that keeps New Zealand moving, but
that contributes around 8 percent
of New Zealand’s carbon emissions,
acknowledging that agriculture
contributes around 49 percent.
Clearly, we are part of the problem.
We’re moving to be part of the solution
and we want to work with others
to lower those emissions. Z has no
upstream assets so we don’t need to
sell oil if we can find something else
to keep New Zealand moving.
The pace of change in the
world makes the future
impossible to predict
Our response to preparing for the long
term is to develop our capability. Yes,
we’re thinking about the future, we’re
doing a lot of work to be ready. But no,
we don’t have one answer. No one does.
For some people, that’s not an adequate
response, but that’s a truthful response.
Towards the end of the year, we
established an innovation team that
will build a certain type of capability:
a willingness to experiment, operate
on limited information, and not be
afraid of failure.
Being able to see what’s happening to
demand for fossil fuels gives us a unique
opportunity to prepare for aspects of the
future in a steady way. I’m confident that
our people are the best at what they do
and will naturally innovate and evolve the
company as the future unfolds.
Robberies have become the
biggest safety risk to our
people and our business
Over the year, Z retail sites have
sustained a disturbing 23 robberies,
mostly in the Auckland region. Robberies
are a significant problem for the industry
and beyond: dairies and bottle stores
are also being hit hard. We are working
with police at national level, and their
intelligence points to very organised
criminal gangs stealing product to order.
Our HSSE team has spent a lot of time,
energy, and resource on improving our
management system and our thinking
on health and safety. That’s because
we want zero harm to people and the
environment, and we know that healthy,
engaged people enable our business
performance.
We are committed to
supporting the communities
we live and work in
Quite simply, Z is for New Zealand. From
our retail sites all over the country, we
sell the fuel that New Zealanders need
to keep moving. That makes us a big
part of every community up and down
the country – and it’s important to us
that we continue to be a force for good.
Z’s Good in the Hood programme
continues to support hundreds of
community projects – groups who are
helping people in the neighbourhoods
around our sites. In 2017, we’ve
widened the programme to include
groups who are supporting sustainable
environments in the neighbourhoods
around our sites.
We fully achieved our financial
objectives for the year
Our financial statements show we
delivered strong financial results. Our
replacement cost operating EBITDAF
was just above the upper end of our
guidance range and reflected admirable
performance across all areas of our
business. Our replacement cost net
profit was the equivalent of 4.6 cents per
litre of fuel sold. Z’s Total Shareholder
Return for the 3 years to 31 March 2017
put us seventh within the NZX 50 for
creating value for our shareholders.
Z is extremely well placed to achieve
long-term value for our shareholders
through a strong competitive position
and a growing capability to deal with the
uncertainty of the future. All of us at Z
appreciate your ongoing support and we
look forward to what the next year brings.
Nō reira, kia ora koutou.
Mike Bennetts
CEO
Mike Bennetts
CEO, Z Energy
Our leaders
14
About Z
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
15
Back to contents
Meet our board
1
Peter Griffiths
Chair
Member, Audit and Risk Committee
BSc (Hons), CMInstD
2
Justine Munro
Director
Member, People and Culture
Committee, and HSSE Committee
3
Julia Raue
Director
Member, HSSE Committee
GAICD, MInstD
Peter is a professional director
and international oil-industry
veteran. Until 2009, Peter was
Managing Director of BP New
Zealand. He previously served on
the boards of The New Zealand
Refining Company, Liquigas,
New Zealand Oil and Gas, Energy
Direct, Wanganui Gas, and
Bitumix. In addition to a range
of personal interests, Peter is
a director of Marsden Maritime
Holdings and Metro Performance
Glass, and a member of the
Civil Aviation Authority.
LLB (Hons) (Vic), MLitt (Law) (Oxon), MInstD
Justine is a change leader
currently working in the area
of the future of work, and
developing and measuring 21st
century skills. She has led or
helped establish many not-for-
profit organisations. She is a
former McKinsey & Company
consultant, lawyer specialising
in indigenous issues, and Rhodes
Scholar. Justine is a trustee of
Simplicity NZ, and was previously
Director of Champions for Change
– a group of 50 CEOs and chairs
committed to advancing diversity
and inclusion.
Julia is a professional director
with 26 years’ experience
in customer experience,
innovation, technology, business
transformation, and strategic
planning. She was the Chief
Information Officer at Air
New Zealand for eight years,
and has held management
positions in local government,
telecommunications, and not-
for-profit organisations. Julia is a
director of TVNZ, The Warehouse
Group, Jade Software, and
Southern Cross Health Society.
4
Paul Fowler
Director
Chair, HSSE Committee; member,
Audit and Risk Committee
BS (Marine Engineering),
ME (Nuclear Engineering), MBA, FAICD
Paul has many years’ experience
in primary industries. He was
the founding CEO of Nyrstar
NV, the world’s largest producer
of zinc metal, COO of Zinifex,
and CEO of Fletcher Challenge
Forests and Carter Holt Harvey
Forests. He spent 15 years with
BP in crude oil trading, strategic
planning, refining, and retail
marketing. Paul has served on
the boards of The New Zealand
Refining Company and Evergreen
Forests.
5
Alan Dunn
Director
Chair, People and Culture Committee;
member, HSSE Committee
6
Mark Cross
Director
Member, Audit and Risk Committee,
and People and Culture Committee
7
Abigail Foote
Director
Chair, Audit and Risk Committee;
member, HSSE Committee
CMInstD
BBS, CA, MInstD
LLB (Hons), BCA, CMInstD, INFINZ (cert)
Alan is an experienced corporate
leader. He was CEO and Chair
of McDonald’s Restaurants
New Zealand before moving
to Chicago to become Vice
President of Operations, then
Regional Vice President in the
Nordic region, and Managing
Director of McDonald’s Sweden.
Alan manages his own business,
Trumpeter Consulting, and is a
director of New Zealand Post,
BurgerFuel Worldwide, and
several private companies.
Mark is a professional director
with 20 years’ international
experience in investment
banking. He holds diverse
directorships spanning publicly
listed companies, institutional
investment funds, and not-
for-profit organisations. Mark
is the Chair of Milford Asset
Management and SIL/MFL
Superannuation Funds, and
a director of Genesis Energy,
Chorus, Argosy Property, and
Triathlon NZ. Mark is a member
of Chartered Accountants
Australia and New Zealand.
Abby is a professional director
with experience in publicly listed
and Crown companies. Trained
as a lawyer, she has worked in
corporate, treasury, and legal
roles for over 20 years. Abby is
a former director of Transpower
New Zealand, and currently
serves on the boards of New
Zealand Local Government
Funding Agency, Livestock
Improvement Corporation,
TVNZ, BNZ Life Insurance,
and Museum of New Zealand
Te Papa Tongarewa.
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2
3
4
5
6
7
Our leaders
16
About Z
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
17
Back to contents
Meet our
executive
team
1
Mike Bennetts
Chief Executive Officer
BBS, Diploma in Corporate Management, CMInstD
2
Chris Day
Chief Financial Officer
BBS, CA, CTP, CMInstD
Mike has led Z since its inception in 2010.
He spent 25 years with BP in a variety of
downstream roles in New Zealand, China,
South Africa, the UK, and Singapore. Mike is
a director of The New Zealand Refining
Company and Chair of Punakaiki Fund Limited.
Chris leads the finance and ICT team.
He was previously Financial Controller
for Contact Energy and, before
that, CFO for AXA New Zealand. He is
a member of Chartered Accountants
Australia and New Zealand, and a
director of Landcorp Farming.
6
Mark Forsyth
General Manager, Retail
BCom, CMInstD
Mark looks after Z’s 204 retail sites,
139 Caltex retail sites, and around
3,700 people working on those sites.
He has held management positions
with Shell in the UK, Ireland, and
New Zealand. Mark is a director of
Loyalty New Zealand Limited.
7
Julian Hughes
General Manager, Health, Safety,
Security, and Environment
BSc, MHSc, CMInstD
Julian is responsible for building leadership,
engagement, and systems capability to
manage Z’s operational risks. He has worked
in health, safety, rehabilitation, and wellness
management for over 20 years. Before joining
Z, Julian helped set up the Business Leaders’
Health and Safety Forum, a group of 200 chief
executives committed to improving workplace
health and safety in New Zealand.
8
Lindis Jones
General Manager, Corporate
BCom (Hons) BSc, MFin
Lindis is responsible for strategy,
communication, community, and sustainability.
He was accountable for incorporating the
Caltex business into Z and was previously
our GM, Commercial. Before joining Z,
Lindis was with Shell for 13 years, primarily
in retail operations and strategy in Europe,
Asia, and New Zealand.
3
Jane Anthony
General Manager, Marketing
BCom
4
Debra Blackett
Chief Governance Officer
LLB (Hons), MInstD
Jane is responsible for building the Z brand
and the company’s marketing and customer
strategy. Before joining Z, she worked with
Shell for 14 years in brand, marketing, and
operations positions in Australia, the UK,
Europe, and New Zealand. Jane is also a
director of Loyalty New Zealand.
Debra works closely with our board of directors,
board committees, subsidiaries, and joint
venture partners to ensure Z complies with all
listing requirements. Debra led the regulatory
application to clear the Caltex acquisition. She
has previously led legal teams at BP, ANZ, and
Telecom, and worked for law firms Chapman
Tripp and DLA Piper.
5
David Binnie
General Manager,
Supply and Distribution
BEng (Hons) Mechanical Engineering, MBA, CMInstD
Dave leads Z’s supply and logistics business,
including biofuels, terminals, and aviation
operations. Before joining Z, Dave spent
25 years with BP in a range of global roles.
He was also Managing Director of OPITO,
the UK’s oil and gas industry’s skills and
competence development organisation.
9
Sharlene Taylor
General Manager, People
and Culture
PgCert
Sharlene oversees all aspects of our people
and culture. Before joining Z, she was with
Fletcher Building where she held HR and
change management roles in the building
products and corporate divisions. Sharlene
has also worked in HR management roles with
Goodman Fielder throughout Australasia.
10
Meredith Ussher
General Counsel
LLB, BA
11
Nicolas Williams
General Manager, Commercial
LLB (Hons), BCom, MBA
Meredith is responsible for all group legal
risks, and strategic and legal advice for all
operational matters, including major contracts
with key suppliers and customers. Meredith
has previously worked with Todd Energy, the
New Zealand Racing Board/TAB, and at Minter
Ellison Rudd Watts as a senior associate.
Nicolas is responsible for all our business-
to-business sales and account management
activity, including Z Card and Star Card. He
was previously Strategy Manager, responsible
for Z’s strategy development, and managing
merger and acquisition activity. Before joining
Z, Nicolas held various corporate finance-
related roles at Macquarie and the New
Zealand Treasury.
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4
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10
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Our leaders
18
About Z
Our leaders
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
19
Back to contents
How we create value
Our capitals
Z is a distinctive company.
The people are different, the way
stuff gets done is different, and what
we aspire to is different. Being
distinctive enables us to achieve a
range of extraordinary outcomes.
When it comes down to it, we are
a values-based and organic firm of
people, not a machine. Our obsession
is to relentlessly look for solutions
that help our customers get out and
about, get on with their lives, and get
on with running their businesses.
In everything we do, we act in ways that
reflect our ambition, our values, and
what we stand for.
Our year
We merged two companies into one
this year without any material negative
effects on our people and culture,
capability, environment, assets, finances,
or our place in New Zealand. We think
that’s a pretty good result.
We’ve got great things planned for
the future and we’re well placed to
achieve long-term value creation for
our shareholders, and to deliver what
matters for our stakeholders and for
New Zealand.
Our people
and culture
Customer
experience
Our place in NZ
Our capability
Our people and culture
Our environment
Our people
Our Purpose
Solving what matters
for a moving world
Community
Our environment
Our capability
Our assets
Our finances
Our assets
Our place in
New Zealand
Our finances
Sustainable
energy
business
Environmental
stewardship
Our ambition
Our values
What we stand for
To be a
world-class
Kiwi company
Share everything
Have the passion
Be bold
Be straight up
Back our people
Health, safety, security,
and the environment
Sustainability
Community
Diversity and inclusion
We safely and
reliably integrated
two organisations,
two cultures, and
two remuneration
frameworks while
staff engagement
remained in the
upper quartile.
Z retail sites
sustained 23
robberies over
the year.
We fully
implemented our
operational risk
management
system, and
brought on board
a Chief Innovation
Officer. We had
no significant
non-compliances
with legal
requirements.
Our biodiesel
plant was safely
completed
although the
launch to market
took much longer
than we said it
would. Our carbon
footprint is 81
percent higher
than FY16, most
of which is due
to our acquisition
of the Caltex
business.
We leveraged
the scale of our
new network,
worked with
unprecedented
changes in
customer-loyalty
programmes,
and introduced
technology to
reduce robberies.
We expanded
Good in the
Hood, supported
safe and healthy
communities,
supported the
aspirations
of our wider
whānau, and
contributed 686
hours of skilled
volunteering.
We achieved
our earnings
targets, completed
the Caltex
transaction, and
invested for the
future.
Our company 20
About Z
Our leaders
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
21
Back to contents
Our supply chain
We focus on making the right choices across our integrated
supply and distribution system so that we can operate a
safe and highly efficient supply chain. We seek sustainable
improvement in all we do across our supply chain, which
spans half the globe.
Imported crude oil and fuel
Z does not explore or drill for oil, so we need
to purchase it on the international market.
Z imports 18 million barrels of crude oil and
7 million barrels of refined fuel per year –
nearly half of New Zealand’s total transport fuel.
Refinery
All crude oil imported into New Zealand is refined by
The New Zealand Refining Company – New Zealand’s only
oil refinery. Z uses nearly half of the capacity of the Marsden
Point refinery where crude is refined into petrol, diesel, jet
fuel, fuel oil, and bitumen. Z owns 15 percent of the refinery.
Supply and
distribution
Imported crude oil and fuel
Refinery
Terminals
Commercial markets
Z provides the fuel for
industry, with 2.2 billion
litres of sales going through
a range of fuels: jet fuel to
airlines; marine fuel oil to
the shipping, fishing, and
cruise-ship industries; all of
New Zealand’s bitumen to
the road-building industry;
and diesel for trucks and
tractors. Z has the strongest
truck-stop network in the
country with 157 sites.
stic businesses
e
m
o
D
Mini-tankers
SMEs
Inter
n
a
ti
o
Commercial
fuel
Jet
n
a
l
b
u
s
i
n
e
s
s
e
s
Commercial
Marine
Bitumen
General aviation
Lubricants
Value busin e s s e s
Distribution
Z stations
Retail
Caltex stat i o n s
Te Kora Hou
biodiesel plant
Supplying our customers
From the terminal storage
facilities, refined product is
distributed in smaller amounts
across New Zealand by road
tankers, pipelines, and marine
barges to retail service stations,
truck stops, and commercial
customers.
Retail service stations
Z has 343 retail service stations
in its network: 204 Z-branded sites
and 139 Caltex-branded sites.
Our company 22
About Z
Our leaders
Our company
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
23
Back to contents
Determining our
material issues
Z uses both the Integrated Reporting
and Global Reporting Initiative
(GRI) reporting frameworks as the
basis of our annual report. Both of
these frameworks require us to disclose
material issues for the business and
the process we use to determine these
material issues.
To determine our material issues, we
use a 6-step process. The process
enables us to collate and rank the issues
that a diverse range of our stakeholders
consider material.
Our process enables
us to collate and rank the
issues that a diverse range
of our stakeholders consider
material.
In this report, ‘stakeholders’ includes
investors, central government,
media, local government, community
organisations, NGOs, the sustainability
sector, and our employees.
Outlining our 6-step materiality process
Material issues
1.
Always in touch: We keep in
contact with a variety of our
stakeholders throughout the year
to maintain a good understanding
of what matters to them. The core
interests of Z’s stakeholder base
fall into broad groupings: financials,
health and safety, community,
and environmental sustainability.
3.
Survey: We survey key
representatives of internal
employees, the board, and key
external stakeholders asking them
to rate the relative importance of
GRI indicators previously used for
reporting.
5.
Annual report interviews:
We summarise issues that arise
in the annual report interviews
with the executive team and
other team members.
2.
What’s on investors’ minds:
We run regular investor roadshows
to develop a picture of what’s
on investors’ minds and to keep
pace with changes over time.
4.
Board agendas: We collate all
agenda items discussed by the
board during the year.
6.
Synthesis: We draw on all of
this information to determine our
material issues for reporting.
s
r
e
d
l
o
h
e
k
a
t
s
o
t
t
n
a
t
r
o
p
m
I
5
4
3
2
1
0
Excluded
Included
Fossil fuel substitutes
Economic
Z values and leadership
Compliance
Customer relationships
Process safety
Greenhouse gases
Product reliability
HSSE
Product transport
Training
Spills
Suppliers
Communities
Labour practices
Waste
Diversity and inclusion
Equal remuneration
Water
Electricity
1
2
3
4
5
Important to Z
Our material issues
24
25
How we
create
value
in a
moving
world
This section focuses on the six
capitals: human, intellectual, natural,
manufactured, social, and financial.
At Z, we call these six capitals:
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
26
About Z
Our leaders
Our company
Our material issues
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
27
Back to contents
Our people and culture
Setting Z
up for
the future
Until now, Z’s strategies
have been largely
investment led: we
spent money to make
money. The next
iteration of our strategy
will be capability led.
It’s about building the capability that will support
the generation of enterprise value up to and
beyond 2020. The business has what we need;
now we need the people with the right skill sets
to drive the business.
Cultural capability is equally important. At Z,
everyone’s a leader whether they’re a leader of self
or a leader of people. We believe that leadership
determines performance, and outstanding
leadership leads to outstanding results.
Z’s five values – be straight up; have the passion;
back people; share everything; be bold – are
embedded into every conversation, and every
person in the company is connected with them
and role-models them.
Jeremy Clarke – Z's Senior
Communications Advisor is
one of the many people who
brought their Caltex heritage
knowledge and skills to
complement and build on Z's
distinctive culture.
Our people and culture 28
About Z
Our leaders
Our company
Our material issues
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
29
Back to contents
Z’s new colleagues
from Caltex were
given choices
throughout their
transition to a new
company.
Integrating two organisations with
different ways of doing things
The Caltex acquisition brought two very different
companies together. The cultural integration of
the two is critical for the company to be fit for the
challenges over the next 10 years.
Sharlene Taylor is Z’s General Manager,
People and Culture.
“We needed to integrate two organisations,
two cultures, and two different remuneration
frameworks. And we needed to do it in a way that
made everyone feel comfortable without giving
up the ‘Z-ness’ of Z. Everyone from both heritage
businesses has had to shift their thinking.”
After the acquisition of the Caltex business, senior
people leaders from Z and Caltex took part in a
2-day workshop to collectively understand how
a clear culture helps to create value over time.
Chief Executive Mike Bennetts led the workshop
himself, rather than bring in an external facilitator.
“These are the people who will lead the integrated
business into the future. It’s important that we
draw on the Caltex heritage knowledge and skills
to complement and build on Z’s distinctive culture.
The unique mix sets us up to create significant
value in the short, medium, and long term.”
Z’s new colleagues from Caltex were given choices
throughout their transition to a new company.
“They could choose to come across to a Z
employment contract, or stay with what they’d been
on in the past. It’s been a genuine choice, and 97
percent of people chose to sign a Z contract within
a very short space of time.”
We completed a culture inventory to find out
what the Caltex world looked like and compared
it with what the Z world looked like.
One model that is useful in articulating an
organisation’s culture is likened to a tricycle.
A big front wheel steers the trike and two back
wheels support the direction.
“In Z’s culture, the front wheel represents the
concept of being ‘related’, which focuses on
people. The back wheels that support the direction
are ‘control’ and ‘develop’. In the Caltex culture,
the front wheel was ‘control’, which focused on
operational effectiveness and cost-efficiency.”
Julian Hughes is Z’s General Manager, Health,
Safety, Security, and Environment (HSSE).
Motor vehicle incidents
“Our focus was making sure we maintained
safe and reliable operations during the cutover
and integration period. We bought a business
that carried out very similar activities, but
actually some very different activities as well.
Essentially, we ended up with a mixed model
for how we manage the risks associated with
fuel-storage terminals and fuel retailing. We now
have a combination of in-house, joint venture,
and wholesale models. This means we need to
be very clear on our responsibilities across our
value chain.”
Embedding HSSE into the business
HSSE is as core to Z as our purpose, values,
and other fundamentals that sit at the heart
of everything we do.
Julian explains how HSSE functions at Z. “As an
integrated part of what Z does, HSSE has a material
impact on every element of the business. You can
separate it out as a function, but if it’s going to
go well, it has to be embedded in and across your
business.”
The HSSE team has spent a lot of time, energy,
and resource improving how Z thinks about
people’s health and wellbeing. And that’s for a
couple of reasons.
“We’ve got a strong commitment to people’s
health and safety, so we’re thinking about making
sure that what we do doesn’t damage their health.
Equally, we believe that healthy, engaged people
perform better.”
So at Z, HSSE is a key part of enabling our
performance as much as it is about ensuring our
people and environment don’t get harmed.
FY17
4
FY16
16
Number of spills
(Loss of containment)
FY17
0
Robberies
FY17
23
FY16
1
FY16
11
HSSE leadership
‘Walk and talks’
FY17
76
FY16
63
Total recordable case frequency (TRCF)
Total
FY17
1.36
FY16
1.26
Z employees
0.56
0
Retailers and Mini-Tankers franchisees*
1.54
1.48
Lost time injury frequency (LTIF)
Total
FY17
1.20
FY16
0.49
Employees
0.56
Retailers and Mini-Tankers franchisees*
1.35
0.58
0
Notes: Injury, occupational disease, and lost work day information follow criteria based on US OSHA guidelines.
*For GRI purposes, contractors are noted as retailers and Mini-Tankers franchisees.
Our people and culture 30
About Z
Our leaders
Our company
Our material issues
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
31
Back to contents
Laying the foundations
for the future
Z’s People and Culture team is re-evaluating what
Z’s workforce looks like, how people work, and how
flexible the workforce is to face the changes that
are occurring externally.
“With so much talk about ‘fluid’ workforces,
we need to be thinking differently in this space,”
says Sharlene.
“We’re going through and refreshing the way we
do things, making sure we’ve got the right systems
in place. Those systems help people to get stuff
done. It’s like laying the foundations for our culture
and performance aspirations. We’re leveraging
what we’ve got and looking at how we elevate
current processes as well.”
HSSE measurements
Exposure hours (millions)
HSSE actions close-out rate
Life saving rules breaches
Lost time injuries (LTIs)
Lost work days (LWDs)
Total recordable cases
Occupational diseases rate
Absenteeism rate
Work-related fatalities
We’re leveraging
what we’ve got and
looking at how we
elevate current
processes.
Total
Z employees
Retailers and Mini-Tankers franchisees
Total
Z employees
Retailers and Mini-Tankers franchisees
Total
Z employees
Retailers and Mini-Tankers franchisees
Total
Z employees
Retailers and Mini-Tankers franchisees
Total
Z employees
Retailers and Mini-Tankers franchisees
Z employees
Total
Z employees
Retailers and Mini-Tankers franchisees
FY17
FY16
4
0.7
3
4
0.5
3
100% 100%
7
23
2
21
259
8
251
26
2
24
0
0
0
6
9
0
9
47
0
47
23
0
23
0
0
0
1.3% 1.3%
0
0
0
21%
1
0
0
0
5%
0
HSSE Forum membership
% of total workforce
Tier 1 and tier 2 process safety incidents
Total
Recruiting the best people
with the right fit
Diversity and inclusion –
Z’s new stand
We believe our ambition to be a world-class
Kiwi company is more likely to be realised with
a diverse and inclusive working environment.
Z’s new Diversity and Inclusion Stand is being
developed to support us in solving what matters
for a moving world.
With the Caltex acquisition, Z has automatically
become a bigger and more diverse company.
We want to harness the benefits of diversity.
Ultimately, diversity helps us get better at
understanding our customer and stakeholder
needs, and responding effectively as they change
over time.
We recognise that diverse backgrounds,
experiences, and perspectives lead to a better
experience of work for our people. With improved
engagement comes stronger teams, greater
innovation and performance, more meaningful
relationships with customers and stakeholders,
and more value for our shareholders.
Z is a signatory to the UN Women’s Empowerment
Principles – one of over 1,400 businesses around
the world demonstrating leadership on gender
equality. The principles are created by the United
Nations and serve to empower women in
the workforce, marketplace, and community.
Just as the company is a different company from
what it was a few years ago, so too is the way
Z attracts talent. Attracting the right talent into
the business is critical to set us up for building
capability for the future.
In the last year Z has filled over 100 roles, many
through internal career pathways.
“Plenty of people have come through with strong
capability and could totally nail the job. But if the
fit’s not there, it’s just not worth employing them
on their skillset alone. You can build capability,
but you can’t build fit.”
This is a key area of focus when we’re looking to
bring people into Z.
“The Z Why explains the identity, meaning,
values, and beliefs of our people individually, and
collectively as one team. This context supports
everything we do. When people are looking to
join Z, we encourage them to read The Z Why
and make sure they connect with it before they
make their decision.”
z.co.nz/about-z/who-is-z-energy/
Culture, capability, leadership –
and now capacity
Z aspires to be a world-class Kiwi company.
Z’s organisational development strategy will
contain some fundamental choices in terms of
culture, capability, leadership, and a new addition –
capacity: how we free people up to get to the
stuff that’s really important.
The behaviours that support our five values
form part of Z’s performance contracts.
“In a lot of organisations, a person can get great
results, but the way they’ve gone about achieving
that mightn’t have been ideal. They may have
knocked a few people along the way or not shown
suitable leadership. For us, great performance
doesn’t exist on delivery alone – the way in which
you go about doing things is just as important.”
Our people and culture 32
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
33
Back to contents
Our capability
Building
capability,
not trying
to predict
the future
The pace of change in
the world makes the future
impossible to predict.
No one has one answer.
Z’s answer to the long term is to develop our
capability without knowing exactly how we’ll
need to use it. Our approach is ‘Yes we see it, we’re
thinking about it, we’re doing a lot of work to be
ready. But no, we don’t have one answer.’ For some
people, that’s not an adequate response, but that’s
a truthful response.
We’re thinking about how we transition from selling
a product that contributes to climate change.
Being able to see what’s happening to fossil fuels
elsewhere in the world gives us the opportunity
to prepare for the future in a steady way. We’re
comfortable that our people are the best at what
they do and will naturally evolve the company as
challenges arise.
Scott Bishop
Z’s Chief Innovation Officer
34
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
Governance
35
Back to contents
Z’s Strategy team became
a team of seven
The Strategy team is focused on getting a shared
view of what the future could hold.
Lindis Jones is Z’s General Manager, Corporate.
“We’re getting on with making the choices for
Strategy 3.0 – a capability-led strategy focused on
our current core business.”
The strategy sets out what we need to do to deliver
on all of our strategic intents across the functional
and the business strategies, and looks to What Is
Next (WIN) beyond 2020. WIN is the long-term
strategic thinking about the future of our business,
the industry, and how we participate in a rapidly
changing, carbon-constrained world.
“WIN is more far-reaching than ever before. We’re
looking at what skills we need to be successful in
the next decade and what other market spaces Z
could participate in. We’re preparing for the gradual
increase in the number of electric vehicles, and the
need to reduce carbon emissions to combat climate
change.”
Continuing to grow our operational
risk management system
This year, we fully implemented Z’s new operational
risk management system, ZORM, which provides a
consistent approach to managing operational risks
right across Z.
“It’s about building the capability in the business
to manage operational risks so that we have
confidence to operate and ensure our people and
the environment are safe,” says Julian Hughes.
Julian says that Z’s purpose – solving what matters
for a moving world – compels the company to act
on HSSE.
“We operate in an industry that has a wider
range of hazards and risks than most. It’s very
hard to predict the future when you’re managing
operational risk in a business like ours. We’ve built
our capability to manage operational risk, which
allows us to make confident choices about our
future operations.”
The successful integration of Caltex and Z is an
obvious example, and that same capability shows
up in many different scenarios across the business.
Using design to eliminate risk
Last year, Z had a ‘significant incident’.
Julian Hughes describes what happened and
how it changed the way we do things.
Z has a lot of tanks, holding a lot of hazardous
products, all over the country. We’ve got a lot of
controls to make sure the product stays in the tank.
One day a valve was left open, and we had a major
leak from a tank at an airfield. A part of the tank
was drained, and around 700 litres of jet fuel
was released from storage. The fuel was quickly
confined so that it didn’t get into the ground, but it
was still 700 litres of jet fuel not in the tank.
It was the first incident of that nature and of that
size since Z has been operating. It’s not the first
leak we’ve ever had but because of its size, it was
the most significant.
An operator had forgotten to close the valve. He’d
been closing that valve for 20 years, no problem. But
one day, for whatever reason, he forgot to close it.
“As you get bigger, with more moving parts, a
systematic approach to managing operational risk
is really important. ZORM supports Z’s stategy to
build a generative HSSE culture by 2020.”
Our investigation showed that while human error
played a part in the incident so too did design.
We’ve since changed some design elements to
eliminate the risk of human error in that situation.
This integrated approach focuses on three core
areas: visible leadership, engaged people, and an
enabled system.
“That way, we have the infrastructure and the
engagement to get to the point where our people
are really living HSSE and looking for ways to
improve how we do things.”
We’re always looking for ways to remove that risk
through design. We don’t want to rely on someone
remembering every day to turn the right knob.
We want safety controls designed into the process.
Bringing a chief innovation
officer on board
Z recently welcomed Chief Innovation Officer
Scott Bishop into our team.
Scott has worked for Amazon and Microsoft, and
most recently for Air New Zealand. He brings all
of his experience to Z in a time of change and
uncertainty to help our people tap into their
potential and develop the capability to innovate.
Scott leads Z’s innovation team, which is as much
about driving culture change as it is about creating
and exploring new products and services for the
customer. He believes that innovation is driven by
leadership behaviour. Companies need to develop
leaders who move away from doing traditional
research and making sure a product is ‘perfect’ to
one of hypotheses and experimentation.
“When you’re thinking about innovation, the
whole premise is to not be certain,” Scott says.
“If you’re confident in the outcome, then it’s not
an experiment. It requires a different type of
leadership to be unsure, to be willing to take risks,
operate on limited information, and not be afraid
of failure. Experimenting with customers allows us
to fail fast on concepts that don’t get traction and
accelerate those that do. This allows the business
to move faster and involve customers in determining
our future direction.”
In the short term, the goal is to build a common
language and operating model to help coach Z’s
different business groups on how to be more
innovative.
“We want everyone to understand how to
incorporate innovation into the ongoing rhythm
of the business, and encourage people to make
experiments that focus more on medium- and
long-term value creation.”
“And so we will investigate a portfolio of new
near-term products and service opportunities
combined with more ambitious projects that
are more speculative and reach further into
the future to ensure Z is a long-term, world-class
Kiwi company.”
The board as a thought partner
“At Z, the board is seen as a thought partner
rather than an approver,” says Debra Blackett,
Z’s Chief Governance Officer. “Everyone works
to get to a better answer, so it’s not about the
board having all the answers. Everyone brings
their experience and their thinking to build on
the way we approach challenges.”
In the same way that the company aspires to be
a world-class Kiwi company, the board aspires
to be a world-class Kiwi board. The board opens
itself up to regular independent assessments of
its performance. Given the volatility in the markets,
the board’s focus is on clear, distinctive, reliable
corporate governance that supports sustainable
value creation.
“The board works well as a team, largely because
of the directors’ diverse experience and ways of
thinking.”
The directors are highly engaged and put extra
time and effort into working with the business
to understand what’s going on – site visits and
safety 'walks and talks' are just part of the job.
The board has invested time and money in
keeping up with the latest technologies and
future thinking from around the world.
Z was the foundation sponsor of the
SingularityU New Zealand Summit 2016, which
almost all of the board attended over 3 days.
The summit attracted speakers and attendees
from around the world to focus on understanding,
adapting, and thriving in an exponentially
changing world.
singularityunz.com
It requires
a different type of
leadership to be unsure,
to be willing to take
risks, operate on limited
information, and not be
afraid of failure.
36
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our assets
Our place in New Zealand
Our finances
Financials
Governance
37
Back to contents
Our environment
Working to
be part of
the solution
We are the first generation
to feel the effect of climate
change and the last
generation who can do
something about it.
– Barack Obama
Z accepts the overwhelming scientific evidence
on climate change. We acknowledge that
climate change is one of the biggest long-
term material issues facing our company, our
industry, our communities, and the world.
We supply a product that keeps New Zealand
moving, but that also contributes to climate
change. Clearly, we are part of the problem.
We’re moving to be part of the solution and
we want to collaborate with others to make a
difference.
Z is not tied to fossil fuels. We have no upstream
assets. We don’t need to sell oil if we can supply
something else to keep New Zealand moving.
Saleshni Chand
Biodiesel Administrator
at Z’s Te Kora Hou
biodiesel plant
Our environment 38
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our assets
Our place in New Zealand
Our finances
Financials
Governance
39
Back to contents
EVs are perfectly
suited to the
New Zealand
environment
because our
electricity
generation is
largely renewable.
Exploring alternative fuels
Z makes up almost half of the fossil fuels market
in New Zealand, and the fuels the company sells
contribute around 8 percent of New Zealand’s
carbon emissions. There is a need to transition
to using less fossil fuel, and Z wants to be an
agent of change.
Dave Binnie is General Manager, Supply and
Distribution. He believes the opportunities that
lie ahead in the short, medium, and long term
for exploring alternative fuels are huge.
“We’ve got land everywhere in the country.
We’ve got terminals. We’re present across
New Zealand. Couple that with all the retail
sites we have now, and opportunities start
to emerge. We could start to use the land we
have differently. We could house more charging
units for electric vehicles, for example – just
one of the many different future options we
are exploring.”
We welcome electric vehicles
to New Zealand
Z supports the introduction of electric vehicles
(EVs) into New Zealand. With seven rapid-charging
units at sites across the country, and three more
on the way, we have a unique opportunity to watch
the market and see how we might play a bigger
part in the shift to EVs in the future.
Jonathan Hill is Z’s Corporate Communications
and Investor Relations Manager.
“EVs are perfectly suited to the New Zealand
environment. Because our electricity generation
is largely renewable, EVs are running on clean fuel.
If you have to burn coal to make your electricity,
EVs are not such a good story. New Zealand has
one of the highest rates of renewable electricity
generation in the world, so the opportunity
to realise benefits from EVs is significant.”
Z recently produced ‘house view’ on EVs, and
shared it widely in the market.
“We want to be clear that we’re not hiding from the
challenges; we want to talk about them and engage
with them. We’re not being complacent, but equally,
we’re not panicking either. We have a role to play
across a range of cleaner transport technologies
and this is an area of real focus for Z.”
Z’s house view on electric vehicles
Z Bio D enters the market
After some delay, Z Bio D is soon to enter the
New Zealand market.
“We took a commercial risk of investing $26 million
in the first commercial-scale biodiesel plant in
New Zealand,” says Jonathan. “As far as we know,
it’s the world’s first biodiesel plant built without
any government subsidies.”
The plant is part of Z’s longer-term vision of
transitioning to alternative fuels to counter
climate change.
“It’s a great example of the innovation from within
the core of the company. Our asset base and the
capability we’ve built in creating Bio D provides
a powerful combination that enables us to create
value over time.”
Z Bio D will soon be available in the upper North
Island, and owners of diesel vehicles can start using
Bio D as it arrives in their region.
Z Bio D is made from locally sourced tallow, an
inedible by-product of the meat industry, which
doesn’t compete with food production.
“It provides an instant reduction in carbon
intensity for our customers. Straight away, you
get a 4 percent emissions reduction. And for the
first time, customers have a real choice to use a
more sustainable product.”
Jonathan says Z is pleased with the demand for
the product from larger commercial customers.
“In particular, we want to thank Fonterra, Fulton
Hogan, TIL, New Zealand Post, and Downers for
their strong support for Z Bio D. We’re really looking
forward to putting a cleaner fuel in their tanks.”
The biodiesel
plant is part of Z’s
longer-term vision
of transitioning
to alternative
fuels to counter
climate change.
Greenhouse gas emissions
Total emissions
Tonnes CO2e
Scope 1 – Z offices and retail sites
Scope 2 – Z offices and retail sites
Scope 3 – Z offices and retail sites
Scope 3 – New Zealand supply chain
Scope 3 – Share of refinery
Scope 3 – Rest of supply chain
Scope 3 – Z product emissions from
our customers
Calendar
year 2012
(base year)
797
5,984
5,140
21,167
542,590
612,911
6,101,736
FY17
3,907
4,045
3,339
40,031
634,848
807,542
9,488,277
Calendar year 2012
(base year)
7,290,325
FY17
10,981,990
With the inclusion of the Caltex business, our total emissions are now 51 percent higher than in our base year.
Looking at operational and supply chain emissions, we’ve managed to reduce our intensity by 12 percent.
Within our own operations, we’ve reduced our emissions by 58 percent per person compared to 2012 through
energy efficiency and waste-reduction initiatives and the closing of our Gracefield plant in 2014.
Our environment 40
About Z
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Our capability
Our assets
Our place in New Zealand
Our finances
Financials
Governance
41
Stewart and Sam didn’t just fix that one gasket.
If one gasket was a problem, then possibly all
of them were compromised. They went right
through the plant making sure that every gasket
was 100 percent.
Their decision reflects the generative health and
safety culture that Z is committed to building. You
can be committed to safety or sustainability, but
that commitment only means something if you
act on it. Their health and safety leadership was
acknowledged in Z’s annual staff-awards ceremony.
Putting safety first at
our biodiesel plant
Launching Z Bio D into the market has taken
longer than we said it would. That’s because we’re
committed to getting things right and running the
plant safely and reliably.
Stewart Gibb and Sam Behzadi illustrated this
commitment when, during a tank inspection, they
saw something they both knew shouldn’t be there.
GM HSSE Julian Hughes explains.
Stewart runs Z’s biodiesel plant in Auckland; Sam
manages operations. Both are absolutely committed
to making sure that the plant operates safely.
Bio D was almost ready to enter the market, so they
brought in the methanol – something you only do
when you’re ready to go because it’s hard to get it
out of the tanks once it’s in.
During the final inspection, Stewart and Sam saw
a small piece of corroded gasket. They knew the
consequence of ‘calling’ it would be to not achieve
what Z had publicly committed to do. They called
it anyway. They announced that the Bio D launch
would be delayed: they had to get things right.
Back to contents
Z’s Biodiesel
Administrator,
Saleshni Chand,
and Biofuels
Operations
Manager,
Stewart Gibb
The less waste
to landfill the
better – for the
environment and
for the bottom line.
Environmental sustainability
is smart business
Recycling – cardboard and paper
The less waste to landfill the better – for the
environment and for the bottom line. Over five years,
Z retailers have reduced waste from the front
line to landfill by 54 percent. That’s a really good
result given that, during that time, retail sites also
increased their café offers.
In the past year, Z retail sites introduced locally
made, compostable coffee cups. The cups are for
composting, not recycling. They’re commercially
compostable rather than home compostable, so
we have composting collections at 70 sites around
the country. Our retailers take responsibility for
that waste if people leave the cups at a Z site.
Forecourt recycling bins arrive at our retail
sites in July this year. Instead of the one grey
rubbish bin, our customers will have four different
compartments to separate different types of
recycling materials.
Dave Gillies, who operates a cluster of retail sites
in the upper part of the North Island, says when
reducing waste also benefits the local community,
he and other retailers are all for it.
“Giving away coffee grinds to local gardeners has
been an amazingly simple way to cut waste from
our sites. Customers whisk the grinds away as fast
as we can produce them.”
FY17
3,212
tonnes
FY16
3,098
tonnes
Composting and organics
FY17
442
tonnes
FY16
456
tonnes
Recycling – plastic, cans and glass
FY16
832
tonnes
FY17
923
tonnes
Landfill
FY17
1,698
tonnes
FY16
1,461
tonnes
Total waste
FY17
6,275
tonnes
FY16
5,847
tonnes
Each year, we collect data for around 50 percent
of our waste streams from our retail sites, and
conduct a waste audit on our key corporate sites.
We then use this data to estimate the total volume
of waste we generate as a business.
Our environment
42
About Z
Our leaders
Our company
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Our environment
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Financials
Governance
43
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Our assets
Committed
to zero harm
to people
and the
environment
The biggest safety risk
to our people and our
business that we’ve had
to deal with in the last
year is the significant
escalation in robberies.
Z retail sites have sustained 23 robberies
over the year, mostly in the Auckland region.
Robberies are a significant problem for the
industry and beyond: dairies and bottle stores
have also seen a rise in robberies.
We are working with police locally and at a
national level, and their intelligence points to
tobacco being stolen to order. The offenders
are ram-raiding and smashing their way into
stores. They’re not bothering with cash because
we don’t hold any. They’re just after tobacco.
Jessica McCleary
Forecourt Concierge
at Z Washdyke in Timaru
Our assets 44
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Our number one
priority is the
safety of our
people.
The rise of highly organised
and executed robberies
Protecting our people and assets
through technology
The people carrying out the attacks are not always
the end customer. They’re often hired to carry out
the robberies. They generally go after the product,
not the people, but this year one of our front-line
people was hospitalised after an attack.
Mark Forsyth is Z’s General Manager, Retail.
“These robberies are an industry thing. It doesn’t
matter what brand is on the site, we’re all getting
attacked.”
The industry has formed a security group that
works together to find the most effective response
to the attacks.
“Our number one priority is the safety of our
people. With the number of robberies that we’ve
had to deal with this year, we are not where we
want to be in meeting our safety objectives.”
Z has invested heavily in robbery prevention and
will continue to invest over FY18. In the last quarter
of this financial year, Z saw an increase in the
number of attempted robberies that failed. At the
same time, the rate of arrests for offenders has
continued to be very high.
We have increased our asset programme across
Auckland to make our sites safer.
Bollards are now positioned across the front of every
store, making it impossible to drive into a store.
We invested in licence-plate recognition software,
linking our cameras to a police database. If cars
or people of interest appear on our sites, that’s
immediately communicated to the police.
Across all of Auckland, we’ve installed fog cannons,
a product that blasts the store with a sugar-soap
cloud solution and reduces visibility to zero in a
matter of seconds. It disorientates the offenders
and puts them off coming in, in the first place.
We’ve rolled out a new glass film, which is a
see-through product applied to the glass,
distributing the force across the whole pane of
glass. If someone hits the glass with a hammer,
the film absorbs the blow and helps stop the
glass from smashing.
Tobacco sales currently form a meaningful part
of Z’s retail profits, but that doesn’t mean we
will continue to sell the product in the future. Z
recognises the harm of tobacco and supports any
regulatory intervention on tobacco sales as long
as it’s fair and equally applied across all retailers.
If you buy 52 shipments
of crude oil, you get a better
price than if you buy 26 – both
for the shipping and for the
crude oil.
Scale provides all kinds of opportunity. “Very simply,
we’ve got trucks that deliver to Caltex service
stations driving past Z service stations. So we’ve
now got the ability to be smart about how we do
things.”
Z has outlined to the market the supply-chain
synergies from the combined business, such as
increased procurement strength in international
markets.
“If you buy 52 shipments of crude oil, you get
a better price than if you buy 26 – both for the
shipping and for the oil.”
Product and crude purchases by origin
(barrels)
Crude
Product
t
s
a
E
e
d
d
M
i
l
a
i
s
s
u
R
d
n
a
l
a
e
Z
w
e
N
a
i
s
A
t
s
a
E
h
t
u
o
S
a
i
l
a
r
t
s
u
A
a
i
s
A
t
s
a
E
e
p
o
r
u
E
A
S
U
a
i
s
A
t
s
a
E
h
t
u
o
S
Country/region of origin
Total crude
18,319,170
Total product
6,604,531
+
Grand total (barrels)
24,923,701
=
Delivering value through the scale
of the Z and Caltex networks
Since the Caltex acquisition, the commercial scale
of Z, as a company, has grown. With around 45
percent of the volumes in New Zealand now under
local operation, a transformative opportunity
presents itself for Z. Our new scale gives us the
opportunity to do things differently.
Nic Williams is Z’s General Manager, Commercial.
“Our strategy focuses on the opportunities from
the combined commercial portfolio. We’re working
to capture the efficiencies of the Caltex operating
model with the more flexible, customer-focused
approach of Z.”
Z continues to identify options for growing the
value of the business, and we’ve got far more
options than ever before. That comes from scale:
the business is around 70 percent bigger than it
was at the beginning of the year.
“We’re already seeing some opportunities for
the businesses to work together. We acquired a
lubricants business, something Z hasn’t had before,
and so there’s an opportunity for us to grow that
business and bring that product line into the Z
service stations.”
)
t
e
n
(
s
l
e
r
r
a
B
The more immediate benefits will be in things
like security of supply. We’ve got more terminals
and terminal locations around the country now
than anyone else. Because we can hold more
stock, we’ll be better placed to manage supply
disruptions.
“There are some immediate scale benefits in terms
of customer coverage. The more tangible benefits
are likely to show up over the next year or two.”
15,000,000
12,000,000
900,000
600,000
300,000
0
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46
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47
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As demand for
international air
travel has rapidly
increased, we’ve
worked hard to
ensure continuity
of supply for our
customers.
Differentiating our offer and
experience for customers
Overall satisfaction scores
Z now has a dual brand presence in retail that
opens up a world of opportunities.
The brand strategy has three parts to it: the
corporate brand; the Z retail brand; and the Caltex
retail brand. Z’s Marketing team is working on how
the three parts live in harmony and create value for
the business and for our customers.
Jane Anthony is Z’s General Manager, Marketing.
“We don’t want the different brands to be
competing directly against each other; we want
them to be complementary. Caltex will have a
different identity from what it had under Chevron
ownership. We’re also not looking to turn the
Caltex brand into the Z brand. The Caltex
brand will be distinctive, yet relative to the Z brand.”
The biggest challenge for marketing this year
was the dynamic shift in the customer loyalty
programmes and the potential for confusion in the
market to impact on performance. Z now partners
with the three largest loyalty programmes in the
country: Fly Buys, Air New Zealand Airpoints, and
AA Smartfuel.
“We see the partnerships as a privilege. We have
a great opportunity to make the most of that for
Z and for our customers.”
In the medium to long term, digital will play a big
part in loyalty.
“People around the world are already ditching
loyalty cards for a simple phone app.”
And the fuel version of that? Jane says it won’t be
inserting a card in the pump and tapping in a PIN. It
will all happen automatically: easy, seamless, digital.
“Customers already have that expectation in many
areas of life; it won’t be any different at the pump.”
86%
FY17
out of a total of 70,954 customers surveyed rated
their experience ‘very satisfied’ or higher.
We serve 60-odd
million people in the Z
network every year, making
us the fourth biggest retailer
in the country. We’re only
as good as how we served
the last customer, about
3 seconds ago, somewhere
in the country.
Supporting New Zealand’s
booming tourist industry
So we engaged with the refinery and our
customers, and pulled out all the stops to
make it happen.
In the last 18 months, the number of airlines
operating out of Auckland airport has increased
by 50 percent, putting unprecedented pressure
on jet-fuel supply as well as New Zealand’s tourism
infrastructure.
The airline and several others are now bringing
flights into New Zealand. By putting the time and
effort into a problem-solving exercise, we found a
way to make it happen. This is what we mean by
‘solving what matters for a moving world’.
Z’s Commercial team is working to keep all planes
moving. Nic Williams explains.
As demand for international air travel has rapidly
increased, we’ve worked hard to ensure continuity
of supply for our customers.
Recently, a major airline signalled its intention to
enter the New Zealand market, and started selling
air tickets to Kiwis and international visitors. Our
two major competitors couldn’t supply the airline
with jet fuel. Initially, we said we couldn’t either
because demand was so strong: we simply didn’t
have enough product. Then we took an NZ Inc
approach to the situation.
How could we make it happen so as to not put
a cap on New Zealand’s tourist numbers when
tourism is the number one export earner right
now? We’re the link between the customer and
the refinery to enable that continuity of supply.
Historically, all jet fuel at Auckland International
Airport has been manufactured at the refinery.
With sustained, strong demand from the booming
flight numbers through the airport, the market
has moved to a model in which refined jet fuel
now needs to be imported to supplement local
production.
The structural move to importing jet fuel on an
ongoing basis was always a likely outcome, but it
has happened several years sooner than expected
as a result of New Zealand’s tourism boom.
Importing jet fuel requires investment to be
made at the refinery, and it costs more than
manufacturing locally. This will show up as a
different price for Z’s jet-fuel customers, but it
will enable our tourism industry to maximise its
opportunity for the benefit of New Zealand.
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49
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Our place in New Zealand
A Kiwi
company
doing good
in the hood
Z is an NZX 10 company.
It’s no secret that
we’re a big business.
We understand our
responsibility to support
the communities we
live and work in.
Quite simply, Z is for New Zealand. From our
retail sites all over the country, we sell the fuel that
New Zealanders need to keep moving. That makes
us a big part of every community up and down the
country – and it’s important to us that we’re a force
for good.
‘Community’ is one of Z’s four stands – the things
we are committed to as a company. The Community
Stand has three parts: neighbourhood solutions;
safe and healthy communities; and aspirations and
achievement. We’re in action on all of our goals, and
making a difference in our communities.
Luana Tupou
Site Manager, Z Whitianga
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Our skilled
volunteering
programme
provides our
employees with
an opportunity to
use their skills to
help not-for-profit
groups in the
community.
We’re part of
neighbourhood solutions
Z is committed to supporting safe
and healthy communities
Z’s Good in the Hood programme continues to
support hundreds of community groups every year.
We are in our sixth year of helping groups who help
people who need it in the neighbourhoods around
our stations. This year, Z announced a widening
of the programme to include groups who actively
support our environment.
Christine Langdon leads Community at Z.
“Z wants to be part of sustainable environments, so
Good in the Hood is playing its part.”
The programme has evolved to include more than
financial support.
“Just being part of Good in the Hood gives profile
to groups we support. We provide tools and
resources to help groups to promote themselves
within their local communities. They can also go
on-site and be forecourt concierges for a day to
connect face to face with our local staff, retailers,
and customers.”
We work to deliver
the most benefit for the
most people.
Z-branded service stations across the country
process around 60 million transactions a year with
motorists travelling on our roads. It’s fair to say that
Z is fundamental to motorists, and that makes road
safety fundamental to Z.
“Z collaborates with the police and NZTA to
support their road safety initiatives, such as their
summer speed campaigns. This includes promoting
road safety messages at our Z stations and
through social media.”
Caltex has also been a leader in road safety
initiatives, partnering with Students Against
Dangerous Driving, and the Community Driver
Mentor Programme. Christine sees the opportunity
to combine the knowledge from both brands, and
partner organisations, and deliver road safety
initiatives that create the most impact in our
communities.
Z retail stores operate on a business model
traditionally based on selling pies and soft drinks.
“Demand has changed and so too will our offer.
Z is working to offer customers a greater range
of healthier food and beverages. This year that
included a fresh fruit offer, a better-for-you drinks
range, and new promotions on healthier options.”
Despite all the health warnings about smoking,
around 14 percent of Kiwis choose to smoke.
Z doesn’t want to tell people what they can or
can’t do, but we do believe customers should
have choices. Z retail stores have started selling a
nicotine-replacement product, giving customers
somewhere they can buy the product at any hour
of the day or night.
We publicly supported the introduction of
electronic cigarettes, which we believe are likely
to offer a safer alternative to traditional tobacco
products. z.co.nz.assets/NEWS/Z-Energy-
submission-on-ecigarettes.pdf
Supporting the aspirations
of our wider whānau
Z supports the aspirations and achievements of
our wider whānau, including the front-line staff at
Z retail sites. Z runs a scholarship programme that,
this year, supported eight site staff from Z-branded
service stations to work towards a tertiary-level
qualification.
“A lot of site staff come to work on Z’s front line
without having had the opportunity to achieve a
tertiary qualification. The scholarship programme
opens up a world of opportunities for staff –
typically for the first member of a family ever to
have taken the opportunity,” says Christine.
“The programme benefits our scholars and
the people around them, as their families and
workmates see them succeeding and see
possibilities for themselves.”
Two front-line staff recently graduated with a
Bachelor of Applied Management and are excited
to bring their new knowledge and skills back into
the business to create value for Z.
Luana Tupou and Nathan Taramai both agree
that after three years of study, they’ve grown and
become more effective leaders. They say they
now have a better understanding of strategic
management and embrace new responsibilities.
“We can draw on our academic grounding to
help design new approaches or coach others in
our clusters,” says Nathan.
Luana was 20 years out of school when she was
selected for the scholarship programme.
“I was a bit anxious about whether I could hold
down a full-time job and study until I met Nathan
and the others on the programme. The ongoing
support really helped me to get through.”
Luana and Nathan want to inspire more front-line
staff to take up the opportunity to study. Both are
adamant that if they can do it, so can others.
Z’s front-line
employees
Luana Tupou and
Nathan Taramai
both graduated
this year with a
Bachelor of Applied
Management.
Our place in New Zealand 52
About Z
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Our company
Our material issues
Our people and culture
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This year, Z’s
Community team
took their thinking
a step further, and
supported a new
external skilled-
volunteering
initiative,
‘HelpTank’,
expected to launch
in June 2017.
Sharing our skills with
the community
The Z Foundation supports
people in sudden hardship
All of Z’s corporate employees are encouraged
and supported to give back to the community.
That’s because, as a company, we recognise that
we’re very privileged. We also recognise that
privilege comes with responsibilities.
“Our Skilled Volunteering programme provides our
employees with an opportunity to use their skills to
help not-for-profit groups in the community,” says
Christine Langdon.
This year, Z’s Community team took their thinking
a step further, and supported the development of a
new external skilled-volunteering website initiative,
‘HelpTank’, expected to launch in June 2017.
“We’ve contributed funding and our skills to help
get HelpTank set up because we see volunteering
opportunities for our people, and HelpTank can
support so many more community groups than we
could on our own.”
Z retailers, who employ Z’s front-line people,
often go beyond what you would expect of an
employer, to help their staff.
They have put their commitment to their people
in black and white in the Crew Promise. As part
of the Crew Promise, this year they set up the
Z Foundation.
The Z Foundation is a fund that provides financial
support for site staff who find themselves in real
hardship when the unexpected happens. It may be
that they or a child in the family has a significant
health problem, or the family car has been stolen,
or the family home has burnt down.
“Retailers have put money into the Z Foundation
and so has Z. We are committed to continuing to
build the fund over the long term.”
Fuel your finances: new financial-
capability tools for front-line staff
Z is committed to building the financial capability
of retailers’ staff to empower them to make
smart financial decisions for the future and for
their retirement.
This year, Z piloted a financial-capability programme
called Fuel your Finances. The programme is initially
for Z’s front-line people who might simply want to
understand more about their payslip, or find options
for how to use their money and save.
The pilot included both a face-to-face programme,
and an online learning module.
“Results so far are very positive,” says Christine.
“At the start of the pilot, around 40 percent of
staff who participated in the pilot were enrolled in
Kiwisaver; by the end, 100 percent were enrolled.”
Today,
New Zealand has 21
brands in the retail
fuel market – some
operating low-cost,
asset-light business
models.
Petrol prices in New Zealand –
confusing for customers
Z welcomed the recent announcement of a
study into the operation of the New Zealand fuel
market. The Ministry of Business, Innovation,
and Enterprise is leading the study, and we hope
it will bring clarity to the situation.
Only 10 years ago, four major brands were
selling identical products in identical markets
at identical prices.
Today, New Zealand has 21 brands in the retail
fuel market – some operating low-cost, asset-light
business models. Seventy percent of New Zealand
service stations are now operated by independent
business people – this has been a massive shift in
the market and it’s showing up in different prices.
Those brands have very low costs and can sell
petrol at very low prices, creating intense regional
competition. Z, on the other hand, owns and
operates a nationwide infrastructure network that
enables us to keep the country moving in the short,
medium, and long term.
At Z service stations, we differentiate ourselves
from these competitors with offers that our
customers tell us they value – food and beverages
on the go; forecourt concierges; hotel-style
bathrooms; and pay@pump.
Our customers
tell us they value
our food and
beverages on the
go, our forecourt
concierges, hotel-
style bathrooms,
and pay@pump.
Our place in New Zealand
54
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Financials
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Our finances
A strong
financial
story to tell
We have fully achieved our
financial objectives for the
year, and delivered on our
commitment to investors.
The Caltex transaction was completed successfully
and the financial performance of the acquisition
has showed up in Z’s financials in the first 10
months, consistent with our expectations.
Financial performance of $419 million of
Replacement Cost Operating EBITDAF (excluding
one-off integration expenses) was 1 percent above
the upper end of our guidance range of $385–$415
million and reflected solid operating performance
in most areas of the business. In replacement
cost net profit terms, the return was around 4.6c
per litre of fuel sold, including profits from the
convenience stores.
Z’s Total Shareholder Return (TSR) for the 3 years
to 31 March 2017 ranked as number seven on the
NZX50, achieving the company’s target of upper
quartile TSR performance.
Our finances 56
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Investing in integrity and growth
Aside from the investment to acquire the Caltex
business, Z invested $77m in capital expenditure
in FY17. This was split between integrity ($45m) –
maintaining pipes, tanks, and our ICT systems,
and in growth ($32m) – principally in building four
new sites and rebuilding existing sites.
As a final step in completing capital management
activities in FY17, Z issued $220m in retail bonds
to repay maturing bonds and replace some of the
bank debt accumulated as part of the acquisition,
with longer dated retail bonds.
“The net effect of the bond issue was to diversify
funding, increase duration from 2.1 years to 3.2
years, and reduce annual financing expenses by
around $5m.”
Investing for the future
Z is undertaking a significant reinvestment in its
key technology platforms to improve their integrity
and make them fit for purpose in realising Z’s
strategy over the medium term.
This has seen the company begin updating the
point of sale technology at all of the Z-branded
retail sites with nine sites live at 31 March and
roll-out to be completed around the middle of FY18.
Z is also reinvesting in its core Enterprise Resource
Planning (ERP) computer system.
“We are delivering a broadened and refreshed ERP
planned for the second half of FY18 and beginning a
multi-year project to upgrade Z’s fuel-card systems
– both the Z and Caltex legacy systems.”
The Caltex acquisition –
the highlight of the financial year
Caltex was purchased for $785 million at an
earnings multiple of around six times current
replacement-cost earnings, with settlement on
1 June 2016. This followed an extended and
thorough 11-month regulatory review and sign-off
that enabled the transaction to proceed, subject to
Z divesting 19 retail sites and one truck stop. This
was completed ahead of the February deadline.
Chris Day is Z’s Chief Financial Officer.
“In achieving the divestment outcome, we met all of
our obligations and set goals in line with Z values,
putting people and their jobs first. We’re very proud
of that. We could have just signed and walked away,
but we didn’t. We put a lot of time and effort into
our communications with retailers and staff.”
Acquiring Caltex delivered on Z’s consolidation
strategy and enables the company to build on
the achievements of the company’s first two
rounds of strategy – Strategy 1.0 and Strategy 2.0.
Both strategies were largely about establishing
and building the Z brand while at the same
time investing in the core business to enable a
significant lift in operational performance and the
value proposition for customers.
The higher returns that have come from executing
these strategies have also enabled Z to reinvest in
the resilience of the business, improve the offer for
customers, and honour the commitments we have
to running a safe business.
“This investment would not have been possible
in the environment when Shell exited in 2010
because returns were below the cost of capital.
The investment would not have been worthwhile.”
The Caltex transaction was fully debt-funded
and did not require any equity to be raised. Since
settlement, we’ve reduced leverage from around
2.6 times RC Operating EBITDAF (excluding
transition expenses) at the time of the transaction
to around 2.3 times at 31 March 2017.
The leverage reduction was generated by
our choices for capital recycling, from site
sales and divestments, and operating cash
flows that put us well on the way to meeting
our deleveraging targets.
Strategy 3.0 relies
on delivering on the
business choices
we have available to
us through building
commercial
relationships and
partnerships with
other parties.
Getting on with making the
choices for Strategy 3.0
Investor Day – sharing our
strategy for the future
Strategy 3.0 relies on delivering on the business
choices we have available to us through building
commercial relationships and partnerships with
other parties.
“We expect the capital demand associated with
Strategy 3.0 will not be significant. However, we
do expect that our organisational capability – in-
house and through our partners – will need to be
developed to enable us to make the most of the
strategy. Z is instinctively well positioned to do that.”
Z’s Investor Day held in October highlighted our
strategy for the future and the option-rich portfolio
that we’ve generated as a result of the Caltex
transaction. It was also a chance for us to talk to the
investor community about our strategies and give
them confidence in the leadership of the business
in the short, medium and longer term.
“Our focus is now on realising the full value from
the transaction over the next two to three years.
At the same time, we will be working on our strategy
for What Is Next (WIN). We have a dedicated team
developing options for WIN after Strategy 3.0.”
We plan to hold an investor day on 28 September
2017. At that time, we will update progress on
Strategy 3.0, provide some initial insight on WIN,
and share our thinking on updating Z’s distribution
policy to take effect once we have deleveraged
the business back to the two times RC operating
EBITDAF target.
Our finances 58
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Our
financial
statements
59
For the year ended 31 March 2017
60
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Statement of comprehensive income
for the year ended 31 March 2017
Revenue
Purchases of crude and product
Excise and carbon expenses
Primary distribution expenses
Operating expenses
Share of earnings of associate companies net of tax
Notes
4, 5
6
15
Earnings before interest, taxation, depreciation including gains and (losses) on sale of fixed
assets, amortisation, impairment, fair value movements in interest rate derivatives and
movements in decommissioning and restoration provision (EBITDAF)
Depreciation and amortisation
Net financing expense
Fair value movements in interest rate derivatives
Impairment
Loss on sale of property, plant and equipment
Movements in decommissioning and restoration provision
Net profit before taxation
Taxation expense
Net profit for the year
Net profit attributable to owners of the company
Revaluation of land and buildings net of tax
12, 13
7
12
17
Movements in decommissioning and restoration provision recognised in asset revaluation reserve
Share of associate other comprehensive loss net of tax
Other comprehensive income net of tax
Total comprehensive income for the year
Total comprehensive income attributable to owners of the company
Basic and diluted earnings per share (cents)
20
2017
$m
3,871
(2,010)
(941)
(41)
(397)
6
488
2016
$m
2,521
(1,417)
(569)
(27)
(353)
23
178
(89)
(56)
3
(5)
(1)
2
342
(99)
243
243
5
-
(1)
4
247
247
61
(41)
(32)
(6)
(5)
(1)
(7)
86
(22)
64
64
100
(2)
-
98
162
162
16
Statement of changes in equity
for the year ended 31 March 2017
Notes
Capital
$m
432
Retained
earnings
$m
Employee
share reserve
$m
Asset
revaluation
reserve
$m
Total equity
$m
(59)
(3)
135
Balance at 1 April 2015
Net profit for the year
Other comprehensive income
Disposal of revalued assets
Total comprehensive income for the year
Transactions with owners recorded directly in equity:
Own shares acquired
Share-based payment
Dividends to equity holders
19
Supplementary dividends to equity holders
Tax credit on supplementary dividends
Total transactions with owners recorded
directly in equity
Balance at 31 March 2016
Balance at 1 April 2016
Net profit for the year
Other comprehensive income
Disposal of revalued assets
Total comprehensive income for the year
Transactions with owners recorded directly in equity:
Own shares acquired
Share-based payment
Dividends to equity holders
19
Supplementary dividends to equity holders
Tax credit on supplementary dividends
Total transactions with owners recorded
directly in equity
-
-
-
-
-
(1)
-
-
-
64
-
1
65
-
-
(100)
(7)
7
(1)
(100)
431
(94)
431
(94)
-
-
-
-
-
(1)
-
-
-
(1)
243
(1)
2
244
-
-
(110)
(11)
11
(110)
-
-
-
-
(1)
1
-
-
-
-
(3)
(3)
-
-
-
-
(1)
1
-
-
-
-
-
98
(1)
97
-
-
-
-
-
-
232
232
-
5
(2)
3
-
-
-
-
-
-
505
64
98
-
162
(1)
-
(100)
(7)
7
(101)
566
566
243
4
-
247
(1)
-
(110)
(11)
11
(111)
The accompanying notes form part of these financial statements.
The accompanying notes form part of these financial statements.
Balance at 31 March 2017
430
40
(3)
235
702
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63
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Statement of financial position
as at 31 March 2017
Shareholders’ equity
Represented by:̱
Current assets
Cash and cash equivalents
Accounts receivable and prepayments
Inventories
Derivative financial instruments
Income tax receivable
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments in associates and subsidiaries
Derivative financial instruments
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Accounts payable, accruals and other liabilities
Income tax payable
Provisions
Short-term loan
Bonds
Derivative financial instruments
Total current liabilities
Non-current liabilities
Other liabilities
Provisions
Derivative financial instruments
Deferred tax
Bonds
Long-term loan
Total non-current liabilities
Total liabilities
Net assets
Notes
11
8
10
23
12
13
13
15, 16
23
9
18
21
22
23
18
23
17
22
21
2017
$m
702
9
278
464
4
-
755
900
158
535
116
5
4
2016
$m
566
76
234
203
8
28
549
674
-
44
115
11
1
1,718
2,473
845
1,394
426
278
24
23
51
-
10
534
14
50
12
170
501
490
1,237
1,771
702
-
6
-
147
9
440
15
37
21
32
283
-
388
828
566
Statement of cash flows
for the year ended 31 March 2017
Cash flows from operating activities
Receipts from customers
Dividends received
Interest received
Payments to suppliers and employees
Excise and carbon paid
Interest paid
Taxation paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Net proceeds from divestments
Purchase of intangible assets
Chevron New Zealand acquisition
Purchase of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Net proceeds from bank loan
Issue of bonds
Purchase of shares
Dividends paid to owners of the company
Repayments of bonds
Net cash inflow / (outflow) from financing activities
Net decrease in cash
Cash balances at beginning of year
Cash and cash equivalents at end of year
Notes
2017
$m
2016
$m
3,911
2,557
4
23
(2,622)
(940)
(71)
(50)
255
13
22
(1,794)
(592)
(50)
(27)
129
4
21
22
19, 25
19
22
23
18
(5)
(778)
(70)
(812)
541
220
(3)
(121)
(147)
490
(67)
76
9
6
-
(5)
(79)
(72)
(150)
-
-
(2)
(107)
-
(109)
(130)
206
76
Approved on behalf of the board
on 10 May 2017 .
Peter Griffiths
Chair
The accompanying notes form part of these financial statements.
Abigail Foote
Chair, Audit and Risk Committee
The accompanying notes form part of these financial statements.
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64
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Reconciliation of net profit for the year to cash flows from
operating activities
Notes to the financial statements
for the year ended 31 March 2017
Net profit for the year
Adjustments to reconcile profit to net cash inflow from operating activities
Depreciation and amortisation
Impairment
Share of earnings of associate companies (net of tax)
Fair value of derivatives
Dividends received
Other
Changes in assets and liabilities, net of non-cash, investing and financing activities
Change in accounts receivable and prepayments
Change in inventories
Change in accounts payable, accruals and other liabilities
Change in taxation
Net cash flow from operating activities
Notes
15
2017
$m
243
89
5
(6)
(3)
4
(19)
(25)
(83)
2
48
255
2016
$m
64
41
5
(23)
6
13
(1)
6
102
(72)
(12)
129
The accompanying notes form part of these financial statements.
1.
Basis of
accounting
2.
Changes in
accounting
policies
Reporting entity
Z Energy Limited is registered in New Zealand
under the Companies Act 1993 and is an FMC
Reporting Entity under the Financial Markets
Conduct Act 2013. The financial statements
have been prepared in line with the
requirements of these Acts and the Financial
Reporting Act 2013.
Z Energy Limited is listed on the New Zealand
(NZX) and Australian (ASX Limited) stock
exchanges and has four series of bonds
quoted on the NZX Debt Market. The financial
statements presented are those of Z Energy
Limited (the Company, Parent, or the Parent
Company) together with its subsidiaries,
interests in associates, and jointly controlled
operations (Z or the Group).
Basis of preparation
The financial statements have been
prepared in line with New Zealand Generally
Accepted Accounting Practice (NZ GAAP)
and the Financial Reporting Act 2013. They
comply with the New Zealand equivalents to
International Financial Reporting Standards
(NZ IFRS) as appropriate for profit-oriented
entities, and with International Financial
Reporting Standards (IFRS). Z has reported
as a Tier 1 entity under the new External
Reporting Board (XRB) Accounting Standards
Framework. Z meets the definition of a Tier 1
entity because it is ‘publicly accountable’ and
‘large’ as defined by the XRB.
The functional and reporting currency
used to prepare the financial statements is
New Zealand dollars, rounded to the nearest
million ($m). The financial statements have
been prepared on a GST-exclusive basis
except billed receivables and payables,
which include GST.
The financial statements are prepared on the
basis of historical cost except certain financial
derivatives, which are valued in line with the
accounting policy in note 23, and property,
plant and equipment, which is valued in line
with the accounting policy in note 12.
Basis of consolidation
A list of associates and subsidiaries is shown
in notes 15 and 16. Consistent accounting
policies are employed in preparing and
presenting the Group financial statements.
Intra-group balances and any unrealised
income or expenses arising from intra-group
transactions are eliminated in preparing the
Group financial statements.
No changes to accounting policy have been
made during the year and policies have been
consistently applied to all years presented in
the financial statements.
Presentational changes
Certain amounts in the comparative
information have been reclassified to
ensure consistency with the current
period’s presentation. The following
balances have been reclassified: property,
plant and equipment – terminal plant has
been split out of plant and machinery;
provisions – remediation has been included
with decommissioning and restoration;
and investment in associates – prior year
comparatives for Coastal Oil Logistics Limited
(COLL) have been restated.
Adoption status of relevant new
financial reporting standards and
interpretations
The Group has chosen not to early adopt the
following standards.
NZ IFRS 15 Revenue from Contracts with
Customers (effective for annual periods
beginning on or after 1 January 2018), which
has been issued. Adopting this standard is
not expected to have a material impact on the
financial statements of Z.
NZ IFRS 9 Financial Instruments: Classification
and Measurement (effective for annual periods
beginning on or after 1 January 2018), which
has been issued. Adopting this standard is
not expected to have a material impact on the
financial statements of Z.
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2. Continued
3.
Critical
accounting
estimates and
judgements
NZ IFRS 16 Leases (effective for annual
periods beginning on or after 1 January 2019),
which has been issued. NZ IFRS 16 introduces
a single lessee accounting model and requires
a lessee to recognise assets and liabilities for
all leases with a term of more than 12 months,
unless the underlying asset is of low value.
Accounting by lessors is unchanged under NZ
IFRS 16. As such, a lessor continues to classify
its leases as operating leases or finance
leases, and to account for those two types of
leases differently. When adopted, NZ IFRS 16
will have an impact on the Group’s financial
statements. The estimated impact based on
leases held at 31 March 2017 is an increase
in property, plant and equipment of $424m,
liabilities of $424m, interest expense of $20m,
depreciation expense of $21m, and a decrease
in operating expenses of $31m. The impact on
net profit is nil over the duration of the lease.
The preparation of financial statements
requires management to make judgements,
estimates, and assumptions that affect the
application of policies and reported amounts
of assets and liabilities, income, and expenses.
Actual results may differ from these estimates.
The principal areas of judgement in preparing
these financial statements are set out below.
Provisions
Liabilities are estimated for decommissioning
and restoration of certain sites of operation.
Such estimates are valued at the estimated
future costs of the expenditure expected to
settle the obligation. Key assumptions have
been made as to the expected amount and
timing of expenditure to remediate, based on
the expected lives of the assets employed
on the sites, discounted using a risk-free rate
(refer to note 18).
Valuation of investments in
associates and subsidiaries
Management performs an assessment of
the carrying value of investments at least
annually and considers objective evidence for
impairment on each investment taking into
account observable data on the investment,
the fair value, the status or context of capital
markets, its own view of investment value, and
its long-term intentions. For more detail, refer
to note 15 and 16.
Measurement of fair value
Some of the Group’s accounting policies and
disclosures require the measurement of fair
values. For further information about the
assumptions made in measuring fair values,
refer to notes 12 and 23.
Business combinations
The recognition of business combinations
requires the Group to make judgements and
estimates about the fair value allocation of
the purchase price. Where the purchase price
exceeds the fair value of the identifiable
assets, goodwill is recognised. In line with
NZ IFRS 3 guidelines, the figures provided in
these statements are final (refer to note 4).
Goodwill
Goodwill recognised through a business
combination depends on the Group’s
judgements and estimates for the fair value
of the assets acquired and the liabilities
assumed. 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 or decline, expected future margins,
and the discount rate for valuing future cash
flows (refer to note 13).
4.
Business
combination
(a) Summary of acquisition
On 1 June 2016, the Company acquired 100% of the share capital of Chevron New Zealand
(renamed Z Energy 2015 Limited), an importer, distributor and seller of transport fuel and related
products. The acquisition has strengthened the Group’s fuel network within New Zealand.
Details of the purchase consideration, the net assets acquired, and goodwill are as follows.
Cash paid
Debt
Total purchase consideration
The assets and liabilities recognised as a result of the acquisition are shown below.
Property, plant and equipment
Inventories
Trade receivables
Other current assets
Other non-current assets
Investment in subsidiaries and associates
Deferred tax
Trade payables
Provisions
GST and FBT payable
Intangible assets
Goodwill
Net assets acquired
$m
147
710
857
Fair value
$m
246
195
86
4
4
1
(148)
(135)
(34)
(4)
484
158
857
The goodwill is attributable to the future earnings of the Group. Goodwill is not deductible for tax
purposes.
(i) Contingent liabilities
A contingent liability has been recorded for
back-dated excise duty claims by New Zealand
Customs Service for periods 1 October 1996
to 31 December 2013, and 1 January 2015 to
30 September 2016.
On 7 March 2017, Z Energy 2015 received an
assessment for excise and additional duty of
$54.1m. This has been paid and the portion
of the assessments that relates to the period
before 1 June ($53m) has been funded by a
third party under an indemnity.
(ii) Acquired receivables
The fair value of acquired trade receivables
was $86m. The gross contractual amount for
trade receivables due was $86m, all of which
has been collected.
(iii) Revenue and profit contribution
The acquired business contributed revenues
of $1,425m to the Group for the 10-month
period to 31 March 2017.
If the acquisition had been at the start of the
reporting period, it is estimated revenues
for the combined entity would have been
$4,149m.
It is impracticable to accurately derive profit
or loss for each entity due to the combined
purchasing and processing of crude and
product together with the co-mingling of
support and other services in the Group since
the acquisition date.
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4. Continued
(iv) Assets held for sale
As part of the Commerce Commission
clearance process for the acquisition, Z was
required to divest 19 retail service stations
and one truck stop across the combined Z-
and Caltex-branded sites. The Caltex-branded
sites identified to divest made up $0.2m of
property, plant and equipment acquired, and
were recognised as assets held for sale. The
divestment of these sites was completed by
January 2017.
(b) Purchase consideration
(v) Investment in associates
As a result of acquiring Z Energy 2015 Limited,
the Group now owns a larger share of Coastal
Oil Logistics Limited (COLL) (50%) and Wiri
Oil Services Limited (WOSL) (44%). Despite
this increase in ownership, the Group does
not have control over either but continues to
have significant influence. Therefore, both will
continue to be reported as associates.
6.
Operating
expenses
Outflow of cash to acquire subsidiary:
Acquisition price
Working capital adjustment
Cash acquired on acquisition
Total cash consideration
Less:
Cash acquired on acquisition
Total purchase consideration
Deposit paid 2 June 2015
Outflow of cash from investing activities – Chevron New Zealand acquisition
$m
785
72
66
923
(66)
857
(79)
778
(i) Acquisition-related expenses
Acquisition-related expenses of $14m (31 March 2016: $25m) are included in operating expenses in
the Statement of comprehensive income and in operating cash flows in the Statement of cash flows.
Revenue comprises the fair value of consideration received or receivable for the sale of goods
in the ordinary course of the Group’s activities. Sales of goods are recognised when a Group
entity has supplied products to the customer, the customer has accepted the products, and the
collectibility of the related receivables is reasonably assured.
Fuel
Non-fuel
Total revenue
2017
$m
3,802
69
3,871
2016
$m
2,457
64
2,521
5.
Revenue
Employee benefits
Secondary distribution
Selling commissions
On-site expenses
Administration and other expenses
Professional fees
Marketing expenses
Storage and handling
Insurance
Operating expenses excluding (gains) / losses on foreign
exchange and commodity transactions
(Gains) / losses on foreign exchange
Losses on commodity transactions
Total operating expenses
Included in professional fees are fees paid to
auditors. These fees include audit and audit-
related fees of $383,026 (2016: $256,280)
and other service fees of $94,100 (2016: nil).
Audit and audit-related fees comprise the
audit and review of financial statements
$358,500 (2016: $216,820), technical
accounting opinions $6,526 (2016: $21,460),
fees for audit of bank covenants and trustee
reporting $12,000 (2016: $12,000), and agreed
upon procedures for license fee return $6,000
(2016: $6,000).
2017
$m
2016
$m
69
64
59
57
54
39
36
20
6
404
(7)
-
397
53
45
59
52
37
39
23
13
6
327
15
11
353
Other service fees comprise IRD risk review
$6,500 (2016: nil), Global Reporting Initiative
reporting review $13,000 (2016: nil), pro
forma financial statements for retail bond
issue $34,600 (2016: nil), Z Retailer reporting
advisory $30,000 (2016: nil), and cost of sales
adjustment review $10,000 (2016: nil).
Included in professional fees are directors’
fees of $0.9m (2016: $0.8m).
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7.
Net financing
expense
8.
Accounts
receivable and
prepayments
Interest revenues are recognised as accrued, taking into account the effective yield of the
financial asset.
Interest income from swaps
Interest income from cash
Other finance income
Total financing income
Interest expense on bonds
Interest expense on swaps
Interest expense on secured bank facilities
Financing fees
Other finance expense
Total financing expense
Net financing expense
2017
$m
20
1
1
22
(29)
(19)
(19)
(9)
(2)
(78)
(56)
2016
$m
20
4
2
26
(30)
(19)
-
(4)
(5)
(58)
(32)
Receivables, classified as loans and receivables, are initially recognised at fair value. From then
on, they are measured at amortised cost less any provision for impairment. A provision for
impairment is established when there is objective evidence that the Group will not be able to
collect the amount due. Receivables that are no longer collectible are written off.
Trade receivables
Prepayments
Deposit for Chevron New Zealand acquisition
Other receivables
Accounts receivable and prepayments
9.
Accounts payable,
accruals and
other liabilities
Accounts payable
Accruals and other liabilities
Employee benefits payable
Accounts payable, accruals and other liabilities
2017
$m
249
17
-
12
278
2017
$m
378
30
18
426
2016
$m
135
12
79
8
234
2016
$m
241
22
15
278
10.
Inventories
11.
Cash and cash
equivalents
12.
Property, plant
and equipment
Inventory is stated at the lower of cost or net realisable value. The cost of inventories is based
on the first-in, first-out principle. Net realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses.
Finished goods / trading products
Raw materials and consumables
Inventories
2017
$m
306
158
464
2016
$m
144
59
203
During the year there was a reversal of the write down of inventories to net realisable value
amounting to $10m (2016 write down: $9m). The reversal of prior year write down is included in
Purchases of crude and product in the Statement of comprehensive income.
Cash and cash equivalents comprise cash on deposit at banks and investments in money market
instruments, excluding outstanding bank overdrafts.
Property, plant and equipment (PPE) is
measured at fair value based on periodic
valuations by an independent valuer, less
accumulated depreciation and any impairment
after the date of revaluation. Additions to PPE
after the most recent valuation are recorded
at cost. Cost includes expenditure that is
directly attributable to the acquisition of the
item, including: the cost of all materials, direct
labour, resource management consent costs,
and an appropriate portion of variable and
fixed overheads.
An assessment of fair value is performed
annually by an independent valuer to assess
the underlying assumption of each asset class
to determine whether a revaluation is required.
Revaluation of land and buildings was
performed at 31 March 2016; revaluation of
terminal plant was performed at 31 March 2017
due to material changes in market conditions
impacting the fair value.
Depreciation is provided on a straight-line basis.
The major depreciation periods (in years) are:
Buildings
Plant and machinery
Land improvements
Terminal plant
10 – 35
5 – 35
15 – 35
5 – 35
Financials
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Our environment
Our assets
Our place in New Zealand
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73
Construction
in progress
$m
Buildings
$m
Land and
improvements
$m
Plant and
machinery
$m
Terminal
plant
$m
Total
$m
Construction
in progress
$m
Buildings
$m
Land and
improvements
$m
Plant and
machinery
$m
Terminal
plant
$m
Total
$m
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12. Continued
Year ended
31 March 2017
Cost / valuation
Balance at beginning of year
Recognised on acquisition
Additions
Disposals
Transfers between asset
classes
Offset of accumulated
depreciation on revaluation
Impairment losses
recognised in profit and loss
Revaluation adjustment
Balance at end of year
67
1
72
-
(92)
-
-
-
48
Accumulated depreciation and impairment
Balance at beginning of year
Depreciation
Disposals
Offset of accumulated
depreciation on revaluation
Balance at end of year
Carrying amounts
At 1 April 2016
At 31 March 2017
-
-
-
-
-
67
48
113
14
-
(3)
11
-
(1)
1
135
(2)
(11)
-
-
(13)
111
122
206
114
-
(25)
10
-
(4)
4
305
(2)
(2)
-
-
258
32
-
(11)
62
-
-
-
115
85
-
-
9
759
246
72
(39)
-
(26)
(26)
-
-
(5)
5
341
183 1,012
(66)
(34)
5
-
(15)
(11)
-
26
(85)
(58)
5
26
(4)
(95)
-
(112)
204
301
192
246
100
183
674
900
Year ended
31 March 2016
Cost / valuation
Balance at beginning of year
Additions
Disposals
Transfers between asset
classes
Offset of accumulated
depreciation on revaluation
Impairment losses
recognised in profit and loss
Revaluation adjustment
Balance at end of year
Balance at beginning of year
Depreciation
Disposals
Offset of accumulated
depreciation on revaluation
Balance at end of year
Carrying amounts
At 1 April 2015
At 31 March 2016
47
65
-
(45)
-
-
-
67
-
-
-
-
-
59
-
(1)
2
(8)
(5)
66
113
(8)
(3)
1
8
(2)
156
226
110
598
-
-
4
(3)
-
49
206
(3)
(2)
-
3
(2)
-
(2)
34
-
-
-
-
-
5
-
-
-
258
115
(41)
(27)
2
-
(10)
(5)
-
-
65
(3)
-
(11)
(5)
115
759
(62)
(37)
3
11
(66)
(15)
(85)
47
67
51
111
153
204
185
192
100
100
536
674
Accumulated depreciation and impairment
Included in buildings ($39m) and plant and machinery ($1m) are assets held under finance leases
(2016: buildings $46m 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 $37m (2016: $32m); land and improvements
$165m (2016: $78m); terminals $151m (2016: $60m); plant and machinery $236m (2016: $155m).
Level-three fair value
PPE is valued using a level-three fair value measurement in line with the fair value hierarchy.
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12. Continued
The following table shows the valuation technique used in measuring the fair value of PPE, as
well as the significant unobservable inputs used.
Valuation techniques
The majority of land and
buildings are valued using the
direct capitalisation approach.
This method involves striking a
sustainable market rental which
is capitalised at an appropriate
rate of return or yield derived
from an analysis of sales of
comparable assets. The market
rental is built up from:
•
•
fuel throughput margin
estimated shop rental
(for non-fuel sales).
A total value for land and
buildings is determined by this
approach. The value ascribed to
the land is determined using a
value that is estimated based on
recent land sales near each site,
with the residual value being
allocated to buildings.
Terminal plant and Plant and
machinery are valued using the
depreciated replacement cost
approach. This approach is based
on the gross current replacement
cost, reduced by factors
providing for age, physical
depreciation, and technical
and functional obsolescence,
taking into account an asset’s
total estimated useful life and
anticipated residual value (if any).
Buildings subject to finance
leases are valued using the net
present value of contracted
rental cash flow at lease
commencement over the
remaining term of the lease.
Significant unobservable
inputs
Inter-relationship between
key unobservable inputs and
fair value measurement
Throughput rental rate
(cents / litre) 1.15 – 2.35
(Retail)
Throughput rental
rate (cents / litre) 1.00
(Truck stop)
Shop rental $125 – $450 per
square metre
Capitalisation rate
5.0% – 10.0%
The estimated fair value
would increase (decrease) if:
throughput margins were
higher (lower);
shop rental rates were higher
(lower);
capitalisation rates were
lower (higher).
Cost estimates are sourced
from contracting machinery
suppliers and cost analysis
of recent projects.
The estimated fair value
would increase (decrease) if:
cost was higher (lower);
remaining useful life was
higher (lower);
technical and functional
obsolescence was lower
(higher).
Discount rate 6.5%.
Rental payments are sourced
from lease agreements.
The estimated fair value
would increase (decrease) if:
discount rate was lower
(higher);
net rental of the lease was
higher (lower);
remaining term of the lease
was longer (shorter).
Highest and best use
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. The assets are recorded at their
highest and best alternative-use valuation.
13.
Intangible assets
Goodwill
Goodwill is the excess of purchase consideration
and net identifiable assets acquired. Goodwill
is not amortised, but it is tested for impairment
annually or more frequently if events or
changes in circumstances indicate that it
might be impaired.
Brands
Brands were acquired as part of the Chevron
New Zealand acquisition and are amortised
over 6 years on a straight-line basis.
Contracts acquired
Contracts acquired include customer
contracts, supply agreements and leases
acquired as part of the Chevron New Zealand
acquisition. These contracts are amortised
over 13 to 21 years on a straight-line basis.
Emissions trading scheme
Units acquired are carried at cost less any
accumulated impairment as they are held for
settlement of emissions obligations. Refer to
note 14 for number of units held.
Other intangibles
Other intangibles include software, franchise
rights, domain name, and occupation rights.
Acquired computer-software licenses are
capitalised on the basis of the costs incurred
to acquire and bring to use the specific
software. These costs are amortised over
3 years on a straight-line basis.
Intangible assets with indefinite lives and
intangible assets not yet available for use are
tested for impairment annually and whenever
there is an indication that the asset may
be impaired.
Year ended 31 March 2017
Goodwill
$m
Brands
$m
Contracts
acquired
$m
Emissions
units
$m
Balance at beginning of year
Recognised on acquisition
-
158
Additions
Utilised
Divested
Amortisation
Balance at end of year
Cost
Accumulated amortisation
Balance at end of year
-
-
-
-
158
158
-
158
-
37
-
-
-
(5)
32
37
(5)
32
-
433
-
-
(7)
(19)
407
426
(19)
407
33
12
61
(22)
-
-
84
84
-
84
Year ended 31 March 2016
Balance at beginning of year
Additions
Utilised
Amortisation
Balance at end of year
Cost
Accumulated amortisation
Balance at end of year
Goodwill
$m
Brands
$m
Contracts
acquired
$m
Emissions
units
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
22
(10)
-
33
33
-
33
Other
$m
11
2
6
-
-
(7)
12
40
(28)
12
Other
$m
11
4
-
(4)
11
42
(31)
11
Total
$m
44
642
67
(22)
(7)
(31)
693
745
(52)
693
Total
$m
32
26
(10)
(4)
44
75
(31)
44
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14.
Emissions
trading scheme
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 satisfy the emissions obligation.
Stock of units
Balance at beginning of year
Units acquired and receivable
Units utilised
Balance at end of year
Obligation
Obligation payable at 31 March
2017
Units
millions
2016
Units
millions
4
4
(2)
6
4
2
(2)
4
2017
Units
millions
4
2016
Units
millions
3
15.
Investments in
associates
Associates are entities in which the Group
has significant influence, but not control,
over the operating and financial policies.
The Group financial statements include the
Group’s share of the net surplus of associates
on an equity-accounted basis from the date
significant influence begins to the date
significant influence ends.
The Group is considered to have significant
influence over its investment in The New
Zealand Refining Company Limited (Refining
NZ) because it has representation on the
board of directors and, therefore, has equity
accounted for this investment. Based on its
closing share price of $2.38, the fair value
of the Group’s investment in Refining NZ is
$114m (2016: $3.10, $149m).
Carrying amounts
Listed
Refining NZ
Unlisted
Loyalty New Zealand Limited (Loyalty)
Total carrying amounts of Investments in associates
Movements in carrying amounts
Carrying amount at beginning of year
Dividends received
Share of earnings of associate companies net of tax
Share of other comprehensive loss net of tax
Carrying amount at end of year
2017
$m
114
2
116
2017
$m
115
(4)
6
(1)
116
2016
$m
113
2
115
2016
$m
105
(13)
23
-
115
Summary financial information for equity-accounted investments, not adjusted for the
percentage ownership held by the Group (all with a reporting date of 31 December, except for
Loyalty, which has a 31 March reporting date).
Principal activity
2017
2016
Ownership
Listed
Refining NZ
Unlisted
Loyalty
Refinery
Marketing
New Zealand Oil Services Limited (NZOSL)
Fuel storage
Wiri Oil Services Limited (WOSL)
Fuel storage
Coastal Oil Logistics Limited (COLL)
Shipping operator
15%
25%
50%
44%
50%
15%
25%
50%
28%
25%
As a result of acquiring Z Energy 2015 Limited, the Group now owns a larger share of COLL (50%)
and WOSL (44%). Despite this increase in ownership, the Group does not have control over either but
continues to have significant influence. Therefore, both will continue to be reported as associates.
2017
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit
Other comprehensive income
Refining NZ
$m
Loyalty
$m
NZOSL
$m
WOSL
$m
COLL
$m
147
1,143
224
313
354
47
(4)
80
11
73
10
92
2
-
5
-
5
-
41
-
-
2
-
2
-
24
-
-
13
2
13
-
57
-
-
2016
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit
Other comprehensive loss
Refining NZ
$m
Loyalty
$m
NZOSL
$m
WOSL
$m
COLL
$m
179
1,153
227
322
447
151
2
83
11
79
8
91
1
-
6
-
6
-
44
-
-
3
-
3
-
62
-
-
14
2
14
-
57
-
-
Financials
78
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16.
Investment in
subsidiaries and
joint operations
Subsidiaries are those entities controlled,
directly or indirectly, by Z. The purchase
method of accounting is used to account
for the acquisition of subsidiaries by Z.
Identifiable assets acquired, liabilities and
contingent liabilities assumed in a business
combination are measured initially at their fair
values at the acquisition date. The financial
statements of subsidiaries are included in
the Group financial statements from the date
control begins to the date control ends.
The subsidiaries of the Group and their
activities are shown below.
The financial statements of the subsidiaries
are included in the Group’s financial
statements. The financial year-end of all
subsidiaries is 31 March, except for Challenge
Petroleum Limited, which has a 31 December
reporting date.
Subsidiaries
Harbour City Property Investments Limited
Z Energy ESPP Trustee Limited
Z Energy LTI Trustee Limited
Challenge Petroleum Limited
Z Energy 2015 Limited
Joint operations are those entities over
whose activities the Group has joint control,
established by contractual agreement and
requiring unanimous consent for strategic
financial and operating decisions. The Group
financial statements include the Group’s
proportionate share line by line.
The Group has participating interests
in five unincorporated jointly controlled
operations relating to the storage and
distribution of petroleum products.
Joint Operations
Joint User Hydrant Installation
Joint Interplane Fuelling Services
Jointly Owned Storage Facility
Joint Ramp Service Operations Agreement
Wiri to Auckland Airport Pipeline
Holding
2017
2016
Principal
activity
Country of
incorporation
100%
100%
100%
100%
100%
100% Property
New Zealand
100% Trustee
New Zealand
100% Trustee
New Zealand
- Dormant
New Zealand
- Downstream
fuel company
New Zealand
The revenues and expenses are allocated on
a performance / usage basis rather than the
share of the joint arrangement.
The Group has rights to the assets and
obligations for the liabilities relating to the
jointly controlled operations. At 31 March
2017, there were no contingent liabilities for
the jointly controlled operations (2016: nil).
The value of assets in these interests is $16m
(2016: $8m).
Holding
2017
2016
Principal
activity
50%
50%
50%
50%
60%
25% Fuel storage
50% Fuel distribution
50% Fuel storage
- Fuel distribution
20% Fuel distribution
17.
Taxation
Taxation expense comprises both current
and deferred tax. Current tax is the expected
tax payable on the taxable income for the
year, using tax rates enacted or substantively
enacted at the balance date, and any
adjustment to tax payable for previous years.
Deferred tax is recognised for the differences
between the carrying amounts of assets and
liabilities for financial reporting purposes and
the amounts used for taxation purposes.
The following temporary differences are not
provided for: the initial recognition of assets
or liabilities that affect neither accounting nor
taxable profit.
The amount of deferred tax provided is based
on the expected manner of realising or settling
the carrying amount of assets and liabilities,
using tax rates enacted or substantively
enacted at the balance date.
A deferred tax asset is recognised only to the
extent that it is probable that future taxable
profits will be available, against which the
asset can be utilised. A deferred tax asset
is reduced to the extent that it is no longer
probable that the related tax benefit will
be realised. Additional income taxes that
arise from the distribution of dividends are
recognised at the same time as the liability to
pay the related dividend.
Income tax is recognised as an expense or
benefit in the Statement of comprehensive
income, except when it relates to items
credited or debited directly to other
comprehensive income or equity. In this case,
the deferred tax is also recognised directly in
other comprehensive income or equity.
Taxation expense or benefit is determined as
follows.
Net profit before taxation
Less share of earnings of associate companies net of tax
Net profit before taxation excluding share of earnings from
associates
Taxation expense on profit for the year at the corporate income tax
rate of 28% (2016: 28%)
Taxation adjustments:
Non-deductible expenditure
Over-provision in prior periods
Taxation expense
Comprising:
Current taxation
Deferred taxation
Taxation expense
2017
$m
342
(6)
336
(94)
(6)
1
(99)
(108)
9
(99)
2016
$m
86
(23)
63
(18)
(5)
1
(22)
(23)
1
(22)
Financials
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17. Continued
Deferred tax
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.
Property, plant
and equipment
$m
Intangible
assets
$m
Employee
benefits
$m
Finance
lease
$m
Other
provisions
$m
Derivative
financial
instruments
$m
Balance at 1 April 2015
Recognised in the Statement of
comprehensive income
Recognised in other comprehensive
income
Over-provision in prior periods in the
Statement of comprehensive income
Balance at 31 March 2016
Balance at 1 April 2016
Recognised on acquisition
Recognised in the Statement of
comprehensive income
Under-provision in prior periods in the
Statement of comprehensive income
(33)
5
(14)
(1)
(43)
(43)
(18)
-
1
-
-
-
-
-
-
(130)
7
-
Balance at 31 March 2017
(60)
(123)
1
-
-
-
1
1
1
5
-
-
-
5
5
-
(1)
(1)
-
1
-
4
2
(1)
-
-
1
1
2
-
(1)
2
2
1
-
-
3
3
-
-
-
3
Deferred tax (liabilities) / assets expected to be settled within
12 months
Deferred tax liabilities expected to be settled after 12 months
Deferred tax liabilities
Other
items
$m
5
(3)
Total
$m
(18)
2
-
(14)
(1)
(2)
1
1
(32)
(32)
(3)
(148)
4
1
3
9
1
(170)
2017
$m
(7)
(163)
(170)
2016
$m
2
(34)
32
Imputation credits available for use in subsequent reporting periods are $17m (2016: $1m).
18.
Provisions
A provision is recognised in the Statement
of financial position when the Group has a
present legal or constructive obligation as
a result of a past event, and it is probable
that an outflow of economic benefits will be
required to settle the obligation.
Estimated decommissioning and restoration
costs are recognised at the estimated
future cost. The estimated future cost
is calculated using amounts discounted
over the estimated useful economic life
of the assets. The discount rate applied
is a risk-free rate. Decommissioning and
restoration costs expected to be settled
within 1 year are classified as current liabilities.
Decommissioning and restoration costs
expected to be settled between 1 and
30 years are classified as non-current.
Estimated remediation costs of sites are
recognised on an accrual basis at the time
there is a formal plan or obligation, legal or
constructive, in place. The remediation costs
are expected to be settled between 1 and
30 years, depending on the location.
Other provisions includes people-related
costs, business development funds, onerous
leases, customs and duties, and general
business provisions.
For the year ended 31 March 2017
Balance at beginning of year
Recognised on acquisition
Created
Utilised
Released
Unwind of discount
Balance at end of year
Current
Non-current
Balance at end of year
For the year ended 31 March 2016
Balance at beginning of year
Created
Utilised
Released
Unwind of discount
Balance at end of year
Current
Non-current
Balance at end of year
Decommissioning, restoration
and remediation
$m
Other
$m
Total
$m
41
22
-
(1)
(2)
1
61
12
49
61
Decommissioning, restoration
and remediation
$m
29
13
(2)
(1)
2
41
4
37
41
2
12
15
(5)
43
34
15
(6)
(12)
(14)
-
12
11
1
12
Other
$m
8
15
(19)
(2)
-
2
2
-
2
1
73
23
50
73
Total
$m
37
28
(21)
(3)
2
43
6
37
43
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19.
Share capital and
distributions
Ordinary shares (fully paid)
Total issued capital at beginning of year
Movements in issued and fully paid ordinary shares
Share-based payment
Total issued capital at end of year
Ordinary shares (fully paid)
Total issued capital at end of year
2017
$m
431
(1)
430
2016
$m
432
(1)
431
2017
Shares
millions
400
2016
Shares
millions
400
All fully paid ordinary shares have equal voting rights and share equally in dividends and equity.
The issued shares have no par value. All authorised shares are issued.
869,906 shares at a cost of $5m are held by Z Energy LTI Trustee Limited for Z’s Restricted
Share Long-Term Incentive Plan (2016: 1,274,941, $5.5m).
Dividend
2015 Final dividend (paid 15 June)
2016 Interim dividend (paid 15 December)
2016 Final dividend (paid 16 June)
2017 Interim dividend (paid 16 December)
Final dividend declared after balance date not provided (refer to note 30).
20.
Earnings per
share
Profit after tax attributable to shareholders of the parent company
($m)
Weighted average number of shares (million)
Basic and diluted earnings per share (cents)
$m
66
34
72
38
2017
243
400
61
Cents per
share
16.5
8.5
18.1
9.4
2016
64
400
16
21.
Interest-bearing
loans and
borrowings
Secured bank facilities
Facilities drawn down
Financing arrangements
The Group’s debt includes bank facilities
secured against certain assets of the Group.
The facilities require Z to maintain certain
levels of shareholder funds and securities,
and operate within defined performance and
gearing ratios. The arrangements also include
restrictions over the sale or disposal of certain
assets without bank agreement.
Throughout the year, the Group has complied
with all debt covenant requirements imposed
by lenders.
At 31 March 2017, the Group had secured bank-
debt facilities of $890m (2016: $400m). At 31
March 2017, $541m was drawn against these
facilities (2016: $nil). The facilities comprise a
$540m revolving term debt facility drawn to
$490m plus a $350m working capital facility
drawn to $51m, both maturing May 2019.
2017
$m
890
541
2016
$m
400
-
The bank debt facilities are able to be drawn
down as required, provided Z is compliant
with debt covenants. All loans must be repaid
on the relevant due dates. Interest rates are
determined by reference to prevailing money
market rates at the time of draw-down, plus
a margin. Interest rates paid during the year
ranged from 3.0% to 3.8% (2016: 3.7% to 4.7%).
Borrowings are recorded initially at fair
value, net of transaction costs. After initial
recognition, borrowings are measured at
amortised cost, with any difference between the
initial recognised amount and the redemption
value being recognised in the Statement of
comprehensive income over the period of the
borrowing, using the effective interest rate.
Bond and bank debt 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 rate method.
22.
Bonds
Balance at beginning of year
New bonds issued
Issuance costs
Bonds repaid
Amortisation
Unwind of fair value loss on substitution
Balance at end of year
Current
Non-current
Balance at end of year
Repayment terms and interest rates:
Maturing on 15 October 2016, 7.35% per annum fixed coupon rate
Maturing on 15 August 2018, 7.25% per annum fixed coupon rate
Maturing on 15 November 2019, 6.50% per annum fixed coupon rate
Maturing on 1 November 2021, 4.01% per annum fixed coupon rate
Maturing on 1 November 2023, 4.32% per annum fixed coupon rate
Balance at end of year
2017
$m
430
220
(3)
(147)
1
-
501
-
501
501
-
150
134
148
69
501
2016
$m
430
-
-
-
1
(1)
430
147
283
430
147
149
134
-
-
430
Fixed coupon
The fixed coupon bonds on issue are at a face
value of $1.00 per bond. Interest is payable
quarterly on all outstanding bonds.
The bonds require Z to maintain certain levels
of performance, security and gearing.
Financials
84
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Our material issues
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Our capability
Our environment
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Our place in New Zealand
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85
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23.
Financial risk
management
The carrying amounts of financial assets
recognised in the Statement of financial
position best represent the Group’s maximum
exposure to credit risk at the reporting date.
Generally, no security is held on these amounts
except for retailer-owned, retailer-operated
service stations where Z holds bank guarantees.
Concentration of credit risk for trade receivables
is limited due to the Group’s large customer
base. Less than 1% (2016: 1%) of the Group’s
receivables are more than 30 days overdue.
Liquidity risk
Liquidity risk is the risk that assets held by
the Group cannot readily be converted to
cash to meet the Group’s contracted cash-
flow obligations. Liquidity risk is monitored
by continuously forecasting cash flows and
matching the maturity profiles of financial
assets and liabilities.
The Group’s approach to managing liquidity is
to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities
when due, under both normal and stress
conditions. The Group manages liquidity risk by
maintaining an adequate amount of committed
credit facilities and spreading debt maturities.
The Group has exposure to the following risks:
• Credit risk
• Liquidity risk
• Market risk
The board of directors has overall responsibility
for the establishment and oversight of the
Group’s risk management framework. The
board has established an Audit and Risk
Committee with responsibilities that include
reviewing treasury practices and policies.
The Group has established a Treasury
Management Committee to review and set
treasury strategy within policy guidelines and
report on market risk positions and exposures.
The Group has developed a comprehensive,
enterprise-wide risk management framework
that guides management and the board in
identifying, assessing and monitoring new and
existing risks. Management report to the Audit
and Risk Committee and the board on the
relevant risks and the controls and treatments
for those risks.
Derivatives are not hedge accounted and
are required to be accounted for at fair value
through the Statement of comprehensive
income. Derivative financial instruments
are recognised initially at fair value at the
date they are entered into. After initial
recognition, derivative financial instruments
are stated at fair value at each Statement of
financial position date. The resulting gain
or loss is recognised in the Statement of
comprehensive income.
Credit risk
Credit risk refers to the risk that a
counterparty will default on its contractual
obligations, resulting in financial loss to the
Group. The Group is exposed to credit risk
in the normal course of business, including
risk arising from trade receivables with
its customers, financial derivatives and
transactions (including cash balances) with
financial institutions.
The Group has adopted a policy to assure
the creditworthiness of its counterparties,
as a means of mitigating the risk of financial
loss from defaults. The Group minimises its
exposure to credit risk of trade receivables
by adopting counterparty credit limits and
standard payment terms.
Derivative counterparties and cash deposit
transactions are limited to high-credit-quality
financial institutions and organisations in
the relevant industry. The Group’s exposure
and the credit ratings of counterparties
are monitored, and the aggregate value of
transactions concluded are spread among
approved counterparties.
The following tables analyse the Group’s
financial liabilities into relevant maturity
groupings based on the earliest possible
contractual maturity date at year end.
The amounts in the tables are contractual
undiscounted cash flows, which include
interest through to maturity.
6 months
or less
$m
6 – 12
months
$m
1 to 2 years
$m
2 to 5 years
$m
5 years +
$m
Contractual
cash flows
$m
Statement
of financial
position
$m
(378)
(1)
(8)
(51)
(14)
(452)
-
-
(3)
(3)
-
(1)
(8)
-
(14)
(23)
-
-
-
-
-
(2)
(17)
-
(173)
(192)
-
(1)
-
(1)
-
(6)
(494)
-
(317)
(817)
-
(7)
-
(7)
-
(7)
-
-
(75)
(82)
-
(2)
-
(2)
(378)
(17)
(527)
(51)
(593)
(378)
(11)
(490)
(51)
(501)
(1,566)
(1,431)
-
(10)
(3)
(13)
-
(10)
(3)
(13)
6 months
or less
$m
6 – 12
months
$m
1 to 2 years
$m
2 to 5 years
$m
5 years +
$m
Contractual
cash flows
$m
Statement
of financial
position
$m
At 31 March 2017
Non-derivative financial liabilities
Accounts payable
Finance leases
Long-term loan
Short-term loan
Bonds
Non-derivative financial liabilities
Derivative financial instruments liabilities
Foreign exchange contracts
Interest-rate swaps
Commodity hedges
Derivative financial instruments liabilities
At 31 March 2016
Non-derivative financial liabilities
Accounts payable
Finance leases
Bonds
Non-derivative financial liabilities
(237)
(1)
(15)
(253)
(4)
(1)
(162)
(167)
-
(2)
(20)
(22)
-
-
-
-
-
(7)
(306)
(313)
-
(7)
-
(7)
-
(9)
-
(9)
-
(7)
-
(7)
(241)
(20)
(503)
(764)
(1)
(13)
1
(13)
(241)
(12)
(430)
(683)
(1)
(11)
1
(11)
Derivative financial instruments (liabilities) / assets
Foreign exchange contracts
Interest-rate swaps
Commodity hedges
Derivative financial instruments liabilities
(1)
1
1
1
-
-
-
-
Market risk
Interest-rate risk
The Group’s primary interest-rate risk arises
from its total gross debt (refer to notes 21 and
22). In line with its treasury policy, Z manages
its exposure to interest-rate risk by entering
into interest-rate swaps (IRS) and interest-
rate collars. By managing the interest-rate
risk, Z aims to minimise the cost of debt and
manage the impact of interest rate volatility on
the Group’s earnings.
The aggregate notional principal amount of
the outstanding IRS at 31 March 2017 was
$735m (2016: $735m). The fair value of the
IRS is $(10)m (2016: $(11)m). The aggregate
notional principal amount of the outstanding
interest-rate collar at 31 March 2017 was
$30m (2016: nil). The fair value of the IRS is nil
(2016: nil).
Sensitivity analysis
At 31 March 2017, if bank interest rates
at that date had been 100 basis points
higher / lower, with all other variables held
constant, it would change after-tax profit
for the year by $10m higher / $11m lower
(2016: $9m higher / $10m lower).
Financials 86
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87
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23. Continued
Foreign-currency risk
The Group has exposure to currency
risk on the value of its sales contracts,
commodity / product supply purchases,
other transaction flows, and assets / liabilities
denominated in foreign currencies. The Group
enters into forward exchange contracts under
the terms of its treasury policy to reduce
the risk from price fluctuations of foreign
currency commitments, mainly associated
with purchasing hydrocarbons.
Transactions in foreign currencies are
translated to the functional currency of
the Group at exchange rates at the dates
of the transactions. Monetary assets and
liabilities denominated in foreign currencies
at the reporting date are translated to the
functional currency at the exchange rate at
that date. The foreign currency gain or loss
on monetary items is the difference between
the translation of the foreign currency into
New Zealand dollars at the beginning and end
of the periods. The resulting gain or loss is
recognised in the Statement of comprehensive
income immediately.
The aggregate notional principal amount of
the outstanding forward foreign exchange
contracts at 31 March 2017 was $9m
(2016: $26m). At balance date, the fair value
of forward foreign exchange contracts
outstanding was nil (2016: $(1)m).
Sensitivity analysis
At 31 March 2017, if the New Zealand dollar
had strengthened / weakened by 10% against
the currencies with which the Group has
foreign currency risk, with all other variables
held constant, after-tax profit for the year
would change by $9m higher / $10m lower
(2016: $2m higher / $2m lower).
Commodity-hedges risk
The Group has exposure to purchase-timing
risk on commodities. This is defined as the
difference in timing between when purchases
of crude and product are priced and when
volumes of product are sold each month.
The Group enters into commodity swap
contracts under the terms of its treasury
policy to reduce the risk from price
fluctuations, by matching purchase and sales
volumes in a particular month. All hedging is
within a 6-month duration. At 31 March 2017,
the fair value of commodity hedges was $(3)m
(2016: $1m).
Sensitivity analysis
At 31 March 2017, if the oil commodity price
had weakened / strengthened by 10% in which
the Group has commodity price risk with all
other variables held constant, there would
be nil impact on after-tax profit for the year
(2016: $2m lower / $2m higher).
Fair value measurement in the
financial statements
The carrying value of financial assets and
financial liabilities recorded in the financial
statements is their amortised cost except
for derivatives, which are held for trading at
fair value.
At 31 March 2017, the fair value of bonds
is $548m (2016: $464m) compared to the
carrying value of $501m (2016: $430m). The
fair value for bonds is the quoted price of
the bonds on the NZDX at 31 March 2017,
representing a level-one measurement
under the NZ IFRS 7 fair value measurement
hierarchy being quoted prices (unadjusted)
in an active market for identical assets and
liabilities.
The fair value for derivatives, which is their
carrying value, is calculated using observable
market prices (forward price curve for the
relevant underlying interest rates, foreign
exchange rates, or commodity prices) based
on discounted cash-flow analysis. It therefore
represents a level-two measurement under the
NZ IFRS 7 fair value measurement hierarchy,
being inputs other than quoted prices
included within level one that are observable
for the asset or liabilities, either directly (as
prices) or indirectly (derived from prices).
Selecting variables requires judgement, and
therefore a range of reasonably possible
assumptions for these variables could be used
in estimating the fair value of these derivatives.
Capital management
The key factors in determining Z’s optimal
capital structure are:
• nature of activities
•
•
•
forecast of earnings and cash flows
capital needs over the forecast period
available sources of capital and
relative cost.
The Group’s capital includes share capital and
retained earnings. The company’s borrowings
are subject to certain compliance ratios
relevant to the facility agreements or the trust
deed applicable to the borrowings.
Discussions on refinancing bank-debt facilities
will normally begin at least 6 months before
maturity, with facility terms agreed at least
3 months before maturity. Bank facilities are
maintained with AA- or above rated financial
institutions, with a syndicate of four bank
counterparties to ensure diversification.
24.
Leases
Operating leases
Operating leases, where the lessor effectively retains substantially all the risks and benefits of
ownership of the leased items, are recognised in the Statement of comprehensive income on a
straight-line basis over the period of the lease term.
The Group has receivables from operating leases as a lessor relating to the lease of premises.
These receivables expire as follows:
Operating lease receivables as lessor
Between 0 and 1 year
Between 1 and 5 years
More than 5 years
Operating lease receivables as lessor
2017
$m
2016
$m
4
11
27
42
1
7
24
32
The Group as the lessee has various non-cancellable operating leases. The leases have varying
terms, escalation clauses, and renewal rights. On renewal, the terms of the lease are renegotiated.
The lease payables are predominantly for the lease of land and buildings.
2017
$m
30
92
102
224
2016
$m
24
74
86
184
The Group has finance leases arising from
the sale and leaseback of buildings and plant
and machinery. These lease contracts expire
within 4 to 13 years and have additional terms
of renewal. The Group also receives some sub-
lease income on these assets but this does not
have a significant impact on the Statement of
comprehensive income.
Operating lease payables as lessee
Between 0 and 1 year
Between 1 and 5 years
More than 5 years
Operating lease payables as lessee
Lease costs expensed and sub-lease
income received through the Statement of
comprehensive income during the year were
$31m (2016: $23m) and $1m (2016: $1m)
respectively.
Finance leases as lessee
Finance leases, which transfer to the lessee
substantially all the risks and benefits
incidental to ownership of the leased items,
are capitalised at the lower of fair value or
present value of the minimum lease payments.
The leased assets and corresponding
liabilities are therefore recognised and the
assets are depreciated in line with the Group’s
depreciation policy to reflect the estimated
useful lives.
Each lease payment is allocated between the
liability and finance charges so as to produce
a constant periodic rate of interest on the
remaining balance of the liability for each year.
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24. Continued
Present value of minimum lease payments
Between 0 and 1 year
Between 1 and 5 years
More than 5 years
Present value of minimum lease payments
Lease liability under finance leases
Between 0 and 1 year
Between 1 and 5 years
More than 5 years
Minimum lease payments
Less interest attributable to future years
Present value of minimum lease payments
2017
$m
1
5
5
11
2017
$m
2
9
7
18
(7)
11
2016
$m
1
4
7
12
2016
$m
2
9
9
20
(8)
12
25.
Share-based
payments
Z Energy Restricted Share Long-Term
Incentive Plan (RSLTIP)
Z provides an RSLTIP for selected senior
employees. Under the RSLTIP, ordinary shares
in the Parent are purchased on-market by
Z Energy LTI Trustee Limited (the Trustee).
Participants purchase shares from the Trustee
with funds lent to them by the Parent.
The amount of shares that vest will depend on
Z’s total shareholder return ranking within a
peer group of the NZX 50 over a 3-year period,
although a reduced period may be used in
some cases. If the individual is still employed
by the Parent at the end of the vesting period,
the employee is provided a cash bonus which
must be used to repay the loan. The shares are
then transferred to the employee.
Grant date
Vesting date
Exercise
price
Number of
shares
Number of
shares
Number of
shares
Number of
shares
Number of
shares
Number of
shares
Balance at the
start of year
Granted
during year
Exercised
during year
Forfeited
during year
Balance at the
end of year
Vested and
exercisable
at end of year
2017
19 August 2013 31 March 2016
20 May 2014
31 March 2017
29 May 2015
31 March 2018
23 May 2016
31 March 2019
$3.71
$3.84
$5.98
$8.20
371,457
373,776
330,525
-
-
-
-
225,984
(371,457)
-
-
-
-
-
-
(49,706)
324,070
324,070
(7,229)
(3,444)
323,296
222,540
-
-
Total
1,075,758
225,984
(371,457)
(60,379)
869,906
324,070
Weighted average exercise price
$4.34
$5.75
$3.84
2016
19 August 2013 31 March 2016
20 May 2014
31 March 2017
29 May 2015
31 March 2018
$3.71
$3.84
$5.98
Total
Weighted average exercise price
397,291
402,134
-
799,425
-
-
330,525
330,525
-
-
-
-
(25,834)
(28,358)
-
371,457
371,457
373,776
330,525
-
-
(54,192)
1,075,758
371,457
$4.00
$3.17
$3.71
Measurement of fair values
The fair value of the RSLTIP has been determined using the framework of the Black-Scholes and
Margrabe option pricing models.
Vesting date of scheme
31 March
2019
31 March
2018
31 March
2017
31 March
2016
Weighted average share price at grant date
$8.20
$5.98
$3.84
$3.71
Contractual life
Risk-free rate
3.00 years
2.84 years
2.86 years
2.61 years
2.1%
3.1%
3.9%
3.7%
Standard deviation of Z share price
20% – 25% 17.5% – 22.5% 17.0% – 22.5% 17.5% – 22.5%
Standard deviation of NZX50
9.0%
8.0%
9.2%
9.0%
Correlation between Z share price and NZX50 0.32 – 0.40
0.32 – 0.40
0.32 – 0.54
0.28 – 0.57
Estimated fair value per share
$3.48
$2.24
$1.24
$1.26
Assumptions have been made that the
participants will remain employed with Z and
will achieve the minimum performance levels
in each period to the vesting date. Dividends
paid on shares are not material to the value of
the shares granted under the RSLTIP.
The fair value of the share-based payments
is recognised as an expense, with a
corresponding increase in equity, over the
vesting period of the plan. The expense
relating to the RSLTIP in the year ended
31 March 2017 was $1m (2016: $1m).
An employee share purchase programme
(ESPP) also exists, which does not have a
material impact on these financial statements.
The ESPP scheme holds 112,336 shares.
26.
Related parties
Included in the Statement of comprehensive
income are sales and expenses that arise from
transactions between the Group and associate
companies. Such transactions comprise sales
and purchases of goods and services in the
ordinary course of business on normal trading
terms, but also include dividends and interest.
Certain Z directors have relevant interests
in several companies with which Z has
transactions in the normal course of business.
Some Z directors are also non-executive
directors of other companies. Any transactions
undertaken with these entities have been
entered into as part of the ordinary business.
Key management personnel have been
defined as the directors, the CEO, and the
executive team for the Group. Executive
members also participate in the Group’s
Restricted Share Long-Term Incentive Plan
(refer to note 25).
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The Group has no contingent assets (2016: nil).
Dividend
On 10 May 2017, the directors approved a fully imputed dividend of $0.199 per share, which is
equal to $80m, to be paid on 7 June 2017 (2016: $0.181 per share, $72m).
29.
Contingent
assets
30.
Events after
balance date
Transactions with related parties
Received / (paid)
Associates – sale of goods and services
Associates – purchase of goods and services
2017
$m
2016
$m
1
2
Refining NZ – processing fees, customs and excise duties
(756)
(557)
COLL – distribution
NZOSL
WOSL
Other
Infratil Group (ceased to be a related party 6 October 2015)
Sales of goods and services
Key management personnel
Short-term employee benefits
Other long-term benefits
Balances at end of year
Associates – payable
(24)
(18)
(10)
(10)
-
7
2
(19)
(18)
(30)
(7)
1
5
2
Refining NZ – processing fees, customs and excise duties
Other
(56)
(4)
(33)
(4)
Commitments relate to PPE and the Good in the Hood community programme.
Committed to but not provided for
2017
$m
40
2016
$m
19
The Group has guaranteed an exposure of up to USD4m ($6m) to a financier of one of the
Group’s associate companies (2016: $8m). This guarantee reduces by USD1m annually.
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26. Continued
27.
Commitments
28.
Contingent
liabilities
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Independent Auditor’s
Report
To the shareholders of Z Energy Limited
Report on the consolidated financial statements
Opinion
In our opinion, the accompanying consolidated financial
statements of Z Energy Limited (the company) and its
subsidiaries (the Group) on pages 60 to 91:
i. present fairly in all material respects the Group’s
financial position as at 31 March 2017 and its
financial performance and cash flows for the year
ended on that date; and
ii. comply with New Zealand Equivalents to
International Financial Reporting Standards.
We have audited the accompanying consolidated
financial statements which comprise:
— the consolidated statement of financial position as
at 31 March 2017;
— the consolidated statement of comprehensive
income, statement of changes in equity and
statement of cash flows for the year then ended;
and
— notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”). We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for
Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our
other ethical responsibilities in accordance with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s Responsibilities for the Audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the group in relation to assurance, general accounting services, tax risk review
and advisory services of pro‐forma financial statements, integrated reporting gap analysis, retailer reporting and cost of
sales adjustment review. Subject to certain restrictions, partners and employees of our firm may also deal with the group
on normal terms within the ordinary course of trading activities of the business of the group. These matters have not
impaired our independence as auditor of the group. The firm has no other relationship with, or interest in, the group.
Scoping
The scope of our audit is designed to ensure that we perform adequate work to be able to give an opinion on the
consolidated financial statements as a whole, taking into account the structure of the Group, the financial reporting
systems, processes and controls, and the industry in which it operates.
The context for our audit is set by the Group's major activities in the financial year ended 31 March 2017. The Group has
had an active year with the acquisition of Chevron New Zealand on 1 June 2016. They have undergone a full
acquisition exercise to determine the assets and liabilities acquired on 1 June 2016 and the subsequent
measurement of goodwill.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the
consolidated financial statements as a whole. The materiality for the consolidated financial statements as a whole was set
at $15 million determined with reference to a benchmark of group total revenue. We chose the benchmark because, in our
view, this is a key measure of the group’s performance. The group also evaluates its own performance on replacement
cost profit and we have benchmarked against this measure and historical cost profit.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements in the current period. We summarise below those matters and our key audit procedures
to address those matters in order that the shareholders as a body may better understand the process by which we arrived
at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit
opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate
elements of the consolidated financial statements
The key audit matter
How the matter was addressed in our audit
Accounting for the acquisition of Chevron New Zealand
As disclosed in note 4 of the financial
statements, the Group has undertaken
a major transaction to acquire Chevron
New Zealand.
The key judgement and estimation is
the allocation of the purchase price to
assets and liabilities (and resulting
goodwill) by estimating the fair value of
identifiable tangible assets (principally
inventory and property, plant and
equipment), intangible assets (such as
brands, franchise agreements and
commercial customer relationships),
and liabilities (including
decommissioning and restoration
Tangible assets
— We attended a sample of Chevron New Zealand stock counts with
material inventory balances.
— We assessed the Group’s opening inventory fair value calculation and
agreed a sample to physical stock counts and comparable prices.
— We assessed the valuation of acquired land and buildings, as outlined in
the valuation key audit matter below.
Intangible assets
— We assessed the appropriateness of the valuation methodology adopted
by comparing the valuations to the internal rates of return (based on
purchase price and expected future cash flows), the weighted average
costs of capital and weighted average return on assets for each category
of asset.
© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
10537643_3
2
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The key audit matter
How the matter was addressed in our audit
provisions, and imposed regulator
divestments).
Valuation of land and buildings
As disclosed in note 12 of the financial
statements, the Group has land and
buildings of $423 million (2016: $315
million).
As part of the accounting required for
the acquisition, all property, plant and
equipment from the Chevron New
Zealand entity was revalued.
Valuation of land and buildings is a key
audit matter due to the magnitude and
judgement involved in the assessment
of the fair value of these assets. The
judgment relates to the valuation
methodologies used and the
assumptions included in each of those
methodologies.
— We used our valuation specialists to check the underlying assumptions of
the valuations by comparing key assumptions to market data, and past
performance of the acquired business.
Liabilities
— We found the methodology applied to determine the fair value of
decommissioning and restoration provisions was consistent with the
Group’s method.
— We considered whether there was any contingent assets or liabilities that
should have been recognised at acquisition.
— For a sample of divestments, we checked the consideration received and
found it agreed to the relevant contracts and bank statements.
Goodwill
— We read the sale and purchase agreement and found the application of
key terms and conditions was appropriate.
— We recalculated goodwill as the difference between the purchase price
and the acquired net assets.
We are satisfied that management undertook an appropriate process in
determining the accounting for the acquisition of Chevron New Zealand and we
identified no evidence of management bias and influence.
— We assessed the competence, objectivity and independence of the
valuer(s) used. We read the valuation report and found the valuation
approach was in accordance with professional valuation standards and
suitable for determining the fair value of land and buildings.
— We compared the various assumptions inherent in the valuations which
are judgemental in nature and which have the largest impact on the
value of land and buildings, such as:
Comparing a sample of throughput volumes to Chevron New
Zealand volume reports.
Assessing the reasonableness of the throughput cents per litre
applied, with assistance from our valuation specialists.
Comparing shop rentals for a sample of sites, land values and
capitalisation rates to recent sales data.
Comparing assets in the fixed asset register to those valued to check
all sites have been included in the fair value exercise.
— We compared the valuers assessment of those asset classes which do not
require a valuation, to market evidence which supports there is not a
material change in the value of those asset classes.
We found the valuation methodology and inputs used in the measurement of
the fair value of land and buildings to be appropriate.
Other Information
The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual Report.
Other information includes the Chairman’s report, Chief Executive’s report, disclosures relating to corporate governance
and statutory information. Our opinion on the consolidated financial statements does not cover any other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Use of this Independent Auditor’s Report
This report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might state to
the shareholders those matters we are required to state to them in the Independent Auditor’s Report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
shareholders as a body for our audit work, this report, or any of the opinions we have formed.
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of the group, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with generally accepted
accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards);
— implementing necessary internal control to enable the preparation of a consolidated set of financial statements that
is fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations,
or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the consolidated financial
statements
Our objective is:
— to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error; and
— to issue an Independent Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
10537643_3
3
10537643_3
4
Financials
96
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Governance
97
Back to contents
A further description of our responsibilities for the audit of these consolidated financial statements is located at the
External Reporting Board (XRB) website at:
https://www.xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx.
This description forms part of our Independent Auditor’s Report.
Graeme Edwards
For and on behalf of
KPMG
Wellington
10 May 2017
Supplementary financial information
for the year ended 31 March 2017
The supplementary financial information does not form part of the financial statements. To assist in understanding the Group’s
performance, the directors have provided additional disclosure of the Group’s results for the year on a replacement cost basis.
Income statement on replacement cost basis1
Revenue
Purchases of crude and product
Excise and carbon expenses
Primary distribution expenses
Cost of sales adjustment (COSA)
Operating expenses2
Replacement cost operating EBITDAF
Share of earnings of associate companies net of tax
Replacement cost EBITDAF
Depreciation and amortisation
Net financing expense
Fair value movements on interest rate derivatives
Impairment and losses on sale of PPE
Movements in decommissioning and restoration provision
Replacement cost net profit before taxation
Taxation expense
Tax on COSA
Replacement cost net profit after taxation
Reconciliation from statutory net profit after tax to RC operating EBITDAF
Statutory net profit after tax
COSA
Foreign exchange and commodity (gains) / losses on fuel purchases2
Tax on COSA
Replacement cost net profit after tax
Depreciation and amortisation
Net financing expense
Other
Taxation (including tax on COSA and foreign exchange and commodity gains and losses on
fuel purchase)2
Share of earnings in associates
Impairment and losses on sale of PPE
Movements in decommissioning and restoration provision
Replacement cost operating EBITDAF
2017
$m
3,871
(2,010)
(941)
(41)
(83)
(404)
2016
$m
2,521
(1,417)
(569)
(27)
83
(327)
392
6
398
(89)
(56)
3
(6)
2
252
(99)
23
176
2017
$m
243
(83)
(7)
23
176
89
56
(3)
76
(6)
6
(2)
392
264
23
287
(41)
(32)
(6)
(6)
(7)
195
(22)
(24)
149
2016
$m
64
83
26
(24)
149
41
32
6
46
(23)
6
7
264
10537643_3
5
1 Replacement cost is a non-GAAP measure used by the downstream fuel industry to report earnings. The difference between HC earnings and RC earnings
is COSA and foreign exchange and commodity gains and losses. A full reconciliation from statutory net profit after tax to RC operating EBITDAF is provided.
2 From FY17 onwards, the impact of foreign exchange and commodity gains and losses on fuel purchases, calculated on an NZ GAAP basis, is removed
from the replacement cost results. Comparative numbers for prior periods have been adjusted to reflect this.
Financials
98
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Corporate
Governance
99
For the year ended 31 March 2017
100
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
101
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Z’s corporate governance
Strong corporate
governance is
fundamental to
strong business
performance.
Positioning corporate
governance to drive
value creation
Z’s governance structure is designed to support the
company’s ability to create value in the short, medium,
and long term. We appreciate growing interest among
market participants in effective Environmental, Social
and Governance (ESG) issues, and seek to deliver value
through the way we engage and report in this space.
This year we are reporting against the Financial Markets
Authority (FMA) Corporate Governance Principles
and Guidelines, as we did last year. We were actively
engaged with the NZX in developing the proposed new
NZX Corporate Governance Best Practice Code, and we
welcome the consistency of the proposed code with the
FMA Corporate Governance Principles and Guidelines
and the ASX Corporate Governance Principles and
Recommendations.
To the extent that we could at the time of printing,
we have taken the latest draft of the NZX Corporate
Governance Best Practice Code into account in the way
we have reported this year.
Z takes a continuous-improvement
approach to corporate governance
and aspires to operate at best-practice
level for an NZX 10 business. We
have adopted international corporate
governance practices, over and above
those prescribed by the local regulatory
environments, where we believe the
quality of Z’s performance and the board’s
ability to create value is enhanced.
Our corporate governance programme
over the last year has seen us:
• update chief executive and board
succession plans
• develop the board’s collective skillset
•
•
•
•
•
implement recommendations from
an external review of the board and
committees
restructure and repurpose the
People and Culture Committee
expand our shareholder relations
programme
adopt a fully Integrated Reporting
environment
commit to a new Diversity and
Inclusion Stand.
We have also worked to simplify
corporate governance reporting and
compliance. The company has now been
granted Foreign Exempt Listing status
by the ASX. This means that we remain
fully dual-listed, but the compliance
requirements for our ASX listing are
significantly reduced.
Z considers that, during the reporting
period, the corporate governance
principles we adopted and followed
did not materially differ from NZX’s
Corporate Governance Best Practice
Code, except for Principle 2.7. There
is no formal process encouraging
board members to invest a portion
of their directors’ fees in Z securities
(as recommended by Principle 2.7 of
the NZX Corporate Governance Best
Practice Code), but some elect to do so.
Principle 1:
Ethical standards
“ Directors should set
high standards of ethical
behaviour, model this
behaviour and hold
management accountable
for delivering these
standards throughout
the organisation.”
Z’s board sets clear and consistent expectations of all directors and Z people (both employees
and contractors) through the Code of Conduct. The board also ensures that Z maintains a culture
that supports and leads ethical and responsible conduct.
Z’s framework for ethical behaviour includes day-to-day focus on the business purpose and
values, as well as the stands we are committed to on community, sustainability, health and safety,
and diversity and inclusion.
Code of conduct for Z people and directors
The Code of Conduct is the cornerstone of expected behaviour and company culture at Z and
is published on our website, z.co.nz. The code applies to all Z people (directors, employees,
contractors, and consultants), who are required to read and understand the Code of Conduct and
acknowledge that they have done so.
The Code of Conduct requires Z people to carry out their roles honestly and diligently and in
the best interests of Z, to declare any conflicts of interest, to disclose any gifts over $200, and
to ensure any gifts under that value do not compromise them. It requires Z people to maintain
confidentiality of all Z information, including information about our business, customers, and
people, and not to use Z information or assets (including intangible assets) improperly.
The Code of Conduct also provides a range of escalation processes and procedures for reporting
ethical breaches, including the assurance of anonymity for whistleblowers, consistent with the
Protected Disclosures Act 2000.
During the reporting period, Z had no significant fine or monetary sanctions imposed by any
government authority, and was not made aware that it had broken any material law.
Principle 1 contains data regarding ethical standards. The numbers reported under Principle 1
relate to Z permanent employees only, and do not include contractors, consultants, or employees
of Z- or Caltex-branded retail sites, who are employed directly by retail operators.
Diversity and inclusion: being successful, being ourselves
Z is committed to a culture that promotes and values diversity and inclusion. Our Diversity Policy
sets out Z’s diversity philosophy, its practical application, and our process for reviewing and
measuring progress towards achieving the policy objectives. The policy sets out our goals to:
leverage diversity as a competitive advantage through our recruitment and development
•
practices
• develop inclusiveness as a core capability for our people leaders and as a channel to our people.
Governance 102
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
103
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For FY17, we committed to create a comprehensive diversity and inclusion strategy that would
produce more wide-ranging and ambitious objectives. During the past year, a new diversity
and inclusion stand was developed by an internal team from all parts of Z. The team was
supplemented with some outside-in expertise to make sure we captured best practice from
others who are better at this than we are. In April 2017, the board supported the development of
the stand and a supporting 3-year strategy with the strap line ‘Being successful, being ourselves’.
Developing Z’s Diversity and Inclusion Stand included training for the team on diversity and
inclusiveness and a review of Z’s current diversity and inclusion practices. Based on this review,
the board considers that we’ve made progress on diversity and inclusion at Z, but we still have
more work ahead to achieve all of the objectives of our diversity policy. Z is yet to reach its
diversity targets (in the table below) for the whole organisation and executive, and our aim to
reflect the ethnic diversity of New Zealand has not yet been met for Z employees.
Across most dimensions, Caltex was a less diverse organisation than Z was previously, so
some progress made towards previous targets has been offset with the inclusion of our Caltex
colleagues. The board, management, and the Diversity and Inclusion team remain committed to
reaching our ambitions and targets through the new strategy.
Gender
Z’s gender composition
Board
Executives
Whole organisation*
Objective: %
Female
20
40
50
Actual %
Female
43
36
40
These figures have been assessed at 31 March 2017.
*
This reference to whole organisation excludes the executive and board members. All other references to
whole organisation in this chapter exclude board members but include the executive.
Below is the gender composition of Z permanent employees at 31 March 2017. For comparison,
we also include figures for the previous year.
Female
Leader of self*
People leader**
Executive
Whole organisation
Board
Male
Leader of self*
People leader**
Executive
Whole organisation
Board
Percentages are represented as whole numbers.
*
Leader of self does not have direct reports.
** People leader has direct reports.
FY2017
FY2016
#
138
31
4
173
3
#
187
62
7
256
4
FY2017
%
42
33
36
40
43
%
58
67
64
60
57
#
91
26
4
121
3
#
125
44
7
176
5
FY2016
%
42
37
36
41
38
%
58
63
64
59
63
Z’s gender-pay ratios
The ratios of female to male average pay for Z permanent employees at 31 March 2017 are set
out below.
Average base salary woman to man
Average remuneration* woman to man
Directors’ fees female to male**
Leader of self
%
91
89
NA
People leader
%
97
96
NA
Executive
%
71
68
NA
Board
%
NA
NA
82
*
**
Remuneration is composed of a base salary, a short-term incentive (% on top of salary), health insurance,
any other allowances, and a long-term incentive for certain senior employees.
All directors are paid the same base fee, except the Chair, who has a higher base fee. Committee chairs and
members are paid an additional fee on top of their base fee.
Age
Z’s age composition
The age groups of Z’s permanent employees and board at 31 March 2017 are as follows.
Under 30 years
30–50 years
Over 50 years
Leader of self
%
11
62
27
People leader
%
2
72
26
Executive
%
0
73
27
Board
%
0
43
57
Total number and rates of new permanent employee hires and permanent employee turnover by
age group and gender.
Male
Female
Under 30 years
30–50 years
Over 50 years
Total employees at the end of the period
New employee
%
#
27
115
17
73
Employee turnover
%
8
5
#
35
21
19
121
48
4
28
11
3
42
11
1
10
3
429
Ethnicity
We collect information from our permanent employees and contractors on which ethnicities
they choose to identify with. Our reporting fields align with New Zealand census-collection data,
although we do allow employees to select ‘other’ or choose not to respond.
Part of Z’s Diversity and Inclusion Stand is that we are committed to reflect the diversity of
Aotearoa New Zealand with an inclusive culture so that diversity can be fully expressed and
manifest in tangible benefits.
Compared to the latest New Zealand census data (2013), we have the same proportion of
European and Asian people as the general population does. Z is partnering with organisations
and groups that provide talent pipelines not previously used (such as Workbridge), with a view
that more people from diverse groups will be employed.
The ethnicities of Z permanent employees and board at 31 March 2017 are set out in the
following table.
Governance 104
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
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Financials
105
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Diversity by ethnicity
Leader
of self
People
leader
Executive
Employee ethnicity
NZ European / Pākehā
European
Asian (including India and
Pakistan)
Multiple ethnicities
Other ethnicity
Middle Eastern / Latin
American / African
Māori
Pacific Islander
Information not provided
Total
#
161
35
44
16
12
7
7
3
40
325
%
50
11
14
5
4
2
2
1
12
Percentages are represented as whole numbers.
Family responsibility
#
67
7
4
3
3
1
1
2
5
93
%
72
8
#
10
1
%
91
9
4
3
3
1
1
2
5
11
Whole
organisation
%
55
10
#
238
43
Board
#
5
2
%
71
29
11
4
3
2
2
1
10
48
19
15
8
8
5
45
429
7
Employees’ dependants
The percentage of Z permanent employees with dependants at 31 March 2017 is as follows.
Leader of self
People leader
Executive
Whole organisation
Board
Percentage of employees with dependants
%
48
69
100
54
86
Return-to-work and retention rates after parental leave
All our employees who are eligible by law are entitled to parental leave. In FY17, 12 male
employees took two weeks’ parental leave funded by Z.
The following table shows the return-to-work and retention rates of Z permanent employees after
exercising legal entitlements to parental leave, as at 31 March 2017.
Employees
who have
taken
parental
leave in
FY17
16
Employees
due to
return from
parental
leave in
FY17
4
Returned to
work after
leave in
FY17
4
Returned to
work after
leave prior
year
5
Return-to-
work rate
100%
Employed
12 months
after
return to
work from
parental
leave
5
Retention
rate
100%
Female
Education
The highest level of education reached by Z’s permanent employees and board at 31 March 2017
is as follows. Percentages are represented in whole numbers.
Leader of self
People leader
Executive
Whole organisation
Board
Secondary
%
14
4
0
12
14
Tertiary
%
51
54
36
51
57
Post-graduate
%
18
31
64
22
29
None or
unknown
%
17
11
0
15
0
Principle 2:
Board composition
and performance
“ To ensure an effective
board, there should
be a balance of
independence, skills,
knowledge, experience
and perspectives.”
Z’s board is a leader in New Zealand in gender balance and brings a diverse mix of age, skills, and
experience to the board table.
Since Marko Bogoievski’s resignation on 6 July 2016, all Z directors are independent, including
the Chair and the board committee chairs. For a director to be considered independent, the
board must determine that the director has no disqualifying relationship (other than solely
as a consequence of being a director). The basis for determining whether a director has a
disqualifying relationship is set out in the Z Board Charter.
To ensure a strong balance of independence, skills, knowledge, experience, and perspective, Z has
developed a detailed skills matrix for the board over the last year. The matrix matches the desirable
skills for the board against current risks and opportunities, overall strategy, and Z’s requirements,
with a core focus on the ability of the board to add value in the short- medium-, and long-term.
The skills matrix is intended to be regularly updated and used as a ‘living’ document to assist
with targeted director succession and appointment, and to inform and guide the board-
development plan. Board and CEO succession are regular agenda items and kept under review,
as is senior-management succession.
These are the directors on the board at 31 March 2017, their appointment dates, and how long
they have been on the board.
Peter Griffiths
Chair – Independent
2 April 2010
(7 years)
Paul Fowler
Independent
2 April 2010
(7 years)
Alan Dunn
Independent
2 April 2010
(7 years)
Abby Foote
Independent
15 May 2013
(3 years, 10 months)
Justine Munro
Independent
15 May 2013
(3 years, 10 months)
Mark Cross
Independent
28 August 2015
(1 year, 7 months)
Julie Raue
Independent
15 February 2016
(1 year, 1 month)
*Marko Bogoievski left Z’s board on 6 July 2016 after 6 years, 3 months.
Effective boards – high challenge, high support
The Z Board Charter sets out how the board exercises and discharges its powers and
responsibilities, including through committees established by the board. The Charter defines and
prescribes the relationship between the board, the CEO, and the executive team.
The board has statutory responsibility for the business affairs of Z, including overall responsibility
for the strategy, governance, culture, and performance of Z, working with, and through, the CEO.
Day-to-day management and administration of Z’s affairs is delegated to the CEO by Z’s
Delegated Authority Framework. The CEO may also sub-delegate authority within specified
financial and non-financial limits.
This framework is consistent with our philosophy of ‘freedom in a framework’ and describes
the purpose of delegations as enabling ‘Z employees to carry out business activities efficiently
without overly restrictive approval requirements’. Part of Z’s governance philosophy includes
preventing unnecessary ‘corporate spread’.
When Z people make decisions under a delegated authority, they are authorised to exercise
appropriate and informed decision-making within a controlled, accountable, and transparent
framework. They must refer to budgets, comply with the law, and meet the objectives of Z
throughout the organisation. Z’s governance structure also includes a commitment by all Z
people to its policies, stands, values, and business purpose.
The 2016 external review of the board provided a structured framework to consider the board’s
operating mode with management. Z’s board was assessed as being an “engaging board” that
operates on a “high-challenge, high-support” basis with management. ‘An engaging board’ was
described in the review as “a board characterised by strong levels of challenge, debate, and
pressure-testing of key decisions along with a supportive environment for management”.
Governance 106
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Nominating and appointing directors to the board
Board succession is the responsibility of the People and Culture Committee on behalf of the board.
This year, the committee developed a 3-year board-succession plan, based on a formal skills
matrix. The matrix includes current and desirable skills and experience of the board, key risks and
opportunities for Z now and in the medium and long term, and diversity and inclusion factors.
We use an external search agency to produce a short list. The potential candidates on the short
list are then interviewed by the Chair and the chairs of the People and Culture Committee and
the Audit and Risk Committee.
Background checks are conducted on the person’s character, experience, education, criminal
record, and bankruptcy history.
Board members enter into a written agreement establishing the terms of their appointment
including Z expectations for the director’s role.
The Board Charter allows directors to seek independent professional advice at Z’s cost.
Continuous improvement – positioning the board to add value
Z is committed to ongoing board development on the same 70 / 20 / 10 basis as Z employees.
For the board, the 70% on-the-job element consists of deep dives, participating in Z events such
as safety days and site visits, strategy leadership, and stakeholder engagement sessions.
The 20% element relates to structured learning and includes a dedicated $30,000 annual fund
for external development opportunities and external speakers.
The final 10% element relates to ensuring the board receives external feedback such as
360-degree feedback from fellow directors and management and formal external review.
Board development during this period focused on collective development of the board,
correlated to key business risks and opportunities for Z. Topics included future strategy (such as
disruption and innovation), governance and investor trends, income inequality and other social-
context factors, and sustainability.
Evaluating executive performance
The board is responsible for monitoring the performance of the CEO and the executive team
against established objectives.
Z’s People and Culture Committee reviews and approves annual performance review
programmes for executives and draws on external market information when considering
remuneration arrangements.
In determining each executive’s total remuneration, external benchmarking is used to ensure
comparability and competitiveness alongside the individual’s performance, skills, expertise,
and experience.
Executives’ performance was evaluated during FY17 in line with this process.
Information on Z’s executive remuneration arrangements (fixed remuneration, short- and long-
term performance incentives) is set out under Principle 5: Remuneration.
One hundred percent of all Z permanent employees, including management, have undertaken
regular performance reviews in 2017. One hundred percent of the executive, 97% of people
leaders, and 86% of leaders of self* had individual development plans at the time of our annual
drive in July.
Review of the board and director performance
The board regularly reviews and evaluates the performance of the board, individual directors,
and committees to ensure they are performing in line with formal obligations and Z’s values, and
are positioned to create value for the business in the short, medium and long term.
The People and Culture Committee has developed the process for evaluating how
recommendations from external reviews are prioritised and implemented, with progress
measured in subsequent reviews.
Board meetings open with scheduled ‘board only’ time and ‘CEO / board only’ time. Reflecting on
the meeting is a formal agenda item at the end of each board meeting.
Z’s board is committed to ‘outside-in’ learning, including benchmarking against best practice
across New Zealand boards. In 2014 (the financial year after listing), the board obtained its first
intensive external review. In 2015, the board obtained a ‘pulse-check’ review.
* Leader of self: does not have direct reports.
In 2016, the board commissioned a second intensive review that noted good progress on
implementing its previous recommendations. Board strengths were listed as leadership by the
Chair, the board’s relationship with management, the quality of board discussion and debate, and
the quality of information and papers provided for the board.
Since the 2016 review, we have made significant progress on implementing its recommendations.
Specifically, we have:
•
•
focused on board and CEO succession
reviewed and restructured the Human Resources and Nominations Committee (now the
People and Culture Committee)
established a formal and detailed skills matrix for the board
agreed on a structured plan for board development aligned with Z strategy
•
•
• developed a streamlined electronic induction process for new directors.
In the independent review planned for later in 2017, we will specifically ask for a review of the
implementation of material recommendations for board, committee, and director performance.
Principle 3:
Board committees at Z are established to perform particular work on an ongoing basis.
The board has three standing committees to help carry out its responsibilities – Audit and Risk;
People and Culture; and Health, Safety, Security, and Environment. All board and committee
charters are published on our website.
Board committees
Audit and Risk Committee
“ The board should use
committees where
this will enhance its
effectiveness in key
areas while still retaining
board responsibility.”
Abby Foote (chair), Paul Fowler, Mark Cross, Peter Griffiths
The role of the Audit and Risk committee (ARC) as defined by the ARC Charter is to govern
enterprise risk management, financial management, accounting, audit and reporting. The
responsibilities and duties delegated to the ARC by the board are also intended to help board
members in taking reasonable steps to acquire and maintain up-to-date knowledge of enterprise
risk management and financial reporting matters relevant to Z.
The ARC provides an independent reporting line for the Risk and Assurance Manager, and meets
with the Risk and Assurance Manager and external auditors (either together or separately) as the
ARC chair considers appropriate.
All members of the ARC are independent non-executive directors. The roles of board Chair
and ARC chair are separate. The skills and relevant qualifications of each member of the Audit
and Risk Committee are set out on page 14 and include details of the ARC chair’s accounting
and financial background. For more information about auditing and reporting of Z’s financial
performance, see Principle 4.
People and Culture Committee
Alan Dunn (chair), Justine Munro, Mark Cross, Julia Raue
Based on recommendations from the external review of the board and board committees, Z
has reviewed the People and Culture Committee (PCC) in the last year. The result of the review
was a renewed PCC Charter and a new annual work plan to implement the revised purpose and
function of the committee.
The PCC’s role is to ensure that Z’s people and culture strategy (organisational design,
remuneration strategy, succession planning, and any related strategy or policy) supports
and delivers on Z’s business plan and strategy. The PCC also oversees Z’s commitment to
continuously develop a strong and open culture, maintain public transparency on remuneration,
and manage other people matters.
The PCC approves performance criteria and remuneration for the CEO, and recommends
incentive payment or other adjustments to CEO remuneration to the board, taking into account
the CEO’s performance review with the board. The PCC establishes, develops, and oversees a
formal and transparent process for the board to review and evaluate board performance, and the
performance of board committees and individual directors. It also determines appropriate board
remuneration, subject to approval by shareholders.
As part of its responsibility for building Z’s culture, the PCC guides and oversees diversity and
inclusion at Z. This includes making sure best-practice principles and practices of diversity and
inclusion and equal-employment opportunities are followed.
Governance 108
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
109
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Principle 4:
Reporting and
disclosure
“ The board should
demand integrity in
financial and non-financial
reporting, and in the
timeliness and balance of
corporate disclosure.”
Health, Safety, Security, and Environment Committee
Paul Fowler (chair), Abby Foote, Alan Dunn, Justine Munro, Julia Raue
The board has ultimate responsibility for the health, safety, security, and environment (HSSE)
outcomes of Z’s operational activities. The HSSE Committee’s role is to provide a specific
governance focus on HSSE risks, including all risks that could cause harm to people or the
environment arising out of Z’s operations and activities, as set out in the HSSE Charter.
The HSSE Committee is responsible for assisting the board to meet its due-diligence obligations.
These include taking reasonable steps to acquire and maintain up-to-date knowledge of HSSE
matters relevant to Z; understanding Z’s operations, hazards, and risks; and ensuring Z has
sufficient resources and processes to eliminate or minimise HSSE operational risk.
The HSSE Committee was provided with an extensive director-development programme that is
part of all director induction. A continuous-development programme is also in place. Given the
specialist nature of the HSSE Committee’s role, the Committee has authority to engage external
expert consultants to give objective advice to the board.
Attendance at board meetings
Directors attended the following board and committee meetings during the year.
Director
Total number of meetings held
Peter Griffiths
Alan Dunn
Abby Foote
Paul Fowler
Justine Munro
Mark Cross
Julia Raue
Marko Bogoievski*
Board meetings
ARC
PCC
HSSE
7 / 7
7 / 7
7 / 7
7 / 7
7 / 7
7 / 7
7 / 7
2 / 2
4 / 4
-
4 / 4
4 / 4
-
3 / 4
-
1 / 1
-
4 / 4
-
-
3 / 4
4 / 4
2 / 2
0 / 1
-
6 / 6
6 / 6
6 / 6
5 / 6
-
5 / 5
-
If a director was not a member of a particular committee at the time of the relevant meetings, “-” has been recorded.
*
Marko Bogoievski left Z’s board on 6 July 2016.
Continuous disclosure
Consistent with Z’s values to ‘share everything’ and ‘be straight up’, the board is committed
to providing timely, orderly, consistent, accurate, and credible information to the market.
We recognise the need to enable orderly behaviour in the market and to promote investor
confidence. Relevant policies include the Market Disclosure Policy, the Investor Communications
Policy, and the Insider Trading Policy, all of which are on Z’s external Investor Centre website.
The Market Disclosure Policy helps the board keep Z’s investors and markets informed through a
clear and balanced approach that communicates both positive and negative news.
Z has a standing Disclosure Committee that is ultimately responsible for Z complying with its
disclosure obligations. The Committee consists of the Chair, ARC chair, CEO, CFO, Corporate
Communications and Investor Relations Manager, General Counsel, and Chief Governance Officer.
The CEO and executive team are required to provide all material information to the Disclosure
Officers. The Disclosure Committee also monitors external markets to issue any corrections if a
false market appears to develop.
The Investor Communications Policy sets out Z’s commitment to building constructive and
trusted relationships with shareholders, including effective communication, ready access to
balanced and understandable information, multiple channels of information including an up-to-
date investor website that contains Z’s Board Charter, Committee Charters, Code of Conduct,
and other core corporate governance documents.
Financial reporting
The ARC plays a central role in Z’s commitment to transparent reporting of its financial and
non-financial performance. The ARC Charter clearly defines the roles of the board, the ARC,
executive, and external auditors.
The executive is responsible for implementing and maintaining appropriate accounting and
financial reporting principles, policies, and internal controls designed to ensure compliance with
accounting standards and applicable laws and regulations.
Z’s external auditor, KPMG, is responsible for planning and carrying out each external audit
and review in line with applicable auditing and review standards. They are accountable
to shareholders through the ARC and the board respectively. The board retains overall
responsibility for financial reporting.
The ARC makes sure that it and the full board are sufficiently informed about good-practice
financial reporting and Z’s operations to know whether financial reporting is fit for purpose. This
means it represents a balanced viewpoint, is factual and complete, and is effectively implemented.
The ARC is provided with a Director Development Programme for inducting new members and
the continuous development of existing members. The ARC may also obtain more information
from external specialists.
As part of half-yearly CEO and CFO certifications, the ARC reviews Z’s risk-management systems
and receives quarterly reports relating to risk management from Z’s risk and assurance function
and management. The certifications provide assurance to the board that Z’s financial records
have been properly maintained, and that the financial statements comply with GAAP and give a
true and fair view of Z’s financial position and performance.
Non-financial reporting
Z is committed to transparency at all levels of the organisation, which includes sustainability
reporting against the Global Reporting Initiative (GRI) and the International Integrated Reporting
Council Guidelines. Both frameworks are recognised by the Sustainable Stock Exchanges Initiative.
The numbers reported under Principle 5 relate to Z permanent employees only and do not
include contractors, consultants, or employees of Z- or Caltex-branded retail sites, who are
employed directly by retail operators.
Director remuneration
Z conducts an annual review of its non-executive director fees, to ensure that the level of fees
paid to its Chair and other non-executive directors is aligned with other organisations of similar
scale and scope.
People and Culture Committee
Z’s remuneration framework and policies are managed by the People and Culture Committee in
line with the People and Culture Committee’s charter.
Remuneration
Z’s success in meeting its ambitious growth strategy relies on the success of our people: how
we attract the best talent, grow our people, and reward and remunerate them to fairly recognise
their contribution to our success. Z has created a performance culture that celebrates and
rewards achievement.
Z’s remuneration strategy is to pay top dollar for stellar performance so that we can attract,
retain, and grow the best people to help deliver an extraordinary future for Z. Our remuneration
position is to benchmark Total Fixed Remuneration to the upper quartile of the external market.
This means that with our Short-Term Incentive (STI) the total rewards we offer are in the top 10%
of the New Zealand market when people deliver results above plan.
Every permanent Z employee has a base salary, an STI component, and health insurance (with
Southern Cross) for themselves and their immediate family in their remuneration package. Z also
makes a 5% employer contribution to KiwiSaver. A limited number of senior employees are also
invited to participate in a Restricted Share Long-Term Incentive Plan (RSLTIP). All remuneration
packages are reviewed annually.
Principle 5:
Remuneration
“ The remuneration of
directors and executives
should be transparent,
fair and reasonable.”
Governance 110
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
111
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Base salary
The base-salary model is informed and adjusted each year based on data from independent
remuneration specialists. An employee’s base salary is determined from a matrix of their own
performance and their current position in the market and reviewed annually.
Short-Term Incentive
Our Short-Term Incentive (STI) model is focused on articulating performance goals, driving for
outcomes, differentiating high performance, and rewarding delivery.
STI values are calculated as a percentage of base salary and determined based on the
complexity of the roles. Employees’ STI payments are determined following a review of the
individual’s performance, and may be paid out at a multiplier of zero to three times an individual’s
STI target depending on the company’s performance.
Restricted Share Long-Term Incentive Plan
The Restricted Share Long-Term Incentive Plan (RSLTIP) is for the executive and selected senior
employees.
The RSLTIP is intended to incentivise selected employees to achieve long-term shareholder
returns by ensuring that their incentives are aligned with the interests of shareholders. The
RSLTIP does this by providing a proportion of the employee’s remuneration on an at-risk basis
aligned with the achievement of defined performance targets.
An amount in shares is held on trust for the employee for three years. After that time, the shares
will be transferred to the employee if they have achieved their defined performance targets and
the company achieves its Total Shareholder Return (TSR) targets.
The amount of shares granted is calculated as a percentage of the employee’s base salary and,
depending on the performance of the company, may be multiplied by zero to two times that
percentage. The first time this scheme vested was in April 2016.
Employee Share Purchase Plan
Z also has an Employee Share Purchase Plan (ESPP) that it has invited eligible employees to
participate in on two occasions (in 2013 and in 2016). Under the ESPP, eligible employees are
invited to buy shares in Z at a discount to the market price. Those shares are then held on trust
by Z Energy ESPP Trustee Limited (ESPP Trustee) for employees until they vest at the end of
a three-year period. The ESPP is an IRD-approved DC12 plan.
For the 2013 grant of the ESPP, employees could purchase up to the amount of 786 shares
for a price below the listing value. Payment for these shares comes out of those employees’
wages over the three-year period, after which the shares were transferred to the participating
employees in November 2016. There were 123 participants in the 2013 grant of the ESPP.
Following the success of the initial ESPP grant, Z invited eligible employees to participate in
a new grant under the ESPP on 15 December 2016. Under the 2016 grant, eligible employees
could purchase up to 413 shares for a discounted price of 22% below the market price. Currently,
273 employees are participating in the 2016 grant of the ESPP.
Transactions in associated products
Z’s Insider Trading Policy prohibits directors, officers, employees, or contractors of Z or any of
its subsidiaries, where they are entitled to participate in any equity-based remuneration scheme,
from entering into any transaction that would limit the economic risk of participating in any
unvested entitlement that they are eligible for under that remuneration scheme.
Remunerating executives
Our approach is to pay executives a base salary and a performance-based bonus that includes a
short-term and a long-term incentive. This ensures executive motivation is aligned with the goals
of the company in the short and long term.
In determining executive base salary, Z partners with EY to conduct market research on the
specific role so that we offer our executives a competitive salary. Final decisions on executive
base salary are agreed by Sharlene Taylor, our GM of People and Culture, and Mike Bennetts, our
CEO. Executives are entitled to the same health insurance for themselves and their immediate
families as all employees, as well as a 5% KiwiSaver employer contribution.
The STI component is the same model used for permanent employees. Depending on the role,
executive STI is calculated at 30% or 40% of a base salary. That figure can be multiplied zero
to three times depending on company and executives’ individual performance. Our executives
participate in the RSLTIP. The Executive RSLTIP is calculated at 30% of their base salary and can
go up to double that percentage, depending on company performance.
CEO remuneration
Mike Bennetts’ employment agreement for his role as CEO began on 1 April 2010. The key terms
of Mike’s employment are set out below.
In FY17, Mike had a base salary of $780,000.00 per annum. The base salary is reviewed annually
with effect from 1 April each year.
In addition to his base salary, Mike may also be paid an annual Short-Term Incentive (STI)
payment with an on-target value of 50% of his base salary and a maximum payment of 150% of
his base salary.
Payment of a Short-Term Incentive is at the board’s discretion and is assessed in the first
quarter of each financial year, based on business performance in the previous financial year. If
Mike is made redundant, he will be entitled to a proportional STI-based performance payment up
to his departure.
Mike may also be entitled to Long-Term Incentive (LTI) payments calculated against his base
salary. Mike’s potential entitlements under the 2014 RSLTIP will be paid in 2017, based on
the company performance against specific financial objectives for each year, relative to the
performance of other NZX-listed companies. The maximum payment to which Mike may be
entitled under the RSLTIP is 100% of his salary.
The values of Mike’s STI and LTI payments are determined by the People and Culture Committee.
The committee assesses Mike’s performance against a range of key performance indicators.
For FY 17, these included a balanced scorecard that includes health and safety metrics (such as
leading and lagging indicators), operational performance (such as customer satisfaction), financial
results, and delivery of strategic projects (such as the Caltex acquisition).
Mike’s base salary is 19 times the lowest-paid employee in Z and 7 times the average Z base
salary. When including performance-related bonuses, Mike’s total remuneration is 51 times
the lowest-paid employee total remuneration and 15 times the average employee’s total
remuneration. This reflects the strong bias of Mike’s remuneration to performance-related pay
relative to other employees who also receive remuneration.
During the 4-year period of FY14 (when Z listed) to FY17, Mike’s total remuneration increased
14% while the company’s replacement cost NPAT increased 83%.
Z has also agreed to pay Mike’s reasonable accommodation and living expenses in Wellington, and
the reasonable travel expenses for national travel (particularly between Wellington and Auckland).
Either Z or Mike can terminate his employment on 3 months’ notice. Z can also terminate his
employment for redundancy or for ill health (in both cases, also on 3 months’ notice).
Mike has also agreed to non-solicitation commitments (applying to Z’s suppliers and employees)
and a restraint of trade (restricting him from involvement in the downstream oil industry in
New Zealand). Both of these generally apply for 12 months after the end of his employment as
CEO, but the restraint of trade does not apply if Mike is made redundant.
Remuneration of directors
None of the directors is entitled to any remuneration from Z other than from directors’ fees and
reasonable travel, accommodation, and other expenses incurred in the course of performing
duties or exercising powers as directors. No directors are entitled to any retirement benefits.
In addition to directors’ fees, additional fees are paid to the Chair and members for work carried
out by directors on various board committees to reflect the additional time involved and
responsibilities of these positions.
The current total remuneration pool for Z’s non-executive directors at 31 March 2017 is
$1,000,000 per annum. Z’s shareholders voted to increase the total remuneration pool to the
current amount from $900,000 per annum at Z’s 2016 Annual Shareholders’ Meeting.
Governance 112
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
113
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Approved director remuneration for FY17
Board of Directors
Audit and Risk Committee (ARC)
People and Culture Committee (PCC)
Position
Chair
Non executive director
Chair
Member
Chair
Member
Health, Safety, Security, Environment (HSSE) Committee Chair
Member
Fees (per annum)
$179,200
$88,000
$20,000
$10,000
$20,000
$10,000
$20,000
$10,000
Z commissioned EY as part of that review process to undertake a comprehensive market review
of Z’s remuneration against its peers (being organisations of a similar scale and scope to Z) and
to take a view on setting director fees for FY18.
EY’s review showed that:
•
each of Z’s non-executive director base fees, Chair base fees, and board committee chair fees
is currently set below the market median
• Z’s committee membership fees are currently set at a level consistent with the market median.
Given the importance of Z continuing to attract directors with the necessary skills and
experience to govern a company of Z’s scale and scope, the board considers that Z’s director
remuneration should be aligned with that of other organisations of similar scale and scope.
As a result of the annual director-remuneration review process that Z conducted during FY17,
Z’s board will recommend that shareholders approve an increase in director remuneration of
$100,000 to take the maximum aggregate remuneration pool available to Z’s non-executive
directors to $1,100,000 per annum.
Director remuneration received in FY17
Peter Griffiths
Chair, Board of Directors;
Member, ARC
Alan Dunn
Chair, PCC;
Member, HSSE Committee
Abby Foote
Chair, ARC;
Member, HSSE Committee
Paul Fowler
Chair, HSSE Committee;
Member, ARC
Justine Munro
Member, HSSE Committee;
Member, PCC
Mark Cross
Member, ARC Committee;
Member, PCC
Julia Raue
Member, HSSE Committee;
Member, PCC
Marko Bogoievski *
Member, ARC Committee;
Member, PCC
Total
Board fees
ARC fees
PCC fees
HSSE fees
$172,800
$10,000
Total
remuneration
$182,800
$85,333
$20,000
$10,000
$115,333
$85,333
$20,000
$10,000
$115,333
$85,333
$10,000
$20,000
$115,333
$85,333
$10,000
$10,000
$105,333
$85,333
$10,000
$9,478
$104,811
$85,333
$5,000
$9,478
$99,811
$13,626
$1,703
$1,703
$17,032
$698,424
$51,703
$46,181
$59,478
$855,786
Note: Mark Cross joined the PCC from 19 April 2016. Julia Raue joined the HSSE Committee from 19 April 2016 and PCC
from 1 October 2016. Marko Bogoievski resigned from the board on 2 June 2016 so fees do not represent a full year.
Employee remuneration
The data in this section relates to Z and Z Energy 2015 Limited permanent employees only.
The total number of corporate employees is 447 (of which 429 are permanent).
283 Z and Z Energy 2015 Limited employees (or former employees) received remuneration and
other benefits over $100,000 in their capacity as employees during FY17, as set out in the table
below. This includes salary, short- and long-term performance bonuses, settlement payments,
and redundancy payments for all permanent employees.
Amount of remuneration
$100,001 to $110,000
$110,001 to $120,000
$120,001 to $130,000
$130,001 to $140,000
$140,001 to $150,000
$150,001 to $160,000
$160,001 to $170,000
$170,001 to $180,000
$180,001 to $190,000
$190,001 to $200,000
$200,001 to $210,000
$210,001 to $220,000
$220,001 to $230,000
$230,001 to $240,000
$240,001 to $250,000
$250,001 to $260,000
$260,001 to $270,000
$270,001 to $280,000
Employees
37
19
27
31
27
19
20
11
8
16
7
9
6
1
4
2
2
8
Amount of remuneration
$280,001 to $290,000
$290,001 to $300,000
$310,001 to $320,000
$330,001 to $340,000
$340,001 to $350,000
$350,001 to $360,000
$380,001 to $390,000
$390,001 to $400,000
$400,001 to $410,000
$410,001 to $420,000
$430,001 to $440,000
$480,001 to $490,000
$490,001 to $500,000
$560,001 to $570,000
$590,001 to $600,000
$920,001 to $930,000
$1,140,001 to $1,150,000
$2,460,001 to $2,470,000
Employees
3
1
2
3
1
1
2
3
1
1
3
1
1
1
1
2
1
1
Z has developed an overall enterprise Risk and Assurance system, designed to ensure a
proactive, consistent, and systematic approach to managing risk, and ensuring independent and
objective views on the design and operational effectiveness of internal controls.
The Risk and Assurance system recognises two principal functions: risk and assurance, and
HSSE. Risk and assurance has a primary focus on enterprise and business risk (insurance, and
financial risk including core financial controls, treasury, delegated authorities, and suspicious
transactions). HSSE has a primary focus on operational and infrastructure risk.
Z’s Risk Management Policy provides clarity on roles and responsibilities for risk and assurance.
The board is responsible for the overall effectiveness of the risk management and internal
control system, setting enterprise-risk appetite, and annually reviewing enterprise risk.
The Audit and Risk Committee (ARC) is responsible for oversight, monitoring, and reviews. Twice
a year, it approves and monitors the annual risk and assurance plan on behalf of the board. The
review is designed to establish an integrated and forward-looking perspective on the entire
risk landscape. It takes in the internal and external environment, changes in the likelihood and
consequence ratings of existing risks, and the business-unit risk profiles.
The CEO is responsible for promoting a culture of proactively managing risks, reporting
to the ARC and managing any changes to the rating of enterprise-wide risks. The CFO is
responsible for providing a single framework for risk management at Z, consistent with the Risk
Management Policy and the board’s risk appetite, including facilitating regular reviews and
updates to the CEO and the ARC.
Because of the nature of Z’s business, HSSE risks are an area of continuous focus. The HSSE
Committee oversees HSSE risk and is responsible for all risks that could cause harm to people or
the environment arising out of Z’s operations and activities.
The committee approves an annual HSSE enterprise plan, receives assurance and performance
reports, monitors implementation of ZORM (Z Operating Management System), and oversees the
management of major hazard facilities.
Principle 6:
Risk management
“ Directors should have a
sound understanding of
the key risks faced by
the business, and should
regularly verify there are
appropriate processes to
identify and manage these.”
Governance 114
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
115
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Principle 7:
Auditors
“ The board should
ensure the quality and
independence of the
external audit process.”
Principle 8:
Shareholder
relations
“ The board should foster
constructive relationships
with shareholders that
encourage them to
engage with the entity.”
Oversight of Z’s external audit arrangements is the responsibility of the ARC (Z’s Audit and Risk
Committee). The ARC is committed to ensuring that Z’s external auditor is able to carry out
its function independently and without impairment such that Z’s external financial reporting is
viewed as being highly reliable and credible.
Z’s formal External Auditor Independence Policy is one of the key aspects in discharging this
obligation. The policy sets out the work that the external auditor is required to do and specifies
the services that the external auditor is not permitted to do, so that the ability of the auditor to
carry out their role is not impaired and could not be reasonably perceived to be impaired.
All non-audit work that the external auditor performs must be approved by the Chair of the ARC.
The approval details what work is to be performed and how auditor independence and objectivity
are maintained. The policy requires that the development of local and overseas practice for other
related assurance services be continuously monitored so that Z’s policies comply with best practice.
KPMG has been the external auditor of Z and its subsidiaries for six years. The tenure and
reappointment procedure of the external auditor is detailed in the External Auditor Independence
Policy. In line with the external-auditor rotation policy and KPMG’s policy, Graeme Edwards of
KPMG is the engagement partner for Z, and has been since the start of FY17.
The KPMG audit report is based on the audited Group financial statements. Total fees paid to
KPMG in its capacity as auditor for FY17 were $383,026 (2016: $256,280). Total fees paid to
KPMG for other professional services for FY17 were $94,100 (2016: nil).
Other service fees comprise IRD risk review $6,500 (2016: nil); Global Reporting Initiative
reporting review $13,000 (2016: nil); pro forma financial statements for retail bond issue $34,600
(2016: nil); Z Retailer reporting advisory $30,000 (2016: nil); and cost of sales adjustment review
$10,000 (2016: nil). To safeguard auditor independence, Z has an External Auditor Independence
Policy, which has been complied with. The policy requires the Audit and Risk Committee Chair to
give pre-approval of non-audit services undertaken by the auditor.
We are committed to having our financial reports externally audited to meet international
accounting standards. We have not sought external assurance over our environmental, social,
and governance (ESG) reporting.
In the past, Z’s external auditors have attended the Annual Shareholders’ Meeting (ASM), where
they have been available to answer shareholders’ questions relevant to the audit. Z expects the
auditor to attend the 2017 ASM.
Principle 9:
Stakeholder
interests
“ The board should
respect the interests
of stakeholders taking
into account the entity’s
ownership type and its
fundamental purpose.”
The purpose of our corporate governance policies is to protect long-term stakeholder interests.
It’s something we take very seriously and that the board is mindful of. In keeping with our values,
Z looks to speak freely and openly about matters that influence and affect the company directly,
and about matters where we have an opinion to share.
Our active engagement in the NZX’s Review of Corporate Governance Reporting Requirements
demonstrates our commitment to our stakeholders. We are committed to increasing disclosure
requirements to allow investors to better understand the businesses they are dealing with and
ensure that all aspects of a business can be measured. We have taken a voluntary step in that
direction through the disclosures that we have made in this annual report.
The methods by which we manage our stakeholder relationships and try to better understand
the issues that are important to our stakeholders include:
• keeping in constant contact with a variety of our stakeholders throughout the year to
maintain a good understanding of what matters to them
• holding quarterly meetings involving key Z employees to review stakeholder interactions
from the previous quarter
• preparing and publishing quarterly updates outlining what investors care about
•
collecting feedback from a sample of key external stakeholders asking them to rate the
relative importance of GRI indicators previously used for reporting.
Z is committed to an open and transparent relationship with shareholders. We are proud of a
comprehensive and evolving programme of shareholder communications that addresses the
needs of institutional, retail, international, and local shareholders.
We communicate with shareholders through multiple channels throughout the year: continuous
market disclosure, half- and full-year reporting, and an Annual Shareholders’ Meeting (the 2017
ASM will be held on Thursday 15 June 2017 at the Z Shed, 3 Queens Wharf, Wellington, 6140,
New Zealand).
Shareholders can directly access the board at any time through our dedicated email address
governance@z.co.nz. Our CEO and CFO also respond directly to shareholder phone calls and emails.
Z held its second investor day in October 2016, delivered roadshows for institutional and retail
investors, and released monthly updates on the progress of system-cutover and synergy
realisation following the acquisition of Chevron NZ.
We provide information about who we are, including our governance policies, on our website for
investors to access at any time.
Our key governance documents are publicly disclosed on our website at z.co.nz/gov.
• Z Board Charter
• Constitution of Z Energy Limited
• Code of Conduct
• Audit and Risk Committee Charter
• People and Culture Committee Charter
• Health, Safety, Security, and Environment
Insider Trading Policy
•
• Market Disclosure Policy
•
• Risk Management Policy
• External Auditor Independence Policy
• HSSE Stand
• Sustainability Stand
• Community Stand
Investor Communications Policy
Committee Charter
• Diversity Policy
• Sustainability Policy
Governance 116
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
117
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Other disclosures required under the Companies Act 1993
Directors’ interests in share transactions
None of the directors disclosed an acquisition or disposal of relevant interest in Z's shares or bonds during the year to 31 March 2017.
Disclosure of directors’ interests
Directors disclosed, under section 140(2) of the New Zealand Companies Act 1993, the following interests at 31 March 2017.
Directors’ interests in shares and bonds
Directors disclosed the following relevant interests in shares and bonds at 31 March 2017.
Position
Director
Peter Griffiths Director
Shareholder
Alan Dunn
Director
Abby Foote
Director
Company
Z Energy Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
The New Zealand Refining Company Limited – 8,744 shares
Burger Fuel Worldwide Limited
Nelson Regional Development Agency Limited
New Zealand Post Limited
Z Energy Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Z Energy ESPP Trustee Limited
Z Energy LTI Trustee Limited
New Zealand Local Government Funding Agency Limited
BNZ Life Insurance Limited
BNZ Insurance Services Limited
Livestock Improvement Corporation Limited
Z Energy Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Television New Zealand Limited
Member
Museum of New Zealand Te Papa Tongarewa Board
Paul Fowler
Director
Noteholder
Justine Munro Director
Mark Cross
Director
Shareholder
Julia Raue
Director
Member
Z Energy Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Caltex Australia Limited – 500 subordinated notes
Z Energy ESPP Trustee Limited
Z Energy LTI Trustee Limited
Z Energy Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Emcee Squared Limited
Argosy Property Limited
Genesis Energy Limited
Superannuation Investments Limited
Milford Asset Management Limited
Milford Funds Limited
Z Energy Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Chorus Limited
Emcee Squared Limited – 1 share
Television New Zealand
Southern Cross Health Society
Z Energy Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
The Warehouse Group Limited
Jade Software Corporation Limited
Risk and Audit Committee of the Treasury
Director
Abby Foote
Peter Griffiths
Paul Fowler
Number of shares or bonds in which a relevant interest is held
Z Energy Limited – 14,285 shares
Z Energy Limited – 42,857 shares
Z Energy Limited – 10,000 shares
Executive team's interests in shares and bonds
The executive team disclosed the following relevant interests in shares at 31 March 2017.
Executive team
members
Mike Bennetts
Chris Day
Interests as registered holder of shares
Z Energy Limited – 151,794 (of which
151,008 shares are held by Kammjam
Trust)
Z Energy Limited – 41,528 shares
held by CW & CR Day Trust
Lindis Jones
Z Energy Limited – 45,836 shares
Mark Forsyth
David Binnie
Z Energy Limited – 44,994 shares
(of which 44,208 shares are held by
Forsyth Family Trust)
Nicolas Williams
Z Energy Limited – 11,646
Z RSLTIP interests
126,421 shares for the period ending 31 March 2017
83,970 shares for the period ending 31 March 2018
59,934 shares for the period ending 31 March 2019
39,324 shares for the period ending 31 March 2017
25,930 shares for the period ending 31 March 2018
18,441 shares for the period ending 31 March 2019
30,078 shares for the period ending 31 March 2017
20,152 shares for the period ending 31 March 2018
16,136 shares for the period ending 31 March 2019
32,618 shares for the period ending 31 March 2017
21,630 shares for the period ending 31 March 2018
15,675 shares for the period ending 31 March 2019
13,881 shares for the period ending 31 March 2017
19,817 shares for the period ending 31 March 2018
13,816 shares for the period ending 31 March 2019
10,288 shares for the period ending 31 March 2017
16,794 shares for the period ending 31 March 2018
14,753 shares for the period ending 31 March 2019
Z ESPP interest
413 shares
413 shares
413 shares
413 shares
413 shares
Donations
For the year ended 31 March 2017, Z made donations of $1,135,251 (2016: $1,255,849). Z's subsidiaries made no donations during
the period.
Indemnity and insurance disclosure
As permitted by its constitution, Z has entered into a deed to indemnify its directors and its personnel who serve as directors of
related companies for potential liabilities or costs they may incur for acts or omissions in their capacity as directors of Z or its
related companies. Z has a Directors’ and Officers’ Liability Insurance Policy in place. This provides insurance for the liabilities of
the directors and employees of Z for acts or omissions in their capacity as directors or employees. Neither the indemnity nor the
insurance policies cover dishonest, fraudulent, malicious, or wilful acts or omissions.
Governance 118
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
119
Back to contents
Results disclosure
The reporting period for this annual report relates to the 12 months prior to 31 March 2017. The previous reporting period relates to
the 12 months prior to 31 March 2016.
Dividend disclosure
FY17 Interim dividend
Record date
Payment date
FY16 Final dividend
Record date
Payment date
Amount per security (cents)
9.4 cents
25 November 2016
12 December 2016
18.1 cents
27 May 2016
8 June 2016
Imputed amounts per security (cents)
3.6556 cents
7.0389 cents
Net tangible assets per security
Net tangible assets per security at 31 March 2017: 1 cent (31 March 2016: 63 cents).
Group disclosures – subsidiaries
Subsidiary directors at 31 March 2017
Person
Mike Bennetts
Subsidiary directorships
Harbour City Property Investments Limited
Mark Forsyth
Justine Munro
Alan Dunn
Peter Griffiths
Paul Fowler
Abby Foote
Mark Cross
Julia Raue
Harbour City Property Investments Limited
Z Energy LTI Trustee Limited
Z Energy ESPP Trustee Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Z Energy ESPP Trustee Limited
Z Energy LTI Trustee Limited
Challenge Petroleum Limited
Z Energy 2015 Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Z Energy 2015 Limited
Challenge Petroleum Limited
Interests
Punakaiki Fund Limited (director)
The New Zealand Refining Company Limited (director)
Loyalty New Zealand Limited (director)
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
As listed on page 116
Other disclosures
Director remuneration
The directors of Harbour City Property Investments Limited are employees of Z and do not receive any remuneration in their
capacity as directors.
The directors of Z Energy 2015 Limited, Challenge Petroleum Limited, Z Energy ESPP Trustee Limited, and Z Energy LTI Trustee
Limited are also directors of Z and do not receive any remuneration in their capacity as directors of those subsidiary companies.
Subsidiary employees
Neither Harbour City Property Investments Limited, Challenge Petroleum Limited, Z Energy ESPP Trustee Limited, and Z Energy
LTI Trustee Limited has any employees.
Details of the employees (or former employees) of Z Energy 2015 Limited who received remuneration and other benefits over
$100,000 in their capacity as employees during FY17 are included in the “Employee remuneration” on page 113.
Payments made to an auditor
None of Z Energy 2015 Limited, Challenge Petroleum Limited, Harbour City Property Investments Limited, Z Energy ESPP Trustee
Limited, or Z Energy LTI Trustee Limited paid any amounts to an auditor, whether for audit fees or otherwise, during the period.
Distribution of ordinary shares and shareholders
At 31 March 2017
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
Number of shareholders
1,884
4,999
1,282
688
53
8,906
Distribution of ordinary bonds and bondholders
%
21
56
14
8
1
100
Number of shares
1,314,529
12,749,623
9,115,103
14,254,106
362,566,639
400,000,000
%
0
3
2
4
91
100
At 31 March 2017
ZEL 020
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
ZEL 030
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
Number of bondholders
0
439
840
1,698
105
3,082
Number of bondholders
0
263
648
1,328
77
2,316
%
0
14
27
55
3
100
%
0
11
28
57
3
100
Number of bonds
0
2,195,000
8,090,000
55,558,000
84,157,000
150,000,000
Number of bonds
0
1,315,000
6,340,000
43,603,000
83,742,000
135,000,000
Governance 120
About Z
Our leaders
Our company
Our material issues
Our people and culture
Our capability
Our environment
Our assets
Our place in New Zealand
Our finances
Financials
121
Back to contents
ZEL 040
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
ZEL 050
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
Number of bondholders
0
122
306
766
70
1,264
Number of bondholders
0
88
247
718
33
1,086
%
0
10
24
61
5
100
%
0
8
23
66
3
100
Number of bonds
0
610,000
2,960,000
26,652,000
119,778,000
150,000,000
Number of bonds
0
440,000
2,394,000
25,232,000
41,934,000
70,000,000
Substantial product holders
According to notices given under the Financial Markets Conduct Act 2013, the following were substantial product holders of the
company at 31 March 2017.
Substantial product holders
Investors Mutual Limited
Perpetual Limited and subsidiaries
Airlie Funds Management Pty Ltd
Commonwealth Bank of Australia
New Zealand Superannuation Fund Nominees Limited
Lazard Asset Management LLC
Number of voting products in substantial
holding (ordinary Z shares)
20,581,414
43,567,496
26,345,102
20,029,420
42,248,538
36,462,849
Percentage of
shares held at
date of notice Date of notice
5.2 29 / 03 / 2017
10.9 30 / 01 / 2017
6.6 15 / 12 / 2016
5.0 25 / 11 / 2016
2 / 06 / 2016
10.6
9.1 25 / 01 / 2016
The total number of Z ordinary shares on issue at 31 March 2017 was 400,000,000.
Our 20 largest shareholders
In the table below, the shareholding of New Zealand Central Securities Depository Limited (NZCSD) has been reallocated to the
underlying beneficial owners.
At 31 March 2017
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Holder name
HSBC Custody Nominees (Australia) Limited
HSBC Nominees (New Zealand) Limited
J P Morgan Nominees Australia Limited
National Nominees New Zealand Limited
Accident Compensation Corporation
HSBC Nominees (New Zealand) Limited
Citibank Nominees (NZ) Ltd
JPMorgan Chase Bank
RBC Investor Services Australia Nominees Pty Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Forsyth Barr Custodians Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees (NZ) Limited
New Zealand Superannuation Fund Nominees Limited
Cogent Nominees Limited
Premier Nominees Limited
Custodial Services Limited
UBS Nominees Pty Ltd
FNZ Custodians Limited
Holding
38,493,099
37,833,084
34,638,797
22,431,606
18,296,580
18,097,343
15,307,794
15,304,511
13,565,143
12,557,860
11,988,111
11,167,371
10,394,728
8,826,494
8,036,092
7,617,655
6,465,317
6,010,891
5,248,347
4,953,936
NZX Main Board waivers
Z does not have any waivers from the requirements of the NZX Main Board / Debt Market Listing Rules.
%
9.6
9.5
8.7
5.6
4.6
4.5
3.8
3.8
3.4
3.1
3.0
2.8
2.6
2.2
2.0
1.9
1.6
1.5
1.3
1.2
Governance 122
123
124
125
Back to contents
GRI Index
GRI standard
Page number(s)
GRI standard
Page number(s)
GRI standard
Page number(s)
GRI standard
Page number(s)
65
9-11, 20-21
126
9
65
20-21
9-11
26-31
20-21
General disclosures
GRI 102: General disclosures 2016
Organisational profile
102 – 1 Name of the organisation
102 – 2 Activities, brands, products, and services
102 – 3 Location of headquarters
102 – 4 Location of operations
102 – 5 Ownership and legal form
102 – 6 Markets served
102 – 7 Scale of the organisation
102 – 8 Information on employees
and other workers
102 – 9 Supply chain
102 – 10 Significant changes
to the organisation and its
supply chain
102 – 11 Precautionary principle or approach
102 – 12 External initiatives
102 – 13 Membership of associations
Caltex acquistion throughout report
113
31, (a)
(b)
Strategy
102 – 14 Statement from senior decision-maker
4-5, 12-13
Ethics and integrity
102 – 16 Values, principles, standards, and
norms of behaviour
Governance
102 – 18 Governance structure
Stakeholder engagement
102 – 40 List of stakeholder groups
102 – 41 Collective bargaining agreements
102 – 42 Identifying and selecting stakeholders
102 – 43 Approach to stakeholder engagement
102 – 44 Key topics and concerns raised
18-19, 101
100-108
22-23
none
22-23
22-23
22-23
Reporting practice
102 – 45 Entities included in the
consolidated financial statements
102 – 46 Defining report content and topic boundaries
102 – 47 List of material topics
102 – 48 Restatements of information
102 – 49 Changes in reporting
102 – 50 Reporting period
102 – 51 Date of most recent report
102 – 52 Reporting cycle
102 – 53 Contact point for questions regarding the report
102-54 Claims of reporting in accordance
with the GRI Standards
102-55 GRI content index
102-56 External assurance
65
65
22-23
No restatements
No changes
5
5
5
126
22
124-125
114
Material topics
GRI 200 Economic standard series
Economic performance
GRI 103: Management approach 2016
GRI 201: Economic performance 2016
201 – 1 Direct economic value generated
and distributed
201 – 2 Financial implications and other
risks and opportunities due to climate change
54-97
10-11, 58-97
12, 36-41
GRI 300 Environmental standards series
Emissions
GRI 103: Management approach 2016
GRI 305: Emissions 2016
305 – 1 Direct (Scope 1) GHG emissions
305 – 2 Energy indirect (Scope 2) GHG emissions
305 – 3 Other indirect (Scope 3) GHG emissions
305 – 4 GHG emissions intensity
Effluents and waste
GRI 103: Management approach 2016
GRI 306: Effluents and waste 2016
306 – 2 Waste by type and disposal method
306 – 3 Significant spills
36-41
39
39
39
29
41
29
Diversity and equal opportunity
GRI 103: Management approach 2016
GRI 405: Diversity and equal opportunity 2016
405 – 1 Diversity of governance bodies and employees 102-104
405 – 2 Ratio of basic salary and remuneration of
women to men
31, 101
103
Local communities
GRI 103: Management approach 2016
GRI 413: Local communities 2016
413 – 1 Operations with local community
engagement, impact assessments, and
development programs
Socioeconomic compliance
GRI 103: Management approach 2016
GRI 419: Socioeconomic compliance 2016
419 – 1 Non-compliance with laws and
regulations in the social and economic area
Oil and gas sector disclosures
Asset integrity and process safety
GRI 103: Management approach 2016
GRI G4-OG13 Process safety events
Number of process safety events, by business activity
48
50
100
101
29
30
Fossil fuel substitutes
GRI 103: Management approach 2016
GRI G4-OG14 Biofuels produced and purchased
Volume of biofuels produced and purchased meeting
sustainability criteria
38-39
No sales
Environmental compliance
GRI 103: Management approach 2016
GRI 307: Environmental compliance 2016
307 – 1 Non-compliance with environmental
laws and regulations
Supplier environmental assessment
GRI 103: Management approach 2016
GRI 308: Supplier environmental assessment 2016
308 – 2 Negative environmental impacts in the
supply chain and actions taken
29
101
20
20-21, 45
GRI 400 Social standards series
26-31, 32-35
Employment
GRI 103: Management approach 2016
GRI 401: Employment 2016
401 – 1 New employee hires and employee turnover
401 – 2 Benefits provided to full-time
employees that are not provided to temporary
or part-time employees
401 – 3 Parental leave
Occupational health and safety
GRI 103: Management approach 2016
GRI 403: Occupational health and safety 2016
403 – 1 Workers representation in formal joint
management-worker health and safety committees
403 – 2 Types of injury and rates of injury,
occupational diseases, lost days, and absenteeism,
and number of work-related fatalities
Training and education
GRI 103: Management approach 2016
GRI 404: Training and education 2016
404 – 2 Programs for upgrading employee
skills and transition assistance programs
404 – 3 Percentage of employees receiving regular
performance and career development reviews
103
109-110
104
29
30
30
26
31
106
(a) Zero Harm workplace, NZX Corporate Governance Best Practice Code, ASX Principles, Women’s Empowerment Principles.
(b) Sustainable Business Council, Sustainable Business Network.
126
127
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Company
Directory
Registered and head office –
New Zealand
3 Queens Wharf
Wellington 6011
z.co.nz
Contact us
For general enquiries
Phone: 0800 474 355
and select ‘0’ or
email: general@z.co.nz
Facebook: Z Energy
LinkedIn: Z Energy
Directors
Peter Ward Griffiths (Chair)
Andrew Mark Cross
Alan Michael Dunn
Abigail Kate Foote
Paul Lightle Fowler
Justine Mary Munro
Julia Margaret Raue
Marko Bogoievski
(Resigned 2 June 2016)
Stephen Reindler
(Appointed 1 May 2017)
Lawyers
Chapman Tripp
10 Customhouse Quay
Wellington 6140
Minter Ellison Rudd Watts
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
Hong Kong and Shanghai Banking
Corporation
HSBC Tower
195 Lambton Quay
Wellington
Westpac Banking Corporation
188 Quay Street
Auckland
Registered Office – Australia
c/- TMF Corporate Services (Aust) Pty
Limited
Level 16, 201 Elizabeth Street
Sydney NSW 2000
Australia
PO Box A2224
Sydney South NSW 1235
Australia
+61 2 8988 5800
Australia Registered Business
Number
164 438 448
Executive team
Michael Bennetts
Chief Executive
Christopher Day
Chief Financial Officer
Jane Anthony
General Manager, Marketing
David Binnie
General Manager, Supply and
Distribution
Debra Blackett
Chief Governance Officer
Mark Forsyth
General Manager, Retail
Julian Hughes
General Manager, Health, Safety,
Security, and Environment
Lindis Jones
General Manager, Corporate
Sharlene Taylor
General Manager, People and Culture
Meredith Ussher
General Counsel
Nicolas Williams
General Manager, Commercial
Share Registrar
Link Market Services – New Zealand
PO Box 91976
Auckland 1142
New Zealand
+64 9 375 5998
linkmarketservices.co.nz
Link Market Services – Australia
Locked Bag A14
Sydney South NSW 1235
Australia
+61 2 8280 7100
Auditor
KPMG
Maritime Tower
10 Customhouse Quay
PO Box 996
Wellington 6140
Do you have feedback?
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about our business and our activities through
our reporting. We welcome your comments
and feedback on this report.
Please email us at yourviews@z.co.nz.
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interactive PDF where you can click on bold
text to view additional content.
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