Plain-text annual report
Arotahi ki ngā tukuhanga
Focused on delivery
Z ENERGY ANNUAL REPORT
For the year ended 31 March 2021
Our strategy is:
To solve what matters for a moving world
by optimising our core business so we can
transition to a low carbon future.
We are tightly focused on:
Reducing costs
Holding market share
Monetising scale
Managing capital
Te pūrongo a te Hēmana me Te Taiurungi:
Arotahi ki ngā tukuhanga
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Chair and CEO report:
Focused on delivery
Covid-19 delivered a momentous
challenge to New Zealand, and to Z. It’s
had a real impact on our business, but, in
the face of this challenge, we have built a
stronger, leaner, more resilient business.
Through Covid-19 Z has focused squarely
on two things: the safety and wellbeing of
our people, customers and communities;
and delivering against the commitments
we have made to shareholders.
It has been a year of markedly different
halves: the first half was a period
of concerted crisis management,
recapitalising our balance sheet and
establishing a new way of working through
We expect to increase earnings
in FY22 as we continue to reduce
structural costs, hold our market
share, optimise the use of our
terminals to improve returns and
deliver new customer offers.
Resumed
dividends
Z has returned to paying dividends
6 months ahead of schedule
FY21
lockdown conditions. The second half has
focused on cutting costs, optimising the
core business and setting the company
up to benefit financially from structural
industry changes.
At the end of this year Z’s staff engagement
is at an all-time high, and we are proud
to be just below the top 10 percent of
organisations globally, as measured by
our engagement service provider, Peakon.
Through this very challenging year we
have collectively improved our resilience,
strengthened our culture and our business
and we have delivered for our customers.
We have delivered Replacement Cost
Earnings Before Interest, Taxation,
Depreciation, Amortisation and Fair value
movements of $238 million, (guidance of
$235–$245 million), as rising oil prices
and retail discounting affected margins
in the second half of the year.
Commercial fuel volumes (primarily
marine and jet fuel) are still affected
by continued Covid-19 disruptions and
with repeated short regional lockdowns
impacting Retail volumes. Additionally,
trading conditions in the final quarter
of FY21 were challenging: intense retail
competition has continued and crude
oil prices have increased substantially,
further compressing margins.
Assuming no further Covid-19 lockdowns,
we expect to increase earnings in FY22
as we continue to reduce structural costs,
hold our market share, optimise the use
of our terminals to improve returns and
deliver new customer offers. At the same
time we will manage capital carefully.
With this financial result we have resumed
dividend payments six months earlier
than forecast. We will continue to focus
on paying down debt and will further
strengthen Z’s balance sheet.
We have continued to build our
customer-focused strategy.
Through enhancing our customer
experience (CX) and digital capabilities
we have increased revenue by
introducing innovative, digital-enabled
offers for our customers and improving
the customer experience. Over FY21 we
have built a lower-cost business that
is more flexible and future-focused.
In terms of improving current
performance, Z remains tightly focused
on four areas of continued improvement:
Reducing costs
Holding market share
Monetising scale
Managing capital
Reducing costs
Over the year we made strategic and
structural changes to our operating
expenditure base without compromising
the integrity of our operations, our
capabilities or our strategy.
We reduced structural, annually recurring
costs by $49 million, and one-off costs of
$14 million as a result of Covid-19 — for
example, through suspended marketing
and reduced fuel delivery costs.
CHAIR AND CHIEF EXECUTIVE’S REVIEW
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In FY22 we will deliver a further
$21 million in structural, ongoing cost
reductions, building on reductions from
FY21. Z will continue to focus on cost
reduction opportunities as we optimise
our core business and leverage our
scale to ensure a competitive, resilient
business that will sustain returns
to shareholders.
Holding market share
With a leaner, focused operation, Z backs
itself to deliver convenience, dynamic
customer offers and competitive pricing
across the country. We will preserve and
build on the economies of our scale and
compete vigorously in our core markets.
Over the year Z has competed for
volume in all markets and has flattened
the decline in its fuel market share.
Z has a strong customer proposition:
competitive pricing, a superior network
of commercial and retail refuelling
stations, an increasingly dynamic set
of digitally enabled customer offers,
a refreshed loyalty programme, and the
clear commitment to be a part of the
climate change solution.
Monetising scale
Z’s supply chain objective is to be
appropriately rewarded for its scale
and resulting efficiency.
A number of significant changes
occurring in New Zealand’s fuel industry
may provide opportunities for Z to realise
more value.
In August 2020, Parliament passed
the Fuel Industry Act which requires
bulk fuel terminal operators to offer
a ‘terminal gate price’ for bulk fuel
supply to competitors. Z has already
successfully piloted this approach by
taking its Nelson terminal out of an
industry arrangement and offering fuel
to any industry participant, including
customers, distributors and competitors.
In March, Z also gave notice of its
intention to exit industry arrangements
at the Port of Tauranga.
Z has the largest network of fuel
storage assets in the country and will
introduce terminal gate pricing across
the country over the next year. Z expects
the efficiency and scale of its national
fuel terminal network to begin to deliver
fair commercial returns from assets
which have historically underperformed
because of long-standing
industry arrangements.
These industry arrangements have
discouraged investment and encouraged
companies to rely on the assets of
others. Z will drive a more independent,
commercial approach to its fuel terminal
management that better serves
New Zealand’s economic interests.
Managing capital
We have a strong balance sheet
following a well-supported $347 million
equity capital raise announced in
May/June 2020. We thank our investors
for their strong support.
Z used the equity raise proceeds to
pay down bank debt. Z is committed
to paying down $150 million of debt in
November of this year, which will see
debt reduced by $330 million over an
18-month period.
In response to the uncertainty of
Covid-19, Z cut its final dividend for FY20
and, as a part of the financing agreement
with our banking partners and debt
providers, agreed to pause dividend
payments to shareholders until after
1H22. We are acutely aware of the effect
that this had for our equity investors
and that is why Z renegotiated the early
release from these provisions and is able
to declare a dividend of 14 cents per
share to shareholders in respect of our
FY21 earnings.
From FY22, through the operational and
structural initiatives already underway,
Z is committed to supporting sustainable
and reliable dividends to shareholders.
Z’s changing context
The liquid fuels industry is going through
a period of significant structural change.
Through our previous investments in
our assets, network and capabilities Z is
well-positioned to lead these changes.
In February 2021, as part of ensuring
Z has the right people in the right roles
to respond to a rapidly changing context,
the company announced changes to its
Executive team.
Julian Hughes has moved from the
General Manager, Strategy and Risk to a
new role as General Manager, Transition.
In this role Julian will be accountable
for ensuring Z is well-positioned in a
changing industry, for example through
developing a reliable biofuels supply
chain and supporting the transition to
an import-only supply chain.
Nicolas Williams has moved from
the position of General Manager,
Commercial, to the position of General
Manager, Strategy and Risk, reflecting a
focus on longer-term business strategy.
Nicola Law has moved into the position
of General Manager, Commercial.
These changes took effect on 1 April 2021.
In addition to the above changes, on
1 February 2021, Z appointed Figen Ulgen
as Chief Customer Officer, following
the departure of Jane Anthony in
December 2020 after 11 years in senior
management roles.
Exiting the crude oil
supply chain
Over FY21, Z has supported the strategic
review of Refining NZ’s operations.
This review has made it clear that
Refining NZ’s future is as a fuel import
terminal rather than a sub-scale refiner
of crude oil.
Z supports Refining NZ in quickly
delivering this outcome on a
commercial basis.
Shifting to a fuel import terminal will
remove Z’s exposure to refining margins
and reduce the volatility of earnings
and operating expenses. It will enable
Z to choose the fuels it wants to supply
and enable fuels to be priced on a
commercial basis.
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We are facing
the future with
confidence in our
ability to deliver.
While work needs to be completed and
agreements reached, moving to a fuel
import terminal will generate a one-off
working capital release of approximately
$150 million. It may also improve the
resilience and security of fuel supply
and ensure a fair, competitive playing
field across all market participants.
Discipline in operations
We will continue to be disciplined in
choosing where we want to compete, and
we will exit operations that do not generate
sufficient returns or provide too much risk.
Over the last year Z ended its charter
of the marine fuel oil barge Awanuia
in Auckland Harbour. The business
generated inadequate return and
detracted from the focus on running
the core business safely and profitably.
Over the period Z also moved to a
bitumen import-only model, although this
was imposed on Z via operational choices
made by Refining NZ.
Over the next 12 months we will closely
examine non-core parts of Z operation
and look to exit or change the way we
operate them where required.
Continuing to lead on
climate change
Over FY21, climate change has
emerged as a highly material issue for
Z’s stakeholders. We’re not surprised.
The Government has declared a climate
emergency, the effects of a warming
climate continue to be felt and, at the time
of publication, there is ongoing private
legal action taken by an individual against
Z and a number of other companies
around the impacts of climate change.
The Climate Change Commission has
published and consulted on New Zealand’s
first draft pathway to meeting the
country’s 2030 and 2050 climate change
commitments. We welcomed this work
and note that the core scenario in the
proposed pathway is closely aligned
with Z’s own scenario modelling.
In late January, the Government
announced a biofuels sale mandate.
When implemented, this is expected
to create mass demand for low
emissions fuels for use in existing
internal combustion engine vehicles.
Biofuel mandates are common globally
and Z has been advocating strongly for a
mandate policy across the industry.
Subject to favourable conditions,
Z expects to be well-positioned to realise
value from its currently hibernated
Te Kora Hou biodiesel plant in Wiri,
Auckland. Through this plant we may be
able to lead the domestic manufacture of
sustainable biodiesel as well as import and
distribute a range of biofuel products.
In March, we launched Z Electric, enabling
our customers to buy their electricity
from Z and be rewarded for doing so.
This is another way we are moving
towards providing the clean, low carbon
energy that will increasingly power our
economy as well as accessing alternative
revenue streams.
Z continues to strive to find the right
balance between strengthening our
business, paying down debt, returning
cash to shareholders and helping to lead
the way towards a low carbon future.
Conclusion
We thank our investors, customers and
our own people for their commitment
and support over FY21.
Our actions over the past three years
have ensured we are well-positioned
to manage through any future
Covid-19-like events. We will continue
to build resilience in our business and
remain focused on creating value for
shareholders and customers through
ensuring our core business is optimised
to respond to structural changes in our
industry and the global economy.
FY21 has been a hugely challenging
year for everyone and the recovery is
just starting. There will be challenging
times ahead. But we have made change
where change was required and we face
the future with confidence in our ability
to deliver.
Thanks again for your support.
Abby and Mike
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Te ara tuku pūrongo
How we report
Z Energy chooses to report against the
issues most material to our stakeholders:
our customers, our investors, our own
people and the communities we serve.
We choose to weight our reporting
towards the future — how we create
value, the business model we pursue,
how we approach strategy and how we
think about Z’s role in a rapidly evolving
energy future.
We believe the best framework to
reflect these reporting priorities
lies in Integrated Reporting .
The framework requires a high level
of transparency and commitment to
robust disclosure around how we manage
risk, approach strategy and report
against our environmental, social and
governance (ESG) commitments.
This framework requires a high level of
interaction with multiple stakeholders in
order to accurately determine the issues
most material to them.
Rārangi ūpoko
Contents
1
Chair and CEO report
4 How we report
5 Our numbers
6 Our business model and strategy
8 Our values
9 How we create value for
shareholders
10 Focusing on the issues that matter
14 Transforming our supply chain
15 Focusing on core markets
16 Commercialising Z’s
terminal network
Supporting our use of the
reporting framework, we also choose
to use the Global Reporting Initiative
(GRI) Standards: Core option and
the Financial Stability Board’s Task
Force on Climate-related Financial
Disclosures (TCFD). The Financial
Stability Board is an independent
international organisation that makes
recommendations to protect global
financial security. Z’s commitment
to TCFD reporting requires us
to progressively disclose our
climate-related risks, how they are
reflected in strategy and how we
seek to manage them.
This is Z’s second year of TCFD
reporting. With the publication of Z’s
FY23 report, we will be compliant with
all of the Financial Stability Board’s
recommended disclosures.
The commitment to transparent
reporting against Z’s ESG commitments
is tightly linked to our strategy. This is
our fifth year of integrated reporting
and our investors, customers and
stakeholders increasingly want to clearly
understand what Z stands for, how our
strategy will continue to be implemented
and how we will support the transition to
a low carbon future.
While these frameworks mean there is
more detail to report against, we are
mindful of the need for this report to
be clear and concise and to be tightly
focused on the material issues that
matter most.
This is Z’s report on the year to the
end of March 2021. It is also our report
on how we intend to deliver value well
into the future — for our customers,
investors, communities and planet.
This document constitutes Z Energy Limited’s
2021 Annual Report to Shareholders. It exceeds
the requirements of the NZX Corporate Governance
Code and Environmental, Social and Governance
Guidance Note.
51 Our Executive Team
84 Additional disclosures
91 Financial Statements
122 Auditors’ report
127 TCFD Index
129 GRI Index
132 Company directory
20 Consistent delivery for
Commercial customers
22 Case study: Z’s Te Kora Hou
biodiesel plant
24 A quicker, competitive
retail experience
26 What we choose to stand for
27 Environmental sustainability
38 Diversity and inclusion
42 Community
44 Safety and wellbeing
46 Corporate Governance Statement
18 A snapshot of our supply chain
47 The Z Board
YEAR AT A GLANCE
Ngā raraunga
Our numbers
FY21
Annual results
FY20 comparison
$57m
Historic net profit after tax
FY20: -$88m
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3,086 million
litres
2,121
Total fuel volume (retail and commercial)
FY20: 3,968 million litres
Please note an adjustment to the fuel volume in our FY20
report — the FY20 volume was reported as 3,837 million litres.
Z’s direct employees, contractors and Retail
network members
FY20: 2,451
51.5
million
transactions
Total transactions on Z-branded retail sites
FY20: 56.6m
99%
Safety and Wellbeing action complete rate
FY20: 100%
$3m
1c
+53
Replacement cost net profit after tax
FY20: $44m
Replacement cost net profit after tax per share
FY20: 11c
Employee net promoter score
FY20: +36
$238m
Replacement cost EBITDAF
FY20: $366m
0.1cpl
+25
Replacement cost net profit after tax per litre
FY20: 1.1cpl
Business net promoter score
FY20: +9
14c
Total dividend per share
FY20: 16.5c
-18.4%
Total shareholder return
FY20: -49.71%
+33
Retail net promoter score
FY20: +38
$42m
Net capital expenditure
FY20: $71m
Please note an adjustment to the capital expenditure
reported in our FY20 report — we reported total
capital expenditure of $102m, rather than net capital
expenditure.
9.4
million
tonnes
Total carbon footprint — carbon dioxide
equivalent (tCO2e)
FY20: 11.6m tonnes
Please refer to our notes about a restatement of our
annual greenhouse gas emissions on page 30
37,500 tonnes
CO2-e
Carbon emissions offset
FY20: 40,000 tonnes CO2-e
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Tō tātou anga pakihi
me te rautaki
Our business model
and strategy
While traditional annual reports focus
largely on the past, Integrated Reporting
is focused more on the future,
including strategy and the way in which
companies create value.
At a high level, Z’s strategy can be
articulated like this:
Our strategy is to solve what
matters for a moving world by
optimising our core business so we
can transition to a low carbon future.
Our strategic priorities are to
always be safe and reliable, deliver
awesome customer experiences,
generate heaps of free cash
flow, and grow our non-fossil
fuels income.
In service of this strategy, we focus on six
inputs and performance outcomes which
will be expanded upon throughout this
report — we call these our capitals:
1 Our
assets
Z is the largest transport energy company
in New Zealand, running an unparalleled
network of commercial refuelling stations,
retail service stations and bulk fuel storage
terminals across the country.
These nationwide assets give Z the
economy of scale across its operations
and provide a highly convenient and
competitive offer for customers across
the country. Monetising the scale of our
assets provides the foundations for strong
shareholder returns.
2 Our
finances
Delivering on our commitments to our
investors, our communities and our planet
requires Z to be profitable.
Z has taken a number of steps over the last
year that recapitalised its balance sheet,
cut costs and set the company up to benefit
financially from structural industry changes.
Z’s financial recovery from the impacts
of Covid-19 has been, while not yet
complete, more rapid than initially
expected and we have declared an early
resumption of dividend payments at the
end of FY21.
3 Our
capabilities
Z has invested heavily in its capability
to delight our customers through
digitisation and innovation, as well as
through effective management and
change of our supply chain and assets.
Z’s substantive investment in building
new customer experience and digital
capabilities is now complete. These
capabilities are spread across all areas
of the company. While we will continue to
nurture and build these capabilities, the
initial transformational investments have
established foundations and enabled
new marketing and product offers to be
introduced over the last year that are
unique in the market. These capabilities
have also ensured our service is efficient
and our operations are always safe.
Our supply chain management
capabilities have been a particular
asset as we have started the process of
potentially exiting the crude oil supply
chain and introducing terminal gate
pricing — both of which can deliver
operational efficiency and reduce costs.
4 Our
people and culture
Z has always believed in the power
of a strong, unified culture guided
by clear values in building a resilient,
high-performing business. Covid-19 was
an unprecedented challenge to our ways
of working and our wellbeing.
In making this rapid transition we
benefited from previous investment in
our technology and IT systems. The way
we led our people and communicated
across our company during a period of
crisis has resulted in world-class internal
engagement scores.
Z’s business is built around genuine
diversity across every area of our team.
Z actively encourages all our people
to bring their true selves to work and
we seek to benefit from the different
perspectives, thinking and backgrounds
that an increasingly diverse team bring
to Z every day.
5 Our
environment
Over the last year the issue of climate
change has clearly emerged as one of the
most material issues for our customers, our
stakeholders, our investors and our staff.
Z remains committed to operating
in what we call ‘the world of both’ —
optimising our core business and running
it efficiently to deliver increasing value to
customers and investors while continuing
to explore the options to lead and support
the transition to a low carbon economy.
This involves new products and offers,
advocating for policy change and delivering
new clean energy services to combat
climate change — for example Z Electric.
6 Our
place in New Zealand
Z’s place in New Zealand has perhaps
never been in such clear focus as it was
over FY21 when the essential services
Z provides were vital in the response
to Covid-19.
Z’s purpose is ‘solving what matters
for a moving world’. Over FY21 our
world moved less, but what mattered
to our customers, stakeholders and our
economy was very clear.
We protected the safety and wellbeing
of our customers, communities and
economy through a period of crisis.
We ran our supply chain safely and
reliably and provided essential services
for local communities in various stages
of Covid-19 lockdown.
Z Energy Limited and Subsidiaries
Year end report 31 March 2021
Our strategy is to solve what
matters for a moving world by
optimising our core business
so we can transition to a low
carbon future.
Z prioritises the following inputs and outcomes
— these are referred to as Z’s six ‘capitals’ under
the Integrated Reporting framework:
Ngā tomonga
Our inputs
Our assets
Our finances
Our capabilities
Our people and culture
Our environment
Our place in New Zealand
Te pūtake
Our purpose
Te whiriwhiri he aha ngā āhuatanga
matua ki te ao nekeneke
Solving what matters
for a moving world
Ngā putanga
Our outcomes
Our assets
Our finances
Our capabilities
Our people and culture
Our environment
Our place in New Zealand
Z Energy Limited and Subsidiaries
Year end report 31 March 2021
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Ō tātou uara
Our values
Z has always placed a very high value
on a strong, values-based culture
to guide the way we behave, work
together and the decisions we make.
Having clearly defined values that all
people sign up to as a part of being at
Z can provide direction and clarity during
uncertain times. Our values have never
been more important than over the
last year.
Z’s values are the foundations of our
company. While we only have three
values, and they are remarkably simple,
they have helped us build a highly
engaged, committed company during the
most challenging year in our history.
Tū kaha | Stand out
We believe we can build a better
business and a better world
We are distinctive where it really matters.
We challenge the status quo by being
bold, innovative and passionate. We work
relentlessly to be a force for good for our
communities, our economy and our planet.
Tū māia | Speak up
We believe extraordinary outcomes
are fuelled by active participation
and dialogue
We speak up with courage around what’s
important to us and encourage others to
do the same. In doing so, we will create
new possibilities together.
Tū kotahi | Side by side
We believe learning and growing
together delivers unlimited potential
We’re better together — holding each
other up as well as challenging ourselves
to grow and develop. Side by side
we build trusted partnerships with
our people, our customers and
our communities.
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Kia puta he hua ki ngā
kaiwhakangao
How we create value
for shareholders
One of the reasons why we choose to
embrace Integrated Reporting is that
it is future focused and requires us to
demonstrate how we create value.
Z’s strategy on how we create value over
the long term was set by Z two years
ago, but its focus and the commitments
within it are unchanged. In fact, the
essence of this strategy is more relevant
than ever now, post Covid-19 impacts
and disruptions.
Z is focused on delivering strong, reliable
returns for shareholders.
We will create value for shareholders
by focusing on our core business and
operating a safe, reliable fuels business.
We will ensure we generate fair
commercial returns for our scale, network
strength and the essential infrastructure
we own and operate.
We will manage our capital and balance
sheet with discipline at the same time
as we deliver returns to shareholders,
generate options for our future, and
ensure we are advantaged under a range
of future scenarios.
Z has a strong, long-term future ahead
of it. Shareholders should expect Z to…
Optimise our market-leading
position
• Z’s unrivalled supply chain
infrastructure provides competitive
advantage through scale and reach
• Z is one of New Zealand’s most
Remain a people- and
values-based company
• Committed to our purpose ‘to solve
what matters for a moving world’
and our ambition to be ‘a world-class
Kiwi company’
recognised and trusted brands capable
of extending to adjacent markets
• Maintain high levels of employee
engagement and customer satisfaction
• Develop organisational capabilities and
individual talent for an uncertain future
Do good in Aotearoa
New Zealand by recognising our
heritage and being committed
to future generations
• Contribute to a sustainable future at
a scale that few other companies can
by supporting the transition to a lower
carbon future
• Provide thought leadership where
we have a track record, especially
in areas like Safety and Wellbeing,
Diversity and Inclusion, and
Customer Experience
• Actively support the communities
in which we operate on what matters
to them.
• Z’s scale provides options that allow
us to adapt and innovate in a market
that will be slowly disrupted by
long-term trends
Pursue a differentiated strategy
that generates long-term
customer loyalty
• Focus on Z’s capabilities in customer
experience, productivity, innovation,
digitisation and brand
• Deliver distinctive customer
experiences that drive loyalty
• Reduce time to market and
lower investment risk through
human-centred design, innovation
and experimentation
Allocate capital with discipline
to maximise shareholder value
• Manage cash flows and capital to
deliver a sustainable dividend in line
with earnings growth
• Limit capital employed in our core
business to $2 billion by selling the
least productive assets to fund growth
• Maintain a strong balance sheet with
the capacity to leverage debt to fund
non-organic investments
01
02
03
Arotahi ki
ngā take
matua
Focusing on
the issues
that matter
W
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1
0
The things that really matter to Kiwi
have shifted abruptly over FY21.
In reading the graph on the next page,
it should be noted that, in such a rapidly
shifting context, what was material in
FY21 may again move quickly in the
coming year. Regardless, this report
directly addresses the most material
of stakeholders’ issues.
Over the last year Kiwi have responded
with concern to the unprecedented
Covid-19 pandemic, approximately
$50 billion in support and stimulus
has been injected into the New Zealand
economy, and our borders have been
effectively closed for a full year.
Concern for the safety and wellbeing
of each other and our communities has
never been so important for so many
people. While Covid-19 continues to rage
around the world, concern for safety
and wellbeing has clearly been the most
material issue for our stakeholders.
This is linked closely with the resilience
of our organisation.
Climate change is increasingly important
for people. Over FY21, the Government
declared a Climate Emergency and
announced significant policy changes
to mandate biofuels across the transport
fuel industry. The Climate Change
Commission published its first draft
carbon budget, highlighting the change
that needs to be made across the
economy if New Zealand is to meet its
climate change commitments.
The New Zealand transport fuel industry
is now undergoing a phase of rapid
transformation, and legislation has been
passed introducing terminal gate pricing
from bulk fuel storage terminals; work
is underway to potentially exit crude oil
refining in New Zealand and transform
Refining NZ into a fuel import terminal.
With the scale of this change comes
some stakeholder uncertainty around
security of fuel supply under a new
operating model.
At the same time, Z continues to
implement a strategy to ensure it is
optimising the operation of its fuel
terminals and monetising their scale,
including by progressively operating
them independently outside of
long-standing industry agreements.
In response to Covid-19, Z elected to
raise more capital to strengthen its
balance sheet during an uncertain
time. As a result of securing the
necessary debt waivers to recapitalise,
Z had to temporarily suspend dividend
payments until after 1H22. Due to
Z’s better-than-expected recovery
from Covid-19, we have been able to
renegotiate these debt waivers and are
able to pay a dividend of 14 cents per
share to shareholders for FY21. Over the
period, Z has strengthened its business,
cut costs, and optimised the operation
of its core business. At the same time,
Z has also continued to lead political
and business advocacy around New
Zealand’s climate change strategy and
how to decarbonise the economy.
Integrated Reporting requires us to
clearly understand the most material
matters for our stakeholders and to then
address them in this report. To ensure we
do understand these matters, Z engages
consistently and frequently with a wide
range of stakeholders. We ask them to
tell us what matters, and we deliberately
capture this feedback in the following
materiality table.
Z can break its stakeholder universe
down into the following five broad
groups, although the most material
issues are becoming increasingly
connected and shared across
multiple stakeholders:
Our customers and
communities
Communities became increasingly
important over FY21 as, for relatively long
periods of time, people were unable to
leave them.
The role of Z’s retail network in
particular became much more
important for neighbourhoods and
communities as a safe, convenient way
to buy food and household supplies
without having to confront a socially
distanced supermarket.
Over the period of the national lockdown
Z provided $337,000 in free fuel to
our partners at St John Ambulance
and $44,000 in free fuel to Wellington
Free Ambulance to support their
frontline work in protecting community
safety and wellbeing. We also provided
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Our material topics
Summary of material topics discussed
in stakeholder engagement, grouped
by value outcome areas
Competition & Market Share
Safety & Wellbeing
Cyber Security
& Data Privacy
Product Quality
Environmental
Sustainability
Security of Supply
Organisational
Resilience
Climate Change
Resilient
Communities
Market Transparency
& Fairness
Responsible
Consumption
& Production
Customer
Experience
Economic
Sustainability
RNZ Strategic Review
Organisational
Capability
Brand Values
Governance
& Stewardship
Strategy Assurance
Capital Strategy
Diversity & Inclusion
Future Fuels
Wholesale Asset Profitability
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Important
Key
Importance to Z
Material
Our
assets
Our
finances
Our
capabilities
Our people
and culture
Our
environment
Our place
in New Zealand
free fuel via Sharetank, to the Student
Volunteer Army Grocery Service to help
them deliver essential supplies to the
doors of the elderly, vulnerable or those
living alone.
We learned a lot through the Covid-19
lockdowns around the changing needs
of our customers — particularly their
need for speed. Harnessing our previous
investments in digital technology and
customer experience (CX) capabilities,
we’ve been actively developing new
customer offers that bring the two
together, for example our ‘Pay by Plate’
technology (see page 24).
Z is proud of the way we operated as
an essential community service, safely
and reliably serving our customers and
communities, over the most challenging
periods of 2020.
Investors
Z is grateful for the support from its
investors during FY21 and continues to
engage closely with investors on the
company’s strategy, short-term business
focus and performance.
As a result of the inherent uncertainty
Covid-19 represented for our
business and the economy, Z adopted
a precautionary approach and
strengthened its balance sheet over
FY21, raising an additional $347 million
from existing and new investors.
A condition of raising this additional
capital was that Z was not able to
pay dividends until its 1H22 result.
Z successfully renegotiated with our
banks and debt providers in order to pay
a full year dividend of 14 cents per share
for FY21.
WHAT MATTERS
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FY21 was an extraordinary year, yet
Z still managed to declare a dividend
to shareholders. We are acutely aware
that a resilient balance sheet and capital
strategy that supports the company
through any market disruption to come,
while providing reliable and sustainable
dividends, is a keen area of focus for
our investors. We remain committed to
generating sustainable, reliable returns
to our shareholders and ensuring a
strong, flexible balance sheet to face
both the challenges and opportunities
of the next decade.
In this year’s half year result in
November 2020, Z clearly outlined
its four areas of focus to improve the
business to investors. At that results
announcement, Z committed to the
following four outcomes which also
form the theme of this report:
Reducing costs
Holding market share
Monetising scale
Managing capital
No one part of the New Zealand
community or economy was spared the
uncertainty of Covid-19 over the last year,
including our investors. In response to
the uncertainty, Z overhauled its market
reporting, disclosing weekly fuel volume
sales data, for which the company was
applauded by investors and stakeholders.
Over the year we’ve taken a number
of important steps to cut costs, free
up working capital, streamline our
operations and focus on efficiency with
the goal of rapidly resuming a solid,
reliable dividend flow to our investors
and rewarding them for their support.
While clearly focused on profitability,
capital management and dividends,
Z’s investors are also increasingly
focused on climate change and where
they choose to invest. For example,
Blackrock, the world’s largest investment
fund with US$8.7 trillion in assets
under management at the end of
December 2020, is asking three things
from the companies it invests in for 2021:
https://www.blackrock.com/corporate/
literature/publication/our-2021-
stewardship-expectations.pdf
• Board and Workforce Diversity with
local market best practice
• An understanding of key stakeholders
and their interests
• Plans to align their businesses with the
global goal of net zero GHG emissions
by 2050.
This approach is increasingly
representative across institutional
investors and in this context Z’s approach
to sustainability and ESG is now highly
strategic to our company and our future.
This is Z’s fifth year of integrated reporting
and we remain committed to best-practice
ESG-related reporting as the most effective
way of demonstrating how we think about
climate change, how it might impact our
business, what we are committed to and
the progress we are making towards a
lower emissions economy.
Central Government
Z has engaged comprehensively with
Government over FY21 on multiple
issues, but primarily in supporting its
response to Covid-19. As the supplier of
almost half of New Zealand’s transport
fuels and the operator of strategic
energy infrastructure, Z was immediately
designated as an essential service.
Security of fuel supply — particularly to
emergency services — has been important
in managing a pandemic and then in
beginning a lengthy economic rebuild with
a focus on infrastructure investment.
Z engaged formally with Government
working groups to contribute to ensuring
a smooth and uninterrupted liquid fuel
supply chain — from fuel imports to
supplying emergency services and
commercial and retail customers —
to support the New Zealand economy
and protect the wellbeing of people.
Z also engaged with Government around
areas of policy focus, particularly the
need for policy support to enable
liquid biofuels to be widely used in
New Zealand and around the shape of the
Emissions Trading Scheme. Z produced
a Briefing to the Incoming Energy
Minister in December 2020 outlining its
business operations, its policy priorities
and climate-related commitments and
published it for all stakeholders to read
at: https://z.co.nz/about-z/news/general-
news/briefing-to-the-incoming-minister-
of-energy-and-resources/
Z has also responded to the Climate
Change Commission’s first draft carbon
budget for New Zealand and our
submission to the consultation can be
viewed at: https://z.co.nz/about-z/news/
general-news/z-energys-submission-to-
the-climate-change-commission/
As the owner of the largest bulk fuel
storage network in New Zealand, Z also
engaged with Government and the
Ministry of Business, Innovation and
Employment (MBIE) in support of the
passing of the Fuel Industry Act, which
introduces terminal gate pricing from
bulk fuel storage terminals and supports
more wholesale fuel supply competition.
We have kept MBIE and Ministers up
to date with our leadership in rapidly
implementing the recommendations from
the Commerce Commission’s 2019 Market
Study well before we were required to
do so.
As the fuel industry embarks on a new
phase of transformation, particularly
around the potential exit of importing
and refining crude oil, Z continues to
engage with government stakeholders
about these changes and their possible
implications for New Zealand.
As evidenced in our Briefing to the
Incoming Minister, Z has also continued
to engage regularly with Government
in support of its climate change and
emissions reduction objectives, including
providing research papers on sustainable
aviation fuel and hydrogen at: https://z.
co.nz/assets/Uploads/Submission-to-
ICCC-on-Reducing-GHG-Emissions-
through-Sustainable-Aviation-Fuel-SAF2.
pdf and https://z.co.nz/assets/Uploads/Z-
House-View-Hydrogen2.pdf
We’ve taken a number of important steps to cut costs,
free up working capital, streamline our operations and
focus on efficiency.
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Over the year, Z regularly fronted up to
discuss these issues and a wide range
of others with media.
Z values its relationships with media as
a way of reaching the broadest possible
range of stakeholders with the issues
that matter to it. From the earliest
days of the company being formed,
Z’s position has been to speak with
media freely and honestly wherever
it can — this position continues.
In an industry that has historically
been insular and closed, discussing
the issues that others are not prepared
to can at times be a lonely position,
but this approach reflects Z’s values
and its accountability to its customers
and stakeholders.
The following section of this report
steps sequentially through the Z supply
chain discussing issues of highest
stakeholder materiality.
Through its Chief Executive, Z is helping
lead a national conversation around
the role of businesses in decarbonising
and supporting New Zealand reaching
its 2030 Paris Accord emissions
reduction targets.
This role requires active advocacy at
Government level, a strong presence
discussing climate-related issues through
the media and a direct role in supporting
the aspirations and commitments of
Kiwi businesses.
During the Covid-19 lockdown in FY21,
Z also supported its small business
customers with extended payment terms
and credit options. Z published a range
of materials to support small businesses
accessing government support, shared
our experience on technology options
and published videos with our thoughts
on protecting wellbeing and leading
through a crisis at: https://z.co.nz/
keeping-business-on-the-move/z-
business-Covid-19-resources
The media
FY21 required leadership and effective
communication from across the economy
on a very wide range of issues across a
wide range of stakeholders.
Just some of these issues include: the
economic challenges of refining crude
oil in New Zealand, the passing of
legislation to change elements of the
fuel industry, ensuring secure supplies
of fuel and convenience products to
customers under crisis conditions and
continuing to advocate publicly for
climate-related solutions.
The business sector
Z — indirectly — continues to play
a leadership role in representing and
advocating for the growing number of
New Zealand businesses concerned
with climate change and committed
to taking action.
Z Chief Executive Mike Bennetts is the
founding Convenor of the New Zealand
Climate Leaders Coalition. Comprising
more than 100 of New Zealand’s leading
businesses, in 2019 the signatories
committed to the following statement:
As signatories to the Climate Leaders
Coalition, we are acting on climate
change now, to create a future that
is low-emissions, positive for our
businesses and the economy, and
inclusive for all New Zealanders.
We are committed to the Paris
Agreement target to keep warming
below 2 degrees and to further pursue
efforts to limit the temperature
increase to 1.5 degrees.
By being a signatory to the Coalition,
our organisations are actively:
• Measuring our greenhouse
gas footprint, having the data
independently verified by a third
party and making the information
publicly available;
• Adopting targets grounded
in science that will deliver
substantial emissions reductions
so our organisations contribute
to New Zealand being carbon
neutral by 2050. These targets
will be considered in current
planning cycles;
• Assessing our climate change risks
and publicly disclosing them;
• Proactively supporting our people
to reduce their emissions; and
• Proactively supporting our suppliers
to reduce their emissions.
WHAT MATTERS
Te whakahou i te
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Transforming our
supply chain
The time for New Zealand to be
importing crude oil from the other
side of the world is over.
It no longer makes economic or
environmental sense to operate
a small, sub-scale refinery in the
Far North of New Zealand. Z is now
supporting Refining NZ to convert
New Zealand’s only refinery into a
much simpler, more cost-effective and
less emissions-intensive import and
distribution terminal for refined fuels.
Exiting the crude oil supply chain and
instead importing New Zealand’s fuel
as finished products will be a significant
change to the way the New Zealand
fuel industry operates. New Zealand
has operated a small oil refinery near
Whangārei for more than 55 years,
but it no longer stacks up or best
serves New Zealand’s energy security,
environmental or economic goals.
Refining NZ is unable to compete with
larger, more efficient refineries around
the Asia-Pacific region. Globally, there is
a trend away from uneconomic crude oil
refining operations in favour of ensuring
the refined fuel supply chain is from the
most efficient sources.
By way of example, over the last two
years Z has had to subsidise operation
of the refinery due to low gross refining
margins around the Asia-Pacific
region by way of $48 million of fee
floor payments.
Not only has Z’s exposure to crude oil
refining recently cost the company and
its shareholders but it has disadvantaged
Z in the market against competitors who
have simply imported their refined fuel
requirements.
The economics of domestic refining
are unlikely to improve.
Part of Z’s commitment to
reducing costs lies now in
ensuring Refining NZ is
converted into a fuel import
terminal on commercial terms.
Part of Z’s commitment to reducing costs
lies in ensuring Refining NZ is converted
into a fuel import terminal on commercial
terms. Doing so will remove a major
source of earnings volatility for Z and
enable the company to deliver much
more consistent and reliable earnings.
It will level an uneven playing field and
help deliver competitive prices and
security of fuel supply for customers.
It will also simplify Z’s supply chain,
removing complexity and risk from
Z’s operations, while at the same
time reducing the amount of capital
employed in the business.
The refining process produces a range
of fuels, even if some are not wanted or
needed. Moving to an import terminal
will allow Z to sell only the fuels its
customers want, rather than having
to export by-products of the refining
process — for example, marine fuel
oil — at a loss. Importing the country’s
jet fuel requirements rather than having
to make them regardless of demand
will also reduce costs and ensure the
development of a fair, transparent and
commercial domestic jet fuel market.
Exiting the crude oil refining process
will enable Z to release approximately
$150 million that is tied up in working
capital — in crude oil on ships at sea or
awaiting processing. It will also provide
opportunities to reduce operating
costs associated with delivery of fuel to
New Zealand ports via coastal shipping.
The value to Z of moving rapidly to an
import model are clear and compelling,
but so too are the benefits to customers
and the country.
It may seem counter-intuitive but
moving to an import-only fuel
supply will strengthen and deepen
New Zealand’s security of supply.
This has understandably been a
concern for stakeholders as change
at Refining NZ has become inevitable.
Under an import model, Z will be in the
international fuel markets much more
frequently and at any time multiple
vessels for different companies will be
heading to different ports in New Zealand
with a range of transport fuels. It will be
simpler and more convenient to divert
ships to different parts of the country
and easier to dial up a new shipment
at short notice if required.
New Zealand’s fuel will likely come
from our backyard in the Asia-Pacific
region rather than crude oil from the
Middle East which can take one month
to reach New Zealand.
New Zealand will end up with a much
more efficient, reliable and flexible
fuel supply chain without the greater
environmental risks of importing crude
oil. There is the potential to remove
unnecessary cost and associated carbon
emissions from the industry through
moving to an import terminal with
relatively low energy requirements.
We want to be clear that none of this
commentary is in any way a criticism of
Refining NZ or its people, who are highly
skilled and committed professionals.
Refining NZ has invested steadily in
its equipment and has run a very safe
operation for many years. It has simply
reached a point in time where it can no
longer compete internationally.
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Z now imports bitumen directly to supply
to its commercial customers, rather than
again selling a by-product of the refining
process. These changes make a simpler,
more focused supply chain with
reduced earnings volatility and stronger
commercial drivers. As New Zealand
embarks on a significant programme
of infrastructure investment as a part of
the Covid-19 ‘Build Back Better’ economic
recovery plan, bitumen remains a very
important product. We continue to
actively support our customers with their
bitumen needs — the only thing that is
changing for customers is the source
of manufacture.
Investors should expect Z to continue
to review all non-core elements of its
operations on an ongoing basis as part
of its commitment to an optimised
core business, a simplified supply
chain, efficient use of capital and
cost reductions.
Our finances
Reducing costs
Z supports the principle of converting
Refining NZ to an import terminal
cost-effectively and on a commercial
basis, but with due care for its assets
and respect for its people — a number
of whom have served the company for
many years.
As refining capacity in New Zealand
has reduced by 25 percent over the
last 12 months due to Covid-19 demand
disruptions, there are a range of
commercial negotiations that need to
be completed between the Refinery
and its customers. While Z will support
Refining NZ in the work that needs
to be done, it will also bring a strong
commercial perspective to ensuring
this period of change is managed as
efficiently and effectively as possible on
behalf of our customers and investors.
As both a shareholder and a customer
of Refining NZ, Z supports the review
process that Refining NZ has run to
reach this point and will now push hard
to ensure the changes that are so clearly
needed are made safely and maximise
value to customers and the country.
Te arotahi ki ngā
mākete matua
Focusing on
core markets
As part of Z’s commitment to
optimising its core business, non-core
elements of our business will remain
under review.
Z’s core business is the management
of its supply chain, the safe and efficient
operation of its terminal, truck stop
and retail service station assets, the
delivery of fuel to commercial customers
and fuel and convenience products to
retail customers.
Over the period, Z exited one non-core
part of its operation — the delivery of
marine fuel oil to vessels in Auckland
Harbour via a barge, the Awanuia.
The Awanuia has been a unique element
of Z’s business since the company was
formed over a decade ago. However, due
to changes at Refining NZ, the
production of marine fuel oil has become
a discretionary activity. Within the overall
business the earnings contribution
from the Awanuia was modest and it
represented a level of operational risk
that required intensive management.
The Awanuia and its crew has made
an important contribution to maritime
operations in New Zealand. Not only has
it safely and conveniently refuelled cruise
and cargo vessels for many years, but in
2011 it played a critical role in removing
marine fuel oil from the grounded vessel,
the MV Rena, off Tauranga, preventing a
much bigger environmental catastrophe.
Over the last year Z moved to an
import-only supply of bitumen.
The capability we have built in supply
chain management gives Z valuable
choices in how to meet customers’
bitumen demand.
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Our assets
Monetising scale
WHAT MATTERS
Tauhokotia te
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Commercialising
Z’s terminal network
Z operates the largest network of
the most strategically important fuel
storage assets in New Zealand. We own
and operate more than 50 percent
of New Zealand’s bulk fuel storage
terminals, representing 191 million
litres of storage, and have a fuel market
share of approximately 40 percent.
The safe, reliable operation of these
bulk fuel storage terminals is critically
important to the operation of the
New Zealand economy.
Despite the contribution of these core
assets to the national economy, these
fuel terminals have never generated a
fair, appropriate commercial return for
the capital that is committed to them.
As we focus on optimising our core
business and monetising our scale,
that is now changing.
Last year, the Government passed the
Fuel Industry Act, with strong support
from Z. The legislation flowed from the
Commerce Commission market study
of the New Zealand fuels sector which
found there were opportunities for
greater competition through companies
making fuel available from bulk fuel
terminals at a commercial wholesale
price to others in the industry.
Z has historically responded favourably
to requests from competitors for access
to bulk fuel on commercial terms, as this
approach starts to ensure our terminal
assets generate commercial returns.
Historically the sharing of terminal assets
has rewarded those who do not invest in
terminals and led to inadequate returns
from those who do.
The Fuel Industry Act provides the
impetus for Z to begin to unwind these
historic industry arrangements to ensure
our assets are fairly remunerated.
Z is well-prepared for this change.
We have taken the management of our
terminals out of industry joint ventures
and run them ourselves. In 2020, ahead
of regulatory changes, we exited industry
arrangements with our Nelson fuel
terminal, which now sells fuel to any
industry participants — distributors,
commercial customers and competitors
— on a commercial basis.
This has been an effective pilot which
gives us confidence for how we might
progressively change the operation of
other terminals. In March 2021, after
careful consideration, Z confirmed
it will take its tanks out of industry
arrangements at the Port of Tauranga
and operate them independently on
a commercial basis.
As New Zealand moves to a fuel
import-only model, these fuel terminal
assets are more important than ever
to our country and to Z.
As New Zealand moves to a
fuel import-only model, these
fuel terminal assets are more
important than ever to our
country and to Z.
WHAT MATTERS
He tirohanga matua ki
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A snapshot of
our supply chain
While New Zealand’s transport fuel
supply chain looks set to change
significantly over the next two years,
this is how our supply chain operated
over a Covid-19-disrupted FY21.
Fuel volumes from the previous year —
FY20 — are provided to demonstrate
the impact of Covid-19 on Z over FY21.
9.5million
barrels
Imported 9.5 million barrels of crude oil into
Refining NZ, producing 1,566 million litres
of finished petrol, diesel, aviation fuel and
marine fuel oil
FY21
1,694 million
litres
Provided 1,694 million litres of fuel to
Commercial customers
FY21
10million
barrels
Imported 10 million barrels of refined oil,
including bitumen
FY21
191.3 million
litres
Directly owns and operates 10 bulk fuel
storage terminals with total storage of
191.3 million litres representing just over
40% of New Zealand tankage
FY21
1,392 million
litres
Provided 1,392 million litres of fuel to
Retail customers via 197 Z-branded and
133 Caltex-branded service stations
FY21
Northland
Awanui
Taipā
Waipapa
Kaitaia
5
1
1
Kaikohe
15
15
Kerikeri
Paihia
Kawakawa
1
1
5
Whangarei
Dargaville
Marsden Point
Ruawai
Maungatūroto
Kaiwaka
Wellsford
Helensville
Warkworth
Whangaparāoa
Waiheke Island
Auckland
Waikato
Whitianga
Kopu
Bay of Plenty
Whangamata
Waihi
2
2
Katikati
Morrinsville
Waharoa
Matamata
3
Tauranga
Papamoa
Te Puke
1
1
Tīrau
Edgecumbe
Putaruru
Whakatāne
Awakeri
Ōpōtiki
70
Pukekohe
Waiuku
Clevedon
Bombay
6
Maramarua
Ngatea
1
1
Paeroa
Pokeno
Huntly
Te Aroha
Taupiri
Ngāruawāhia
Hamilton
16
Cambridge
Ōtorohanga
3
3
Taranaki
Waitara
New Plymouth
7
Pungarehu
Rāhotu
Opunake
Kapuni
Inglewood
Stratford
Kaponga
Eltham
Hāwera
Waverley
Tokoroa
Rotorua
Te Kuiti
Kinleith
Piopio
Galatea
Kāingaroa
Murupara
Reporoa
Taupō
7
Tūrangi
Raetihi
Waiouru
3
Hastings
11
Havelock North
Whanganui
Manawatū
& Whanganui
Sanson
Hunterville
Marton
Waipukurau
Matamau
Dannevirke
Feilding
13
Palmerston
North
Woodville
Pahiatua
Shannon
Levin
Ōtaki
Paraparaumu
4
Masterton
Pāuatahanui
Porirua
23
Wellington
Carterton
Greytown
Featherston
3
Gisborne
Wairoa
3
Gisborne
& Hawke’s Bay
94
94
Te Anau
Mossburn
6
6
Wānaka
Cromwell
Queenstown
Clyde
4
Alexandra
Riversdale
6
6
Gore
Winton
98
98
Mataura
Wyndham
Invercargill
5
Bluff
Wellington
Southland
Key
Biodiesel plant
Depot
Imported crude
Pipeline
Refinery
1
Service Station
Terminal — Z owned
Terminal — jointly owned
Truck Stop
Marlborough
Nelson &
Tasman
Takaka
60
60
Motueka
Wakefield
Rai Valley
Nelson
7
Richmond
6
6
5
Linkwater
Picton
1
1
Blenheim
6
6
63
63
Westport
Murchison
West Coast
6
6
7
7
1
1
Kaikōura
Greymouth
4
Hokitika
Hanmer Springs
7
7
Culverden
Cheviot
1
1
Arthur's Pass
73
73
Springfield
Amberley
Oxford
Rangiora
Waikuku
Kirwee
Darfield
Burnham
Leeston
1
1
Kaiapoi
27
Lincoln
Christchurch
Tai Tapu
Little River
Southbridge
Ashburton
Methven
Mayfield
Geraldine
Winchester
10
Temuka
Timaru
Canterbury
6
6
Tekapo
8
8
Fairlie
8
8
Cave
Pleasant
Point
83
83
Kurow
1
1
Waimate
82
82
85
85
Ranfurly
Ōamaru
Alma
4
1
1
8
8
Palmerston
Outram
7
Mosgiel
Dunedin
Milton
Otago
8
8
8
8
1
1
270 million
litres
Provided 270 million litres of aviation fuel
FY21
120 million
litres
Provided 120 million litres of bitumen
FY21
151
Sold fuel through a network of 151 truck stops
across New Zealand
FY21
116 million
litres
Sold 116 million litres of fuel directly from our
bulk fuel terminals
FY21
2.7 million
litres
Imported and sold 2,712,840 litres of biofuels
FY21
WHAT MATTERS
Tapatahi ana te tukutuku
ki ngā kiritaki
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Consistent delivery for
Commercial customers
The sector that has most driven this
growth and supported the early stages
of New Zealand’s economic recovery
is primary production — agriculture,
horticulture and forestry. Z expects
further growth opportunities for the
Commercial business as many of the
infrastructure projects funded as a part
of the Covid-19 stimulus package —
for example roading and construction
projects — kick off in 2021.
Z has been disciplined in its approach to
its Commercial customer portfolio over the
last year as it has had to apportion its fixed
cost base over reduced fuel volumes at
times. Z has put effort into communicating
frequently and transparently with its
customers over this period and in ensuring
all of its customers were clear on how to
access Covid-19 financial support and
government assistance if it was required.
While many businesses have been
impacted by Covid-19, Z also observes
an underlying resilience across our
Commercial customers — through sales
and payment terms, for example —
as we work together on New Zealand’s
economic recovery.
FY21 was a year in which Z clearly
demonstrated the unrivalled value
of its Commercial customer offer
— particularly the convenience of
its national truck stop network, the
efficiency of its supply assets and
logistics and the convenience of a
single fuel card system for use across
all Caltex and Z-branded retail sites
and truck stops.
The Commercial team has grown volume
and delivered clear customer value —
all within a context of rising levels of
competition. We have started to drive more
value from the scale of our network and
have continued to optimise Commercial
operations, including exiting the marine
fuel barge operation and the domestic
production of bitumen at Refining NZ,
and now importing finished bitumen.
There is more progress to be made on
delivering a fully optimised Commercial
business over the next two years.
As the New Zealand fuel industry
goes through a period of significant
change, we see further opportunities
to add value for our customers,
including through direct terminal gate
supply at more locations for some
Commercial customers.
Commercial customers and
climate change
Z has never stopped seeking ways to
support our Commercial customers in
reducing their own carbon emissions.
While electrification promises the ability
to begin to decarbonise New Zealand’s
light passenger vehicle fleet, for many
large Commercial customers with trucks
and heavy machinery to run, the options
are limited.
Over the last year Z has provided lower
emissions biodiesel to core Commercial
customers in the Auckland region that
want to cut their emissions. Through our
Highbrook truck stop we have supplied
imported biodiesel as well as biodiesel
that we had manufactured through our
Z has focused tightly on consistent
delivery for its Commercial customers
over the last year. Security of fuel
supply was vital to the ongoing
operation of the economy over FY21
and, in the first half of the year in
particular, Z worked tirelessly to
ensure the national fuel supply chain
was uninterrupted by Covid-19.
Z’s Commercial customer portfolio
and the truck stop infrastructure assets
that support large sectors of it is a
core part of our business. Over the last
year Commercial fuel volumes were
seriously disrupted through the Covid-19
lockdowns and steps through various
alert levels, with overall Commercial
volume down 70 percent during the
height of the national lockdown.
Over this period, Z’s Commercial team
has focused on delivering the basics:
retaining Commercial businesses,
growing some accounts and providing
security of supply during a highly
uncertain period.
As the New Zealand economy recovered
from the impacts of Covid-19 faster
than many expected in the second half
of the 2020 calendar year, Z has been
well-positioned to fuel this growth.
Our place in
New Zealand
Our environment
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We are committed to
continuing to champion and
celebrate small businesses
and to keep them moving.
Since 2019, we’ve seen more and more
Kiwi businesses sign up to Z Business
Plus, with more SME customers with
Z than before Covid-19.
We also made hundreds of phone
calls to check on our small business
customers’ wellbeing and discuss how
we could further support them.
We are committed to continuing
to champion and celebrate small
businesses and to keep them moving.
We’re continuing to listen to our SME
customers and understand their needs,
and to evolve our offering to better
suit them — across both digital and
physical experiences.
In 2020, small businesses were hit hard
by Covid-19 — what mattered to them
and their worlds changed very quickly.
To help, we put together a package
to support small business customers
including increasing discounts, extending
credit terms and removing account fees
through lockdown. We also launched our
online Z Business Hub to provide access
to tools, resources and support materials
and ran a webinar for customers on
how to look after themselves and their
businesses during a crisis.
Te Kora Hou biodiesel plant before Z was
forced to place it in hibernation due to
challenging economics (see page 22).
With the Government’s announcement
in January 2021 that, subject to
consultation, it intends to introduce
a biofuel mandate for all fuel sellers
in New Zealand, Z will likely face
new choices around the future of its
Te Kora Hou biodiesel plant and how
to begin supplying a range of biofuels
at scale for both our Commercial and
Retail customers.
Focusing on small and
medium-sized business
Small business is the heart of the
New Zealand economy and they are
leading New Zealand’s post-Covid-19
economic recovery, with small business
jobs in December 6.4 percent higher
than prior to the March 2020 lockdown,
according to data from our business
partner, Xero.
Supporting our small and medium
enterprises (SMEs) is an area of focus
for Z. Our research has determined that
SMEs primarily value ease and efficiency
in running their businesses. In 2019, we
launched Z Business Plus, our fuel card
product designed with the needs of Kiwi
small businesses in mind. Combined with
the depth of our Retail and Commercial
network, we have a compelling offer that
makes life as simple as possible for busy
small businesses.
Prime Minister Jacinda Ardern
and Z’s Biodiesel Plant Operations
Manager Wayne Reid at Z’s
Te Kora Hou biodiesel plant,
January 2021.
(Phil Walter via Getty Images)
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WHAT MATTERS
He rangahau:
Te Kora Hou o Z
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Case study:
Z’s Te Kora Hou biodiesel plant
Being at the leading edge of
sustainability initiatives can be hard.
No truer has this been than with Z’s
commitment to biodiesel production
in New Zealand.
Z has actively developed the country’s
only commercial-scale biodiesel
production plant, which can produce
20 million litres of pure, high-quality
biodiesel per annum. Blended at
5 percent into conventional mineral
diesel, this volume can see 400 million
litres of diesel converted into a
‘B5’ biodiesel blend.
Using a B5 blend will enable diesel
motorists to cut their emissions by
4 percent, saving 37,000 tonnes of
CO2e per year.
Te Kora Hou — meaning ‘the spark’ —
was developed, planned and then built
at a cost of $50 million between 2010
and 2018. It can use inedible waste tallow
to produce a high-quality biodiesel
that exceeds all of New Zealand’s
fuel specifications.
It was the first plant of its kind built
anywhere in the world without any
form of government support — either
a subsidy or a mandate requiring fuel
sellers to sell a biodiesel blend. The plant
was widely welcomed by our large
trucking customers who wanted to
reduce their emissions and use a more
climate-friendly fuel.
Then, relatively quickly, the price of
tallow increased by nearly 50 percent —
driven by demand from countries with
existing biofuel subsidies — and the
price of crude oil halved. All of sudden,
the economics of this plant did not work
without government policy to support
it. In 2020, we took the hard decision
as part of our commitment to discipline
in cost management to put the plant
into hibernation, regrettably leading to
12 redundancies at the plant.
Despite this setback, we continued
to advocate for government policy
that would enable all motorists to
use biofuels and cut their emissions.
What the New Zealand Climate Change
Commission’s draft carbon budget on
31 January 2021 found is that we need
to use all the tools available to us in
order to cut emissions from across the
economy, and that biofuels have an
important role to play.
In January 2021, at our Te Kora Hou
plant, the Government announced its
intention to introduce a biofuels mandate
for New Zealand. This is sensible and
much-needed policy that is common
in other parts of the world and the
detail around introducing a biofuels
mandate is, at the time of publication,
currently being consulted on. While the
detail is yet to be worked out, and final
commitments made, Z’s view is it will
likely involve all fuel sellers having to sell
biofuel blends and will likely involve all
major fuel suppliers having to source and
import biofuel products until domestic
options are available. This will ensure a
fair competitive market and will possibly
involve Z selling biodiesel from its
Te Kora Hou plant to competitors.
It is likely Z will have to import biofuels
to meet a mandate across all fuel
types. Again, Z has the national fuel
supply network at sufficient scale to
achieve this.
Over 2021 we are likely to be significantly
increasing the volume of biofuels that
New Zealand will need to materially cut
emissions and combat climate change.
Our assets
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
WHAT MATTERS
Kia tere ake, kia koi ake
mō te kiritaki
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A quicker,
competitive
retail experience
Z’s Retail network is the most visible
core of our business; it is also the
part of our business that most people
experience regularly. Our Retail
operations across both the Caltex
and Z-branded networks are at the
heart of most Kiwi communities.
Over FY21 we took some decisions
around the Z Retail offer and which sites
best fit within each brand. For example,
we transferred three Caltex-branded
sites to the Z brand and offer. This is
part of optimising our Retail network
and having the right customer offers
in the right place. We also stopped
the Z forecourt concierge offer due to
shifting customer preferences and an
opportunity to reduce onsite costs.
We will continue to focus on
opportunities for shifting offers
between the two brands over the
coming 12 months, as well as continuing
to develop and implement loyalty
offers that are increasingly tailored
to customers’ specific needs.
Covid-19 and keeping our
communities safe
Z’s role in communities across
New Zealand was critically important
in managing the response to Covid-19
over FY21 — particularly during the
national lockdown and the subsequent
Auckland lockdowns.
Z’s grocery and convenience store
products played a vital role in providing
Kiwi with the goods they needed during
lockdown — milk, bread and, yes, toilet
paper — in a simple, easy and safe way.
With a greater focus on shopping local,
sales of convenience store staple goods
are up 3.5 percent year-on-year.
We were able to rapidly deploy the
Covid-19 safety infrastructure needed
across all of our sites — Perspex screens,
signage, staff PPE — and to manage
customers in a socially distanced way.
Z has contactless payments available
across all of its retail sites, providing a
safe shopping experience for essential
goods and services. We are hugely proud
of our Retailers and their teams who were
immediately designated as essential
workers. During a highly uncertain time,
our people served their fellow Kiwi with
courage and compassion.
With what mattered to our communities
switching very quickly to safety and the
basics, over the year there was a switch
away from healthier, fresh food sales to
more traditional ‘comfort’ foods, like pies.
Z’s plans for the continued development
of its fresh, healthy food range, alongside
its existing and much-valued current
offer, were disrupted by Covid-19 but will
resume again over the next 12 months.
Delivering safety and speed
with digital
While safety and security mattered more
than ever for Kiwi across the country last
year, very quickly the focus also swung
back to speed and convenience.
One of the areas of focus for the retail and
technology teams in Z has been to listen to
our customers’ feedback and then deliver
solutions quickly. One way of combining
both safety and speed in a new offer lay
in harnessing the digital capabilities that
Z has invested in over previous years.
And so ‘Pay in App’ was born.
Using the Z App across our 197 Z-branded
retail service station sites, customers can
now, once they have registered, simply
drive into a service station and:
• Use ‘Pay in App’ by selecting the Pump
and confirming their already registered
car and fuel grade profile, then confirm
or select the payment method and fill
amount, and fill up and go. This puts
the control back into our customers’
hands. And additionally;
• Use ‘Pay by Plate’ at 63 of these
service stations, by simply driving
in and being greeted on the digital
screen on the pump; then fill up and
leave with payment already taken care
of. Our digital camera technology on
site recognises the car’s number plate,
and simply charges the customer’s
preferred payment method once they
have filled up.
Pay in App is the ultimate in ease, speed,
and convenience, and over the last
quarter of the year we have been actively
promoting it to customers.
Since launching in November 2020,
Pay in App experienced customer
sign-up growth of more than 40 percent
in the first two months, and the active
customer base has already doubled.
The Z Pay in App was born from
combining the best of our Caltex
pay-in-app experience launched in
April 2020 and our previous Fastlane
trial; demonstrating Z’s commitment to
experimenting, building, and evolving
innovative offers that meet customers’
needs in a highly functional and
delightful way.
Doing away with the queue
Over 2020, following the national
lockdown and periods of social
distancing due to Covid-19, we’ve noticed
a greater reluctance from Kiwi to queue.
Again, by listening to what our customers
were telling us, through Covid-19 we’ve
been able to effectively promote our
app-based coffee offer.
Through the Z App customers can
pre-order coffee, and a range of other hot
and chilled beverages, while approaching
a retail site, prepay for it through the app
and simply collect and go.
This is proving an increasingly popular
offer with sales via the app increasing
rapidly over FY21 to more than 15 percent
of Z drink sales, and revenue more than
doubling on a monthly basis over the last
12 months.
The Sharetank advantage
Z continues to evolve its Sharetank
offer to deliver ever more customer
benefit. Over FY22, Z will also begin to
promote and market the advantages of
New Zealand’s only virtual fuel tank.
Sharetank is a highly innovative digital
offer that enables fuel sharing while
ensuring a very competitive price.
It allows customers to pre-purchase
litres of fuel to redeem at a later date
and share their balance with up to five
friends, whānau or colleagues, all within
the Z App.
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Our
capabilities
Our place in
New Zealand
Across 63 Z-branded retail service sites,
customers can now simply drive in, fill up,
and leave with payment already taken care
of in the Z App.
Customers can purchase up to
12,000 litres of fuel in a rolling 12-month
period, buying at the lowest Z-offered
price in a 30km range of their location
and storing them in their virtual tank in
the Z App. These litres can be exchanged
for real fuel when the customer needs
it at any one of 197 participating Z sites
across the country, and we’ll let them
know if the price at that site is lower so
they can choose whether to save their
Sharetank litres for another day.
When a customer or anyone in their
group is ready to fill up with fuel for real,
they just fill their tank and pay using their
Sharetank balance. All it takes is a simple
scan of the Z App at a participating
Z station.
In a new development, Z launched
a retail electricity customer pilot
offer — Z Electric, see page 27 — that
rewards customers with free fuel litres
via Sharetank. This is an example of
effectively integrating multiple customer
offers with digital technology. We believe
Z is the only fuel retailer in the world
that allows customers to earn ongoing
fuel rewards (via Z Electric) that are
automatically deposited into a customer’s
virtual fuel tank (Sharetank) and can
then be effortlessly redeemed via our
no-touch payment method (Pay in App).
Customers can even choose to offset
their purchases and rewards through
permanent New Zealand forests.
Offsetting our carbon emissions
at retail sites
Our customers tell us they are concerned
about climate change but don’t know
what they can do at an individual level
to help.
So in February 2020 Z launched Carbon
Count on the Z App — a digital service
that automatically calculates the carbon
footprint of the fuel you buy, giving you
the choice to offset part or all of those
emissions through Permanent Forests
NZ Limited.
This is a unique offer in the market
that provides retail customers with the
opportunity to act to combat climate
change every time they fill up. This further
demonstrates the opportunities for
distinctive customer engagement through
our investment in digital capability.
With the Climate Change Commission’s
publication of its initial draft carbon
budget in January 2021, focus looks set
to increase sharply on what we can all
contribute to meet New Zealand’s climate
change commitments. Z will increasingly
market this offer to customers in FY22.
Our new digital capabilities
All of these offers represent the evolution
of our focus on customer experience
(CX) and digital capabilities.
We have now baked our CX and digital
capabilities into our business and have
been able to end our reliance on digital
and CX contract resources as part of our
commitment to cost reductions.
Z now has a unique digital and CX
capability across the company that lies
at the heart of our customer strategy.
We will continue to use these capabilities
to delight our customers with new
products, offers and services over
the next 12 months.
01
02
03
Tā tātou
whakataunga
tūtanga
What we
choose to
stand for
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Our aspirations in these Stands
can have the greatest impact on
the following 10 UN Sustainable
Development Goals:
Z has always elected to publicly
stand for the things we believe are
most important to our customers,
communities, investors and people.
We call these things our ‘Stands’ and
they are the areas in which we seek
to make a distinctive contribution.
With the challenges posed by climate
change and Covid-19, and with global
concern continuing to mount over issues
of racial and gender equality in particular,
these four Stands have never been more
relevant, important and urgent across
our stakeholder universe than in FY21.
Z’s assessment of materiality that
underpins this report confirms that
what we are choosing to stand for are
the things that genuinely matter most.
Environmental sustainability
Z will move from being a part of the
climate change problem to the heart
of the solution
Community
A resilient and healthy Aotearoa
New Zealand that empowers our youth,
neighbourhoods and Z whānau
Diversity and inclusion
Being successful being ourselves and
reflecting Aotearoa New Zealand
Safety and wellbeing
Enhancing the lives of our people
and communities.
This report has already canvassed a
range of developments and initiatives
underway in our business to advance
these four Stands. The following section
of this report covers some of our
more detailed and specific reporting
against them.
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Te tiaki taiao
Environmental
sustainability
Z stands for an environmentally
sustainable New Zealand that is an
example to the rest of the world and
an inspiration to Kiwi. We will move
from being a part of the climate change
problem to the heart of the solution.
The fuels we sell and which our
customers use produce approximately
10 percent of New Zealand’s greenhouse
gas emissions. As a company we have
always been committed to helping lead
New Zealand towards a low emissions
future and have experimented in
adjacent technologies.
We were the first fuel company to
introduce an EV charger at a retail
service station, we have built a
biodiesel production plant, invested
in a ride-sharing service, offset all of
our operational emissions and have
introduced multiple sustainability
initiatives covering waste and energy
consumption. We have led discussion
on important issues, contributing to
industry research on biofuels, hydrogen
and electric mobility as reflected in
our submission to the Climate Change
Commission’s Draft Recommendations;
https://z.co.nz/assets/Uploads/Z-Energy-
submission-to-the-Climate-Change-
Commission-March-2021-FINAL.pdf
Cutting emissions gets hard once the
relatively simple emissions reductions
opportunities have been completed
and, despite what people say, not
many want to pay any more for cleaner
energy alternatives.
However, we have not executed some of
our early initiatives as well as we would
have liked and we must and will do better.
We remain committed to Z moving to the
heart of the climate change solution.
Over FY21 the issue of climate change
became increasingly important for our
investors, Government, customers and
our own people. Our strategy remains
focused on optimising our core business
and transitioning to a low carbon future.
How we are tracking
on our targets
Further to Z’s sustainability policy, in
FY17 Z set a range of sustainability
stretch targets and areas of focus for our
business. FY21 marked the end of the
target period, so the table on the next
page maps how we have progressed
against our commitments.
We have made very good progress in
most areas, though significantly reducing
operational carbon emissions has been
particularly challenging and, while we
have made material reductions, we have
not delivered against the target we set
for ourselves.
This is an area in which many
businesses across New Zealand are
currently struggling. While complex,
Z is committed to reducing its own
operational emissions in line with the
Paris Agreement to limit warming to
1.5 degrees Celsius above pre-industrial
levels. For Z, this translates to a revised
target of 42 percent reduction in
operational emissions over FY20–FY30.
Supporting this commitment will be
new climate-related metrics and targets
focused on reducing the carbon impact
of the energy products Z sells. This will
be determined in FY22.
Our environment
Introducing Z Electric
The biggest advantage that New Zealand
has in combating climate change is
that approximately 85 percent of its
electricity comes from renewable
sources. As a result, approximately
4 percent of New Zealand’s total
emissions comes from electricity
compared to approximately 19 percent
from transport.
As New Zealand seeks to maximise the
use of renewable electricity across our
economy, Z is also committed to using
its digital and customer experience
capabilities, and its large customer
base, to trial opportunities to enter the
electricity market.
In 2018, Z purchased a 70 percent share
in the wholesale spot market electricity
retailer Flick Electric. Flick is a modern,
progressive, tech-savvy electricity
company and Z’s shareholding has
taught us a lot about the opportunities
of widespread electrification and the
challenges also facing this market.
In March 2021, Z announced the creation
of Z Electric. Using the Flick systems
and processes, Z now has a distinctive,
fully Z-branded electricity offer in
the market. We will offer competitive
electricity prices and provide our current
customers with new digitally enabled
offers that bundle together their fuel
and electricity requirements.
One of the products developed at the
launch of Z Electric is the opportunity to
reward customers with bonus fuel litres
for their electricity spend through the
use of Sharetank in the Z App, which can
then be offset easily using Z’s Carbon
Count feature also in the Z App.
Diversifying into a branded electricity
offer will enable Z to understand the
customer loyalty benefits and value
arising from moving into cleaner, more
sustainable energy markets — all at very
little operational cost.
WHAT WE STAND FOR
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How we are tracking on our targets
We must act in order to make good on what we stand for. Our sustainability goals and targets were developed using the UN Sustainable
Development Goals as a framework.
Three outcomes were set to lead us on a pathway to contribute authentically to the welfare of New Zealand’s natural environment and
its people by the end of FY21. In addition, recognising our size and scale in New Zealand, our goals and targets cover Z’s operations as
well as those of our key suppliers. The table below outlines our progress against these goals, with targets to be reset during FY22.
Outcome
Progress
Use less and waste less in our operations
Status
Reduce carbon emissions
We have reduced our carbon emissions by 18 percent since FY17 against a target of 30 percent
by FY21. Each year we voluntarily offset the emissions we cannot avoid in permanent New Zealand
forests (see local permanent forests below).
Reduce waste
Our commitment is to reduce waste to landfill year-on-year from our operations (offices, terminals and Z
retail sites) continuing to move towards being zero-waste. Waste to landfill is 19 percent below last year.
We aim to use water as efficiently as possible, and this year have started the installation of
permanent water tanks to supply car washes in the water-constrained Auckland region, estimated
to save 12 million litres of water a year once completed. Over 32.5 million litres of water were
recycled through existing Z car wash infrastructure this year.
Reduce retail electricity
We are currently 2 percent below our 2012 baseline, and have reduced retail electricity 5 percent
year-on-year since FY18, with a focus on efficiency.
Make purchasing decisions that support sustainability
Supply chain
Z’s Supplier Code of Conduct is embedded in all of Z’s Standard Supplier Agreements outlining
minimum standards and expectations on ethical, social and environmental business practices.
It was updated in July 2020 to reflect regulatory changes, for example, the Zero Carbon
Amendment Act, Australian Modern Slavery Act and Z’s refreshed Safety & Wellbeing Stand.
All suppliers must confirm compliance with the Code on an annual basis.
Customers reduce fossil fuel use While the biodiesel plant was hibernated in FY21, Z continued to offer support to commercial
customers who are committed to reducing their carbon emissions and impact on air pollution.
Z biodiesel, a B5 blend, is now also available at the Z Highbrook truck stop in Auckland to all
Z Business cardholders.
Lower carbon products
and services
Our investment in climate positive car-sharing company Mevo continues. Our staff use Mevo for
business trips in Wellington, with 1 tonne CO2-e offset from Z business trips.
There was a 65 percent reduction in business travel over FY21, largely due to Covid-19.
The launch of Z Electric represents the next step in Z’s low carbon business transition.
Enable others to reduce their impact
Customers experience emerging
transport technologies
Z’s EV chargers continue to grow in popularity with 14,132 charges in the past year, saving over
138 tonnes of CO2-e.
Carbon offsets
Carbon Count was launched in February 2020, allowing any driver in New Zealand to view and
choose to offset their emissions from their fuel use through the Z App.
Partnerships for a low
emission economy
Local permanent forests
Policy and leadership
We’ve been proud to partner with Trees That Count since 2017, funding 56,698 new native trees
and supporting 64 planting communities leading to better biodiversity, cleaner waterways and
better physical and mental health for our New Zealand communities.
Z has partnered with Permanent Forests NZ Limited to ensure that all voluntary offsets are locked in
long-lived forest carbon sinks in New Zealand that both address the climate crisis and restore local
landscapes. A total of 160,465 tonnes CO2-e has been offset in permanent forests since FY17.
We continue to advocate and lead for the development of policy that moves New Zealand to a
low-emissions economy and recently advocated for more ambitious targets on biofuels in response
to the Climate Change Commission Draft Recommendations. Through our membership with the
Climate Leaders Coalition, Sustainable Business Council and Sustainable Business Network, we take a
leadership position to inspire and enable Kiwi to take action and reduce their environmental impact.
Key
We’re on track and doing well
We’ve made some good progress but we need to do more
We’re off track and need to do more
Note: Full details can be found at https://z.co.nz/about-z/what-matters/sustainability
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Z is committed to reducing its
own operational emissions in line
with the Paris Agreement to limit
warming to 1.5 degrees Celsius
above pre-industrial levels.
WHAT WE STAND FOR
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Greenhouse gas emissions — tonnes CO2-e
Site waste data
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Scope
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
Total operational emissions2,3
% change from FY17
Scope 3 — Share of refinery
Base Year
(FY17)
3,907
4,045
3,339
34,247
45,250
–
FY18
3,853
4,223
3,875
31,041
42,992
-6%
FY19
3,837
4,195
4,495
29,303
40,704
-10%
FY201
4,127
3,371
3,369
29,785
39,605
-12%
634,848
618,483
555,892
520,708
Scope 3 — International supply chain (rest of supply)
807,542
983,939
902,215
1,031,309
FY21
3,398
3,191
2,434
29,017
37,149
-18%
475,255
852,236
Scope 3 — Z product emissions from our customers
9,488,277
10,330,585
10,459,104
9,990,103
8,039,840
Total emissions
10,976,205
11,975,999
11,958,268
11,582,773
9,405,371
1 There has been a restatement to ‘FY20 Scope 3 — Z product emissions from our customers’ and, therefore also ‘FY20 Total emissions’ due to MfE 2019-corrected
emissions factors for aviation fuel and aviation gasoline.
2 Total operational emissions excludes emissions from line losses and upstream electricity, which are included in the sum totals above for Scope 3 — Z offices and Retail
sites and New Zealand Supply Chain. In FY21, emissions from air travel were amended to include radiative forcing from the reporting year FY20, therefore there is a minor
restatement to FY20 operational emissions.
3 Total operational emissions intensity has decreased by 3 percent from FY17 per litre of fuel sold. Emissions are reported in tonnes of carbon dioxide equivalent
(tonnes CO2-e), which, in line with the GHG Protocol Corporate Standard, includes the three main greenhouse gases: carbon dioxide, methane and nitrous oxide.
MfE Emissions Factors are used in all cases where available for data sets.
A full greenhouse gas inventory is available to view at https://z.co.nz/about-z/what-matters/sustainability/
KPMG have provided an unmodified reasonable assurance opinion as to whether Z’s Greenhouse Gas statement has, in all material
respects, been prepared in accordance with the Greenhouse Gas Protocol’s Corporate Standard requirements for the period
1 April 2020–31 March 2021.
By far the biggest area of waste generation in our business is through our retail operations. However, we also aim to reduce waste
across our corporate sites, including offices and terminals. Here is how our site waste tracked over FY21 (acknowledging significant
disruption due to Covid-19 lockdowns).
Waste by composition, in metric tons (t)
Waste composition
Retail sites
Corporate sites
Total waste
Total waste
generated
Waste diverted
from disposal
Waste directed
to disposal
4,286t
84t
4,370t
2,782t
26t
2,809t
Waste diverted from disposal by recovery operation, in metric tons (t)
Retail sites
Corporate sites
1,642t
371t
769t
13t
4t
9t
Non-hazardous waste
Recycled cardboard & paper
Recycled composting & organics
Recycled plastic, cans & glass
Total waste diverted, in metric tons (t)
Hazardous waste1, in metric tons (t)
Landfill
Total hazardous waste
1 Hazardous waste comprises mainly soil and spill from site remediation works such as fuel tank replacements. The material is safely disposed of in licensed waste facilities.
All waste is disposed of via landfill or recycled offsite. There are no waste incineration facilities used.
Waste data is based on a combination of actual and estimated weights reported by our waste management providers. Where no data
was provided for a site an uplift has been applied.
1,504t
57t
1,561t
Total
1,656t
375t
778t
2,809t
Total
2,468t
2,468t
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WHAT WE STAND FOR
Pūrongo TCFD tau tuarua
TCFD Report year two
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Climate change presents many risks to businesses
around the world, including financial risks related
to future earnings and the value of assets. It is a
material issue for Z.
The products that Z sells represent
approximately 10 percent of
New Zealand’s emissions and Z has
been in existence during a decade in
which New Zealand’s emissions from
the transport sector have increased.
In line with our integrated reporting
approach, last year Z adopted the TCFD
Framework to begin to further assess
the business’s climate-related risks and
opportunities. Climate-related financial
risks require an integrated business
approach to mitigate and manage now
and into the future.
A four-year roadmap (see page 33) set
Z on a path towards fully understanding
and disclosing our climate-related
risks and opportunities to provide
transparency of the most material
climate-related financial impacts.
This approach aligns Z with the
Government’s recommendation to
introduce mandatory climate-related
financial disclosures by 2023. It also
enables Z to incorporate the Climate
Change Commission’s carbon budget
advice to set New Zealand on a path
to net-zero by 2050.
Z’s focus in FY21 was to assess and
understand the business’s material
climate change risks and opportunities
so that guidance can be provided on
how to control for, mitigate or adapt
to these risks.
A series of cross-functional internal
workshops and analysis supported by
external advisors informed this work.
The outcome is a better understanding
of Z’s physical and transitional risks and
opportunities based on two different
climate scenarios. The workshops
considered the risks and opportunities
in the short term (2020–2025), medium
term (2025–2040) and long term
(2040–2060).
Our four-year TCFD roadmap
FY20
FY21
FY22
FY23
Governance
• Gap analysis completed
• Internal alignment
achieved
• Board approval
Strategy
• BEC Scenarios used to
• Scenarios expanded
• Climate scenario
inform strategy
Risk
Management
• Approach to climate
risk management
documented
to include a 2 degrees
Celsius and one other
comparison scenario
analyses integrated into
financial modelling and
informs strategy
• Qualitative risk
assessments identified
physical and transitional
climate-related risks
• Climate risks integrated
into risk management
processes
• Climate-related risks
and management
process reviewed for
effectiveness
• Quality assurance of
climate risk management
and financial disclosures
• Climate-related risks
and opportunities
quantified, and financial
impacts identified
Metrics and
Targets
• Carbon targets
integrated into business
planning
• Climate-metrics and
targets under review
and agreed
Key
Note: TCFD Index can be found on pages 127–128.
Complete
In progress
Planned
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WHAT WE STAND FOR
TCFD Report year two,
continued
Climate scenarios
Last year, Z started to use the Business
Energy Council (BEC) 2060 scenarios
(Kea and Tūī) for long-term planning.
These scenarios, combined with the
latest climate projections provided by
the Intergovernmental Panel on Climate
Change (IPCC) and local New Zealand
data, were used to assess Z’s
climate-related risks and opportunities
in line with different temperature
scenarios, including a below 2 degrees
Celsius scenario.
In the ‘Rapid Transition’ scenario, climate
change is recognised by society as the
most important priority and New Zealand
transforms itself rapidly into a
low-emissions economy to meet net-zero
targets. In the ‘Slow Transition’ scenario,
climate change is recognised as one of
many competing social and environmental
priorities and emissions peak by 2040
before beginning to decline.
BEC scenarios
On 31 January 2021, the Climate Change
Commission (CCC) released their Draft
Advice to put New Zealand on the path
to meeting its 2050 targets under the
Climate Change Response (Zero Carbon)
Act. The CCC’s advice calls for a rapid
decline in emissions from transport,
with a fall of 47 percent from 2018 to
2035. This includes an import ban on
internal combustion engines for light
vehicles in the early 2030s, continued tax
increases on fossil fuels combined with
encouragement for active transport and
mode shift. This would result in very steep
declines in fossil fuel demand post 2030.
Z has since mapped the CCC ‘Our path’
forecasts (the grey line in the graph to the
right) to the two BEC scenarios (Tūī and
Kea) that Z has been using for long-term
planning. Given the CCC’s advice is still
in draft stage, it is more indicative than
exact, but clearly shows that the CCC’s
forecasts are consistent with the Kea
scenario, and therefore within Z’s previous
long-term demand forecasts.
Rapid transition
New Zealand aggressively transforms
itself into a low-emissions economy to
meet net-zero targets. There has been
a global transition to a low-emissions
economy and the Paris Agreement has
been implemented.
Global warming is well below 2 degrees
Celsius over the next century.
Reference scenarios include:
• BEC2060 Kea scenario
• IPCC RCP 2.6
• MfE Climate Change projections
for New Zealand, 2nd edition and
supporting regional documentation
from NIWA
Slow transition
Climate change is recognised as one of
many priorities. New Zealand leverages
its traditional comparative economic
advantages to generate wealth and does
not transform its economy. Emissions
peak by 2040 and then begin to decline as
the world begins to appreciate the impacts
of climate change. Global economies have
failed to curb emissions over the medium
term, resulting in warming of 3 degrees
Celsius or more by 2100.
Reference scenarios include:
• BEC2060 Tūī scenario
• IPCC RCP 4.5
• MfE Climate Change projections for
New Zealand, 2nd edition and
supporting regional documentation
from NIWA
Z has commissioned further modelling to
undertake sensitivity analysis and test
the scenarios. Following this, Z will then
complete the quantification of its own
House View, with the expectation it will
not materially differ from the CCC pathway.
Like all scenario planning, these
scenarios are not predictions of the
future. Nor are they created as desirable
Transport fuel emissions Kt CO2-e
or undesirable outcomes. The scenarios
simply allow the testing of Z’s plans and
current positions. The likelihood is that
the future may sit somewhere between
the two scenarios, but they allow us to
explore what is possible to help influence
how we plan for the future and what we
do now.
Kt CO2-e
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
5
1
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2
Year
0
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2
5
2
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2
0
3
0
2
5
3
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2
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4
0
2
Projected transport fuel emissions (in kilo-tonnes of carbon dioxide equivalent)
under Kea, Tūī and Climate Change Commission ‘Our path’ scenarios.
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2020 qualitative analysis of Z’s
climate-related risks and opportunities
Physical
Risk Cause
Transitional
Temperature
Precipitation
Wind
Climate
Sea level rise
Markets
Policy/Legal
Technology
Reputation
Risk Consequence
• Social
• Workforce safety
and wellbeing
• Corporate
• Increased operating
costs (water and
cooling)
• Increased
environmental
regulation and
compliance costs
• Increased insurance
premiums
• Operations
• Asset damage and
maintenance costs
• Supply disruption
• Increased reliance
on third-party
infrastructure
mitigation
• Potential expansion of biodiesel delivery areas
• Ability to leverage scale to reduce supply disruption
• Partner with third-party asset owners to mitigate shared
infrastructure risks
Opportunity
• Operations
• Reduced
performance
of assets
• Corporate
• Increased cost of
capital
• Increased operational
costs due to higher
carbon price
• Increased litigation,
regulation and
compliance costs
• Re-pricing of asset
values
• Reduced revenue
through diminished
demand for product
• Social
• Reduced employee
wellbeing
• Reduced talent
attraction and
retention
• Inability to provide
products that
meet customer
expectations
• Invest in low carbon
• Leverage Z’s
products and
services
• Reduce exposure
to compliance and
regulation costs
distributed footprint
across NZ
• Optimise strategic
asset planning
• Attract talent
through proactive
approach to a low
carbon transition
• Enhance customer
experience through
low carbon offerings
Business Response
Tūī
CCC
Kea
• Carry out risk assessment findings integrated into business
unit strategic and financial planning
• Perform quantitative analysis of high-risk locations determined
by site value and physical risk exposure
• Develop and agree an engagement plan with third-party
asset owners
• Strengthen balance sheet and pay down debt
• Deliver additional cash flow through exiting crude oil supply
• Develop alternative, low carbon revenue streams
• Reduce operational emissions and exposure to carbon costs whilst
providing options for customers to do the same
• Build capabilities
• Provide transparent ESG Reporting
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WHAT WE STAND FOR
TCFD Report year two,
continued
Physical risks and opportunities
Z’s physical assets, including terminals,
pipelines, truck stops and retail sites,
were assessed against a range of
projected changes to New Zealand’s
climate in the year 2040 (the mid-point in
line with BEC’s 2060 Energy Scenarios).
Both acute (floods, heatwaves) and
chronic (changing rainfall patterns,
rising sea level) physical impacts were
considered. The key climate-related risk
causes to Z’s assets were identified as
changing rainfall patterns, increased
frequency and severity of droughts,
and rising sea levels.
Z’s Enterprise Risk Management
framework was used to assess the
materiality of each risk identified.
Material risks are shown in the
infographic on the preceding page.
Many of the risks identified are not
new and now occur in the short term
(for example, storm events causing
shipping disruptions and increased
demurrage costs). However, the
likelihood of these events occurring
are currently low. Increased likelihood
of occurrence in the medium term
(by 2040) and in the long term (by 2060)
creates a need to integrate the risk
assessment findings into long-term
asset planning.
The next steps for Z are to integrate
these findings with those of the
value-based Natural Hazard Exposure
Review completed in FY21. This review
provided an analysis of Z’s assets’
exposure to climate-related hazards
(wind, storm, lightning, floods, wildfire,
hail, tornado and storm surge)
and non-climate-related hazards
(earthquake and tsunami) using Munich
Re’s Natural Hazard database ‘Nathan’
and Swiss Re CatNet for current climate
conditions. The review was limited in
its usefulness for predicting future
climate risks, however it did identify
flooding events as causing the highest
climate-related risk of damage to
Z’s assets.
The underlying data from the physical
scenario analysis and Natural Hazard
Exposure Review will be used to
determine those high-risk locations by
site value and physical risk exposure
in FY22. This will enable Z’s long-term
asset plans to be updated to account
for climate risk.
Common to all of Z’s supply chain
elements was the increased reliance
on third-party infrastructure being
adequately maintained and mitigated
against projected climate change
impacts. The roading network,
stormwater systems and port wharfs
are the third-party-owned assets most
critical to Z’s operations, and highlight
the need and opportunity to work in
partnership with others to reduce the
burden of long-term climate-related risks.
Transitional risks and
opportunities
Transitional risks are caused by policy,
legal, technology and market changes
occurring in the transition to a low
carbon economy. Depending on the
nature, speed and focus of these
changes, transitional impacts may pose
varying levels of corporate, operational
and social risk or opportunity.
In contrast to the physical risks
identified, the consequences of
transitional risks and opportunities
are much more likely to be seen in the
short to medium term (2020–2040).
Z’s response therefore is to focus on how
we manage the transitional risks in the
short term. This provides an opportunity
to successfully mitigate the transitional
risks now, with a view on mitigation
options to manage physical risks in the
medium to long term (2040–2060).
Many of the transitional risks and
opportunities identified from the
scenario analysis are not new and have
a corresponding business response.
This is reflected both in Z’s actions to
reduce exposure to carbon costs from
its own operations and to develop new,
low carbon revenue streams, such as
Z biodiesel (Z BioD), Mevo and Z Electric.
However, the analysis did highlight
the need to consider time horizons in
prioritising our mitigation response whilst
constantly reviewing the underlying
context, such as the recent draft advice
from the CCC. The draft advice brings
clarity to the policy and market settings
that must result if the transport sector is
to play its large part in decarbonising to
meeting net-zero by 2050. Z will continue
its commitment to transition to a low
carbon future and now has an enabling
environment to deliver within.
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Climate metrics and targets
Z has further committed to adopting
climate-related metrics and targets
grounded in science. This includes the
revised target to reduce its operational
carbon emissions by 42 percent by
2030 in line with efforts to limit global
warming to 1.5 degrees Celsius above
pre-industrial levels. In light of the recent
CCC draft carbon budgets, Z’s review
of climate-related metrics and targets
associated with the fossil fuel products
it sells is being re-modelled with a clear
direction to be provided by 1HFY22.
Climate Strategy
How Z thinks about carbon and climate
change has directly impacted our
strategy, the decisions we make every
day, and the choices we make around
our own activities and customer offers.
The biodiesel plant at Wiri Auckland has
been part of the solution to providing
New Zealanders with an immediate
low carbon transport fuel alternative.
Z regularly engages with government
on the need for meaningful, tangible
transport decarbonisation policies,
particularly in relation to biodiesel.
On 28 January 2021, the Government
announced a suite of transport
decarbonisation policies, including the
introduction of a biofuels mandate.
The package of decarbonisation policies
paves the way for future investments in
low carbon fuel and transport energy,
whether that is in sustainable aviation
fuel, electric mobility or hydrogen.
Z’s feedback on the draft CCC
recommendations is that the right fuel for
the right use case is the correct strategic
approach to ensure broad consensus
and get as many people as possible on
the low carbon journey. To that end,
Z’s submission focused on two areas of
the recommendations for the transport
sector — be more ambitious on biofuels
and further incentivise construction of
electric vehicle charging infrastructure:
https://z.co.nz/assets/Uploads/Z-Energy-
submission-to-the-Climate-Change-
Commission-March-2021-FINAL.pdf
Risk Management
For some time, climate change has been
a risk for Z, identified and managed at an
enterprise level through Z’s Enterprise
Risk Management processes and
frameworks. This approach to climate
risk management is necessarily evolving
as climate change becomes ever more
present and complex and infiltrates
beyond the enterprise to business
unit level. Over the past year, Z has
focused on achieving more granularity
by doing further work to identify, at
a high level, physical and transitional
climate-related risks across various
time horizons and at all levels of the
organisation. This approach has been
informed by Z’s existing Enterprise Risk
Management System (ERMS) as well as
TCFD guidance.
This more detailed risk identification
process has followed the bottom-up
and top-down approach set out
in Z’s ERMS. From a top-down
perspective, key principle and emerging
risks at an enterprise level have
been identified through deliberate,
focused discussions and analysis with
members of Z’s Executive team and
Audit and Risk Committee. From a
bottom-up perspective, both enterprise
and business unit risks have been
identified through workshops involving
members of the Executive team and
key representatives from each area of
Z’s business. This bottom-up work was
specifically focused on climate change
risk and utilised two scenarios (Tūī and
Kea) to prompt the identification of
transitional and physical risks across
several time horizons, including those
on page 35 of this report.
The risk identification process has
determined that climate-related risks
exist at both business unit and enterprise
level; in addition, the process has
illuminated how climate change impacts
existing risks already identified and
being managed. The Risk and Assurance
team is now working with business
units and Executives to guide them in
conducting the next stage of work to
assess and manage new risks or evolve
risk assessments and controls already
in place.
WHAT WE STAND FOR
Ngā rerekētanga me
te whakaurutanga
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Here’s what Z would look like if it was a village of 100 people:
Diversity
and inclusion
Building a diverse and
inclusive Z
We are committed to reflecting the
diversity of New Zealand with an
inclusive culture so that diversity
can be fully expressed and manifest
in tangible benefits. We will lead the
way in developing a Kiwi firm that
has our people being successful,
being ourselves.
Z remains committed to building a
genuinely diverse organisation where
the success of the company is built
upon the diversity of people, thinking,
perspectives and backgrounds.
To achieve this outcome, we must get
the best from all our people. This starts
with every member of the Z team feeling
included and comfortable bringing their
best self to work every day. We seek to
build a company that accurately reflects
the composition and diversity of the
communities we serve.
While we are making good progress,
we are not there yet.
12
European
FY20: 13%
2
Middle Eastern, Latin
American or African
FY20: 2%
60
Male
FY20: 63%
3
Māori
FY20: 5%
64
NZ European
FY20: 60%
2
Other
FY20: 3%
1
Non-binary and
Prefer not to say
FY20: 1%
51
Have dependants
FY20: 52%
1
Have a disability
FY20: 1%
1
Pacific Islander
FY20: 2%
15
Asian
FY20: 14%
1
Prefer not to say
FY20: 1%
39
Female
FY20: 37%
79
Have a tertiary education
FY20: 79%
2.2
Absenteeism rate
FY20: 1.92%
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yrs
42
Average age of Z employees
FY20: 42 years
19
Auckland
FY20: 23%
60
Wellington
FY20: 59%
21
Rest of NZ
FY20: 18%
FY20: 3%3
Gen Z (born 1997–present)
23
35
22
17
Millennials (born 1984–1996)
FY20: 22%
Xennials (born 1977–1983)
FY20: 34%
Gen X (born 1965–1980)
FY20: 25%
Baby Boomers (born 1946–1964)
FY20: 15%
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WHAT WE STAND FOR
Diversity and inclusion,
continued
Challenges in diversity
and inclusion
Z has a clear plan to increasingly build
diversity into our business but we have
not been as successful as we would like
in delivering it.
Z has a 50:50 gender split target but we
have a long way to go to get there with a
62:38 male to female ratio. Over FY21 there
was an 8 percent increase in women in
senior leadership positions to 42 percent,
but we have work to do to continue to
build a pipeline of talented women for
introduction into and promotion across Z.
We continue to make progress on
pay parity and have closed the gap to
2 percent. The largest gap outside of
our most senior roles is at career level 5
(in a job scale of 1–9) primarily as a result
of a small number of historically highly
paid outliers who joined Z from Caltex
in 2016. Work will continue in FY22 to
further reduce this gap across all levels
of the business.
In building a more representative
business Z has more challenges in
building in ethnic diversity. In particular,
currently only 3 percent of Z people
identify as Māori, against a national
population of 16.5 percent, and 1 percent
as Pasifika against 9 percent of
New Zealand.
Over FY21 Z has worked hard to embed
Te Reo and tikanga Māori across the
business and we will undertake a focused
and deliberate programme of work in
FY22 to continue to drive us towards the
diversity we seek.
Our strategy to drive diversity
and inclusion
In February 2021 the Executive team
considered, discussed and approved
Z’s Diversity and Inclusion work
programme for the next three years.
One of the elements discussed in
confirming this plan was the need to
promote and encourage diversity of
thinking and a more inclusive style of
leadership across the company.
While our engagement data shows people
feel comfortable and free to share their
thoughts and observations openly, there
may be barriers emerging in which there
is less listening and more tightly holding
one’s own perspective than we would like.
In addition to specific Diversity and
Inclusion targets, our new Leadership
Framework focuses on what it takes
to lead in a diverse workplace and
get everyone contributing at their
best, including:
• People Leaders valuing diversity and
translating the collective mindsets,
capabilities, and aspirations of their
teams into positive impact; and
• Everyone achieving together by
embracing an inclusive environment
where anyone can safely ask a
question, propose a new idea and/or
provide constructive feedback.
These principles also underpin Z’s
approach to organisational design.
Our Diversity and Inclusion work
programme for FY22 is focused on
maintaining Z’s core strengths and
what is now ‘business as usual at Z’, for
example maintaining Z’s Rainbow Tick
accreditation and sharing our journey
to date with others. At the same time,
Z will continue to weave its Diversity
and Inclusion commitments into all of
Z’s processes and frameworks, actively
celebrate diversity across all of its
operations and continue to experiment
with ways to increase representation in
key areas.
While cementing ‘the basics’ of Diversity
and Inclusion, Z has committed to
sharpening its focus in accelerating
progress in female, Māori and Pasifika
representation. In particular, Z has
committed to the following two enduring
outcomes against which it will measure
progress quarterly:
• Our population represents Aotearoa
New Zealand
• We are one of the most inclusive
workplaces in Aotearoa New Zealand.
Against these outcomes, Z has
committed by the end of FY24 to closing
the gender pay gap (currently sitting at
2% excluding our Executive), achieving a
45/45/10 gender ratio (men, women, any
gender — including non-binary) at every
career level in Z, and making material
uplifts in our representation of women in
operational roles and Māori employees.
Focus on wellbeing and
organisational resilience
The wellbeing of Z’s people and the
company’s organisational resilience are
linked, and both have been areas of clear
focus for Z in FY21.
Covid-19 posed significant operational
challenges to Z that were successfully
managed. We had to urgently move all our
office-based staff into a working-from-
home arrangement at the same time
as rapidly gearing up our operational
teams — primarily terminal operators and
retail service station staff — to operate
as essential workers with appropriate
protections in a live Covid-19 environment.
Z’s previous investments in digital
technology and capability paid off
immediately, with all office-based staff
effectively able to walk out the door with
their laptop and resume immediate and
effective remote working. The hardware
and software tools we provided for our
people worked seamlessly, enabling
continued efficient operations.
Maintaining culture and living Z’s values
remotely was something the company
worked hard at through carefully
designed internal communications,
with regular whole-of-company remote
stand-up briefings during the initial
lockdown period and beyond.
Teams learned to use digital technology
effectively with many saying the quality
of team interaction was at times more
focused and more productive than
previously in person.
In addition to our leaders and teams
supporting each other, we had digital
tools that supported us across Z.
Thanks to our online engagement tool
we were able to stay close to what
mattered to our people, with frequent
snapshots of engagement — highlighting
any emerging issues and allowing rapid
response to any concerns.
Despite working remotely in a highly
uncertain environment, receiving
no annual performance incentive
and with a significant cost-cutting
programme underway, Z’s people
thrived. People demonstrated their
best leadership and focused on core
issues that really mattered.
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This approach further aligns Z’s
approach to remuneration with
shareholder interests.
Despite the challenges of the year and
reduced income for members of the
Z team, staff satisfaction with their
remuneration remains high, with people
generally feeling fairly paid.
The Gender Tick
While Z has more work to do in achieving
its gender balance goals, it has the right
foundations in place to do so. In FY21,
Z secured Gender Tick accreditation.
Run by the YWCA, the Gender Tick is
awarded to organisations who pass
an audit of policies and processes to
determine that there is no gender bias
in the organisation, at: https://www.ywca.
org.nz/workplace/gendertick/
Accredited organisations also must
demonstrate commitment to:
• A gender-inclusive workplace
• A safe workplace
• Flexible work and leave
• Leadership representation
• Equal pay.
TupuToa
Part of Z’s commitment to increasing
its Māori representation is through
the TupuToa internship programme.
TupuToa’s vision is all about growing
Māori and Pacific leaders for a greater
Aotearoa: https://www.tuputoa.org.nz/
Z is a strong supporter of this
programme, having partnered with
TupuToa for the last three years.
Over FY21 we had three TupuToa interns
in the company.
One of Z’s TupuToa interns, Joseph
(Joey) Ushaw, spent the summer
working in Z’s Innovation Refinery.
Joey has recently completed his
business studies degree from Auckland
University of Technology, with a focus
on Marketing and Entrepreneurship.
Outside of work, he is an accomplished
softball player and brought that
competitive spirit to Z.
He spent his time with us working on
the launch of Z Electric, bringing new
thinking and some great ideas to help
bring this offer to life.
Our people
and culture
TupuToa intern,
Joseph (Joey) Ushaw
A new programme to set, drive and
track progress and performance against
targets every quarter rather than
annually contributed to a feeling of clear
focus and accountability. Lower value
work was stopped.
We recognised that individual
experiences of work differed in FY21.
There was additional demand for
some of our people working remotely,
depending on personal circumstances —
from home schooling children, to living in
flatting environments, to having whānau
with high health risks. We put in place
policies and practices to support some
of this including our wellbeing support
(see pages 44–45).
Feedback from our people is that
operating under a highly uncertain
environment, we all lived our values.
We cut costs without cutting headcount;
we kept ourselves and our people safe
and looked after people’s physical and
mental wellbeing; we communicated
clearly and effectively and focused
people on work that really mattered.
As a result of all of these initiatives,
Z’s level of staff engagement over
FY21 rose sharply to just below the
top-10 percent global standard, as
measured by Peakon, our engagement
service provider, from a 94 percent
aggregated response rate.
A new approach to
remuneration
While any performance incentives
that were due to be paid in FY21 were
abandoned, Z’s previous approach to
performance-based pay also changed
in FY21. Historically all staff incentives
were calculated by a mix of company
performance and individual performance.
For everyone excluding the Executive
and sales teams, this has been
abandoned in favour of just the one
aggregate measure that matters:
company performance. When the time
comes for most Z staff to again be
considered for performance-based
remuneration, the primary consideration
will be the company’s performance
measured against a balanced scorecard
reflecting financial performance, safety
and wellbeing and the living of Z’s values.
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WHAT WE STAND FOR
Z Energy Limited and Subsidiaries
Year end report 31 March 2021
Hapori
Community
In the context of Covid-19, Z chose not
to run its Good in the Hood community
investment programme. Pulling it
together over 197 sites felt like a
distraction and handing out voting
tokens was inconsistent with our safety
and wellbeing commitments. Our teams
had enough on their plates.
Instead, we sought to more directly
and immediately support champions in
our community. We donated $337,000
to our partners at St John Ambulance
and $44,000 to Wellington Free
Ambulance to support the operation
of their ambulances during lockdown
and donated free fuel to the New
Zealand Student Volunteer Army who
delivered food and essential supplies
to elderly and vulnerable people across
our communities.
In relation to our use of PPE on Retail
sites, we needed some help here.
During the initial national lockdown,
we struggled to get our hands on
enough initial supply of face masks
for frontline workers. Westpac Bank
supported us by providing some from
their stocks. In return for the masks we
made a $20,000 donation of fuel to the
Life Flight Trust via our aviation team,
which provided the ability to complete
over 54 missions.
$496,200
Z made donations of $496,200 to support
champions in our community, including Z
Retail team staff suffering significant financial
hardship, in relation to Covid-19
FY21
A focused Good in the Hood
In 2021, Good in the Hood is back —
with a twist. To mark 10 years of Z,
this year we’re using Good in the Hood
to support the 10 organisations our
customers have most supported and
valued over the last decade.
From 1 June, each of these
10 organisations will be in to receive
a share of $700,000, with votes being
placed as per usual with orange tokens
at each Z Retail site. Z Retailers will get
to choose the four charities that they
promote in their community and a lot of
the funds will filter back into the regions
where it’s needed most.
These 10 organisations which have most
resonated with our customers will be
announced later in May 2021.
We have also continued to support
the outstanding work of the Graeme
Dingle Foundation in its commitment
to ‘powering up future generations’ both
through Good in the Hood and in direct
corporate support.
We stand for a resilient and healthy
Aotearoa that empowers our youth,
neighbourhoods and Z whānau.
Z has always stood for supporting the
local communities in which we are based,
but Covid-19 put these commitments
into much sharper focus.
When we talked about the health of
our own whānau our focus immediately
came onto how we could best support
and keep safe those Z frontline workers
in our retail service stations. Faced
with Covid-19 in our communities and
our retail operations deemed essential
services, it was our frontline whānau that
supported their communities and in turn
required our support.
Z’s retail operations provided an
invaluable lifeline in many communities
across New Zealand during the periods
of Covid-19 lockdown, providing people
and families with reliable, safe access
to staple essential goods.
Year-on-year, sales of convenience
store products rose by 3.5 percent as
customers looked for a convenient and
comfortable way to shop for basics and
avoid supermarket queues.
With our frontline team serving the
public across the country every day,
our focus was also on their safety.
We ensured plentiful supply of personal
protective equipment (PPE) and Perspex
screens and ensured clear signage was
prominent at every site. All of our sites
have contactless payments which further
protected customers and our staff.
We donated $337,000 to our partners at
St John Ambulance to support the operation
of their ambulances during lockdown.
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WHAT WE STAND FOR
Haumarutanga me te hauora
Safety and wellbeing
We stand for enhancing the lives of our
people and communities.
Due primarily to the health challenges
of Covid-19, safety and wellbeing was
the most material issue for Z and
its stakeholders over the course of
FY21. As such, safety and wellbeing is
referenced and covered throughout this
report rather than just in this section.
This is because, just as we have sought
to do with our business, our approach to
safety and wellbeing is integrated across
all that we do.
Z has been, and continues to be, on
a safety and wellbeing journey. It is a
journey that will never be complete —
we must never become complacent
and we must always be vigilant; but we
can acknowledge where we have made
progress and where there is more work
to be done.
In the decade since Z was formed
our approach to safety and wellbeing
has transformed from a very
compliance-based and directive
approach to one in which safety and
wellbeing is cultural and increasingly
integrated across our business and
everything we do.
Z has a small, empowered safety and
wellbeing team that focuses on building
risk management capabilities across the
business, which allows us to devolve key
elements of risk management back into
the business.
This devolution of the traditional ‘health
and safety’ functions inside Z holds
every member of the team accountable
for ensuring the safety and wellbeing
we strive for.
Safety and wellbeing at Z is now more
digitally enabled, mature and culturally
embedded than it has ever been in
the past, and this served us well with
the arrival of Covid-19 at the very end
of FY20.
Personal accountability for
safety and wellbeing
Genuine wellbeing can only be achieved
when we are physically and emotionally
healthy and feel safe in the work that
we are doing, as well as being safe and
supported in bringing our whole selves
to our work.
Over FY21 we created and embedded
a new wellbeing framework that clearly
states our commitments on wellbeing,
the capabilities required to manage
wellbeing, both as a company and as
individuals, and a range of tools people
can use to enhance their own wellbeing.
Our Safety and Wellbeing stand
is enabled through focus on the
following key capabilities:
Engaged and visible leaders
At Z, we are committed to providing
workplaces that enable safe, productive
and engaging work.
Enabled safety system
Our safety system drives us to
proactively focus on the risks that matter
most, ensures the continual improvement
of our operations, and it’s part of
everything we do. It drives us to meet
our responsibilities as a New Zealand
company and our internal standards too.
Capable and courageous people
We know that our people are key to our
success and we work together to grow
capability and empower them to speak
up and actively participate. We back our
people 100 percent to make the calls
required for safe and reliable operations.
Planning for a pandemic
Z had actively prepared for the possibility
of a pandemic — alongside a range of
other crisis scenarios — and considered
the implications on its supply chain.
In May 2015, Z commissioned and
published an independent research
report based on the outbreak of Ebola
in Africa. Titled Lessons From the West
African Ebola Outbreak in Relation to
New Zealand’s Supply Chain Resilience,
+66
This score places Z in the top 5 percent of
companies as measured by our engagement
service provider, Peakon.
Wellbeing eNPS score
Z shared this document widely with
government stakeholders at the time and
used it for its own internal preparation
for the possibility of pandemic-related
supply chain impacts: https://z.co.nz/
assets/20150501-Supply-Chain-
Resilience-Report-Final-Low-res.pdf
With Covid-19 on the horizon at the
beginning of the 2020 calendar year, this
provided useful material around which
to organise our crisis management team
and strategic response to the rapidly
evolving virus.
Supported by this original document
and with a clear, well-rehearsed crisis
management plan in place, Z operated two
crisis management teams — week on, week
off — between January and May 2020.
As part of our commitment to resilience,
we actively build our crisis management
capability and ensure we have the depth
of people to run in crisis management
mode for extended periods — as was
required over FY21.
By the time the Covid-19 virus emerged
in New Zealand, Z’s processes were clear,
staff were aware of their responsibilities,
technology was tested, and the
organisation ran differently but smoothly.
Z already offers unlimited sick leave and
we made additional special leave available
for people who had additional demands
on their time over the lockdown period.
Protecting diversity — and
our people
Following the 15 March 2019 Christchurch
mosque attack in which 51 people were
killed, we’ve been seeking to not only
foster diversity in our company and
communities, but to actively protect it.
As a baseline, Z has a strong Discrimination,
Bullying and Harassment Policy which
clearly sets out our expectations for
ensuring conduct protects and celebrates
diversity. The Discrimination, Bullying
and Harassment Policy can be found in
the Corporate Governance section of
the Z Energy Investor Centre: https://
investors.z.co.nz/corporate-governance/
governance-overview
In addition to our ‘We’ve got your back’
campaign which we have run internally for
much of the last two years, in July 2020
we joined the NZ Retailers Against
Racism pledge committed to protecting
our people from racism and abuse in the
workplace: https://retail.kiwi/speaking-
up-for-you/diversity
Weaving our commitments to Safety and
Wellbeing, Community, and Diversity and
Inclusion together under one umbrella,
we have run this campaign featuring a
sample of our Retail people talking openly
and honestly about their experiences of
racism on a Z forecourt, how it made them
feel and the impact it has. https://z.co.nz/
about-z/what-matters/community/weve-
got-your-back/
These stories are a moving reminder to all
New Zealanders as to what we must stand
against. We have shared our people’s
experiences within the broader retail
industry on effective ways to deal with
verbal racial abuse and our retailers have
trespassed verbally abusive customers.
Operational safety matters
The true mark of successful cultural
leadership around operational safety
is to measure performance during
periods of change. With the fuel industry
going through the early stages of
transformation, focus on operational
safety is more important than ever.
Z’s increasing move to independent
management of its fuel terminals and
Refining NZ starting the process of
potentially transforming into a fuel
import terminal represent areas of clear
and ongoing safety focus for Z.
At the same time, much of the focus on
optimising Z’s core business provides
opportunities to reduce operational risk.
For example, exiting the marine fuel oil
barge operations and reducing the human
presence on retail forecourts in response
to changing consumer preferences both
reduce costs, simplify the core business
and reduce operational risk.
Exiting the crude oil supply chain is
another example which, if well managed,
will deliver significant safety, cost and
simplification benefits.
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Robberies decline
Another example of where Z is benefiting
from previous investments in safety
and wellbeing capability and equipment
is in retail site robberies. From a high
of 23 robberies in both FY17 and FY18,
Z closed FY21 with four.
That is four too many, but we have
invested up to $20 million in our systems
and equipment over the last five years
and the safety and wellbeing of our
people are benefiting from that. We have
a larger network than others in this
sector and recorded fewer robberies.
The area of robberies is an interesting
example as to the synergies in our digital
investments. Originally in place to deter
‘drive-offs’ and robberies, our investment
in quality digital CCTV equipment
continues to serve this function but is
also being harnessed to deliver the retail
Pay by Plate offer.
Digital innovation and safety
Z’s digital capabilities are further
assisting in how we manage risk
internally. Our digital systems and
capabilities combined make risk
information more accessible, easily
interpreted and are supporting
the business in making better
evidence-based decisions around
safety and wellbeing.
Over FY21 Z also implemented a new
digital safety management system for
Z’s retail franchise operators which
we extended to cover our corporate
operations. This new simple and fast
system has improved productivity,
increased reporting rates and allowed
for data from our Retail operational
environment to more easily flow
back into Z and inform our risk
management programmes.
4.01
million
hours
Number of hours worked (Z employees, retail sites,
Mini-Tankers)
FY20: 4.1 million hours
3
Motor vehicle incidents
FY20: 2
0
Work-related fatalities
FY20: Zero
4
Robberies
FY20: 14
0
Number of spills (loss of containment)
FY20: 6
0
Tier 1 and Tier 2 process safety incidents
FY20: 1
Main types of work-related injury: Manual handling
FY20: Slips and trips
1.15
0.90
Total recordable case frequency*
Z employees:
Retailers and Mini-Tankers franchisees:
FY20: 1.33
FY20: 0.48
FY20: 1.56
FY21: 0.72
FY21: 1.26
Lost time injury frequency*
Z employees:
Retailers and Mini-Tankers franchisees:
FY20: 1.18
FY20: 0.24
FY20: 1.43
FY21: 0.24
FY21: 1.07
* TRCF and LTIF are based on 200,000 hours worked.
01
02
03
He pūronga
nā Te Poari
Whakahaere
Corporate
Governance
Statement
as at 31 March 2021
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Covid-19 and its subsequent impacts
have demanded more from the Z Board
than in any other year. It has forced
us to operate differently — in crisis
management mode and remotely for
much of the year — and to focus on
broad and challenging material issues.
From ensuring the safety and wellbeing
of our people and the customers we
serve during a national lockdown and
subsequent lockdowns of our biggest
city; to protecting the organisational
resilience of our company; to taking
concrete steps to firm up our balance
sheet and cut costs during uncertain
times. And that is just Covid-19.
Over the year the Board has also
focused on ensuring Z is well-positioned
for a major reorganisation of the
industry’s supply chain, overseen the
implementation of new legislation
around the operation of bulk fuel storage
terminals and ensured Z has the right
strategy to optimise its core business,
deliver strong returns to shareholders
and respond to growing political,
investor and community concern
around climate change.
Again in response to uncertainty,
Z has set new standards of corporate
disclosure to stakeholders and investors
during Covid-19, helping stakeholders
understand the true impact on our
business and the New Zealand economy.
Covid-19 has required a diverse yet
cohesive governance team and the
challenges of the year have required
all of the skills we collectively bring to
the Z Board.
This has been a year in which Z has
benefited from previous commitments
to a strong, values-driven culture, a
genuinely diverse organisation and
strong capability in wellbeing, safety
and serving our customers.
The unprecedented experience of
the downstream transport fuels
industry across both the Board and
Z’s management has also served our
company well during FY21.
This Corporate Governance Statement
seeks to provide insight into how we
have responded to the challenges of
FY21, as well as how we have governed
the company in service of the issues
most material to our investors and
stakeholders. This statement goes well
beyond the compliance requirements
on our company and seeks to provide a
high level of transparency into what the
Z Board does, how and why.
The Z Board would welcome any
feedback on this Statement and how
we may further improve the quality
of our disclosure.
This statement goes well beyond
the compliance requirements
on our company and seeks
to provide a high level of
transparency into what the
Z Board does, how and why.
Tō tātou poari
The Z Board
On 30 April 2020, Alan Dunn left
the Z Board after a decade of
service. Alan brought a strong
retail focus to the Z Board and has
been particularly influential in the
continued development of the Z retail
offer and the development of strong
customer experience capabilities
across the Z team.
The Z Board and management team
thank Al for his commitment to
the Z Board.
Z Directors
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Abby Foote
Joined
15 May 2013
Steve Reindler
Joined
1 May 2017
Mark Cross
Joined
28 August 2015
Mark Malpass
Joined
30 October 2019
Julia Raue
Joined
15 February 2016
Blair O’Keeffe
Joined
1 August 2018
Flick Energy Directors
Marcel van den Assum (Chair)
Matt Todd
Lindis Jones
Aimee McCammon
Aaron Snodgrass
(alternate for Matt Todd)
Scott Bishop
(resigned 31 March 2021)
Board Committee membership
The Z Board makes use of a number
of Committees to ensure a clear focus
on particular areas of the business.
The following Corporate Governance
Section references these Committees
at various points and the table under
Principle 2, requirement 2.4, outlines
membership of Z’s Board Committees
and Director attendance as at the end
of FY21.
GOVERNANCE
The Z Board,
continued
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How we appoint the Board
The Z Board takes a structured
approach to Board appointments and
succession, ensuring the Board has the
appropriate skills required to effectively
execute its strategy. The process of
evaluating and reviewing the Board’s
skills against what might be required in
the future is ongoing and supplemented
by professional, independent
third-party review.
Capability building across the Board
occurs through ongoing personal
development and Board education
programmes in targeted areas.
The Board’s commitment to ensuring
it has the right skills around capital
management served Z well over FY21,
with the Board and management working
closely and effectively together with
the capital markets and debt providers
around recapitalising the company.
These skills remain vital to Z’s future as
the company resumes dividends, pays
down debt and builds a more flexible
and resilient organisation.
Z’s Board has particularly strong skills
in listed company governance, the
liquid fuels industry and infrastructure
management, and has increased its
capability over FY21 in organisational
transformation and management of
significant change.
Directors’ skills matrix
as at 31 March 2021
Strategic context aligned to Director capability
Number of Directors
with high and moderate
capability
Balanced
Possible
focus of
future Board
appointments
Focus
of future
Board
learning
Creating value for
investors by focusing
on a safe and profitable
core fuel business
Delivering outstanding
customer experiences
while positioning
ourselves for future
disruption
Strategic knowledge for scale oil
Brings extensive experience in the fuels industry
with an emphasis on integrated downstream oil.
Operating model transformation – balancing
legacy and growth
Former CEO, ideally brings large scale turnaround
experience in an entity that has gone through
significant change.
Heavy industry business (or similar)
Extensive experience in engineering, construction
and infrastructure and/or transport and logistics.
Finance and capital markets
Former CFO or senior executive with extensive
knowledge of financial strategy, cost optimisation
and commercial acumen.
Retail transformation
Deep understanding of the retail business including
value chain, customer experience transformation,
supply and distribution.
Customer insight data and brand
Brings extensive capability in customer innovation,
brand and systems including data-driven marketing.
Digitisation – back office and field
Application of digital technology in physical retail.
Expertise in customer-based app development and
internet of things.
Remaining a people-
and values-based
company committed to
future generations
Listed company governance
Experience driving best practice in corporate
governance, regulation, risk and compliance,
and ESG.
HSE (Health and safety)
Experience in workplace health and safety including
knowledge of legal obligations and regulations.
Sustainability and clean green energy
Sustainability strategies to limit environmental
impact including experience with alternative
energy sources.
Key
High Capability
Moderate Capability
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All of these skills are highly relevant
and important to Z’s future.
Over FY21, the Board focused on
increasing its capability in data and
customer experience, as well as
customer insight, brand and digitisation.
These areas of focus will continue
into FY22.
Last year Z reported it has been seeking
an appropriately skilled and qualified
new Director with particular skills in
digital technology, data and customer
experience since June 2019. This search
was paused due to Covid-19 and will now
resume. The market remains incredibly
tight for people with these skills.
Increasing the Board’s capability
in Sustainability and Clean Energy
also remains a focus for ongoing
Board development.
The Z Board also measures itself on
how diverse we are as a group, using a
‘Diversity of Thought’ measurement tool.
Using this tool, we map the diversity of
both the Board and Z Executive team so
we fully understand how we think and
work together and so we can be highly
strategic in the recruitment processes
for each group.
The year in the Z Board
Over FY21, the Z Board led the business
through the Covid-19 pandemic, while
in parallel refocusing the business on
delivery of results as the company
and the country moved through the
Covid-19 crisis.
While Covid-19 was a major part of FY21,
with a significant and enduring impact
on Z’s fuel volumes and earnings, the
national lockdown began on 25 March
— the last week of Z’s FY20 year — and
the country returned to Alert Level 1 on
8 June 2020.
With the first 10 weeks of FY21 in
lockdown, Z was running a critical
supply chain and all operational
elements of its business were deemed
‘essential services’.
All working remotely, the Z Board
provided support to the Z management
team, which was operating continuously
under existing crisis management and
pandemic plan structures. Alongside its
operational crisis management team,
Z also ran a strategic crisis team, with
separate team members and structures
to focus on the potential longer-term
implications of the Covid-19 pandemic on
the future for Z, for New Zealand and for
global transport fuel supply chains.
Z’s crisis strategy team was a focus
for the Board, and Directors with skills
and experience in global supply chain
management and the broader fuels
industry supported this team.
This work also focused on scenario
planning, fuel demand forecasting and
the potential impacts of the pandemic
on operational infrastructure.
The Board’s participation in this work
was reflected in Z’s pandemic response
priorities. The insights generated through
this work and the way the impacts of the
pandemic were reported were valued by
a wide range of stakeholders, including
central government and investors.
Members of the Z Board with extensive
capital market experience worked
side-by-side with the Z team on the
successful $347 million capital raise in
May/June 2020 and to negotiate with
Z’s bankers.
In addition to strengthening Z’s balance
sheet with additional capital during the
uncertainty of Covid-19, the Board made
a decision not to pay the FY20 final
dividend and to exercise its discretion
not to make any annual Short Term
Incentive bonus payments to Z people.
While managing lockdown conditions at
the height of the pandemic, Z’s Board
and management continued discussions
around the commitment to optimise the
core business by reducing costs, holding
market share, monetising Z’s scale and
carefully managing capital.
These four commitments were
communicated to the market at the
company’s 1H21 results and they remain
the operational focus for the company
in FY22.
Consistent with these objectives, over
FY21, $63 million in costs were cut from
the business. Towards the end of FY21
the Board had supported management
in making important decisions around
the future shape of the company and the
downstream transport fuels industry.
In particular, Z committed to supporting
the commercial transition of Refining NZ
to a fuel import terminal, and decided to
exit marine fuel oil barge operations.
The Z Board and management team
reflected in depth on the lessons
learned through the Covid-19 lockdown
in order to maximise the effectiveness
of its leadership and governance in an
uncertain and rapidly changing context.
The focus for the Board now is on further
optimising the core business, removing
volatility, paying down debt and resuming
dividend payments to shareholders.
Over the year the Z Board decided to
align its own processes and procedures
with a new performance management
system across Z.
The Board and Executive team agreed
that ‘optimising the core’ was Z’s single
unifying purpose and agreed the metrics
that demonstrate achievement of this
purpose to be built into the OKR system
for performance management and
tracking delivery.
The priorities agreed to deliver on
‘optimising the core’ were:
• Strong focus on the size and speed
of the cost reduction programme
• Focus on industry structures and in
particular, maximising value where
Z is relatively advantaged
• Focus on the operation of the supply
chain under the new regulatory regime
• The value of Z’s data and digital
capabilities.
Again supporting the tight focus on
delivery into FY22, the Z Board and
Executive have agreed a ‘performance
contract’ to measure and review
progress on these priorities at each
Board meeting.
More broadly, the Z Board maintained
a rigorous focus on risk management
over the year, including new risks raised
by the pandemic and the evolving
challenges presented by climate change
and cybersecurity.
The Board and
Executive team
agreed that
‘optimising the
core’ was Z’s
single unifying
purpose.
GOVERNANCE
The Z Board,
continued
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Over FY21 Z rolled out a new system
of managing quarterly performance
and planning. This system delivers a
clear set of company-wide objectives
and key results (OKRs) in an integrated
system of performance management
and tracking delivery.
This system requires fortnightly
discussions on performance and delivery
with each Z team member. Results are
recorded in the system allowing for
tracking at both a company and an
individual level and all levels in between.
The Z Board now uses an aligned
performance monitoring process.
Based on what it had learned from
governing Z virtually through Covid-19,
the Board agreed to meet quarterly
for a full two-day in-person meeting
(subject to external pandemic context)
and to meet virtually for shorter periods
in between these in-person meetings.
Limiting in-person meetings supports
Z’s commitment to reducing travel, cost,
and carbon emissions and provides
leadership on these issues and Z’s
flexible working practices.
The two-day in-person meetings are
scheduled to allow for an in-depth review
of delivery and performance over the
past quarter and to agree planning for
the next quarter. This system is designed
principally to support an overarching
focus on delivery and execution.
These meetings are largely decoupled
from Board Committee meetings,
allowing for deep focus rather than a
more time-constrained approach of
‘getting through business’ across a range
of Board and Committee meetings.
We believe these changes will put the
Board in the best position to most
effectively lead Z’s strategy delivery.
In September, the Z Board held a two-day
offsite with the full Executive team.
Tō tātou kāhui amorangi
Our Executive Team
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Mike Bennetts
Chief Executive Officer
Joined 1 April 2010
Debra Blackett
General Counsel and
Chief Governance Officer
Joined 2 June 2015
Lindis Jones
Chief Financial Officer
Joined 10 May 2010
Helen Sedcole
Chief People Officer
Joined 29 January 2018
Julian Hughes
General Manager,
Strategy and Risk
Joined 16 February 2015
Andy Baird
General Manager,
Retail
Joined 1 April 2019
Nicolas Williams
General Manager,
Commercial
Joined 7 June 2011
David Binnie
General Manager, Supply
Joined 8 September 2014
Mandy Simpson
Chief Digital Officer
Joined 19 February 2019
Figen Ulgen
Chief Customer Officer
Joined 1 February 2021
Jane Anthony left Z in
December 2020 and was
replaced as Chief Customer
Officer by Figen Ulgen on
1 February 2021.
The following section refers frequently
to Z Board Charters and the charters
for Board Committees, as well as codes,
policies and other core corporate
documents. All of these documents can
be found in the Corporate Governance
section of the Z Energy Investor Centre
at: https://investors.z.co.nz/corporate-
governance/governance-overview
GOVERNANCE
Tā tātou tautuku ki Ngā Tikanga o
NZX Rangatōpū Kāwanatanga
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How we comply with the
NZX Corporate Governance Code
The NZX Corporate
Governance Principles
The NZX Corporate Governance Code
was launched in 2017 and covers eight
principles. These principles seek
to “reflect internationally accepted
corporate governance practices, which
are intended to protect the interests
of and provide long-term value to
shareholders while also seeking to
reduce the cost of capital for issuers”.
The Z Board seeks to go well beyond
these eight principles in its disclosure
and reporting to shareholders and
stakeholders. While much of this content
has been covered elsewhere in this
report (see ‘How we report’ on page 4)
we also report briefly against each
principle for completeness and to provide
summary compliance information for
those that seek it.
How we meet
these conditions
Over FY21, Z has fully complied with the
NZX Corporate Governance Code.
During the period, no significant fine or
monetary sanction has been imposed
against Z by any government authority.
Nor has Z been made aware that it had
broken any material law.
Z is not aware of any material
non-compliance with environmental
laws and/or regulations.
On 30 April 2020 Alan Dunn resigned
from the Z Board after 10 years of
service. The Board is working on filling
this vacancy in line with its approach to
Board appointments on pages 48–49.
Z was granted a waiver from NZX
Listing Rule 4.5.1 on 11 May 2020 to
allow a placement of up to 30 percent of
Z shares without requiring approval by
ordinary resolution by shareholders.
This related to Z’s equity capital
restructure response to the Covid-19
crisis. The waiver included a number of
conditions such as requiring that existing
Z shareholders would be given priority
to obtaining a pro-rata allocation in the
placement, an application of $50,000.00
per shareholder, and the requirement to
subsequently disclose the proportions of
existing shareholders and other investors
that participated in the Placement and
the allocation policy used to determine
allocations in the Placement.
The NZX ruling stated that it was
satisfied that the structure of the
placement together with Z’s proposed
share purchase plan was such that
almost all retail shareholders had a
sufficient opportunity to maintain their
pro-rata shareholding in the share
purchase plan alone, and in doing so,
met the policy objective underpinning
the relevant listing rules.
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PRINCIPLE 1
CODE OF ETHICAL BEHAVIOUR:
“Directors should set high standards of ethical behaviour,
model this behaviour and hold management accountable
for these standards being followed throughout
the organisation.”
Z has a clearly articulated Code of Conduct, which is one of Z’s foundation documents.
This is our code of ethical behaviour, but it goes well beyond ethics.
It sets clear standards of ethical and appropriate behaviour. All staff, including Directors
and the leadership team, are expected to hold each other to account for the standards
set in this document.
Our Code of Conduct can be found in the Corporate Governance section of the Z Energy
Investor Centre at: https://investors.z.co.nz/corporate-governance/governance-overview
1.1 – The board should document
minimum standards of ethical behaviour
to which the issuer’s directors and
employees adhere to (a code of ethics).
The code of ethics and where to find it
should be communicated to the issuer’s
employees. Training should be provided
regularly The standards may be contained
in a single policy or more than one policy.
The code of ethics should outline internal
reporting procedures for any breach
of ethics, and describe the issuer’s
expectations about behaviour, namely
that every director and employee:
a. acts honestly and with personal
integrity in all actions;
b. declares conflicts of interest
and proactively advises of any
potential conflicts;
c. undertakes proper receipt and use
of corporate information, assets
and property;
d. in the case of directors, gives proper
attention to the matters before them;
e. acts honestly and in the best interests
of the issuer, as required by law,
and takes account of interests of
shareholders and other stakeholders;
f. adheres to any procedures around giving
and receiving gifts (for example, where
gifts are given that are of value in order
to influence employees and directors,
such gifts should not be accepted);
g. adheres to any procedures about whistle
blowing (for example, where actions of
a whistle blower have complied with the
issuer’s procedures, an issuer should
protect and support them, whether or
not action is taken); and
h. manages breaches of the code.
The Code of Conduct also applies to secondees, contractors, consultants, 100 percent-
owned subsidiaries and all Directors, which we define collectively as ‘Z People’.
The Code outlines Z’s values, policies, the responsibilities of Z as the employer and those
of all individual line managers of people. The Code also sets out Z’s obligations to our
neighbourhoods, stakeholders and Government, and contractors and suppliers.
Additionally, the Code outlines some of our obligations related to financial reporting,
commercial conduct, and company assets, information and equipment.
Z has an overarching internal Security Policy that supports our commitment to operating
a safe and secure business. This Policy enables Z to prepare for, and be able to respond
to, security threats and incidents to protect our people, information and assets.
The Code of Conduct also provides a range of escalation procedures for reporting
ethical breaches, including the assurance of anonymity for whistle-blowers, consistent
with the Protected Disclosures Act 2000.
It indicates the expectations of all Z people in relation to conflicts of interest, acceptance of
gifts, bribery and corruption, and confidentiality. All Z people are provided with training and
become familiar with the Code of Conduct when starting at Z. All Z people are expected to
adhere to the Code of Conduct. It is a condition of entering and remaining in Z’s employment.
In FY21, Z extended its commitment to ethical conduct by publishing its first Modern
Slavery Statement under the Australian Modern Slavery Act 2018 as part of Z’s obligations
under its ASX listing at https://modernslaveryregister.gov.au/statements/765/
The notion of modern slavery in New Zealand is unfortunately not as far-removed as it
might sound. In July 2020 a Hawke’s Bay horticulture labour contractor was sentenced
to 11 years in jail for people trafficking and slavery.
Z’s Modern Slavery Statement outlines how Z ensures exploitative practices such as forced
labour, debt bondage, forced marriage, people trafficking, and child labour are not part
of Z’s operations or supply chain either directly or indirectly, noting that in New Zealand,
franchised retail service station operations have been identified as a potential area of risk.
Z will take a multi-year path to fulfilling this responsibility, starting by identifying the
highest risk areas and the most direct relationships we hold and then moving deeper
into the indirect networks supporting our business.
In anticipation of the commitment to modern slavery eradication, in July 2020,
Z launched a new Supplier Code of Conduct. This includes an expectation of all
employees and subcontractors, parents, subsidiaries and affiliates providing products
or services to Z to account for applicable laws, regulations and ethical standards such
as the Modern Slavery Act: https://z.co.nz/about-z/what-matters/sustainability/working-
with-our-suppliers/supplier-code-of-conduct/
Z commits to conducting regular assessments of compliance with its Supplier Code of
Conduct and reserves the right to request documentation that demonstrates compliance.
GOVERNANCE
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PRINCIPLE 1
CODE OF ETHICAL BEHAVIOUR:
continued
1.2 – An issuer should have a financial
product dealing policy which applies to
all employees and directors.
Z’s Board and management are committed to the integrity of financial markets and to
ensuring compliance with all the regulatory market requirements upon it.
Z’s Securities Trading Policy is a critical part of this commitment. The Policy aims
to ensure that every member of the Z team is aware of their obligations and legal
requirements in relation to the trading in Z securities. The Policy applies to all Directors,
officers, employees and contractors to Z, who intend to deal in Z Restricted Securities.
Previously called the Insider Trading Policy, the name of the Policy has been updated
to make it obvious it applies to all Z-listed securities and bonds as well as equities.
Other key changes made to the Policy are:
• Addition of a clause that the Policy applies not only to information concerning
Z Energy Restricted Securities but also if individuals have inside information relating
to quoted financial products of any other listed issuer;
• Clarity that the Policy does not extend to dealings in securities over which
individuals have no ability to exercise any influence or control over dealing, such as
a superannuation fund or managed fund;
• Addition of a clause allowing exceptions for Restricted Persons or employees in
possession of inside information to accept an offer made to all shareholders pursuant
to the New Zealand Takeovers Code;
• Addition of a clause that any known non-compliance of the Policy should be notified
to the General Counsel and Chief Governance Officer, or confidentially to the
Whistleblower service;
• Updates to role title names for Restricted Persons to whom additional rules apply.
The Securities Trading Policy can be found in the Corporate Governance section of
the Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/
governance-overview
PRINCIPLE 2
BOARD COMPOSITION
AND PERFORMANCE:
“To ensure an effective board, there should be
a balance of independence, skills, knowledge,
experience and perspectives.”
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2.1 – The board of an issuer should
operate under a written charter which
sets out the roles and responsibilities
of the board. The board charter should
clearly distinguish and disclose the
respective roles and responsibilities of
the board and management.
2.2 – Every issuer should have a
procedure for the nomination and
appointment of directors to the board.
The Z Board seeks to ensure it is balanced with a diverse and complementary set of skills,
backgrounds, experience and thinking. Over FY21 this balance of complementary skills
proved particularly valuable as the Board balanced the governance of significant risk,
operational, industry and capital structure matters. The Board makes appointments using
a rigorous process, and partners in international Director recruitment, to ensure the right
skills are on the Z Board at the right time and that it actively manages Board succession.
Z’s Board operates under a written Charter.
Z’s Board Charter sets out how the Board exercises and discharges its powers and
responsibilities in relation to Z’s business and affairs. The Charter sets out the role,
composition, responsibilities and duties, procedures, powers and authority, and review
and accountability of the Board, the Chief Executive Officer and the Executive team.
This Charter is important in clarifying the functions of governance and management.
It enables general Board oversight, including of management’s implementation of
Z’s strategic objectives and performance.
The Charter can be found in the Corporate Governance section of the Z Energy Investor
Centre at: https://investors.z.co.nz/corporate-governance/governance-overview
Z’s Board Charter describes the procedure for nomination of potential candidates
for appointment as Directors.
Potential candidates are recommended by Z’s People and Culture Committee following
consultation with external recruiters and are then considered by the Board.
Board quality and capacity is, somewhat obviously, important. For context, in
January 2021 the world’s largest investor, Blackrock, noted that:
We are raising our regional expectations for director independence and director
capacity to serve, reflecting our reliance on strong, engaged, and effective boards to
look after investors’ long-term economic interests.
Z has robust processes to support this sentiment.
A candidate must demonstrate appropriate qualities and experience, be able to commit
the time needed to their role and meet certification requirements of the NZX and ASX.
They must be free of conflicts of interest.
Assessments of overall Board diversity and thinking styles, including the fit of potential
new Directors, is an integral part of this process.
The Board maintains a live skills matrix which records the mix of experience and
expertise of the current Board and the future strategy and business needs to be
considered for future appointments. This was updated in February 2021 as part of an
independent Board evaluation. For more information on this skills matrix see page 48.
Directors are appointed depending on the specific needs of the Board at the time of
appointment. Their independence, qualifications, skills and experience and the diversity
of their thinking are all actively considered and reviewed.
All new Directors must undergo induction, familiarise themselves with the Z Board Charter,
charters of the Z Board Committees and other key governance policies and documents.
The Charter outlines the procedure for nomination and appointment of Directors.
Directors are also expected to continuously educate themselves to effectively perform
their role.
The Charter can be found in the Corporate Governance section of the Z Energy Investor
Centre at: https://investors.z.co.nz/corporate-governance/governance-overview
GOVERNANCE
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PRINCIPLE 2
BOARD COMPOSITION
AND PERFORMANCE:
continued
2.3 – An issuer should enter into
written agreements with each newly
appointed director establishing the
terms of their appointment.
2.4 – Every issuer should disclose
information about each director in
its annual report or on its website,
including a profile of experience,
length of service, independence and
ownership interests and director
attendance at board meetings.
Z enters into written agreements with all new Directors.
These agreements establish the terms and conditions of their appointment, including
compliance with the Z Constitution, the Board and Committee Charters, and Board
policies. This year the Board resolved that part of the agreement between Z and individual
Directors will be a requirement to hold the equivalent of a year’s Director’s fee in Z shares
within three years of appointment unless specific individual circumstances apply.
Directors also undergo a structured induction and training process which includes an
introduction to Z’s foundation document, the ‘Z Why’, and one-to-one engagement with
each member of the Executive team and the CEO.
Z currently has six Directors and typically manages the number of Directors between
six and eight (the maximum under the Z constitution).
While there is no formal requirement around maximum Director tenure, Z actively
monitors this and plans for succession. Z is very mindful around Directors ‘staying for
too long’ and seeks a mix of levels of experience across the Board to ensure the right
balance between fresh thinking and strong industry knowledge and experience.
There are currently six Directors that serve on the Z Board. All are independent,
including the Chair. There are no executive or non-independent Directors on the Board.
There are currently two women on the Board, one of whom is Chair of the Board, the
other is Chair of the People and Culture Committee. The Board is committed to a
target gender split of 40/40/20. Continued progress towards this target will be actively
considered in all Director succession planning and recruitment.
Board profiles can be found in the Corporate Governance section of the Z Energy
Investor Centre at: https://investors.z.co.nz/corporate-governance/board-of-directors
For details on Directors’ interests in shares and bonds, see page 85.
Attendance at Board meetings
Directors attended the following Board and Board Committee meetings during the year
Director
Total number of meetings held
Abby Foote
Mark Cross
Julia Raue
Stephen Reindler
Blair O’Keeffe
Mark Malpass
Alan Dunn*
Board
meetings
ARC
PCC
SWC
7
7/7
7/7
7/7
7/7
7/7
7/7
1/1
4
-
4/4
-
4/4
-
4/4
-
3
3/3
-
3/3
-
3/3
-
-
5
5/5
4/5
5/5
5/5
5/5
5/5
-
*Alan Dunn retired from Z’s Board on 30 April 2020.
2.5 – An issuer should have a written
diversity policy which includes
requirements for the board or a
relevant committee of the board to set
measurable objectives for achieving
diversity (which, at a minimum, should
address gender diversity) and to
assess annually both the objectives
and the entity’s progress in achieving
them. The issuer should disclose the
policy or a summary of it.
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Other Z subsidiary Directors
Z Subsidiary
Names of Directors
Z Energy LTI Trustee Limited
Z Energy ESPP Limited
Z Energy 2015 Limited
Julia Raue
Grant Glendinning
Ben Rodgers (retired 5 June 2020)
Julia Raue
Grant Glendinning
Ben Rodgers (retired 5 June 2020)
Abby Foote
Mark Cross
Mark Malpass
Julia Raue
Stephen Reindler
Blair O'Keeffe
Alan Dunn (retired 30 April 2020)
Z is committed to a culture that promotes and values diversity and inclusiveness.
This is reflected in our Diversity and Inclusion policy which applies to all Z people and
sets out processes for annual review of the organisation’s performance against the
policy and how it will be measured. The Board recognises that while Z has a clear plan
to increasingly build diversity into our business and we have made some progress,
there is more work to be done. Please refer to pages 38–41 for more information on
Z’s commitments in the Diversity and Inclusion space. Z’s Diversity and Inclusion policy
can be read here: https://investors.z.co.nz/corporate-governance/governance-overview
Total number of employees by employment contract (permanent and temporary)
by gender
Employee Type
Female
Permanent
Fixed Term
183
11
Non
Binary/Not
Disclosed
1
0
Total
476
22
Male
292
11
Total number of employees by employment contract (permanent and temporary)
by gender
Region
Auckland
Canterbury
Otago
Mini-Tankers Driver
Bay of Plenty
Hawke’s Bay
Nelson
Wellington
Home Office
Female
Male
Non
Binary/Not
Disclosed
45
2
1
2
143
1
61
43
3
11
9
3
9
158
6
1
Total
106
45
4
11
11
3
9
302
7
GOVERNANCE
A
N
N
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0
2
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8
PRINCIPLE 2
BOARD COMPOSITION
AND PERFORMANCE:
continued
Total number of employees by employment type (full time and part time), by gender
Employee Type
Full Time
Part Time
On Parental Leave
Female
160
19
15
Male
299
4
Non
Binary/ Not
Disclosed
1
Total
460
23
15
*Notes re total employees tables
1. Twenty contractors were engaged in the year, predominantly to provide additional digital capabilities.
2. Variations across the numbers above are due to the operational side of the business, with more males employed
in those roles which are predominantly based in regions outside of the main centres.
3. This data has been extracted from Z’s payroll system.
Gender pay ratios
Our primary method for tracking gender pay internally measures the gap across all
career levels excluding the Executive, as their remuneration is driven by market rates
for their individual roles. When excluding our Executive, the gender pay gap across Z in
FY21 was 2 percent in total. However, the methodology that is required to be reported
in this section includes our Executive and CEO, whose higher remuneration influences
these figures significantly.
The ratios of female to male average pay for Z’s permanent employees at 31 March 2021
are set out below.
Significant locations of operation are those regions where at least 20 males and females
are employed.
Ratio of basic salary and remuneration of women to men
By significant location of operation
Average base salary woman to man
Pay gap
Wellington
Auckland
0.87:1
13%
0.88:1
12%
Ratio of basic salary and remuneration of women to men for each employee category
Auckland
By role
Wellington
Leader of Self
Senior Leader
People Leader
Exec
0.95:1
0.95:1
0.92:1
0.66:1
The age groups of Z’s permanent employees and Board at 31 March 2021
% Employees
Age
Under 30 years
30–50 years
Above 50 years
16%
60%
24%
0.91:1
0.81:1
0.97:1
n/a
% Board
0%
0%
100%
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2
0
2
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A
U
N
N
A
The ethnicities of Z’s permanent employees and Board at 31 March 2021
Ethnicity
% Employees
% Board
NZ European/Pākehā
European
Asian (including Indian and Pakistan)
Other Ethnicity
Information Not Provided
Middle Eastern/Latin American/African
Māori
Pacific Islander
64%
12%
15%
2%
1%
2%
3%
1%
100%
0%
0%
0%
0%
0%
0%
0%
The number of Z permanent employees and Board with dependants at 31 March 2021
Number
Dependants
No
Yes
Not disclosed
Parental leave
Total number of employees that were entitled to parental leave, by gender
Female
194
Male
303
Non Binary/
Not Disclosed
1
Total number of employees that took parental leave, by gender
Non Binary/
Not Disclosed
Female
Male
13
0
0
193
256
49
Total
498
Total
13
Total number of employees that returned to work in the reporting period after
parental leave ended, by gender
Female
12
Male
1
Non Binary/
Not Disclosed
0
Total
13
Total number of employees that returned to work after parental leave ended
that were still employed 12 months after their return to work, by gender
Female
17
Male
5
Non Binary/
Not Disclosed
0
Total
22
Return to work and retention rates of employees that took parental leave, by gender
Return to work rate
Retention rate
Female
85
72
Male
100
100
Non Binary/Not
Disclosed
NA
NA
GOVERNANCE
A
N
N
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0
2
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0
PRINCIPLE 2
BOARD COMPOSITION
AND PERFORMANCE:
continued
Number of employees by education level
Education Level
Tertiary
Post Graduate
Secondary
None or unknown
Number
285
113
60
40
Z’s capability-led strategy relies on all people developing their capability in Customer
Experience (CX), innovation and digitisation. A CX-blended learning pathway is
available for all staff, and over 80 percent have completed it so far. Our previous work
in partnership with Microsoft to embed Microsoft 365 and upskill our people in digital
capabilities via a scenario-based learning programme paid off as we entered lockdown,
with our corporate workforce able to seamlessly transition to working remotely without
an impact on productivity.
We have recently targeted capability build in CX for specialist roles, starting with
product managers. A product management capability framework has been developed
and is now in use for development planning for product managers, supported by online
learning resources and a community of practice. In addition, capability has been built
with our Segment Managers and Experience Owners in the development of strategies
and effective evaluation of the initiatives that deliver on strategy.
Ways of Working (WOW) principles have been further developed and embedded
across Z, with our WOW coaches building agile, lean and human-centred development
capability. We have embedded these principles within the Z How — the operating
model we have designed this year which will allow us to manage and evaluate ideas
into clear road maps for the key parts of our business, prioritise what matters most
and then deliver this at pace on a rolling quarterly cadence. E-learning to support the
implementation of the Z How has been built, initially focusing on idea management.
Z delivers training and programmes through online learning modules using SAP’s Litmos
learning management system.
Z’s revised Leadership Framework was launched early in FY21 to reflect changing
expectations of leadership. Everyone at Z is a Leader and Covid-19 demonstrated how
fit for purpose this revised framework is for leading through increasingly volatile times.
A Learning and Development programme which supports all employees to develop these
skills will be rolled out in FY22, beginning with our senior leaders.
Blended learning programmes have been tailored for frontline operations staff at
Terminals and the Biodiesel plant. Z has partnered with Otago Polytech EduBits to add
micro-credentials to Terminals training for the Wharf Attendant role, and intends to
expand the programme if this is successful.
EAP Services Limited provides career coaching and is available to all staff and their
immediate families.
Outplacement and career coaching services are provided by CDL Insight Consulting.
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1
2
0
2
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A
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N
N
A
Diversity of governance bodies and employees
Percentage of individuals by gender, age and ethnicity
% Employees
% Exec
% Board
FY21 FY20
FY21 FY20
FY21 FY20
Gender
Female
Male
Non Binary/Not Disclosed
Age Group
Under 30 years
30–50 years
Above 50 years
Ethnicity
39% 37%
60% 63%
1%
1%
40% 40%
60% 60%
0%
0%
16% 15%
60% 62%
24% 23%
0%
0%
40% 50%
60% 50%
NZ European/Pākehā
European
Asian (including Indian and Pakistan)
Other Ethnicity
Information Not Provided
Middle Eastern/Latin American/African
Māori
Pacific Islander
64% 60%
12% 13%
15% 14%
3%
2%
1%
1%
2%
2%
5%
3%
2%
1%
80% 80%
20% 20%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Notes
The age groups of Board members were incorrectly stated in the FY20 report.
The standard deviation of Director age is 6.86 years.
33% 29%
67% 71%
0%
0%
0%
0%
29% 43%
71% 57%
100% 100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
GOVERNANCE
A
N
N
U
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0
2
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2
PRINCIPLE 2
BOARD COMPOSITION
AND PERFORMANCE:
continued
New employee hires and employee turnover
Total number and rate of new employee hires during the reporting period, by age group,
gender and region
Number
Rate
Gender
Female
Male
Non Binary/Not Disclosed
Region
Auckland
Canterbury
Otago
Mini-Tankers Driver
Bay of Plenty
Hawke's Bay
Nelson
Wellington
Home Office
Age Groups
Under 30 years
30–50 years
Above 50 years
31
26
10
1
1
3
0
0
0
42
0
22
31
4
54%
46%
18%
2%
2%
5%
0%
0%
0%
74%
0%
39%
54%
7%
Total number and rate of employee turnover during the reporting period, by age group,
gender and region
Number
Rate
Gender
Female
Male
Non Binary/Not Disclosed
Region
Auckland
Canterbury
Otago
Mini-Tankers Driver
Bay of Plenty
Hawke's Bay
Nelson
Wellington
Home Office
Age Groups
Under 30 years
30–50 years
Above 50 years
26
50
1
23
3
1
4
0
1
1
43
1
14
47
16
34%
65%
1%
30%
4%
1%
5%
0%
1%
1%
56%
1%
18%
61%
21%
2.6 – Directors should undertake
appropriate training to remain current
on how to best perform their duties as
directors of an issuer.
Z is committed to the continuous education of the Board. According to the Z Board
Charter, all Directors are expected to continuously educate themselves to ensure they
have the appropriate expertise to perform their duties effectively.
This year, the development opportunities for the Board provided by Z focused on
structured ‘deep dive’ education sessions on the following issues:
• Covid-19 — the potential for resurgence and safety implications
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A
• Building the capability of Z people
• Robberies and risk of abuse/wellbeing of staff
• Safety and Wellbeing/environment risk management
• Z’s process safety management framework
• Retail operational risk management
• Z Loyalty activity (Pumped, FlyBuys, data-driven programmes and offers)
• Cyber risk — loss/exposure of customer/sensitive data
• Cyber risk — loss of control/access to Z systems or data
• Cyber risk — ransomware.
Individual Directors also pursued a range of external training and development,
including attending sessions on governing through crisis, the need for clear business
purpose, governing climate change risk, building governance capability, boardroom
behaviour and attending the annual Corporate Governance Symposium.
Individual Directors also conducted safety ‘walk and talks’ (SWATS) as part of Z’s
operational risk management system including meeting with Z Mini-Tanker drivers,
visiting the Te Kora Hou Biodiesel plant, and inspection of the Seaview pier facilities,
including an update on asset management and strategy.
For FY22, areas targeted specifically for Director development include developing a
coherent ESG strategy bringing together all the various activity streams across Z and
setting clear future goals and commitments; a deep dive into the global status and
development of future fuels; further deep dives on climate change risk; and work on the
future of Z’s retail business.
GOVERNANCE
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PRINCIPLE 2
BOARD COMPOSITION
AND PERFORMANCE:
continued
2.7 – The board should have a
procedure to regularly assess director,
board and committee performance.
The Z Board’s People and Culture Committee is responsible for overseeing the annual
evaluation process of the Z Board and Board Committees. As a condition of the Z Board
Charter, the Board annually reviews and evaluates the performance of the Board,
Committees and individual Directors.
This year the Z Board was reviewed by independent experts, including an organisational
psychologist, in December 2020.
This process included attendance by the independent assessors at the full set of
in-person Board and Committee meetings, one-on-one interviews with each of the
Directors and key Executive team members, and reviews of Board papers, agendas,
and minutes.
Feedback is provided to the Board as a collective, and individual feedback is given
to each Director privately followed by individual conversations with the Board Chair.
The outcome of the review was discussed with the Board in February 2021. The report
noted that systems, policies and processes are seen to be in good shape, with a rigorous
framework in place and strong commitment to best practice. It also noted there is a
strong collective skill set and all Directors are engaged and contributing strongly. The key
recommendation for the Board was around generating more clarity on future strategy and
using this clarity to focus diversity of thought and enhance Board cohesion.
This had previously been identified as an area of Board focus. Future strategy was
addressed at the February Board meeting following the Board’s discussion on the
broader Governance review. The Board also agreed that strategic choices will remain
an area of focus over FY22.
2.8 – A majority of the board should be
independent Directors.
One hundred percent of the Board is independent. In order for a Director to be
considered independent, the Board must affirmatively determine that the Director
does not have a disqualifying relationship or material relationship with Z Energy.
Additionally, the Chair’s other commitments must not be such that they are likely
to hinder the Chair’s effective performance of the role.
2.9 – An issuer should have an
independent chair of the board. If the
chair is not independent, the chair and
the CEO should be different people.
Abby Foote is Z’s independent Chair of the Board. The roles of Z’s Chair and the CEO
are required to be held by different people.
PRINCIPLE 3
BOARD COMMITTEES:
“The board should use committees where this will
enhance its effectiveness in key areas, while still
retaining board responsibility.”
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N
A
3.1 – An issuer’s audit committee
should operate under a written charter.
Membership on the audit committee
should be majority independent and
comprise solely of non-executive
directors of the issuer. The chair of
the audit committee should be an
independent director and not the chair
of the board.
3.2 – Employees should only attend
audit committee meetings at the
invitation of the audit committee.
3.3 – An issuer should have a
remuneration committee which
operates under a written charter
(unless this is carried out by the whole
board). At least a majority of the
remuneration committee should be
independent directors. Management
should only attend remuneration
committee meetings at the invitation
of the remuneration committee.
The Z Board has a number of Committees, providing specialist areas of focus on core
parts of the business, such as Safety and Wellbeing, People and Culture, and Risk.
Details of these Committees and Director attendance at their meetings is on page 56.
Z’s Audit and Risk Committee (ARC) operates under a written charter. All members
(100 percent) of the ARC are independent Directors and the Chair of the ARC is not the
Chair of the Board.
The ARC Charter can be found in the Corporate Governance section of the Z Energy
Investor Centre at: https://investors.z.co.nz/corporate-governance/governance-overview
Z’s employees only attend ARC meetings at the invitation of the Committee. Committee
meeting procedure is outlined in the ARC Charter.
Z’s People and Culture Committee (PCC) performs the duties of a remuneration
committee and it operates under a written charter.
The PCC guides and reviews Z’s People and Culture and Remuneration strategies.
This involves reviewing short- and long-term incentive offers, and Z’s structures and
policies to ensure they support the delivery of Z’s strategy and business plans. The PCC
subsequently makes recommendations to the Board. The PCC also approves Z’s annual
remuneration budget.
The PCC agrees on remuneration of the CEO, the Board and the Executive. This element
of the PCC’s role involves approving performance criteria for the CEO. The Board Chair
is responsible for the CEO’s performance review. The PCC approves CEO remuneration
and recommends incentive payments or other adjustments to CEO remuneration to the
Board, considering the CEO’s performance review with the Board Chair.
The PCC establishes, develops and oversees a formal and transparent process for
the Board to review and evaluate the performance of the overall Board, the Board
Committees, and individual Directors, and to determine appropriate Board remuneration
subject to approval by shareholders as required by the NZX Main Board and Debt
Market Listing Rules.
It is the responsibility of the PCC to review and provide oversight of diversity and
inclusion within the Z Group. This is particularly relevant in the context of providing
assurance that Z’s remuneration practices are checked for bias and in support of
Z’s commitment to closing the gender pay gap.
Management only attend PCC meetings if invited by the Committee. The PCC Charter
can be found in the Corporate Governance section of the Z Energy Investor Centre at:
https://investors.z.co.nz/corporate-governance/governance-overview
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N
A
3.6 – The board should establish
appropriate protocols that set out the
procedure to be followed if there is as
takeover offer for the issuer including
any communication between insiders
and the bidder. The board should
disclose the scope of independent
advisory reports to shareholders.
These protocols should include the
option of establishing an independent
takeover committee, and the likely
composition and implementation of an
independent takeover committee.
Z adopted its Takeover Response Policy in 2019 to assist the Board and management if
Z receives an offer or an approach by a potential acquirer for a controlling stake in Z.
The purpose of the Policy is to ensure that Z is well-prepared for any approach and
therefore will be better able to control the takeover response process, and respond
to any approach in a professional, timely and co-ordinated manner. Such a response
will ensure that any approach is properly managed in the best interests of Z and
its shareholders.
Z has a takeover response manual for reference by the Board and relevant senior
management to assist in the effective operational management of any potential
takeover offer.
While acknowledging a takeover is not a crisis, the Z crisis management plans and
pandemic response plans proved to be highly effective and accessible in developing
frameworks, responses, roles and responsibilities. The format for Z’s takeover response
manual is also familiar to Z people.
Z’s Takeover Response Policy sets out specific obligations that apply to Directors, the
CEO and the CFO, as well as certain other employees who may be involved in a takeover
response process.
In the event of an offer or approach occurring, the material contained in the Policy would
be supplemented by Z’s management and external advisers at the time.
The Takeover Response Policy can be found in the Corporate Governance section
of the Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/
governance-overview
GOVERNANCE
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PRINCIPLE 3
BOARD COMMITTEES:
continued
3.4 – An issuer should establish a
nomination committee to recommend
director appointments to the board
(unless this is carried out by the whole
board), which should operate under a
written charter. At least a majority of
the nomination committee should be
independent directors.
3.5 – An issuer should consider
whether it is appropriate to have any
other board committees as standing
board committees. All committees
should operate under written charters.
An issuer should identity the members
of each of its committees, and
periodically report member attendance.
The People and Culture Committee (PCC) assists the Board with succession planning
and recruitment for the Board, CEO, Executive and other agreed key people.
The PCC directly designs and implements Z’s succession planning for the Board,
including the Chair of the Board, and the CEO. The succession planning strategy
addresses continued effective composition, necessary and desirable skills, experience,
knowledge, diversity and judgement and appropriate size of the Board.
The PCC identifies and recommends individuals for nomination to be members of the
Board and Board Committees to ensure the effective composition of both. The PCC
considers factors such as skills, experience, qualification, tenure (if applicable), diversity,
judgement, the ability to work with other Directors, fit with the culture of Z, and current
and future ability to lead and support Z’s strategy.
This year the Board asked to see more key talent as part of their commitment to managing
succession, particularly senior leaders identified as potential Executive team successors.
The PCC consults as required with the CEO over appointments to the Executive team.
This year Z appointed Figen Ulgen as Chief Customer Officer. Figen began working at
Z on 1 February 2021, following the departure of Jane Anthony in December 2020 after
11 years in senior management roles.
Before immigrating to New Zealand and working as Head of Analytics and Insight at
Countdown, Figen held senior executive roles at Intel and Microsoft in the USA, after
working with McKinsey in her home country, Turkey.
Figen holds a Bachelor of Science and Computer Engineering and a Master of Science
in Artificial Intelligence from Florida Institute of Technology (USA) where she held a
Fulbright Scholarship. She published her PhD in Machine Learning while studying in
Japan under a Government scholarship.
Figen adds proven expert executive capability in the areas of digital technologies, data
and analytics, product management and development to the Z Executive team.
The PCC Charter can be found in the Corporate Governance section of the Z Energy
Investor Centre at: https://investors.z.co.nz/corporate-governance/governance-overview
The Board has appointed three standing Board Committees to assist in carrying out its
responsibilities and has accordingly delegated responsibilities, powers and authority to
those Committees.
These Committees assist the Board by focusing on specific responsibilities in greater
detail than is possible for the Board as a whole. The Board ensures that each Committee
has access to adequate resources to perform its functions effectively and efficiently.
The Audit and Risk Committee (ARC) has the responsibility of assisting the Board in
ensuring oversight of all matters relating to risk management, including verification that
there are appropriate processes to identify and manage risk, financial management and
controls, and the financial accounting, audit and reporting of Z.
The People and Culture Committee (PCC) guides and reviews the People and Culture
Strategy and policies. It provides assurance to the Board that the strategy and policies are
designed and implemented effectively and are fully compliant with all legislative and listing
requirements. The PCC also oversees all people policies including remuneration frameworks.
Over FY21 the Health Safety Security and Environment (HSSE) Committee changed
its name to the ‘Safety and Wellbeing Committee’ reflecting the changes made in the
business and an increasing focus on holistic wellbeing as well as physical health.
This was a key focus for Z during the Covid-19 lockdowns and is aligned with stakeholders’
concern around organisational resilience and wellbeing. Over the year considerable
progress was made at Z on developing accessible wellbeing resources and leadership.
The Board Committee charters can be found in the Corporate Governance section
of the Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/
governance-overview
GOVERNANCE
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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 disclosures.”
This report seeks to demonstrate the Z Board’s commitment to high-quality disclosure
and reporting to shareholders and stakeholders. Z places a high value on transparency
and the relevance and quality of its financial and non-financial reporting and seeks to
make appropriate market disclosures in a timely fashion.
4.1 – An issuer’s board should have a
written continuous disclosure policy.
Z’s Market Disclosure Policy ensures the company keeps Z’s investors and markets
informed through a clear and balanced approach that communicates both positive and
negative developments.
4.3 – Financial reporting should
be balanced, clear and objective.
An issuer should provide non-financial
disclosure at least annually, including
considering environmental, economic
and social sustainability factors
and practices. It should explain how
operational or non-financial targets
are measured. Non-financial reporting
should be informative, include forward
looking assessments, and align with
key strategies and metrics monitored
by the board.
The Board is committed to providing timely, consistent, accurate, and credible
information to the market.
Z’s standing Disclosure Committee is responsible for ensuring Z’s compliance with its
disclosure obligations. The Committee consists of the Board Chair, the ARC Chair, the
CEO, the CFO, Z’s Corporate Communications and Investor Relations Manager, the
General Counsel and Chief Governance Officer.
The CEO and the Executive team are required to provide all material information to the
Disclosure Officers. The Disclosure Committee also monitors external markets to ensure
it is complying with external requirements.
The Market Disclosure Policy can be found in the Corporate Governance section of
the Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/
governance-overview
As part of Z’s commitment to continuous disclosure, and in response to high levels of
investor and stakeholder uncertainty around the impacts of Covid-19, Z committed
on 9 April 2020 to disclosing weekly fuel volume data to the markets in response
to requests for greater clarity around fuel market trading conditions during the
Covid-19 pandemic.
This level of disclosure is unique in the fuel market and has been welcomed by investors
and stakeholders.
4.2 – An issuer should make its code of
ethics, boards and committee charters
and the policies recommended in the
NZX Code, together with any other key
governance documents, available on
its website.
Z’s Investor Centre on its website (www.z.co.nz/investor) contains a Corporate
Governance section which holds the Z Board Charter and the Charters for
Z’s Sub-Committees. This section also includes Z’s Code of Conduct and all other
Z policies for public consumption.
All key governance, policy and disclosure documents are available on the Z Investor
Centre website.
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N
N
A
Z’s Executive team 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 is KPMG. 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 Z Board retains overall responsibility for financial reporting.
The ARC makes sure that it and the full Board are sufficiently informed about
best-practice financial reporting and Z’s operations to know whether financial
reporting is fit for purpose.
The ARC reviews Z’s risk-management systems and receives quarterly reports relating
to risk management from Z’s risk and assurance function and from management.
Additionally, two certifications from Z’s risk and assurance function are generated
every year, providing assurance to the Board that Z’s financial records have been
properly maintained, and that the financial statements comply with generally
accepted accounting principles and give a true and fair view of Z’s financial position
and performance.
Non-financial reporting
Z is committed to best-practice reporting and transparency at all levels of the
organisation. This currently includes reporting against the Global Reporting Initiative
(GRI) and Integrated Reporting guidelines and this report is the fifth annual report
using these frameworks.
Both the GRI and guidelines are recognised by the Sustainable Stock Exchanges
Initiative. Z also complies with NZX’s Environmental, Social and Governance guidance
and reports against the United Nations Sustainable Development Goals.
Z also reports against the Task Force on Climate-related Financial Disclosures (TCFD)
and the Australian Modern Slavery Act 2018 (see ‘How we report’ on page 4,
‘TCFD Report year two’ on pages 32–37, ‘Principle 1.1’ (modern slavery) on page 53,
and ‘TCFD Index’ on pages 127–128).
The ARC makes sure that it and the full Board are sufficiently informed about
best-practice financial and non-financial reporting.
5.2 – An issuer should have a
remuneration policy for remuneration
of directors and officers, which
outlines the relative weightings of
remuneration components and relevant
performance criteria.
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1
2
0
2
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A
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N
N
A
Approved Director remuneration for FY21
Board of Directors
Audit and Risk Committee (ARC)
People and Culture Committee (PCC)
Safety and Wellbeing Committee (SWC)
Position
Chair
Non-executive Director
Chair
Member
Chair
Member
Chair
Member
Fees
(per annum)
$185,000
$97,000
$20,000
$10,000
$20,000
$10,000
$20,000
$10,000
Flick Energy Directors’ remuneration received in FY21
The data in this table relates to Flick Energy Director remuneration. No other payments
were made to Flick Energy Directors.
Marcel van den Assum
Scott Bishop
Matt Todd
Aimee McCammon
Lindis Jones
Total
Board Fees
$81,000
$-
$54,000
$45,000
$-
$180,000
GOVERNANCE
A
N
N
U
A
L
R
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P
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2
0
2
1
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0
PRINCIPLE 5
REMUNERATION:
“The remuneration of directors and executives should be
transparent, fair and reasonable.”
5.1 – An issuer should recommend
director remuneration to shareholders
for approval in a transparent manner.
Actual director remuneration should
be clearly disclosed in the issuer’s
annual report.
Directors’ fees
The Board determined that there would be no increase in Director fees this year. The last
increase in the Z Board remuneration was in 2017.
None of the Z Directors are entitled to any remuneration from Z other than 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 2021
is $1,100,000 per annum.
Board fees
ARC fees
PCC fees
SWC fees
Total
remuneration
$185,000
-$4,194
$10,000
$190,806
$97,000
$20,000
$10,000
$127,000
$97,000
$20,000
$10,000
$127,000
$97,000
$10,000
$20,000
$127,000
$97,000
$10,000
$10,000
$117,000
$97,000
$10,000
$10,000
$117,000
$8,084
$833
$833
$9,750
Abby Foote*
Chair, Board of Directors
Member, ARC
Member, SWC
Mark Cross
Board of Directors
Chair, ARC
Member, SWC
Julia Raue
Board of Directors
Chair, PCC
Member, SWC
Stephen Reindler
Board of Directors
Chair, SWC
Member, ARC
Blair O’Keeffe
Board of Directors
Member, PCC
Member, SWC
Mark Malpass
Board of Directors
Member, ARC
Member, SWC
Alan Dunn**
Board of Directors
Member, ARC
Member, SWC
* Abby Foote returned $4,194 in Audit and Risk Committee fees paid in error.
** Alan Dunn retired from Z’s Board on 30 April 2020.
GOVERNANCE
A
N
N
U
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P
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0
2
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2
PRINCIPLE 5
REMUNERATION:
continued
CEO and senior officer total remuneration for FY21
We believe in creating a clear link between performance and reward. We report on
remuneration earned for the respective year of performance rather than remuneration
paid as a more appropriate way of illustrating how pay relates to performance.
This means this reporting includes cash bonuses earned over the course of the FY21
year even though they will not be paid until May 2021/FY22.
Although it is not required in New Zealand, we have disclosed the remuneration for our
senior officers (as disclosed to the NZX) as well as the CEO. This is consistent with our
commitment to an open and transparent relationship with our shareholders who have
expressed increasing interest in remuneration reporting in recent years. We have also
provided information on the performance targets Z set for the CEO and senior officers
in this period.
CEO and senior officer remuneration
Salary
and fees
$1,180,000
$440,000
$420,000
$420,000
$510,000
Fixed
taxable
benefits
$60,908
$23,908
$22,908
$22,908
$25,500
Subtotal
$1,240,908
$463,908
$442,908
$442,908
$535,500
Pay for performance
STI
paid in FY22 for
FY21 performance
Gross LTI
paid in FY22 for
2018–21 period
$590,000
$198,000
$126,000
$189,000
$229,500
$ –
$ –
$ –
$ –
$ –
Subtotal
$590,000
$198,000
$126,000
$189,000
$229,500
Total
remuneration
$1,830,908
$661,908
$568,908
$631,908
$765,000
Position
Chief Executive Officer
GM Retail
GM Supply
GM Commercial
Chief Financial Officer
Notes
1. Gross LTI — no payment as performance hurdles were not met.
2. Gross STI — excludes any KiwiSaver contribution.
3. Total remuneration excludes variances based on previous 12 months accumulative annual leave hourly rates,
and loan repayment and tax deduction for LTI.
4. Fixed benefits are 5% employer KiwiSaver contribution and medical insurance.
5. In April 2020, the Executive nominated not to receive a remuneration increase.
6. In May 2020, the Board chose not to pay STI for the entire organisation.
Breakdown of pay for performance
Z’s remuneration position is to benchmark total fixed remuneration (base pay) to the
upper quartile of the external market. This means that with our Short-term Incentive
(STI) annual bonus payment (cash bonus), the total rewards we offer are in the
top 10 percent of the New Zealand market when people deliver results above plan.
This includes both individual targets and company-wide targets.
Every permanent Z employee’s remuneration package comprises a base salary, an
STI component, and health insurance (with Southern Cross) for themselves and their
immediate family. Z also makes a 5 percent employer contribution to KiwiSaver.
One hundred percent of Z employees had regular performance and career development
reviews during the reporting period.
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.
Our STI model is focused on articulating performance goals for Z overall, and rewarding
all our people for working together to deliver these.
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 company’s performance and may be paid out at a multiplier of zero to two times an
individual’s STI target. While the value of the employee STI payments are solely driven
by company performance (with the exception of the Executive and Commercial Sales
employees), any individual who is underperforming is not eligible for participation in
this scheme.
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0
2
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R
L
A
U
N
N
A
The Executive team and selected senior employees are also eligible for participation in a
Performance Rights Long-Term Incentive Plan (PRLTIP). This is a share-based incentive
scheme which focuses on alignment with long-term shareholder interests by using a
share-based incentive over a three-year vesting period on an at-risk basis aligned with
the achievement of defined performance targets. Again, there are both individual and
company targets.
For shares to be issued under the scheme, participants must meet their individual
performance targets and the company must achieve a total shareholder return (TSR)
in the three-year period of at least 25th on the NZX 50. Payment is also subject to the
discretion of the Board.
Thirty percent of executives’ salary (excluding the CEO) is subject to stock ownership
requirements or guidelines. There are no stock ownership requirements or guidelines
for the CEO.
Loans are not provided to executives.
Performance measures for long-term equity and cash awards granted in the last fiscal
year are published in our annual report each year.
Short-term Incentive (STI) scheme at Z FY21
The CEO Target bonus amounts for Z Energy meeting expectations for both company
and individual performance is 50% of base salary. If the individual and/or the company’s
overall performance is below or exceeds expectations a multiplier is applied.
Although it is not required In New Zealand, we have disclosed the remuneration for our
senior officers (as disclosed to the NZX) as well as the CEO. This is consistent with our
commitment to an open and transparent relationship with our shareholders who have
expressed increasing interest in remuneration reporting in recent years. We have also
provided information on the performance targets Z set for the CEO and senior officers in
this period.
STI multiplier matrix for CEO and Executive
Individual
performance
Unacceptable
Below
expectations
Strong
performance
Exceeds
Extraordinary
Exceeds
Strong
performance
e Extraordinary
c
n
a
m
r
o
f
r
e
p
y
n
a
p
m
o
C
Below
expectations
Unacceptable
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.00
1.50
1.00
0.50
0.00
2.50
2.00
1.50
1.00
0.00
3.00
2.50
2.00
1.50
0.00
Notes
Performance evaluation descriptors are as follows:
• Below expectations: Performance less than would normally be expected for the role either due to inconsistent
delivery or inconsistent behaviours
• Strong performance: Performance fully meets expectations for the role both in what is delivered (results) and how
it is delivered (behaviours)
• Exceeds: Consistently met expectations in all areas. Performance is measurably ahead of that expected for the
role in either delivery against goals or leadership behaviours
• Extraordinary: Outstanding contribution to the business made. Generally recognised beyond own team as
having delivered outstanding performance in both what was achieved and how they achieved outcomes.
Leadership behaviours exceed expectations relative to role.
Z’s STI cash bonus is based on three things for our CEO and Executive:
1. Company performance ratings
2. Individual performance rating
3. Base salary and the on-target bonus for role.
GOVERNANCE
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4
PRINCIPLE 5
REMUNERATION:
continued
In February/March, the CEO and the Board agree on the company objectives to be
achieved in the following financial year. The company objectives are targets aligned to
the four strategic objectives which are to always be safe and reliable, deliver awesome
customer experiences, generate heaps of cash flow and grow non-fossil fuel income.
The Board assesses them in April after year end. In determining an overall performance
rating, the Board assesses the key result areas individually and considers any additional
achievements beyond plan.
Once the company objectives are set, individual objectives for the CEO and each
Executive are set.
An STI bonus will be paid only if 85 percent of the annual company RC EBITDAF target
has been met. Once this threshold has been met, payment is subject to the company
performance rating.
To qualify for any payment, individuals must achieve a minimum overall performance
rating of ‘Strong performance’ against their individual targets. To meet those
expectations, individuals must deliver strong performance and exhibit behaviour
consistent with Z’s values and leadership framework over the course of the year.
The STI bonus is paid only if both the company and the individual achieve these
nominated thresholds. The Board retains complete discretion over payment of STI
bonuses and may determine that no bonus will be paid in a given year.
The Board considers the following areas of performance when determining the overall
level of company performance:
• Significant Safety and Wellbeing incidents, such as fatalities
• Significant adverse reputational incidents, such as customer reaction to an
operational failure
• The company’s reputational alignment with being a world-class Kiwi company.
Restricted Share Long-Term Incentive Plan (RSLTIP)
The Executive team and selected senior employees were eligible for the Restricted Share
Long-Term Incentive Plan (RSLTIP) that ran from April 2018 to March 2021. The RSLTIP
was a share-based incentive scheme, not a cash bonus payment. The RSLTIP focused
on alignment with long-term shareholder interests by using a share-based incentive over
a three-year vesting period on an at-risk basis aligned with the achievement of defined
performance targets. Again, these are both individual and company targets.
For shares to vest under the scheme, participants must meet their individual performance
targets and the company must achieve a total shareholder return (TSR) in the three-year
period of at least 25th on the NZX 50. Payment is also subject to the discretion of the Board.
For the 2018 RSLTIP, the total shareholder returns over a three-year period have not
met the required entry level benchmark of #25 within the NZX50. Z actually ranked
#41, and the Board have determined that no payout will be made. This is consistent with
the principle that there should be strong alignment between shareholder interests and
those of Z’s senior managers.
The Board holds absolute discretion on the cash bonuses paid to participants, which are
used to repay the participant loan balances on the vested shares.
RSLTIP 2018–2021
Key criteria:
• Must achieve at least ‘strong performance’ each year, otherwise pro-rated
• Continued employment on the vesting date
• Board discretion for significant operational failures
• TSR must be higher than the 50th percentile of NZX companies
• Outperformance to market is rewarded by additional payout of up to 200 percent for
ranking of 5 or better.
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A
RSLTIP leadership percentage
• CEO — maximum of 2 × 50 percent of salary
• All senior officers — maximum of 2 × 30 percent of salary.
CEO STI FY21 — 50 percent of salary if Z meets company targets and
CEO meets individual targets
Meets all company targets above, plus demonstrates personal leadership, staff
engagement, stakeholder management, brand ambassadorship and thought leadership.
• CEO’s annual bonus cap — 3 × target percent of bonus
• None of the annual bonus for the CEO is or can be deferred
• Our senior officers must meet individual performance targets that are direct subsets
of the above-listed company STI FY21 measures
• Executives’ annual bonus (excluding CEO) cap — 3 × target percent of bonus
• None of the annual bonus for executives can be deferred
• No part of the bonus is granted or will be granted guaranteed.
CEO pay for performance scenario FY21
Remuneration policy and disclosures
The figures in the two graphs below are the total of current-year salary and fixed
benefits paid in the year noted, and performance payments earned in that year and paid
in the following financial year.
The first graph shows potential remuneration based on the scenario, and the second
graph shows actual remuneration for the last five years.
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
FY21 Fixed Rem
(unacceptable, below)
FY21 On-plan
(meets)
FY21 Maximum
(extraordinary)
Fixed
STI
LTI
Five-year summary CEO remuneration
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
FY17 actual
FY18 actual
FY19 actual
FY20 actual
FY21 actual
Fixed
STI
LTI
GOVERNANCE
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N
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PRINCIPLE 5
REMUNERATION:
continued
Five year summary — TSR performance
For measuring total company performance, Total Shareholder Return (TSR) is the metric
for RSLTI. This determines what proportion of shares vest.
Z’s relative TSR ranking as shown below is determined based on where Z ranks against
other companies in the NZX 50 at the end of the three-year term of the scheme.
Total Shareholder Return (TSR)
ZEL v NZX 50 assuming dividend reinvestment
200
150
100
50
0
6
1
-
r
a
M
159.85
52.08
7
1
-
r
a
M
8
1
-
r
a
M
9
1
-
r
a
M
0
2
-
r
a
M
1
2
-
r
a
M
Z Energy
New Zealand NZX 50 (TSR)
Explanation of remuneration policy and items in scenario charts
The CEO target bonus amount for strong performance by both company and individual
is 50 percent of base salary.
The numbers in the graphs on page 75 indicate the multiplier applied to an employee’s
bonus depending on company and individual performance.
Required disclosures
• Pay gap: CEO fixed remuneration ratio to Z permanent employee median fixed
remuneration is 10.5:1 (excludes STI and LTI)
• Explanation of key elements of TSR methodology: as explained above
• Any information that has been omitted: no material information is omitted
• Any benefits not included: none
• Key terms of any CEO benefits: Z has agreed to pay Mike Bennetts’ reasonable
accommodation and living expenses in Wellington, and reasonable travel expenses
for national travel (particularly between Wellington and Auckland). Mike has 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. The restraint of trade does not apply if Mike is made redundant
• Any amounts withheld/clawed back: none
• Summary of any estimates used: none
• Remuneration that uses related parties: none.
Z granted an additional payment to four Executive team members in FY21, rewarding
them for additional crisis management work.
The notice period for the CEO if the Z Board was to terminate the employment contract
is four weeks.
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1
2
0
2
T
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A
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N
N
A
Z employees’ remuneration
The total number of corporate employees is 498, of which 476 are permanent.
326 Z employees (or former employees) received remuneration and other benefits
over $100,000 in their capacity as employees during FY21, as set out in the table below.
This includes salary, settlement payments and redundancy payments for all permanent
employees. It would also normally include short- and long-term performance bonuses
awarded at the end of the previous financial year and paid in this financial year, however
this year there were no bonuses paid for the FY20.
This disclosure is based on actual amounts received in the year and differs from the
disclosure on Executive Remuneration that reflects performance in FY21, not all of
which is received during the current year. Z notes the high proportion of employees
(65 percent) earning above $100,000 reflects Z’s business model decisions. For example,
traditionally lower-earning employee roles (like call centre staff) are presently
outsourced to other New Zealand-based organisations.
Amount of remuneration
$100,000 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
$280,001 to $290,000
$290,001 to $300,000
$310,001 to $320,000
$370,001 to $380,000
$380,001 to $390,000
$410,001 to $420,000
$420,001 to $430,000
$430,001 to $440,000
$440,001 to $450,000
$460,001 to $470,000
$530,001 to $540,000
$1,240,001 to $1,250,000
Total
Employees
35
34
40
32
29
36
23
21
15
10
7
8
5
5
5
1
3
1
2
1
2
2
1
1
1
1
1
2
1
1
326
GOVERNANCE
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PRINCIPLE 5
REMUNERATION:
continued
Flick Energy employees’ remuneration
The data in this table relates to Flick Energy permanent employees only and the figures
include all remuneration and benefits.
Amount of remuneration
$100,000 to $110,000
$110,001 to $120,000
$120,001 to $130,000
$130,001 to $140,000
$140,001 to $150,000
$160,001 to $170,000
$200,001 to $210,000
$210,001 to $220,000
$230,001 to $240,000
$270,001 to $280,000
$350,001 to $360,000
Total
Employees
6
1
1
3
3
1
1
1
1
2
1
21
5.3 – An issuer should disclose the
remuneration arrangements in place
for the CEO in its annual report.
This should include disclosure of the
base salary, short-term incentives
and long-term incentives and the
performance criteria used to determine
performance-based payments.
We report on the CEO’s income for the year of performance, as opposed to the date
of payment.
The Board completed a review of the CEO’s base remuneration in April 2020.
However, facing into the uncertainty of Covid-19, the Executive and CEO nominated not to
receive a base remuneration increase in FY21. Their remuneration will be reviewed again
in early FY22 to ensure their salaries remain appropriate for the role and skills required.
Further details about CEO remuneration and benefits are available under Principle 5,
requirement 5.2.
PRINCIPLE 6
RISK MANAGEMENT
6.1 – An issuer should have a risk
management framework for its
business and the issuer’s board should
receive and review regular reports.
An issuer should report the material
risks facing the business and how
these are being managed.
“Directors should have a sound understanding of the
material risks faced by the issuer and how to manage
them. The Board should regularly verify that the issuer
has appropriate processes that identify and manage
potential and material risks.”
Z considers that it has followed robust enterprise risk management practices in
accordance with Z’s Risk Management Policy during the reporting period. Naturally,
Covid-19 was a critical principal enterprise risk requiring significant dedicated attention
from Management and the Board during FY21. In that context, the consideration of safety,
wellbeing and effective risk management — always areas of strong management and
governance focus at Z — have been particularly heightened over the period.
Z has an enterprise Risk and Assurance system, designed to ensure a proactive, consistent,
and systematic approach to identifying and managing risk, and ensuring independent and
objective views on the design and operational effectiveness of internal controls.
Z’s Risk and Assurance system recognises two principal functions: Risk and Assurance,
and Safety and Wellbeing.
Risk and Assurance has a primary focus on enterprise risk (commercial, strategic, legal,
reputational, people, culture and climate-related) and business risk (insurance and
financial risk, including core financial controls, treasury, delegated authorities, and
suspicious transactions).
Safety and Wellbeing has a primary focus on operational and infrastructure risk and
protecting and enhancing the wellbeing of people.
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A
Z’s Risk Management Policy provides clarity on roles and responsibilities for risk and
assurance. The Board is responsible for the overall effectiveness of Z’s risk management
and internal control systems, setting enterprise-risk appetite, and annually reviewing
enterprise risks.
The Risk Management Policy can be found in the Corporate Governance section of
the Z Energy Investor Centre at: https://investors.z.co.nz/corporate-governance/
governance-overview
The Audit and Risk Committee (ARC) is responsible for oversight, monitoring and reviews.
Each year, it approves and subsequently monitors the annual risk and assurance plan on
behalf of the Board.
It takes into account the internal and external environment, changes in the likelihood
and consequence ratings of existing enterprise risks, new risks, emerging risks and the
individual business-unit risk profiles. The ARC takes into account specific risks and
broader linkages between those risks. If a risk is not deemed to have the right level
of control in place, a treatment plan is identified and implemented to manage the risk.
Similarly, if additional risk assessment or review is required then this will be identified;
a recent example of this being the way in which Z is managing climate-related risks.
This year, the ARC introduced a new ‘risk watchlist’ to the highest priority principle
enterprise risks and ensure resources are being appropriately allocated to the
development of controls and mitigants for these risks.
Management regularly reports to the Board on principle enterprise risks through a series
of risk deep dives. These entail the Executive risk owner discussing one or two risks with
a detailed risk control plan for each.
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 risks. Z’s General Manager,
Strategy and Risk, is responsible for providing a single framework for risk management
at Z, consistent with Z’s Risk Management Policy and the Board’s risk appetite, including
facilitating regular reviews and updates to the CEO and the ARC.
6.2 – An issuer should disclose how it
manages its health and safety risks and
should report on its health and safety
risks, performance and management.
Because of the nature of Z’s business, safety and wellbeing risks are an area of
continuous focus. Z’s Safety and Wellbeing Committee oversees health and safety risk
and is responsible for all risks that could cause harm to people or the environment
arising from Z’s operations and activities.
Over FY21 safety and wellbeing emerged as the most material issue of concern to
stakeholders, and much of the Board and management team’s focus over the year was
protecting the safety and wellbeing of our people, customers, communities and our
economy in light of risks associated with Covid-19.
More information on Z’s commitment to Safety and Wellbeing is available on pages
44–45.
Z’s Safety and Wellbeing Committee approves an annual Safety and Wellbeing
enterprise plan, receives assurance and performance reports, monitors implementation
of Z’s Operational Risk Management system, and oversees the management of major
hazard facilities.
Z discloses its Safety and Wellbeing indicators quarterly to the market in its quarterly
operational data, which is available on Z’s Investor Centre. These indicators are:
lost time injuries; spills to ground; robberies; fuel quality incidents; process safety
incidents; food safety incidents; Z’s total recordable case frequency; and motor vehicle
incident frequency.
The quarterly operational data can be found in the Announcements section of the Z
Energy Investor Centre at: https://investors.z.co.nz/announcements/nzx-announcements
GOVERNANCE
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PRINCIPLE 7
AUDITORS:
“The board should ensure the quality and independence
of the external audit process.”
7.3 – Internal audit functions should
be disclosed.
7.1 – The board should establish a
framework for the issuer’s relationship
with its external auditors. This should
include procedures:
a. for sustaining communication with
the issuer’s external auditors;
b. to ensure that the ability of the
external auditors to carry out their
statutory audit role is not impaired
or could reasonably be perceived to
be impaired;
c. to address what, if any, services
(whether by type or level) other
than their statutory audit roles may
be provided by the auditors to the
issuer; and
d. to provide for the monitoring and
approval by the issuer’s audit
committee of any service provided
by the external auditors to the
issuer other than in their statutory
audit role.
7.2 – The external auditor should
attend the issuer’s Annual Meeting to
answer questions from shareholders in
relation to the audit.
The oversight of Z’s external audit arrangements is the responsibility of the ARC.
The key roles of the ARC are ensuring that the independence of the external auditors is
maintained, and that Z’s external financial reporting is highly reliable and credible.
The ARC Charter states that one of the responsibilities of the ARC is to sustain
communication with Z’s external auditors by providing a formal forum for free and
open communication between the Board, Z’s Risk and Assurance function, the external
auditors and management. The ARC Charter indicates the different ways in which
communication occurs with Z’s external auditors.
Z’s External Auditor Independence Policy outlines the framework for the relationship
with its external auditors. The Policy was reviewed in August 2020 following the
Financial Markets Authority New Zealand (FMA) report ‘Audit Quality — a Directors’
Guide’ on auditor independence and reviews of policies in other listed companies.
The ARC noted the policy was substantially consistent with FMA guidelines and similar
to the equivalent policies reviewed. Relatively minor amendments were made. KPMG
are retained as Z’s audit firm and a process was completed in FY21 to appoint a new
audit partner.
The Policy outlines the general requirements for approval of external auditors.
A firm may only be approved if it is considered to have full knowledge of the relevant
facts and has impartial judgement on issues related to the engagement.
The external auditor must not have held a management position at Z within two years
prior to the engagement that involved financial oversight. The firm must not allow the
direct compensation of its audit partners for selling other services to Z.
The Policy also outlines the guidelines for ensuring that any other assurance services
provided by Z’s external auditor do not conflict with the independence element of the
role. A general set of principles to be applied is provided.
The ARC must pre-approve all statutory and regulatory audit and related assurance
services provided by the external auditor.
Aside from core audit services relating to the statutory and regulatory audit, there are
other assurance services by the external auditor that are permitted as long as these
are pre-approved. The Policy also clarifies other services that are not appropriate or
permitted for the external auditor to carry out.
Z trusts and relies on KPMG’s internal processes and declarations.
The updated External Auditor Independence Policy can be found in the Corporate
Governance section of the Z Energy Investor Centre at: https://investors.z.co.nz/
corporate-governance/governance-overview
Z’s external auditors attend all of Z’s ASMs and are available to answer questions from
shareholders in relation to their audit.
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The Enterprise Risk and Control Committee is a management committee chaired
by the General Manager, Strategy and Risk. This committee has oversight of the
implementation and operation of Z’s enterprise risk management system, and considers
general risk and control matters consistent with the Board’s risk appetite.
Z’s Enterprise Risk and Assurance function reviews and reports on the effectiveness of
internal control systems and procedures. It has full access to the ARC. Each year, the
ARC determines the scope and activities of Z’s Risk and Assurance function.
The Head of Risk and Assurance has direct access to the CEO, reports to the Chair
of the ARC for functional risk and assurance purposes, the CFO for administrative
purposes and the GM, Strategy and Risk for other purposes.
PRINCIPLE 8
SHAREHOLDER RIGHTS
AND RELATIONS:
“The board should respect the rights of shareholders and
foster constructive relationships with shareholders that
encourage them to engage with the issuer.”
Z’s starting position is that shareholders are the owners of the company. Z respects its
shareholders and is committed to communicating with them openly and transparently.
With that commitment comes a commitment to listening, and Z seeks to understand
shareholders’ views, perspectives and ideas on a continuous basis.
Over FY21 there was a great deal of uncertainty across the capital markets as to what
the impact of Covid-19 might be. In this context, Z redesigned the way it seeks to
communicate with investors, moving, for example, to providing weekly fuel volume data
disclosures instead of on a quarterly basis.
At its 1H21 result, Z also outlined clearly the steps and areas of focus for Z in rapidly
rebuilding from Covid-19 and resuming dividend flows to investors. This report is a
continuation of these areas of focus.
Z has a comprehensive Investor Centre at www.z.co.nz/investor via which shareholders
and stakeholders can access a wide range of disclosures, reports, policies and charters
as have been referenced throughout this Corporate Governance section.
Z seeks to be open and accessible to shareholders and ensures face-to-face
engagement with institutional investors whether in person or virtually. Z’s annual
meeting provides a form for retail investors to engage with both management and the
Board. Z’s hybrid ASM on 18 June 2020 saw 418 attendees (most online).
Technology allowed for questions to be submitted prior to or at the meeting and a record
number of questions were raised.
Z provides multiple channels through which shareholders can easily contact the
company. All of Z’s reporting and corporate information is available electronically
through its website but Z will also provide information in other ways when that better
suits an investor. Z also maintains an accessible social media presence.
Z has an Investor Communications Policy which sets out how Z will engage with
shareholders at: https://investors.z.co.nz/corporate-governance/governance-overview
We’re always happy to talk to shareholders. Z’s Investor Centre website contains contact
information for direct access to our Corporate Communications and Investor Relations
Manager, Z’s Board of Directors and Z’s General Counsel and Chief Governance Officer.
Shareholders have the option to receive communications from Z electronically.
8.1 – An issuer should have a website
where investors and interested
stakeholders can access financial
and operational information and key
corporate governance information
about the issuer.
8.2 – An issuer should allow investors
the ability to easily communicate with
the issuer, including providing the
option to receive communications from
the issuer electronically.
GOVERNANCE
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PRINCIPLE 8
SHAREHOLDER RIGHTS
AND RELATIONS:
continued
8.3 – Quoted equity security holders
should have the right to vote on major
decisions which may change the nature
of the issuer in which they are invested.
8.4 – If seeking additional equity
capital, issuers of quoted equity
securities should offer further
equity security holders to existing
equity securities of the same class
on a pro rata basis, and on no less
favourable terms, before further
equity securities are offered to
other investors.
Contact information, frequently asked questions, and options to receive alerts and
request information from Z can be found under the Shareholder Services section of Z’s
Investor Centre at: https://investors.z.co.nz/shareholder-services/investor-faqs
Major decisions that may change the nature of Z’s business would be presented as
resolutions at the ASM and voted on by shareholders.
8.5 – The board should ensure that the
notices of annual or special meetings
of quoted equity security holders is
posted on the issuer’s website as soon
as possible and at least 20 working
days prior to the meeting.
Each year the Annual Shareholders Notice of Meeting is sent to shareholders by mail
and email at least 28 days before the meeting. Notices are also made available in the
Announcements section of the Z Investor Centre website at least 20 working days prior
to the meeting at: https://investors.z.co.nz/announcements/annual-shareholder-meeting
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As stated in this report, Z raised $347 million in additional equity capital in May/June
2020. The equity capital raise consisted of an institutional placement (including to new
investors) (Placement) followed by a share purchase plan (SPP). The $347 million raised
comprised $57.5 million in a share purchase plan and a fully underwritten $290 million
placement of new shares.
The Placement was fully underwritten at $2.75 per share, and shares were allocated
to existing shareholders and new investors at a price of NZ$2.90 per share, resulting
in the issue of 100 million new fully paid ordinary shares. The Placement issue price
represented a discount of 7.6 percent to the last close price of NZ$3.14 on 8 May 2020,
and a discount of 7.3 percent to the five-day volume weighted average price (VWAP)
of NZ$3.13. The Placement was conducted on an open-access basis and existing
shareholders who participated were given priority to obtain a pro rata allocation. Over
95 percent of the new shares issued under the Placement were allocated to existing
shareholders, with the remaining new shares issued allocated to new investors, in
accordance with Z Energy’s allocation policy.
The Share Purchase Plan (SPP) was offered to all eligible existing Z shareholders with
a registered address in New Zealand or Australia, enabling them to each subscribe for
up to a maximum of NZ$50,000 / AU$47,000 of new Z shares. 6,220 Z shareholders
applied under the SPP with an average application of approximately NZ$9,239. Given the
New Zealand Dollar to Australian Dollar exchange rate on the closing date, Australian
Dollar applications were capped at AU$46,710. The new shares issued under the SPP
were issued at a price of NZ$2.806, being a 2.5 percent discount to the five-day volume
weighted average price of Z’s shares traded on the NZX during the last five days of the
SPP offer period (including the closing date).
Z was granted a waiver from Listing Rule 4.5.1 in connection with the equity capital
raise offer (Waiver). As a part of its consideration of Z’s application for the Waiver,
NZX Regulation confirmed that the equity capital raise complied with recommendation
8.4 of the Corporate Governance Code.
The reasons for this include:
• As a condition of the Waiver, the Placement was conducted on an ‘open access’ basis,
so that existing Z shareholders with a broker relationship could participate
• As a condition of the Waiver, existing Z shareholders were given priority to obtain their
pro rata allocations in the Placement
• As a condition of the Waiver, Z was required to disclose the proportions of existing
investors and new investors who participated in the Placement
• NZX Regulation was satisfied that approximately 99 percent of existing Z retail
shareholders would have the opportunity to maintain their pro rata shareholding
under the SPP alone.
In total, the new shares issued through the Placement comprised 25 percent of
Z Energy’s shares prior to the completion of the Placement. This means that Z did not
rely on the waiver from Listing Rule 4.5.1 granted by NZX Regulation on 11 May 2020.
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GOVERNANCE
Ngā puakanga tāpiri
Additional disclosures
Disclosure of Directors’ interests
Z Directors:
Director
Abby Foote
Positions
Director
Blair O’Keeffe
Director
Julia Raue
Chair
Director
Mark Cross
Director
Mark Malpass
Stephen Reindler
Member
Shareholder
Director
Member
Power of Attorney
Director
Chair
Independent Advisor
Shareholder
Company
Z Energy 2015 Limited
Sanford Limited
Freightways Limited
Z Energy 2015 Limited
Endzone Commercial Limited
Central Economic Development Agency (ended 31 March 2021)
Napier Port Holdings Limited
Port of Napier Limited
Central Air Ambulance Rescue Limited
Hawke’s Bay Rescue Helicopter Trust
Z Energy 2015 Limited
Z Energy ESPP Trustee Limited
Z Energy LTI Trustee Limited
Jade Software Corporation Limited
Television New Zealand Limited
The Warehouse Group Limited
Southern Cross Health Society
Southern Cross Pet Insurance Limited
Z Energy 2015 Limited
Milford Asset Management Limited
Milford Funds Limited
Chorus Limited
Xero Limited
Investment Committee of Te Puia Tapapa Private Equity Fund
Milford Asset Management Limited
Z Energy 2015 Limited
Candesco Limited
Steel & Tube subsidiaries
Auckland Grammar School Board of Trustees
Steel & Tube Holdings Limited
Z Energy 2015 Limited
Pearl Coast Properties Pty Limited
Broome International Airport Pty Limited
Broome Shared Services Pty Limited
Steel and Tube Holdings Limited
CMUA Project Delivery Ltd
Waste Disposal Services (unincorporated joint venture)
D & H Steel Construction Limited
Clearwater Construction Limited
Massey University/AgResearch Joint Food Science Centre Steering Committee
Air New Zealand development at Auckland Airport
Auckland International Airport Limited
Air New Zealand
Meridian Energy Limited
Contact Energy Limited
Vector Limited
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Flick Energy Directors disclosed the following interests in other named companies at 31 March 2021:
Director
Positions
Company
Marcel van den Assum
Shareholder
Director and shareholder
Director
Shareholder
Member
Beneficiary of a Deed of Indemnity provided by
Matt Todd
Group Chief Executive
Director
Beneficiary of a Deed of Indemnity provided by
Flick Energy Limited
Regen Limited
Merlot.Aero Limited
Education Payroll Limited
Guam Nominee Limited
Wipster Independent Shareholders Limited
Wip App Limited
CropX (NZ) Limited
Sprout Agritech Limited
Yonix Limited
Cogo Connecting Good Limited
Angel Association
Flick Energy Limited
Eastland Group Limited
Eastland Group Limited and subsidiaries
Plus Business Limited (formerly Matt Todd
Holdings Limited)
Gisvin Limited
Flick Energy Limited
Lindis Jones
Chief Financial Officer
Director
Beneficiary of a Deed of Indemnity provided by
Z Energy Limited
The New Zealand Refining Company Limited
Flick Energy Limited
Aimee McCammon
Managing Director
Advisory board member
Beneficiary of a Deed of Indemnity provided by
Aaron Snodgrass
(Alternate for Matthew Peter Todd)
Chief Financial Officer
Director
Trustee and Chairman
Board Trustee and Chairman
Beneficiary of a Deed of Indemnity provided by
Augusto Group (Augusto, Augusto
Entertainment, Corner Store, New Ventures)
Pic's Peanut Butter
Flick Energy Limited
Eastland Group Limited
Eastland Group Limited and subsidiaries
AP Snodgrass Limited
Dilworth Trust
The Dilworth Foundation
Flick Energy Limited
Scott Bishop
(Resigned 31 March 2021)
Chief Innovation Officer
Beneficiary of a Deed of Indemnity provided by
Z Energy Limited
Flick Energy Limited
Directors’ interests in share transactions
The following Directors disclosed an acquisition or disposal of relevant interest in Z shares or bonds during the year to 31 March 2021:
Director
Abby Foote
Julia Raue
Mark Cross
Stephen Reindler
Blair O'Keeffe
Mark Malpass
Number of shares or bonds in
which a relevant interest is held
Z Energy Limited — 52,040 shares
Z Energy Limited — 21,191 shares
Z Energy Limited — 18,000 shares
Z Energy Limited — 18,100 shares
Z Energy Limited — 53,685 shares
Z Energy Limited — 15,000 shares
Acquired shares for the
year to March 2021
14,255 shares
10,691 shares
17,818 shares
10,600 shares
53,685 shares
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GOVERNANCE
Additional disclosures (continued)
Senior officers’ interests in shares and bonds
The senior officers disclosed the following relevant interests in shares at 31 March 2021:
Executive
team member
Mike Bennetts
Interest as
registered holder
of shares
Z RSLTIP interests
Z PRLTIP interests
Z PRLTIP interests
367,076 shares (held
by Kammjam Trust)
69,351 shares for the period
ended 31 March 2021
185,535 shares for the period
ended 31 March 2022
398,649 shares for the period
ended 31 March 2023
Lindis Jones
120,415 shares
19,401 shares for the period
ended 31 March 2021
48,113 shares for the period
ended 31 March 2022
103,378 shares for the period
ended 31 March 2023
Nicolas Williams 43,893 shares
17,143 shares for the period
ended 31 March 2021
39,623 shares for the period
ended 31 March 2022
85,135 shares for the period
ended 31 March 2023
Andrew Baird
David Binnie
Nil
41,509 shares for the period
ended 31 March 2022
89,189 shares for the period
ended 31 March 2023
17,946 shares for the period
ended 31 March 2021
39,623 shares for the period
ended 31 March 2022
85,135 shares for the period
ended 31 March 2023
Z ESPP
interests
Nil
Nil
Nil
Nil
Nil
Donations
For the year ended 31 March 2021, Z made total donations of $683,040 (2020: $874,551).
Flick Energy Limited made donations of $3,000 (2020: $1,496) during this period.
Material transactions
Z did not enter into an employment contract or contract for personal services during FY21 that would be classified as a
Material Transaction under Listing Rule 5.2.2(e)(i).
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. The Directors have disclosed entry into the deed of indemnity and the
Directors’ and officers’ liability insurance in its interests register.
As permitted by its constitution, Flick has entered into a deed to indemnify its Directors for potential liabilities or costs they may incur
for acts or omissions in their capacity as Directors of Flick. Z has a Directors’ and Officers’ Liability Insurance Policy in place that covers
Flick’s Directors. This provides insurance for the liabilities of the Directors of Flick for acts or omissions in their capacity as Directors.
The insurance policies do not cover dishonest, fraudulent, malicious, or wilful acts and omissions. The Directors have disclosed entry
into the deed of indemnity and the Directors’ and officers’ liability insurance in its interests register.
Payments to an auditor
Z audit fees are set out in note 7 of the Financial Statements. None of Z Energy 2015 Limited, Z Energy ESPP Trustee Limited, or
Z Energy LTI Trustee Limited paid any amounts to an auditor, for audit fees or otherwise, during the period.
Flick Energy Limited paid its auditors (KPMG) a fee of $44,000 plus disbursements.
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 2021:
Substantial product holders
Accident Compensation Corporation
L1 Capital Pty Ltd
Number of voting products in substantial
holding (ordinary Z shares)
Percentage of shares held
at date of notice
46,524,110
26,113,002
8.95%
5.02%
Date of
notice
18/05/20
27/11/20
The total number of Z ordinary shares on issue at 31 March 2021 was 520,136,969.
Distribution of ordinary shares and shareholders
At 31 March 2021
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001 and over
Totals
Number of shareholders
%
Number of shares
5,025
7,853
2,535
2,055
171
101
17,740
28.33
44.27
14.29
11.58
0.96
0.57
100
2,740,820
20,767,827
18,785,125
42,325,211
11,994,869
423,523,117
520,136,969
Distribution of ordinary bonds and bondholders
At 31 March 2021
ZEL 040
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001 and over
Totals
ZEL 050
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001 and over
Totals
ZEL 060
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001 and over
Totals
Number of bondholders
0
108
264
504
55
52
983
Number of bondholders
0
82
215
543
72
40
952
Number of bondholders
0
133
184
325
35
46
723
%
0.00
10.99
26.86
51.27
5.60
5.29
100
%
0.00
8.61
22.58
57.04
7.56
4.20
100
%
0.00
18.40
25.45
44.95
4.84
6.36
100
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%
0.53
3.99
3.61
8.14
2.31
81.42
100
Number of bonds
0
540,000
2,556,000
13,594,000
4,573,000
128,737,000
150,000,000
Number of bonds
0
410,000
2,084,000
15,258,000
5,921,000
46,327,000
70,000,000
Number of bonds
0
665,000
1,744,000
8,100,000
2,843,000
111,648,000
125,000,000
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GOVERNANCE
Additional disclosures (continued)
Our 20 largest registered shareholders
At 31 March 2021
Rank Holder name
Account
New Zealand Central Securities Depository Limited
HSBC Custody Nominees (Australia) Limited
CS Third Nominees Pty Limited
Citicorp Nominees Pty Limited
FNZ Custodians Limited
Forsyth Barr Custodians Limited
J.P. Morgan Nominees Australia Pty Limited
New Zealand Depository Nominee
JBWere (NZ) Nominees Limited
BNP Paribas Nominees Pty Ltd
National Nominees Limited
Pt Booster Investments Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
JBWere (NZ) Nominees Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16 Custodial Services Limited
17 Hobson Wealth Custodian Limited
18 Custodial Services Limited
19 Hawkesby Management Limited
Forsyth Barr Custodians Limited
20
1-CUSTODY
NZ RESIDENT
DRP
COLONIAL FIRST STATE INV
AGENCY LENDING DRP
RES INST
1
4
1 E
Holding
% issued
capital
209,802,802
33,244,879
29,325,215
18,347,088
17,505,007
15,844,080
12,612,534
10,809,342
8,888,837
7,144,709
6,118,403
5,152,179
4,486,934
3,921,106
3,200,370
3,104,610
2,846,491
2,601,620
1,908,122
1,771,521
40.34
6.39
5.64
3.53
3.37
3.05
2.42
2.08
1.71
1.37
1.18
0.99
0.86
0.75
0.62
0.60
0.55
0.50
0.37
0.34
Our 20 largest registered bondholders
At 31 March 2021
ZEL 040
Rank Holder name
New Zealand Central Securities Depository Limited
FNZ Custodians Limited
Forsyth Barr Custodians Limited
Hobson Wealth Custodian Limited
Custodial Services Limited
Investment Custodial Services Limited
Custodial Services Limited
Custodial Services Limited
Custodial Services Limited
FNZ Custodians Limited
JBWere (NZ) Nominees Limited
Custodial Services Limited
1
2
3
4
5
6
7
8
9
10
11
12
13 University Of Otago Foundation Trust
14
15
16 Custodial Services Limited
17
18 Hobson Wealth Custodian Limited
19
20 Custodial Services Limited
Sui Fong Chan
Forsyth Barr Custodians Limited
FNZ Custodians Limited
ENFT Limited
ZEL 050
Rank Holder name
1
2
3
FNZ Custodians Limited
Forsyth Barr Custodians Limited
New Zealand Central Securities Depository Limited
Custodial Services Limited
Custodial Services Limited
Investment Custodial Services Limited
Custodial Services Limited
JBWere (NZ) Nominees Limited
Forsyth Barr Custodians Limited
4
5
6
7
8
9
10 Hobson Wealth Custodian Limited
Custodial Services Limited
11
Custodial Services Limited
12
13
FNZ Custodians Limited
14 Custodial Services Limited
15
Karl Heinz Lehmann & Anne Marie Lehmann
JBWere (NZ) Nominees Limited
JBWere (NZ) Nominees Limited
Zhaoxi Lu
16
17
17
18 Custodial Services Limited
19 Green Lane Research & Education Fund Board
20 Custodial Services Limited
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U
N
N
A
Total units
50,917,000
13,492,000
11,082,000
9,546,000
8,125,000
5,606,000
5,389,000
5,175,000
2,613,000
2,321,000
1,571,000
1,537,000
1,005,000
1,000,000
913,000
871,000
465,000
460,000
425,000
334,000
Total units
9,115,000
5,786,000
4,824,000
4,244,000
2,715,000
2,685,000
2,482,000
2,297,000
2,265,000
1,477,000
924,000
840,000
725,000
646,000
600,000
308,000
300,000
300,000
269,000
250,000
215,000
% issued
capital
33.94
8.99
7.39
6.36
5.42
3.74
3.59
3.45
1.74
1.55
1.05
1.02
0.67
0.67
0.61
0.58
0.31
0.31
0.28
0.22
% issued
capital
13.02
8.27
6.89
6.06
3.88
3.84
3.55
3.28
3.24
2.11
1.32
1.20
1.04
0.92
0.86
0.44
0.43
0.43
0.38
0.36
0.31
Account
1-CUSTODY
RESIDENT CASH
4
C
3
2
18
DTA NON RESIDENT
NZ RESIDENT
1
1 E
16
DRP
AIL CASH
28
Account
1-CUSTODY
4
2
C
3
NZ RESIDENT
1 E
RESIDENT CASH
1
18
DTA NON RESIDENT
16
56413
NR USA
12
7
GOVERNANCE
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
9
0
Additional disclosures (continued)
Our 20 largest registered bondholders (continued)
ZEL 060
Rank Holder name
Forsyth Barr Custodians Limited
New Zealand Central Securities Depository Limited
Custodial Services Limited
FNZ Custodians Limited
Custodial Services Limited
Hobson Wealth Custodian Limited
JBWere (NZ) Nominees Limited
Custodial Services Limited
Custodial Services Limited
Investment Custodial Services Limited
Custodial Services Limited
Custodial Services Limited
Forsyth Barr Custodians Limited
FNZ Custodians Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15 Hobson Wealth Custodian Limited
16
17
18
19 Custodial Services Limited
20
JBWere (NZ) Nominees Limited
Custodial Services Limited
Best Farm Limited
JBWere (NZ) Nominees Limited
Account
1-CUSTODY
4
3
RESIDENT CASH
NZ RESIDENT
2
1
C
18
16
1 E
DTA NON RESIDENT
NON RESIDENTS CASH
NR USA
6
28
32086
Total units
19,140,000
18,926,000
12,931,000
12,422,000
7,334,000
7,006,000
6,870,000
6,195,000
3,430,000
3,153,000
3,141,000
1,986,000
1,045,000
698,000
451,000
438,000
422,000
400,000
346,000
300,000
% issued
capital
15.31
15.14
10.34
9.94
5.87
5.60
5.50
4.96
2.74
2.52
2.51
1.59
0.84
0.56
0.36
0.35
0.34
0.32
0.28
0.24
1
9
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Pūrongo
Pūtea
Financial
Statements
as at 31 March 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
9
2
Statement of comprehensive income
for the year ended 31 March 2021
Statement of changes in equity
for the year ended 31 March 2021
3
9
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Revenue
Expenses
Purchases of crude, product and electricity
Excise, carbon and other taxes
Primary distribution
Operating expenses
Share of loss of associate companies (net of tax)
Depreciation and amortisation
Net financing expense
Impairment
Net lease expenses
Fair value movements in interest rate derivatives
Gain on sale of property, plant and equipment
Increase in decommissioning and restoration provision
Total expenses
Net profit/(loss) before taxation
Taxation expense/(benefit)
Net profit/(loss) for the year
Net profit/(loss) attributable to the owners of the company
Net loss attributable to non-controlling interest
Other comprehensive income
Items that will not be reclassified to profit or loss
Valuation adjustment of land and buildings
Revaluation of investments
Disposal of revalued assets
Total items that will not be reclassified to profit or loss
Items that are or may be reclassified subsequently to profit or loss
Cash flow hedge and cost of hedging
Other comprehensive income/(loss) net of tax
Total comprehensive income/(loss) after taxation
Total comprehensive income/(loss) attributable to owners of the company
Total comprehensive loss attributable to non-controlling interest
Basic and diluted earnings per share (cents)
Notes
6
3, 7
12, 13
8
13
10
17
9
5
15
2021
$m
3,520
1,765
1,149
43
273
1
143
38
-
32
(10)
-
1
3,435
85
28
57
61
(4)
17
(15)
(2)
-
17
17
74
78
(4)
11
2020
$m
4,987
3,093
1,150
50
484
-
144
50
96
35
3
(2)
9
5,112
(125)
(37)
(88)
(72)
(16)
14
(63)
2
(47)
4
(43)
(131)
(115)
(16)
(18)
Notes
Capital
$m
Retained
earnings
$m
Investment
revaluation
reserve
$m
Employee
share
reserve
$m
Hedging
reserve
$m
Asset
revaluation
reserve
$m
Non-
controlling
interest
$m
Balance at 1 April 2019
Adjustment on initial
application of NZ IFRS 16
Adjusted balance at 1 April 2019
Net loss for the year
Other comprehensive income
Revaluation of investment
Disposal of revalued assets
Revaluation of assets
Total comprehensive
income for the year
Transactions with owners
recorded directly in equity:
Share-based payments and
own shares acquired
Dividends to equity holders
Supplementary dividends to
equity holders
Tax credit on supplementary
dividends
Total transactions with owners
recorded directly in equity
Balance at 31 March 2020
Balance at 1 April 2020
Net profit/(loss) for the year
Other comprehensive income
Revaluation of investment
Disposal of revalued assets
Revaluation of assets
Total comprehensive
income for the year
Transactions with owners
recorded directly in equity:
Issue of shares
Equity raise costs
Share-based payments and
own shares acquired
Total transactions with owners
recorded directly in equity
Balance at 31 March 2021
15
12
12
20
20
429
-
429
-
-
-
-
-
-
1
-
-
-
1
430
430
-
-
-
-
-
-
347
(10)
-
337
767
238
1
239
(72)
-
-
4
-
(13)
-
(13)
-
-
(63)
-
-
(68)
(63)
-
(188)
(15)
15
(188)
(17)
(17)
61
-
15
2
(17)
61
-
-
-
-
-
-
-
-
-
(76)
(76)
-
-
(15)
-
-
(15)
-
-
-
-
44
(91)
(5)
-
(5)
-
-
-
-
-
-
(1)
-
-
-
(1)
(6)
(6)
-
-
-
-
-
-
-
-
(2)
(2)
(8)
(5)
-
(5)
-
4
-
-
-
4
-
-
-
-
-
(1)
(1)
-
17
-
-
-
17
-
-
-
-
258
-
258
-
-
-
(2)
14
12
-
-
-
-
-
270
270
-
-
-
(2)
17
15
-
-
-
-
18
-
18
(16)
-
-
-
-
(16)
-
-
-
-
-
2
2
(4)
-
-
-
-
(4)
-
-
-
-
16
285
(2)
Total
equity
$m
920
1
921
(88)
4
(63)
2
14
(131)
-
(188)
(15)
15
(188)
602
602
57
17
-
-
-
74
347
(10)
(2)
335
1,011
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
9
4
Statement of financial position
at 31 March 2021
Statement of cash flows
for the year ended 31 March 2021
Shareholders’ equity
Equity attributable to owners of the company
Non-controlling interest
Total equity
Represented by:
Current assets
Cash and cash equivalents
Accounts receivable and prepayments
Income tax receivable
Inventories
Derivative financial instruments
Assets held for sale
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Right of use assets
Goodwill
Intangible assets
Investments
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 borrowings
Derivative financial instruments
Lease liability
Total current liabilities
Non-current liabilities
Other liabilities
Provisions
Derivative financial instruments
Deferred tax
Long-term borrowing
Lease liability
Total non-current liabilities
Total liabilities
Net assets
Approved on behalf of the Board on 5 May 2021
Abigail Kate Foote
Chair
Andrew Mark Cross
Chair, Audit and Risk Committee
Notes
11
19
12
12
10
13
13
15
19
9
17
18
19
10
17
19
9
18
10
2021
$m
1,013
(2)
1,011
162
299
-
570
77
-
1
1,109
816
280
158
497
42
38
13
1,844
2,953
605
15
21
169
33
16
859
8
72
25
94
601
283
1,083
1,942
1,011
2020
$m
600
2
602
19
297
24
565
32
4
-
941
819
282
158
628
48
153
16
2,104
3,045
748
-
19
70
91
14
942
10
74
26
74
1,032
285
1,501
2,443
602
Cash flows from operating activities
Receipts from customers
Dividends received
Interest received
Payments to suppliers and employees
Excise, carbon and other taxes paid
Interest paid
Taxation received/(paid)
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from assets held for sale
Proceeds from sale of property, plant and equipment
Lease payments received from leases
Purchase of intangible assets
Purchase of investments
Purchase of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Issue of shares
Equity raising costs
Net proceeds/(repayment) from bank facility
Purchase of shares
Dividends paid to owners of the company
Repayment of bonds
Payment of lease liabilities
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash
Cash balances at beginning of year
Cash at end of year
Notes
9
10
20
20
18
21
20
18
10
Reconciliation of net profit for the year to cash flows from operating activities
Net profit/(loss) for the year
Adjustments to reconcile profit to net cash inflow from operating activities
Depreciation and amortisation
Impairment
Share of loss of associate companies (net of tax)
Change in ETS units
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
5
9
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
2021
$m
3,542
-
26
(2,393)
(995)
(80)
22
122
5
-
1
(17)
(11)
(47)
(69)
347
(10)
(231)
(3)
-
-
(13)
90
143
19
162
57
143
-
1
70
(38)
(2)
(5)
(143)
39
122
2020
$m
5,156
1
43
(3,889)
(985)
(104)
(63)
159
2
24
1
(51)
(5)
(51)
(80)
-
-
182
-
(203)
(135)
(15)
(171)
(92)
111
19
(88)
144
96
-
(253)
17
202
13
71
(43)
159
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
9
6
Notes to the financial statements
for the year ended 31 March 2021
(1) Basis of accounting
Reporting entity
Z Energy Limited is a profit-oriented company registered in New Zealand under the Companies Act 1993 and a FMC Reporting
Entity for the purposes of the Financial Markets Conduct Act 2013. Z Energy Limited is listed, its ordinary shares quoted on the
NZX Main Board equity security market (NZX Main Board), on the Australian Stock Exchange (ASX) and has bonds quoted on
the NZX debt market.
The financial statements presented are those of Z Energy Limited (the Company, Parent) together with its subsidiaries, interests
in associates and jointly controlled operations (Z or the Group).
Basis of preparation
These financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand
(NZ GAAP) and part 7 of the Financial Markets Conduct Act 2013. They comply with the New Zealand equivalents to International
Financial Reporting Standards (NZ IFRS) as appropriate for profit-oriented entities and with International Financial Reporting
Standards (IFRS). Z has reported as a Tier 1 entity under the External Reporting Board (XRB) Accounting Standards Framework,
as a listed entity.
The measurement basis adopted in the preparation of these financial statements is historical cost, modified by the revaluation
of certain assets, investments and financial instruments as identified in the accompanying notes. The functional and reporting
currency used to prepare the financial statements is New Zealand dollars, rounded to the nearest million ($m), unless otherwise
stated. The financial statements have been prepared on a GST-exclusive basis except billed receivables and payables, which
include GST.
Basis of consolidation
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.
(2) Changes in accounting policies
The accounting policies have been applied consistently to all years presented in these Group financial statements, with the
exception of the early adoption of the amendment to NZ IAS 1 ‘Classification of liabilities as current or non-current’ (NZ IAS 1)
from 1 April 2020 and NZ IFRS 16 Leases (NZ IFRS 16). The early adoption of the amendment to NZ IAS 1 had no impact on
classification of Z’s debt facilities. Z has applied the NZ IFRS 16 practical expedient that permits lessees not to assess whether
rent concessions that occur as a direct consequence of the Covid-19 pandemic are lease modifications. The impact is disclosed
in note 3.
7
9
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
(3) Critical accounting estimates and judgements
The preparation of financial statements requires management to make the following judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
Refining NZ strategic review (notes 13, 15, 25)
On 25 June 2020, Refining NZ announced as part of their strategic review (previously announced on 15 April 2020), that
two business model options would be taken forward; a Simplified Refinery model and an Import Terminal System (ITS) model.
Both of these models impact Z as a customer and as a shareholder in Refining NZ.
Refining NZ implemented the Simplified Refinery model on 1 January 2021, reducing available refining capacity by
circa 18% to circa 34 million barrels per annum.
On 17 December 2020, Z issued a notice of dispute under its Processing Agreement with Refining NZ in response to the
Simplified Refinery model as the proposition did not allow Refining NZ’s customers to access the full capacity of the refinery
and made no financial adjustment for the reduced capacity. Z received a notice of dispute from Refining NZ under the Processing
Agreement on 18 December 2020 seeking retrospective payment of additional funds up to $70m per annum relating to historic
increases to the fee floor and changes to the capacity of the refinery. These disputes remain unresolved, and in conjunction with
the strategic review, there is a range of potential outcomes that Z does not have complete control over.
Financial impact
Z has assessed the financial impact and disclosure requirements in compliance with NZ IFRS, predominantly NZ IAS 36
Impairment of Assets (NZ IAS 36), NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets (NZ IAS 37) and NZ IAS 10
Events after the Reporting Period (NZ IAS 10). Z has assessed the significant uncertainty of both the outcomes of the Processing
Agreement disputes and likelihood of a decision by Refining NZ on whether or not to proceed with the conversion to an ITS.
This assessment has resulted in Z expensing the processing fee and the fee floor top up for January, February and March 2021.
As at 31 March 2021, the fee floor top up amounts for January and February had been paid to Refining NZ.
A change to the ITS model could impact Z on an on-going basis by simplifying the supply chain, which may lead to a reduction
in working capital requirements and changes to operating expenditure incurred by the Group. In addition, there are likely to be
some one-off conversion impacts, in particular a write-down in the value of any unrefined stock held at the refinery at the time
of conversion to an ITS.
The impact on the Refining NZ Processing Agreement intangible asset has been assessed in note 13.
There will be no impact on the treatment of the investment in RNZ, this will continue to be recognised at the NZX-listed
share price at balance date, disclosed in note 15.
The impact of events after balance date is disclosed in note 25.
Climate Change Commission
On 31 January 2021, the Climate Change Commission released its draft advice for the emissions budgets, plans and targets that
will enable New Zealand to meet two commitments: the 2030 emissions reduction targets as per the Paris Agreement and to be
net carbon zero by 2050. A wide range of advice was issued, including transport, heat industry and power, the Emissions Trading
Scheme (ETS), forestry and waste.
If the draft advice is adopted by Government, transport emissions would be impacted significantly through a variety of initiatives
including greater use of public transport, electrifying the vehicle fleet and increased use of low carbon fuels e.g. biofuels and hydrogen.
Z has accounted for its assets and liabilities included within the Statement of financial position in a manner consistent with the
draft advice, with no revaluation changes required as at 31 March 2021. Once the advice has been finalised by the Climate Change
Commission, Z will reassess if there is any impact on valuations within the Statement of financial position.
Provisions (note 17)
Liabilities are estimated for decommissioning and restoration (D&R) of certain sites of operation.
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
9
8
(3)
Critical accounting estimates and judgements
(continued)
Measurement of fair value (notes 12, 15 and 19)
Some of the Group’s accounting policies and disclosures require the measurement of fair values. Land and land improvements
are adjusted based on a land inflation index marker (see note 12).
Goodwill (note 13)
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.
Covid-19 pandemic
While some economic impacts of the Covid-19 pandemic have manifested during the year, there remains some uncertainty
of the ongoing impact on the Group’s business.
Covid-19 Provisions
The Group has recorded the following provisions to account for the impacts of the Covid-19 pandemic on the 31 March 2021
financial results:
Recognition in the
Statement of comprehensive income
Balance at 1 April 2020
Created
Utilised
Released
Balance at 31 March 2021
Doubtful
debts
$m
Operating
expenses
Convenience
stores
$m
Finished
product costs
$m
Operating
expenses
Cost of
goods sold
Secondary
distribution
$m
Operating
expenses
17
-
-
(10)
7
7
2
-
(9)
-
9
1
(8)
(2)
-
-
5
(4)
(1)
-
2021
$m
33
8
(12)
(22)
7
The provisions have been updated to reflect the current estimate of the impact of the Covid-19 pandemic. Movements in the
provision balances since 1 April 2020 relate to actual expenses billed, movement in doubtful debts to reflect current debtor
balances and latest fuel prices, release of provisions no longer required due to reassessment of expected costs and the
identification of additional distribution costs incurred as a result of the Covid-19 pandemic.
Doubtful debts
The remaining provision is for doubtful debts for the expected impact of recessionary decline caused by the Covid-19 pandemic
on the debtor balances existing as at 31 March 2021.
Commercial customers
Z has performed an assessment of credit risk on its largest Commercial customers and provided for these based on a risk
weighting. The criteria for the risk rating includes:
• Probability of enduring demand for that customer’s business
• The ability of the business to access alternative sources of funding
• Z’s understanding and experience with the customer
Retail customers and sub-tenants
Z has recorded provisions to account for the estimated financial impact of any defaults.
Wage subsidy
The Group received $3.4m of wage subsidies which have been recognised as an offset to salaries and wages within operating
expenses, in line with NZ IAS 20 Government Grants.
Rent concessions
The Group received $0.5m of rent relief as a direct consequence of the Covid-19 pandemic. The Group has applied the NZ IFRS 16
practical expedient as a lessee not to treat the rent relief as a lease modification. $0.5m of rent relief has been recognised in the
Statement of comprehensive income and the lease liability has been reduced by $0.5m.
(4) Replacement cost reconciliation
Replacement cost (RC) is a non-GAAP measure used by the downstream fuel industry to report earnings. RC removes the impact
of changes in crude oil and refined product prices on the value of inventory held by Z. Z manages the Group’s performance based
on RC. The difference between Historical Cost (HC) earnings and RC earnings is a cost of sales adjustment (COSA), foreign
exchange, commodity gains and losses and the associated tax impact.
9
9
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Income statement on RC basis
Revenue
Expenses
Purchases of crude, product and electricity
Excise, carbon and other taxes
Primary distribution
Operating expenses (net of foreign exchange and commodity gains/losses on fuel purchases)
Total expenses
RC operating EBITDAF*
Share of loss of associate companies (net of tax)
RC EBITDAF
Below RC EBITDAF expenses
Depreciation and amortisation
Net financing expense
Impairment
Lease depreciation
Lease interest income
Lease interest expense
Fair value movements in interest rate derivatives
Gain on sale of property, plant and equipment
Increase in decommissioning and restoration provision
Total below RC EBITDAF expenses
RC net profit before taxation
Taxation expense/(benefit)
RC net profit after taxation
2021
$m
3,520
1,755
1,149
43
334
3,281
239
1
238
143
38
-
20
(1)
13
(10)
-
1
204
34
31
3
2020
$m
4,987
3,005
1,150
50
416
4,621
366
-
366
144
50
96
19
(1)
17
3
(2)
9
335
31
(13)
44
* 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).
Reconciliation from statutory net profit after tax to RC net profit after tax
Statutory net profit after tax
COSA
Net foreign exchange and commodity (gains)/losses on fuel purchases
Tax expense on COSA
RC net profit after tax
2021
$m
57
10
(61)
(3)
3
2020
$m
(88)
88
68
(24)
44
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
0
0
(5) Non-controlling interest
Z owns 70% of Flick Energy Limited (Flick) with 30% owned by non-controlling interest (NCI). Z consolidates 100% of Flick’s
results and presents the portion of profit/(loss) and other comprehensive income attributable to NCI.
(7) Audit fees
Included in operating expenses are fees paid to the auditors (presented in whole dollars):
Flick results for the year ended 31 March 2021
NCI Percentage
Assets
Cash
Other current assets
Intangible assets
Other non-current Assets
Total assets
Liabilities
Trade payables
Deferred tax
Provisions
Income tax payable
Other non-current liabilities
Total liabilities
Net assets
Net assets attributable to NCI (30%)
Revenue
Net loss
Other comprehensive income
Total comprehensive income
Total comprehensive income attributable to NCI (30%)
Flick goodwill write-down attributable to NCI
Other losses attributable to NCI on consolidation
Total comprehensive loss attributable to NCI
Flick
2021
$m
30%
Flick
2020
$m
30%
3
31
3
1
38
(9)
-
-
(8)
-
(17)
21
6
47
(8)
-
(8)
(2)
-
(2)
(4)
4
2
2
1
9
(1)
-
-
-
(1)
(2)
7
2
39
(7)
-
(7)
(2)
(11)
(3)
(16)
(6) Revenue
Revenue from major business activities — fuel and convenience retail
Revenue comprises the fair value of consideration received or receivable for the sale of fuel, convenience retail or other, which
contains electricity income, in the ordinary course of the Group’s activities. The Group’s performance obligations are typically
satisfied when the Group has supplied the product to the customer, the customer has accepted the product and the collectability
of the related receivable is reasonably assured.
Fuel invoices are raised following delivery and settled in accordance with agreed payment terms. Some international customers
are required to pay prior to delivery. Transaction price is based on agreed contract rates and delivered volumes and is allocated
on delivery. Convenience revenue is recognised at the time of sale. Transaction price is based on the ticketed or contract price.
Fuel
Convenience retail
Other
Total revenue
2021
$m
3,399
65
56
3,520
2020
$m
4,870
64
53
4,987
Audit fees
Audit and review of financial statements
Audit and review of 2020 financial statements additional fee
Agreed upon procedures — licence fee return
Cost of stock adjustment review
Total audit fees
Audit-related fees
Greenhouse Gas Statement reasonable assurance
Total audit-related fees
Total audit and audit-related fees
(8) Net financing expenses
Financing income
Interest income from derivatives
Interest income from cash
Other finance income
Total financing income
Financing expense
Interest expense on bonds
Interest expense on derivatives
Interest expense on secured bank facilities
Interest expense on USPP notes
Financing fees
Other finance expense
Total financing expense
Net financing expense
1
0
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
2021
$
2020
$
348,900
30,000
4,500
10,250
393,650
30,000
30,000
344,000
-
6,000
10,000
360,000
-
-
423,650
360,000
2021
$m
2020
$m
24
1
1
26
14
25
2
16
1
6
64
38
40
1
1
42
20
42
5
19
1
5
92
50
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
0
2
(9) Taxation
Taxation expense or benefit is determined as follows:
Net profit/(loss) before taxation
Less share of loss of associate companies (net of tax)
Net profit/(loss) before taxation excluding share of earnings from associates
Taxation expense/(benefit) on profit for the year at the corporate income tax rate of 28% (2020: 28%)
Taxation adjustments:
Non-deductible expenditure
Reinstatement of depreciation on buildings
Over-provision in prior periods
Taxation expense/(benefit)
Comprising:
Current taxation
Deferred taxation
Taxation expense/(benefit)
2021
$m
85
1
86
24
-
5
(1)
28
8
20
28
2020
$m
(125)
-
(125)
(35)
11
(12)
(1)
(37)
32
(69)
(37)
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.
In March 2020, the Government re-introduced the deductibility of depreciation on buildings for tax purposes, for buildings
not primarily used for residential accommodation. This amendment applied from 1 April 2020 and the depreciation rate
is 2% diminishing value. The impact of this change was assessed at 31 March 2020 to increase the tax base for these assets,
reducing the difference between the carrying cost and the tax base. Both the deferred tax liability and tax expense reduced
by $12m. This has been reassessed in the current year with an increase in both the deferred tax liability and tax expense of $5m.
The comparative balances have not been restated.
Property,
plant and
equipment
$m
Intangible
assets
$m
Employee
benefits
$m
Finance
lease
$m
Other
provisions
$m
Derivative
financial
instruments
$m
Other
items
$m
Balance at 1 April 2019
Recognised in the Statement
of comprehensive income
Over-provision in prior
periods in the Statement of
comprehensive income
Reinstatement of
depreciation on buildings
Balance at 31 March 2020
Balance at 1 April 2020
Recognised in the Statement
of comprehensive income
Over-provision in prior
periods in the Statement of
comprehensive income
Reinstatement of
depreciation on buildings
Balance at 31 March 2021
(41)
12
(2)
12
(19)
(19)
7
(5)
(5)
(22)
(115)
28
-
-
(87)
(87)
3
-
-
(84)
-
1
-
-
1
1
-
(1)
-
-
4
(1)
-
-
3
3
-
3
-
6
2
5
-
-
7
7
6
11
-
-
17
17
(3)
(17)
-
-
4
-
-
-
1
4
(1)
-
4
4
(3)
1
-
2
Total
$m
(143)
60
(3)
12
(74)
(74)
(13)
(2)
(5)
(94)
3
0
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
2021
$m
(22)
(72)
(94)
2020
$m
(12)
(62)
(74)
Deferred tax expected to be settled within 12 months
Deferred tax expected to be settled after 12 months
Deferred tax
Imputation credits available for use in subsequent reporting periods are $106m (2020: $118m).
(10) Leases
Leases as a Lessee
Under NZ IFRS 16, Z recognises right-of-use assets and lease liabilities for most property leases.
On inception of a new lease, the lease liability is measured at the present value of the remaining lease payments, discounted
using Z’s incremental borrowing rate at that date. The right-of-use assets are measured at an amount equal to the lease liability,
and are depreciated over the estimated remaining lease term on a straight-line basis. Z presents the right-of-use assets and lease
liabilities separately on the face of the Statement of financial position.
Z applies the following practical expedients when applying NZ IFRS 16:
• A single discount rate to a portfolio of leases with similar characteristics;
• Exemption to not recognise right-of-use assets for low-value leases; and
• Exemption to not recognise right-of-use assets for leases with less than 12 months remaining.
Nature of lease payments as a lessee
Z as the lessee has various non-cancellable leases predominantly for the lease of land and buildings. The leases have varying
terms, escalation clauses and renewal rights. On renewal, the terms of the lease are renegotiated.
Information about leases for which Z is a lessee is presented below:
Right-of-use assets
Balance at 1 April 2020
Depreciation charge for the year
Additions to right-of-use assets
Adjustments to existing right-of-use assets
Derecognition of right-of-use assets
Balance at 31 March 2021
Right-of-use assets related to leased properties that do not meet the definition of investment property are represented
as property, plant and equipment.
Amounts recognised in profit or loss
Leases under NZ IFRS 16
Lease depreciation
Interest expense on lease liabilities
Lease expense on short-term leases
Maturity analysis
Leases liabilities as lessee
Between 0 to 1 year
Between 1 to 5 years
More than 5 years
Lease liabilities as lessee
2021
$m
20
13
1
2021
$m
16
80
203
299
2021
$m
282
(20)
9
9
-
280
2020
$m
19
17
3
2020
$m
13
74
212
299
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
0
4
(10) Leases (continued)
Leases as a Lessor
Z acts as a lessor for subleases on sites that Z leases. Z assesses each sublease based on the right-of-use asset and expected
useful life of the head lease, and where a sublease is for a significant part of the expected life of the lease, Z derecognises part
of the right-of-use asset and records this as sublease receivable. Sublease receivables are measured using the present value
of the future sublease income, discounted using Z’s incremental borrowing rate at that date. Subleases which are not classified
as being for a significant part of the expected life of the lease or of marginal costs are classed as operating leases.
Z has receivables from leases as a lessor relating to the lease of premises as shown below:
Operating lease income as a lessor
Income from subleasing right-of-use assets
Total lease expenses/(income) as lessor and lessee
Lease interest income
Lease depreciation
Lease interest expense
Net lease expenses
2021
$m
1
2021
$m
(1)
20
13
32
2020
$m
1
2020
$m
(1)
19
17
35
(11) Inventories
Inventory is stated at the lower of cost or net realisable value (NRV). The cost of inventories is based on the first-in-first-out
principle. NRV is the estimated selling price in the ordinary course of business less applicable variable selling expenses. Inventory
write down at 31 March 2021 was $3m (2020: the impact of Covid-19 drove a significant fall in commodity prices resulting in a
$53m write down of the closing value of crude and refined products as NRV fell below cost for certain products). The write down
is recorded in cost of goods sold.
5
0
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
(12) Property, plant and equipment
Property, plant and equipment (PPE) is measured at fair value based on periodic valuations, less accumulated depreciation
and any impairment after the date of revaluation.
An independent revaluation of all land and buildings (including terminal plants) is undertaken by an independent valuer every
five years using a level 3 fair value methodology in line with the fair value hierarchy. In the years between independent valuations,
the carrying value of land is adjusted annually by a land inflation index provided by an independent valuer based on recent sales,
as underlying land values are considered the significant determinant of fair value changes for Z. An assessment of other PPE fair
values is also performed annually by Z to assess the underlying assumptions for each asset class and determine whether any
revaluation is required. Additions to PPE after the most recent valuation are recorded at cost.
The last independent revaluation was recorded at 31 March 2017, with the next revaluation scheduled for 31 March 2022.
Depreciation is provided on a straight-line basis. The major depreciation periods (in years) are:
Buildings
Plant and machinery
Land improvements
Terminal plant
9–35
2–35
14–35
5–35
Year ended 31 March 2021
Cost/valuation
Balance at beginning of year
Additions
Disposals
Transfers between asset classes
Right of use asset
Assets held for sale
Valuation adjustment
Balance at end of year
34
46
-
(50)
-
-
-
30
Accumulated depreciation and impairment
-
Balance at beginning of year
-
Depreciation
-
Disposals
Balance at end of year
Carrying amounts
At 1 April 2020
At 31 March 2021
-
34
30
Constr-
uction
in progress
$m
Buildings
$m
Land and
improve-
ments
$m
Plant and
machinery
$m
Terminal
plant
$m
118
-
-
3
-
-
-
121
(29)
(8)
-
(37)
89
84
319
-
(1)
3
-
-
15
336
(13)
(3)
-
(16)
306
320
405
-
(13)
28
-
-
-
420
(189)
(38)
13
(214)
216
206
211
-
-
16
-
-
-
227
(37)
(14)
-
(51)
174
176
2020
Total
$m
1,046
51
(12)
-
(8)
(4)
14
1,087
(216)
(62)
10
(268)
2021
Total
$m
1,087
46
(14)
-
-
-
15
1,134
(268)
(63)
13
(318)
819
816
Included in buildings ($13m) and plant and machinery ($1m) are assets held under finance leases (2020: buildings $16m and
plant and machinery $1m).
For each revalued class, the carrying amount that would have been recognised had the assets been carried on a historical
cost basis are: buildings $48m (2020: $48m); land and improvements $132m (2020: $132m); terminals $149m (2020: $145m);
plant and machinery $184m (2020: $191m).
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
0
6
(12) Property, plant and equipment (continued)
The following table shows the valuation technique used in measuring the fair value of PPE, as well as the significant
unobservable inputs used.
Asset
class
Valuation techniques during full
revaluation
Significant
unobservable inputs
Land and
Buildings
Terminal
plant, and
plant and
machinery
Direct capitalisation approach based on
a sustainable market rental is capitalised
at an appropriate rate of return or yield
derived from comparable asset sales.
The market rental is built up from:
- fuel throughput margin
- estimated shop rental (for non-fuel sales)
The value ascribed to the land is allocated
using a value estimated based on recent
comparable land sales with the residual
value being allocated to buildings.
Depreciated replacement cost approach
is based on the gross current replacement
cost, reduced by factors providing for
age, physical depreciation, and technical
and functional obsolescence considering
an asset’s total estimated useful life and
anticipated residual value (if any).
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%-10%
Cost estimates sourced
from contracting
machinery suppliers
and cost analysis of
recent projects
Finance
leases
(buildings)
Net present value of contracted rental
cash flow at lease commencement over
the remaining term of the lease.
Discount rate 6.5%.
Rental payments are
sourced from lease
agreements.
Inter-relationship between
key unobservable inputs
and fair value measurement
The estimated fair value
would increase (decrease) if:
- throughput margins were
higher (lower).
- shop rental rates were
higher (lower).
- capitalisation rates were
lower (higher).
Valuation
adjustments
between full
revaluation
Land and land
improvements are
adjusted based
on a land inflation
index marker.
Land and buildings
are assessed
for impairment
annually.
Assessed for
impairment.
Assessed for
impairment.
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).
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).
Z considers the effects of the Covid-19 pandemic has not had a significant impact on the fair value of land and buildings
or terminal plant and machinery.
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.
Assets held for sale
There are no assets held for sale at 31 March 2021.
7
0
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
(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,
by estimating future cash flow considering expected fuel volumes, margin and discount rates.
Chevron acquisition goodwill
On 1 June 2016, Z 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. Z recognised $158m of goodwill as part of the purchase price allocation. As at 31 March 2021, an annual impairment
test of the goodwill was undertaken. The impairment test considered the impacts of Covid-19 on the carrying amount of
the goodwill.
The recoverable amount of the cash generating unit (CGU) containing the goodwill has been calculated based on the present
value of future cash flows expected to be derived from the CGU (value in use). This was calculated using a Z Board approved
20 year discounted cash flow valuation (DCF). Significant assumptions within the DCF include:
• Discount rate of 6.3% (real terms), which is the current weighted average cost of capital (WACC) estimated by Z and adjusted
for lease financing
• Terminal value growth rate of -5%
• Future sales volumes which have been estimated based on management’s internal view of industry volumes, informed by
the growth rate assumptions within the Tūī and Kea Energy forecast fuel use scenarios developed by the BusinessNZ Energy
Council for the period to 2060 (‘BEC2060 Scenarios’) and compared to consensus industry analyst forecasts. The demand
profile is more pessimistic than Tūī until around 2030, but more optimistic in the long-run out to 2040.
A 20 year DCF has been used instead of a five-year DCF due to the industry life cycle. The headroom between the carrying
amount and the recoverable amount of the CGU has decreased due to the current market conditions, however, there is
still sufficient headroom to conclude that no impairment is required. The discounted cash flows are most sensitive to
the following assumptions:
Change in key assumptions
Discount rate [+/-0.50%]
Retail margins [-/+ 1cpl]
Capital expenditure [+/- $10m] per annum
Market demand change [Kea]
Reduction in valuation
$m
Increase in valuation
$m
Would the indicated
sensitivity result in
impairment?
(152)
(138)
(115)
(771)
167
138
115
102
No
No
No
No
Z will continue to monitor market conditions on an ongoing basis and make necessary judgement on the need for impairment
of the goodwill.
Brands
Brands were acquired as part of the Chevron acquisition and are amortised over six years on a straight-line basis.
Contracts and customers acquired
Contracts acquired include customer contracts, supply agreements and leases acquired as part of the Chevron acquisition
and Flick customers as part of the Flick acquisition. These contracts are amortised over 3 to 21 years on a straight-line basis.
As at 31 March 2021, Z undertook an impairment test on the current value of both the Flick and Chevron customer contracts
as per the requirements of NZ IAS 36. Despite the challenging electricity market conditions, no adjustment was deemed
necessary for the Flick customer contracts as these were appropriately supported by the DCF at 31 March 2021.
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
0
8
(13) Intangible assets (continued)
Chevron customer contracts
On 1 June 2016, Z acquired the Caltex NZ business from Chevron. Included in this purchase was an allocation of $345m for the
intangible assets relating to the Caltex retail customer contracts. These were valued at the net present value of future cash flows
and amortised over 21 years on a straight-line basis.
Under NZ IAS 36, contracts acquired are finite life intangible assets that have a measurable life which can be amortised over a
measurable period. Accordingly, accounting standards require this type of asset to be tested for impairment when there is an
indicator of impairment due to triggering of a significant event, for example a decline in performance. If this indication is present,
an entity is required to make a formal estimate of recoverable amount.
On the basis that the Covid-19 pandemic has had a significant impact on retailers, an impairment test was carried out as at
31 March 2021 using the method and assumptions set out below.
Cash flow projections are based on Z’s forecasts for the year ending 31 March 2022 (FY22 Plan). In estimating the cash flow
projections beyond FY22, Z has based subsequent years on the fuel volume change implied by management’s internal view of
industry volumes, derived from consensus industry analyst forecasts. This demand profile is slightly more pessimistic than the
BEC2060 Tūī scenario until around 2030, but more optimistic in the long run out to 2040, consistent with the demand profile
used in the Chevron acquisition goodwill DCF model.
The assumptions for the 31 March 2021 calculation are as follows:
• 19-year DCF (previously 20 years, reflecting the roll-forward one year since the previous valuation) with no terminal value
• Retail gross margin based on FY22 plan and management’s long-term margin assumptions
• Discount rate of 6.5% (real terms), which is the current weighted average cost of capital (WACC) estimated by Z
• Future sales volumes which have been estimated based on management’s internal view of industry volumes, informed by the
growth rate assumptions within the Tūī and Kea Energy forecast fuel use scenarios developed by the BusinessNZ Energy
Council for the period to 2060 (‘BEC2060 Scenarios’) and compared to consensus industry analyst forecasts. The demand
profile is more pessimistic than Tūī until around 2030, but more optimistic in the long run out to 2040.
Using these assumptions, the recoverable amount as at 31 March 2021 was determined to be $273m, which is $85m more than
the carrying amount of $187m, therefore no impairment is required.
Refining NZ processing agreement
On 1 June 2016, Z acquired the Caltex business from Chevron. Included in this purchase was an allocation of $46m for the
intangible asset relating to the Processing Agreement (The Agreement) Chevron had with Refining NZ. The Agreement was
for the processing of crude oil to refined product and distribution of product through the Refinery to Auckland Pipeline (RAP).
The Agreement was valued using a discounted cashflow model of the local refining advantage over importing finished product.
This was based on Chevron’s then refining capacity allocation of total refinery throughput of ~120kbbl/day. A valuation timeframe
of June 2016–31 March 2030 was used and the asset value amortised straight line over this term. At 31 March 2021, the amortised
value is $30m.
Under NZ IAS 36, intangibles acquired are finite life intangible assets that have a measurable life which can be amortised over
a measurable period. Accordingly, accounting standards require this type of asset to be tested for impairment when there is
an indicator of impairment due to triggering of a significant event, for example a change to the processing agreement. If this
indication is present, an entity is required to make a formal estimate of recoverable amount.
The event of Refining NZ undertaking the strategic review has triggered an impairment test to be carried out at 31 March 2021.
Management has assessed possible outcomes of the strategic review and disputes, including the potential for Refining NZ
transitioning to an ITS, and carried out discounted cash flow valuations for various scenarios. Key assumptions used in the
‘continued refining’ model are a discounting period ending 2035 and refining margins averaging ~5.90 USD/bbl, consistent with
Refining NZ’s view on timeframes and refining margins. Key assumptions used in the ITS model are an initial 10-year discounting
period with no terminal value and forecast cost differential of ensuring product is available at the locations required. Based on the
various potential outcomes of this assessment there has been no impairment identified at 31 March 2021.
Emissions trading scheme
Units acquired are carried at cost less any accumulated impairment. Refer to note 14 for the number of units held.
9
0
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Other intangibles
Other intangibles include software, franchise rights, domain name and contacts acquired. Acquired computer software licences
are capitalised based on the costs incurred to acquire and bring to use the specific software. These costs are amortised over
three years on a straight-line basis. Contacts acquired are amortised over the useful life of the asset which is up to the lease’s
first right of renewal date. 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 2021
Balance at beginning of year
Additions
Transfers between asset
classes
Utilised
Reacquired/(leased)
Sale of units
Impairment
Amortisation
Balance at end of year
Cost
Accumulated impairment
Accumulated amortisation
Balance at end of year
Software in
progress
$m
Goodwill
$m
Brands
$m
Contracts
acquired
$m
Emissions
units
$m
Other
$m
4
14
(14)
-
-
-
-
-
4
4
-
-
4
158
-
-
-
-
-
-
-
158
193
(35)
-
158
14
-
-
-
-
-
-
(7)
7
37
-
(30)
7
281
-
-
-
-
-
-
(32)
249
445
(61)
(135)
249
261
136
-
(191)
37
(52)
-
-
191
191
-
-
191
68
5
14
-
-
-
-
(41)
46
203
-
(157)
46
2021
Total
$m
786
155
-
(191)
37
(52)
-
(80)
655
1,073
(96)
(322)
655
2020
Total
$m
668
336
-
-
(37)
-
(96)
(85)
786
1,124
(96)
(242)
786
(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 sold
Units reacquired/(leased)
Units surrendered
Balance at end of year
Obligation
Obligation payable at 31 March
2021
Units millions
2020
Units millions
10
4
(2)
1
(7)
6
-
6
-
4
-
10
2021
Units millions
2020
Units millions
9
10
The Emissions Trading Scheme obligation of $303m (2020: $246m) is included within accounts payable, accruals and other
liabilities and is valued at cost where units have been acquired to settle the Group’s obligation. Any shortfall in units needed
to settle the obligation is measured at fair value.
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
1
0
(15) Investments
The Group’s investment in Refining NZ is recognised at the NZX-listed share price at 31 March 2021 of $0.47 (2020: $0.78) giving
rise to a $15m reduction in the fair value for the financial year which is accounted for in other comprehensive income.
Investment in NZ Refining (fair value hierarchy level 1)
Investment in associates
Total investments
The Group wholly owns or has a partial interest in the below associates and subsidiaries:
Associates and subsidiaries
Drylandcarbon One Limited Partnership
Mevo Limited
Loyalty NZ Limited
Wiri Oil Services Limited (WOSL)
Coastal Oil Logistics Limited (COLL)
Flick Energy Limited
Z Energy 2015 Limited (formerly Chevron New Zealand)
Z Energy ESPP Trustee Limited
Z Energy LTI Trustee Limited
2021
$m
23
19
42
2020
$m
38
10
48
2021
% Holding
2020
% Holding
Associate
Associate
Associate
Associate
Associate
Subsidiary
Subsidiary
Subsidiary
Subsidiary
37%
32%
25%
44%
50%
70%
100%
100%
100%
37%
32%
25%
44%
50%
70%
100%
100%
100%
(16) Investment in joint operations
The Group has participating interests in four unincorporated jointly controlled operations relating to the storage and distribution
of petroleum products. The revenues and expenses are allocated in the financial statements of a proportionate share on a
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 2021,
there were no contingent liabilities for the jointly controlled operations (2020: nil). The value of assets in these interests is $13m
(2020: $13m).
Joint User Hydrant Installation
Joint Interplane Fuelling Services
Jointly Owned Storage Facility
Joint Ramp Service Operations Agreement
Wiri to Auckland Airport Pipeline
Principal activity
Fuel storage
Fuel distribution
Fuel storage
Fuel distribution
Fuel distribution
2021
% Holding
2020
% Holding
33%
50%
50%
0%
40%
33%
50%
50%
50%
40%
1
1
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
(17) Provisions
Decommissioning and restoration (D&R) 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. For the majority of assets, the
discount rate applied is the Treasury 30-year risk-free rate (currently 2.6%) and the inflation rate is the Treasury 30-year CPI rate
(currently 1.97%). Exceptions to this are the Caltex Retailer-owned Retailer-operated (RORO) sites, which use the six-year risk-free
rate (currently 0.63%) and the six-year CPI rate (currently 1.87%), and Caltex truck stops which use the 12-year risk-free rate
(currently1.38%) and the 12-year CPI rate (currently 1.93%). These rates are revised annually.
D&R costs expected to be settled within one year are classified as current liabilities. D&R costs expected to be settled
between 1 and 30 years are classified as non-current liabilities.
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.
Z engages a third party to provide an estimate of the D&R obligations for Z. Estimates are reviewed every three years, with the
next review due in February 2022. The current D&R obligations are between $40k–$45k for above-ground tanks and $65k–$75k
for below-ground tanks.
Other provisions include people-related costs and general business provisions.
For the year ended 31 March 2021
Balance at beginning of year
Created
Utilised
Released
Unwind of discount
Balance at end of year
Current
Non-current
Balance at end of year
(18) Borrowings
Decommissioning,
restoration and
remediation
$m
Other
$m
Total
$m
92
2
(2)
(1)
2
93
21
72
93
1
-
(1)
-
-
-
-
-
-
93
2
(3)
(1)
2
93
21
72
93
Financing arrangements
The Group’s debt includes bank facilities, bonds and US Private Placement (USPP) notes secured against certain assets
of the Group. The facilities require Z to maintain securities and operate within defined performance and gearing ratios.
The arrangements also include restrictions over the sale or disposal of certain assets without lender agreement. The Group
has complied with all debt covenant requirements imposed by lenders for the year ended 31 March 2021, with the exception
of the covenants temporarily waived for the year ended 31 March 2021.
Bank facilities and bonds are recorded initially at fair value, net of transaction costs. After initial recognition, bank facilities
and bonds are measured at amortised cost. Any difference between the initial recognised amount and the redemption value
is recognised in the Statement of comprehensive income over the period of the borrowing. USPP notes are recorded initially
at fair value, net of transaction costs, and are revalued monthly for spot risk.
Bank facilities’, bonds’ and USPP notes’ issue expenses, fees and other costs incurred in arranging finance are capitalised
and amortised over the term of the relevant debt instrument or debt facility, using the effective interest method.
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
1
2
(18) Borrowings (continued)
Banking facilities
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 1.5% to 2.3% (2020: 1.5% to 3.0%).
Secured bank facilities available
Balance at end of year (facilities drawn down)
Current
Non-current
Balance at end of year
2021
$m
530
19
19
-
19
2020
$m
530
250
70
180
250
The facilities comprise a $180m revolving-term debt facility drawn to $0m plus a $350m working capital facility drawn to $19m,
both maturing in December 2021.
Bonds
Balance at beginning of year
Bonds repaid
Amortisation
Balance at end of year carrying value
Current
Non-current
Balance at end of year carrying value
Fair value of bonds
USPP notes
Balance at beginning of year
Movement in fair value hedge
Movement in foreign-exchange revaluation
Balance at end of year carrying value
Current
Non-current
Balance at end of year carrying value
Fair value of USPP notes
2021
$m
343
-
1
344
150
194
344
362
2021
$m
509
(35)
(67)
407
407
407
456
2020
$m
477
(135)
1
343
-
343
343
340
2020
$m
393
60
56
509
-
509
509
574
3
1
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
(19) Financial risk management
The Group has 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 reports
to the Audit and Risk Committee and the Board on the relevant risks and the controls and treatments for those risks.
Summary of the Group’s exposure to financial risk and the management of those:
Financial risk Exposure
Product
Management of risk
Market risk
Foreign
exchange
risk
Movement in foreign
exchange rates
Bills Libor
(Basis swap)
Forward
exchange
contract
Cross currency
interest rate
swaps (CCIRS)
Quarterly resetting notional (based on the actual FX spot rate of the
NZD/USD) on the 8-,10- and 12-year basis swaps offset with the 1-year
basis swap, reviewed annually for renewal.
Reduce price fluctuations risk of foreign currency commitments, mainly
associated with purchasing hydrocarbons.
Hedge variability risk in cash flows arising from price fluctuations of foreign
currency of the USD USPP notes.
To mitigate profit or loss volatility, the CCIRS is designated into a fair value
hedge and cash flow hedge relationship.
Sensitivity
to FX
Interest
rate risk
Sensitivity to
interest rate
Commodity
price and
timing risk
Sensitivity
to electricity
prices
Liquidity risk
Credit risk
Foreign-currency: At 31 March 2021, 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
would change by $3m higher/$7m lower (2020: $16m higher/$20m lower) and the change in other comprehensive
income for the year would be $0 higher/$2m lower (2020: $2m higher/$1m lower).
Movement in
interest rates
Minimise the cost of debt (interest) and manage the volatility to the
Groups earnings.
The CCIRS is designated into a fair value hedge and cash flow hedge
relationship to mitigate profit or loss volatility.
Reduce exposure on the basis cost of the CCIRS.
Interest rate
swaps (IRS)
Cross currency
interest rate
swaps
Bills Libor
(Basis swap)
At 31 March 2021, if bank interest rates at that date had been 100 basis points higher/lower (with all other variables
held constant), after-tax profit would change by $6m higher/$2m lower (2020: $4m higher/$3m lower) and the change
in other comprehensive income for the year would be $2m higher/$0m lower (2020: $2m higher/$3m lower).
Changes in crude and
product prices
Match commodity purchase and sales.
Commodity
swaps
At 31 March 2021, if forward electricity prices at that date had been $25/MWH higher/lower (with all other variables held
constant), after-tax profit would change by $0m higher/$0m lower (2020: $0m higher/$0m lower) and the change in other
comprehensive income for the year would be $8m higher/$8m lower (2020: $0m higher/$0m lower).
Risk that the Group will
not be able to meet its
financial obligations as
they fall due
Risk of loss to the
Group due to customer
or counterparty default
Risk of derivative
counterparties and cash
deposits being lost
Active management of cash flow, access to committed funds and lines
of credit and the maturity profile of its financial obligations.
Limited exposure due to credit checks carried out on new customers, credit
terms and standard payment terms. Less than 2% of the Group’s receivables
are overdue (2020: 7%).
Bank facilities are maintained with A or above rated financial institutions,
with a syndicate of 5 bank counterparties to ensure diversification.
The CCIRS is classified as level 2 in fair value hierarchy and are hedge accounted. All other products are level 2 and accounted
for as fair value through the Statement of comprehensive income.
The fair value of the CCIRS and IRSs excludes accrued interest. All other derivatives do not contain interest components.
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
1
4
(19) Financial risk management (continued)
Recognition and measurement of derivatives
Derivative financial instruments are recognised initially at fair value at the date they are entered into (trade date). 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 immediately, unless the instruments are designated in
an effective hedge accounting relationship.
Liquidity risk
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.
At 31 March 2021
6 months or
less
$m
6 to 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
Non-derivative financial liabilities
Working capital loan
Accounts payable
Lease liabilities
Bonds
USPP notes
Non-derivative
financial liabilities
Derivative financial instruments
IRS
Commodity hedges
CCIRS
Basis swap
Derivative
financial instruments
19
151
16
7
8
201
(4)
32
3
1
32
-
-
16
155
8
179
(4)
10
3
1
10
-
-
31
8
15
54
(6)
6
5
9
14
-
-
117
205
175
497
(6)
-
8
-
2
-
-
291
-
289
580
-
-
1
(2)
(1)
19
151
471
375
495
19
151
299
344
407
1,511
1,220
(20)
(20)
48
20
9
57
48
26
3
57
5
1
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
At 31 March 2020
6 months or
less
$m
6 to 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
Non-derivative financial liabilities
Working capital loan
Accounts payable
Lease liabilities
Long-term loan
Bonds
USPP notes
Non-derivative
financial liabilities
Derivative financial instruments
IRS
Commodity hedges
CCIRS
Basis swap
Derivative
financial instruments
70
304
15
1
7
9
406
(3)
37
4
-
38
-
-
15
1
7
9
32
(4)
-
4
(17)
(17)
-
-
29
182
163
18
392
-
-
86
-
213
54
353
(7)
(12)
-
7
2
2
-
21
6
15
-
-
336
-
-
503
839
-
-
43
27
70
70
304
481
184
390
593
70
304
299
180
343
509
2,022
1,705
(26)
37
79
18
108
(25)
(37)
130
-
68
Discussions on refinancing bank-debt facilities will normally begin at least six months before maturity with facility terms agreed
at least three months before maturity.
Interest rate risk analysis
At 31 March 2021
Interest-rate exposure borrowing
Cross-currency swaps
Interest-rate swaps
Net interest-rate exposure
At 31 March 2020
Interest-rate exposure borrowing
Cross-currency swaps
Interest-rate swaps
Net interest-rate exposure
Less than
1 year
$m
150
378
(380)
148
Less than
1 year
$m
-
378
(130)
248
1 to 2
years
$m
-
-
200
200
1 to 2
years
$m
330
-
-
330
2 to 5
years
$m
321
(126)
(55)
140
2 to 5
years
$m
195
-
5
200
5+
years
$m
252
(252)
125
125
5+
years
$m
378
(378)
125
125
Total
Notional
$m
723
-
(110)
613
Total
Notional
$m
903
-
-
903
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
1
6
(19) Financial risk management (continued)
Offsetting of financial instruments
Z enters into derivative transactions under International Swaps Derivatives Association (ISDA) master agreements.
The ISDA agreements do not meet the criteria for offsetting in the Statement of financial position for accounting purposes.
This is because Z does not have any current legally enforceable right to offset recognised amounts. Under the ISDA agreements,
the right to offset is enforceable only on the occurrence of future events such as a default on the bank loans or other credit
events. The potential net impact of this offsetting is disclosed in: ‘Amount after applying rights of offset under ISDA agreements’.
Z does not hold and is not required to post collateral against its derivative positions.
Derivative assets
Derivative liabilities
Derivative financial assets/(liabilities)
Derivative
position
2021
$m
Amount after
applying rights of
offset under ISDA
agreements
$m
Derivative
position
2020
$m
Amount after
applying rights of
offset under ISDA
agreements
$m
115
(58)
57
64
(7)
57
185
(117)
68
69
(1)
68
Hedge accounting
The nature and the effectiveness of the hedge accounting relationship will derive where the gains and losses on re-measurement
are recognised. The CCIRS derivatives are designated as either:
• Fair value hedges: the derivative is used to manage the variability in the fair value of recognised liabilities, to hedge
the interest-rate risk (the hedged risk) arising from the USD USPP notes (the hedged items).
The following changes are recognised in profit or loss:
- The change in fair value of the hedging instruments;
- The change in fair value of the underlying hedged items attributable to the hedged risk.
Once hedging is discontinued, the fair value adjustments to the carrying amount of the hedged item arising from the hedged
risk is amortised through profit or loss from that date through to maturity of the hedged item.
• Cash flow hedges: derivatives are used to manage the variability in cash flows of highly probable forecast transactions, to
hedge the variability in cash flows arising from interest rate and foreign currency exchange rate movements of the USD USPP
notes (the hedged items).
The following changes are recognised in profit or loss (interest costs):
- any gain or loss in relation to the ineffective portion of the hedging instrument
- fair value changes in the hedging instrument previously accumulated in other comprehensive income, transfer to profit
or loss when the underlying transactions are recognised in the Statement of comprehensive income.
Once hedging is discontinued, any cumulative gain or loss previously recognised in other comprehensive income is recognised
in profit or loss (interest costs) either:
- at the same time as the forecast transaction, or
- immediately if the transaction is no longer expected to occur.
Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, or no longer qualifies
for hedge accounting.
Z designates the entire CCIRS to hedge its foreign-currency risk and interest-rate risk and applies a hedge ratio of 1:1, except for
the cross-currency basis elements of the CCIRS that are excluded from the designation and are separately accounted for as a
cost of hedging. This cost is recognised in other comprehensive income in a cost of hedging reserve. The Group’s Treasury Policy
is for the critical terms of the CCIRS contracts to align with the hedged item.
Z determines the existence of an economic relationship between the hedging instrument and the hedged item based on the
currency, amount and timing of the respective cash flows, reference interest rates, tenors, repricing dates, maturities and notional
amounts. Z assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in
offsetting the changes in cash flows of the hedged item using the hypothetical derivative method.
7
1
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
In these hedge relationships, the main source of ineffectiveness is the effect of the counterparty and Z’s own credit risk
on the fair value of the CCIRS.
Electricity Price Hedges
To mitigate profit and loss volatility, some electricity derivatives are designated into cash flow hedge relationships. Z determines
the existence of an economic relationship between the hedging instrument and the hedged item based on the amount and timing
of their respective cash flows, reference nodes, maturities and volumes. Z assesses whether the derivative designated in each
hedging relationship is expected to be and has been effective in offsetting the changes in cash flows of the hedged item.
In these hedge relationships the main source of ineffectiveness is where the volume of electricity sold at fixed price is lower than
the volume of the derivative contracts. Other sources of ineffectiveness include location factor differences (location of hedging
and consumption nodes) and credit risk.
The effect of Z’s hedge accounting policies in managing its foreign-exchange risk, interest-rate risk and electricity price risk
related to the underlying hedging instrument is presented in the tables below. The details of the hedging instruments and items at
31 March 2021 are recognised in the Statement of financial position within derivative financial instruments and borrowings as follows:
Nominal
amount
(hedging
instrument)
Carrying
amount
(hedged item)
$m
Accumulated
fair value hedge
adjustment
to carrying
amount
(hedge item)
$m
Carrying value
of derivatives
(hedging
instrument)
$m
Life to date
change in
value used for
calculating
hedge
ineffectiveness
$m
Accumulated
cost of hedging
reserve
$m
At 31 March 2021
Cash flow hedge and fair value hedge
Interest-rate risk and
foreign-currency risk
8 years, rate 3.83%
10 years, rate 4.04%
12 years, rate 4.14%
Commodity hedge
Commodity price risk
and timing risk
Outstanding notional
Volumes
$90m USD
$90m USD
$90m USD
354,866 MWh
Total
(136)
(136)
(135)
-
(407)
(7)
(8)
(8)
-
(23)
9
9
8
31
57
10
10
9
31
60
(1)
(1)
(1)
-
(3)
The hedged item is recognised in Borrowings and the hedging instrument is recognised in Derivative financial instruments
Hedge ineffectiveness for the year ended 31 March 2021 was $1m (2020: $0m).
Nominal amount
(hedging
instrument)
Carrying
amount
(hedged item)
$m
At 31 March 2020
Accumulated
fair value hedge
adjustment to
carrying amount
(hedge item)
$m
Carrying value
of derivatives
(hedging
instrument)
$m
Life to date
change in
value used for
calculating
hedge
ineffectiveness
$m
Accumulated
cost of hedging
reserve
$m
Cash flow hedge and fair value hedge
Interest-rate risk and
foreign-currency risk
8 years, rate 3.83%
10 years, rate 4.04%
12 years, rate 4.14%
Commodity hedge
Commodity price risk
and timing risk
Outstanding notional
Volumes
$90m USD
$90m USD
$90m USD
70,842 MWh
Total
(165)
(170)
(174)
-
(509)
(14)
(19)
(24)
-
(57)
39
44
47
1
131
39
44
48
1
132
-
-
(1)
-
(1)
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
1
8
(20) Share capital and distributions
Equity raise
On 15 May 2020, Z issued 100 million shares raising $290m and on 5 June 2020 an additional 20 million shares were issued
raising $57m.
Institutional Placement (15 May 2020)
Share Placement Plan (5 June 2020)
Costs capitalised in equity
Total authorised and issued capital at end of year
Price per share
$
2.900
2.806
-
-
Total
$m
290
57
(10)
337
Total shares
100,000,000
20,476,853
-
120,476,853
Costs capitalised in equity
$12m of costs were recognised in the equity raise of which $10m have been recognised as a deduction to equity, $1m capitalised
to borrowing costs and $1m has been expensed in operating expenses.
Ordinary shares (fully paid)
Total authorised and issued capital at beginning of year
Movements in issued and fully paid ordinary shares
Total authorised and issued capital at end of year
Issued capital
Total issued capital at end of year
The par value of one share is $1.
2021
$m
430
337
767
2021
Shares
millions
520
2020
$m
430
-
430
2020
Shares
millions
400
Z Energy LTI Trustee Limited holds 199,125 shares at a cost of $2m for Z’s Restricted Share Long-Term Incentive Plan (RSLTP)
(2020: 811,823, $4m). Z holds Treasury stock of 106,935 shares at a cost of $1m (2020: 339,884, $2m) and 1,861,391 shares at
a cost of $8m for Z’s Performance Rights Long-Term Incentive Plan (PRLTP).
Dividends
2019 Final dividend (paid May 2019)
2020 Interim dividend (paid December 2019)
$m
cents per share
122
66
30.5
16.5
Directors resolved not to pay a final dividend in respect of the 2020 financial year.
In addition and as a result of the temporary covenant waivers and temporary adjustments to covenant definitions agreed with its
debt providers, Z was restricted from distributing funds to shareholders until after 30 September 2021. The temporary covenant
waivers were successfully renegotiated in March 2021 allowing Z to recommence distributions to shareholders.
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(21) Share-based payments
Z Energy Restricted Share Long-Term Incentive Plan (RSLTIP) & Z Energy Limited — Performance Rights
Long-Term Incentive Plan (PRLTIP)
Z provides the 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. Z stopped making new offers under the RSLTIP after the year ended 31 March 2019. In the year ended 31 March 2020,
the Group moved to a new stock settled share rights scheme for selected senior employees (PRLTIP). Under the scheme
performance rights have been granted at no cost to the holder. For each performance share right that vests, one share will
be issued.
Under the RSLTIP the number of shares that vest will depend on Z’s total shareholder return ranking within a peer group of the
NZX 50 over a three-year period, although a reduced period may be used in some cases. If the individual is still employed at
the end of the vesting period, the employee is provided a cash bonus which must be used to repay the loan and the shares are
then transferred to the employee. Under the PRLTIP the number of shares that vest will depend on Z’s total shareholder return
ranking within a peer group of the NZX 50 over a three-year period, although a reduced period may be used in some cases.
If the individual is still employed at the end of the vesting period, the shares are then transferred to the employee.
Plan
type
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
2021
RSLTIP 22 May 2018 31 March 2021
PRLTIP 11 April 2019 31 March 2022
PRLTIP 8 June 2020 31 March 2023
$6.93
$6.25
$2.97
212,320
584,603
-
-
-
1,404,067
796,923
1,404,067
-
-
-
-
(212,320)
(54,306)
(72,973)
-
530,297
1,331,094
(339,599)
1,861,391
Weighted average exercise price
$0.00
$5.97
$3.90
2020
RSLTIP 22 May 2017 31 March 2020
RSLTIP 22 May 2018 31 March 2021
PRLTIP 11 April 2019 31 March 2022
$6.99
$6.93
$6.25
181,293
219,590
-
-
-
590,644
400,883
590,644
-
-
-
-
(181,293)
(7,270)
(6,041)
-
212,320
584,603
(194,604)
796,923
Weighted average exercise price
$0.00
$6.96
$6.43
-
-
-
-
-
-
-
-
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
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(21) Share-based payments (continued)
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 for the schemes vesting 2017–2020. For the RSLTIP and PRLTIP schemes vesting after 2020, a Monte Carlo Simulation
has been used.
Weighted average share price at grant date
Contractual life
Risk-free rate
Standard deviation of Z’s TSR
Standard deviation of peers’ TSR
Correlation between Z’s TSR and peers’ TSR (average)
Estimated fair value per share
PRLTIP
Plan type
PRLTIP
RSLTIP
Vesting date of scheme
RSLTIP
31 March
2023
31 March
2022
31 March
2021
31 March
2020
$3.11
2.81 years
0.25%
28%-40%
14%-90%
0.33-0.42
$0.89
$6.18
2.77 years
1.0%
19%-22%
9%-48%
0.12-0.15
$2.52
$7.45
2.85 years
2.0%
25%-27%
18%-21%
0.15-0.16
$3.78
$8.00
2.86 years
2.1%
18%-25%
20%-22%
0.16-0.19
$4.22
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 2021 was a credit of $0.7m
(2020: $11,000) due to the 31 March 2021 plan not vesting. The expense relating to the PRLTIP in the year ended 31 March 2021
was $0.9m (2020: $0.5m).
Employee benefits payable, excluding share based payments, are $16m (2020: $7.6m).
(22) Related parties
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 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 21).
Included in operating expenses are directors’ fees of $1m (2020: $1m).
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(23) Commitments
Commitments relate to property, plant and equipment of $23m (2020: $19m) and DrylandCarbon One Limited Partnership
investment commitment of $28m (2020: $39m).
(24) Contingent assets and liabilities
Refining NZ contingent asset
On 17 December 2020, Z issued a notice of dispute under the Processing Agreement with Refining NZ regarding the reduction
in processing capacity effective 1 January 2021 and that no financial adjustment had been made to reflect the reduced capacity.
Z has expensed the Refining NZ fee floor top up for January, February and March 2021 and these have been paid without
prejudice. No receivable has been recognised for these payments. These payments are a possible receivable that could arise due
to the notice of dispute with Refining NZ however as at 31 March 2021 the dispute was unresolved, with no action beyond issuing
a dispute notice taken. Therefore, an asset was unable to be recognised on the basis of an outcome that is pending and subject
to the inherent uncertainty of any future litigation.
Post 31 March 2021 Z paused progressing its dispute notice pending completion of the ITS negotiations.
Refining NZ contingent liability
On 18 December 2020, Z received a notice of dispute from Refining NZ seeking retrospective payment of additional funds and
changes to the capacity of the refinery. No liability has been recognised at 31 March 2021 for the dispute that the fee floor payable
by all customers in combination should be $70m per annum higher as substantial uncertainty exists with the dispute. The dispute
is currently unresolved and the pathway to resolution is unclear. If the dispute advances to litigation, any potential damages
could be impacted by multiple factors including gross refining margins over an as yet undefined time period. The likelihood of the
outcome is unknown, uncertainty exists if any cost will be incurred by Z and these cannot be reliably measured.
Post 31 March 2021 Refining NZ has paused progressing its dispute notice pending completion of the ITS negotiations.
Flick guarantees contingent liability
Z currently guarantees a total potential exposure relating to Flick Energy Ltd of up to $18m as per the table below.
Counterparty
Westpac
Mercury
Meridian
Genesis
Total exposure
2021
$m
7
4
4
3
18
2020
$m
5
4
-
3
12
Transactions with related parties received/(paid)
Refining NZ — processing fees, Customs and excise duties
Associates — sale of goods and services
- Coastal Oil Logistics Ltd — distribution
Associates — purchase of goods and services
- Coastal Oil Logistics Ltd — distribution
- Wiri Oil Services Ltd
- Loyalty Ltd
Key management personnel
- Short-term employee benefits
Balances at the end of period
- Refining NZ — processing fees, Customs and excise duties
2021
$m
567
9
(46)
(7)
(6)
(7)
42
2020
$m
791
2
(34)
(11)
(7)
(6)
52
The Group has no other guarantees. (2020: The Group guaranteed an exposure of up to USD1m ($2m) to a financier of one of the
Group’s associate companies).
(25) Events after balance date
Refining NZ strategic review
As at the date of approval of these financial statements the strategic review was still ongoing with no confirmed conclusion.
Negotiations between Z and Refining NZ are ongoing.
Refining NZ dispute
As at the date of approval of these financial statements, the March floor top up has been paid. The dispute with Refining NZ
is yet to be resolved. Z has paused its dispute notice pending completion of the ITS negotiations and Refining NZ has paused
progressing its dispute notice pending completion of the ITS negotiations.
Dividend
On 5 May 2021, the Directors approved a fully imputed dividend of 14 cents per share, which is equal to $73m, to be paid
on 2 June 2021 (2020: nil).
Z ENERGY LIMITED AND SUBSIDIARIES YEAR END REPORT 31 MARCH 2021
AUDITORS’ REPORT
Auditors’ report
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© 2021 KPMG, a New Zealand Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Independent Auditor’s Report To the shareholders of Z Energy Limited Report on the audit of 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 92 to 121: i. present fairly in all material respects the Group’s financial position as at 31 March 2021 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 and International Financial Reporting Standards. We have audited the accompanying consolidated financial statements which comprise: — the consolidated statement of financial position as at 31 March 2021; — the consolidated statements of comprehensive income, changes in equity and 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 International Code of Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (‘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 the cost of stock adjustment and greenhouse gas assurance. 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. 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 Assessment of goodwill Refer to Note 13 of the consolidated financial statements. The group’s testing of goodwill for impairment is a Key Audit Matter due to the complexity of auditing the judgements used by the group to determine the recoverable amount of the relevant cash generating units (CGU’s). The relevant CGU is the Z Energy group. The group used complex models to perform their assessment of the recoverable amount. The models used a range of external and internal inputs, including assumptions made by the group. Complex modelling using forward-looking assumptions are prone to greater risk for potential bias, error, and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and consistent application. Our audit procedures included: — We considered the appropriateness of the valuation method applied by the group to perform the test of goodwill for impairment against the requirements of the accounting standards. — We assessed the accuracy of previous group forecasts to inform our evaluation of forecasts incorporated in the model. — We checked the consistency of forward-looking assumptions to the group’s stated plan and strategy, past performance of the group, published information on industry trends, and our experience regarding the feasibility of these in the industry in which they operate. The key forward-looking assumptions we checked are as follows: – Retail fuel market demand – Retail and commercial gross margin per litre – Discount and terminal growth rates — We worked with our valuation specialists to analyse the group’s discount and terminal growth rates used in the valuation model by comparing to independently developed discount rates using publicly available market data for comparable entities, adjusted by risk factors specific to the group and the industry in which they operate. — We considered the sensitivity of the model by varying key assumptions, such those listed above. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to focus additional procedures. — We assessed the disclosures in the consolidated financial statements using our understanding of the issue obtained from our testing and against the requirements of the accounting standards.
AUDITORS’ REPORT
Auditors’ report (continued)
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The key audit matter How the matter was addressed in our audit Assessment of the recoverable amount of the contract with The New Zealand Refining Company Limited recognised on acquisition of Chevron New Zealand Refer to Note 13 of the consolidated financial statements. The assessment of the recoverable amount of the group’s contract with The New Zealand Refining Company Limited (‘Refining NZ’) is a Key Audit Matter due to the complexity of auditing the judgements used by the group to determine the recoverable amount of this asset. Our consideration of the group’s assessment of the carrying value of the contract has focussed on the significant assumptions and judgements the group applied in determining the recoverable amount of the asset. These assumptions and judgements relate to the discounting period, long-term demand for fuel in New Zealand, and a relevant discount rate. Such judgements and assumptions carry a higher risk of bias and error which required additional scrutiny by us. Our audit procedures included: — We assessed the integrity of the value in use calculation model, including the accuracy of the underlying calculation formulae. — We reviewed the discounting period used in the value in use calculation model against the terms of the contract and expectations of the period of use of the refinery. — We checked long-term volume forecasts for consistency with other valuation models prepared during the period. — We worked with our valuation specialists to analyse the group’s discount rate by comparing to an independently developed discount rate using publicly available market data for comparable entities, adjusted by risk factors specific to the group and the industry it operates in. — We considered the sensitivity of the model by varying key assumptions. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to focus additional procedures. We found the valuation methodology and inputs used in the calculation of the recoverable amount of the contact with Refining NZ to be appropriate. We consider the group has appropriately considered those key assumptions that support the carrying value of the asset. Other information The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual Report. Other information may include 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. The Annual Report is expected to be made available to us after the date of this Independent Auditor's Report. Our responsibility is to read the Annual Report when it becomes available and consider whether the other information it contains is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the audit, or otherwise appear misstated. If so, we are required to report such matters to the Directors. Use of this independent auditor’s report This independent auditor’s 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 The key audit matter How the matter was addressed in our audit We found the valuation methodology and inputs used in the calculation of the recoverable amount of the CGU to be appropriate. We consider the group has appropriately considered those key assumptions that support the carrying value for goodwill relating to the Chevron New Zealand acquisition. Assessment of the recoverable amount of retail customer contracts recognised on acquisition of Chevron New Zealand Refer to Note 13 of the consolidated financial statements. The assessment of the recoverable amount of the group’s retail customer contracts is a Key Audit Matter due to the complexity of auditing the judgements used by the group to determine the recoverable amount of this asset. Our consideration of the group’s assessment of the carrying value of the retail customer contracts has focussed on the significant assumptions and judgements the group applied in determining the recoverable amounts of these assets. These assumptions and judgements relate to short-term forecasted sales volumes, long-term retail demand for fuel in New Zealand, retail gross margin per litre, and a relevant discount rate. Such judgements and assumptions carry a higher risk of bias and error which required additional scrutiny by us. Our audit procedures included: — We assessed the integrity of the value in use calculation model, including the accuracy of the underlying calculation formulae. — We checked the consistency of short-term forecasted sales to past performance of the group, and our experience regarding the feasibility of these in the industry in which they operate. — We challenged the assumptions around long-term retail demand for fuel in New Zealand by comparing to published information on industry trends and the historical accuracy of relevant forecasts. We used our knowledge of the group, their past performance, business and customers, and our industry experience. — We worked with our valuation specialists to analyse the group’s discount rate by comparing to an independently developed discount rate using publicly available market data for comparable entities, adjusted by risk factors specific to the group and the industry it operates in. — We considered the sensitivity of the model by varying key assumptions, such as long-term retail demand for fuel in New Zealand and retail gross margin per litre. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to focus additional procedures. We found the valuation methodology and inputs used in the calculation of the recoverable amount of the retail customer contracts to be appropriate. We consider the group has appropriately considered those key assumptions that support the carrying value of the asset.
AUDITORS’ REPORT
Auditors’ report (continued)
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Te Kuputohu TCFD
Task Force on Climate-related Financial Disclosures
(TCFD) Index
These are the 11 recommended disclosures from the Task Force on Climate-related Financial Disclosures, with an overlay to show
Z’s completed and planned disclosures:
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Disclosure
Governance
Page no.
Further information
Disclose the organisation’s governance around climate-related risks
and opportunities
The Z Board has committed to responding to the challenge of climate change in
an integrated way. Z’s Environmental Sustainability Stand and carbon targets were
approved by the Board in 2017, and performance is reviewed annually. The Board
agreed Z’s approach to TCFD in FY20, with progress against the roadmap
specifically reviewed in FY21.
A core function of the Board is oversight of Z’s Enterprise Risk Management
System (ERMS), including monitoring all of Z’s enterprise risks including climate
change, and systems of internal control. Monitoring of risks, controls and
opportunities for climate change is performed through the Board Audit and Risk
Committee (ARC). The ARC meets quarterly to review all Z’s risks and conducts a
substantive review twice a year.
The Chief Executive officer (CEO) has overall responsibility for the management of
Z. Day-to-day management of Z’s operations is delegated to the General Managers
who make up the Executive Leadership Team (ELT). The ELT are responsible for
providing direction and assurance on Z’s ERMS, with each principal risk assigned to
an ELT member.
Z’s General Manager, Strategy and Risk is the responsible business owner for
managing climate-related risks and opportunities identified within the ERMS.
The ELT as a whole approves climate-related risks and opportunities identified
within Z’s business strategy, including Z’s climate-related metrics and targets
which are included in company performance targets.
Disclose the actual and potential impact of climate-related risks and
opportunities on the organisation’s business, strategy and financial planning
where such information is material
Z’s climate-related risks and opportunities were assessed in a series of workshops
in FY21. Transitional and physical risks were considered over the short term
(2020–2025), medium term (2025–2040) and long term (2040–2060).
The material risks and opportunities are identified in the TCFD section of
this report.
The impact of climate-related risks and opportunities and Z’s business
response are outlined in the ‘Qualitative Analysis of Z’s climate-related risks and
opportunities’ infographic in the TCFD section of this report.
Z is undertaking further work to quantify the impacts identified to integrate these
into financial planning.
Z has used the BEC 2060 Tūī and Kea scenarios as key indicators to help model
fuel demand and assess organisational strategy. These are being updated to
include the draft information presented by the Climate Change Commission.
Describe the Board’s oversight
of climate-related risks and
opportunities
3, 46, 50, 63,
78–79
Describe management’s role
in assessing and managing
climate-related risks and
opportunities
13, 37, 78–79
Strategy
Describe the climate-related risks
and opportunities the organisation
has identified over the short,
medium and long term
32–37
Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy and financial planning
3, 32–37
32–37
Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios, including
a 2 degree Celsius or lower scenario
Key
Complete disclosure
In progress
or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed. Responsibilities of the Directors for the consolidated financial statements The Directors, on behalf of the company, 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) and 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. A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (XRB) website at: http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/ This description forms part of our independent auditor’s report. The engagement partner on the audit resulting in this independent auditor's report is Graeme Edwards For and on behalf of KPMG Wellington 5 May 2021
TCFD INDEX
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TCFD (continued)
Disclosure
Page no.
Further information
Te Kuputohu GRI
Global Reporting Initiative (GRI) Index
9
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Risk Management
Describe the organisation’s
processes for identifying and
assessing climate-related risks
Describe the organisation’s
processes for managing
climate-related risks
Describe how processes for
identifying, assessing and
managing climate-related risk are
integrated into the organisation’s
overall risk management
Disclose how the organisation identifies, assesses and manages
climate-related risks
32–37, 78–79 Z has taken a bottom-up and top-down approach to identifying transitional and
physical climate-related risks in line with TCFD guidance.
Further detail is provided under ‘Risk Management’ in the TCFD section of
this report.
37, 78–79
Z has developed a business response in the form of current or future controls for
the key climate-related risks identified.
This is shown in the ‘Qualitative Analysis of Z’s climate-related risks and
opportunities’ infographic in the TCFD section of this report.
32–37, 78–79 The process for identifying, assessing and managing climate-related risks is in
line with Z’s Enterprise Risk Management System (ERMS). More information on
Z’s ERMS can be found in the ‘Corporate Governance Statement’ section of this
report, specifically in Principle 6.
Metrics and Targets
Disclose the metrics and targets used to assess climate-related risks and
opportunities where such information is material
37
Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process
Metrics highlighted in this report include a combination of quantitative data
including greenhouse gas emissions, carbon intensity and carbon emissions for our
obligatory and voluntary offsets, and qualitative data including climate risk reviews.
Z’s review of climate-related metrics and targets associated with the fossil fuel
products it sells is being re-modelled with a clear direction to be provided by FY22
half-year.
Disclose Scope 1, Scope 2 and if
appropriate Scope 3 greenhouse
gas (GHG) emissions and the
related risks
Describe the targets used by
the organisation to manage
climate-related risks and
opportunities and performance
against targets
30
Scope 1, Scope 2, and Scope 3 greenhouse gas emissions are disclosed.
27–28
Z’s progress against its FY17–FY21 carbon targets and future FY30 target are
described in the Environmental Sustainability section of this report.
Note: Z fully disclosed against seven of the 11 recommended disclosures in this report. Disclosures that are identified as being ‘complete’ are reviewed on an annual basis to
ensure information is up to date, relevant and fit for purpose.
GRI Disclosures: Description
General Standard Disclosures
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
Strategy
102 - 14 Statement from senior decision-maker
102 - 15 Key impacts, risks, and opportunities
Ethics, Values & Integrity
102 - 16 Values, principles, standards, and norms
of behaviour
Governance
102 - 18 Governance structures
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
Reporting practice
102 - 45 Entities included in the consolidated
financial statements
Page
Supporting Details
Operates in New Zealand only
Front cover
2–3, 14–25
Inside back cover
18–19
4
14–25
5, 18–19, 92
5, 38–41
14–15, 18–19
1–3, 14–15, 93
27, 34–37
13, 27, 28, 41, 42,
45, 52, 113, 122
13, 28
1 –3
10–13
8
46–84
Also applies to 'Governance & Stewardship' material
disclosure
None
10–13
N/A
10–13
10–13
11
87, 96
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
4, 6–7
11
5, 30, 61
10–13
Front cover
4
4
Inside back cover
4
129–131
30, 122–126
31 March 2020
Financial year from 1 April to 31 March
GRI INDEX
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
3
0
Global Reporting Initiative (GRI) Index (continued)
1
3
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
GRI Disclosures: Description
Material Topic Standard Disclosures
Economic Sustainability
103 - Management Approach
201 - 1 Direct economic value generated and distributed
201 - 2 Financial implications and other risks and
opportunities due to climate change
Climate Change
103 - Management Approach
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
305 - 5 Reduction of GHG emissions
Fossil Fuel Substitutes (Future Fuels)
103 - Management Approach
GRI G4-DG14
Environmental Sustainability
103 - Management Approach
306 - 2 Waste by type and disposal method
306 - 2 Significant Spills
Responsible consumption & production, Product Quality
& Security of Supply
103 - Management Approach
308 - 1 New suppliers that were screened using
environmental criteria
308 - 2 Negative environmental impacts in the supply
chain and actions taken
Organisational Resilience
103 - Management Approach
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, Safety & Wellbeing
103 - Management Approach
403 - 2: Hazard identification, risk assessment, and
incident investigation
403 - 6: Promotion of worker health
403 - 9: Work-related injuries
Asset Integrity and Process Safety
103 - Management Approach
G4 - OG13: Process Safety Events
Page
Supporting Details
GRI Disclosures: Description
Page
Supporting Details
Material Topic Standard Disclosures (continued)
Organisational Capability
103 - Management Approach
404 - 2 Programmes for upgrading employee skills and
transition assistance programs
404 - 3 Percentage of employees receiving regular
performance and career development reviews
Diversity & Inclusion
103 - Management Approach
405 - 1 Diversity of governance bodies and employees
405 - 2 Ratio of basic salary and remuneration of women
to men
Resilient Communities
103 - Management Approach
413 - 1 Operations with local community engagement,
impact assessments, and development programmes
Cyber Security & Data Privacy
103 - Management Approach
418 - 1 Substantiated complaints concerning breaches of
customer privacy and losses of customer data
Market Transparency & Fairness
103 - Management Approach
419 - 1 Non-compliance with laws and regulations in the
social and economic area
Customer Experience and Brand Values
103 - Management Approach
Own measure – Customer NPS Score
6–7
60
71
61
61
58
42
42
100% retail sites allocated funding for and engaged in
local community activities
48–50, 63
63
No substantiated complaints or data breaches
46
3
9
5
Business & Retail net promoter scores
Note also relevant for the following material disclosures:
Competition & Market Share, RNZ Strategic Review,
Capital Strategy, Wholesale Asset Profitability
0 litres biodiesel produced, 2,712,840 litres of B5 sold
No supplier relationships were terminated due to
negative environmental impacts
Z corporate employees. This excludes retail site staff
6–7, 10–13
5, 14–16
32–37
6–7
30
30
30
30
28
27
22
27
31
45
14
28, 53
28, 53
57
62
72
59
44
44–45
44–45
45
44
45
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
Z
E
N
E
R
G
Y
P
g
1
3
2
COMPANY DIRECTORY
Ngā
Pārongo
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
Abigail Kate Foote (Chair)
Andrew Mark Cross
Blair Albert O’Keeffe
Julia Margaret Raue
Mark Roy Malpass
Stephen Reindler
Executive team
Mike Bennetts
Chief Executive Officer
Lindis Jones
Chief Financial Officer
Jane Anthony
Chief Customer Officer
(Resigned 31 December 2020)
Andy Baird
General Manager, Retail
David Binnie
General Manager, Supply
Debra Blackett
General Counsel and
Chief Governance Officer
Julian Hughes
General Manager, Strategy and Risk
(to 31 March 2021)
General Manager, Transition
(from 1 April 2021)
Helen Sedcole
Chief People Officer
Mandy Simpson
Chief Digital Officer
Figen Ulgen
Chief Customer Officer
(Appointed 1 February 2021)
Nicolas Williams
General Manager, Commercial
(to 31 March 2021)
General Manager, Strategy and Risk
(from 1 April 2021)
Nicola Law
General Manager, Commercial
(Appointed 1 April 2021)
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 NSW1235
Australia
+61 2 8280 7111
Auditor
KPMG
Maritime Tower
10 Customhouse Quay
PO Box 996
Wellington 6140
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
MUFG Bank
Level 22, 151 Queen Street
Auckland
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
3
3
1
g
P
Y
G
R
E
N
E
Z
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
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