Z Energy heads into first strategy refresh since founding

New Zealand’s newly listed transport fuels distributor Z Energy is heading into the first refresh of its corporate strategy since launching three years ago.
CEO Mike Bennetts said the Z board will be considering a “four to five year” plan in the next round of strategic planning, which should start happening later in 2013, but it may take much of 2014 to reach agreements.
After its NZX listing on August 19 at NZD3.50 (USD2.94), Z has seen a healthy gain, trading on September 24 at NZD3.80 (USD3.19). It has also seen strong support from one private Melbourne fund manager, Cooper Investments, which holds 6.5% of the company and has been responsible for the only two substantial security holder notices issued for Z so far.
The company expects new research by analysts for the two float lead managers, Goldman Sachs and First NZ Capital, to emerge as they end the post-float blackout period on Sept. 26. The company is due to enter the NZX50 at the end of September, ranked around 16th in the index.
Bennetts would not comment on progress towards achieving the company’s prospectus goal of a NZD16.5 cents a liter (USD13.9) average margin on transport fuels, but said Ministry for Business, Innovation and Employment statistics showing rising importer margins did not tell the full story.
Z’s preference for improved margin over retail turnover growth remains intact, and the strategic review will look in areas such as rate of growth in new outlets, add-on services such as assisting fleet operators with fuel efficiency, and future investments in bio-fuels.
However, Bennetts says bio-fuels are only likely to be economic if there’s a government incentive such as a mandated ratio of transport fuels being bio-fuels, especially with the global price of oil apparently heading to between USD60 and USD80, thanks to the shale oil and gas revolution. “A change of government or a new incentive might see us ramp up quickly,” said Bennetts, but he was unaware of bio-fuels working commercially anywhere in the world without government subsidies.
Z has two bio-fuels options, the easiest to implement being a 20 million liter annual production plant using domestically sourced tallow, which would take about a year to start running.
The company is also contributing 25% of the cost of a NZD13 million (USD10.9 million) feasibility study with Kawerau pulp and paper mill owner Norske Skog and the government’s Primary Growth Partnership scheme into a wood-to-bio-fuels project. Results are expected late next year, said Bennetts.
Bennetts also said the company was evaluating whether making the Port of Lyttelton a deepwater destination and reconfiguring its wharves would be key to increased investment in tankage for the South Island.
At the Port of Tauranga, where Z has signaled a desire for more capacity, the company had the option either of building or leasing tankage from Gull Petroleum, which has constructed a new 10 million liter fuel tank, which Bennetts said was not currently in full use.
(September 23, 2013)