Speaker 1: Hey, order and welcome to shared Lunch. My name is
Speaker 1: Susanna Batley and I'm at Channel Infrastructure's head office here
Speaker 1: in Auckland. I'll be joined by Robie Cannon, the CEO.
Speaker 2: More than ever energy security. If fuel security is really
Speaker 2: important to economic prosperity.
Speaker 1: Channel Infrastructure was once an oil refinery and it's going
Speaker 1: through a major transition.
Speaker 2: There was a really significant opportunity to build a real
Speaker 2: future for the company and bring back much more, hopefully
Speaker 2: than what was lost when the refinery was closed.
Speaker 1: It's got a big, bold vision to become an energy
Speaker 1: precinct caring New Zealand's future energy resilience and decarbonization.
Speaker 2: We've got a really awesome opportunity to be transformational for
Speaker 2: Ausland and New Zealand. That could be twenty thousand jobs
Speaker 2: are significant tributor to GDP.
Speaker 1: Before I head upstairs, here's some important information.
Speaker 3: Investing involves the risk you might lose the money you
Speaker 3: start with. We recommend talking to a licensed financial advisor.
Speaker 3: We also command reading product disclosure documents before deciding to invest.
Speaker 3: Everything you're about to see and here is current at
Speaker 3: the time of recording.
Speaker 1: Welcome Rob, Thank you, sus I should probably say things
Speaker 1: for having me here at your premises.
Speaker 2: We're delighted to have you. Thank you very much for
Speaker 2: giving us your time.
Speaker 1: So I'm keen to start by zooming out a bit
Speaker 1: and hearing a bit more about some of the big
Speaker 1: energy changes that are happening in New Zealand, and then
Speaker 1: in particular, what are the challenges and opportunities and how
Speaker 1: Channel might be uniquely positioned to either sold for those
Speaker 1: challenges or take advantage of those opportunities.
Speaker 2: I guess I'll start with a really big picture global context.
Speaker 2: We're finding ourselves in a more contested environment and I
Speaker 2: think more than ever energy security. Fuel security is really
Speaker 2: important to economic prosperity and everybody having a certainty that
Speaker 2: they can get on and invest in what they're doing
Speaker 2: in New Zealand, and so Channels are really able to
Speaker 2: provide or help provide that fuel security piece. It's a
Speaker 2: core part of what we do. We store over three
Speaker 2: hundred million liters of petrol, diesel and jet up at
Speaker 2: Marsden Point, and we're currently in the process of bringing
Speaker 2: in place additional storage. We've got another three hundred and
Speaker 2: fifty million liters of empty tanks up there that we
Speaker 2: can convert, which we've got quite good at and that
Speaker 2: obviously adds to overall New Zealand fuel security. I think
Speaker 2: one of the other challenges as we've gone through the
Speaker 2: energy transition, trying to transition to a renewables electricity system
Speaker 2: has been that firming capacity or generation that can come
Speaker 2: on or off at short notice when the sun's not
Speaker 2: shining or the wind's not blowing and it's not raining,
Speaker 2: which has been doing a lot of lately. And that's
Speaker 2: another area where channel can play a part. So we're
Speaker 2: looking at a diesel peaker at the moment. If all
Speaker 2: of our fuel tanks at Marston Point were full, we'd
Speaker 2: actually have as much stored energy up at Marston Point
Speaker 2: as you would have and like Pookeke in the South Island,
Speaker 2: so huge amount of stored energy and the potential for
Speaker 2: that to just firm that that electricity system will add
Speaker 2: to that firming.
Speaker 1: And in terms of that firming and so the amount
Speaker 1: that might be required to support the sort of largely
Speaker 1: renewables in terms of energy generation in New Zealand, do
Speaker 1: you see that sort of going down as we're bringing
Speaker 1: on more renewables or you know, on the demand side,
Speaker 1: Obviously the demand for electricity is going up. We've got AI,
Speaker 1: we've got data centers that support that, we've got electrification
Speaker 1: of automobiles and other industrial plants. So how do you
Speaker 1: think about that sort of supply versus demand and what
Speaker 1: that firming profile might look like in the future.
Speaker 2: Well, there's no question in my mind that demand for
Speaker 2: electricity will continue to grow. And I like data centers
Speaker 2: as a classic example. They use a lot of electricity
Speaker 2: and they use it twenty four to seven. And so
Speaker 2: the challenge for us in New Zealand is matching up
Speaker 2: that twenty four to seven usage of data centers or
Speaker 2: manufacturing that just needs to be able to turn on
Speaker 2: and have the power available to use at a cost
Speaker 2: effective price. Is that our system is actually quite renewable,
Speaker 2: and we've got and it's fairly well known. I think
Speaker 2: most people know that gues is declining in New Zealand,
Speaker 2: and so that used to be the fuel that plugged
Speaker 2: the gap, and now we're relying on whole and there's
Speaker 2: only so much call FID capacity in New Zealand as well.
Speaker 2: So that's where we see diesel picking or maybe other
Speaker 2: forms of gas peaking as being an opportunity to switch on,
Speaker 2: make sure that the power is there when folks need it.
Speaker 2: But ultimately, hopefully over time the New Zealand electricity system
Speaker 2: fully renewabilizers and the need for that firming thes great.
Speaker 1: If that is the case, what happens to your role
Speaker 1: as part of that well.
Speaker 2: I think at the moment, the way we're thinking about
Speaker 2: the diesel picker option for our site is that it's
Speaker 2: there for when as long as it's needed, and we'll
Speaker 2: see how long that is. One of the options we're
Speaker 2: looking at is containerized units so that they can just
Speaker 2: be broad in across the wharf, across the road, planted down,
Speaker 2: probably turned on for very short duration during them during
Speaker 2: a year, and then if we do get to a
Speaker 2: point in our system where it's no longer required, then
Speaker 2: you know, those units can go back offshore and we
Speaker 2: can get value for them. I think, from Channel's perspective,
Speaker 2: the way we interact with our customers, one of our
Speaker 2: key requirements is that we have long term contracts and
Speaker 2: we're not an electricity participant. We have no electricity trading capacity,
Speaker 2: so you know that project would only get developed and
Speaker 2: built if there are other parties in the electricity sector
Speaker 2: that would basically take that capacity off their hands.
Speaker 1: Yeah, their risk it correct. Yeah. So in terms of
Speaker 1: customers then that you mentioned who.
Speaker 2: Are they at the moment, our three key customers are
Speaker 2: bp X on Mobile and Ample and you'll have seen
Speaker 2: also that we will soon be welcoming Higgins to our
Speaker 2: site is one of our newest customers of the new
Speaker 2: e bitumen import terminal.
Speaker 1: As well, you're clearly needing to balance a lot of stakeholders.
Speaker 1: I'm sure there's you know, quite a lot of path
Speaker 1: and safety things to think about with your employees. So
Speaker 1: how do you your shareholders obviously as a listed company,
Speaker 1: so how do you think about balancing those different stakeholder
Speaker 1: interests and how you're making sure that you're generating a
Speaker 1: good sheld of return while also making sure that from
Speaker 1: a U yelling in point of view, that you're also
Speaker 1: fulfilling that role as well.
Speaker 2: You know, the way I look at it is that
Speaker 2: they're all very important. He mentioned health and safety. It's
Speaker 2: absolutely core to what we do and you know, getting
Speaker 2: everybody home safely every day is a core value for Channel.
Speaker 2: And if I zoom out on health and safety and
Speaker 2: safety in general, the role that we provide, and that
Speaker 2: field security piece means that we need to have a
Speaker 2: safe and resilient operation as well. You know, obviously, our
Speaker 2: customers are a key stakeholder and we spend a lot
Speaker 2: of time with them making sure that we can service
Speaker 2: their needs. And the government's obviously very interested in what
Speaker 2: we do, and shareholders obviously as well, So a very
Speaker 2: broad set of stakeholders, and I think as a company
Speaker 2: we're really privileged to be able to interact and serve
Speaker 2: all of them.
Speaker 1: In terms of those current customers and then future ones
Speaker 1: like Higgins as part of factures coming on board. You
Speaker 1: have talked about this transition and this new vision of
Speaker 1: an energy precinct. Can you talk a bit more about
Speaker 1: that and particularly why now, why is now the right
Speaker 1: time for that transition.
Speaker 2: On first of April twenty two two, we close the
Speaker 2: refinery and we converted to an import terminal and upon
Speaker 2: that closure, you know, the key assets that earn the
Speaker 2: I think last year we earned ninety five point one
Speaker 2: million dollars of EBITDA. The key assets that earned that
Speaker 2: were effectively the tank farm, are the port that we
Speaker 2: operate and the pipeline to Auckland. Now those assets cover
Speaker 2: are only thirty or thirty five percent of our one
Speaker 2: hundred and eighty hectares of land that we've got up
Speaker 2: at Marsden Point. So it's part of that transition and
Speaker 2: reinvention of our company into a new business. We thought
Speaker 2: long and hard about what the alternative and highest and
Speaker 2: best use for that land is. And if you look
Speaker 2: at the characteristics of the land, so we're adjacent to
Speaker 2: a port or our Gety which is actually currently only
Speaker 2: really thirty thirty five percent utilized a significant amount of capacity,
Speaker 2: and our Gety, the land itself is only around thirty
Speaker 2: thirty five percent utized. We've got a significant amount of
Speaker 2: land and we've got a pipe line all the way
Speaker 2: to Auckland, So if you make a product and we
Speaker 2: can get it into that pipeline, we can get it
Speaker 2: all the way down into the heart of industrial New Zealand.
Speaker 2: In addition to that, we have a very attractive resource
Speaker 2: consents for fuels manufacture which persists for thirty five years
Speaker 2: from twenty twenty two when they were re issued or
Speaker 2: twenty twenty one. And we've got a very attractive zoning package.
Speaker 2: So the zone that we sit in is actually literally
Speaker 2: called called the Marsden Point Energy Precinct, and so we
Speaker 2: looked at all those features. We realized that there was
Speaker 2: it went very many places in New Zealand that you
Speaker 2: could build, for example, butcham an import terminal or a
Speaker 2: renewable fuels manufacturing site or additional fuel storage, and that
Speaker 2: there was a really significant opportunity to build a real
Speaker 2: future for the company and bring back perhaps much more
Speaker 2: hopefully than what was lost when the refinery was closed.
Speaker 1: In terms of that that capacity that you've got both
Speaker 1: in the land and in the in the in the pipeline.
Speaker 1: What does an ideal customer look like like? Presumably you're
Speaker 1: talking to other potential customers, you know, like l like Higgins,
Speaker 1: what what makes an ideal tenant or customer of the site?
Speaker 2: You know, the first comment to be would be, well,
Speaker 2: we've got a lot of empty tank crew tank still,
Speaker 2: so you know, we would love customers for those for
Speaker 2: our core fuel storage business, and obviously we've got existing
Speaker 2: customers that might have interested in those. I think, you know,
Speaker 2: the thing I'd speak to and we've spoken about publicly
Speaker 2: is the bio Refinery project with the consortium of Sedra Quantas,
Speaker 2: who will be well known Renova, who are Japanese real
Speaker 2: electricity and fuels manufacturer, a n Z Bank and Kent
Speaker 2: who are working to repurpose some of the old refining
Speaker 2: equipment into a biofuel's menu facturing facility. And if you
Speaker 2: think about you know, it's a few things, a few
Speaker 2: reasons why that would be really epic for both our
Speaker 2: region and New Zealand. Firstly, buyo fuels and manufactured from
Speaker 2: feedstocks which tend to be local. So whether you import
Speaker 2: crude into New Zealand or you ship crude into Asia
Speaker 2: and refine it and bring it down in a boat,
Speaker 2: you've still got a feedstock that's got a transit international
Speaker 2: waters which carries risk. You know, the great thing about
Speaker 2: buio fuels is you can manufacture them from domestic feedstocks.
Speaker 2: So all of a sudden you've actually got your own
Speaker 2: self sufficient fuel industry, which is fantastic for fuel security. Obviously,
Speaker 2: there's a hell of a lot of jobs and economic
Speaker 2: growth and investment associated with that facility should it go ahead,
Speaker 2: it would be incredibly large. Channels expertise today is in
Speaker 2: the management of a high hazard facility and fuels infrastructure,
Speaker 2: and our shareholders invest in us for the regular dividends
Speaker 2: and the long term contracted returns we're able to provide them,
Speaker 2: and so our role in this project is really is
Speaker 2: if you like enabler. So you know, we've got a
Speaker 2: big piece of land and some ex refining equipment that
Speaker 2: we can provide them and steady rental income on. You know,
Speaker 2: we've got some empty tanks which I think they'd like
Speaker 2: to use for their project, which you know we can
Speaker 2: earn revenue from, and we've got a jetty in a
Speaker 2: pipeline in terms of getting that product in and out.
Speaker 2: So I think from our perspective, we're being quite careful
Speaker 2: about where we play in these new projects. We're not
Speaker 2: here to expose shareholders to a significant amount of development risk.
Speaker 2: We know they like investing in us because of those
Speaker 2: long term, stable returns, and that's the position we've crafted
Speaker 2: for ourselves.
Speaker 1: Is that helpful now with I guess some of these
Speaker 1: bigger opportunities that probably do require a significant capital expenditure.
Speaker 1: You did go back to the market's last year and
Speaker 1: raise fifty million, but some of the quantums on some
Speaker 1: of the projects are a lot more than that. How
Speaker 1: are you thinking about funding those versus you know, a
Speaker 1: regular dividend that maybe shareholders expect now and is that,
Speaker 1: you know, is that the right capital structure that sets
Speaker 1: you up for success for this growth.
Speaker 2: So at our annual shareholders meeting, we talked about actually
Speaker 2: increasing our dividend payout ratio. So you know, we're very
Speaker 2: committed to those dividends. And I think the capital rays
Speaker 2: we did last year was extraordinarily successful. In fact, I
Speaker 2: think I'll get the stats wrong, but it had one
Speaker 2: of the highest take ups for a rights issue structured
Speaker 2: in that way ever in New Zealand. And you know,
Speaker 2: fundamentally the reason that people I think backed us for
Speaker 2: that is, you know, the projects that we brought forward
Speaker 2: and if I take the jet tank or I take
Speaker 2: the bitumen terminal facility, you know, largely the fee that
Speaker 2: we earn on those are capacity based. So we're not
Speaker 2: taking a significant newspect about development risk before we're not
Speaker 2: taking a significant amount of operating risk associated with those assets.
Speaker 2: The risk follows the parties that are best able to
Speaker 2: manage that risk, which is generally our customers. And so
Speaker 2: from our perspective, we're playing to our strengths, which is
Speaker 2: management of a high hazard facility and long term infrastructure
Speaker 2: and we're letting our customers and partners play to their strengths,
Speaker 2: which is management of the product that they ultimately want
Speaker 2: to get into New Zealand store and distribute to where
Speaker 2: it needs to go. So I think from my perspective,
Speaker 2: you know, I think shareholders are attracted to that type
Speaker 2: of model, and I think as long as we stick
Speaker 2: to that type of model, you know, I'm really confident
Speaker 2: that we can raise the capital that we need to
Speaker 2: fund these projects and.
Speaker 1: On those contracted revenues and contracts that you enter into
Speaker 1: with the customers. With the move of shutting down the refinery,
Speaker 1: you know, revenues less dependent on fuel volley, But what
Speaker 1: does that do to the potential for upside? So it's
Speaker 1: greater protecting the downside risk, but where is the upside
Speaker 1: for equity returns?
Speaker 2: Yeah, So I think I think the way I look
Speaker 2: at the business is we've got this core, defensive infrastructure
Speaker 2: business with long term contracts with our customers, and that's
Speaker 2: in a place where I think we're up to you know,
Speaker 2: roughly fifty percent of our revenue last year or this
Speaker 2: year is fixed, so not dependent on volume threeput, And
Speaker 2: I think investors take a lot of comfort from that.
Speaker 2: I think the upside comes from our ability to deliver
Speaker 2: the growth projects, and so last year we committed to
Speaker 2: fifty five to I think sixty five or sixty two
Speaker 2: million of new growth projects that we're at attractive returns,
Speaker 2: and that is the Bitchumen terminal and the tank that
Speaker 2: we're talking about, and we've spoken this year about and
Speaker 2: in this conversation about some of the other projects that
Speaker 2: we've got growth projects that we're working on, like the
Speaker 2: the capacity based diesel peak, like the Buyer refinery project,
Speaker 2: where you know, we're able to in a really smart
Speaker 2: way use our existing assets, use our existing land to
Speaker 2: provide additional revenue and returns to shareholders. But the returns
Speaker 2: and revenue associated with those deals are likely to be
Speaker 2: the same contracted, capacity based type deals that you've seen
Speaker 2: from us in the past, because we know that shareholders
Speaker 2: like them. So that's that's one part of the upside.
Speaker 2: I think the other for us is over the course
Speaker 2: of the past eighteen months, you know, three of our
Speaker 2: major shareholders sell down the three customers actually that we have,
Speaker 2: which is a legacy they holding their head when we
Speaker 2: were a refinery, and that to me speaks to their
Speaker 2: discipline about recycling capital, and we see an opportunity for
Speaker 2: us to help them recycle capital and other terminal assets
Speaker 2: they might own in this part of the world as well.
Speaker 2: Because we're not the only terminal in New Zealand. There's
Speaker 2: a bun from others. There is one actually just downstream
Speaker 2: from us. And so from my perspective, you know, we're
Speaker 2: here saying we've got capital to invest. You know, we're
Speaker 2: a good owner and manager of these assets. That's why
Speaker 2: customer relationship piece is so important, and you know, we
Speaker 2: can take a long term, long term view and allow
Speaker 2: our customers to reinvest their capital elsewhere in their supply chain.
Speaker 1: Your background is that you've headed up M and A
Speaker 1: for a large, a recent bank. Outside of maybe those
Speaker 1: terminal assets, is there any other sorts of assets that
Speaker 1: could be quite attractive, particularly because of maybe capabilities, expertise,
Speaker 1: other sort of assets and experience that channel might have
Speaker 1: that they could leverage.
Speaker 3: Yeah.
Speaker 2: One of the lessons that I've learned from doing twenty
Speaker 2: years of M and A is you need to look
Speaker 2: really long and hard at what your own capabilities are
Speaker 2: as a business and ask yourself, you know, can you
Speaker 2: actually manage what you're buying better than the person that's
Speaker 2: selling it to you. And I think in relation to
Speaker 2: terminals sets, you know, I think we've got we managed
Speaker 2: New Zealand's largest terminal by a country mile. We've made
Speaker 2: some really good operational improvements over the last couple of years.
Speaker 2: Really proud of the way the team's delivered that, and
Speaker 2: I think, you know, that's earned us the right to say, well,
Speaker 2: we are really good owners and managers of those assets.
Speaker 2: And so I think we're pretty disciplined about the types
Speaker 2: of sets that we'll look at, actually, and I think
Speaker 2: focused on those where we can add value as a
Speaker 2: management team and as an operator and sticking sticking to
Speaker 2: those now. It might be in the future that we
Speaker 2: build additional capability and we say, hey, we've got a
Speaker 2: capability that we can go and export, or you know,
Speaker 2: there's an asset that comes with the team that has
Speaker 2: a great capability. But I think for the business as
Speaker 2: it stands today, that's really our focus.
Speaker 1: So it's really asking the question, are we the highest
Speaker 1: value owner of this asset? It's right, I'm not just
Speaker 1: trying to get a bargain for a sort of random
Speaker 1: asset that might not be so strategically alone.
Speaker 2: You shouldn't and you can't do M and A for
Speaker 2: M and a's sake. You do it because you see
Speaker 2: it gives you a competitive advantages of business, helped solve
Speaker 2: your customers problems in our case, and that most importantly,
Speaker 2: we can add venue to shareholders and if it doesn't
Speaker 2: tack those boxes, then we shouldn't be doing it.
Speaker 1: So you did mention that twenty years experience doing a
Speaker 1: lot of different M and A deals. Was going into
Speaker 1: an executive position always part of your plan? Or was
Speaker 1: that more sort of an opportunity that came up.
Speaker 2: I think, if you want to be really real about it,
Speaker 2: I don't think becoming an investment banker was ever part
Speaker 2: of my plan. I went to university to study computer science,
Speaker 2: took one finance course, and almost by accident, just kept going.
Speaker 2: And when I finished university, most of the cool kids
Speaker 2: were trying to get internships at banks and those types
Speaker 2: of things. So I just did what everybody else did it.
Speaker 2: So from my perspective, I found myself twenty years into
Speaker 2: an investment banking career. I think one of the privileges
Speaker 2: of that is that you work with companies in their
Speaker 2: best moments and in the worst moments. You know, I
Speaker 2: saw a lot of really good decisions and I saw
Speaker 2: some not so good decisions, and you learn a lot
Speaker 2: in that. I think personally, I'd achieved a lot in
Speaker 2: that part of my career and I was kind of
Speaker 2: ready to move on to the next thing. And actually,
Speaker 2: you know the role well. The two roles that I've
Speaker 2: had since I transitioned out of banking have both been
Speaker 2: with really good clients. When I was working at Full
Speaker 2: South bar and moved on to Manua, you know, they
Speaker 2: were a client at the time, and I knew that
Speaker 2: business really, really well, So I think that helps with
Speaker 2: that familiarity. But yeah, look, I think I wouldn't say
Speaker 2: it had always been part of the plan, but certainly
Speaker 2: increasingly it was part of the plan. And I'm really
Speaker 2: excited by what I'm doing now.
Speaker 1: You talked about seeing both good decisions and not so
Speaker 1: good decisions. A key part I imagine of being a
Speaker 1: CEO is that you really have to live through the consequences,
Speaker 1: both good and bad, of those decisions. What has been
Speaker 1: some of the biggest learnings you've had as you've made
Speaker 1: that transition from advising to sort of you know, seeing
Speaker 1: the consequences both good and bad, of any of the
Speaker 1: decisions that are being made.
Speaker 2: Having a really good team around you is everything. And
Speaker 2: having a team that aren't afraid to put their hand
Speaker 2: up when they think you're making a bad decision or
Speaker 2: we're not heading in the right direction. And so, you know,
Speaker 2: what I really value about our team at Channel is
Speaker 2: everybody is upfront and straight up about what they think,
Speaker 2: and we have really good discussions about all the decisions
Speaker 2: that we make. You know, that healthy culture of challenge
Speaker 2: and debate leads you to making really good decisions. And
Speaker 2: so for me, being surrounded by soper smart people who
Speaker 2: are passionate about what we're doing, passionate about the mission,
Speaker 2: want the best for the company, and each bring different
Speaker 2: perspectives to a decision, whether it's operational, financial, strategic, commercial risk,
Speaker 2: and each bring that lens from my perspective. I think
Speaker 2: that's how we make good decisions as a company.
Speaker 1: And as you say, when you do have those diverse opinions,
Speaker 1: it's almost impossible to get consensus straight away.
Speaker 2: I almost worry if everybody agrees with something because it
Speaker 2: makes me wonder, have we really tested this right? And
Speaker 2: so Yeah, that's why really diverse team of talented people
Speaker 2: is such an important part of a high performing business.
Speaker 2: And people that are unafraid to provide their opinions, good
Speaker 2: fact based discussion and you know, ultimately contribute to the
Speaker 2: success success of the company.
Speaker 1: So in terms of that success of Channel Infrastructure, if
Speaker 1: we fast forward five years or maybe even ten years
Speaker 1: and things have turned out really well, what is Channel Infrastructure.
Speaker 2: Well, we've got a really awesome opportunity to be transformational
Speaker 2: for Northland and New Zealand. As I said, so the
Speaker 2: development of the Energy Precinct, you know, I think you've
Speaker 2: seen the numbers. You know, during the build phase that
Speaker 2: could be twenty thousand.
Speaker 1: Jobs, just a massive for fifteen years.
Speaker 2: Over fifteen years, you know, it could be over eleven
Speaker 2: hundred jobs on an ongoing basis, a significant contributed to GDP.
Speaker 2: You know, depending on the projects that we can bring
Speaker 2: to be, you know, we will be really additive to
Speaker 2: New Zealand energy and fuel security because that's what the
Speaker 2: Energy Precinct is designed to do. And you know, I
Speaker 2: think if we did that, you know, for Northland and
Speaker 2: New Zealand, that would be epic, That would be just
Speaker 2: such a such a great outcome and where you know,
Speaker 2: the energy Precinct is a long term plan and there
Speaker 2: will be ups and downs on projects that happen and don't,
Speaker 2: but I think we all see the potential there and
Speaker 2: the awesome economic potential for Northland and the awesome you know,
Speaker 2: opportunity for that energy and fuel security piece.
Speaker 3: You know.
Speaker 2: The other comment I would make is that my hope,
Speaker 2: certainly within fifteen years, is that we aren't just based
Speaker 2: at marson Point or don't just have as sets at
Speaker 2: Marston Point to Auckland. That we're a bigger company than that.
Speaker 2: We've got a bigger footprint.
Speaker 1: Their precinct is a real long term investment. Some of
Speaker 1: the numbers are you know, I've got big scale. I
Speaker 1: think PETWC estimated about two point three billion dollar contribution
Speaker 1: to the to the GDP. That that might make you know,
Speaker 1: things around us are changing all the time, and it
Speaker 1: feels if anything like the rate of change is getting faster,
Speaker 1: not slower. How do you think about building a long
Speaker 1: term strategy, and particularly one where it does require significant
Speaker 1: capex upfront when things change so much?
Speaker 2: Yeah, well, firstly that's why partners are really important. I
Speaker 2: think we need to be really humble in New Zealand,
Speaker 2: that we won't have all the right ideas and the solutions.
Speaker 2: And there's a whole bunch of really big companies and
Speaker 2: some small companies out there in the world doing some
Speaker 2: really interesting things in this space, and we need to
Speaker 2: bring their expertise in capital as relevant. So, you know,
Speaker 2: I think that's part of how we de risk this
Speaker 2: for Channel and our investors. So from my perspective, partners
Speaker 2: are key to that. I think being willing to be
Speaker 2: patient and pivot as well. So said, this won't be
Speaker 2: a linear journey. And you know, probably two years ago,
Speaker 2: did I think that you know, we would have need
Speaker 2: for a diesel peaker or on the site or that
Speaker 2: might be something that New Zealand would need. And so
Speaker 2: I think you've always got to be scanning on the horizon.
Speaker 2: Where are the opportunities, How can we contribute as a company,
Speaker 2: What is our unique competitive advantage that we can bring
Speaker 2: to something, and who can we partner with to help
Speaker 2: make it happen. And you know, if it happens that great,
Speaker 2: that's great. And if it doesn't, then you know, maybe
Speaker 2: it sits there for five years and it happens in
Speaker 2: five years, or maybe it pivots to something else. I
Speaker 2: mean if you think about, you know, the Buyer refinery project,
Speaker 2: that's the ultimate pivot because we're turning what was some
Speaker 2: old refining kit into something that is new and you
Speaker 2: could make a really significant economic contribution to New Zealand.
Speaker 1: If you were an investor thinking about channel infrastructure as
Speaker 1: an investment, what would be the metrics that you would
Speaker 1: be looking at. We talked about dividend, so divin yield
Speaker 1: is one, but what are some of those other metrics
Speaker 1: that you would think about tracking over time to assess
Speaker 1: whether channel of structure is being well run and doing well.
Speaker 2: So the measure that I would look at so this
Speaker 2: dividend and free cash flow? Right, and the reason that
Speaker 2: free cash flow is so important and actually you look
Speaker 2: at it across any business you invest in, not just channel.
Speaker 2: You know, that is a true measure for the cash
Speaker 2: that the business is reducing. And so you know ebit
Speaker 2: DA can have you know, when people talk about revenue
Speaker 2: and ebit DAR, you know there's pros and cons with
Speaker 2: those measures, but free cash flow is the yearnings less,
Speaker 2: the sustainable capex, less your interest costs, so you know
Speaker 2: it's a true measure of the cash that the business
Speaker 2: is producing, and I think scheerholders should look at that.
Speaker 2: I wouldn't want to give anybody any financial advice, but
Speaker 2: I'd I certainly look at it at any investment that
Speaker 2: I look at, not just not just channel. And that's
Speaker 2: a metric that we are focused on as a company
Speaker 2: because you know, we need to balance you know, the
Speaker 2: long term nature of our business and making sure that
Speaker 2: we make good, disciplined investments in our assets to ensure
Speaker 2: that they're there for a very long period of time,
Speaker 2: so that that's covered in the KPEX part of it.
Speaker 2: And then there's the yearnings part of it, or the
Speaker 2: cash that the business generates as well, which is a
Speaker 2: reflection of the enterprise or the job that we do well.
Speaker 1: I think we're I'm here, but thank you so much
Speaker 1: for what has been a really interesting conversation.
Speaker 2: Thank you, suys, really appreciate it.
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