28 Jul 2021

Z Energy biding its time over switch to low carbon

5:58 pm on 28 July 2021

Fuel retailer Z Energy says there is no need for it to race into a low carbon future, although it's preparing for significant changes to the industry.

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Photo: RNZ

The company has released material from an investor day seminar showing it is expecting significant demand for fossil fuels for some time to come.

Z Energy chief executive Mike Bennetts said the company had made considerable changes over the past couple of years, but he had a confident view on the company's future core business.

"We are very focused on optimising our core business, with a tighter and simpler definition of what that core business is."

He said the aim was to steer the business as a broad based convenience retailer, with a target of revenue of $500 million by the end of 2024.

It would look to cut its debt, maximise its cash flow, and ensure regular dividend payments, with Bennetts stipulating a minimum payout of 19 cents a share.

Z was also looking at putting its retail sites into a separate real estate investment entity, which might be fully or partially floated.

The company expected to make a $150m savings if and when the Marsden Point refinery converted into an import only facility.

Carbon changes in the slow lane

Z's presentation included a special report on the future of fuel demand in which it said the direction of travel was clear, but asked how long it would take to get there.

It based its view on the Climate Change Commission's (CCC) report, but differed in some of the conclusions about the transition to a carbon free sector.

"While we may differ on some assumptions, we strongly agree with the CCC that the time to take action is now," the presentation said.

"Our view is that although annual growth in petrol and diesel demand will slow markedly from 2025 and turn negative from 2026 for petrol and 2028 for diesel, it will not reduce as quickly as the CCC predicts. We see demand for both fuels remaining substantially higher than the commission does out to 2040."

It expected a slower consumer uptake of electric cars, and it did not expect price parity or similar availability with internal combustion vehicles until 2029.

Demand for fuel for heavy transport and freight sectors would be stronger and remain longer than the CCC has been forecasting. That was due to the current lack of suitable alternatives, which it said would offer opportunities for bio-fuels, although hydrogen was currently not a viable option, but it was watching developments.

Z said it was better placed than its major rivals, BP, Mobil, and Gull, to cope with changes, because it was broad based around the country, had a better and more diversified retail offering, and would not be as prone to any major uptake in the purchase of electric vehicles.

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