CHI - Channel Infrastructure Ltd (NZR)

[SailorRob]

Luckily for me, busy living life rather than worrying about the ups and downs of share prices. Really healthy buying, holding and forgetting about it.

My business case is simple. RAP, jetty, Port and land have an intrinsic value. Shame the refinery is a big rusty paper weight but I didn't pay for it when I was buying in the ~40c range. Gonna cost a bomb to remediate all the crap they have buried around the place.

Shame I bought some before Covid blew everything up but pleased I bought more as the investment case got stronger (with the price getting cheaper) and now happy to hold a boring infrastructure asset for 10 years and see what happens. I thought I was buying a gutter stock that might run the refinery for another 5 years to get the last puffs out but oh well.

Def not buying at these prices but happy to top up if it gets around 50c again.

Nothing has intrinsic value unless it can produce profit and that profit needs to be in relation to the capital employed to produce that profit.

Further to us as investors we need to consider what we pay for our share of that capital and how this profit relates to what we pay.

All I asked for was a investment hypothesis clearly explaining how as an equity owner you will see cash generated over and above all expenses and distributed to you, and the risks involved with that hypothesis. Now nobody owes me that explanation but as share holders you owe it to yourselves.

Now the truth is that nobody can provide that case as it doesn't exist.

To make it simple, lets assume the shares are free. So you are getting the equity free right now. i.e share price zero. No explain how you wring money out of it??

[Snoopy]

For Petrol it's 10 ppm maximum for both NZR production and for any fuel sold in NZ. We follow European regulations.

Desulphurisation of petrol is pretty simple and cheap to do, for diesel its more complicated.

We spent 180 million dollars in 2006 to upgrade processing to meet new Sulphur requirements for diesel (under 10 ppm) and benzine in petrol.

That (10ppm) is pretty good when Australian refineries have been allowed to pump out premium petrol -with 50ppm of sulphur- and regular petrol -with 150ppm of sulphur-. I can quite understand why the Australian government wants to tidy the sulphur content of their fuel up. But if Australia thinks the best way to secure improved fuel standards is to subsidise their two remaining fuel refineries, this would suggest to me that low sulphur fuel is not readily available in the Asia Pacific region on the open market.

So what standard of fuel will be available to us once Marsden Point Refining shuts down? Or is price the only measuring stick standard from now on?

SNOOPY

[Dotbond]

https://www.nzta.govt.nz/roads-and-r...y-regulations/

[Snoopy]

https://www.nzta.govt.nz/roads-and-r...y-regulations/

Ah thanks for that. The most recent standards for diesel and petrol are as follows:

2009 - Reducing sulphur in diesel to 10ppm allowing Euro 5/V diesel vehicles
2018 - Reducing sulphur in petrol to 10ppm

I guess imported fuel will have to meet this standard as well. So the question is can we source a supply to that standard?

https://rentar.com/best-crude-oil-wo...better-others/

The four best quality oils found in the world are pumped out of Malaysia (Tapis, Kikeh, Miri Light, Kimanis)

"the only crude oils in the world that is close to as light as Tapis Crude oil is found in the Gulf States and in Minnesota."

So it looks like there are sources for light and low sulphur fuels that we could tap into?

SNOOPY

[Dotbond]

Sorry double post

[SailorRob]

Yes we can, remember a lot of NZ's fuel is imported now. It's no problem at all to source low sulphur fuels.

[Waikaka]

Nothing has intrinsic value unless it can produce profit and that profit needs to be in relation to the capital employed to produce that profit.

Further to us as investors we need to consider what we pay for our share of that capital and how this profit relates to what we pay.

All I asked for was a investment hypothesis clearly explaining how as an equity owner you will see cash generated over and above all expenses and distributed to you, and the risks involved with that hypothesis. Now nobody owes me that explanation but as share holders you owe it to yourselves.

Now the truth is that nobody can provide that case as it doesn't exist.

To make it simple, lets assume the shares are free. So you are getting the equity free right now. i.e share price zero. No explain how you wring money out of it??

No point over scienceing it, Profit = cashflow - operating expenses

What someone else has paid to build it doesn't affect my profitability cause you gave NZR to me for free. When it becomes an import tolling facility they have indicated revenue of $95 million and expenses of $35 million. So profit of 70 million right?

Conversion cost of 220 million, existing debt of $235 million so that is combined $445 million. $445million/$70 million = 6.3 years to pay of all existing debt and terminal conversion fees.

Ignore all the land that could be repurposed, catalytic scrap and possibility of extra revenue and I still see plenty of intrinsic value.

[SailorRob]

No point over scienceing it, Profit = cashflow - operating expenses

What someone else has paid to build it doesn't affect my profitability cause you gave NZR to me for free. When it becomes an import tolling facility they have indicated revenue of $95 million and expenses of $35 million. So profit of 70 million right?

Conversion cost of 220 million, existing debt of $235 million so that is combined $445 million. $445million/$70 million = 6.3 years to pay of all existing debt and terminal conversion fees.

Ignore all the land that could be repurposed, catalytic scrap and possibility of extra revenue and I still see plenty of intrinsic value.

Waikaka, this is unreal.

I did not give you NZR free... I gave you the EQUITY for free.

Profit = Revenue minus ALL expenses. Cash flow is irrelevant.

You're using EBITDA for your figures!! What's next community adjusted EBITDA as in We works case?

It's not hard to see how people have been so burned by this 'investment'. The figures you present are just from glossy presentations, have you thought about them in the context of all previous glossy presentations from this company?

As I said nobody can present a simple investment case. I'm all for not over complicating it Waikaka but using EBITDA in a company like this, lets get real.

I want to see CASH generated in the bank and paid out to me as a share holder...

[Waikaka]

Waikaka, this is unreal.

I did not give you NZR free... I gave you the EQUITY for free.

Profit = Revenue minus ALL expenses. Cash flow is irrelevant.

You're using EBITDA for your figures!! What's next community adjusted EBITDA as in We works case?

It's not hard to see how people have been so burned by this 'investment'. The figures you present are just from glossy presentations, have you thought about them in the context of all previous glossy presentations from this company?

As I said nobody can present a simple investment case. I'm all for not over complicating it Waikaka but using EBITDA in a company like this, lets get real.

I want to see CASH generated in the bank and paid out to me as a share holder...

I tried to make it simple as you requested, yes I used company figures what other ones should I make up for a 'quick' business case and cashflow is def not irrelevant.

Yes there are all the tax credits, ongoing costs to maintain facilities and future one off costs and depreciation slice it up a million ways to complicate things but honestly I am not an accountant.

There is an underlying value to the infrastructure assets that remain. People will want to use them for many years aka the RAP is the only cost effective way to get oil into Auckland. It has a huge moat as no one could build a new pipeline. People will pay me to use it and then I will make a profit.

It was a good price in the 40's, it is not a good price now. In 5 years I suspect it will be giving me a return, nothing to lose sleep over.

Honestly there is a lot to dislike about the refinery. Past losses have been truly spectacular but when I walked past the stock it is and was broken down and beaten up, I invested a little to see what will happen in 5 years.

Yes they have lost money in the past, building and running an expensive refinery but honestly history doesn't matter much to me. Is there a decent chance it will make a profit in the future my vote is yes.

Hit me up in 5 years if they haven't paid a dividend and ill owe you a beer.

[SailorRob]

I tried to make it simple as you requested, yes I used company figures what other ones should I make up for a 'quick' business case and cashflow is def not irrelevant.

Yes there are all the tax credits, ongoing costs to maintain facilities and future one off costs and depreciation slice it up a million ways to complicate things but honestly I am not an accountant.

There is an underlying value to the infrastructure assets that remain. People will want to use them for many years aka the RAP is the only cost effective way to get oil into Auckland. It has a huge moat as no one could build a new pipeline. People will pay me to use it and then I will make a profit.

It was a good price in the 40's, it is not a good price now. In 5 years I suspect it will be giving me a return, nothing to lose sleep over.

Honestly there is a lot to dislike about the refinery. Past losses have been truly spectacular but when I walked past the stock it is and was broken down and beaten up, I invested a little to see what will happen in 5 years.

Yes they have lost money in the past, building and running an expensive refinery but honestly history doesn't matter much to me. Is there a decent chance it will make a profit in the future my vote is yes.

Hit me up in 5 years if they haven't paid a dividend and ill owe you a beer.

Yep some good points. Definitely do not ever use company provided figures (not this one anyway) for any analysis. The maintenance and ongoing consistent 'one offs' will be the killer. You don't need to be an accountant to know there are many more costs involved in a venture like this than simple operating costs which will be very low.

Yes the pipeline and jetty are valuable and irreplaceable but this requires a lot of context, depends what you pay for them and how they are financed along with all the other fishhooks etc..

Is there a decent chance it will make a profit in the future my vote is yes. And you could well be very right but this isn't investing, casting votes based on good chances, but it sounds like you know that it is speculating and there is nothing wrong with that.

They could pay a dividend within the next 5 years but this is meaningless if it's not distributed out of real profit. That's just like increasing your mortgage to create cash in your bank - totally pointless.

There is a good chance it will produce a profit in the future, but how far out that is, how certain it is and how much it will be and how consistent, nobody knows.

Every year it goes without a profit, it has to generate even more profit in future to make up for that time.

If you're paying 130 mil for the company then it has to generate say 7 to 10 million clear profit each year for you at least. If it doesn't this year then you'll need the 7 you're missing added to future profits which just ain't going to happen.