ZEL - Z Energy.

[theace]

Link now showing allocations.

[Soarin]

Got it - thanks.

[Waikaka]

I have participated in the SPP and getting enough ZEL in the portfolio I better start looking into Z more.

I suspect that with the balance sheet now pretty much improved and NZ'rs now back up running their cars around town buying junk we will see a steady return to volume sales. However the aviation side of the business is going to impacted longer term. How much of a problem would it be if that sales stream dropped out of the business?

In 2020 annual report they said:
2,294m litres sold to commercial customers (49%)
1,543m litres sold to retail customers (33%)
843m litres of jet fuel (18%)

They also note that Aviation fuel is the lowest margin product they sell, so hopefully less than 15% decline in earnings but who knows.

Not ideal but at the current share price happy that there is a decent discount even if the aviation fuels business is severely impacted long term.

Bit concerned about them throwing their toys out of the cot re terminal gate pricing. Long been a understanding that using each other infrastructure collaboratively to balance supply and demand is good for everyone but suspect as these smaller low service retailers are cutting the big guys lunch they are going to throw them under the bus.

Statement below from their 2020 annual report

"Z has just over 45 percent fuel market share in New Zealand, but just over 50 percent of terminal storage.We’re more than pulling our weight.Progressively, expect Z to continue to step back from the established fuel industry sharing arrangements in which fuel and terminals were shared and move much more onto a solid commercial footing.

We’ve already started. We have exited the industry sharing arrangements at Nelson, as a starting point. If fuel companies, including new wholesale fuel suppliers, want fuel at Nelson, we will sell it to them on commercial terms at a price that reflects the capital costs of the terminals. That’s fair and reasonable.

What we don’t want to do anymore is provide fuel to competitors with no assets in an area at zero margin for them, to then on-sell to distributors at a cost we can’t even provide to our own retail/commercial networks.That’s distorting the operation of a proper market, rewarding a lack of investment and failing to see investments adequately rewarded."

[Cyclical]

I have participated in the SPP and getting enough ZEL in the portfolio I better start looking into Z more.

I suspect that with the balance sheet now pretty much improved and NZ'rs now back up running their cars around town buying junk we will see a steady return to volume sales. However the aviation side of the business is going to impacted longer term. How much of a problem would it be if that sales stream dropped out of the business?

In 2020 annual report they said:
2,294m litres sold to commercial customers (49%)
1,543m litres sold to retail customers (33%)
843m litres of jet fuel (18%)

They also note that Aviation fuel is the lowest margin product they sell, so hopefully less than 15% decline in earnings but who knows.

Not ideal but at the current share price happy that there is a decent discount even if the aviation fuels business is severely impacted long term.

Bit concerned about them throwing their toys out of the cot re terminal gate pricing. Long been a understanding that using each other infrastructure collaboratively to balance supply and demand is good for everyone but suspect as these smaller low service retailers are cutting the big guys lunch they are going to throw them under the bus.

Statement below from their 2020 annual report

"Z has just over 45 percent fuel market share in New Zealand, but just over 50 percent of terminal storage.We’re more than pulling our weight.Progressively, expect Z to continue to step back from the established fuel industry sharing arrangements in which fuel and terminals were shared and move much more onto a solid commercial footing.

We’ve already started. We have exited the industry sharing arrangements at Nelson, as a starting point. If fuel companies, including new wholesale fuel suppliers, want fuel at Nelson, we will sell it to them on commercial terms at a price that reflects the capital costs of the terminals. That’s fair and reasonable.

What we don’t want to do anymore is provide fuel to competitors with no assets in an area at zero margin for them, to then on-sell to distributors at a cost we can’t even provide to our own retail/commercial networks.That’s distorting the operation of a proper market, rewarding a lack of investment and failing to see investments adequately rewarded."

Does anyone know if the aviation fuel is a necessary by product of the refining process (and thus we potentially have a storage issue), or can they easily amend the formulas to align with supply and demand of the different products?

[Waikaka]

Does anyone know if the aviation fuel is a necessary by product of the refining process (and thus we potentially have a storage issue), or can they easily amend the formulas to align with supply and demand of the different products?

Interesting question, refineries can alter the type of crude imported, to alter what products are produced. NZR uses heavy sour and is set up for it so not easy to change.

NZR produced about 85% of our pre-covid jet fuel demand, the rest was imported.

From what I can figure historically NZR makes a jet/DPK (dual purpose kerosene) cut of about ~15% on their bulk crude imported, perhaps it has changed since refinery upgrades. In cracking the fuel they have to produce off lighter fractions and yes it will become a headache:

https://www.odt.co.nz/star-news/star...anies-millions

However in ZEL case it is not a big worry with the plant just barely running until August, I don't think they will have storage problems. DPK is pretty versatile so I suppose if you had to you could export it.

I am learning more about refining than I ever wanted to (see NZR thread).

[Oliver Mander]

Does anyone know if the aviation fuel is a necessary by product of the refining process (and thus we potentially have a storage issue), or can they easily amend the formulas to align with supply and demand of the different products?

NZR is a 'mid-distillate' refinery - so it's very good at producing diesel and jet fuel. So yes, lack of Jet fuel consumption will cause a headache...but it is worth noting that it does not produce enough Jet (or Petrol) to supply the entire country normally...most of NZR's Jet goes down to the pipeline to Auckland, with (usually) Christchurch and Wellington relying on jet fuel imports to their terminals. So the refinery will only hurt if the total jet fuel consumption on a national basis falls below what Auckland usually uses (from memory, about 65% of the national total).

[Simsee]

Hi
Anyone received confirmation of strike price or allocations for the recent share issue? Ive seen nothing

[BreaKerNZ]

Hi
Anyone received confirmation of strike price or allocations for the recent share issue? Ive seen nothing

$2.806 per share, I received my full allotment.

[Jim]

Hi
Anyone received confirmation of strike price or allocations for the recent share issue? Ive seen nothing

Shares allocated on 6 June at $2.806 a piece

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-websit...190/325145.pdf

To me this reads like ZEL's major stake in NZR has little if any value and they can expect very little if any profit from their share of NZR's earnings going forward.
Market seems to agree with ZEL starting to plumb new lows. Only reason to ever own this company, (in my view was for the dividends) and with no dividends until at least October 2021, (by which stage they may have lost significant further market share to the minnows with their unmanned stations) one wonders what sort of annual dividend they might be capable of paying in the future, (if any with their substantial debt burden). Brokers on average think 33 cents per share from FY22, see https://www.marketscreener.com/Z-ENE...98/financials/
If I agreed I would be a buyer for the incredible yield of 33 cents fully imputed = 33 / 0.72 = 45.83 cents gross / $2.75 = incredible gross projected FY22 yield of 16.67% but if something sounds too good to be true, then...it's probably hogwash.

Looking at the 3 year chart, you'd have to be "brave" to hold this one...so much value destroyed in the last 3 years...really one wonders if management have any answers ? ZELCHART.jpg
Good luck to holders, I think you are going to need it.