NZR
15/10/2015 10:03
GENERAL
NOT PRICE SENSITIVE
REL: 1003 HRS The New Zealand Refining Company Limited
GENERAL: NZR: Refining NZ - Revised Freight Benchmarks
Refining NZ has renegotiated the freight benchmarks of its processing fee
arrangements with its customers. This is in line with the recommendation
published in the 2014 independent review of Refining NZ's processing fee
arrangements by Hale and Twomey disclosed to the market on 15 September 2014.
From 1 January 2016 freight benchmarks published by the Platts agency will
replace the benchmarks published by the London Tanker Brokers Panel.
As part of their review, commissioned by the Independent Directors of
Refining NZ, Hale & Twomey assessed whether the benchmarks and associated
premiums for valuing crude and product for the purposes of the processing fee
calculation are appropriate. As their single finding Hale & Twomey
recommended alternative freight benchmarks.
Refining NZ's processing fee is calculated as 70% of its Gross Refining
Margin (GRM). The GRM is the difference between prices for refined products
including product freight and the cost of materials to manufacture those
products such as crude and crude freight. The freight costs are calculated
using published benchmarks.
Since 1995 the processing agreements have used freight benchmarks published
by the London Tanker Brokers Panel. These were average global assessments of
freight cost because reliable regional benchmarks were not available.
Nowadays, the agency Platts quotes a specific index for shipping to New
Zealand/Australia which is based on actual fixtures for these trade routes.
Hale & Twomey concluded that Platts benchmarks therefore better reflect
actual freight costs than the existing benchmarks.
While the change better reflects actual freight cost in the region, Hale &
Twomey calculated that this change would have been virtually revenue neutral
over the past 5 years.
ENDS
For further information:
Greg McNeill, Communications and External Affairs Manager
T: 09 432 8311; M: 021 873 623; E: [email protected]
End CA:00271780 For:NZR Type:GENERAL Time:2015-10-15 10:03:19
