Timing of leak disclosure queried

A leak in the Marsden Point-Wiri pipeline has affected jet fuel supplies to Auckland...
A leak in the Marsden Point-Wiri pipeline has affected jet fuel supplies to Auckland International Airport. Photo: NZME.
New Zealand Refining is expected to take a hit of up to $15million on its revenue after revealing a pipeline leak was disrupting fuel supplies at Auckland International Airport.

However,  mystery remains about when the leak on the Marsden Point-Wiri pipeline was first discovered and why it took so long to tell the market.

A Christchurch investor, Peter Wakeman, contacted the Otago Daily Times to talk about the handling of the situation.He had complained to the NZX about NZ Refining’s slowness to tell the market.

The company knew last Thursday but made the announcement to the market only at 8.30am yesterday.

Mr Wakeman, who owns shares in Auckland Airport but not NZ Refining, said he was concerned people were trading shares last week without full knowledge about the potential impact on the company and other listed companies such as the airport and airlines.

"It is unbelievable for NZ Refining to not make the disclosure until Monday morning. New Zealand doesn’t want to be known as a Third-World country when dealing with these problems.

"Overseas, shares would be suspended while an investigation is undertaken."

Mr Wakeman had complained to the NZX and the Financial Markets Authority about the delay. The FMA said a response would be forthcoming in two to three days but the NZX said it could take two weeks before information was available.

That was unacceptable for investors, he said.

Stock exchange operator NZX said it was in talks with NZ Refining regarding its announcement about the pipeline leak.

Listed companies had an obligation to continuously report anything that may have a material impact on them.

Asked if the NZX was looking into the timing of the announcement, a spokeswoman said it was "engaging with NZ Refining on this morning’s announcement regarding the Wiri pipeline leak.‘‘NZX is unable to provide any further comment at this time."

The company said the leak would affect revenue by $10million to $15million.

NZ Refining generated annual revenue of $353.8million in calendar year 2016.

Craigs Investment Partners broker Chris Timms said

NZ Refining had indicated it would take less than two weeks to fix the pipeline. There were no penalties involved, just sales impacts.

"As the reason for the pipeline damage has been identified, and it is not a pressure-induced breakage, the repair timeline should be achieved."

The supply of jet fuel was the biggest impact on the market, he said.

The shutdown was affecting all airlines operating into and out of Auckland Airport and jet fuel sales were limited to 30% of normal usage.

"This supply will not last long as it is coming from Wiri supplies."

There  were just 12 days of jet fuel supply to Auckland Airport at 30% rationing.

While some of the fuel would be shipped by tankers, it was not a meaningful fix.  In context, an A380 would require seven tankers — 250,000 litres — for one fill. Only one tanker was allowed to fill at any one time, Mr Timms said.

Petrol and diesel supplies were mostly unaffected as there were five to six days of storage at Wiri and product was being shipped from Tauranga and Whangarei.

Although 100% supply at all times was not guaranteed, and there could be some forecourt disruption, it was unlikely to develop into a retail issue, he said.

After the repair, the pipeline would run at about 80% of capacity for a time. Craigs was still waiting for a NZ Refining response on some issues.

Air New Zealand should experience only a modest passenger number reduction through the disruption, as long as the repair meant supplies were back to normal before the school holidays in two weeks, Mr Timms said.

Z Energy had not changed its 2018 full-year guidance of $445million to $475million. Craigs expected a $2million to $5million impact to the profit due to slower jet fuel sales, extra distribution costs and moderately lower retail sales.

Investors usually took events like the pipeline leak in their stride, he said.Air NZ said  about 2000 of its passengers would be affected by flight cancellations. In addition,  some long-haul services to and from Asia and North America would undertake refuelling stops at Fiji. The airline was ensuring domestic jet services uplifted maximum fuel limits when operating from Wellington or Christchurch, to limit refuelling in Auckland.

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