I would now like to hand the conference over to Rob Buchanan, Chief Executive Officer. Please go ahead.
Good morning, everyone. Thank you for joining us as we run through our financial and operating results for the 2025 year. I'm joined here today by our Chief Financial Officer Alexa Preston, and we will speak to the presentation we disclosed on the NZX this morning. As usual, I'll cover off our company highlights and the operational update before Alexa talks to the financials in more detail. I'll take you through our strategic highlights before we have some time for questions at the end. Let's start with our financial highlights on page three. Excluding the one-off impact of the Wiri lease, EBITDA grew 4%. This reflects CPI escalation, an increase in throughput, and the benefit of the full-year contribution from the Transmix Contract. Normalized free cash flow increased by 5%, and our free cash flow conversion pleasantly increased from 67% - 72%.
Today, the board declared a final dividend of NZD 0.0675 per share. With a continued focus on stable and growing dividends, the board remains committed to our dividend policy of 70%-90% of normalised free cash flow, paying this equally between the interim and final dividend. This year we had higher than anticipated free cash flow, reflecting stronger jet and petrol throughput than anticipated, and we now have good visibility on the finishing line for our jet storage and bitumen projects. The board decided to declare a dividend higher than we had guided to, recognizing the need to continue to be efficient with shareholders' funds. We've listed the 2025 highlights on page four. I'm very proud of everything the Channel team has done this year. To say it's been a busy year would be an understatement.
We continue to execute, deliver, and drive shareholder value year after year. This is reflected in our 2025 total shareholder return of 63%, which significantly outperformed the NZX50 over the same period. Our safety track record continues with consistent safety performance. We delivered a strong financial result in line with the guidance we provided at the beginning of last year. Marsden Point reliably delivered over 3.5 billion liters of fuel through our infrastructure, and while throughput was relatively stable, as we had anticipated, Q4 was the highest throughput since import terminal operations began, and jet fuel, the highest since 2019, despite the New Zealand's well-known aircraft issues. The Z Energy Jet Storage project is on track to be delivered in Q3, ahead of schedule. The new bitumen import terminal is well underway and expected to be operational in Q4 this year.
As we announced in August, we signed another storage contract. This was a contract extension, which adds NZD 50 million of revenue prior to PPI over the extended 9-year contract period. We'll start seeing the benefit of this from Q1, 2028. In November, we made our first steps into the Australian market with the acquisition of a strategic position in Melbourne's jet fuel supply chain. Reflecting our confidence in the Marsden Point Energy Precinct, we've committed to and started the process of relocating the control room and construction of the new administration building. This will not only support the energy precinct redevelopment plans, but is important for improving the safety and environment our people work in every day. We updated our capital allocation framework and importantly, increased our dividend payout ratio.
We listed on the ASX, which is a real milestone for our company, reflecting how far we've come and the growth opportunities ahead of us. Lastly, but definitely not least, we've been progressing growth and development opportunities, and I'll come back to this later in the presentation. Moving to page five. Starting with safety, there were no Tier 1 and Tier 2 process safety incidents and three recordable cases through the year. Looking at the asset availability chart at the bottom of the page, our pipeline and tank availability remain at world-class levels, which is something we're very proud of. As you can see, the number of ships at our jetty continues to fall. Our customers are bringing in larger ships, utilizing the contracted storage on our site, and the supply chain benefits our high throughput facility offers.
These ships are carrying more product on average, awkward revenue received continues to remain steady. Moving to page six. Jet throughput was relatively flat, in line with our expectations at the beginning of the year. The New Zealand aircraft challenges are still anticipated to continue for some months. We saw Q4 jet throughput the highest since Q1, 2019, despite many of the New Zealand planes being on the ground. This chart excludes the volumes going through the Somerton Pipeline that we recently acquired. It is worth pointing out that Melbourne Airport, which gets a significant amount of its fuel through the Somerton Pipeline, is undergoing significant growth. The third runway is being built and will be operational in the early 2030s. In December last year, we saw the largest number of passengers on record going through Melbourne Airport. Moving to page seven.
Diesel remains stable year on year, as forecast by Envisory. Petrol was slightly ahead of the Envisory forecast. In part, we believe this is because our customers are taking advantage of the supply chain efficiencies offered by our high throughput Marsden Point site, along with the payoff of our world-class work, which is helping create efficiencies for our customer supply chains and boosting our resiliency as an operator. Now I'll hand over to Alexa to take you through the financials.
Thanks, Rob. Looking at the P&L on page nine, we have delivered yet another solid result in line with our guidance, reporting EBITDA of NZD 93.4 million and an EBITDA margin of 67%. The pro forma table at the bottom of this slide shows our results adjusted for the impact of the expiry of the legacy Wiri lease. Excluding this, we have delivered EBITDA growth of 4%. The higher depreciation charge reflects the revaluation of the import terminal system assets in 2024, and the capitalization of a number of new assets this year. Lower financing costs for the half reflect the benefit of interest rate hedging and the successful refinancing in November 2024, which lowered the all-in cost of drawn facilities by 0.6%. Moving to page 10. Overall, revenue for the period was broadly flat.
We saw the contracted $5 million nominal step-down in the annual fixed terminal fee from April 1st, 2025, and the impact from the expiry of the legacy Wiri lease, which ended at the end of February. Fees were offset by CPI indexation and a full-year contribution from the Transmix Contract. Revenue for the year also includes one-off earnings of around $700,000 and a non-cash investment property revaluation of $200,000. Turning to operating costs on page 11. Channel continues to exercise operating cost discipline, delivering flat underlying costs for the year. We have an ambitious growth strategy, and some investment is needed in order to execute growth opportunities and grow the value of the business.
In 2025, we incurred NZD 1 million of cost associated with our Foreign Exempt ASX listing, and NZD 1.5 million of cost relating to the pursuit of growth, which included the successful acquisition of a 25% interest in the Somerton jet fuel Pipeline to Melbourne Airport. Going forward, we will incorporate the revenue and operating costs associated with our share of the Somerton Pipeline in the relevant lines in our P&L. Page 12 provides the detail of our investment in resilience and growth. I just wanted to take a moment to talk to the photo on this slide. Earlier this month, the Z Energy jet storage tank achieved a significant milestone, with the geodesic dome roof being constructed inside the tank and then lifted up on top of it.
The tank is now fully enclosed, hydro testing is being completed, with other compliance checks scheduled over the coming months. Here is anticipated early commissioning in Q3 this year. Maintenance CapEx for the period was NZD 12.3 million, and growth CapEx was NZD 27.1 million. The growth CapEx program for the year included completion of the private storage bund program, ongoing work on the Z Energy jet tank conversion, and the initial construction works related to the Higgins bitumen import terminal. Conversion CapEx includes the last remaining workstream in the overall program, being the bunding upgrades, which will be completed over the period to December 31st, 2027. Turning to the cash flow on page 13. Net debt as at December 31st closed at NZD 330 million.
Normalized free cash flow, NZD 66.9 million, and free cash flow conversion was 72%, up from 67% last year. The board declared a final dividend of NZD 0.0675 per share. As Rob spoke to earlier, we aim to split our dividends equally between interim and final dividends. This year we had higher than anticipated free cash flow. The board determined to declare our dividend higher than guidance and return the surplus to shareholders. Page 14 shows our strong balance sheet position. Leverage sits at 3.6x net debt to EBITDA, up from the prior year, reflecting the acquisition of the Somerton jet fuel pipeline. Gearing and interest cover ratios remain well inside our covenant levels. We have no debt due for refinancing this year, following a one-year extension to our banking facilities in 2025.
Let me finish up with the outlook for FY 2026 on page 15. We are expecting EBITDA of between NZD 95 million-NZD 100 million. This reflects the early completion of the Z Energy Jet Storage project and the bitumen import terminal being ready for service in late 2026. The Producer Price Index applicable to 2026 is 3.25%, and approximately 95% of Channel's revenues are in that index by this factor in 2026. Positive signs of growth emerged in jet fuel throughput in Q4 last year, Auckland Airport continues to anticipate only modest passenger growth, some of which is likely to be absorbed by available seat capacity on existing flights.
In addition, Air New Zealand has outlined the disruption it is expecting from its aircraft availability issues, and as a result, Channel anticipates modest jet fuel growth of 2% in 2026. Lastly, it's worth noting that only $23 million of the conversion budget remains to be spent, spread evenly across 2026 and 2027. I'll now hand back to Rob to give an update on progress towards the delivery of our strategy.
Thanks, Alexa. Moving to page 17. We've talked for some time about our ambition to become a world-class operator. The reason why we've relentlessly pursued this work is to demonstrate our operating capability to current and new customers, who are generally global organizations that expect outstanding operational performance. Ultimately, our expectation is that this will help us to unlock growth opportunities and attract product flow to Marsden Point. We're already seeing the benefits of this work, not only through our fuel volumes, but the wider growth we've already unlocked. I wanted to give you an update on the significant progress we have made towards our world-class ambition. We are a significant way through this piece of work. On the infrastructure and performance front, we've taken a number of steps to improve the reliability and resilience of the import terminal system for our customers and for New Zealand.
This helps entrench Marsden Point as a key import location, an integral part of our customer's supply chain. In terms of systems and processes, we've made it easier and cheaper for our customers coming to Marsden Point by, for example, seeking to reduce ship alongside time at our jetty. In people and capabilities, which is critical to the successful operation of a high-hazard facility, we've seen a significant increase in overall staff engagement over the past few years. Through building organizational culture, we're seeking to drive improved safety, operational, and efficiency outcomes, as well as align our people with our company's strategy and delivery for shareholders. Page 18 is the strategy that we announced back in October 2023.
As I've just mentioned, we have made great progress on becoming the infrastructure partner of choice for our customers and demonstrating strong financial discipline while being a good neighbor and good citizen. This is now positioning us well to drive harder on the middle pillar of the strategy, which is growth. I won't spend much time on page 19, as you've seen this slide before at the August results, This is a reminder that we are very focused on our growth ambitions and disciplined with how we allocate shareholders' capital. Our first priority is near-term opportunities identified for additional product storage and fuel energy security initiatives at Marsden Point. Beyond Marsden Point and the Auckland supply chain, we're taking a measured approach to incremental growth and in saw this action with the acquisition of a 25% share in the Somerton Pipeline. Moving to page 20.
The purpose of this slide is to demonstrate our proven track record of delivering growth and large projects safely, on budget, and on time. The conversion project, which is a significant six-year project with a budget of NZD 220 million, remains on track and will be completed by December 31st, 2027. On top of this, we've executed an impressive four new growth projects over the past two years. This will deliver an additional NZD 170 million before PPI indexation and incremental revenue over 15 years. We completed our first measured step-out last year in Australia. Moving to page 21.
We announced to the market our Marsden Point Energy Precinct concept back in October 2024, which was the framework for how we saw a wider use of our sites and the way we want to maximize the significant opportunities from our highly strategic and unique assets. This plan is never going to be static, with market opportunity evolving, we always knew that the final shape of our precinct would change over time. Therefore, it's no surprise there have been a few updates to this image, which I wanted to draw your attention to today. All of you will have noted the New Zealand government's announcement regarding LNG procurement and a preference for a facility based in Taranaki. We've been clear for some time that LNG was unlikely to be the best option for Marsden Point, although we remain open to considering viable projects should the market heavy.
From our perspective, we see better uses for our site than LNG and therefore removed it from the plan. We have now completed the conversion works for increased jet fuel storage, amounting to a total of 120 million liters capacity in the new jet compound, which supports the energy resilience of New Zealand by enabling our customers to increase the size of the ships they bring to New Zealand and the amount of fuels they hold here. You will note that the jet compound is now in blue, with only two tanks left to contract, and we continue to see opportunities for these assets with projected jet growth and on import in the long term. We've previously spoken to a potential eSAF plant on the Marsden Point site.
With the timelines for this project now looking longer, we are now supporting several new scoping studies by international parties considering further biofuels opportunity, as well as hydrogen production and export at this location. Lastly, the more contested geopolitical environment we live in means energy security is becoming more and more relevant. As New Zealand's Prime Minister has said, "Energy security is national security." While we previously thought the use cases for our largest liquid crude tanks would be limited, we have reconsidered this assumption in light of changing potential customer interest. I do want to stress, however, that any opportunities for these larger tanks are long-dated. Looking at our potential projects for the Marsden Point site. The Marsden Point biorefinery project is progressing well. Air New Zealand have now joined the consortium, enhancing the project's offtake profile.
This project would make the scarce supply of renewable fuel more accessible for New Zealand, and domestic fuel manufacturing capacity using domestic feedstock will also further enhance New Zealand's fuel security. Engineering work has progressed, and the final form of the feedstock supply and key product offtake agreements have now been prepared. A select group of lenders has been shortlisted to participate in the formal debt rating process, and the Preliminary Information Memorandum has been developed and when finalized, will be issued to financiers. Channel continues to support the consortium in progressing the project in its capacity as a landlord and ancillary infrastructure provider. We continue to anticipate a Final Investment Decision by the consortium later this year. Channel has completed a feed study for the 72 MW diesel-powered electricity peaking plant, with the cost borne by two electricity market participants.
Electricity market participants with whom we have engaged so far, see this project as a useful and resilient asset for firming renewables. Channel's project will be relatively fast to construct and benefits from significant fuel reserves already stored on Channel's Marsden Point site, providing for near immediate start as required. Channel was in advanced discussions with several parties regarding a long-term capacity contract to underwrite the development costs of the project, to be funded by Channel. Following the New Zealand government's announcement that it's considering proposals relating to a potential LNG import facility, development of the project has been paused pending the outcome of the government's work on the facility. This decision to pause development reflects Channel's disciplined approach to developments and prioritizing growth spend. In November, we acquired a 25% share in the Fulton Jet Fuel Pipeline.
We went through all the details at the time of the acquisition, but just want to remind you, we talked about this asset not only being attractive on a stand-alone basis, but also the significant and better growth opportunities we see in the street supply chain. One of these is the significant latent capacity in the Fulton pipeline that is constrained from use by downstream pipeline capacity. Parties to the JV have several options for debottlenecking, which are currently being considered. These opportunities will take time to unlock. Pleasingly, we are already seeing throughput for the pipeline late last year exceed our base case assumptions. Melbourne Airport had a record total number of passengers in December and a record number of international passengers in January.
Just this week, the airport announced NZD 4 and a half billion in investment to expand its international terminal to complement the third runway, which will be complete in the early 2030s. Slide 24 is our investor scorecard, which you're all familiar with by now. We set ourselves ambitious targets every year. During 2025, we had 1 lost time injury, which was a minor back strain. We didn't quite achieve our ambition with regard to our customer assessments, reflecting that our customers have demanding expectations. I'm confident that our world-class work will see us meet this year's target. All of our other targets were met, reflecting the number of achievements we've discussed in this presentation. Another outstanding year for Channel, and I'm incredibly proud of what our team has delivered. With that, I'd like to open the phone lines for any questions you may have.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star, then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from Andrew Harvey-Green from Forsyth Barr. Please go ahead.
Good morning, Rob and Alexa. Good to see delivery continues. A few couple of questions for me. First one, just around the dividend, and I guess the comments that it's the increase related to the fact that there was better cash generation than anticipated. Should we consider there is an element of a special dividend in there, or are we setting a new benchmark for the dividend going forward?
You've seen our board before pay special dividends, and the choice to make this an ordinary dividend was intentional.
Okay, I think that's pretty clear. Thanks, Alexa. Second, couple of questions just around, I guess, the biorefinery, and that looks like that's going ahead. Should I say progress has been pretty positive. I just trying to get a sense over the last sort of six months or so, relative to your expectations, has there been any slippage in the timetable, or has pretty much everything continued to progress on track?
Look, I think from my perspective, broadly, it's on track. I think, you know, this is a big year for that project around an FID decision. There's still a lot of work to do to get to that point, but we're happy with how the project's been progressing. I think, you know, one more thing to say, you know, obviously, you'll have noticed that we paused work on GPL Kauri, so we're pretty ruthless about applying our resources to projects that we think are viable. You know, that's why we are continuing to see that as a good opportunity for us.
Yeah. Okay, good. Thanks. The second question I just had related around that was, I guess in terms of the information that you've provided to the market, I think October 24, gave a little bit of a sense of what the revenues, et cetera, could be. Are you able to sort of give any update, given how things have progressed since then, sort of the upsides and I guess the revenue streams that we can expect, if the biorefinery goes ahead?
Andrew, there's been no change to the update we made in October, and that update, just for those on the call, was lease revenue of between $6 million and $7 million for the site biorefinery well occupied. We indicated that any avoided demolition costs, as a result of the transaction, would be invested in incremental storage. Our role will continue to be as landlord and ancillary infrastructure provider. We've got an established pattern of how we price storage assets, as I said, no change to that guidance, but those are the indications that we've circulated to date.
Okay, thanks, Alexa. Just the last question, I guess, which I think you kind of alluded to a wee bit, but, I guess the government's security of supply storage requirements, are you able to give us sort of any update on that and your current thinking on that at all?
Is the question in relation to, minimum stockholding obligations, Andrew?
Yeah, that's right. Yep.
Yeah. Look, when we've got an update, we'll give it. I think, you know, we're still engaging with customers around, you know, opportunities to convert those tanks. I will know every time I get asked this question, I talk about the fact that we see as much, if not more, opportunity for commercially driven storage contracts as we do for government ones. You know, we continue to have some of our commercially driven ones, and so, there's plenty of those discussions as well.
Okay, that's great. That's all from me for now. Thanks.
Thank you. The next question comes from Nevill Gluyas from Jarden. Please go ahead.
Good morning, team. Hopefully, you can hear me.
Absolutely, Nevill.
Very good. I had pushed the mute button off. A couple for me as well. Just a question, with Air New Zealand sort of joining the Seadra consortium, does that change any way the timetable, or does it bring it forward? I have in my mind that I should think about this as sort of a late calendar 2026 decision. Should I keep that in mind?
I don't think any change to the timetable driven by that. I think it just demonstrates kind of building momentum for that project.
Yep, yep. No, that's useful. Thank you. Obviously, a bit of discussion already about the OpEx in FY 2025, which obviously includes some of those one-off items. What are you guiding for OpEx this year? What commentary can you add? I guess, to add to sort of the two one-offs you noted last year, there's also a question of what kind of level of Seadra related OpEx was built into, in 2025 and how much we might expect in 2026, or whether perhaps that's been capitalized instead. Can you offer us any thoughts there?
Thanks, Nevill. Our guidance status is pretty clear, but I'll give a little bit more color around what you've just discussed. Effectively, the biggest impact on the outturn for FY2026 will be in this growth spend category. Optically, whilst the guidance range is in line with what the market's expecting, we don't normalize out any growth investment from that number, and so that's embedded in that range. You've seen the sort of spend levels that we are undertaking each year in growth. Those are just flowed through our OpEx lines, and then we highlight them for transparency.
FY2025 number was higher because ASX listing fees are significant, but the baseline level is around that NZD 1.4 million-NZD 1.5 million, you know, for the last couple of years. As we move forward, I think, you can expect us to continue to exercise discipline around our costs. It's quite challenging to deliver an underlying cost outturn that's flat, and we are ruthless with the prioritization of our spend. The Seadra costs are all expensed, and then obviously, we've signaled that some of that one-off growth spend for FY25 related to the acquisition, you'll be aware, you know, due diligence costs and the like will flow through that line.
Okay, that's helpful, thanks. I guess the sense I'm taking from part of your answer there is that while we might identify some of these one-off items, Seadra, for example, or Somerton JV, there's an element of sort of continued growth focus you've got, that means that you will have outlays for other projects that we may not know the names of yet.
That's right.
Yep, good. Okay, that's useful. Thanks. The last one from me, there's sort of a brief allusion to it in the pack, is about the Somerton JV, sort of debottlenecking options. Can you give us just a rough idea of timing? Could we think some of those options might come in front of your desk, sort of in the course of this calendar year? When you sort of talk about long dated, should we be thinking about options that might be coming across for you to consider next year or later?
Hi, Nevill. I think the thing to do here is to work backwards from what the demand will be for jet at Melbourne Airport. We've got a new runway, which is scheduled to be going into around 2031. The airport having announced, I think yesterday, we're aiming for around AUD 4.5 billion worth of works, particularly around reconfiguring their international terminal and other enabling infrastructure to support what they expect to be quite strong growth. That's the sort of back end around, you know, what the jet fuel supply chain needs to deliver. I think one of the things that I'm not sure has been picked up, is there are actually multiple opportunities for the debottlenecking, which have pros and cons and different costs and benefits.
There's a bit to do to work through all of that, and in particular, obviously, the complexity of a JV structure where, you know, different parties have different views. I think the headline I've given you is we've owned the asset for about 13 weeks.
Yeah.
You know, we assure that we are working on these things, but I think you've got to give us time to convert ourselves with the other parties and work through these things as well.
Okay. That's useful color. Thanks, team. That's all from me.
Thank you once again. To ask a question, please press star one on your telephone. The next question comes from Cameron McDonald, from E&P. Please go ahead.
Good morning, Rob and Alexa. Two questions from me. One sort of detail, one for you, Alexa. Just the tax rate for the, and how we should be thinking about that, given the H1 tax rate looked to be to the 28.8%, same as last year, but the full year result ended up at in excess of 34%. There was a big step up in that H2. What drove that, and how do we think about that going forward?
I think a key thing to remember with our tax, Cam, is, we're not a cash taxpayer at present, and so these are all accounting entries. The variance really is around some adjustments to do with taxes from previous years, so wash up some various findings from our internal reviews and other matters. We did have the binding ruling for our tax losses, which involved a factual review from the Inland Revenue Department, which can drive some of that variability as well.
Okay, we shouldn't be thinking that that 34 is an ongoing, that's just a one-off?
Yep.
Yeah. Okay, excellent. Rob, can I just delve into. I'm always interested in, you know, in incentives and LTIs, et cetera, and there's been an announcement today that you've been granted some additional shares with some hurdles that, you know, relate to the successful execution of the Marsden Point Energy Precinct designated projects. Can we just get some clarity about what the designated projects actually include and then what the targeted, and then they've also made comment about the M&A sort of opportunities and activity as well. Interested in what makes the definition of designated, please?
I think there's quite a bit of detail in that, in the annual report, Cam. I encourage you to just spend a bit of time going through that. What I'd say at a high level is, you know, the thresholds and hurdles are pretty challenging. We're talking about some pretty significant projects and opportunities, you know, some of which we've talked about today.
Okay, thank you.
Thank you. Once again, to ask a question, please press star one on your phone. We'll pause for a moment to allow any last questioners to come through. At this time, we're showing no further questions. I'll hand the conference back to Rob for any closing remarks.
Thanks, everybody. I really appreciate you all dialing in and the interest you show in our company. We look forward to catching up with you, as we further engage with investors over the next couple of weeks.