New Zealand Refining : Chairman's Letter to Shareholders - September 2017

29 September 2017

Dear Shareholder,

Please find attached our interim report for the six months ending 30 June 2017.

These results do not include the impact of the third party damage to the pipeline between the Refinery and Wiri as the incident occurred after the Company's publication of the half year results.

As previously announced, our current best estimate of the impact on the Company's full year 2017 net profit after tax will be in the range of NZ$ 9 - 11 million. This comprises a pre-tax revenue impact (processing fee and pipeline income) of NZ$ 8-9 million and our first estimation of costs associated with the repairs, recovery and remediation activities of NZ$4-5 million.

The Company has insurance cover for business interruption, property and environmental damage amongst others. However, given the limited extent of the currently expected losses and the excesses that apply to these policies, only a limited amount of the losses is expected to be recovered. The Company's contracts with its customers include force majeure provisions which we believe apply in these circumstances. Some of our customers have reserved their position as to the application of the force majeure provisions until the outcome of our inquiries into the incident is known.

The Company has updated the profit matrix, issued with our results presentation on 24 August 2017, to reflect the expected financial impact of this incident. The updated profit matrix for the year ended 31 December 2017 is included as an attachment to this letter. This supersedes the profit matrix on page four of the interim report.

Refining NZ regrets that the pipeline was damaged and caused this negative financial impact on our shareholders. We also regret the disruption to the New Zealand public and foreign visitors.

While Refining NZ would have preferred that the incident had never happened and we will be working hard to see whether there is anything more we can do going forward to prevent incidents such as this, the Board was pleased to see the way our team, customers, the airlines, Auckland Airport, the Government and others all worked together co-operatively to minimise the disruption. We also appreciate the patience and understanding of the community and the support of iwi and local authorities during the recovery from this incident.

I do wish to extend my thanks to our team and all involved for their hard work, co-operation and understanding during this difficult period.

Yours faithfully

Simon Allen

Chairman

Attachment

USD Exch. Rate Actual H1	0.71	0.71	0.71	0.71	0.71
Forecast H2	0.65	0.70	0.75	0.80	0.85
Margin Actual Forecast	Full
H1 H2 USD USD	Year USD
7.70 5.00	6.29

FY17 Profit Matrix - 29 September 2017 7.70 6.00 6.81 7.70 7.00 7.33 7.70 8.00 7.86 7.70 9.00 8.38

33	27	21	17	13
226	234	241	248	254

50	43	36	31	26
202	212	221	228	235

67	59	51	45	39
184	192	200	209	217

84	75	66	59	52
166	176	185	192	199

102	91	81	73	65
149	160	170	178	186

NPAT

Borrowings 42 Production, Mbbl 82 Non Processing Fee Revenue, $m 94 Depreciation, $m