As a reflection of the uncertainty, Channel had opted to retain its guidance for its 2026 financial year of earnings before interest, tax, depreciation and amortisation of between $95-$100m.
Upgrade works involve tank cleaning, the construction of linework to connect the tanks into Channel’s diesel infrastructure and the installation of instrumentation and pumping systems to facilitate the movement of fuel through the supply chain.
Under the agreement, Channel expects to generate incremental revenue from the capacity availability date of $1.2m per month over the term of storage.
The agreement with the Government provides for reimbursement of Channel’s costs if the Government elects not to proceed with the additional storage capacity prior to the capacity availability date.
Channel has already commenced work on bringing the additional storage into service, with its team and contractors engaged up to seven days a week.
The required work is significantly less than for a full tank refurbishment, which would typically take between 18 and 24 months, and the cost is therefore able to be funded within Channel’s existing debt facility.
Chief executive Rob Buchanan said the Channel team had created a “unique and expedient solution” to provide additional diesel resiliency at massive scale in a highly compressed timeframe.
He added that the current fuel supply chain environment is rapidly evolving.
Channel would continue to monitor demand signals and provide further guidance updates at its annual meeting on May 6.
The Ministry for Business, Innovation and Employment (MBIE) in an update last week, said fuel levels were broadly in line with normal levels before recent global disruptions, and fuel supply remained normal.
At the time, MBIE said New Zealand had 56.3 days of petrol available, 45.4 days of diesel and 47 days of jet fuel.
Another update from the ministry is expected today.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
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