Ampol Limited (ALD) Earnings Call Transcript & Summary

Good morning, and welcome to the 2024 Annual General Meeting of Ampol Limited. My name is Steve Gregg and it's an honor to be your Chairman. As a result of the proxies I hold as Chairman, we have a quorum present, so I declare this meeting open. I'd like to begin by welcoming Uncle Craig Madden, to the stage for work in the country. Gives me great pleasure. Craig.

Thank you very much, Steven. [Foreign Language]. Today and welcome. My name is Craig Madden, and I'd like to thank Ampol for inviting me here today to welcome me on to country. I'm a proud Bundjulang/Gadigal man from the Eora Nation, and Gadigal land is the land on which we are gathered here today. This land is Gadigal. It is our customary for Aboriginal people to invite guest or visitors onto our country and offer you safe passage as you pass through our lands. So as a proud Gadigal man and representative of the Metropolitan Local Aboriginal Land Council, we welcome you all to Gadigal Land, Aboriginal land. I'd like to pay my respects to our elders past, present and emerging, and honor the stories and traditions of our Aboriginal people from this land. I'd also like to acknowledge the ancestors who watch over us as we work behind these sacred lands. If we have any Aboriginal brothers and sisters, if we have any brothers and sisters of Torres Strait Islands, welcome. To our non-Aboriginal brothers and sisters here today, a warm and sincere welcome to Gadigal land Aboriginal land. Our Gadigal clan is one of the 29 clans, which make up the Eora Nation. And it's a nation that's bound by 3 distinct landmarks. So we have the Hawkesbury River to the north, the Nepean River out to the west, the Georges River down to the south and within the boundaries of those mighty rivers lie the Eora Nation and the land of our Gadigal people, one of the many clans of that nation. So I guess you've traveled from across the seas from those of you from across our great country, great state to this beautiful city of ours, which has rained on us for the last 5 days, welcome to Gadigal land Aboriginal land. I hope you enjoy the AGM as much as anyone can enjoy the AGM, I guess. On behalf of the Metropolitan Local Aboriginal Land Council and our Gadigal, please travel safely home. And once again, welcome, welcome, welcome. Thank you.

Thank you, Craig, and I do aim to make it an enjoyable AGM, notwithstanding the rain and all of the suffering. Trying to explain to our Melbourne colleagues with the interest. Thank you, Craig. And I'll now outline the technology and procedural matters for the meeting today. Today's meeting is being held in person at The Mint in Sydney and online via The Link online platform. The Link online platform allows shareholders, proxy holders and guests to attend the meeting virtually. In addition to receiving votes and taking questions from the room here in Sydney, shareholders and proxy holders joining through Link also have the ability to ask questions and submit votes. There is also a teleconference number for shareholders and proxy holders to dial, listen and ask questions here today. Our virtual meeting online guide for today's meeting is available on the Ampol Investor Center, on the Ampol website. [Operator Instructions] Only shareholders and proxy holders can submit questions via The Link online platform at any time. [Operator Instructions] For questions online, Jeff Etherington, our Deputy CFO, is here with me today and will read out the name of the shareholder and their question. We want to take best efforts to honor and address all questions. However, in the interest of the limited time we have, we may choose to merge some online questions together where there's a duplication on the subject matter. If we do run out of time, we will look to provide direct responses to outstanding questions and post these responses on our website for all shareholders to see. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. For those shareholders participating in the meeting via the online platform, you can cast your direct vote using the electronic voting card that you have received when you validated the registration. If you have any questions about casting your vote online, please refer to the virtual online platform guide or call us on the numbers set out in the guide or on the screen in front of you. If you do have the ability to change -- if you do have the ability to change your vote up until the time that I declare the vote is closed. If we experience any technical issues today, a short recess or an adjournment may be required depending on the number of shareholders being affected. If this occurs, I shall advise accordingly. If you are attending the meeting in person, you would have been given an attendance card when you had registered on your arrival. If you have a yellow voting card, you are a voting shareholder, proxy holder or corporate representative and will vote by filling out a paper voting card. You'll also be entitled to speak during the meeting. If you have a blue card, you are a nonvoting shareholder. While you're entitled to ask questions and make comments, you are not entitled to vote at this meeting. If you have a red card, you are a visitor and not entitled to speak or vote at the meeting. At the conclusion of the meeting, please return the completed paper voting card to a Link registry team member. If anyone with a yellow or blue card wishes to speak, please raise your hand for the microphone at the appropriate time and identify yourself to me before asking the question. For those who are participating via our online platform, you'll be able to submit questions by registering as a shareholder or proxy holder and selecting the Ask a Question tab. I will consider the questions submitted online and via telephone after I've taken questions from the floor. I now declare voting open on all items of business. For online attendees, please submit your votes at any time. I will give you a warning before I move to close the voting. Let me start the meeting today with some introductions, if I could. With me on stage about to become on stage is CEO, Matt Halliday. Also joining me in the room today are Non-exec Directors, Penny Winn, Melinda Conrad, Gary Smith, Simon Allen, Mike Ihlein and Betsy Donaghey. Mark Chellew has informed the Board that he's retiring from the Board effective today, 9th of May and is an apology at today's AGM. On behalf of the Board, I would like to thank Mark for his significant contribution to the development of the organization and the Board since 2018. He has been a valued member of the Safety and Sustainably Committee and the People and Culture Committee. We thank Mark for all his service and wish him all the best in the future. Today, Mike and Gary are seeking reelection as non-exec directors of Ampol. We also have our Company Secretaries here with us, Faith Taylor and Yvonne Chong. Members of the Ampol leadership team are in the room today. Representatives of our external auditor, KPMG, are also in attendance. Before we get to the items of business, I will provide a review of 2023's performance, then hand over to Matt, who will provide an update on our key strategic initiatives from 2023 as well as trading performance over the first quarter of 2024. Ladies and gentlemen, 2023 marked a year of continued strong operational and financial performance. The result was achieved despite the uncertainty of volatile international energy markets, brought about by ongoing geopolitical tensions. At Ampol, we use a profit measure called replacement cost operating profit, otherwise known as RCOP, which adjusts for the volatility in crude oil and product prices. Matt and I will be referring to these earnings metrics throughout the morning's presentation unless otherwise stated. In 2023, our group RCOP EBITDA was AUD 1.76 billion. RCOP EBIT was just under AUD 1.3 billion, and RCOP net profit after tax, $740 million. After adjusting for significant items and inventory gains and losses, our strategy net profit after tax was just under $550 million. This was the second highest result in Ampol's history, only beaten by 2022's record performance, which was underpinned by unprecedented high refiner margins. Total fuel sales across the year were a record 28.4 billion liters. This was a 17% increase on 2022. Ampol's earnings have not only grown significantly over the past few years, but in 2023, we also saw that our earnings have an improved mix that leaves us well placed to continue to grow and evolve the business. As a result of the group's strong financial performance and cash flow generation, I'm pleased to announce that in 2023, Ampol delivered a fully -- full year fully franked total dividend of $2.75 per share comprising an ordinary dividend of $2.15 per share and a special dividend of $0.60 per share. This was in line with the 2022's record payout and totaled $650 million return to shareholders, representing a payout ratio of 89% of RCOP net profit after tax. Ampol is also a major provider of tax revenue to governments in Australia and New Zealand. In 2023, we contributed over $10 billion in taxes, largely relating to fuel excise and GST, making Ampol a significant contributor to public revenues in both countries. I believe it's worth reflecting on the significant impact Ampol has had on Australia and New Zealand since its inception. The story of Ampol's history and role in the development of Australia and New Zealand is as relevant today as it's ever been. "Show me a mountain, and I'll show you a way to get over it" was a line frequently used by Ampol's founder, William Walkley. Beginning his work in New Zealand, in his initial priority in 1931 was to deliver more competitive fuel pricing to local motorists. Just 5 years later, he took the business to Australia, seeking to address the challenge of rolling out scalable refueling network across the nation. Ampol was created to take on the established overseas owned oil companies that dominated the Australian market in the '30s. At that time, Ampol was known as an innovator using a bold, nimble and ambitious approach to push into new frontiers, pioneering technology that went on to shape the transport fuels industry in Australia and investing to support the growth and development of our country. At that time, Ampol took calculated and informed decisions that enabled the company to grow and back its people as they execute the company's strategy. In many ways, we can see history repeating as we face into the challenges associated with energy transition, including establishing a reliable EV charging network across Australia and New Zealand, exploring other low-carbon solutions for our customers in hard-to-abate sectors. Our current workforce is the pioneering force providing the energy solutions that our Australian and New Zealand customers need now and into the future. It is the role of the Board and the management to back our people as they execute the company's strategy and support a bold, nimble and ambitious approach yet again. In doing so, we will be disciplined in how we invest on behalf of our shareholders. We seek to strike the right balance between investing in the energy transition at an appropriate pace in the core business and of course, returning capital to our shareholders. Performance in safety and environment continues to also be a major focus at Ampol and a key input to achieve operational excellence. I'm pleased to report that in 2023, Ampol's personal safety performance was close to our best ever results in all parts of our business. Success in our safety performance has been achieved through an active program of implementing improvements in our systems and practices to ensure we have a robust safety culture. Highlights from 2023 include over 15,000 hours of face-to-face training for our workers at Lytton refinery and the introduction of mental health awareness training for key leaders across our entire business. Another operational highlights from 2023 was the recovery in fuel volumes following the impacts of COVID-19. In Australia, we saw increased volumes with sales reaching 15.6 billion liters, the highest level since 2019. This reflected a continued recovery in the aviation -- in aviation within the group as well as generally favorable freight markets, enabling Ampol to benefit from a superior East Coast infrastructure. Ongoing growth in international sales, particularly from our U.S. trading and shipping teams, demonstrated the benefit of sourcing desks in key global markets. We have used our trading team's insights to inform supply decisions, which have provided valuable flexibility in market -- in a market still adjusting to the rapid rise in premiums in 2022 following Russia's invasion of Ukraine. Our strategy is at the core of business decisions at Ampol, as headlined by 3 pillars: enhancing the core business, expanding from a rejuvenated fuels and convenience platform, and evolving the energy offer for our customers as their needs change. Based on our results, I believe the strategy is delivering. Over the last few years, we have been focused on getting the balance right in terms of our investment decisions to grow the business. And in the short, medium and long term, also delivering strong returns for our shareholders. We are approaching the final investment decision on the Ultra Low Sulfur Fuels Project at Lytton refinery. We have a clear strategy to grow our Australian Convenience Retail Offer, and we will continue to pursue organic growth in our F&I International business. Our progress on the rollout of the EV charging network will also continue over the next few years, and we will continue to explore low carbon energy solutions for the hard-to-abate sectors. Ampol has proven its strength and capabilities over the last few years with the company in a very strong position to continue delivering in 2024 and beyond. While we are operating in a challenging environment due to the geopolitical volatility, inflationary pressures and the cost of living crisis, Ampol has demonstrated its resilience across many different market conditions. This is due to a number of competitive advantages, including a privileged infrastructure, a high-quality retail network and I believe, iconic brands, supply chain expertise and a robust strategy. On behalf of the board, I'd like to congratulate Matt and the entire executive team and all Ampol employees for achieving outstanding results in 2023. I'd also like to thank our customers and all our stakeholders, including our suppliers and joint venture partners to remain vital to our continuing success. And lastly, I would like to thank you, Ampol shareholders, for your continued support of the company and for coming on this exciting journey that we are creating. I'd like to now hand over to our CEO, Matt Halliday, to address the meeting. Thanks, Matt.

Thank you, Chairman, and good morning, everyone. Once again, I'm proud to stand here and address you after Ampol's strong performance in 2023. It remains a privilege to lead this great Australian company as we continue to deliver great outcomes for shareholders, customers, communities and as we successfully execute on our strategy. These outcomes would not have been possible without the dedication of the entire Ampol team who have demonstrated resilience in the face of the significant challenges of global energy markets, geopolitical volatility, extreme weather, inflationary pressures that are existing right across our supply chain. We have continued to deliver safely, reliably and efficiently for our customers. 2023 saw good performance across all of our business segments. RCOP EBITDA and RCOP EBIT was slightly down from 2022's record result. It's worth remembering, though, that this result is compared against a period of record refining margins back in 2022. Given this, for the 2023 result to be within 0.5% of 2022's record EBITDA is an extremely pleasing outcome and is arguably a higher quality result with stronger performances across all refining divisions. I would also highlight that in 2023, we saw the first full 12 months contribution from Z Energy. And the Z business performed very well, and the transition to Ampol supply has been relatively seamless, thanks to the work of our teams in Singapore and on either side of the Tasman. Local Z management and the supply team have delivered on the business improvements and synergies that we committed to at the time of the acquisition back in May 2022. Beyond New Zealand, we continued to deliver on the strategy to grow our international earnings. Organic growth in trading and shipping is demonstrated from the international earnings uplift that we saw in 2023, with that business contributing approximately 30% to the group's earnings. This is a clear differentiator for Ampol in the market and builds from the strength that we have in our customer demand and infrastructure positions in both Australia and in New Zealand. The good progress in shop performance continued on through 2023. Given the cost of living crisis, we have sought to provide value-driven convenience retail offers, such as various Crave N Save deals for our customers. Excluding tobacco, shop sales grew in value, particularly in areas like bakery, snacks and beverages. Tobacco sales have continued to decline across the market, and this is largely due to shifting consumer habits as well as the growth in illicit markets. When considering the decline in tobacco, the growth we saw in average basket value demonstrates that our convenience retail strategy is delivering. A further proof point has been the success of our network rationalization program. The program began in 2019 with about 800 stores. And as at the end of 2023, we operated 636 stores within our company-controlled network, which represents a reduction of about 20%. This more focused network has resulted in Ampol having above industry average fuel volumes per site and a higher mix of premium fuel sales. We are focused on the quality of our network and our ability to deliver the right offer for our customers and returns for our shareholders rather than the number of stores. Last year, the strategy focused specifically on the premium sites with the rebranding of 50 sites from MetroGo to our Foodary offer, which is performing very strongly. We also continued to invest in our highway network, with the [ Mackay ] Pheasants Nest sites opened and the refurbishment of the M1 Northbound near Wyong, in each case with multiple quick service restaurant options, providing an enhanced offer for our customers. We are now the largest multisite franchisee for Boost Juice in Australia, and we continue to progress our partnership with Hungry Jack's. We are committed to delivering the right customer offer for each local market in which we operate with an appropriately segmented proposition and we'll continue bringing other brands into our QSR portfolio as appropriate. Moving on now to the Lytton refinery, which continues to be a significant contributor to the group's success. We intend to invest further in Lytton to enhance its capabilities, and so we've made substantial progress in design, approvals and groundworks on the Ultra Low Sulfur Fuels Project. This project will deliver important upgrades to Lytton so that it can produce low sulfur fuels by the end of 2025. This will make the Australian government's timeline to introduce improved quality standards for fuels. Based on our New Zealand experience, we expect this product to trade in international markets at a premium to existing Australian fuel grades and therefore, increasing the value of Lytton's production. As we look to the future, we're evolving the business to support our customers through the energy transition. We're progressing our on-the-go public fast charging network rollouts in both Australia and in New Zealand. And by the end of 2023, we had rolled out 82 fast charging bays in Australia and 104 in New Zealand. Expanding off our forecourts, we have arranged back-to-base charging arrangements with various B2B customers and also established major agreements with both Mirvac and Stockland to provide fast charging at their shopping centers which represent attractive charging locations for customers. A reliable e-mobility offer and strong network coverage not only supports the development of our e-mobility business as EV uptake grows over time, but it also reinforces our traditional fuels business as our customers are seeking integrated solutions to support them in navigating their energy transition. For the hard-to-abate heavy transport sectors, we're exploring the development of a renewable fuel supply chain. This includes evaluating the feasibility of establishing a biorefinery up at Lytton, which would have the capacity to produce more than 500 million liters of renewable diesel and sustainable aviation fuel every year. Renewable diesel and sustainable aviation fuel, a diesel or jet fuel that instead of being produced from crude oil, are made from renewable biomass waste products such as used vegetable oils or tallow and as such, reduce emissions. While we continue to scope the feasibility of the biorefinery, in the shorter term, we're also exploring opportunities to commence the coprocessing of renewable feedstocks alongside traditional feedstocks up at Lytton. This would enable Ampol to produce high-quality blended renewable fuels for our customers in a shorter time frame. We've also completed a successful trial to import and supply renewable diesel to some of our B2B customers including Hanson and intend to scale this up to meet growing demand over the coming years. On a related note, I'm pleased to share that Ampol has made significant headway in our sustainability reporting. In July 2023, Ampol released its first voluntary TCFD-aligned Climate Report. The report detailed the significant progress made in delivering on our future energy and decarbonization strategies which we first released to market in May 2021. Our operational Scope 1 and Scope 2 emissions are something that we do have control over. For the emissions we do not control, such as the emissions associated with fuel after it is sold, we are committed to supporting our customers in their own decarbonization journeys. On the people front, in 2023, Ampol took the next step in supporting our customers' decarbonization journeys by bringing the Australian and New Zealand teams together into one Energy Solutions team. This allows us to leverage our combined scale and expertise in delivering solutions for our customers while continuing to differentiate for unique local markets. Last year, the group adopted Peakon, an employee listening tool used by our colleagues in New Zealand. Through enhancing the monitoring of employee sentiment month-to-month across the group, we've been able to identify trends and engagement and areas for improvement. And while it is early days in the collection of that group data, I'm pleased to share that Ampol has employee Net Promoter Score of 40, which places us in the top quartile of Peakon's global benchmark. Another highlight in 2023 was the Z Energy team being recognized for its efforts in diversity and inclusion. Winning the Supreme Award at the Human Resources Institute of New Zealand awards ceremony for their initiative to help close the gender pay gap through salary transparency as well as an innovative KiwiSaver offering for employees working part time or taking parental leave. On the community front, in 2023, our total Australian community investment was over $4.5 million, and our total New Zealand community investment was New Zealand $2.8 million, and that included New Zealand $1 million for Z Energy's annual Good in the Hood program, where over 500 local community charities and organizations received funding according to our customers' votes. Moving on now to Ampol's performance so far this year. Late last month, we updated the market on trading conditions and operational performance in the first quarter of 2024. The Lytton refiner margin for the first quarter was USD 11.80 per barrel compared to USD 14.90 per barrel in the first quarter of last year. During the quarter, Singapore refined product cracks were approximately USD 4 per barrel lower than the same period last year while higher product freight rates, net of landed crude costs benefited our LRM. Production levels were impacted by the previously communicated refinery-wide steam outage as well as the temporary delay in the supply of catalyst for the Alkylation Unit due to disruptions experienced in the Red Sea. The refinery returned to normal operations in early April. RCOP EBIT from Ampol's non-refining divisions was in line with the prior corresponding period. Australian fuel sales volumes were in line with the first quarter of 2023. And while international fuel sales volumes were lower year-on-year, this was largely due to third-party spot sales. Integrated margins compared favorably year-on-year with our integrated supply chain able to effectively manage the refinery and market disruptions experienced during the first quarter. Convenience Retail delivered earnings slightly ahead of the same quarter as last year and improved fuel margins more than mitigated lower fuel sales volumes, largely in base-grade gasoline in a higher input price environment. Shop income grew year-on-year with improved gross margins and growth in sales, excluding tobacco. The New Zealand segment grew RCOP EBIT year-on-year, including their comparative benefits from the transition to full Ampol supply from April 2023. In closing, the Board and management are focused on delivering for our customers, communities and for you, our shareholders. And I would like to again thank our employees for their ongoing commitment to the delivery of our strategy, and I look forward to building on the strong momentum we have over the coming months and into the second half of this year. I'll now hand back to our Chairman, Steven Gregg.

Thanks, Matt. Well spoken. I would like to open up the meeting if I may, to general questions. I'd like the room to note there will be the opportunity to ask questions about each of the resolutions later in the meeting before going to a vote outcomes on each resolution. A reminder that we will first take questions here in the room. We'll go to Link online platform for questions. And finally, if there are questions on the phone, we will deal with those as well. We've also received a few questions in advance of today's meeting, which I will answer before inviting questions from the room. The first question received was, what will Ampol do when all cars are electric. We thank you for that question. And I'm sure that's a question on the minds of many of our shareholders. It's certainly something to which we give careful consideration. And we expect that traditional fuel demand for passenger cars will decline over time as EV penetration increases. However, the pace of the change is uncertain at the moment, but before we expect transport fuels demand to remain robust well into the 2030s. We are currently installing EV charging facilities at a number of our forecourts and at third-party sites as well as exploring opportunities to provide at home charging to address passenger vehicle electrification. It's important to remember that different solutions will be required for heavy commercial vehicles, mining and aviation, which rely on diesel and jet fuel. For these, we are also exploring solutions other than electrification, including renewable fuels and hydrogen. While still early to predict the timing and the exact impacts of the transition, we believe we will continue to generate our return on investment thresholds and some divestment of surplus assets over time may occur. The next question was, what do you think next year's dividend will be? If I knew, I'll tell you. Well, we obviously can't put a figure on it. We have a stated dividend policy, which is a payout ratio of between 50% and 70% of RCOP NPAT, excluding significant items. Where we have surplus capital, the Board may also consider the declaration of a special dividend. Shareholders have received a total of $2.75 in ordinary and special fully franked dividends with respect to both the '22 and '23 financial years, demonstrating the company's commitment to return capital to shareholders in a tax-effective manner where available. The next question is, as the world is transitioning to renewable fuels, what is Ampol doing to reduce the CO2 emissions? The transition to renewable fuels will be a long journey but one which we are committed to. In '21, we released our future energy and decarbonization strategies. And since then, we have been making good progress with regard to our own emissions called Scope 1 and Scope 2. We have set out emission reduction targets for '25, and we are on track to achieve these. We have also set targets for reductions to 2030 and an ambition to be net zero in 2040 for Scope 1 and Scope 2. Z Energy, which we acquired in May '22 has set their own emission targets and are on track to achieve these two. With regard to Scope 3 emissions, the large component of these relate to our customers' use of transport fuels, this is where our future energy strategy comes in. Ampol and Z are continuing to roll out EV chargers to support the electrification of passenger cars and light commercial vehicles. We are also exploring options for the production and distribution of renewable fuels for hard to abate sectors. However, these have not yet reached commercialization. The next question was, does Ampol believe earnings will grow or decrease with more EVs appearing on the Australian roads. This is purely from an Ampol perspective and nothing else. That was the question. As we are so early in Australia's energy transition, it's difficult to provide an answer to your question, EV penetration remains in the low single digits as a percentage of the fleet. So we are not currently seeing material impact on earnings. What I can say is that we have strategies in place to respond to the energy transition. While it's difficult to predict the timing and exact impacts, we believe we will continue to generate our return on investment thresholds and some divestments of surplus assets may also occur over time. And the final question received for today's meeting was when will the Chair introduce a modicum of restraint in the constant increases in remuneration and fee pool increases. This is the worst aspect of corporate behavior and needs to be reined in. Let me just answer that, if I may. And I appreciate the openness of that question. The increases to senior executive remuneration in '23 and '24 followed internal and external benchmarking. In '23, the Board determined to award each senior executive a 3% increase to keep up with market dynamics and a 5% increase to the EGM of retail. In '24, the EGM of retail will receive an increase of 6%, reflecting performance in the role complexity associated with the strategy and to ensure a stronger internal alignment. We envisage that other increases for the ALD members during '24 will only happen on an individual basis where there's a change in scope or role or a significant market movement. On to the second question, part of the question regarding the proposed fee pool increase for non-exec directors, this is important because this is part of the resolution coming up. The fee pool cap has not been increased since 2016. That's 8 years. Since that time, the size, complexity and Board and the company have grown significantly. Following a market review and noting the future needs of the Board, we consider the proposed increase in the fee pool to be appropriate. I might also add while we're here that the Board itself has not received any increases in fees for 7 years and is not intending to receive any today as well. Now to answer all the questions received before the meeting, I would like to invite other questions on general business from the room.

Mr. Chairman, I would like to introduce Natasha Lee, a shareholder.

Thank you. Welcome along again.

Thank you, Mr. Chair. Can I ask that I have a special spot next time for the questions? But just joking. Thank you, Mr. Chair. I note that there were 82 EV charging stations in Australia. There are actually more in New Zealand and there's a target of 300 by the end of 2024. What's the trajectory for the Australian EV charging stations over the short term?

Sure. I'll get Matt to add to it in some detail, but we are on track to achieve this for the next year to 18 months. And we're very targeted about how we roll out those stations. It's not just a blanket rollout. We're being very targeted about the intermodal, the highways and also in specific high density areas in the big cities where we think they need that facility. But Matt, do you want to comment on that?

Yes. So we are focused on making sure we're rolling out and getting good coverage across our network where the EVs are arriving. And across, we're tracking all of the data around where the EVs are and where the network coverage needs to be for our customers, for our fleet customers in particular. What I would say is beyond the 300, we continue to look at building the pipeline, including on our own sites and through the partnerships that I mentioned with Stockland and Mirvac. And we'll continue to build out that network. The pace of the change of uptake is something that we monitor very carefully, both internationally and in Australia and New Zealand. And that's really important because we want to make sure we get the pace right, and we also want to make sure we take the learnings. And the site selection is really important in terms of both the quality of the real estate, the convenience offer that we're putting there and also the connectivity to the grid. And what we've seen and observed in the work that we've done so far is that grid connectivity is going to be increasingly challenging. And so making sure we have done all of the diligence around understanding which sites we want to build out and what pace depending on EV uptake is the work we continue to do to move beyond the 300 number for the end of this year, and the target is 150 by the end of this year in New Zealand.

So that's about 150 in Australia, the 300 include across Australia and New Zealand.

No, the 300 is the Australia number. New Zealand will go from 104 to 150.

Okay. No, that's okay. Yes, I did see the 300, but I was -- I can't remember, and maybe I was a bit confused about that. Overall, your annual report was pretty good and comprehensive. I think that there was a comment about the Kurnell incidents in 2023. And you referred to the contribution of 700,000, which I take it as a penalty. It sounds like you're kind of sugar coating it that it almost sounds like a voluntary contribution rather than a penalty for the incident. Do you have any comments on that?

Look the incident was regrettable. We've dealt with it well and we've been dealing with it for the last 9 months. But Matt, any observations there.

So the $700,000 represents an enforceable undertaking that was agreed with the EPA and the contribution of the various community programs that comprise that $700,000 were agreed with the EPA and in conjunction with the local community.

Yes, yes. No, that's what I expected. Now I think just the categorization with at least in my mind in the annual report of just describing as a contribution when it was a penalty element or it wasn't a voluntary contribution. It was a negotiated settlement, so to speak. On your finance cost, it was an increase in 50% overall. And whilst you talk about higher interest rates, the 50% does seem a bit excessive for the amount of fee interest rate rises over that period of time. And I think that there's some detail which could have been added to the report to better explain...

That reflects bringing Z on the balance sheet as much as anything and interest rates changes and the like.

Yes. But overall, your debt level would remain more or less the same year.

It's very modest and very conservative. It's a 1.6x EBITDA, which is by most industrial standards extremely conservative, and that's how we like to manage the company.

Yes. Yes. No. I'm happy with that. It's just that the finance costs associated with that was significant. And at least seem to be a little bit disproportionately high quantum.

Okay. Great.

And the other comment is whilst you talked about your strategic property assets and stuff. I was wondering whether the Board is actually considered investment in rental property above some of the, say, over some of the forecourts in strategic locations. I think that offers an opportunity, particularly with the government seemingly relaxing development approvals to provide a revenue stream in the future where it's -- I'm talking about rental rather than selling properties, but having some sort of partnership with property development company here to better utilize and provide alternative income source.

So are you suggesting we buy properties to rent out to other people.

No, I'm saying buying -- building property...

Building property to rent outs.

Yes, above your next -- or next to your service stations.

Yes, we, it's a good question. We've debated that on occasion, but we're not in the business of property development. We're in the business of running a fuels company and an energy company. So we have some very privileged assets, which yes, on certain instances may have value in about -- over and above purely service stations and the like. But at this stage, we've not decided to get on that path.

Okay. No, it's just that we pass service stations, we see...

You see property development, don't you?

Well, there was that element of -- in my background that I kind of just see this space, which seems to be underutilized. I'm just raising a point, that's all I have for now.

Very good. Thank you. Other questions in the room, please, Roger? Welcome.

Mr. Chairman, a question from a shareholder.

Thank you. Chairman, Roger Ashley, of the Australian Shareholders' Association. Once again, we've been impressed with the responses from management to our questions have provided input to our voting intentions. So thank you very much for that. We accept that the company is managing the transition from fossil fuels to renewables with a flexible strategy of capital expenditure in future technologies. You did talk about a couple of the new technologies. But I wonder if you can expand on some of your pilot projects, Endua, your point of difference in retail home electricity market, which is a pretty crowded market, I think. Your position in hydrogen fuels with comments on ONEH2 and refueling outlets in Canberra. And I was also going to ask whether you would meet your target of rollout of charging stations in Australia this year. I think you're saying that you will.

Thanks, Roger. I appreciate the question. I want to hand to Matt that basket of questions.

Yes. So look, I think it's really important as a business that we are exploring and working across with our customers the technologies that are of interest to them and relevant to them as they look to decarbonize. So if I take your list, Endua is a partnership with Main Sequence Ventures, a venture fund borne out of the CSIRO, it's an off-grid edge of grids hydrogen-powered renewable solution, green hydrogen-powered renewable solution. The cost base is still too high for that to have real traction in the market, and the team continues to work actively at Endua on how those costs could be brought down. It's very much in the R&D type category, I would say. In terms of hydrogen more broadly, again, the economics of hydrogen for heavy transport are looking quite challenged when you look across the full value chain. So the original equipment manufacturer or the truck manufacturer needs to change out their entire production chain. You've then got the trucking operator needs to change out their trucking, their maintenance facilities, et cetera and then you've got refueling. When you look at all of that together, at this point, the economics look relatively challenging. And our own view, consistent with the comments that we made today is that renewable fuels, so renewable diesel, for instance or sustainable aviation fuel for aviation, are more likely to be the solutions for a very meaningful period of time at least. We are, though, working with our customers who are interested in testing their hydrogen supply chains and ONEH2 is a partnership we've got with an American company. It's a very low-cost solution from our point of view, but it's a mobile hydrogen refueling solution that would enable our customers to test and learn with these solutions as the solution for everyone is going to look a little bit different. If I just wind up on your point on retail electricity, we're really looking at retail electricity from the point of view of when you look at fleet customers, particularly. What they're looking for is a solution, recognizing they're going to have a mixed fleet or a petrol-powered fleet and an EV fleet that's going to change and evolve over time. So they need an integrated solution. We obviously have a very strong solution from a fuels point of view. But when you look at charging, what they are asking for is a back-to-base charging solution, a potentially at home charging solution for their employees together with EV -- on-the-go EV charging that we offer on our sites. And so our testing is very much with that in mind, how are we delivering solutions for our customers. And as we prove that out and the returns, we'll look to take steps around how we take that part of the business forward.

Thank you. One other question, if I may. Ampol has significant franking credits over $500 million, can the shareholders continue to expect special dividends with a view to paying out those credits?

Roger, I think the, we answered the question slightly in one of the previous questions that I read out. If we have excess capital and we have the ability to pay special dividends, we will. But it's very dependent on how the business is performing and our capital requirements and our balance sheet management. As stated before, we run a very, very conservative prudent balance sheet because it's a volatile industry by nature. It's important that we maintain that. And we also have capital works programs in the pipeline as you're aware. So if the capital is there, if we have excess capital, we will certainly return this to shareholders, but it's with that in mind. Thanks, Roger. Any other questions before we move on? Great. Jeff, Sorry.

Mr. Chairman, a question from a shareholder.

Thank very much. I'm so keen to have an answer to this question. All of us who drive petrol cars and diesel cars and the trucks that make life possible are paying a road tax. We are contributing to the roads we're driving on and EV drivers are not. They're getting it all for free. So what I want to know is, why are we going to charge them for this huge infrastructure we're putting in just for them? And how are you reminding the government that they rip us off, but they're not ripping them off?

I think that's a great question, actually. It's not a question that's not lost on us. Because we -- as I mentioned in my talk this year, the Ampol system, Ampol company, when we sell our profit contributed to over $10 billion to state coffers, and that does not include our income tax and other taxes, all up probably close to $11 billion goes from the Ampol company in the system back to government. A lot of that is fuel excise on every liter of petrol we sell, that goes back there presumably to go into coffers to help with the road system. How the government chooses to tax EV drivers is another matter. And it's up to them. They are very aware of this. They're also very aware of the revenue that we give them, so they have a conundrum. We have been reminding them of this for some time. So it's not lost. So it's a very good question. Thank you.

And what are you charging them for that -- will we make a profit from these things, sorry, will we make a profit from these because you're spending a lot on them?

Yes, we certainly are. We are looking at the investment in our e-mobility business from a returns point of view. The returns will take time to come through, but we are charging $0.69 a kilowatt hour for our charging. And we are on most sites that have been in place for more than 12 months and there's not a lot of those. But they are gross margin positive despite the fact that less than 1% of the light vehicle fleet in Australia at the moment are EVs. So there is a long way to go on this. And really, we'll look at this commercially, we'll look to make a return, and we'll look to scale and pace our investment accordingly over time.

We need to be very prudent on how we invest in this area because we need to move into it, but we are very conscious of the economics on this. So we are making the investment in a very, very careful way. Thanks for the question. I might just ask Jeff, have we got any questions online?

Yes, Chairman, we do. The first question comes from [ Stephen Mayne ]. The question is the 8 people in our executive leadership team and the 8 non-executive directors all appear to be white Anglo-Saxons. Diversity is much more than gender. So when is the top table at Ampol going to include some skillful and merit-worthy people of color or from different ethnic, cultural or religious backgrounds? Does the Chair agree this lack of diversity is an unusual feature of Ampol's monocultural leadership team and that needs to be addressed over time to better reflect the communities you serve?

Thank you, Jeff, and thank you, Stephen. I don't believe it's an unusual factor of Ampol. I think it's a fact of the society at the moment. We pride ourselves at Ampol of selecting high-quality people from across the board or whatever persuasion, male, female. Whatever their sexual persuasion or whatever their color or religion. We are not in any way judgmental. We have a number of people in the organization of varying varieties and background. So I hear what Stephen is saying, but I don't believe that's an issue in our company. And we are very, very open to how we accept people into the organization.

Okay. The next question, also from Stephen Mayne is our Chair Steven Gregg last year achieved the rare feat of being poached from outside to become Chair of Westpac despite not even being on the Board at the time. What is the current state of dealings between Westpac and Ampol, and is that likely to change? Which of the big 4 has our biggest relationship and has the chair spoken to the CEO and CFO about protocols in which Westpac dealings are handled going forward?

Thank you, Steven. Yes, it was a great privilege to -- it is a great privilege to be the Chair of this wonderful company, but also to have been asked to join Australia's oldest company, which is Westpac. And it's a great organization as well. Yes, Westpac is a financier amongst a large group of banks for Ampol. That has been noted at both Westpac and at Ampol. There are protocols in place. I certainly do not involve in any fashion or any area of that relationship.

The next question also comes from Stephen Mayne. The question is Viva bought OTR for $1.2 billion last year. When 7-Eleven was put up for sale, the Japanese parent was successful with a $1.7 billion bid. Even when Coles Express put its fuel business up for sale last year, Viva also won that auction with a $300 million bid. When Woolworths exited fuel in 2019, it was U.K. Group EG owned by the Issa Brothers which won that auction paying $1.72 billion. The brothers are now splitting and EG is offloading its Australian business. Are we even going to try and win this auction? Or have we given up on successful Australian M&A?

Again, thank you, Stephen, for the question. We, as a group, don't comment on what we're looking at in the market with EG or anything else, that's very much behind the closed doors, for obvious reasons, market disclosure being the main one. I would just like to say, though, be it EG or be it anything we look at, we are looking at things in an extremely disciplined fashion. We are not going to overpay for anything. And I think if you look at our Z acquisition that we made a year or 2 back, it's a demonstration of how carefully we manage that and how we looked at the valuation on that. So M&A is always something we look at. We don't comment on specifics, but the shareholders should be assured that anything we do will be done very carefully.

The next question again from Stephen Mayne. Australia is currently in the midst of an unprecedented deluge of takeovers. There have been 7 major takeovers completed this year with another 18 deals announced. The ASX is losing long-standing names such as CSR, Boral, Blackmores, Illumina, InvoCare, Newcrest, Crown and AusNet. There is a clear mispricing between public and private markets. Why are public markets not valuing ASX-listed companies like ours more highly? And what are we doing to avoid being gobbled up? Does the Chair agree this is a problem for the nation.

I think in my -- I've been around for a long time in this market and other overseas markets. These things go in fits and starts. They are [ cynical ]. I would agree with Stephen that our company is undervalued. I think it's a great company, and I would encourage Stephen to buy more shares in the company. And that would also help when the people like him or who are obviously educated and thoughtful appreciate that we're undervalued that he actually does invest in the company. We, at Ampol, have a very sophisticated Investor Relations group, and our top team talks with investors, both locally and internationally a lot. The company is well known. Yes, of course, I would like us to be more highly valued. We just hope that the market sees inherent value that we see.

There are no more questions.

Are you sure?

For this section, yes.

Anything on the phone, Jeff? Good. Okay. Thank you very much. On that basis, let's move on, if we can, to the formal items of business. As notified to the ASX and the New Zealand Stock Exchange, all resolutions will be decided today by poll. I thank all the shareholders for their efforts to submit proxies in advance of the meeting. A number of the shareholders have appointed the Chairman as proxy for today's meeting. Where these proxies are open, I intend to cast votes in favor of each resolution. The first item of business relates to the 2023 financial reports. Ampol's '23 annual report has been released to the ASX and the New Zealand Stock Exchange and is available on our website. For the purpose of today's meeting, the financial report, the directors' report and the independent auditors' report for the year ended 31st of December '23, are put before the meeting. I'd like to open the meeting to questions on the financial reports. There will be an opportunity to ask questions on other items of business later. A reminder, that we will first take questions here in the room. Then to The Link online platform and finally, by phone. So I'd just like to ask any questions on the financial report. Bear in mind that there are opportunities later in the meeting to ask questions as well. Okay, thank you. Jeff, anything online?