Channel Infrastructure NZ Limited has accelerated key project completions and expanded contract scope, prompting a raised EBITDA forecast for FY2026 amid an uncertain fuel demand outlook.
- New Zealand Government diesel storage near completion by May end
- Z Energy jet tank commissioning moved six months earlier to July
- Higgins bitumen terminal contract revenue increased to $57 million
- FY2026 EBITDA guidance raised to $97-$105 million
- Strong operational performance supports stable and growing dividends
Diesel Storage Expansion Nears Completion Ahead of Schedule
Channel Infrastructure (ASX:CHI; NZX:CHI) is on track to complete a substantial 93 million litre diesel storage facility for the New Zealand Government by 31 May 2026, delivering this critical capacity in a compressed timeframe of under two months. This rapid buildout, a response to heightened fuel security concerns, adds roughly nine days of diesel supply to the country’s reserves, reinforcing Channel’s pivotal role in national fuel resilience. This project builds on the momentum from the company’s earlier acceleration of diesel storage capacity at Marsden Point, a move that has attracted considerable attention for its scale and speed of execution Additional 93 million litres diesel storage.
Z Energy Jet Tank Ready Six Months Early
The Z Energy jet fuel storage tank, another cornerstone infrastructure project, is now expected to be commissioned in July 2026; six months ahead of the original schedule. This advancement not only accelerates revenue commencement from the project but also injects an additional eight days of jet fuel capacity into the supply chain, a timely boost amid ongoing aviation fuel demand challenges. The early commissioning underscores Channel’s operational efficiency and project management capabilities, which have been highlighted in recent quarterly throughput records Jet fuel throughput strongest since Q1 2019.
Expanded Bitumen Terminal Contract Enhances Revenue Profile
Channel has also announced an expansion in the scope of the Higgins bitumen import terminal project. The total revenue expected over the 15-year contract term has increased to $57 million from the previously forecast $45 million, reflecting enhancements in terminal capabilities tailored to customer needs. Correspondingly, project costs have risen to between $25 million and $27 million, up from an original estimate of $17 million to $21 million. This contract expansion signals Channel’s ability to capture value through bespoke infrastructure solutions that align with evolving customer requirements.
Upgraded EBITDA Guidance Reflects Growth and Market Uncertainty
Reflecting these project developments and contract enhancements, Channel’s Board has revised its EBITDA guidance for the 2026 financial year upward to a range of $97 million to $105 million, from the prior $95 million to $100 million forecast. This adjustment factors in additional revenues from the accelerated Z Energy jet tank commissioning and the government diesel storage, balanced against an uncertain fuel demand outlook amid persistently high fuel prices. Channel’s business model, with around 50% of revenues insulated from fuel volume fluctuations through indexed take-or-pay contracts, provides a degree of resilience against demand volatility.
Operational Excellence and Strategic Growth Initiatives
Channel’s operational performance remains robust, with over 3.5 billion litres of fuel handled through Marsden Point in 2025, representing 40% of New Zealand’s transport fuel and 80% of its jet fuel. Asset availability has consistently exceeded 99%, and the company has maintained a zero process safety incident record, reinforcing its reputation as a reliable infrastructure operator. Alongside infrastructure upgrades, Channel is advancing strategic growth initiatives including the Marsden Point Energy Precinct, which aims to unlock significant economic and employment benefits for Northland, and its first Australian investment; a 25% stake in the Somerton jet fuel pipeline servicing Melbourne Airport. These moves position Channel to support New Zealand’s energy transition and fuel security while expanding its footprint in resilient aviation fuel markets Solid FY25 Results and ASX Debut.
Dividend Growth and Capital Management Focus
Channel continues to prioritise stable and growing dividends, having increased its payout ratio to 70-90% of Normalised Free Cash Flow. The company delivered an 18% increase in total dividends for 2025, with a cumulative yield of approximately 50% since the 2021 transition to a dedicated import terminal. The Board reaffirmed its commitment to equitable shareholder treatment, maintaining a fully pro-rata approach to capital raises where possible. While no new capital raises are planned currently, the company signals readiness to support major growth initiatives through disciplined capital management.
Bottom Line?
Channel Infrastructure’s early project completions and contract expansions underpin a raised EBITDA outlook, but fuel demand uncertainty amid high prices tempers near-term visibility.
Questions in the middle?
- How will ongoing global fuel supply disruptions influence Channel’s throughput and contract renewals?
- What is the timeline and investment risk profile for the Marsden Point Energy Precinct’s next development phases?
- To what extent can Channel replicate its Australian foothold beyond the Somerton pipeline acquisition?