Chris Lee & Partners Ltd

Taking Stock 30 April 2026

Chris Lee Writes:

Yet another potential project has popped up, signalling a pathway back to the first world status that our country pretends to possess.

An Australian company has released some detail of its plan to initiate a project that would create significant government revenue and jobs, while reducing New Zealand’s reliance on imports.

It is sobering to add that it would need a difficult and grown-up debate before the Australian plan could advance. It would certainly require NZ to accept that after nearly two decades of dreadful leadership the country’s ability to foster its people has slid at least two grades below the current first-world countries like Singapore, Japan, Switzerland and The Netherlands.

The debate will be on the extraction industry, a subject recently raised by Oceania Gold, Santana Minerals and a number of new miners, some based around the West Coast, particularly Reefton.

The Australian private company Victoria Hydrogen & Ammonia Industries Ltd (VHA) believes it has private farming agreement in Southland to access some of New Zealand’s billions of tonnes of high-value lignite coal.

The project has a potential value of tens of billions. VHA believes that with modern chemistry it can convert the lignite coal to fertiliser (urea), enabling NZ to be self-sufficient and from the process extract invaluable by-products for use in diesel, aviation fuel, petrol, synthetic natural gas, and ammonia, the latter the newest to attract the maritime industry.

With the help of Connor English (a former CEO of Federated Farmers and accepted as an agriculture expert) VHA last week released details of the proposal to the media.

Brother of former Minister of Finance (and, briefly, Prime Minister) Bill, Connor English is as influential as anyone in the sector and through a family trust he has 5000 milking cows, as well as other rural investments.

VHA has been smart in working with him, and smart in signing a memorandum of understanding with Ngāi Tahu.

It believes it can make use of the lignite coal in a carbon-neutral manner.

It has a plan to work with the landowners whose pasture sits above quite shallow veins of enough lignite to feed a 50-year project.

Its plan it says, simply involves rearranging the molecules of lignite which is present in Southland to an extent of billions of tonnes.

The process would also feed electricity to the grid, as a by-product.

The farmers would be amply compensated for the access to small parts of their land. As the mining venture moves from paddock to paddock, rehabilitation of the disturbed land would be undertaken.

If the rehabilitation is anything like the success of previous gold mining in places like Millers Flat and Waikaia the farmers would end up with a better paddock than had been the case before, and a pocketful of cash.

To achieve its goals, VHA is now preparing for a 12-month formal feasibility plan, to be followed by finalising land access, negotiating with Iwi, councils and government and sounding out potential partners. It will be raising money in New Zealand from investors and potential partners.

It has the certainty that a huge Chinese company will provide the technology for the coal conversion. That company is currently using its technology for a similar project in Zambia.

When I spoke with the CEO, Allan Blood, I pointed out the obstacles that would need to be overcome.

My reservation is that in NZ, even an obviously lucrative project involving extraction will be noisily opposed by those who believe NZ can afford the status quo, preferring to seek growth in the low-paying seasonal tourism sector and the loss-making Viticulture sector.

A project that is carbon-neutral and offers by-products to reduce carbon in other sectors (shipping industry - ammonia as an example) is likely to find that New Zealand’s leadership would be intimidated by sometimes shrill activists, threatening to glue their hands to the roads, probably supported by an anti-development media.

Lignite coal, like gold, exists under the ground to a nett value of tens of billions, easily sufficient to restore the balance sheet and the revenue accounts of NZ Inc. It can be mined in a low emission manner, with an aspiration to be carbon neutral.

To what extent does NZ have to watch its living standards and infrastructure fall before we allow a few paddocks to be disturbed?

_ _ _ _ _ _ _ _ _ _

Of course VHA is not the first organisation to recognise the untapped value of Southland's multi-billion tonnes of lignite.

One of New Zealand’s smartest engineers, Dr Don Elder, will be remembered by many for his role in pursuing a lignite coal to synthetic gas project around 15 years ago.

Elder was CEO of Solid Energy, once the NZ Coal Department. Solid Energy owned coal mines on behalf of the government and at one stage produced profits of tens of millions per annum.

Elder foresaw the immense potential of lignite coal to reduce New Zealand’s dependency on oil.

With government encouragement he set about developing his project but was hijacked by some foreign exchange losses which provided an easy excuse for Key’s government to withdraw support, step away from providing essential capital, and isolate Solid Energy as a disposable asset.

Solid Energy closed mines, cancelled the lignite project, lost money, Elder resigned and assets were sold at fire sale prices to mostly Australian buyers.

Clever, eh!

Many would argue that Elder was scapegoated by self-focused (for re-election) politicians. 

The lignite has continued to grow in value as the various components of the energy sector have soared in price.

If our media wants to join the business sector’s plan to be aspirational and look for ways to change our low productivity, it could start by accessing skilled analysts with the communication skills to inform middle-ground New Zealand.

As far as I know there is no immutable law that requires New Zealand to slump into third world status.

_ _ _ _ _ _ _ _ _ _

Considering Santana Mineral’s request for consent of its gold mining project at Bendigo (Cromwell), the Fast Track panel is now hearing verbal submissions from those who made written submissions.

Most will be offered twenty minutes to talk about their response. Ngāi Tahu has had a generous allocation of time.

Although the private land involved is not of direct relevance to local iwi ownership, some iwi told the panel they preferred the gold to remain buried.

This appears to be a change in position, having earlier been engaged in discussions regarding potential involvement in the venture.

Investors will be reassured to know that iwi has no right of veto.

In the case of some of the parties, the time will be best used if they focus on the most important evidence in their submission. The panel requires evidence rather than ideology or sentiment.

All the submissions have been published on the Fast Track panel’s website. Some are based on ideology or contain inaccuracies.

Santana had been given a week to respond to written submissions.

Its response largely referenced scientific and technical evidence, while addressing the more subjective allegations that it had not communicated and engaged fully with iwi, most specifically Kā Rūnaka, which represents four rūnanga in the area.

It could be argued that this allegation shifts the focus away from scientific matters and toward interpretation of communication records and expectations.

By raising this issue, iwi effectively invited a detailed response from Santana, including full disclosure of its engagement.

Santana responded accordingly with records of numerous meetings with iwi, on site and on marae, along with details of emails, video calls, and phone discussions. It also outlined the 100 plus community meetings it had advertised and held.

It detailed attendance at community meetings and the issues raised.

For example, some twenty meetings held in a nearby tiny hamlet, Tarras, were minuted showing whether none, 1, 2, 6, 10 or, once, 20 people arrived. It recorded that the main questions were on how to apply for jobs.

It also noted the absence of a small number of vocal objectors from these meetings, at least one of whom lives in Wellington, intent on monetising academic activism, as far as I can observe.

The Santana response was clinical, commercial and legalistic, with clear evidence of the level of communication undertaken.

The meeting notes also recorded iwi discussions regarding their expectations for involvement.

In my opinion, Iwi made an error in alleging a Treaty breach as that allegation had to lead to some cold, perhaps damaging, disclosure of Iwi expectations. 

It is also my opinion that Iwi made an error in choosing its advisors. One was a lawyer trained by Russell McVeagh, now running his own practice, with a special emphasis on consent procedures and the Treaty. 

Iwi also used PWC.

While fee structures are not disclosed, in some comparable cases adviser incentives have been aligned with achieving commercial outcomes, which can shape negotiation positions.

If the minutes of a very recent Santana/Iwi meeting are undisputed, as is so far the case, the "compensation" sought should the project proceed seems to be linked to the $180 million obtained by Iwi when Meridian and Contact Energy sought consent renewals for hydro schemes on the Waitaki River.

Given Meridian is 51% Crown-owned, and the river is a Crown asset, this $180m figure was probably reached with Iwi to cover Iwi obligations to maintain environmental issues around the river. The amount seemed extreme at the time and still does.

It is clearly not a benchmark for a project planned on private property. Nor is it even close to potential value-add.

The disclosure has inevitably raised heated debate in some media outlets, though not in the mainstream media (MSM), unless you, kindly, included the dreadful Dunedin paper on the definition of MSM. (It needs a new editor. Its editorial direction seems click-bait focussed).

The Fast Track panel will focus on the evidence presented. It will assess environmental considerations alongside the economic implications of the project.

At this stage, the key evidence indicates that Santana has undertaken extensive efforts to communicate with iwi and the wider community.

When the oral submissions conclude in the coming weeks, the panel will move to private deliberations.

It will weigh the scientific evidence relating to environmental impact and consider this alongside the economic benefits.

We expect that any differences between iwi and Santana can be resolved over time and that there remains the potential for a constructive and mutually beneficial relationship.

Such a value might be offset in many ways, but a figure anything like $180 million is as realistic as a promise by Santana to provide the winning Lotto numbers for the draws of Lotto over the next 500 weeks.

Santana could offer to fund a Guardian of the Clutha River board and invite Ka Runaka to provide a chairman.

It could invite Iwi to be an advisor on environmental improvements to the river. For example, judicious planting can improve a waterway, as can anti-erosion rock walls.

There are many wise experienced people who could contribute to a panel of river guardians.

Nationally, Iwi make up 40% of the highly-paid labour force, and management at mines.

Iwi has immense revenue from other gold mining ventures in the South Island.

I believe it is in the interests of Iwi to combine with Santana to expedite a best-of-class mining project, as Santana has prepared.

_ _ _ _ _ _ _ _ _ _

The Infrastructure Minister, Chris Bishop, and his under-secretary, Simon Court, are addressing some of the issues that add cost but rarely add value to consent processes.

Court states that the era of expensive, subjective, cultural reports will end before this election.

May it be replaced by a request for simple good manners and respect for others, and an end to extravagant costs, impeding well-designed mines.

Travel

6 May - Christchurch - Johnny Lee

6 May – Wellington – Edward Lee

28 May - Kerikeri - David Colman

29 May - Whangarei - David Colman

8 June – Nelson – Chris Lee (3 appointments left)

9 June – Blenheim – Chris Lee (5 appointments left)

Chris Lee and Partners Limited

Taking Stock 23 April 2026

DURING my career in financial markets, now in its 52nd year (good grief!), I have become familiar with most options for investors.

I remain puzzled by the likes of the modern betting products (iPredict etc) and am unfamiliar with some of the new American synthetic offers but am now informed about the latest version of timeshare, promoted by the Marriott Group, a huge American tourism company.

Recently I was staying at Ko Olina in Hawaii for a family break that brought four of our directors together to consider the best options for the various outcomes of the Middle East's disastrous war. We stayed at a resort owned by Marriott International, the world's biggest hotel group. 

A polite young woman asked my wife and I if we would attend a presentation on an offer from the Marriott. Politely we agreed, my logic being I might learn something useful.

What followed was a full disclosure of the Marriott's "ownership" scheme, a modern version of Timeshare, a holiday ownership scheme commonly marketed in New Zealand 40 years ago. Marriott International wants regular holiday travellers to pay a variable one-off lump sum and a small annual fee to acquire "points" used as payment for holidays chosen from Marriott’s menu of about 80,000 options around the world, including several in New Zealand, at places like Wanaka, Waiheke, Taupo and Queenstown.

Each of the 80,000 options has a value expressed in points. The number of points required for each option never changes.

The resort we were using would cost 500 points a night. (We simply paid cash.) A resort in Florida would cost 300 points a night, in Chicago 100 points.

To buy 5,000 points might cost US$80,000 payable only once, the points given to you to spend, every year, in perpetuity, transferable to one’s estate.

The annual fee for "maintenance" might be US$4,000 a year and for other incidentals, say US$1,000, so ongoing costs are defined.

If one paid $80,000 once, and $5,000 per annum, one could receive 5,000 points every year forever, enabling you to holiday 10 days a year in the Hawaiian Ko Olina resort, in superior accommodation.

The 5,000 points are yours forever to be used each year, except they may be stored up or even spent in advance. In Ko Olina each accommodation houses at least two couples in opulent rooms.

The 80,000 (approx) Marriott holidaying options on which points can be spent include cruises, as well as fixed destinations, such as Ko Olina.

If you buy into the scheme your status changes from being a "renter" (people like me who book and pay the going rate whenever we wish) to an "owner".

In the US, ownership eliminates the hefty US hotel tax, around US$100 a day at our resort. It eliminates car parking fees (US$48 a day at Ko Olina) and it comes with a wide range of "discounts", from services, restaurants etc in nearby areas.

Americans love the concept and see it as an affordable way of holidaying at middle-class venues. (Marriott hotels are somewhat short of the top of the range.)

The Marriott in Ko Olina costs a renter of a small hotel room around US$700 a night. The hotel has no dining room and no bar. Food services are in a couple of restaurants/bars offering, may I say politely, food of the equivalent (at best) of a Cobb & Co in NZ. 

There is a resort mini supermarket where staples (bread, milk, food etc) are sold at a price that most would find uncomfortable (i.e.a litre of milk - US$13). It is a long walk to any competing supermarket.

Renters accept all of this.

Those who are "owners" enjoy the superior units, two bedrooms, three bathrooms, large kitchen/dining, nice views etc. They get discounts from the supermarket.

Within ownership status there are five categories based on how many points were bought. If you paid US$250,000 to acquire 20,000 points you might reach the President status, which would entitle you to various additional privileges.

All of this is very American; status, discounts, privileges etc.

As a form of investment, it might suit some.

 Americans to whom I spoke found it "forced" them to take holidays; they found they could offer free holidays to friends and family. By being canny they could often book at very low prices when cancellations left rooms vacant, leading to big reductions in the points needed per night.

Because the maximum points per night never increases, those with decades of travel to enjoy genuinely found the points scheme an investment, as the points per day cost never increases.

I attended the Mariott presentation with my wife. I listened. I learned a little. My wife and I were offered a half-price holiday at Ko Olina next year. 

We were granted a day's free tariff from our stay this year. We were not buyers. (I politely asked if I could attend every day and thus make our stay costless!)

Footnote: Ko Olina is on the west coast of Hawaii and has four adjacent resorts - Royal Hawaiian, Disney and Four Seasons, as well as The Marriott, each with its own safe man-made lagoon, all four within a drive and a wedge of the Ko Olina golf course, a PGA venue (US$350 a round, including club hireage).

Ko Olina is a suitable location for a series of brainstorming sessions for company directors. We may reconvene there in the future. As renters!

_ _ _ _ _ _ _ _ _ _

GROWING evidence of the divide between the wealthy and the rest grows at pace in the US.

Their all-important auto industry illustrates this.

Three years ago, the lower half of US households by income owned a third of all cars registered in the USA. The latest published figure is 25%. Explanations for the decline include higher interest rates, higher fuel costs, job insecurity, maintenance costs and the cost of parts (tariff-related).

Cost of ownership, largely based on car leasing, not outright purchase, has risen 40% since Covid. (Outright purchase is rare.)

Delinquent loans for cars have risen 28%.

More people are using Uber.

The average US car on the road was built in 2013, somewhat similar to NZ.

The gap in living standards is starkly reflected by the success (or otherwise) of shopping malls. Of 900 shopping malls, the value of the top 100 equates to 50% of the sector's total value. The bottom 350 malls make up just 10% of the sector's value.

Malls selling at auction have little value. An example was the Palisades Centre in New York's Hudson Valley. Twenty years ago its value was US$880m. It recently sold for US$175m.

Bank loans to malls have a sickening delinquency rate of 11%.

Each year throughout the USA 40 malls close, many as zombie properties.

The successful malls focus on high-net-worth individuals, promoting luxury. Rents there are at all-time highs. People of “normal” wealth shop elsewhere.

The cost of pharmaceuticals in the USA highlights their inaccessibility to those without health insurance or high income. Two of the world’s most-desired new drugs are Wegovy and Zepbound, both weight loss medications.

Below is a chart of the price of the drugs in US Dollars in major economies.

Wegovy

Zepbound

Japan

163

155

France

196

268

Denmark

198

333

Germany

198

320

UK

222

279

Switzerland

225

284

Italy

282

399

USA

349

399

Canada

375

256

Like NZ, Hawaii is highly dependent on imported energy. It aspires to be based on renewable energy by 2045. Enabling the transition is LPG/LNG.

The Japanese company (JERA), the largest power provider in Japan, is to build in Hawaii a hybrid plant, initially using LNG, able to be adapted to use hydrogen and ammonia, planning to convert to net-zero sources by 2045.

The plan is highly contentious in the islands which are home to 1.5 million people, of whom around 350,000 live around Honolulu. Many locals oppose the JERA plan, evoking thoughts of New Zealanders towards the same issue.

Given the extreme difference in wealth between Hawaii’s many shanty towns and, say, the resorts or the narrow Waikiki surf beach, it did sound as though low-paid Hawaiians make no connection between the cost of lifting living standards and the compromise on things like development, with its implied environmental changes.

Footnote: Hawaii is no fan of Trump. Some 83% of its population vigorously oppose Trump's plan to sign the new US dollar notes.

_ _ _ _ _ _ _ _ _ _

SANTANA shareholders now face a long wait. This will test the patience of many, especially given the depressing weather, the global instability, the future of oil prices, and the upcoming NZ election.

The panel had asked Santana to respond to any of the submissions. The response is now on display on the Fast-track website. It makes compelling reading.

Santana’s response offers science and maths to counter some of the more tenuous submissions, but its response mainly addresses the Iwi claim that Santana has breached the Treaty of Waitangi.

The claim is that Santana did not communicate adequately with Iwi and did not address sincerely the concerns of Iwi.

Santana has responded with a log of every meeting on site and on marae, every zoom conversation, and every discussion between Santana and the Runanga.

The panel will read the minutes of those hundreds of discussions and will decide if Santana was respectful, responsive and reasonable. Any accusation of Treaty breach will have to be considered alongside the minutes of meetings, and related correspondence.

So too, will the offers of inclusion in the project and any evidence of Iwi requests for involvement.

My guess is that thousands will read the minutes of all the contacts. They will reach their own conclusions.

I recommend reading the Santana response to submissions.

My own expectation is that many of the opponents’ submissions will be fully addressed by science and maths, and by the correction of much totally unsustainable comment.

_ _ _ _ _ _ _ _ _ _

Travel

28 April - Wellington - Edward Lee

6 May - Christchurch - Johnny Lee

28 May - Kerikeri - David Colman

29 May - Whangarei - David Colman

8 June – Nelson – Chris Lee

9 June – Blenheim – Chris Lee

Chris Lee

Chris Lee and Partners Ltd

Taking Stock 16 April 2026

Chris Lee Writes:

IF a new moneylender wanted to pick a time to grow its loan book, now might not be an optimal time.

Receiverships and liquidations are at record levels, business confidence is low, discretionary spending is falling, and further job losses look to be inevitable.

McCains and Watties are not alone in planning closures.

So when the tiny moneylender Runway bought the 37-year-old factoring company SH Lock & Co, now known just as Lock & Co, its ambition to quickly grow its loan book from $40m to several hundred million was, if nothing else, brave.

Factoring invoices comes loosely within the definition of cash flow lending, an area of banking requiring robust data and detailed knowledge of the debtor, as well as the supplier of credit. To achieve scale in factoring, a loan book of hundreds of millions is so improbable as to be laughable.

For that reason Runway plans to get involved in other forms of lending like asset-financing, an area of lending in which UDC Finance, with 100 years of experience, dominates the market.

Runway also hopes to grow by offering term loans. Its target market will be the small and medium sized enterprises (SMEs) which generally have fewer than 20 staff.

The main banks do not shun SMEs but are highly selective, have a huge advantage in holding data from which to judge SME behaviour, and charge bigger margins to reflect risk. Many have tried low-cost lending processes to SMEs and come unstuck. Matrix lending, performed by computerised box-ticking, is easily gamed.

Small businesses that struggle rarely have shareholders with liquid assets that might shore up cash flow problems.

All of this explains why SMEs are friendless when their times are troubled.

Despite this, Runway might be different from all the previous moneylenders which have drifted away in recent decades.

Think GE Finance, owned by a giant, General Electric, yet still defaulted on its lending commitments in 2008, along with several dozen other moneylenders.

I think of so many finance companies which hired senior bankers with genuine experience, yet collapsed, as a result of failure to collect their loans. Provincial Finance, St Laurence, Allied Nationwide, Strategic Finance, and National Mutual Finance all foundered, discovering that moneylenders need much more than just a lender trained by a bank.

They need a comprehensive database from which to observe patterns of behaviour; they need wide knowledge of different lending segments; they need access to capital from their shareholders, and most of all they need patience and wisdom at the top.

That is where Runway may have the comparative advantage that justifies its audacious plans.

Its chairman is one of New Zealand’s smartest business leaders, Marko Bogoievski, a man whose accomplishments, personal attributes, and reputation puts him close to the level of New Zealand’s greatest ever banker, the late Sir John Anderson.

Bogoievski made his breakthrough during the limp years of Theresa Gattung’s failed leadership of Telecom, a period when Bogoievski was lurking in Telecom’s second tier of leaders. It was he who recognised that the internet would curl the edges of Telecom’s Yellow Pages, so he sought to sell it before others recognised that its business model would become obsolete.

Brilliantly, he found some inept investment bankers and pension funds who combined to buy the Yellow Pages for more than $2 billion, nearly 20 years ago. A consortium comprising CCMP Capital and a Canadian Teachers Pension plan paid $2.24 billion to Telecom for the print and internet rights to the Yellow Pages. Its value today might be a tiny fraction of that sum.

Gattung may have been praised for this improbably lucrative transaction, but Bogoievski was the brains trust. He went on to a stellar career with Morrison & Co / Infratil, the company founded by the late Lloyd Morrison.

Bogoievski now runs a private investment company, and will chair Runway.

If he endorses a business model for Runway, the plan will have been skilfully analysed. Bogoievski will have access to real capital. The bankers he will choose will manage the book.

It is not clear from where Runway will obtain the money it proposes to lend but it is a fair guess that Runway will have access to enough capital that it will attract debt offers from banks. Maybe it might also securitise loans, if its growth is rapid and profitable.

SMEs - by definition employing fewer than 20 people - definitely will need debt and equity to grow in this currently troubled environment.

Perhaps, just perhaps, Runway might develop the credibility to become the lender the SME sector needs.

Runway will not automatically gain a credit rating and then gain access to the Crown Deposit Guarantee Scheme, but if in time it wanted to raise retail deposits it would by some distance be the best-governed of those non-banks which operate in the non-bank lending area.

One hopes the new lender has patience. The first few years will be hard.

New Zealand needs a credible non-banking sector. The sector currently survives because of the Crown deposit guarantee.

Currently the value of the guarantee is so underpriced that the guarantee looks like a hazard for taxpayers, lurking around the next corner.

Bogoievski will set a proper standard, I expect, just as Sir John Anderson would have done.

_ _ _ _ _ _ _ _ _ _

THE loss suffered by Synlait Milk will have been anticipated by its bankers but perhaps not by the innocent investor who expects its major shareholder (Bright Dairy) to execute the recovery plan, inject hundreds of millions to restore the company, and then share the recovery with minority holders. Fat chance.

For as long as I can recall, China’s investments in NZ have rarely, if ever, been constructed to share rewards with NZ minority shareholders.

Very few of our clients would still hold Synlait Milk. It has now sold its processing plant at Pokeno, one of a few assets built or acquired some years ago. It sold for a figure much less than true cost. It will reduce debt with the proceeds. It will process farmgate milk at Dunsandel near Rolleston in the South Island and abandon its North Island aspirations.

It may soon revert to profitability, at a modest level. But Bright Dairy will want all others to be subordinated behind it when there is loot to be distributed.

Synlait Milk’s next dividend for all shareholders is likely to be noticed by the crew of Artemis II before it is noticed by NZ shareholders, and may well rely on cheese sales at that sort of atmospheric elevation.

_ _ _ _ _ _ _ _ _ _

PERHAPS there will be a similar wait for dividends for any NZ shareholders in Dangerous Goods Ltd, the NZ company founded by Simon Henry to dispose of unwanted chemicals.

Henry’s company was priced loftily at $4 a share before he was set upon for a silly and irrelevant comment about a woman from My Food Bag. Henry scuttled off to Australia, delisted from the NZX, and has since had to deal with internal fraud, financial losses, regulatory issues regarding late reporting, and a collapsing share price.

What was $4 is now 40 cents.

While he battles with regulators in Australia, his ambitious brother, Bernie Whimp, says he plans to go to court to take on New Zealand’s financial market regulator (the FMA).

The FMA wants to clean up dozens more of Whimp’s companies, knowing client money has been invested by Whimp and his team in less-than-inspired choices, and doubting the solvency of the companies in the Whimp group.

Former Whimp staff allege that, of the $44 million he raised from the public, some $6m was lent to him or his private companies.

Whimp says these loans were documented and interest-bearing. I am not sure that documentation is of particular comfort to his unwise investors.

I have to assume that the original offer to invest pointed out that money raised might be lent to Whimp, and that the investors were happy with this.

It does seem that the brothers, Simon Henry and Bernie Whimp, will be in the spotlight for some time. (Henry changed his surname).

Whimp says his investors will lose many millions if he is not allowed to nurse his stock picks back towards breakeven prices. It seems those investors lost many millions when he was allowed to use the money, so the logic of reverting to him seems questionable.

New Zealand investors without access to financial advice will always be at risk.

This is not an uncaring swipe using the old saying of a fool and his money, but is a plea to all investors to use Mr Google, or an experienced financial advisor, before reacting to newspaper advertisements by sending in money.

Hopefully, a class action will emerge to test the liability of newspapers which run advertisements, collect the revenue, but perform no due diligence, effectively facilitating the schemes that are advertised.

The Otago Daily Times group will have a board of directors. That board should be obtaining good legal advice on what its liabilities might be when it publishes advertising. Perhaps there is no liability. Perhaps it will find there is no accountability however improbable the advertising claim (20% returns p.a. etc).

My view is there should be accountability.

A litigation funder might want to investigate. Parliament might want to consider new, tough laws.

_ _ _ _ _ _ _ _ _ _ _

Travel

17 April – Napier – Johnny Lee

22 April – Auckland (Ellerslie) – Edward Lee

23 April – Auckland (Albany) – Edward Lee

28 April – Wellington – Edward Lee

6 May – Christchurch – Johnny Lee

Chris Lee & Partners Limited

Taking Stock 9 April 2026

James Lee writes:

“Most of life comes down to controlling what you can and putting guardrails around what you can’t.”

It sounds like a throwaway line but it wasn’t. It was a clear and coherent strategy.

I was sitting with the then CEO of Air New Zealand. We were talking about the realities of running an airline, arguably one of the most exposed business models in the world. Oil prices, FX, global demand, the economic cycle, even the weather are all out of your control.

So Air NZ hedged what it could - fuel, currency and capacity - then focussed relentlessly on the one thing it could control: brand and customer loyalty. The experience, the reason a customer comes back. (That was the edge, but perhaps Air New Zealand might revisit whether customer loyalty has been as much of a focus recently.)

But let’s be clear, the definition of “controllable” shifts when the world shifts. And it’s worth asking whether that playbook still holds in today’s environment, because the reality is that risks are now materially higher than where we started the year. This isn’t noise, it’s a repricing of geopolitical risk. And the duration of the Iranian conflict is, frankly, the single biggest variable hanging over markets.

Right now, the world finds itself in the middle of a potential ceasefire, that has seen the oil price fall sharply and equity markets rebound. Investors should expect volatility to remain heightened.

Not all conflicts matter to markets. This one does because it runs straight through energy.

Oil prices are probably the second most important variable to consider, behind interest rates, when thinking about input variables that impact the world. When you consider that the correlation between oil and inflation and then inflation into interest rates, you could probably argue it’s the most important input to monitor.

The price of oil has increased 50% since the Iran conflict began. The general thesis was that the war would be short lived, which perhaps ignored the history of what is one of the oldest civilisations on the planet. Now we are faced with a reality that this has the potential to materially impact portfolios.

The cost to human life is real and impossible to calculate. The cost of the war itself varies but currently I have read estimates of anywhere between $200B and $400B including weapons, damage, and cost to rebuild, but the economic impact of this disruption is estimated to be between 1% and 3% of global GDP (global GDP is about US$100 trillion) depending on what happens next.

The world is faced with three simple scenarios. Yesterday we saw the first step towards de-escalation, but there are still a few twists and turns to play out.

The first is de-escalation - a brokered ceasefire, which Trump often says is what he wants. Oil pulls back. LNG stabilises. Inflation expectations ease. Central banks regain optionality. Risk assets recover. Iran is asking for a full ceasefire, including sanctions being lifted. This is what the market generally believes is most likely. The consensus was that Trump would announce he has achieved what he wanted, declare victory, and step back. The US public was recently polled, with 90% wanting the conflict to end and 70% opposing ground troops. While the market may be pricing this outcome as likely, oil is not.

The second is escalation, specifically either significant bombing of key infrastructure, what Donald suggests is “bombing Iran into the stone age”, or ground troops. This would cause major disruption to infrastructure in Iran, which would likely retaliate across the UAE or Oman. Global security would change materially, as any response from Iran would be aimed at economic disruption. Iran does not have the capability to match physical damage, so it would target economic damage instead. This is not a headline risk. It would be a supply shock unlike most have seen. For now, that risk appears to be easing.

The third is the messy middle - oscillation. Tensions flare, then cool, week by week. Oil spikes, retracts, then spikes again. Markets churn and confidence erodes. This is effectively what we have seen over the past seven weeks.

Now here is what matters. This conflict has highlighted that the system has very little slack.

Global oil demand is just over 100 million barrels per day. The Middle East supplies roughly a third of that, and more importantly, most of the spare capacity. Remove even 3–5 million barrels per day and you are not rebalancing supply, you are exposing the absence of alternatives.

US shale can respond, but slowly. Call it 1 to 1.5 million barrels per day over 12 to 18 months if price incentives hold. Offshore projects take years. Global reserves are already being used, but if you assume a 10% reduction in supply, reserves would last broadly three months.

LNG is tighter again. Global trade sits around 400 million tonnes per annum. Qatar alone accounts for roughly 20%. If that flow is disrupted, there is no immediate replacement. The US is the swing supplier, but it is already running at capacity. New supply is coming, but on a multi-year timeline.

The reality is energy markets do not adjust smoothly. They gap. A small disruption in volume becomes a large move in price because there is no buffer, and no real short-term solution.

Oil feeds directly into inflation. Higher oil and LNG prices lift transport, electricity, and input costs. That flows into CPI. Central banks cannot ignore this as transitory. Rates stay higher for longer, and could move higher again. Consumers feel it immediately through fuel, food, and utilities. Discretionary spending tightens, employment slows, and business investment weakens. This time, it likely also feeds into housing, as people have held on, expecting a recovery that may not come as quickly as hoped.

So the outcome of any peace agreement will not be theoretical, it will be mechanical.

Over the past week, Trump has said the war will end quickly, then signalled escalation, then called for a ceasefire. Today we have talk of peace. With Trump, there are still likely a few acts to play out.

Any good Trump analyst will tell me that Trump always does both. It’s negotiation 101 - threaten aggressively but don’t pull the trigger - Greenland, Chinese tariffs, North Korea, so on and so forth.  So rather than be fearful that lunacy takes hold, we just need to recognise that we have probably all been guilty of being too casual about the strategic importance of the supply chain of oil.

Now bring that back to New Zealand, where we sit at the end of the supply chain, not the centre of it.

We import essentially all of our refined fuels. Marsden Point was our only refinery and shut in 2022. Since then, we’ve relied on imported petrol, diesel, and jet fuel, largely from Asia and the Middle East. That means we’re exposed not just to crude prices, but to refining margins, shipping capacity, and global competition for finished product.

The obvious question - why not lean on Australia?

Australia cannot bail us out as its refining capacity has shrunk materially. It imports a large share of its own fuel and relies on the same Asian supply chains we do. Even if it had surplus, logistics and contracts don’t flex overnight.

In short, there is no regional safety net; the fact is we’ve traded resilience for efficiency. It worked in a stable world. It looks different in a volatile one.

What do you do?

At a national level, the levers are clear - more storage, more diversified supply, and a serious conversation about strategic capability. That is not necessarily rebuilding a full refinery but acknowledging that pure just-in-time supply carries risk. We can expect sensible government-supported investment into our supply chain across most things, which, to be frank is the government’s job, not to tweet and comment on every single micro thing. Being grumpy right now, I do not care about a politician’s view on the rugby, their plans for Easter, or whether we should subsidise some pet project.  Their job is to focus on the macro investments that keep its citizens employed, healthy and safe.

For an investor it’s more nuanced, while the question is simpler: where does capital go when energy becomes unstable? You have to also balance that with how long will it remain unstable.

I start with the macro by looking at what the market thinks is the base case, which currently is de-escalation, then compare that with what has already moved or what hasn’t.  Then overlay that with the following logic.

What struggles?

Anything energy-intensive with no pricing power is going to struggle - transport, logistics, low-margin manufacturing, discretionary retail. These businesses wear higher input costs and can’t fully pass them on. Margins compress and demand softens at the same time.  They will have a hard time.

What holds up?

Defence is the obvious one. Spending is already committed and rising, driven by policy, not the cycle. That said, defence stocks were already elevated and while many stocks rallied in the first few days, most have fallen with markets.  To me though, standing back, the big four defence stocks trade at 15-20x EV/EBITDA, have 5-10% EBITDA growth and have margins on average at 15%.  This puts them into the category of very stable investments in this environment that are also low-growth, low-margin investments.  Personally, though, I would rather own something more positive than betting the world is going to arm up because it has been wartime for a while now under Trump and Putin.

Balancing the fact the market is down a bit (4%), consensus is currently for de-escalation. I would say the market is under-pricing the risk of a long drawn-out process, or escalation.  It is doing so in the belief that the economic cost is too high.  The question I would put to an investor is, Do you really feel confident enough that you can call it, and even if you get it right and the market bounces 5%, will oil really go back to the old levels or will it stay above US$80 a barrel for some time to come?

This leads me to what I think is the interesting outcome of all this, which is electrification - and this is where nuance matters.

At first glance, higher energy prices sound negative for everything. But for electrification, it’s the opposite, and could be where New Zealand decides to pivot into building resilience into its systems.

The more volatile and expensive fossil fuels become, the stronger the case for alternatives, across the board.  Renewable electricity - wind, solar, hydro - has high upfront costs but low and predictable marginal costs, plus no fuel input and the benefit that we control the supply chain.

What matters is that renewables shift energy from a traded commodity to a domestic asset, and for New Zealand, that’s particularly relevant. We already generate a large share of electricity from renewables, but it doesn’t make us immune and will never be the full solution, but lowering our reliance and increasing our resilience is important and is likely to get more attention.

Electricity demand rises as transport and industry electrify. They will electrify as government-supported investment solves infrastructure constraints, such as generation, storage, and grid capacity. In the short term, gas still plays a balancing role, which means LNG prices still matter, so we should actively be encouraging gas exploration.

Consumer behaviours will change. Anecdotally I hear that BYD and Tesla sales staff have been run off their feet as car sales companies prey on the fear of fuelling up. My bet is the CFO at bus operator Ritchies Transport, owned by private equity company KKR, is feeling pretty happy about life, and probably a few investment bankers might be pushing it to an IPO.  Even second-hand Audi E-Trons probably look like good value now.

To me, the takeaway is straightforward - electrification wins. It is not instant, and it’s not frictionless, but my guess is that long-term investors should be open to looking at something like Contact Energy. Contact trades on 12x EBITDA, will grow EBITDA gradually depending on the weather, and produces circa 30% EBITDA margins. This allows it to pay a healthy dividend, so in an environment that feels pretty tough, where our return expectations should be tempered and income should be prized, we have a few good sensible options.

We’re moving from a world where energy was abundant and predictable to one where it’s strategic and volatile. In this environment markets will swing between overreacting and underestimating - because that’s what markets do.

Our investment strategies need to embrace that concept at the moment because whether the Iran war escalates or de-escalates is actually out of the average investor’s control, and escalation is ugly.  Regardless of what happens, I don’t see a world where oil prices aren’t more connected to that strategic risk for a while, especially as people build strategic reserves again.

For an investor, control what you can. Do you need to be fully invested? Hedge what you can’t, reduce your risks.  And be very clear about which parts of your portfolio - and your economy - are exposed to forces you no longer control.

The reality for many investors is simple, and goes back to one my golden rules: If you’re not sure, don’t place a bet.  The easiest way to grow your wealth is actually not to lose it on bad bets. 

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Travel

13 April – Taupo – Johnny Lee

14 April – Hamilton – Johnny Lee

15 April – Tauranga – Johnny Lee

16 April – Lower Hutt – David Colman

17 April – Napier – Johnny Lee

22 April – Auckland (Ellerslie) – Edward Lee

23 April – Auckland (Albany) – Edward Lee

Chris Lee & Partners Limited

Bottom of Form

Taking Stock, 2 April 2026

Fraser Hunter writes:

ENTERING 2026, there were genuine reasons to feel better about New Zealand. Interest rates had fallen materially from their highs. GDP had grown in both the September and December 2025 quarters – modestly, but in the right direction. The Reserve Bank held the OCR at 2.25% in February and acknowledged that earlier easing was starting to support activity.

In February, locally listed companies delivered their strongest reporting season in three years, with earnings successes outweighing misses for the first time since 2023. Consumer confidence in January hit its highest reading since August 2021, at 107.2.

The recovery was uneven and not yet self-sustaining, but for the first time in a while the evidence was pointing in the right direction.

Then conflict in the Middle East widened, oil surged, trade tensions returned, and global markets repriced sharply. None of that was in anybody’s forecast for the quarter.

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THE quarter’s disruption came from several directions at once, which is part of what made it difficult to navigate.

The most significant was energy. The temporary closure of the Strait of Hormuz drove Brent crude to around US$120 a barrel at its peak, its steepest monthly surge since the Gulf crisis.

While NZ’s distance from conflict provides some comfort, it’s the type of shock that matters. A growth scare and an inflationary supply shock are different animals. Markets have been more willing to look through growth scares, with falling demand eventually bringing inflation down and clearing the way for rate cuts. An oil-driven shock does the opposite, raising prices at the same time as it weakens confidence and spending power. It is much harder for central banks to cut their way through that.

Trade provided a further layer of uncertainty. Following the US Supreme Court’s February ruling against the initial tariffs, the US launched fresh trade probes in March targeting major partners. China is reciprocating in kind, though neither side moved to full escalation by the end of quarter. The trajectory however signals slower global trade and higher costs, and that kind of uncertainty is particularly challenging for smaller, trade-dependent economies like New Zealand.

Bonds offered no shelter either. New Zealand swap rates rose 40 to 55 basis points in March alone, sending the corporate bond index down -1.4% for the month and the government bond index down nearly -2%.

Gold, which continued its stellar run into late January, pulled back sharply in March as the inflationary nature of the shock reminded markets that gold pays no income and tends to struggle when real yields are rising.

The assumption that lower interest rates would paper over a lot of problems has already come under real pressure.

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THE domestic economy told a reasonable story through most of the quarter. Export commodity prices held up, with the ANZ commodity price index rising more than 4% month-on-month in February and meat prices near record highs. The reporting season was genuinely good. The domestic story was delivering. It was simply overtaken by a global one that few had written into their base case.

But by March the mood had turned. The NZX50 fell -6.7% in March and finished the quarter down -6.1%. Those with fuel exposure were hit the hardest. Auckland Airport dropped -13%. Mainfreight fell -10% and Freightways dropped -14.5%.

Air New Zealand was the worst performer, off more than -22% after suspending guidance and cutting flights as jet fuel costs surged. Only nine stocks on the NZX50 posted a positive return for the month.

Consumer confidence fell, unwinding the last six months’ recovery in sentiment. Business confidence more so. Households were squeezed at the fuel pump and inflation expectations returned. The major banks are now projecting inflation to return to above 4%, which will make the Reserve Bank’s job considerably harder. The RBNZ has acknowledged that the conflict could both stoke inflation and weaken growth momentum, a combination that leaves very little room to move.

Offshore was not much better, though New Zealand underperformed most peers. The S&P 500 fell -5.0% in March and -4.3% for the quarter. The ASX dropped -7.1% in March but held up better over the full three months, down just -1.6%. The MSCI World index lost -3.6% over the quarter.

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EARLIER in my career I was part of an annual client strategy piece that leaned heavily into the “green shoots” metaphor, complete with the plant growing through cracked earth stock photo. The economy was showing signs of life coming out of the GFC, the Rugby World Cup was just around the corner and the listed market outlook was improving. 2010 proved to be a false dawn, largely because of the Christchurch earthquake, again a scenario nobody had planned.

The decade that followed told a different story. The insurance rebuild mattered. Sentiment recovered. The NZ market went on to become one of the stronger performers in the developed world. The clichéd green shoots were real. They just took longer to establish than expected, and the early stage of the recovery was the least comfortable part of it.

The same metaphor popped up again entering 2026, and the first quarter has looked like another head fake, again largely due to factors outside our control. The world is more fractured now than it was post-GFC, and the bear case grows the longer the conflict in the Middle East drags on.

But the pattern is still worth noting. The early stage of a real recovery and the early stage of a false one can look almost identical from the inside, particularly when they are interrupted by shocks that have nothing to do with the underlying domestic picture. The discomfort of this quarter is not, by itself, evidence that the thesis was wrong.

In my own case, I’ve been thinking about a range of outcomes from here in three buckets: an ideal scenario, where the conflict is contained and the domestic recovery continues broadly on track; a compromised one, where some combination of higher energy costs, sticky inflation and delayed rate relief persists for longer than markets hope; and a very much not ideal scenario, where things deteriorate to the point that a much higher allocation to cash and fixed income becomes necessary.

A meaningful cash reserve is important, not because I think the worst case is certain, but to prevent being forced to sell good securities at bad prices. Forced selling is the most reliable way to destroy long-term returns. Holding cash that earns a modest return while you wait for clarity isn’t glamorous. But it’s disciplined, and it keeps your options open when others are running out of them.

The optimal scenario doesn’t require dramatic action; it requires a careful review of what you hold and whether it still makes sense at current prices. The compromised scenario, which I suspect is where we’re most likely to spend the next few months, calls for a portfolio that reflects your stage of life, your tolerance for volatility, and your willingness to accept that market returns won’t be a straight line.

The adverse scenario is worth planning for, not because it’s probable, but because the cost of being unprepared is high.

At the very least, these are conversations you should have with yourself, if not with your adviser.

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THE domestic fundamentals have not yet changed. Companies are delivering. Commodity prices are holding. Lower rates are still working through the system. The risk worth watching is a prolonged conflict that keeps energy prices elevated, delays rate relief further and tests business and consumer confidence beyond what the recovery can absorb. That is a genuine risk, not a remote one. But it is the bear case, not the base case, and positioning as though it is certain comes with its own costs.

Recoveries are rarely comfortable in their early stages. The evidence comes before the confidence does, and the confidence comes before it feels obvious. This quarter tested that assumption harder than most. It has not changed it.

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Property For Industry

Property For Industry has set its interest rate for its 6.5- year Senior bond at 5.35% and is fully allocated. Thank you to those who participated in this issue.

Local Government Funding Agency

LGFA has set its interest for its 8-year bond at 4.75%. These bonds are AAA rated by S&P and mature on the 15th of May 2034. Clients interested in this bond are welcome to contact us, as we have a small supply remaining.

Travel

13 April – Taupo – Johnny Lee

14 April – Hamilton – Johnny Lee

15 April – Tauranga – Johnny Lee

16 April – Lower Hutt – David Colman

17 April – Napier – Johnny Lee

Chris Lee & Partners Ltd