Meridian Energy has reported record first-quarter generation of 3,644 GWh, up 18.9% from the same period last year, but the headline masks a significant challenge facing the business. While the company delivered exceptional operational performance, electricity prices have collapsed 64.3% year-on-year, compressing revenue despite the surge in megawatt hours generated. Management attributes the strong generation to favorable hydro conditions, with inflows running 154% of historical average and 29% higher than the prior year quarter, but those same conditions have flooded the New Zealand market with cheap electricity.
The water story underpins the operational performance. Waitaki catchment storage finished the quarter at levels 100% higher than a year ago, with seasonal snow storage sitting at 102% of average in early October. National storage has since moderated to 121% of historical average by 12 October as demand has drawn from reserves, but remains well above long-term norms. September itself was mild across the country with above-average rainfall in the South Island, conditions that allowed Meridian to maintain high-level hydro output. The company notes that Q1 was New Zealand’s third-warmest winter on record, which depressed demand growth to just 0.4% above the prior year period. This combination of high supply and tepid demand explains the dramatic price compression that surrounded Meridian’s generation.
On the retail side, total customer connections declined 0.9% year-on-year to 448,725 installation control points, though the company stabilized connections with a 0.03% increase during September itself. Retail sales volumes are tracking 3.0% lower year-to-date, with weakness concentrated in agricultural and corporate segments that saw volume declines of 10.2% and 9.2% respectively. The company has made progress migrating customers onto its Kraken platform, with over 245,000 customers now live on the new system, representing more than half the customer base. This operational improvement should eventually translate to cost benefits as the migration continues.
Meridian’s management team has held its capital expenditure guidance unchanged at $370 million to $410 million for the 2027 financial year, with stay-in-business capex of $110 million to $120 million and growth capex of $220 million to $250 million. The decision to maintain guidance despite the sharp price decline suggests confidence that current conditions are cyclical rather than structural. Chief Executive Mike Roan highlighted that strong inflows and above-average storage enabled the record generation, a tone that acknowledges the seasonal nature of hydro dynamics.
Investors should monitor how forward electricity prices track as the New Zealand market processes the implications of the strong inflow year. The company has noted that 2030 futures began trading in early October at levels slightly higher than 2029 contracts, suggesting some expectation of price recovery over the medium term. The upcoming call with management will likely provide additional commentary on the durability of current conditions and confidence in the 2027 capex program. This announcement is classified as price sensitive and material to the ASX.
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About Meridian Energy Limited (ASX: MEZ)
Meridian Energy Limited generates and retails electricity to residential, business, and industrial customers in New Zealand, Australia, and the United Kingdom. The company operates 7 hydro stations, 8 wind farms, a 100MW battery energy storage system, and a grid-scale solar array, selling electricity under the Meridian Energy and Powershop brands.
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