How Mercury’s AI and Rehab Project Could Reverse Hydro Declines
Mercury reports an 11% drop in FY25 total generation, with hydro output hitting its fourth lowest level since 1980. Yet, advances from the Karāpiro Hydro Rehabilitation and AI-driven Digital River platform lift hydro generation forecasts for FY26 and beyond.
- FY25 total generation down 11% to 7,906 GWh
- Hydro generation at 3,410 GWh, fourth lowest since 1980
- Karāpiro Hydro Rehabilitation project nearing completion adds 16.5 MW capacity
- Digital River AI platform enhances hydro operational efficiency
- FY26 average hydro generation guidance raised to 4,140 GWh
A Challenging Year for Hydro Generation
Mercury’s FY25 results reveal a notable decline in total electricity generation, falling 11% to 7,906 GWh compared to the prior corresponding period. The hydroelectric segment, a cornerstone of Mercury’s renewable portfolio, was particularly affected, delivering just 3,410 GWh; the fourth lowest output from the Waikato scheme since 1980. This shortfall was primarily driven by unusually low inflows in the Waikato catchment, registering at the 12th percentile, compounded by a below-average starting level in Lake Taupō.
Additional factors included reduced wind speeds that curtailed wind generation by 6%, and planned outages that trimmed geothermal output by 2%. These combined elements contributed to a challenging operating environment, with spot electricity prices in Auckland averaging $216/MWh during the quarter, reflecting the impact of hydrological conditions on market dynamics.
Turning the Tide with Technology and Infrastructure
Despite the setbacks, Mercury is positioning itself for a stronger future. The company’s Digital River platform, an AI-powered decision-making and simulation tool, has already demonstrated its value by optimizing hydro operations and achieving record efficiency levels in FY25. This digital innovation allows Mercury to better navigate complex hydrological scenarios, enhancing the value derived from its hydro assets.
Complementing this technological edge is the nearing completion of the Karāpiro Hydro Rehabilitation Project. This three-year initiative will conclude with the replacement of the third generating unit in September 2025, boosting the station’s capacity by 16.5 MW. The upgrade is expected to add approximately 32 GWh of additional generation annually, assuming average inflows, effectively increasing Mercury’s average annual hydro generation forecast by 62 GWh to 4,140 GWh.
Looking Ahead, Stability and Growth
Hydrological conditions improved towards the end of the quarter, with inflows rising to the 79th percentile, replenishing hydro storage and setting a healthier baseline for FY26. Forward electricity prices have eased to $179/MWh for FY26 and FY27 in Auckland, reflecting market adjustments to supply expectations.
Mercury’s strategic investments in both infrastructure and digital capabilities suggest a resilient outlook despite recent weather-related challenges. The company’s ability to leverage AI and complete critical rehabilitation projects could well position it to capitalize on future market opportunities and mitigate the volatility inherent in renewable generation.
Bottom Line?
Mercury’s blend of technology and infrastructure upgrades signals a promising rebound in hydro generation amid ongoing environmental uncertainties.
Questions in the middle?
- How will actual hydro inflows in FY26 compare to the improved forecasts?
- What measurable efficiency gains will Digital River deliver beyond qualitative improvements?
- Could further rehabilitation projects or technology investments accelerate Mercury’s growth?
