Why Meridian Energy’s Hydro Storage Surge Could Reshape New Zealand’s Power Market

Hydro Storage and Inflows Defy Seasonal Norms

Meridian Energy’s latest monthly operating report for September 2025 highlights a remarkable rebound in New Zealand’s hydro storage levels. National hydro storage surged from 79% to 110% of the historical average by early October, with the North Island reaching an impressive 118% and the South Island 107%. This surge is underpinned by exceptionally strong inflows, with September’s total inflows hitting 181% of the historical average. The Waiau catchment, a critical water source for Meridian’s hydro assets, recorded inflows at 201% of average, while the Waitaki catchment’s water storage stood at 91% of average, supported by a notable increase in snow storage to 105%.

Rising Demand Amid Warm and Variable Weather

September 2025 was warmer than usual across most of New Zealand, with rainfall patterns showing a stark west-east divide, above average in the west and much drier in eastern regions. This climatic backdrop coincided with an 8.5% increase in national electricity demand compared to September 2024. The New Zealand Aluminium Smelters (NZAS) ramped up its average load to 571MW, a significant rise from 375MW the previous year, reflecting the end of a major demand response call. This uptick in demand was matched by a surge in Meridian’s retail sales volumes, which grew 18.5% year-on-year, led by a 32% increase in residential sales, including customers acquired through the Flick acquisition.

Generation and Pricing Dynamics

Meridian’s generation output rose 13.8% in September compared to the prior year, driven by higher hydro and wind generation. However, this increase in volume came alongside a sharp decline in average generation prices, which fell 56.9% year-to-date. This price drop reflects broader market trends, including decreased near-term electricity futures prices during the first quarter of the financial year. Despite lower prices, Meridian’s ability to generate more electricity positions it well to meet rising demand and capitalize on improved hydro conditions.

Operational Efficiency and Customer Growth

Operationally, Meridian has managed to reduce total operating costs by 5.5% and capital expenditure by 6% compared to the previous year, suggesting improved efficiency. Customer connections have expanded robustly, with a 21.2% increase year-on-year, supporting the growth in retail sales volumes across all segments, including small and medium businesses, large businesses, agriculture, and corporate clients. This broad-based growth underscores Meridian’s strengthening market position in New Zealand’s competitive electricity retail sector.

Looking Ahead – Weather and Market Signals

The Earth Sciences spring 2025 outlook indicates ongoing neutral El Niño conditions with a La Niña watch, forecasting warmer temperatures and variable rainfall, particularly normal to below normal rainfall in the South Island. These conditions could influence hydro inflows and storage levels in the coming months. Meanwhile, the completion of NZAS’s ramp-up from the previous demand response call adds a layer of demand stability. Investors will be watching how these factors, combined with Meridian’s operational momentum, translate into financial performance in upcoming quarterly results.