Falling Prices Challenge Meridian Energy Despite Record Hydro Inflows

Record Hydro Storage Boosts Meridian's Generation Capacity

Meridian Energy's October 2025 monthly operating report highlights a remarkable surge in hydro storage, with national levels reaching 143% of the historical average by early November. The South Island's hydro storage climbed to 148%, while the North Island's rose to 121%, driven by inflows more than double the norm. The Waiau catchment inflows were particularly strong at 218% of average, and the Waitaki catchment's water storage stood at 151% of its historical average. Snow storage also increased, supporting sustained hydro generation capacity.

Rising Demand and Retail Sales Reflect Economic Activity

Electricity demand across New Zealand rose 6.6% compared to October 2024, with Meridian's retail sales volumes up 14.6% year-on-year. Residential sales surged by nearly 30%, bolstered by the inclusion of Flick customers, while agriculture and business segments also saw solid growth. The agricultural sector experienced its highest October volumes in five years, driven by dry, windy conditions that increased irrigation needs. Customer connections grew modestly by 0.2% during the month, marking a 20.7% increase over the past year.

Generation and Pricing Dynamics Shift

Meridian's electricity generation rose 17.4% compared to last October, reflecting the abundant hydro inflows and favorable wind conditions. Despite this increase in output, the average price Meridian received for its generation dropped by 43.9%, while the cost to supply customers fell by 40.3%. This divergence suggests a market environment of lower wholesale prices, even as demand and production volumes climb. Notably, New Zealand Aluminium Smelters Ltd (NZAS) increased its average load to 567MW, up from 417MW a year earlier, indicating stronger industrial consumption.

Market and Operational Implications

Electricity futures prices on the ASX saw slight declines during October, despite the strong fundamentals in hydro storage and generation. This could reflect market expectations of continued lower prices or other external factors influencing trader sentiment. Meridian's operating costs and capital expenditures remain steady, with no major changes reported in contracts or leadership. The company continues to provide weekly lake storage updates, underscoring transparency in its resource management.

Looking Ahead

Meridian Energy's strong operational metrics position it well for the coming months, but the sharp drop in prices received for generation raises questions about margin pressures. The interplay between abundant hydro resources and market pricing will be critical to watch as the company navigates evolving demand patterns and competitive dynamics.