Mercury Faces Price Pressure Despite Strong Hydro; OEC5 Commissioning Key to Growth

Strong Hydro Inflows Temper Electricity Prices

Mercury NZ Limited’s latest quarterly update reveals a period marked by exceptionally high national hydro inflows, reaching the 98th percentile. This abundance of water resources has translated into a significant 23% increase in hydro generation compared to the prior corresponding period, with 1,072 GWh produced. The elevated Taupō hydro storage levels have further bolstered the company’s generation capacity, enabling it to maintain lakes at high operating levels despite substantial hydro spill of approximately 345 GWh during the quarter.

The plentiful hydro supply has exerted downward pressure on wholesale electricity prices, with spot prices in Auckland averaging just $40 per megawatt-hour. Forward prices for the 2026 financial year have softened considerably to $135/MWh, reflecting market expectations of sustained strong hydro conditions.

Geothermal Expansion and Operational Highlights

While geothermal generation dipped by 9% due to planned maintenance at the Ngā Awa Pūrua plant, Mercury is on track to boost its geothermal output with the near completion of the Ngā Tamariki OEC5 expansion. Commissioning began in January, and once fully operational by the end of the third quarter, the new unit is expected to add 390 GWh annually and increase net output by 46 MW. This addition will diversify Mercury’s generation mix and enhance its renewable energy credentials.

Wind generation also saw a modest increase of 6%, contributing to the company’s overall renewable energy portfolio. Meanwhile, electricity demand rose by 3.1%, largely driven by the New Zealand Aluminium Smelter returning to normal operations after a period of curtailments, underscoring the interplay between industrial activity and energy consumption.

Customer Growth and Market Position

Mercury’s strategic focus on customer bundling has paid dividends, with a 10% increase in customers holding two or more products, now totaling 223,000 connections. This growth was supported by a 30,000 increase in telco and mobile connections, highlighting the company’s expanding footprint beyond traditional electricity services.

Overall, Mercury’s strong operational performance, combined with the commissioning of new generation capacity and a growing customer base, positions it well to navigate the evolving New Zealand energy market. The company’s ability to leverage high hydro inflows while managing generation mix and customer engagement will be key to sustaining its competitive edge.