Meridian Energy Boosts Hydro Storage to 125% Amid Dry May and Retail Surge

Hydro Storage Surges Despite Dry Conditions

Meridian Energy (NZX:MEL) closed May 2026 with national hydro storage levels climbing from 119% to 125% of the historical average by 8 June, a remarkable feat given May was a record dry month across many New Zealand regions. The South Island storage rose to 120% of average, while the North Island’s storage eased to 160% of average. CEO Mike Roan highlighted that consistent inflows and prudent management of southern hydro lakes have mitigated significant drought risk heading into winter.

Although May’s monthly total inflows were only 82% of the historical average, the financial year to date inflows stand at 118% of average, marking the highest since 1998. Notably, Meridian’s Waitaki catchment water storage finished May at 106% of average, while the Waiau catchment lagged at 48% of average. This divergence underscores the company’s geographic water resource challenges.

Electricity Demand and Retail Sales Gain Momentum

Electricity demand in May 2026 rose 1.7% compared to the same month last year, with a 0.6% increase when excluding the New Zealand Aluminium Smelters Ltd (NZAS) load. NZAS itself increased its average load to 576MW from 523MW a year earlier, following a previous demand response agreement that reduced load by 50MW between March and August 2025.

Meridian’s retail sales volumes expanded 7.8% year-on-year, with residential segment sales surging 20.4%. Other segments also posted gains: small medium business up 6.7%, large business 8.3%, agriculture 9.7%, and corporate 1.2%. Customer connections grew by 14.3% over the past year, though there was a modest 0.8% dip in May alone.

Generation Rises While Prices Plummet

Hydro generation in May was 12.0% higher than May 2025, reflecting the strong water storage and inflows. Wind generation, however, was lower, contributing to a total generation increase of 12%. Despite this, the average price Meridian received for its generation plunged 61.7% year-on-year. Similarly, the average price paid to supply customers dropped by 62.6%. This sharp price decline aligns with ongoing falls in ASX electricity futures prices, which have dropped over 20% since February 2026 due to committed new generation projects entering the market.

Hedging volumes remained steady around 421 GWh in May, with hedging costs averaging $185.5/MWh. The company’s capital expenditure increased, with May’s total capex at $28 million, up from $11 million in April, reflecting ongoing investments in both maintenance and growth.

Operational Resilience Amid Market Shifts

Meridian’s ability to maintain robust hydro storage levels amid a dry month and rising electricity demand highlights effective resource management. The company’s retail business continues to expand, contributing to solid volume growth despite a challenging pricing environment. However, the steep fall in average generation prices poses questions about margin pressures and future revenue streams.

Given the recent draft approval allowing Meridian greater access to Lake Pūkaki’s hydro storage contingent reserves, the company may have additional flexibility to navigate water resource constraints this winter, though final decisions remain pending. This operational backdrop sets the stage for close monitoring of how Meridian balances generation volumes, pricing, and capital investment in the months ahead.