Meridian Energy's June 2026 report reveals record-high hydro inflows and storage, robust generation growth, and rising retail sales, offset by sharply lower wholesale prices and rising costs.
- June hydro inflows hit 187% of historical average
- Retail sales volumes up 6.4% year-on-year in June
- Generation volumes rise 7.9% with 63.8% lower average prices
- National hydro storage climbs to 136% of average by mid-July
- Electricity futures prices for 2027-2029 down around 15%
Record Hydro Inflows and Storage Boost Supply
Meridian Energy (NZX:MEL) reported a surge in hydro inflows for June 2026, with monthly total inflows reaching 187% of the historical average, the highest financial year inflows since 1998. This strong water flow has pushed national hydro storage to 136% of average by mid-July, with the South Island storage climbing to 139% while the North Island dipped slightly to 126% of average. Meridian’s flagship Waitaki catchment water storage ended June at 131% of historical averages, up 51% from the same time last year, underscoring a well-managed water resource amid the warmest June on record.
Generation Rises but Prices Plunge
Higher water inflows translated into a 7.9% increase in Meridian's generation volumes for June compared to last year, supported by both hydro and wind output. However, the average price received for generation plummeted 63.8% year-on-year, reflecting a broader market trend of declining wholesale electricity prices. Futures prices for 2027 through 2029 have dropped approximately 15%, driven by the commissioning of new renewable capacity. This price pressure is already filtering through to commercial customers, with contracts being renegotiated at lower rates.
Retail Sales and Customer Growth Strengthen
Despite softer wholesale prices, Meridian's retail business showed robust growth. Retail sales volumes in June increased 6.4% year-on-year, with residential segment sales up 16.4% and large business sales rising 9.2%. Customer connections grew 12.3% over the past year, although June itself saw a slight 0.3% decline. This expansion in retail demand partly offsets the margin pressure from falling generation prices.
Costs and Capital Expenditure Climb
Operating costs rose notably in the fourth quarter, with total operating expenses up 21.5% and capital expenditure surging 64.1% compared to the prior year. Investment capital expenditure accounted for a significant portion of this increase, reflecting ongoing commitments to maintain and expand Meridian’s asset base. This cost inflation contrasts with the declining revenue per megawatt hour from generation, presenting a margin squeeze challenge.
Market Demand and Weather Patterns
National electricity demand was broadly flat in June, down 0.1% compared to the prior year, but increased 1.7% in the fourth quarter. Excluding the New Zealand Aluminium Smelters Ltd (NZAS), demand was 1.1% lower in June and 0.6% higher in Q4, reflecting variations in industrial consumption and demand response agreements. The country experienced a mild, dry, and warmer-than-average autumn, with localized rainfall events and a cyclone impacting parts of the North Island. These weather conditions have influenced both demand patterns and hydro catchment inflows.
Bottom Line?
Meridian’s strong hydro inflows and retail growth cushion the impact of falling wholesale prices, but rising costs and capital spend pose challenges to margins.
Questions in the middle?
- How will continued declines in electricity futures prices affect Meridian’s revenue and profitability in 2027 and beyond?
- Can Meridian sustain retail sales growth amid intensifying competition and lower wholesale price pass-through?
- What impact will rising operating and capital costs have on Meridian’s financial flexibility and investment plans?