Meridian Energy (ASX:MEZ) reported a stronger set of interim results for the six months ended 31 December 2025, supported by favorable hydro and wind conditions, customer growth, and what management described as a return to “more normal” wholesale market settings compared with the prior year.
Chief Executive Mike Roan said the period benefited from heavy rainfall in the Southern Alps through spring and summer and strong wind conditions, while the retail business continued to grow even as it transitioned customers onto a new technology platform. Chief Financial Officer Mandy Simpson said the company is now “bouncing back from the unusual result last year,” and framed the performance as a restoration of Meridian’s growth trajectory.
Financial performance and dividend
Simpson noted gross operating cash flow was NZD 85 million lower than EBITDAF, attributing the difference mainly to timing between derivative earnings and cash settlements (expected to “wash through” by year-end) and a payment under financial commitments associated with the Huntly Strategic Energy Reserve.
With earnings returning to a more normal pattern, Meridian lifted its interim ordinary dividend by 4%, from NZD 0.0615 per share to NZD 0.0640 per share. The dividend will be 85% imputed and paid on 24 March, with the Dividend Reinvestment Plan applying at a 2% discount to the volume-weighted average price from 5 March to 11 March. Asked about future imputation levels, Simpson said the 85% level “seems to be” what the company expects going forward.
Operational drivers: generation, pricing, and retail growth
Management repeatedly pointed to an “abundant fuel supply” as a key driver. Simpson said the half included record wind output and the second highest hydro inflows on record. Generation volumes increased 14% versus the prior comparable period to 892 GWh. She said a dry July and August was followed by a record wet stretch, described as the wettest September to December on record, which extended into January.
Average generation prices fell sharply alongside high hydro storage levels, with Simpson saying average generation prices were down more than 50% year over year. She also highlighted January as an extreme example, when Meridian cleared an average generation price of NZD 1 per MWh, while wet conditions also reduced irrigation volumes. Despite that, she described January as “still a very solid” result due to performance across the broader retail sales book.
On the retail side, Simpson said retail sales increased by NZD 133 million, with about two-thirds of that lift driven by volume (NZD 84 million). Retail sales volumes rose 12%, including onboarding ex-Flick customers, while agri volumes were up 11%. Mass market volume increased 16% versus the first half of FY2025, and a 10% higher net average price across mass market customers drove NZD 117 million of additional revenue. Customer supply costs fell significantly due to lower spot prices, despite higher volumes.
Simpson said operating expenses rose 3%, reflecting contractor support for the Kraken implementation and Meridian’s DigiGEN program. She also noted dual system operating costs for Kraken and Flux are expected through the end of calendar 2026 and “potentially into 2027.” Increased wind component costs reflected investment aimed at lifting wind farm availability, which she said improved from less than 90% in May 2025 to over 92% by December.
Capital spending, balance sheet, and funding
Meridian reiterated its full-year operating cash flow guidance of NZD 311 million to NZD 316 million, with Simpson saying the latest forecast sat at the higher end of the range. Full-year CapEx guidance was unchanged at NZD 330 million to NZD 360 million, with spend expected to be materially higher in the second half after a lower first half.
First-half CapEx totaled NZD 86 million, including NZD 53 million of growth CapEx, which covered the start of construction at the Ruak?k? Solar Farm and Kraken implementation. “Stay in business” CapEx included work on Benmore penstocks, transformer replacements at Manapouri, and generation control system replacement.
At period end, total borrowings were NZD 1.9 billion and net debt was NZD 1.7 billion. Simpson said Meridian simplified funding by moving from multiple bilateral facilities to a NZD 1 billion committed syndicated bank facility. The company also issued NZD 350 million of 6.5-year fixed-rate green bonds in September. Net debt to EBITDAF was 1.9x at December, down from 2.5x in June.
In Q&A, Roan said Meridian does not foresee capital raising to fund its current development profile, and Simpson added the investments outlined are considered “affordable” through the debt capital markets, with equity raising only potentially considered if the company pursued additional investment beyond the current plan.
Investment pipeline and system affordability
Roan emphasized growth as central to Meridian’s strategy and said the company expects investment decisions over the next 12 months for Mt Munro, Te Rere Hau, and Te Rahui Solar Farm Stage Two. He said Meridian is preparing to spend upwards of NZD 1.2 billion on upcoming investments, which he said would add 1.3 TWh of renewable electricity to New Zealand’s system once completed.
He also discussed projects under construction, including Ruak?k? as an integrated energy park combining a 130 MW solar farm with a 100 MW / 200 MWh battery, sharing a transformer to improve economics. On Te Rahui, he said conversations with joint venture partner Nova have started regarding stage two, but it is “too early” to provide certainty, though he said stage two economics appear stronger because infrastructure from stage one can be leveraged.
Te Rere Hau remains delayed, with Roan saying the final investment decision is being held back by the need to secure consent for an air waste facility at Marima Peak. He called the site “magnificent” and said it is expected to become New Zealand’s most productive wind farm when complete. Roan also highlighted that Meridian has added 542 GWh of new generation since 2024, has 702 GWh under construction, and anticipates committing to “all consented projects” totaling just over 1,300 GWh within the next 12 months.
Roan framed the build-out as a pathway to lower power prices, while cautioning that lines and transmission costs—regulated and approved by the Commerce Commission—are a major contributor to bill increases and are likely to continue flowing through for at least the next three years. He said Meridian aims to bring the energy portion of electricity price increases back to or below inflation by 2027 or 2028, though doing so for total bills is “unlikely” given the magnitude of network charge increases.
Roan said Meridian supports government objectives to improve security and lower prices, including in relation to the government’s LNG announcement, but said the company is awaiting project details and sees “no silver bullet.” He reiterated Meridian’s focus on renewables and hydro advantages to reduce dry-year risk.
Hydro storage, spill, and contingent storage
Simpson said high inflows led to spill events, particularly at Manapouri and Pukaki, to maintain consent and legal conditions. She argued spill underscores the potential benefit of more efficient use of hydro storage, stating that a one-meter higher operating range at Pukaki is “entirely possible” from an engineering perspective and would have more than halved 521 GWh of spill during the most recent event.
Roan said progress on contingent storage has been more difficult than expected, despite broad agreement following the Frontier report that more firming solutions are needed. He argued contingent storage is the only option that could immediately reduce wholesale prices “at the stroke of a pen,” while acknowledging system security settings and neighboring asset operability must be managed. Roan said Meridian estimates the annual benefit to its shareholders as marginal but the benefit to consumers at around NZD 400 million per year, and expressed hope consumers could benefit by July through the fast-track process.
Looking longer term, Roan said Meridian plans to seek fast-track referral for the Waiinu Energy Park and the Western Bay Solar Farm, which would not produce electricity until 2030 or 2031. He also said a final investment decision on a Waitaki Power Station upgrade is likely in the second half of 2026, while noting details—including expected generation uplift—were still being finalized.
About Meridian Energy (ASX:MEZ)
Meridian Energy Limited engages in the generation, trading, and retailing of electricity to residential, business, and industrial customers in New Zealand, Australia, and the United Kingdom. It generates electricity through 7 hydro stations that has a capacity of 2,353 MW; 5 wind farms that has a capacity of 416 MW; and grid-scale solar array, as well as offers solar installation services. It sells electricity under the Meridian Energy and Powershop brands. The company was formerly known as Hydro Energy Limited.
