Meridian Energy's Profit Just Doubled — Can NZ's Biggest Power Generator Keep It Going?
When It Rains, Meridian Profits
Meridian Energy (NZX: MEL) just posted one of the most impressive half-year results on the NZX. First-half EBITDA doubled to $506 million NZD, driven by something you can't manufacture or predict with certainty: rain.
As New Zealand's largest electricity generator — producing 100% renewable energy primarily from hydroelectric dams in the South Island — Meridian's fortunes are literally tied to the weather. And the weather in late 2025 was very, very good.
The Numbers
Meridian's half-year performance was exceptional, but context matters:
- •H1 FY2026 EBITDA: $506 million NZD (doubled year-on-year)
- •Operating cash flows: $336 million NZD
- •Interim dividend: $0.064 per share (up 4%), 85% imputed
- •Annual dividend: ~$0.39 per share (trailing)
- •Dividend payout policy: 80-100% of operating free cash flow
The reason EBITDA doubled wasn't a revolutionary business transformation — it was that the prior period was hit by very dry conditions that crushed hydro generation. Near-record rainfall in the current period created the perfect comparison.
Why the Weather Matters So Much
Most investors don't think about rainfall when they buy a stock. But for Meridian, it's arguably the single most important variable:
- •Meridian operates large hydro schemes in the South Island, which depend on snowmelt and rainfall to fill their lakes
- •In dry years, Meridian has to either reduce generation or buy expensive wholesale electricity on the spot market
- •In wet years, generation is cheap and abundant, and Meridian can sell excess power at healthy margins
- •This creates huge earnings volatility that makes year-on-year comparisons misleading
The Green Premium
Meridian generates 100% renewable electricity from hydro and wind, which gives it a unique positioning:
- •As New Zealand and the world push for decarbonisation, Meridian's asset base becomes more valuable
- •The company is expanding its wind farm portfolio, adding generation that's less weather-dependent than hydro
- •Green energy credentials attract ESG-focused institutional investors, supporting the share price
- •Government policy tailwinds continue to favour renewable generators
The Bear Case
The market isn't getting carried away with the doubled EBITDA, and for good reason:
- •Electricity prices will normalise: The current elevated wholesale prices are partly a function of tight supply in recent years. As more renewable capacity comes online (including from competitors), prices are expected to fall to long-term averages
- •Weather reversion: Near-record rainfall won't happen every year. Next year's comparison will be tough
- •Regulated environment: The government can and does intervene in electricity markets when prices get too high, capping upside
- •Valuation is full: With 11 analysts covering the stock, Morningstar considers MEL fairly valued at current levels — not cheap, not expensive
The Dividend Story
For income investors, Meridian offers a reliable but modest dividend. The 4% increase in the interim payment to $0.064 per share shows management is confident but cautious. The 80-100% payout ratio policy means dividends track cash flows closely — great in wet years, potentially lower in dry ones.
At current prices, the trailing yield is reasonable for a utility stock, but don't expect rapid dividend growth. This is a steady-as-she-goes income stream, not a high-yield play.
The Bottom Line
Meridian Energy's doubled EBITDA is impressive but largely weather-driven, making it unreliable as a baseline for future expectations. The company's 100% renewable positioning and expanding wind portfolio provide genuine long-term tailwinds, but electricity prices are expected to moderate, which will weigh on earnings. At current valuations, Meridian is a solid utility hold — a dependable dividend payer with green credentials — but not a stock where you should expect fireworks. Buy it for stability and renewable exposure, not for growth.
*Disclaimer: This article is for educational and informational purposes only. It does not constitute financial advice. Stock data may not be real-time. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.*