Meridian Energy slumped to a $452 million net loss in the June year, driven by a steep decline in its energy margins arising from two severe droughts.
The company said its cashflow fell to $318m in the year, down from $667m in the previous year.
The generator-retailer’s net loss compared with a $429m net profit a year earlier.
Earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) - the sector’s preferred measure - dropped to $611m from $905m a year earlier.
Meridian’s underlying net profit fell from $359m to $56m in 2025.
A key factor behind the results was a 23% decrease in energy margins - down from $1.276b to $982m, the company said.
The result was impacted by two severe droughts and $300m spent on hedge and “demand response” contracts to help maintain security of supply for New Zealand homes and businesses.
During the year, Meridian called on its demand response arrangement with aluminium smelter NZAS - the country’s biggest power user - resulting in the plant cutting production, allowing some breathing space for the national grid.
“We weathered a perfect storm,” chief executive Mike Roan said.
“The combination of historically low hydro inflows, extended periods of low wind, two major droughts and a dramatic decline in gas availability combined to make this a very challenging financial year.
“But the fundamentals of this business have been strengthened through sound investment and delivering on our strategy.”
Despite the challenges, there were some important wins.
“We secured five resource consents for new assets, invested $193m in building and maintaining generation plant, acquired two businesses, and undertook a strategic reset of the retail business while growing customer connections.”
Roan said Meridian had been putting New Zealand’s security of supply first, which had resulted in the financial hit.
Meridian’s company’s balance sheet is structured to underwrite major droughts.
The company declared a final ordinary dividend of 14.85 cents per share, bringing the total to 21.00 cents per share.
The board said it may review the level of dividends in the event of a severe drought in future years so the company can prudently manage cash flows.
In its review of the year, the droughts and domestic gas supply issues that shaped Meridian’s result also impacted wholesale and customer pricing, with increases in lines and transmission charges also key factors.
These issues combined to generate intense scrutiny of the industry and potential reforms through the Energy Competition Task Force and the Government’s Frontier Report.
The Government is expected to make an announcement on the Frontier report late next month.
“We would expect decision makers to focus any interventions on the core challenge driving costs into the sector, which is the rapid decline in the gas market,” Roan said.
Freeing up contingent storage at Lake Pūkaki was a vital step and Meridian’s application was going through a fast-track process.
Pūkaki holds more than 40% of the country’s total hydro storage and access to more of its water will reduce the impacts of future droughts on both supply and prices, Roan said.
Continuing to focus on reducing resource consenting timeframes will also greatly assist to improve security of supply more rapidly.
In the meantime, Meridian and the sector had taken steps to support security of supply for winter 2026 and beyond by supplementing gas as a peaking fuel.
Last month, Meridian, together with Contact, Mercury and Genesis, signed to support the operational resilience of Genesis’s coal and gas fired Huntly power station.
Looking ahead, Meridian said it expects to invest over $350m in new and existing assets during the 2026 financial year and a total of $2b over the next three years.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.