Power profits vs price hikes: Why bumper $1.85b gentailer results risk a political break-up
Wednesday, 25 February 2026
ANALYSIS: Meridian chief executive Mike Roan may feel the electricity market is functioning well, as he boldly announced to the NZX on Wednesday.
But after a year in which average household power prices jumped 12.2%, consumers could be forgiven for thinking differently.
Meridian, Contact, Mercury and Genesis Energy have all now reported their financial results for the six months to the end of December, and they tell a fairly familiar story.
Their combined operating profits were up 42% to $1.85 billion, roughly in line with analysts’ forecasts. Their combined dividend payout to shareholders also rose, by 10% to $551 million. Meanwhile, the total sum they invested in so-called “growth capital expenditure” — new power plants, for example — was unchanged from the same period last year at $497m.
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All the companies are to greater or lesser extents talking up their investment intentions, with Contact and Genesis planning to raise $925m from investors for new renewable projects.
But the sum the two firms are raising from shareholders needs to be kept in perspective. It is less than the amount the four firms are likely to pay out in dividends over the course of the year.
Contact and Genesis are essentially taking money from investors with one hand, while planning to give it back to them over the course of a couple of years with the other.
With the country’s hydro lakes currently fuller than they are in nine out of 10 years, the favourable hydrological conditions that contributed to the power firms’ latest results look set to continue into autumn at least.
That means there is every reason to expect the combined operating profits of the big four gentailers for the full year should top $3.5b, as analysts have also been forecasting, with the firms reporting those bumper profits in August.
A large proportion — but not all — of the power firms’ net profits do flow back to Kiwis through the 51% stakes the Government holds in Meridian, Mercury and Genesis, KiwiSaver investments and the like.
But electricity companies may be on a sticky wicket persuading consumers that the power price rises of the past year have proved necessary or justified.
NZ First deputy leader Shane Jones is clearly hoping to extract a political price, having promised that the pricing decisions of the electricity gentailers would “represent about 99%” of his election campaign and that NZ First would campaign on breaking them up.
If that resonates with voters in November, the question may be the extent to which the major parties feel motivated to help protect the gentailers come coalition negotiation time.
The Government’s commentary on the power market — including on its own decision to pave the way for imports of LNG — is probably starting to have the effect of encouraging consumers to expect an actual reduction in household power prices.
Commenting on the power companies’ latest profits, Energy Ministry Simon Watts noted they were down to high inflows into the hydro lakes which had helped them avoid the use of “expensive coal and gas”.
Watts noted the price of buying electricity on the futures market for use in 2028 and 2029 had slipped over the past week, which he linked to the Government’s LNG announcement.
“This is a strong signal that the market is responding as expected and positive for households and businesses,” he said.
Most importantly, he told The Post: “We expect the reduction in wholesale prices that we are seeing to be passed onto consumers now that inflation has also fallen significantly.”
Labour energy spokesperson Megan Woods will of course be turning the screws from the Opposition benches.
She described the gentailers’ profit jump as “a slap in the face for families who can’t turn the power on this winter”.
“The Government’s failure to do anything to fix the electricity market has allowed this to happen.”
There is little sign the gentailers currently envisage lowering their retail prices in the months ahead.
But if they don’t, they do risk this year’s profits coming at a bigger long-term cost.