Earnings Plunge Poses Questions for Mercury’s Renewable Ambitions

Challenging Year for Earnings

Mercury NZ Limited has reported a significant earnings decline for the financial year ended 30 June 2025, with net profit after tax plunging to just $1 million from $290 million the previous year. This steep drop reflects a 10% fall in EBITDAF to $786 million, driven largely by adverse hydro and wind generation conditions and elevated electricity prices during peak demand periods.

Hydro generation, a key pillar of Mercury's renewable portfolio, was down 17% to 3,410 GWh; the fourth lowest output for the Waikato scheme since 1980. Wind generation also dipped by 6%, while geothermal output fell slightly due to planned maintenance outages. These factors combined to reduce total electricity generation by 10% year-on-year.

Investing Heavily in New Renewable Capacity

Despite the earnings pressure, Mercury is aggressively advancing its renewable build program. The company has invested over $1 billion across three major projects currently under construction, the Ngā Tamariki Geothermal Station expansion, and the Kaiwera Downs 2 and Kaiwaikawe Wind Farms. These projects are on track in terms of schedule and budget, with plans to deliver 3.5 TWh of new renewable generation over the next five years.

Capital expenditure on growth projects surged by $193 million to $347 million in FY25, reflecting Mercury’s commitment to underpinning New Zealand’s energy future. Stay-in-business capital expenditure remained steady at $138 million, supporting ongoing maintenance and refurbishment efforts, including the near-completion of the Karāpiro Hydro Station upgrade.

Supporting Customers Amid Rising Costs

Mercury acknowledges the cost-of-living pressures facing New Zealand households and businesses, with electricity prices rising approximately 9.7% on average, largely due to regulated network and transmission cost increases. The company has implemented measures to assist customers experiencing hardship and continues to expand its retail customer base, which grew 5% to 906,000 connections, with 38% purchasing multiple products.

In the commercial sector, Mercury secured long-term contracts with major industrial customers including NZ Aluminium Smelters, Fonterra, and Visy, reinforcing its position as a key energy partner.

Strategic Refresh and Future Outlook

Mercury refreshed its strategy during the year, focusing on delivering more generation, transforming earnings, capturing growth from the energy transition, rebuilding sector confidence, and fostering a high-performing culture. The company also restructured its executive leadership team to align with these priorities.

Looking ahead, Mercury has set ambitious FY26 guidance with EBITDAF expected to reach $1 billion, supported by approximately $600 million in growth capital expenditure. The board declared a fully imputed final dividend of 14.4 cents per share, bringing the total ordinary dividend to 24.0 cents per share; a 3% increase on the prior year; with FY26 dividends guided to rise a further 4%.

Mercury’s commitment to renewable energy development and customer support positions it as a pivotal player in New Zealand’s energy transition, even as it navigates short-term market and environmental challenges.