Gentailer profits: It’s not the players, it’s the game
01 October 2026
New Zealand’s four big power companies reported combined statutory net profits of $959 million for their latest financial years, equivalent to roughly $500 for every household in the country.
Whilst power-company net profit can fluctuate sharply because of hydro conditions, asset revaluations, and non-cash movements in electricity derivatives the current year profit level is pretty much an annual occurrence in recent years. Last year the combined profit dipped to $49 million, but that sharp drop was a one off; overall profits have now returned to the same levels as seen from 2022 to 2024 period.
Ultimately, net profit earned by the big four totalled $4.2 billion over the last five years, an average of $832 million annually, underlining the considerable earnings power of the sector. Meanwhile, after household power bills rose about 20% over two years, prices are increasing again.
The gentailers are pointing to last year’s renewable ‘boom’ and the terawatt-hours of potential new renewable generation in their pipelines, as evidence that the market is working. But there is an important distinction missing from that story.
A pipeline is not the same thing as a build.
So let’s dig deeper - is building more really in their best interests, and is that aligned with what’s best for New Zealand?
Wholesale electricity prices have been well above the price needed to make a reasonable return on investment since 2018.
Yet the market was extremely quiet until a swift catch up kicked off in 2024, with new renewable projects coming online at pace. That’s good news.
This new generation isn’t necessarily creating a large surplus. It is replacing retired power plants, while electricity demand should grow substantially as we electrify. Transpower, the grid operator, has already warned that even if every committed and consented project is built on time, as a country we’ll still run dangerously low on electricity during a drought such as winter 2024.
A pipeline is a list of possibilities. Consent means a project is allowed to proceed. But only a Final Investment Decision (FID) is a genuine commitment to build generation that will deliver electrons that will flow through to the grid and onto power bills.
The recent annual results announcements made one thing clear - despite the terawatt-hours in the pipelines, the commercial incentives for scarcity remain as strong as ever.
The numbers sounded impressive. Mercury has a pipeline of 17 TWh of potential projects. Contact has 11 TWh. Meridian has 6 TWh. There is no shortage of options.
New Zealand already has more than 2.6 GW of consented generation and battery projects that have yet to start construction – equivalent to around 23% of the country’s current generation capacity. Gentailers are actively pursuing consents that would double that to over 5 GW, including 1.1 GW through the Fast-track process.
But of the existing 2.6 GW, just 14% has reached Final Investment Decision - the point at which a company has formally committed to proceeding with a project.
Gentailers have signalled other investment decisions are pending during the next financial year. But the warning signs are there. Mercury’s investor presentation describes freedom to defer or hold. Contact describes their pipeline as optionality to build as demand materialises. This is not the language of a construction boom.
Why? Because their overarching commercial incentive is to ensure returns across existing generation portfolios are protected from the lower prices that new supply brings. And it’s deferral to achieve scarcity, not build to achieve abundance, that will bring high prices back to the market.
Genesis, Mercury, Meridian and Contact own most of New Zealand's existing hydro, thermal and geothermal generation – largely built generations ago and paid off. As wholesale prices rose and older thermal stations were wound down, the system needed significant new generation, but investment didn't keep pace and dividends kept flowing.
The high prices since 2018 should have seen a flood of new capital into our electricity market. But to get financing, independent developers need access to “firming” when the wind isn't blowing or the sun isn't shining. With around 95% of hydro and thermal firming generation in gentailer hands, access to that firming is largely controlled by companies whose existing generation revenues can be negatively impacted by new supply.
And this is the central problem.
The issue isn’t whether a gentailer should get a reasonable return on a new wind or solar farm. The issue is that any new build that comes to market puts downward pressure on wholesale prices, potentially reducing returns across the company’s existing generation portfolio.
In a truly competitive market, the scarcity that drives high prices should create a powerful incentive for new players who can deliver electricity at lower prices to build rapidly to claim those returns.
Affordable electricity would encourage industry to electrify and stimulate economic growth. We wouldn’t be waiting, as Contact’s investor presentation puts it, for demand to “materialise”. We’d be out there in the world chasing hard for it because when energy is consumed, economies are productive.
We want a market where the commercial incentive is to build as much as possible, as fast as possible, to make energy as affordable as possible - growing the size of the electricity market, growing revenues for all participants and crucially, growing our economy.
We believe two reforms can change the dominant incentive from ‘protect scarcity’ to ‘build more’. Operational separation of gentailers to stimulate competition, and Government backing for long-term energy supply agreements to break down the firming barrier for independent generators. Both reforms are proven and have cross-sector support.
The most powerful action consumers can take right now is with their feet.
An online price comparison could save you hundreds per year. You hold the players to account, and we’ll hold the game to account.
This article was originally written by our CEO Huia Burt, and published on nzherald.co.nz.
