Meridian commits $440M–$510M to breathe new life into a 92-year-old icon
Meridian Energy has committed to a $440 million to $510 million investment over the next ten years to upgrade its Waitaki Power Station, a 92-year-old hydro asset in New Zealand. Scheduled for completion by 2036, the project will increase the station’s available capacity from 105MW to 120MW, giving the repowered station an expected useful life of 50 years.
The station currently generates enough electricity to power approximately 51,000 average New Zealand homes. This upgrade represents a generational reinvestment in a piece of national energy infrastructure that has been operating since 1935.
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What the upgrade actually involves
The Waitaki project represents Meridian’s first full mechanical and electrical refurbishment of a hydro power station. The scope of works is comprehensive, covering the station’s generating units through to its connection and balance-of-plant systems.
Key physical works include:
- All seven turbines and generators replaced
- All 21 headgates and associated equipment replaced
- Balance-of-plant systems upgraded
- Connection assets upgraded
Two main contractors have been appointed. Voith Hydro, an international hydro generation specialist, will supply the turbines and generators. New Zealand-owned Gentec Solutions will cover the headgates and associated works.
Critically, the station will continue to generate electricity throughout the project. Sequential unit outages have been planned to minimise the impact on generation output. The upgrade is also expected to improve seismic resilience and operational reliability, as noted by Meridian’s Chief Executive.
The investment case — returns, capex structure and dividend treatment
The headline return metric is a projected internal rate of return (IRR) of 15% to 20%, which Meridian states is higher than the alternative of further deferral or decommissioning.
The total investment of $440M to $510M (nominal) spans ten years and is split across two capex classifications. Repowering capital expenditure, a new category, accounts for 85% of the total investment. Growth capital expenditure accounts for the remaining 15%.
| Capex Category | Share of Investment | FY27 Guidance ($M) | Treatment in OFCF | Dividend Policy Treatment |
|---|---|---|---|---|
| Growth capex | 15% | $220M–$250M (total FY27 growth) | Excluded | Excluded |
| Repowering capex | 85% | $40M | Excluded as incurred | Added back proportionately over 50-year station life |
| Stay-in-business capex | — | $110M–$120M | — | — |
Meridian’s total capital expenditure guidance for the 2027 financial year remains unchanged at $370M to $410M.
Meridian’s A$400 million Green Notes Issue, completed in March 2026 at a 6.214% fixed coupon and significantly oversubscribed, provides a capital markets read on how institutional investors are pricing Meridian’s renewable energy pipeline, including long-duration infrastructure commitments of the kind the Waitaki upgrade represents.
What is “repowering capex” and why does it matter for Meridian investors?
Repowering capital expenditure is a new category Meridian has introduced specifically for the Waitaki upgrade. It sits between stay-in-business capital expenditure (routine maintenance to keep existing assets running) and pure growth capital expenditure (spending on new capacity).
The key accounting treatment works in two stages. As the repowering capex is incurred during the build phase, it is excluded from the operating free cash flow (OFCF) calculation used to determine dividends. This means near-term dividend calculations are not dragged lower by the full weight of the spend as it occurs. Over time, the same capex is added back into OFCF proportionately across the 50-year expected useful life of the repowered station, allowing the investment’s returns to flow through to dividends across the asset’s life.
Think of it this way: rather than charging the entire renovation cost against one year’s household budget, the cost is spread across the decades the renovation will benefit the household. For investors, the practical implication is that an OFCF dip during the construction phase should not be read as a deterioration in Meridian’s underlying earnings quality — it reflects the timing treatment of a long-duration asset investment.
New Zealand’s energy transition and Meridian’s broader capacity push
The Waitaki upgrade sits within a broader context of New Zealand’s shift away from thermal fuels and the rising share of intermittent wind and solar generation on the national grid. Firm, dispatchable hydro generation plays an increasingly important role in balancing a system with growing renewable variability.
Mike Roan, Chief Executive, Meridian Energy
“Hydro generation has an even more vital role to play in our energy system as New Zealand transitions away from thermal fuels and increases intermittent wind and solar generation. More system firming is essential and, as part of the Waitaki Power Scheme, the station benefits from the reliability of New Zealand’s biggest battery, Lake Pūkaki.”
Meridian has increased the operating capacity of its existing hydro assets by 75MW over the last two years and expects further incremental improvements in the coming years. The Waitaki upgrade complements a broader programme of work across the wider Waitaki Power Scheme to improve availability and flexible generation output.
The Waitaki Power Scheme reconsenting, confirmed by the Environment Court in mid-2026, locked in 1,553 MW of hydro capacity through to the 2060s, removing regulatory overhang and giving Meridian the certainty needed to commit to a decade-long upgrade programme at the station.
The main contract works carry an estimated emissions footprint of 10,000 tCO₂e.
The station itself carries deep historical significance. Built with manual labour as a Depression-era make-work project, it has been generating electricity for over nine decades. Its history is outlined below:
- 1930s: Construction begins as a Depression-era make-work project using manual labour
- 1935: First two 15MW generators come online, meeting almost half of the South Island’s electricity needs at the time
- 1940–1949: Three more generators installed, bringing total capacity to 75MW
- 1952–1954: Final two units constructed and powerhouse extended to accommodate them
- 2026: Full mechanical and electrical refurbishment committed, securing an expected useful life of 50 years for the station
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