Why is this little-known ASX 200 electricity stock in the green today?

Investors are buying the stock today.

| More on:
a man dressed in a green superhero lycra outfit stands in a crouched pose with arms outstretched as if ready to spring into action with a blue sky and oil barrels lying in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Meridian Energy Ltd (ASX: MEZ), an often-overlooked ASX 200 electricity stock, is catching the eye of investors today.

The stock is currently swapping hands at $6.04 apiece, more than 3.6% higher on the day after posting its monthly operating update for July.

Despite reporting some challenging conditions in its monthly update, investors are still keenly buying the ASX 200 electricity stock. Let's take a look.

Created with Highcharts 11.4.3Meridian Energy PriceZoom1M3M6MYTD1Y5Y10YALL1 Aug 202315 Aug 2024Zoom ▾Sep '23Nov '23Jan '24Mar '24May '24Jul '24Oct '23Oct '23Jan '24Jan '24Apr '24Apr '24Jul '24Jul '24www.fool.com.au

ASX 200 electricity stock's monthly update

Meridian is the largest electricity producer in New Zealand, with around one-third of the market there. All of its hydroelectric electricity is generated as renewable energy.

In its July 2024 report, the ASX 200 electricity stock highlighted a drop in national hydro storage, which fell from 65% to just 45% of its historical average by mid-August.

This decline was particularly sharp in the South Island, where storage levels dipped to 44%. In the North Island, they reached 51% of the average.

Reductions were observed across the entire set of metrics, from capacity to generation. In fact, it says that July 2024 recorded the lowest inflows for that month since 2011.

Rising electricity demand

Despite the lower water storage levels, there was a silver lining. National electricity demand in July 2024 increased by 2.1% compared to July 2023.

This rise in demand has likely supported the ASX 200 electricity stock's price, helping offset the impact of reduced hydro inflows.

The company also noted that, over the last 12 months, demand has grown by 2.2% due to a steady need for electricity. As is usually the case, a bulk of this was driven by the weather:

July 2024 was mild and dry for much of the country, with much of the South Island recording extended dry spells.

On the retail side, Meridian saw a slight drop in overall sales volumes, down 2.8% from July 2023.

However, this was not across the board. Sales to residential customers edged up by 0.6%, while the small-medium business segment grew by 3.1%, and agriculture sales increased by 1.7%.

Foolish takeaway

While the drop in hydro storage and lower inflows present challenges for this ASX 200 electricity stock, the increase in New Zealand's electricity demand and retail sales appear to balance the debate.

Investors appear to be reacting to this mix of news, pushing the stock into the green.

The Meridian Energy share price has climbed 18.9% in the past 12 months.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Happy coal miner.
Share Gainers

Up 75% this week, why is this ASX All Ords stock rocketing again today?

Investors are piling into this ASX 300 stock on Wednesday. But why?

Read more »

Man pointing at a blue rising share price graph.
Share Gainers

Guess which ASX 300 stock just rocketed 43% on big news!

Investors are piling into this ASX 300 stock on Wednesday. But why?

Read more »

A male oil and gas mechanic wearing a white hardhat walks along a steel platform above a series of gas pipes in a gas plant
Energy Shares

4 reasons to buy Santos shares right now

A leading expert forecasts Santos shares and dividends are set to grow. But why?

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX 200 stock has rocketed 86% since April?

This sky rocketing ASX 200 stock continues to defy short sellers. But how?

Read more »

A miner in visibility gear and hard hat looks seriously at an iPad device in a field where oil mining equipment is visible in the background.
Energy Shares

4 ASX 200 energy shares making big moves today as OPEC's oil production set to surge

ASX energy shares, including Woodside and Santos, are making big moves today. But not all in the same direction.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Woodside share price charging higher on North West Shelf approval

Woodside has been working more than six years to gain an extension for its North West Shelf gas project.

Read more »

Gas and oil plant with a inspector in the background.
Energy Shares

Does Macquarie rate Origin Energy shares a buy, hold or sell?

The broker has given its verdict on the energy giant. Let's see what it is saying.

Read more »

An oil worker in front of a pumpjack using a tablet PC.
Energy Shares

Ord Minnett tips Woodside shares to rise 15%+

Market-beating returns could be on offer from this energy giant.

Read more »