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.
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.
