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Understanding NextEra Energy’s 3Q15 Profitability Metrics

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Operating income

NextEra Energy (NEE) reported operating income of $1.5 billion in 3Q15 compared to $1.2 billion in 3Q14. Florida Power and Light’s (or FPL) operating income rose to $855 million in 3Q15 compared to $834 million in 3Q14 due to lower fuel costs and marginally lower operations and maintenance expenses.

FPL’s fuel costs fell by $60 million, as the average Henry Hub natural gas spot price decreased in 3Q15 compared to 3Q14. The majority of FPL’s fleet is powered by natural gas. Operations and maintenance expenses and depreciation expenses were marginally lower.

NextEra Energy Resources (or NEER) reported a substantial uptick in operating income due to higher revenues because of the addition of new renewable capacity during or after 3Q14. Since renewable energy (TAN) facilities are cheap to operate, the increase resulted in higher operating income.

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Net income

FPL’s reported net income increased to $489 million, or $1.07 per share, in 3Q15. It was $462 million, or $1.05 per share, in 3Q14. New investments resulted in the higher regulatory capital base. Since utilities get a fixed rate of return on regulatory capital employed, the rise in capital base increased the EPS by $0.06 in 3Q15. The increase was partially offset by the $0.04 a share impact of share dilution.

NEER reported net income of $375 million, or $0.82 a share, in 3Q15 compared to $204 million, or $0.46 a share, during 3Q14. However, after deducting the non-recurring items, net income came in at $221 million, or $0.48 a share. NEER reported $158 million in gains on hedging activities, resulting in the deviation between GAAP (generally accepted accounting principles) and adjusted net income.

Overall, NEE reported net income of $879 million, or $1.93 per share, in 3Q15, compared to $660 million, or $1.50 per share, in 3Q14. While NEE’s EPS jumped, Exelon (EXC) saw a substantial drop in net income in 3Q15.

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