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NextEra’s Growing Customer Base Offsets Its Revenue Headwinds

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Jan. 18 2016, Updated 1:35 p.m. ET

Revenue trends

Many utilities in the United States are facing revenue headwinds with subdued growth in demand for electricity. NextEra Energy (NEE) has posted nearly flat revenues in the last eight years. NextEra derives more than 70% of its total revenues from its regulated business operations.

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Florida Power and Light

Florida Power and Light is a principal subsidiary of NextEra Energy, which serves nearly 4.8 million customers. In the nine months ended September 30, 2015, Florida Light and Power experienced a 2.4% rise in average electricity usage per customer. NEE’s customer base also grew by 1.4% in the same period.

Both factors mainly led to the revenue rise of $140 million during the first nine months of 2015. Favorable weather conditions also contributed to increased revenues. Revenues were positively impacted in the same period due to the upgrade of Riviera Beach Power Plant, which came into service in April 2014.

NextEra Energy Resources

NextEra Energy Resources operates the unregulated business of NextEra Energy. This segment receives windfall gains when the demand for power is high. Over the last couple of quarters, the segment has witnessed increased revenues due to increased customer demand and growth in the gas trading business.

NEER also showed higher revenues in the first nine months of 2015 due to higher unrealized hedging gains. During the nine months ended September 30, 2015, NEER recorded unrealized hedging gains of $337 million against a loss of $367 million for a comparable period in 2014. 2015 revenues in the above figure represent revenues during the first nine months of 2015.

It is forecast by industry experts that unregulated utilities will be under additional stress this year. Falling power and gas prices will have negative impacts on their operating cash flows. Thus, many utilities (IDU) are reducing their unregulated operations.

Duke Energy (DUK), Southern Company (SO), and PPL (PPL) are increasing their exposures to regulated segments to provide more stability to revenues and cash flows.

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