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Will NextEra Be Able to Maintain Its Revenue Growth in 4Q15?

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Jan. 19 2016, Updated 1:03 p.m. ET

Revenues

NextEra Energy (NEE) derives maximum revenues from its regulated operations. In 3Q15, regulated operations contributed nearly 67% to the total revenues. NEER (NextEra Energy Resources) looks after the unregulated business of NextEra. NEE’s heavy reliance on regulated operations offers stability to its cash flows. NextEra is aggressively investing to expand its regulated operations by adding to its current capacity.

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Revenue drivers

According to Wall Street analysts’ estimates, revenues in 4Q15 are expected to come at $4 billion. NextEra Energy reported revenues of $4.7 billion in the comparable quarter of the prior year. In 3Q15, the revenues of Florida Power and Light—a principal subsidiary of NextEra—rose by nearly $300 million. This rise was mainly due to a higher usage by customers and the addition of new customers. In 3Q15, the average electricity usage per customer rose by 1.2% compared to 3Q14. However, the average electricity usage per customer is falling every year after peaking in 2008.

In the third quarter of 2015, customer accounts also rose by 1.4% compared to the same period the year before. Favorable weather also contributed to greater revenues. Customer growth and increased electricity usage may continue to impact revenues positively in 4Q15 due to the improvement in economic conditions. This improvement includes more building permits, growing employment, and higher consumer spending.

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Given a strong focus on renewable capacity addition, operating revenues may rise in the medium to short term. The running costs per unit of energy for renewables (TAN)(PBW) are lower as compared to generation by fossil fuels, but setting up those plants involves heavy capital expenses. Utilities like Duke Energy (DUK) and Southern Company (SO) also actively invest to expand their renewables (TAN) generation capacity.

NextEra Energy Resources

NEER looks after the competitive business of NextEra Energy. 2015 was a strong year for NEER as revenues in 3Q15 rose by ~$300 million as compared to 3Q14. This rise was mainly triggered due to growth in the gas trading business and more customer demand. NEER also reported unrealized hedging gains in the same period.

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