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Will NextEra Energy Keep Up Its Revenue Growth?

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NextEra Energy’s revenue

US utilities have been facing flattish electricity demand growth for the last decade or so. More energy efficiency initiatives might make the situation even worse for them. Lower electricity consumption per customer squeezed utilities’ margins and flattened their revenue growth. NextEra Energy (NEE), however, has managed to grow its top line in the last few years.

NEE revenue

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Customer base growth

NextEra Energy has been very aggressive in expanding its customer base in the last few years, which positively impacted its revenues. Florida Power and Light (or FPL), NextEra Energy’s principal utility in Florida, expanded its customer base 1.5% in 2016 year-over-year. FPL’s customer addition rate has been much higher than the industry average of around 1%.

Florida is the third most populous state in the US. Its population growth is also much higher than the national average, which naturally helps expand FPL’s customer base. Also, in terms of employment and consumer sentiment, Florida’s economy is better than the national average, which could boost the utility’s client base.

NextEra Energy Resources

NextEra Energy’s competitive business segment, NextEra Energy Resources, has a diverse presence in 27 states, which helps balance its overall performance. NEER sells its wholesale power under long-term contracts unlike other competitive utilities (FE) (EXC) in the country, which gives it revenue predictability and stability.

Though NextEra Energy Resources has been expanding its clean generation fleet, it’s gradually looking to reduce the competitive power business. The larger focus is expected to be on rate-regulated and contracted wholesale energy operations going forward.

Many electric utilities such as Duke Energy (DUK) and Dominion Energy (D) have been expanding in gas distribution and midstream operations lately, as these businesses are growing faster than electricity and can potentially improve earnings.

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