Free cash flow
Whereas NextEra Energy (NEE) looks better placed than peers in terms of FCF (free cash flow), it should be noted that all of the utilities we’re looking at in this series have failed to report positive FCF in the last few years. In 2017, NextEra Energy reported FCF of -$746 million, while Southern Company (SO) and Duke Energy (DUK) reported FCF of -$1.613 billion and -$1.213 billion, respectively. Dominion Energy (D) reported FCF of -$993 million.
FCF, the difference between operating cash flow and capital expenditure, is a vital metric in measuring utilities’ (XLU) performance, mainly due to their heavy capital expenditure needs. Dominion Energy hasn’t registered positive FCF for the last five years, a pattern that has been common in the sector due to increasing capital investments and flat cash flow from operations. In comparison, Southern Company’s and Duke Energy’s FCF has been negative for the last five years.