Southern Company’s Growing Customer Base Is the Key to Revenue
Southern Company Is Set to Rise on Strong Infrastructure Spending
Revenue trends
According to a Moody’s report released in October 2015, unregulated utilities with coal and nuclear power plants will be under additional stress in 2016. Falling power and gas prices will have a negative impact on their operating cash flows.
Southern Company derives more than 90% of its revenues from its regulated operations. In fact, large-cap utilities (XLU) such as Duke Energy (DUK), Southern Company, and PPL (PPL) are increasing their exposures to regulated segments to provide more stability to revenues and cash flows.
Regulated operations
Southern Company’s revenues have been quite steady despite falling average electricity use per customer. This is the result of robust customer base growth. SO managed to add 26,000 residential customers as well as 3,000 commercial customers in the 12-month period ended September 30, 2015.
SO’s industrial customer segment has seen a fall in revenues due to weaker global growth and a slowdown in the industrial sector. As of September 30, 2015, SO’s residential and commercial sectors reported sales growth of nearly 1% compared to 2014. The revenues for 2015 in the above figure are for the nine months ended September 30, 2015.
Southern Company expects the rise in revenue from the residential class to continue due to the strong recovery in the housing sector and robust employment growth. Revenues from its commercial customer class also are expected to grow, driven by higher consumer spending.
Unregulated operations
Southern Power is the subsidiary of Southern Company that looks after its competitive business. Revenues from SO’s competitive business fell from $1.7 billion to $1.4 billion in the first nine months of 2015. This fall was mainly due to lower natural gas (UNG) prices.
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