Can Franchise Agreement Help NEE to Continue Its Dominance in Florida?

NextEra Energy, Inc. NEE, through its subsidiary Florida Power & Light Company (“FPL”), has established a dominant presence in Florida's utility space. This position is largely underpinned by long-term franchise agreements with numerous municipalities that grant FPL exclusive rights to provide electric service within specific areas. These agreements typically span 30 years, offering a stable and predictable operating environment that supports infrastructure investment, long-term planning and uninterrupted service delivery.

At the end of 2024, FPL had 226 franchise agreements with municipalities and counties across Florida, expiring at various dates up to 2054. These agreements encompass the overwhelming majority of FPL’s retail customers in the state. The franchise agreements function as a legal framework, granting FPL the right to access public rights-of-way in exchange for a franchise fee paid to local governments.

This mutually beneficial arrangement incentivizes municipalities to renew agreements, ensuring continuity for residents and revenue streams for both parties. Such contracts provide NextEra with a regulatory moat, limiting the risk of competition from alternative power providers within those jurisdictions.

By leveraging its long-standing municipal relationships, NextEra continues to upgrade infrastructure, including grid modernization and clean energy deployment, which aligns with state and federal decarbonization goals. These upgrades are supported by the financial and regulatory stability that franchise agreements offer.

NextEra’s franchise agreements serve as a strategic asset that reinforces its competitive edge in Florida. The enduring nature of these contracts, coupled with operational excellence and clean energy leadership, positions NextEra to sustain growth and shareholder value well into the future.

How Utilities Benefit From Long-Term Service Agreements?

Long-term service agreements enhance utility performance by ensuring operational continuity, enabling planned maintenance and supporting infrastructure upgrades, which improve reliability, reduce unexpected outages and allow for efficient capital investment over an extended planning horizon.

Utilities like Dominion Energy D and Entergy Corporation ETR both benefit from long-term service and franchise agreements. Dominion’s agreements support infrastructure investments across its regulated markets, enhancing grid reliability. Entergy secures stable revenues through long-term utility contracts in the Gulf region, which allow for planned upgrades and consistent returns while minimizing regulatory uncertainty and competitive pressure in core service areas.

NEE’s Price Performance

NextEra’s shares have gained 12.6% in the past three months against the Zacks Utility Electric-Power industry’s decline of 0.7%.

NextEra’s Earnings Estimates Moving North

NextEra expects its 2025 earnings per share to be in the range of $3.45-$3.70 compared with $3.43 a year ago. The Zacks Consensus Estimate for NEE’s 2025 and 2026 earnings per share indicates year-over-year growth of 7.3% and 8%, respectively. NEE expects to increase its earnings per share in the range of 6-8% annually through 2027 from the level of 2024.

NEE Stock Returns Better Than Its Industry

NextEra’s trailing 12-month return on equity (“ROE”) is 12.06%, ahead of the industry average of 10.41%. ROE is a financial ratio that measures how well a company uses its shareholders’ equity to generate profits. The current ROE of the company indicates that it is using shareholders’ funds more efficiently than peers.

NEE’s Zacks Rank

NextEra currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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This article originally published on Zacks Investment Research (zacks.com).

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