Through our recent utilities industry case study project for 2017, which is available on KG Prime, we’ve learned that electricity still reigns supreme in this market. Supporting our utilities industry market projections from earlier this year, companies operating within the electricity segment maintained significantly greater revenues and incomes, on average, than service providers operating primarily in the natural gas or water spheres. Even the smallest of the electricity providers which we examined, Calpine Corporation, generated roughly the same revenue in 2016 (roughly $6.7 billion) as the largest natural gas- or water-oriented providers. Nonetheless, our 2017 utilities industry case study substantiated our claim that there is significant fragmentation in the market, presenting thousands of contracting opportunities for the ARM industry.
Per the below graph titled 2016 Utilities Industry Revenue Segmentation, market concentration in the utilities market appeared relatively low in 2016 as the five largest utilities providers were expected to account for less than 20% of total industry revenue. This speaks more to the growth and size of the utilities market, more so than the companies themselves, as many of these companies generated billions of dollars in revenue in 2016. Many of the largest utilities providers were able to maintain consistent and upward-trending revenue growth over the past decade, which suggests that this industry is able to resist against suboptimal economic and business conditions like those during the Great Recession. Usually the companies’ accounts receivable increased significantly in line with the revenue growth; however, their allowance for bad debt was, on average, not terribly impressive when compared to other market segments (specifically healthcare and financial services). Nonetheless, per our thorough and in-depth market examinations, there are still opportunities for ARM companies currently operating within, or considering entering, the utilities market.
Although many of these larger companies enjoyed significant revenue increases over time, their income remained relatively flat, mainly driven by their heavy investment in infrastructure and acquisitions. Based on our research, this should lead to higher accounts receivable levels overall, which, theoretically, should necessitate greater reliance on ARM specialists for first- and/or third-party collection services.
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