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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Exact name of Registrants as specified in their charters,
Commission address of principal executive offices and IRS Employer
File Number Registrants' telephone number Identification Number
1-8841 FPL GROUP, INC. 59-2449419
1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
State or other jurisdiction of incorporation or organization: Florida
Name of exchange
on which registered
Securities registered pursuant to Section 12(b) of the Act:
FPL Group, Inc.: Common Stock, $0.01 Par Value and
Preferred Share Purchase Rights New York Stock Exchange
Florida Power & Light Company: None
Securities registered pursuant to Section 12(g) of the Act:
FPL Group, Inc.: None
Florida Power & Light Company: Preferred Stock, $100 Par Value
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) have been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrants' knowledge in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock of FPL Group, Inc. held by non-
affiliates as of January 31, 2001 (based on the closing market price on the
Composite Tape on January 31, 2001) was $10,180,979,540 (determined by
subtracting from the number of shares outstanding on that date the number
of shares held by directors and officers of FPL Group, Inc.).
There was no voting stock of Florida Power & Light Company held by non-
affiliates as of January 31, 2001.
The number of shares outstanding of each class of FPL Group, Inc. common
stock, as of the latest practicable date: Common Stock, $0.01 Par Value,
outstanding at January 31, 2001: 175,819,435 shares
As of January 31, 2001, there were issued and outstanding 1,000 shares of
Florida Power & Light Company's common stock, without par value, all of
which were held, beneficially and of record, by FPL Group, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of FPL Group, Inc.'s Proxy Statement for the 2001 Annual Meeting
of Shareholders are incorporated by reference in Part III hereof.
______________________________
This combined Form 10-K represents separate filings by FPL Group, Inc. and
Florida Power & Light Company. Information contained herein relating to an
individual registrant is filed by that registrant on its own behalf.
Florida Power & Light Company makes no representations as to the
information relating to FPL Group, Inc.'s other operations.
DEFINITIONS
Acronyms and defined terms used in the text include the following:
Term Meaning
capacity clause Capacity cost recovery clause
CMP Central Maine Power Company
charter Restated Articles of Incorporation, as amended, of FPL Group or FPL, as
the case may be
Coalition The Coalition for Equitable Rates
conservation clause Energy conservation cost recovery clause
DOE U.S. Department of Energy
EMF Electric and magnetic fields
EMT Energy Marketing & Trading
Entergy Entergy Corporation
environmental clause Environmental compliance cost recovery clause
FAS Financial Accounting Standards No.
FDEP Florida Department of Environmental Protection
FERC Federal Energy Regulatory Commission
FIPUG The Florida Industrial Power Users Group
FGT Florida Gas Transmission Company
FMPA Florida Municipal Power Agency
FPL Florida Power & Light Company
FPL Energy FPL Energy, LLC
FPL FiberNet FPL FiberNet, LLC
FPL Group FPL Group, Inc.
FPL Group Capital FPL Group Capital Inc
FPSC Florida Public Service Commission
fuel clause Fuel and purchased power cost recovery clause
GridFlorida GridFlorida LLC
Holding Company Act Public Utility Holding Company Act of 1935, as amended
IBEW International Brotherhood of Electrical Workers
JEA Jacksonville Electric Authority
kv Kilovolt
kwh Kilowatt-hour
Management's Discussion Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
mortgage FPL's Mortgage and Deed of Trust dated as of January 1, 1944, as
supplemented and amended
mw Megawatt(s)
Note Note to Consolidated Financial Statements
NRC U.S. Nuclear Regulatory Commission
Nuclear Waste Policy Act Nuclear Waste Policy Act of 1982
O&M expenses Other operations and maintenance expenses in the Consolidated
Statements of Income
PMI FPL Energy Power Marketing, Inc.
Public Counsel State of Florida Office of Public Counsel
PURPA Public Utility Regulatory Policies Act of 1978, as amended
qualifying facilities Non-utility power production facilities meeting the requirements of a
qualifying facility under the PURPA
Reform Act Private Securities Litigation Reform Act of 1995
ROE Return on common equity
RTOs Regional transmission organizations
SJRPP St. Johns River Power Park
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In connection with the safe harbor provisions of the Reform Act, FPL Group
and FPL (collectively, the Company) are hereby filing cautionary statements
identifying important factors that could cause the Company's actual results
to differ materially from those projected in forward-looking statements (as
such term is defined in the Reform Act) made by or on behalf of the Company
which are made in this combined Form 10-K, in presentations, in response to
questions or otherwise. Any statements that express, or involve
discussions as to expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of
words or phrases such as will likely result, are expected to, will
continue, is anticipated, estimated, projection, outlook) are not
statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties. Accordingly,
any such statements are qualified in their entirety by reference to, and
are accompanied by, the following important factors that could cause the
Company's actual results to differ materially from those contained in
forward-looking statements made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date
on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess
the impact of each such factor on the business or the extent to which any
factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statement.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include changes in laws or regulations, changing governmental policies and
regulatory actions, including those of the FERC, the FPSC, the PURPA, the
Holding Company Act and the NRC, with respect to allowed rates of return
including but not limited to ROE and equity ratio limits, industry and rate
structure, operation of nuclear power facilities, acquisition, disposal,
depreciation and amortization of assets and facilities, operation and
construction of plant facilities, recovery of fuel and purchased power
costs, decommissioning costs, and present or prospective wholesale and
retail competition (including but not limited to retail wheeling and
transmission costs).
The business and profitability of the Company are also influenced by
economic and geographic factors including political and economic risks,
changes in and compliance with environmental and safety laws and policies,
weather conditions (including natural disasters such as hurricanes),
population growth rates and demographic patterns, competition for retail
and wholesale customers, availability, pricing and transportation of fuel
and other energy commodities, market demand for energy from plants or
facilities, changes in tax rates or policies or in rates of inflation or in
accounting standards, unanticipated delays or changes in costs for capital
projects, unanticipated changes in operating expenses and capital
expenditures, capital market conditions, competition for new energy
development opportunities and legal and administrative proceedings (whether
civil, such as environmental, or criminal) and settlements.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results, and are beyond the control of the
Company.
PART I
Item 1. Business
FPL GROUP
FPL Group is a public utility holding company, as defined in the Holding
Company Act. It was incorporated in 1984 under the laws of Florida. FPL
Group's principal subsidiary, FPL, is engaged in the generation,
transmission, distribution and sale of electric energy. FPL Group Capital,
a wholly-owned subsidiary of FPL Group, holds the capital stock and
provides funding for the operating subsidiaries other than FPL. The
business activities of these operating subsidiaries primarily consist of
FPL Energy's independent power projects. For financial information
regarding segments, see Note 14. At December 31, 2000, FPL Group and its
subsidiaries employed 10,852 persons.
FPL Group is exempt from substantially all of the provisions of the Holding
Company Act on the basis that FPL Group's and FPL's businesses are
predominantly intrastate in character and carried on substantially in a
single state in which both are incorporated.
In July 2000, FPL Group and Entergy announced a proposed merger. FPL Group
and Entergy shareholders approved the proposed merger in December 2000.
The merger will create a company with capabilities and resources to succeed
and grow in the competitive energy marketplace. The new company will be a
registered public utility holding company under the Holding Company Act.
The companies' objective is to complete the merger by the end of 2001.
However, completion of the merger and the ultimate closing date depend upon
meeting a number of conditions, including the receipt of applicable
regulatory approvals. For additional information concerning the proposed
merger, see Note 2.
FPL OPERATIONS
General. FPL was incorporated under the laws of Florida in 1925 and is a
wholly-owned subsidiary of FPL Group. FPL supplies electric service
throughout most of the east and lower west coasts of Florida with a
population of more than seven million. During 2000, FPL served
approximately 3.8 million customer accounts. Operating revenues were as
follows:
Years Ended December 31,
2000 1999 1998
(millions)
Residential .......................... $3,504 $3,357 $3,580
Commercial ........................... 2,299 2,226 2,239
Industrial ........................... 181 190 197
Other, including the provision for
retail rate refund and the net
change in unbilled revenues ........ 377 284 350
$6,361 $6,057 $6,366
Regulation. The retail operations of FPL provided approximately 99% of
FPL's operating revenues for 2000. Such operations are regulated by the
FPSC which has jurisdiction over retail rates, service territory, issuances
of securities, planning, siting and construction of facilities and other
matters. FPL is also subject to regulation by the FERC in various
respects, including the acquisition and disposition of facilities,
interchange and transmission services and wholesale purchases and sales of
electric energy.
FPL's nuclear power plants are subject to the jurisdiction of the NRC. NRC
regulations govern the granting of licenses for the construction and
operation of nuclear power plants and subject such power plants to
continuing review and regulation.
Federal, state and local environmental laws and regulations cover air and
water quality, land use, power plant and transmission line siting, EMF from
power lines and substations, noise and aesthetics, solid waste and other
environmental matters. Compliance with these laws and regulations
increases the cost of electric service by requiring, among other things,
changes in the design and operation of existing facilities and changes or
delays in the location, design, construction and operation of new
facilities. See Item 3. Legal Proceedings. Capital expenditures required
to comply with environmental laws and regulations for 2001-03 are included
in FPL's projected capital expenditures set forth in Item 1. Business - FPL
Operations - Capital Expenditures and are not material.
FPL currently holds 172 franchise agreements with varying expiration dates
to provide electric service in various municipalities and counties in
Florida. FPL considers its franchises to be adequate for the conduct of its
business.
Retail Ratemaking. The underlying concept of utility ratemaking is to set
rates at a level that allows the utility the opportunity to collect from
customers total revenues (revenue requirements) equal to its cost of
providing service, including a reasonable rate of return on invested
capital. To accomplish this, the FPSC uses various ratemaking mechanisms.
The basic costs of providing electric service, other than fuel and certain
other costs, are recovered through base rates, which are designed to
recover the costs of constructing, operating and maintaining the utility
system. These basic costs include O&M expenses, depreciation and taxes, as
well as a return on FPL's investment in assets used and useful in providing
electric service (rate base). The rate of return on rate base approximates
FPL's weighted cost of capital, which includes its costs for debt and
preferred stock and an allowed ROE. The FPSC monitors FPL's ROE through a
surveillance report that is filed monthly by FPL with the FPSC. The FPSC
does not provide assurance that the allowed ROE will be achieved. Base
rates are determined in rate proceedings which occur at irregular intervals
at the initiative of FPL, the FPSC, Public Counsel or a substantially
affected party.
FPL's last full rate proceeding was in 1984. In 1999, the FPSC approved a
three-year agreement among FPL, Public Counsel, FIPUG and Coalition regarding
FPL's retail base rates, authorized regulatory ROE, capital structure and
other matters. The agreement, which became effective April 15, 1999,
provides for a $350 million reduction in annual revenues from retail base
operations allocated to all customers on a cents-per-kilowatt-hour basis.
Additionally, the agreement sets forth a revenue sharing mechanism for each
of the twelve month periods covered by the agreement, whereby revenues from
retail base operations in excess of a stated threshold are required to be
shared on the basis of two-thirds refunded to retail customers and one-third
retained by FPL. Revenues from retail base operations in excess of a second
threshold are required to be refunded 100% to retail customers.
The refund thresholds are as follows:
Twelve Months Ended
April 14,
2000 2001 2002
(millions)
66 2/3% to customers ....................... $3,400 $3,450 $3,500
100% to customers .......................... $3,556 $3,606 $3,656
The agreement allows for special depreciation of up to $100 million, at FPL's
discretion, in each year of the three-year agreement period to be applied to
nuclear and/or fossil generating assets. This new depreciation program
replaced a revenue-based special amortization program. See Note 1 - Revenue
and Rates and Electric Plant, Depreciation and Amortization.
The agreement also lowered FPL's authorized regulatory ROE range to 10% -
12%. During the term of the agreement, the achieved ROE may from time to
time be outside the authorized range, and the revenue sharing mechanism
described above is specified to be the appropriate and exclusive mechanism to
address that circumstance. For purposes of calculating ROE, the agreement
establishes a cap on FPL's adjusted equity ratio of 55.83%. The adjusted
equity ratio reflects a discounted amount for off-balance sheet obligations
under certain long-term purchased power contracts. Finally, included in the
agreement are provisions which limit depreciation rates and accruals for
nuclear decommissioning and fossil dismantlement costs to currently approved
levels and limit amounts recoverable under the environmental clause during
the term of the agreement.
The agreement states that Public Counsel, FIPUG and Coalition will neither
seek nor support any additional base rate reductions during the three-year
term of the agreement unless such reduction is initiated by FPL. Further,
FPL agreed to not petition for any base rate increases that would take
effect during the term of the agreement.
Fuel costs are recovered through levelized charges per kwh established
pursuant to the fuel clause and totaled $2.0 billion in 2000. These
charges are calculated annually based on estimated fuel costs and estimated
customer usage for the following year, plus or minus a true-up adjustment
to reflect the variance of actual costs and usage from the estimates used
in setting the fuel adjustment charges for prior periods. An adjustment to
the levelized charges may be approved during the course of a year to
reflect a projected variance based on actual costs and usage. Due to
higher than projected oil and natural gas prices in 2000, the FPSC approved
higher per kwh charges effective June 15, 2000. Later in the year, the
FPSC approved FPL's annual fuel filing for 2001, which included an estimate
of under-recovered fuel costs in 2000 of $518 million. FPL will recover
the $518 million over a two-year period beginning January 2001, rather than
the typical one-year time frame. FPL has also agreed that instead of
receiving a return at the commercial paper rate on this unrecovered portion
through the fuel clause, the under-recovery will be included as a rate base
regulatory asset over the two-year recovery period. Actual under-recovered
fuel costs through December 31, 2000 exceeded the estimates made earlier in
the year by $78 million, and in February 2001, FPL requested the FPSC to
approve a fuel adjustment increase effective April 2001 to recover the
additional $78 million of under-recovered fuel costs. See Note 1 -
Regulation.
Capacity payments to other utilities and generating companies for purchased
power are recovered through the capacity clause and base rates. In 2000,
$455 million was recovered through the capacity clause. Costs associated
with implementing energy conservation programs totaled $80 million in 2000
and are recovered through the conservation clause. Costs of complying with
federal, state and local environmental regulations enacted after April 1993
totaled $12 million in 2000 and are recovered through the environmental
clause to the extent not included in base rates. The new rate agreement
limits recovery under this clause to $12.8 million in 2000 and $6.4 million
in 2001, with no further amounts recoverable during the remaining term of
the agreement.
The FPSC has the authority to disallow recovery of costs that it considers
excessive or imprudently incurred. Such costs may include O&M expenses,
the cost of replacing power lost when fossil and nuclear units are
unavailable and costs associated with the construction or acquisition of
new facilities.
Competition. The electric utility industry is facing increasing
competitive pressure. FPL currently faces competition from other suppliers
of electrical energy to wholesale customers and from alternative energy
sources and self-generation for other customer groups, primarily industrial
customers. In 2000, operating revenues from wholesale and industrial
customers combined represented approximately 4% of FPL's total operating
revenues. A number of potential merchant plants have been announced in
Florida over the past several years. Five of these announced merchant
plants totaling 3,700 mw have presented submissions to seek a determination
of need to the FPSC. In March 1999, the FPSC approved one of the petitions
for a power plant to be constructed within FPL's service territory. FPL,
along with other Florida utilities, appealed the decision to the Florida
Supreme Court. In April 2000, the Florida Supreme Court upheld arguments by
FPL and other Florida utilities and ruled that under current Florida law the
FPSC is not authorized to grant a determination of need for a proposed power
plant, the output of which is not fully committed to use by Florida retail
customers. In March 2001, the United States Supreme Court denied a petition
for certiorari review by one of the petitioners.
Over half of the states, other than Florida, have enacted legislation or
have state commissions that issued orders designed to deregulate the
production and sale of electricity. By allowing customers to choose their
electricity supplier, deregulation is expected to result in a shift from
cost-based rates to market-based rates for energy production and other
services provided to retail customers. Similar initiatives are also being
pursued on the federal level. Although the legislation and initiatives
vary substantially, common areas of focus include when market-based pricing
will be available for wholesale and retail customers, what existing
prudently incurred costs in excess of the market-based price will be
recoverable and whether generation assets should be separated from
transmission, distribution and other assets. It is generally believed
transmission and distribution activities would remain regulated.
In 2000, the Governor of Florida signed an executive order creating the
Energy 2020 Study Commission to propose an energy plan and strategy for
Florida. The order required that recommendations be made to the
legislature and Governor by December 1, 2001. The commission chose to
split the energy study between wholesale and retail competition. In January
2001, the commission issued an interim report containing a proposal for
restructuring Florida's wholesale market for electricity. The proposal
recommends the removal of statutory barriers to entry for merchant plants
and, according to the report, provides a transition to a "level playing
field" for all generating assets. Under the commission's proposal,
investor-owned utilities such as FPL would establish, and transfer their
generating assets to, affiliated exempt wholesale generators, which would
also construct and operate new generating assets. The investor-owned load-
serving utilities, such as FPL, would acquire energy resources through
competitive bidding, negotiated contracts or from the short-term (spot)
market. Purchases from affiliated exempt wholesale generators would be
pursuant to a competitive bidding process. The proposal includes a number
of features, including a three-year retail base rate freeze. The proposal
may be addressed in the next legislative session which takes place in March
through May 2001. In addition, the FERC has jurisdiction over potential
changes which could affect competition in wholesale transactions. The
commission will now consider recommendations for the retail market.
In 1999, the FERC issued its final order on RTOs. RTOs, under a variety of
structures, provide for the independent operation of transmission systems
for a given geographic area. The final order establishes guidelines for
public utilities to use in considering and/or developing plans to initiate
operations of RTOs by December 15, 2001. In October 2000, FPL, together
with Florida Power Corporation and Tampa Electric Company, filed a joint
proposal to form a fully independent for-profit transmission company that
would be responsible for the transmission lines that carry electricity from
power plants primarily within the state to substations in Florida. The
October filing was supplemented by a December 2000 filing that provided
certain operational details of the proposed RTO.
Under the proposed form of RTO, FPL would contribute its transmission
assets to an independent transmission company, GridFlorida, that would own
and operate the system. A separate corporation would be formed to own the
voting interest in and manage GridFlorida. In return for its transmission
assets, FPL would receive a non-voting ownership interest in GridFlorida,
which could be exchanged for non-voting stock of the managing corporation.
FPL would account for its interest in GridFlorida using the equity method.
In the event the basis of regulation for some or all of FPL's business
changes from cost-based regulation, existing regulatory assets and
liabilities would be written off unless regulators specify an alternative
means of recovery or refund. Further, other aspects of the business, such
as generation assets and long-term power purchase commitments, would need
to be reviewed to assess their recoverability in a changed regulatory
environment. See Management's Discussion - Results of Operations and
Note 1 - Regulation.
System Capability and Load. FPL's resources for serving summer load as of
December 31, 2000 consisted of 19,069 mw, of which 16,864 mw are from FPL-
owned facilities (see Item 2. Properties - Generating Facilities) and 2,205
mw are obtained through purchased power contracts. See Note 13 -
Contracts. FPL's reserve margin target is currently 15%. However, with
the FPSC's approval, FPL and two other Florida utilities voluntarily
adopted a 20% reserve margin target to be achieved by the summer of 2004.
The compounded annual growth rate of retail kwh sales and number of retail
customers was 3.4% and 2.1%, respectively, for the three years ended
December 31, 2000. It is anticipated that retail kwh sales will grow at a
compounded annual rate of approximately 3.7% for the next three years.
Occasionally, unusually cold temperatures during the winter months result
in significant increases in electricity usage for short periods of time.
However, customer usage and operating revenues are typically higher during
the summer months largely due to the prevalent use of air conditioning in
FPL's service territory. On January 5, 2001, FPL set an all-time record for
energy peak demand of 18,219 mw. Adequate resources were available at the
time of the peak to meet customer demand.
FPL has begun construction to repower its two existing Fort Myers steam
units and two of its three existing steam units at the Sanford site. The
repowering work at these sites is scheduled to be completed by the end of
2002. FPL will also add two new gas-fired combustion turbines at each of
its Martin site in 2001 and its Fort Myers site in 2003, and add new
combustion turbines and/or gas-fired combined cycle units from 2005-10.
These actions, plus other changes to FPL's existing units and purchased
power contracts, are expected to increase FPL's net generating capability
by approximately 7,000 mw.
Capital Expenditures. FPL's capital expenditures totaled approximately
$1.3 billion in 2000, $924 million in 1999 and $617 million in 1998.
Capital expenditures for the 2001-03 period are expected to be $3.3
billion, including $1.1 billion in 2001. This estimate is subject to
continuing review and adjustment, and actual capital expenditures may vary
from this estimate. See Management's Discussion - Liquidity and Capital
Resources.
Nuclear Operations. FPL owns and operates four nuclear units, two at
Turkey Point and two at St. Lucie. The operating licenses for Turkey Point
Units Nos. 3 and 4 expire in 2012 and 2013, respectively. The operating
licenses for St. Lucie Units Nos. 1 and 2 expire in 2016 and 2023,
respectively. FPL has informed the NRC of its intent to apply for a 20-year
license renewal for each of its four nuclear units. FPL filed the license
extension application with the NRC for the Turkey Point units in 2000 and
expects to file in 2002 for the St. Lucie units. The nuclear units are
periodically removed from service to accommodate normal refueling and
maintenance outages, repairs and certain other modifications. A condition
of the operating license for each unit requires an approved plan for
decontamination and decommissioning. FPL's current plans provide for
prompt dismantlement of the Turkey Point Units Nos. 3 and 4 with
decommissioning activities commencing in 2012 and 2013, respectively.
Current plans call for St. Lucie Unit No. 1 to be mothballed beginning in
2016 with decommissioning activities to be integrated with the prompt
dismantlement of St. Lucie Unit No. 2 beginning in 2023. See estimated
cost data in Note 1 - Decommissioning and Dismantlement of Generating
Plant.
Fuel. FPL's generating plants use a variety of fuels. See Item 2.
Properties - Generating Facilities and Note 13 - Contracts. The diverse
fuel options, along with purchased power, enable FPL to shift between
sources of generation to achieve an economical fuel mix.
FPL has four firm transportation contracts in place with FGT that together
will satisfy substantially all of the anticipated needs for natural gas
transportation. The four existing contracts expire in 2005, 2015, 2021 and
2022, respectively, but each can be extended at FPL's option. To the
extent desirable, FPL can also purchase interruptible gas transportation
service from FGT based on pipeline availability. FPL has a long-term
natural gas supply contract at market rates to provide a portion of FPL's
anticipated needs for natural gas. The remainder of FPL's gas requirements
are purchased under other contracts and in the spot market.
FPL has, through its joint ownership interest in SJRPP Units Nos. 1 and 2,
long-term coal supply and transportation contracts for a portion of the
fuel needs for those units. All of the transportation requirements and a
portion of the fuel supply needs for Scherer Unit No. 4 are covered by a
series of annual and long-term contracts. The remaining fuel requirements
will be obtained in the spot market. FPL's oil requirements are obtained
under short- and long-term contracts and in the spot market.
FPL leases nuclear fuel for all four of its nuclear units. Currently, FPL
is storing spent fuel on site pending its removal by the DOE. See Note 1 -
Nuclear Fuel. Under the Nuclear Waste Policy Act, the DOE was required to
construct permanent disposal facilities and take title to and provide
transportation and disposal for spent nuclear fuel by January 31, 1998 for
a specified fee based on current generation from nuclear power plants.
Through December 2000, FPL has paid approximately $425 million in such fees
to the DOE's Nuclear Waste Fund. The DOE did not meet its statutory
obligation for disposal of spent nuclear fuel under the Nuclear Waste
Policy Act. In 1997, a court ruled, in response to petitions filed by
utilities, state governments and utility commissions, that the DOE could
not assert a claim that its delay was unavoidable in any defense against
lawsuits by utilities seeking money damages arising out of the DOE's
failure to perform its obligations. In 1998, FPL filed a lawsuit against
the DOE seeking damages caused by the DOE's failure to dispose of spent
nuclear fuel from FPL's nuclear power plants. The matter is pending. In
the interim, FPL is investigating other alternatives to provide adequate
storage capacity for all of its spent nuclear fuel. Based on current
projections, FPL will lose its ability to store spent fuel on site for St.
Lucie Unit No. 1 in 2005 and for St. Lucie Unit No. 2 in 2007. FPL is
pursuing two approaches to expanding spent fuel storage at St. Lucie:
increase rack space in its existing spent fuel pools and/or develop the
capability to store spent fuel in dry storage containers. The dry storage
containers would be either located at the St. Lucie plant or at a facility
operated by Private Fuel Storage, LLC (PFS) in Utah. PFS is a consortium
of eight utilities seeking to license, construct and operate an independent
spent fuel storage facility. FPL joined the consortium in May 2000. PFS
has filed a license application with the NRC and hearings on the
application are ongoing.
Energy Marketing and Trading. EMT, a division of FPL, buys and sells
wholesale energy commodities, such as natural gas, oil and electric power.
EMT procures natural gas and oil for FPL's use in power generation and
sells excess gas and electric power. EMT also uses financial instruments,
such as futures and swaps, to manage the risk associated with fluctuating
commodity prices and increase the value of FPL's power generation assets.
Substantially all of the results of EMT's activities are passed through to
customers in the fuel or capacity clauses.
Electric and Magnetic Fields. In recent years, public, scientific and
regulatory attention has been focused on possible adverse health effects of
EMF. These fields are created whenever electricity flows through a power
line or an appliance. Several epidemiological (i.e., statistical) studies
have suggested a linkage between EMF and certain types of cancer, including
childhood leukemia and adult lymphoma associated with occupational
exposure; other studies have been inconclusive, contradicted earlier
studies or have shown no such linkage. Neither these epidemiological
studies nor clinical studies have produced any conclusive evidence that EMF
does or does not cause adverse health effects. In 1999, the National
Institute of Environmental Health Sciences, as the culmination of a five-
year federally supported research effort, pronounced that the scientific
support for an EMF-cancer link is marginal and concluded that the
probability that EMF exposure is truly a health hazard is small but cannot
be completely discounted.
FPL is in compliance with the FDEP regulations regarding EMF levels within
and at the edge of the rights of way for transmission lines. Future
changes in the FDEP regulations could require additional capital
expenditures by FPL for such things as increasing the right of way
corridors or relocating or reconfiguring transmission facilities. It is
not presently known whether any such expenditures will be required.
Employees. FPL had 9,838 employees at December 31, 2000. Approximately
34% of the employees are represented by the IBEW under a collective
bargaining agreement with FPL that will expire October 31, 2004.
FPL ENERGY OPERATIONS
FPL Energy. FPL Energy, a wholly-owned subsidiary of FPL Group Capital, was
formed in 1998 to aggregate FPL Group's existing unregulated energy-related
operations. FPL Energy's participation in the domestic energy market has
evolved in recent years from non-controlling equity investments to a more
active role that includes ownership, development, construction, management
and operation of many projects. FPL Energy is actively involved in
managing more than 82% of its projects, which represents approximately 98%
of the net generating capacity in which FPL Energy has an ownership
interest. This active role is expected to continue as opportunities in the
unregulated generation market are pursued. As of December 31, 2000, FPL
Energy had ownership interests in operating independent power projects with
a net generating capacity of 4,110 mw. Generation capacity spans various
regions thereby reducing seasonal volatility on a portfolio basis. The
percentage of capacity by region is 35% Northeast, 30% Central, 21% Mid-
Atlantic and 14% West. Fuel sources for these projects are 52% natural
gas, 18% oil, 15% wind, 9% hydro and 6% other.
PMI, a subsidiary of FPL Energy, buys and sells wholesale energy
commodities, such as natural gas, oil and electric power. PMI procures
natural gas and oil for FPL Energy's use in power generation and sells
excess gas and electric power. PMI also uses financial instruments, such
as futures and swaps, to manage the risk associated with fluctuating
commodity prices and increase the value of FPL Energy's power generation
assets. The results of PMI's activities are recognized in FPL Energy's
operating results.
Currently, approximately 25% of FPL Energy's net generating capacity has
qualifying facility status under the PURPA. Qualifying facility
electricity may be generated from hydropower, wind, solar, geothermal,
fossil fuels, biomass or waste-product combustion. Utilities pay for
qualifying facility electricity on the basis of each utility's avoided cost
of power. Qualifying facility status exempts the projects from the
application of the Holding Company Act, many provisions of the Federal
Power Act, and state laws and regulations respecting rates and financial or
organizational regulation of electric utilities. FPL Energy also has
ownership interest in operating independent power projects that have
received exempt wholesale generator status as defined in the Holding
Company Act. These projects represent approximately 75% of FPL Energy's
net generating capacity. Exempt wholesale generators own or operate a
facility exclusively to sell electric energy at wholesale. They are barred
from selling electricity directly to retail customers. While projects with
qualifying facility and exempt wholesale generator status are exempt from
various restrictions, each project must still comply with other federal,
state and local laws, including those regarding siting, construction,
operation, licensing and pollution abatement.
FPL Energy's capital expenditures and investments totaled approximately $507
million, $1.540 billion and $521 million in 2000, 1999 and 1998,
respectively. During 2000, FPL Energy completed the construction of a 1,000
mw combined-cycle natural gas-fired plant in Texas, of which FPL Energy owns
99%, and purchased net ownership interests in two windfarms totaling 118 mw.
FPL Energy has announced or is currently constructing eight plants that
would add approximately 2,700 mw to its generating capacity by 2003. In
1999, FPL Energy completed the purchase of CMP's non-nuclear generating
assets, primarily fossil and hydro power plants, for $866 million. See Note
10 and Management's Discussion - Liquidity and Capital Resources.
Deregulation of the electric utility market presents both opportunities and
risks for FPL Energy. Opportunities exist for the selective acquisition of
generation assets that are being divested under deregulation plans and for
the construction and operation of efficient plants that can sell power in
competitive markets. Substantially all of the energy produced in 2000 by
FPL Energy's independent power projects was sold through power sales
agreements with utilities that expire in 2001-28. As competitive wholesale
markets become more accessible to other generators, obtaining power sales
agreements will become a progressively more competitive process. FPL
Energy expects that as its existing power sales agreements expire, more of
the energy produced will be sold through shorter-term contracts and into
competitive wholesale markets.
Competitive wholesale markets in the United States continue to evolve and
vary by geographic region. Revenues from electricity sales in these
markets will vary based on the prices obtainable for energy, capacity and
other ancillary services. Some of the factors affecting success in these
markets include the ability to operate generating assets efficiently, the
price and supply of fuel, transmission constraints, competition from new
sources of generation, demand growth and exposure to legal and regulatory
changes.
FPL Energy has approximately 540 net mw in California, most of which are
wind, solar and geothermal qualifying facilities. The output of these
projects is sold predominantly under long-term contracts with California
utilities. Revenues are derived from energy payments based upon the
purchasing utilities' short run avoided cost and contractual capacity
payments. Short run avoided costs in California are currently tied to
natural gas monthly prices at the California border. Increases in natural
gas prices and an imbalance between power supply and demand, as well as
other factors, have contributed to significant increases in wholesale
electricity prices in California. Utilities in California had previously
agreed to fixed tariffs to their retail customers, which resulted in
significant under-recoveries of wholesale electricity purchase costs. The
state of California is currently considering legislation that, among other
things, provides for long-term price stability and payments to qualifying
facilities, such as those owned by FPL Energy. If enacted, the proposed
legislation is not expected to significantly change FPL Energy's economic
position.
FPL Energy had 867 employees at December 31, 2000. Approximately 16% of
the employees are represented by the IBEW under a collective bargaining
agreement with FPL Energy that expires on February 28, 2003.
OTHER FPL GROUP OPERATIONS
FPL FiberNet. FPL FiberNet sells wholesale fiber-optic network capacity to
FPL and other new and existing customers, primarily telephone, cable
television, internet and other telecommunications companies. FPL FiberNet
was formed in January 2000 to enhance the value of FPL Group's fiber-optic
network assets that were originally built to support FPL operations.
Accordingly, FPL's existing 1,600 miles of fiber-optic lines were
transferred to FPL FiberNet in January 2000. FPL FiberNet's network
interconnects major cities in Florida. During 2000, FPL FiberNet invested
approximately $90 million to expand the network within major cities
throughout Florida. Over the next three years, FPL FiberNet plans to
continue this expansion by investing a total of approximately $240 million.
EXECUTIVE OFFICERS OF THE REGISTRANTS (a)(b)
Name Age Position Effective Date
James L. Broadhead 65 Chairman of the Board and Chief Executive Officer of FPL Group ...... May 8, 1990
Chairman of the Board and Chief Executive Officer of FPL ............ January 15, 1990
Dennis P. Coyle 62 General Counsel and Secretary of FPL Group .......................... June 1, 1991
General Counsel and Secretary of FPL ................................ July 1, 1991
K. Michael Davis 54 Controller and Chief Accounting Officer of FPL Group ................ May 13, 1991
Vice President, Accounting, Controller and Chief Accounting
Officer of FPL .................................................... July 1, 1991
Paul J. Evanson 59 President of FPL .................................................... January 9, 1995
Lewis Hay, III 45 President of FPL Energy ............................................. March 13, 2000
Lawrence J. Kelleher 53 Vice President, Human Resources of FPL Group ........................ May 13, 1991
Senior Vice President, Human Resources and Corporate Services of FPL. July 1, 1999
Robert L. McGrath 47 Treasurer of FPL Group and FPL ...................................... January 11, 2000
Vice President Finance and Chief Financial Officer of FPL Energy .... June 6, 2000
Armando J. Olivera 51 Senior Vice President, Power Systems of FPL ......................... July 1, 1999
Thomas F. Plunkett 61 President, Nuclear Division of FPL .................................. March 1, 1996
Antonio Rodriguez 58 Senior Vice President, Power Generation Division of FPL ............. July 1, 1999
____________________
(a) Executive officers are elected annually by, and serve at the pleasure of, their respective boards of directors.
Except as noted below, each officer has held his present position for five years or more and his employment
history is continuous.
(b) The business experience of the executive officers is as follows: Mr. Hay was senior vice president and chief
financial officer of US Foodservice, a food service distributor, from 1991 to 1997. From 1997 to 1999 he was
executive vice president and chief financial officer of US Foodservice. From August 1999 to March 2000, Mr. Hay
was vice president, finance and chief financial officer of FPL Group and senior vice president, finance and chief
financial officer of FPL. Mr. Kelleher was senior vice president, human resources of FPL from July 1991 to July
1999. Mr. McGrath was assistant treasurer of FPL Group and FPL from February 1998 to January 2000. Prior to that,
Mr. McGrath was vice president and chief financial officer of ESI Energy, Inc. Mr. Olivera was vice president,
distribution of FPL from February 1997 to July 1999. Prior to that, Mr. Olivera was vice president, power delivery
of FPL. Mr. Rodriguez was vice president, power delivery of FPL from February 1997 to July 1999. Prior to that,
Mr. Rodriguez was vice president, operations of FPL's power generation division.
Item 2. Properties
FPL Group and its subsidiaries maintain properties which are adequate for
their operations. At December 31, 2000, the electric generating,
transmission, distribution and general facilities of FPL represent 45%,
13%, 36% and 6%, respectively, of FPL's gross investment in electric
utility plant in service.
Generating Facilities. As of December 31, 2000, FPL Group had the
following generating facilities:
No. of Net
Facility Location Units Fuel Capability (mw)(a)
FPL:
STEAM TURBINES
Cape Canaveral ...................... Cocoa, FL 2 Oil/Gas 806
Cutler .............................. Miami, FL 2 Gas 215
Fort Myers .......................... Fort Myers, FL 2 Oil 990(b)
Manatee ............................. Parrish, FL 2 Oil 1,625
Martin .............................. Indiantown, FL 2 Oil/Gas 1,640
Port Everglades ..................... Port Everglades, FL 4 Oil/Gas 1,242
Riviera ............................. Riviera Beach, FL 2 Oil/Gas 563
St. Johns River Power Park .......... Jacksonville, FL 2 Coal/Petroleum Coke 254(c)
St. Lucie ........................... Hutchinson Island, FL 2 Nuclear 1,553(d)
Sanford ............................. Lake Monroe, FL 3 Oil/Gas 914
Scherer ............................. Monroe County, GA 1 Coal 658(e)
Turkey Point ........................ Florida City, FL 2 Oil/Gas 810
2 Nuclear 1,386
COMBINED-CYCLE
Lauderdale .......................... Dania, FL 2 Gas/Oil 854
Martin .............................. Indiantown, FL 2 Gas 948
Putnam .............................. Palatka, FL 2 Gas/Oil 498
COMBUSTION TURBINES
Fort Myers .......................... Fort Myers, FL 12 Oil 636
Lauderdale .......................... Dania, FL 24 Oil/Gas 840
Port Everglades ..................... Port Everglades, FL 12 Oil/Gas 420
DIESEL UNITS
Turkey Point ........................ Florida City, FL 5 Oil 12
TOTAL ................................. 16,864
FPL Energy:
Cerro Gordo ......................... Ventura, IA 55 Wind 42
Doswell ............................. Ashland, VA 4 Gas 708
Lake Benton II....................... Ruthton, MN 138 Wind 104
Lamar Power Partners................. Paris, TX 2 Gas 990
Maine ............................... Various - ME 9 Oil 755
Maine ............................... Various - ME 89 Hydro 373
Maine ............................... Ft. Fairfield, ME 1 Wastewood 31
Marcus Hook 50 ...................... Marcus Hook, PA 1 Gas 50
West Texas Wind ..................... McCamey, TX 107 Wind 75
Vansycle ............................ Helix, OR 38 Wind 25
Investments in joint ventures ....... Various (f) Various 957
TOTAL ................................. 4,110
____________________
(a) Represents FPL's net warm weather peaking capability and FPL Energy's net ownership interest in plant capacity.
(b) Includes three gas-combustion turbines in simple cycle operation as part of a repowering project.
(c) Represents FPL's 20% ownership interest in each of SJRPP Units Nos. 1 and 2, which are jointly owned with the JEA.
(d) Excludes Orlando Utilities Commission's and the FMPA's combined share of approximately 15% of St. Lucie Unit No. 2.
(e) Represents FPL's approximately 76% ownership of Scherer Unit No. 4, which is jointly owned with the JEA.
(f) Includes two natural gas-fired units in the Northeast (295 mw) and 1,448 units at a wind project in the West (83
mw). The remaining 579 mw are provided by plants with less than 50 mw each.
Transmission and Distribution. As of December 31, 2000, FPL owned and
operated 497 substations and the following electric transmission and
distribution lines:
Nominal Overhead Lines Trench and Submarine
Voltage Pole Miles Cable Miles
500 kv ........ 1,107(a) -
230 kv ........ 2,258 31
138 kv ........ 1,440 49
115 kv ........ 671 -
69 kv ........ 166 14
Less than 69 kv 40,201 22,106
Total ......... 45,843 22,200
____________________
(a) Includes approximately 75 miles owned jointly with the JEA.
Character of Ownership. Substantially all of FPL's properties are subject
to the lien of FPL's mortgage, which secures most debt securities issued by
FPL. The principal properties of FPL Group are held by FPL in fee and are
free from other encumbrances, subject to minor exceptions, none of which is
of such a nature as to substantially impair the usefulness to FPL of such
properties. Some of FPL's electric lines are located on land not owned in
fee but are covered by necessary consents of governmental authorities or
rights obtained from owners of private property.
Item 3. Legal Proceedings
In November 1999, the Attorney General of the United States, on behalf of
the U.S. Environmental Protection Agency (EPA) brought an action in the
U.S. District Court for the Northern District of Georgia against Georgia
Power Company and other subsidiaries of The Southern Company for injunctive
relief and the assessment of civil penalties for violations of the
Prevention of Significant Deterioration (PSD) provisions and the New Source
Performance Standards (NSPS) of the Clean Air Act. Among other things, the
EPA alleges Georgia Power Company constructed and is continuing to operate
Scherer Unit No. 4, in which FPL owns a 76% interest, without obtaining a
PSD permit, without complying with NSPS requirements, and without applying
best available control technology for nitrogen oxides, sulfur dioxides and
particulate matter as required by the Clean Air Act. The suit seeks
injunctive relief requiring the installation of such technology and civil
penalties of up to $25,000 per day for each violation from an unspecified
date after August 7, 1977 through January 30, 1997, and $27,500 per day for
each violation thereafter. Georgia Power Company has filed an answer to the
complaint asserting that it has complied with all requirements of the Clean
Air Act, denying the plaintiff's allegations of liability, denying that the
plaintiff is entitled to any of the relief that it seeks and raising
various other defenses. The EPA subsequently moved for leave to file an
amended complaint that would extend the suit to other Southern Company
subsidiaries and plants and would add an allegation that unspecified major
modifications have been made at Scherer Unit No. 4 that require its
compliance with the aforementioned Clean Air Act provisions (comparable
allegations were made in the original complaint as to other plants but not
Scherer Unit No. 4). The Court has not yet ruled on whether to permit the
amendment. If amended as proposed, the EPA's demand for civil penalties
with respect to Scherer Unit No. 4 would apply to the period commencing on
an unspecified date after June 1, 1975.
In June 2000, Southern California Edison Company (SCE) filed with the FERC a
Petition for Declaratory Order (petition) asking the FERC to apply the
November 1999 decision of the U.S. Court of Appeals for the District of
Columbia Circuit in Southern California Edison Co. v. FERC, to all qualifying
small power production facilities, including the SEGS VIII and SEGS IX
facilities owned by Luz Solar Partners Ltd., VIII and Luz Solar Partners
Ltd., IX (collectively, the partnerships), indirectly owned in part by FPL
Energy. The federal circuit court of appeals' decision invalidated the
FERC's so-called essential fixed assets standard, which permitted secondary
uses of fossil fuels by qualifying small power production facilities beyond
those expressly set forth in PURPA. The petition requests that the FERC
declare that qualifying small power production facilities may not continue to
use fossil fuel under the essential fixed assets standard and that they may
be required to make refunds with respect to past usage. The partnerships
intend to file a Motion to Intervene and Protest before the FERC, vigorously
objecting to the position taken by SCE in its petition. The partnerships
have always operated the SEGS VIII and SEGS IX facilities in accordance with
orders issued by the FERC. Such orders were neither challenged nor appealed
at the time they were granted, and it is the position of the partnerships
that the orders remain in effect.
In September 2000, Karen and Bruce Alexander filed suit against FPL Group,
FPL, FPL FiberNet, FPL Group Capital and FPL Investments, Inc. in the
Circuit Court for Palm Beach County, Florida, purportedly on behalf of all
property owners in Florida whose property is encumbered by defendants'
easements and on whose property the defendants have installed or intend to
install fiber-optic cable which defendants lease, license or convey for
non-electric transmission or distribution purposes, or intend to do so.
The lawsuit alleged that FPL's easements did not permit the installation
and use of fiber-optic cable for general communication purposes. The
plaintiffs sought injunctive relief, compensatory damages, interest and
attorneys' fees. The defendants served an offer of judgment for ten
dollars on the named plaintiffs, reflecting the defendants' conclusion
that, based on an analysis of the claims and circumstances of these
individual plaintiffs, they had not sustained the injuries for which they
claimed a right to relief. In January 2001, the plaintiffs accepted this
offer of judgment, pursuant to which the suit has been dismissed with
prejudice.
In the event that FPL Group and FPL do not prevail in these suits, there
may be a material adverse effect on their financial statements. However,
FPL Group and FPL believe that they have meritorious defenses to the
pending litigation discussed above and are vigorously defending these
suits. Accordingly, the liabilities, if any, arising from these
proceedings are not anticipated to have a material adverse effect on their
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of FPL Group's shareholders was held on December 15, 2000
to approve the proposed merger between FPL Group and Entergy. Of the
176,171,034 shares of common stock outstanding on the record date of November
6, 2000, a total of 140,418,246 shares were represented in person or by
proxy, of which 136,123,939 voted for the merger, 3,042,680 against and
1,251,627 abstained.
PART II
Item 5. Market for the Registrants' Common Equity and Related Stockholder
Matters
Common Stock Data. All of FPL's common stock is owned by FPL Group. FPL
Group's common stock is traded on the New York Stock Exchange. The high
and low sales prices for the common stock of FPL Group as reported in the
consolidated transaction reporting system of the New York Stock Exchange
for each quarter during the past two years are as follows:
2000 1999
Quarter High Low High Low
First ....................................................... $48 1/4 $36 3/8 $61 15/16 $50 1/8
Second ...................................................... $50 13/16 $41 13/16 $60 1/2 $52 7/8
Third ....................................................... $67 1/8 $47 1/8 $56 11/16 $49 1/8
Fourth ...................................................... $73 $59 3/8 $52 1/2 $41 1/8
Approximate Number of Stockholders. As of the close of business on
January 31, 2001, there were 44,645 holders of record of FPL Group's common
stock.
Dividends. Quarterly dividends have been paid on common stock of FPL Group
during the past two years in the following amounts:
Quarter 2000 1999
First .......... $0.54 $0.52
Second ......... $0.54 $0.52
Third .......... $0.54 $0.52
Fourth ......... $0.54 $0.52
The amount and timing of dividends payable on FPL Group's common stock are
within the sole discretion of FPL Group's board of directors. The board of
directors reviews the dividend rate at least annually (in February) to
determine its appropriateness in light of FPL Group's financial position
and results of operations, legislative and regulatory developments
affecting the electric utility industry in general and FPL in particular,
competitive conditions and any other factors the board deems relevant. The
ability of FPL Group to pay dividends on its common stock is dependent upon
dividends paid to it by its subsidiaries, primarily FPL. There are no
restrictions in effect that currently limit FPL's ability to pay dividends
to FPL Group. See Management's Discussion - Liquidity and Capital Resources
and Note 5 - Common Stock Dividend Restrictions regarding dividends paid by
FPL to FPL Group.
Item 6. Selected Financial Data
Years Ended December 31,
2000 1999 1998 1997 1996
SELECTED DATA OF FPL GROUP
(millions, except per share amounts):
Operating revenues .................................... $ 7,082 $ 6,438 $ 6,661 $ 6,369 $ 6,037
Net income ............................................ $ 704(b) $ 697(c) $ 664 $ 618 $ 579
Earnings per share of common stock(a) ................. $ 4.14(b) $ 4.07(c) $ 3.85 $ 3.57 $ 3.33
Dividends paid per share of common stock .............. $ 2.16 $ 2.08 $ 2.00 $ 1.92 $ 1.84
Total assets .......................................... $ 15,300 $13,441 $12,029 $12,449 $12,219
Long-term debt, excluding current maturities .......... $ 3,976 $ 3,478 $ 2,347 $ 2,949 $ 3,144
Obligations of FPL under capital lease, excluding
current maturities .................................. $ 127 $ 157 $ 146 $ 186 $ 182
Preferred stock of FPL with sinking fund requirements,
excluding current maturities ........................ $ - $ - $ - $ - $ 42
Energy sales (kwh) .................................... 100,777 92,446 91,041 84,642 80,889
SELECTED DATA OF FPL (millions):
Operating revenues .................................... $ 6,361 $ 6,057 $ 6,366 $ 6,132 $ 5,986
Net income available to FPL Group...................... $ 607(b) $ 576(c) $ 616 $ 608 $ 591
Total assets .......................................... $ 12,020 $10,608 $10,748 $11,172 $11,531
Long-term debt, excluding current maturities .......... $ 2,577 $ 2,079 $ 2,191 $ 2,420 $ 2,981
Energy sales (kwh) .................................... 91,969 88,067 89,362 82,734 80,889
Energy sales:
Residential ......................................... 50.4% 50.2% 50.9% 50.6% 51.1%
Commercial .......................................... 40.2 40.3 38.8 39.8 38.6
Industrial .......................................... 4.1 4.5 4.4 4.7 4.7
Interchange power sales ............................. 3.1 3.0 3.2 2.1 2.6
Other(d) ............................................ 2.2 2.0 2.7 2.8 3.0
Total ................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Approximate 60-minute net peak served (mw)(e):
Summer season ....................................... 17,808 17,615 17,897 16,613 16,064
Winter season ....................................... 18,219 17,057 16,802 13,047 16,490
Average number of customer accounts (thousands):
Residential ......................................... 3,414 3,332 3,266 3,209 3,153
Commercial .......................................... 415 405 397 389 381
Industrial .......................................... 16 16 15 15 15
Other ............................................... 3 3 2 3 2
Total ................................................. 3,848 3,756 3,680 3,616 3,551
Average price per kwh (cents)(f) ...................... 6.86 6.87 7.13 7.37 7.39
____________________
(a) Basic and assuming dilution.
(b) Includes merger-related expenses. Excluding these expenses, FPL Group's net income and earnings per share would
have been $745 million and $4.38, respectively and FPL's net income available to FPL Group would have been $645
million.
(c) Includes effects of a gain on sale of Adelphia Communications Corporation stock, impairment loss on Maine assets,
settlement of litigation between FPL and FMPA and a gain on the redemption of a one-third ownership interest in a
cable limited partnership. Excluding these items, FPL Group's net income and earnings per share would have been
$681 million and $3.98, respectively. Excluding the settlement of litigation between FPL and FMPA, FPL's net
income available to FPL Group would have been $618 million.
(d) Includes the net change in unbilled sales.
(e) Winter season includes November and December of the current year and January to March of the following year.
(f) Excludes interchange power sales, net change in unbilled revenues, deferrals/recoveries under cost recovery clauses
and the provision for retail rate refund.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein. In the following
discussion, all comparisons are with the corresponding items in the prior
year.
Merger
In July 2000, FPL Group and Entergy announced a proposed merger. FPL Group
and Entergy shareholders approved the proposed merger in December 2000.
The merger will create a company with capabilities and resources to succeed
and grow in the competitive energy marketplace. The companies' objective
is to complete the merger by the end of 2001. However, completion of the
merger and the ultimate closing date depend upon meeting a number of
conditions, including the receipt of applicable regulatory approvals. In
2000, FPL Group recorded $67 million in merger-related expenses, of which
FPL recorded $62 million ($38 million after-tax), FPL Energy recorded $2
million ($1 million after-tax) and Corporate and Other recorded $3 million
($2 million after-tax). Merger-related expenses are likely to continue in
2001, although to a lesser degree. For additional information concerning
the proposed merger, see Note 2.
Results of Operations
FPL Group's net income and earnings per share in 2000 increased despite a
charge for merger-related expenses. This charge reduced net income and
earnings per share by $41 million and $0.24, respectively. Net income and
earnings per share in 1999 included the net effect of several nonrecurring
transactions that resulted in additional net income of $16 million, or $0.09
per share. Excluding the merger-related expenses in 2000 and the
nonrecurring items in 1999, FPL Group's net income in 2000 increased 9.4% to
$745 million, and earnings per share increased 10.1% to $4.38. The
comparable growth rates for 1999 were 2.6% and 3.4%, respectively, excluding
the effects of the nonrecurring items in 1999. In 2000, both FPL and FPL
Energy contributed to the growth, while in 1999 the growth was primarily
attributable to FPL Energy.
FPL - FPL's results for 2000 continued to benefit from customer growth,
increased electricity usage per retail customer and lower O&M expenses.
The effect of the rate reduction and higher interest charges partly offset
these positives. FPL's portion of the merger-related expenses in 2000
reduced net income by $38 million. Results for 1999 also include a
nonrecurring charge related to the settlement of litigation that reduced
net income by $42 million. FPL's net income, excluding these items in both
periods, was $645 million in 2000, up $27 million from 1999. Excluding the
litigation settlement in 1999, FPL's slight net income growth in 1999
reflected lower depreciation, customer growth and lower O&M expenses partly
offset by the effect of the rate reduction and a decline in electricity
usage per retail customer.
FPL's operating revenues consist primarily of revenues from retail base
operations, cost recovery clauses and franchise fees. Revenues from retail
base operations were $3.5 billion, $3.5 billion and $3.8 billion in 2000,
1999 and 1998, respectively. Revenues from cost recovery clauses and
franchise fees represent a pass-through of costs and do not significantly
affect net income. Fluctuations in these revenues are primarily driven by
changes in energy sales, fuel prices and capacity charges. Due to higher
than projected oil and natural gas prices in 2000, the FPSC approved higher
per kwh charges effective June 15, 2000. These additional clause revenues
resulted in higher operating revenues. Later in the year, the FPSC
approved FPL's annual fuel filing for 2001, which included an estimate of
under-recovered fuel costs in 2000 of $518 million. FPL will recover the
$518 million over a two-year period beginning January 2001, rather than the
typical one-year time frame. FPL has also agreed that instead of receiving
a return at the commercial paper rate on this unrecovered portion through
the fuel clause, the under-recovery will be included as a rate base
regulatory asset over the two-year recovery period. Actual under-recovered
fuel costs through December 31, 2000 exceeded the estimates made earlier in
the year by $78 million, and in February 2001, FPL requested the FPSC to
approve a fuel adjustment increase effective April 2001 to recover the
additional $78 million of under-recovered fuel costs. See Note 1 -
Regulation.
In 1999, the FPSC approved a three-year agreement among FPL, Public
Counsel, FIPUG and Coalition regarding FPL's retail base rates, authorized
regulatory ROE, capital structure and other matters. The agreement, which
became effective April 15, 1999, provides for a $350 million reduction in
annual revenues from retail base operations allocated to all customers on a
cents-per-kilowatt-hour basis. Additionally, the agreement sets forth a
revenue sharing mechanism for each of the twelve month periods covered by
the agreement, whereby revenues from retail base operations in excess of a
stated threshold are required to be shared on the basis of two-thirds
refunded to retail customers and one-third retained by FPL. Revenues from
retail base operations in excess of a second threshold are required to be
refunded 100% to retail customers.
The refund thresholds are as follows:
Twelve Months Ended
April 14,
2000 2001 2002
(millions)
66 2/3% to customers ................... $3,400 $3,450 $3,500
100% to customers ...................... $3,556 $3,606 $3,656
During 2000, FPL accrued approximately $60 million relating to refunds to
retail customers compared to $20 million in 1999. Furthermore, FPL refunded
in 2000 approximately $23 million, including interest, to retail customers
for the first twelve-month period under the rate agreement. At December 31,
2000 and 1999, the accrual for the revenue refund was approximately $57
million and $20 million, respectively.
The earnings effect of the annual revenue reduction was offset by lower
special depreciation. The agreement allows for special depreciation of up to
$100 million, at FPL's discretion, in each year of the three-year agreement
period to be applied to nuclear and/or fossil generating assets. Under this
new depreciation program, FPL recorded $100 million of special depreciation
in the first twelve-month period and $71 million through December 31, 2000 of
the second twelve-month period. On a fiscal year basis, FPL recorded
approximately $101 million and $70 million of special depreciation in 2000
and 1999, respectively. The new depreciation program replaced a revenue-based
special amortization program whereby special amortization in the amount of
$63 million and $378 million was recorded in 1999 and 1998, respectively.
See Note 1 - Electric Plant, Depreciation and Amortization.
The agreement also lowered FPL's authorized regulatory ROE range to 10% -
12%. During the term of the agreement, the achieved ROE may from time to
time be outside the authorized range, and the revenue sharing mechanism
described above is specified to be the appropriate and exclusive mechanism
to address that circumstance. FPL reported an ROE of 12.2%, 12.1% and
12.6% in 2000, 1999 and 1998, respectively. See Note 1 - Revenues and
Rates.
Revenues from retail base operations were flat during 2000. Customer
growth of 2.5% and a 1.9% increase in electricity usage per retail customer
was almost entirely offset by the effect of the rate reduction.
The decline in retail base revenues in 1999 was largely due to the rate
reduction. A 2.8% decline in electricity usage per retail customer, mainly
due to milder weather conditions, was almost entirely offset by the 2.0%
increase in the number of customer accounts.
FPL's O&M expenses continued to decline in 2000 due to improved
productivity. O&M expenses in 1999 also declined as a result of continued
cost control efforts partially offset by higher overhaul costs at fossil
plants.
Interest charges increased in 2000 reflecting increased debt activity to
fund FPL's capital expansion program and under-recovered fuel costs. Lower
interest charges in 1999 and 1998 reflect lower average debt balances and
the full amortization in 1998 of deferred costs associated with debt
reacquired through 1998.
The electric utility industry is facing increasing competitive pressure.
FPL currently faces competition from other suppliers of electrical energy
to wholesale customers and from alternative energy sources and self-
generation for other customer groups, primarily industrial customers. In
2000, operating revenues from wholesale and industrial customers combined
represented approximately 4% of FPL's total operating revenues. A number
of potential merchant plants have been announced in Florida over the past
several years. Five of these announced merchant plants totaling 3,700 mw
have presented submissions to seek a determination of need to the FPSC. In
March 1999, the FPSC approved one of the petitions for a power plant to be
constructed within FPL's service territory. FPL, along with other Florida
utilities, appealed the decision to the Florida Supreme Court. In April
2000, the Florida Supreme Court upheld arguments by FPL and other Florida
utilities and ruled that under current Florida law the FPSC is not
authorized to grant a determination of need for a proposed power plant, the
output of which is not fully committed to use by Florida retail customers.
In March 2001, the United States Supreme Court denied a petition for
certiorari review by one of the petitioners. See Note 1 - Regulation.
In 2000, the Governor of Florida signed an executive order creating the
Energy 2020 Study Commission to propose an energy plan and strategy for
Florida. The order required that recommendations be made to the
legislature and Governor by December 1, 2001. The commission chose to
split the energy study between wholesale and retail competition. In January
2001, the commission issued an interim report containing a proposal for
restructuring Florida's wholesale market for electricity. The proposal
recommends the removal of statutory barriers to entry for merchant plants
and, according to the report, provides a transition to a "level playing
field" for all generating assets. Under the commission's proposal,
investor-owned utilities such as FPL would establish, and transfer their
generating assets to, affiliated exempt wholesale generators, which would
also construct and operate new generating assets. The investor-owned load-
serving utilities, such as FPL, would acquire energy resources through
competitive bidding, negotiated contracts or from the short-term (spot)
market. Purchases from affiliated exempt wholesale generators would be
pursuant to a competitive bidding process. The proposal includes a number
of features, including a three-year retail base rate freeze. The proposal
may be addressed in the next legislative session which takes place in March
through May 2001. In addition, the FERC has jurisdiction over potential
changes which could affect competition in wholesale transactions. The
commission will now consider recommendations for the retail market.
In 1999, the FERC issued its final order on RTOs. RTOs, under a variety of
structures, provide for the independent operation of transmission systems
for a given geographic area. The final order establishes guidelines for
public utilities to use in considering and/or developing plans to initiate
operations of RTOs by December 15, 2001. In October 2000, FPL, together
with Florida Power Corporation and Tampa Electric Company, filed a joint
proposal to form a fully independent for-profit transmission company that
would be responsible for the transmission lines that carry electricity from
power plants primarily within the state to substations in Florida. The
October filing was supplemented by a December 2000 filing that provided
certain operational details of the proposed RTO.
Under the proposed form of RTO, FPL would contribute its transmission
assets to an independent transmission company, GridFlorida, that would own
and operate the system. A separate corporation would be formed to own the
voting interest in and manage GridFlorida. In return for its transmission
assets, FPL would receive a non-voting ownership interest in GridFlorida,
which could be exchanged for non-voting stock of the managing corporation.
FPL would account for its interest in GridFlorida using the equity method.
FPL Energy - FPL Energy's earnings continue to benefit from the significant
expansion of its independent power generation portfolio, which has more
than tripled since 1997 to over 4,100 mw at December 31, 2000. In 2000,
Lamar Power Partners, a natural gas-fired plant in the Central region
became operational and added approximately 1,000 mw to FPL Energy's
operating portfolio. In 1999, FPL Energy acquired the Maine assets, which
totaled 1,159 mw and in 1998, FPL Energy invested in two natural gas-fired
plants in the Northeast, adding 295 mw. In addition, approximately 400 mw
of wind projects have been added in the West and Central regions since
1997.
In 2000, FPL Energy's net income also benefited from increased revenues
generated by the Maine assets as a result of warmer weather and higher
prices in the Northeast during May 2000, and lower O&M expenses at Doswell.
In 1999, the effect of a $176 million ($104 million after-tax) impairment
loss (see Note 10) and higher administrative expenses to accommodate future
growth more than offset the benefits of the growing generation portfolio
and improved results from Doswell. FPL Energy's 1998 net income includes
the effect of a $35 million ($21 million after-tax) charge for the
termination of an interest rate swap agreement, which was partly offset by
the receipt of a $31 million ($19 million after-tax) settlement relating to
a contract dispute.
Deregulation of the electric utility market presents both opportunities and
risks for FPL Energy. Opportunities exist for the selective acquisition of
generation assets that are being divested under deregulation plans and for
the construction and operation of efficient plants that can sell power in
competitive markets. Substantially all of the energy produced in 2000 by
FPL Energy's independent power projects was sold through power sales
agreements with utilities that expire in 2001-28. As competitive wholesale
markets become more accessible to other generators, obtaining power sales
agreements will become a progressively more competitive process. FPL
Energy expects that as its existing power sales agreements expire, more of
the energy produced will be sold through shorter-term contracts and into
competitive wholesale markets.
Competitive wholesale markets in the United States continue to evolve and
vary by geographic region. Revenues from electricity sales in these
markets will vary based on the prices obtainable for energy, capacity and
other ancillary services. Some of the factors affecting success in these
markets include the ability to operate generating assets efficiently, the
price and supply of fuel, transmission constraints, competition from new
sources of generation, demand growth and exposure to legal and regulatory
changes.
FPL Energy has approximately 540 net mw in California, most of which are
wind, solar and geothermal qualifying facilities. The output of these
projects is sold predominantly under long-term contracts with California
utilities. Revenues are derived from energy payments based upon the
purchasing utilities' short run avoided cost and contractual capacity
payments. Short run avoided costs in California are currently tied to
natural gas monthly prices at the California border. Increases in natural
gas prices and an imbalance between power supply and demand, as well as
other factors, have contributed to significant increases in wholesale
electricity prices in California. Utilities in California had previously
agreed to fixed tariffs to their retail customers, which resulted in
significant under-recoveries of wholesale electricity purchase costs. The
state of California is currently considering legislation that, among other
things, provides for long-term price stability and payments to qualifying
facilities, such as those owned by FPL Energy. If enacted, the proposed
legislation is not expected to significantly change FPL Energy's economic
position.
Corporate and Other - Beginning in 2000, the corporate and other segment
includes FPL FiberNet's operating results. FPL FiberNet was formed in
January 2000 to enhance the value of FPL Group's fiber-optic network assets
that were originally built to support FPL operations. Accordingly, FPL's
existing 1,600 miles of fiber-optic lines were transferred to FPL FiberNet
in January 2000. In 1999, net income for the corporate and other segment
reflects a $149 million ($96 million after-tax) gain on the sale of an
investment in Adelphia Communications Corporation common stock, a $108
million ($66 million after-tax) gain recorded by FPL Group Capital on the
redemption of its one-third interest in a cable limited partnership, costs
associated with closing a retail marketing business of $11 million ($7
million after-tax) and the favorable resolution of a prior year state tax
matter of $10 million ($7 million after-tax). In 1998, net income for the
corporate and other segment reflects a $36 million ($25 million after-tax)
loss from the sale of Turner Foods Corporation's assets, the cost of
terminating an agreement designed to fix interest rates of $26 million ($16
million after-tax) and adjustments relating to prior years' tax matters,
including the resolution of a $30 million audit issue with the Internal
Revenue Service.
Liquidity and Capital Resources
FPL Group's capital requirements consist of expenditures to meet increased
electricity usage and customer growth of FPL, investment opportunities at
FPL Energy and expansion of FPL FiberNet. Capital expenditures of FPL for
the 2001-03 period are expected to be approximately $3.3 billion, including
$1.1 billion in 2001. As of December 31, 2000, FPL Energy has commitments
totaling approximately $380 million, primarily in connection with the
development and expansion of independent power projects. Subsidiaries of
FPL Group, other than FPL, have guaranteed approximately $810 million of
prompt performance payments, lease obligations, purchase and sale of power
and fuel agreement obligations, debt service payments and other payments
subject to certain contingencies. See Note 13 - Commitments.
Debt maturities of FPL Group's subsidiaries will require cash outflows of
approximately $1.0 billion ($860 million for FPL) through 2005, including
$65 million for FPL in 2001. It is anticipated that cash requirements for
capital expenditures, energy-related investments and debt maturities in
2001 will be satisfied with internally generated funds and debt issuances.
Any internally generated funds not required for capital expenditures and
current maturities may be used to reduce outstanding debt or repurchase
common stock, or for investment. Any temporary cash needs will be met by
short-term bank borrowings. In 2000, FPL had $125 million of first mortgage
bonds mature and issued $452 million of variable-rate bonds and $500
million of first mortgage bonds. The proceeds from these issuances were
used in 2000 to redeem $278 million of variable-rate bonds, $109 million of
first mortgage bonds and to repay FPL's short-term borrowings. In 2001,
$65 million was used to redeem $49 million of variable-rate bonds and $16
million of first mortgage bonds. Bank lines of credit currently available
to FPL Group and its subsidiaries aggregate $3.0 billion ($853 million for
FPL).
During 2000, FPL Group repurchased 2.6 million shares of common stock under
its share repurchase programs. Under the $570 million share repurchase
program authorized in connection with the proposed merger, 1,876,500 shares
totaling $116 million have been repurchased through January 31, 2001. See
Note 2.
FPL self-insures for damage to certain transmission and distribution
properties and maintains a funded storm reserve to reduce the financial
impact of storm losses. The balance of the storm fund reserve at December
31, 2000 and 1999 was $229 million and $216 million, respectively. Bank
lines of credit of $300 million, included in the $853 million above, are
also available if needed to provide cash for storm restoration costs. The
FPSC has indicated that it would consider future storm losses in excess of
the funded reserve for possible recovery from customers.
FPL's charter and mortgage contain provisions which, under certain
conditions, restrict the payment of dividends and the issuance of
additional unsecured debt, first mortgage bonds and preferred stock. Given
FPL's current financial condition and level of earnings, expected financing
activities and dividends are not affected by these limitations.
New Accounting Rule
Effective January 1, 2001, FPL Group and FPL adopted Financial Accounting
Standards No. (FAS) 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by FAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." For information concerning the
adoption of FAS 133/138, see Note 1 - Accounting for Derivative Instruments
and Hedging Activities.
Market Risk Sensitivity
Substantially all financial instruments and positions held by FPL Group and
FPL described below are held for purposes other than trading. Market risk
is measured as the potential loss in fair value resulting from hypothetical
reasonably possible changes in interest rates, equity prices or commodity
prices over the next year.
Interest rate risk - The special use funds of FPL include restricted funds
set aside to cover the cost of storm damage and for the decommissioning of
FPL's nuclear power plants. A portion of these funds is invested in fixed
income debt securities carried at their market value of approximately
$1.002 billion and $847 million at December 31, 2000 and 1999,
respectively. Adjustments to market value result in a corresponding
adjustment to the related liability accounts based on current regulatory
treatment. Because the funds set aside for storm damage could be needed at
any time, the related investments are generally more liquid and, therefore,
are less sensitive to changes in interest rates. The nuclear
decommissioning funds, in contrast, are generally invested in longer-term
securities, as decommissioning activities are not expected to begin until
at least 2012. At December 31, 2000 and 1999, other investments of FPL
Group include $300 million and $291 million, respectively, of investments
that are carried at estimated fair value or cost, which approximates fair
value.
The following are estimates of the fair value of FPL's and FPL Group's
long-term debt:
2000 1999
Carrying Fair Carrying Fair
Value Value Value Value
(millions)
Long-term debt of FPL (a) .................. $2,642 $2,621(b) $2,204 $2,123(b)
Long-term debt of FPL Group (a) ............ $4,041 $4,080(b) $3,603 $3,518(b)
____________________
(a) Includes current maturities.
(b) Based on quoted market prices for these or similar issues.
Based upon a hypothetical 10% decrease in interest rates, the net fair
value of the net liabilities would increase by approximately $84 million
($43 million for FPL) at December 31, 2000.
Equity price risk - Included in the special use funds of FPL are marketable
equity securities carried at their market value of approximately $511
million and $573 million at December 31, 2000 and 1999, respectively. A
hypothetical 10% decrease in the prices quoted by stock exchanges would
result in a $51 million reduction in fair value and corresponding
adjustment to the related liability accounts based on current regulatory
treatment at December 31, 2000.
Commodity price risk - EMT, a division of FPL, and PMI, a subsidiary of FPL
Energy, purchase natural gas and oil to be delivered in the future for use
as fuel in the generation of electric power. Generation, to the extent not
required for FPL's native load customers or under contract by FPL Energy,
is also sold for future delivery by EMT and PMI. To manage the risk
inherent in fluctuating commodity prices compared to the committed prices,
EMT and PMI enter into commodity-based derivative instruments (primarily
swaps and futures) to mitigate this risk. The fair value of the net
position in commodity-based derivative instruments at December 31, 2000 was
a negative $11 million for FPL Group and a negative $5 million for FPL. At
December 31, 1999, the fair value of these instruments was insignificant.
The effect of a hypothetical 40% decrease in the price of natural gas and a
hypothetical 25% decrease in the price of oil would be to change the fair
value at December 31, 2000 of these instruments to a negative $32 million
for FPL Group and a negative $23 million for FPL.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
See Management's Discussion - Market Risk Sensitivity
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS,
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY:
We have audited the consolidated financial statements of FPL Group, Inc.
and of Florida Power & Light Company, listed in the accompanying index at
Item 14(a)1 of this Annual Report (Form 10-K) to the Securities and
Exchange Commission for the year ended December 31, 2000. These financial
statements are the responsibility of the respective company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of FPL Group, Inc. and
Florida Power & Light Company at December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 9, 2001
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
Years Ended December 31,
2000 1999 1998
OPERATING REVENUES ................................................................. $7,082 $6,438 $6,661
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................................ 2,868 2,365 2,244
Other operations and maintenance ................................................. 1,257 1,253 1,284
Litigation settlement ............................................................ - 69 -
Merger-related ................................................................... 67 - -
Depreciation and amortization .................................................... 1,032 1,040 1,284
Impairment loss on Maine assets .................................................. - 176 -
Taxes other than income taxes .................................................... 618 615 597
Total operating expenses ....................................................... 5,842 5,518 5,409
OPERATING INCOME ................................................................... 1,240 920 1,252
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................................. (278) (222) (322)
Preferred stock dividends - FPL .................................................. (15) (15) (15)
Divestiture of cable investments ................................................. - 257 -
Other - net ...................................................................... 93 80 28
Total other income (deductions) - net .......................................... (200) 100 (309)
INCOME BEFORE INCOME TAXES ......................................................... 1,040 1,020 943
INCOME TAXES ....................................................................... 336 323 279
NET INCOME ......................................................................... $ 704 $ 697 $ 664
Earnings per share of common stock (basic and assuming dilution) ................... $4.14 $4.07 $3.85
Dividends per share of common stock ................................................ $2.16 $2.08 $2.00
Average number of common shares outstanding ........................................ 170 171 173
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(millions)
December 31,
2000 1999
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property ....................................... $19,642 $18,474
Nuclear fuel under capital lease - net...................................................... 127 157
Construction work in progress .............................................................. 1,253 923
Less accumulated depreciation and amortization ............................................. (11,088) (10,290)
Total property, plant and equipment - net ................................................ 9,934 9,264
CURRENT ASSETS:
Cash and cash equivalents .................................................................. 129 361
Customer receivables, net of allowances of $7 each ......................................... 637 482
Other receivables .......................................................................... 246 61
Materials, supplies and fossil fuel inventory - at average cost ............................ 370 343
Deferred clause expenses ................................................................... 337 54
Other ...................................................................................... 62 72
Total current assets ..................................................................... 1,781 1,373
OTHER ASSETS:
Special use funds of FPL ................................................................... 1,497 1,352
Other investments .......................................................................... 651 611
Other ...................................................................................... 1,437 841
Total other assets ....................................................................... 3,585 2,804
TOTAL ASSETS ................................................................................. $15,300 $13,441
CAPITALIZATION:
Common shareholders' equity ................................................................ $ 5,593 $ 5,370
Preferred stock of FPL without sinking fund requirements ................................... 226 226
Long-term debt ............................................................................. 3,976 3,478
Total capitalization ..................................................................... 9,795 9,074
CURRENT LIABILITIES:
Commercial paper ........................................................................... 1,158 339
Current maturities of long-term debt ....................................................... 65 125
Accounts payable ........................................................................... 564 407
Customers' deposits ........................................................................ 254 284
Accrued interest and taxes ................................................................. 146 182
Deferred clause revenues ................................................................... 70 116
Other ...................................................................................... 506 417
Total current liabilities ................................................................ 2,763 1,870
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes .......................................................... 1,378 1,079
Deferred regulatory credit - income taxes .................................................. 107 126
Unamortized investment tax credits ......................................................... 162 184
Storm and property insurance reserve ....................................................... 229 216
Other ...................................................................................... 866 892
Total other liabilities and deferred credits ............................................. 2,742 2,497
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ......................................................... $15,300 $13,441
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
Years Ended December 31,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................................... $ 704 $ 697 $ 664
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................ 1,032 1,040 1,284
Increase (decrease) in deferred income taxes and related regulatory credit ... 283 (198) (237)
Deferrals under cost recovery clauses ........................................ (810) 55 68
Gain on sale of cable investments ............................................ - (257) -
Impairment loss on Maine assets .............................................. - 176 -
Other - net .................................................................. (233) 50 (36)
Net cash provided by operating activities ...................................... 976 1,563 1,743
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ...................................................... (1,299) (861) (617)
Independent power investments .................................................... (507) (1,540) (521)
Return of investment and loan repayments - partnerships and joint ventures ....... 24 57 220
Proceeds from the sale of assets ................................................. 22 198 135
Other - net....................................................................... (183) (26) (12)
Net cash used in investing activities .......................................... (1,943) (2,172) (795)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ....................................................... 947 1,609 343
Retirement of long-term debt ..................................................... (515) (584) (727)
Increase (decrease) in short-term debt ........................................... 819 229 (24)
Repurchases of common stock ...................................................... (150) (116) (62)
Dividends on common stock ........................................................ (366) (355) (345)
Net cash provided by (used in) financing activities ............................ 735 783 (815)
Net increase (decrease) in cash and cash equivalents ............................... (232) 174 133
Cash and cash equivalents at beginning of year ..................................... 361 187 54
Cash and cash equivalents at end of year ........................................... $ 129 $ 361 $ 187
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest (net of amount capitalized) ............................... $ 301 $ 221 $ 308
Cash paid for income taxes ....................................................... $ 160 $ 573 $ 463
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease obligations ........................................... $ 43 $ 86 $ 34
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(millions)
Accumulated
Common Stock (a) Additional Other Common
Aggregate Paid-In Unearned Comprehensive Retained Shareholders'
Shares Par Value Capital Compensation Income (Loss) Earnings Equity
Balances, December 31, 1997..... 182 $2 $3,302 $(264) $ 1 $1,804
Net income ................... - - - - - 664
Repurchases of common stock .. (1) - (62) - - -
Dividends on common stock .... - - - - - (345)
Earned compensation under ESOP - - 13 12 - -
Other ........................ - - (1) - - -
Balances, December 31, 1998 .... 181(b) 2 3,252 (252) 1 2,123
Net income ................... - - - - - 697
Repurchases of common stock .. (2) - (116) - - -
Dividends on common stock .... - - - - - (355)
Earned compensation under ESOP - - 12 14 - -
Other comprehensive loss ..... - - - - (2) -
Other ........................ - - - (6) - -
Balances, December 31, 1999 .... 179(b) 2 3,148 (244) (1) 2,465 $5,370
Net income ................... - - - - - 704
Repurchases of common stock .. (3) - (150) - - -
Dividends on common stock .... - - - - - (366)
Earned compensation under ESOP - - 12 15 - -
Other comprehensive income ... - - - - 1 -
Other ........................ - - (2) 9 - -
Balances, December 31, 2000 .... 176(b) $2 $3,008 $(220) $ - $2,803 $5,593
____________________
(a) $0.01 par value, authorized - 300,000,000 shares; outstanding 175,766,215 and 178,554,735 at December 31, 2000 and
1999, respectively.
(b) Outstanding and unallocated shares held by the Employee Stock Ownership Plan Trust totaled 7 million, 8 million and
9 million at December 31, 2000, 1999 and 1998, respectively.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(millions)
Years Ended December 31,
2000 1999 1998
OPERATING REVENUES ................................................................ $6,361 $6,057 $6,366
OPERATING EXPENSES:
Fuel, purchased power and interchange ........................................... 2,511 2,232 2,175
Other operations and maintenance ................................................ 1,062 1,089 1,163
Litigation settlement ........................................................... - 69 -
Merger-related .................................................................. 62 - -
Depreciation and amortization ................................................... 975 989 1,249
Income taxes .................................................................... 351 327 356
Taxes other than income taxes ................................................... 600 605 596
Total operating expenses ...................................................... 5,561 5,311 5,539
OPERATING INCOME .................................................................. 800 746 827
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................................ (176) (163) (196)
Other - net ..................................................................... (2) 8 -
Total other deductions - net .................................................. (178) (155) (196)
NET INCOME ........................................................................ 622 591 631
PREFERRED STOCK DIVIDENDS ......................................................... 15 15 15
NET INCOME AVAILABLE TO FPL GROUP, INC. ........................................... $ 607 $ 576 $ 616
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
(millions)
December 31,
2000 1999
ELECTRIC UTILITY PLANT:
Plant in service ......................................................................... $18,073 $17,556
Less accumulated depreciation ............................................................ (10,919) (10,184)
Net .................................................................................... 7,154 7,372
Nuclear fuel under capital lease - net.................................................... 127 157
Construction work in progress ............................................................ 833 449
Electric utility plant - net ......................................................... 8,114 7,978
CURRENT ASSETS:
Cash and cash equivalents ................................................................ 66 -
Customer receivables, net of allowances of $7 each ....................................... 489 433
Other receivables ........................................................................ 157 36
Materials, supplies and fossil fuel inventory - at average cost .......................... 313 299
Deferred clause expenses ................................................................. 337 54
Other .................................................................................... 54 71
Total current assets ................................................................. 1,416 893
OTHER ASSETS:
Special use funds ........................................................................ 1,497 1,352
Other .................................................................................... 993 385
Total other assets ................................................................... 2,490 1,737
TOTAL ASSETS ............................................................................... $12,020 $10,608
CAPITALIZATION:
Common shareholder's equity .............................................................. $ 5,032 $ 4,793
Preferred stock without sinking fund requirements ........................................ 226 226
Long-term debt ........................................................................... 2,577 2,079
Total capitalization ................................................................. 7,835 7,098
CURRENT LIABILITIES:
Commercial paper ......................................................................... 560 94
Current maturities of long-term debt ..................................................... 65 125
Accounts payable ......................................................................... 458 379
Customers' deposits ...................................................................... 254 284
Accrued interest and taxes ............................................................... 127 137
Deferred clause revenues ................................................................. 70 116
Other .................................................................................... 408 298
Total current liabilities ............................................................ 1,942 1,433
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ........................................................ 1,084 802
Deferred regulatory credit - income taxes ................................................ 107 126
Unamortized investment tax credits ....................................................... 162 184
Storm and property insurance reserve ..................................................... 229 216
Other .................................................................................... 661 749
Total other liabilities and deferred credits ......................................... 2,243 2,077
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ....................................................... $12,020 $10,608
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
Years Ended December 31,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................... $ 622 $ 591 $ 631
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................ 975 989 1,249
Increase (decrease) in deferred income taxes and related
regulatory credit ...................................................... 262 (105) (202)
Deferrals under cost recovery clauses .................................... (810) 55 68
Other - net .............................................................. (200) (31) (28)
Net cash provided by operating activities .................................. 849 1,499 1,718
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ......................................................... (1,299) (861) (617)
Other - net .................................................................. (100) (52) (80)
Net cash used in investing activities ...................................... (1,399) (913) (697)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ................................................... 947 224 197
Retirement of long-term debt ................................................. (515) (455) (389)
Increase (decrease) in commercial paper ...................................... 466 94 (40)
Capital contributions from FPL Group, Inc. ................................... 400 - -
Dividends .................................................................... (682) (601) (640)
Net cash provided by (used in) financing activities ........................ 616 (738) (872)
Net increase (decrease) in cash and cash equivalents ........................... 66 (152) 149
Cash and cash equivalents at beginning of year ................................. - 152 3
Cash and cash equivalents at end of year ....................................... $ 66 $ - $ 152
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest ....................................................... $ 175 $ 171 $ 181
Cash paid for income taxes ................................................... $ 131 $ 503 $ 510
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease obligations ....................................... $ 43 $ 86 $ 34
Transfer of net assets to FPL FiberNet, LLC .................................. $ 100 $ - $ -
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(millions)
Common
Common Additional Retained Shareholder's
Stock (a) Paid-In Capital Earnings Equity
Balances, December 31, 1997 ......................... $1,373 $2,566 $ 875
Net income available to FPL Group, Inc. ........... - - 616
Dividends to FPL Group, Inc. ...................... - - (626)
Other ............................................. - - (1)
Balances, December 31, 1998 ......................... 1,373 2,566 864
Net income available to FPL Group, Inc. ........... - - 576
Dividends to FPL Group, Inc. ...................... - - (586)
Balances, December 31, 1999 ......................... 1,373 2,566 854 $4,793
Net income available to FPL Group, Inc. ........... - - 607
Capital contributions from FPL Group, Inc. ........ - 400 -
Dividends to FPL Group, Inc. (b) .................. - - (768)
Balances, December 31, 2000 ......................... $1,373 $2,966 $ 693 $5,032
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(a) Common stock, no par value, 1,000 shares authorized, issued and outstanding.
(b) Includes transfer o