Edison Electric Institute Conference
November 5-8, 2006
Cautionary Statements And Risk
Factors That May Affect Future
Results
Any statements made herein about future operating results or
other future events are forward-looking statements under the
Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements may
include, for example, statements regarding anticipated future
financial and operating performance and results, including
estimates for growth. Actual results may differ materially from
such forward-looking statements. A discussion of factors that
could cause actual results or events to vary is contained in the
Appendix herein and in our SEC filings.
2
FPL Group: Fall 2006 Overview
• Regulatory clarity and positive outlook at FPL
– positioned for continued success
– sound fundamentals
– storm cost securitization in progress
• Favorable environment for FPL Energy
–
–
–
–
continued wind development
roll-off of hedges at incrementally higher prices
recent portfolio additions (e.g., solar, nuclear)
growing retail and wholesale businesses
• Expect compound annual EPS growth of 9-10% through
1
end of decade
– composition of growth is transparent
– assumes reasonable wind development and no incremental asset
acquisitions
• Financial strength and flexibility
1 Assumes
normal weather and excludes the effect of adopting new accounting standards and the mark-tomarket effect of non-qualifying hedges neither of which can be determined at this time. 2005 is used as base
in expected growth rate.
3
FPL Group
2006 Adjusted EPS Expectations
As of 10/05
Current View
FPL
$2.05 - $2.10
~ lower end of range – [storm cost
disallowance]
FPL Energy
$0.90 - $1.00
$1.10 - $1.15
Corp. & Other
FPL Group
($0.15) - ($0.20)
$2.80 - $2.90
($0.20) – ($0.25) – [incremental
capex + non-recourse debt]
~ $2.90 ±
Note: The current view of 2006 adjusted earnings expectations are valid as of October 30, 2006 and should be
viewed in conjunction with the Company’s Cautionary Statements contained in the Appendix to this
presentation.
Assumes normal weather and excludes the effect of adopting new accounting standards as well as the mark-tomarket effect of non-qualifying hedges neither of which can be determined at this time.
4
FPL Group: Adjusted Earnings Per
Share Expectations
2007P
1
1
2008P
FPL
$2.10 - $2.15
$2.15 - $2.25
FPL Energy
$1.45 - $1.55
$1.65 - $1.85
($0.20) - ($0.25)
($0.20) - ($0.25)
$3.35 - $3.45
$3.60 - $3.80
Corporate & Other
FPL Group
Note: The 2007 and 2008 adjusted earnings expectations are valid as of October 30, 2006 and should be
viewed in conjunction with the Company’s Cautionary Statements contained in the Appendix to this
presentation.
1 Assumes normal weather and excludes the effect of adopting new accounting standards as well as the markto-market effect of non-qualifying hedges neither of which can be determined at this time.
5
FPL Group
• $17.9 billion market capitalization
• $34.9 billion in total assets
• 33,935 mw in operation
• $11.8 billion operating revenue
FPL Energy
FPL
• One of the largest U.S. electric utilities
• Vertically integrated, retail rateregulated utility
• 20,777 mw in operation
• 4.4 million customers
• $9.5 billion operating revenue
• Successful competitive energy supplier,
operating in 24 states
• U.S. market leader in
wind-generation
• 13,158 mw in operation
• $2.2 billion operating revenue
A Growing, Diversified Company
Operating revenues as of December 31, 2005; all other data as of September 30, 2006
6
FPL Group
Comparative Total Shareholder Return*
(YTD thu 10/31)
130
125
26.1%
120
18.4%
Indexed Return (%)
115
12.1%
110
105
100
95
90
85
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06
FPL Group
* Dividends are reinvested
Jul-06 Aug-06 Sep-06 Oct-06
S&P 500 Electric Utilities Index
S&P 500 Index
7
Florida Power & Light – Focus on 2007
• 2007 fuel filing
– filed September 1, revised downward in October,
– expect November decision
– modest positive impact on retail prices (down 4-5%)
• Revenue outlook
– expect continued, moderate customer growth
– return to positive usage growth
• Cost outlook
– primary driver will be Storm Secure
– productivity initiatives elsewhere
SM
• Turkey Point 5
– on schedule, on budget
– positive impact for customers and shareholders
• Glades coal project
– Two 980 MW super critical pulverized plants
– Operation expected in 2012 / 2013
– Need certificate and site permits expected to be filed by January
9
FPL: On of the best electric utilities
in the U.S.
•
•
•
•
•
Attractive customer mix
Exceptional growth
Operational excellence
Proven cost management
Superior environmental
performance
• Good regulatory climate with
clarity through 2009
10
FPL: Demonstrated Ability
to Grow Earnings
Steady customer growth translates to steady earnings growth
Delivered Sales & Adj. Earnings
100
700
75
600
50
500
25
400
0
95
1
96
97
98
99
00
01
02
03
04
FPL Delivered Sales (billion kwh)
Adjusted Earnings ($ millions)
800
05
Delivered sales adjusted for the impact of the 2004 and 2005 hurricane seasons
2 See
Appendix for reconciliation of GAAP to adjusted amounts
3 CAGR
calculated from 1995 to 2005
11
Florida ranks 1st in growth
among most populous states
% of Population
CAGR
in 20041
2000-2004
State
CAGR
2000-2030
% of Population
in 20301
Florida
2.1%
5.9%
2.0%
7.9%
Texas
1.9%
7.7%
1.6%
9.2%
California
1.5%
12.2%
1.1%
12.8%
Illinois
0.6%
4.3%
0.3%
3.7%
New York
0.3%
6.5%
0.1%
5.4%
United States
1.1%
0.9%
1
Estimated population by state as a percentage of total U.S. population; figures for 2030 are based on estimated
population
Source: U.S. Census Bureau
12
Diversified Fuel Sources
FPL Projected 2015 Fuel Sources
(mWh produced)
FPL 2005 Fuel Sources
(mWh produced)
Coal
5%
Oil
17%
Gas
43%
Gas
59%
Nuclear
16%
Purchased
Power
16%
Coal
14%
Nuclear
19%
Purchased
Power
9%
Oil
2%
Further hedged through its use of multiple energy
sources at FPL
Source: FPL Ten Year Power Plant Site Plan, 2006 - 2015
13
Managing Extraordinary Growth at FPL
Steady customer growth requires significant system expansion
Average Customer Accounts
Total Generation Capability
(mm)
(mw)
Glades
or PPAs
West
County
5.13
Turkey
Point 5
Glades or
PPAs
West
County
20,777
4.32
05
06E
07E
08E
09E
10 E
11E
12 E
13 E
14 E
15 E
05
06E
Source: FPL Ten Year Power Plant Site Plan, 2006 - 2015
07E
08E
09E
10 E
11E
12 E
13 E
14 E
15 E
14
Proposed New Plant Additions
In Service
Exp. Cost
Plant Name
Date
MW
($ millions)
$ / KW
Turkey Point
2007
1,144
$580
$507
Unsited CT
2008
160
$84
$522
West County 1
2009
1,219
$689
$565
West County 2
2010
1,219
$633
$519
Unsited CTs, 2 units
2011
320
$180
$562
Glades 1 *
2012
850
$2,002
$2,355
Glades 2 *
2013
850
$1,472
$1,732
Unsited CT
2014
160
$110
$689
Unsited CT
2015
160
$114
$710
Unsited CC
2015
553
$674
$1,218
6,635
$6,538
$985
TOTALS
* Per 10 year site plan filed in Spring 2006; Glades project formally announced September 2006
with two 980 MW units, total expected costs not yet finalized
15
FPL: Investing Capital to Support Growing Energy
Demand
Steady customer growth translates into increased investment
Capital Expenditures
2007-2009 cumulative
(billions)
1
CapEx of $6.2B
$2.5
$2.0
$1.5
$1.0
$0.5
$01
02
All other
1
03
04
05
06E
07E
08E
09E
Transmission and Distribution New Generation
Projections as of September 30, 2006
16
ROE Trends - Regulatory and Financial
Florida Power & Light
Return on Equity
14.0%
13.5%
13.0%
Regulatory
12.5%
12.0%
11.5%
Financial
11.0%
1
Downside Protection
of 10.0% Continued
10.5%
10.0%
9.5%
95
96
1
97
98
99
00
01
02
03
04
05
Financial ROE is calculated by using a rolling 12-month GAAP net income before cumulative effect adjustments
and any extraordinary items divided by simple average of beginning and ending equity.
17
FPL Energy
• Well diversified by fuel source and by region
• Wind and nuclear continue to build substantial
value
– PTC extension supports continued and consistent
wind development
– acquisition of 70% interest in Duane Arnold
completed January 2006
– Seabrook uprate
• Commodity market remains robust
– expiring contracts renewing at higher margins
• Growing retail and wholesale businesses
• Potential new portfolio additions
• Strengthening outlook for 2007 and beyond
19
Strong Track Record of Growth
at FPL Energy
Adjusted
$655$7352
Earnings1
($ millions)
$575$6152
$435$4552
$299
$9
$32
97
98
$58
99
$126
$105
$83
00
01
02
$175 $175
03
04
05
06E 07E 08E
1 See
2
Appendix for reconciliation of GAAP to adjusted amounts
FPL Energy’s 2006, 2007 and 2008 figures are based upon FPL Energy EPS expectations provided on Slides 4 and 5 and
are believed to be appropriate for this point in time. As a result, they should only be read in conjunction with the Company’s
standard earnings expectations, which is usually delivered upon the release of quarterly earnings or in another Reg FD
forum.
20
FPL Energy’s diverse portfolio
Asset Type
Hydro
3%
Regional Breakdown
Oil
5%
West
15%
Central
42%
Northeast
22%
Wind
30%
Gas
49%
MidAtlantic
21%
Other
2%
Nuclear
11%
FPL Energy operations
13,158 Net mw in Operation
As of 9/30/06
21
FPL Energy has an attractive portfolio mix with unique
strength in wind
FPL Energy 2006P Portfolio Mix
Segment
MW
%
Capital
Employed
Wind
4,016
30%
$3,202
40%
Primarily long-term contract,
plus terminal value
QF/Contract
2,461
18%
$1,229
15%
Long-term contract with
variable merchant tail
New England
2,671
20%
$1,540
19%
Actively managed hedged
positions, plus modest full
requirements short positions
Texas
2,700
20%
$1,074
13%
As New England, plus modest
retail short position
Other
1,472
12%
$1,017
13%
Minor assets and full
requirements positions
TOTAL
13,320
%
Economic
Value Proposition
$8,082
Note: Based on June 2006 forecast. Capital employed is calculated as follows: Consolidated projects = equity +
debt; non-consolidated projects = investment balance. Texas includes Gexa. All $ figures in millions.
22
U.S. leader in wind energy
Wind Generation
Market Share
10,000
9,000
9,000
8,000
8,000
7,000
7,000
6,000
6,000
~ 4,700 +
~ 4,000
5,000
4,000
3,000
1,745
1,421
2,000
1,000
460 578
0
99
00
01
02
03
04
1
05 06E 07E
1
43%
40%
35%
33%
?
35%
30%
25%
22%
18%
20%
3,000
15%
2,000
10%
1,000
5%
0
0%
99
00
01
Industry
1
45%
41%
37%
5,000
4,000
3,192
2,758
2,720
50%
02
03
04
05
06
FPL Energy Market Share
10,000
MW
MW
FPL Energy Wind
Generation
07
FPL Energy Market Share
Assumes approximately 750 MW of new wind development in 2006 and 2007
23
24
“Wind 101” Economics
• Production Tax Credit available for every kWh
produced;
– 1.9¢ in 2005, escalating with inflation, for first 10 years of operation
– credit available for new projects that achieve COD by 12/31/07
• MACRS depreciation over 5 years
• PPA market in U.S. typically 15-25 years, 3-6 ¢/kWh
• All-in construction costs in 2006/2007 will likely range
from $1,300 - $1,700/kw, depending upon size of
project, region, interconnection requirements
• Typical production cost: less than 5 ¢/kWh
• Typical wind project size: 50-150 MW
• Typical capacity factor: 25-40%
• Typical cash-on-cash returns: Mid-teens
25
Wind Energy Pricing
150
100
50
2000 2003 2005 2007 2008
26
Wind projects conservatively create 15
to 40 cents of value per dollar invested
Typical Wind Project Valuation
- Value created per dollar invested -
Spread over
Cost of Capital
+2
+4
Duration (yrs)
20
25
30
0.15 0.18 0.19
0.31 0.36
0.40
Assumptions: Annuity cash flow streams; zero terminal value; base discount rate of 8%
27
The risk profile of wind is also attractive
Wind Risk Characteristics
•
•
•
•
•
Short development and
construction cycles
Front-loaded cash flow profile
“Tolerant” operational risk
Customer credit
Resource variability
Financing 1 ($ billions)
Wind
Rest of
Portfolio
Capital
Employed
$3.2
40%
$4.9
60%
$8.1
Non- or
limited
recourse
debt
$2.0
83%
$0.4
17%
$2.4
Total
1
2006P forecast
28
The wind business contributes disproportionately
to the FPL Energy portfolio
FPL Energy Adjusted Earnings Mix
1
36% – 40%
34% – 37%
31% – 33%
34%
% Wind
27%
35%
50%
2003
2004
Wind
vs.
All Other
2002
2005
2006(P)
2007(P)
2008(P)
Allocation of adjusted earnings includes G&A allocation based upon MW’s and interest expense
based on 50/50 debt/equity structure. 2006P based on a range of $435-455 million.
1
See Appendix for reconciliation of GAAP to adjusted earnings. 2006 (P) through 2008 (P)
assumes normal weather and excludes the effect of adopting new accounting standards and
the mark-to-market effect of non-qualifying hedges, none of which can be determined at this
29
Where does wind rank in the valuation
scale?
August 1, 2006 Lehman Research Report
$/KW
QUARTILE
Lehman
Brothers
FPL Group
view
1st
2nd
3rd
4th
Nuclear
$2,126
$1,961
$1,811
$1,582
Hydro
$2,023
$1,508
$977
$293
Coal
$1,627
$1,489
$1,041
$227
Gas CC
$741
$196
$155
NM
Gas
Peakers
$319
$42
NM
NM
~ $2,000
~ $1,600
~ $1,200
~ $800
Wind
August 1, 2006 Lehman research report entitled “The Cheaper IPP” by Dan Ford and team. Used with permission.
30
What is FPL Energy worth? An end of
2006 view….
FPL Energy Valuation Analysis: Year-end 2006P
Portfolio
Element
Quartile
MW
$/KW
Implied
Enterprise Value
Wind
1
934
$2,023
$1,888
Wind
2
2,669
$1,508
$4,025
Wind
3
328
$ 977
$ 320
Wind
4
86
$ 293
$
Nuclear
1
1,519
$2,126
$3,229
Hydro
1
361
$2,023
$ 730
Gas CC
1
4,997
$ 741
$3,702
Gas CC
2
556
$ 196
$ 109
Peakers
1
949
$ 319
$ 303
Peakers
2
50
$ 196
$
872
$ 435
$ 380
All other
TOTAL
13,320
25
10
$14,271
Based on Lehman Brothers August 1 report, “The Cheaper IPP”, with hydro values applied to wind
projects. MW figures may not total due to rounding. All $ figures in millions unless noted otherwise.
31
FPL Energy’s growth profile supports an
attractive value proposition for FPL Group
shareholders
FPL Group Implied Valuation
- 12/06 Basis Enterprise Value
FPL Energy (from prior slide, pg. 31)
$14 – 15
FPL @ 15-16x 2006 earnings
$17 – 19
Less: net debt
($12)
Implied equity value
$19 – 22
$ / share
$48 – 56
All $ figures shown in billions, except per share amounts
32
Our view of the FPL Group risk-reward
profile
High
New
England
Wind
QF/
Contract
Reward
Texas
Florida
Power
& Light
1.0
Other
Low
1.0
Risk
33
FPL Group
2006 Adjusted EPS Expectations
As of 10/05
Current View
FPL
$2.05 - $2.10
~ lower end of range – [storm cost
disallowance]
FPL Energy
$0.90 - $1.00
$1.05 - $1.15
Corp. & Other
FPL Group
($0.15) - ($0.20)
$2.80 - $2.90
($0.20) – ($0.25) – [incremental
capex + non-recourse debt]
~ $2.90 ±
Note: The current view of 2006 adjusted earnings expectations are valid as of October 30, 2006 and should be
viewed in conjunction with the Company’s Cautionary Statements contained in the Appendix to this
presentation.
Assumes normal weather and excludes the effect of adopting new accounting standards as well as the mark-tomarket effect of non-qualifying hedges neither of which can be determined at this time.
35
FPL Group: Adjusted Earnings Per
Share Expectations
2007P
1
1
2008P
FPL
$2.10 - $2.15
$2.15 - $2.25
FPL Energy
$1.45 - $1.55
$1.65 - $1.85
($0.20) - ($0.25)
($0.20) - ($0.25)
$3.35 - $3.45
$3.60 - $3.80
Corporate & Other
FPL Group
Note: The 2007 and 2008 adjusted earnings expectations are valid as of October 30, 2006 and should be
viewed in conjunction with the Company’s Cautionary Statements contained in the Appendix to this
presentation.
1 Assumes normal weather and excludes the effect of adopting new accounting standards as well as the markto-market effect of non-qualifying hedges neither of which can be determined at this time.
36
Drivers of Florida Power and Light
Growth: 2006-20071
Expected 2006 EPS Range
05 storm write-off
$2.05 – $2.10
0.07
0.25 – 0.35
Revenue
O&M expense
(0.10) – (0.15)
Depreciation expense
(0.06) – (0.08)
Interest and AFUDC
(0.04) – (0.06)
All Other
(0.06) – (0.08)
Expected 2007 EPS Range
$2.10 – $2.15
1
Assumes normal weather and excludes the effect of adopting new accounting standards which cannot be
determined at this time.
37
Drivers of Florida Power and Light
Growth: 2007-20081
Expected 2007 EPS Range
$2.10 – $2.15
0.25 – 0.35
Revenue
O&M expense
(0.02) – (0.06)
Depreciation expense
(0.06) – (0.08)
Interest and AFUDC
(0.02) – (0.05)
All Other
(0.04) – (0.06)
Expected 2008 EPS Range
$2.15 – $2.25
1
Assumes normal weather and excludes the effect of adopting new accounting standards which cannot be
determined at this time.
38
Drivers of FPL Energy Earnings
Growth: 2006-20071
Expected 2006 EPS Range
$1.10 – $1.15
New investments
0.18 – 0.20
Existing portfolio
0.24 – 0.27
Asset restructuring, marketing and trading
0.02 – 0.03
Interest
(0.05) – (0.04)
All other
(0.05) – (0.04)
Expected 2007 EPS Range
$1.45 – $1.55
1
Assumes normal weather and excludes the effect of adopting new accounting standards as well as the
mark-to-market effect of non-qualifying hedges neither of which can be determined at this time.
39
Drivers of FPL Energy Earnings
Growth: 2007-20081
Expected 2007 EPS Range
$1.45 – $1.55
New investments
0.18 – 0.23
Existing portfolio
0.01 – 0.05
Asset restructuring, marketing and trading
(0.01) – 0.01
Interest
(0.01) – 0.01
All other
(0.01) – 0.01
Expected 2008 EPS Range
1
$1.65 – $1.85
Assumes normal weather and excludes the effect of adopting new accounting standards as well as the
mark-to-market effect of non-qualifying hedges neither of which can be determined at this time.
40
Florida Power & Light: Potential Drivers
of 2007 Earnings Variability
Potential Impact
2007
Issue
Variability
Weather variability
At 80% probability
± 7-8¢
Revenue growth
± 10 – 20 bps
± 1-2¢
O&M expenses sensitivity
± 2%
± 4¢
Interest rates
± 1%
± 1¢
See Company’s Cautionary Statements contained in the Appendix and
the Company’s filings for full discussion of risks
41
FPL Energy: Potential Drivers of 2007
Earnings Variability
Potential
Impact 2007
Issue
Sensitivity
Variability
Weather
•Wind portfolio
•Maine hydro
wind resource
rainfall, snowpack
± 1 wind index1
± 20%2
± 2.5 – 3.0¢
± 3.0¢
Market Risk
commodity prices
± $2/mmbtu3
± 2.0 – 3.0¢
Oper. Performance
EFOR4
± 1%
± 1.0 – 3.0¢
New growth
•Wind
Timing of in-service
One month
Asset restructuring
± 1.0¢
< 1% FPL Energy
earnings
1 Based
on wind MW installed as of 12/31/06
From historic mean
3 FPL Energy’s portfolio including the retail energy business is a net short gas position in 2007
4 Impact based on merchant assets
2
See Company’s Cautionary Statements contained in the Appendix and the Company’s filings
for full discussion of risks
42
Sound Credit Profile Reflected On Balance
Sheet And Credit Ratings
Total Debt to
Total Capitalization
S&P
A/
Stable
Moody’s
A2/
Stable
Fitch
A/
Stable
FPL First
Mortgage
Bonds
A/
Stable
Aa3/
Stable
AA-/
Stable
FPL Group
Capital
Debentures
A-/
Stable
A2/
Stable
A/
Stable
1
FPL Group,
Inc. Issuer
59%
55%
FPL Group 2
Industry
Average
1
GAAP Basis. Industry data as of June 30, 2006, FPL Group as of September 30, 2006
Adjusted TD/TC is 46%, as of September 30, 2006
Source: Company reports, EEI June 2006 Quarterly Update.
2
44
Credit Facilities and Liquidity
as of September 30, 2006
($ millions)
FPL Group
Capital
FPL
Bank revolving LOCs (1)
$
Less: LOC
2,000
(2)
$
190
$
1,810
FPL Group
2,500
$
216
$
2,284
4,500
406
$
4,094
Revolving term
loan facility
250
0
250
Less: borrowings
250
0
250
0
0
0
65
94
159
Cash & equivalents
Net Available Liquidity
$
1,875
$
2,378
(2)
$
4,253
1 Maturity
date for FPL and FPL Group Capital are both November 2010. Provide for the issuance of letters of credit up to
$4.5 billion and are available to support the companies’ commercial paper programs and to provide additional liquidity in the
event of a loss to the companies’ or the subsidiaries’ operating facilities (including, in the case of FPL, a transmission and
distribution property loss), as well as for general corporate purposes.
2
Excludes $300 mm in sr. secured revolving credit facilities of an entity consolidated by FPL under FIN46R, as revised (the
variable interest entity (VIE)) that leases nuclear fuel to FPL which credit facilities are available only to the VIE
45
Growing, stable dividend
1
Dividend Payout
$1.42
$1.50
$1.30
$1.04 $1.08
99
00
62%
$1.20
$1.12 $1.16
01
02
03
2
52%2
04
05
06
FPL Group
Industry Median
1
Annualized split-adjusted quarterly dividend
Dividend payout is based on annualized dividend and 2006 First Call EPS estimate as of 9/30/06
Source: Edison Electric Institute Third Quarter 2006 statistics
2
46
Additional Wind Information
Wind’s Future in the U.S. Promising…
• 2006 another great year for U.S. wind
development
• Many challenges and opportunities
exist
• Boom/bust cycle still with us
• 2006 - 2007 even greater challenge for
U.S. market
– Upwards of 5,000 - 6,000 MW may be
added 2006/ 2007 combined
– Total U.S. capacity may approach 15,000
MW by Dec 2007
49
2007 And Beyond: Our View
•
PTC renewals will continue (2 year cycle?) ≈$200
mm/yr subsidy per year ($3.500B @ 32% NCF)
•
Wind resource analysis and risk will be better
understood
•
Transmission/ interconnection
•
Significant (upward) supplier price & quality
pressures on turbines/ towers/ components
•
Global market forces will impact U.S. (5,000 –
6,000 MW/year may be added in 2006/ 2007
combined)
•
25,000 MW U.S. market size by end of 2010 is
realistic goal
50
Appendix
FPL - Reconciliation GAAP to
Adjusted Earnings
1999
($ millions, except per share amounts)
$
Net Income
Adjustments, net of income taxes:
Settlement of litigation
Merger-related expenses
Adjusted Earnings
576
2000
$
607
$
38
645
2001
$
679
$
16
695
42
$
618
There were no adjustments to GAAP earnings from 1994 to 1998 and from 2002 to 2005
52
FPL Energy - Reconciliation GAAP
to Adjusted Earnings
Net Incom e (Loss)
$
1999
(46)
Adjustments, net of income tax:
Impairment loss
Merger-related expenses
Cumulative effect of change in accounting principle (FAS 142)
Restructuring and other charges
Cumulative effect of change in accounting principles (FIN 46)
Net unrealized mark-to-market losses (gains) associated
w ith non-qualifying hedges
Adjusted Earnings
$
$
2000
82
$
2001
113
$
2002
(169)
$
2003
194
$
2004
172
$
2005
187
$
3
175
$
112
299
104
1
222
73
3
58
$
83
$
(8)
105
$
126
$
(22)
175
There were no adjustments to GAAP earnings in 1997 and 1998
Totals may not add due to rounding
53
Cautionary Statements And Risk Factors That
May Affect Future Results
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (Reform Act), FPL Group, Inc. (FPL Group) and Florida Power
& Light Company (FPL) are hereby providing cautionary statements identifying important factors that could cause FPL Group's or FPL'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 FPL Group and FPL in this
presentation, on their respective websites, 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, believe, could, estimated, may, plan, potential, projection, target, outlook) are not statements of historical facts and may be forwardlooking. 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 (in addition to any assumptions and other factors referred to specifically in connection with
such forward-looking statements) that could cause FPL Group's or FPL's actual results to differ materially from those contained in forward-looking statements
made by or on behalf of FPL Group and FPL.
Any forward-looking statement speaks only as of the date on which such statement is made, and FPL Group and FPL undertake no obligation to update any
forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which such statement is made. 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.
The following are some important factors that could have a significant impact on FPL Group's and FPL's operations and financial results, and could cause FPL
Group's and FPL's actual results or outcomes to differ materially from those discussed in the forward-looking statements:
FPL Group and FPL are subject to complex laws and regulations and to changes in laws and regulations as well as changing governmental policies and regulatory
actions, including initiatives regarding deregulation and restructuring of the energy industry and environmental matters. FPL holds franchise agreements with local
municipalities and counties, and must renegotiate expiring agreements. These factors may have a negative impact on the business and results of operations of
FPL Group and FPL.
•FPL Group and FPL are subject to complex laws and regulations, and to changes in laws or regulations, including the Public Utility Regulatory Policies Act of
1978, as amended, the Public Utility Holding Company Act of 2005, the Federal Power Act, the Atomic Energy Act of 1954, as amended, the Energy Policy Act of
2005 (2005 Energy Act) and certain sections of the Florida statutes relating to public utilities, changing governmental policies and regulatory actions, including
those of the Federal Energy Regulatory Commission (FERC), the Florida Public Service Commission (FPSC) and the legislatures and utility commissions of other
states in which FPL Group has operations, and the Nuclear Regulatory Commission (NRC), with respect to, among other things, allowed rates of return, industry
and rate structure, operation of nuclear power facilities, operation and construction of plant facilities, operation and construction of transmission facilities,
acquisition, disposal, depreciation and amortization of assets and facilities, recovery of fuel and purchased power costs, decommissioning costs, return on
common equity and equity ratio limits, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission
costs). The FPSC has the authority to disallow recovery by FPL of any and all costs that it considers excessive or imprudently incurred. The regulatory process
generally restricts FPL's ability to grow earnings and does not provide any assurance as to achievement of earnings levels.
FPL Group and FPL are subject to extensive federal, state and local environmental statutes as well as the effect of changes in or additions to applicable statutes,
rules and regulations relating to air quality, water quality, waste management, wildlife mortality, natural resources and health and safety that could, among other
things, restrict or limit the output of certain facilities or the use of certain fuels required for the production of electricity and/or require additional pollution control
equipment and otherwise increase costs. There are significant capital, operating and other costs associated with compliance with these environmental statutes,
rules and regulations, and those costs could be even more significant in the future.
54
FPL Group and FPL operate in a changing market environment influenced by various legislative and regulatory initiatives regarding deregulation, regulation or
restructuring of the energy industry, including deregulation or restructuring of the production and sale of electricity. FPL Group and its subsidiaries will need to
adapt to these changes and may face increasing competitive pressure.
•FPL Group's and FPL's results of operations could be affected by FPL's ability to renegotiate franchise agreements with municipalities and counties in Florida.
The operation and maintenance of power generation facilities, including nuclear facilities, involve significant risks that could adversely affect the results of
operations and financial condition of FPL Group and FPL.
The operation and maintenance of power generation facilities involve many risks, including, but not limited to, start up risks, breakdown or failure of equipment,
transmission lines or pipelines, the inability to properly manage or mitigate known equipment defects throughout our generation fleets unless and until such defects
are remediated, use of new technology, the dependence on a specific fuel source, including the supply and transportation of fuel, or the impact of unusual or
adverse weather conditions (including natural disasters such as hurricanes), as well as the risk of performance below expected or contracted levels of output or
efficiency. This could result in lost revenues and/or increased expenses, including, but not limited to, the requirement to purchase power in the market at
potentially higher prices to meet contractual obligations. Insurance, warranties or performance guarantees may not cover any or all of the lost revenues or
increased expenses, including the cost of replacement power. In addition to these risks, FPL Group's and FPL's nuclear units face certain risks that are unique to
the nuclear industry including, but not limited to, the ability to store and/or dispose of spent nuclear fuel, the potential payment of significant retrospective insurance
premiums, as well as additional regulatory actions up to and including shutdown of the units stemming from public safety concerns, whether at FPL Group's and
FPL's plants, or at the plants of other nuclear operators. Breakdown or failure of an operating facility of FPL Energy may prevent the facility from performing under
applicable power sales agreements which, in certain situations, could result in termination of the agreement or incurring a liability for liquidated damages.
The construction of, and capital improvements to, power generation facilities involve substantial risks. Should construction or capital improvement efforts be
unsuccessful, the results of operations and financial condition of FPL Group and FPL could be adversely affected.
•FPL Group's and FPL's ability to successfully and timely complete their power generation facilities currently under construction, those projects yet to begin
construction or capital improvements to existing facilities within established budgets is contingent upon many variables and subject to substantial risks. Should
any such efforts be unsuccessful, FPL Group and FPL could be subject to additional costs, termination payments under committed contracts, and/or the write-off of
their investment in the project or improvement.
The use of derivative contracts by FPL Group and FPL in the normal course of business could result in financial losses that negatively impact the results of
operations of FPL Group and FPL.
FPL Group and FPL use derivative instruments, such as swaps, options and forwards to manage their commodity and financial market risks, and to a lesser
extent, engage in limited trading activities. FPL Group could recognize financial losses as a result of volatility in the market values of these contracts, or if a
counterparty fails to perform. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these derivative
instruments involves management's judgment or use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods
could affect the reported fair value of these contracts. In addition, FPL's use of such instruments could be subject to prudency challenges and if found imprudent,
cost recovery could be disallowed by the FPSC.
FPL Group's competitive energy business is subject to risks, many of which are beyond the control of FPL Group, that may reduce the revenues and adversely
impact the results of operations and financial condition of FPL Group.
55
•There are other risks associated with FPL Group's competitive energy business. In addition to risks discussed elsewhere, risk factors specifically affecting FPL
Energy's success in competitive wholesale markets include the ability to efficiently develop and operate generating assets, the successful and timely completion of
project restructuring activities, maintenance of the qualifying facility status of certain projects, the price and supply of fuel (including transportation), transmission
constraints, competition from new sources of generation, excess generation capacity and demand for power. There can be significant volatility in market prices for
fuel and electricity, and there are other financial, counterparty and market risks that are beyond the control of FPL Energy. FPL Energy's inability or failure to
effectively hedge its assets or positions against changes in commodity prices, interest rates, counterparty credit risk or other risk measures could significantly
impair FPL Group's future financial results. In keeping with industry trends, a portion of FPL Energy's power generation facilities operate wholly or partially without
long-term power purchase agreements. As a result, power from these facilities is sold on the spot market or on a short-term contractual basis, which may affect
the volatility of FPL Group's financial results. In addition, FPL Energy's business depends upon transmission facilities owned and operated by others; if
transmission is disrupted or capacity is inadequate or unavailable, FPL Energy's ability to sell and deliver its wholesale power may be limited.
FPL Group's ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including the effect of increased competition for
acquisitions resulting from the consolidation of the power industry.
•FPL Group is likely to encounter significant competition for acquisition opportunities that may become available as a result of the consolidation of the power
industry, in general, as well as the passage of the 2005 Energy Act. In addition, FPL Group may be unable to identify attractive acquisition opportunities at
favorable prices and to successfully and timely complete and integrate them.
Because FPL Group and FPL rely on access to capital markets, the inability to maintain current credit ratings and access capital markets on favorable terms may
limit the ability of FPL Group and FPL to grow their businesses and would likely increase interest costs.
FPL Group and FPL rely on access to capital markets as a significant source of liquidity for capital requirements not satisfied by operating cash flows. The
inability of FPL Group, FPL Group Capital Inc and FPL to maintain their current credit ratings could affect their ability to raise capital on favorable terms,
particularly during times of uncertainty in the capital markets, which, in turn, could impact FPL Group's and FPL's ability to grow their businesses and would likely
increase their interest costs.
Customer growth in FPL's service area affects FPL Group's results of operations.
FPL Group's results of operations are affected by the growth in customer accounts in FPL's service area. Customer growth can be affected by population growth
as well as economic factors in Florida, including job and income growth, housing starts and new home prices. Customer growth directly influences the demand for
electricity and the need for additional power generation and power delivery facilities at FPL.
Weather affects FPL Group's and FPL's results of operations.
FPL Group's and FPL's results of operations are affected by changes in the weather. Weather conditions directly influence the demand for electricity and natural
gas and affect the price of energy commodities, and can affect the production of electricity at wind and hydro-powered facilities. FPL Group's and FPL's results of
operations can be affected by the impact of severe weather which can be destructive, causing outages and/or property damage, may affect fuel supply, and could
require additional costs to be incurred. At FPL, recovery of these costs is subject to FPSC approval.
FPL Group and FPL are subject to costs and other effects of legal proceedings as well as changes in or additions to applicable tax laws, rates or policies, rates of
inflation, accounting standards, securities laws and corporate governance requirements.
•FPL Group and FPL are subject to costs and other effects of legal and administrative proceedings, settlements, investigations and claims, as well as the effect of
new, or changes in, tax laws, rates or policies, rates of inflation, accounting standards, securities laws and corporate governance requirements.
56
Threats of terrorism and catastrophic events that could result from terrorism may impact the operations of FPL Group and FPL in unpredictable ways.
FPL Group and FPL are subject to direct and indirect effects of terrorist threats and activities. Generation and transmission facilities, in general, have been
identified as potential targets. The effects of terrorist threats and activities include, among other things, terrorist actions or responses to such actions or threats,
the inability to generate, purchase or transmit power, the risk of a significant slowdown in growth or a decline in the U.S. economy, delay in economic recovery in
the U.S., and the increased cost and adequacy of security and insurance.
The ability of FPL Group and FPL to obtain insurance and the terms of any available insurance coverage could be affected by national, state or local events and
company-specific events.
FPL Group's and FPL's ability to obtain insurance, and the cost of and coverage provided by such insurance, could be affected by national, state or local events
as well as company-specific events.
FPL Group and FPL are subject to employee workforce factors that could affect the businesses and financial condition of FPL Group and FPL.
FPL Group and FPL are subject to employee workforce factors, including loss or retirement of key executives, availability of qualified personnel, collective
bargaining agreements with union employees and work stoppage that could affect the businesses and financial condition of FPL Group and FPL.
The risks described herein are not the only risks facing FPL Group and FPL. Additional risks and uncertainties not currently known to FPL Group or FPL, or that
are currently deemed to be immaterial, also may materially adversely affect FPL Group's or FPL's business, financial condition and/or future operating results.
57