ML021430087
| ML021430087 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 05/17/2002 |
| From: | Feigenbaum T, Stall J Florida Power & Light Energy Seabrook, North Atlantic Energy Service Corp |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| Download: ML021430087 (52) | |
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FPL Grouc 2000 Annual Report f i n a n c i a I
h i g h I i h t s For the Years Ended December 31, 2000 1999
% change Financial Results (millions, exceptpershare amounts)
Operating Revenues
$7,082
$6,438 10.0 Operating Income
$1,240"'
$920 2) 34.8 Net Income
$745'3'
$681
9.4 Earnings Per Share
$4.38('3
$3.98'-i' 10.1 Cash Flow from Operating Activities
$976
$1,563 (37.6)
Total Assets
$15,300
$13,441 13.8 Common Stock Data Average Shares Outstanding (millions) 170 171 (0.6)
Dividends Per Share
$2.16
$2.08 3.8 Book Value Per Share
$33.22
$31.47 5.6 Market Price Per Share (bigh/low)
$73 - $363/8
$6115/16 - $41'/8 Operating Data Energy Sales (millions kwh) 100,777 92,446 9.0 FPL Customer Accounts (average; thousands) 3,848 3,756 2.4 Employees (year end) 10,852 10,717 1.3 (I) Includes effects of merger-related expenses.
(2) Includes effects of impairmzent loss on7 Maine assets and settlement of litigation2 between FPL and FMPA.
(3) Excluides effect of nerger-related expenses.
(4) Excluides effects of gain on sale of Adeiphia Communications Corporation stock, impairment loss on Maine assets, settlement of litigation between FPL and FMilPA and the gain on the iedemption of a one-third ownership interest in a cable lim7ited partnership.
prof il e FPL Group is one of the nation's largest providers of electricity-related services. Its principal subsidiary, Florida Power & Light Company, serves more than seven million people along the eastern seaboard and the southern portion of Florida. FPL Energy, LLC, FPL Group's unregulated energy generating subsidiary, is a leader in producing electricity from clean and renewable fuels. FPL Energy owns and operates domestic power plants representing more than 4,100 megawatts and has more than 2,700 megawatts of capacity under construction or in late-stage development. FPL FiberNet provides fiber-optic services and fiber-optic cable to businesses within Florida.
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Ple Matla choice t n n 11 r q h A r n h nK I r P r c Consistent Earnings Per Share Growth
$4138 I
$3.983 199 1$957 i
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1996 1997 1998 1999 2000 xcIudo,ecrjN iovms In I 9nd mefo -reae e.Qnse in X was a lantimark year for IIL 200 0 Group. Our core businesses, Florida Power & Light and FPL Eneigy, prodiuced outstanding operating results, and our new subsidiary, FP1.
FiberNet, achieved profitabiliry in its first year of operation. This performance enabled us to reach new records of net income and earnings per share, andl shareholders were rewarded with exceptionally attractive returns.
Record financial results Net income, excluding special charges related to the pending merger, reached an all-time high of $745 million.
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FPL Group 2000 Annial Report Earnings per share increased by 10%
to a record $4.38.
Shareholder returns Electric utility stocks fared very well in 2000 compared with the overall stock mar-ket, and FPL Group performed substantially better than the industry as a whole. The total return on the company's common stock - dividends plus stock price apprecia-tion - was 74.8%. The return of the Standard & Poor's Electric Companies Index was 53.4%. More importantly, the stock of FPL Group has been a sound long-term investment. Since we began restructuring our company in 1990, the annualized total return to our shareholders has been 15.2%,
compared to the 12.3% return for the Standard & Poor's Electric Companies Index.
Major achievements of Florida Power & Light:
The key to FPL's success in recent years has been its ability to lower costs while improving customer ser-vice and reliability. Outstanding achievements continued in all of these areas.
Operations and maintenance costs per kilowatt-hour declined for the tenth consecutive year. Since 1990, we have reduced O&M costs by 40% - from 1.82 cents per kWh to 1.09 cents.
What's more, the lower costs have been achieved during a period when the Consumer Price Index has risen nearly 38% and FPL has added more than 700,000 new customers.
Power plant performance, already among the best in the nation, continued to reach new levels.
the natILIrI cI,o ce
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-The 95% availability factor" of our fossil plants wvas the highest ever and substantially above the inclustry average.
Our nuclear plant availability of 93%
-was far superior to the industry average. It was less than one percent-age point short of the previous years recorcd, despite an additional schecluled refueling outage.
Service reliability again improvecd.
and Fl'L's reliabilitv is within the top 20% of the industry.
E-EL's customer satisfaction surveys, carried out by an indepenclent agency.
rewarded us with some of the highest marks for service in the last decade.
Accomplishments of FPL Energy:
FEL Energy, our non-regulatecl whole-sale power business that operates outsicle Floricla, is an industry leacder in the use of environmentally friencdly fuels.
Approximately 80% of its electricity is gener-ated from clean fuels, inclucling natural gas and renewable resources sLich as \\vind and solar. It is the largest cleveloper of wincd generation in the country ancl operates the twzvo largest solar plants in the world.
A Decade of O&M Expense Reductions (cents per kilowatt-hour) 1.79 1
~~~Down 40%
j 1 91.61 since
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1990 90 91 92 93 94 95 96 97 98 99 00 In 2000 FPL Energy constructecl and began operation of a 1,000-megawatt natural gas-fired plant in Texas and purclhasecl a 104-megavatt wind facility in Minnesota. This increased its generat-ing capacity by over one-tlhird - from 3,000 to more than 4,100 megawatts.
The company nowv has powver plants in operation in 12 states. Additional announced projects aggregating more than 2,700 megawatts are tinder late-stage development or construction.
These projects will further enhance the company's regional portfolios.
Fl'IE Energy's contribtutions to earnings, excluding nonrecurring charges and merger-related expenses, increased to S83 million, up 43% from S58 million in 1999. With a solid pipeline of potential projects, xve expect FEL Energy's healthy grow,vth to continue.
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FPL GrLcp 2000 Arrilal Reporl In 2000 the company continued installing intra-city, metropolitan fiber networks that are tied together by its inter-city, long distance network. The company currently owns about 2,000 route-miles of long distance and metropolitan fiber network, which represent approximately 122,000 fiber-miles.
FPL FiberNet is already a profitable business and is well positioned to make a growing contribution to earnings.
Proposed merger terminated Just prior to the publication of this annual report, we announced the termina-tion of our proposed merger with Entergy Corporation. When the merger was announced in late July, and submitted to shareholders later in the year, we felt that combining our companies would prove beneficial to shareholders and customers alike. However, a number of factors led us recently to conclude that the merger would neither achieve the synergies nor create the shareholder value on which our original agreement was based. Although I am disap-pointed, this does not diminish in any way our positive outlook for FPL Group's future.
Summary and outlook We are in a period of rapid change in the electric power industry. Federal legislation was enacted during the early 1990s that opened transmission lines to all competitors and created a new class of wholesale generators. In addition, in recent years many states have restrmLcturecd their electric power businesses with varying results.
Going forward, the governor of Florida has established a commission to examine the state's energy policy and make recom-mendations regarding the future structure of the electricity system. Although a full report is not due until December 2001, the commission's initial proposal calls for creating a fully competitive wholesale power market in Florida. Also, we have responded to the Federal Energy Regulatoiy Commission's request to all utilities and submitted a proposal to create a separate and independent for-profit company known as a "Transco" to operate Florida's electric transmission system.
No one can predict precisely the ultimate industry structure, but over the last ten years we have worked hard to build an organization that will thrive under any set of circumstances. We are confident that under any fair rules, we will be successful and continue to generate value for our shareholders.
James L. Broadhead Chairman and Chief Executive Officer April 2, 2001 5
F I n r i rd P o w e r L i a h t C o m pa n v The St. Lucie nuclear plant is home to sea turtles as well as 160 species of birds and 24 species of mammals. Three-quarters of the plant's 1,132-acre site consists of swamps, marshes and beaches that are preserved for area wildlife.
A s th eclectric power inclustry Contin-tes to chanue. one of the keys to suceLss is ho1V Well utilities execute the fundamentals.
'Whein it comes to hasiCS, nO electriC utilitV has performed hetter than Floridak Power & Liuht over the past clecade.
Since 1990. when the company was reCStrUCtUred, FIPL has driven down costs while achieving continLtlOUs improvements in virtulally every area of its operations. At the same time, it has taken steps to meet the sha rplv increasing energy deincns of a1 serVice area that continues to groxv at a1 rapid pace.
FPUIs customer hase grew bv 2.50 in 2000 to more than 3.8 million. More new CuLIStOMeCrS 92.000, were added than in any year since 1990. In addition. energy usage per custom11er-increased h)v nearly 200o over the prexious y ear.
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FPL GOup 2000 Annua Report Superior Long-Term Investment Performance (10-year gmwth of $100 invested on December31 1990) i^
$411
$318 90 91 92 93 94 95 96 97 98 E3 m PFEL Group
-S&PElectcCompnies Continued cost reduction In 2000, FPL reduced its operations and maintenance costs per kilowatt-hour for the tenth consecutive year. Since 1990, O&M costs have declined 40% - from 1.82 cents per kilowatt-hour to 1 09 cents During this tine the company added more than 700,000 new customer accounts and increased its generating capacity by 24%.
FPL's cost reduction efforts have resulted in a more efficient and productive organization and enabled the company to holcl down the price of its electricity to below [he national average.
Performance-driven operations FPL continues to achieve major improvements in such critical success areas as plant performance, electric reliability, and customer service.
PPL's power plants remain among the nation's top performers This is impornant because superior plant performance helps defer the need for additional new generation. It also enables FPL to reliably meet peak energy demands and tO sell excess power produced by its plants to other utilities through the company's Energy Marketing and Trading Division, a leading wholesale marketer and trader of electriciry, gas and oil. Gains from these energy sales provide savings to FPL customers.
I in 2000 the availability of FPL's fossil plants - the percentage of time they were available to generate power -
rose to an all-time high of 95%./ This was well above the industry average of 860/o and places FPL among the nation's best performers.
The 93% availability of FPL's nuclear plants was just short of the record high achieved in 1999, despite an adcitional scheduled refueling outage, and it is substantially better than the most recent nuclear industry average of 84%.
-B. In addition, the World Association of Nuclear Operators indlex, which measures 11 critical areas of operating and safety performance, placed IlT's nuclear facilities in the top quartile of plants nationwide. The WANO rating of 98. 1 is the highest FPL has ever received and marks the fouLth consecutive year of improvement.
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the nalI chdhcv An Industry Leader in Plant Performance Fossil PlantAvailability 92% 9 4% 9 90 92 94 96 98 99 r0 Nuciear Plant Availability V
ndus,ty Average 90 92 94 96 9R 99 Energy Sources Florida Power & Light Company (based on kilowatt-hours produced)
FPL utilizes a diverse energy mix that enables it to take advantage of energy price changes. In 2000, nuclear accounted for 26%/
of the power FPI. provided, followed by natiural gas at 25%. Oil also accounted for 25%, purchased power 17%, and coal 7%.
During 2000, utility companies nationwide experienced skyrocketing costs for oil and natural gas. The Florida Public Service Commission approved rate adjust-ments allowing FPI. to recover its fuel costs, which the company is spreading over a two-year period to lessen the impact on customers. Continued pressures on oi and natural gas prices forced FPL to request an additional adjustment early in 2001.
FPL's electric reliability, whici is rated within the top 200/n of the industry, improved for the third straight year.
i c0 t industry Average I
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Cooling canals at the Turkey Point power plant are among only three nesting areas in the country for the endangered American crocodile. This unique habitat has attracted world attention on CNN, National Geographic and many other international programs.
As the result of a major initiative launched in 1997, FPL has:
Reduced the average amount of time its customers are without power by 30%;
Reduced by 10% the average duration of interruptions; and Reduced the frequency of interruptions by 21%.
While improving its reliability, FPL also has taken steps to enhance its communications with customers. A recent independent study found that among the customer call centers of 16 major utilities, FPL ranked number one overall. The com-pany also is utilizing the latest technologies to further improve customer service.
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choicc Hundreds of manatees congregate at five FPL power plants during the winter months. As water temperatures decline in winter, these endangered mammals frequently find shelter in the power plants' warm water discharge.
Expanding for the future
'I'o meet the neects of its rapidlv (xrowin-service territor-. F1'L plans to acid over the next ten years approximately 7,000 nlmegaw atts of generating capability - an increase of more than 40%. The additional generation will be fueled by clean-burning natural gas, which will strengthen FPls standing as one of the m)ost environmentall-frielICIy: ultilities in the country.
Fll. expects approximately 2.700 megawatts of new oeneration to be available bv 2004.
Approximately 2,000 megawn atts wvill come from "repo\\vering' oldler oil-burnin,g pow-er plants at Fort MIvers and Sanford and converting them to naitural gas. The Fort My7ers plant already provides the first increments of new generation in the formii of simple cycle" comb-ustion turbines, J
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FPL Group 2000 Annual Report FPL Customer Growth Highest in a Decade (number of customer accounts in millions) 3.7 3.161 92 93 94 95 96 97 98 99 00 90 91 92 93 94 95 96 97 98 99 00 2.5%
growth in 2000 which will ultimately be re-configured as 'combined-cycle" units. When the project is completed in 2002, the plant's capacity will nearly triple, while emissions will be reduced. The Sanford plant repowering will more than double its capacity, while reducing emissions as well. Sanford is scheduled for completion by the end of 2002.
"Peaking" units will provide an additional 600 megawatts of generation.
These combustion turbines provide power during short-term periods of peak demand. Two peaking units totaling 300 megawatts are scheduled to be available at the Martin plant site near Lake Okeechobee in 2001. Two similar-sized units will be added at Fort Myers in 2003.
While FPL is adding new generation, it continues to utilize energy conservation programs to help individual customers reduce their demand for energy and save on their electricity bills. Over the past 20 years, these programs have reduced energy consumption and enabled FPL to avoid building several additional power plants. Attaining FPL's 10-year energy conservation goals, which the Florida Public Service Commission approved in 2000, will eliminate the need for two additional power plants that would otherwise have been part of its expansion program.
Nuclear license extension Nuclear power has played an important role in FPL's energy mix for nearly three decades - ever since the two nuclear units 11
The Barley Barber Swamp is a 400-acre natural cypress swamp voluntarily preserved by FPL at the Martin power plant site. Hundreds of wildlife species are protected here.
The endangered Florida panther also roams the swamps and hammocks nearby.
at Turkey Point soutlh of Miami began operation in 1972 and 1973.
The Turkey Point nuclear units generate approximately 1.400 megawatts of electricity
- enoughi to provicle power for more than 300.000 customers - and are among the l)wvvest-cost generators in the FPL system.
In addition, the nuclear units prclduce no greenhouse emissions.
To ensure that customers continue to receive the economic and environmental benefits provicied by Turkey Point. FPL in 2000 submittecd an application to the Nuclear Regulatory Commission to extencl the plant's operating license an addclitional 20 years until 2033.
The commission is expected to review the application over the next t\\v-o to three
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FPL Group 2000 Annual Report years before deciding whether to renew the license. The NRC already has extended the licenses for several other nuclear plants.
FPL plans to file a similar application in 2002 to extend the license of the St.
Lucie nuclear units on Hutchinson Island.
Proposed changes in Florida An Energy Study Commission established last year by Florida's governor is studying possible changes in the state's electric system. The commission is expected to make a final report to the governor and legislature in late 2001.
Although acknowledging that the current electric system has worked well in providing abundant, affordable and reliable power, the commission early in 2001 proposed to create a fully competitive wholesale power market in Florida. Under the commission's proposal there would be a six-year transition period to ensure an orderly move to a competitive market and all generators would compete under the same rules.
At the national level, the Federal Energy Regulatory Commission (FERC) last year strongly recommended to the country's investor-owned utilities that they find ways to create regional transmission organiza-tions. As a result, FPL - together with Florida Power Corporation and Tampa Electric Company - proposed creating a separate and independent for-profit trans-mission company to operate the electrical transmission system statewide. This so-called "Transco," if approved by the FERC, could be in operation before the end of this year (see related story on page 14 for additional information).
- 1 in environmental performance FPL is an environmental leader within the electric industry and considers making the right choices to maintain and preserve Florida's environment an important part of its operations. Last year - in an affirmation of its commitment to the environment - the investment research firm Innovest named FPL number one among 30 leading electric utilities in environmental performance.
FPL's overall emissions are among the lowest in the country, based on the amount of electricity it produces.
More than half of its generation is derived from clean energy sources. In addition, FPL will reduce emissions at two of its older oil-fired plants when they are converted to natural gas. The Fort Myers and Sanford plants will utilize advanced technology that will significantly lower emissions, even though the plants will generate more electricity than before.
FPL also has taken initiatives to protect the native environments surrounding its power plants. As shown by the photos with-in this report, FPL's efforts have enabled a large number of endangered and threatened species to thrive in their natural habitat.
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FILs coimmitment to the environment M\\Ianatees seeking the warm waters near gainecl wide attention in Janua-y 2001 the Fort Myers plant. The island is the w-hen it malde the unusual donation of an first acdclition to the Caloosahatchee island to the U.S. Fish and Wildlife Service.
National Wildlife Refuge, which was Mglanatee Islandl is an 18-acre refuge for estahlished in 1920 by President Woodrow-migratory andc native birds that also serves Wilson as a preserAe and breeding ground as a w-inter landnmark for West Inclian for native hirds.
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FPL Group 2000 Annual Report F P I F n P r n \\
The osprey is a protected species that builds its nests in large trees... or occasionally on utility poles. In the latter case, FPL provides special elevated nesting platforms for the osprey's protection.
F PL Energy is the company's rapidly growing wholesale power business and an industry leader in clean energy production - including renewable energy sources and the use of environmen-tally friendly fuels. Since 1998, its power plant portfolio has more than doubled to 4,110 megawatts of capacity, with plants in 12 states. In addition, a strong pipeline of development projects should ensure strong and continued growth.
Excluding nonrecurring items and merger-related expenses, FPL Energy's contributions to net income rose 43% in 2000 from $58 million to $83 million.
Its contributions to earnings per share increased from 34 cents to 49 cents, an increase of 44%. The growth in earnings 15
the natrl choice In addition to providing clean, renewable power to homes and businesses, several FPL Energy wind projects sited in the California desert are home to the endangered San Joaquin kit fox.
A Diversified Portfolio (net mw in operation) reflects an increase in its portfolio of generation and improved operating performances of existing assers. FPL Energy achieved earnings growth despite the costs of building necessary infrastricture to support its future expansion Generating assets in Maine and wind facilities in California were among the FPL Energy operations making strong earnings contributions in 2000.
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FPL Gtoup 2000 A,n, a ReDon FPL Energy A Growing Portfolio (nMt mw in operation) 4,110 3
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1,240 20* 0 f81X X
X X
1996 1997 1998 199 2000 37%
growth in 2000 FPL Energy increased its generation portfolio 37% during 2000 with the construction of a 1,000-megawatt natural gas plant in Lamar, Texas, and the purchase of a 104-megawatt wind facility in southwest Minnesota.
Building capacity Projects currently under construction or that have been announced will provide FPL Energy with more than 2,700 additional megawats of generation through 2003.
Natiral gas-fired projects totaling more than 2,200 megawatts and their expected completion dates include:
A peaking unit, totaling 171 megawatts, at the Doswell plant in Virginia, which is already one of the nation's largest independent power facilities (2001);
3 A 535-megawatt plant in Johnston, Rhode island (2002);
A 536-megawatt facility near Austin, Texas, in which FPL Energy retains 50%
ownenship (2002);
~ A 525-megawatt plant in Bellingham, Massachusetts (2003);
e-< A 744-megawatt plant in Marcus Hook, Pennsylvania (2003).
Wind projects totaling nearly 500 megawatts include:
3 A 300-tnegawatt wind farm on the Washington/Oregon border (2001);
<< A 160-megawatt project in Texas (2001);
3 A 25-megawatt facility in Wisconsin (2001).
Focus on clean energy FPL Energy's primary strategy is to utilize its power generation expertise and energy marketing and trading skills to develop or acquire new projects that emphasize "clean energy."
Natural gas or renewable sources, including wind, solar, hydro and geothermal, provide the Fuel for nearly 80% of FPL Energy's generation. The company places a particular emphasis on natural gas-fired and wind-driven generation, areas in which it possesses world-class skills.
3A contract with General Electric for 66 gas tLrbines through 2004 supports future natural gas projects. Sonie of tie turbines are being used by FPL for its capacity expansion.
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State-of-the-art fishways at FPL Energy's hydroelectric facilities in Maine are helping to preserve and restore populations of Atlantic salmon, American shad and river herring in the Saco River.
Winci pow:eir is a niclhe market that has proven to he highly profitable for F1' Energy. The company currently operates xvind farms that procdUce nearly 1,000 meigavatts.
FPl's focus on clean energy offers strong business advantages. l3ecause of its benefits to the environment, the demand for clean energy is grov ing. anld soIm(e states are reqLuiring that a portion of their generation come from renew-able sources In addition.
clean power provides cost advantages as more stringent emission reqjuirements make it more expensive to generate electricity using fuels such as oil or coal.
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FPL GmroD 2000 Annual Q,,
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F PI, FiberNet, a subsidiary of FPL GroLup formed at the beginning F
of 2000, was a mo(lest contributor to earnings in its first year of operation.
FPL FiberNet provides fiber-optic services and fiber optic cable to businesses that include cable television, Internet service providels, wireJcss communications, and telecomm nicat ions Expansion at Fl mown netmo ss 0* o pl Tampe
- m. Petehbun San 1
FL FIbe,N Netwok m I,,ervvcnvtin Agreenieit FPL FiberNec owns approximilately 2,000 miles of fiber network and plans to add several hundred more miles by 2002. The 2,000 route-miles represent approximately 122,000 fiber-miles Fibci optic cable is utilized to send data, voice and video cominunications and is capable of carrying thousands of times more information thian convenitional cable.
PL FiberNet Jacksonille West Palm Beach Fo t Mt ers Boca Ramn Fart Lauderdale
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The squirrel treefrog lives near many of our power plants in areas carefully set aside for wildlife protection. The frog is considered to be one of nature's best indicators of a healthy environment.
The company is expanding its intra-city fiber networks in municipalities thlouLghout Florida.
FIIL FiherNet has comipletedi netwvorks in Miami. Fort Lauderdale, Orlandlo and Tampa. ancl is currenitl construct-ing fiber networks in i3oca Raton.
N'est Palm BIeachi. St. Petersburg and Jacksonville.
FPL FiherNet su1pp)orts a number of initiatives to install Inter-niet nocles in Soutlh Florida. Thlis installation, comnbined wvith international fiber cables coming into South Florida.
wvill establish the area as an inter-national telecommuLnications hul.
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manatee island: The lush flora and fauna of Manatee Island, located in the Caloosahatchee River adjacent to the Fort Myers power plant, will continue to be protected with FPL's donation of the 18-acre refuge to the U.S. Fish and Wildlife Service in January 2001.
Triangular in shape, the island serves as a unique haven for birds and other species of wildlife. With FPL's donation, Manatee Island becomes the first addi-tion to the Caloosahatchee National Wildlife Refuge, established in 1920.
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i n f n r m q t i n n financial and operating statistics 1999 1998 1997 1996 1995 1990 S6438
$5.518 S920 S697 S697T" S13.441 S6.661 SS.409 S1.252 S664 S664 12.029 S6,369 S5.141 S1.228
$618 S618
$12.449 S6,037 S4,866 S1,171
$579
$579
$12,219
$5.592 S4.395 Sl.197
$S553
$553 S12,459
$5.075
$4,326 S749 S298 "'
$091)0.0 S10.802
$3.478
$2,347
$2,949 S3.144 S3,3 i S3,853 S-S-
S-92.446 91.041 84.642
$42 80.889 S50 79,756 S166 66,763 S6,057 S6.366
$6132
$5,986 S5,530 S4,988 88,067 89,362 82.734 80.889 79.756 66,763 3.756 17.057 I-,615 18.,649 14 25 25 27 16 5924 3,680 16,802 17,897 18,509 10 27 26 26 14 7
S6 17 3,616 13,047 16,613 18,715 20 18 29 25 20 8
$551 3.551 16,490 16.064 18,538 23 18 29 26 20
$474 3.489 18.096 15.813 18,153 21 19 31 25 18 S669 3,159 11,868 13.754 16.074 19 23 17 24 33 3
$1.038 171 173 173 174 175 137 S.07
$ j,071
$2.08 S31.47 50.,421 50,215
$3.85 S3.85 S2.00 S29.76
$61]-,
$7 2>.-56.
55,149
$3.57 S3.57
$1.92 S28.03 S59 /,],
$60-422, 60.493 S3.33 S3.33 S1.84
$26.46
$46 S48' -41'<
67,580 S3.16
$3.16 S1.76
$25.12 S46 2
$46K,-34 74.169 S2.18."
,S(2.86)','
`2.34
$19.63 S29
$36,&-26 /1/4 69,554 (1j Icilcles chalrges/or a1rite-down a/lb oJ tsin7e.sses to le dtisconlttinlted.,
EycIltd Ing these cbtig,es. in)l e andcl earllings per.sbaref/too caitni)Iiig OI)(eIrttionS nfldd bhave been S3?61 i//lion CandI S2.64. Iesprectirely.
(2 In ic/idles mterri e-relaltedi expense.*. EXCing these expeJnses. net incomne at 16/
earn 1)1n)Sp er sbare u oi/lel hat beeti $745 milllion and S4., S', respeclit elt.
( ?j 11 te es e//cts o/ a t)ain oa sale ofAdeipbia Communications C
Clporationt stoCk.
impairment loss an Mtaine assets settlement o/
fii'ataiojn heiceit i111. eciiie 1.\\1111 (nd Cl gaClnl n the redettptiont o/a auote-tbirdl otunelship interest in a cable litm ited h)artnershtP.
/:YcllC/ill, tbese items, net income and earnillS' per shlate IOuld bhave beenl S681 million andci
$3.98.
respectivleb.
(4) Itnchtdcies cbanges.fir dispositiol aund a'rie-daown a/a subsidiarv i accont nditeclJr as disconltineci operations.
5 ttY niter seasonl Inciudes NCovembher ancl D2ecembher a/ the Crrerent tear andjlannant to Aachlb oJ/the fiWlving year (6) Ih'piresen1ts inistalledl capabilite /)pits pt cbhasedlpvo)ter Resertve mmargin is baesedl on peak load et of load mtanagement.
( 7) IaCsica Cold afsslm/)
diintian.
the natoj!al choce Years Ended December 31, 2000 FPL GROUP, INC. (millions)
Operating RevenuLies S-()2 Operating FxPapeses SS.8i2 Op.ratintg Incomtte S1,240 fllotsoneC 01Frot C(2 tnilloUillg O)pera'Iti lS t7-n Net ilcolle (L loss)
St()j Totail Assets
$15,.300 l.nogjerni I)teft (eNX(tlclill,g CLUITir t iMllItliiitiUS)
S32976 1)referred Stoek of' IlT.
ith sinking fLund ie(2qliremiients (CWxti L id og CLIrent C 11 t I
'itjest 1e nu-N SAfes (1kwh) 100.7-FLORIDA POWER & LIGHT COMPANY Opema,mi,g R2e iiLiCes ( llilliolIs)
$6(361
,enrgx.
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- ,g. t threl(>
s anrfC1s 1
3,8 8 P)catk L.oaid. inter (oiv 6(1-mzinute)
IS8,219 PLt. k 1.01(1a
. S$LI imi eIC' Onw 60-milltLlti2)
I,8(8)
T otal CtIXthiliti (SiLt11 11tL m ner peak. iiiw 19,069 lZeser`Ve2 M argin tsLioiilelirpe k
..10 13 Net El ergr Itr o
.LoXdf (t)(0:
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26 N'\\
ct L 1 ic) Itise I )\\ ve r a iid I ite rc h a i ge 1-(Co;l Capit;ill fXpeniditOies S1,299 COMMON STOCK DATA Average Slares OLulstamlidig (illilliolns)
L(I a rninigs Ple-SIhawl
. ol( (CommiiiioiI Sit k: -
(. itliLlit iig Op)r-atio n1s S-i4 14
.Net Income (f.o,ss)
S.l-i I)ividtiids
'aid Per slihare S2.10(
lB otk V.ILi IPer.
Share year endl)
S33.22 M aiket P)rice 1 SPer tri (vie I er end t S ',
M\\Iarket Price Pecr Sitari (digih--lo )
S73-36,.
NLIMIier l(Io Sflareiholdfers (yeair endc) 45.o66 J
22 J
1 III
FPL Group 2000 Annual Report 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, which was approved by the shareholders of the respec-tive companies in December 2000. Subsequently, a number of factors led FPL Group to conclude the merger would not achieve the synergies or create the shareholder value originally contem-plated when the merger was announced. As a result, on April 1, 2001, FPL Group and Entergy mutually terminated the merger agreement.
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 will continue in 2001, although to a lesser degree. For additional information concerning the 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 grovwth 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 wArere S3.5 billion, S3.5 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 Florida Public Service Commission (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 S518 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 and purchasecd power cost recovery clause (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 FebruLaly 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, the State of Florida Office of Public Counsel, The Florida Industrial Power Users Group and The Coalition for Equitable Rates regarding FPL's retail base rates, authorized regulatory return on equity (ROE), capital structuLre 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 refuncled to retail customers and one-third retained by FPL. Revenues from retail base operations in excess of a second threshold are required to be reftnded 100% to retail customers.
The refund thresholds are as follows:
(millions)
Twelve Months Ended April 14, 2000 2001 2002 662/3% to customers
$3.400 S3.450 S3.500 100% to customers
$3.556 S3.606 S3.656 23
the natLral choice f i n a
n c i a; i
n f o r m a
t i q r-continued from page 23 During 2000, FPL accrued approximately S60 million relating to refunds to retail customiiers compared to S20 million in 1999.
Furthermore. FPL refunded in 2000 approximately S23 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 approximatelv
$57 million and S20 million, respectively.
The earnings effect of the annual revenue reduction was offset by lover special depreciation. The agreement allows for special depreciation of up to $100 million, at FPL's discretion.
in each year of the tlhree-year agreement period to be applied to nuclear and/or fossil generating assets. Under this new depreciation program. FPL recorded S100 million of special depreciation in the first twelve-month period and $71 million through December 31, 2000 of the second twelve-month periocl.
On a fiscal year basis. FPL recorded approximately $101 million and $70 million of special clepreciation in 2000 and 1999. respec-tively. The new depreciation program replaced a revenue-basecd special amortization program whereby special amortization in the amount of S63 million and S378 million was recorded in 1999 and 1998. respectively. See Note 1 -
Electric l'lant, 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 outsicLe the authorizedl range, and the revenue sharing mechanism describecd 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 duLring 2000.
Customer groxth of 2.5% and a 1.9%/o increase in electricity usage per retail customer wvas 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 wveather condLitions, was almost entirely offset by the 2.0% increase in the nuLmlber of customer accounts.
Fl'L'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 higlhe overhaul costs at fossil plants.
Interest charges increased in 2000 reflecting increasedl debt activity to fund FPL's capital expansion program and under-recov-ered fuel costs. Lowver interest charges in 1999 and 1998 reflect lower average debt balances and the full amortization in 1998 of deferred costs associated wvith debt reacquired throughl 1998.
The electric utility industry is facing increasing competitive pressure. FPL currently faces competition from other suppliers of electrical energy to wholesale customers ancd 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 megawatts (mw) have presenited submissions to seek a determination of need to the FPSC. In March 1999, the FIlSC approved one of the petitions for a powver 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 Suprem-ae CouLt uphielcd 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 pover plant. the output of whichi is not fully committed to use by Florida retail customers. In March 2001, the United States Supreme Court dleniecd a petition for certiorari review by one of the petitioners. See Note 1-Regulation.
In 2000 the Governor of Florida signed an executive orcder creating the Energy 2020 Stucly Commission to propose an energy plan and strategy for Florida. The order required that recommenclations 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 issuecd an interiim 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 w ould establish, and transfer their generating assets to.
affiliated exempt wholesale generators. which would also construct and operate new generating assets. The investor-owned load-serv ing utilities, such as FPL, would acquire energy resources througLh competitive bidLding. negotiated contracts or from the short-ternm (spot) market. Purchases fiom affiliated exempt whlolesale generators would be puLsuant to a competitive bidding process. The proposal includes a number of features, includcing a three-year retail base rate freeze. The proposal may be acddressed in the next legislative session which takes place in March through May 2001. In acidition. the FERC has jurisdiction over potential changes which could affect competition in wholesale transactions. The commission will now considLer recommendations for the retail market.
In 1999, the FERC issued its final order on regional transmission organizations (RTOs). RTOs. uncder 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 wvith Florida Power Corporation and Tampa Electric Company. filed a joint proposal to form a fully independent for-profit transmission company that wvould be responsible for the transmission lines that cany electricity from power plants primarily wvithin the state to substations in Florida. The October filing was supplemented J
I III
FPL Group 2000 Annual Report by a December 2000 filing that provided certain operational details of the proposed RTO.
Under the proposed form of RTO, FPL wvould contribute its transmission assets to an independent transmission company, GridFlorida LLC (GridFlorida) that would own and operate the system. A separate corporation would be formed to owvn the voting interest in and manage GridFloricla. In retuLn for its transmission assets, FPL woould receive a non-voting ownership interest in GridFlorida, wlhich could be exchangedI 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 powver generation portfolio, w.;hich has more than tripled since 1997 to over 4,100 mrv at December 31, 2000. In 2000, Lamar Powver Partners, a natural gas-fired plant in the Central region became operational ancl addlecd approximately 1,000 mw to FPL Energy's operating portfolio. In 1999, FPL Energy acquired the IMaine 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 addecd in the NWfest and Central regions since 1997.
In 2000, FPL Energy's net income also benefited from increasecd revenues generated by the Maine assets as a result of warmer weather and higher prices in the Northeast during May 2000, and lower O&MI expenses at Doswell. In 1999, the effect of a S176 million (S104 million after-tax) impairment loss (see Note
- 10) and higher administrative expenses to accommodate future growth more than offset the benefits of the growing oeneration poltfolio and improved results from Doswell. FPL Energy's 1998 net income includes the effect of a $35 million (S21 million after-tax) charge for the termination of an interest rate swap agreement, which was partly offset by the receipt of a S31 million (S19 million after-tax) settlement relating to a contract dispute.
Deregulation of the electric utility market presents both opportunities and risks for FFL Energy. Opportunities exist for the selective acquisition of generation assets that are being divested under deregulation plans and for the constLuction 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 wvas sold through power sales agreements vith 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 soldl 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 inclucle the ability to operate generating assets efficiently, the price and supply of fuel. transmission constraints, competition from newi sources of generation, demand grow;th and exposure to legal ancl regulatory changes.
FPL Energy has approximately 540 net mwi in California, most of which are wind, solar ancd geothernmal qualifying facilities.
The output of these projects is sold precdominantly tinder long-term contracts with California utilities. Increases in natuLral gas prices and an imbalance between power supply and clemand. as well as other factors, have contributed to significant increases in wvholesale electricity prices in California. Utilities in California had previously agreed to fixed tariffs to their retail customers, vhich resulted in significant under-recoveries of wvholesale electricity purchase costs. FPL Energy's projects have not received the majority of payments due from California utilities since November 2000. On April 6, 2001, Pacific Gas and Electric Company (PG&E) filed for protection under the U.S. Bankruptcy lawArs. Earnings from projects that sell to PG&E represent approximately 15% of FPL Energy's earnings from California projects. At December 31, 2000, FPL Energy's net investment in Californlia projects was approximately S250 million. It is impossible to predict what the outcome of the situation in California wvill be.
Corporate and Other -
Beginning in 2000, the corporate and other segment includes FP'L FiberNet s operating results. FPL FiberNet wvas formed in January 2000 to enhance the value of FPL Group's fiber-optic netwvork assets that wvere originally built to support FPL operations. Accorclingly, 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 S149 million ($96 million after-tax) gain on the sale of an investment in Adelphia Communications Corporation common stock, a S108 million ($66 million after-tax) gain recordedl by FPL Group Capital Inc (FPL Group Capital) on the redemption of its one-third interest in a cable limitecd partnership, costs associated with closing a retail marketing business of S11 million (S7 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 S36 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 S30 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 Fl'L, investment opportunities at FPI Energy ancd expansion of FPL FiberNet.
Capital expenditures of Fl'L for the 2001-03 period are expected to be approximately $3.3 billion, including S1.1 billion in 2001.
As of December 31, 2000, FPL Energy has commitments totaling approximately $380 million, primarily in conmection w-ith the
V I 2 2 2 2 2 2 t 2 r m 2 t
(1--
continued from page 25 J
rkevelopmoent and expansion of in(lepeni(lent powver projects.
Subsidiaries of Fl' Gotup, othel than EIT, have guaranteed approximately S8 IO million of prompt performance payments, lease ObligatiOnS. pIlrChaSe and sale of power andl fuel agreement obligations deht service payments and other payments subject to certain continigencies. See Note 13 -
Commitments.
l)eht malturities of FlPl Grouips subsidiaries Wvill reqUire cash outflows of approximately SI.0 billion through 2005 including 565 million in 2001. It is anticipated that cash requiremenets ftor capital expeCnditules. energy-related investments and debt maturi-ties in 2001 wvill be satisfied vith interniall1 generated funds and debt issuances. Any internally generated fLunicds not reCluiledC for capital expen(liturls andLi curienit maturities may be used to reCIuce outstandinfig debt or repurchase cotamon stock, or ftor investment.
Any temporary cash needs w-ill he met by short-terim bank borrowings In 2000 FPL had S 125 millioni of first mort-age bonds mature anidl issuedc $452 millioEm of variable-rate bonds and S500 millioni of first mortgage bonds. The proceeds fromll these issuances Were usecl in 2000 to redleem S2-8 millioni of variable-rate honds $109 million of first mortgage bonds and to repay FE[I's short-ter-mil borroxwings. In 2001. 565 million w-as use(l to recdeem $49 millioni of variable-rate bonds and $16 millioni of first mortgage bonds. Bank lines of creclit currently available to F'L Group and its subsidiaries aggregate $3.0 billion.
DlUring 2000 1F1'1 Group repurchased 2.6 million shares of comimiionI stock uinder its share repurchase programs. Undcer the S570 million share repurchase program authorized in connection with the merger agreement wvith Entergv. 1,876,500 shares total-ing 5116 millioni have heen repurchased through january 31.
2001. See Note 2.
FI'l self-insures for dcamage to certain transmission and distribution properties and maintains a fundlecl storm reserve to redluce the financial impact of storm losses. The balance of the storm fuLid reserve aIt December 31. 2000 and 1999 was
$229 million and 5216 million, respectively. Bank lines of credit of 5300 million, included in the 53.0 billion above. are also available if needledl to provide cash for storm restoration costs.
The FI'SC has indlicatecd that it Would cotnsicer future stormn losses in excess of the ftundledl reserve for possible recovery ftrol11 custolmers.
FlL's charter and mortgage conta in provisions which, uLIclel certain con(litions, restrict the pay.ment of dividends and the issuance ol' additional unsecurecd debt. first m q01lage bonds and pteferred stock. Given Fll's curient financial coniditionI and level of earnings. expectedl financing activities and di\\iciencis are not affectedl by these limitations.
NEW ACCOUNTING RULE Effective january 1. 2001, FPIl Groutp adopted Financial AccouLntilng Standards No. (FAS) 133. Accounting ftor Derivative InstrUmelnlltS and -Clecdginig Activities." as amiended by FAS 138, Accountinag for Certain Dlerivative Instrumlients ancl Certain Hedging Activities." For information concerninig the acloption of FAS 133 138. see Note I -
Accounting for Derivative InstrulmenIts and HeFdging Activities.
MARKET RISK SENSITIVITY Substantially all financial instiuLilelitS and positions helcd by FPL Group cdescribed helow are helel for purposes other than trading.
Market risk is measured as the potential loss in fair xalue resultilng ftromii hypothetical reasonahbl possible changes in interest rates.
equity prices o1 colilmlmidity prices over the next year.
Interest rate risk -
The special use futndls of FEl' inclucle restrictecd fundicls set aside to cover the cost of storm cLimage and for the clecommilissioninig of FlI's nuclear pouwer plants.
A portion of these funicis is invested in fixecl incomiie debt securities carried at their market value of approxi mately 51.002 billion and $84-F million at lDecember 31, 2000 and 1999.
respectivelv. Acljustments to market value result in a corresponding atdjustImenIt to the relate( I iability accounts based o0n current regulatolr treatment. B3ecause the ftundls set aside fior storml damiaage couldC be neededl at any time, the related investments are generally more liqui(d anl, therefore, ale less sensitive to chalilges in interest rates. 'he nIcleaC r decommissioning funcs, in contrast, are generally itvested in lotger-termil securities, as decommissioning activities are not expected to begin unltil at least 2012. At December 31, 2000 and 1999, other investments include $300 million and S291 million, respectively, of investments that are carried at estimated fair value or cost.
which approximates fair value.
TlFe following are estimates of the fair Value of long-terIll lebt:
'Inlioulo, 2000 1999 (arrying lair Carrying Fair V'ale V'aueI Value Value Lolng-terll dcet 5 S i1 S4.080 S3.603
$3I518" Based upon a hypothetical 10% clecrease in interest rates.
the net fair Value of the net liabilities Would incre.ase by approximately $84 million at December 31. 2000.
Equity price risk -
Inciudecl in the speciail use funcds of FPI are marketable equity securities carried at their market Value of approximately S511 million and $5'3 million at December 31, 2000 and 1999. respectivelv. A hypothetical 10%o decrease in the prices quoted by stock exchanges \\vould result in a $51 million redcCtion in fair Value andc corresponding adjustment to the related liability accounts hased on current regulatoin treatment at Dlecember 31, 2000.
Commodity price risk -
Energy Marketing & Trading (EMIT).
a division of l 'PL and FPL Energy Power NlMarketing Inc. (PMI.)
a subsidialr of FI'L Energy. I2urchase natural gas and oil to he delivered in the futIle
'for use as fuel in the generation of J
/(I) hlichldSe LiOYct' ollmoiliunOes.
(bn j
osed uo 0/1cc!
uiiOikcIplitCs /
1/soc ol similarlissmlSz.
J I
I 11 TI I
I ri P, n r, I a I I n f
n r
m q
i r) I-)
FPL Group 2000 Annual Report 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 instLuments at December 31, 2000 wvas a negative
$11 million. 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 woould be to change the fair value at December 31, 2000 of these instruments to a negative
$32 million.
MANAGEMENT'S REPORT The management of FPL Group is responsible for the integrity and objectivity of the financial information and representations contained in the consolidated financial statements and other sections of this Annual Report. The consolidatecd financial statements, whiclh in part are based on inforned judgments and estimates made by management, have been prepared in conformity with generally accepted accounting principles applied on a consistent basis.
To aid in carrying out this responsibility, management maintains a system of internal accounting control, wvhich is established after wNeighing the cost of such controls against the benefits derived. The overall system of internal accounting control, in the opinion of management, provides reasonable assurance that the assets of FPL Group and its subsidiaries are safeguarded and transactions are executed in accordance with management's authorization and are properly recorded for the preparation of financial statements. In addition, management believes the overall system of internal accounting control provides reasonable assurance that material errors or irregularities would be prevented or detected on a timely basis by employees in the normal course of their duties. Due to the inherent limitations of the effectiveness of any system of internal accounting control, management cannot provide absolute assurance that the objectives of internal accounting control will be met. The system of internal accounting control is supported by written policies andL guidelines, the selection and training of qualified employees, an organizational structure that provides an appropriate division of responsibility and a program of internal auditing. To ftirther enhance the internal accounting control environment, management has prepared and distributed to all employees a Code of Concluct wvhich states management's policy on conflict of interest and ethical conduct.
FPL Group's independent auditors, Deloitte & Touche LLP, are engaged to express an opinion on FPL Group's financial statements. Their report is based on procedures believed by them to provide a reasonable basis to support such an opinion.
The Board of Directors pursues its oversight responsibility for financial reporting and accounting through its Audit Committee.
This Committee, which is comprised entirely of outsicLe directors, meets periodically with management, the internal auditors and the independent auditors to make inquiries as to the manner in wvhich the responsibilities of each are being (Lischarged. The independent auditors and the internal audit staff have free access to the Committee witlhout management's presence to discuss auditing, internal accounting control and financial reporting matters.
INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholdlers, FP'L Group, Inc.:
We have audited the accompanying consolidated balance sheets of FPL Group, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolicdatecd statements of income, shareholders' equity, and cash flows for each of the thlree years in the period endecd December 31, 2000. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance w-ith 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 wvell as evaluating the overall financial statement presentation. We believe that our aulcits provide a reasonable basis for our opinion.
In our opinion, such consolidatecl financial statements present fairly, in all material respects, the financial position of FPL Group, Inc. and subsidiaries 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 acceptecl in the United States of America.
Tu.) L Uf Deloitte & Touche LLP Certified Public Accountants Miami, Florida Febrmary 9, 2001, except for the first paragraph of Note 2, as to which the date is April 2, 2001
the natira doMice f i n a n c i aI i n f o r m a t io n consolidated statements of income FPL Group, Inc.
Years Ended December 31, 2000 1999 1998 onlilliwls,
.X.
ef '
-'112/-,{,(,
sba re amol/l/1S OPERATING REVENUES S7.082 S6,438 S6,66i OPERATING EXPENSES FIoCi, pol-lCha.seCl powei ncl ii-ntcrchminge 2.868 2_365 2,244 Othel operattions andl immintcenance 1.25 1.253 1,284 L iti-'itioll snttleilielit 69
'\\klgem--reklted 6T_
IDep rciltiont,ncld irno(rtization 1.032 1,040 1,284 Impa mmi irlent loss onl M tiale assets 176 T,xes othiel thin iicollmi talxcs 618 615 597 T(ot,iI opu iatinlg expenses 5.8-t2 5.518 5,409 OPERATING INCOME 1,240 920 1,252 OTHER INCOME (DEDUCTIONS) tCl'ci'st chiii-es (2-8)
(222)
(322) ileltic ncl stock chd iclcidens Flll (15)
(15)
(15)
Divestiture of cable ixmestments 257 Otlerl' -
inet 93 80 28 Total othel inCom1le (dceIctions)
-net (200) 100 (309)
INCOME BEFORE INCOME TAXES L(4-iO 1020 943 INCOME TAXES 336 323 279 NET INCOME S
04
$ 697 S 664 ILilings per shame of coimmiiioni stock (hatSiC andC aISSoLmmoi1ig Cliltioll)
S4.14
$4.07
$3.85 I)viclendcls per share of comimilonl stock S2.16
$2.08
$2.00 A\\eerIge numbLI)er of ComllmonI sharles outstandllilng 1-0 171 173 T7e accompanYing Votes to Consolidated Financial Statemnents are an integralpart of these statemeents.
28 I
III
FPL Group 2000 Annual Report consolidated balance sheets FPL Group, Inc.
December 31, 2000 1999 (miillions)
PROPERTY, PLANT AND EQUIPMENT Electric utility plant in service and other property S 19,642
$18,474 iNuclear fuel under capital lease -
net 127 157 Construction wvork in progress 1,253 923 Less accumulated depreciation and amortization (11,088)
(10,290)
Total property, plant ancl equipment -
net 9,934 9,264 CURRENT ASSETS Cash and cash equivalents 129 361 Custoimiet receivables, net of allowances of S7 each 637 482 Other receivables 246 61 Materials, supplies and fossil fuel inventoy
-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 clebt 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.
29
F i
F l n F l I i 2 '
i n f r r m 2
t i C I, 3 nf1 S'
ate(t.St)
S f
.<eS o cas-f 5ws FPPL Group, Flnc.
1999 S 697 1.040 (198) 55 (257) 176 50 1998 s
664 1.284 (237) 68 (36) 1.563 1.743 (861)
(617)
(1,540)
(521) 57 220 198 135 (26)
(12)
(2,172)
(795) 1.609 343 (584)
(727) 229 (24)
(116)
(62)
(355)
(345) 783 (815) 174 133 187 54 S
361 S
187 S
221 S
573 S
86 77.e accOmpa I il It ANotes lo C(ontsolidated Fiinancial Statements are an integralpart qf tbese statements.
J 308 463 S
34 J
I I ll
'.e13.rar. r J
Years Ended December 31, 2000
,,, lliwlsl)
C SA,iH F L WS Fli! (S1 O(PERATING ACT V TIES
\\Nt itn( )olin S
7(4 Adjtiustlitm s to reontcile ilet iclotmet to nuet cash plrtopided optlrlatig acmtiZtinn
.s3
[)eprec-.1(ttio)ll ;111d tIllloriti/.ltioIl
].()32 lcrca'.u (cc ricutse) ill dtietered icolniu talxes anti l.I;ItCdti rcgut(1ltv uu-telit 283 I
rc) urd.ak t clki t
nst r(uovurv claetiss (810)
G;ill on salt of, e;II)lc ilivustimunits ii plm ilt riLttt loss oil ILlille Issuts Othiuc nut (2,33)
Nut ctsth pidntitiud by operating auctiitius 9-6 CASH F- )MIS F.R10M iMVESTING ACTMMIT)ES (Catpittll xpu ti`dittILI-s of FPL1.
(1.299)
Indtependtint po%vur ilnv\\ustments (5
RutI t Of ' ins ust nudt aniloan rupasmunis-pa itniMsi i ps Intld toiln xullttltcs 2-i Prtocttees tfloilt lit, Salk otf assuts 22 (hOiu- -
nllu-t (183)
Nut ctisll Ltscl in invustilnl activitics (1.9-i43)
C2,-iSF FLJ1
.FR9$.1..;i F3NIANC3NG ACTZT3ME(S Issa nut'-ii 0o ltoll-tul-ni tilht 9 i Rctirltliclit of lonitnt-trm ctiuht (515) ln(ICaISC (tiuctuasul in short-t1rm11 diebt 819 Repttrti isets ofI coliio ititol stockt (I50))
ijidunic 011s noi comt o ni stock (366)
Nut caIShI ptnoN itieu bV (uISCuI ill) fillnancing aCthixitiCS
-35 Nut jnctrasc I tiucuasu) in cash ndtl cashl euivhalunts (232)
Cash anti catsll eutiv alunts at beiginning of veuar 361 (asIh.atli (cash utittitluCI`ts at cin of vuar S
129 Supplementa'l i,isclosures of Cash Flowv information (Ish pa iti lot illt 21iuSt (lnut Of iallnllttt Cua)ita lizeul)
S 301 Cishll paid tnlt incoie tlaxus 160 Suppiernental Scheduie of Noncash investing and Financing Actihities Adtiitions to ca[pital leuas ohligations 5
-13
FPL Group 2000 Annual Report consolidated statements of shareholders' equity FPL Group, Inc.
Tbe accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
31 Accumulated Common Stock(,'
Additional Other Common Aggregate Paid-In Unearned Comprehensive Retained Shareholders' (nillions)
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)
Diviclends on common stock (345)
Earned compensation under ESOP 13 12 Other (1)
Balances. December 31, 1998 181"'
2 3,252 (252) 1 2,123 Net income 697 Repurchases of common stock (2)
(116)
Dividends on common stock (355)
Earnecl compensation under ESOP 12 14 Other comprehensive loss (2)
Other (6)
Balances, December
- 31. 1999 179""
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 Balanices, December 31, 2000 176"1"
$ 2
$3,008
$(220)
S2,803 S5,593 (a) $0.01 par vailute, auithorized-300,000,000 shares; outstanding 175. 766~.215 and 178,554, 735 at DecemberG31, 2000 and 1999S respectivelY.
(b) Outstanding an1d unallocated shares held by the Emiplqyee Stock. Ouvneiship Plan? Trust totaled 7 mnillion. 8 inzillion and 9 iN?il/ion cit Decemiber 31. 2000. 1999 and 1998, respectively.
f i n f
n fc I 2 I i n f n r m q t i n n notes to consolidated financial statements fealts fEnled Decemntbe3 31. 2000. 1999 Cu17 1998
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES Basis of Presentation -
FEL Group, Inc.'s (FPIE Groop) operations are COCndUCtedCI primarily thruOLglh FloidicAa 1o\\\\ver
& Light Company (EilL) and FllEL Energy. LLC (FPL Energ').
Fll. a rate-regulateC pnlhlic otilitv. supplies electric service to approximately 3.8 million custom1ers thl-oughloot most of the east and lower west coasts of Florida. EEIL Energy invests in inclepenclenit p0xver projects throughI )oth controllecd and consolidated entities and non-controlling ownerslhip interests in joint ventiles accounted for unidler the equlitV method.
Thle consolidated financial statements of FPL Groitp include the accoulnts of its majoritV-o\\vnedz andic controllecl subsidiaries.
All significant intercompany halances and transactions have heen eliminatedl in consolidlation. Certain aitoul s.S includcecl in priol years' consolidated financial statememts have been reclassified to conforimi to the cuIrenlt tear s presentation. The preparation of financial statements requiles the use of estimates and assumiptions that affect the reported amonL[ts of assets, liabilities revenLues ancl expenses and thae disclosore of contingent assets and liabilities. Actual resolts couldl differ from those estimates.
Regulation -
EIL is subject to regulation by the Florida I'ulblic Service Comimiission (FHSC) and the Federal Energy RegulatoiA Comimiission (lERC). Its rates are designecd to recover the cost of providing electric selrice to its custollmers including a reasonable rate of retunl1 on investedl capital As a result of this cost-based regulation. FI'L folloxvs the accounting practices set folth in Statement of Financial Accounlting Standards No. (FAS) -1.
'AccouLntilng for the Effects of Certain Types of Regulation." EAS
'I indicates that regulators can create assets and impose liabilities that wxouldl not he recorded 1by unr1egulated entities. Regulatort' assets and liabilities represent probable future revenues that w%ill he recovered fromil or refunided to customers throughl the ratemaking process. Tle continuedl applicability of FAS -1 is assessedi at each reporting period.
In the event that El'Ps generating operations are no longer sublject to the provisions of FAS 71, portions of the existing regulatory assets andl liabilities that relate to generation woiuld he wvritten off Linless regulators specify an alternative means of recoverv or refunEcl Further other aspects of the Ibusiness.
sucIh as generation assets and long-term power puirchase commlnitlments. Vouldl need to be reviewed to assess their recoveriahilitv in a changed regulatorV environment.
The principal regulatoty assets and liabilities are as follows:
Ihe almou[nts preseelted above exclude clause-related rIegulatorl assets and liabilities that are recovered or refunded over the next twelve-nionth period. These am1-ounts are included in deferred clause expenses ancd deferred clause revenues in the consoliclated balance sheets. At December 31. 2000. under-recovered fuiel costs totaled $596 million, S337 million of xvhiclh is includecd in deferiecl clause expenses and $259 million, the noncuirrent poItioI.
is includcecd in other assets At December 31. 1999. under-recovered fuel costs totaled $54 million and are includecd in deferrecl clause expenses. As part of the annual fiel filing for 2001, the F'SC approved Fli's request to recover $S518 million of the undet-recovered fuel costs over a twvo-vear period beginning January 2001. rather than the tvpical one-year time frame. FIlL has also agreed that instead of receiving a retuLr-n at the commercial paper rate on this unrecoveted portion thloughl the fuel ancl purchased powver cost recovery clause (ftlel clause), the uncler-recovery xxill he includecd as a rate base regulatory asset over the tx'o-xear recover' periocl Actual under-recovered fuel costs tht'ough December 31, 2000 exceecled the estimates made earlier in the vear by $78 million, and in February 2001. FPL requested the El'SC to apploVe a fuel adjustment increase effective April 2001 to recover the additional S78 million of under-recovered fuiel costs.
Over half of the states. other-than Florida. have enacted legislation or have state commissiolns that issued ordlers designecl to cleregulate the production and sale of electricity. By-allowing customers to choose their electricity-supplier-, deregulation is expectecl to tesult in a shift friom cost-based rates to market-based rates for energy production and other services provided to retail custollels. Similar initiatixes are also being pursued on the fecderal level. AlthoughL the legislation and initiatives xarx' substantiall',
comimiloIn areas of focus includce xhen market-based pricing xx'ill he available for svholesale ancd retail customers, xxhat existing prtdentlx-incunred costs in excess of the market-based price xvill be recox-erable and whether generation assets shouldl he separatecd from transmission, distribution and other assets It is generally' believedl transimission and distribiution activities \\vouldc remain regulatec.
the natral cho ce December 31, 2000 1999 Assets (inc]lu(led in other assets):
t m.litortiecd dect teac u isition ccosts S 18 S 12 IDeferred Il)CeIpament of ElnCergy VtaSSUSSIYessmet S 35 S 39 1 oicr-rci ocred foiel costs
( 110cieCTC11t portion)
S259 S -
Liti-ation settlemienit (see Note 12)
$223 s -
L.iahlilitigs:
I)flelerld 1gutOlatO -y credit -
inc0me taxes Sl( )
S126 I r.l1nortizecd investimient tax credits 5162 S18-i Sto -ii) altld property insura neC reserve (see Note 13 -Insurance)
$229
$216 J
I I ll
'royc 2Q'00 Ar-,ia] Recort 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 recommenclations be made to the legislature and Governor by December 1, 2001. The commission chose to split the energy stidy between wlholesale 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 woLrld establish, and transfer their generating assets to, affiliated exempt wholesale generators, which wouldc also construrct and operate new generating assets. The investor-owned load-serving utilities, surch 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 pursurant to a competitive bidding process. The proposal includes a number of features, including a three-year retail base rate freeze. The proposal may be addressecd 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 regional transmission organizations (RTOs). RTOs, under a varieth of strr.ctuLres, provide for the independent operation of transmission systems for a given geographic area. The final orcler establishes guidelines for public urtilities 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 ancl Tampa Electric Company, filecd a joint proposal to form a fully independent for-profit transmission company that wvould be responsible for the transmission lines that carry electricity from power plants primarily within the state to sLrbstations in Florida. The October filing wvas supplemented by a December 2000 filing that provided certain operational details of the proposecl RTO.
Under the proposed form of RTO, FPL wourld contribute its transmission assets to an independent transmission company, GricdFlorida LLC (GridFlorida), that would own and operate the system. A separate corporation wourld be formed to ow\\n the voting interest in and manage GridFlorida. In returrn for its transmission assets, FPL vrould receive a non-voting ownership interest in GridFlorida, which could be exchanged for non-voting stock of the managing corporation. FPL would accournt for its interest in GridFlorida using the equity method.
Revenues and Rates FPL's retail and wholesale utility rate schedules are approved by the FPSC and the FERC, respectively.
FPL records unbillecd base revenues for the estimated amount of energy delivered to customers burt not yet billed. Unbillecd base revenues are included in customer receivables and amounted to S137 million and $130 million at December 31, 2000 and 1999, respectively. Substantially all of the energy produrced by FPL Energy's independent power projects is sold through power sales agreements with utilities and revenue is recorded on a deliverecl basis.
In 1999, the FPSC approved a three-year agreement among FPL, the State of Florida Office of Public Counsel (Public Cournsel), The Florida Industrial Power Users Grorp (FIPUG) and The Coalition for Equitable Rates (Coalition) regarding FPL's retail base rates, authorized regulatory return on common equity (ROE), capital structure and other matters. The agreement, which became effective April 15, 1999, provides for a S350 million reduction in annual revenues fiom retail base operations allocated to all customers on a cents-per-kilowatt-hIour basis.
Additionally, the agreemiient sets forth a revenue sharing mechanism for each of the tvelve 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 curstomers.
The reftrnd thresholds are as follows:
(rrilionsS Twelve Months Ended April 14, 2000 2001 2002 66%o/o to customers S3,400 83,450 $3.500 100% to customers S3,556 S3,606
$3.656 The accrual for the refund associatecd vith the revenue sharing mechanism is computed monthly for each twelve-month period of the rate agreement. At the beginning of each twelve-month period, planned revenues are reviewed to determine if it is probable that the threshold will be exceeded. If so, an accrual is recorded each month for a portion of the anticipated refurnd based on the relative percentage of year-to-clate plannecl revenues to the total estimated reventres for the twelve-month period, plus accrued interest. In addition, if in any month actual revenues are above or below planned revelnles, the accrural is increased or decreased as necessary to recognize the effect of this variance on the expected refund amournt. The annual refund (including interest) is paid to customers as a credit to their June electric bill.
As of December 31, 2000 and 1999, the accrual for the revenue refund was approximately S57 million and S20 million, respectively.
The agreement also lowered FPL's autlhorizecd regulatory ROE range to 10% - 12%. During the term of the agreement, the achieved ROE may from time to time he outside the authorized range, anct 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 adjustecl equity ratio of 55.83%. The adjusted equity ratio reflects a cliscountedl 33
f i n a n (c i a I
i-n f o r m a t i o n amnount for ofl-baance slheet obligations uncler certain long-term purchased power contracts. Finally the agreement estahlished a new special dlepreciation program (see Electric Plant.
Depreciation and Amortization) andl inClucles provisions whiich limit depreciation rates and accruals foi 1iLClear dleCollrissiol1in(7 and fossil dismantlement Costs to Currently approved levels and limit amoLints recoverablrle undler-the environimental compliance cost recovery clause CLloing the term of thie agreement.
'lhe agreemrrent states that Public Counlsel FIPUG and Coalition will neitlher seek nor support any additional hase rate reductiolIs duirinig the three-year term of the agreement unless sucLh recluetion is initiated hv Fl'I Furtier. FPL agreed to not petition for any base rate inCreases that Would take effect during the termll of thle agreement.
Fl'L's revenues include am11ouints resulting fiot01 Cost recovery Clauses, Certain reVenue taxes and franchise fees. Cost recovelr clauses, which are dlesignedl to permit ftull recovern of certain costs ancl provicde a return on certain assets utilizecd by these prograins.
inclucle suLIstalltially all fuel, purchased power ancl interchange expenses. conservation-and enrvironmental-related expenses and Certain reVen1ue taxes. ReUVenu1-es from cost recovery Claulses areC recordcedl wv,hen hilled: FPL achieves matching of costs ancd relatecl revenues byv cdefeini-ig the net incer-or over-recoveAr. Any undler-recovered costs or ove-recovered reventues are collectecd ftromii or retuliled to Cushomers in subsequent periods. See Regulation.
Electric Plant, Depreciation and Amortization The cost of additions to uLnits of utility property of I-PI ancd 1`1l, Energy is added to electric utilit plaint. In accordance with regulatoly accounting the cost of FPIs units of utility pioperty retirecd less net salvage is CharIgec to aCCuLImulated depreciation. Maintenance atndl repaiirs of property as well as replicemernts andl renewals of items cleteriniied to be less than uinits of utility property are chairged to otlher operations and maintenance (O&Ml) expenses.
At Decemriber 31. 2000, the generating, transmission, listrihution and general facilities of FPl, repr-esentedl approximately 45°o 13%. 36°n and 6%,(, respectively, of FPL's gross investment in electric utility phint in service. SuLbstantially all eleCtriC utility plant of FPL is sublject to the lien of a mrortgage seciurinlg FPls first mortgage honds.
Depreciation of electric property is primiarily provided on a straight-line average remaining life hasis. FPL inCludces in depreciation expense a provision for fossil plant dismantlement ancl nuclear plant decomm1lissioning (see Decommissioning and Dlismantlement of Generating Plant). For substantialkl all of FlPl's propert\\. depreckition stLldies are perftormed ancd filecd with the FPSC at least every four years. In April 1999. thie FPSC granted finazl approval of Fl'L's most reCelnt dCepreciation stUdies.
whiCh wvere effectiVe lanua1L 1. 1998. The weighted annual composite depreciation rate for l'I'L's electric plant in service was approximauitely i.2"% for 2000. 4.3% for 1999 ancl 4.4% for 1998.
excluding thie ffects of decomimiissioning and dlismantlement.
IFurtlher.
thcse rates exclucle the specCil and plant-related deferrecd cost amortization discussed below.
The agreement that reduced FPl's hase rates (see Revenues andl Rates) also allows for special depreciation of up to S100 million.
at FPL's cliscretion. in each year of the three-year agreement periocl to he applied to nuclear andc or fossil generating assets.
tnder this ncw depreciation program, FPl' recorcccl S100 million of special depreciation in the first twelve-month period ancl S71 million througlh December 31. 2000 of the secondl twelve-month periodl. On a fiscal y ear basis. E l'L recordted approximately $101 million ancl $70 million of special clepreciation in 2000 and 1999, respectively. The newN depreciation program replaced a revenue-lbased special amortization programn whereby I<l'L recorded as depreciation and amiortization expense a fixed im(ILint of $9 million in 1999 andl $30 millioni in 1998 for nuclear assets. FPIl also tecorclecl uLnicer the reVenue-based special amortization program variable amortization based oin the actual level of retail base revenues compalired to a fixedl amount.
The variable b
am-oints recorcled in 1999 and 1998 were $54 million ancl S3-i8 million, respectively. The 1998 variable amount includes. as dlepreciation and almolrtizatioln expense. S161 million for amortizatioln of regulatory assets. TheC remnainling variable amounts were applied against nuclear and fossil production assets. A.dditionally. Fl'l. cominplete(l arnortizatioln of certain plant-related deferred costs bv recording S2-4 imillion in 1998.
These costs are consiclerecl recoverable costs and are monitorecl throuiglh the iIonthlv reporting process with the Fl'SC.
Nuclear Fuel - FlL leases nuclear ftuel f'or all four of its ncicCar-uinits. Nuclear fuel lease expense was $82 million.
S83 million and $83 million in 2000. 1999 andI 1998. respectively.
Includeld in this expense was an interest component of $9 million.
S8 million ancd S9 million in 2000, 1999 and 1998. respectively.
Nuclear fuel lease payments and a charge for spent nucleCar fuel disposal mlie chargedl to ftuel expense on a unit of pr(oduction method. These costs are recovered throughl the fuel clause.
tTndiel certain circumstances of lease termination. Flll is requiirecd to purchase all nuclear fuel in vhatever foriml at a purchaise price designecd to allow the lessor to recover its net investment cost in thc ftil. \\vhich totaled S127 millioli at December 31, 2000.
For ratemnaking. these leases lire classified is operating leases.
F'or financial reporting. the capital lease obligaition is iecorded at the almolunt clue in the event of lease terminaltion.
Decommissioning and Dismantlement of Generating Plant -
Fl', accrues nuclealr decormissioning costs over the expectetl selVice life of each Lllit. Nuclear clecolmilissioning stuclies are perfomiiied lit least every five years andl are stbibmitted to the FIlSC for approval. In Januarl 2001. FPlI filecd uptlatecl maIclear (lecominissioning studies \\vith the FPSC. These stLidies aissLItmiC pr(omilpt dismantlement for the Turkey Point Units Nos. 3 and 4 with decorinmissioning activities commenacing in 2012 and the natural choice J
34 I
I ll
_j_
FPL Group 2000 Annual Report 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. These studies also assume that FPL will be storing spent fuel on site pending removal to a U.S. government facility. The studies, which are pending FPSC approval, indicate FPL's portion of the ultimate costs of decommissioning its four nuclear units, including costs associated with spent fuel storage, to be S6.8 billion. Decommissioning expense accnials included in depreciation and amortization expense, were S85 million in each of the years 2000, 1999 and 1998. FPL's portion of the ultimate cost of decommissioning its four units, expressed in 2000 dollars, is currently estimated to aggregate S1.8 billion. At December 31, 2000 and 1999, the accumulated provision for nuclear decommissioning totaled approximately $1.5 billion and $1.4 billion, respectively, and is included in accumulated depreciation. See Electric Plant, Depreciation and Amortization.
Similarly, FPL accrues the cost of dismantling its fossil fuel plants over the expected service life of each unit. Fossil fuel plant dismantlement studcies are performed and filed with the FPSC at least every four years. Fossil fuel plant dismantlement studies were filed in September 1998 and wvere effective January 1, 1999. The dismantlement studies indicated an estimated reserve deficiency of $38 million, which was recovered through the special amortization program. Fossil dismantlement expense was S14 million in 2000 and 517 million in each of the yea rs 1999 and 1998, and is included in depreciation and amortization expense. FPL's portion of the ultimate cost to dismantle its fossil units is S482 million. At December 31, 2000 and 1999, the accumtilated provision for fossil dismantlement totaled $246 million and $232 million, respectively, and is included in accumulated depreciation. See Electric Plant, Depreciation and Amortization.
Restricted trust funds for the payment of future expenditures to decommission FPL's nuclear units are included in special use funds of FPL. Securities held in the decommissioning find are carried at market value vith market adjustments resulting in a corresponding adjustment to the accumulated provision for nuclear decommissioning. See Note 4 -
Special Use Funds. Contributions to the funds are based on current period decommissioning expense. Additionally, fund earnings, net of taxes are reinvested in the funds. The tax effects of amounts not yet recognized for tax purposes are included in accumulated deferred income taxes.
Accrual for Major Maintenance Costs -
Consistent with regulatory treatment, FPL's estimated nuclear maintenance costs for each nuclear unit's next planned outage are accrued over the period from the end of the last outage to the end of the next planned outage. The accrual for nuclear maintenance costs at December 31, 2000 and 1999 totaled S31 million and S42 million, respectively, and is included in other liabilities. Any difference between the estimated and actual costs are included in O&M expenses when known.
FPL Energy's estimated major maintenance costs for each unit's next planned outage are accrued over the period from the end of the last outage to the end of the next planned outage.
The accrual for FPL Energy's major maintenance costs totaled
$33 million at both December 31, 2000 and 1999. Any difference between the estimated and actual costs are incltided in O&M expenses when known.
Construction Activity -
In accordance with FPSC guidelines, FPL has elected not to capitalize interest or a return on common equity on construction projects. The cost of these construLction projects is allowed as an element of rate base. FPL Group's unregulated operations capitalize interest on construction projects.
Storm and Property Insurance Reserve Fund (storm fund) -
The storm fund provides coverage to-ward storm damage costs and possible retrospective premium assessments stemming from a nuclear incident under the various insurance programs covering FPL's nuclear generating plants. Securities held in the fund are carried at market value with market adjustments resulting in a corresponding adjustment to the storm ancd property insurance reserve. See Note 4 -
Special Use Funds and Note 13 Insurance. Fund earnings, net of taxes, are reinvested in the fund. The tax effects of amounts not yet recognized for tax purposes are included in accumulated cleferred income taxes.
Other Investments Included in other investments is FPL Group's participation in leveraged leases of S154 million at both December 31, 2000 and 1999. Additionally, other investments include notes receivable and non-controlling non-majority ovned interests in partnerships and joint ventures, essentially all of which are accounted for under the equity method. See Note 4.
Impairment of Long-Lived Assets -
FPL Group evaluates on an ongoing basis the recoverability of its assets and related intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable as described in FAS 121, 'Accounting for the Impairment of Long-Lived Assets ancl for Long-Lived Assets to be Disposed Of." See Note 10.
Cash Equivalents Cash equivalents consist of short-term, highly liquid investments with original maturities of thlee months or less.
Retirement of Long-Term Debt -
The excess of FPL s reacquisition cost over the book value of long-term debt is deferred and amortized to expense ratably over the remaining 35
f i n a nf C i q I
i n f o r m a
t i o n
life of the original issue. xwhichi is consistent writh its treatnment in the ratemnaking process. See Regulation. Fll. Group Capital Inc (FlL Group Capital) expenses this cost in the period incurred.
Income Taxes Deferred income taxes are prosided on all significant temporary cliffetrenices betwveen the financial statement and tax bases of assets and liabilities. The leferred regulatory7 creclit -
incomile taxes of E'IL represents the revenue equivalent of the clifferenice in accumulated cleferred incomiie taxes computed inder-FAS 109. iAccouL1tilng for Income Taxes." as comparedl to regulatorv accounting rules. This amount is being amilortized in accordance with the regulatory treatment over the estimated lives of the assets or liabilities which resulted in the initial recogniition of the cleferrecl tax amount. Investment tax credits (ITC) ftor FlPI. are cleferred andI amortized to incomlie oxer the approximate lives of the related property in accordance
-with the regulatory treatment.
Energy Trading
- FEL and F'L Energy engage in limited energv trading activities to optimize the value of electricity and fuel contracts, as well as generating facilities. These activities are accounted for at market value. There were no sionificant open positions in trading activities at December 31. 2000 or 1999.
Substaintiall-all of the effects of EEL's tracling activities are reportedl net ancl passed throughl to customners in the fuel clause or capacity cost recovery clause (capacity clause). Fl'L Energy's trading activities are reflected gross in operating revenues and ftiel expense in the consoliclated statements of inconme.
Accounting for Derivative Instruments and Hedging Activities Effective lanuary 1. 2001, FPL Group adopted FAS 133. Accounlting for Derivative InstrumiLents ancl Hedging Activities," as amended by FAS 138, 'Accounting for Certain Derivative Instrumients and Certain Hedging Activities.'
The statement establishes accounting an(l reporting stanclardIs requiring that esers derivative instrumnent (includcing certain derivatise instruml1ents embedIded in otlher contracts) be recorded in the balance sheet as either an asset or liabilitv measured at its fair value. Tle statement requires that changes in the derivatives' fair value le recognized currently in earnings unless specific hedge accounting criteria are met. In January 2001. FPL recor-cledl an initial acljustment to recorcd the fair al]ues of instiuments not previously reportecl on the balance sheet, resulting in derivative liabilities of S5 million. w-ith the net offsetting amount recorded as a deferred regulators asset. Subsequent changes in the fair values of FEL's clerivatise instruments svill also be deferied in a regulators asset or liabilitV until the contracts are settled.
Upon settleimlenlt, aiy gains or losses ssill be passed througlh the fuel and capacigt clauses.
J In addition to the amounts i-ecorded bl FPL, in January 2001 FPL Energy recorded an initial adjustment to record derisatise assets of $37 million, derivative liabilities of $35 million and an increase in investments of $11 million. For those con-ttacts sshere hecdge accounting is applied, the adoption of the new rules resulted in a credit of S1O million to other comprehen-sive incomiie (in stockholdlers' equity). FIL Group recorded a S2 million loss as the cumulative effect on earnings of a change in accountinig principle representing the effect of those derivative instrumlients for swhichi hedge accounting svas not applied.
In December 2000, the Financial Accounting Standards Board's Derivatives Implementation Group (DIG) discussed several issues related to the posser generation industry. but did not reach conclusions on those issues. The ultimate resolution of these issues could result in a requiremenit to mark certain of FPL Group's posver and fuel agreements to their fair market salues each reporting period. If these agreements are required to be treated as derivatise instruments. the ness' accounting would first be applied in the quarter follosving final resolution of the issues. At this time, management is unable to estimate the effects on the financial statements of any future dlecisions of the Financial Accounting Standards Board or the 1)IG.
J
- 2. MERGER In July 2000 Fl'L Group and Entergy announced a proposecl merger svhich wvas approved by the shareholdlers of the respec-tive companies in Decenilber 2000. Subsequently, a number of factors lecd FPL Gt'oup to concludce the merger ssould not achieve the synergies or create the shareholcler value originally contem-plated when the merger was announced. As a result, on April 1.
2001, FPL Group and Entergy mutually terminatedl the meiger agreement. Both companies agreecl that no teramination fee is payable uncler the terms of the merger agreement as a result of this terminaation. A fee svill be payable by FPL Group or Entergy.
however. if either agrees svitli another partv to a comparabile transaction prior to january 2002. Each company Wvill bear its osvn nierger-related expenses.
In 2000. FPL Group recorded S67 million in merger-related expenses of which FEL recorded S62 million (S38 million after-tax). FPL Energy recorded S2 millioti (S1 million after-tax) and Corporate and Other recordecl $3 million ($2 million after-tax).
I I II
FP i u-2COC AnTmual Reoct
- 3. EMPLOYEE RETIREMENT BENEFITS FPL Group and its subsidiaries sponsor a noncontributory defined benefit pension plan and defined benefit postretirement plans for health care and life insurance benefits (other benefits) for substantially all employees. The following tables provide a reconciliation of the changes in the plans' benefit obligations, fair value of assets and a statement of the funded status:
(1millions)
Pension Benefits Other Benefits 2000 1999 2000 1999 Change in benefit obligation:
Obligation at October 1 of prior year S1, 178
$1,173 S 335 S 345 Service cost 44 46 5
6 Interest cost 77 71 22 21 Participant contributions 1
2 Plan amendments 6
Actuarial (gains) losses -
net (20)
(38) 4 (24)
Acquisitions 4
2 Benefit payments (80)
(78)
(17)
(17)
Obligation at September 30 1.205 1,178 350 335 Change in plan assets:
Fair value of plan assets at October 1 of prior year 2.555 2,329 111 115 Actual return on plan assets 284 310 7
12 Participant contributions 1
2 Benefit payments and expenses (89)
(84)
(21)
(18)
Fair value of plan assets at September 30 2,750 2,555 98 111 Funded Status:
Fundled status at September 30 1,545 1,377 (252)
(224)
Unrecognized prior service cost (76)
(89)
Unrecognized transition (asset) obligation (93)
(117) 42 45 Unrecognized (gain) loss (993)
(900) 15 7
Prepaid (accrued) benefit cost at December 31
$ 383 S 271
$(195)
S (172)
The following table provides the components of net periodic benefit cost for the plans:
Pension Benefits Other Benefits Years ended December 31, 2000 1999 1998 2000 1999 1998 Service cost S 44 S 46 S 45
$ 5 S 6 S6 Interest cost 77 71 75 21 21 21 Expected returnl on plan assets (172)
(156)
(149)
(7)
(7)
(8)
Amortization of transition (asset) obligation (23)
(23)
(23) 4 3
3 Amortization of prior service cost (7)
(8)
(8)
Amortization of losses (gains)
(31)
(22)
(21) 1 1
Effect of Maine acquisition 2
Net periodic (benefit) cost S(112)
$ (92)
S (81)
S 23
$ 26 S 23 The weighted-average discount rate used in determining the benefit obligations was 6.75% and 6.5% for 2000 and 1999, respectively.
The assumed level of increase in future compensation levels was 5.5% for all years. The expected long-term rate of return on plan assets was 7.75% for all years.
Based on the current discount rates and current health care costs, the projected 2001 trend assumptions used to measure the expected cost of benefits covered by the plans are 5.8% for persons up to age 65 and 5.4% thereafter. The rate is assumed to decrease over the next two years to the ultimate trend rate of 5% for all age groups and remain at that level thereafter.
the ra';, a clua f i n a
n c i a I
i n f o r m a
ti n
Assumned health talre cost trelld rates can have a significanit effect on the amounts reportedl for the health care plans. A 1% increase or dle(CeaCse in assumeci health care cost trenct rates would have a corresponding effect on the service and interest cost components and the accumulated obligation of other-hernefits of approximately SI million and 513 million.
respectively.
- 4. FINANCIAL INSTRUMENTS
'I'he C.11`1y0i1g alluOLMS of cash equivalenits andcl commercial paper approximate their fair values. At I)ecember 31, 2000 and 1999. other inv estmen11lts inclICue S300 maillion ancI S291 millioni, respectivelv, of investments that are carried at estimatecd fair vakle or cost, which approxillm.ites failr alue. Thle following estimates of the fair value of financial instruments have been made using available market information and other Vtkiation methiocdologies. Howcver. the use of different market assumptions or methocds of vahlation could result in different cstimated fair Val]Ues.
ondh... I,,)l Deconhcr 31__,,_l 2000 1999 Carrying Estimated Carrving Estimated Amounit I:air Value Amounlt Fair ValuLe to.o1g-ten delbt iCIildn cUIrrent 111tuLitiVS S-i()--1 S4.080 S3.603 S3,518""
(a/ J
/?ase j o-n 12/11(1o
'(d mal 4)?('l pr1iccsjo /i)l' IIRC.s S)wim)ilar slw'iS&.\\
Special Use Funds -
The special use fuLndcs conlsist of storm fund assets totaling $140 million and $131 million, ancl decommission-ilng flu C assets totaiog 51.35-billion and 51.220 billion at December 31. 2000 and 1999, respectively. SecuLities heldl in the special use fudcls are cai ued at estimiated fail Value based on quotedl market prices. Thle nuclear decommissioning fund consists of approximately 40°l, eiitA s!curities and 60't municipal. government, corporate and mortgage-and other asset-backed debt securities waith a weightecd-iVeralge ltaulrity of approximately nine years. The storm fund primnarily consists of municipal debt securities with a veighted-average mlaturity of approxilmately four years. The cost of sectirities soldl is determinedl on the specific identification method. The funcis had approximnate realized gains of 58 miilion and approximate realized losses of S15 million in 2000. S32 million and S22 million in 1999 amd 524-million and S-i millioni in 1998, respectively. The fuindis had unlrealizecd gains of approximately S258 million and $286 million at Dlecember
- 31. 2(11(1( and 1999. respectively; the unrealized losses at those dates were approximately $4 million and $17 milliorn. The proceeds from the sale of securities in 2000. 1999 ancd 1998 were approximately $2.0 billion. S2.7 billion and $1.2 billion, respectively.
- 5. COMMON STOCK Common Stock Dividend Restrictions FPL Group's charter does not limit the dividlends that may he paid on its common stock As a piracticala matter, thie ability of FPI. Group to pay dividends on its common stock is clependent UpoIn dividends paid to it by its stibsidiaries. pril imaril Fl)l.. FHI.'s chatter andc a mortgage secuLing FPL's first mortgage bonds contain provisions that, under certain Conditions, Icstrict the payment of dividends ancl othel distributions to FIlL Group. These restrictions (lo n0t currently limit FPL's ability to pa v dividends to 1:'1t Group. In 2000. 1999 and 1998. FPI paid. as dividends to FPI Group. its net income available to FPL Group on a onie-mi1ointhI lag basis.
Employee Stock Ownership Plan (ESOP) -
The employee thlift plans of FPI. GIoup include a leveraged ESOIP feature. Shares of common stock held by the 'I'frst ftor the thlift plans (Trrust) al-e used to provide all or a portion of the employers' matching contribu-tions. liv idends received oin all shares, alon,g wx ith cash contributions from the employers, are usedl to pay principal andl interest on an ESOI' loan hekl by FPl' Group Capital. IDividendls on shares allocated to employee accounts andl usecl hv the Trust for clebt service are replacedc With anl edLti\\alent am1ount of shares of comimion stock at prevailing market prices.
ES()I-related compensation expense of approximately S22 million. S21 million and $19 million in 2000. 1999 and 1998, respectively.
\\as recognlizedC based onl the fair vaklue of shaires allocated to employee accounts during the period. Interest income on the ESOP loan is elimtinatedi in consolidatiot.
ESGI)-relatecl unearned compensation includecd as a redluction of sharelholders' equity at December 31. 2000 w-as approximatel
$2 1-million, representing - million unallocatedl shares at the original issue price of S29 per share. The fair value of the IFSOP-relted uLLearLnled compenCsation accounlt usinag the closing price of FPI Group stock as of December 31. 2000 wvas approximately
$538 million.
9 38 I
III
FPL Group 2000 Annual Report Long-Term Incentive Plan -
As of December 31, 2000, approximately 9 million shares of comnmon stock are reserved and available for awards to officers and employees of FPL Group and its subsidiaries under FPL Group's long-term incentive plan. Restricted stock is issued at market value at the date of grant, typically vests within four years and is subject to, among other things, restrictions on transferability.
Performance share awards are typically payable at the end of a three-or four-year performance period and are subject to risk of forfeiture if the specified performance criteria is not met within the vesting period. The changes in share awards under the incentive plan are as follows:
Options "
Restricted Performance Weighted-Average Stock Shares"'
Number Exercise Price Balances, December 31, 1997 219,550 442,588 Granted 19.500
178,518" Paid/released (80,920)
Forfeited (22,250)
(29,566)
Balances, December 31, 1998 216,800 510,620 Granted 210,100"'
294,662'1' 1.300.000"'
$51.53 Paid/released (78,640)
Forfeited (13,500)
(80,027)
(200.000)
$51.16 Balances, December 31, 1999 413,400 646,615 1,100.000
$51.59 Granted 28,350'^h 465,614"'
564.950"
$39.64 Paid/released/exercised (264,800)
(1,038,375)
(1.060.726)
$49.88 Forfeited (95,700)
(54,854)
(212,056)
$50.51 Balances, December 31, 2000 81,250 19,000 392.168'
$39.58 (a) Peformance shares ancl options resulted in 3773431, 252.572 and 128.443 assumed incremental shares of com)1?on)1 stock outstandingfor pinposes of computing dilutedearningspershare in 2000. 1999 and 1998, respectively. These incremenetalsharesdid not change basic earningsper share.
(b) 7Te neighted-av ercige gr-ant clatefair -alue of restricted stock granted in 2000, 1999 and 1998 uas $45.55. $53.21 and S61.89per share.
respectivel/.
(c) 9T e u eighted-averagegrant datefair value of performance shares gra)nted in 2000. 1999 and 1998 wvas $41.25, $61.19 and $59.19 per share.
respectively.
(cd) 7he weighted-average grant datefair value of options granted was $39.64 and $51.53 per sbare in 2000 and 1999, respectively. The excerciseprice of each option granted in 2000 and 1999 equaled the marketprice of FPL Group stock on the clate of grant.
(e) Lvercisepricesfor options outstanding as of December 31. 2000, rangedfr-om $38.13 to $47.63 per share and bad a weighted-aveirage remaining contractual life of 9.2 years. As of December 31 2000. all outstanding options were exer cisacble andfuily vested.
FAS 123, 'Accotnting for Stock-Based Compensation," encourages a fair value based method of accounting for stock-based compensation. FPL Group, however, uses the intrinsic value based method of accounting as permitted by the statement. Stock-based compensation expense was approximately $80 million, $13 million and $10 million in 2000, 1999 and 1998, respectively. Stock-based compensation expense in 2000 reflects merger-related costs associated with the change in control provisions in FPL Group's long-term incentive plan. Compensation expense for restricted stock and performance shares is the same under the fair value and the intrinsic value based methods. Had compensation expense for the options been determined as prescribed by the fair value based method, FPL Groups net income and earnings per share would have been $696 million and $4.10 ($4.09 assuming dilution) in 2000 and $696 million and $4.06 in 1999, respectively.
The fair value of the options granted in 2000 and 1999 were estimated on the date of the grant using the Black-Scholes option-pricing model with a weighted-average expected dividend yield of 3.82% and 3.81%, a weighted-average expected volatility of 20.27% and 17.88%,
a weighted-average risk-free interest rate of 6.59% and 5.460/o and a weighted-average expected term of 10 years and 9.3 years, respectively.
Other -
Each share of common stock has been granted a Preferred Share Purchase Right (Right), at an exercise price of $120, subject to adjustment, in the event of certain attempted business combinations. The Rights will cause substantial dilution to a person or group attempting to acquire FPL Group on terms not approved by FPL Group's board of directors.
39
f i n a n c i a I
i n f o r m a t i o n
- 6. PREFERRED STOCK FPI. Groop s chliarter auVth1orizes the issuance of 100 millioni shares of serial preferred stock. SO.01 pair value. None of these shares is out-standing. ITI. Group has reservedl 3 million shares for issuaice upon exercise of preferred share purchase rights which expire in june 2006. Irefeirecd stock of FPL consists of the following: <t December 31, 2000 Olii/tns, Shares Redelmiption
[)ecemher 31.
(Utstand1linig PrI-ice 2000 1999 CLulisie.
S 10 I'Mt P
\\'alue. Wxithlout Sinikillg ILindl re(juiremllents.
authorized 15.822.5100 sharCs:
i' Sies 199.i)()1)(
S1.(1 S 10 S 10 i
" Serieis A 5(it()( (t S Itti It) 5 5
Series 13 5(,)(((
sloQ
-0 5 5
i Selries (,
62.509 S103.00 ft 6
Si. ri' es 1) 50.tllll S10(35(1 5
5 i.35' Series E 5(.(((t)
S 102.0 5
- 6.
9' scries s
-5(.))()
s(13 49 '5 75
-115' Series T 5(1(9.0((
510)3.52 `
5(
50 S' ri, series t1 650.00 91S 1
'37 65 65 lotal pieferred stock of 11'.
2.262.500 S226
$226
((ii 1711. /' (tait ldso itlhiriz(-t the itsnaniice (t5 millitn 5/1002 *,
/
I)tt'/Oti/ StOrk.
sbare op) p llrie. None o/ fticie sh/Sirs ollttlslldilu.7btr tierc 0oO i tss lilles (n retdelti,i,s (f/p/rnd sltock ill 2000. 1999,ot /9(8.
(b)
Not A c //aI/u/ prei to 200.)¢
- 7. DEBT J
Long-term deht consists of thc followNing:
D)ecilmler 31.
2000 1999 FPL Fi r st oRor tgage bonds:
- laturing t hriomigh (195 -
5 8' tio 6_ !
S 2S S 350 M1.aiuriig 211(18 through 20)1(f-t 5
'. to 7-3.>
650 650 N.tturimt in9-20 throu'ih 2026
_- 7' to 7 0
51(
516 Ied lit rn-terim niotes -nt.ttu ring 20)0)3 579')
7(
PoHllUt ionl ConltioI MI d irCdlustri,1 dCeVlopMeCnIt series MItuIring 20()? thitoLIgh 20)27 6.7 to 75
-) il 150 PIllution contrttol soilid waste disposatl a1n1I inldustri.al dc elopillent i'evuce bonds -
- naturinig 20l20 through 20)2 9 -
viriable. 3.4 i anld 3<
v civage aInnuIl initelrest rate. respectiely 658
-483 ljamtllolrtizedl dliscount -
net 118)
(15)
Iotal long-terilm lelht of FP L.
2.642 2.204 L.ss c rrelt ma,ItUritieS 65 125 1,o0g-lerm id Iet of' 1F1'1 ex ILIclin(g cuIrrenlt Ima.Lt U itics 2079 207 FPL Group Capital I)CblC'llttt'C'S:
Niaturing 21111 6
17S 175 Iatu ring 2006 through 2009 7)- '1
\\
t 7
'.0 1225 1L225 Otlhle ii tg-termc deht maturing 015-
- 35.
S 5
Ilnlalortticd dliscouilt (6)
(6)
I'otilI long-term deht of FPL Group Capital 1.399 1.399 Total lon g-term del a S39 53 -0478 J
(a) In~~~~
1)cebe 200 1-1, issz^,icdo
,,J00\\
(
Zffirsl b)onds ulh)1 anl illicie-st
)rale (!/ (6 z`'
J mai(iril i) i l 200it5.
.Iso i)) I)c iti')))l) 20100, 11. r'edt'(') dlteI(l/ ()tt
/ 1? ipproximillrlt
/!
2 S
il/ion li)it inc til 1iii01/i1f oJ, a rir(l/)/e-rltle bond(/s m)lilri)iti lstiien 206 d)ti 2029.
I I ll
FPL Group 2000 Annual Report Minimum annual maturities of long-term debt for FPL Group are approximately $65 million, $170 million, $300 million and
$500 million for 2001, 2003, 2004 and 2005, respectively.
At December 31, 2000, commercial paper borrowings had a year end weighted-average interest rate of 6.77%. Available lines of credit aggregated approximately $3.0 billion at December 31, 2000, all of which were based on firm commitments.
B. INCOME TAXES The components of income taxes are as follows:
(millions)
Years Ended December 31, 2000 1999 1998 Federal:
Current
$ 77
$511
$467 Deferred 239 (196)
(215)
ITC and other -
net (35)
(29)
(27)
Total federal 281 286 225 State:
Current 6
55 72 Deferred 49 (18)
(18)
Total state 55 37 54 Total income taxes
$336
$323
$279 A reconciliation between the effective income tax rates and the applicable statutory rates is as follows:
Years Ended December 31, 2000 1999 1998 Statutory federal income tax rate 35.0%
35.0%
35.0%
Increases (reductions) resulting from:
State income taxes -
net of federal income tax benefit 3.5 2.4 3.7 Amortization of ITC (2.1)
(2.1)
(2.5)
Amortization of deferred regulatory credit -
income taxes (1.2)
(1.3)
(1.8)
Adjustments of prior years' tax matters (2.7)
(2.7)
(6.3y",
Preferred stock dividends -
FPL 0.5 0.5 0.5 Other -
net (0.7)
(0.2) 1.0 Effective income tax rate 32.3%
31.6%
29.6%
(a) Includes the resolution of an audit issue with the Internal Revenue Servce (IRS).
The income tax effects of temporary differences giving rise to consolidated deferred income tax liabilities and assets are as follows:
(mzillionls)
December 31, 2000 1999 Deferred tax liabilities:
Property-related
$1,338
$1,377 Investment-related 398 373 Other 630 312 Total deferred tax liabilities 2,366 2,062 Deferred tax assets and valuation allowance:
Asset writedowns and capital loss carryforward 156 170 Unamortized ITC and deferred regulatory credit -
income taxes 104 119 Storm and decommissioning reserves 277 245 Other 474 472 Valuation allowance (23)
(23)
Net deferred tax assets 988 983 Accumulated deferred income taxes
$1,378
$1,079 The carryforward period for a capital loss from the disposi-tion in a prior year of an FPL Group Capital subsidiary expired at the end of 1996. The amount of the deductible loss from this disposition was limited by IRS rules. FPL Group is challenging the IRS loss limitation and the IRS is disputing certain other positions taken by FPL Group. Tax benefits, if any, associated with these matters will be reported in future periods when resolved.
- 9. JOINTLY-OWNED ELECTRIC UTILITY PLANT FPL owns approximately 85% of St. Lucie Unit No. 2, 20% of the St. Johns River Power Park units and coal terminal and approxi-mately 76% of Scherer Unit No. 4. At December 31, 2000, the proportionate share of FPL's gross investment in these units was $1.174 billion, $329 million and $569 million, respectively; accumulated depreciation was $752 million, $167 million and
$288 million, respectively.
PPL is responsible for its share of the operating costs, as well as providing its own financing. These costs are included in the consolidated statements of income. At December 31, 2000, there was no significant balance of construction work in progress on these facilities. See Note 13 -
Litigation.
- 10. ACQUISITION OF MAINE ASSETS During the second quarter of 1999, FPL Energy completed the purchase of Central Maine Power Company's (CMP) non-nuclear generating assets, primarily fossil and hydro power plants, for
$866 million. The purchase price was based on an agreement, subject to regulatory approvals, reached with CMP in January 1998. In October 1998, the FERC struck down transmission rules that had been in effect in New England since the 1970s. FPL 41
f i n a n r i a I i n f o r m a t i o n Energy filed a law\\suit in November 1998 reqLtesting a declaratory judcgment that CMIll coulld not meet the essential termis of the purchase agreement and, as a result, FPL Energy shouldC not be requlire(l to complete the transaction. FEL Energy believed these FERC rulings regirding transmission constittite(l a material a(dverse effect Lindle the purchase agreement because of the significant clecline in the value of the assets causecd by the rulings. The request for (leclaratory judgimient was (lenie(l in March 1999 and the acquisition wras completed on April 7. 1999.
The acquisition was accountedl for under the purcliase methocd of accounting and the res.ults of operating the Mvaine plants have been included in the consolidated financial statements since the acquisition date.
The FERC rulilIgs regarding transmission, as wRell as the annouLncement of new-entrants into the market and changes in fuel prices since Januar 1998. resultecd in FPL Energy recordling a S176 million pre-tax impairment loss to wvrite-dow-n the fossil assets to their fair Value. which was detertiminecl basecl on a discoulited cash flow analysis. The impairment loss redlucecl 1999 results of operations ancI earnings per share by S104 million anct so.61 per share, respectively.
Most of the reinainder of the purclhase price was allocated to the hydro operations. The hydrio plants ancl relatedl goocdwill are being amortized on a straight-line hasis over the 40-year term of the hivdlo plant operating licenses.
- 11. DIVESTITURE OF CABLE INVESTMENTS In JanuaLr 1999. a subsiCdiarr sold 3.5 million common shares of Adelphia Communications Corporation (Adelphia) stock and in October 1999 had its one-thircl ownership interest in a cable limited partnership redeemecd, resultilng in after-tax gains of approximately
$96 Imillion andl $66 miillion. respectively. Both investments had been accounted for under the equity' methiocd.
- 12. SETTLEMENT OF LITIGATION In October 1999. EIL and the Florida Municipal Power Agency
('lMPA) entered into a settlement agreemenit pursuant to which FEL agreed to pay FMPA a cash settlement: Fl'I. agreed to reduce the demand chaige on an existing power purchase agreement:
and FllE ancd EMIA agreed to enter into a new pover purchase agreemnent giving FMPA the right to purchase limited amounts of power in the futLre at a specifiecd price. FMPIA agreed to clismiss the laWsuit With prejudice. and both parties agreedl to exchange mutual releases. The settleimient recduced 1999 net income by S42 million.
In September 2000, the bankruptcy coUlt approved the set-tlement of a contract dispute hevteen FEL and twzo qualifying facilities. The settlemenit was approved by the FI'SC in October 2000. In I)ecember 2000 uinler-the terms of the settlement, the trulstee was paid S222.5 million plis security deposits. The funds were subseCquenItly distributed by the trustee as tlirectedI hy the bankrIptcy couLrt. El'I. will recover the cost of the settlement through the fuel and capacity clauses over a five-year periocl beginning January 1. 2002. Also, from the payment clate to lDecember 31. 2001. FIL will not receive a return on the unre-covered amount through the fuel ancd capacity clauses, but instead, the settlement amount wvill he inclucled as a rate hase regulatory asset over that periodl. See Note 1 -
Regulation.
- 13. COMMITMENTS AND CONTINGENCIES Commitments -
FPL has made commitments in connection w ith a portion of its projectedl capital expenditures. Capital expendlituies for the construction or acquisition of additional facilities and eqtuipment to meet customer demancl are estimatecd to be approximately S3.3 billion for 2001 throughi 2003. Inclided in this three-year forecast are capital expenclitures for 2001 of approximately S1.1 billion. As of December 31. 2000, EEL Energy has made commitments in coniection wvith the development and expansion of indepencdent power projects totaling approxinmately S380 million. Subsidiaries of EI'L Group, other than FPL, have guaranteed approximately $810 million of prompt performance payments, lease obligations, purcihase ancd sale of power and fuel agreement obligations, debt service paymenits and othier payments subject to certain contingencies.
Insurance -
Liability for accidents at nuclear power plants is governed by the Price-Anderson Act, \\vhichI limits the liability of nuclear reactol owners to the amnount of the insurance available fromil private sources andL under an indlustr) retrospective pay-ment plan. In accordance with this Act. FEL maintains $200 mil-lion of private liability insurance, which is the maximum obtain-able. and palticipates in a secondary financial protection system undler which it is subject to retrospective assessments of Up to S363 million per incicient at any nuclear utility reactor in the United States, payable at a rate not to exceed $43 million per iniicient per year.
FEL participates in nuclear insurance muulal companies that provide $2.75 billion of limitecd insurance coverage for property
- damage, lecontamination andl pretmIature clecommissioning risks at its nuclear plants. The proceeds from sucIh insurance, howev-er. must first be usecd for reactor stabilization and site decontami-nation before they can be usecd for plant repair: FPIE also paltici-pates in an insurance programn that provides limited coverage for replacement power costs if a nuclear plant is out of service because of an accident. In the event of an accicient at one of FEL's or another participating insured's nuiclear plants, FEL could he assseSsecl p to $38 million in retrospective premiums.
In the event of a catastrophic loss at one of FPIE s niclear plants. the amount of insurance available may not be adequate to cover property damage and other expenses inCurred.
Uninsuredc losses, to the extent not recovered throughi rates, Would be borne by FEL and coould have a material adverse effect
)On FEL Group's financial concdition.
the natural choice J
42 I
I II
FPL Group 2000 Annual Report FPL self-insures the majority of its transmission and distribution (T&D) property due to the high cost and limited coverage available from third-party insurers. As approved by the FPSC, FPL maintains a funded storm and property insurance reserve, which totaled approximately $229 million at December 31, 2000 for uninsured property storm damage or assessments under the nuclear insurance program. Recovery from customers of any losses in excess of the storm and property insurance reserve will require the approval of the FPSC. FPL's available lines of credit include $300 million to provide additional liquidity in the event of a T&D property loss.
Contracts -
FPL Group has entered into a $3.7 billion long-term agreement with General Electric Company for the supply of 66 gas turbines through 2004 and parts, repairs and on-site services through 2011. The turbines are intended to support expansion at FPL and FPL Energy, and the related commitments for a portion of the 66 gas turbines are included in Commitments above.
FPL has entered into long-term purchased power and fuel contracts. Take-or-pay purchased power contracts with the Jacksonville Electric Authority (JEA) and with subsidiaries of The Southern Company (Southern Companies) provide approximately 1,300 megawatts (mw) of power through mid-2010 and 388 mw thereafter through 2021. FPL also has various firm pay-for-performance contracts to pur-chase approximately 900 mw from certain cogenerators and small power producers (qualifying facilities) wvith expiration dates ranging from 2002 through 2026. The purchased power contracts provide for capacity and energy payments. Energy payments are based on the actLal power taken under these contracts. Capacity payments for the pay-for-performance contracts are subject to the qualifying facilities meeting certain contract conditions. FPL has long-term contracts for the transportation and supply of natLral gas, coal and oil with vari-ous expiration dates through 2022. FPL Energy has long-term contracts for the transportation and storage of natural gas with expiration dates ranging from 2002 through 2017, and a contract for the supply of natural gas that expires in mid-2002.
The required capacity and minimum payments through 2005 under these contracts are estimated to be as follows:
(ni/tions) 2001 2002 2003 2004 2005 FPL Capacity payments:
JEA and Southern Companies
$ 200
$ 200
$ 190 S 200 S 200 Qualifying facilities
$ 320
$ 330
$ 340 S 350
$ 340 Minimum payments. at projected prices:
Natural gas. including transportation
$1,020
$ 815
$ 710 S 680
$ 630 Coal S
45
$ 45 S 20 S
10 10 Oil S 275
$ 15 S -
S -
FPL Energy Natural gas, including transportation and storage S
20
$ 20 S
15
$ 15 15 Charges under these contracts were as follows:
(null,ons) 2000 Charges 1999 Charges 1998 Charges Energy/
Energy/
Energy/
Capacity Fuel Capacity Fuel Capacity Fuel FPL JEA and Southern Companies
$198"'
5153'b'
$186,"'
$132""
S192""
$138"'
Qualifying facilities
$318"'
S135""
$319"'
$121(b" S299")
$108"")
Natural gas, including transportation S567"l'
$373""
$280"'
Coal S 50"
$ 43"
$ 50 Oil S354"
$115"'
FPL Energy NatLral gas, including transportation and storage S -
$ 17
$ 16 5 18 (a) Recoverable throufgh base rates anld the capacity, clause.
(b) Recoverable through theffuel clause.
(c) Recoverable throu(gh the capacity clause.
43
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Litigation In 1999, the Attorney General of the United States, on hehalf of the UJ.S. Environmental Protection Agency (EPA) brought an action against Georgia Power Company and other subsidiaries of The Southiern Company for injunctive relief and the assessment of civil penalties for certain violations 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 wvhich FPL ow ns a 76% interest, without obtaining proper permitting. an(l without complying w ith per-formance and technology stanclards as requiredl 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 dav for each violation from an unspecified (late after Auguist 7, 1977 througil January 30, 1997, and S27.500 per day for each violation thereafter. Georgia Power Company has filed an answer to the complaint asserting that it has complied wvith 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 Southerin Company subsidiaries and plants and would acdd an allegation that unspecifiecl major modifications have been ma(le at Scherer Unit No. 4 that require its compli-ance with the aforementionecd Clean Air Act provisions (compa-rable allegations wvere 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 proposecl, the EPA's dcemand for civil penalties w ith respect to Scherer Unit No. 4 vould apply to the period commencing on an unspecified date after June 1, 1975.
In 2000, Southein California Edison Company (SCE) filed wvith the FERC a IPetition for Declaratory Order (petition) asking the FERC to apply a November 1999 fedleral circuit COUlt of appeals' decision to all (qualifving small power production facili-ties, including two solar facilities operated by partnerships indi-rectlv owned in part by Fl'L Energy. The fecleral circuit court of appeals' decision invalidated the FERC's so-called essential fixedl assets standard, wvhich permittecl seconclaiy uses of fossil fuels by qualifying small power production facilities beyond those expressly set forthi in the Public Utility Regulatoly Policies Act of 1978, as amendecl. The petition requests that the FERC declare that qualifying small power production facilities may not contin-ue to use fossil fuiel under the essential fixed assets standard and that they may he requiredl to make refuncds \\vith respect to past usage. The partnerships intend to file a Motion to Intervene antI IProtest before the FERC. vigorously objecting to the position taken byv SCE in its petition. The partnerships have always oper-ate(l the solar facilities in accordance withi orders issued by the FERC. Sucih orders wvere neither challenged nor appealedl at the time they were granted, and it is the position of the partnerships that the orclers remain in effect.
In 2000, Karen and Bruce Alexander filecd suit against FPL Group, F'L, FPL FiberNet. LLC, FP'L Group Capital ancd FPL Investments. Inc. in the Florida circuit coUrt purportedly on behalf of all property owners in Florida whose property is encuLimbered by defendants' easements and on whiose property the defendants have installed or intend to install fiber-optic cable w,rhich clefendants lease, license or convey for non-electric trans-mission or distribution puiposes. or intencd to do so. The lawsuit alleged that FPL's easements dicd not permit the installation ancl 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 jucdgment for ten dollars on the named plaintiffs, reflecting the defendants' conclusion that, based on an analysis of the claims and circum-stances of these individual plaintiffs, they had not sustained the injuries for vNhich the' claimecl a right to relief. In january 2001.
the plaintiffs accepted this offer of judgment. pursuant to which the suit has been clissmissed \\vith prejudice.
FPL Group believes that it has meritorious defenses to the pending litigation discussed above and is vigorously clefending the suits. Accordingly, the liabilities, if any, arising from the pro-ceedings are not anticipated to have a material adverse effect on its financial statements.
- 14. SEGMENT INFORMATION Fl'L Group's reportable segments inclucle FPL. a regulated utility, and FPI Energy. a non-rate regulated energy generating sub-sidiary. Corporate and Other represents other business activities, other segments that are not separately reportable and eliminating entries. Operating revenues derived from the sale of electricity represented approximately 97%, 98% and 97% of FPL Group's operating revenues in 2000. 1999 ancl 1998. respectively. Less thani 1% of operating revenues were from foreign sources for each of the three
'ears enclecd December 31. 2000. As of December 31. 2000 and 1999, less than 1% of long-lived assets were located in foreign countries.
the viaa.ra'. c-10ce
-J 44
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llI
FPL Group 2000 Annual Report Segment information is as follows:
1999 1998 Corp.
Corp.
Corp.
FPL and FPL and FPL and FPL Energy Other Total FPL Energy Other Total FPL Energy Other Total Operating revenues S 6,361
$ 632 S 89
$ 7,082
$ 6,057
$ 323
$ 58
$ 6,438
$ 6,366 S 234 S 61
$6,661 Interest expense
$ 176
$ 67'`
S 35
$ 278
$ 163 44",'
$ 15
$ 222
$ 196
$ 84','
$ 42
$ 322 Depreciation ancl amortization
$ 975
$ 50 S 7
$1,032
$ 989 34
$ 17
$1,040
$1,249 S 31 S 4
$1,284 Equity in earnings of equity method investees
$ 45 S-
$ 45 $ -
$ 50
$ 50 39 S-
$ 39 Incomne tax expense (benefit)"'
S 341 S 36 S(41)
$ 336
$ 324
$ (42)
$ 41
$ 323
$ 349
$ 24
$(94)
$ 279 Net income (loss)""
S 607'"' $ 82"'
S 15"' $ 704"'t S 576
$ (46)
$167
$ 697
$ 616
$ 32
$ 16
$ 664 Significant noncash iteims S (57)
S -
$100 43 86 86 34 S -
34 Capital expenditures and investments S 1,299
$ 507 S 90
$1,896
$ 924
$1,540
$ 15
$ 2,479
$ 617 5 313
$ 16
$ 946 Total assets S12,020 S2,679
$601
$15,300 $10,608
$2,212
$621
$13,441
$10,748
$1,092
$189
$12,029 Investment in equity imetlhod investees S -
S 196 S-
$ 196 $
$ 166
$ 166 $ -
S 165
$ 165 (a) Based on an asstnned capital stnrcture of 50% debtfor operatiog projects and 100% dlebtforprojects under construction. FPL Energy's 1998 interest eApense also includes the cost of terminating an interest rate snvap agreemnent.
(b)
FPI Group allocates income taxes to FPL Energy on tbe "separate return method' as if it vere a taxpaying entity.
(c)
Iucludes merger-related expenses of $38 millionfor FPL, SI million for FPL Energy and $2 millionfor Corporate and Other totaling $41 mrillion after-tax (see A'ote 2).
(d) 7befollowing nonrecuning items affected 1999 net incon?e: FPL settled litigation for $42 million after-tax (see Note 12); FPL Energy recorded $104 million after-tax impairment loss (see A\\rote
- 10) and Cotporate and Other divested its cable investments resulting in a $162 mtillion after-tax gain (see NAote 11).
- 15. SUMMARIZED FINANCIAL INFORMATION OF FPL GROUP CAPITAL FPL Group Capital, a 100% owned subsidiary of FPL Group, provides funding for and holds ownership interest in FPL Group's operating subsidiaries other than FPL. FPL Group Capital's debentures are fully and unconditionally guaranteed by FPL Group.
Condensed consolidating financial information is as follows:
condensed consolidating statements of income (millions)
Years ended December 31, 2000 1999 1998 FPL FPL Group FPL FPL Group FPL FPL Group FPL Group Consoli-FPL Group Consoli-FPL Group Consoli-Group Capital Othere' dated Group Capital Other"'
Dated Group Capital Othere' dated Operating revenues S -
$ 721 $6,361 $ 7,082
$ 380 $ 6,058 $ 6,438
$ 295 $ 6,366 $ 6,661 Operating expenses
(-)
(632)
(5,210)
(5,842)
(-)
(533)
(4,985)
(5,518)
(-)
(225)
(5,184)
(5,409)
Interest charges (31)
(102)
(145)
(278)
(32)
(59)
(131)
(222)
(33)
(126)
(163)
(322)
Divestiture of cable investments 257 257 Other income (deductions) -
net 726 135 (783) 78 712 108 (755) 65 689 61 (737) 13 Income before income taxes 695 122 223 1,040 680 153 187 1,020 656 5
282 943 Income tax expense (benefit)
(9) 4 341 336 (17) 15 325 323 (8)
(63) 350 279 Net income (loss)
$ 704
$ 118
$ (118) $ 704
$697
$ 138
$ (138) $ 697
$664
$ 68 (68) $
664 (a) Represents FPL, other subsidiaries and consolidating adjustments.
45 2000
("tt?iiOn)?.
the nat.ira chao f i n a n c i a in f o r m a t i o n condensed consolidating balance sheets (millions)
December 31.
2000 1999 FTI.
I'I. Group Fl'L FPL Group Fi ll1
<,roup Consoli-FPL Group Consoli-Group Capital Other-clatecl Group Capital Other' dated PROPERTY, PLANT AND EQUIPMENT Fleetric utility plant in serxvice and othiel propertY 5
S1,984
$19,038 S21.022 S1.386 S18.168 S19.554 Less accumiCulateCd depreciation and amortization Ih 10,918 11.088 105 10,185 10.290 Total propertyx plant and eqIuipimient -net 1,814 8,120 9.934 1.281 7.983 9.264 CURRENT ASSETS (Cash anld Cash1 c(jlulinents 12 51 66 129 (16) 376 1
361 Receix ahles 56 18 t()9 883 218 325 543 Other 66 T()3 769 46 423 469 Totat CLuirrnt asscts 68 535 1,1'8 1 781 (16) 640 749 1.373 OTHER ASSETS Investment in subsidiiaries 5,967 (5,96-)
5.805
(.805)
Other 1-il 1,365 2,0-9 3.585 133 1,346 1,325 2,804 Total othel assets 6,108 1,365 (3,888) 3.585 5.938 1.346 (4,480) 2.804 TOTAL ASSETS S6,16 S3,7-14 5,-ilO
$15,300
$5,922 S3.267 S 4,252
$13.441 CAPITALIZATION Common sltarChlolldcts e(LuitV S5,593
$ 935 S (935)
S 5,593
$5.370 S.013 S(1,013) $ 5,370 P-i tei-redc stock ol 1'11 wxithoLit sinking fuLndl Ie(Luifiemnents 226 226 226 226 Long-teim deht 1-too 2,5-6 3.976 1.399 2,079 3.478 Total capitili,altion 5.593 2.335 1.86-9,795 5.370 2.412 1,292 9,074 CURRENT LIABILITIES Accounts pix ib)le and commercial paper T0S 1.01-1,722 273 473 746 Otllct-467 186 388 1,0-il 485 141 498 1,124
[otal cutu-ent liabilities46-891 1.405 2,763 485 414 971 1,870 OTHER LIABILITIES AND DEFERRED CREDITS Accumulirtcd cIlt ucCIl ilncom1le ta\\xCs and uLami)1ti.eCd tax c-CClits 399 1.2i8 1.64-365 1,024 1,389 Otllhc-116 89 890 1,095 67 76 965 1,108 Total otlhel Ilabilities and cleferired clrelits 116 i88 2.138 27-42 67 441 1,989 2,497 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES
$6.1-6
$37-1i S 5.-iLO
$15,300
$5.922 S3,267 S i4,252
$13,441 (a) Rjpr'('nsi rI' ii!
(4r(
siidiairiw aued cmiou/lidaling, 6djllS/fIIniens.
I III
FPL Group 2000 Annual Report condensed consolidating statements of cash flows (millions)
Years ended December 31, 2000 1999 1998 FPL FPL Group FPL FPL Group FPL FPL Group FPL Group Consoli-FPL Group Consoli-FPL Group Consoli-Group Capital Other"'
dated Group Capital Other,'
dated Grotip Capital Other`"
dated NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
$ 959
$ 159
$ (142) $
976
$ 594 56
$ 913
$ 1,563 S 654 S
8
$1,081 $ 1,743 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures and independent power investments (507)
(1.299)
(1,806)
(1,540)
(861)
(2,401)
(521)
(617)
(1,138)
Capital contributions to FPL Group Capital and FPL (418) 418 (127) 127 (249) 249 Other -
net 3
(34)
(106)
(137)
(18) 313 (66) 229 427 (84) 343 Net cash used in investing activities (415)
(541)
(987)
(1,943)
(145)
(1,227)
(800)
(2,172)
(249)
(94)
(452)
(795)
CASH FLOWS FROM FINANCING ACTIVITIES Issuance of long-term debt 947 947 1,385 224 1,609 146 197 343 Retirement of long-term debt (515)
(515)
(130)
(454)
(584)
(338)
(389)
(727)
Increase (decrease) in short-tern debt 353 466 819 135 94 229 16 (40)
(24)
Capital contributions from FPL Group 18 (18) 127 (127) 249 (249)
Repurchases of common stock (150)
(150)
(116)
(116)
(62)
(62)
Dividends (366)
(314) 314 (366)
(355)
(355)
(345)
(345)
Net cash provided by (used in) financing activities (516) 57 1,194 735 (471) 1,517 (263) 783 (407) 73 (481)
(815)
Net increase (decrease) in cash and cash equivalents 28 (325) 65 (232)
(22) 346 (150) 174 (2)
(13) 148 133 Cash and cash equivalents at beginning of year (16) 376 1
361 6
30 151 187 8
43 3
54 Cash and cash equivalents at end of year
$ 12
$ 51 66 129
$ (16) $ 376 1 $
361 6
$ 30
$ 151 S 187 (a) Represents FPL. other subsidiaries and consolidating adjustments.
- 16. QUARTERLY DATA (UNAUDITED)
Condensed consolidated quarterly financial information is as follows:
(mltions, exceptper share amounts) 2000 1999 March 31("
June 30`
Sept. 30"`
Dec. 31"'
March 31"'
JLne 30' Sept. 30' Dec. 31"'
Operating revenues
$1,468
$1,670
$2,087
$1,857
$1,412
$1,614
$1,892 S1,520 Operating income
$ 237
$ 347
$ 511
$ 145"'
$ 208 S 135""
$ 470 S 107""
Net income
$ 121
$ 204
$ 314 65"'
$ 209's' 77"'"
$ 291 S 120f",""
Earnings per share:""
Basic
$ 0.71
$1.20
$ 1.85
$ 0.39"'
$ 1.22'f S 0.45""
$ 1.70
$ 0.71"
Assuming dilution
$ 0.71
$1.20
$ 1.84
$ 0.38"'
$ 1.22'f S 0.45""
S 1.70
$ 0.71""`"
Dividends per share
$ 0.54
$ 0.54
$ 0.54
$ 0.54
$ 0.52
$ 0.52 S 0.52
$ 0.52 High-low common stock sales prices
$ 48X-36k
$50-411-%6 $67M-47X $73-591x
$61'Yo-50so S608-52;4
$56%s6-491/4 $522-411x (a)
In the opinion of FPL Group, all adjustments, which consist of normal recuri-ng accruals necessary to present a fair statement of the amounts shown for such periods. have been made. Results of operations for an interim period may not give a true indication of results for the year (b)
The stun of the quarterly amoucnts may not equal the totalfor tbeyear due to rounding.
(c)
Includes merger-related expenses.
(d)
Includes impairment loss on Maine assets.
47 (e)
Inclucles the settlement of litigation between FP4 and FMPA.
(f) Includes gain on the sale of an investment in Adeipbia common stock.
(g)
Includes gain on the redemption of a one-third ownership interest in a cable limitedpartnership.
the 1-a1/2U.re COICCC n f f i c e r s FPL Group, Inc.
James L. Broadhead Chairman andlCI ChiefEl-ecutive Q/vficer Dennis P. Coyle General Counsel and Secretalry K. Michael Davis Controller James P. Higgins 17ice President Tax Mary Lou Kromer Vice President CGoporate Communications Robert L. McGrath Treasurer Florida Power
& Light Company James L. Broadhead C'hairman an1d Chief' Execuetive Officer PaulJ. Evanson President LawrenceJ. Kelleher Vice President Hulmnlan Resources Dennis P. Coyle General Coten2sel ancd Secretay?y Lawrence J. Kelieher Senior Vice President Human Resources ancd Gorporate Services Armando J. Olivera Senior Vice President Pouer Systems Thomas F. Plunkett President
.Vuclear Division Antonio Rodriguez Seni or Vice President Power Generation Division FPL Energy, LLC James L. Broadhead Cbairman Lewis Hay, III President Robert L. McGrath Vice President, Fin2an2ce Glenn E. Smith Senior Vice President Development b n a r d n f d i r P r t r H. Jesse Arnelle Of Counsel, Vomile, Carlvle, Sa ndridge & Rice (laxv firm) Director since 1990. Member -iaudlit commnaittee, compensation committee.
Sherry S. Barrat Chairman ancl Chief ExecuLtive Officer of Northern Irust Bank of California, NA.
(commercial hank)
Director since 1998.
.M,1ember aulCdit cominmittee, finance committee.
Robert M. Beall, II Chairman and Chief ExecutiVe Officer Beal's, Inc. (department stores)
Director since 1989.
Member acquisitions commotittee. benefits committee, compensation Comm mnittee.
James L. Broadhead Chair-man and Chief Executive Officer Flll Group. Inc.
Directorsince 1989.
C'hairman executive com mittee.
J. Hyatt Brown Chairman, President and Chief Executive Officer Brown & 13rown, Inc.
(insurance broker)
Director7since 7989.
Chairman compensation coi mmittee. Meember benefits committee, executive committee.
Armando M. Codina Chairman and Chief Executive Officer Codina Group, Inc.
(real estate developer)
Director7since 1994.
C'hairman acquisitions committee.
.e11mber benefits committee, cormpensation conmnittee.
executiive comminittee.
Marshall M. Criser Of Counsel, McGuire, Woods, 13attle & Boothe, L. L.I. (law firm) Director^
since 1989. Chairman audit comiinittee.
Mteber executive comnmittee, finance com7n2ittee.
Willard D. Dover Ilrincipal Niles, Dobbins, Meeks, Raleigh & Dover (law firm) Directorsince 1989. M1ember aucdit committee, acquisitions comt inittee, benefits commnittee.
Alexander W. Dreyfoos, Jr.
Owner and Chief Executive Officer, The Dreyfoos Group/Photo Electronics Corporation (electronic equipment (leveloper)
Director sinice 1997.
Member audit committee.
filance committee.
PaulJ. Evanson IPresident, Florida Plower
& Light Company Directorsince 1995.
Frederic V. Malek Chairman, Ihayer Capital Partners (merchant bank)
Directorsince 1987.
Chairman benefits committee. Member acquiisitions comm ittee, executive comnmittee, finaln2ce coammnittee.
Paul R. Tregurtha Chairman and Chief Executive Officer, Mormac Marine Group, Inc.
(maritime shipping company) Directorsince 1989. Chairman finance comnimittee. Member compensation comin7ittee, executiv.e commniittee.
r R
J I
III
FPL Group 2000 Annual Report i n f n r m a t i o n
Corporate Offices FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000 Juno Beach, FL 33408-0420 Exchange Listings Common Stock New York Stock Exchange Ticker Symbol: FPL Options Philadelphia Stock Exchange Newspaper Listing Common Stock: FPL Gp Registrar, Transfer, and Paying Agents FPL Group Common Stock and FPL Preferred Stock FPL Group, Inc.
c/o EquiServe P.O. Box 43010 Providence, RI 02940-3010 Florida Power & Light Co.
First Mortgage Bonds Bankers Trust Company Security Holder Relations P.O. Box 305050 Nashville, TN 37230-5050 (800) 735-7777 Duplicate Mailings Financial reports must be mailed to each account unless you instruct us otherwise. If you wish to discontinue multiple mailings to your address, please call EquiServe.
Direct Deposit of Dividends Cash dividends may be deposited directly to personal accounts at financial institutions. Direct deposit expedites payments and eliminates lost checks.
Call EquiServe for authorization forms.
Shareholder Inquiries Communications concerning transfer requirements, lost certificates, dividend checks, address changes, stock accounts and the dividend reinvestment plan should be directed to EquiServe: (888) 218-4392 or www.equiserve.com Other shareholder communications to:
Shareholder Services (800) 222-4511 (561) 694-4694 (561) 694-4620 (Fax)
Dividend Reinvestment Plan FPL Group offers a low-cost plan for holders of common stock and FPL preferred stock to reinvest their dividends or make optional cash pay-ments for the purchase of additional common stock. Enrollment materials may be obtained by calling EquiServe.
Online Investor Information Up-to-the-minute information on FPL Group and its subsidiaries is just a mouse click away, 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day, seven days a week. Visit our expanded investor information site at www.investor.fplgroup.com to get stock quotes, earnings reports, financial releases and other news.
You can also request and receive information via e-mail. Shareholders of record can receive secure online account access through a link to our transfer agent, EquiServe.
Electronic Proxy Material Registered shareholders may receive proxy materials electronically by contacting www.econsent.com/fpl.
Beneficial shareholders should contact their brokerage firm to determine the availability of electronic proxy material distribution.
News and Financial Information Investors can get the latest news and financial information about FPL Group through our Shareholder Direct toll-free line at (888) 375-1329.
In addition to hearing recorded announcements, you can request information via fax or e-mail.
Analyst Inquiries
Contact:
Investor Relations (561) 694-4697 (561) 694-4620 (Fax)
News Media Inquiries
Contact:
Corporate Communications P.O. Box 029100 Miami, FL 33102-9100 (305) 552-3888 (305) 552-2144 (Fax)
Certified Public Accountants Deloitte & Touche LLP 200 S. Biscayne Boulevard, Suite 400 Miami, FL 33131-2310 Form 10-K The Form 1Q-K annual report for 2000 as filed with the Securities and Exchange Commission is available without charge by writing to FPL Group, Shareholder Services.
Annual Meeting May 14, 2001, 10 a.m.
PGA National Resort 400 Avenue of the Champions Palm Beach Gardens, FL Proposed 2001 Common Stock Dividend Dates*
Declaration Ex-Dividend Record Payment Optional Cash Payment Dates Qtr./Yr.
Acceptance begins February 21 February 23 May 23 May 25 August 29 August 31 November 12 November 28 November 30 December 17
'Declaration of dividends and dates sho,wn are suzbject to the discretion, of the board of directors of FPL Croup. Dates shown are based on the assumnptiont that post paiterns will prevail.
February 12 May 14 August 13 March 15 June 15 September 17 2nd/01 3rd/01 4th/01 lst/02 Must be received by May 15 August 15 November 15 February 15 June 8 September 10 December 10 March 8 49 i n \\/ p q t n r
the natural choice: Bald eagles - a threatened species - live in harmony with other wildlife at FPL Group facilities. As shown by the photos within this report, FPL 's efforts to protect and preserve the environment have enabled a large number of endangered, threatened and protected species to thrive in their natural habitat.
Operating in harmony with the environment is a natural _hoice for FPL Group. And with its track record of strong operating performance and attractive growth profile, FPL Group is the natural choice for shareholders seeking exceptional value.
FPL Group, Inc.
700 Universe Boulevard Juno Beach, Florida 33408 0
Printed on recycled paper 0732-AR-01 z
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