ML17338A594

Annual Rept 1978.

ML17338A594
Person / Time
Site:	Saint Lucie, Turkey Point
Issue date:	03/20/1979
From:	Mcdonald M FLORIDA POWER & LIGHT CO.
To:
Shared Package
ML17266A048	List: ML17266A047 ML17338A594
References
NUDOCS 7903290023
Download: ML17338A594 (38)

Text

Our Business Is....

Since its incorporation in 1925, FPL has been engaged primarily in the electric utility business. As the map on the opposite page shows, the Company today supplies service to most of the territory along the east and lower west coasts of Florida, to the agricultural area around southern and eastern Lake Okeechobee and to portions of central and north centi+1 Florida. Within the 27,650-square-mile area, which encompasses'll or part of 35 Florida counties, service is provided to approximately 700 communities and to more than two million customers.

Power Supply and Facilities The company operates 10 power plants having total capacity of 10,941 megawatts (mw). Individual plants and installed net capability are 'Ibrkey Point, 2,079.5 mw; Port Everglades 1,581.5; Manatee, 1,528; Fort Myel, 1,176; Lauderdale, 1,126; Sanford, 861; St. Lucie, 777; Cape Canaveral, 729; Riviera, 653; and Putnam, 430. Additionally, five fossil units with 371 mw are on cold standby status at Cutler (three units, 264 mw) and Palatka (two units, 107 mw). Other physical properties include 74 service centers and satellites, 404 substations and 38,689 miles of transmission and distribution lines.

People.. Serving People

~

At year end, the Company had 9,750 employees. As evidence of their commitment to what always has been FPL's foremost responsibility, providing the public with the best possible service at the lowest possible cost, the Company serves 192,255 more customers with 115 fewer employees than two years ago. Over the long run, it is this same commitment to service that requires the Company to earn profits sufficient to justify the continuing confidence of its inves'tors.

FPL Believes. .. ~

The Company is ever mindful that customers and investors alike have much in common, including the need for a reasonable return.

This then allows the Company to compete effectively in the money markets. A company with good earnings and strong credit ratings can raise funds to build facilities at less cost than a company experiencing financial difficulties. In the end, then, customers of a financially healthy company will pay less for their electricity.

Highlights of the Year Operating results for 1978 reflect the combined and continuing efforts of FPL directors, management and employees to enhance the Company's business capabilities and the value of its services to the public. As you will read later, in Management's Analysis of Operating Results on pages four through six, virtually every yardstick of Corporate performance indicates improved conditions.

Specific information is available at a glance in the 5-Year Consolidated Summary of Operations on page seven.

q 9032900 x5

My Fellow Shareholders It is ahvays gratifying when the adequate energy, available at But electricity is a secondary form management of a company can competitive prices. 'Ibday's of energy. It is derived from a present a report like the one which Americans and the standard of living primary enei~ soui.ce such as coal, follows. With continued reliable we enjoy have been nurtured by this oil or nuclear fission. 'Ibday each of service to a growing number of favorable circumstance. We have had these primary energy sources has customers, increases in both no experience of living in a United become enmeshed in politics. Each revenues and earnings and significant States which cannot compete has powerful special interests achievements recorded by the fine advantageously with other nations. working to hobble its use.

people who work for us, 1978 can That, however, is precisely the threat Reliance on coal is discouraged by justly be called "a good year." And we we face today. Other major industrial restrictive mining legislation and a launched 1979 on a positive note with nations are taking action to provide welter of environmental regulations.

the selection by the Board of John J. adequate energy sources for the Oil is virtually outlawed as a fuel for Hudiburg as president and chief futuiv. We are not. new power plants because of the operating officer. This choice of an Like the U.S.A., these other major threat to our economy and security FPL veteran with 28 years of service nations long ago abandoned pastoral posed by dependence on foreign to our Company is a clear signal of and cottage industry as economically sources. Nuclear power is beset by our success in developing managerial undesirable. Human and animal legal and administrative roadblocks talent within the organization. The power gave way to machine power. It that seem designed for abuse by "Search Committee" acknowledged is more productive. It relieves anti-nuclear extremists. The present that management development when mankind from poverty and drudgegr. national Administration's response it noted the many qualified It permits vast numbers of people to has been spineless. Indeed, the candidates within FPL ranks and the enjoy a life of comfort and good Administration's attitude seems to long selection time required. health unknown even to royalty just support anti-nuclear sentiments. As a My responsibility, however, goes a few centuries ago. result, the financial risks of nuclear beyond transmitting to you this Machine power, however, requires generation are almost prohibitive.

report on the achievements and reliable sources of energy. For Yet electric utilities like FPL have status of our Company. It is also reasons which range from eQiciency an obligation to provide electric important to assess the environment to cleanliness, electricity has become service to satisfy customer needs. We in which our Company has the preferred form of that enemy. It must assess the risks that go with accomplished these results and in has been said that electricity used each of the primary energy sources.

which we must work in the future. for laundering and dishwashing, And we must accept the calculated Our nation became a superpower- cooking, housecleaning and other risk of choosing one as a fuel for in the industrial, the commercial and tasks has liberated more women future generating plants. At present, the military sense because we had than any political movement. we are giving important Marshall McDonald Chairman of the Board John J. lludiburg President

consideration to coal. But this is not These are worthwhile objectives, development of the nuclear breeder for oveisvhelming positive reasons. It in keeping with the national reactor. A strong policy of positive is, rather, because of a wishy-washy conservation program. But we must support for such steps would national policy that gives us little be realistic. The total energy which preserve Americans from a drastic choice but promises major headaches. can be saved painlessly is minor. change in our way of life.

Can we do more than complain? IfAmericans really want to There are major technological Yes. In fact, we'e doing achieve significant energy savings challenges in positive steps like everything we think will be through conservation, they must be these. We must meet these productive. In the first place, we ready to accept drastic changes in challenges. This is more than a realize that we must enter the public lifestyle. Consider, for example, narrow, selfish priority of the energy arena. We must present the case for a transportation. For years, it has industry In truth, companies like positive, productive enemy policy. been our largest single enei~ user. FPL could endure and thrive even in We must show the direct relationship Will Americans walk... pedal bikes an energy-short economy. Customers between energy and our country' ... ride mass transit... instead of would simply have to adjust their strength and prosperity. We must driving personal cars? Will all cars be demands to fit our ability to supply.

deliver the warning that energy small, low in power and used only to But the economic and social dangers cannot be taken for granted. carry a full load of passengers? of a future with energy too short in You are part of this effort. As a Going beyond transportation, will a supply and too high in cost should responsible citizen. And as part large portion of Americans change concern all of us very seriously.

owner of an enemy company. their daily schedules? Will they work, The overriding challenge in enei~

Individually, you can help impress cook and wash late at night? It's the is not technical. Nor is it 'owever, the facts upon media and politicians. only way to spread out peak loads economic. Today the challenge to an Among friends and associates, you that now come in daytime. energy-rich future is political.

can stimulate discussions about These questions are critical. No We have an administration America's energy future. You can realistic conservation effort will topheavy with zealots drawn from point out the dangers of energy satisfy our power needs ifwe special-interest gix)ups which preach starvation. The rewards of enemy want to maintain our standard of living no-growth and anti-business abundance. You can explain the There's another side to the propaganda. This Administration has technological means of achieving equation. Ifwe cannot eliminate the been waffling on nuclear power and abundance which are available to need for more power, can we develop stifling breeder reactor progress.

America, if we will but use them. more power to fill the need? Like These same people have woven a Call on us for any supporting other utilities, FPL has invested mesh of restrictive, non-cost-effective materials you may need. resources in the search for ways to regulation around coal. They are Meanwhile, we continue urging our supply the energy our customers will crippling the whole energy effort.

customers to use energy wisely. We need tomorrow. We have invested We must secure America's essential published FPL's original Watt directly in solar and wind power enemy supply at competitive prices.

Watche"s Guide long before many of research. We'e also explored gas, oil I have discussed with you on earlier today's self-appointed "consumerists" and geothermal prospects right here occasions how necessary it is that I stepped into the headlines. And in Florida. And last year, we dedicate a good deal of time and work we'e still providing energy-saving contributed more than $ 5.1 million to to this effort. It is work that serves tips.iWe have launched a major the Electric Power Research both our Company and our country.

program in support of homes Institute. EPRI combines utility In this work, I will continue to ask designed for Watt-Wise Living'". We contributions to support many for your suppoit.

have made energy audits for heavy projects aimed at expanding and users of electricity. We'e working on optimizing energy resources. Sincerely, load-management techniques to Meanwhile, there are several smooth out the peaks and valleys of practical ways for our nation to demand, so we can defer building the ensure the energy supply needed for next generating plant. the next 40 years or so. For example, Marshall McDonald we can moderate the unreasonable Chairman of the Board restrictions on mining and burning February 12, 1979 coal. We can join other industrialized nations of the world in high-priority

Management's Analysis of Operating Results Its financial well-being restored to a allowed by the FPSC in its June 1977 common equity, 11 percent preferred large extent, FPL emerged from 1978 ordei: stock and 51 percent long-term debt.

showing unmistakable signs of F<PL intends to enlarge common renewed vitality. Dividends equity by continuing to reinvest a Despite the squeeze of higher Dividends on common stock were portion of earnings and issuing capital and operating costs, magnified raised to a quarterly rate of 52 cents common stock to employee benefit by inflation, the Company managed per share from 44 cents (an eQ'ective plans. The Company's goal is a not only to keep pace with Florida's annual rate of $ 2.08, up from $ 1.76), capitalization mix of 38-43 percent flourishing growth, but also to reach commencing with the June 15, 1978, common equity, 5-10 percent record levels of earnings and dividends. quarterly payment. preferred stock and 50-52 percent Total dividend payments were long-term debt. The time required to Earnings $ 2.00 per share in 1978, compared reach this mix will depend on the Earnings per share increased to $ 4.54 with $ 1.66 the previous year. market price of FPL common stock, in 1978 from $ 3.81 in 1977. This Dividend actions were taken in since the Company desires to marked improvement in profitability recognition of the growing investment achieve these ratios without a public reflects financial recovery resulting by common shareholders through re- sale of common stock at the current from a rate adjustment granted by investment of a large portion of their price levels.

the Florida Public Service earnings. The 1978 increase not only 'Ib provide more financial Commission (FPSC) in 1977 and from provides a return on this additional flexibility, I<'PL obtained bondholder a vigorous customer growth rate investment, but also reflects FPL's approval in February 1979 to modify which has shown little sign of letup. desire to move closer to the industry the mortgage securing first mortgage Of the 1978 earnings ratio of dividends to earnings. bonds, the principal source of accomplishment, newly elected long-term financing used by FPL.

President John J. Hudiburg noted, F<iscal Strategy "This improved level of operating An attractive dividend policy is but Operating Revenues performance and financial integrity one key element in the Company's Revenues passed the $ 1.6 billion means that the new rates approved long-range plans for strengthening mark for the first time in 1978, rising in 1977 are working as intended." its financial base. $ 182.6 million, or 12 percent, over the The rate of return earned by the Another essential component 1977 total of $ 1.46 billion. About Company in 1978 reached its is a sound capital structure. two-thirds of the 1978 rise was healthiest level in two yean. Still, it Capitalization ratios at the close of ~

attributable to higher kilowatt hour was somewhat below the amount 1978 were approximately 38 percent (kwh) sales and the remainder 3.81 3.48 2.76

'2.39 1.70 1.66 1.56 1.435 1.325 0.895 1968 1974 1975 1976 1977 1978 1968 1974 1975 1976 1977 1978 Earnings Per Share Dividends Paid Per Share

primarily to the 1977 rate increase. rate case have been in effect more markets. In the 5-year period By comparison, nearly two-thirds than a full year now, the key factor 1974-78, 47 percent of the funds were of the 23 percent increase of 1977 affecting 1979 revenues is expected to from operations.

revenues over those of 1976 was the be kwh sales growth resulting In 1978, $ 152 million was raised result of rate increases and the primarily from new customers. through the sale of new securities.

recovery of increased fuel costs Involved were 30-year first mortgage through the fuel adjustment clause. Construction bonds with 9Vs percent interest rate Growth in kwh sales accounted for Construction aimed at providing ($ 75 million), a new issue of 8.84 most of the balance. additional generation to meet percent preferred stock ($ 50 million),

Average revenue per kwh, anticipated demand in the early 1980s a 30-year obligation with 6.10 percent including fuel adjustment revenue, is proceeding both on schedule and interest rate in connection with a for total customers rose to 4.02 cents within budget. pollution control financing ($ 19.4 in 1978, the first full year that the Included are two oil-burning units million) and approximately $ 7.5 present rates were in effect. This at Martin Plant scheduled for million of common shares issued to compares to 3.87 cents in 1977 and completion in 1980 and 1981 and the employee benefit plans. During 1977, 3.38 cents in 1976, the last full year Company's fourth nuclear unit, St.. $ 33 million of securities were issued, the prior rates were in effect. Lucie No. 2. The latter has an and capital expenditures were $ 875 operational target date of 1983. million. Funds from operations Energy Sales FPL also has initiated a coal plant provided the balance of funds Kwh sales climbed by 3.1 billion, or project of its own and is considering needed for construction and, in 1977, 8 percent, to 40.6 billion in 1978. The possible joint ownership of another. debt redemption.

corresponding figures for 1977 were Throughout the course of 1978, the Thes'e transactions resulted in 2.6 billion, 7 percent, and 37.5 billion. Company invested $ 473 million in higher interest expense and The increases were indicative of new facilities and nuclear fuel. preferred dividend requirements, growth in average customers of 4.9 portions of which were capitalized percent in 1978 and 4.5 percent in Financing through the allowance for funds used 1977. Per-customer consumption also The charts on these pages show during construction (AFUDC).

increased 3.2 percent in 1978 and 2.9 that the Company has generated AFUDC increased in 1978 by $ 5.5 percent in 1977. substantial amounts of its financing million (19 percent) as a result of requirements from current increases in construction work in Looking Ahead.... operations, with a corresponding progress and capitalization of Since rates established in the 1977 reduction in reliance on the capital AFUDC on nuclear fuel.

3 hfiUions e

662 49?

470 419 376 273 176 162 110 1968 1974 1976 1976 1977 1978 1979 1968 1974 1976 1976 1977 1978 1979 Capital Expondituros External Financing

Operating Expenses Conversely, the price of oil used in costs in connection with the Total 1978 operating expenses 1977 had risen 11 percent over the Company's canceled South Dade climbed 14 percent, or $ 163 million, to year before. That increase was Project also was included in 1978 reach a new high of $ 1.3 billion. partially offset, in turn, by a drop in depreciation expense.

Comparative figures for 1977 were 17 the amount of oil burned, thanks to percent, or $ 167 million, and $ 1.2 the additional nuclear capability Other Operation and Maintenance billion, respectively. provided by St. Lucie. Expenses These expenses Still greater revenue growth The price of gas rose 18 percent 'ncreased primarily due to higher resulted in increases in operating in 1978, in part a result of actions payroll and related employee benefit income of 7 percent in 1978 and 56 taken by a supplier to increase the costs. The increase in maintenance percent in 1977. output of certain wells. The price expense reflected additional new Increases in the past year were increase added about $ 12 million to properties, as well as work primarily in the following areas: fuel expense. performed during the first refueling, Fluctuations in fuel expense overhaul and inspection of St. Lucie Fuel Expense-Greater use of more generally are reflected in revenues, Unit No. 1 in mid-1978.

expensive fossil fuel generation to after a 2-month lag, through the fuel meet growing system demand and to adjustment clause. 1hz Eapensc-Increased income tax provide for greater interchange deliveries resulted in a fuel expense Depreciation Expense-Increases in provisions stemmed from greater increase of 11 percent in 1978. depreciation expense in 1977 and 1978 taxable income provided by higher were principally the outcome of revenues. Taxes other than income Meanwhile, the Company's three additional plant in service. Several taxes also increased in 1977 and 1978, nuclear units, which have provided largely as a product of the greater over 30 percent of total generation new generating units were placed in revenues and additions to property.

since St. Lucie Unit No. 1 was added commercial service in the past three in December 1976, continued to make years. Manatee Unit No. 1 and St.

consistent contributions. Lucie Unit No. 1 went in service in The Bottom Line....

The oil portion of fuel expense was 1976, the first Putnam unit and After meeting operating expenses, up $ 39 million in 1978 as the amount Manatee Unit No. 2 in 1977 and the interest and preferred dividend of oil consumed rose by 4.7 million second Putnam unit in 1978. requirements, the growth in barrels, or 15 percent, over 1977 These plants alone added about revenues experienced in 1978 levels. Generally lower oil prices $ 22.4 million to depreciation expense produced net income applicable to partially offset the effects of the in 1977 and about $ 7.5 million in 1978. common stock of $ 182.1 million, an greater amount of oil burned. Amortization of $ 5.8 million of increase of $ 29.3 million.

Billions ti ) e" 42.0 a

40.0 37.6 E.A. Adomat cleft) and EE.

Autrey are FPL's Executive 34.9 Vice Presidents. Adomat is in charge of operations, and Autrey directs commercial activities.

17.8 10 1968 1974 1975 1970 1977 1978 1979 Kwh Sales

Florida Power & Light Company and Subsidiaries Consolidated Summary of Operations, The Past Five Years (Thousands of Dollars Except Per-Share Data) 1978 1977 1976 1975 1974 Operating Revenues $ 1 647 226 $ 1 464 584 $ 1 189 680 $ 1 182 644 $ 951 055 Operating Expenses:

Fuel . 551,876 497,015 482,347 461,385 400,115 Other Operation . 216,653 187,011 178,127 160,151 187,522 Maintenance . 85,865 67,579 67,062 59,646 57,472 Depreciation . 144,267 125,166 88,591 82,322 74,775 Income Taxes 198,163 171,098 85,368 114,822 51,306 Taxes Other Than Income Taxes ........... 132 205 117 807 96 972 87 558 71 241 Total Operating Expenses ............... 1 328 529 1 165 676 998 467 965 834 792 431 Operating Income . 318 697 298 908 191 213 216 810 168 624 Other Income (Deductions):

Allowance for Funds Used During Construction 65,497 48,486 39,907 Allowance for Other Funds Used During Construction . 20,819 16,009 Income Taxes 827 '1,558) (298) 5,350 11,676 Other Net . 3 382 (1 731) 1 005 (850) (1 734)

Other Income Net . 24 528 ,. 12 720 66 204 52 986 49 849 Income Before Interest Charges ............. 343 225 311 628 257 417 269 796 208 473 Interest Charges:

Interest Expense . 146,096 144,088 140,572 124,575 102,999 Allowance for Borrowed Funds Used During Construction . (14 112) (12 893)

Interest Charges Net 131 984 131 190 140 572 124 575 102 999 Net Income . 211,241 180,488 116,845 145,221 105,474 Preferred Dividend Requirements............ 29,138 27 653 22 378 20 066 11 654 Net Income Applicable to Common Stock ..... 6 182 103 8 152 785 8 94 467 8 125 155 8 93 820 Average Number of Common Shares Outstanding (in Thousands) ............. 40,120 40,050 39,542 35,940 34,050 Earnings Per Average Share of Common Stock. $ 4.54 $ 3.81 $ 2.39 $ 3.48 $ 2.76 Common Stock Data Shares Outstanding, Year End Thousands . 40,315 40,050 40,050 87,050 34>050 Dividends Paid Per Share $ 2.00 $ 1.66 $ 1.56 $ 1.485 $ 1.825 Dividend Rate Year End ................ $ 2,08 $ 1.76 $ 1.56 $ 1.46 $ 1.36 Dividend Payout Percentage............... 44.1 48.6 65.3 41.2 48.1 Price/Earnings Ratio Year End .......... 5.8 7.1 11.6 7.7 5.6 Book Value Per Share Year End.......... $ 32.49 $ 29.97, $ 27.81 $ 27.21 $ 25.60 Operating and Financial Statistics Kwh Sales Thousands. 40,602,076 37,529,397 34,929,541 34,110,898 32,711,136 Customers Year End .

Revenue per Kwh Residential ~....... ..

Kwh per Customer Residential ..........

~

2,032,298 4.10'1,790 1,927,668 3.96/

11,870 1;840,043 3.50/

10,968 1,772,304 3.53/

11,127

'.95/

1,721,841 11,215 Net Warm Weather Capability, Kw-Year End . 10,941,000 10,6441000 9,740,000 8,927,000 9,015,000 Peak Load, Summer, Kw 60-minute ...... 8,345,000 7,841,000 7,598,000 7,076,000 7,235,000 Peak Load, Winter, Kw 60-minute........ 8,617,000 8,606,000 7,287,000 5,807,000 6,258,000 Reserve Capability Percentage-at Time of Summer Peak 30.4 28.0 13.8 27.4 24.6 Nuclear Generation, Kwh Thousands ..... 13,273,383 13,452,276 8,647,474 8,369,810 7,877,826 Total UtilityPlant Thousands of Dollars .. $ 4,983,794 $ 4,525,916 $ 4,181,839 $ 3,724,270 $ 3,252,397 Capital Expenditures (including nuclear fuel and AFUDC) Thousands of Dollars ..... $ 472,830 $ 875,860 $ 469,750 $ 497,238 $ 604,946 External Financing Thousands of Dollars .. $ 151,866 $ 38,240 $ 272,540 $ 418,925 $ 425,000 Employees Year End . 9,750 9,415 9,865 9,911 9,769

The Year in Review In the constant quest to improve increased costs for items not Hudiburg, 51, was elected to the profitability and levels of service, measured by the CPI. Board when he was chosen to FPL's long-tenn Corporate objective However, the Company is satisfied succeed Marshall McDonald as FPL is to keep increases in the cost of that budgetary controls worked president. In that capacity he also serving customers at or below the effectively to minimize these serves as chief operating officer.

rate of inflation. With that increases. McDonald, 60, became Chairman of commitment in mind, Corporate the Board, a position vacant since the goals are established annually as the Performance Goals for 1979 retirement of R.C. Fullerton in May basis of budgets and plans for the Having either hit or come close to 1977. He also continues to serve as coming year. those three marks, the Company in chief executive officer.

1978 established similar aims for Whiddon, 50, is a Fort Lauderdale Corporate Goals 1979. businessman.

FPL management established three Again, one goal is to operate the Director Joseph P. Taravella died main goals for 1978: Company so that the increase in cost Nov. 23, 1978. Ihravella, president

~ To limit capital expenditures in per customer is kept in line with and chairman of the Board of Coral order to avoid a public sale of increases in consumer prices. Ridge Properties Inc., had served on common stock. 'Ibugh controls on Next, the Company intends to the Board since 1972. He was 59.

spending brought that goal to carefully control capital and Organizational Structure fruition. operating expenditures so as to

~ To identify areas where the reduce the need to sell common stock With the appointments of McDonald Company is perceived by customers under unfavorable market conditions. and Hudibuig, the Company in and employees to be in need of A measurable increase in January 1979 redrew lines of improvement and to take action, as customers who regard FPL as being reporting responsibilities within the appropriate. Several programs, responsive to their service needs is organization.

including a customer survey, were the final 1979 goal. In prior actions designed to initiated along these lines. improve effectiveness of FPL's

~ .To keep the increase in Board of Directors management-by-objectives system, pet customer operating costs at or With the election of John J. Hudiburg H.L. Allen and L.C. Hunter were below the increase in the Consumer and Gene A. Whiddon on Jan. 15, appointed senior vice presidents and Price Index (CPI). For the year, the 1979, Board membership grew to 11 five division general managers were goal was not met. Actual increases directors. Nine are outside directors named to the new (non-Corporate per customer exceeded the increase and two are Company officers. All officer) positions of division vice in the CPI as FPL coped with but one live in the FPL service area. president. They are L.H. Adams,

~7P+lV a

'y 0 U ~l,'%(

4'lNNI 'l gllf The Company's four Senior Vice Presidents serve on the Senior Management Planning Council. They are (above, from jk-'

~

D left) H.L. Allen and L.C. Hunter and (below, from leit) J.G. ee sH~+

Spencer Jr. and R.W. Wall Jr.

~iI~iil~l FPL at work around the clock.

Left: Nuclear control room at St. Lucie Plant. Center: Fleet of troublemen's bucket trucks. Right:

Linemen strike a pose familiar g~plw+lo to FPL customers everywhere.

t II r,)

I J,",,i IIII,

'I i ')

j'Jt

'tt I)

...I

'~Ill i,)II JI t

),r pi,'

I '~(I

),

l w~~(i(

j,pll, (l,'y I

l~ l Q

fg fh(

N

,i (4' ,ik C

)

q, t'ai p.f l

/ ) "l~'l)

t,l j(j

, J I I

',k;t) t,II II lJ (t} II

Southern (Miami) Division; K.R. human resources than it does to owned electric utilities in the nation Beasley, Western (Sarasota); T.R. technical resources. having two million or more Moffett Jr., Eastern (West Palm In the field of training, for customers.

Beach); J.N. Scott, Northeastern example, employees'apabilities Whereas it took FPL 41 years to (Daytona Beach); and G.E. Sullivan, have been broadened through reach the million-customer level in Southeastern (Fort Lauderdale). programs such as transactional 1966, it took just 12 years to double The appointment of Scott was analysis and decision-making courses. that figure.

made in conjunction with A talent assessment program was When welcoming the Roberts consolidation of FPL's former introduced in 1978 to assist in family, a Company spokesman noted Northern and North Central planning for management succession. that the event "reflects Florida's Divisions into the new Northeastern Other examples of the Company's continued rapid growth and Division. In keeping with that interest in self-development include a underscores the challenge faced by change, which brought the divisions college tuition aid program, a salary the Company in serving that growth."

more closely in line in terms of administration program based solely Another rise in new customers is customers served, the Southern and on merit and encouragement of expected for 1979, with a yeai end Southeastern Divisions were given employee involvement in civic, total of more than 2.1 million their new names in early 1979. educational and cultural affairs. customers anticipated.

Formerly, they were known as the In the year ahead, overall Area Development Miami and Southeast Divisions. employment is expected to rise slightly as the Company continues to Florida's gains in tourism, industrial Human Resources staff the Martin Plant and provide development and population were of At year end, the Company had 9,750 service to a growing number of particular significance in 1978.

employees. customers. State tourism oflicials placed the In order to attract, and hold, number of tourist arrivals at 32.6 employees who have the will and Customers million, up from 30 million a year ability to learn skills necessary to FPL people today are serving more ago. Pet capita spending rose, as meet customers'eeds, the Company Floridians than ever before. The well, and the South Florida area, has a stated personnel objective of Company reached a milestone in 1978 especially, benefited from a heavy providing compensation that is both when it greeted its two millionth influx of Latin American visitors.

internally equitable and externally customer, the Charles H. Roberts The state continues to successfully competitive. family of suburban West Palm Beach. emphasize light, clean manufacturing Through effective supervision and With the arrival of the Roberts, as a source of economic development.

training, FPL commits no less who moved from Kentucky, FPL Industrial development, given energy to the development of its joined a select group of investoi government encouragement, grew in Vice Presidents have been assigned control of 11 specific areas of activity. Above (from Ieit) are D.K. Baldwin, Corporate Services; E.L. Bivans, System Planmng, and Michael C. Cook, Fuel Resources and Corporate Development. Photos of the other vice presidents appear on pages 12, 14 and 16.

FPL at work making Florida a better place to live and work. Upper Left: Underground ylg~gif service is supplied to new Miami home.

Lower Left: FPL serves Dictaphone Corporation's new headquarters at Melbourne. Center: Company signs point the way to new energy-eQicient housing.

Upper Right: Space shuttle craft Enterprise serves as a backdrop for FPL workman at Cape Kennedy. Lower Right:

Amid lush foliage of avocado grove, Company crew tackles rural assignment.

10

1978, both as a result of expanded existing operations and of new operations moving into the state.

Among newcomers attracted to the FPL service area recently were such familiar business names as Dictaphone Corp., The Harris Co.

Inc., Siemens Corp., Houdaille Industries Inc. and Westinghouse Electric Corp.

Those expanding existing facilities included Sikorsky Aircraft, Motorola Inc. and International Business Machines Corp.

The perception of Florida as a desirable place to live and work, coupled with the availability of more Job opportunities, had a pronounced effect on FPL in 1978. During the year, the Company added 104,600 customers.

Meanwhile, population of the state increased to 8.97 million, a gain of 2.9 percent over 1977. Estimated population of FPL's service territory for the year was 4.6 million, a gain of 3.7 percent over 1977.

One recent survey indicated 11 of the nation's 30 fastest growing metropolitan areas are in Florida, and six Fort Myers, Fort Lauderdale-Hollywood, Sarasota, West Palm Beach-Boca Raton, Bradenton and Daytona Beach are in FPL's service area.

The increase in population brought with it increased demand for housing.

Florida housing starts were running 48 percent ahead of last year.

Agriculture, another staple in the economy of the area serviced by FPL, continued to make strong contributions.

As for 1979, the economy is expected to show improvement in several areas. 'Ibtal Florida employment is expected to increase.

This is expected to contribute to an increase in personal income for Floridians.

Also on the horizon is another development which could favorably influence Florida's economy the space shuttle. The first shuttle test is scheduled in September at Kennedy Space Center, the nation's prime

spaceport. Observers note that could example, the peak of 8,345 mw was Industrial and commercial signal "the start of a whole new era." reached between 5 and 6 p.m. on segments, having few other sources Thus, the picture emerging for August 29. It was 6 percent greater of fuel available, plready are heavily 1979 is one of continued growth, than the summer peak of 1977. dependent on electricity. Here, again, moderated perhaps by a slowdown in The Company's record peak the Company has begun to feel the the national economy which could, of demand of 8,791 mw was established impact of energy conservation course, affect Florida. during a cold snap on Feb. 2, 1979. It practices. Effects of these measures surpassed the previous mark of 8,617 and more efficient appliances are Vse of Electricity mw set Feb. 23, 1978. reflected in the forecast of load growth.

FPL customers, most of whom are F<PL maintains flexibilityin its residential, consumed more electric Load Forecast planning. Should growth be higher energy in 1978 than in 1977. than forecast, for instance, there are FPL's average residential user In its forecasting, FPL projects a range of growth rates in both sales five generating units on cold standby consumed 11,790 kwh during the that can be reactivated. Also, the year, 3.7 percent more than the and peak. Through 1988, the range of growth for peak load is projected to Company has additional options of 11,370 of 1977. In contrast, the 'purchasing gas turbines and/or national average among investoi be between 3.4 and 5.1 percent per year. initiating load management owned utilities for the 12 months techniques.

ended October 1978 was 8,419 kwh. Key variables affecting load For 1978, 89 percent of the growth are customer growth, Energy Management Company's customers were per-capita income, employment and With customers intent on saving residential and 11 percent were the price of electricity. Other major energy and holding down rising commercial and industrial. factors in load projections are the costs, FPL, like most utilities, weather, conservation practices, has initiated programs in load Peak Demand electric appliance saturation and management and enei~

Because of heavy air conditioning improved appliance efficiency. Florida conservation.

requirements, FPL in recent years has proved to be unique in some These activities include a broad has been a summer peaking utility. respects because of a large retiree communications program showing Although cold-weather peaks have population and a significant number customers how to be more been measured the past three of seasonal residents and second conservation-conscious; an winters, the Company continues to homes. The Company already has experimental project allowing the build around summer peak begun to feel the impact of new Company to interrupt service, projections. replacement appliances that are more through remote control, to heating, In the summer just passed, for energy efficient. ail conditioning and water heating From leit, Vice Presidents H.J. Dager Jr.,

Engineering, Project Management and Construction; Tracy Danese, Public Affairs; and J.H. Francis Jr., Corporate Communications.

FPL at work maintaining air quality. Leit:

Stacks at Turkey Point Plant jut majestically into blue South Florida skies.

Center: Pollution control equipment being 5 added to several FPL power plants. Right:

Welders install new emission-reducing od burner at Cape Canaveral Plant.

systems in 125 Boca Raton homes; a program encouraging architects and builders to produce structures designed for Watt-Wise Living';

solar technology activities, including participation and sponsorship in the national "Sun Day" observance; and research into microwave oven and water heater usage.

Additional evidence of the Company's interest in this area is its support of the Electric Power Research Institute, the research and development arm of the electric utility industry. FPL's contribution to this cooperative effort of looking for new and better ways to meet the nation's growing energy needs was

$ 5.1 million in 1978 and is expected to grow to $ 5.7 million in 1979.

The Company has numerous R&D involvements of its own, as well.

Among them are a lightning research project, a solar heating and off-peak aii conditioning study and a program aimed at combating corrosion of underground power lines. Company researchers also track progress made by other utilities and government energy agencies in such areas as pricing concepts, remote meter reading and the development of energy-efficient modernization programs for existing buildings.

In another venture, FPL has contracted to buy steam from a county-owned resource recovery plant that will recycle energy from solid waste when the plant becomes operational in the early 1980s. The purchased steam will be used to generate electricity.

In each instance, the ultimate goal is to conserve energy and to shave peak demand and thereby help postpone building the generating capability required to meet future demand.

Improving Efficiency Strict budgetary considerations and the eEorts of FPL employees in improving operating efficiency were strong contributors to the Company's 1978 financial performance. Likewise, the 1979 Corporate goal of keeping cost increases near the rate of inflation requires a tight control on

the number of employees and puts on April 24, 1978, the Company's Nuclear Power the spotlight on increased installed generating capacity rose to Generating capability includes two productivity and efficiency. 10,886 mw. nuclear units at Turkey Point Plant An excellent example of the The combined-cycle unit was the with 1,332 mw and one unit at St.

Company's pursuit of better ways to only new generating unit put into Lucie Plant with 777 mw of capacity.

do things involves looking at methods service during the year. In 1978, the three units generated to save fuel costs. Right now, for 13.3 billion kwh. In comparison, it However, in December, Riviera instance, FPL is installing would have taken 21 million bart>is of high-efficiency oil burners capable of Units No. 1 and 2 were brought back on line from cold standby reserve. oil at an increased cost of $ 233 million burning lower grade, cheaper fuels to produce an equivalent amount of without causing environmental harm. At year's end, system capability power. Since FPL fimt began nuclear Other efforts include use of stood at 10,941 mw. generation in 1972, fuel savings of an analytical computer program to $ 924 million compared to the cost of assist in nuclear licensing activities, Generation Mix oil have been realized.

installation in district offices of The Company's generating plants Work is proceeding on a second equipment to electronically display utilize residual oil, distillate oil, nuclear unit at St. Lucie. It has customer information and natural gas and nuclear fuel. None approximately the same planned employment of environmentally burn coal, although the Company capability as the first unit and is acceptable chemicals to control plans to build coal units for service in scheduled for completion in 1983.

growth of vegetation along Company the mid-1980s. In December 1978, the U.S. Court rights-of-way. The proportion of generation by of Appeals for the District of As a rule, increased efficiency fuel for 1978 consisted of residual oil, Columbia Circuit rendered a translates into lower costs and more 49 percent; nuclear, 30; natural gas, judgment which affirmed decisions of dependable service. When the the Nuclear Regulatory Commission 18; gas turbines-distillate oil and rigorous search for improvement natural gas, 2; and combined- (NRC) authorizing construction of helps to reduce the growth in energy cycle-oil, 1. the unit. However, certain matters demands, it also helps to postpone Average fuel costs per kwh, in concerning the construction permit the need to build a new power plant, are pending before the Atomic Safety thereby saving both energy costs and mills, were nuclear, 2; natural gas, 8.49; residual oil, 19.57; gas and Licensing Appeal Board.

capital costs.

turbines-distillate oil and natural gas, At %n'key Point Units 3 and 4, the Generating Capacity 21.15; and combined-cycle-oil, 26.29. Company is experiencing problems With the placing into commercial F<or all fuels, average cost was 12.41 with the steam generators and has operation of the second Putnam unit mills per kwh generated. had to plug certain pressurized water I

I

'ilgwu, From left, Vice Presidents R.J. Gardner, Strategic Planning; W.M. Klein, Economic Development; and A.D. Schmidt, Power Resources.

Pr CrÃI~ia.

Wgg ',

FPL at work providing the fuels from which electricity is made. Left: Fuel costs for nuclear plants, such as this one at St.

Lucie, are lower than for fossil-fuel plants.

Right: Oil tanker discharges its precious cargo into Riviera Plant storage containers.

14

4 IC i

/p i

~jI J4fC I ~

I>

+

F P

I 4

~ FF

~ 14

~ F4

circulation tubes in the steam No. 2. The NRC also has indicated it Meanwhile, construction is generators. Approximately 17.3 is considering initiating a proceeding continuing on two oil-fired units at percent of the tubes in Unit No. 3 concerning the licenses of the three the site. They are expected to be and 18.7 percent of the tubes in Unit operating nuclear units as a result of finished in 1980 and 1981. Capability No. 4 have been plugged. Both units the decision in the Gainesville is planned at 775 mw apiece.

are licensed to have up to 25 percent Antitrust Suit. A discussion of that FPL also is discussing plans with of the tubes plugged and still operate litigation is contained in Note 7 of the Jacksonville Electric Authority at full power. Notes to Consolidated Financial for possible joint construction of a No decision has been made as to Statements. coal plant in Northeast Florida for when permanent repairs will begin. the late 1980s. Supply alternatives The Company estimates that the Coal in the Fuel Mix and the question of how to transport amount of time required to repair 'lb keep pace with anticipated future the coal are being evaluated. Rail, each unit will be a period of 6-9 generation needs, the Company has barge, slurry pipeline or months, not 9-12 months as originally to plan at least 10 years ahead, since combinations of those three methods anticipated. The cost to replace the that is the lead time required to build are being considered.

steam generator tube bundles is a new generating plant. The estimated to be $ 51 million per unit. increasingly complex government Fuel Supply Unit No. 3 was taken oQ'the line in requirements and approvals that Oil, gas and uranium have been the January 1979 for its annual refueling must be met require an even longer lifeblood of FPL's power production.

and overhaul. The outage is planning horizon for building nuclear The Company has a contract with scheduled to last into April 1979, plants. As a result of red tape Exxon Corp. that provides a allowing time for a planned overhaul associated with nuclear projects, plus substantial portion of residual oil of the turbine-generator. federally mandated prohibitions on requirements through 1981. FPL also During the 1978 refueling outage of the use of gas and oil in new plants, has a contract for most of the distillate St. Lucie Unit No. 1, minor corrosion FPL has turned its sights to coal. fuel requirements through early 1980.

was detected in its steam generators. On the drawing boards now are Additional fuel may be acquired This year during the annual refueling two coal-fired units to be built at the through competitive open-market outage in the spring, FPL plans to existing Martin Plant site along the purchases or new contracts.

chemically clean the steam eastern shores of Lake Okeechobee. As of Feb. 6, 1979, the price of generators. The first unit is estimated to cost residual oil at Port Everglades Plant In other proceedings before the $ 830 million. Planned capability is in was $ 15.41 per barrel, $ 1.28 higher NRC, an antitrust hearing has been the 700-mw range for each unit. The than at year end.

ordered concerning St. Lucie Unit units are scheduled for the mid-1980s. The Company's natural gas C, 4k 4

p

.P

~IP"

\/

It w.J ".

1'+,

I y From left, Vice Presidents R.E. Talion, Divisions and R.E. Uhrig, Advance<i Systems and Technology.

FPL at work building to meet customer needs. Leit: Work on high-voltage transmission line through the Everglades is done from barges. Right:

Superstructure of Martin Plant takes shape, silhouetted against cloudless heavens.

16

1c

~ ~

~ ~

1 pl I V

contract with Sun Oil Co. expires in FPL will be seeking additional management feels it is important to June 1979. It covers approximately long-term suppliers for its increased maintain flexibility, especially in 20 percent of the Company's gas oil and uranium requirements. areas which affect the timing and supplies. Expiration of this contract type of securities that will be used to will increase Company reliance on Construction Budget meet cash requirements.

more expensive fuel oil. Discussions The Company estimates The objective of this approach are undenvay to seek possible expenditures under its 1979-81 is to position the Company so needed additional gas supplies. construction program will funds can be raised at the lowest Another contract which expires in approximate $ 2 billion, and $ 662 possible cost.

1988 provides for the balance of the million has been budgeted for 1979. Interconnections gas supply. As with load forecasts, the FPL has interconnection agreements In 1978, the Company also moved construction budget is subject to with nine neighboring utilities closer to its goal of assuring adequate continuing scrutiny and adjustment. seven municipal and two supplies of nuclear fuel when it FPL is keeping the program as investoi owned. An interconnection signed two long-term contracts for flexible as possible to accommodate with Georgia Power Corp. is uranium. The uranium would be factors that develop or change. planned. The two systems will be produced as a by-product of a Florida linked in 1980 with 240-kilovolt (kv) phosphate fertilizer operation. The Financing in 1979 lines in order to enhance FPL system fuel would be extracted from External financing will pick up in stability and reliability.

phosphoric acid at facilities to be 1979. The Company estimates $ 275 built in Polk County east of Tampa. million will have to be raised from Power Delivery In October 1978, a federal judge external sources, including FPL made considerable progress in ruled that Westinghouse Electric approximately $ 14 million through 1978 in expanding its high-voltage Corp. was not excused from honoring issuance of common stock to transmission system. Work its fuel supply contract with the employee benefit plans. proceeded on several legs of a 500-kv Company. A second phase of the trial The Company is investigating a grid destined to criss-cross FPL's will commence in May 1979 to $ 50 million nuclear fuel lease territory by the early 1980s.

determine the extent of damages arrangement which is expected to The next stretch planned for owed to FPL. The 8-yeai old suit provide a portion of needed financing completion will permit a greater involves the fuel service contract for in the first half of 1979. A significant transfer of bulk power into extreme both Turkey Point nuclear units. portion of the balance of 1979 South Florida from upstate.

In 1979, oil is expected to continue requirements is likely to be first In 1978, Company officials initiated as the main fuel source. Meanwhile, mortgage bonds. In that regard, FPL a study to determine future power

'=- / gp Principal FPL officers include (from left)

J.L. Howard, Treasurer; Astrid Pfeiffer, Secretary; and H.P. Williams Jr., Comptroller.

FPL at work out of doors. Barley Barber Swamp was saved when the Company built this cooling system at Martin Plant around it, not through it. The swamp contains abundant ammal and bird life, including an active eagle's nest, and is home to one of the state's oldest cypress trees. Right: Manatee Plant workman examines turbine blades.

18

needs for Dade County where about regulated by the Florida Public At press time, the appointments one-third of FPL customers live. Service Commission (FPSC) and, for had not been made.

Dade County presents a unique wholesale sales, by the Federal No applications for rate increases planning dilemma because only one Energy Regulatory Commission were filed with the FPSC in 1978, plant, 'Ibrkey Point, is located there. (FERC), an agency of the U.S. and Company officers have gone on The Company will apply the findings Department of Energy. public record saying that, barring of the study to its consideration of , A number of signiTicant regulatory emergencies, they do not expect base both transmission and generation events involving the two commissions rates to be increased in 1979.

alternatives. Options to be took place in 1978. In the Company's last rate case, considered are new generation, which took effect July 8, 1977, an j including coal, for the early 1990s on F'PSC Effective Jan. 2, 1979, the inverted residential rate feature was Company property adjoining Turkey FPSC was restructured by the state included that provides for the first Point Plant; new transmission routes legislature, becoming a 5-member 750 kwh to be billed at a lower rate across environmentally sensitive areas appointed Commission with than consumption above 750 kwh. As to other sites; or a combination thereof. staggered 4-year terms. Previously, a result of its implementation, 1978 In all, 1979 activity promises to be it had been a 3-member elected revenue was approximately $ 5 million eventful with approximately 340 panel. higher than it would have been under miles of transmission line under Two new Commissioners were the traditional declining block rate construction. Never before has the appointed by former Gov. Reubin structure.

Company had as much line-building Askew.'Their terms commenced on In non-rate-related developments Jan. 2, 1979, and willrun for four afi'ecting FPL in 1978, the FPSC:

activity in one given year. ~ sanctioned a deposit refund plan Also of significance in the area of years. The newly appointed power delivery will be the completion Commissioners are Joe Cresse, who for FPL customers. By year end, the this year of a new computerized served as budget director for the Company had refunded over $ 20 system control center in Miami. It State of Florida, and Gerald L. million to customers having will monitor and control the entire Gunter, who served on the 'Htusville continuous service for at least 25 FPL electrical system, integrating City Council. months and a satisfactory payment divisional systems being installed in The nominating council has sent a record during the last 12 of those Sanford, Sarasota, West Palm Beach list of nominees to Gov. Robert months.

~ broadened the Company's and Fort Lauderdale. Graham for appointment to the three seats currently being filled by financing flexibilityby increasing the Regulation and Rates Commissioners Paula F. Hawkins, maximum amount of allowable FPL rates for retail sales are W.T. Mayo and R.T. Mann. short-term debt that can be outstanding.

~ initiated a formal proceeding to determine whether, as a result of the reduction in income taxes caused by enactment of the Revenue Act of 1978, electric utilities are earning in excess of their allowed return.

Hearings will be held at a later date.

~ ordered the Company to adopt a plan allowing customers to have a third party receive copies of delinquency notices advising of possible service termination.

~ opened several dockets dealing with implementation of the Public UtilityRegulatory Policy Act of 1978,

including mandated conservation and stockholders alike. During 1978, FPL Company's generating reserves could rate structures. capital expenditures included about be adversely affected.

$ 22 million to achieve a cleaner FERC-In the only rate activity of environnient. Similarly, the Legal Proceedings the year, an FPL request for an construction program for 1979 The Company is a party to various in sale-foi~resale rates which

'ncrease includes approximately $ 29 million to legal proceedings. Details are was filed in 1977 was placed in effect meet environmental requirements. contained in Note 7 of Notes to in March 1978, subject to refund with New legislation or regulation could Consolidated Financial Statements.

interest, pending final disposition of result, of course, in even further Governmental Relations the case by the FERC. increases. In an area of increasing importance, In other developments during the FPL is working on many projects FPL has identified the need to year, the FERC: to improve the environment. In 1978, participate in the legislative process

~ approved FPL's petition to a great deal of attention focused on to bring sense and fairness into the withdraw an application for approval Barley Barber Swamp, an consideration of energy legislation.

of a proposed acquisition of the City environmentally valuable area which The program is based on the of Vero Beach electric system. the Company preserved while conviction of Chairman Marshall

~ called for an investigation of developing the cooling reservoir at McDonald that "it is imperative we Florida Gas%ansmission Co. and Martin site. explain what we are doing, why we Amoco Production Co. concerning The Company also was commended are doing it and what results are possible violations of the Natural Gas for its work with the Audubon expected."

Act. FPL also is party to the Society to save manatees, or sea investigation because it has cows. The species is threatened with In Retrospect....

contractual arrangements with both extinction. During 1978, FPL experienced a firms. distinct improvement in the

~ issued a show-cause order Energy Legislation Company's financial integrity, which concerning allegations by a municipal An important issue to the Company was achieved through rate relief and utility authority that the Company in 1979 is interpretation of national determined eQ'orts at internal cost violated provisions of its energy legislation enacted in control. FPL continued to provide sale-foi resale tari6'and the Federal November 1978. reliable service for a rapidly Power Act by refusing to provide

=

The Powerplant and Industrial increasing number of customers. At service to the authority. A response Fuel Use Act of 1978, a part of the the same time, numerous was filed by FPL in July 1978. national energy legislation, requires advancements and improvements A previous FERC decision that oil-burning plants for which were made in Company operations.

FPL's gas supply is not subject to the construction or acquisition began on a Looking to the future, however, curtailment plan of Florida Gas date after April 20, 1977 to convert FPL is faced with the evei present

%ansmission Co. has been appealed to coal unless an exemption is pressures of inflation and new to the courts. obtained from the Economic challenges in the public and political Regulatory Administration (ERA). arenas. These forces emphasize the Environmental Affairs The ERA has issued interim need for increasing Corporate FPL continues to work aggressively regulations that define "construction excellence in order for the Company to protect natural resources and the began" as "operational" and has to be able to serve the best interests health and welfare of Floridians. advised the Company that based on a of customers, employees and Toward that end, the Company preliminary review some of the investors alike. IfFPL is to succeed works frequently and regularly with Company's units may be covered by in its aim of continuing to be a well federal, state and local government the interim regulations. In the managed electric utility, it must environmental agencies on opinion of the Company, these- maintain financial strength, satisfied compliance with laws and regulations are not in compliance customers and dedicated employees.

regulations, both existing and with the Act. All of the Company's These are constant Company proposed. units began construction well before objectives, which must be supported As these laws and regulations proliferate and become more complex April 20, 1977. Should the Company have to convert some units to coal, by shoit-term goals measurable standards of performance. FPL's and demanding, the cost of the Company's financial position success as a Company depends to a compliance becomes a matter of could be adversely affected to the great extent on how well it measures increasing concern for customers and extent it would be unable to recover up to these standards.

these conversion costs, which would be substantial, through its rates. The 20

Florida Power 8 Light Company Financial & Statistical Information 1978

~~+g~Z~

Contents 22 Balance Sheets 24 Statements of Capitalization 25 Statements of Income r~/r 26 Statements of Retained Earnings 27 Statements of Changes in Financial Position 28 Schedule of Taxes Schedule of Allowance for Funds Used During Construction 30 Notes to Consolidated Financial Statements Management's Discussion and Analysis of the Consolidated Summary of Operations, together with the Consolidated Summary of Operations, appears on pages 4-7.

Opinion of Independent Certified Public Accountants To the Board of Directors and Shareholders, Florida Power & Light Company:

We have examined the consolidated balance sheets of Florida Power & Light Company and subsidiaries as of December 31, 1978 and 1977 and the related consolidated statements of capitalization, income, retained earnings and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, such consolidated financial statements present fairly the financial position of the Company and its subsidiaries as of December 31, 1978 and 1977 and the results of their operations and the changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

DELOITTE HASKINS Er, SELLS February 12, 1979

Florida Power & Light Company and Subsidiaries Consolidated Balance Sheets, December 31, 1978 and 1977 (Thousands of Dollars) 1978 1977 Assets ELECTRIC UTILITYPLANT (Notes 1 and 6):

At original cost . $ 4,025,649 $ 3,821,809 Less accumulated depreciation 869 887 741 862 Net . 3,155,762 3,079,947 Construction work in progress . 806,471 674,813 Nuclear fuel (less accumulated amortization of $ 21,673 at December 31, 1978 and $ 10,692 at December 31, 1977) . 130 001 118 702 Electric utility plant net 4 092 234 3 778 462 INVESTMENTS:

Storm and property insurance reserve fund (Note 1) . 15,099 14,406 Other ~ ~ ~ ~ ~ ~ ~ ~ ~ 6 354 8 125

'Ibtal investments ........ ~ ..-. ~ ................................. 21 453 22 531 CURRENT ASSETS:

Cash (Note 4) 4,952 3,824 Temporary investments (at cost which approximates market) 28,701 Accounts receivable:

Customers (less allowance for uncollectible accounts of $ 3,478 at December 31, 1978 and $ 4,602 at December 31, 1977) . 93,454 80,130 Employees and miscellaneous . 6,838 6,172 Materials and supplies at average cost. 61,765 66,662 Fossil fuel stock at average cost . 85)145 66,082 Prepaid expenses 21,471 9,815 0 ther. 14 742 4 394

'Ibtal current assets . 317 063 237 079 DEFERRED DEBITS:

Unamortized cancelled project costs (Note 6)..... 14,842 20,278 Accumulated deferred income taxes (Note 1) . 7,997 5,084 Unamortized debt expense and loss on reacquired debt... ~.... 5,653 5,056 Other..... 898 7 812

'Ibtal deferred debits 29,390 38 230 Total . 84 460 145 34 071 302 The accompanying Schedules and Notes to Consolidated Financial Statements are an integral part of these statements.

22

Florida Power & Light Company and Subsidiaries Consolidated Balance Sheets, December 31, 1978 and 1977 (Thousands of Dollars) 1978 1977 Liabilities CAPITALIZATION(See Statements of Capitalization):

Common shareholders'quity $ 1,309,862 $ 1,200,189 Preferred stock 386,250 336,250 Long-term debt 1 766 861 1 744 243

'Ibtal capitalization 3 462 973 3 280 682 CURRENT LIABILITIES:

Long-term debt current portion 62,618 12,693 Accounts payable trade . 46,480 39,508 Customers'eposits 79,120 84,607

'Income taxes (Note 1) 57,257 44,874 Other taxes 35,118 33,485 Interest accrued 39,055 34,405 Pension cost accrued (Note 1) 31,919 25,460 Tax collections payable 13,882 11,628 Other 44,753 29 499

'Ibtal current liabilities 410 202 316 049 DEFERRED CREDITS:

Accumulated deferred income taxes (Note 1) 370,329 299,722 Unamortized investment credit (Note 1) . 176,883 141,237 Other 14 939 11 040

'Ibtal deferred credits. 562 151 451 999 RESERVES:

Storm and property insurance (Note 1) . 15,099 14,406 Injuries and damages and other . 9,720 8 166 Total reserves . 24 819 22 572 COMMITMENTSAND CONTINGENCIES (Notes 6 and 7)

Total $ 4 460 145 $ 4 071 302 The accompanying Schedules and Notes to Consolidated Financial Statements are an integral part of these statements.

Florida Power & Light Company and Subsidiaries Consolidated Statements of Capitalization, December 31, 1978 and 1977 (Thousands of Dollars) 0 978 1977 COMMON SHAREHOLDERS'QUITY:

Common Stock, no par, authorized 50,000,000 shares; outstanding 40,314,552 shares in 1978 and 40,050,000 shares in 1977 (Note 3) .............................. 3 756,841 $ 749,375 Capital stock premium and expense . (3,751) (3,715)

Retained earnings...................................................... 556 772 464 529

'Ibtal common shareholders'quity 1,309 862 1 200 189 PREFERRED STOCK $ 100 Par Value, authorized Current 5,000,000 shares (Note 3): Shares Redemption

~Ontstandin Price 4k% Series 100,000 $ 101.00 10,000 10,000 4'k% Series A 50,000 101.00 5,000 5,000 4'k% Series B . 50,000 101.00 5,000 5,000 42/e% Series C . 62,500 103.00 6,250 6,250 4.32% Series D . 50,000 103.50 5,000 5,000 4.35% Series E.......... 50,000 102.00 5,000 5,000 7.28% Series F . 600,000 106.57 60,000 60,000 7.40% Series G 400,000 106.23 40,000 40,000 9.25% Series H 500,000 115.00 50,000 50,000 10.08% Series J . 750,000 111.50 75,000 75,000

~

8.70% Series K 750,000 109.85 75,000 75,000 8.84% Series L 500,000 109.84 50 000

'Ibtal Preferred Stock 386 250 336 250 LONG-TERM DEBT (Notes 1 and 3):

First Mortgage Bonds:

Maturing through 1983 3'/e% Due June 1978 11,000 3% Due June 1979. 10,000 10,000 8/s% Due August 1980... 50,000 50,000 3/s% Due November 1981. 10,000 10,000 8/e% Due May 1982 100,000 100,000 37/s% Due April 1983 . 15,000 15,000 Maturing 1984 through 1993 3/e% to 9/s% 225,000 225,000 Maturing 1994 through 2003 4/s% to 8% . 675,000 675,000 Maturing 2004 through 2008 8'h% to 10'/s%. 436,289 361,289 Pollution Control Series A, 6.10% Due January 2008 . 19,400 10/4% Notes Due November 1981 125,000 125,000 Note, 1% over prime Due February 1982 . 6,048 7,560 Bank Notes (under term loan agreement) Due June 1979 50,000 50,000 Installment Purchase and Security Contracts 5.40% to 6.15% due 2004 through 2007

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

92,090 92,090 Promissory Notes 6% to 8/4% Due Various to September 1987 4,145 4,200 Unamortized Premium and Discount .. 4,922 5,085 Short-term debt refinanced 9,000 Promissory Notes of Subsidiaries 7/e% to 9/s% Due Various to December 1995 .. 6 585 6 712 Total long-term debt 1,829,479 1,756,936 Less current maturities . 62 618 12 698 Long-term debt excluding current maturities. 1 766 861 1 744 248 Total capitalization . $ 3,462,973 63 280 682 The accompanying Schedules and Notes to Consolidated Financial Statements are an integral part of these statements.

Florida Power 8 Light Company and Subsidiaries Consolidated Statements of Income for the years ended December 31, 1978 and 1977 (Thousands of Dollars) 1978 1977 OPERATING REVENUE<S (Notes 1 and 5) .. 31 647 226 31 464 584 OPERATING EXPENSES:

Operations:

Fuel 551,376 497,015 Other production .. ~ ~ ~ ~...... ~ ~ 17,031 14,709

,% ansmission and distribution 46,176 42,953 Customers 42,839 38,082 Administrative and general ..... 110,60? 91,267 Maintenance 85,865 67,579 Depreciation (Notes 1 and 6) 144,267 125,166 Income taxes (Note 1) ............ 198,163 171,098 Taxes other than income taxes ~ 132 205 117 807 Total operating expenses 1 328 529 1 165 676 OPERATING INCOME 318 697 298 908 OTHER INCOME (DEDUCTIONS):

Allowance for other funds used during construction (Note 1) . 20,319 ~

16,009 Income taxes (Note 1) 827 (1,558)

Other net 3 382 (1 731)

Other income net . 24 528 12 720 INCOME BEFORE INTE<REST CHARGES 343 225 311 028 INTEREST CHARGES:

Interest on first mortgage bonds. 116,446 113,530 Interest on other long-term debt. 24,031 22,947 Other interest .............. ~ ~ 5,619 7,606 Allowance for borrowed funds used during construction (Note 1) (14 112) (12 898)

Interest charges net 131 984 131 190 NET INCOME . 211,241 180,438 PREFERRED DIVIDENDREQUIREMENTS ..... 29 138 27 058 NET INCOME APPLICABLE TO COMMON STOCK . 3 182 103 2 152 785 Average number of common shares outstanding (in thousands) 40,120 40,050 Earnings per average share of Common Stock . $ 4.54 $ 3.81 Dividends per share of Common Stock $ 2.00 $ 1.66 The accompanying Schedules and Notes to Consolidated Financial Statements are an integral part of these statements.

25

Florida Power & Light Company and Subsidiaries Consolidated Statements of Retained Earnings for the years ended December 31, 1978 and 4 977 (Thousands of Dollars) 1978 1 977 BALANCE AT BEGINNING OF YEAR $ 454,529 $ 368,227 NE<T INCOME 211 241 180 438 Total 665 770 548 065 DE<DUCT CASH DIVIDENDS:

Preferred stock:

4%% Series ($ 4.50 a share) 450 450 4'%eries A ($ 4.50 a share) . 225 225 4'%eries B ($ 4.50 a share) . 225 225 4%% Series C ($ 4.50 a share) . 281 281 4.32% Series D ($ 4.32 a share) . 216 216 4.35% Series E ($ 4.35 a share) . 218 218 7.28% Series F ($ 7.28 a share) . 4,368 4,368 7.40% Series G ($ 7.40 a share) 2,960 2,960 9.25% Series H ($ 9.25 a share) 4,625 4,625 10.08% Series J ($ 10.08 a share) 7,560 7,560 8.70% Series K ($ 8.70 a share) 6,525 6,525 8.84% Series L ($ 2.23 a share) . 1,117 Common stock . 80 228 66 48S Total 108 998 94 136 BALANCEAT END OF YEAR ...... S556 772 ~454 529 Dividend Restrictions: The Charter, Mortgage and Deed of Trust and 10'%ote Indenture contain provisions which, under certain conditions, restrict the payment of dividends and other distributions to common shareholders. Under the most restrictive of these provisions $ 454.3 million of retained earnings is available for payment of dividends on Common Stock at December 31, 1978. In the event that the Company should be in arrears on its sinking fund obligations, which commence in 1980, for the 10.08% Preferred Stock, the Company may not pay dividends on Common Stock.

The accompanying Schedules and Notes to Consolidated Financial Statements are an integral part of these statements.

Florida Power & Light Company and Subsidiaries Consolidated Statements of Changes in Financial Position for the years ended December 3C, 1978 and 1977 (Thousands of Dollars) 1978 4977 Sources of Funds:

Current operations:

Net income ~ ~ ~ ~ 0 \ I ~ I 0 I ~ ~ 0 \ \ \ ~ ~ ~ ~ $ 211,241 8180,438 Depreciation . 144,267 125,166 Amortization of nuclear fuel assemblies 11,081 9,487 Deferred investment credit net 35,646 35,513 Deferred income taxes 67,695 91>660 Allowance for other funds used during construction (20 319) ~(16 009 Total 449,611 426,255 Sale of first mortgage bonds . 75,202 Reimbursement by trustee from pollution control and industrial development financings for construction expenditures . 18,476 32,291 Issuance of other long-term debt.... ~......................... 9,000 Issuance of common stock 7,466 Sale of preferred stock 50,134 Other sources ............ ~ ~ ~ ................ 20,825 12,524 Decrease in working capital . ~.................................. 14 164 59 706 Total . $ 635 878 $ 539 776 Application of Funds:

Construction expenditures* $ 432,586 $ 316>434 Nuclear fuel* . 19,925 42,917 Retirement, redemption and current maturity of long-term debt 71,617 76,405 Dividends ~ ~ I ~ ~ ~ ~ ~ ~ ~ ~ 0 ~ ~ ~ ~ ~ ~ ~ ~ 108,998 94>136 Other apphcations ....................................... ~ .. 2 752 9 884 Total $ 635 878 $ 539 776 Change in Working Capital Effected By:

Increase (Decrease) in current assets:

Cash and temporary investments $ 29,829 $ (4,824)

Accounts receivable ..... ~.................. ~............ 13,990 (29,687)

Fossil fuel stock . 19,063 12,545 Other changes net . 17,107 (4,929)

Decrease (Increase) in current liabilities:

Notes payable and current portion of long-term debt ... (49,925) 19,029 Accounts payable . (6,972) (8,208)

Customers'eposits 5,387 (13,563)

Income taxes . (12,383) (37,064)

Revenue refunds. 24,558 Other changes net . ~ ~ ~ ~ ~ I ~ ~ 0 ~ ~ ~ ~ I ~ 0 \ ~ (30 260) (17 563)

Increase (Decrease) in Working Capital $ (14 164) 8 (59 706)

• Excluding Allowance for other funds used during construction. See Note 1 AFUDC.

The accompanying Schedules and Notes to Consolidated Financial Statements are an integral part of these statements.

Florida Power & Light Company and Subsidiaries Schedule of Taxes for the years ended December 34, 1978 and 1977 (Thousands of Dollars) 1978 1977 Income Taxes Federal:

Charged to operating expenses:

Current $ 739659 $ 37,573 Deferred Accelerated depreciation 53,220 46,521 Debt component of AFUDC .. 6,405 5,983 Repair allowance . 5,117 8,913 Other (1,617) 2,583 Deferred in prior years Accelerated depreciation (1,934) (3,078)

Debt component of AF(UDC (662) (526)

Repair allowance . (931) (709)

Estimated revenue refunds 11,198 Other 2,002 2,371 Charge equivalent to the investment credit 47,535 46,628 Amortization of investment credit. (4 695) (8 655)

Total 178,099 153,802 Charged to other income:

Current. (212) (7,878)

Deferred net (585) 9 247'55

'Ibtal Federal 177,302 171 State:

Charged to operating expenses:

Current;....... 13,320 9,155 Deferred Accelerated depreciation . 5,835 5,099 Debt component of AF(UDC . 702 665 Repair allowance . 561 977 Other . (178) 284 Deferred in prior years Accelerated depreciation . (198) (332)

Debt component of AFUDC . (73) (58)

Repair allowance . (102) (78)

Estimated revenue refunds . 1,228 Other. 197 356 Total 20,064 17,296 Charged to other income:

Current. 34 (825)

Deferred net . (64) 1 014'7

'Ibtal State . 20 084 485

'Ibtal income taxes 8197 886 172 656

'Deferred federal and state income tax provisions charged to other income in 1977 related to the cancelled South Dade project costs described in Note 6 Construction Program.

Schedule of Taxes (Continued)

Total income taxes differ from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for the differences are as follows: 1978 1977

%of %of Pre-Ttx Pre-Ttx Amount Income Amount Income Computed at statutory rate . $ 196,117 48.0%%uo $ 169,485 48.0%%uo Increases, (reductions) in tax resulting from:

Allowance for other funds used during construction..... (9,753) (2.4) (7,684) (2.2)

State income taxes net of federal tax benefits ....... 10,418 2.6 9,092 2.6 Other net....... 554 0.1 1 763 0.5 Recorded income tax expense $ 197 386 48.3%%uo $ 172 656 48.9%%uo Other Taxes 1978 1977 Taxes other than federal and state income taxes:

Federal and state payroll $ 11,343 $ 9,506 Real and personal property . 41,308 38,848 State gross receipts . 23,955 21,125 Franchise charges 55,862 47,967 Miscellaneous . 14 997 7 929 Total other taxes . $ 147 375 $ 125 875 Charged to:

Operating expenses other taxes $ 1321205 $ 117,807 Utility plant and other accounts . 15 179 7 568

'lbtal . $ 147 375 $ 125 875 Schedule of Allowance for Funds Used During Construction for the years ended December 31, 1978 and 1977 (Millions of Dollars) 1978 1977 Monthly average Construction work in progress (CWIP) . $ 669.9 $ 625.2 Less:

Amount included in rate base 200.0 200.0 AFUDC previously capitalized and included in monthly average CWIP . 60.9 60.3 Other . 76.9 53.4 CWIP base for computing AFUDC 332.1 311.5 Nuclear fuel base for computing AFUDC (1) . 46.3 Total base for computing AFUDC . 378.4 311.5 Capitalization rate (2) 9.10%%uo 9.28%%uo Total AFUDC charged to CWIP and nuclear fuel 34.4 28.9 Amount, credited to interest charges 14.1 12.9 Amounts credited to other income ~ $ 20.3 $ 16.0 Ttx effect of debt portion of AFUDC for which deferred taxes have been provided (3) ....... 8 7.1 6.6 (1) See Note 1 AFUDC for information regarding a change in the method of capitalizing AFUDC on certain nuclear fuel.

(2) The AFUDG rate is calculated by applying the capital ratio to the current embedded cost of each component of capital, except for common equity, which is based on the rate allowed in the Company's last rate case. The debt component is not reduced by the applicable income taxes.

(3) Allowed by the FPSC as an operating expense for ratemaking purposes.

29

Florida Power 8 Light Company and Subsidiaries Notes to Consolidated Financial Statements for the years ended December 31, 1978 and 1977 1~ Summary of Significant Book depreciation is provided on a during construction which represents Accounting and Reporting straight-line service-life basis by the allowed cost of capital used to Policies primary accounts as directed by the finance a portion of CWIP and Regulation: Accounting and FPSC using the following rates: nuclear fuel. The portion of AFUDC reporting policies of the Company are Steam production plant ..... 3.2k-4.6%%uo attributable to borrowed funds is subject to regulation by the Florida Nuclear production plant.... 3.2%%uo-6.2% recorded as a reduction of Interest Public Service Commission (FPSC) Other production plant...... 5.0%%uo-6.5% charges and the portion attributable and the Federal Energy Regulatory Transmission plant ......... 1.5%-3.3% to.other funds as Other income. See Commission (FERC). The following Distribution plant .......... 2.0%-6.6% the Schedule of AFUDC for detailed summarizes the more significant of General plant .............. 2.1%%uo-7.8% mformation.

Transportation equipment ... 9.0% Commencing in 1978 the Company these policies.

capitalized AFUDC on its investment Basis of Consolidation: The The weighted annual composite in nuclear fuel in excess of the consolidated financial statements depreciation rate was approximately amount in the Company's rate base.

include the accounts of the Company 3.8% and 3.7% in 1978 and 1977, respectively. The nuclear production In 1978 approximately $ 4.2 million of and its wholly-owned subsidiaries. AFUDC on nuclear fuel was All significant intercompany balances plant rates include estimated recorded.

and transactions have been negative net salvage values of eliminated. See Note 2. approximately 20% for certain Storm and Property Insurance components, reflecting estimated Reserve and Related Fund: The Rates and Revenues: Revenues are decommissioning costs. The storm and property insurance recognized based on monthly cycle transmission and distrib'ution plant reserve fund is maintained at an billings to customers. Retail and rates include negative net salvage amount equivalent'to the reserve.

wholesale rate schedules are values. The reserve provides co'verage of approved by the FPSC and the Substantially all utility plant is . storm damage costs and possible FERC, respectively. The rate subject to the lien of the Mortgage public liability losses stemming from schedules contain a fuel a@ustment and Deed of Trust (as supplemented) a nuclear incident. Earnings from the clause which gives effect to changes securing the First Mortgage Bonds. fund, net of taxes, are reinvested in in efficiency, the cost of fuel as woll, the fund. Securities held in the fund as the fuel component of purchased Amortization of Nuclear Fuel: The are recorded at cost which cost of nuclear fuel for St. Lucie Unit power, the total energy cost of approximates market value.

No. 1, with a provision for zero net economy interchange and the generation mix of fossil and nuclear salvage, is amortized to fuel expense Employee Benefit Plans: The on a unit of production method. No Company has a non-contributory fuels. Generally, the effects are reflected in customer billings about provision for estimated future spent employees'ension plan covering two months after the changes occur. fuel storage or disposal costs is substantially all employees. The See Note 5 for additional information presently included in fuel expense. Company's policy is to fund each current rate matters. The suppliers of the nuclear fuel year's accrued pension costs, regarding cores in the reactors are under including amortization of the Electric UtilityPlant and contract to provide spent fuel estimated unfunded prior service Depreciation: The cost of additions, removal and, in the case of St. Lucie costs. In April 1978 the Company replacements, and renewals of units Unit No. 1, to buy back spent fuel, reduced the amortization period for of property is added to utility plant. but have indicated that they are prior service costs from 30 years to 10 The cost (estimated, ifnot known) of presently unable to perform such years, effective October 1, 1977. The units of property retired, less net services due to the unavailability of change increased 1978 pension costs salvage, is charged to accumulated storage and/or reprocessing. The by approximately $ 5.6 million.

depreciation. Maintenance and Company has expanded its spent Pension costs for 1978 and 1977 were repairs of property, and replacements nuclear fuel storage facilities and has $ 26.2 million and $ 20.5 million, and renewals of items determined to adequate facilities for storage of respectively. The estimated unfunded be less than units of property, are spent fuel until the mid-1980's under prior service cost of the pension charged to operating expenses normal refueling conditions. plan at October 1, 1978 was maintenance. gS million using the entry age Allowance for Funds Used During normal cost method. There was no Construction: The Company excess of vested benefits over the capitalizes as an additional cost of property an allowance for funds used 30

fund balance as of October 1, 1978. In income at a rate approximating the The Company's Charter authorizes 1978 the Board of Directors approved lives of the related property. See the issuance of 10;000,000 shares of a plan amendment which changed the Schedule of Taxes. Preferred Stock, no par value, and pension plan year from a fiscal year 5,000,000 shares of Subordinated beginning October 1 to a calendar 2. Investment in Subsidiaries Preferred Stock, no par value, to be year commencing January 1, 1979. known as "Preference Stock." None of The Company's wholly-owned The Employee Thrift Plan provides these shares is outstanding.

subsidiaries, FSS, LRIC and EFC, for basic contributions by eligible are engaged in activities Long-'Iform Debt: Certain series of employees of up to 6% of their base complementary to those of the the Company's First Mortgage Bonds salaries, which are matched 50% by Company. FSS is engaged in oil and have sinking fund requirements the Company. Supplemental gas and uranium exploration through 1995 which may be satisfied contributions by employees may be ventures and proprietary fuel by certification of property additions made up to an additional 6%. The research and development projects. at the rate of 167% of such Company matching contributions for FSS is not presently subject to requirements. Such requirements are 1978 and 1977 were $ 2.0 million and regulation by the FPSC or FERC. approximately $ 4 million for each of

$ 1.7 million, respectively. See Note 3 Common Stock.

LRIC holds real properties used or to be used by the Company in its utility the next five years. Annual maturities of long-term debt're In 1976 an Employee Stock operations for the purpose of approximately $ 63 million in 1979, Ownership Plan (ESOP) was adopted increasing financing options beyond $ 52 million in 1980, $ 137 million in pursuant to the Tax Reduction Act of those permitted by the Company's 1981, $ 102 million in 1982 and $ 16 1975. The Act permits the Company Mortgage and Deed of Trust. EFC million in 1983.

to claim an additional 1% investment was organized for the purpose of Interest on the Bank Notes due tax credit, provided that the entire supplying engineering, fabrication June 1979 is based on the cuivent amount of the credit is contributed to and construction services for power commercial loan interest rate up to a an employee stock ownership plan plants. In 1977, EFC entered into a maximum average interest rate of and invested in Company Common joint venture, NISCO-South, which 7~/4% over the term of the loan.

Stock for the benefit of employees. In was terminated in 1978. Commercial paper aggregating $ 9 1978 the Board of Directors amended The Company's total investment in million at December 31, 1977 was the ESOP to enable the Company to FSS and EFC is not material. The repaid from proceeds from long-tenn claim a further investment tax credit Company's net investment in LRIC financing in January 1978.

up to h% to the extent that the k% approximates $ 36.8 million. Accordingly, the commercial paper credit is matched by voluntary was classified as long-term debt. The contributions by participating 3. Capitalization financing included the sale of $ 75 employees pursuant to the Tax million of 9'%irst Mortgage Bonds Reform Act of 1976. Since the Common Stock: In June 1978 the and $ 19.4 million of 6.1% Pollution payments to the Plan are in lieu of Company reserved 1,000,000 shares Control Series A First Mortgage income tax payments, there is no of Common Stock for issuance in Bonds. The latter Bond series was effect on net income. Provisions for connection with the Employee Thrift issued concurrently with the Company contributions to the ESOP Plan and Employee Stock Ownership execution by the Company of an were $ 7.2 million and $ 7.5 million in Plan. In 1978 the Company issued installment purchase contract as 1978 and 1977, respectively. See 49,600 shares for $ 1.4 million under security for payment of pollution Note 3 Common Stock. the Thrift Plan and 214,952 shares for conti'evenue bonds issued by

$ 6.1 million under the ESOP. Martin County, Florida, to provide Income Taxes: Deferred income taxes are provided on all significant Preferred Stock: The 10.08% financing to the Company for certain book-tax timing differences as Preferred Stock is entitled to a pollution control facilities.

permitted for rate-making purposes sinking fund to retire a minimum of by the FPSG. Investment tax credits 37,500 shares and a maximum of Changes in Capital Accounts: The used to reduce current federal income 75,000 shares at $ 101.50 per share, changes in Common Stock, Preferred taxes are deferred and amortized to plus accrued dividends to the Stock and Capital Stock Premium redemption date on April 1 of each and Expense for 1977 and 1978 are year, commencing on April 1, 1980. shown below (in thousands):

Minimum payments are designed to retire the entire issue by April 1, 1999.

31

Florida Power & Light Company and Subsidiaries Notes to Consolidated Financial Statements (Continued)

Capital 6. Commitments Stock and Contingencies Common Stock Preferred Stock Premium and Construction Program:

Shams Amount Shares Amount ~Ex ense Commitments in connection with the Balances, January 1, 1977...... 40,050 $ 749,3Z5 3,362 $ 336,250 $ (3,612) construction program for electric Expenses recorded in 1977..... (103)

, utility plants, generating units and Balances, December 31, 19Z7... 40,050 749,3Z6 3,362 336,250 (3,716) related facilities were estimated at Sales in 1978 500 50,000 (30) approximately $ 1.4 billion at Issued to benefit plans in 1978 .. 265 7,466 (6)

December 31, 1978 including $ 500 Balances, December 31, 1978... 40,316 $ 756,841 3,862 $ 386,250 $ (3,761) million for nuclear fuel cores. These estimates are based on the presently proposed construction program and

4. Short. Term Debt are not necessarily contractual Unused available bank credit aggregated approximately $ 201.8 million at obligations. Certain of these December 31, 1978, and is based on informal arrangements which are subject commitments are also subject to to cancellation without notice. Compensating balances maintained in escalation for increases in labor, connection with these credits arise in the normal course of business and are services and material costs.

not material to the Company's financial position and borrowing costs. In 1977 the Company cancelled the Details of short-term borrowings for the years ended December 31, 1978 two nuclear units previously and 1977 are shown below: proposed for a South Dade site and Other deferred the costs, including Financial cancellation penalties, of the project Commercial Bank Commercial Bank Insti- of approximately $ 14.9 million before

~Pa r B~ormwin ~Pa er B~orrowin s tutions income taxes. The Company obtained (Thousands of Dollars) authorization from the FPSC to Average aggregate amortize these costs over a five-year borrowings....... $ 4,866 $ 300 $ 10,880 $ 16,394 $ 1,677 period. In 1978 an additional $ 7.9 Maximum month-end million of costs related to the project balances ........... $ 37,300 $ 37,600 $ 89,000 $ 10,035 were determined to be not recoverable. These costs were added Weighted daily average interestrate ......... 7.7% Z.6% 5.4% 6.5% 5.9% to the original amount of cancelled Weighted average interest project costs and are being amortized rate on amounts over the same five-year amortization outstanding at end period. Depreciation expense in 1978 of period............... includes $ 5.8 million of amortization of Maximum combined these costs. In 1977 $ 2.2 million of borrowings at any such amortization was charged to month-end ............. $ 37 300 s $39,000 Other income.

Rental and Nuclear Fuel Expense:

5. Revenues The annual lease expense and the FPSC: In 1977 the Company was granted a retail rate increase designed to minimum rental commitments under produce increased revenues of $ 195.5 million on an annual basis. The new property and equipment leases are rates went into effect July 8, 1977. Interim rate relief providing additional not material. The Company has annual revenues of $ 87.9 million was effective March 14, 1977 and was various contracts for supplies of fuel included in the July rate increase. The new residential rates include an including a contract for nuclear fuel inverted rate structure. services for its two Turkey Point Plant nuclear units. However, in FERC: A request for a rate increase on sales to customers for resale filed September 1975 the Company was with FERC in 1977 was placed in effect March 1, 1978 subject to refund with notified by the supplier that it is interest. The Company is seeking an annual increase in wholesale revenues of approximately $ 6.7 million based on a 1978 projected test year. Adequate provision has been made for refunds which may be required after final settlement with FERC.

32

taking the position that it is excused to indemnify such owners against have been plugged, bringing the from the complete performance of its thiA-party liability claims in percentage of tubes in Unit No. 3 obligations to supply uranium under amounts up to $ 560 million, less which have been plugged to the contract. See Note 7 Nuclear liability insurance available from approximately 17.3%. In addition, Fuel Suit. Expenses under the insurance companies (currently temporary repairs are being made to nuclear fuel services contract for limited to $ 140 million) and parts of the blades in each of the two 1978 and 1977 which were changed to contributions by owners. In the low pressure turbine rotors of the operating expenses were $ 15.4 event of public liability losses arising unit. Permanent repairs will be made million and $ 16.9 million, from a nuclear incident at a facility when Unit No. 3 is refueled in late respectively. The Company is currently covered by government 1979. NRC approval must be committed to pay a minimum annual indemnification, the Company is obtained before the unit may be charge per nuclear unit of $ 1,260,000 obligated to pay a deferred premium returned to service.

under the Turkey Point nuclear fuel of up to $ 5 million per incident for In September 1978 the Company supply contract; however, annual each of its three licensed reactors but obtained approval from the NRC to charges on a usage basis may be not more than $ 10 million in a plug up to 25% of the tubes in both substantially in excess of the calendar year for each of its three Unit No. 3 and No. 4 without minimum charge and are subject to licensed reactors under regulations reducing the output of the units. To escalation for increases in certain adopted by the NRC. The Company date, steam generator tube plugging costs to the supplier. The present could be assessed up to has not required a reduction in the value of the minimum lease approximately $ 30 million in a year output of the units. Ifa significant commitments, including the nuclear under such regulations. pattern of leaks occurs in a steam fuel supply contract, and the impact generator of either unit, an on net income if certain leases and Nuclear Units: inspection must be performed and the nuclear fuel supply contract had Turkey Point Unit Nos. 8 and 4-The NRC approval would be required been capitalized, are not material Company is experiencing problems before returning the affected unit to and, therefore, not presented. with the steam generators of these service.

units and has had to plug certain The Company has executed a Nuclear Insurance: The Company is pressurized water circulation tubes in contract to obtain new steam a member of Nuclear Mutual the steam generators. generator tube bundles with delivery Limited, which provides insurance Unit No. 4 returned to service in anticipated in the second half of 1979.

coverage against property damage to early October 1978 following its The new steam generator tube members'uclear generating annual refueling and overhaul. While bundles will incorporate different facilities. The Company could be the unit was off the line, inspections materials and design which the subject to a maximum assessment of of the steam generator tubes were Company anticipates will prevent a approximately $ 39 million, based on performed and additional tubes were recurrence of the present problems.

estimated 1978 premiums, in the plugged. At present approximately No decision has been made as to event losses occur at a nuclear plant 18.7% of the tubes in Unit No. 4 have when the permanent repairs of the of a member utility, and is a been plugged. Unit No. 4 is presently steam generators will begin, The cost self-insurer for any such loss in authorized by the NRC to operate to replace the tube bundles is excess of $ 225 million. until the next scheduled refueling in estimated at approximately $ 51 Under the Price-Anderson Act, April 1979 at which time an million per unit. A total of $ 31 million the Company maintains private inspection of the steam generators has been expended through insurance and agreements of must be performed and NRC 'December 31, 1978. The balance of indemnity with the Nuclear approval obtained for continued these costs are reflected in the Regulatory Commission (NRC) to operation. construction commitments (Note 6 cover third-party liability arising Unit No. 3 came off the line in Construction Program). Repair of the from a nuclear incident which might January 1979 for its annual refueling, steam generators may require each occur at the Company's nuclear overhaul and inspection. While the unit to be out of service for about six power plants. The Act currently unit is off the line, additional tubes to nine months and will require limits the liability of owners of a amendments to the operating licenses licensed nuclear unit to $ 560 million for each unit. While the Company has for a single nuclear incident and applied to the NRC for the necessary provides for the Federal Government 33.

Florida Power & Light Company and Subsidiaries Notes to Consolidated Financial Statements (concluded) amendments to the operating coal unless an exemption is obtained it was excused from performing its licenses, NRC procedures governing from the Economic Regulatory obligations to supply uranium and the issuance of the amendments have Administration (ERA). The ERA has from removing spent fuel pursuant to not yet been completed. The issued interim regulations that define the contract for the Turkey Point Company anticipates that generation "construction began" as "operational", site.

lost when a unit is out of service or and has advised the Company that In 1975 the Company filed suit operating at reduced power levels based on a preliminary review some against Westinghouse. The action would be made up by fossil-fired of the Company's units may be was consolidated with suits brought generation, the additional cost of covered by the interim regulations. by other utility customers against which should be recoverable through In the opinion of the Company, these Westinghouse in the U.S. District its fuel adjustment clause as interim regulations are not in Couit for the Eastern District of presently in effect. Power resources compliance with the Act. All of the Virginia (District Court).

could be inadequate and the southern Company's units began construction In October 1978 the District Court part of the Company's system could well before April 20, 1977. Should the ruled that Westinghouse was not be without adequate power from time Company have to convert these units excused from performing its contract to time during any period that both to coal, the Company's financial with the Company with respect to units were simultaneously out of position could be adversely affected the uranium issue. The damage phase service. The Company's financial to the extent it would be unable to of the litigation will commence in position could be adversely affected. recover these conversion costs, which May 1979. Prior to the damage phase In May 1978 the Company filed suit would be substantial, through its the Court set aside for later for damages in the U.S. District rates. The Company's electrical adjudication the Company's dispute Court for the Southern District of generating reserves could be with Westinghouse over spent fuel Florida against Westinghouse adversely affected. removal. This issue will be tried Electric Corporation, the supplier of Federal Income Taxes: The IRS has immediately after the conclusion of the steam generators. The matter is examined the Company's income tax the damage trial.

pending. returns for 1971, 1972, and 1973 and, Gainesville Antitrust Suit: A treble St,. Lrucie No. 1-During routine in August 1977, proposed additional damage suit was brought in 1968 inspection at the Spring 1978 income taxes aggregating $ 22.1 against the Company, seeking refueling of this unit, minor corrosion million, exclusive of interest. The damages of approximately $ 11 was detected in the steam principal issue ($ 18.5 million) is the million, before trebling. The case was generators. An additional inspection taxability of customer deposits. The was performed in November 1978.

tried in 1975 and resulted in a jury Company filed a formal protest and verdict for the Company. Plaintiffs Additional inspections are scheduled conferences are being held at the appealed to the U.S. Couit of for the unit's next refueling in the Appellate Division of the IRS. Appeals for the Fifth Circuit. In May Spring of 1979, at which time the Any liability for taxes and interest 1978 the Couit of Appeals ruled that Company anticipates chemically resulting from final settlement with certain matters peitaining to the case cleaning the steam generators. the IRS would not have a material should be re-tried by the District St. Lucie No. 8-Construction work effect on net income. Income taxes on Court. At issue in the case on on the unit resumed in June 1977 customer deposits would be remand is whether an agreement, following the issuance of a normalized and adequate provisions understanding or concert of action, to construction permit. In December have been made for the taxes related which the Court of Appeals found the 1978 the U.S. Court of Appeals for to the other issues. Company was a party, was a the District of Columbia Circuit substantial factor in plaintiffs'ailure

?. Legal Proceedings rendered a judgment which affirmed to obtain an interconnection. Ifthe the NRC decisions authorizing Nuclear Fuel Suit: The Company has a contract with Westinghouse jury should find in favor of plaintiffs, construction of this unit. it will then have to assess what Electric Corporation covering its full Energy Legislation: The Powerplant nuclear fuel requirements and related damages, ifany, plaintiffs sustained.

and Industrial Fuel Use Act of 1978 'IHal Counsel has advised the services, including removal of spent requires oil burning plants for which fuel, for Turkey Point Units No. 3 Company that it is impossible to construction or acquisition began on a and 4 thi'ough 1982 and 1983, predict the outcome of this litigation date after April 20, 1977 to convert to respectively. See Note 6 Rental at the present time because of the and Nuclear Fuel Expense. In 1975 Westinghouse took the position that 34

ambiguities in the opinion of the The Company cannot predict the securities laws with respect to the Court of Appeals and the unceitainty outcome of these claims but, based on redemption on September 2, 1977 by as to how the trial judge will the facts that so far have come to its the Company of approximately $ 63.7 interpret the law in charging the jury attention, the Company is of the million of its 10'%eries First as well as its being unable to predict opinion that the likelihood that the Mortgage Bonds due March 1, 2005.

whether or not the plaintiffs will ultimate outcome of these claims will Discovery has commenced and a have a new theory of damages or have a material adverse effect on the motion to certify the suit as a class additional facts upon which to financial condition of the Company is action is pending. The Company's predicate their claims. However, remote. General Counsel has stated that at Trial Counsel does not believe, based this early stage in the proceedings on the facts as it knows them at this Bond Redemption Suit: In 1977 a they cannot predict the outcome.

time, that the Company willlikely purported class action was brought However, the facts that have so far incur a liability that will be material against the Company alleging come to their attention do not in relation to its consolidated damages in excess of $ 9 million, indicate that the outcome of the suit financial statements. based on alleged breach of contract will have a material adverse eQ'ect on and violations of the federal the financial condition of the Company.

Alleged Discrimination Claims: In April 1976 the Company was named as the defendant in an alleged class 8. Quarterly Data (Unaudited) action. The complaint alleges patterns and practices of F<or the periods shown below, the unaudited Operating Revenues, Operating discrimination by the Company Income, Net Income and Earnings per average share of Common Stock (after against blacks and females. The dividend requirements on Prefened Stock) are as follows: Earnings complaint, seeks, among other things, per average share of injunctive relief, reimbursement for Operating Operating Net Common lost pay and benefits and damages. Quarter Ended Revenues Income Income Stock Discovery is proceeding. In (Thousands of Dollars)

September 1978 a U.S. District Court hlarch 31, 1977 ..... $ 334,589 $ 71)901 $ 42,907 $ 0.90 conditionally certified the suit as a June 30, 1977....... 307,517 45,269 16,599 0.24 class action concerning only blacks September 30, 1977 . 468,099 102,664 73,107 1.65 and trial has been set for mid-1979. December 31, 1977 .. 354,379 79,074 47,825 1.02 In November 1977 a Commissioner March 31, 1978 ..... 371,901 74,655 48,679 1.04 June 30, 1978....... 371,185 57,241 29,594 0.57 of the Equal Employment September 30, 1978 . 496,785 104,304 76,774 1.73 Opportunity Commission filed a December 31, 1978 .. 407,365 82,597 56,194 1.20 charge of unlawful labor employment practices against the Company, In the opinion of the Company all adjustments (consisting of only normal certain labor organizations and a recurring accruals) necessary to present a fair statement of such amounts for joint Company/labor organization such periods have been made.

committee. Alleged discriminatory The Company is of the opinion that comparisons of the most recent quarter practices charged against the to the quarter immediately preceding it may not give a true indication of Company are substantially similar to overall trends and changes in the Company's operations and may be those described in the preceding misleading to an understanding of the results of operations as the revenues paragraph except that the charge and expenses of the Company are subject to periodic fluctuations due to concerns Spanish-surnamed changes in weather conditions, customer usage, number of customers and the Americans, blacks and females. proportion of generation by various fuels.

In June 1978 the Company and a labor organization were named as 9. Replacement Cost Data (Unaudited) defendants in an alleged class action filed in U.S. District Court for the One result of inflation experienced by the Company in recent years is Middle District of Florida. Alleged replacement costs of productive capacity that are significantly greater than discriminatory practices charged the historical costs of such assets reported in the Company's financial against the Company are similar to statements. The Company's annual report to the Securities and Exchange those described in the preceding two Commission for 1978 on F<orm 10-K contains specific replacement cost paragraphs. information and is available upon request.

35

Stockholder Information Annual Meeting therefore have direct interest in their FPL holdings, invested an The 1979 Annual Meeting of FPL business activities of the Company. additional $ 466,000 during 1978 alone.

shareholders will be in Port St. Information and enrollment cards Common Stock Data may be obtained by writing The First Lucie, Fla., on 'Ibes., April 17, at 10 a.m. Notices of the meeting, together Principal market for FPL common National Bank of Boston, Automatic with a proxy statement and form of stock is the New York Stock Dividend Reinvestment and Cash Exchange. Ticker symbol is FPL. Stock Purchase Plan, P.O. Box 1681, proxy, will be mailed to shareholders The following table indicates the on or about March 18, at which, time Boston, Mass. 02102.

proxies will be requested by the range (high/low) of trading prices for the past two years: Investor Communications management.

The 1978 gathering at Ravine State 1978 1977 Florida Hi-Lights, a newsletter Gardens in Palatka attracted a prepared especially for shareholders, First Quarter 27V4/23s/s 28 /23'/s is published several times each year turnout of 274 persons. During the Second Quarter 27~/s/24'5 27~/s/21% and sent to holders of common and meeting, shareholders re-elected 10 Third Quarter '9%/267/s 28%/24%

directors to the Board and ratified preferred stock.

Fourth Quarter 285/25s/4 27%/24%

the selection of Deloitte Haskins & Statistical Supplement Sells as auditors. Proposals to restore Transfer agent, registrar and A Financial & Statistical Report limited pre-emptive rights and to dividend disbursing agent for the containing comprehensive data for furnish transcripts of the Annual stock is The First National Bank of the years 1968-78 is published for Meeting were defeated. Boston, Shareholder Services professionals in the investment Nearly 86 percent of outstanding Division, P.O. Box 644, Boston, community and is available to others shares were voted. Mass. 02102. Telephone 617/434-6562. as a supplement to this report.

Form 10-K for 1978 Dividends Requests for copies should be sent to A copy of the Company's Annual Stockholder Information For many years, FPL's policy has Department, Florida Power & Light Report on Form 10-K filed with the been to share gains in earnings with Securities and Exchange Commission Company, P. 0. Box 629100, Miami, stockholders in the form of increased Fla. 88152.

is available, without charge, to cash dividends. Accordingly, interested stockholders. Requests dividends paid per share have Inquiries must be in writing and should be increased every year since FPL Inquiries concerning the Company's addressed to J.E. Moore, Director of began quarterly payments in 1946. activities, including requests for Stockholder Information, Florida The following table indicates copies of F~PL's Quarterly Power & Light Company, P.O. Box dividends paid on common stock in Consolidated Financial Statements, 529100, Miami, Fla. 38152. the past two years: should be directed to Stockholder.

Board of Directors Meetings 1978 1977 Information Department, Florida Regular meetings of the Board of Power & Light Company, P.O. Box First Quarter $ 0.44 $ 0.39 529100, Miami, Fla. 33152. Telephone Directors are scheduled on Monday Second Quarter $ 0.52 $ 0.39 305/552-4046.

following the second Friday of each Third Quarter $ 0.52 $ 0.44 month. The sessions generally are in Fourth Quarter $ 0.52 $ 0.44 Auditors the Company's principal offices at Deloitte Haskins & Sells Miami, Fla. On Feb. 12, 1979, the Board Certified Public Accountants declared the regular quarterly 1 Southeast Third Avenue Company Ownership dividend of 62 cents, the 133rd At the end of 1978, the Company had Miami, Fla. 33131 consecutive payment. It is payable 40,314,552 shares of common stock March 15 to holders of record as of General Counsel outstanding, owned by 32,089 holders February 28. Steel Hector & Davis of record. These shareholders are Southeast First National individuals or institutions, such as Dividend Reinvestment Plan Bank Building foundations, insurance companies and Shareholders may elect to have their Miami, Fla. 33131 pension funds, which in turn hold dividends automatically reinvested in large blocks of stock on behalf of still additional FPL shares through a Principal Company Offices more individuals. low-cost Automatic Dividend Florida Power & Light Company As a result of direct purchases or Reinvestment Service offered by the 9250 W. Flagler St.

of shares acquired through the FPL First National Bank of Boston. P.O. Box 529100 Thrift and Employee Stock Participants in the plan also have the Miami, Fla. 33152 Ownership Plans, nearly all option of making supplemental cash Telephone 305/652-3552 employees maintain ownership and deposits of up to $ 8,000 per quarter for investment. Shareholders, using this convenient method of increasing

Directors Principal Officers

'M.P. Anthony Marshall McDonald West Palm Beach, Florida. President, Chairman of the Board and Chief Executive Officer Anthony's Inc., a chain of ladies ready-to-wear retail stores. Serving since 1977. John J. Hudiburg President and Chief Operating Officer George F. Bennett E.A. Adomat Boston, Massachusetts. President and Executive Vice President, Operations Chief Executive Officer of State Street Investment Corporation and of Federal F.E. Autrey Anthony Bennett Executive Vice President, Commercial Street Fund Inc., investment companies; Managing Partner of State Street H.L. Allen Research and Management Company. Senior Vice President Serving since 1970. L.C. Hunter Senior Vice President

'David B1umberg Miami, Florida. President, Planned J.G. Spencer Jr.

Senior Vice President 9,

)

Development Corporation, a building and development firm. Serving since 1973. R.lU. Wall Jr.

Senior Vice President and B iumberg Davis Jean McArthur Davis Assistant Secretary Miami, Florida. President, McArthur D.K. Baldwin Dairy Inc. and McArthur Farms Inc., Vice President, Corporate Services engaged in the production, processing, distribution and sale of dairy products.

E.L. Bivans Vice President, System Planning Serving since 1977.

Michael C. Cook John J. Hudiburg Vice President, Fuel Resources Miami, Florida. President of the and Corporate Development Company since Jan. 15, 1979. Formerly H.J. Dager Jr.

udiburg Knight Executive Vice President, Finance. Vice President, Engineering, Serving since January 1979. Project Management and Construction Robert B. Knight Tracy Danese Vice President, Public Affairs Coral Gables, Florida. Chairman, National Food Services Inc., a restaurant J.H. Francis Jr.

Vice President, management company. Serving since 1977.

Corporate Communications John M. McCarty R.J. Gardner Fort Pierce, Florida. Attorney. Serving Vice President, Strategic Planning since 1973.

McCarty McDonald W.M. Klein tMarshall McDonald Vice President, Economic Development Miami, Florida. Chairman of the Board of A.D. Schmidt Directors of the Company. Formerly Vice President, Power Resources President and Chairman of Meetings of R.E. 'Ihllon the Board. Serving since 1971. Vice President, Divisions t'Edgar H. Price Jr. R.E. Uhrig Bradenton, Florida. President and Vice President, Advanced Systems Director of The Price Company Inc., and Technology Price Wadsworth consultant firm. Serving since 1972. J.L. Howard

'lh.asurer tLewis E. Wadsworth Bunnell, Florida. Engaged in the forestry Astrid Pfeiffer Secretary and cattle businesses. Serving since 1970.

H.P. williams Jr.

Gene A. Whiddon Comptroller Fort Lauderdale, Florida. President, (Photographs appear on pages 2-18.)

Causeway Lumber Company Inc.,

engaged in retail lumber and business H'

materials. Serving since January 1979.

Whiddon t Executive Committee

'udit Committee

ADE~-'

LOI1 ICN k7wtlt ~ LCM'OMEY BULK RATE .

9260 West Flagler Street U.S. POSTAGE P.O. Box 629100 PAID Miami, Florida 33162 MIAMI,FLA.

PERMIT NO. V6