UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Exact name of Registrants as specified in their charters,
Commission address of principal executive offices and IRS Employer
File Number Registrants' telephone number Identification Number
1-8841 FPL GROUP, INC. 59-2449419
1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
State or other jurisdiction of incorporation or organization: Florida
Name of exchange
on which registered
Securities registered pursuant to Section 12(b) of the Act:
FPL Group, Inc.: Common Stock, $0.01 Par Value and
Preferred Share Purchase Rights New York Stock Exchange
Florida Power & Light Company: None
Securities registered pursuant to Section 12(g) of the Act:
FPL Group, Inc.: None
Florida Power & Light Company: Preferred Stock, $100 Par Value
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) have been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrants' knowledge in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock of FPL Group, Inc. held by non-
affiliates as of January 31, 2001 (based on the closing market price on the
Composite Tape on January 31, 2001) was $10,180,979,540 (determined by
subtracting from the number of shares outstanding on that date the number
of shares held by directors and officers of FPL Group, Inc.).
There was no voting stock of Florida Power & Light Company held by non-
affiliates as of January 31, 2001.
The number of shares outstanding of each class of FPL Group, Inc. common
stock, as of the latest practicable date: Common Stock, $0.01 Par Value,
outstanding at January 31, 2001: 175,819,435 shares
As of January 31, 2001, there were issued and outstanding 1,000 shares of
Florida Power & Light Company's common stock, without par value, all of
which were held, beneficially and of record, by FPL Group, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of FPL Group, Inc.'s Proxy Statement for the 2001 Annual Meeting
of Shareholders are incorporated by reference in Part III hereof.
______________________________
This combined Form 10-K represents separate filings by FPL Group, Inc. and
Florida Power & Light Company. Information contained herein relating to an
individual registrant is filed by that registrant on its own behalf.
Florida Power & Light Company makes no representations as to the
information relating to FPL Group, Inc.'s other operations.
DEFINITIONS
Acronyms and defined terms used in the text include the following:
Term Meaning
capacity clause Capacity cost recovery clause
CMP Central Maine Power Company
charter Restated Articles of Incorporation, as amended, of FPL Group or FPL, as
the case may be
Coalition The Coalition for Equitable Rates
conservation clause Energy conservation cost recovery clause
DOE U.S. Department of Energy
EMF Electric and magnetic fields
EMT Energy Marketing & Trading
Entergy Entergy Corporation
environmental clause Environmental compliance cost recovery clause
FAS Financial Accounting Standards No.
FDEP Florida Department of Environmental Protection
FERC Federal Energy Regulatory Commission
FIPUG The Florida Industrial Power Users Group
FGT Florida Gas Transmission Company
FMPA Florida Municipal Power Agency
FPL Florida Power & Light Company
FPL Energy FPL Energy, LLC
FPL FiberNet FPL FiberNet, LLC
FPL Group FPL Group, Inc.
FPL Group Capital FPL Group Capital Inc
FPSC Florida Public Service Commission
fuel clause Fuel and purchased power cost recovery clause
GridFlorida GridFlorida LLC
Holding Company Act Public Utility Holding Company Act of 1935, as amended
IBEW International Brotherhood of Electrical Workers
JEA Jacksonville Electric Authority
kv Kilovolt
kwh Kilowatt-hour
Management's Discussion Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
mortgage FPL's Mortgage and Deed of Trust dated as of January 1, 1944, as
supplemented and amended
mw Megawatt(s)
Note Note to Consolidated Financial Statements
NRC U.S. Nuclear Regulatory Commission
Nuclear Waste Policy Act Nuclear Waste Policy Act of 1982
O&M expenses Other operations and maintenance expenses in the Consolidated
Statements of Income
PMI FPL Energy Power Marketing, Inc.
Public Counsel State of Florida Office of Public Counsel
PURPA Public Utility Regulatory Policies Act of 1978, as amended
qualifying facilities Non-utility power production facilities meeting the requirements of a
qualifying facility under the PURPA
Reform Act Private Securities Litigation Reform Act of 1995
ROE Return on common equity
RTOs Regional transmission organizations
SJRPP St. Johns River Power Park
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In connection with the safe harbor provisions of the Reform Act, FPL Group
and FPL (collectively, the Company) are hereby filing cautionary statements
identifying important factors that could cause the Company's actual results
to differ materially from those projected in forward-looking statements (as
such term is defined in the Reform Act) made by or on behalf of the Company
which are made in this combined Form 10-K, in presentations, in response to
questions or otherwise. Any statements that express, or involve
discussions as to expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of
words or phrases such as will likely result, are expected to, will
continue, is anticipated, estimated, projection, outlook) are not
statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties. Accordingly,
any such statements are qualified in their entirety by reference to, and
are accompanied by, the following important factors that could cause the
Company's actual results to differ materially from those contained in
forward-looking statements made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date
on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess
the impact of each such factor on the business or the extent to which any
factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statement.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include changes in laws or regulations, changing governmental policies and
regulatory actions, including those of the FERC, the FPSC, the PURPA, the
Holding Company Act and the NRC, with respect to allowed rates of return
including but not limited to ROE and equity ratio limits, industry and rate
structure, operation of nuclear power facilities, acquisition, disposal,
depreciation and amortization of assets and facilities, operation and
construction of plant facilities, recovery of fuel and purchased power
costs, decommissioning costs, and present or prospective wholesale and
retail competition (including but not limited to retail wheeling and
transmission costs).
The business and profitability of the Company are also influenced by
economic and geographic factors including political and economic risks,
changes in and compliance with environmental and safety laws and policies,
weather conditions (including natural disasters such as hurricanes),
population growth rates and demographic patterns, competition for retail
and wholesale customers, availability, pricing and transportation of fuel
and other energy commodities, market demand for energy from plants or
facilities, changes in tax rates or policies or in rates of inflation or in
accounting standards, unanticipated delays or changes in costs for capital
projects, unanticipated changes in operating expenses and capital
expenditures, capital market conditions, competition for new energy
development opportunities and legal and administrative proceedings (whether
civil, such as environmental, or criminal) and settlements.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results, and are beyond the control of the
Company.
PART I
Item 1. Business
FPL GROUP
FPL Group is a public utility holding company, as defined in the Holding
Company Act. It was incorporated in 1984 under the laws of Florida. FPL
Group's principal subsidiary, FPL, is engaged in the generation,
transmission, distribution and sale of electric energy. FPL Group Capital,
a wholly-owned subsidiary of FPL Group, holds the capital stock and
provides funding for the operating subsidiaries other than FPL. The
business activities of these operating subsidiaries primarily consist of
FPL Energy's independent power projects. For financial information
regarding segments, see Note 14. At December 31, 2000, FPL Group and its
subsidiaries employed 10,852 persons.
FPL Group is exempt from substantially all of the provisions of the Holding
Company Act on the basis that FPL Group's and FPL's businesses are
predominantly intrastate in character and carried on substantially in a
single state in which both are incorporated.
In July 2000, FPL Group and Entergy announced a proposed merger. FPL Group
and Entergy shareholders approved the proposed merger in December 2000.
The merger will create a company with capabilities and resources to succeed
and grow in the competitive energy marketplace. The new company will be a
registered public utility holding company under the Holding Company Act.
The companies' objective is to complete the merger by the end of 2001.
However, completion of the merger and the ultimate closing date depend upon
meeting a number of conditions, including the receipt of applicable
regulatory approvals. For additional information concerning the proposed
merger, see Note 2.
FPL OPERATIONS
General. FPL was incorporated under the laws of Florida in 1925 and is a
wholly-owned subsidiary of FPL Group. FPL supplies electric service
throughout most of the east and lower west coasts of Florida with a
population of more than seven million. During 2000, FPL served
approximately 3.8 million customer accounts. Operating revenues were as
follows:
Years Ended December 31,
2000 1999 1998
(millions)
Residential .......................... $3,504 $3,357 $3,580
Commercial ........................... 2,299 2,226 2,239
Industrial ........................... 181 190 197
Other, including the provision for
retail rate refund and the net
change in unbilled revenues ........ 377 284 350
$6,361 $6,057 $6,366
Regulation. The retail operations of FPL provided approximately 99% of
FPL's operating revenues for 2000. Such operations are regulated by the
FPSC which has jurisdiction over retail rates, service territory, issuances
of securities, planning, siting and construction of facilities and other
matters. FPL is also subject to regulation by the FERC in various
respects, including the acquisition and disposition of facilities,
interchange and transmission services and wholesale purchases and sales of
electric energy.
FPL's nuclear power plants are subject to the jurisdiction of the NRC. NRC
regulations govern the granting of licenses for the construction and
operation of nuclear power plants and subject such power plants to
continuing review and regulation.
Federal, state and local environmental laws and regulations cover air and
water quality, land use, power plant and transmission line siting, EMF from
power lines and substations, noise and aesthetics, solid waste and other
environmental matters. Compliance with these laws and regulations
increases the cost of electric service by requiring, among other things,
changes in the design and operation of existing facilities and changes or
delays in the location, design, construction and operation of new
facilities. See Item 3. Legal Proceedings. Capital expenditures required
to comply with environmental laws and regulations for 2001-03 are included
in FPL's projected capital expenditures set forth in Item 1. Business - FPL
Operations - Capital Expenditures and are not material.
FPL currently holds 172 franchise agreements with varying expiration dates
to provide electric service in various municipalities and counties in
Florida. FPL considers its franchises to be adequate for the conduct of its
business.
Retail Ratemaking. The underlying concept of utility ratemaking is to set
rates at a level that allows the utility the opportunity to collect from
customers total revenues (revenue requirements) equal to its cost of
providing service, including a reasonable rate of return on invested
capital. To accomplish this, the FPSC uses various ratemaking mechanisms.
The basic costs of providing electric service, other than fuel and certain
other costs, are recovered through base rates, which are designed to
recover the costs of constructing, operating and maintaining the utility
system. These basic costs include O&M expenses, depreciation and taxes, as
well as a return on FPL's investment in assets used and useful in providing
electric service (rate base). The rate of return on rate base approximates
FPL's weighted cost of capital, which includes its costs for debt and
preferred stock and an allowed ROE. The FPSC monitors FPL's ROE through a
surveillance report that is filed monthly by FPL with the FPSC. The FPSC
does not provide assurance that the allowed ROE will be achieved. Base
rates are determined in rate proceedings which occur at irregular intervals
at the initiative of FPL, the FPSC, Public Counsel or a substantially
affected party.
FPL's last full rate proceeding was in 1984. In 1999, the FPSC approved a
three-year agreement among FPL, Public Counsel, FIPUG and Coalition regarding
FPL's retail base rates, authorized regulatory ROE, capital structure and
other matters. The agreement, which became effective April 15, 1999,
provides for a $350 million reduction in annual revenues from retail base
operations allocated to all customers on a cents-per-kilowatt-hour basis.
Additionally, the agreement sets forth a revenue sharing mechanism for each
of the twelve month periods covered by the agreement, whereby revenues from
retail base operations in excess of a stated threshold are required to be
shared on the basis of two-thirds refunded to retail customers and one-third
retained by FPL. Revenues from retail base operations in excess of a second
threshold are required to be refunded 100% to retail customers.
The refund thresholds are as follows:
Twelve Months Ended
April 14,
2000 2001 2002
(millions)
66 2/3% to customers ....................... $3,400 $3,450 $3,500
100% to customers .......................... $3,556 $3,606 $3,656
The agreement allows for special depreciation of up to $100 million, at FPL's
discretion, in each year of the three-year agreement period to be applied to
nuclear and/or fossil generating assets. This new depreciation program
replaced a revenue-based special amortization program. See Note 1 - Revenue
and Rates and Electric Plant, Depreciation and Amortization.
The agreement also lowered FPL's authorized regulatory ROE range to 10% -
12%. During the term of the agreement, the achieved ROE may from time to
time be outside the authorized range, and the revenue sharing mechanism
described above is specified to be the appropriate and exclusive mechanism to
address that circumstance. For purposes of calculating ROE, the agreement
establishes a cap on FPL's adjusted equity ratio of 55.83%. The adjusted
equity ratio reflects a discounted amount for off-balance sheet obligations
under certain long-term purchased power contracts. Finally, included in the
agreement are provisions which limit depreciation rates and accruals for
nuclear decommissioning and fossil dismantlement costs to currently approved
levels and limit amounts recoverable under the environmental clause during
the term of the agreement.
The agreement states that Public Counsel, FIPUG and Coalition will neither
seek nor support any additional base rate reductions during the three-year
term of the agreement unless such reduction is initiated by FPL. Further,
FPL agreed to not petition for any base rate increases that would take
effect during the term of the agreement.
Fuel costs are recovered through levelized charges per kwh established
pursuant to the fuel clause and totaled $2.0 billion in 2000. These
charges are calculated annually based on estimated fuel costs and estimated
customer usage for the following year, plus or minus a true-up adjustment
to reflect the variance of actual costs and usage from the estimates used
in setting the fuel adjustment charges for prior periods. An adjustment to
the levelized charges may be approved during the course of a year to
reflect a projected variance based on actual costs and usage. Due to
higher than projected oil and natural gas prices in 2000, the FPSC approved
higher per kwh charges effective June 15, 2000. Later in the year, the
FPSC approved FPL's annual fuel filing for 2001, which included an estimate
of under-recovered fuel costs in 2000 of $518 million. FPL will recover
the $518 million over a two-year period beginning January 2001, rather than
the typical one-year time frame. FPL has also agreed that instead of
receiving a return at the commercial paper rate on this unrecovered portion
through the fuel clause, the under-recovery will be included as a rate base
regulatory asset over the two-year recovery period. Actual under-recovered
fuel costs through December 31, 2000 exceeded the estimates made earlier in
the year by $78 million, and in February 2001, FPL requested the FPSC to
approve a fuel adjustment increase effective April 2001 to recover the
additional $78 million of under-recovered fuel costs. See Note 1 -
Regulation.
Capacity payments to other utilities and generating companies for purchased
power are recovered through the capacity clause and base rates. In 2000,
$455 million was recovered through the capacity clause. Costs associated
with implementing energy conservation programs totaled $80 million in 2000
and are recovered through the conservation clause. Costs of complying with
federal, state and local environmental regulations enacted after April 1993
totaled $12 million in 2000 and are recovered through the environmental
clause to the extent not included in base rates. The new rate agreement
limits recovery under this clause to $12.8 million in 2000 and $6.4 million
in 2001, with no further amounts recoverable during the remaining term of
the agreement.
The FPSC has the authority to disallow recovery of costs that it considers
excessive or imprudently incurred. Such costs may include O&M expenses,
the cost of replacing power lost when fossil and nuclear units are
unavailable and costs associated with the construction or acquisition of
new facilities.
Competition. The electric utility industry is facing increasing
competitive pressure. FPL currently faces competition from other suppliers
of electrical energy to wholesale customers and from alternative energy
sources and self-generation for other customer groups, primarily industrial
customers. In 2000, operating revenues from wholesale and industrial
customers combined represented approximately 4% of FPL's total operating
revenues. A number of potential merchant plants have been announced in
Florida over the past several years. Five of these announced merchant
plants totaling 3,700 mw have presented submissions to seek a determination
of need to the FPSC. In March 1999, the FPSC approved one of the petitions
for a power plant to be constructed within FPL's service territory. FPL,
along with other Florida utilities, appealed the decision to the Florida
Supreme Court. In April 2000, the Florida Supreme Court upheld arguments by
FPL and other Florida utilities and ruled that under current Florida law the
FPSC is not authorized to grant a determination of need for a proposed power
plant, the output of which is not fully committed to use by Florida retail
customers. In March 2001, the United States Supreme Court denied a petition
for certiorari review by one of the petitioners.
Over half of the states, other than Florida, have enacted legislation or
have state commissions that issued orders designed to deregulate the
production and sale of electricity. By allowing customers to choose their
electricity supplier, deregulation is expected to result in a shift from
cost-based rates to market-based rates for energy production and other
services provided to retail customers. Similar initiatives are also being
pursued on the federal level. Although the legislation and initiatives
vary substantially, common areas of focus include when market-based pricing
will be available for wholesale and retail customers, what existing
prudently incurred costs in excess of the market-based price will be
recoverable and whether generation assets should be separated from
transmission, distribution and other assets. It is generally believed
transmission and distribution activities would remain regulated.
In 2000, the Governor of Florida signed an executive order creating the
Energy 2020 Study Commission to propose an energy plan and strategy for
Florida. The order required that recommendations be made to the
legislature and Governor by December 1, 2001. The commission chose to
split the energy study between wholesale and retail competition. In January
2001, the commission issued an interim report containing a proposal for
restructuring Florida's wholesale market for electricity. The proposal
recommends the removal of statutory barriers to entry for merchant plants
and, according to the report, provides a transition to a "level playing
field" for all generating assets. Under the commission's proposal,
investor-owned utilities such as FPL would establish, and transfer their
generating assets to, affiliated exempt wholesale generators, which would
also construct and operate new generating assets. The investor-owned load-
serving utilities, such as FPL, would acquire energy resources through
competitive bidding, negotiated contracts or from the short-term (spot)
market. Purchases from affiliated exempt wholesale generators would be
pursuant to a competitive bidding process. The proposal includes a number
of features, including a three-year retail base rate freeze. The proposal
may be addressed in the next legislative session which takes place in March
through May 2001. In addition, the FERC has jurisdiction over potential
changes which could affect competition in wholesale transactions. The
commission will now consider recommendations for the retail market.
In 1999, the FERC issued its final order on RTOs. RTOs, under a variety of
structures, provide for the independent operation of transmission systems
for a given geographic area. The final order establishes guidelines for
public utilities to use in considering and/or developing plans to initiate
operations of RTOs by December 15, 2001. In October 2000, FPL, together
with Florida Power Corporation and Tampa Electric Company, filed a joint
proposal to form a fully independent for-profit transmission company that
would be responsible for the transmission lines that carry electricity from
power plants primarily within the state to substations in Florida. The
October filing was supplemented by a December 2000 filing that provided
certain operational details of the proposed RTO.
Under the proposed form of RTO, FPL would contribute its transmission
assets to an independent transmission company, GridFlorida, that would own
and operate the system. A separate corporation would be formed to own the
voting interest in and manage GridFlorida. In return for its transmission
assets, FPL would receive a non-voting ownership interest in GridFlorida,
which could be exchanged for non-voting stock of the managing corporation.
FPL would account for its interest in GridFlorida using the equity method.
In the event the basis of regulation for some or all of FPL's business
changes from cost-based regulation, existing regulatory assets and
liabilities would be written off unless regulators specify an alternative
means of recovery or refund. Further, other aspects of the business, such
as generation assets and long-term power purchase commitments, would need
to be reviewed to assess their recoverability in a changed regulatory
environment. See Management's Discussion - Results of Operations and
Note 1 - Regulation.
System Capability and Load. FPL's resources for serving summer load as of
December 31, 2000 consisted of 19,069 mw, of which 16,864 mw are from FPL-
owned facilities (see Item 2. Properties - Generating Facilities) and 2,205
mw are obtained through purchased power contracts. See Note 13 -
Contracts. FPL's reserve margin target is currently 15%. However, with
the FPSC's approval, FPL and two other Florida utilities voluntarily
adopted a 20% reserve margin target to be achieved by the summer of 2004.
The compounded annual growth rate of retail kwh sales and number of retail
customers was 3.4% and 2.1%, respectively, for the three years ended
December 31, 2000. It is anticipated that retail kwh sales will grow at a
compounded annual rate of approximately 3.7% for the next three years.
Occasionally, unusually cold temperatures during the winter months result
in significant increases in electricity usage for short periods of time.
However, customer usage and operating revenues are typically higher during
the summer months largely due to the prevalent use of air conditioning in
FPL's service territory. On January 5, 2001, FPL set an all-time record for
energy peak demand of 18,219 mw. Adequate resources were available at the
time of the peak to meet customer demand.
FPL has begun construction to repower its two existing Fort Myers steam
units and two of its three existing steam units at the Sanford site. The
repowering work at these sites is scheduled to be completed by the end of
2002. FPL will also add two new gas-fired combustion turbines at each of
its Martin site in 2001 and its Fort Myers site in 2003, and add new
combustion turbines and/or gas-fired combined cycle units from 2005-10.
These actions, plus other changes to FPL's existing units and purchased
power contracts, are expected to increase FPL's net generating capability
by approximately 7,000 mw.
Capital Expenditures. FPL's capital expenditures totaled approximately
$1.3 billion in 2000, $924 million in 1999 and $617 million in 1998.
Capital expenditures for the 2001-03 period are expected to be $3.3
billion, including $1.1 billion in 2001. This estimate is subject to
continuing review and adjustment, and actual capital expenditures may vary
from this estimate. See Management's Discussion - Liquidity and Capital
Resources.
Nuclear Operations. FPL owns and operates four nuclear units, two at
Turkey Point and two at St. Lucie. The operating licenses for Turkey Point
Units Nos. 3 and 4 expire in 2012 and 2013, respectively. The operating
licenses for St. Lucie Units Nos. 1 and 2 expire in 2016 and 2023,
respectively. FPL has informed the NRC of its intent to apply for a 20-year
license renewal for each of its four nuclear units. FPL filed the license
extension application with the NRC for the Turkey Point units in 2000 and
expects to file in 2002 for the St. Lucie units. The nuclear units are
periodically removed from service to accommodate normal refueling and
maintenance outages, repairs and certain other modifications. A condition
of the operating license for each unit requires an approved plan for
decontamination and decommissioning. FPL's current plans provide for
prompt dismantlement of the Turkey Point Units Nos. 3 and 4 with
decommissioning activities commencing in 2012 and 2013, respectively.
Current plans call for St. Lucie Unit No. 1 to be mothballed beginning in
2016 with decommissioning activities to be integrated with the prompt
dismantlement of St. Lucie Unit No. 2 beginning in 2023. See estimated
cost data in Note 1 - Decommissioning and Dismantlement of Generating
Plant.
Fuel. FPL's generating plants use a variety of fuels. See Item 2.
Properties - Generating Facilities and Note 13 - Contracts. The diverse
fuel options, along with purchased power, enable FPL to shift between
sources of generation to achieve an economical fuel mix.
FPL has four firm transportation contracts in place with FGT that together
will satisfy substantially all of the anticipated needs for natural gas
transportation. The four existing contracts expire in 2005, 2015, 2021 and
2022, respectively, but each can be extended at FPL's option. To the
extent desirable, FPL can also purchase interruptible gas transportation
service from FGT based on pipeline availability. FPL has a long-term
natural gas supply contract at market rates to provide a portion of FPL's
anticipated needs for natural gas. The remainder of FPL's gas requirements
are purchased under other contracts and in the spot market.
FPL has, through its joint ownership interest in SJRPP Units Nos. 1 and 2,
long-term coal supply and transportation contracts for a portion of the
fuel needs for those units. All of the transportation requirements and a
portion of the fuel supply needs for Scherer Unit No. 4 are covered by a
series of annual and long-term contracts. The remaining fuel requirements
will be obtained in the spot market. FPL's oil requirements are obtained
under short- and long-term contracts and in the spot market.
FPL leases nuclear fuel for all four of its nuclear units. Currently, FPL
is storing spent fuel on site pending its removal by the DOE. See Note 1 -
Nuclear Fuel. Under the Nuclear Waste Policy Act, the DOE was required to
construct permanent disposal facilities and take title to and provide
transportation and disposal for spent nuclear fuel by January 31, 1998 for
a specified fee based on current generation from nuclear power plants.
Through December 2000, FPL has paid approximately $425 million in such fees
to the DOE's Nuclear Waste Fund. The DOE did not meet its statutory
obligation for disposal of spent nuclear fuel under the Nuclear Waste
Policy Act. In 1997, a court ruled, in response to petitions filed by
utilities, state governments and utility commissions, that the DOE could
not assert a claim that its delay was unavoidable in any defense against
lawsuits by utilities seeking money damages arising out of the DOE's
failure to perform its obligations. In 1998, FPL filed a lawsuit against
the DOE seeking damages caused by the DOE's failure to dispose of spent
nuclear fuel from FPL's nuclear power plants. The matter is pending. In
the interim, FPL is investigating other alternatives to provide adequate
storage capacity for all of its spent nuclear fuel. Based on current
projections, FPL will lose its ability to store spent fuel on site for St.
Lucie Unit No. 1 in 2005 and for St. Lucie Unit No. 2 in 2007. FPL is
pursuing two approaches to expanding spent fuel storage at St. Lucie:
increase rack space in its existing spent fuel pools and/or develop the
capability to store spent fuel in dry storage containers. The dry storage
containers would be either located at the St. Lucie plant or at a facility
operated by Private Fuel Storage, LLC (PFS) in Utah. PFS is a consortium
of eight utilities seeking to license, construct and operate an independent
spent fuel storage facility. FPL joined the consortium in May 2000. PFS
has filed a license application with the NRC and hearings on the
application are ongoing.
Energy Marketing and Trading. EMT, a division of FPL, buys and sells
wholesale energy commodities, such as natural gas, oil and electric power.
EMT procures natural gas and oil for FPL's use in power generation and
sells excess gas and electric power. EMT also uses financial instruments,
such as futures and swaps, to manage the risk associated with fluctuating
commodity prices and increase the value of FPL's power generation assets.
Substantially all of the results of EMT's activities are passed through to
customers in the fuel or capacity clauses.
Electric and Magnetic Fields. In recent years, public, scientific and
regulatory attention has been focused on possible adverse health effects of
EMF. These fields are created whenever electricity flows through a power
line or an appliance. Several epidemiological (i.e., statistical) studies
have suggested a linkage between EMF and certain types of cancer, including
childhood leukemia and adult lymphoma associated with occupational
exposure; other studies have been inconclusive, contradicted earlier
studies or have shown no such linkage. Neither these epidemiological
studies nor clinical studies have produced any conclusive evidence that EMF
does or does not cause adverse health effects. In 1999, the National
Institute of Environmental Health Sciences, as the culmination of a five-
year federally supported research effort, pronounced that the scientific
support for an EMF-cancer link is marginal and concluded that the
probability that EMF exposure is truly a health hazard is small but cannot
be completely discounted.
FPL is in compliance with the FDEP regulations regarding EMF levels within
and at the edge of the rights of way for transmission lines. Future
changes in the FDEP regulations could require additional capital
expenditures by FPL for such things as increasing the right of way
corridors or relocating or reconfiguring transmission facilities. It is
not presently known whether any such expenditures will be required.
Employees. FPL had 9,838 employees at December 31, 2000. Approximately
34% of the employees are represented by the IBEW under a collective
bargaining agreement with FPL that will expire October 31, 2004.
FPL ENERGY OPERATIONS
FPL Energy. FPL Energy, a wholly-owned subsidiary of FPL Group Capital, was
formed in 1998 to aggregate FPL Group's existing unregulated energy-related
operations. FPL Energy's participation in the domestic energy market has
evolved in recent years from non-controlling equity investments to a more
active role that includes ownership, development, construction, management
and operation of many projects. FPL Energy is actively involved in
managing more than 82% of its projects, which represents approximately 98%
of the net generating capacity in which FPL Energy has an ownership
interest. This active role is expected to continue as opportunities in the
unregulated generation market are pursued. As of December 31, 2000, FPL
Energy had ownership interests in operating independent power projects with
a net generating capacity of 4,110 mw. Generation capacity spans various
regions thereby reducing seasonal volatility on a portfolio basis. The
percentage of capacity by region is 35% Northeast, 30% Central, 21% Mid-
Atlantic and 14% West. Fuel sources for these projects are 52% natural
gas, 18% oil, 15% wind, 9% hydro and 6% other.
PMI, a subsidiary of FPL Energy, buys and sells wholesale energy
commodities, such as natural gas, oil and electric power. PMI procures
natural gas and oil for FPL Energy's use in power generation and sells
excess gas and electric power. PMI also uses financial instruments, such
as futures and swaps, to manage the risk associated with fluctuating
commodity prices and increase the value of FPL Energy's power generation
assets. The results of PMI's activities are recognized in FPL Energy's
operating results.
Currently, approximately 25% of FPL Energy's net generating capacity has
qualifying facility status under the PURPA. Qualifying facility
electricity may be generated from hydropower, wind, solar, geothermal,
fossil fuels, biomass or waste-product combustion. Utilities pay for
qualifying facility electricity on the basis of each utility's avoided cost
of power. Qualifying facility status exempts the projects from the
application of the Holding Company Act, many provisions of the Federal
Power Act, and state laws and regulations respecting rates and financial or
organizational regulation of electric utilities. FPL Energy also has
ownership interest in operating independent power projects that have
received exempt wholesale generator status as defined in the Holding
Company Act. These projects represent approximately 75% of FPL Energy's
net generating capacity. Exempt wholesale generators own or operate a
facility exclusively to sell electric energy at wholesale. They are barred
from selling electricity directly to retail customers. While projects with
qualifying facility and exempt wholesale generator status are exempt from
various restrictions, each project must still comply with other federal,
state and local laws, including those regarding siting, construction,
operation, licensing and pollution abatement.
FPL Energy's capital expenditures and investments totaled approximately $507
million, $1.540 billion and $521 million in 2000, 1999 and 1998,
respectively. During 2000, FPL Energy completed the construction of a 1,000
mw combined-cycle natural gas-fired plant in Texas, of which FPL Energy owns
99%, and purchased net ownership interests in two windfarms totaling 118 mw.
FPL Energy has announced or is currently constructing eight plants that
would add approximately 2,700 mw to its generating capacity by 2003. In
1999, FPL Energy completed the purchase of CMP's non-nuclear generating
assets, primarily fossil and hydro power plants, for $866 million. See Note
10 and Management's Discussion - Liquidity and Capital Resources.
Deregulation of the electric utility market presents both opportunities and
risks for FPL Energy. Opportunities exist for the selective acquisition of
generation assets that are being divested under deregulation plans and for
the construction and operation of efficient plants that can sell power in
competitive markets. Substantially all of the energy produced in 2000 by
FPL Energy's independent power projects was sold through power sales
agreements with utilities that expire in 2001-28. As competitive wholesale
markets become more accessible to other generators, obtaining power sales
agreements will become a progressively more competitive process. FPL
Energy expects that as its existing power sales agreements expire, more of
the energy produced will be sold through shorter-term contracts and into
competitive wholesale markets.
Competitive wholesale markets in the United States continue to evolve and
vary by geographic region. Revenues from electricity sales in these
markets will vary based on the prices obtainable for energy, capacity and
other ancillary services. Some of the factors affecting success in these
markets include the ability to operate generating assets efficiently, the
price and supply of fuel, transmission constraints, competition from new
sources of generation, demand growth and exposure to legal and regulatory
changes.
FPL Energy has approximately 540 net mw in California, most of which are
wind, solar and geothermal qualifying facilities. The output of these
projects is sold predominantly under long-term contracts with California
utilities. Revenues are derived from energy payments based upon the
purchasing utilities' short run avoided cost and contractual capacity
payments. Short run avoided costs in California are currently tied to
natural gas monthly prices at the California border. Increases in natural
gas prices and an imbalance between power supply and demand, as well as
other factors, have contributed to significant increases in wholesale
electricity prices in California. Utilities in California had previously
agreed to fixed tariffs to their retail customers, which resulted in
significant under-recoveries of wholesale electricity purchase costs. The
state of California is currently considering legislation that, among other
things, provides for long-term price stability and payments to qualifying
facilities, such as those owned by FPL Energy. If enacted, the proposed
legislation is not expected to significantly change FPL Energy's economic
position.
FPL Energy had 867 employees at December 31, 2000. Approximately 16% of
the employees are represented by the IBEW under a collective bargaining
agreement with FPL Energy that expires on February 28, 2003.
OTHER FPL GROUP OPERATIONS
FPL FiberNet. FPL FiberNet sells wholesale fiber-optic network capacity to
FPL and other new and existing customers, primarily telephone, cable
television, internet and other telecommunications companies. FPL FiberNet
was formed in January 2000 to enhance the value of FPL Group's fiber-optic
network assets that were originally built to support FPL operations.
Accordingly, FPL's existing 1,600 miles of fiber-optic lines were
transferred to FPL FiberNet in January 2000. FPL FiberNet's network
interconnects major cities in Florida. During 2000, FPL FiberNet invested
approximately $90 million to expand the network within major cities
throughout Florida. Over the next three years, FPL FiberNet plans to
continue this expansion by investing a total of approximately $240 million.
EXECUTIVE OFFICERS OF THE REGISTRANTS (a)(b)
Name Age Position Effective Date
James L. Broadhead 65 Chairman of the Board and Chief Executive Officer of FPL Group ...... May 8, 1990
Chairman of the Board and Chief Executive Officer of FPL ............ January 15, 1990
Dennis P. Coyle 62 General Counsel and Secretary of FPL Group .......................... June 1, 1991
General Counsel and Secretary of FPL ................................ July 1, 1991
K. Michael Davis 54 Controller and Chief Accounting Officer of FPL Group ................ May 13, 1991
Vice President, Accounting, Controller and Chief Accounting
Officer of FPL .................................................... July 1, 1991
Paul J. Evanson 59 President of FPL .................................................... January 9, 1995
Lewis Hay, III 45 President of FPL Energy ............................................. March 13, 2000
Lawrence J. Kelleher 53 Vice President, Human Resources of FPL Group ........................ May 13, 1991
Senior Vice President, Human Resources and Corporate Services of FPL. July 1, 1999
Robert L. McGrath 47 Treasurer of FPL Group and FPL ...................................... January 11, 2000
Vice President Finance and Chief Financial Officer of FPL Energy .... June 6, 2000
Armando J. Olivera 51 Senior Vice President, Power Systems of FPL ......................... July 1, 1999
Thomas F. Plunkett 61 President, Nuclear Division of FPL .................................. March 1, 1996
Antonio Rodriguez 58 Senior Vice President, Power Generation Division of FPL ............. July 1, 1999
____________________
(a) Executive officers are elected annually by, and serve at the pleasure of, their respective boards of directors.
Except as noted below, each officer has held his present position for five years or more and his employment
history is continuous.
(b) The business experience of the executive officers is as follows: Mr. Hay was senior vice president and chief
financial officer of US Foodservice, a food service distributor, from 1991 to 1997. From 1997 to 1999 he was
executive vice president and chief financial officer of US Foodservice. From August 1999 to March 2000, Mr. Hay
was vice president, finance and chief financial officer of FPL Group and senior vice president, finance and chief
financial officer of FPL. Mr. Kelleher was senior vice president, human resources of FPL from July 1991 to July
1999. Mr. McGrath was assistant treasurer of FPL Group and FPL from February 1998 to January 2000. Prior to that,
Mr. McGrath was vice president and chief financial officer of ESI Energy, Inc. Mr. Olivera was vice president,
distribution of FPL from February 1997 to July 1999. Prior to that, Mr. Olivera was vice president, power delivery
of FPL. Mr. Rodriguez was vice president, power delivery of FPL from February 1997 to July 1999. Prior to that,
Mr. Rodriguez was vice president, operations of FPL's power generation division.
Item 2. Properties
FPL Group and its subsidiaries maintain properties which are adequate for
their operations. At December 31, 2000, the electric generating,
transmission, distribution and general facilities of FPL represent 45%,
13%, 36% and 6%, respectively, of FPL's gross investment in electric
utility plant in service.
Generating Facilities. As of December 31, 2000, FPL Group had the
following generating facilities:
No. of Net
Facility Location Units Fuel Capability (mw)(a)
FPL:
STEAM TURBINES
Cape Canaveral ...................... Cocoa, FL 2 Oil/Gas 806
Cutler .............................. Miami, FL 2 Gas 215
Fort Myers .......................... Fort Myers, FL 2 Oil 990(b)
Manatee ............................. Parrish, FL 2 Oil 1,625
Martin .............................. Indiantown, FL 2 Oil/Gas 1,640
Port Everglades ..................... Port Everglades, FL 4 Oil/Gas 1,242
Riviera ............................. Riviera Beach, FL 2 Oil/Gas 563
St. Johns River Power Park .......... Jacksonville, FL 2 Coal/Petroleum Coke 254(c)
St. Lucie ........................... Hutchinson Island, FL 2 Nuclear 1,553(d)
Sanford ............................. Lake Monroe, FL 3 Oil/Gas 914
Scherer ............................. Monroe County, GA 1 Coal 658(e)
Turkey Point ........................ Florida City, FL 2 Oil/Gas 810
2 Nuclear 1,386
COMBINED-CYCLE
Lauderdale .......................... Dania, FL 2 Gas/Oil 854
Martin .............................. Indiantown, FL 2 Gas 948
Putnam .............................. Palatka, FL 2 Gas/Oil 498
COMBUSTION TURBINES
Fort Myers .......................... Fort Myers, FL 12 Oil 636
Lauderdale .......................... Dania, FL 24 Oil/Gas 840
Port Everglades ..................... Port Everglades, FL 12 Oil/Gas 420
DIESEL UNITS
Turkey Point ........................ Florida City, FL 5 Oil 12
TOTAL ................................. 16,864
FPL Energy:
Cerro Gordo ......................... Ventura, IA 55 Wind 42
Doswell ............................. Ashland, VA 4 Gas 708
Lake Benton II....................... Ruthton, MN 138 Wind 104
Lamar Power Partners................. Paris, TX 2 Gas 990
Maine ............................... Various - ME 9 Oil 755
Maine ............................... Various - ME 89 Hydro 373
Maine ............................... Ft. Fairfield, ME 1 Wastewood 31
Marcus Hook 50 ...................... Marcus Hook, PA 1 Gas 50
West Texas Wind ..................... McCamey, TX 107 Wind 75
Vansycle ............................ Helix, OR 38 Wind 25
Investments in joint ventures ....... Various (f) Various 957
TOTAL ................................. 4,110
____________________
(a) Represents FPL's net warm weather peaking capability and FPL Energy's net ownership interest in plant capacity.
(b) Includes three gas-combustion turbines in simple cycle operation as part of a repowering project.
(c) Represents FPL's 20% ownership interest in each of SJRPP Units Nos. 1 and 2, which are jointly owned with the JEA.
(d) Excludes Orlando Utilities Commission's and the FMPA's combined share of approximately 15% of St. Lucie Unit No. 2.
(e) Represents FPL's approximately 76% ownership of Scherer Unit No. 4, which is jointly owned with the JEA.
(f) Includes two natural gas-fired units in the Northeast (295 mw) and 1,448 units at a wind project in the West (83
mw). The remaining 579 mw are provided by plants with less than 50 mw each.
Transmission and Distribution. As of December 31, 2000, FPL owned and
operated 497 substations and the following electric transmission and
distribution lines:
Nominal Overhead Lines Trench and Submarine
Voltage Pole Miles Cable Miles
500 kv ........ 1,107(a) -
230 kv ........ 2,258 31
138 kv ........ 1,440 49
115 kv ........ 671 -
69 kv ........ 166 14
Less than 69 kv 40,201 22,106
Total ......... 45,843 22,200
____________________
(a) Includes approximately 75 miles owned jointly with the JEA.
Character of Ownership. Substantially all of FPL's properties are subject
to the lien of FPL's mortgage, which secures most debt securities issued by
FPL. The principal properties of FPL Group are held by FPL in fee and are
free from other encumbrances, subject to minor exceptions, none of which is
of such a nature as to substantially impair the usefulness to FPL of such
properties. Some of FPL's electric lines are located on land not owned in
fee but are covered by necessary consents of governmental authorities or
rights obtained from owners of private property.
Item 3. Legal Proceedings
In November 1999, the Attorney General of the United States, on behalf of
the U.S. Environmental Protection Agency (EPA) brought an action in the
U.S. District Court for the Northern District of Georgia against Georgia
Power Company and other subsidiaries of The Southern Company for injunctive
relief and the assessment of civil penalties for violations of the
Prevention of Significant Deterioration (PSD) provisions and the New Source
Performance Standards (NSPS) of the Clean Air Act. Among other things, the
EPA alleges Georgia Power Company constructed and is continuing to operate
Scherer Unit No. 4, in which FPL owns a 76% interest, without obtaining a
PSD permit, without complying with NSPS requirements, and without applying
best available control technology for nitrogen oxides, sulfur dioxides and
particulate matter as required by the Clean Air Act. The suit seeks
injunctive relief requiring the installation of such technology and civil
penalties of up to $25,000 per day for each violation from an unspecified
date after August 7, 1977 through January 30, 1997, and $27,500 per day for
each violation thereafter. Georgia Power Company has filed an answer to the
complaint asserting that it has complied with all requirements of the Clean
Air Act, denying the plaintiff's allegations of liability, denying that the
plaintiff is entitled to any of the relief that it seeks and raising
various other defenses. The EPA subsequently moved for leave to file an
amended complaint that would extend the suit to other Southern Company
subsidiaries and plants and would add an allegation that unspecified major
modifications have been made at Scherer Unit No. 4 that require its
compliance with the aforementioned Clean Air Act provisions (comparable
allegations were made in the original complaint as to other plants but not
Scherer Unit No. 4). The Court has not yet ruled on whether to permit the
amendment. If amended as proposed, the EPA's demand for civil penalties
with respect to Scherer Unit No. 4 would apply to the period commencing on
an unspecified date after June 1, 1975.
In June 2000, Southern California Edison Company (SCE) filed with the FERC a
Petition for Declaratory Order (petition) asking the FERC to apply the
November 1999 decision of the U.S. Court of Appeals for the District of
Columbia Circuit in Southern California Edison Co. v. FERC, to all qualifying
small power production facilities, including the SEGS VIII and SEGS IX
facilities owned by Luz Solar Partners Ltd., VIII and Luz Solar Partners
Ltd., IX (collectively, the partnerships), indirectly owned in part by FPL
Energy. The federal circuit court of appeals' decision invalidated the
FERC's so-called essential fixed assets standard, which permitted secondary
uses of fossil fuels by qualifying small power production facilities beyond
those expressly set forth in PURPA. The petition requests that the FERC
declare that qualifying small power production facilities may not continue to
use fossil fuel under the essential fixed assets standard and that they may
be required to make refunds with respect to past usage. The partnerships
intend to file a Motion to Intervene and Protest before the FERC, vigorously
objecting to the position taken by SCE in its petition. The partnerships
have always operated the SEGS VIII and SEGS IX facilities in accordance with
orders issued by the FERC. Such orders were neither challenged nor appealed
at the time they were granted, and it is the position of the partnerships
that the orders remain in effect.
In September 2000, Karen and Bruce Alexander filed suit against FPL Group,
FPL, FPL FiberNet, FPL Group Capital and FPL Investments, Inc. in the
Circuit Court for Palm Beach County, Florida, purportedly on behalf of all
property owners in Florida whose property is encumbered by defendants'
easements and on whose property the defendants have installed or intend to
install fiber-optic cable which defendants lease, license or convey for
non-electric transmission or distribution purposes, or intend to do so.
The lawsuit alleged that FPL's easements did not permit the installation
and use of fiber-optic cable for general communication purposes. The
plaintiffs sought injunctive relief, compensatory damages, interest and
attorneys' fees. The defendants served an offer of judgment for ten
dollars on the named plaintiffs, reflecting the defendants' conclusion
that, based on an analysis of the claims and circumstances of these
individual plaintiffs, they had not sustained the injuries for which they
claimed a right to relief. In January 2001, the plaintiffs accepted this
offer of judgment, pursuant to which the suit has been dismissed with
prejudice.
In the event that FPL Group and FPL do not prevail in these suits, there
may be a material adverse effect on their financial statements. However,
FPL Group and FPL believe that they have meritorious defenses to the
pending litigation discussed above and are vigorously defending these
suits. Accordingly, the liabilities, if any, arising from these
proceedings are not anticipated to have a material adverse effect on their
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of FPL Group's shareholders was held on December 15, 2000
to approve the proposed merger between FPL Group and Entergy. Of the
176,171,034 shares of common stock outstanding on the record date of November
6, 2000, a total of 140,418,246 shares were represented in person or by
proxy, of which 136,123,939 voted for the merger, 3,042,680 against and
1,251,627 abstained.
PART II
Item 5. Market for the Registrants' Common Equity and Related Stockholder
Matters
Common Stock Data. All of FPL's common stock is owned by FPL Group. FPL
Group's common stock is traded on the New York Stock Exchange. The high
and low sales prices for the common stock of FPL Group as reported in the
consolidated transaction reporting system of the New York Stock Exchange
for each quarter during the past two years are as follows:
2000 1999
Quarter High Low High Low
First ....................................................... $48 1/4 $36 3/8 $61 15/16 $50 1/8
Second ...................................................... $50 13/16 $41 13/16 $60 1/2 $52 7/8
Third ....................................................... $67 1/8 $47 1/8 $56 11/16 $49 1/8
Fourth ...................................................... $73 $59 3/8 $52 1/2 $41 1/8
Approximate Number of Stockholders. As of the close of business on
January 31, 2001, there were 44,645 holders of record of FPL Group's common
stock.
Dividends. Quarterly dividends have been paid on common stock of FPL Group
during the past two years in the following amounts:
Quarter 2000 1999
First .......... $0.54 $0.52
Second ......... $0.54 $0.52
Third .......... $0.54 $0.52
Fourth ......... $0.54 $0.52
The amount and timing of dividends payable on FPL Group's common stock are
within the sole discretion of FPL Group's board of directors. The board of
directors reviews the dividend rate at least annually (in February) to
determine its appropriateness in light of FPL Group's financial position
and results of operations, legislative and regulatory developments
affecting the electric utility industry in general and FPL in particular,
competitive conditions and any other factors the board deems relevant. The
ability of FPL Group to pay dividends on its common stock is dependent upon
dividends paid to it by its subsidiaries, primarily FPL. There are no
restrictions in effect that currently limit FPL's ability to pay dividends
to FPL Group. See Management's Discussion - Liquidity and Capital Resources
and Note 5 - Common Stock Dividend Restrictions regarding dividends paid by
FPL to FPL Group.
Item 6. Selected Financial Data
Years Ended December 31,
2000 1999 1998 1997 1996
SELECTED DATA OF FPL GROUP
(millions, except per share amounts):
Operating revenues .................................... $ 7,082 $ 6,438 $ 6,661 $ 6,369 $ 6,037
Net income ............................................ $ 704(b) $ 697(c) $ 664 $ 618 $ 579
Earnings per share of common stock(a) ................. $ 4.14(b) $ 4.07(c) $ 3.85 $ 3.57 $ 3.33
Dividends paid per share of common stock .............. $ 2.16 $ 2.08 $ 2.00 $ 1.92 $ 1.84
Total assets .......................................... $ 15,300 $13,441 $12,029 $12,449 $12,219
Long-term debt, excluding current maturities .......... $ 3,976 $ 3,478 $ 2,347 $ 2,949 $ 3,144
Obligations of FPL under capital lease, excluding
current maturities .................................. $ 127 $ 157 $ 146 $ 186 $ 182
Preferred stock of FPL with sinking fund requirements,
excluding current maturities ........................ $ - $ - $ - $ - $ 42
Energy sales (kwh) .................................... 100,777 92,446 91,041 84,642 80,889
SELECTED DATA OF FPL (millions):
Operating revenues .................................... $ 6,361 $ 6,057 $ 6,366 $ 6,132 $ 5,986
Net income available to FPL Group...................... $ 607(b) $ 576(c) $ 616 $ 608 $ 591
Total assets .......................................... $ 12,020 $10,608 $10,748 $11,172 $11,531
Long-term debt, excluding current maturities .......... $ 2,577 $ 2,079 $ 2,191 $ 2,420 $ 2,981
Energy sales (kwh) .................................... 91,969 88,067 89,362 82,734 80,889
Energy sales:
Residential ......................................... 50.4% 50.2% 50.9% 50.6% 51.1%
Commercial .......................................... 40.2 40.3 38.8 39.8 38.6
Industrial .......................................... 4.1 4.5 4.4 4.7 4.7
Interchange power sales ............................. 3.1 3.0 3.2 2.1 2.6
Other(d) ............................................ 2.2 2.0 2.7 2.8 3.0
Total ................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Approximate 60-minute net peak served (mw)(e):
Summer season ....................................... 17,808 17,615 17,897 16,613 16,064
Winter season ....................................... 18,219 17,057 16,802 13,047 16,490
Average number of customer accounts (thousands):
Residential ......................................... 3,414 3,332 3,266 3,209 3,153
Commercial .......................................... 415 405 397 389 381
Industrial .......................................... 16 16 15 15 15
Other ............................................... 3 3 2 3 2
Total ................................................. 3,848 3,756 3,680 3,616 3,551
Average price per kwh (cents)(f) ...................... 6.86 6.87 7.13 7.37 7.39
____________________
(a) Basic and assuming dilution.
(b) Includes merger-related expenses. Excluding these expenses, FPL Group's net income and earnings per share would
have been $745 million and $4.38, respectively and FPL's net income available to FPL Group would have been $645
million.
(c) Includes effects of a gain on sale of Adelphia Communications Corporation stock, impairment loss on Maine assets,
settlement of litigation between FPL and FMPA and a gain on the redemption of a one-third ownership interest in a
cable limited partnership. Excluding these items, FPL Group's net income and earnings per share would have been
$681 million and $3.98, respectively. Excluding the settlement of litigation between FPL and FMPA, FPL's net
income available to FPL Group would have been $618 million.
(d) Includes the net change in unbilled sales.
(e) Winter season includes November and December of the current year and January to March of the following year.
(f) Excludes interchange power sales, net change in unbilled revenues, deferrals/recoveries under cost recovery clauses
and the provision for retail rate refund.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein. In the following
discussion, all comparisons are with the corresponding items in the prior
year.
Merger
In July 2000, FPL Group and Entergy announced a proposed merger. FPL Group
and Entergy shareholders approved the proposed merger in December 2000.
The merger will create a company with capabilities and resources to succeed
and grow in the competitive energy marketplace. The companies' objective
is to complete the merger by the end of 2001. However, completion of the
merger and the ultimate closing date depend upon meeting a number of
conditions, including the receipt of applicable regulatory approvals. In
2000, FPL Group recorded $67 million in merger-related expenses, of which
FPL recorded $62 million ($38 million after-tax), FPL Energy recorded $2
million ($1 million after-tax) and Corporate and Other recorded $3 million
($2 million after-tax). Merger-related expenses are likely to continue in
2001, although to a lesser degree. For additional information concerning
the proposed merger, see Note 2.
Results of Operations
FPL Group's net income and earnings per share in 2000 increased despite a
charge for merger-related expenses. This charge reduced net income and
earnings per share by $41 million and $0.24, respectively. Net income and
earnings per share in 1999 included the net effect of several nonrecurring
transactions that resulted in additional net income of $16 million, or $0.09
per share. Excluding the merger-related expenses in 2000 and the
nonrecurring items in 1999, FPL Group's net income in 2000 increased 9.4% to
$745 million, and earnings per share increased 10.1% to $4.38. The
comparable growth rates for 1999 were 2.6% and 3.4%, respectively, excluding
the effects of the nonrecurring items in 1999. In 2000, both FPL and FPL
Energy contributed to the growth, while in 1999 the growth was primarily
attributable to FPL Energy.
FPL - FPL's results for 2000 continued to benefit from customer growth,
increased electricity usage per retail customer and lower O&M expenses.
The effect of the rate reduction and higher interest charges partly offset
these positives. FPL's portion of the merger-related expenses in 2000
reduced net income by $38 million. Results for 1999 also include a
nonrecurring charge related to the settlement of litigation that reduced
net income by $42 million. FPL's net income, excluding these items in both
periods, was $645 million in 2000, up $27 million from 1999. Excluding the
litigation settlement in 1999, FPL's slight net income growth in 1999
reflected lower depreciation, customer growth and lower O&M expenses partly
offset by the effect of the rate reduction and a decline in electricity
usage per retail customer.
FPL's operating revenues consist primarily of revenues from retail base
operations, cost recovery clauses and franchise fees. Revenues from retail
base operations were $3.5 billion, $3.5 billion and $3.8 billion in 2000,
1999 and 1998, respectively. Revenues from cost recovery clauses and
franchise fees represent a pass-through of costs and do not significantly
affect net income. Fluctuations in these revenues are primarily driven by
changes in energy sales, fuel prices and capacity charges. Due to higher
than projected oil and natural gas prices in 2000, the FPSC approved higher
per kwh charges effective June 15, 2000. These additional clause revenues
resulted in higher operating revenues. Later in the year, the FPSC
approved FPL's annual fuel filing for 2001, which included an estimate of
under-recovered fuel costs in 2000 of $518 million. FPL will recover the
$518 million over a two-year period beginning January 2001, rather than the
typical one-year time frame. FPL has also agreed that instead of receiving
a return at the commercial paper rate on this unrecovered portion through
the fuel clause, the under-recovery will be included as a rate base
regulatory asset over the two-year recovery period. Actual under-recovered
fuel costs through December 31, 2000 exceeded the estimates made earlier in
the year by $78 million, and in February 2001, FPL requested the FPSC to
approve a fuel adjustment increase effective April 2001 to recover the
additional $78 million of under-recovered fuel costs. See Note 1 -
Regulation.
In 1999, the FPSC approved a three-year agreement among FPL, Public
Counsel, FIPUG and Coalition regarding FPL's retail base rates, authorized
regulatory ROE, capital structure and other matters. The agreement, which
became effective April 15, 1999, provides for a $350 million reduction in
annual revenues from retail base operations allocated to all customers on a
cents-per-kilowatt-hour basis. Additionally, the agreement sets forth a
revenue sharing mechanism for each of the twelve month periods covered by
the agreement, whereby revenues from retail base operations in excess of a
stated threshold are required to be shared on the basis of two-thirds
refunded to retail customers and one-third retained by FPL. Revenues from
retail base operations in excess of a second threshold are required to be
refunded 100% to retail customers.
The refund thresholds are as follows:
Twelve Months Ended
April 14,
2000 2001 2002
(millions)
66 2/3% to customers ................... $3,400 $3,450 $3,500
100% to customers ...................... $3,556 $3,606 $3,656
During 2000, FPL accrued approximately $60 million relating to refunds to
retail customers compared to $20 million in 1999. Furthermore, FPL refunded
in 2000 approximately $23 million, including interest, to retail customers
for the first twelve-month period under the rate agreement. At December 31,
2000 and 1999, the accrual for the revenue refund was approximately $57
million and $20 million, respectively.
The earnings effect of the annual revenue reduction was offset by lower
special depreciation. The agreement allows for special depreciation of up to
$100 million, at FPL's discretion, in each year of the three-year agreement
period to be applied to nuclear and/or fossil generating assets. Under this
new depreciation program, FPL recorded $100 million of special depreciation
in the first twelve-month period and $71 million through December 31, 2000 of
the second twelve-month period. On a fiscal year basis, FPL recorded
approximately $101 million and $70 million of special depreciation in 2000
and 1999, respectively. The new depreciation program replaced a revenue-based
special amortization program whereby special amortization in the amount of
$63 million and $378 million was recorded in 1999 and 1998, respectively.
See Note 1 - Electric Plant, Depreciation and Amortization.
The agreement also lowered FPL's authorized regulatory ROE range to 10% -
12%. During the term of the agreement, the achieved ROE may from time to
time be outside the authorized range, and the revenue sharing mechanism
described above is specified to be the appropriate and exclusive mechanism
to address that circumstance. FPL reported an ROE of 12.2%, 12.1% and
12.6% in 2000, 1999 and 1998, respectively. See Note 1 - Revenues and
Rates.
Revenues from retail base operations were flat during 2000. Customer
growth of 2.5% and a 1.9% increase in electricity usage per retail customer
was almost entirely offset by the effect of the rate reduction.
The decline in retail base revenues in 1999 was largely due to the rate
reduction. A 2.8% decline in electricity usage per retail customer, mainly
due to milder weather conditions, was almost entirely offset by the 2.0%
increase in the number of customer accounts.
FPL's O&M expenses continued to decline in 2000 due to improved
productivity. O&M expenses in 1999 also declined as a result of continued
cost control efforts partially offset by higher overhaul costs at fossil
plants.
Interest charges increased in 2000 reflecting increased debt activity to
fund FPL's capital expansion program and under-recovered fuel costs. Lower
interest charges in 1999 and 1998 reflect lower average debt balances and
the full amortization in 1998 of deferred costs associated with debt
reacquired through 1998.
The electric utility industry is facing increasing competitive pressure.
FPL currently faces competition from other suppliers of electrical energy
to wholesale customers and from alternative energy sources and self-
generation for other customer groups, primarily industrial customers. In
2000, operating revenues from wholesale and industrial customers combined
represented approximately 4% of FPL's total operating revenues. A number
of potential merchant plants have been announced in Florida over the past
several years. Five of these announced merchant plants totaling 3,700 mw
have presented submissions to seek a determination of need to the FPSC. In
March 1999, the FPSC approved one of the petitions for a power plant to be
constructed within FPL's service territory. FPL, along with other Florida
utilities, appealed the decision to the Florida Supreme Court. In April
2000, the Florida Supreme Court upheld arguments by FPL and other Florida
utilities and ruled that under current Florida law the FPSC is not
authorized to grant a determination of need for a proposed power plant, the
output of which is not fully committed to use by Florida retail customers.
In March 2001, the United States Supreme Court denied a petition for
certiorari review by one of the petitioners. See Note 1 - Regulation.
In 2000, the Governor of Florida signed an executive order creating the
Energy 2020 Study Commission to propose an energy plan and strategy for
Florida. The order required that recommendations be made to the
legislature and Governor by December 1, 2001. The commission chose to
split the energy study between wholesale and retail competition. In January
2001, the commission issued an interim report containing a proposal for
restructuring Florida's wholesale market for electricity. The proposal
recommends the removal of statutory barriers to entry for merchant plants
and, according to the report, provides a transition to a "level playing
field" for all generating assets. Under the commission's proposal,
investor-owned utilities such as FPL would establish, and transfer their
generating assets to, affiliated exempt wholesale generators, which would
also construct and operate new generating assets. The investor-owned load-
serving utilities, such as FPL, would acquire energy resources through
competitive bidding, negotiated contracts or from the short-term (spot)
market. Purchases from affiliated exempt wholesale generators would be
pursuant to a competitive bidding process. The proposal includes a number
of features, including a three-year retail base rate freeze. The proposal
may be addressed in the next legislative session which takes place in March
through May 2001. In addition, the FERC has jurisdiction over potential
changes which could affect competition in wholesale transactions. The
commission will now consider recommendations for the retail market.
In 1999, the FERC issued its final order on RTOs. RTOs, under a variety of
structures, provide for the independent operation of transmission systems
for a given geographic area. The final order establishes guidelines for
public utilities to use in considering and/or developing plans to initiate
operations of RTOs by December 15, 2001. In October 2000, FPL, together
with Florida Power Corporation and Tampa Electric Company, filed a joint
proposal to form a fully independent for-profit transmission company that
would be responsible for the transmission lines that carry electricity from
power plants primarily within the state to substations in Florida. The
October filing was supplemented by a December 2000 filing that provided
certain operational details of the proposed RTO.
Under the proposed form of RTO, FPL would contribute its transmission
assets to an independent transmission company, GridFlorida, that would own
and operate the system. A separate corporation would be formed to own the
voting interest in and manage GridFlorida. In return for its transmission
assets, FPL would receive a non-voting ownership interest in GridFlorida,
which could be exchanged for non-voting stock of the managing corporation.
FPL would account for its interest in GridFlorida using the equity method.
FPL Energy - FPL Energy's earnings continue to benefit from the significant
expansion of its independent power generation portfolio, which has more
than tripled since 1997 to over 4,100 mw at December 31, 2000. In 2000,
Lamar Power Partners, a natural gas-fired plant in the Central region
became operational and added approximately 1,000 mw to FPL Energy's
operating portfolio. In 1999, FPL Energy acquired the Maine assets, which
totaled 1,159 mw and in 1998, FPL Energy invested in two natural gas-fired
plants in the Northeast, adding 295 mw. In addition, approximately 400 mw
of wind projects have been added in the West and Central regions since
1997.
In 2000, FPL Energy's net income also benefited from increased revenues
generated by the Maine assets as a result of warmer weather and higher
prices in the Northeast during May 2000, and lower O&M expenses at Doswell.
In 1999, the effect of a $176 million ($104 million after-tax) impairment
loss (see Note 10) and higher administrative expenses to accommodate future
growth more than offset the benefits of the growing generation portfolio
and improved results from Doswell. FPL Energy's 1998 net income includes
the effect of a $35 million ($21 million after-tax) charge for the
termination of an interest rate swap agreement, which was partly offset by
the receipt of a $31 million ($19 million after-tax) settlement relating to
a contract dispute.
Deregulation of the electric utility market presents both opportunities and
risks for FPL Energy. Opportunities exist for the selective acquisition of
generation assets that are being divested under deregulation plans and for
the construction and operation of efficient plants that can sell power in
competitive markets. Substantially all of the energy produced in 2000 by
FPL Energy's independent power projects was sold through power sales
agreements with utilities that expire in 2001-28. As competitive wholesale
markets become more accessible to other generators, obtaining power sales
agreements will become a progressively more competitive process. FPL
Energy expects that as its existing power sales agreements expire, more of
the energy produced will be sold through shorter-term contracts and into
competitive wholesale markets.
Competitive wholesale markets in the United States continue to evolve and
vary by geographic region. Revenues from electricity sales in these
markets will vary based on the prices obtainable for energy, capacity and
other ancillary services. Some of the factors affecting success in these
markets include the ability to operate generating assets efficiently, the
price and supply of fuel, transmission constraints, competition from new
sources of generation, demand growth and exposure to legal and regulatory
changes.
FPL Energy has approximately 540 net mw in California, most of which are
wind, solar and geothermal qualifying facilities. The output of these
projects is sold predominantly under long-term contracts with California
utilities. Revenues are derived from energy payments based upon the
purchasing utilities' short run avoided cost and contractual capacity
payments. Short run avoided costs in California are currently tied to
natural gas monthly prices at the California border. Increases in natural
gas prices and an imbalance between power supply and demand, as well as
other factors, have contributed to significant increases in wholesale
electricity prices in California. Utilities in California had previously
agreed to fixed tariffs to their retail customers, which resulted in
significant under-recoveries of wholesale electricity purchase costs. The
state of California is currently considering legislation that, among other
things, provides for long-term price stability and payments to qualifying
facilities, such as those owned by FPL Energy. If enacted, the proposed
legislation is not expected to significantly change FPL Energy's economic
position.
Corporate and Other - Beginning in 2000, the corporate and other segment
includes FPL FiberNet's operating results. FPL FiberNet was formed in
January 2000 to enhance the value of FPL Group's fiber-optic network assets
that were originally built to support FPL operations. Accordingly, FPL's
existing 1,600 miles of fiber-optic lines were transferred to FPL FiberNet
in January 2000. In 1999, net income for the corporate and other segment
reflects a $149 million ($96 million after-tax) gain on the sale of an
investment in Adelphia Communications Corporation common stock, a $108
million ($66 million after-tax) gain recorded by FPL Group Capital on the
redemption of its one-third interest in a cable limited partnership, costs
associated with closing a retail marketing business of $11 million ($7
million after-tax) and the favorable resolution of a prior year state tax
matter of $10 million ($7 million after-tax). In 1998, net income for the
corporate and other segment reflects a $36 million ($25 million after-tax)
loss from the sale of Turner Foods Corporation's assets, the cost of
terminating an agreement designed to fix interest rates of $26 million ($16
million after-tax) and adjustments relating to prior years' tax matters,
including the resolution of a $30 million audit issue with the Internal
Revenue Service.
Liquidity and Capital Resources
FPL Group's capital requirements consist of expenditures to meet increased
electricity usage and customer growth of FPL, investment opportunities at
FPL Energy and expansion of FPL FiberNet. Capital expenditures of FPL for
the 2001-03 period are expected to be approximately $3.3 billion, including
$1.1 billion in 2001. As of December 31, 2000, FPL Energy has commitments
totaling approximately $380 million, primarily in connection with the
development and expansion of independent power projects. Subsidiaries of
FPL Group, other than FPL, have guaranteed approximately $810 million of
prompt performance payments, lease obligations, purchase and sale of power
and fuel agreement obligations, debt service payments and other payments
subject to certain contingencies. See Note 13 - Commitments.
Debt maturities of FPL Group's subsidiaries will require cash outflows of
approximately $1.0 billion ($860 million for FPL) through 2005, including
$65 million for FPL in 2001. It is anticipated that cash requirements for
capital expenditures, energy-related investments and debt maturities in
2001 will be satisfied with internally generated funds and debt issuances.
Any internally generated funds not required for capital expenditures and
current maturities may be used to reduce outstanding debt or repurchase
common stock, or for investment. Any temporary cash needs will be met by
short-term bank borrowings. In 2000, FPL had $125 million of first mortgage
bonds mature and issued $452 million of variable-rate bonds and $500
million of first mortgage bonds. The proceeds from these issuances were
used in 2000 to redeem $278 million of variable-rate bonds, $109 million of
first mortgage bonds and to repay FPL's short-term borrowings. In 2001,
$65 million was used to redeem $49 million of variable-rate bonds and $16
million of first mortgage bonds. Bank lines of credit currently available
to FPL Group and its subsidiaries aggregate $3.0 billion ($853 million for
FPL).
During 2000, FPL Group repurchased 2.6 million shares of common stock under
its share repurchase programs. Under the $570 million share repurchase
program authorized in connection with the proposed merger, 1,876,500 shares
totaling $116 million have been repurchased through January 31, 2001. See
Note 2.
FPL self-insures for damage to certain transmission and distribution
properties and maintains a funded storm reserve to reduce the financial
impact of storm losses. The balance of the storm fund reserve at December
31, 2000 and 1999 was $229 million and $216 million, respectively. Bank
lines of credit of $300 million, included in the $853 million above, are
also available if needed to provide cash for storm restoration costs. The
FPSC has indicated that it would consider future storm losses in excess of
the funded reserve for possible recovery from customers.
FPL's charter and mortgage contain provisions which, under certain
conditions, restrict the payment of dividends and the issuance of
additional unsecured debt, first mortgage bonds and preferred stock. Given
FPL's current financial condition and level of earnings, expected financing
activities and dividends are not affected by these limitations.
New Accounting Rule
Effective January 1, 2001, FPL Group and FPL adopted Financial Accounting
Standards No. (FAS) 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by FAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." For information concerning the
adoption of FAS 133/138, see Note 1 - Accounting for Derivative Instruments
and Hedging Activities.
Market Risk Sensitivity
Substantially all financial instruments and positions held by FPL Group and
FPL described below are held for purposes other than trading. Market risk
is measured as the potential loss in fair value resulting from hypothetical
reasonably possible changes in interest rates, equity prices or commodity
prices over the next year.
Interest rate risk - The special use funds of FPL include restricted funds
set aside to cover the cost of storm damage and for the decommissioning of
FPL's nuclear power plants. A portion of these funds is invested in fixed
income debt securities carried at their market value of approximately
$1.002 billion and $847 million at December 31, 2000 and 1999,
respectively. Adjustments to market value result in a corresponding
adjustment to the related liability accounts based on current regulatory
treatment. Because the funds set aside for storm damage could be needed at
any time, the related investments are generally more liquid and, therefore,
are less sensitive to changes in interest rates. The nuclear
decommissioning funds, in contrast, are generally invested in longer-term
securities, as decommissioning activities are not expected to begin until
at least 2012. At December 31, 2000 and 1999, other investments of FPL
Group include $300 million and $291 million, respectively, of investments
that are carried at estimated fair value or cost, which approximates fair
value.
The following are estimates of the fair value of FPL's and FPL Group's
long-term debt:
2000 1999
Carrying Fair Carrying Fair
Value Value Value Value
(millions)
Long-term debt of FPL (a) .................. $2,642 $2,621(b) $2,204 $2,123(b)
Long-term debt of FPL Group (a) ............ $4,041 $4,080(b) $3,603 $3,518(b)
____________________
(a) Includes current maturities.
(b) Based on quoted market prices for these or similar issues.
Based upon a hypothetical 10% decrease in interest rates, the net fair
value of the net liabilities would increase by approximately $84 million
($43 million for FPL) at December 31, 2000.
Equity price risk - Included in the special use funds of FPL are marketable
equity securities carried at their market value of approximately $511
million and $573 million at December 31, 2000 and 1999, respectively. A
hypothetical 10% decrease in the prices quoted by stock exchanges would
result in a $51 million reduction in fair value and corresponding
adjustment to the related liability accounts based on current regulatory
treatment at December 31, 2000.
Commodity price risk - EMT, a division of FPL, and PMI, a subsidiary of FPL
Energy, purchase natural gas and oil to be delivered in the future for use
as fuel in the generation of electric power. Generation, to the extent not
required for FPL's native load customers or under contract by FPL Energy,
is also sold for future delivery by EMT and PMI. To manage the risk
inherent in fluctuating commodity prices compared to the committed prices,
EMT and PMI enter into commodity-based derivative instruments (primarily
swaps and futures) to mitigate this risk. The fair value of the net
position in commodity-based derivative instruments at December 31, 2000 was
a negative $11 million for FPL Group and a negative $5 million for FPL. At
December 31, 1999, the fair value of these instruments was insignificant.
The effect of a hypothetical 40% decrease in the price of natural gas and a
hypothetical 25% decrease in the price of oil would be to change the fair
value at December 31, 2000 of these instruments to a negative $32 million
for FPL Group and a negative $23 million for FPL.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
See Management's Discussion - Market Risk Sensitivity
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS,
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY:
We have audited the consolidated financial statements of FPL Group, Inc.
and of Florida Power & Light Company, listed in the accompanying index at
Item 14(a)1 of this Annual Report (Form 10-K) to the Securities and
Exchange Commission for the year ended December 31, 2000. These financial
statements are the responsibility of the respective company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of FPL Group, Inc. and
Florida Power & Light Company at December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 9, 2001
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
Years Ended December 31,
2000 1999 1998
OPERATING REVENUES ................................................................. $7,082 $6,438 $6,661
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................................ 2,868 2,365 2,244
Other operations and maintenance ................................................. 1,257 1,253 1,284
Litigation settlement ............................................................ - 69 -
Merger-related ................................................................... 67 - -
Depreciation and amortization .................................................... 1,032 1,040 1,284
Impairment loss on Maine assets .................................................. - 176 -
Taxes other than income taxes .................................................... 618 615 597
Total operating expenses ....................................................... 5,842 5,518 5,409
OPERATING INCOME ................................................................... 1,240 920 1,252
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................................. (278) (222) (322)
Preferred stock dividends - FPL .................................................. (15) (15) (15)
Divestiture of cable investments ................................................. - 257 -
Other - net ...................................................................... 93 80 28
Total other income (deductions) - net .......................................... (200) 100 (309)
INCOME BEFORE INCOME TAXES ......................................................... 1,040 1,020 943
INCOME TAXES ....................................................................... 336 323 279
NET INCOME ......................................................................... $ 704 $ 697 $ 664
Earnings per share of common stock (basic and assuming dilution) ................... $4.14 $4.07 $3.85
Dividends per share of common stock ................................................ $2.16 $2.08 $2.00
Average number of common shares outstanding ........................................ 170 171 173
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(millions)
December 31,
2000 1999
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property ....................................... $19,642 $18,474
Nuclear fuel under capital lease - net...................................................... 127 157
Construction work in progress .............................................................. 1,253 923
Less accumulated depreciation and amortization ............................................. (11,088) (10,290)
Total property, plant and equipment - net ................................................ 9,934 9,264
CURRENT ASSETS:
Cash and cash equivalents .................................................................. 129 361
Customer receivables, net of allowances of $7 each ......................................... 637 482
Other receivables .......................................................................... 246 61
Materials, supplies and fossil fuel inventory - at average cost ............................ 370 343
Deferred clause expenses ................................................................... 337 54
Other ...................................................................................... 62 72
Total current assets ..................................................................... 1,781 1,373
OTHER ASSETS:
Special use funds of FPL ................................................................... 1,497 1,352
Other investments .......................................................................... 651 611
Other ...................................................................................... 1,437 841
Total other assets ....................................................................... 3,585 2,804
TOTAL ASSETS ................................................................................. $15,300 $13,441
CAPITALIZATION:
Common shareholders' equity ................................................................ $ 5,593 $ 5,370
Preferred stock of FPL without sinking fund requirements ................................... 226 226
Long-term debt ............................................................................. 3,976 3,478
Total capitalization ..................................................................... 9,795 9,074
CURRENT LIABILITIES:
Commercial paper ........................................................................... 1,158 339
Current maturities of long-term debt ....................................................... 65 125
Accounts payable ........................................................................... 564 407
Customers' deposits ........................................................................ 254 284
Accrued interest and taxes ................................................................. 146 182
Deferred clause revenues ................................................................... 70 116
Other ...................................................................................... 506 417
Total current liabilities ................................................................ 2,763 1,870
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes .......................................................... 1,378 1,079
Deferred regulatory credit - income taxes .................................................. 107 126
Unamortized investment tax credits ......................................................... 162 184
Storm and property insurance reserve ....................................................... 229 216
Other ...................................................................................... 866 892
Total other liabilities and deferred credits ............................................. 2,742 2,497
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ......................................................... $15,300 $13,441
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
Years Ended December 31,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................................... $ 704 $ 697 $ 664
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................ 1,032 1,040 1,284
Increase (decrease) in deferred income taxes and related regulatory credit ... 283 (198) (237)
Deferrals under cost recovery clauses ........................................ (810) 55 68
Gain on sale of cable investments ............................................ - (257) -
Impairment loss on Maine assets .............................................. - 176 -
Other - net .................................................................. (233) 50 (36)
Net cash provided by operating activities ...................................... 976 1,563 1,743
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ...................................................... (1,299) (861) (617)
Independent power investments .................................................... (507) (1,540) (521)
Return of investment and loan repayments - partnerships and joint ventures ....... 24 57 220
Proceeds from the sale of assets ................................................. 22 198 135
Other - net....................................................................... (183) (26) (12)
Net cash used in investing activities .......................................... (1,943) (2,172) (795)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ....................................................... 947 1,609 343
Retirement of long-term debt ..................................................... (515) (584) (727)
Increase (decrease) in short-term debt ........................................... 819 229 (24)
Repurchases of common stock ...................................................... (150) (116) (62)
Dividends on common stock ........................................................ (366) (355) (345)
Net cash provided by (used in) financing activities ............................ 735 783 (815)
Net increase (decrease) in cash and cash equivalents ............................... (232) 174 133
Cash and cash equivalents at beginning of year ..................................... 361 187 54
Cash and cash equivalents at end of year ........................................... $ 129 $ 361 $ 187
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest (net of amount capitalized) ............................... $ 301 $ 221 $ 308
Cash paid for income taxes ....................................................... $ 160 $ 573 $ 463
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease obligations ........................................... $ 43 $ 86 $ 34
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(millions)
Accumulated
Common Stock (a) Additional Other Common
Aggregate Paid-In Unearned Comprehensive Retained Shareholders'
Shares Par Value Capital Compensation Income (Loss) Earnings Equity
Balances, December 31, 1997..... 182 $2 $3,302 $(264) $ 1 $1,804
Net income ................... - - - - - 664
Repurchases of common stock .. (1) - (62) - - -
Dividends on common stock .... - - - - - (345)
Earned compensation under ESOP - - 13 12 - -
Other ........................ - - (1) - - -
Balances, December 31, 1998 .... 181(b) 2 3,252 (252) 1 2,123
Net income ................... - - - - - 697
Repurchases of common stock .. (2) - (116) - - -
Dividends on common stock .... - - - - - (355)
Earned compensation under ESOP - - 12 14 - -
Other comprehensive loss ..... - - - - (2) -
Other ........................ - - - (6) - -
Balances, December 31, 1999 .... 179(b) 2 3,148 (244) (1) 2,465 $5,370
Net income ................... - - - - - 704
Repurchases of common stock .. (3) - (150) - - -
Dividends on common stock .... - - - - - (366)
Earned compensation under ESOP - - 12 15 - -
Other comprehensive income ... - - - - 1 -
Other ........................ - - (2) 9 - -
Balances, December 31, 2000 .... 176(b) $2 $3,008 $(220) $ - $2,803 $5,593
____________________
(a) $0.01 par value, authorized - 300,000,000 shares; outstanding 175,766,215 and 178,554,735 at December 31, 2000 and
1999, respectively.
(b) Outstanding and unallocated shares held by the Employee Stock Ownership Plan Trust totaled 7 million, 8 million and
9 million at December 31, 2000, 1999 and 1998, respectively.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(millions)
Years Ended December 31,
2000 1999 1998
OPERATING REVENUES ................................................................ $6,361 $6,057 $6,366
OPERATING EXPENSES:
Fuel, purchased power and interchange ........................................... 2,511 2,232 2,175
Other operations and maintenance ................................................ 1,062 1,089 1,163
Litigation settlement ........................................................... - 69 -
Merger-related .................................................................. 62 - -
Depreciation and amortization ................................................... 975 989 1,249
Income taxes .................................................................... 351 327 356
Taxes other than income taxes ................................................... 600 605 596
Total operating expenses ...................................................... 5,561 5,311 5,539
OPERATING INCOME .................................................................. 800 746 827
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................................ (176) (163) (196)
Other - net ..................................................................... (2) 8 -
Total other deductions - net .................................................. (178) (155) (196)
NET INCOME ........................................................................ 622 591 631
PREFERRED STOCK DIVIDENDS ......................................................... 15 15 15
NET INCOME AVAILABLE TO FPL GROUP, INC. ........................................... $ 607 $ 576 $ 616
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
(millions)
December 31,
2000 1999
ELECTRIC UTILITY PLANT:
Plant in service ......................................................................... $18,073 $17,556
Less accumulated depreciation ............................................................ (10,919) (10,184)
Net .................................................................................... 7,154 7,372
Nuclear fuel under capital lease - net.................................................... 127 157
Construction work in progress ............................................................ 833 449
Electric utility plant - net ......................................................... 8,114 7,978
CURRENT ASSETS:
Cash and cash equivalents ................................................................ 66 -
Customer receivables, net of allowances of $7 each ....................................... 489 433
Other receivables ........................................................................ 157 36
Materials, supplies and fossil fuel inventory - at average cost .......................... 313 299
Deferred clause expenses ................................................................. 337 54
Other .................................................................................... 54 71
Total current assets ................................................................. 1,416 893
OTHER ASSETS:
Special use funds ........................................................................ 1,497 1,352
Other .................................................................................... 993 385
Total other assets ................................................................... 2,490 1,737
TOTAL ASSETS ............................................................................... $12,020 $10,608
CAPITALIZATION:
Common shareholder's equity .............................................................. $ 5,032 $ 4,793
Preferred stock without sinking fund requirements ........................................ 226 226
Long-term debt ........................................................................... 2,577 2,079
Total capitalization ................................................................. 7,835 7,098
CURRENT LIABILITIES:
Commercial paper ......................................................................... 560 94
Current maturities of long-term debt ..................................................... 65 125
Accounts payable ......................................................................... 458 379
Customers' deposits ...................................................................... 254 284
Accrued interest and taxes ............................................................... 127 137
Deferred clause revenues ................................................................. 70 116
Other .................................................................................... 408 298
Total current liabilities ............................................................ 1,942 1,433
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ........................................................ 1,084 802
Deferred regulatory credit - income taxes ................................................ 107 126
Unamortized investment tax credits ....................................................... 162 184
Storm and property insurance reserve ..................................................... 229 216
Other .................................................................................... 661 749
Total other liabilities and deferred credits ......................................... 2,243 2,077
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ....................................................... $12,020 $10,608
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
Years Ended December 31,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................... $ 622 $ 591 $ 631
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................ 975 989 1,249
Increase (decrease) in deferred income taxes and related
regulatory credit ...................................................... 262 (105) (202)
Deferrals under cost recovery clauses .................................... (810) 55 68
Other - net .............................................................. (200) (31) (28)
Net cash provided by operating activities .................................. 849 1,499 1,718
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ......................................................... (1,299) (861) (617)
Other - net .................................................................. (100) (52) (80)
Net cash used in investing activities ...................................... (1,399) (913) (697)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ................................................... 947 224 197
Retirement of long-term debt ................................................. (515) (455) (389)
Increase (decrease) in commercial paper ...................................... 466 94 (40)
Capital contributions from FPL Group, Inc. ................................... 400 - -
Dividends .................................................................... (682) (601) (640)
Net cash provided by (used in) financing activities ........................ 616 (738) (872)
Net increase (decrease) in cash and cash equivalents ........................... 66 (152) 149
Cash and cash equivalents at beginning of year ................................. - 152 3
Cash and cash equivalents at end of year ....................................... $ 66 $ - $ 152
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest ....................................................... $ 175 $ 171 $ 181
Cash paid for income taxes ................................................... $ 131 $ 503 $ 510
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease obligations ....................................... $ 43 $ 86 $ 34
Transfer of net assets to FPL FiberNet, LLC .................................. $ 100 $ - $ -
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(millions)
Common
Common Additional Retained Shareholder's
Stock (a) Paid-In Capital Earnings Equity
Balances, December 31, 1997 ......................... $1,373 $2,566 $ 875
Net income available to FPL Group, Inc. ........... - - 616
Dividends to FPL Group, Inc. ...................... - - (626)
Other ............................................. - - (1)
Balances, December 31, 1998 ......................... 1,373 2,566 864
Net income available to FPL Group, Inc. ........... - - 576
Dividends to FPL Group, Inc. ...................... - - (586)
Balances, December 31, 1999 ......................... 1,373 2,566 854 $4,793
Net income available to FPL Group, Inc. ........... - - 607
Capital contributions from FPL Group, Inc. ........ - 400 -
Dividends to FPL Group, Inc. (b) .................. - - (768)
Balances, December 31, 2000 ......................... $1,373 $2,966 $ 693 $5,032
____________________
(a) Common stock, no par value, 1,000 shares authorized, issued and outstanding.
(b) Includes transfer of net assets to FPL FiberNet, LLC totaling approximately $100 million.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2000, 1999 and 1998
1. Summary of Significant Accounting and Reporting Policies
Basis of Presentation - FPL Group, Inc.'s (FPL Group) operations are
conducted primarily through Florida Power & Light Company (FPL) and FPL
Energy, LLC (FPL Energy). FPL, a rate-regulated public utility, supplies
electric service to approximately 3.8 million customers throughout most of
the east and lower west coasts of Florida. FPL Energy invests in
independent power projects through both controlled and consolidated
entities and non-controlling ownership interests in joint ventures
accounted for under the equity method.
The consolidated financial statements of FPL Group and FPL include the
accounts of their respective majority-owned and controlled subsidiaries.
All significant intercompany balances and transactions have been eliminated
in consolidation. Certain amounts included in prior years' consolidated
financial statements have been reclassified to conform to the current
year's presentation. The preparation of financial statements requires the
use of estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities. Actual results could differ from those estimates.
Regulation - FPL is subject to regulation by the Florida Public Service
Commission (FPSC) and the Federal Energy Regulatory Commission (FERC). Its
rates are designed to recover the cost of providing electric service to its
customers including a reasonable rate of return on invested capital. As a
result of this cost-based regulation, FPL follows the accounting practices
set forth in Statement of Financial Accounting Standards No. (FAS) 71,
"Accounting for the Effects of Certain Types of Regulation." FAS 71
indicates that regulators can create assets and impose liabilities that
would not be recorded by unregulated entities. Regulatory assets and
liabilities represent probable future revenues that will be recovered from
or refunded to customers through the ratemaking process. The continued
applicability of FAS 71 is assessed at each reporting period.
In the event that FPL's generating operations are no longer subject to the
provisions of FAS 71, portions of the existing regulatory assets and
liabilities that relate to generation would be written off unless
regulators specify an alternative means of recovery or refund. Further,
other aspects of the business, such as generation assets and long-term power
purchase commitments, would need to be reviewed to assess their
recoverability in a changed regulatory environment. The principal
regulatory assets and liabilities are as follows:
December 31,
2000 1999
(millions)
Assets (included in other assets):
Unamortized debt reacquisition costs ...................................................... $ 18 $ 12
Deferred Department of Energy assessment .................................................. $ 35 $ 39
Under-recovered fuel costs (noncurrent portion) ........................................... $259 $ -
Litigation settlement (see Note 12) ....................................................... $223 $ -
Liabilities:
Deferred regulatory credit - income taxes ................................................. $107 $126
Unamortized investment tax credits ....................................................... $162 $184
Storm and property insurance reserve (see Note 13 - Insurance)............................. $229 $216
The amounts presented above exclude clause-related regulatory assets and
liabilities that are recovered or refunded over the next twelve-month
period. These amounts are included in deferred clause expenses and
deferred clause revenues in the consolidated balance sheets. At December
31, 2000, under-recovered fuel costs totaled $596 million, $337 million of
which is included in deferred clause expenses and $259 million, the
noncurrent portion, is included in other assets. At December 31, 1999,
under-recovered fuel costs totaled $54 million and are included in deferred
clause expenses. As part of the annual fuel filing for 2001, the FPSC
approved FPL's request to recover $518 million of the under-recovered fuel
costs over a two-year period beginning January 2001, rather than the
typical one-year time frame. FPL has also agreed that instead of receiving
a return at the commercial paper rate on this unrecovered portion through
the fuel and purchased power cost recovery clause (fuel clause), the under-
recovery will be included as a rate base regulatory asset over the two-year
recovery period. Actual under-recovered fuel costs through December 31,
2000 exceeded the estimates made earlier in the year by $78 million, and in
February 2001, FPL requested the FPSC to approve a fuel adjustment increase
effective April 2001 to recover the additional $78 million of under-
recovered fuel costs.
Over half of the states, other than Florida, have enacted legislation or
have state commissions that issued orders designed to deregulate the
production and sale of electricity. By allowing customers to choose their
electricity supplier, deregulation is expected to result in a shift from
cost-based rates to market-based rates for energy production and other
services provided to retail customers. Similar initiatives are also being
pursued on the federal level. Although the legislation and initiatives vary
substantially, common areas of focus include when market-based pricing will
be available for wholesale and retail customers, what existing prudently
incurred costs in excess of the market-based price will be recoverable and
whether generation assets should be separated from transmission,
distribution and other assets. It is generally believed transmission and
distribution activities would remain regulated.
In 2000, the Governor of Florida signed an executive order creating the
Energy 2020 Study Commission to propose an energy plan and strategy for
Florida. The order required that recommendations be made to the
legislature and Governor by December 1, 2001. The commission chose to split
the energy study between wholesale and retail competition. In January 2001,
the commission issued an interim report containing a proposal for
restructuring Florida's wholesale market for electricity. The proposal
recommends the removal of statutory barriers to entry for merchant plants
and, according to the report, provides a transition to a "level playing
field" for all generating assets. Under the commission's proposal,
investor-owned utilities such as FPL would establish, and transfer their
generating assets to, affiliated exempt wholesale generators, which would
also construct and operate new generating assets. The investor-owned load-
serving utilities, such as FPL, would acquire energy resources through
competitive bidding, negotiated contracts or from the short-term (spot)
market. Purchases from affiliated exempt wholesale generators would be
pursuant to a competitive bidding process. The proposal includes a number
of features, including a three-year retail base rate freeze. The proposal
may be addressed in the next legislative session which takes place in March
through May 2001. In addition, the FERC has jurisdiction over potential
changes which could affect competition in wholesale transactions. The
commission will now consider recommendations for the retail market.
In 1999, the FERC issued its final order on regional transmission
organizations (RTOs). RTOs, under a variety of structures, provide for the
independent operation of transmission systems for a given geographic area.
The final order establishes guidelines for public utilities to use in
considering and/or developing plans to initiate operations of RTOs by
December 15, 2001. In October 2000, FPL, together with Florida Power
Corporation and Tampa Electric Company, filed a joint proposal to form a
fully independent for-profit transmission company that would be responsible
for the transmission lines that carry electricity from power plants
primarily within the state to substations in Florida. The October filing
was supplemented by a December 2000 filing that provided certain
operational details of the proposed RTO.
Under the proposed form of RTO, FPL would contribute its transmission
assets to an independent transmission company, GridFlorida LLC
(GridFlorida), that would own and operate the system. A separate
corporation would be formed to own the voting interest in and manage
GridFlorida. In return for its transmission assets, FPL would receive a
non-voting ownership interest in GridFlorida, which could be exchanged for
non-voting stock of the managing corporation. FPL would account for its
interest in GridFlorida using the equity method.
Revenues and Rates - FPL's retail and wholesale utility rate schedules are
approved by the FPSC and the FERC, respectively. FPL records unbilled base
revenues for the estimated amount of energy delivered to customers but not
yet billed. Unbilled base revenues are included in customer receivables
and amounted to $137 million and $130 million at December 31, 2000 and
1999, respectively. Substantially all of the energy produced by FPL
Energy's independent power projects is sold through power sales agreements
with utilities and revenue is recorded on a delivered basis.
In 1999, the FPSC approved a three-year agreement among FPL, the State of
Florida Office of Public Counsel (Public Counsel), The Florida Industrial
Power Users Group (FIPUG) and The Coalition for Equitable Rates (Coalition)
regarding FPL's retail base rates, authorized regulatory return on common
equity (ROE), capital structure and other matters. The agreement, which
became effective April 15, 1999, provides for a $350 million reduction in
annual revenues from retail base operations allocated to all customers on a
cents-per-kilowatt-hour basis. Additionally, the agreement sets forth a
revenue sharing mechanism for each of the twelve month periods covered by
the agreement, whereby revenues from retail base operations in excess of a
stated threshold are required to be shared on the basis of two-thirds
refunded to retail customers and one-third retained by FPL. Revenues from
retail base operations in excess of a second threshold are required to be
refunded 100% to retail customers.
The refund thresholds are as follows:
Twelve Months Ended
April 14,
2000 2001 2002
(millions)
66 2/3% to customers ...................... $3,400 $3,450 $3,500
100% to customers ......................... $3,556 $3,606 $3,656
The accrual for the refund associated with the revenue sharing mechanism is
computed monthly for each twelve-month period of the rate agreement. At
the beginning of each twelve-month period, planned revenues are reviewed to
determine if it is probable that the threshold will be exceeded. If so, an
accrual is recorded each month for a portion of the anticipated refund
based on the relative percentage of year-to-date planned revenues to the
total estimated revenues for the twelve-month period, plus accrued
interest. In addition, if in any month actual revenues are above or below
planned revenues, the accrual is increased or decreased as necessary to
recognize the effect of this variance on the expected refund amount. The
annual refund (including interest) is paid to customers as a credit to
their June electric bill. As of December 31, 2000 and 1999, the accrual
for the revenue refund was approximately $57 million and $20 million,
respectively.
The agreement also lowered FPL's authorized regulatory ROE range to 10% -
12%. During the term of the agreement, the achieved ROE may from time to
time be outside the authorized range, and the revenue sharing mechanism
described above is specified to be the appropriate and exclusive mechanism
to address that circumstance. For purposes of calculating ROE, the
agreement establishes a cap on FPL's adjusted equity ratio of 55.83%. The
adjusted equity ratio reflects a discounted amount for off-balance sheet
obligations under certain long-term purchased power contracts. Finally,
the agreement established a new special depreciation program (see Electric
Plant, Depreciation and Amortization) and includes provisions which limit
depreciation rates and accruals for nuclear decommissioning and fossil
dismantlement costs to currently approved levels and limit amounts
recoverable under the environmental compliance cost recovery clause during
the term of the agreement.
The agreement states that Public Counsel, FIPUG and Coalition will neither
seek nor support any additional base rate reductions during the three-year
term of the agreement unless such reduction is initiated by FPL. Further,
FPL agreed to not petition for any base rate increases that would take
effect during the term of the agreement.
FPL's revenues include amounts resulting from cost recovery clauses,
certain revenue taxes and franchise fees. Cost recovery clauses, which are
designed to permit full recovery of certain costs and provide a return on
certain assets utilized by these programs, include substantially all fuel,
purchased power and interchange expenses, conservation- and environmental-
related expenses and certain revenue taxes. Revenues from cost recovery
clauses are recorded when billed; FPL achieves matching of costs and
related revenues by deferring the net under- or over-recovery. Any under-
recovered costs or over- recovered revenues are collected from or returned
to customers in subsequent periods. See Regulation.
Electric Plant, Depreciation and Amortization - The cost of additions to
units of utility property of FPL and FPL Energy is added to electric
utility plant. In accordance with regulatory accounting, the cost of FPL's
units of utility property retired, less net salvage, is charged to
accumulated depreciation. Maintenance and repairs of property as well as
replacements and renewals of items determined to be less than units of
utility property are charged to other operations and maintenance (O&M)
expenses. At December 31, 2000, the generating, transmission, distribution
and general facilities of FPL represented approximately 45%, 13%, 36% and
6%, respectively, of FPL's gross investment in electric utility plant in
service. Substantially all electric utility plant of FPL is subject to the
lien of a mortgage securing FPL's first mortgage bonds.
Depreciation of electric property is primarily provided on a straight-line
average remaining life basis. FPL includes in depreciation expense a
provision for fossil plant dismantlement and nuclear plant decommissioning
(see Decommissioning and Dismantlement of Generating Plant). For
substantially all of FPL's property, depreciation studies are performed and
filed with the FPSC at least every four years. In April 1999, the FPSC
granted final approval of FPL's most recent depreciation studies, which
were effective January 1, 1998. The weighted annual composite depreciation
rate for FPL's electric plant in service was approximately 4.2% for 2000,
4.3% for 1999 and 4.4% for 1998, excluding the effects of decommissioning
and dismantlement. Further, these rates exclude the special and plant-
related deferred cost amortization discussed below.
The agreement that reduced FPL's base rates (see Revenues and Rates) also
allows for special depreciation of up to $100 million, at FPL's discretion,
in each year of the three-year agreement period to be applied to nuclear
and/or fossil generating assets. Under this new depreciation program, FPL
recorded $100 million of special depreciation in the first twelve-month
period and $71 million through December 31, 2000 of the second twelve-month
period. On a fiscal year basis, FPL recorded approximately $101 million and
$70 million of special depreciation in 2000 and 1999, respectively. The new
depreciation program replaced a revenue-based special amortization program
whereby FPL recorded as depreciation and amortization expense a fixed amount
of $9 million in 1999 and $30 million in 1998 for nuclear assets. FPL also
recorded under the revenue-based special amortization program variable
amortization based on the actual level of retail base revenues compared to a
fixed amount. The variable amounts recorded in 1999 and 1998 were $54
million and $348 million, respectively. The 1998 variable amount includes,
as depreciation and amortization expense, $161 million for amortization of
regulatory assets. The remaining variable amounts were applied against
nuclear and fossil production assets. Additionally, FPL completed
amortization of certain plant-related deferred costs by recording $24 million
in 1998. These costs are considered recoverable costs and are monitored
through the monthly reporting process with the FPSC.
Nuclear Fuel - FPL leases nuclear fuel for all four of its nuclear units.
Nuclear fuel lease expense was $82 million, $83 million and $83 million in
2000, 1999 and 1998, respectively. Included in this expense was an
interest component of $9 million, $8 million and $9 million in 2000, 1999
and 1998, respectively. Nuclear fuel lease payments and a charge for spent
nuclear fuel disposal are charged to fuel expense on a unit of production
method. These costs are recovered through the fuel clause. Under certain
circumstances of lease termination, FPL is required to purchase all nuclear
fuel in whatever form at a purchase price designed to allow the lessor to
recover its net investment cost in the fuel, which totaled $127 million at
December 31, 2000. For ratemaking, these leases are classified as
operating leases. For financial reporting, the capital lease obligation is
recorded at the amount due in the event of lease termination.
Decommissioning and Dismantlement of Generating Plant - FPL accrues nuclear
decommissioning costs over the expected service life of each unit. Nuclear
decommissioning studies are performed at least every five years and are
submitted to the FPSC for approval. In January 2001, FPL filed updated
nuclear decommissioning studies with the FPSC. These studies assume prompt
dismantlement for the Turkey Point Units Nos. 3 and 4 with decommissioning
activities commencing in 2012 and 2013, respectively. Current plans call
for St. Lucie Unit No. 1 to be mothballed beginning in 2016 with
decommissioning activities to be integrated with the prompt dismantlement
of St. Lucie Unit No. 2 beginning in 2023. These studies also assume that
FPL will be storing spent fuel on site pending removal to a U.S. government
facility. The studies, which are pending FPSC approval, indicate FPL's
portion of the ultimate costs of decommissioning its four nuclear units,
including costs associated with spent fuel storage, to be $6.8 billion.
Decommissioning expense accruals included in depreciation and amortization
expense, were $85 million in each of the years 2000, 1999 and 1998. FPL's
portion of the ultimate cost of decommissioning its four units, expressed
in 2000 dollars, is currently estimated to aggregate $1.8 billion. At
December 31, 2000 and 1999, the accumulated provision for nuclear
decommissioning totaled approximately $1.5 billion and $1.4 billion,
respectively, and is included in accumulated depreciation. See Electric
Plant, Depreciation and Amortization.
Similarly, FPL accrues the cost of dismantling its fossil fuel plants over
the expected service life of each unit. Fossil fuel plant dismantlement
studies are performed and filed with the FPSC at least every four years.
Fossil fuel plant dismantlement studies were filed in September 1998 and were
effective January 1, 1999. The dismantlement studies indicated an estimated
reserve deficiency of $38 million, which was recovered through the special
amortization program. Fossil dismantlement expense was $14 million in 2000
and $17 million in each of the years 1999 and 1998, and is included in
depreciation and amortization expense. FPL's portion of the ultimate cost
to dismantle its fossil units is $482 million. At December 31, 2000 and
1999, the accumulated provision for fossil dismantlement totaled $246
million and $232 million, respectively, and is included in accumulated
depreciation. See Electric Plant, Depreciation and Amortization.
Restricted trust funds for the payment of future expenditures to
decommission FPL's nuclear units are included in special use funds of FPL.
Securities held in the decommissioning fund are carried at market value
with market adjustments resulting in a corresponding adjustment to the
accumulated provision for nuclear decommissioning. See Note 4 - Special
Use Funds. Contributions to the funds are based on current period
decommissioning expense. Additionally, fund earnings, net of taxes are
reinvested in the funds. The tax effects of amounts not yet recognized for
tax purposes are included in accumulated deferred income taxes.
Accrual for Major Maintenance Costs - Consistent with regulatory treatment,
FPL's estimated nuclear maintenance costs for each nuclear unit's next
planned outage are accrued over the period from the end of the last outage
to the end of the next planned outage. The accrual for nuclear maintenance
costs at December 31, 2000 and 1999 totaled $31 million and $42 million,
respectively, and is included in other liabilities. Any difference between
the estimated and actual costs are included in O&M expenses when known.
FPL Energy's estimated major maintenance costs for each unit's next planned
outage are accrued over the period from the end of the last outage to the
end of the next planned outage. The accrual for FPL Energy's major
maintenance costs totaled $33 million at both December 31, 2000 and 1999.
Any difference between the estimated and actual costs are included in O&M
expenses when known.
Construction Activity - In accordance with FPSC guidelines, FPL has elected
not to capitalize interest or a return on common equity on construction
projects. The cost of these construction projects is allowed as an element
of rate base. FPL Group's unregulated operations capitalize interest on
construction projects.
Storm and Property Insurance Reserve Fund (storm fund) - The storm fund
provides coverage toward storm damage costs and possible retrospective
premium assessments stemming from a nuclear incident under the various
insurance programs covering FPL's nuclear generating plants. Securities
held in the fund are carried at market value with market adjustments
resulting in a corresponding adjustment to the storm and property insurance
reserve. See Note 4 - Special Use Funds and Note 13 - Insurance. Fund
earnings, net of taxes, are reinvested in the fund. The tax effects of
amounts not yet recognized for tax purposes are included in accumulated
deferred income taxes.
Other Investments - Included in other investments is FPL Group's
participation in leveraged leases of $154 million at both December 31, 2000
and 1999. Additionally, other investments include notes receivable and
non-controlling non-majority owned interests in partnerships and joint
ventures, essentially all of which are accounted for under the equity
method. See Note 4.
Impairment of Long-Lived Assets - FPL Group evaluates on an ongoing basis
the recoverability of its assets and related intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable as described in FAS 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." See Note 10.
Cash Equivalents - Cash equivalents consist of short-term, highly liquid
investments with original maturities of three months or less.
Retirement of Long-Term Debt - The excess of FPL's reacquisition cost over
the book value of long-term debt is deferred and amortized to expense
ratably over the remaining life of the original issue, which is consistent
with its treatment in the ratemaking process. See Regulation. FPL Group
Capital Inc (FPL Group Capital) expenses this cost in the period incurred.
Income Taxes - Deferred income taxes are provided on all significant
temporary differences between the financial statement and tax bases of
assets and liabilities. FPL is included in the consolidated federal income
tax return filed by FPL Group. FPL determines its income tax provision on
the "separate return method." The deferred regulatory credit - income
taxes of FPL represents the revenue equivalent of the difference in
accumulated deferred income taxes computed under FAS 109, "Accounting for
Income Taxes," as compared to regulatory accounting rules. This amount is
being amortized in accordance with the regulatory treatment over the
estimated lives of the assets or liabilities which resulted in the initial
recognition of the deferred tax amount. Investment tax credits (ITC) for
FPL are deferred and amortized to income over the approximate lives of the
related property in accordance with the regulatory treatment.
Energy Trading - FPL and FPL Energy engage in limited energy trading
activities to optimize the value of electricity and fuel contracts, as well
as generating facilities. These activities are accounted for at market
value. There were no significant open positions in trading activities at
December 31, 2000 or 1999. Substantially all of the effects of FPL's
trading activities are reported net and passed through to customers in the
fuel clause or capacity cost recovery clause (capacity clause). FPL
Energy's trading activities are reflected gross in operating revenues and
fuel expense in the consolidated statements of income.
Accounting for Derivative Instruments and Hedging Activities - Effective
January 1, 2001, FPL Group and FPL adopted FAS 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by FAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities." The statement establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The statement
requires that changes in the derivatives' fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. In January
2001, FPL recorded an initial adjustment to record the fair values of
instruments not previously reported on the balance sheet, resulting in
derivative liabilities of $5 million, with the net offsetting amount recorded
as a deferred regulatory asset. Subsequent changes in the fair values of
FPL's derivative instruments will also be deferred in a regulatory asset or
liability until the contracts are settled. Upon settlement, any gains or
losses will be passed through the fuel and capacity clauses.
In addition to the amounts recorded by FPL, in January 2001 FPL Energy
recorded an initial adjustment to record derivative assets of $37 million,
derivative liabilities of $35 million and an increase in investments of $11
million. For those contracts where hedge accounting is applied, the adoption
of the new rules resulted in a credit of $10 million to other comprehensive
income (in stockholders' equity) for FPL Group. FPL Group recorded a $2
million loss as the cumulative effect on FPL Group's earnings of a change in
accounting principle representing the effect of those derivative instruments
for which hedge accounting was not applied.
In December 2000, the Financial Accounting Standards Board's Derivatives
Implementation Group (DIG) discussed several issues related to the power
generation industry, but did not reach conclusions on those issues. The
ultimate resolution of these issues could result in a requirement to mark
certain of FPL Group's power and fuel agreements to their fair market values
each reporting period. If these agreements are required to be treated as
derivative instruments, the new accounting would first be applied in the
quarter following final resolution of the issues. At this time, management
is unable to estimate the effects on the financial statements of any future
decisions of the Financial Accounting Standards Board or the DIG.
2. Merger
In July 2000, FPL Group and Entergy Corporation (Entergy) announced a
proposed merger. FPL Group and Entergy shareholders approved the proposed
merger in December 2000. The merger will create a company with
capabilities and resources to succeed and grow in the competitive energy
marketplace. In a tax-free, stock-for-stock exchange, each holder of FPL
Group common stock will receive one share of the new holding company for
each share of FPL Group common stock, and each holder of Entergy common
stock will receive 0.585 of a share of the new holding company for each
share of Entergy common stock. Based on the number of common shares
outstanding as of December 31, 2000, FPL Group shareholders would own 58
percent of the common equity of the new company and Entergy shareholders
would own 42 percent. FPL Group will account for the merger as an
acquisition of Entergy under the purchase method of accounting. The
companies' objective is to complete the merger by the end of 2001.
However, completion of the merger and the ultimate closing date depend upon
meeting a number of conditions, including the receipt of applicable
regulatory approvals.
The new company's board of directors, which will include James L.
Broadhead, FPL Group chairman and chief executive officer, and J. Wayne
Leonard, Entergy chief executive officer, will initially consist of 15
members, eight from FPL Group and seven from Entergy. Corporate
headquarters of the merged company will be located in Juno Beach, Florida,
while the utility group will be headquartered in New Orleans, Louisiana.
Each of the company's six utilities will continue to maintain its
headquarters at its present location. In 2000, FPL Group recorded $67
million in merger-related expenses of which FPL recorded $62 million ($38
million after-tax), FPL Energy recorded $2 million ($1 million after-tax)
and Corporate and Other recorded $3 million ($2 million after-tax).
3. Employee Retirement Benefits
FPL Group and its subsidiaries sponsor a noncontributory defined benefit
pension plan and defined benefit postretirement plans for health care and
life insurance benefits (other benefits) for substantially all employees.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations, fair value of assets and a statement of the funded
status:
Pension Benefits Other Benefits
2000 1999 2000 1999
(millions)
Change in benefit obligation:
Obligation at October 1 of prior year ...................... $1,178 $1,173 $ 335 $ 345
Service cost ............................................... 44 46 5 6
Interest cost .............................................. 77 71 22 21
Participant contributions .................................. - - 1 2
Plan amendments ............................................ 6 - - -
Actuarial (gains) losses - net ............................. (20) (38) 4 (24)
Acquisitions ............................................... - 4 - 2
Benefit payments ........................................... (80) (78) (17) (17)
Obligation at September 30 ................................... 1,205 1,178 350 335
Change in plan assets:
Fair value of plan assets at October 1 of prior year ....... 2,555 2,329 111 115
Actual return on plan assets ............................... 284 310 7 12
Participant contributions .................................. - - 1 2
Benefit payments and expenses .............................. (89) (84) (21) (18)
Fair value of plan assets at September 30 .................... 2,750 2,555 98 111
Funded Status:
Funded status at September 30 .............................. 1,545 1,377 (252) (224)
Unrecognized prior service cost ............................ (76) (89) - -
Unrecognized transition (asset) obligation ................. (93) (117) 42 45
Unrecognized (gain) loss ................................... (993) (900) 15 7
Prepaid (accrued) benefit cost at FPL Group at December 31 . $ 383 $ 271 $(195) $ (172)
Prepaid (accrued) benefit cost at FPL at December 31 ....... $ 371 $ 263 $(191) $ (168)
The following table provides the components of net periodic benefit cost
for the plans:
Pension Benefits Other Benefits
Years Ended December 31, Years Ended December 31,
2000 1999 1998 2000 1999 1998
(millions)
Service cost ................................. $ 44 $ 46 $ 45 $ 5 $ 6 $ 6
Interest cost ................................ 77 71 75 21 21 21
Expected return on plan assets ............... (172) (156) (149) (7) (7) (8)
Amortization of transition (asset) obligation. (23) (23) (23) 4 3 3
Amortization of prior service cost ........... (7) (8) (8) - - -
Amortization of losses (gains) ............... (31) (22) (21) - 1 1
Effect of Maine acquisition .................. - - - - 2 -
Net periodic (benefit) cost at FPL Group ..... $(112) $ (92) $ (81) $ 23 $ 26 $ 23
Net periodic (benefit) cost at FPL ........... $(108) $ (89) $ (80) $ 23 $ 23 $ 23
The weighted-average discount rate used in determining the benefit
obligations was 6.75% and 6.5% for 2000 and 1999, respectively. The
assumed level of increase in future compensation levels was 5.5% for all
years. The expected long-term rate of return on plan assets was 7.75% for
all years.
Based on the current discount rates and current health care costs, the
projected 2001 trend assumptions used to measure the expected cost of
benefits covered by the plans are 5.8% for persons up to age 65 and 5.4%
thereafter. The rate is assumed to decrease over the next two years to the
ultimate trend rate of 5% for all age groups and remain at that level
thereafter.
Assumed health care cost trend rates can have a significant effect on the
amounts reported for the health care plans. A 1% increase or decrease in
assumed health care cost trend rates would have a corresponding effect on
the service and interest cost components and the accumulated obligation of
other benefits of approximately $1 million and $13 million, respectively.
4. Financial Instruments
The carrying amounts of cash equivalents and commercial paper approximate
their fair values. At December 31, 2000 and 1999, other investments of FPL
Group include $300 million and $291 million, respectively, of investments
that are carried at estimated fair value or cost, which approximates fair
value. The following estimates of the fair value of financial instruments
have been made using available market information and other valuation
methodologies. However, the use of different market assumptions or methods
of valuation could result in different estimated fair values.
December 31,
2000 1999
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(millions)
Long-term debt of FPL, including current maturities .......... $2,642 $2,621(a) $2,204 $2,123(a)
Long-term debt of FPL Group, including current maturities .... $4,041 $4,080(a) $3,603 $3,518(a)
____________________
(a) Based on quoted market prices for these or similar issues.
Special Use Funds - The special use funds consist of storm fund assets
totaling $140 million and $131 million, and decommissioning fund assets
totaling $1.357 billion and $1.220 billion at December 31, 2000 and 1999,
respectively. Securities held in the special use funds are carried at
estimated fair value based on quoted market prices. The nuclear
decommissioning fund consists of approximately 40% equity securities and
60% municipal, government, corporate and mortgage- and other asset-backed
debt securities with a weighted-average maturity of approximately nine
years. The storm fund primarily consists of municipal debt securities with
a weighted-average maturity of approximately four years. The cost of
securities sold is determined on the specific identification method. The
funds had approximate realized gains of $8 million and approximate realized
losses of $15 million in 2000, $32 million and $22 million in 1999 and $24
million and $4 million in 1998, respectively. The funds had unrealized
gains of approximately $258 million and $286 million at December 31, 2000
and 1999, respectively; the unrealized losses at those dates were
approximately $4 million and $17 million. The proceeds from the sale of
securities in 2000, 1999 and 1998 were approximately $2.0 billion, $2.7
billion and $1.2 billion, respectively.
5. Common Stock
Common Stock Dividend Restrictions - FPL Group's charter does not limit the
dividends that may be paid on its common stock. As a practical matter, the
ability of FPL Group to pay dividends on its common stock is dependent upon
dividends paid to it by its subsidiaries, primarily FPL. FPL's charter and
a mortgage securing FPL's first mortgage bonds contain provisions that,
under certain conditions, restrict the payment of dividends and other
distributions to FPL Group. These restrictions do not currently limit
FPL's ability to pay dividends to FPL Group. In 2000, 1999 and 1998, FPL
paid, as dividends to FPL Group, its net income available to FPL Group on a
one-month lag basis.
Employee Stock Ownership Plan (ESOP) - The employee thrift plans of FPL
Group include a leveraged ESOP feature. Shares of common stock held by the
Trust for the thrift plans (Trust) are used to provide all or a portion of
the employers' matching contributions. Dividends received on all shares,
along with cash contributions from the employers, are used to pay principal
and interest on an ESOP loan held by FPL Group Capital. Dividends on
shares allocated to employee accounts and used by the Trust for debt
service are replaced with an equivalent amount of shares of common stock at
prevailing market prices.
ESOP-related compensation expense of approximately $22 million, $21 million
and $19 million in 2000, 1999 and 1998, respectively, was recognized based
on the fair value of shares allocated to employee accounts during the
period. Interest income on the ESOP loan is eliminated in consolidation.
ESOP-related unearned compensation included as a reduction of shareholders'
equity at December 31, 2000 was approximately $217 million, representing 7
million unallocated shares at the original issue price of $29 per share.
The fair value of the ESOP-related unearned compensation account using the
closing price of FPL Group stock as of December 31, 2000 was approximately
$538 million.
Long-Term Incentive Plan - As of December 31, 2000, approximately 9 million
shares of common stock are reserved and available for awards to officers
and employees of FPL Group and its subsidiaries under FPL Group's long-term
incentive plan. Restricted stock is issued at market value at the date of
grant, typically vests within four years and is subject to, among other
things, restrictions on transferability. Performance share awards are
typically payable at the end of a three- or four-year performance period
and are subject to risk of forfeiture if the specified performance criteria
is not met within the vesting period.
The changes in share awards under the incentive plan are as follows:
Options (a)
Restricted Performance Weighted-Average
Stock Shares (a) Number Exercise Price
Balances, December 31, 1997 .......... 219,550 442,588 - -
Granted ............................ 19,500(b) 178,518(c) - -
Paid/released ...................... - (80,920) - -
Forfeited .......................... (22,250) (29,566) - -
Balances, December 31, 1998 .......... 216,800 510,620 - -
Granted ............................ 210,100(b) 294,662(c) 1,300,000(d) $51.53
Paid/released ...................... - (78,640) - -
Forfeited .......................... (13,500) (80,027) (200,000) $51.16
Balances, December 31, 1999 .......... 413,400 646,615 1,100,000 $51.59
Granted ............................ 28,350(b) 465,614(c) 564,950(d) $39.64
Paid/released/exercised ............ (264,800) (1,038,375) (1,060,726) $49.88
Forfeited .......................... (95,700) (54,854) (212,056) $50.51
Balances, December 31, 2000 .......... 81,250 19,000 392,168(e) $39.58
____________________
(a) Performance shares and options resulted in 373,431, 252,572 and 128,443 assumed incremental shares of common stock
outstanding for purposes of computing diluted earnings per share in 2000, 1999 and 1998, respectively. These
incremental shares did not change basic earnings per share.
(b) The weighted-average grant date fair value of restricted stock granted in 2000, 1999 and 1998 was $45.55, $53.21
and $61.89 per share, respectively.
(c) The weighted-average grant date fair value of performance shares granted in 2000, 1999 and 1998 was $41.25, $61.19
and $59.19 per share, respectively.
(d) The weighted-average grant date fair value of options granted was $39.64 and $51.53 per share in 2000 and 1999,
respectively. The exercise price of each option granted in 2000 and 1999 equaled the market price of FPL Group
stock on the date of grant.
(e) Exercise prices for options outstanding as of December 31, 2000, ranged from $38.13 to $47.63 per share and had a
weighted-average remaining contractual life of 9.2 years. As of December 31, 2000, all outstanding options were
exercisable and fully vested.
FAS 123, "Accounting for Stock-Based Compensation," encourages a fair value
based method of accounting for stock-based compensation. FPL Group,
however, uses the intrinsic value based method of accounting as permitted
by the statement. Stock-based compensation expense was approximately $80
million, $13 million and $10 million in 2000, 1999 and 1998, respectively.
Stock-based compensation expense in 2000 reflects merger-related costs
associated with the change in control provisions in FPL Group's long-term
incentive plan. Compensation expense for restricted stock and performance
shares is the same under the fair value and the intrinsic value based
methods. Had compensation expense for the options been determined as
prescribed by the fair value based method, FPL Group's net income and
earnings per share would have been $696 million and $4.10 ($4.09 assuming
dilution) in 2000 and $696 million and $4.06 in 1999, respectively.
The fair value of the options granted in 2000 and 1999 were estimated on
the date of the grant using the Black-Scholes option-pricing model with a
weighted-average expected dividend yield of 3.82% and 3.81%, a weighted-
average expected volatility of 20.27% and 17.88%, a weighted-average risk-
free interest rate of 6.59% and 5.46% and a weighted-average expected term
of 10 years and 9.3 years, respectively.
Other - Each share of common stock has been granted a Preferred Share
Purchase Right (Right), at an exercise price of $120, subject to
adjustment, in the event of certain attempted business combinations. The
Rights will cause substantial dilution to a person or group attempting to
acquire FPL Group on terms not approved by FPL Group's board of directors.
6. Preferred Stock
FPL Group's charter authorizes the issuance of 100 million shares of serial
preferred stock, $0.01 par value. None of these shares is outstanding.
FPL Group has reserved 3 million shares for issuance upon exercise of
preferred share purchase rights which expire in June 2006. Preferred stock
of FPL consists of the following:(a)
December 31, 2000
Shares Redemption December 31,
Outstanding Price 2000 1999
(millions)
Cumulative, $100 Par Value, without sinking fund requirements,
authorized 15,822,500 shares:
4 1/2% Series ........................................... 100,000 $101.00 $ 10 $ 10
4 1/2% Series A ......................................... 50,000 $101.00 5 5
4 1/2% Series B ......................................... 50,000 $101.00 5 5
4 1/2% Series C ......................................... 62,500 $103.00 6 6
4.32% Series D .......................................... 50,000 $103.50 5 5
4.35% Series E .......................................... 50,000 $102.00 5 5
6.98% Series S .......................................... 750,000 $103.49(b) 75 75
7.05% Series T .......................................... 500,000 $103.52(b) 50 50
6.75% Series U .......................................... 650,000 $103.37(b) 65 65
Total preferred stock of FPL .................................. 2,262,500 $226 $226
____________________
(a) FPL's charter also authorizes the issuance of 5 million shares of subordinated preferred stock, no par value. None
of these shares is outstanding. There were no issuances or redemptions of preferred stock in 2000, 1999 and 1998.
(b) Not callable prior to 2003.
7. Debt
Long-term debt consists of the following:
December 31,
2000 1999
(millions)
FPL:
First mortgage bonds:
Maturing through 2005 - 5 3/8% to 6 7/8% (a) ............................................. $ 725 $ 350
Maturing 2008 through 2016 - 5 7/8% to 7.3% .............................................. 650 650
Maturing 2023 through 2026 - 7% to 7 3/4% ................................................ 516 516
Medium-term notes - maturing 2003 - 5.79% ................................................ 70 70
Pollution control and industrial development series -
maturing 2020 through 2027 - 6.7% to 7.5% ............................................. 41 150
Pollution control, solid waste disposal and industrial development revenue bonds -
maturing 2020 through 2029 - variable, 3.4% and 3.4% average
annual interest rate, respectively (b) ................................................. 658 483
Unamortized discount - net ................................................................. (18) (15)
Total long-term debt of FPL .............................................................. 2,642 2,204
Less current maturities ................................................................ 65 125
Long-term debt of FPL, excluding current maturities .................................... 2,577 2,079
FPL Group Capital:
Debentures:
Maturing 2004 - 6 7/8% ................................................................... 175 175
Maturing 2006 through 2009 - 7 3/8% to 7 5/8% ............................................ 1,225 1,225
Other long-term debt - maturing 2013 - 7.35% ............................................... 5 5
Unamortized discount ....................................................................... (6) (6)
Total long-term debt of FPL Group Capital ................................................ 1,399 1,399
Total long-term debt ......................................................................... $3,976 $3,478
____________________
(a) In December 2000, FPL issued $500 million principal amount of first mortgage bonds with an interest rate of 6 7/8%,
maturing in 2005.
(b) In December 2000, FPL issued approximately $65 million principal amount of variable-rate bonds maturing in 2024.
Also in December 2000, FPL redeemed a total of approximately $242 million principal amount of variable-rate bonds
maturing between 2026 and 2029.
Minimum annual maturities of long-term debt for FPL Group are approximately
$65 million, $170 million, $300 million and $500 million for 2001, 2003,
2004 and 2005, respectively. The amounts for FPL for the same periods are
$65 million, $170 million, $125 million and $500 million, respectively.
At December 31, 2000, commercial paper borrowings had a year end weighted-
average interest rate of 6.77% for FPL Group (6.60% for FPL). Available
lines of credit aggregated approximately $3.0 billion ($853 million for
FPL) at December 31, 2000, all of which were based on firm commitments.
8. Income Taxes
The components of income taxes are as follows:
FPL Group FPL
Years Ended December 31, Years Ended December 31,
2000 1999 1998 2000 1999 1998
(millions)
Federal:
Current ............................................. $ 77 $511 $467 $ 87 $383 $492
Deferred ............................................ 239 (196) (215) 231 (88) (169)
ITC and other - net ................................. (35) (29) (27) (22) (21) (24)
Total federal ................................... 281 286 225 296 274 299
State:
Current ............................................. 6 55 72 13 62 78
Deferred ............................................ 49 (18) (18) 42 (9) (21)
Total state ..................................... 55 37 54 55 53 57
Income taxes charged to operations - FPL............... 351 327 356
Credited to other income (deductions) - FPL ........... (10) (3) (7)
Total income taxes .................................... $336 $323 $279 $341 $324 $349
A reconciliation between the effective income tax rates and the applicable
statutory rates is as follows:
FPL Group FPL
Years Ended December 31, Years Ended December 31,
2000 1999 1998 2000 1999 1998
Statutory federal income tax rate ........................ 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
Increases (reductions) resulting from:
State income taxes - net of federal income tax benefit.. 3.5 2.4 3.7 3.7 3.8 3.7
Amortization of ITC .................................... (2.1) (2.1) (2.5) (2.3) (2.3) (2.4)
Amortization of deferred regulatory credit -
income taxes ......................................... (1.2) (1.3) (1.8) (1.3) (1.5) (1.7)
Adjustments of prior years' tax matters ................ (2.7) (2.7) (6.3)(a) - (0.1) 0.1
Preferred stock dividends - FPL ........................ 0.5 0.5 0.5 - - -
Other - net ............................................ (0.7) (0.2) 1.0 0.3 0.5 0.9
Effective income tax rate ................................ 32.3% 31.6% 29.6% 35.4% 35.4% 35.6%
____________________
(a) Includes the resolution of an audit issue with the Internal Revenue Service (IRS).
The income tax effects of temporary differences giving rise to consolidated
deferred income tax liabilities and assets are as follows:
FPL Group FPL
December 31, December 31,
2000 1999 2000 1999
(millions)
Deferred tax liabilities:
Property-related ................................................... $1,338 $1,377 $1,291 $1,377
Investment-related ................................................. 398 373 - -
Other .............................................................. 630 312 520 168
Total deferred tax liabilities ................................... 2,366 2,062 1,811 1,545
Deferred tax assets and valuation allowance:
Asset writedowns and capital loss carryforward ..................... 156 170 - -
Unamortized ITC and deferred regulatory credit - income taxes ...... 104 119 104 119
Storm and decommissioning reserves ................................. 277 245 277 245
Other .............................................................. 474 472 346 379
Valuation allowance ................................................ (23) (23) - -
Net deferred tax assets .......................................... 988 983 727 743
Accumulated deferred income taxes .................................... $1,378 $1,079 $1,084 $ 802
The carryforward period for a capital loss from the disposition in a prior
year of an FPL Group Capital subsidiary expired at the end of 1996. The
amount of the deductible loss from this disposition was limited by IRS
rules. FPL Group is challenging the IRS loss limitation and the IRS is
disputing certain other positions taken by FPL Group. Tax benefits, if
any, associated with these matters will be reported in future periods when
resolved.
9. Jointly-Owned Electric Utility Plant
FPL owns approximately 85% of St. Lucie Unit No. 2, 20% of the St. Johns
River Power Park units and coal terminal and approximately 76% of Scherer
Unit No. 4. At December 31, 2000, the proportionate share of FPL's gross
investment in these units was $1.174 billion, $329 million and $569
million, respectively; accumulated depreciation was $752 million, $167
million and $288 million, respectively.
FPL is responsible for its share of the operating costs, as well as
providing its own financing. These costs are included in FPL Group's and
FPL's consolidated statements of income. At December 31, 2000, there was
no significant balance of construction work in progress on these
facilities. See Note 13 - Litigation.
10. Acquisition of Maine Assets
During the second quarter of 1999, FPL Energy completed the purchase of
Central Maine Power Company's (CMP) non-nuclear generating assets,
primarily fossil and hydro power plants, for $866 million. The purchase
price was based on an agreement, subject to regulatory approvals, reached
with CMP in January 1998. In October 1998, the FERC struck down
transmission rules that had been in effect in New England since the 1970s.
FPL Energy filed a lawsuit in November 1998 requesting a declaratory
judgment that CMP could not meet the essential terms of the purchase
agreement and, as a result, FPL Energy should not be required to complete
the transaction. FPL Energy believed these FERC rulings regarding
transmission constituted a material adverse effect under the purchase
agreement because of the significant decline in the value of the assets
caused by the rulings. The request for declaratory judgment was denied in
March 1999 and the acquisition was completed on April 7, 1999. The
acquisition was accounted for under the purchase method of accounting and
the results of operating the Maine plants have been included in the
consolidated financial statements since the acquisition date.
The FERC rulings regarding transmission, as well as the announcement of new
entrants into the market and changes in fuel prices since January 1998,
resulted in FPL Energy recording a $176 million pre-tax impairment loss to
write-down the fossil assets to their fair value, which was determined
based on a discounted cash flow analysis. The impairment loss reduced FPL
Group's 1999 results of operations and earnings per share by $104 million
and $0.61 per share, respectively.
Most of the remainder of the purchase price was allocated to the hydro
operations. The hydro plants and related goodwill are being amortized on a
straight-line basis over the 40-year term of the hydro plant operating
licenses.
11. Divestiture of Cable Investments
In January 1999, an FPL Group Capital subsidiary sold 3.5 million common
shares of Adelphia Communications Corporation (Adelphia) stock and in
October 1999 had its one-third ownership interest in a cable limited
partnership redeemed, resulting in after-tax gains of approximately $96
million and $66 million, respectively. Both investments had been accounted
for under the equity method.
12. Settlement of Litigation
In October 1999, FPL and the Florida Municipal Power Agency (FMPA) entered
into a settlement agreement pursuant to which FPL agreed to pay FMPA a cash
settlement; FPL agreed to reduce the demand charge on an existing power
purchase agreement; and FPL and FMPA agreed to enter into a new power
purchase agreement giving FMPA the right to purchase limited amounts of
power in the future at a specified price. FMPA agreed to dismiss the
lawsuit with prejudice, and both parties agreed to exchange mutual
releases. The settlement reduced FPL's 1999 net income by $42 million.
In September 2000, the bankruptcy court approved the settlement of a
contract dispute between FPL and two qualifying facilities. The settlement
was approved by the FPSC in October 2000. In December 2000, under the
terms of the settlement, the trustee was paid $222.5 million plus security
deposits. The funds were subsequently distributed by the trustee as
directed by the bankruptcy court. FPL will recover the cost of the
settlement through the fuel and capacity clauses over a five-year period
beginning January 1, 2002. Also, from the payment date to December 31,
2001, FPL will not receive a return on the unrecovered amount through the
fuel and capacity clauses, but instead, the settlement amount will be
included as a rate base regulatory asset over that period. See Note 1 -
Regulation.
13. Commitments and Contingencies
Commitments - FPL has made commitments in connection with a portion of its
projected capital expenditures. Capital expenditures for the construction or
acquisition of additional facilities and equipment to meet customer demand
are estimated to be approximately $3.3 billion for 2001 through 2003.
Included in this three-year forecast are capital expenditures for 2001 of
approximately $1.1 billion. As of December 31, 2000, FPL Energy has made
commitments in connection with the development and expansion of independent
power projects totaling approximately $380 million. Subsidiaries of FPL
Group, other than FPL, have guaranteed approximately $810 million of prompt
performance payments, lease obligations, purchase and sale of power and fuel
agreement obligations, debt service payments and other payments subject to
certain contingencies.
Insurance - Liability for accidents at nuclear power plants is governed by
the Price-Anderson Act, which limits the liability of nuclear reactor
owners to the amount of the insurance available from private sources and
under an industry retrospective payment plan. In accordance with this Act,
FPL maintains $200 million of private liability insurance, which is the
maximum obtainable, and participates in a secondary financial protection
system under which it is subject to retrospective assessments of up to $363
million per incident at any nuclear utility reactor in the United States,
payable at a rate not to exceed $43 million per incident per year.
FPL participates in nuclear insurance mutual companies that provide $2.75
billion of limited insurance coverage for property damage, decontamination
and premature decommissioning risks at its nuclear plants. The proceeds
from such insurance, however, must first be used for reactor stabilization
and site decontamination before they can be used for plant repair. FPL
also participates in an insurance program that provides limited coverage
for replacement power costs if a nuclear plant is out of service because of
an accident. In the event of an accident at one of FPL's or another
participating insured's nuclear plants, FPL could be assessed up to $38
million in retrospective premiums.
In the event of a catastrophic loss at one of FPL's nuclear plants, the
amount of insurance available may not be adequate to cover property damage
and other expenses incurred. Uninsured losses, to the extent not recovered
through rates, would be borne by FPL and could have a material adverse
effect on FPL Group's and FPL's financial condition.
FPL self-insures the majority of its transmission and distribution (T&D)
property due to the high cost and limited coverage available from third-
party insurers. As approved by the FPSC, FPL maintains a funded storm and
property insurance reserve, which totaled approximately $229 million at
December 31, 2000, for uninsured property storm damage or assessments under
the nuclear insurance program. Recovery from customers of any losses in
excess of the storm and property insurance reserve will require the
approval of the FPSC. FPL's available lines of credit include $300 million
to provide additional liquidity in the event of a T&D property loss.
Contracts - FPL Group has entered into a $3.7 billion long-term agreement
with General Electric Company for the supply of 66 gas turbines through 2004
and parts, repairs and on-site services through 2011. The turbines are
intended to support expansion at FPL and FPL Energy, and the related
commitments for a portion of the 66 gas turbines are included in Commitments
above.
FPL has entered into long-term purchased power and fuel contracts. Take-
or-pay purchased power contracts with the Jacksonville Electric Authority
(JEA) and with subsidiaries of The Southern Company (Southern Companies)
provide approximately 1,300 megawatts (mw) of power through mid-2010 and
388 mw thereafter through 2021. FPL also has various firm pay-for-
performance contracts to purchase approximately 900 mw from certain
cogenerators and small power producers (qualifying facilities) with
expiration dates ranging from 2002 through 2026. The purchased power
contracts provide for capacity and energy payments. Energy payments are
based on the actual power taken under these contracts. Capacity payments
for the pay-for-performance contracts are subject to the qualifying
facilities meeting certain contract conditions. FPL has long-term contracts
for the transportation and supply of natural gas, coal and oil with various
expiration dates through 2022. FPL Energy has long-term contracts for the
transportation and storage of natural gas with expiration dates ranging
from 2002 through 2017, and a contract for the supply of natural gas that
expires in mid-2002.
The required capacity and minimum payments through 2005 under these
contracts are estimated to be as follows:
2001 2002 2003 2004 2005
(millions)
FPL:
Capacity payments:
JEA and Southern Companies .......................................... $ 200 $200 $190 $200 $200
Qualifying facilities ............................................... $ 320 $330 $340 $350 $340
Minimum payments, at projected prices:
Natural gas, including transportation ............................... $1,020 $815 $710 $680 $630
Coal ................................................................ $ 45 $ 45 $ 20 $ 10 $ 10
Oil ................................................................. $ 275 $ 15 $ - $ - $ -
FPL Energy:
Natural gas, including transportation and storage ................... $ 20 $ 20 $ 15 $ 15 $ 15
Charges under these contracts were as follows:
2000 Charges 1999 Charges 1998 Charges
Energy/ Energy/ Energy/
Capacity Fuel Capacity Fuel Capacity Fuel
(millions)
FPL:
JEA and Southern Companies .................. $198(a) $153(b) $186(a) $132(b) $192(a) $138(b)
Qualifying facilities........................ $318(c) $135(b) $319(c) $121(b) $299(c) $108(b)
Natural gas, including transportation ....... $ - $567(b) $ - $373(b) $ - $280(b)
Coal ........................................ $ - $ 50(b) $ - $ 43(b) $ - $ 50(b)
Oil ......................................... $ - $354(b) $ - $115(b) $ - $ -
FPL Energy:
Natural gas, including transportation
and storage ............................... $ - $ 17 $ - $ 16 $ - $ 18
_______________
(a) Recoverable through base rates and the capacity clause.
(b) Recoverable through the fuel clause.
(c) Recoverable through the capacity clause.
Litigation - In 1999, the Attorney General of the United States, on behalf
of the U.S. Environmental Protection Agency (EPA) brought an action against
Georgia Power Company and other subsidiaries of The Southern Company for
injunctive relief and the assessment of civil penalties for certain
violations of the Clean Air Act. Among other things, the EPA alleges
Georgia Power Company constructed and is continuing to operate Scherer Unit
No. 4, in which FPL owns a 76% interest, without obtaining proper
permitting, and without complying with performance and technology standards
as required by the Clean Air Act. The suit seeks injunctive relief
requiring the installation of such technology and civil penalties of up to
$25,000 per day for each violation from an unspecified date after August 7,
1977 through January 30, 1997, and $27,500 per day for each violation
thereafter. Georgia Power Company has filed an answer to the complaint
asserting that it has complied with all requirements of the Clean Air Act,
denying the plaintiff's allegations of liability, denying that the
plaintiff is entitled to any of the relief that it seeks and raising
various other defenses. The EPA subsequently moved for leave to file an
amended complaint that would extend the suit to other Southern Company
subsidiaries and plants and would add an allegation that unspecified major
modifications have been made at Scherer Unit No. 4 that require its
compliance with the aforementioned Clean Air Act provisions (comparable
allegations were made in the original complaint as to other plants but not
Scherer Unit No. 4). The Court has not yet ruled on whether to permit the
amendment. If amended as proposed, the EPA's demand for civil penalties
with respect to Scherer Unit No. 4 would apply to the period commencing on
an unspecified date after June 1, 1975.
In 2000, Southern California Edison Company (SCE) filed with the FERC a
Petition for Declaratory Order (petition) asking the FERC to apply a
November 1999 federal circuit court of appeals' decision to all qualifying
small power production facilities, including two solar facilities operated
by partnerships indirectly owned in part by FPL Energy. The federal
circuit court of appeals' decision invalidated the FERC's so-called
essential fixed assets standard, which permitted secondary uses of fossil
fuels by qualifying small power production facilities beyond those
expressly set forth in The Public Utility Regulatory Policies Act of 1978,
as amended. The petition requests that the FERC declare that qualifying
small power production facilities may not continue to use fossil fuel under
the essential fixed assets standard and that they may be required to make
refunds with respect to past usage. The partnerships intend to file a
Motion to Intervene and Protest before the FERC, vigorously objecting to
the position taken by SCE in its petition. The partnerships have always
operated the solar facilities in accordance with orders issued by the FERC.
Such orders were neither challenged nor appealed at the time they were
granted, and it is the position of the partnerships that the orders remain
in effect.
In 2000, Karen and Bruce Alexander filed suit against FPL Group, FPL, FPL
FiberNet, LLC, FPL Group Capital and FPL Investments, Inc. in the Florida
circuit court purportedly on behalf of all property owners in Florida whose
property is encumbered by defendants' easements and on whose property the
defendants have installed or intend to install fiber-optic cable which
defendants lease, license or convey for non-electric transmission or
distribution purposes, or intend to do so. The lawsuit alleged that FPL's
easements did not permit the installation and use of fiber-optic cable for
general communication purposes. The plaintiffs sought injunctive relief,
compensatory damages, interest and attorneys' fees. The defendants served
an offer of judgment for ten dollars on the named plaintiffs, reflecting
the defendants' conclusion that, based on an analysis of the claims and
circumstances of these individual plaintiffs, they had not sustained the
injuries for which they claimed a right to relief. In January 2001, the
plaintiffs accepted this offer of judgment, pursuant to which the suit has
been dismissed with prejudice.
FPL Group and FPL believe that they have meritorious defenses to the
pending litigation discussed above and are vigorously defending the suits.
Accordingly, the liabilities, if any, arising from the proceedings are not
anticipated to have a material adverse effect on their financial
statements.
14. Segment Information
FPL Group's reportable segments include FPL, a regulated utility, and FPL
Energy, a non-rate regulated energy generating subsidiary. Corporate and
Other represents other business activities, other segments that are not
separately reportable and eliminating entries. FPL Group's operating
revenues derived from the sale of electricity represented approximately
97%, 98% and 97% of FPL Group's operating revenues in 2000, 1999 and 1998,
respectively. Less than 1% of operating revenues were from foreign sources
for each of the three years ended December 31, 2000. As of December 31,
2000 and 1999, less than 1% of long-lived assets were located in foreign
countries.
FPL Group's segment information is as follows:
2000 1999 1998
(a) Corp. (a) Corp. (a) Corp.
FPL and FPL and FPL and
FPL Energy Other Total FPL Energy Other Total FPL Energy Other Total
(millions)
Operating revenues.. $ 6,361 $ 632 $ 89 $ 7,082 $ 6,057 $ 323 $ 58 $ 6,438 $ 6,366 $ 234 $ 61 $ 6,661
Interest expense.... $ 176 $ 67 $ 35 $ 278 $ 163 $ 44 $ 15 $ 222 $ 196 $ 84 $ 42 $ 322
Depreciation and
Amortization...... $ 975 $ 50 $ 7 $ 1,032 $ 989 $ 34 $ 17 $ 1,040 $ 1,249 $ 31 $ 4 $ 1,284
Equity in earnings
of equity method
investees......... $ - $ 45 $ - $ 45 $ - $ 50 $ - $ 50 $ - $ 39 $ - $ 39
Income tax expense
(benefit)(b)...... $ 341 $ 36 $(41) $ 336 $ 324 $ (42) $ 41 $ 323 $ 349 $ 24 $(94) $ 279
Net income (loss)
(c)(d)............ $ 607 $ 82 $ 15 $ 704 $ 576 $ (46) $167 $ 697 $ 616 $ 32 $ 16 $ 664
Significant noncash
Items............. $ (57) $ - $100 $ 43 $ 86 $ - $ - $ 86 $ 34 $ - $ - $ 34
Capital expenditures
and investments... $ 1,299 $ 507 $ 90 $ 1,896 $ 924 $1,540 $ 15 $ 2,479 $ 617 $ 313 $ 16 $ 946
Total assets........ $12,020 $2,679 $601 $15,300 $10,608 $2,212 $621 $13,441 $10,748 $1,092 $189 $12,029
Investment in equity
method investees.. $ - $ 196 $ - $ 196 $ - $ 166 $ - $ 166 $ - $ 165 $ - $ 165
____________________
(a) FPL Energy's interest expense is based on an assumed capital structure of 50% debt for operating projects and 100%
debt for projects under construction. FPL Energy's 1998 interest expense also includes the cost of terminating an
interest rate swap agreement.
(b) FPL Group allocates income taxes to FPL Energy on the "separate return method" as if it were a tax paying entity.
(c) Includes merger-related expense recognized in 2000 totaling $41 million after-tax, of which $38 million was
recognized by FPL, $1 million by FPL Energy and $2 million by Corporate and Other (see Note 2).
(d) The following nonrecurring items affected 1999 net income: FPL settled litigation for $42 million after-tax (see
Note 12); FPL Energy recorded $104 million after-tax impairment loss (see Note 10); and Corporate and Other
divested its cable investments resulting in a $162 million after-tax gain (see Note 11).
15. Summarized Financial Information of FPL Group Capital
FPL Group Capital, a 100% owned subsidiary of FPL Group, provides funding for
and holds ownership interest in FPL Group's operating subsidiaries other than
FPL. FPL Group Capital's debentures are fully and unconditionally guaranteed
by FPL Group. Condensed consolidating financial information is as follows:
Condensed Consolidating Statements of Income
Year Ended Year Ended Year Ended
December 31, 2000 December 31, 1999 December 31, 1998
FPL FPL Group FPL FPL Group FPL FPL Group
FPL Group Other Consoli- FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated Group Capital (a) dated
(millions)
Operating revenues $ - $ 721 $6,361 $7,082 $ - $ 380 $6,058 $6,438 $ - $ 295 $6,366 $6,661
Operating expenses (-) (632) (5,210) (5,842) (-) (533) (4,985) (5,518) (-) (225) (5,184) (5,409)
Interest charges... (31) (102) (145) (278) (32) (59) (131) (222) (33) (126) (163) (322)
Divestiture of
cable investments - - - - - 257 - 257 - - - -
Other income (de-
ductions) - net.. 726 135 (783) 78 712 108 (755) 65 689 61 (737) 13
Income before
income taxes..... 695 122 223 1,040 680 153 187 1,020 656 5 282 943
Income tax expense
(benefit)........ (9) 4 341 336 (17) 15 325 323 (8) (63) 350 279
Net income (loss).. $ 704 $ 118 $ (118) $ 704 $ 697 $ 138 $ (138) $ 697 $ 664 $ 68 $ (68) $ 664
(a) Represents FPL, other subsidiaries and consolidating adjustments.
Condensed Consolidating Balance Sheets
December 31, 2000 December 31, 1999
FPL FPL Group FPL FPL Group
FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated
(millions)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and
other property ......................... $ - $ 1,984 $19,038 $21,022 $ - $1,386 $18,168 $19,554
Less accumulated depreciation and
amortization ........................... - 170 10,918 11,088 - 105 10,185 10,290
Total property, plant and equipment - net - 1,814 8,120 9,934 - 1,281 7,983 9,264
CURRENT ASSETS:
Cash and cash equivalents ................ 12 51 66 129 (16) 376 1 361
Receivables .............................. 56 418 409 883 - 218 325 543
Other .................................... - 66 703 769 - 46 423 469
Total current assets ................... 68 535 1,178 1,781 (16) 640 749 1,373
OTHER ASSETS:
Investment in subsidiaries ............... 5,967 - (5,967) - 5,805 - (5,805) -
Other .................................... 141 1,365 2,079 3,585 133 1,346 1,325 2,804
Total other assets ..................... 6,108 1,365 (3,888) 3,585 5,938 1,346 (4,480) 2,804
TOTAL ASSETS ............................... $ 6,176 $ 3,714 $ 5,410 $15,300 $ 5,922 $3,267 $ 4,252 $13,441
CAPITALIZATION:
Common shareholders' equity .............. $ 5,593 $ 935 $ (935) $ 5,593 $ 5,370 $1,013 $(1,013) $ 5,370
Preferred stock of FPL without
sinking fund requirements .............. - - 226 226 - - 226 226
Long-term debt ........................... - 1,400 2,576 3,976 - 1,399 2,079 3,478
Total capitalization ................... 5,593 2,335 1,867 9,795 5,370 2,412 1,292 9,074
CURRENT LIABILITIES:
Accounts payable and commercial paper .... - 705 1,017 1,722 - 273 473 746
Other .................................... 467 186 388 1,041 485 141 498 1,124
Total current liabilities .............. 467 891 1,405 2,763 485 414 971 1,870
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes and
unamortized tax credits ................ - 399 1,248 1,647 - 365 1,024 1,389
Other .................................... 116 89 890 1,095 67 76 965 1,108
Total other liabilities and deferred
credits .............................. 116 488 2,138 2,742 67 441 1,989 2,497
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ....... $ 6,176 $ 3,714 $ 5,410 $15,300 $ 5,922 $3,267 $ 4,252 $13,441
(a) Represents FPL, other subsidiaries and consolidating adjustments.
Condensed Consolidating Statements of Cash Flows
Year Ended Year Ended Year Ended
December 31, 2000 December 31, 1999 December 31, 1998
FPL FPL FPL
FPL Group FPL Group FPL Group
FPL Group Other Consoli- FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated Group Capital (a) dated
(millions)
NET CASH PROVIDED
BY (USED IN)
OPERATING
ACTIVITIES $ 959 $ 159 $ (142) $ 976 $ 594 $ 56 $ 913 $ 1,563 $ 654 $ 8 $1,081 $ 1,743
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Capital
expenditures
and independent
power
investments - (507) (1,299) (1,806) - (1,540) (861) (2,401) - (521) (617) (1,138)
Capital contributions
to FPL Group
Capital and FPL (418) - 418 - (127) - 127 - (249) - 249 -
Other - net 3 (34) (106) (137) (18) 313 (66) 229 - 427 (84) 343
Net cash used
in investing
activities (415) (541) (987) (1,943) (145) (1,227) (800) (2,172) (249) (94) (452) (795)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Issuance of long-
term debt - - 947 947 - 1,385 224 1,609 - 146 197 343
Retirement of
long-term debt - - (515) (515) - (130) (454) (584) - (338) (389) (727)
Increase (decrease)
in short-term debt - 353 466 819 - 135 94 229 - 16 (40) (24)
Capital
contributions
from FPL Group - 18 (18) - - 127 (127) - - 249 (249) -
Repurchases of
common stock (150) - - (150) (116) - - (116) (62) - - (62)
Dividends (366) (314) 314 (366) (355) - - (355) (345) - - (345)
Net cash
provided by
(used in)
financing
activities (516) 57 1,194 735 (471) 1,517 (263) 783 (407) 73 (481) (815)
Net increase
(decrease) in
cash and cash
equivalents 28 (325) 65 (232) (22) 346 (150) 174 (2) (13) 148 133
Cash and cash
equivalents
at beginning
of year (16) 376 1 361 6 30 151 187 8 43 3 54
Cash and cash
equivalents
at end of
year $ 12 $ 51 $ 66 $ 129 $ (16) $ 376 $ 1 $ 361 $ 6 $ 30 $ 151 $ 187
(a) Represents FPL, other subsidiaries and consolidating adjustments.
16. Quarterly Data (Unaudited)
Condensed consolidated quarterly financial information is as follows:
March 31 (a) June 30 (a) September 30 (a) December 31 (a)
(millions, except per share amounts)
FPL Group:
2000
Operating revenues ................ $ 1,468 $ 1,670 $ 2,087 $ 1,857
Operating income .................. $ 237 $ 347 $ 511 $ 145(c)
Net income ........................ $ 121 $ 204 $ 314 $ 65(c)
Earnings per share: (b)
Basic ........................... $ 0.71 $ 1.20 $ 1.85 $ 0.39(c)
Assuming dilution ............... $ 0.71 $ 1.20 $ 1.84 $ 0.38(c)
Dividends per share ............... $ 0.54 $ 0.54 $ 0.54 $ 0.54
High-low common stock sales prices. $ 48 1/4-36 3/8 $50 13/16-41 13/16 $ 67 1/8-47 1/8 $ 73-59 3/8
1999
Operating revenues ................ $ 1,412 $ 1,614 $ 1,892 $ 1,520
Operating income .................. $ 208 $ 135(d) $ 470 $ 107(e)
Net income ........................ $ 209(f) $ 77(d) $ 291 $ 120(e)(g)
Earnings per share (basic and
assuming dilution) (b)........... $ 1.22(f) $ 0.45(d) $ 1.70 $ 0.71(e)(g)
Dividends per share ............... $ 0.52 $ 0.52 $ 0.52 $ 0.52
High-low common stock sales prices. $61 15/16-50 1/8 $ 60 1/2-52 7/8 $56 11/16-49 1/8 $52 1/2-41 1/8
FPL:
2000
Operating revenues ................ $ 1,338 $ 1,533 $ 1,917 $ 1,573
Operating income .................. $ 151 $ 218 $ 326 $ 105(c)
Net income ........................ $ 110 $ 176 $ 279 $ 57(c)
Net income available to FPL Group.. $ 106 $ 172 $ 275 $ 54(c)
1999
Operating revenues ................ $ 1,359 $ 1,511 $ 1,769 $ 1,418
Operating income .................. $ 150 $ 207 $ 303 $ 86(e)
Net income ........................ $ 108 $ 167 $ 268 $ 48(e)
Net income available to FPL Group.. $ 104 $ 163 $ 264 $ 45(e)
____________________
(a) In the opinion of FPL Group and FPL, all adjustments, which consist of normal recurring accruals necessary to
present a fair statement of the amounts shown for such periods, have been made. Results of operations for an
interim period may not give a true indication of results for the year.
(b) The sum of the quarterly amounts may not equal the total for the year due to rounding.
(c) Includes merger-related expenses.
(d) Includes impairment loss on Maine assets.
(e) Includes the settlement of litigation between FPL and FMPA.
(f) Includes gain on the sale of an investment in Adelphia common stock.
(g) Includes gain on the redemption of a one-third ownership interest in a cable limited partnership.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrants
FPL Group - The information required by this Item will be included in FPL
Group's Proxy Statement which will be filed with the Securities and
Exchange Commission in connection with the 2001 Annual Meeting of
Shareholders (FPL Group's Proxy Statement) and is incorporated herein by
reference, or is included in Item I. Business - Executive Officers of the
Registrants.
FPL DIRECTORS(a)
James L. Broadhead. Mr. Broadhead, 65, is chairman and chief executive
officer of FPL and FPL Group. He is a director of Delta Air Lines, Inc.,
New York Life Insurance Company and The Pittston Company, and a trustee
emeritus of Cornell University. Mr. Broadhead has been a director of FPL
and FPL Group since 1989.
Dennis P. Coyle. Mr. Coyle, 62, is general counsel and secretary of FPL
and FPL Group. He is a director of Adelphia Communications Corporation.
Mr. Coyle has been a director of FPL since 1990.
Paul J. Evanson. Mr. Evanson, 59, is president of FPL. He is a director
of Lynch Interactive Corporation. Mr. Evanson has been a director of FPL
since 1992 and a director of FPL Group since 1995.
Lawrence J. Kelleher. Mr. Kelleher, 53, is senior vice president, human
resources and corporate services of FPL and vice president, human resources
of FPL Group. Mr. Kelleher has been a director of FPL since 1990.
Armando J. Olivera. Mr. Olivera, 51, is senior vice president, power
systems of FPL. Mr. Olivera has been a director of FPL since 1999.
Thomas F. Plunkett. Mr. Plunkett, 61, is president of FPL's nuclear
division. Mr. Plunkett has been a director of FPL since 1996.
Antonio Rodriguez. Mr. Rodriguez, 58, is senior vice president, power
generation division of FPL. Mr. Rodriguez has been a director of FPL since
1999.
____________________
(a) Directors are elected annually and serve until their resignation,
removal or until their respective successors are elected. Each
director's business experience during the past five years is noted
either here or in the Executive Officers table in Item 1. Business -
Executive Officers of the Registrants.
Item 11. Executive Compensation
FPL Group - The information required by this Item will be included in FPL
Group's Proxy Statement and is incorporated herein by reference, provided
that the Compensation Committee Report and Performance Graph which are
contained in FPL Group's Proxy Statement shall not be deemed to be
incorporated herein by reference.
FPL - The following table sets forth FPL's portion of the compensation paid
during the past three years to FPL's chief executive officer and the other
four most highly-compensated persons who served as executive officers of
FPL at December 31, 2000.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Other Number of Long-Term All
Annual Restricted Securities Incentive Other
Compen- Stock Underlying Plan Compen-
Name and Principal Position Year Salary Bonus sation Awards(a) Options Payouts(b) sation(c)
James L. Broadhead 2000 $974,400 $1,132,740 $20,632 $ - - $21,053,233 $13,563,705
Chairman of the Board and 1999 943,000 895,850 18,809 2,412.005 250,000 1,083,272 12,658
Chief Executive Officer 1998 847,875 937,125 9,809 - - 1,788,731 12,009
of FPL and FPL Group
Paul J. Evanson 2000 660,000 660,700 11,105 - - 10,395,654 8,544
President of FPL 1999 628,500 616,900 8,656 1,278,900 150,000 458,985 13,539
1998 592,500 546,900 2,785 - - 704,304 13,746
Dennis P. Coyle 2000 410,640 310,045 8,487 - - 5,892,417 7,900
General Counsel and 1999 399,832 259,891 7,964 964,802 100,000 236,783 10,259
Secretary of FPL 1998 357,000 257,040 595 - - 368,079 9,737
and FPL Group
Thomas F. Plunkett 2000 375,000 243,000 11,121 - - 5,902,937 8,391
President, Nuclear 1999 340,000 219,100 10,088 255,780 100,000 179,564 10,146
Division of FPL 1998 302,500 177,900 3,482 - - 103,481 10,344
Lawrence J. Kelleher 2000 316,680 240,723 11,952 - - 5,757,767 7,616
Senior Vice President, 1999 306,475 220,662 10,213 964,802 100,000 267,694 10,661
Human Resources and 1998 267,750 194,119 3,108 - - 222,173 9,724
Corporate Services of FPL
and Vice President, Human
Resources of FPL Group
____________________
(a) At December 31, 2000, none of the named officers held any shares of restricted common stock.
(b) FPL Group shareholders' December 15, 2000 approval of the proposed merger with Entergy Corporation resulted in a
change of control under the definition in FPL Group's 1994 Long Term Incentive Plan. Upon the change of control,
all performance criteria of performance-based awards, restricted stock and other stock-based awards held by the
executive officers were deemed fully achieved and all such awards were deemed fully earned and vested; all options
and other exercisable rights became exercisable and vested; the restrictions, deferral limitations and forfeiture
conditions applicable to all awards under the Plan lapsed; and all outstanding awards were canceled and the holder
thereof paid in cash on the basis of the highest trading price of FPL Group common stock during the 60-day period
preceding the date that the shareholders approved the merger.
(c) For 2000, represents employer matching contributions to employee thrift plans and employer contributions for life
insurance as follows:
Thrift Match Life Insurance
Mr. Broadhead ....................... $7,494 $1,245
Mr. Evanson ......................... 8,075 469
Mr. Coyle ........................... 7,494 406
Mr. Plunkett ........................ 8,075 316
Mr. Kelleher ........................ 7,494 122
Also represents FPL's portion of the distribution upon change of
control on December 15, 2000 to Mr. Broadhead of his already vested
benefit under his individual supplemental retirement plan. Mr.
Broadhead's vested lump sum benefit payable in cash as of December 15,
2000, was $14,021,598; this amount included the value of 96,800 shares
of restricted Common Stock awarded to him in 1991 for the purpose of
financing this plan, which would have otherwise vested on January 2,
2001. Also includes for Mr. Broadhead, $585,046 in cash that accrued
in a trust established to receive dividends from the 96,800 restricted
shares that was not part of the supplemental retirement plan lump sum
benefit.
Long-Term Incentive Plan Awards - In 2000, performance awards and
shareholder value awards under FPL Group's Long-Term Incentive Plan were
made to the executive officers named in the Summary Compensation Table as
set forth in the following tables.
Performance Share Awards
Estimated Future Payouts
Number of Performance Period Under Non-Stock Price-Based Plans
Name Shares Until Payout Target(#) Maximum(#)
James L. Broadhead ................ 28,257 1/1/00 - 12/31/03 28,257 45,211
Paul J. Evanson ................... 11,303 1/1/00 - 12/31/03 11,303 18,085
Dennis P. Coyle ................... 6,495 1/1/00 - 12/31/03 6,495 10,392
Thomas F. Plunkett ................ 5,505 1/1/00 - 12/31/03 5,505 8,808
Lawrence J. Kelleher .............. 5,009 1/1/00 - 12/31/03 5,009 8,014
The performance share awards in the preceding table are, under normal
circumstances, payable at the end of the four-year performance period. The
amount of the payout is determined by multiplying the participant's target
number of shares by his average level of attainment, expressed as a
percentage, which may not exceed 160%, of his targeted awards under the
Annual Incentive Plans for each of the years encompassed by the award
period. Annual incentive compensation is based on the attainment of net
income goals for FPL and FPL Group, which are established by the
Compensation Committee of FPL Group's Board of Directors (the Committee) at
the beginning of the year. The amounts earned on the basis of this
performance measure are subject to reduction based on the degree of
achievement of other corporate and business unit performance measures, and
in the discretion of the Committee. Mr. Broadhead's annual incentive
compensation for 2000 was based on the achievement of FPL Group's net
income goals and the following performance measures for FPL (weighted 75%)
and the non-utility and/or new businesses (weighted 25%) and upon certain
qualitative factors. For FPL, the incentive performance measures were
financial indicators (weighted 50%) and operating indicators (weighted
50%). The financial indicators were operations and maintenance costs,
capital expenditure levels, net income, regulatory return on equity and
operating cash flow. The operating indicators were service reliability as
measured by the frequency and duration of service interruptions and service
unavailability; system performance as measured by availability factors for
the fossil power plants, and an industry index for the nuclear power
plants; employee safety; number of significant environmental violations;
customer satisfaction survey results; load management installed capability
and conservation programs' annual installed capacity. For the non-utility
and/or new businesses, the performance measures were total combined return
on equity; non-utility net income and return on equity; corporate and other
net income; employee safety; number of significant environmental violations
and the development of a plan to meet five-year growth objectives. The
qualitative factors included measures to position FPL Group for increased
competition and initiating other actions that significantly strengthen FPL
Group and enhance shareholder value.
Shareholder Value Awards
Estimated Future Payouts
Number of Performance Period Under Non-Stock Price-Based Plans
Name Shares Until Payout Target(#) Maximum(#)
James L. Broadhead ................ 19,266 1/1/00 - 12/31/02 19,266 30,826
Paul J. Evanson ................... 9,688 1/1/00 - 12/31/02 9,688 15,501
Dennis P. Coyle ................... 4,872 1/1/00 - 12/31/02 4,872 7,795
Thomas F. Plunkett ................ 4,128 1/1/00 - 12/31/02 4,128 6,605
Lawrence J. Kelleher .............. 3,757 1/1/00 - 12/31/02 3,757 6,011
The shareholder value awards in the preceding table are, under normal
circumstances, payable at the end of the three-year performance period.
The amount of the payout is determined by multiplying the participant's
target number of shares by a factor derived by comparing the average annual
total shareholder return of FPL Group (price appreciation of FPL Group
common stock plus dividends) to the total shareholder return of the Dow
Jones Electric Utilities Index companies over the three-year performance
period. The payout may not exceed 160% of targeted awards.
On December 15, 2000, FPL Group shareholders approved the proposed merger
with Entergy Corporation, resulting in a change of control under the
definition in FPL Group's 1994 Long Term Incentive Plan. Upon the change
of control, all performance criteria of performance-based awards held by
the named executive officers, including the Performance Share Awards and
Shareholder Value Awards shown in the preceding tables, were deemed fully
achieved, and all such awards were deemed fully earned and vested, were
canceled, and were paid in cash to the holder thereof on the basis of the
highest trading price of FPL Group common stock during the 60-day period
preceding the date that the shareholders approved the merger.
The named officers did not receive any stock option grants during 2000, did
not exercise any stock options during 2000 and held no exercisable options
at the end of the year.
Retirement Plans - FPL Group maintains a non-contributory defined benefit
pension plan and a supplemental executive retirement plan which covers FPL
employees. The following table shows the estimated annual benefits,
calculated on a straight-line annuity basis, payable upon retirement in
2000 at age 65 after the indicated years of service.
Pension Plan Table
Eligible Average Years of Service
Annual Compensation 10 20 30 40 50
$ 300,000 ........................................... $ 58,704 $ 117,397 $ 146,101 $ 154,543 $ 156,931
400,000 ........................................... 78,704 157,397 196,101 207,043 209,431
500,000 ........................................... 98,704 197,397 246,101 259,543 261,931
600,000 ........................................... 118,704 237,397 296,101 312,043 314,431
700,000 ........................................... 138,704 277,397 346,101 364,543 366,931
800,000 ........................................... 158,704 317,397 396,101 417,043 419,431
900,000 ........................................... 178,704 357,397 446,101 469,543 471,931
1,000,000 ........................................... 198,704 397,397 496,101 522,043 524,431
1,100,000 ........................................... 218,704 437,397 546,101 574,543 576,931
1,200,000 ........................................... 238,704 477,397 596,101 627,043 629,431
1,300,000 ........................................... 258,704 517,397 646,101 679,543 681,931
1,400,000 ........................................... 278,704 557,397 696,101 732,043 734,431
1,500,000 ........................................... 298,704 597,397 746,101 784,543 786,931
1,600,000 ........................................... 318,704 637,397 796,101 837,043 839,431
1,700,000 ........................................... 338,704 677,397 846,101 889,543 891,931
1,800,000 ........................................... 358,704 717,397 896,101 942,043 944,431
1,900,000 ........................................... 378,704 757,397 946,101 994,543 996,931
2,000,000 ........................................... 398,704 797,397 996,101 1,047,043 1,049,431
2,100,000 ........................................... 418,704 837,397 1,046,101 1,099,543 1,101,931
2,200,000 ........................................... 438,704 877,397 1,096,101 1,152,043 1,154,431
2,300,000 ........................................... 458,704 917,397 1,146,101 1,204,543 1,206,931
2,400,000 ........................................... 478,704 957,397 1,196,101 1,257,043 1,259,431
2,500,000 ........................................... 498,704 997,397 1,246,101 1,309,543 1,311,931
2,600,000 ........................................... 518,704 1,037,397 1,295,101 1,362,043 1,364,431
2,700,000 ........................................... 538,704 1,077,397 1,348,101 1,414,543 1,416,931
2,800,000 ........................................... 558,704 1,117,397 1,396,101 1,467,043 1,469,431
The compensation covered by the plans includes annual salaries and bonuses
of certain officers of FPL Group and annual salaries of officers of FPL, as
shown in the respective Summary Compensation Tables, but no other amounts
shown in those tables. Estimated credited years of service for the FPL
executive officers named in the Summary Compensation Table are: Mr.
Broadhead, 12 years; Mr. Evanson, 8 years; Mr. Coyle, 11 years; Mr.
Plunkett, 10 years and Mr. Kelleher, 33 years. Amounts shown in the table
reflect deductions to partially cover employer contributions to social
security.
A supplemental retirement plan for Mr. Coyle provides for benefits based on
two times his credited years of service. A supplemental retirement plan
for Mr. Evanson provides for benefits based on two times his credited years
of service up to age 65 and one times his credited years of service
thereafter. A supplemental retirement plan for Mr. Plunkett provides for
benefits, upon retirement at age 62 or more, based on two times his
credited years of service up to age 65 and one times his credited years of
service thereafter.
FPL Group sponsors a split-dollar life insurance plan for certain of FPL's
and FPL Group's senior officers, including the FPL executive officers named
in the Summary Compensation Table. Benefits under the split-dollar plan
are provided by universal life insurance policies purchased by FPL Group.
If the officer dies prior to retirement (defined to include age plus years
of service), or for Mr. Kelleher during employment or after retirement but
prior to age 65, the officer's beneficiaries generally receive two and one-
half times the officer's annual salary at the time of death. If the
officer dies after retirement, or for Mr. Kelleher on or after 65 but
before termination of his split dollar agreement, the officer's
beneficiaries receive between 50% to 100% (100% to 180% depending upon age
at time of death for Mr. Kelleher) of the officer's final annual salary.
Upon termination of the agreement after 10 years, at age 65 or termination
of employment which qualifies as retirement, whichever is later, the life
insurance policies will be assigned to the officer or his beneficiary.
Each officer is taxable on the insurance carrier's one-year term rate for
his life insurance coverage.
Employment Agreements - On December 15, 2000, when FPL Group's shareholders
approved the proposed merger with Entergy Corporation, previously-existing
employment agreements between FPL Group and certain officers, including the
individuals named in the Summary Compensation Table, became effective. The
agreements provide that the officer shall be employed by FPL Group for a
period of four years (five years in the case of Mr. Broadhead) in a
position at least commensurate with his position with FPL Group in December
2000. During the employment period the officer shall be paid an annual
base salary at least equal to his annual base salary for 2000, with annual
increases consistent with those awarded to other peer officers of FPL
Group, but not less than the increases in the consumer price index; shall
be paid an annual bonus at least equal to the highest bonus paid to him for
any of the three years immediately preceding 2000; be given the opportunity
to earn long term incentive compensation at least as favorable as such
opportunities given to other peer officers of FPL Group during 2000 or
thereafter and shall be entitled to participate in employee benefit plans
providing benefits at lest as favorable as those provided to other peer
officers of FPL Group during 2000 or thereafter.
In the event that the officer's employment is terminated (except for death,
disability, or cause) or if the officer terminates his employment for good
reason, as defined in the agreement, the officer is entitled to severance
benefits in the form of a lump-sum payment equal to the compensation due
for the remainder of the employment period or for two years, whichever is
longer. Such benefits would be based on the officer's then base salary
plus an annual bonus at least equal to the bonus for the year 2000. The
officer is also entitled to the maximum amount payable under all long-term
incentive compensation grants outstanding, continued coverage under all
employee benefit plans, supplemental retirement benefits and reimbursement
for any tax penalties incurred as a result of the severance payments.
As discussed in the joint proxy/prospectus of FPL Group and Entergy
Corporation dated November 7, 2000, upon completion of the proposed merger
with Entergy Mr. Broadhead would become entitled pursuant to his employment
agreement to terminate his employment for good reason, and receive the
severance benefits described above, because of the change in his titles and
responsibilities with the new holding company. In order to retain Mr.
Broadhead's services following the merger FPL Group agreed to pay him, upon
completion of the merger, the severance benefits to which he then would
become entitled if his employment were terminated, and the new holding
company has entered into an employment agreement with Mr. Broadhead under
which he will receive an annual base salary, and will have incentive
compensation opportunities no less favorable than in effect immediately
prior to consummation of the merger. The employment agreement provides for
continuation of all the terms and conditions of Mr. Broadhead's employment
agreement with FPL Group, except that any severance payments as to which he
may become eligible will be offset by the amount payable to him upon
consummation of the merger, as described above.
Director Compensation - All of the directors of FPL are salaried employees
of FPL Group and its subsidiaries and do not receive any additional
compensation for serving as a director.
Item 12. Security Ownership of Certain Beneficial Owners and Management
FPL Group - The information required by this Item will be included in FPL
Group's Proxy Statement and is incorporated herein by reference.
FPL - FPL Group owns 100% of FPL's common stock. FPL's directors and
executive officers beneficially own shares of FPL Group's common stock as
follows:
Name Number of Shares (a)
James L. Broadhead ...................................................................... 91,789
Dennis P. Coyle ......................................................................... 26,439(b)
Paul J. Evanson ......................................................................... 47,021
Lawrence J. Kelleher .................................................................... 23,038
Armando J. Olivera ...................................................................... 14,049
Thomas F. Plunkett ...................................................................... 15,070
Antonio Rodriguez ....................................................................... 7,632
All directors and executive officers as a group ......................................... 243,916(b)(c)
____________________
(a) Information is as of January 31, 2001, except for holdings under the thrift plans, which are as of December 31,
2000. Unless otherwise indicated, each person has sole voting and sole investment power.
(b) Includes 25 shares owned by Mr. Coyle's wife, as to which Mr. Coyle disclaims beneficial ownership.
(c) Less than 1% of FPL Group's common stock outstanding.
Section 16(a) Beneficial Ownership Reporting Compliance - FPL's directors
and executive officers are required to file initial reports of ownership
and reports of changes of ownership of FPL Group common stock with the
Securities and Exchange Commission. Based upon a review of these filings
and written representations from FPL directors and executive officers, all
required filings were timely made in 2000 except one transaction involving
a gift transfer by Mr. Broadhead to a trust for the benefit of members of
Mr. Broadhead's family was inadvertently not reported on Form 5 on a timely
basis for fiscal year 1999 due to an oversight by counsel to FPL Group.
Item 13. Certain Relationships and Related Transactions
FPL Group - The information required by this Item will be included in FPL
Group's Proxy Statement and is incorporated herein by reference.
FPL - None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements Page(s)
Independent Auditors' Report 18
FPL Group:
Consolidated Statements of Income 19
Consolidated Balance Sheets 20
Consolidated Statements of Cash Flows 21
Consolidated Statements of Shareholders' Equity 22
FPL:
Consolidated Statements of Income 23
Consolidated Balance Sheets 24
Consolidated Statements of Cash Flows 25
Consolidated Statements of Shareholder's Equity 26
Notes to Consolidated Financial Statements 27-42
2. Financial Statement Schedules - Schedules are omitted as not
applicable or not required.
3. Exhibits including those Incorporated by Reference
Exhibit FPL
Number Description Group FPL
*2 Agreement and Plan of Merger dated as of July 30, 2000, among FPL Group, x x
Entergy, WCB Holding Corp., Ranger Acquisition Corp. and Ring Acquisition
Corp. (filed as Exhibit 2.1 to both FPL Group's Form 8-K dated July 31,
2000, File No. 1-8841 and FPL's Form 8-K dated August 3, 2000, File No.
1-3545)
*3(i)a Restated Articles of Incorporation of FPL Group dated December 31, 1984, x
as amended through December 17, 1990 (filed as Exhibit 4(a) to Post-
Effective Amendment No. 5 to Form S-8, File No. 33-18669)
*3(i)b Amendment to FPL Group's Restated Articles of Incorporation dated June 27, x
1996 (filed as Exhibit 3 to Form 10-Q for the quarter ended June 30, 1996,
File No. 1-8841)
*3(i)c Restated Articles of Incorporation of FPL dated March 23, 1992 (filed as x
Exhibit 3(i)a to Form 10-K for the year ended December 31, 1993, File No.
1-3545)
*3(i)d Amendment to FPL's Restated Articles of Incorporation dated March 23, 1992 x
(filed as Exhibit 3(i)b to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)e Amendment to FPL's Restated Articles of Incorporation dated May 11, 1992 x
(filed as Exhibit 3(i)c to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)f Amendment to FPL's Restated Articles of Incorporation dated March 12, 1993 x
(filed as Exhibit 3(i)d to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)g Amendment to FPL's Restated Articles of Incorporation dated June 16, 1993 x
(filed as Exhibit 3(i)e to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)h Amendment to FPL's Restated Articles of Incorporation dated August 31, 1993 x
(filed as Exhibit 3(i)f to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)i Amendment to FPL's Restated Articles of Incorporation dated November 30, x
1993 (filed as Exhibit 3(i)g to Form 10-K for the year ended December 31,
1993, File No. 1-3545)
3(ii)a Bylaws of FPL Group as amended February 12, 2001 x
*3(ii)b Bylaws of FPL dated May 11, 1992 (filed as Exhibit 3 to Form 8-K dated x
May 1, 1992, File No. 1-3545)
*4(a) Form of Rights Agreement, dated as of July 1, 1996, between FPL Group x
and The First National Bank of Boston (filed as Exhibit 4 to Form 8-K
dated June 17, 1996, File No. 1-8841)
*4(b) Amendment to Rights Agreement dated as of July 30, 2000, between FPL x
Group and Fleet National Bank (f/k/a The First National Bank of Boston),
as the Rights Agent (filed as Exhibit 2 to Form 8-A/A dated July 31, 2000,
File No. 1-8841)
*4(c) Mortgage and Deed of Trust dated as of January 1, 1944, and Ninety-nine x x
Supplements thereto between FPL and Bankers Trust Company and The
Florida National Bank of Jacksonville (now First Union National Bank of
Florida), Trustees (as of September 2, 1992, the sole trustee is Bankers
Trust Company) (filed as Exhibit B-3, File No. 2-4845; Exhibit 7(a),
File No. 2-7126; Exhibit 7(a), File No. 2-7523; Exhibit 7(a), File No.
2-7990; Exhibit 7(a), File No. 2-9217; Exhibit 4(a)-5, File No. 2-10093;
Exhibit 4(c), File No. 2-11491; Exhibit 4(b)-1, File No. 2-12900;
Exhibit 4(b)-1, File No. 2-13255; Exhibit 4(b)-1, File No. 2-13705;
Exhibit 4(b)-1, File No. 2-13925; Exhibit 4(b)-1, File No. 2-15088;
Exhibit 4(b)-1, File No. 2-15677; Exhibit 4(b)-1, File No. 2-20501;
Exhibit 4(b)-1, File No. 2-22104; Exhibit 2(c), File No. 2-23142; Exhibit
2(c), File No. 2-24195; Exhibit 4(b)-1, File No. 2-25677; Exhibit 2(c),
File No. 2-27612; Exhibit 2(c), File No. 2-29001; Exhibit 2(c), File
No. 2-30542; Exhibit 2(c), File No. 2-33038; Exhibit 2(c), File No.
2-37679; Exhibit 2(c), File No. 2-39006; Exhibit 2(c), File No. 2-41312;
Exhibit 2(c), File No. 2-44234; Exhibit 2(c), File No. 2-46502; Exhibit
2(c), File No. 2-48679; Exhibit 2(c), File No. 2-49726; Exhibit 2(c),
File No. 2-50712; Exhibit 2(c), File No. 2-52826; Exhibit 2(c), File No.
2-53272; Exhibit 2(c), File No. 2-54242; Exhibit 2(c), File No. 2-56228;
Exhibits 2(c) and 2(d), File No. 2-60413; Exhibits 2(c) and 2(d), File
No. 2-65701; Exhibit 2(c), File No. 2-66524; Exhibit 2(c), File No.
2-67239; Exhibit 4(c), File No. 2-69716; Exhibit 4(c), File No. 2-70767;
Exhibit 4(b), File No. 2-71542; Exhibit 4(b), File No. 2-73799; Exhibits
4(c), 4(d) and 4(e), File No. 2-75762; Exhibit 4(c), File No. 2-77629;
Exhibit 4(c), File No. 2-79557; Exhibit 99(a) to Post-Effective Amendment
No. 5 to Form S-8, File No. 33-18669; Exhibit 99(a) to Post-Effective
Amendment No. 1 to Form S-3, File No. 33-46076; Exhibit 4(b) to Form
10-K for the year ended December 31, 1993, File No. 1-3545; Exhibit
4(i) to Form 10-Q for the quarter ended June 30, 1994, File No. 1-3545;
Exhibit 4(b) to Form 10-Q for the quarter ended June 30, 1995, File
No. 1-3545; Exhibit 4(a) to Form 10-Q for the quarter ended March 31,
1996, File No. 1-3545; Exhibit 4 to Form 10-Q for the quarter ended
June 30, 1998, File No. 1-3545; and Exhibit 4 to Form 10-Q for the
quarter ended March 31, 1999, File No. 1-8841)
*4(d) Indenture, dated as of June 1, 1999, between FPL Group Capital Inc and x
The Bank of New York, as Trustee (filed as Exhibit 4(a) to Form 8-K
Dated July 16, 1999, File No. 1-8841)
*4(e) Guarantee Agreement between FPL Group, Inc. (as Guarantor) and x
The Bank of New York (as Guarantee Trustee) date as of June 1, 1999
(filed as Exhibit 4(b) to Form 8-K dated July 16, 1999, File No. 1-8841)
4(f) One-hundredth Supplemental Indenture dated as of December 1, 2000 x x
between FPL and Bankers Trust Company, Trustee
4(g) One Hundred First Supplemental Indenture dated as of December 1, x x
2000 between FPL and Bankers Trust Company, Trustee
*10(a) FPL Group Supplemental Executive Retirement Plan, amended and restated x
effective April 1, 1997 (filed as Exhibit 10(a) to Form 10-K for the
year ended December 31, 1999, File No. 1-8841)
*10(b) Amendments # 1 and 2 effective January 1, 1998 to FPL Group Supplemental x
Executive Retirement Plan, amended and restated effective April 1, 1997
(filed as Exhibit 10(b) to Form 10-K for the year ended December 31,
1999, File No. 1-8841)
*10(c) Amendment #3 effective January 1, 1999, to FPL Group Supplemental x
Executive Retirement Plan, amended and restated effective April 1, 1997
(filed as Exhibit 10(c) to Form 10-K for the year ended December 31,
1999, File No. 1-8841)
*10(d) Supplement to the FPL Group Supplemental Executive Retirement Plan x
as it applies to Paul J. Evanson effective January 1, 1996 (filed as
Exhibit 10(b) to Form 10-K for the year ended December 31, 1996, File
No. 1-8841)
*10(e) Supplement to the FPL Group Supplemental Executive Retirement Plan as x
it applies to Thomas F. Plunkett (filed as Exhibit 10(e) to Form 10-K
for the year ended December 31, 1997, File No. 1-8841)
10(f) Supplemental Executive Retirement Plan for Dennis P. Coyle effective x
November 15, 1993
*10(g) Long-Term Incentive Plan 1994 (filed as Exhibit 4(d) to Form S-8, File x
No. 33-57673)
10(h) Annual Incentive Plan x
*10(i) FPL Group, Inc. Deferred Compensation Plan, amended and restated effective x
January 1, 1995 (filed as Exhibit 99 to Form S-8, File No. 333-88067
*10(j) FPL Group Executive Long Term Disability Plan effective January 1, 1995 x
(filed as Exhibit 10(g) to Form 10-K for the year ended December 31,
1995, File No. 1-8841)
*10(k) Employment Agreement between FPL Group and James L. Broadhead, amended and x
restated as of May 10, 1999 (filed as Exhibit 10(a) to Form 10-Q for the
quarter ended September 30, 1999, File No. 1-8841)
*10(l) Employment Agreement between FPL Group and Dennis P. Coyle, amended and x
restated as of May 10, 1999 (filed as Exhibit 10(b) to Form 10-Q for the
quarter ended September 30, 1999, File No. 1-8841)
*10(m) Employment Agreement between FPL Group and Paul J. Evanson, amended and x
restated as of May 10, 1999 (filed as Exhibit 10(c) to Form 10-Q for the
quarter ended September 30, 1999, File No. 1-8841)
*10(n) Employment Agreement between FPL Group and Lewis Hay, III, dated x
as of September 13, 1999 (filed as Exhibit 10(d) to Form 10-Q for the
quarter ended September 30, 1999, File No. 1-8841)
*10(o) Employment Agreement between FPL Group and Lawrence J. Kelleher, amended x
and restated as of May 10, 1999 (filed as Exhibit 10(e) to Form 10-Q for the
quarter ended September 30, 1999, File No. 1-8841)
*10(p) Employment Agreement between FPL Group and Thomas F. Plunkett, amended and x
restated as of May 10, 1999 (filed as Exhibit 10(f) to Form 10-Q for the
quarter ended September 30, 1999, File No. 1-8841)
*10(q) Employment Agreement between FPL Group and Armando J. Olivera, dated as x
of June 12, 2000 (filed as Exhibit 10(a) to Form 10-Q for the quarter
ended June 30, 2000, File No. 1-8841)
*10(r) Employment Agreement between FPL Group and Antonio Rodriguez, dated as x
of June 12, 2000 (filed as Exhibit 10(b) to Form 10-Q for the quarter
ended June 30, 2000, File No. 1-8841)
*10(s) FPL Group, Inc. Non-Employee Directors Stock Plan dated as of March 17, x
1997 (filed as Appendix A to FPL Group's 1997 Proxy Statement, File No.
1-8841)
*10(t) Employment Agreement dated as of July 30, 2000, between WCB Holding x x
Corp. and James L. Broadhead (filed as Exhibit 10.1 to both FPL Group's
Form 8-K dated July 31, 2000, File No. 1-8841 and FPL's Form 8-K dated
August 3, 2000, File No. 1-3545)
*10(u) Employment Agreement dated as of July 30, 2000 between WCB Holding Corp. x x
and J. Wayne Leonard (filed as Exhibit 10.2 to both FPL Group's Form 8-K
dated July 31, 2000, File No. 1-8841 and FPL's Form 8-K dated August 3,
2000, File No. 1-3545)
10(v) Retention Bonus Plan dated November 6, 2000 x
10(w) Form of Split Dollar Agreement between FPL Group and each of x
James L. Broadhead, Dennis P. Coyle, Paul J. Evanson,
Lewis Hay, III, Lawrence J. Kelleher and Thomas F. Plunket
12(a) Computation of Ratio of Earnings to Fixed Charges x
12(b) Computation of Ratios x
21 Subsidiaries of the Registrant x
23 Independent Auditors' Consent x x
____________________
* Incorporated herein by reference
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed with the Securities
Exchange Commission on November 2, 2000 by FPL Group and FPL
reporting one event under Items 5. Other Events.
A Current Report on Form 8-K was filed with the Securities
Exchange Commission on December 15, 2000 by FPL Group and FPL
reporting one event under Items 5. Other Events.
FPL GROUP, INC. SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FPL Group, Inc.
JAMES L. BROADHEAD
James L. Broadhead
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer and Director)
Date: March 5, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature and Title as of March 5, 2001:
K. MICHAEL DAVIS
K. Michael Davis
Controller and Chief Accounting Officer
(Principal Financial and Accounting Officer)
Directors:
H. JESSE ARNELLE WILLARD D. DOVER
H. Jesse Arnelle Willard D. Dover
ALEXANDER W. DREYFOOS. JR
Sherry S. Barrat Alexander W. Dreyfoos Jr.
ROBERT M. BEALL, III PAUL J. EVANSON
Robert M. Beall, II Paul J. Evanson
J. HYATT BROWN FREDERIC V. MALEK
J. Hyatt Brown Frederic V. Malek
ARMANDO M. CODINA PAUL R. TREGURTHA
Armando M. Codina Paul R. Tregurtha
MARCHALL M. CRISER
Marshall M. Criser
FLORIDA POWER & LIGHT COMPANY SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Florida Power & Light Company
PAUL J. EVANSON
Paul J. Evanson
President and Director
Date: March 5, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature and Title as of March 5, 2001:
JAMES L. BROADHEAD
James L. Broadhead
Chairman of the Board
(Principal Executive Officer and Director)
K. MICHAEL DAVIS
K. Michael Davis
Vice President, Accounting,
Controller and Chief Accounting Officer
(Principal Financial and Accounting Officer)
Directors:
DENNIS P. COYLE THOMAS F. PLUNKETT
Dennis P. Coyle Thomas F. Plunkett
LAWRENCE J. KELLEHER ANTONIO RODRIGUEZ
Lawrence J. Kelleher Antonio Rodriguez
ARMANDO J. OLIVERA
Armando J. Olivera
EXHIBIT 12(a)
FPL GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years Ended December 31,
2000 1999 1998 1997 1996
(Millions of Dollars)
Earnings, as defined:
Net income ............................................ $ 704 $ 697 $ 664 $ 618 $ 579
Income taxes .......................................... 336 323 279 304 294
Fixed charges, included in the determination of
net income, as below ................................ 296 234 335 304 283
Distributed income of independent power investments.... 80 75 68 47 38
Less: Equity in earnings of independent power
investments ......................................... 45 50 39 14 5
Total earnings, as defined ........................ $1,371 $1,279 $1,307 $1,259 $1,189
Fixed charges, as defined:
Interest charges ...................................... $ 278 $ 222 $ 322 $ 291 $ 267
Rental interest factor ................................ 9 4 4 4 5
Fixed charges included in nuclear fuel cost ........... 9 8 9 9 11
Fixed charges, included in the determination of net
income .............................................. 296 234 335 304 283
Capitalized interest .................................. 23 9 2 4 -
Total fixed charges, as defined ................... $ 319 $ 243 $ 337 $ 308 $ 283
Ratio of earnings to fixed charges ...................... 4.30 5.26 3.88 4.09 4.20
EXHIBIT 12(b)
FLORIDA POWER & LIGHT COMPANY
COMPUTATION OF RATIOS
Years Ended December 31,
2000 1999 1998 1997 1996
(Millions of Dollars)
RATIO OF EARNINGS TO FIXED CHARGES
Earnings, as defined:
Net income .................................................... $ 622 $ 591 $ 631 $ 627 $ 615
Income taxes .................................................. 341 324 349 321 322
Fixed charges, as below ....................................... 192 174 209 240 262
Total earnings, as defined .................................. $1,155 $1,089 $1,189 $1,188 $1,199
Fixed charges, as defined:
Interest charges .............................................. $ 176 $ 163 $ 196 $ 227 $ 246
Rental interest factor ........................................ 7 3 4 4 5
Fixed charges included in nuclear fuel cost ................... 9 8 9 9 11
Total fixed charges, as defined ............................. $ 192 $ 174 $ 209 $ 240 $ 262
Ratio of earnings to fixed charges .............................. 6.02 6.26 5.69 4.95 4.58
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Earnings, as defined:
Net income .................................................... $ 622 $ 591 $ 631 $ 627 $ 615
Income taxes .................................................. 341 324 349 321 322
Fixed charges, as below ....................................... 192 174 209 240 262
Total earnings, as defined .................................. $1,155 $1,089 $1,189 $1,188 $1,199
Fixed charges, as defined:
Interest charges .............................................. $ 176 $ 163 $ 196 $ 227 $ 246
Rental interest factor ........................................ 7 3 4 4 5
Fixed charges included in nuclear fuel cost ................... 9 8 9 9 11
Total fixed charges, as defined ............................. 192 174 209 240 262
Non-tax deductible preferred stock dividends .................... 15 15 15 19 24
Ratio of income before income taxes to net income ............... 1.55 1.55 1.55 1.51 1.52
Preferred stock dividends before income taxes ................... 23 23 23 29 36
Combined fixed charges and preferred stock dividends ............ $ 215 $ 197 $ 232 $ 269 $ 298
Ratio of earnings to combined fixed charges
and preferred stock dividends ................................. 5.37 5.53 5.13 4.42 4.02
EXHIBIT 21
SUBSIDIARIES OF FPL GROUP, INC.
State or Jurisdiction
Subsidiary of Incorporation
1. Florida Power & Light Company (100%-Owned) ............................................. Florida
2. Bay Loan and Investment Bank (a) ....................................................... Rhode Island
3. Palms Insurance Company, Limited (a) ................................................... Cayman Islands
____________________
(a) 100%-owned subsidiary of FPL Group Capital Inc
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-56869 on Form S-3; Registration Statement No. 33-57673 on Form S-8;
Post-Effective Amendment No. 2 to Registration Statement No. 33-31487 on
Form S-8; Post-Effective Amendment No. 2 to Registration Statement No. 33-
33215 on Form S-8; Registration Statement No. 33-11631 on Form S-8; Post-
Effective Amendment No. 1 to Registration Statement No. 33-39306 on Form S-
3; Registration Statement No. 33-57470 on Form S-3; Registration Statement
No. 333-27079 on Form S-8; Registration Statement No. 333-30695 on Form S-
8; Registration Statement No. 333-30697 on Form S-8; Registration Statement
No. 333-87869 on Form S-8; Registration Statement No. 333-87941 on Form S-
3; Registration Statement No. 333-88067 on Form S-8; Post-Effective
Amendment No. 1 to Registration Statement No. 333-79305 on Form S-8 and
Registration Statement No. 333-39270 on Form S-3 of FPL Group, Inc., of our
report dated February 9, 2001, appearing in this Annual Report on Form 10-K
of FPL Group, Inc. for the year ended December 31, 2000.
We also consent to the incorporation by reference in Registration Statement
No. 33-40123 on Form S-3 and Post-Effective Amendment No. 1 to Registration
Statement No. 33-46076 on Form S-3 of Florida Power & Light Company, of our
report dated February 9, 2001, appearing in this Annual Report on Form 10-K
of Florida Power & Light Company for the year ended December 31, 2000.
We also consent to the incorporation by reference in Registration Statement
No. 333-87941-01 on Form S-3 and Registration Statement No. 333-39270-01 on
Form S-3 of FPL Group Capital Inc, of our report dated February 9, 2001,
appearing in this Annual Report on Form 10-K of FPL Group, Inc. for the
year ended December 31, 2000.
DELOITTE & TOUCHE LLP
Miami, Florida
March 5, 2001