UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified IRS Employer
Commission in their charters, address of principal Identification
File Number executive offices and Registrants' telephone number 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
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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each class of FPL Group, Inc. common
stock, as of the latest practicable date: Common Stock, $.01 par value,
outstanding at March 31, 2001: 175,857,570 shares.
As of March 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.
______________________________
This combined Form 10-Q 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.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), FPL Group, Inc. (FPL Group) and
Florida Power & Light Company (FPL) (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 in this combined Form 10-Q, 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 Federal Energy Regulatory
Commission (FERC), the Florida Public Service Commission (FPSC), the Public
Utility Regulatory Policies Act of 1978, as amended (PURPA), the Public
Utility Holding Company Act of 1935, as amended, and the U. S. Nuclear
Regulatory Commission, with respect to allowed rates of return including
but not limited to return on common equity 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 - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
(unaudited)
Three Months Ended
March 31,
2001 2000
OPERATING REVENUES .................................................................. $1,941 $1,468
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................................. 951 542
Other operations and maintenance................................................... 310 285
Merger-related .................................................................... 31 -
Depreciation and amortization ..................................................... 240 259
Taxes other than income taxes ..................................................... 169 145
Total operating expenses ........................................................ 1,701 1,231
OPERATING INCOME .................................................................... 240 237
OTHER INCOME (DEDUCTIONS):
Interest charges .................................................................. (85) (62)
Preferred stock dividends - FPL ................................................... (4) (4)
Other - net ....................................................................... 15 7
Total other deductions - net .................................................... (74) (59)
INCOME BEFORE INCOME TAXES .......................................................... 166 178
INCOME TAXES ........................................................................ 56 57
NET INCOME .......................................................................... $ 110 $ 121
Earnings per share of common stock (basic and assuming dilution)..................... $ 0.65 $ 0.71
Dividends per share of common stock ................................................. $ 0.56 $ 0.54
Weighted-average number of common shares outstanding:
Basic ............................................................................. 169 170
Assuming dilution ................................................................. 169 171
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements herein and the Notes to Consolidated
Financial Statements appearing in the combined Annual Report on Form 10-K/A
for the fiscal year ended December 31, 2000 (2000 Form 10-K) for FPL Group
and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
March 31, December 31,
2001 2000
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property,
including nuclear fuel and construction work in progress ....................... $21,429 $21,022
Less accumulated depreciation and amortization ................................... (11,290) (11,088)
Total property, plant and equipment - net ...................................... 10,139 9,934
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 109 129
Customer receivables, net of allowance of $5 and $7, respectively................. 619 637
Materials, supplies and fossil fuel inventory - at average cost .................. 340 370
Deferred clause expenses ......................................................... 458 337
Other ............................................................................ 268 308
Total current assets ........................................................... 1,794 1,781
OTHER ASSETS:
Special use funds of FPL ......................................................... 1,558 1,497
Other investments ................................................................ 686 651
Other ............................................................................ 1,486 1,437
Total other assets ............................................................. 3,730 3,585
TOTAL ASSETS ....................................................................... $15,663 $15,300
CAPITALIZATION:
Common stock ..................................................................... $ 2 $ 2
Additional paid-in capital........................................................ 2,790 2,788
Retained earnings................................................................. 2,819 2,803
Accumulated other comprehensive income ........................................... 13 -
Total common shareholders' equity............................................... 5,624 5,593
Preferred stock of FPL without sinking fund requirements ......................... 226 226
Long-term debt ................................................................... 3,977 3,976
Total capitalization ........................................................... 9,827 9,795
CURRENT LIABILITIES:
Debt due within one year ......................................................... 1,385 1,223
Accounts payable ................................................................. 525 564
Accrued interest, taxes and other ................................................ 1,063 976
Total current liabilities ...................................................... 2,973 2,763
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,467 1,378
Unamortized regulatory and investment tax credits ................................ 258 269
Other ............................................................................ 1,138 1,095
Total other liabilities and deferred credits ................................... 2,863 2,742
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $15,663 $15,300
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements herein and the Notes to Consolidated
Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
Three Months Ended
March 31,
2001 2000
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 533 $ 480
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ......................................................... (333) (301)
Independent power investments ....................................................... (235) (81)
Other - net ......................................................................... (52) (29)
Net cash used in investing activities ........................................... (620) (411)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt ........................................................ (66) -
Increase (decrease) in commercial paper ............................................. 227 (218)
Repurchase of common stock .......................................................... - (16)
Dividends on common stock ........................................................... (94) (92)
Net cash provided by (used in) financing activities ............................. 67 (326)
Net decrease in cash and cash equivalents ............................................. (20) (257)
Cash and cash equivalents at beginning of period ...................................... 129 361
Cash and cash equivalents at end of period ............................................ $ 109 $ 104
Supplemental disclosures of cash flow information:
Cash paid for interest (net of amount capitalized)................................... $ 64 $ 53
Cash paid for income taxes .......................................................... $ - $ 17
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 18 $ 17
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements herein and the Notes to Consolidated
Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions)
(unaudited)
Three Months Ended
March 31,
2001 2000
OPERATING REVENUES ......................................................................... $1,647 $1,338
OPERATING EXPENSES:
Fuel, purchased power and interchange .................................................... 763 501
Other operations and maintenance ......................................................... 253 237
Merger-related ........................................................................... 26 -
Depreciation and amortization ............................................................ 223 247
Income taxes ............................................................................. 62 60
Taxes other than income taxes ............................................................ 164 142
Total operating expenses ............................................................... 1,491 1,187
OPERATING INCOME ........................................................................... 156 151
OTHER INCOME (DEDUCTIONS):
Interest charges ......................................................................... (53) (40)
Other - net .............................................................................. (2) (1)
Total other deductions - net ........................................................... (55) (41)
NET INCOME ................................................................................. 101 110
PREFERRED STOCK DIVIDENDS .................................................................. 4 4
NET INCOME AVAILABLE TO FPL GROUP .......................................................... $ 97 $ 106
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements herein and the Notes to Consolidated
Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
March 31, December 31,
2001 2000
ELECTRIC UTILITY PLANT:
Plant in service, including nuclear fuel and construction work in progress ....... $19,265 $19,033
Less accumulated depreciation and amortization ................................... (11,104) (10,919)
Electric utility plant - net ................................................... 8,161 8,114
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 12 66
Customer receivables, net of allowance of $5 and $7, respectively................. 504 489
Materials, supplies and fossil fuel inventory - at average cost .................. 303 313
Deferred clause expenses ......................................................... 458 337
Other ............................................................................ 117 211
Total current assets ........................................................... 1,394 1,416
OTHER ASSETS:
Special use funds ................................................................ 1,558 1,497
Other ............................................................................ 961 993
Total other assets ............................................................. 2,519 2,490
TOTAL ASSETS ....................................................................... $12,074 $12,020
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 5,346 $ 5,032
Preferred stock without sinking fund requirements ................................ 226 226
Long-term debt ................................................................... 2,577 2,577
Total capitalization ........................................................... 8,149 7,835
CURRENT LIABILITIES:
Debt due within one year ......................................................... 200 625
Accounts payable ................................................................. 449 458
Accrued interest, taxes and other ................................................ 929 859
Total current liabilities ...................................................... 1,578 1,942
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,162 1,084
Unamortized regulatory and investment tax credits ................................ 258 269
Other ............................................................................ 927 890
Total other liabilities and deferred credits ................................... 2,347 2,243
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,074 $12,020
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements herein and the Notes to Consolidated
Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
Three Months Ended
March 31,
2001 2000
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 502 $ 516
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (333) (301)
Other - net ......................................................................... (10) (26)
Net cash used in investing activities ........................................... (343) (327)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt ........................................................ (66) -
Decrease in commercial paper ........................................................ (360) (78)
Dividends ........................................................................... (87) (102)
Capital contributions from FPL Group ................................................ 300 -
Net cash used in financing activities ............................................. (213) (180)
Net increase (decrease) in cash and cash equivalents .................................. (54) 9
Cash and cash equivalents at beginning of period ...................................... 66 -
Cash and cash equivalents at end of period ............................................ $ 12 $ 9
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 30 $ 27
Cash received for income taxes - net ................................................ $ 39 $ 42
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 18 $ 17
Transfer of net assets to FPL FiberNet, LLC ......................................... $ - $ 100
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements herein and the Notes to Consolidated
Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL.
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The accompanying condensed consolidated financial statements should be read
in conjunction with the 2000 Form 10-K for FPL Group and FPL. In the opinion
of FPL Group and FPL management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair financial statement
presentation have been made. Certain amounts included in the prior year's
consolidated financial statements have been reclassified to conform to the
current year's presentation. The results of operations for an interim period
may not give a true indication of results for the year.
1. Accounting for Derivative Instruments and Hedging Activities
Effective January 1, 2001, FPL Group and FPL adopted Statement of Financial
Accounting Standards No. (FAS) 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by FAS 137 and 138 (collectively, FAS
133). As a result, beginning in January 2001, derivative instruments are
recorded on FPL Group's and FPL's balance sheets as either an asset or
liability (in other current assets, other assets, other current liabilities
and other liabilities) measured at fair value. FPL Group and FPL use
derivative instruments (primarily swaps, options and futures) to manage the
commodity price risk inherent in fuel purchases and electricity sales, as
well as to optimize the value of power generation assets.
At FPL, changes in fair value are deferred as a regulatory asset or
liability until the contracts are settled. Upon settlement, any gains or
losses will be passed through the fuel and capacity cost recovery clauses.
For FPL Group's unregulated operations, predominantly FPL Energy, LLC (FPL
Energy), changes in the derivatives' fair value are recognized currently in
earnings (in other-net) unless hedge accounting is applied. While
substantially all of FPL Energy's derivative transactions are entered into
for the purposes described above, hedge accounting is only applied where
specific criteria are met and it is practicable to do so. In order to
apply hedge accounting, the transaction must be designated as a hedge and
it must be highly effective. The hedging instrument's effectiveness is
assessed utilizing regression analysis at the inception of the hedge and on
at least a quarterly basis throughout its life. Hedges are considered
highly effective when a correlation coefficient of .8 or higher is
achieved. Substantially all of the transactions that FPL Group has
designated as hedges are cash flow hedges. The effective portion of the
gain or loss on a derivative instrument designated as a cash flow hedge is
reported as a component of other comprehensive income and is reclassified
into earnings in the period(s) during which the transaction being hedged
affects earnings. The ineffective portion of these hedges flows through
earnings in the current period. Settlement gains and losses are included
within the line items in the statements of income to which they relate.
In January 2001, FPL Group recorded in other-net 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. For those contracts where hedge
accounting was applied, the adoption of the new rules resulted in a credit
of approximately $10 million to other comprehensive income for FPL Group.
Included in FPL Group's accumulated other comprehensive income at March 31,
2001 is approximately $13 million of net unrealized gains associated with
hedges of forecasted fuel purchases through December 2003. See Note 2 -
Other. Approximately $4 million of FPL's Group's accumulated other
comprehensive income at March 31, 2001 will be reclassified into earnings
within the next 12 months as the hedged fuel is consumed.
In April 2001, the Financial Accounting Standards Board (FASB) reached
tentative conclusions on several issues related to the power generation
industry. After considering comments on the tentative conclusions, the
FASB will issue final guidance that would be applied in the quarter
following final resolution of the 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 values each reporting period. At this
time, management is unable to estimate the effects on the financial
statements of the tentative conclusions or any future decisions of the
FASB.
2. Capitalization
FPL Group Common Stock - In April 2001, FPL Group's $570 million share
repurchase program authorized in connection with the merger agreement with
Entergy Corporation was terminated. As of March 31, 2001, FPL Group had
repurchased a total of approximately 4.6 million shares of common stock under
the 10 million share repurchase program that began in April 1997.
Long-Term Debt - In February 2001, FPL redeemed approximately $65 million
principal amount of solid waste disposal revenue refunding bonds,
consisting of $16 million bearing interest at 7.15% and maturing 2023 and
$49 million with variable rate interest maturing in 2025.
Long-Term Incentive Plan - Performance shares and options granted to date
under FPL Group's long-term incentive plan resulted in assumed incremental
shares of common stock outstanding for purposes of computing diluted earnings
per share for the three months ended March 31, 2001 and 2000. These
incremental shares were not material in the periods presented and did not
cause diluted earnings per share to differ from basic earnings per share.
Other - Comprehensive income of FPL Group, totaling $123 million and $121
million for the three months ended March 31, 2001 and 2000, respectively,
includes net income, changes in unrealized gains and losses on securities and
foreign currency translation adjustments. For the three months ended March
31, 2001, comprehensive income also includes approximately $13 million of net
unrealized gains on qualifying cash flow hedges. Accumulated other
comprehensive income is separately displayed in the condensed consolidated
balance sheets of FPL Group.
3. 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, of which $289 million had been spent through
March 31, 2001. As of March 31, 2001, FPL Energy has made commitments in
connection with the development and expansion of independent power projects
totaling approximately $500 million. Subsidiaries of FPL Group, other than
FPL, have guaranteed approximately $900 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 $239 million at
March 31, 2001, 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 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. In addition, FPL Energy has
entered into a contract to purchase 866 wind turbines through 2001. FPL
Energy has also entered into various engineering, procurement and
construction contracts to support its development activities through 2003.
These contracts are intended to support expansion primarily at FPL Energy,
and the related commitments 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 under these contracts for the
remainder of 2001 (April-December) and for 2002-2005 are estimated to be as
follows:
2001 2002 2003 2004 2005
(millions)
FPL:
Capacity payments:
JEA and Southern Companies .......................................... $150 $200 $200 $200 $200
Qualifying facilities ............................................... $240 $330 $340 $350 $340
Minimum payments, at projected prices:
Natural gas, including transportation ............................... $725 $870 $710 $660 $625
Coal ................................................................ $ 35 $ 45 $ 20 $ 10 $ 10
Oil ................................................................. $205 $ 10 $ - $ - $ -
FPL Energy:
Natural gas, including transportation and storage ................... $ 15 $ 20 $ 15 $ 15 $ 15
Charges under these contracts were as follows:
Three Months Ended March 31,
2001 Charges 2000 Charges
Energy/ Energy/
Capacity Fuel Capacity Fuel
(millions)
FPL:
JEA and Southern Companies ......................... $51(a) $ 40(b) $50(a) $31(b)
Qualifying facilities .............................. $77(c) $ 33(b) $79(c) $32(b)
Natural gas, including transportation .............. $ - $201(b) $ - $82(b)
Coal ............................................... $ - $ 12(b) $ - $11(b)
Oil ................................................ $ - $ 98(b) $ - $21(b)
FPL Energy:
Natural gas transportation and storage ............. $ - $ 4 $ - $ 4
_______________
(a) Recovered through base rates and the capacity cost recovery clause (capacity clause).
(b) Recovered through the fuel and purchased power cost recovery clause.
(c) Recovered 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. In March 2001, the court granted the EPA's motion
for leave to file an amended complaint that would extend the suit to
another Southern Company subsidiary and other 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). Under the amended
complaint, 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. At this time, the EPA has not yet filed its amended
complaint and hence Georgia Power Company has not had occasion to answer.
In April 2001, the court strongly recommended to the parties that this case
be administratively terminated until the Eleventh Circuit Court of Appeals
rules on a pending appeal of an EPA order under the Clean Air Act involving
the Tennesee Valley Authority (TVA). The EPA and Georgia Power Company
have stated that they do not object to administrative termination, although
the EPA asserts that the case should be reopened when its motion for
consolidation of several Clean Air Act cases is decided by a Multi-District
Litigation panel rather than at the conclusion of the TVA appeal.
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 partnerships).
The federal circuit court of appeals' decision invalidated the FERC's so-
called essential fixed assets standard, which permitted 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. In August 2000, the
partnerships filed motions to intervene and protest before the FERC,
vigorously objecting to the position taken by SCE in its petition. The
partnerships contend that they have always operated the solar facilities in
accordance with certification orders issued to them 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 fully in
effect. Briefing in this proceeding is complete and the parties are
currently awaiting a final determination from the FERC.
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.
4. 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 segment
information is as follows:
Three Months Ended March 31,
2001 2000
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy & Other Total
(millions)
Operating revenues ..... $ 1,647 $ 264 $ 30 $ 1,941 $ 1,338 $ 107 $ 23 $ 1,468
Net income (a).......... $ 97 $ 18 $ (5) $ 110 $ 106 $ 15 $ - $ 121
March 31, 2001 December 31, 2000
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy & Other Total
(millions)
Total assets ........... $12,074 $2,910 $ 679 $15,663 $12,020 $2,679 $601 $15,300
(a) Includes merger-related expense in 2001 of $19 million after-tax, of
which $16 million was recognized by FPL and $3 million by Corporate
and Other.
5. 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
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
FPL FPL Group FPL FPL Group
FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated
(millions)
Operating revenues ................... $ - $ 294 $ 1,647 $ 1,941 $ - $ 130 $ 1,338 $ 1,468
Operating expenses ................... - (271) (1,430) (1,701) - (105) (1,126) (1,231)
Interest charges ..................... (7) (31) (47) (85) (8) (22) (32) (62)
Other income (deductions) - net ...... 114 30 (133) 11 126 19 (142) 3
Income before income taxes ........... 107 22 37 166 118 22 38 178
Income tax expense (benefit) ......... (3) 1 58 56 (3) 2 58 57
Net income (loss) .................... $ 110 $ 21 $ (21) $ 110 $ 121 $ 20 $ (20) $ 121
(a) Represents FPL, other subsidiaries and consolidating adjustments.
Condensed Consolidating Balance Sheets
March 31, 2001 December 31, 2000
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 .......................... $ - $ 2,159 $19,270 $21,429 $ - $1,984 $19,038 $21,022
Less accumulated depreciation and
amortization ............................ - (186) (11,104) (11,290) - (170) (10,918) (11,088)
Total property, plant and equipment - net - 1,973 8,166 10,139 - 1,814 8,120 9,934
CURRENT ASSETS:
Cash and cash equivalents ................. 6 91 12 109 12 51 66 129
Receivables ............................... 18 731 85 834 56 418 409 883
Other ..................................... 1 42 808 851 - 66 703 769
Total current assets .................... 25 864 905 1,794 68 535 1,178 1,781
OTHER ASSETS:
Investment in subsidiaries ................ 6,315 - (6,315) - 5,967 - (5,967) -
Other ..................................... 124 1,495 2,111 3,730 141 1,365 2,079 3,585
Total other assets ...................... 6,439 1,495 (4,204) 3,730 6,108 1,365 (3,888) 3,585
TOTAL ASSETS ................................ $ 6,464 $ 4,332 $ 4,867 $15,663 $ 6,176 $3,714 $ 5,410 $15,300
CAPITALIZATION:
Common shareholders' equity ............... $ 5,624 $ 969 $ (969) $ 5,624 $ 5,593 $ 935 $ (935) $ 5,593
Preferred stock of FPL without
sinking fund requirements ............... - - 226 226 - - 226 226
Long-term debt ............................ - 1,400 2,577 3,977 - 1,400 2,576 3,976
Total capitalization .................... 5,624 2,369 1,834 9,827 5,593 2,335 1,867 9,795
CURRENT LIABILITIES:
Accounts payable and commercial paper ..... - 1,261 649 1,910 - 705 1,017 1,722
Other ..................................... 731 191 141 1,063 467 186 388 1,041
Total current liabilities ............... 731 1,452 790 2,973 467 891 1,405 2,763
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes and
unamortized tax credits ................. - 408 1,317 1,725 - 399 1,248 1,647
Other ..................................... 109 103 926 1,138 116 89 890 1,095
Total other liabilities and deferred
credits ............................... 109 511 2,243 2,863 116 488 2,138 2,742
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ........ $ 6,464 $ 4,332 $ 4,867 $15,663 $ 6,176 $3,714 $ 5,410 $15,300
(a) Represents FPL, other subsidiaries and consolidating adjustments.
Condensed Consolidating Statements of Cash Flows
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
FPL FPL Group FPL FPL Group
FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated
(millions)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ..................... $ 388 $(269) $ 414 $ 533 $ 127 $ (61) $ 414 $ 480
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and independent
power investments ....................... - (235) (333) (568) - (81) (301) (382)
Capital contributions to FPL............... (300) - 300 - - - - -
Other - net ............................... - (43) (9) (52) 3 (4) (28) (29)
Net cash provided by (used in)
investing activities .................. (300) (278) (42) (620) 3 (85) (329) (411)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt .............. - - (66) (66) - - - -
Increase (decrease) in commercial paper.... - 587 (360) 227 - (140) (78) (218)
Repurchases of common stock ............... - - - - (16) - - (16)
Dividends ................................. (94) - - (94) (92) - - (92)
Net cash provided by (used in)
financing activities .................. (94) 587 (426) 67 (108) (140) (78) (326)
Net increase (decrease) in cash and
cash equivalents .......................... (6) 40 (54) (20) 22 (286) 7 (257)
Cash and cash equivalents at beginning
of period.................................. 12 51 66 129 (16) 376 1 361
Cash and cash equivalents at end of period... $ 6 $ 91 $ 12 $ 109 $ 6 $ 90 $ 8 $ 104
(a) Represents FPL, other subsidiaries and consolidating adjustments.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements contained herein and Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Management's Discussion) appearing in the 2000 Form 10-K for FPL Group and
FPL. The results of operations for an interim period may not give a true
indication of results for the year. In the following discussion, all
comparisons are with the corresponding items in the prior year.
RESULTS OF OPERATIONS
FPL Group's earnings improved in the first quarter of 2001, excluding
expenses related to the proposed merger with Entergy Corporation, which was
terminated in April 2001. Earnings growth at both FPL and FPL Energy
contributed to the improvement. FPL Group's earnings for the quarter ended
March 31, 2001 include the effect of the adoption of FAS 133, which became
effective January 1, 2001. The impact of FAS 133 negatively impacted FPL
Energy's earnings for the quarter by approximately $1 million. For
additional information regarding FAS 133, see Note 1. FPL Group recorded
$31 million ($19 million after-tax) for merger-related expenses in the
first quarter of 2001, of which $26 million ($16 million after-tax) relates
to FPL and $5 million ($3 million after-tax) relates to the Corporate and
Other segment. The discussion of results of operations below excludes the
effect of merger-related expenses.
FPL - FPL's net income for the three months ended March 31, 2001 improved
mainly due to higher energy sales and lower depreciation expense, partially
offset by the effect of the rate reduction agreement, higher other
operations and maintenance expense (O&M) and higher interest charges.
During the first quarter of 2001, usage per retail customer was up 5.7% due
to cold weather conditions in January, and the number of customer accounts
increased 2.4% for the same period. As a result, revenues from retail base
operations, net of an increase in the revenue refund provision of
approximately $40 million, increased to $758 million for the first quarter
of 2001 from $730 million for the same period last year. At March 31,
2001, FPL has accrued approximately $97 million associated with refunds to
retail customers for the twelve-month period ending April 14, 2001 under
the rate reduction agreement. Depreciation expense declined during the
quarter ended March 31, 2001 reflecting lower special depreciation allowed
under the rate reduction agreement. FPL's O&M expense increased primarily
due to the timing of some planned outages at its fossil plants. Interest
expense increased due to higher debt balances required to fund FPL's
capital expansion and under-recovered fuel costs.
In January 2001, the Energy 2020 Study Commission issued a proposal for
restructuring Florida's wholesale electricity market anticipating that the
proposal would be considered in the 2001 legislative session. In May 2001,
the Florida legislative session ended with no action taken on the
commission's proposal. The commission is scheduled to develop a
recommendation addressing retail competition by the end of 2001. Both
wholesale and retail competition issues may then be addressed at the 2002
legislative session.
On May 3, 2001, the FPSC staff recommended to the FPSC that it require FPL
to submit minimum filing requirements, based on a 2002 projected calendar
year, by August 15, 2001 to initiate a base rate proceeding regarding FPL's
future rates. The FPSC staff has asked the FPSC to consider its
recommendation on May 15, 2001. FPL's current rate agreement will remain
in effect until April 15, 2002. The FPSC staff expressed concerns in its
recommendation related to FPL's plans to participate in the creation of an
independent transmission company along with other major utilities in
Florida. FPL has been proceeding to meet the FERC's Order 2000 to
establish a regional transmission organization (RTO), but may have to re-
evaluate its plans in light of the FPSC staff's expressed concerns.
FPL Energy - FPL Energy's net income for the three months ended March 31,
2001 benefited from a power generation portfolio with approximately 1,000
more megawatts in operation and strong performance from the wind projects.
FPL Energy's portfolio growth is expected to continue to grow. FPL Energy
is currently constructing or has announced construction plans for 11 plants
that would add more than 5,300 mw by the end of 2003.
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. 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. On April 6, 2001, Pacific Gas &
Electric Company (PG&E) filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. FPL Energy's projects have not received the majority of
payments due from California utilities for electricity sold from November
2000 through March 2001. FPL Group's earnings exposure relating to these
receivables at March 31, 2001 was approximately $17 million. All of FPL
Energy's California projects have received payment for April 2001
electricity sales, and the California utilities have stated that they
intend to pay qualifying facilities on a prospective basis. At March 31,
2001, FPL Energy's net investment in California projects was approximately
$250 million. It is impossible to predict what the outcome of the situation
in California will be or its effect, if any, on FPL Group's financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
For information concerning capital commitments, see Note 3 - Commitments.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3. Legal Proceedings in the 2000 Form 10-K for
FPL Group and FPL.
In March 2001, the U.S. District Court for the Northern District of Georgia
granted the EPA's motion for leave to file an amended complaint that would
extend the suit filed in 1999 against Georgia Power Company and other
subsidiaries of the Southern Company to another Southern Company subsidiary
and other 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). Under the amended complaint, 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. At this time,
the EPA has not yet filed its amended complaint and hence Georgia Power
Company has not had occasion to answer. In April 2001, the Court strongly
recommended to the parties that this case be administratively terminated
until the Eleventh Circuit Court of Appeals rules on a pending appeal of an
EPA order under the Clean Air Act involving the TVA. The EPA and Georgia
Power Company have stated that they do not object to administrative
termination, although the EPA asserts that the case should be reopened when
its motion for consolidation of several Clean Air Act cases is decided by a
Multi-District Litigation panel rather than at the conclusion of the TVA
appeal.
In August 2000, the SEGS VIII and SEGS IX facilities filed motions to
intervene and protest, vigorously objecting to the position taken by SCE in
its petition filed with the FERC. Briefing in this proceeding has been
complete since September 2000, and the parties are currently awaiting a
final determination from the FERC.
Item 5. Other Information
Reference is made to Item 1. Business - FPL Operations - Retail Ratemaking
in the 2000 Form 10-K for FPL Group and FPL.
For information regarding the FPSC staff's recommendation to require FPL to
submit minimum filing requirements to initiate a base rate proceeding
regarding FPL's future rates, see Item 2. Management's Discussion - Results
of Operations - FPL.
Reference is made to Item 1. Business - FPL Operations - Competition in the
2000 Form 10-K for FPL Group and FPL.
For information regarding the Energy 2020 Study Commission, see Item 2.
Management's Discussion - Results of Operations - FPL.
On March 28, 2001, the FERC granted provisional RTO status to GridFlorida,
LLC. The RTO status is subject to FPL, Florida Power Corporation and Tampa
Electric Company filing the required modifications with the FERC within 60
days. For information regarding the FPSC staff's recommendation, see Item
2. Management's Discussion - Results of Operations - FPL.
Reference is made to Item 1. Business - FPL Energy Operations in the 2000
Form 10-K for FPL Group and FPL.
For information regarding FPL Energy's California projects, see Item 2.
Management's Discussion - Results of Operations - FPL Energy.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit FPL
Number Description Group FPL
12(a) Computation of Ratio of Earnings to Fixed Charges x
12(b) Computation of Ratios x
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed with the Securities and
Exchange Commission on January 22, 2001 by FPL Group and FPL
reporting one event under Item 5. Other Events.
A Current Report on Form 8-K was filed with the Securities and
Exchange Commission on March 19, 2001 by FPL Group and FPL reporting
one event under Item 5. Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FPL GROUP, INC.
FLORIDA POWER & LIGHT COMPANY
(Registrants)
Date: May 3, 2001
K. MICHAEL DAVIS
K. Michael Davis
Controller and Chief Accounting Officer of FPL Group, Inc.
Vice President, Accounting, Controller and
Chief Accounting Officer of Florida Power & Light Company
(Principal Financial and Accounting Officer of the Registrants)
EXHIBIT 12(a)
FPL GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months
Ended
March 31,
2001
(millions)
Earnings, as defined:
Net income .............................................................................. $110
Income taxes ............................................................................ 56
Fixed charges, included in the determination of net income, as below .................... 89
Distributed income of independent power investments...................................... 2
Less: Equity in earnings of independent power investments ............................... 1
Total earnings, as defined ............................................................ $256
Fixed charges, as defined:
Interest charges ........................................................................ $ 85
Rental interest factor .................................................................. 2
Fixed charges included in nuclear fuel cost ............................................. 2
Fixed charges, included in the determination of net income .............................. 89
Capitalized interest .................................................................... 6
Total fixed charges, as defined ....................................................... $ 95
Ratio of earnings to fixed charges ........................................................ 2.69
EXHIBIT 12(b)
FLORIDA POWER & LIGHT COMPANY
COMPUTATION OF RATIOS
Three Months Ended
March 31, 2001
(millions)
RATIO OF EARNINGS TO FIXED CHARGES
Earnings, as defined:
Net income .............................................................................. $101
Income taxes ............................................................................ 59
Fixed charges, as below ................................................................. 56
Total earnings, as defined ............................................................ $216
Fixed charges, as defined:
Interest charges ........................................................................ $ 53
Rental interest factor .................................................................. 1
Fixed charges included in nuclear fuel cost ............................................. 2
Total fixed charges, as defined ....................................................... $ 56
Ratio of earnings to fixed charges ........................................................ 3.86
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Earnings, as defined:
Net income .............................................................................. $101
Income taxes ............................................................................ 59
Fixed charges, as below ................................................................. 56
Total earnings, as defined ............................................................ $216
Fixed charges, as defined:
Interest charges ........................................................................ $ 53
Rental interest factor .................................................................. 1
Fixed charges included in nuclear fuel cost ............................................. 2
Total fixed charges, as defined ....................................................... 56
Non-tax deductible preferred stock dividends .............................................. 4
Ratio of income before income taxes to net income ......................................... 1.58
Preferred stock dividends before income taxes ............................................. 6
Combined fixed charges and preferred stock dividends ...................................... $ 62
Ratio of earnings to combined fixed charges and preferred stock dividends ................. 3.48