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 June 30, 2001
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, address of principal IRS Employer
Commission executive offices and Identification
File Number 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 July 31, 2001: 175,872,617 shares.
As of July 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)
<table>
<caption>
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
<s> <c> <c> <c> <c>
OPERATING REVENUES ............................................... $2,166 $1,670 $4,107 $3,138
OPERATING EXPENSES:
Fuel, purchased power and interchange .......................... 1,054 605 2,005 1,146
Other operations and maintenance................................ 313 308 623 593
Merger-related ................................................. - - 30 -
Depreciation and amortization .................................. 245 266 485 525
Taxes other than income taxes .................................. 174 144 344 291
Total operating expenses ..................................... 1,786 1,323 3,487 2,555
OPERATING INCOME ................................................. 380 347 620 583
OTHER INCOME (DEDUCTIONS):
Interest charges ............................................... (82) (64) (167) (126)
Preferred stock dividends - FPL ................................ (4) (4) (7) (7)
Other - net .................................................... 34 26 48 34
Total other deductions - net ................................. (52) (42) (126) (99)
INCOME BEFORE INCOME TAXES ....................................... 328 305 494 484
INCOME TAXES ..................................................... 109 101 165 159
NET INCOME ....................................................... $ 219 $ 204 $ 329 $ 325
Earnings per share of common stock (basic and assuming dilution).. $ 1.30 $ 1.20 $ 1.95 $ 1.91
Dividends per share of common stock .............................. $ 0.56 $ 0.54 $ 1.12 $ 1.08
Weighted-average number of common shares outstanding:
Basic .......................................................... 169 170 169 170
Assuming dilution .............................................. 169 171 169 171
</table>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements (Notes) 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)
<table>
<caption>
June 30, December 31,
2001 2000
<s> <c> <c>
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property,
including nuclear fuel and construction work in progress ....................... $22,145 $21,022
Less accumulated depreciation and amortization ................................... (11,508) (11,088)
Total property, plant and equipment - net ...................................... 10,637 9,934
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 72 129
Customer receivables, net of allowances of $7 at each date ....................... 670 637
Materials, supplies and fossil fuel inventory - at average cost .................. 373 370
Deferred clause expenses ......................................................... 473 337
Other ............................................................................ 275 308
Total current assets ........................................................... 1,863 1,781
OTHER ASSETS:
Special use funds of FPL ......................................................... 1,585 1,497
Other investments ................................................................ 901 651
Other ............................................................................ 1,573 1,437
Total other assets ............................................................. 4,059 3,585
TOTAL ASSETS ....................................................................... $16,559 $15,300
CAPITALIZATION:
Common stock ..................................................................... $ 2 $ 2
Additional paid-in capital ....................................................... 2,798 2,788
Retained earnings ................................................................ 2,944 2,803
Accumulated other comprehensive income ........................................... 5 -
Total common shareholders' equity .............................................. 5,749 5,593
Preferred stock of FPL without sinking fund requirements ......................... 226 226
Long-term debt ................................................................... 4,474 3,976
Total capitalization ........................................................... 10,449 9,795
CURRENT LIABILITIES:
Debt due within one year ......................................................... 1,562 1,223
Accounts payable ................................................................. 622 564
Accrued interest, taxes and other ................................................ 1,127 976
Total current liabilities ...................................................... 3,311 2,763
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,398 1,378
Unamortized regulatory and investment tax credits ................................ 248 269
Other ............................................................................ 1,153 1,095
Total other liabilities and deferred credits ................................... 2,799 2,742
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $16,559 $15,300
</table>
This report should be read in conjunction with the Notes 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)
<table>
<caption>
Six Months Ended
June 30,
2001 2000
<s> <c> <c>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 849 $ 748
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ......................................................... (595) (660)
Independent power investments ....................................................... (899) (294)
Other - net ......................................................................... (55) (63)
Net cash used in investing activities ........................................... (1,549) (1,017)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt .......................................................... 493 145
Retirement of long-term debt ........................................................ (66) (149)
Increase in commercial paper ........................................................ 404 363
Repurchase of common stock .......................................................... - (34)
Dividends on common stock ........................................................... (188) (183)
Net cash provided by financing activities ....................................... 643 142
Net decrease in cash and cash equivalents ............................................. (57) (127)
Cash and cash equivalents at beginning of period ...................................... 129 361
Cash and cash equivalents at end of period ............................................ $ 72 $ 234
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 24 $ 22
</table>
This report should be read in conjunction with the Notes 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)
<table>
<caption>
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
<s> <c> <c> <c> <c>
OPERATING REVENUES ................................................. $1,935 $1,533 $3,582 $2,871
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................ 939 570 1,702 1,071
Other operations and maintenance ................................. 256 250 510 487
Merger-related ................................................... - - 26 -
Depreciation and amortization .................................... 226 254 449 501
Income taxes ..................................................... 107 101 169 161
Taxes other than income taxes .................................... 174 140 337 282
Total operating expenses ....................................... 1,702 1,315 3,193 2,502
OPERATING INCOME ................................................... 233 218 389 369
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................. (47) (42) (100) (82)
Other - net ...................................................... - - (2) (2)
Total other deductions - net ................................... (47) (42) (102) (84)
NET INCOME ......................................................... 186 176 287 285
PREFERRED STOCK DIVIDENDS .......................................... 4 4 7 7
NET INCOME AVAILABLE TO FPL GROUP .................................. $ 182 $ 172 $ 280 $ 278
</table>
This report should be read in conjunction with the Notes 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)
<table>
<caption>
June 30, December 31,
2001 2000
<s> <c> <c>
ELECTRIC UTILITY PLANT:
Plant in service, including nuclear fuel and construction work in progress ....... $19,475 $19,033
Less accumulated depreciation and amortization ................................... (11,307) (10,919)
Electric utility plant - net ................................................... 8,168 8,114
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 8 66
Customer receivables, net of allowances of $6 and $7, respectively................ 575 489
Materials, supplies and fossil fuel inventory - at average cost .................. 315 313
Deferred clause expenses ......................................................... 473 337
Other ............................................................................ 167 211
Total current assets ........................................................... 1,538 1,416
OTHER ASSETS:
Special use funds ................................................................ 1,585 1,497
Other ............................................................................ 920 993
Total other assets ............................................................. 2,505 2,490
TOTAL ASSETS ....................................................................... $12,211 $12,020
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 5,410 $ 5,032
Preferred stock without sinking fund requirements ................................ 226 226
Long-term debt ................................................................... 2,577 2,577
Total capitalization ........................................................... 8,213 7,835
CURRENT LIABILITIES:
Debt due within one year ......................................................... 192 625
Accounts payable ................................................................. 490 458
Accrued interest, taxes and other ................................................ 1,054 859
Total current liabilities ...................................................... 1,736 1,942
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,079 1,084
Unamortized regulatory and investment tax credits ................................ 248 269
Other ............................................................................ 935 890
Total other liabilities and deferred credits ................................... 2,262 2,243
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,211 $12,020
</table>
This report should be read in conjunction with the Notes 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)
<table>
<caption>
Six Months Ended
June 30,
2001 2000
<s> <c> <c>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 905 $ 722
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (595) (660)
Other - net ......................................................................... (24) (43)
Net cash used in investing activities ........................................... (619) (703)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt .......................................................... - 145
Retirement of long-term debt ........................................................ (66) (149)
Increase (decrease) in commercial paper ............................................. (368) 253
Dividends ........................................................................... (210) (225)
Capital contributions from FPL Group ................................................ 300 100
Net cash provided by (used in) financing activities ............................... (344) 124
Net increase (decrease) in cash and cash equivalents .................................. (58) 143
Cash and cash equivalents at beginning of period ...................................... 66 -
Cash and cash equivalents at end of period ............................................ $ 8 $ 143
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 24 $ 22
Transfer of net assets to FPL FiberNet, LLC ......................................... $ - $ 100
</table>
This report should be read in conjunction with the Notes 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. New Accounting Rules
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 purchased power cost recovery
clause (fuel clause) and the capacity cost recovery clause (capacity
clause).
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 June 30,
2001 is approximately $5 million of net unrealized gains associated with
cash flow hedges of forecasted fuel purchases through December 2003.
Approximately $1 million of FPL Group's accumulated other comprehensive
income at June 30, 2001 will be reclassified into earnings within the next
12 months as the hedged fuel is consumed. Within other comprehensive
income, approximately $8 million and $6 million represent the effective
portion of the net loss on cash flow hedges during the three and six months
ended June 30, 2001, respectively. See Note 3 - Other.
In June 2001, the Financial Accounting Standards Board (FASB) reached
conclusions on several derivative accounting issues related to the power
generation industry, which became effective July 1, 2001. Management is in
the process of evaluating the conclusions reached by the FASB and is unable
to estimate the effects, if any, on FPL Group's financial statements. One
possible result of the FASB's conclusions could be that certain power
purchase and power sales contracts will have to be recorded at fair value
with changes in fair value recorded in the income statement each reporting
period.
Goodwill and Other Intangible Assets - In July 2001, the FASB issued FAS
142, "Goodwill and Other Intangible Assets." Under this statement, the
amortization of goodwill will no longer be permitted. Instead, goodwill
will be assessed for impairment at least annually by applying a fair-value
based test. At June 30, 2001, FPL Group had approximately $380 million of
goodwill recorded in other assets. Management is in the process of
evaluating the impact of implementing FAS 142 and is unable to estimate the
effect, if any, on FPL Group's financial statements. FPL Group will be
required to adopt FAS 142 beginning in 2002.
2. Rate Matters
In May 2001, the FPSC ordered FPL to submit minimum filing requirements
(MFRs) to initiate a base rate proceeding regarding FPL's future retail
rates. FPL expects to file MFRs with the FPSC by October 15, 2001. Any
change in base rates would become effective after the expiration of the
current rate agreement on April 14, 2002. FPL as well as other investor-
owned utilities in Florida had requested that the FPSC open a separate
generic docket to address issues related to the utilities' participation in
an independent regional transmission organization (RTO), pursuant to the
FERC's Order 2000. In June 2001, the FPSC decided to address on an
expedited basis the RTO matters in conjunction with the base rate
proceeding instead of in a generic docket. In mid-July 2001, the FERC
initiated a mediation process directed toward forming a single RTO for the
Southeast region of the United States. FPL is participating in the
mediation process, scheduled to last 45 days.
3. 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 June 30, 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. No FPL
Group shares have been repurchased in 2001.
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% maturing in 2023 and
$49 million with variable rate interest maturing in 2025. In May 2001, FPL
Group Capital Inc (FPL Group Capital) sold $500 million principal amount of
6 1/8% debentures maturing in 2007. In July 2001, a subsidiary of FPL Energy
issued $435 million of 7.52% senior secured bonds maturing in 2019.
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 and six months ended June 30, 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 $211 million and $204
million for the three months ended June 30, 2001 and 2000 and $333 million
and $325 million for the six months ended June 30, 2001 and 2000,
respectively, includes net income, changes in unrealized gains and losses on
securities and foreign currency translation adjustments. For the three and
six months ended June 30, 2001, comprehensive income of FPL Group also
includes approximately $8 million of net unrealized losses and $5 million of
net unrealized gains, respectively, on cash flow hedges of forecasted fuel
purchases. Accumulated other comprehensive income is separately displayed in
the condensed consolidated balance sheets of FPL Group.
4. 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 $548 million had been spent through June
30, 2001. As of June 30, 2001, FPL Energy has made commitments in connection
with the development and expansion of independent power projects totaling
approximately $860 million. In July 2001, an additional $440 million was
committed by FPL Energy for project development and expansion. Subsidiaries
of FPL Group, other than FPL, have guaranteed approximately $690 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. In addition, at June 30, 2001
approximately $183 million of cash collateral was posted pursuant to a
project financing agreement and is included in other assets in FPL Group's
condensed consolidated balance sheets.
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 $36
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 $247 million at
June 30, 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 long-term agreement for the supply of gas
turbines through 2004 and for parts, repairs and on-site services through
2011. In addition, FPL Energy has entered into a contract to purchase 866
wind turbines through 2001, of which approximately 240 were placed in service
as of June 30, 2001 and the remainder are expected to be in operation by the
end of 2001. FPL Energy has also entered into various engineering,
procurement and construction contracts to support its development activities
through 2003. All of 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 and the Southern
Companies' contract is subject to minimum quantities. Capacity payments
for the pay-for-performance contracts are subject to the qualifying
facilities meeting certain contract conditions. In 2001, FPL entered into
agreements with several electricity suppliers to purchase an aggregate of
up to approximately 1,300 mw of power with expiration dates ranging from
2003 through 2007. In general, the agreements require FPL to make capacity
payments and supply the fuel consumed by the plants under the contracts.
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 2005 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 (July-December) and for 2002 through 2005 are estimated
to be as follows:
<table>
<caption>
2001 2002 2003 2004 2005
(millions)
<s> <c> <c> <c> <c> <c>
FPL:
Capacity payments:
JEA and Southern Companies .......................................... $110 $200 $200 $200 $200
Qualifying facilities ............................................... $185 $330 $340 $350 $340
Other electricity suppliers ......................................... $ 5 $ 75 $ 95 $ 95 $ 45
Minimum payments, at projected prices:
Southern Companies - energy ......................................... $ 30 $ 50 $ 60 $ 50 $ 60
Natural gas, including transportation ............................... $340 $715 $695 $720 $720
Coal ................................................................ $ 20 $ 45 $ 20 $ 10 $ 10
Oil ................................................................. $100 $ 10 $ - $ - $ -
FPL Energy:
Natural gas, including transportation and storage ................... $ 15 $ 20 $ 15 $ 15 $ 15
</table>
Charges under these contracts were as follows:
<table>
<caption>
Three Months Ended June 30, Six Months Ended June 30,
2001 Charges 2000 Charges 2001 Charges 2000 Charges
Energy/ Energy/ Energy/ Energy/
Capacity Fuel Capacity Fuel Capacity Fuel Capacity Fuel
(millions)
<s> <c> <c> <c> <c> <c> <c> <c> <c>
FPL:
JEA and Southern Companies $50(a) $ 44(b) $51(a) $ 41(b) $101(a) $ 84(b) $102(a) $ 72(b)
Qualifying facilities .... $79(c) $ 35(b) $80(c) $ 28(b) $156(c) $ 69(b) $159(c) $ 59(b)
Other electricity suppliers $ 3 $ 2 $ - $ - $ 3 $ 2 $ - $ -
Natural gas, including
transportation ......... $ - $215(b) $ - $130(b) $ - $416(b) $ - $212(b)
Coal ..................... $ - $ 12(b) $ - $ 11(b) $ - $ 24(b) $ - $ 23(b)
Oil ...................... $ - $ 91(b) $ - $ 89(b) $ - $189(b) $ - $110(b)
FPL Energy:
Natural gas, including trans-
portation and storage .. $ $ 4 $ - $ 4 $ - $ 8 $ - $ 8
_______________
(a) Recovered through base rates and the capacity clause.
(b) Recovered through the fuel clause.
(c) Recovered through the capacity clause.
</table>
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 certain alleged violations of the Clean Air Act. In May 2001,
the EPA amended its complaint. The amended complaint alleges, among other
things, that 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. It also alleges that
unspecified major modifications have been made at Scherer Unit No. 4 that
require its compliance with the aforementioned Clean Air Act provisions.
The EPA seeks injunctive relief requiring the installation of best
available control technology and civil penalties of up to $25,000 per day
for each violation from an unspecified date after June 1, 1975 through
January 30, 1997, and $27,500 per day for each violation thereafter.
Georgia Power Company has answered the amended 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 June 2001, the Court stayed discovery and administratively
closed the case pending resolution of the EPA's motion for consolidation of
discovery in several Clean Air Act cases that was filed with a Multi-
District Litigation (MDL) panel. The MDL panel has heard oral argument on
the motion for consolidation but has not yet ruled on it.
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)
which have power purchase agreements with SCE. 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. In June 2001, SCE and the
partnerships entered into an agreement that provides, among other things,
that SCE and the partnerships will take all necessary steps to suspend or
stay, during a specified period of time, the proceeding initiated by the
petition. The agreement is conditioned upon, among other things,
legislative action in California and completion of SCE's financing plan.
The agreement provides that, if the conditions of the agreement are
satisfied, then SCE and each of the partnerships agree to release and
discharge each other from any and all claims of any kind arising from
either parties' performance under the power purchase agreements. Such a
release would include release of the claim made by SCE in the petition for
refunds with respect to past usage. For additional information regarding
the agreement, see Management's Discussion and Analysis of Financial
Condition and Results of Operations (Management's Discussion) - Results of
Operations - FPL Energy.
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.
5. Segment Information
FPL Group's reportable segments include FPL, a rate-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:
<table>
<caption>
Three Months Ended June 30,
2001 2000
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy & Other Total
(millions)
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Operating revenues .......... $ 1,935 $ 199 $ 32 $ 2,166 $ 1,533 $ 114 $ 23 $ 1,670
Net income .................. $ 182 $ 38 $ (1) $ 219 $ 172 $ 28 $ 4 $ 204
Six Months Ended June 30,
2001 2000
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy & Other Total
(millions)
Operating revenues .......... $ 3,582 $ 463 $ 62 $ 4,107 $ 2,871 $ 222 $ 45 $ 3,138
Net income (a)............... $ 280 $ 56 $ (7) $ 329 $ 278 $ 42 $ 5 $ 325
June 30, 2001 December 31, 2000
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy & Other Total
(millions)
Total assets ................ $12,211 $3,707 $641 $16,559 $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.
</table>
6. 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
<table>
<caption>
Three Months Ended Three Months Ended
June 30, 2001 June 30, 2000
FPL FPL Group FPL FPL Group
FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated
(millions)
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Operating revenues ................ $ - $ 231 $ 1,935 $ 2,166 $ - $ 138 $ 1,532 $ 1,670
Operating expenses ................ - (193) (1,593) (1,786) - (109) (1,214) (1,323)
Interest charges .................. (7) (35) (40) (82) (8) (22) (34) (64)
Other income (deductions) - net ... 224 45 (239) 30 210 35 (223) 22
Income before income taxes ........ 217 48 63 328 202 42 61 305
Income tax expense (benefit) ...... (2) 6 105 109 (2) 4 99 101
Net income (loss) ................. $ 219 $ 42 $ (42) $ 219 $ 204 $ 38 $ (38) $ 204
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
FPL FPL Group FPL FPL Group
FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated
(millions)
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Operating revenues ................ $ - $ 525 $ 3,582 $ 4,107 $ - $ 268 $ 2,870 $ 3,138
Operating expenses ................ - (463) (3,024) (3,487) - (214) (2,341) (2,555)
Interest charges .................. (15) (66) (86) (167) (16) (44) (66) (126)
Other income (deductions) - net ... 339 73 (371) 41 337 55 (365) 27
Income before income taxes ........ 324 69 101 494 321 65 98 484
Income tax expense (benefit) ...... (5) 6 164 165 (4) 7 156 159
Net income (loss) ................. $ 329 $ 63 $ (63) $ 329 $ 325 $ 58 $ (58) $ 325
- ---------------
(a) Represents FPL, other subsidiaries and consolidating adjustments.
</table>
Condensed Consolidating Balance Sheets
<table>
<caption>
June 30, 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)
<s> <c> <c> <c> <c> <c> <c> <c> <c>
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and
other property .......................... $ - $ 2,663 $19,482 $22,145 $ - $1,984 $19,038 $21,022
Less accumulated depreciation and
amortization ............................ - (202) (11,306) (11,508) - (170) (10,918) (11,088)
Total property, plant and equipment - net - 2,461 8,176 10,637 - 1,814 8,120 9,934
CURRENT ASSETS:
Cash and cash equivalents ................. 1 63 8 72 12 51 66 129
Receivables ............................... 1 668 168 837 56 418 409 883
Other ..................................... 1 79 874 954 - 66 703 769
Total current assets .................... 3 810 1,050 1,863 68 535 1,178 1,781
OTHER ASSETS:
Investment in subsidiaries ................ 6,413 - (6,413) - 5,967 - (5,967) -
Other ..................................... 124 1,838 2,097 4,059 141 1,365 2,079 3,585
Total other assets ...................... 6,537 1,838 (4,316) 4,059 6,108 1,365 (3,888) 3,585
TOTAL ASSETS ................................ $ 6,540 $ 5,109 $ 4,910 $16,559 $ 6,176 $3,714 $ 5,410 $15,300
CAPITALIZATION:
Common shareholders' equity ............... $ 5,749 $ 1,003 $(1,003) $ 5,749 $ 5,593 $ 935 $ (935) $ 5,593
Preferred stock of FPL without
sinking fund requirements ............... - - 226 226 - - 226 226
Long-term debt ............................ - 1,897 2,577 4,474 - 1,400 2,576 3,976
Total capitalization .................... 5,749 2,900 1,800 10,449 5,593 2,335 1,867 9,795
CURRENT LIABILITIES:
Accounts payable and commercial paper ..... - 1,502 682 2,184 - 705 1,017 1,722
Other ..................................... 684 174 269 1,127 467 186 388 1,041
Total current liabilities ............... 684 1,676 951 3,311 467 891 1,405 2,763
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes and
unamortized tax credits ................. - 423 1,223 1,646 - 399 1,248 1,647
Other ..................................... 107 110 936 1,153 116 89 890 1,095
Total other liabilities and deferred
credits ............................... 107 533 2,159 2,799 116 488 2,138 2,742
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ........ $ 6,540 $ 5,109 $ 4,910 $16,559 $ 6,176 $3,714 $ 5,410 $15,300
- ----------------
(a) Represents FPL, other subsidiaries and consolidating adjustments.
</table>
Condensed Consolidating Statements of Cash Flows
<table>
<caption>
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
FPL FPL Group FPL FPL Group
FPL Group Other Consoli- FPL Group Other Consoli-
Group Capital (a) dated Group Capital (a) dated
(millions)
<s> <c> <c> <c> <c> <c> <c> <c> <c>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ..................... $ 485 $(330) $ 694 $ 849 $ 356 $ (107) $ 499 $ 748
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and independent
power investments ....................... - (899) (595) (1,494) - (294) (660) (954)
Capital contributions to subsidiaries...... (300) - 300 - (118) - 118 -
Other - net ............................... (8) (24) (23) (55) 6 (24) (45) (63)
Net cash used in investing
activities ............................ (308) (923) (318) (1,549) (112) (318) (587) (1,017)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ................ - 493 - 493 - - 145 145
Retirement of long-term debt .............. - - (66) (66) - - (149) (149)
Increase (decrease) in commercial paper.... - 772 (368) 404 - 110 253 363
Capital contributions from FPL Group ...... - - - - - 18 (18) -
Repurchases of common stock ............... - - - - (34) - - (34)
Dividends ................................. (188) - - (188) (183) - - (183)
Net cash provided by (used in)
financing activities .................. (188) 1,265 (434) 643 (217) 128 231 142
Net increase (decrease) in cash and
cash equivalents .......................... (11) 12 (58) (57) 27 (297) 143 (127)
Cash and cash equivalents at beginning
of period.................................. 12 51 66 129 (16) 376 1 361
Cash and cash equivalents at end of period... $ 1 $ 63 $ 8 $ 72 $ 11 $ 79 $ 144 $ 234
- -----------------
(a) Represents FPL, other subsidiaries and consolidating adjustments.
</table>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes contained herein
and 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 net income increased for the three and six months ended June
30, 2001 primarily as a result of increased earnings at both FPL and FPL
Energy. The adoption of FAS 133, which became effective January 1, 2001,
positively affected FPL Group's and FPL Energy's earnings by $5 million for
both the three and six months ended June 30, 2001. For additional
information regarding FAS 133, see Note 1 - Accounting for Derivative
Instruments and Hedging Activities. FPL Group's earnings for the six
months ended June 30, 2001 also include approximately $19 million after-tax
of merger-related expenses, of which $16 million relates to FPL and $3
million relates to the Corporate and Other segment. The discussion of
results of operations below excludes the effects of FAS 133 and merger-
related expenses.
FPL - FPL's net income for the three months ended June 30, 2001 improved
mainly due to lower depreciation expense, partially offset by higher other
operations and maintenance (O&M) expenses and higher interest charges.
Revenues from retail base operations were $880 million for the second
quarter of 2001 compared to $874 million for the same period last year.
This reflects an increase in the average number of customer accounts of
2.3% offset by a decrease in usage per customer of 2.2% due to milder
weather. During the second quarter of 2001, FPL accrued $38 million
associated with refunds to retail customers under the rate reduction
agreement, approximately the same amount as in 2000. In June 2001, FPL
refunded approximately $109 million, including interest, to retail
customers for the second twelve-month period under the rate agreement.
Primarily all of this refund was accrued in periods prior to the second
quarter of 2001. In June 2000, approximately $23 million was refunded to
retail customers for the first twelve-month period, primarily all of which
was accrued in 1999. FPL's revenues and fuel, purchased power and
interchange expense have increased for both the three-month and six-month
periods. This is the result of an increase in FPL's fuel charge to retail
customers in mid-2000 and in 2001 in response to higher fuel costs. FPL's
fuel costs are substantially a pass-through and do not significantly affect
net income. Depreciation expense declined during the quarter ended June
30, 2001 reflecting lower special depreciation under the rate reduction
agreement. Interest expense increased due to higher debt balances required
to fund FPL's capital expansion and under-recovered fuel costs.
Net income for the six months ended June 30, 2001 improved mainly due to
higher energy sales and lower depreciation expense, partially offset by
higher O&M expenses and higher interest charges. Revenues from retail base
operations were $1,664 million for the six months ended June 30, 2001
compared to $1,632 million for the same period last year. This reflects an
increase in the average number of customer accounts of 2.3% and an increase
in usage per customer of 1.4%. The increase in usage reflects cold weather
conditions, primarily in January, partly offset by the milder weather in
the second quarter. Partially offsetting the increase in revenues due to
higher usage and customer growth was a higher provision for revenue refund
under the rate reduction agreement. During the six months ended June 30,
2001, FPL accrued approximately $78 million relating to refunds to retail
customers, compared to $37 million in 2000. Depreciation expense declined
during the six-month period reflecting lower special depreciation under the
rate reduction agreement. FPL's O&M expenses increased primarily due to
additional fossil plant outage costs, partly due to timing, and higher
employee-related costs. 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 in the 2002
legislative session.
In May 2001, the FPSC ordered FPL to submit MFRs to initiate a base rate
proceeding regarding FPL's future retail rates. FPL expects to file MFRs
with the FPSC by October 15, 2001. Any change in base rates would become
effective after the expiration of the current rate agreement on April 14,
2002. FPL as well as other investor-owned utilities in Florida had
requested that the FPSC open a separate generic docket to address issues
related to the utilities' participation in an independent RTO, pursuant to
the FERC's Order 2000. In June 2001, the FPSC decided to address on an
expedited basis the RTO matters in conjunction with the base rate
proceeding instead of in a generic docket. In mid-July 2001, the FERC
initiated a mediation process directed toward forming a single RTO for the
Southeast region of the United States. FPL is participating in the
mediation process, scheduled to last 45 days.
FPL Energy - FPL Energy's net income for the three and six months ended
June 30, 2001 benefited from a power generation portfolio with
approximately 1,200 more mw in operation and improved performance from the
wind projects. These benefits were somewhat offset in the second quarter of
2001 by lower income from the Northeast region, mainly reflecting lower
market prices and transmission constraints affecting the Maine assets. FPL
Energy is continuing its expansion plans, which include adding 11 plants
with more than 5,800 mw by the end of 2003.
FPL Energy has a net ownership interest in approximately 540 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. FPL Energy's projects
have not received the majority of payments due from California utilities
for electricity sold from November 2000 through March 2001. In April 2001,
Pacific Gas & Electric Company (PG&E) filed for protection under Chapter 11
of the U.S. Bankruptcy Code. In July 2001, an agreement was reached
between PG&E and FPL Energy regarding most of the qualifying facility
contracts between the companies. The agreement requires a fixed payment
structure over the next five years as well as payment of all outstanding
receivables subject to approval of PG&E's reorganization plan by the
bankruptcy court and PG&E's creditors. In June 2001, an agreement was
reached between SCE and FPL Energy regarding the qualifying facility
contracts with SCE. The agreement with SCE also requires a fixed payment
structure over the next five years as well as payment of all outstanding
receivables but is conditioned upon, among other things, legislative action
in California and completion of SCE's financing plan. No assurance can be
given that the conditions to the agreements with PG&E and SCE will be
satisfied. FPL Group's earnings exposure relating to past due receivables
from these California utilities at June 30, 2001 was approximately $15
million. At June 30, 2001, FPL Energy's net investment in California
projects was approximately $290 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.
New Accounting Rules - For information concerning FAS 142, which FPL Group
will be required to adopt in 2002, see Note 1 - Goodwill and Other
Intangible Assets.
LIQUIDITY AND CAPITAL RESOURCES
For financing activity during the six months ended June 30, 2001, see Note
3 - Long-Term Debt. In July 2001, a subsidiary of FPL Energy issued $435
million of 7.52% senior secured bonds maturing in 2019, the proceeds of
which will be used in part to reduce FPL Group Capital's commercial paper
balance. Principal will be payable in semi-annual installments beginning
December 31, 2001.
For information concerning capital commitments and posting of cash
collateral, see Note 4 - 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 and Part II, Item 1. Legal Proceedings in the March 31,
2001 Form 10-Q for FPL Group and FPL.
In November 1999, the Attorney General of the United States, on behalf of
the 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 certain alleged violations of the Prevention of
Significant Deterioration (PSD) provisions and the New Source Performance
Standards (NSPS) of the Clean Air Act. In May 2001, the EPA amended its
complaint. The amended complaint alleges, among other things, that 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 the NSPS requirements, and without applying best available
control technology for nitrogen oxides, sulfur dioxide and particulate
matter as required by the Clean Air Act. It also alleges that unspecified
major modifications have been made at Scherer Unit No. 4 that require its
compliance with the aforementioned Clean Air Act provisions. The EPA seeks
injunctive relief requiring the installation of best available control
technology and civil penalties of up to $25,000 per day for each violation
from an unspecified date after June 1, 1975 through January 30, 1997, and
$27,500 per day for each violation thereafter. Georgia Power Company has
answered the amended 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 June 2001, the Court
stayed discovery and administratively closed the case pending resolution of
the EPA's motion for consolidation of discovery in several Clean Air Act
cases that was filed with a MDL panel. The MDL panel has heard oral
argument on the motion for consolidation but has not yet ruled on it.
For discussion of litigation filed by SCE with the FERC against
partnerships that are partially owned by FPL Energy, see Note 4 -
Litigation.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of FPL Group's shareholders was held on May 14, 2001. Of
the 175,838,735 shares of common stock outstanding on the record date of
March 5, 2001, a total of 148,182,117 shares were represented in person or by
proxy.
The following directors were elected effective May 14, 2001:
Votes Cast
Against or
For Withheld
H. Jesse Arnelle ........... 137,309,390 10,872,727
Sherry S. Barrat ........... 137,420,056 10,762,061
Robert M. Beall, II ........ 137,404,792 10,777,325
James L. Broadhead ......... 127,817,453 20,364,664
J. Hyatt Brown ............. 137,393,592 10,788,525
Armando M. Codina .......... 137,349,906 10,832,211
Willard D. Dover ............ 137,352,766 10,829,351
Alexander W. Dreyfoos, Jr. .. 137,423,426 10,758,691
Paul J. Evanson .............. 137,307,240 10,874,877
Frederic V. Malek ............ 137,370,662 10,811,455
Paul R. Tregurtha ............ 137,395,206 10,786,911
Item 5. Other Information
(a) 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 FPL's base rate proceeding with the FPSC, see
Note 2.
(b) Reference is made to Item 1. Business - FPL Operations - System
Capability and Load in the 2000 Form 10-K for FPL Group and FPL.
For information regarding additional purchase power contracts, see Note 4 -
Contracts.
On July 30, 2001, FPL set an all-time record for energy peak demand of
18,354 mw. Adequate resources were available at the time of the peak to
meet customer demand.
(c) Reference is made to Item 1. Business - FPL Operations - Fuel in the
2000 Form 10-K for FPL Group and FPL.
Based on current projections, FPL will lose its ability to store spent fuel
on site for St. Lucie Unit No. 1 in 2005, St. Lucie Unit No. 2 in 2007,
Turkey Point Unit No. 3 in 2009 and Turkey Point Unit No. 4 in 2011. In
addition, degradation in a material used in the spent fuel pools at St.
Lucie Unit No. 1 and Turkey Point Units Nos. 3 and 4 could result in
implementation of alternative spent fuel storage options sooner than
projected. FPL is pursuing various approaches to expanding spent fuel
storage at the sites, including increasing rack space in its existing spent
fuel pools and/or developing the capacity to store spent fuel in dry
storage containers.
(d) 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
<table>
<caption>
Exhibit FPL
Number Description Group FPL
<s> <c> <c> <c>
4 Officer's Certificate of FPL Group Capital dated May 11, 2001, x
creating the 6 1/8% Debentures, Series due May 15, 2007
10(a) FPL Group, Inc. Deferred Compensation Plan, amended and restated x
effective January 1, 2001
10(b) Amendment to Employment Agreement between FPL Group, Inc. and x
Thomas F. Plunkett, dated as of May 7, 2001
12(a) Computation of Ratio of Earnings to Fixed Charges x
12(b) Computation of Ratios x
</table>
FPL Group agrees to furnish to the Securities and Exchange Commission upon
request any instrument with respect to long-term debt that FPL Group has not
filed as an exhibit pursuant to the exemption provided by Item
601(b)(4)(iii)(A) of Regulation S-K.
(b) Reports on Form 8-K
A current report on Form 8-K was filed with the Securities and Exchange
Commission on April 2, 2001 by FPL Group and FPL filing exhibits under Item
7. Financial Statements and Exhibits.
A current report on Form 8-K was filed with the Securities and Exchange
Commission on April 10, 2001 by FPL Group and FPL filing an exhibit under
Item 7. Financial Statements and Exhibits and Item 9. Regulation FD
Disclosure.
A current report on Form 8-K was filed with the Securities and Exchange
Commission on May 18, 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 June 13, 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: August 8, 2001
K. MICHAEL DAVIS
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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 Accounting Officer of the Registrants)