<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<CAPTION>
Exact name of Registrants as specified in
Commission their charters, address of principal executive IRS Employer Iden-
File Number offices and Registrants' telephone number tification Number
<S> <C> <C>
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
</TABLE>
State or other jurisdiction of incorporation or organization: Florida
<TABLE>
<CAPTION>
Name of exchange
on which registered
<S> <C>
Securities registered pursuant to Section 12(b) of the Act:
FPL Group, Inc.: Common Stock, $.01 Par Value and Preferred Share Purchase Rights New York Stock Exchange
Florida Power & Light Company: None
Securities registered pursuant to Section 12(g) of the Act:
FPL Group, Inc.: None
Florida Power & Light Company: Preferred Stock, $100 Par Value
</TABLE>
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) have been
subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrants' knowledge in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock of FPL Group, Inc. held by
non-affiliates as of January 31, 1998 (based on the closing market
price on the Composite Tape on January 31, 1998) was $10,407,089,108
(determined by subtracting from the number of shares outstanding on
that date the number of shares held by directors and officers of FPL
Group, Inc.).
There was no voting stock of Florida Power & Light Company held by
non-affiliates as of January 31, 1998.
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 January 31, 1998: 181,762,385 shares
As of January 31, 1998, there were issued and outstanding 1,000
shares of Florida Power & Light Company's common stock, without par
value, all of which were held, beneficially and of record, by FPL
Group, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of FPL Group, Inc.'s Proxy Statement for the 1998 Annual
Meeting of Shareholders are incorporated by reference in Part III hereof.
______________________________
This combined Form 10-K represents separate filings by FPL Group,
Inc. and Florida Power & Light Company. Information contained herein
relating to an individual registrant is filed by that registrant on
its own behalf. Florida Power & Light Company makes no
representations as to the information relating to FPL Group, Inc.'s
other operations.
<PAGE>
DEFINITIONS
Acronyms and defined terms used in the text include the following:
<TABLE>
<CAPTION>
Term Meaning
<S> <C>
capacity clause Capacity cost recovery clause
Central Maine Central Maine Power Company
charter Restated Articles of Incorporation, as amended, of FPL Group or FPL, as
the case may be
conservation clause Energy conservation cost recovery clause
DOE United States Department of Energy
EMF Electric and magnetic fields
environmental clause Environmental compliance cost recovery clause
ESI ESI Energy, Inc.
EWG Exempt wholesale generator
FDEP Florida Department of Environmental Protection
FERC Federal Energy Regulatory Commission
FGT Florida Gas Transmission Company
FMPA Florida Municipal Power Agency
FPL Florida Power & Light Company
FPL Energy FPL Energy, Inc.
FPL Group FPL Group, Inc.
FPL Group Capital FPL Group Capital Inc
FPL Group International FPL Group International, Inc.
FPSC Florida Public Service Commission
fuel clause Fuel and purchased power cost recovery clause
Holding Company Act Public Utility Holding Company Act of 1935, as amended
IBEW International Brotherhood of Electrical Workers
JEA Jacksonville Electric Authority
kv Kilovolt
kva Kilovolt-ampere
kwh Kilowatt-hour
Management's Discussion Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
mortgage FPL's Mortgage and Deed of Trust dated as of January 1, 1944, as
supplemented and amended
mw Megawatt(s)
Note Note to Consolidated Financial Statements
NRC United States Nuclear Regulatory Commission
Nuclear Waste Policy Act Nuclear Waste Policy Act of 1982
O&M expenses Other operations and maintenance expenses in the Consolidated
Statements of Income
PURPA Public Utility Regulatory Policies Act of 1978, as amended
qualifying facilities Non-utility power production facilities meeting the requirements of a
qualifying facility under the PURPA
Reform Act Private Securities Litigation Reform Act of 1995
ROE Return on common equity
SJRPP St. Johns River Power Park
Turner Turner Foods Corporation
</TABLE>
<PAGE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
In connection with the safe harbor provisions of the Reform Act, FPL
Group and FPL (collectively, the Company) are hereby filing
cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those
projected in forward-looking statements (as such term is defined in
the Reform Act) of the Company made by or on behalf of the Company
which are made in this combined Form 10-K, in presentations, in
response to questions or otherwise. Any statements that express, or
involve discussions as to, expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always,
through the use of words or phrases such as will likely result, are
expected to, will continue, is anticipated, estimated, projection,
outlook) are not statements of historical facts and may be
forward-looking. Forward-looking statements involve estimates,
assumptions and uncertainties that could cause actual results to
differ materially from those expressed in the forward-looking
statements. 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
of the Company 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 or statements 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 statements.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking
statements include prevailing governmental policies and regulatory
actions, including those of the FERC, the FPSC and the NRC, with
respect to allowed rates of return, industry and rate structure,
operation of nuclear power facilities, acquisition and disposal 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, pricing and
transportation of commodities, market demand for energy from plants
or facilities, changes in tax rates or policies or in rates of
inflation, unanticipated development project delays or changes in
project costs, 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.
<PAGE>
PART I
Item 1. Business
FPL GROUP
FPL Group is a public utility holding company, as defined in the
Holding Company Act. It was incorporated in 1984 under the laws of
Florida. FPL Group's principal subsidiary, FPL, is engaged in the
generation, transmission, distribution and sale of electric energy.
Other operations are conducted through FPL Group Capital and its
subsidiaries and mainly consist of independent power projects and
agricultural operations. FPL Group and its subsidiaries employ
10,039 persons.
FPL Group is exempt from substantially all of the provisions of the
Holding Company Act on the basis that FPL Group's and FPL's
businesses are predominantly intrastate in character and carried on
substantially in a single state in which both are incorporated.
FPL OPERATIONS
General. FPL was incorporated under the laws of Florida in 1925 and
is a wholly-owned subsidiary of FPL Group. FPL supplies electric
service throughout most of the east and lower west coasts of Florida.
This service territory contains 27,650 square miles with a population
of approximately 7 million. During 1997, FPL served 3.6 million
customer accounts. Operating revenues were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
(Millions of Dollars)
<S> <C> <C> <C>
Residential ........................................... $3,394 $3,324 $3,097
Commercial ............................................ 2,222 2,116 1,953
Industrial ............................................ 206 203 195
Other, including the net change in unbilled revenues .. 310 343 285
$6,132 $5,986 $5,530
</TABLE>
Regulation. The retail operations of FPL provided approximately 99%
of FPL's operating revenues for 1997. Such operations are regulated
by the FPSC which has jurisdiction over retail rates, service
territory, issuances of securities, planning, siting and construction
of facilities and other matters. FPL is also subject to regulation
by the FERC in various respects, including the acquisition and
disposition of facilities, interchange and transmission services and
wholesale purchases and sales of electric energy.
FPL's nuclear power plants are subject to the jurisdiction of the
NRC. NRC regulations govern the granting of licenses for the
construction and operation of nuclear power plants and subject such
power plants to continuing review and regulation.
Federal, state and local environmental laws and regulations cover air
and water quality, land use, power plant and transmission line
siting, EMF from power lines and substations, noise and aesthetics,
solid waste and other environmental matters. Compliance with these
laws and regulations increases the cost of electric service by
requiring, among other things, changes in the design and operation of
existing facilities and changes or delays in the location, design,
construction and operation of new facilities. FPL estimates that
capital expenditures required to comply with environmental laws and
regulations for 1998 through 2000 will not be material. These
expenditures are included in FPL's projected capital expenditures set
forth in Item 1. Business - FPL Operations - Capital Expenditures.
FPL holds franchises with varying expiration dates to provide
electric service in various municipalities and counties in Florida.
FPL considers its franchises to be adequate for the conduct of its
business.
Retail Ratemaking. The underlying concept of utility ratemaking is
to set rates at a level that allows the utility to collect from
customers total revenues (revenue requirements) equal to its cost of
providing service, including a reasonable rate of return on invested
capital. To accomplish this, the FPSC uses various ratemaking
mechanisms.
The basic costs of providing electric service, other than fuel and
certain other costs, are recovered through base rates, which are
designed to recover the costs of constructing, operating and
maintaining the utility system. These basic costs include O&M
expenses, depreciation and taxes, as well as a return on FPL's
investment in assets used and useful in providing electric service
(rate base). The rate of return on rate base approximates FPL's
weighted cost of capital, which includes its costs for debt and
preferred stock and an allowed ROE. FPL's currently authorized ROE
range is 11% to 13% with a midpoint of 12%. The FPSC monitors FPL's
ROE through a surveillance report that is filed monthly by FPL with
the FPSC. The FPSC does not provide assurance that the allowed ROE
will be achieved. Base rates are determined in rate proceedings
which occur at irregular intervals at the initiative of FPL, the FPSC
or a substantially affected party. FPL's last base rate proceeding
was in 1984. In 1990, FPL's base rates were reduced following a
change in federal income tax rates. In December 1997, a large
customer of FPL filed a petition with the FPSC requesting a limited
scope proceeding to reduce FPL's base rates. The petition asks the
FPSC to reduce FPL's authorized ROE and to exclude amounts recorded
under an FPSC-approved special amortization program in determining
the amount of the rate reduction. FPL Group is unable to predict
what course of action the FPSC might take and what effect, if any,
this matter would have on FPL Group's and FPL's financial statements.
Fuel costs totaled $1.7 billion in 1997 and are recovered through
levelized charges per kwh established pursuant to the fuel clause.
These charges are calculated semi-annually based on estimated costs
of fuel and estimated customer usage for the ensuing six-month
period, plus or minus a true-up adjustment to reflect the variance of
actual costs and usage from the estimates used in setting the fuel
adjustment charges for prior periods.
Capacity payments to other utilities and generating companies for
purchased power are recovered through the capacity clause and base
rates. In 1997, $430 million was recovered through the capacity
clause. Costs associated with implementing energy conservation
programs totaled $119 million in 1997 and are recovered through the
conservation clause. Costs of complying with federal, state and
local environmental regulations enacted after April 1993 totaled $14
million in 1997 and are recovered through the environmental clause to
the extent not included in base rates.
The FPSC has the authority to disallow recovery of costs that it
considers excessive or imprudently incurred. Such costs may include
O&M expenses, the cost of replacing power lost when fossil and
nuclear units are unavailable and costs associated with the
construction or acquisition of new facilities.
Competition. The electric utility industry is facing increasing
competitive pressure. FPL currently faces competition from other
suppliers of electrical energy to wholesale customers and from
alternative energy sources and self-generation for other customer
groups, primarily industrial customers. In 1997, operating revenues
from wholesale and industrial customers combined represented
approximately 4% of FPL's total operating revenues. Various states,
other than Florida, have either enacted legislation or are pursuing
initiatives designed to deregulate the production and sale of
electricity. By allowing customers to choose their electricity
supplier, deregulation is expected to result in a shift from
cost-based rates to market-based rates for energy production and
other services provided to retail customers. Similar initiatives are
also being pursued on the federal level. Although the legislation
and initiatives vary substantially, common areas of focus include
when market-based pricing will be available for wholesale and retail
customers, what existing prudently incurred costs in excess of the
market-based price will be recoverable and whether generation assets
should be separated from transmission, distribution and other assets.
In the event the basis of regulation for some or all of FPL's
business changes from cost-based regulation, existing regulatory
assets and liabilities would be written off unless regulators specify
an alternative means of recovery or refund. Further, other aspects
of the business, such as generation assets and long-term power
purchase commitments, would need to be reviewed to assess their
recoverability in a changed regulatory environment. See Management's
Discussion - Results of Operations and Note 1 - Regulation.
While legislators and state regulatory commissions will decide what
impact, if any, competitive forces will have on retail transactions,
the FERC has jurisdiction over potential changes which could affect
competition in wholesale transactions. In 1993, FPL filed with the
FERC a comprehensive revision of its service offerings in the
wholesale market. FPL proposed changes to its wholesale sales
tariffs for service to municipal and cooperatively-owned electric
utilities and its power sharing (interchange) agreements with other
utilities. In addition, FPL proposed expanding its transmission
offerings for new services by switching from individually negotiated
contracts to three tariffs of general applicability. FPL began
collecting the proposed rates in 1994, subject to refund pending the
final ruling on its proposal. In December 1995, the administrative
law judge issued his initial decision, ruling in favor of FPL on some
issues and against FPL on others. In 1996, the FERC revised its
policies with respect to transmission service and required all
jurisdictional utilities to have on file at the FERC open access
transmission tariffs. In general, these policies require a utility
to provide to third parties access to the utility's transmission
system on a basis comparable to the uses the utility makes of its own
system and at comparable rates. FPL updated its 1993 filing to
accommodate the FERC's revised policies. A final decision on these
filings is pending before FERC.
FPL is a defendant in an antitrust suit filed by the FMPA. The
complaint includes an alleged inability to utilize FPL's transmission
facilities to wheel power. See Item 3. Legal Proceedings.
System Capability and Load. FPL's resources for serving load as of
December 31, 1997 consisted of 18,589 mw of electric power, of which
16,416 mw are from FPL-owned facilities (see Item 2.
Properties - Generating Facilities) and 2,173 mw are obtained through
purchased power contracts. See Note 9 - Contracts. The compounded
annual growth rate of kwh sales and customers was 2.5% and 1.9%,
respectively, for the three years ended December 31, 1997.
Customer usage and operating revenues are typically higher during the
summer months largely due to the prevalent use of air conditioning in
FPL's service territory. However, occasionally, extremely cold
temperatures during the winter months result in unusually high
electricity usage for a short period of time.
Capital Expenditures. FPL's capital expenditures totaled $551
million in 1997, $474 million in 1996 and $669 million in 1995.
Capital expenditures for the 1998-2000 period are expected to be
approximately $1.8 billion, including $620 million in 1998. This
estimate is subject to continuing review and adjustment, and actual
capital expenditures may vary from this estimate. See Management's
Discussion - Liquidity and Capital Resources.
Nuclear Operations. FPL owns and operates four nuclear units, two at
St. Lucie and two at Turkey Point. The operating licenses for St.
Lucie Units Nos. 1 and 2 expire in 2016 and 2023, respectively. The
operating licenses for Turkey Point Units Nos. 3 and 4 expire in 2012
and 2013, respectively. The nuclear units are periodically removed
from service to accommodate normal refueling and maintenance outages,
repairs and certain other modifications. A condition of the
operating license for each unit requires an approved plan for
decontamination and decommissioning. FPL's current plans provide for
dismantlement of the Turkey Point units commencing in 2013. St.
Lucie Unit No. 1 will be mothballed in 2016 until 2023 when
dismantlement of both Unit No. 1 and Unit No. 2 will commence. See
estimated cost data in Note 1 - Decommissioning and Dismantlement of
Generating Plant.
In mid-1995, the St. Lucie nuclear plant began experiencing a series
of mechanical and operational problems that resulted in increased
attention and fines from the NRC. In 1997, St. Lucie's operating
performance improved as a result of corrective actions implemented by
St. Lucie's management team. Also during 1997, the St. Lucie Unit
No. 1 steam generators were replaced and put into service.
Fuel. FPL's generating plants use a variety of fuels. See Item 2.
Properties - Generating Facilities and Note 9 - Contracts. The
diverse fuel options, along with purchased power, enable FPL to shift
between sources of generation to achieve an economical fuel mix.
FPL's oil requirements are obtained under short-term contracts and in
the spot market.
FPL has contracts in place with FGT that satisfy substantially all of
the anticipated needs for natural gas transportation. The existing
contracts expire in 2005 and 2010, but can be extended at FPL's
option. To the extent desirable, FPL can also purchase interruptible
gas transportation service from FGT based on pipeline availability.
FPL has a 15-year firm natural gas supply contract at market rates
with an affiliate of FGT to provide approximately two-thirds of FPL's
anticipated needs for natural gas. The remainder of FPL's gas
requirements will be purchased under other contracts and in the spot
market.
FPL has, through its joint ownership interest in SJRPP Units Nos. 1
and 2, long-term coal supply and transportation contracts for a
portion of the fuel needs for those units. All of the transportation
requirements and a portion of the fuel supply needs for Scherer Unit
No. 4 are covered by a series of annual and long-term contracts. The
remaining fuel requirements will be obtained in the spot market.
FPL leases nuclear fuel for all four of its nuclear units. See
Note 1 - Nuclear Fuel. Under the Nuclear Waste Policy Act, the DOE
is required to construct permanent disposal facilities and take title
to and provide transportation and disposal for spent nuclear fuel by
January 31, 1998 for a specified fee based on current generation from
nuclear power plants. Through 1997, FPL has paid approximately $341
million in such fees to the DOE's Nuclear Waste Fund. The DOE did
not meet its statutory obligation for disposal of spent nuclear fuel
under the Nuclear Waste Policy Act. In 1997, FPL joined a number of
other utilities in a lawsuit against the DOE seeking to suspend
payments for future transportation and disposal. Alternatively, the
utilities proposed to hold the funds in escrow until a nuclear waste
storage facility is available. In November 1997, a court ruled that
DOE failed to meet the statutory deadline for spent fuel disposal,
and ordered that the DOE could not assert a claim that its delay was
unavoidable in any defense against lawsuits seeking money damages.
The DOE has appealed this decision. The court also declined the
utilities' request for an order to have the DOE begin disposal of
spent nuclear fuel, and did not specifically address the request to
escrow the Nuclear Waste Fund payments. In December 1997, FPL and a
number of other utilities filed a petition with the DOE requesting
suspension of payments into the Nuclear Waste Fund in light of the
DOE's impending default on taking title to and disposing of spent
nuclear fuel. This Petition was denied by the DOE. In February
1998, FPL and the other utilities petitioned an appeals court for an
order preventing the DOE from using money in the Nuclear Waste Fund
to pay the utilities' damages for the DOE's breach of obligation.
Currently, FPL is storing spent fuel on site and plans to provide
adequate storage capacity for all of its spent nuclear fuel, pending
its removal by the DOE.
In 1994, FPL entered into a 20-year contract with Bitor America to
purchase Orimulsion, a fuel that is an emulsion of bitumen and water
and is priced equivalently to coal. FPL has committed to purchase
Orimulsion to satisfy approximately 60% of the capacity of the
Manatee units, but may elect to purchase sufficient Orimulsion to
satisfy the Manatee units' total capacity. See Item 2.
Properties - Generating Facilities. The contract is contingent upon
FPL obtaining an operating permit from environmental agencies to use
Orimulsion at the Manatee units. In 1996, Florida's Power Plant
Siting Board denied FPL's request to burn Orimulsion at the Manatee
power plant. FPL appealed the denial. In 1997, Florida's Power
Plant Siting Board remanded selected issues for hearing before an
administrative law judge. Hearings took place in January and
February 1998. A decision is pending.
Energy Marketing and Trading. During 1997, FPL formed a division to
buy and sell wholesale energy commodities, such as natural gas and
electric power. Initially, the primary focus of the Energy Marketing
& Trading Division has been the procurement of natural gas for FPL's
own use in power generation (the effects of which are reflected in
the cost of fuel recovered through the fuel clause) and the sale of
excess electric power. The level of trading activity is expected to
grow as FPL seeks to manage the risk associated with fluctuating fuel
prices, increase value from its own power generation and position
itself to take advantage of opportunities in evolving energy-related
markets throughout the country.
Electric and Magnetic Fields. In recent years, public, scientific
and regulatory attention has been focused on possible adverse health
effects of EMF. These fields are created whenever electricity flows
through a power line or an appliance. Several epidemiological (i.e.,
statistical) studies have suggested a linkage between EMF and certain
types of cancer, including leukemia and brain cancer; other studies
have been inconclusive, contradicted earlier studies or have shown no
such linkage. Neither these epidemiological studies nor clinical
studies have produced any conclusive evidence that EMF does or does
not cause adverse health effects.
The FDEP has promulgated regulations setting standards for EMF levels
within and at the edge of the rights of way for transmission lines,
and FPL is in compliance with these regulations. The FDEP reviewed
its EMF standards in 1997 and confirmed the field limits previously
established. Future changes in the standards could require
additional capital expenditures by FPL for such things as increasing
the right of way corridors or relocating or reconfiguring
transmission facilities. At present it is not known whether any such
expenditures will be required.
Employees. FPL had 9,588 employees at December 31, 1997.
Approximately 34% of the employees are represented by the IBEW under
a collective bargaining agreement with FPL. In 1997, IBEW members
approved a new collective bargaining agreement which expires on
October 31, 2000.
OTHER FPL GROUP OPERATIONS
FPL Group Capital, a wholly-owned subsidiary of FPL Group, holds the
capital stock and provides funding for the operating subsidiaries
other than FPL. At December 31, 1997, FPL Group Capital and its
subsidiaries represented approximately 10% of FPL Group's total
assets. The business activities of these companies primarily consist
of independent power projects and agricultural operations.
FPL Energy. In January 1998, FPL Energy was formed as a subsidiary
of FPL Group Capital to manage existing non-regulated investments and
to pursue new investment opportunities in the domestic and
international energy markets. All of the capital stock of ESI and
FPL Group International was transferred to FPL Energy in January and
two separate investment transactions were announced. First, FPL
Energy announced an agreement to acquire, subject to approval by
federal and state regulators, the non-nuclear generation assets of
Central Maine, in a transaction that is expected to close in the
second half of 1998. FPL Energy, through ESI, also announced
participation in a joint venture that owns and operates two 300 mw
combined-cycle power plants located in Massachusetts and New Jersey.
FPL Energy's focus is on environmentally-favored generation including
natural gas, wind, geothermal, solar, biomass, and, with the expected
addition of the Central Maine assets later in 1998, hydro.
FPL Energy's participation in the domestic energy market has changed
in recent years from non-controlling equity investments to a more
active role including ownership, management, operation, construction
and development of many projects. This active role is expected to
continue as opportunities in the non-regulated generation market are
pursued. FPL Energy currently owns or has non-controlling ownership
interests in a number of independent power projects totaling
approximately 3,100 mw of generating capacity. These projects are
geographically concentrated in California and Virginia. Upon
completion of the acquisition of the Central Maine assets, generating
capacity will increase to over 4,200 mw.
Deregulation of the electricity utility market across the United
States presents both opportunities and risks for FPL Energy.
Opportunities exist for the selective acquisition of generation
assets that are being divested under deregulation plans and for the
construction and operation of efficient plants that can sell low-cost
power in competitive markets. However, market-based pricing, new
entrants and the possibility of reduced availability of long-term
power purchase agreements may result in fluctuations in revenues and
earnings. FPL Energy has long-term power purchase agreements in
place with utilities for essentially all of its existing portfolio.
The majority of power generated by the Central Maine assets will be
sold under a power purchase agreement until the year 2000, when
market-based pricing is implemented.
FPL Energy also holds non-controlling investments in natural gas and
geothermal generator projects totaling 300 mw located in Colombia and
Indonesia, and owns a 5 mw wind farm in Northern Ireland.
Essentially all of the output from these projects is subject to long-
term power purchase agreements. The project in Colombia is expanding
its generating capability and the Indonesian project is under
development. FPL Energy is monitoring the economic uncertainty in
Indonesia, but currently anticipates no material adverse effect on
FPL Group's financial statements from its investment there.
Turner. FPL Group Capital's agricultural subsidiary, Turner, owns
and operates citrus groves in Florida. Turner's primary product is
juice oranges, which are sold to processors for the premium
not-from-concentrate, as well as the domestic frozen-concentrate,
orange juice markets. Other products include grapefruit and
specialty fruits. Turner's operations are seasonal, with the
majority of the citrus harvest taking place between January and
April.
As of December 31, 1997, Turner owned or leased approximately 30,000
acres of citrus properties, which included 19,000 planted acres,
3,000 acres of undeveloped land and 8,000 acres of infrastructure,
wetlands and reservoirs.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS (a)(b)
<TABLE>
<CAPTION>
Name Age Position Effective Date
<S> <C> <C> <C>
James L. Broadhead 62 Chairman of the Board, President and Chief Executive Officer
of FPL Group .................................................... May 8, 1990
Chairman of the Board and Chief Executive Officer of FPL .......... January 15, 1990
Dennis P. Coyle 59 General Counsel and Secretary of FPL Group ........................ June 1, 1991
General Counsel and Secretary of FPL .............................. July 1, 1991
K. Michael Davis 51 Controller and Chief Accounting Officer of FPL Group .............. May 13, 1991
Vice President, Accounting, Controller and Chief Accounting
Officer of FPL .................................................. July 1, 1991
Paul J. Evanson 56 President of FPL .................................................. January 9, 1995
Lawrence J. Kelleher 50 Vice President, Human Resources of FPL Group ...................... May 13, 1991
Senior Vice President, Human Resources of FPL ..................... July 1, 1991
Thomas F. Plunkett 58 President, Nuclear Division of FPL ................................ March 1, 1996
Dilek L. Samil 42 Treasurer of FPL Group ............................................ May 13, 1991
Treasurer of FPL .................................................. July 1, 1991
C. O. Woody 59 President, Power Generation Division of FPL Group and FPL ......... January 15, 1998
Michael W. Yackira 46 President of FPL Energy, Inc. ..................................... January 15, 1998
(a) Executive officers are elected annually by, and serve at the pleasure of, their respective boards of directors. Except as
noted below, each officer has held his or her present position for five years or more and his or her employment history is
continuous.
(b) The business experience of the executive officers is as follows: Mr. Evanson was formerly vice president, finance and chief
financial officer of FPL Group and senior vice president, finance and chief financial officer of FPL; Mr. Plunkett was site
vice president at Turkey Point; Mr. Woody was senior vice president, power generation of FPL; and Mr. Yackira was vice
president, finance and chief financial officer of FPL Group and senior vice president, finance and chief financial officer
of FPL from January 1995 to January 1998. Prior to that, Mr. Yackira was senior vice president, market and regulatory
services of FPL.
</TABLE>
Item 2. Properties
FPL Group and its subsidiaries maintain properties which are adequate
for their operations. At December 31, 1997, the electric generating,
transmission, distribution and general facilities of FPL represent
47%, 13%, 33% and 7%, respectively, of FPL's gross investment in
electric utility plant in service.
Generating Facilities. As of December 31, 1997, FPL had the
following generating facilities:
<TABLE>
<CAPTION>
No. of Net Warm Weather
Facility Location Units Fuel Peaking Capability (mw)
<S> <C> <C> <C> <C>
STEAM TURBINES
Cape Canaveral ......................... Cocoa, FL 2 Oil/Gas 810
Cutler ................................. Miami, FL 2 Gas 215
Fort Myers ............................. Fort Myers, FL 2 Oil 544
Manatee ................................ Parrish, FL 2 Oil 1,638
Martin ................................. Indiantown, FL 2 Oil/Gas 1,630
Port Everglades ........................ Port Everglades, FL 4 Oil/Gas 1,227
Riviera ................................ Riviera Beach, FL 2 Oil/Gas 580
St. Johns River Power Park ............. Jacksonville, FL 2 Coal/Petroleum Coke 260(a)
St. Lucie .............................. Hutchinson Island, FL 2 Nuclear 1,553(b)
Sanford ................................ Lake Monroe, FL 3 Oil/Gas 926
Scherer ................................ Monroe County, GA 1 Coal 667(c)
Turkey Point ........................... Florida City, FL 2 Oil/Gas 810
2 Nuclear 1,386
COMBINED-CYCLE
Lauderdale ............................. Dania, FL 2 Gas/Oil 860
Martin ................................. Indiantown, FL 2 Gas 860
Putnam ................................. Palatka, FL 2 Gas/Oil 498
COMBUSTION TURBINES
Fort Myers ............................. Fort Myers, FL 12 Oil 626
Lauderdale ............................. Dania, FL 24 Oil/Gas 876
Port Everglades ........................ Port Everglades, FL 12 Oil/Gas 438
DIESEL UNITS
Turkey Point ........................... Florida City, FL 5 Oil 12
TOTAL .................................... 16,416
(a) Represents FPL's 20% individual ownership interest in SJRPP Units Nos. 1 and 2, which are jointly owned with the JEA.
(b) Excludes Orlando Utilities Commission's and the FMPA's combined share of approximately 15% of St. Lucie Unit No. 2.
(c) Represents FPL's approximately 76% ownership of Scherer Unit No. 4, which is jointly owned with the JEA.
</TABLE>
FPL Energy has wholly-owned generating facilities totaling 830 mw,
the largest being a 665 mw gas-fired combined-cycle plant in
Virginia. The remaining facilities include solar- and wind-power
generators located in California and Northern Ireland.
Transmission and Distribution. FPL owns and operates 478 substations
with a total capacity of 104,493,440 kva. Electric transmission and
distribution lines owned and in service as of December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
Overhead Lines Trench and Submarine
Nominal Voltage Pole Miles Cable Miles
<S> <C> <C>
500 kv ............................................................ 1,107(a) -
230 kv ............................................................ 2,196 31
138 kv ............................................................ 1,405 48
115 kv ............................................................ 672 -
69 kv ............................................................ 166 11
Less than 69 kv ................................................... 39,168 20,086
Total ............................................................. 44,714 20,176
(a) Includes approximately 80 miles owned jointly with the JEA.
</TABLE>
Character of Ownership. Substantially all of FPL's properties are
subject to the lien of its mortgage, which secures most debt
securities issued by FPL. The principal properties of FPL are held
by it in fee and are free from other encumbrances, subject to minor
exceptions, none of which is of such a nature as to substantially
impair the usefulness to FPL of such properties. Some of the
electric lines are located on land not owned in fee but are covered
by necessary consents of governmental authorities or rights obtained
from owners of private property.
Item 3. Legal Proceedings
In 1991, FPL entered into 30-year power purchase agreements with two
qualifying facilities (as defined by PURPA) located in Palm Beach
County, Florida. The power plants, which have a total generating
capacity of 125 mw, were intended to sell capacity and energy to FPL
and to provide steam to sugar processors. The plants were to be
fueled by bagasse (sugar cane waste) and wood waste. Construction of
the plants was funded, in part, through the sale of $288.5 million of
solid waste industrial development revenue bonds (the bonds). The
plants are owned by Okeelanta Power Limited Partnership (Okeelanta);
Osceola Power Limited Partnership (Osceola); Flo-Energy Corp.; Glades
Power Partnership; Gator Generating Company, Limited Partnership; and
Lake Power Leasing Partnership (collectively, the partnerships).
In January 1997, FPL filed a complaint against Okeelanta and Osceola
in the Circuit Court for Palm Beach County, Florida, seeking an order
declaring that FPL s obligations under the power purchase agreements
were rendered of no force and effect because the power plants failed
to accomplish commercial operation before January 1, 1997, as
required by the agreements. In November 1997, the complaint was
amended to include all the partnerships.
The partnerships filed for bankruptcy under Chapter XI of the United
States Bankruptcy Code in May 1997 and ceased all attempts to operate
the power plants in September 1997. In November 1997, the
partnerships entered into an agreement with the holders of more than
70% of the bonds. This agreement gives the holders of a majority of
the principal amount of the bonds (the majority bondholders) the
right to control, fund and manage any litigation against FPL and the
right to settle with FPL on any terms such majority bondholders
approve, provided that certain agreements with the sugar processors
are not affected and certain other conditions are met.
In January 1998, the partnerships (through the attorneys for the
majority bondholders) filed an answer denying the allegations in
FPL s complaint and asserting a counterclaim for approximately $2
billion, consisting of all capacity payments that could have been
made over the 30-year term of the power purchase agreements plus some
security deposits. The partnerships also seek three times their
actual damages for alleged violations of Florida antitrust laws, plus
attorneys fees.
In December 1991, the FMPA, an organization comprised of municipal
electric utilities operating in the state, filed a suit against FPL
in the Circuit Court of the Ninth Judicial Circuit in Orange County,
Florida. The suit was subsequently removed to the United States
District Court for the Middle District of Florida. The FMPA alleges
that FPL is in breach of a "contract," consisting of several
different documents, by refusing to provide transmission service to
the FMPA and its members on the FMPA's terms. The FMPA also alleges
that FPL has violated federal and Florida antitrust laws by
monopolizing or attempting to monopolize the provision, coordination
and transmission of electric power in FPL's area of operation by
refusing to provide transmission service or to permit the FMPA to
invest in and use FPL's transmission system on the FMPA's proposed
terms. The FMPA seeks $140 million in damages, before trebling for
the antitrust claim, and asks the court to require FPL: to transmit
electric power among the FMPA and its members on "reasonable terms
and conditions"; to permit the FMPA to contribute to and use FPL's
transmission system on "reasonable terms and conditions"; and to
recognize the FMPA transmission investments as part of FPL's
transmission system such that the FMPA can obtain transmission on a
basis equivalent to FPL or, alternatively, to provide transmission
service equivalent to such FMPA transmission ownership. In 1993, the
District Court granted summary judgment in favor of FPL. In 1995,
the court of appeals vacated the District Court's summary judgment
and remanded the matter to the district court for further
proceedings. In 1996, the District Court ordered the FMPA to seek a
declaratory ruling from the FERC regarding certain issues in the
case. All other action in the case has been stayed pending the
FERC's ruling.
In November 1989, Johnson Enterprises of Jacksonville, Inc. (Johnson
Enterprises) filed suit in the United States District Court for the
Middle District of Florida against FPL Group, FPL Group Capital and
Telesat Cablevision, Inc. (Telesat), a subsidiary of FPL Group
Capital. The suit alleged breach of contract, fraud, violation of
racketeering statutes and several other claims. Plaintiff claimed
more than $24 million in compensatory damages, treble damages under
racketeering statutes, punitive damages and attorneys' fees. The
District Court entered a judgment in favor of FPL Group and Telesat
on nine of twelve counts, including all of the racketeering and fraud
claims, and in favor of FPL Group Capital on all counts. It also
denied all parties' claims for attorneys' fees. However, the jury in
the case awarded the contractor damages totaling approximately $6
million against FPL Group and Telesat for breach of contract and
tortious interference. All parties have appealed.
In the event that FPL Group or FPL does not prevail in these suits,
there may be a material adverse effect on their financial statements.
However, FPL Group and FPL believe that they have meritorious
defenses to the litigation to which they are parties and are
vigorously defending these suits. Accordingly, the liabilities, if
any, arising from these proceedings are not anticipated to have a
material adverse effect on their financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrants' Common Equity and Related
Stockholder Matters
Common Stock Data. All of FPL's common stock is owned by FPL Group.
FPL Group's common stock is traded on the New York Stock Exchange.
The high and low sales prices for the common stock of FPL Group as
reported in the consolidated transaction reporting system of the New
York Stock Exchange for each quarter during the past two years are as
follows:
<TABLE>
<CAPTION>
Quarter 1997 1996
High Low High Low
<S> <C> <C> <C> <C>
First ....................................................... $46 3/4 $43 5/8 $48 $42 1/8
Second ...................................................... $48 1/8 $42 5/8 $46 1/4 $41 1/2
Third ....................................................... $51 9/16 $45 1/2 $46 5/8 $42 5/8
Fourth ...................................................... $60 $49 1/2 $48 1/8 $43 1/8
</TABLE>
Approximate Number of Stockholders. As of the close of business on
January 31, 1998, there were 60,024 holders of record of FPL Group's
common stock.
Dividends. Quarterly dividends have been paid on common stock of
FPL Group during the past two years in the following amounts:
<TABLE>
<CAPTION>
Quarter 1997 1996
<S> <C> <C>
First ......................................................................................... $.48 $.46
Second ........................................................................................ $.48 $.46
Third ......................................................................................... $.48 $.46
Fourth ........................................................................................ $.48 $.46
</TABLE>
The amount and timing of dividends payable on FPL Group's common
stock are within the sole discretion of FPL Group's board of
directors. The board of directors reviews the dividend rate at least
annually (in February) to determine its appropriateness in light of
FPL Group's financial position and results of operations, legislative
and regulatory developments affecting the electric utility industry
in general and FPL in particular, competitive conditions and any
other factors the board deems relevant. The ability of FPL Group to
pay dividends on its common stock is dependent upon dividends paid to
it by its subsidiaries, primarily FPL. There are no restrictions in
effect that currently limit FPL's ability to pay dividends to FPL
Group. See Management's Discussion - Liquidity and Capital Resources
and Note 4 regarding dividends paid by FPL to FPL Group.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
SELECTED DATA OF FPL GROUP
(Millions of Dollars, except per share amounts):
Operating revenues ...................................... $ 6,369 $ 6,037 $ 5,592 $ 5,423 $ 5,312
Net income .............................................. $ 618 $ 579 $ 553 $ 519 $ 429(a)
Earnings per share of common stock(b) ................... $ 3.57 $ 3.33 $ 3.16 $ 2.91 $ 2.30(a)
Dividends paid per share of common stock ................ $ 1.92 $ 1.84 $ 1.76 $ 1.88 $ 2.47
Total assets ............................................ $12,449 $12,219 $12,459 $12,618 $13,078
Long-term debt, excluding current maturities ............ $ 2,949 $ 3,144 $ 3,377 $ 3,864 $ 3,749
Obligations of FPL under capital lease, excluding
current maturities .................................... $ 186 $ 182 $ 179 $ 186 $ 271
Preferred stock of FPL with sinking fund requirements,
excluding current maturities .......................... - $ 42 $ 50 $ 94 $ 97
Energy sales (millions of kwh)(c)........................ 84,765 80,889 79,756 77,096 72,455
SELECTED DATA OF FPL (Millions of Dollars):
Operating revenues ...................................... $ 6,132 $ 5,986 $ 5,530 $ 5,343 $ 5,224
Net income available to FPL Group........................ $ 608 $ 591 $ 568 $ 529 $ 425(a)
Total assets ............................................ $11,172 $11,531 $11,751 $11,821 $11,911
Long-term debt, excluding current maturities ............ $ 2,420 $ 2,981 $ 3,094 $ 3,581 $ 3,463
Energy sales (millions of kwh) .......................... 82,734 80,889 79,756 77,096 72,455
Energy sales:
Residential ........................................... 50.6% 51.1% 50.8% 50.2% 50.2%
Commercial ............................................ 39.8 38.6 38.5 38.8 39.3
Industrial ............................................ 4.7 4.7 4.9 5.0 5.4
Interchange power sales ............................... 2.1 2.6 1.6 2.5 2.6
Other(d) .............................................. 2.8 3.0 4.2 3.5 2.5
Total ................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Approximate 60-minute net peak served (mw)(e):
Summer season ......................................... 16,613 16,064 15,813 15,179 15,266
Winter season ......................................... 13,047 16,490 18,096 16,563 12,594
Average number of customer accounts (thousands):
Residential ........................................... 3,209 3,153 3,097 3,038 2,974
Commercial ............................................ 389 381 374 366 358
Industrial ............................................ 15 15 15 16 15
Other ................................................. 3 2 3 2 3
Total ................................................... 3,616 3,551 3,489 3,422 3,350
Average price per kwh sold (cents)(f) ................... 7.29 7.29 6.83 6.82 7.10
(a) Reduced by $85 million, or $.45 per share, after-tax effect of cost reduction program charge.
(b) Basic and assuming dilution.
(c) Includes consolidated entities only from the date of consolidation.
(d) Includes the net change in unbilled sales.
(e) The winter season includes November and December of the current year and January through March of the following year.
(f) Includes the net change in unbilled and cost recovery clause revenues.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
FPL Group's net income and earnings per share for 1997 grew 6.7% and
7.2%, respectively. The improvement over the respective 1996 growth
rates of 4.7% and 5.4% is primarily due to better operating results
in FPL Group's other businesses, particularly ESI's independent power
projects. A number of ESI's projects have been restructured to gain
more direct operating control and projects have been added.
Beginning in 1997, several projects are consolidated in FPL Group's
financial statements, including the accounts of a 665 mw gas-fired
EWG and two solar projects. In January 1998, FPL Group announced the
formation of FPL Energy, an FPL Group Capital subsidiary, that will
hold directly or indirectly all generation assets not owned by FPL.
FPL continues to represent the predominant portion of FPL Group's
operations. FPL's results over the past three years reflect a
combination of continued growth in the number of customers served by
FPL and actions taken by management to accelerate the amortization of
nuclear and fossil fuel generating assets and regulatory assets, and
to reduce debt and preferred stock balances.
FPL's operating revenues represent about 96% of FPL Group's operating
revenues and primarily consist of revenues from base rates, cost
recovery clauses and franchise fees. Revenues from FPL's base rates
were $3.5 billion, $3.4 billion and $3.4 billion in 1997, 1996 and
1995, respectively. There were no changes in base rates during those
years. Revenues from cost recovery clauses and franchise fees
represent a pass-through of costs and do not significantly affect net
income. Fluctuations in these revenues are primarily driven by
changes in energy sales, fuel prices and capacity charges. Clause
revenues and the related fuel, purchased power and interchange
expense increased in 1996 primarily due to higher fuel prices and
higher capacity charges as an additional purchased power contract
became effective. See Note 9 - Contracts. In 1997, FPL Group's
operating revenues and fuel, purchased power and interchange expense
include the effects of consolidating some independent power projects
formerly accounted for as equity investments.
The population in FPL's service territory continued to grow,
contributing to retail customer growth of 1.8%, 1.8% and 1.9% in
1997, 1996 and 1995, respectively. In 1997, warmer weather
contributed to an increase in retail customer usage of 1.2%, while in
1996, milder weather conditions resulted in a decrease in retail
customer usage of 1.3%. Extreme weather in 1995 contributed to an
increase in usage of 2.5%. Together these factors and changes in
sales to other utilities contributed to an increase in FPL's total
energy sales of 2.3%, 1.4% and 3.5% in 1997, 1996 and 1995,
respectively. The consolidation of some independent power projects
increased FPL Group energy sales in 1997.
The FPSC regulates FPL's retail sales, which represent approximately
94% of FPL Group's total operating revenues. FPL reported a retail
regulatory ROE of 12.3%, 12.1% and 12.3% in 1997, 1996 and 1995,
respectively. The ROE range authorized by the FPSC for these periods
was 11% to 13% with a midpoint of 12%. In December 1997, a large
customer of FPL filed a petition with the FPSC requesting a limited
scope proceeding to reduce FPL's base rates. The petition asks the
FPSC to reduce FPL's authorized ROE and to exclude amounts recorded
under an FPSC-approved special amortization program in determining
the amount of the rate reduction. FPL Group is unable to predict
what course of action the FPSC might take and what effect, if any,
this matter would have on FPL Group's and FPL's financial statements.
O&M expenses increased in 1997, following several years of decline,
primarily as a result of additional costs associated with the
conservation clause. Excluding these costs, which are essentially a
pass-through and do not affect net income, O&M expenses declined
slightly as a result of lower nuclear refueling and lower payroll-
related costs. Partially offsetting these items were higher
maintenance costs on FPL's distribution system to improve service
reliability. O&M expenses are expected to increase in 1998 due to a
continuing focus on improving service reliability and higher storm
fund accruals. In 1996, cost savings from operational improvements
were partially offset by the third quarter adoption of an
FPSC-approved change in accounting for costs associated with nuclear
refueling outages. See Note 1 - Accrual for Nuclear Maintenance
Costs. O&M expenses in 1995 include charges associated with
facilities consolidation and inventory reductions.
The increases in depreciation and amortization expense are primarily
the result of an FPSC-approved special amortization program initiated
by FPL in 1995. The program calls for recording as amortization
expense a fixed amount of $30 million per year for nuclear assets
plus, through 1997, an additional amount of amortization based on the
level of retail base revenues achieved compared to a fixed amount for
nuclear and fossil generating assets and certain regulatory assets.
Under this program, $199 million, $160 million and $126 million of
special amortization was recorded in 1997, 1996 and 1995,
respectively. The 1997 and 1996 amounts include, as depreciation and
amortization expense, $169 million and $20 million, respectively, for
amortization of regulatory assets. All other special amortization
amounts were applied against nuclear and fossil production assets.
In December 1997, the FPSC voted to extend this program through 1999
and added costs associated with the decommissioning of nuclear plants
and dismantling fossil plants to the cost categories covered by the
plan. The decision was made after the FPSC conducted hearings that
were requested by a third party. In addition to depreciation and
amortization recorded under the special amortization program, in
1997, 1996 and 1995 FPL amortized $22 million, $28 million and $37
million, respectively, of plant-related regulatory assets deferred
since FPL's last rate case in 1984. It is anticipated that
substantially all of the remaining $24 million balance will be
amortized in 1998 as authorized by the FPSC. In 1997 and 1996 the
FPSC approved higher depreciation rates for certain assets which
resulted in additional depreciation of $31 million and $22 million in
1997 and 1996, respectively.
FPL lowered its interest charges and preferred stock dividends by
reducing debt and preferred stock balances. FPL Group has reduced
these balances, net of commercial paper increases, over the past
three years by $1.0 billion ($1.4 billion for FPL). In 1997,
additional debt has been assumed as a result of ESI's portfolio
restructuring and expansion resulting in higher interest charges at
FPL Group.
Improved results in 1997 from independent power partnerships
contributed to an increase in the non-operating line other - net of
FPL Group. The 1996 change in other - net of both FPL Group and FPL
resulted from an accounting rule change, approved by the FPSC, that
eliminated the capitalization of interest and return on equity on all
but very large construction projects.
The lower effective income tax rate in 1997 and 1996 reflects
increased amortization of FPL's deferred investment tax credits due
to the special amortization program and adjustments of prior years'
tax matters.
The electric utility industry is facing increasing competitive
pressure. FPL currently faces competition from other suppliers of
electrical energy to wholesale customers and from alternative energy
sources and self-generation for other customer groups, primarily
industrial customers. In 1997, operating revenues from wholesale and
industrial customers combined represented approximately 4% of FPL's
total operating revenues. Various states, other than Florida, have
either enacted legislation or are pursuing initiatives designed to
deregulate the production and sale of electricity. By allowing
customers to choose their electricity supplier, deregulation is
expected to result in a shift from cost-based rates to market-based
rates for energy production and other services provided to retail
customers. Similar initiatives are also being pursued on the federal
level. Although the legislation and initiatives vary substantially,
common areas of focus include when market-based pricing will be
available for wholesale and retail customers, what existing prudently
incurred costs in excess of the market-based price will be
recoverable and whether generation assets should be separated from
transmission, distribution and other assets. In the event the basis
of regulation for some or all of FPL's business changes from
cost-based regulation, existing regulatory assets and liabilities
would be written off unless regulators specify an alternative means
of recovery or refund. Further, other aspects of the business, such
as generation assets and long-term power purchase commitments, would
need to be reviewed to assess their recoverability in a changed
regulatory environment. Since there is no deregulation proposal
currently under consideration in Florida, FPL is unable to predict
what impact would result from a change to a more competitive
environment or when such a change might occur. See
Note 1 - Regulation.
FPL Group is working to resolve the potential impact of the year 2000
on the processing of information by its computer systems. An
assessment of identified software, including vendor-supplied
software, has been completed and work has begun to make the necessary
modifications. The estimated cost of addressing year 2000 issues in
software applications is not expected to have a material adverse
effect on FPL Group's financial statements. FPL Group continues to
assess the potential financial and operational impacts of
computerized processes embedded in operating equipment.
Liquidity and Capital Resources
FPL Group's primary capital requirements consist of expenditures to
meet increased electricity usage and customer growth of FPL. Capital
expenditures of FPL for the period 1998 through 2000 are expected to
be approximately $1.8 billion, including $620 million for 1998.
Also, in January 1998 FPL Group acquired interests in two power
plants in the Northeast and announced plans to purchase all of
Central Maine's non-nuclear generation assets. The Central Maine
transaction is expected to close in the second half of 1998 and is
subject to approval by federal and state regulators. Commitments for
energy-related acquisitions, including the acquisitions mentioned
above, are $1.1 billion for 1998. Other acquisitions may be made as
opportunities arise. See Note 9 - Commitments. In 1997, FPL's
capital expenditures were higher than 1996 as a result of costs
associated with the replacement of steam generators at St. Lucie Unit
No. 1. The further planned increase in 1998 reflects reliability
improvements to be made to the distribution system. Expenditures on
independent power projects in 1997 by FPL Group's other operating
subsidiaries, primarily ESI, were $291 million. This increase over
prior years is the result of ESI's expansion and restructuring of
various projects.
Debt maturities of FPL Group's subsidiaries will require cash
outflows of approximately $718 million ($535 million for FPL) through
2002, including $198 million ($180 million for FPL) in 1998. See
Note 6. It is anticipated that cash requirements for FPL's capital
expenditures, energy-related investments and debt maturities in 1998
will be satisfied with internally generated funds and debt issuances.
Any internally generated funds not required for capital expenditures
and current maturities may be used to reduce outstanding debt,
preferred or common stock, or for investment. Any temporary cash
needs will be met by short-term bank borrowings. Bank lines of
credit currently available to FPL Group and its subsidiaries
aggregate $1.3 billion ($900 million for FPL).
In 1997, FPL Group's board of directors authorized the repurchase of
up to 10 million shares of common stock over an unspecified period.
During 1997, FPL Group repurchased 0.7 million shares of common stock
under this program and 0.3 million shares under a previously
authorized stock repurchase program.
FPL self-insures for damage to certain transmission and distribution
properties and maintains a funded storm reserve to reduce the
financial impact of storm losses. The balance of the storm fund
reserve at December 31, 1997 was $252 million. Bank lines of credit
of $300 million, included in the $1.3 billion above, are also
available if needed to provide cash for storm restoration costs. The
FPSC has indicated that it would consider future storm losses in
excess of the funded reserve for possible recovery from customers.
FPL filed a request for FPSC approval to increase the annual storm
fund contribution from $20 million to $35 million; a decision by the
FPSC is pending.
In 1996, the FASB issued an exposure draft on accounting for
obligations associated with the retirement of long-lived assets and
recently decided to restudy the matter. A method proposed by the
FASB would require the present value of estimated future cash flows
to decommission FPL's nuclear power plants and dismantle its fossil
power plants to be recorded as an increase to asset balances and as a
liability. This amount is currently estimated to be $1.5 billion.
Under that proposal, it is anticipated that there will be no effect
on cash flows and, because of the regulatory treatment, there will be
no significant effect on net income.
FPL Group Capital and its subsidiaries have guaranteed approximately
$240 million of lease obligations, debt service payments and other
payments subject to certain contingencies. This amount includes
guarantees associated with acquisitions occurring in early 1998.
FPL's charter and mortgage contain provisions which, under certain
conditions, restrict the payment of dividends and the issuance of
additional unsecured debt, first mortgage bonds and preferred stock.
Given FPL's current financial condition and level of earnings,
expected financing activities and dividends are not affected by these
limitations.
Market Risk Sensitivity
All financial instruments and positions held by FPL Group and FPL
described below are held for purposes other than trading.
Interest rate risk - The special use funds of FPL include restricted
funds set aside to cover the cost of storm damage and for the
decommissioning of FPL's nuclear power plants. A portion of these
funds is invested in fixed income debt securities carried at their
market value of $640 million at December 31, 1997. Adjustments to
market value result in a corresponding adjustment to the related
liability accounts based on current regulatory treatment. Because
the funds set aside for storm damage could be needed at any time, the
related investments are generally more liquid and, therefore, are
less sensitive to changes in interest rates. The nuclear
decommissioning funds, in contrast, are generally invested in longer
term securities as decommissioning activities are not expected to
begin until 2012. Market risk associated with all of these
securities is estimated as the potential loss in fair value resulting
from a hypothetical 10% increase in interest rates and amounts to $19
million.
The fair value of FPL Group's and FPL's long-term debt is also
affected by changes in interest rates. Over the last several years,
the outstanding long-term debt balance has been substantially
reduced, resulting in a significant decrease in the related interest
expense, and a portion of the remaining debt balance has been
converted to variable rate debt. Interest rate swap agreements
entered into by an FPL Group subsidiary reduce the impact of interest
rate changes on its variable rate debt (total notional principal
amount of $267 million at December 31, 1997). The following presents
the sensitivity of the fair value of debt and interest rate swap
agreements to a hypothetical 10% decrease in interest rates:
<TABLE>
<CAPTION>
Hypothetical
Carrying Increase in
Value Fair Value Fair Value(a)
(Millions of Dollars)
<S> <C> <C> <C>
Long-term debt of FPL ................................................ $ 2,600 $ 2,679(b) $ 92
Long-term debt of FPL Group .......................................... $ 3,147 $ 3,236(b) $103
Interest rate swap agreements of FPL Group ........................... - $ 31(c) $ 6
(a) Calculated based on the change in discounted cash flow.
(b) Based on quoted market prices for these or similar issues.
(c) Based on the estimated cost to terminate the agreements.
</TABLE>
While a decrease in interest rates would increase the fair value of
debt, it is unlikely that events that would result in a realized loss
will occur.
Equity price risk - Included in the special use funds of FPL are
marketable equity securities carried at their market value of $367
million at December 31, 1997. A hypothetical 10% decrease in the
prices quoted by stock exchanges would result in a $37 million
reduction in fair value and corresponding adjustment to the related
liability accounts based on current regulatory treatment.
Other risks - Under current cost-based regulation, FPL's cost of fuel
is recovered through the fuel clause, with no effect on earnings. In
line with FPL's ongoing efforts to control costs, and to address the
commodity price risk that FPL would face in a deregulated
environment, FPL formed a division to buy and sell wholesale energy
commodities, such as natural gas and electric power. Initially, the
primary focus of the Energy Marketing & Trading Division has been the
procurement of natural gas for FPL's own use in power generation (the
effects of which are reflected in the cost of fuel recovered through
the fuel clause) and the sale of excess electric power. At December
31, 1997, there were no material open positions in these activities.
The level of trading activity is expected to grow as FPL seeks to
manage the risk associated with fluctuating fuel prices, increase
value from its own power generation and position itself to take
advantage of opportunities in evolving energy-related markets
throughout the country.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
See Management's Discussion - Market Risk Sensitivity.
<PAGE>
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY:
We have audited the consolidated financial statements of FPL Group,
Inc. and of Florida Power & Light Company, listed in the accompanying
index at Item 14(a)1 of this Annual Report (Form 10-K) to the
Securities and Exchange Commission for the year ended December 31,
1997. These financial statements are the responsibility of the
companies' management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of FPL
Group, Inc. and Florida Power & Light Company at December 31, 1997
and 1996 and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 13, 1998
<PAGE>
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
OPERATING REVENUES ................................................................. $6,369 $6,037 $5,592
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................................ 2,255 2,131 1,722
Other operations and maintenance ................................................. 1,231 1,189 1,206
Depreciation and amortization .................................................... 1,061 960 918
Taxes other than income taxes .................................................... 594 586 549
Total operating expenses ....................................................... 5,141 4,866 4,395
OPERATING INCOME ................................................................... 1,228 1,171 1,197
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................................. (291) (267) (291)
Preferred stock dividends - FPL .................................................. (19) (24) (43)
Other - net ...................................................................... 4 (7) 19
Total other deductions - net ................................................... (306) (298) (315)
INCOME BEFORE INCOME TAXES ......................................................... 922 873 882
INCOME TAXES ....................................................................... 304 294 329
NET INCOME ......................................................................... $ 618 $ 579 $ 553
Earnings per share of common stock (basic and assuming dilution) ................... $3.57 $3.33 $3.16
Dividends per share of common stock ................................................ $1.92 $1.84 $1.76
Average number of common shares outstanding ........................................ 173 174 175
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
FPL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property ....................................... $17,430 $16,593
Nuclear fuel under capital lease ........................................................... 186 182
Construction work in progress .............................................................. 204 258
Less accumulated depreciation and amortization ............................................. (8,466) (7,649)
Total property, plant and equipment - net ................................................ 9,354 9,384
CURRENT ASSETS:
Cash and cash equivalents .................................................................. 54 196
Customer receivables, net of allowances of $9 and $12 ...................................... 501 462
Materials, supplies and fossil fuel inventory - at average cost ............................ 302 268
Deferred clause expenses ................................................................... 122 127
Other ...................................................................................... 122 120
Total current assets ..................................................................... 1,101 1,173
OTHER ASSETS:
Special use funds of FPL ................................................................... 1,007 806
Other investments .......................................................................... 282 327
Other ...................................................................................... 705 529
Total other assets ....................................................................... 1,994 1,662
TOTAL ASSETS ................................................................................. $12,449 $12,219
CAPITALIZATION:
Common shareholders' equity ................................................................ $ 4,845 $ 4,592
Preferred stock of FPL without sinking fund requirements ................................... 226 290
Preferred stock of FPL with sinking fund requirements ...................................... - 42
Long-term debt ............................................................................. 2,949 3,144
Total capitalization ..................................................................... 8,020 8,068
CURRENT LIABILITIES:
Short-term debt ............................................................................ 134 -
Current maturities of long-term debt and preferred stock ................................... 198 155
Accounts payable ........................................................................... 368 308
Customers' deposits ........................................................................ 279 268
Accrued interest and taxes ................................................................. 180 259
Other ...................................................................................... 340 284
Total current liabilities ................................................................ 1,499 1,274
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes .......................................................... 1,473 1,531
Deferred regulatory credit - income taxes .................................................. 166 129
Unamortized investment tax credits ......................................................... 229 251
Storm and property insurance reserve ....................................................... 252 223
Other ...................................................................................... 810 743
Total other liabilities and deferred credits ............................................. 2,930 2,877
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ......................................................... $12,449 $12,219
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
FPL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................................... $ 618 $ 579 $ 553
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................ 1,061 960 918
Decrease in deferred income taxes and related regulatory credit .............. (30) (76) (90)
Increase (decrease) in accrued interest and taxes ............................ (79) 39 10
Other - net .................................................................. 27 90 119
Net cash provided by operating activities ...................................... 1,597 1,592 1,510
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ...................................................... (551) (474) (661)
Independent power investments .................................................... (291) (52) (37)
Other - net....................................................................... 45 - (4)
Net cash used in investing activities .......................................... (797) (526) (702)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ....................................................... 42 - 178
Retirement of long-term debt and preferred stock ................................. (717) (338) (574)
Increase (decrease) in short-term debt ........................................... 113 (179) (56)
Repurchase of common stock ....................................................... (48) (82) (69)
Dividends on common stock ........................................................ (332) (320) (309)
Other - net....................................................................... - 3 (18)
Net cash used in financing activities .......................................... (942) (916) (848)
Net increase (decrease) in cash and cash equivalents ............................... (142) 150 (40)
Cash and cash equivalents at beginning of year ..................................... 196 46 86
Cash and cash equivalents at end of year ........................................... $ 54 $ 196 $ 46
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest ........................................................... $ 287 $ 248 $ 276
Cash paid for income taxes ....................................................... $ 434 $ 381 $ 391
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease obligations ........................................... $ 81 $ 86 $ 84
Debt assumed for property additions .............................................. $ 420 $ 33 -
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions of Dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
OPERATING REVENUES ................................................................ $6,132 $5,986 $5,530
OPERATING EXPENSES:
Fuel, purchased power and interchange ........................................... 2,196 2,131 1,722
Other operations and maintenance ................................................ 1,132 1,127 1,138
Depreciation and amortization ................................................... 1,034 955 909
Income taxes .................................................................... 329 329 347
Taxes other than income taxes ................................................... 592 585 549
Total operating expenses ...................................................... 5,283 5,127 4,665
OPERATING INCOME .................................................................. 849 859 865
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................................ (227) (246) (270)
Other - net ..................................................................... 5 2 16
Total other deductions - net .................................................. (222) (244) (254)
NET INCOME ........................................................................ 627 615 611
PREFERRED STOCK DIVIDENDS ......................................................... 19 24 43
NET INCOME AVAILABLE TO FPL GROUP, INC. ........................................... $ 608 $ 591 $ 568
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Plant in service ......................................................................... $16,819 $16,406
Less accumulated depreciation ............................................................ (8,355) (7,610)
Net .................................................................................... 8,464 8,796
Nuclear fuel under capital lease ......................................................... 186 182
Construction work in progress ............................................................ 131 220
Electric utility plant - net ......................................................... 8,781 9,198
CURRENT ASSETS:
Cash and cash equivalents ................................................................ 3 78
Customer receivables, net of allowances of $9 and $12 .................................... 471 460
Materials, supplies and fossil fuel inventory - at average cost .......................... 242 248
Deferred clause expenses ................................................................. 122 127
Other .................................................................................... 104 98
Total current assets ................................................................. 942 1,011
OTHER ASSETS:
Special use funds ........................................................................ 1,007 806
Other .................................................................................... 442 516
Total other assets ................................................................... 1,449 1,322
TOTAL ASSETS ............................................................................... $11,172 $11,531
CAPITALIZATION:
Common shareholder's equity .............................................................. $ 4,814 $ 4,668
Preferred stock without sinking fund requirements ........................................ 226 289
Preferred stock with sinking fund requirements ........................................... - 42
Long-term debt ........................................................................... 2,420 2,981
Total capitalization ................................................................. 7,460 7,980
CURRENT LIABILITIES:
Commercial paper ......................................................................... 40 -
Current maturities of long-term debt and preferred stock ................................. 180 4
Accounts payable ......................................................................... 344 299
Customers' deposits ...................................................................... 279 268
Accrued interest and taxes ............................................................... 180 301
Other .................................................................................... 289 256
Total current liabilities ............................................................ 1,312 1,128
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ........................................................ 1,070 1,147
Deferred regulatory credit - income taxes ................................................ 166 129
Unamortized investment tax credits ....................................................... 229 251
Storm and property insurance reserve ..................................................... 252 223
Other .................................................................................... 683 673
Total other liabilities and deferred credits ......................................... 2,400 2,423
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ....................................................... $11,172 $11,531
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................... $ 627 $ 615 $ 611
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................ 1,034 955 909
Decrease in deferred income taxes and related regulatory credit........... (98) (25) (107)
Increase (decrease) in accrued interest and taxes ........................ (121) 22 12
Other - net .............................................................. 61 41 97
Net cash provided by operating activities .................................. 1,503 1,608 1,522
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ......................................................... (551) (474) (661)
Other - net .................................................................. (83) (124) (73)
Net cash used in investing activities ...................................... (634) (598) (734)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ................................................... - - 170
Retirement of long-term debt and preferred stock ............................. (505) (333) (574)
Increase (decrease) in commercial paper ...................................... 40 (179) (47)
Capital contributions from FPL Group, Inc. ................................... 140 195 280
Dividends .................................................................... (619) (617) (597)
Other - net .................................................................. - 2 (21)
Net cash used in financing activities ...................................... (944) (932) (789)
Net increase (decrease) in cash and cash equivalents ........................... (75) 78 (1)
Cash and cash equivalents at beginning of year ................................. 78 - 1
Cash and cash equivalents at end of year ....................................... $ 3 $ 78 $ -
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest ....................................................... $ 216 $ 228 $ 252
Cash paid for income taxes ................................................... $ 575 $ 379 $ 479
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease obligations ....................................... $ 81 $ 86 $ 84
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
1. Summary of Significant Accounting and Reporting Policies
Basis of Presentation - FPL Group, Inc.'s (FPL Group) operating
activities consist of a rate-regulated public utility, Florida Power
& Light Company (FPL), independent power projects and agricultural
operations. FPL supplies electric service to 3.6 million customers
throughout most of the east and lower west coasts of Florida. The
independent power projects consist of owned and controlled entities,
which are consolidated, and non-controlling ownership interests in
joint ventures or leveraged leases.
The consolidated financial statements of FPL Group and FPL include
the accounts of their respective majority-owned and controlled
subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation. Certain amounts included in
prior years' consolidated financial statements have been reclassified
to conform to the current year's presentation. The preparation of
financial statements requires the use of estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Regulation - FPL is subject to regulation by the Florida Public
Service Commission (FPSC) and the Federal Energy Regulatory
Commission (FERC). Its rates are designed to recover the cost of
providing electric service to its customers including a reasonable
rate of return on invested capital. As a result of this cost-based
regulation, FPL follows the accounting practices set forth in
Statement of Financial Accounting Standards No. (FAS) 71, "Accounting
for the Effects of Certain Types of Regulation." FAS 71 indicates
that regulators can create assets and impose liabilities that would
not be recorded by non-regulated entities. Regulatory assets and
liabilities represent probable future revenues that will be recovered
from or refunded to customers through the ratemaking process.
Recoverability of regulatory assets is assessed at each reporting
period.
Various states, other than Florida, have either enacted legislation
or are pursuing initiatives designed to deregulate the production and
sale of electricity. By allowing customers to choose their
electricity supplier, deregulation is expected to result in a shift
from cost-based rates to market-based rates for energy production and
other services provided to retail customers. Similar initiatives are
also being pursued on the federal level. Although the legislation
and initiatives vary substantially, common areas of focus include
when market-based pricing will be available for wholesale and retail
customers, what existing prudently incurred costs in excess of the
market-based price will be recoverable and whether generation assets
should be separated from transmission, distribution and other assets.
It is generally believed that under any proposal, transmission and
distribution activities would remain regulated.
In the event that FPL's generating operations are no longer subject
to the provisions of FAS 71, as a result of market-based pricing due
to regulatory or other changes, portions of the existing regulatory
assets and liabilities that relate to generation would be written off
unless regulators specify an alternative means of recovery or refund.
The principal regulatory assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
(Millions of Dollars)
<S> <C> <C>
Assets (included in other assets):
Unamortized debt reacquisition costs ...................................................... $171 $283
Plant-related deferred costs .............................................................. $ 24 $ 46
Nuclear maintenance reserve cumulative effect adjustment .................................. $ 14 $ 21
Deferred Department of Energy assessment .................................................. $ 48 $ 53
Liabilities:
Deferred regulatory credit - income taxes ................................................. $166 $129
Unamortized investment tax credits ........................................................ $229 $251
Storm and property insurance reserve ...................................................... $252 $223
</TABLE>
The storm and property insurance reserve is primarily related to
transmission and distribution properties. The amounts presented above
exclude clause-related regulatory assets and liabilities that are recovered
or refunded over six- or twelve-month periods. These amounts are
included in current assets and liabilities in the consolidated balance
sheets. Further, other aspects of the business, such as generation
assets and long-term power purchase commitments, would need to be
reviewed to assess their recoverability in a changed regulatory
environment. Since there is no deregulation proposal currently under
consideration in Florida, FPL is unable to predict what impact would
result from a change to a more competitive environment or when such a
change might occur.
In 1995, FPL began amortizing the plant-related deferred costs in the
preceding table over a period of no more than five years as approved by
the FPSC. Amounts recorded in 1997, 1996 and 1995 were $22 million,
$28 million and $37 million, respectively. Pursuant to an FPSC-
approved program started in 1995, FPL recorded as amortization
expense a fixed amount of $30 million per year for nuclear assets plus,
through 1997, an additional amount of amortization based on the level of
retail base revenues achieved compared to a fixed amount for nuclear
and fossil generating assets and certain regulatory assets. Under this
program, $199 million, $160 million and $126 million of special
amortization was recorded in 1997, 1996 and 1995, respectively. The
1997 and 1996 amounts include, as depreciation and amortization
expense, $169 million and $20 million, respectively, for amortization of
regulatory assets. All other special amortization amounts were applied
against nuclear and fossil production assets. In December 1997, the
FPSC voted to extend this program through 1999 and added costs
associated with the decommissioning of nuclear plants and dismantling
fossil plants to the cost categories covered by the plan. The decision
was made after the FPSC conducted hearings that were requested by a
third party.
Revenues and Rates - FPL's retail and wholesale utility rate schedules
are approved by the FPSC and the FERC, respectively. FPL records
unbilled base revenues for the estimated amount of energy delivered to
customers but not yet billed. Unbilled base revenues are included in
customer receivables and amounted to approximately $154 million and
$161 million at December 31, 1997 and 1996, respectively.
Revenues include amounts resulting from cost recovery clauses, which
are designed to permit full recovery of certain costs and provide a return
on certain assets utilized by these programs, and franchise fees. These
revenues generally represent a pass-through of costs and include
substantially all fuel, purchased power and interchange expenses,
conservation- and environmental-related expenses, certain revenue
taxes and franchise fees. Revenues from cost recovery clauses are
recorded when billed; FPL achieves matching of costs and related
revenues by deferring the net under or over recovery. Any under
recovered costs or over recovered revenues are collected from or
returned to customers in subsequent periods.
In December 1997, a large customer of FPL filed a petition with the
FPSC requesting a limited scope proceeding to reduce FPL's base rates.
The petition asks the FPSC to reduce FPL's authorized return on
common equity and to exclude amounts recorded under the FPSC-
approved special amortization program in determining the amount of the
rate reduction. FPL Group is unable to predict what course of action the
FPSC might take and what effect, if any, this matter would have on FPL
Group's and FPL's financial statements.
Electric Plant, Depreciation and Amortization - The cost of additions to
units of utility property of FPL is added to electric utility plant. The cost
of units of utility property retired, less net salvage, is charged to
accumulated depreciation. Maintenance and repairs of property as well
as replacements and renewals of items determined to be less than units
of utility property are charged to other operations and maintenance
(O&M) expenses. At December 31, 1997, the generating, transmission,
distribution and general facilities of FPL represented approximately 47%,
13%, 33% and 7%, respectively, of FPL's gross investment in electric
utility plant in service. Substantially all electric utility plant of FPL is
subject to the lien of a mortgage securing FPL's first mortgage bonds; a
portion of the remaining electric plant in service is pledged as collateral
for the senior term loan of FPL Group Capital Inc (FPL Group Capital).
Depreciation of electric property is primarily provided on a straight-line
average remaining life basis. FPL includes in depreciation expense a
provision for fossil plant dismantlement and nuclear plant
decommissioning. For substantially all of FPL's property, depreciation
and fossil fuel plant dismantlement studies are performed and filed with
the FPSC at least every four years. Depreciation studies were filed in
December 1997 and will be effective for 1998. The next fossil fuel plant
dismantlement studies are scheduled to be filed by October 1, 1998 and
will be effective for 1999. The weighted annual composite depreciation
rate was approximately 4.3% for 1997, 4.1% for 1996 and 4.0% for
1995, excluding the effects of decommissioning and dismantlement.
Further, these rates exclude approximately $222 million, $188 million
and $163 million, respectively, of special and plant-related deferred cost
amortization. See Regulation.
Nuclear Fuel - FPL leases nuclear fuel for all four of its nuclear units.
Nuclear fuel lease expense was $85 million, $94 million and $104 million
in 1997, 1996 and 1995, respectively. Included in this expense was an
interest component of $9 million, $10 million and $11 million in 1997,
1996 and 1995, respectively. Nuclear fuel lease payments and a charge
for spent nuclear fuel disposal are charged to fuel expense on a unit of
production method. These costs are recovered through the fuel and
purchased power cost recovery clause (fuel clause). Under certain
circumstances of lease termination, FPL is required to purchase all
nuclear fuel in whatever form at a purchase price designed to allow the
lessor to recover its net investment cost in the fuel, which totaled $186
million at December 31, 1997. For ratemaking, these leases are
classified as operating leases. For financial reporting, the capital lease
obligation is recorded at the amount due in the event of lease
termination.
Decommissioning and Dismantlement of Generating Plant - FPL
accrues nuclear decommissioning costs over the expected service life of
each unit. Nuclear decommissioning studies are performed at least once
every five years for FPL's four nuclear units and are submitted to the
FPSC for approval. The next studies are scheduled to be filed by
October 1, 1998 and will be effective for 1999. These studies assume
prompt dismantlement for the Turkey Point Unit Nos. 3 and 4 with
decommissioning activities commencing in 2012 and 2013, respectively.
St. Lucie Unit No. 1 will be mothballed in 2016 until St. Lucie Unit No. 2
is ready for decommissioning in 2023. These studies also assume that
FPL will be storing spent fuel on site pending removal to a U.S.
Government facility. Decommissioning expense accruals, included in
depreciation and amortization expense, were $85 million in 1997, 1996
and 1995. FPL's portion of the ultimate cost of decommissioning its four
units, including dismantlement and reclamation, expressed in 1997
dollars, is currently estimated to aggregate $1.5 billion. At December 31,
1997 and 1996, the accumulated provision for nuclear decommissioning
totaled $998 million and $805 million, respectively, and is included in
accumulated depreciation.
Similarly, FPL accrues the cost of dismantling its fossil fuel plants over
the expected service life of each unit. Fossil dismantlement expense
totaled $17 million in both 1997 and 1996 and $25 million in 1995, and is
included in depreciation and amortization expense. The ultimate cost of
dismantlement for the fossil units, expressed in 1997 dollars, is
estimated to be $266 million. At December 31, 1997 and 1996, the
accumulated provision for fossil dismantlement totaled $162 million and
$146 million, respectively, and is a component of accumulated
depreciation.
Restricted assets for the payment of future expenditures to
decommission FPL's nuclear units are included in special use funds of
FPL. At December 31, 1997 and 1996, decommissioning fund assets
were $850 million and $667 million, respectively. Securities held in the
decommissioning fund are carried at market value with market
adjustments resulting in a corresponding adjustment to the accumulated
provision for nuclear decommissioning. See Note 3. Contributions to
the funds are based on current period decommissioning expense.
Additionally, fund earnings, net of taxes are reinvested in the funds. The
tax effects of amounts not yet recognized for tax purposes are included
in accumulated deferred income taxes.
In 1996, the Financial Accounting Standards Board (FASB) issued an
exposure draft on accounting for obligations associated with the
retirement of long-lived assets and recently decided to restudy the
matter. A method proposed by the FASB would require the present
value of estimated future cash flows to decommission FPL's nuclear
power plants and dismantle its fossil power plants to be recorded as an
increase to asset balances and as a liability. This amount is currently
estimated to be $1.5 billion. Under that proposal, it is anticipated that
there will be no effect on cash flows and, because of the regulatory
treatment, there will be no significant effect on net income.
Accrual for Nuclear Maintenance Costs - In 1996, the FPSC approved a
new method of accounting for maintenance costs incurred during nuclear
refueling outages. Under this new method, the estimated maintenance
costs relating to each unit's next planned outage will be accrued over the
period beginning when the unit resumes operations until the end of the
next refueling outage. Any difference between the estimated and actual
costs will be included in O&M expenses when known. This approach
results in FPL recognizing maintenance costs equivalent to slightly less
than three outages per year based upon the current refueling outage
schedule for FPL's four nuclear units. The cumulative effect of adopting
this accounting method was $35 million and, in accordance with the
FPSC order, was recorded as a regulatory asset which will be amortized
and included in O&M expenses over a period not to exceed five years.
In 1997 and 1996, $7 million and $14 million, respectively, of the
cumulative adjustment was expensed.
Construction Activity - In accordance with an FPSC rule, FPL is not
permitted to capitalize interest or a return on common equity during
construction, except for projects that cost in excess of 1/2% of plant in
service and will require more than one year to complete. The FPSC
allows construction projects below the 1/2% threshold as an element of
rate base. FPL Group's non-regulated operations capitalize interest on
construction projects.
Storm and Property Insurance Reserve Fund (storm fund) - The storm
fund provides coverage toward storm damage costs and possible
retrospective premium assessments stemming from a nuclear incident
under the various insurance programs covering FPL's nuclear generating
plants. The storm fund, which totaled $157 million and $139 million at
December 31, 1997 and 1996, respectively, is included in special use
funds of FPL. Securities held in the fund are carried at market value
with market adjustments resulting in a corresponding adjustment to the
storm and property insurance reserve. See Note 3 and
Note 9 - Insurance. Fund earnings, net of taxes, are reinvested in the
fund. The tax effects of amounts not yet recognized for tax purposes
are included in accumulated deferred income taxes.
Other Investments - Included in other investments in FPL Group's
consolidated balance sheets are FPL Group's participation in leveraged
leases of $154 million and $157 million at December 31, 1997 and 1996,
respectively. Additionally, other investments include non-majority owned
interests in partnerships and joint ventures, essentially all of which are
accounted for under the equity method.
Cash Equivalents - Cash equivalents consist of short-term, highly liquid
investments with original maturities of three months or less.
Short-Term Debt - The year end weighted-average interest rate on short-
term debt at December 31, 1997 was 6.3% (6.6% for FPL).
Approximately $29 million of the non-FPL fossil-fuel inventory is pledged
as collateral for short-term debt.
Retirement of Long-Term Debt - The excess of FPL's reacquisition cost
over the book value of long-term debt is deferred and amortized to
expense ratably over the remaining life of the original issue, which is
consistent with its treatment in the ratemaking process. Under the
special amortization program, $110 million of this regulatory asset was
amortized in 1997. See Regulation. FPL Group Capital expenses this
cost in the period incurred.
Income Taxes - Deferred income taxes are provided on all significant
temporary differences between the financial statement and tax bases of
assets and liabilities. FPL is included in the consolidated federal income
tax return filed by FPL Group. FPL determines its income tax provision
on the "separate return method." The deferred regulatory credit -
income taxes of FPL represents the revenue equivalent of the difference
in accumulated deferred income taxes computed under FAS 109,
"Accounting for Income Taxes," as compared to regulatory accounting
rules. This amount is being amortized in accordance with the regulatory
treatment over the estimated lives of the assets or liabilities which
resulted in the initial recognition of the deferred tax amount. Investment
tax credits (ITC) for FPL are deferred and amortized to income over the
approximate lives of the related property in accordance with the
regulatory treatment. The special amortization program included
amortization of regulatory assets related to income taxes of $59 million
and $20 million in 1997 and 1996, respectively.
2. Employee Retirement Benefits
Pension Benefits - Substantially all employees of FPL Group and its
subsidiaries are covered by a noncontributory defined benefit pension
plan. Plan benefits are generally based on employees' years of service
and compensation during the last years of employment. Participants are
vested after five years of service. During 1997, the pension plan was
amended and restated to a cash balance design. This plan amendment,
together with changes in assumptions, caused a $38 million decrease in
1997 pension cost and a $236 million decrease in the 1997 projected
benefit obligation. Under this new design, benefits are described in
terms of account balances and they accrue ratably over the years of
service. All costs of the FPL Group pension plan are allocated to
participating subsidiaries on a pro rata basis. In September 1997, a
special retirement program was accepted by 456 bargaining unit
employees at FPL.
For 1997, 1996 and 1995 the components of pension cost are as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
(Millions of Dollars)
<S> <C> <C> <C>
Service cost ...................................................................... $ 38 $ 38 $ 32
Interest cost on projected benefit obligation ..................................... 76 90 88
Actual return on plan assets ...................................................... (343) (123) (350)
Net amortization and deferral ..................................................... 160 (24) 211
Negative pension cost ............................................................. (69) (19) (19)
Effect of special retirement programs ............................................. 18 - 5
FPL Group's pension cost .......................................................... $ (51) $ (19) $ (14)
Pension cost allocated to FPL ..................................................... $ (50) $ (18) $ (13)
</TABLE>
FPL Group and its subsidiaries fund the pension cost calculated under
the entry age normal level percentage of pay actuarial cost method,
provided that this amount satisfies the minimum funding standards of the
Employee Retirement Income Security Act of 1974, as amended, and is
not greater than the maximum tax deductible amount for the year. No
contributions to the plan were required for 1997, 1996 or 1995.
A reconciliation of the funded status of the plan to the amounts
recognized in FPL Group's consolidated balance sheets is presented
below:
<TABLE>
<CAPTION>
December 31,
1997 1996
(Millions of Dollars)
<S> <C> <C>
Plan assets at fair value, primarily listed stocks and bonds (a) ............................ $2,287 $1,996
Actuarial present value of benefits for services rendered to date (a):
Accumulated benefits based on salaries to date, including vested benefits
of $1.103 billion and $898 million ...................................................... 1,127 951
Additional benefits based on estimated future salary levels ............................... 19 311
Projected benefit obligation (a) ............................................................ 1,146 1,262
Plan assets in excess of projected benefit obligation ....................................... 1,141 734
Prior service (credits) costs not recognized in net periodic pension cost ................... (117) 175
Unrecognized net asset at January 1, 1986, being amortized
over 19 years - net of accumulated amortization ........................................... (163) (187)
Unrecognized net gain ....................................................................... (762) (675)
Prepaid pension cost of FPL Group ........................................................... $ 99 $ 47
Prepaid pension cost allocated to FPL ....................................................... $ 94 $ 43
(a) Measured as of September 30.
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 6.50% and 7.00%
for 1997 and 1996, respectively. The assumed rate of increase in future
compensation levels was 5.5% for both years. The expected long-term
rate of return on plan assets used in determining pension cost was
7.75% for 1997, 1996 and 1995. In 1996, FPL Group elected to change
the measurement date for pension obligations and plan assets from
December 31 to September 30. The effect of this accounting change
was not material.
Other Postretirement Benefits - FPL Group and its subsidiaries have
defined benefit postretirement plans for health care and life insurance
benefits that cover substantially all employees. All costs of the FPL
Group plans are allocated to participating subsidiaries on a pro rata
basis. Eligibility for health care benefits is based upon age plus years of
service at retirement. The plans are contributory and contain
cost-sharing features such as deductibles and coinsurance. FPL Group
has set a cap on company contributions for postretirement health care
which may be reached at some point in the future depending on actual
claims experience. Generally, life insurance benefits for retirees are
capped at $50,000. FPL Group's policy is to fund postretirement
benefits in amounts determined at the discretion of management.
For 1997, 1996 and 1995, the components of net periodic postretirement
benefit cost are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
(Millions of Dollars)
<S> <C> <C> <C>
Service cost ........................................................................... $ 6 $ 5 $ 4
Interest cost .......................................................................... 21 18 18
Actual return on plan assets ........................................................... (28) (4) (23)
Amortization of transition obligation .................................................. 3 3 3
Net amortization and deferral .......................................................... 21 (2) 17
FPL Group's postretirement benefit cost ................................................ $ 23 $20 $ 19
Postretirement benefit cost allocated to FPL ........................................... $ 23 $19 $ 18
</TABLE>
A reconciliation of the funded status of the plan to the amounts
recognized in FPL Group's consolidated balance sheets is presented
below:
<TABLE>
<CAPTION>
December 31,
1997 1996
(Millions of Dollars)
<S> <C> <C>
Plan assets at fair value, primarily listed stocks and bonds (a) ............................ $125 $107
Accumulated postretirement benefit obligation (a):
Retirees .................................................................................. 214 189
Fully eligible active plan participants ................................................... 9 3
Other active plan participants ............................................................ 101 81
Total ................................................................................... 324 273
Accumulated postretirement benefit obligation in excess of plan assets ...................... 199 166
Unrecognized net transition obligation (amortized over 20 years) ............................ (53) (56)
Unrecognized net loss ....................................................................... (23) (10)
Accrued postretirement benefit liability of FPL Group ....................................... $123 $100
Accrued postretirement benefit liability allocated to FPL ................................... $122 $100
(a) Measured as of September 30.
</TABLE>
The weighted-average annual assumed rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) for 1997 was
7.0% for retirees under age 65 and 6.0% for retirees over age 65.
These rates are assumed to decrease gradually to 5.0% by 2003. The
cap on FPL Group's contributions mitigates the potential significant
increase in costs resulting from an increase in the health care cost trend
rate. Increasing the assumed health care cost trend rate by one
percentage point would increase the plan's accumulated postretirement
benefit obligation as of September 30, 1997 by $12 million, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost of the plan for 1997 by approximately $1
million.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 6.50% and 7.00% for
1997 and 1996, respectively. The expected long-term rate of return on
plan assets used in determining postretirement benefit cost was 7.75%
for 1997, 1996 and 1995. In 1996, FPL Group elected to change the
measurement date for benefit obligations and plan assets from
December 31 to September 30. The effect of this accounting change
was not material.
3. Financial Instruments
The carrying amounts of cash equivalents and short-term debt
approximate their fair values. Certain investments of FPL Group,
included in other investments, are carried at estimated fair value which
was $51 million and $66 million at December 31, 1997 and 1996,
respectively. The following estimates of the fair value of financial
instruments have been made using available market information and
other valuation methodologies. However, the use of different market
assumptions or methods of valuation could result in different estimated
fair values.
<TABLE>
<CAPTION>
December 31,
1997 1996
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(Millions of Dollars)
<S> <C> <C> <C> <C>
Preferred stock of FPL with sinking fund requirements (a)..... $ - $ - $ 46 $ 47(b)
Long-term debt of FPL (a) .................................... $2,600 $2,679(b) $2,981 $3,001(b)
Long-term debt of FPL Group (a) .............................. $3,147 $3,236(b) $3,295 $3,319(b)
Interest rate swap agreements of FPL Group ................... $ - $ 31(c) $ - $ -
(a) Includes current maturities.
(b) Based on quoted market prices for these or similar issues.
(c) Based on estimated cost to terminate the agreements.
</TABLE>
Special Use Funds - Securities held in the special use funds are
carried at estimated fair value. Slightly more than one-half of the
nuclear decommissioning fund consists of municipal and corporate debt
securities with a weighted-average maturity of 10 years. The
remaining balance consists of equity securities. The storm fund
primarily consists of municipal debt securities with a
weighted-average maturity of 4 years. The cost of securities sold is
determined on the specific identification method. The funds had
realized gains of $3 million and realized losses of $2 million in
1997, $8 million and $9 million in 1996 and $13 million and $4
million in 1995, respectively. The funds had unrealized gains of
$126 million and $55 million at December 31, 1997 and 1996,
respectively; the unrealized losses at those dates were $1 million
and $2 million. The proceeds from the sale of securities in 1997,
1996 and 1995 were $800 million, $1.05 billion and $950 million,
respectively.
4. Common Shareholders' Equity
FPL Group - The changes in common shareholders' equity accounts of
FPL Group are as follows:
<TABLE>
<CAPTION>
Common Stock (a) Additional Common
Aggregate Paid-In Unearned Retained Shareholders'
Shares Par Value Capital Compensation Earnings Equity
(In Millions)
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994 .... 187 $2 $3,486 $(304) $1,014
Net income ................... - - - - 553
Repurchase of common stock ... (2) - (69) - -
Dividends on common stock .... - - - - (309)
Earned compensation under ESOP - - 5 17 -
Other ........................ - - (2) - 1
Balances, December 31, 1995 .... 185(b) 2 3,420 (287) 1,259
Net income ................... - - - - 579
Repurchase of common stock ... (2) - (82) - -
Dividends on common stock .... - - - - (320)
Earned compensation under ESOP - - 8 15 -
Other ........................ - - (1) - -
Balances, December 31, 1996 .... 183(b) 2 3,345 (272) 1,518 $4,593
Net income ................... - - - - 618
Repurchase of common stock ... (1) - (48) - -
Dividends on common stock .... - - - - (332)
Earned compensation under ESOP - - 6 8 -
Balances, December 31, 1997 .... 182(b) $2 $3,303 $(264) $1,804 $4,845
(a) $.01 par value, authorized - 300,000,000 shares; outstanding 181,762,385 and 182,815,135 at December 31, 1997 and
1996, respectively.
(b) Outstanding and unallocated shares held by the ESOP Trust totaled 8.9 million, 9.3 million and 9.8 million at December 31,
1997, 1996 and 1995, respectively.
</TABLE>
Common Stock Dividend Restrictions - FPL Group's charter does not
limit the dividends that may be paid on its common stock. As a practical
matter, the ability of FPL Group to pay dividends on its common stock is
dependent upon dividends paid to it by its subsidiaries, primarily FPL.
FPL's charter and a mortgage securing FPL's first mortgage bonds
contain provisions that, under certain conditions, restrict the payment of
dividends and other distributions to FPL Group. These restrictions do
not currently limit FPL's ability to pay dividends to FPL Group. In 1997,
1996 and 1995, FPL paid, as dividends to FPL Group, its net income
available to FPL Group on a one-month lag basis.
Employee Stock Ownership Plan (ESOP) - The employee thrift plans of
FPL Group include a leveraged ESOP feature. Shares of common stock
held by the Trust for the thrift plans (Trust) are used to provide all or a
portion of the employers' matching contributions. Dividends received on
all shares, along with cash contributions from the employers, are used to
pay principal and interest on an ESOP loan held by FPL Group Capital.
Dividends on shares allocated to employee accounts and used by the
Trust for debt service are replaced with an equivalent amount of shares
of common stock at prevailing market prices.
ESOP-related compensation expense of approximately $19 million in
1997, $23 million in 1996 and $18 million in 1995 was recognized based
on the fair value of shares allocated to employee accounts during the
period. Interest income on the ESOP loan is eliminated in consolidation.
ESOP-related unearned compensation included as a reduction of
shareholders' equity at December 31, 1997 was approximately $259
million, representing 8.9 million unallocated shares at the original issue
price of $29 per share. The fair value of the ESOP-related unearned
compensation account using the closing price of FPL Group stock as of
December 31, 1997 was approximately $528 million.
Long-Term Incentive Plan - In 1994, FPL Group's board of directors and
its shareholders approved FPL Group's current long-term incentive plan.
Under this plan, 9 million shares of common stock are reserved and
available for awards to officers and employees of FPL Group and its
subsidiaries as of December 31, 1997. Total compensation charged
against earnings under the incentive plan was not material in any year.
The changes in share awards under the incentive plan are as follows:
<TABLE>
<CAPTION>
Performance Restricted Non-qualified
Shares(a) Stock Option Shares(a)
<S> <C> <C> <C>
Balances, December 31, 1994 ....................................... 377,190 187,750 38,387
Granted (b) ..................................................... 97,786 13,500 -
Exercised at $30 7/8 ............................................ - - (23,136)
Paid/released ................................................... (123,328) (3,000) -
Forfeited ....................................................... (31,312) (4,050) (4,066)
Balances, December 31, 1995 ....................................... 320,336 194,200 11,185
Granted (b) ..................................................... 90,772 23,000 -
Exercised at $30 7/8 ............................................ - - (10,935)
Paid/released ................................................... (60,359) (34,250) -
Forfeited ....................................................... (39,222) (16,650) (250)
Balances, December 31, 1996 ....................................... 311,527 166,300 -
Granted (b) ..................................................... 212,011 71,000 -
Paid/released ................................................... (70,008) - -
Forfeited ....................................................... (10,942) (17,750) -
Balances, December 31, 1997 ....................................... 442,588(c) 219,550(d) -
(a) Performance shares and non-qualified option shares resulted in 132 thousand, 124 thousand and 112 thousand assumed
incremental shares of common stock outstanding for purposes of computing diluted earnings per share in 1997, 1996 and
1995, respectively. These incremental shares did not change basic earnings per share.
(b) The average grant date fair value of equity instruments issued under the incentive plan was $13 million in 1997, $5 million
in 1996 and $4 million in 1995.
(c) Payment of performance shares is based on the market price of FPL Group's common stock when the related performance
goal is achieved.
(d) Shares of restricted stock were issued at market value at the date of the grant.
</TABLE>
The accounting and disclosure requirements of FAS 123, "Accounting
for Stock-Based Compensation," became effective in 1996. The
statement encourages a fair value-based method of accounting for
stock-based compensation. FPL Group, however, elected to continue
the use of the intrinsic value-based method of accounting as
permitted by the statement. The results of utilizing the accounting
method recommended in FAS 123 would not have a material effect on FPL
Group's results of operations or earnings per share.
Other - Each share of common stock has been granted a Preferred Share
Purchase Right (Right), which is exercisable in the event of certain
attempted business combinations. The Rights will cause substantial
dilution to a person or group attempting to acquire FPL Group on
terms not approved by FPL Group's board of directors.
FPL - The changes in common shareholder's equity accounts of FPL are
as follows:
<TABLE>
<CAPTION>
Common Additional Retained Common Share-
Stock (a) Paid-In Capital Earnings holder's Equity
(Millions of Dollars)
<S> <C> <C> <C> <C>
Balances, December 31, 1994 ......................... $1,373 $1,947 $ 866
Contributions from FPL Group ...................... - 280 -
Net income available to FPL Group ................. - - 568
Dividends to FPL Group ............................ - - (558)
Other ............................................. - 2 (4)
Balances, December 31, 1995 ......................... 1,373 2,229 872
Contributions from FPL Group ...................... - 195 -
Net income available to FPL Group ................. - - 591
Dividends to FPL Group ............................ - - (593)
Other ............................................. - - 1
Balances, December 31, 1996 ......................... 1,373 2,424 871 $4,668
Contributions from FPL Group ...................... - 140 -
Net income available to FPL Group ................. - - 608
Dividends to FPL Group ............................ - - (601)
Other ............................................. - 2 (3)
Balances, December 31, 1997 ......................... $1,373 $2,566 $ 875 $4,814
(a) Common stock, no par value, 1,000 shares authorized, issued and outstanding.
</TABLE>
5. Preferred Stock
FPL Group's charter authorizes the issuance of 100 million shares of
serial preferred stock, $.01 par value. None of these shares is
outstanding. FPL Group has reserved 3 million shares for issuance
upon exercise of preferred share purchase rights which expire in June
2006. Preferred stock of FPL consists of the following: (a)
<TABLE>
<CAPTION>
December 31, 1997
Shares Redemption December 31,
Outstanding Price 1997 1996
(Millions of Dollars)
<S> <C> <C> <C> <C>
Cumulative, No Par Value, authorized 10,000,000 shares at
December 31, 1996; without sinking fund requirements -
$2.00 No Par Value, Series A (Involuntary Liquidation
Value $25 Per Share) (b) .................................... - $ 63
Cumulative, $100 Par Value, authorized 15,822,500 shares at
December 31, 1997 and 1996:
Without sinking fund requirements:
4 1/2% Series ........................................... 100,000 $101.00 $ 10 10
4 1/2% Series A ......................................... 50,000 $101.00 5 5
4 1/2% Series B ......................................... 50,000 $101.00 5 5
4 1/2% Series C ......................................... 62,500 $103.00 6 6
4.32% Series D .......................................... 50,000 $103.50 5 5
4.35% Series E .......................................... 50,000 $102.00 5 5
6.98% Series S .......................................... 750,000 $103.49(c) 75 75
7.05% Series T .......................................... 500,000 $103.52(c) 50 50
6.75% Series U .......................................... 650,000 $103.37(c) 65 65
Total preferred stock of FPL without sinking
fund requirements ................................... 2,262,500 226 289
Less current maturities ........................... - - -
Total preferred stock of FPL without sinking fund
requirements, excluding current maturities .......... 2,262,500 $226 $289
With sinking fund requirements:
6.84% Series Q (d) ...................................... - $ 41
8.625% Series R (e) ..................................... - 5
Total preferred stock of FPL with sinking
fund requirements ................................... - 46
Less current maturities ........................... - 4
Total preferred stock of FPL with sinking fund
requirements, excluding current maturities .......... - $ 42
(a) FPL's charter authorizes the issuance of 5 million shares of subordinated preferred stock, no par value. None of these
shares is outstanding. There were no issuances of preferred stock in 1997, 1996 and 1995. In 1996, FPL redeemed
600,000 shares of its 7.28% Preferred Stock, Series F, $100 Par Value and 400,000 shares of its 7.40% Preferred Stock,
Series G, $100 Par Value.
(b) In 1997, FPL redeemed all of the outstanding shares of its $2.00 No Par Value Preferred Stock, Series A.
(c) Not redeemable prior to 2003.
(d) FPL redeemed and retired 30,000 shares in 1996 and the remaining 410,000 shares in 1997.
(e) FPL redeemed and retired 50,000 shares in 1996 and the remaining 50,000 shares in 1997.
</TABLE>
<PAGE>
6. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
(Millions of Dollars)
<S> <C> <C>
FPL
First mortgage bonds:
Maturing through 2000 - 5 3/8% to 5 1/2% ................................................. $ 355 $ 355
Maturing 2001 through 2015 - 6 5/8% to 7 7/8% ............................................ 642 660
Maturing 2016 through 2026 - 7% to 7 3/4% ................................................ 741 910
Medium-term notes:
Maturing 1998 - 5.50% to 6.20% ......................................................... 180 180
Maturing 2003 - 5.79% .................................................................. 70 107
Maturing 2016 through 2022 - 8% ........................................................ - 99
Pollution control and industrial development series -
Maturing 2020 through 2027 - 6.7% to 7.5% .............................................. 150 150
Pollution control, solid waste disposal and industrial development revenue bonds -
Maturing 2021 through 2029 - variable, 3.9% and 3.6%
average annual interest rate, respectively ............................................. 484 484
Installment purchase and security contracts - Maturing 2007 - 5.9% ......................... - 2
Quarterly Income Debt Securities (Subordinated Deferrable Interest Debentures) -
Maturing 2025 - 8.75% .................................................................... - 62
Unamortized discount - net ................................................................. (22) (28)
Total long-term debt of FPL .............................................................. 2,600 2,981
Less current maturities ................................................................ 180 -
Long-term debt of FPL, excluding current maturities .................................... 2,420 2,981
FPL Group Capital
Debentures:
Maturing 1997 - 6 1/2% ................................................................... - 150
Maturing 2013 - 7 5/8% ................................................................... 125 125
Senior term loan - Maturing 2007 - variable (a) ............................................ 333 -
Other long-term debt - 3.5% to 8.58% due various dates to 2013 ............................. 91 41
Unamortized discount ....................................................................... (2) (2)
Total long-term debt of FPL Group Capital ................................................ 547 314
Less current maturities ................................................................ 18 151
Long-term debt of FPL Group Capital, excluding current maturities ...................... 529 163
Total long-term debt ..................................................................... $2,949 $3,144
(a) A notional principal amount of $267 million at December 31, 1997 is hedged with interest rate swap agreements to reduce
the impact of changes in interest rates on variable rate long-term debt. The swap agreements effectively change the
variable interest rates to an average fixed rate of 9.7% and expire in 2001.
</TABLE>
Minimum annual maturities of long-term debt for FPL Group for
1998-2002 are approximately $198 million, $322 million, $147 million,
$24 million and $27 million, respectively. The respective amounts for
FPL are $180 million, $230 million, $125 million, with no amounts due in
2001 and 2002.
Available lines of credit aggregated approximately $1.3 billion ($900
million for FPL) at December 31, 1997, all of which were based on firm
commitments.
7. Income Taxes
The components of income taxes are as follows:
<TABLE>
<CAPTION>
FPL Group FPL
Years Ended December 31, Years Ended December 31,
1997 1996 1995 1997 1996 1995
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Federal:
Current ............................................. $308 $355 $381 $377 $388 $395
Deferred ............................................ (34) (77) (78) (83) (81) (85)
ITC - net ........................................... (22) (31) (22) (22) (31) (20)
Total federal ................................... 252 247 281 272 276 290
State:
Current ............................................. 52 63 59 60 53 64
Deferred ............................................ - (16) (11) (3) - (7)
Total state ..................................... 52 47 48 57 53 57
Income taxes charged to operations - FPL............... 329 329 347
Credited to other income (deductions) - FPL ........... (8) (7) (5)
Total income taxes .................................... $304 $294 $329 $321 $322 $342
</TABLE>
A reconciliation between the effective income tax rates and the
applicable statutory rates is as follows:
<TABLE>
<CAPTION>
FPL Group FPL
Years Ended December 31, Years Ended December 31,
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income tax rate ........................ 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
Increases (reductions) resulting from:
State income taxes - net of federal income tax benefit.. 3.7 3.5 3.5 3.9 3.7 3.9
Amortization of ITC .................................... (2.4) (3.6) (2.4) (2.3) (3.3) (2.2)
Amortization of deferred regulatory credit -
income taxes ......................................... (1.8) (2.0) (2.0) (1.8) (1.9) (1.8)
Adjustments of prior years' tax matters ................ (2.7) (1.3) (0.1) (1.7) (0.1) (0.5)
Preferred stock dividends - FPL ........................ 0.7 1.0 1.7 - - -
Other - net ............................................ 0.5 1.0 1.6 0.8 0.9 1.5
Effective income tax rate ................................ 33.0% 33.6% 37.3% 33.9% 34.3% 35.9%
</TABLE>
The income tax effects of temporary differences giving rise to
consolidated deferred income tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
FPL Group FPL
December 31, December 31,
1997 1996 1997 1996
(Millions of Dollars)
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Property-related ................................................... $1,663 $1,708 $1,631 $1,677
Investment-related ................................................. 436 384 - -
Other .............................................................. 362 342 185 188
Total deferred tax liabilities ................................... 2,461 2,434 1,816 1,865
Deferred tax assets and valuation allowance:
Asset writedowns and capital loss carryforward ..................... 110 155 - -
Unamortized ITC and deferred regulatory credit - income taxes ...... 153 147 153 147
Storm and decommissioning reserves ................................. 246 224 246 224
Other .............................................................. 507 442 347 347
Valuation allowance ................................................ (28) (65) - -
Net deferred tax assets .......................................... 988 903 746 718
Accumulated deferred income taxes .................................... $1,473 $1,531 $1,070 $1,147
</TABLE>
The carryforward period for a capital loss from the disposition in a prior
year of an FPL Group Capital subsidiary expired at the end of 1996.
The amount of the deductible loss from this disposition was limited by
Internal Revenue Service (IRS) rules. FPL Group is challenging the IRS
loss limitation and the IRS is disputing certain other positions taken by
FPL Group. Tax benefits, if any, associated with these matters will be
reported in future periods when resolved.
8. Jointly-Owned Electric Utility Plant
FPL owns approximately 85% of the St. Lucie Unit No. 2, 20% of the St.
Johns River Power Park units and coal terminal and approximately 76%
of Scherer Unit No. 4. At December 31, 1997, FPL's gross investment in
these units was $1.173 billion, $328 million and $573 million,
respectively; accumulated depreciation was $484 million, $155 million
and $160 million, respectively.
FPL is responsible for its share of the operating costs, as well as
providing its own financing. At December 31, 1997, there was no
significant balance of construction work in progress on these facilities.
9. 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 $1.8 billion for
1998 through 2000. Included in this three-year forecast are capital
expenditures for 1998 of approximately $620 million. Also, in January
1998 FPL Group acquired interests in two power plants in the Northeast
and announced plans to purchase all of Central Maine Power Company's
(Central Maine) non-nuclear generation assets. The Central Maine
transaction is expected to close in the second half of 1998 and is subject
to approval by federal and state regulators. Commitments for energy-
related acquisitions, including the acquisitions mentioned above, are $1.1
billion for 1998. FPL Group Capital and its subsidiaries have guaranteed
approximately $240 million of lease obligations, debt service payments
and other payments subject to certain contingencies. This amount
includes guarantees associated with acquisitions occurring in early 1998.
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 $327 million per incident at any nuclear utility reactor in the
United States, payable at a rate not to exceed $40 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 $68 million in retrospective premiums.
FPL also participates in a program that provides $200 million of tort
liability coverage industry wide for nuclear worker claims. In the event of
a tort claim by an FPL or another insured's nuclear worker, FPL could be
assessed up to $12 million in retrospective premiums per incident.
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 certain of its transmission and distribution (T&D)
property due to the high cost and limited coverage available from
third-party insurers. FPL maintains a funded storm and property
insurance reserve, which totaled approximately $252 million at
December 31, 1997, for T&D 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 has entered into certain 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 374 mw through 2022.
FPL also has various firm pay-for-performance contracts to purchase
approximately 1,000 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. The fuel contracts provide for the
transportation and supply of natural gas and coal and the supply and
use of Orimulsion. Orimulsion is a new fuel that FPL expected to begin
using in 1998. The contract and related use of this fuel is subject to
regulatory approvals. In 1996, Florida's Power Plant Siting Board denied
FPL's request to burn Orimulsion at the Manatee power plant. FPL
appealed the denial. In 1997, Florida's Power Plant Siting Board
remanded selected issues for hearing before an administrative law
judge. Hearings took place in January and February 1998. A decision is
pending.
The required capacity and minimum payments through 2001 under these
contracts are estimated to be as follows:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
(Millions of Dollars)
<S> <C> <C> <C> <C> <C>
Capacity payments:
JEA ...................................................................... $ 80 $ 90 $ 90 $ 90 $ 90
Southern Companies ....................................................... $130 $130 $120 $120 $120
Qualifying facilities (a) ................................................ $350 $360 $370 $380 $400
Minimum payments, at projected prices:
Natural gas, including transportation .................................... $230 $220 $220 $220 $220
Orimulsion (b) ........................................................... - $ - $140 $140 $140
Coal ..................................................................... $ 50 $ 40 $ 40 $ 40 $ 40
(a) Includes approximately $35 million, $40 million, $40 million, $40 million and $45 million, respectively, for capacity
payments associated with two projects that are currently in dispute. These capacity payments are subject to the outcome of
the related litigation. See Litigation.
(b) All of FPL's Orimulsion-related contract obligations are subject to obtaining the required regulatory approvals.
</TABLE>
Capacity, energy and fuel charges under these contracts were as
follows:
<TABLE>
<CAPTION>
1997 Charges 1996 Charges 1995 Charges
Energy/ Energy/ Energy/
Capacity Fuel (a) Capacity Fuel (a) Capacity Fuel (a)
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C>
JEA ................................................ $ 78(b) $ 50 $ 77(b) $ 49 $ 83(b) $ 47
Southern Companies ................................. $123(c) $103 $115(c) $ 99 $130(c) $ 94
Qualifying facilities............................... $296(c) $128 $279(c) $125 $158(c) $ 92
Natural gas ........................................ - $413 - $422 - $361
Coal ............................................... - $ 52 - $ 49 - $ 37
(a) Recovered through the fuel clause.
(b) Recovered through base rates and the capacity cost recovery clause (capacity clause).
(c) Recovered through the capacity clause.
</TABLE>
Litigation - In 1997, FPL filed a complaint against the owners of two
qualifying facilities (plant owners) seeking an order declaring that FPL's
obligations under the power purchase agreements with the qualifying
facilities were rendered of no force and effect because the power plants
failed to accomplish commercial operation before January 1, 1997, as
required by the agreements. In 1997, the plant owners filed for
bankruptcy under Chapter XI of the United States Bankruptcy Code,
ceased all attempts to operate the power plants and entered into an
agreement with the holders of more than 70% of the bonds that partially
financed the construction of the plants. This agreement gives the holder
of a majority of the principal amount of the bonds (the majority
bondholders) the right to control, fund and manage any litigation against
FPL and the right to settle with FPL on any terms such holders approve,
provided that certain agreements are not affected and certain conditions
are met. In January 1998, the plant owners (through the attorneys for
the majority bondholders) filed an answer denying the allegations in
FPL's complaint and asserted a counterclaim for approximately $2
billion, consisting of all capacity payments that could have been made
over the 30-year term of the power purchase agreements, plus some
security deposits. The plant owners also seek three times their actual
damages for alleged violations of Florida antitrust laws, plus attorneys'
fees.
The Florida Municipal Power Agency (FMPA), an organization comprised
of municipal electric utilities, has sued FPL for allegedly breaching a
"contract" to provide transmission service to the FMPA and its members
and for breaching antitrust laws by monopolizing or attempting to
monopolize the provision, coordination and transmission of electric
power in refusing to provide transmission service, or to permit the FMPA
to invest in and use FPL's transmission system, on the FMPA's
proposed terms. The FMPA seeks $140 million in damages, before
trebling for the antitrust claim, and court orders requiring FPL to permit
the FMPA to invest in and use FPL's transmission system on
"reasonable terms and conditions" and on a basis equal to FPL. In
1995, the Court of Appeals vacated the District Court's summary
judgment in favor of FPL and remanded the matter to the District Court
for further proceedings. In 1996, the District Court ordered the FMPA to
seek a declaratory ruling from the FERC regarding certain issues in the
case. All other action in the case has been stayed pending the FERC's
ruling.
A former cable installation contractor for Telesat Cablevision, Inc.
(Telesat), a wholly-owned subsidiary of FPL Group Capital, sued FPL
Group, FPL Group Capital and Telesat for breach of contract, fraud,
violation of racketeering statutes and several other claims. The trial
court entered a judgment in favor of FPL Group and Telesat on nine of
twelve counts, including all of the racketeering and fraud claims, and in
favor of FPL Group Capital on all counts. It also denied all parties'
claims for attorneys' fees. However, the jury in the case awarded the
contractor damages totaling approximately $6 million against FPL Group
and Telesat for breach of contract and tortious interference. All parties
have appealed.
FPL Group and FPL believe that they have meritorious defenses to the
litigation to which they are parties described above and are vigorously
defending these suits. Accordingly, the liabilities, if any, arising from
these proceedings are not anticipated to have a material adverse effect
on their financial statements.
10. Summarized Financial Information of FPL Group Capital
(Unaudited)
FPL Group Capital's debenture is guaranteed by FPL Group and
included in FPL Group's consolidated balance sheets. Operating
revenues of FPL Group Capital for the three years ended December 31,
1997, 1996 and 1995 were $237 million, $50 million and $62 million,
respectively. For the same periods, operating expenses were $186
million, $65 million and $77 million, respectively. Net income for 1997,
1996 and 1995 was $27 million, $11 million and $2 million, respectively.
At December 31, 1997, FPL Group Capital had $156 million of current
assets, $1.447 billion of noncurrent assets, $252 million of current
liabilities and $999 million of noncurrent liabilities. At December 31,
1996, FPL Group Capital had current assets of $144 million, noncurrent
assets of $857 million, current liabilities of $182 million and noncurrent
liabilities of $595 million.
The expansion and restructuring of a number of ESI Energy, Inc.
projects contributed to the fluctuation in certain account balances as
disclosed above. Beginning in 1997, several projects are consolidated in
FPL Group Capital's financial statements, including the accounts of a
665 mw gas-fired exempt wholesale generator and two solar projects.
These transactions increased noncurrent assets by approximately $555
million and noncurrent liabilities by approximately $336 million as of
December 31, 1997, as well as contributed to the increase in operating
revenues and operating expenses during 1997.
11. Quarterly Data (Unaudited)
Condensed consolidated quarterly financial information for 1997 and
1996 is as follows:
<TABLE>
<CAPTION>
March 31 (a) June 30 (a) September 30 (a) December 31 (a)
(In millions, except per share amounts)
FPL Group:
<S> <C> <C> <C> <C>
1997
Operating revenues ............... $ 1,445 $ 1,587 $ 1,859 $ 1,478
Operating income ................. $ 225 $ 321 $ 464 $ 218
Net income ....................... $ 101 $ 164 $ 262 $ 91
Earnings per share(b) ............ $ 0.58 $ 0.95 $ 1.52 $ 0.52
Dividends per share .............. $ 0.48 $ 0.48 $ 0.48 $ 0.48
High-low trading prices .......... $46 3/4 - 43 5/8 $48 1/8 - 42 5/8 $51 9/16 - 45 1/2 $ 60 - 49 1/2
1996
Operating revenues ............... $ 1,358 $ 1,474 $ 1,770 $ 1,435
Operating income ................. $ 223 $ 299 $ 459 $ 190
Net income ....................... $ 94 $ 150 $ 250 $ 85
Earnings per share(b) ............ $ 0.54 $ 0.86 $ 1.44 $ 0.49
Dividends per share .............. $ 0.46 $ 0.46 $ 0.46 $ 0.46
High-low trading prices .......... $ 48 - 42 1/8 $46 1/4 - 41 1/2 $ 46 5/8 - 42 5/8 $48 1/8 - 43 1/8
FPL:
1997
Operating revenues ............... $ 1,399 $ 1,541 $ 1,819 $ 1,373
Operating income ................. $ 168 $ 220 $ 311 $ 150
Net income ....................... $ 110 $ 164 $ 256 $ 97
Net income available to FPL Group. $ 104 $ 160 $ 251 $ 93
1996
Operating revenues ............... $ 1,341 $ 1,455 $ 1,761 $ 1,429
Operating income ................. $ 167 $ 219 $ 317 $ 156
Net income ....................... $ 107 $ 158 $ 253 $ 97
Net income available to FPL Group. $ 101 $ 153 $ 247 $ 90
(a) In the opinion of FPL Group and FPL, all adjustments, which consist of normal recurring accruals necessary to present a
fair statement of the amounts shown for such periods, have been made. Results of operations for an interim period may not
give a true indication of results for the year. The change in the method of accounting for the cost of nuclear refueling
outages described in Note 1 did not have a material effect on the operating results of any quarter.
(b) Basic and assuming dilution.
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrants
FPL Group - The information required by this Item will be included in
FPL Group's Proxy Statement which will be filed with the Securities
and Exchange Commission in connection with the 1998 Annual Meeting of
Shareholders (FPL Group's Proxy Statement) and is incorporated herein
by reference, or is included in Item I. Business - Executive Officers
of the Registrants.
FPL DIRECTORS(a)
James L. Broadhead. Mr. Broadhead, 62, is chairman and chief
executive officer of FPL and chairman, president and chief executive
officer of FPL Group. He is a director of Delta Air Lines, Inc. and
The Pittston Company, and a board fellow of Cornell University. Mr.
Broadhead has been a director of FPL and FPL Group since 1989.
Dennis P. Coyle. Mr. Coyle, 59, is general counsel and secretary of
FPL and FPL Group. Mr. Coyle has been a director of FPL since 1990.
Paul J. Evanson. Mr. Evanson, 56, became the president of FPL in
January 1995, after having served as senior vice president, finance
and chief financial officer of FPL and vice president, finance and
chief financial officer of FPL Group since December 1992. He is a
director of Lynch Corporation and Southern Energy Homes, Inc. Mr.
Evanson has been a director of FPL since 1992 and a director of FPL
Group since 1995.
Lawrence J. Kelleher. Mr. Kelleher, 50, is senior vice president,
human resources of FPL and vice president, human resources of FPL
Group. Mr. Kelleher has been a director of FPL since 1990.
Thomas F. Plunkett. Mr. Plunkett, 58, is president of FPL's nuclear
division. He was formerly site vice president at Turkey Point. Mr.
Plunkett has been a director of FPL since 1996.
C. O. Woody. Mr. Woody, 59, became president of the power generation
division in January 1998. He was formerly senior vice president,
power generation of FPL. Mr. Woody has been a director of FPL since
1989.
Michael W. Yackira. Mr. Yackira, 46, became president of FPL Energy,
Inc. in January 1998. Prior to that, Mr.Yackira was senior vice
president, finance and chief financial officer of FPL and vice
president, finance and chief financial officer of FPL Group from
January 1995 to January 1998. Prior to that, Mr. Yackira was senior
vice president, market and regulatory services of FPL. Mr. Yackira
has been a director of FPL since 1990.
(a) Directors are elected annually and serve until their
resignation, removal or until their respective
successors are elected. Each director's business
experience during the past five years is noted either
here or in the Executive Officers table in Item 1.
Business - Executive Officers of the Registrants.
Item 11. Executive Compensation
FPL Group - The information required by this Item will be included in
FPL Group's Proxy Statement and is incorporated herein by reference,
provided that the Compensation Committee Report and Performance Graph
which are contained in FPL Group's Proxy Statement shall not be
deemed to be incorporated herein by reference.
FPL - The following table sets forth FPL's portion of the
compensation paid during the past three years to FPL's chief
executive officer and the other four most highly-compensated persons
who served as executive officers of FPL at December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Other Re- Long-Term All
Annual stricted Incentive Other
Compen- Stock Plan Compen-
Name and Principal Position Year Salary Bonus sation Awards(a) Payouts(b) sation(c)
<S> <C> <C> <C> <C> <C> <C> <C>
James L. Broadhead (a) 1997 $846,000 $824,850 $ 9,813 - $1,402,140 $11,286
Chairman of the Board and Chief 1996 799,800 633,423 10,601 - 920,892 12,727
Executive Officer of FPL and 1995 749,567 637,000 30,342 - 947,387 15,901
FPL Group, President of FPL
Group
Paul J. Evanson 1997 564,300 423,200 2,646 - 306,741 15,233
President 1996 540,000 340,200 2,925 - 197,471 15,868
1995 500,000 307,400 3,691 - 155,513 12,906
Dennis P. Coyle 1997 353,628 198,904 3,600 - 310,021 10,653
General Counsel and Secretary 1996 334,800 158,193 - - 203,637 10,742
of FPL and FPL Group 1995 303,849 138,957 3,756 - 223,724 11,972
C.O. Woody 1997 308,000 135,800 5,663 $572,500 279,837 12,959
President of the Power Generation 1996 295,000 142,500 3,882 - 184,711 13,448
Division 1995 283,300 133,400 3,234 - 207,350 15,539
Michael W. Yackira 1997 300,800 195,520 3,600 538,150 222,173 10,115
President of FPL Energy, Inc. 1996 279,000 131,874 3,886 - 145,942 9,908
1995 239,250 110,403 4,526 - 153,294 9,092
(a) At December 31, 1997, Mr. Broadhead held 96,800 shares of restricted common stock with a value of $5,729,350. These
shares were awarded in 1991 for the purpose of financing Mr. Broadhead's supplemental retirement plan and will offset
lump sum benefits that would otherwise be payable to him in cash upon retirement. See Retirement Plans herein. In 1997,
10,000 restricted shares were awarded to Messrs. Woody and Yackira, which will vest on June 18, 2000 and August 14,
2007, respectively. Dividends at normal rates are paid on restricted common stock.
(b) Payouts were made in cash (for payment of income taxes) and shares of common stock, valued at the closing price on the
last business day preceding payout. Messrs. Evanson and Woody deferred their payouts under FPL Group's Deferred
Compensation Plan.
(c) Represents employer matching contributions to employee thrift plans and employer contributions for life insurance as
follows:
Thrift Match Life Insurance
Mr. Broadhead ....................... $7,144 $4,142
Mr. Evanson ......................... 7,600 7,633
Mr. Coyle ........................... 7,144 3,509
Mr. Woody ........................... 7,600 5,359
Mr. Yackira ......................... 7,144 2,971
</TABLE>
Long-Term Incentive Plan Awards - In 1997, performance awards under
FPL Group's Long-Term Incentive Plan were made to the executive
officers named in the Summary Compensation Table as set forth in the
following tables.
LONG-TERM INCENTIVE PLAN AWARDS
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based Plans
Number of Shares
Number of Performance Period
Name Shares Until Payout Threshold Target Maximum
<S> <C> <C> <C> <C> <C>
James L. Broadhead ................ 22,310 1/1/97 - 12/31/00 - 22,310 35,696
Paul J. Evanson ................... 8,902 1/1/97 - 12/31/00 - 8,902 14,243
Dennis P. Coyle ................... 5,087 1/1/97 - 12/31/00 - 5,087 8,139
C. O. Woody ....................... 4,165 1/1/97 - 12/31/00 - 4,165 6,664
Michael W. Yackira ................ 4,327 1/1/97 - 12/31/00 - 4,327 6,923
</TABLE>
Shown in the preceding table, the performance share awards are
payable at the end of the four-year performance period. The amount
of the payout is determined by multiplying the participant's target
number of shares by his average level of attainment, expressed as a
percentage, which may not exceed 160%, of his targeted awards under
the Annual Incentive Plans for each of the years encompassed by the
award period. Annual incentive compensation is based on the
attainment of net income goals for FPL and FPL Group, which are
established by the Compensation Committee of FPL Group's Board of
Directors (the Committee) at the beginning of the year. The amounts
earned on the basis of this performance measure are subject to
reduction based on the degree of achievement of other corporate and
business unit performance measures, and in the discretion of the
Committee. Mr. Broadhead's annual incentive compensation for 1997
was based on the achievement of FPL Group's net income goals and the
following performance measures for FPL (weighted 85%) and the non-
utility and/or new businesses (weighted 15%) and upon certain
qualitative factors. For FPL, the incentive performance measures
were financial indicators (weighted 50%) and operating indicators
(weighted 50%). The financial indicators were operations and
maintenance costs, capital expenditure levels, net income, regulatory
return on equity and operating cash flow. The operating indicators
were service reliability as measured by the frequency and duration of
service interruptions, system performance as measured by availability
factors for the fossil and nuclear power plants, SALP ratings for
nuclear power plants, unplanned trips of nuclear power plants,
employee safety, number of significant environmental violations,
customer satisfaction survey results, load management installed
capability, conservation programs' annual installed capacity and
full-time equivalent workforce. For the non-utility and/or new
businesses, the performance measures were total combined net income
and the achievement of the net income targets for ESI Energy, Inc.
and Turner Foods Corporation and to develop wholesale energy
marketing capabilities, develop retail marketing strategy, evaluate
international acquisitions and evaluate domestic electric and gas
acquisitions. The qualitative factors included measures to position
FPL Group for greater competition and initiating other actions that
significantly strengthen FPL and FPL Group and enhance shareholder
value.
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based Plans
Number of Shares
Number of Performance Period
Name Shares Until Payout Threshold Target Maximum
<S> <C> <C> <C> <C> <C>
James L. Broadhead ................ 15,211 1/1/97 - 12/31/99 - 15,211 24,338
Paul J. Evanson ................... 7,630 1/1/97 - 12/31/99 - 7,630 12,208
Dennis P. Coyle ................... 3,815 1/1/97 - 12/31/99 - 3,815 6,104
C. O. Woody ....................... 3,123 1/1/97 - 12/31/99 - 3,123 4,997
Michael W. Yackira ................ 3,606 1/1/97 - 12/31/99 - 3,606 5,770
</TABLE>
Shown in the preceding table, the shareholder value share awards are
payable at the end of the three-year performance period. The amount
of the payout is determined by multiplying the participant's target
number of shares by a factor determined based on the average annual
total shareholder return of FPL Group (includes appreciation in FPL
Group common stock plus dividends) as compared to the total
shareholder return of the Dow Jones Electric Utilities Index
companies over the three-year performance period. This payment may
not exceed 160% of targeted awards.
Retirement Plans - FPL Group maintains a non-contributory defined
benefit pension plan and a supplemental executive retirement plan
which covers FPL employees. The following table shows the estimated
annual benefits, calculated on a straight-line annuity basis, payable
upon retirement in 1997 at age 65 after the indicated years of
service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Eligible Average Years of Service
Annual Compensation 10 20 30 40 50
<S> <C> <C> <C> <C> <C>
$ 300,000 ............................................. $ 58,974 $117,936 $146,910 $155,487 $157,875
400,000 ............................................. 78,974 157,936 196,910 207,987 210,375
500,000 ............................................. 98,974 197,936 246,910 260,487 262,875
600,000 ............................................. 118,974 237,936 296,910 312,987 315,375
700,000 ............................................. 138,974 277,936 346,910 365,487 367,875
800,000 ............................................. 158,974 317,936 396,910 417,987 420,375
900,000 ............................................. 178,974 357,936 446,910 470,487 472,875
1,000,000 ............................................. 198,974 397,936 496,910 522,987 525,375
1,100,000 ............................................. 218,974 437,936 546,910 575,487 577,875
1,200,000 ............................................. 238,974 477,936 596,910 627,987 630,375
1,300,000 ............................................. 258,974 517,936 646,910 680,487 682,875
1,400,000 ............................................. 278,974 557,936 696,910 732,987 735,375
1,500,000 ............................................. 298,974 597,936 746,910 785,487 787,875
1,600,000 ............................................. 318,974 637,936 796,910 837,987 840,375
1,700,000 ............................................. 338,974 677,936 846,910 890,487 892,875
1,800,000 ............................................. 358,974 717,936 896,910 942,987 945,375
1,900,000 ............................................. 378,974 757,936 946,910 995,487 997,875
2,000,000 ............................................. 398,974 797,936 996,910 1,047,987 1,050,375
</TABLE>
The compensation covered by the plans includes annual salaries and
bonuses of officers of FPL Group and subsidiaries other than FPL, and
annual salaries of officers of FPL, as shown in the respective
Summary Compensation Tables, but no other amounts shown in that
table. The estimated credited years of service for the executive
officers named in the Summary Compensation Table are: Mr. Broadhead,
9 years; Mr. Evanson, 5 years; Mr. Coyle, 8 years; Mr. Woody, 41
years; and Mr. Yackira, 8 years. Amounts shown in the table reflect
deductions to partially cover employer contributions to Social
Security.
A supplemental retirement plan for Mr. Broadhead provides for a
lump-sum retirement benefit equal to the then present value of a
joint and survivor annuity providing annual payments to him equal to
61% to 70% of his average annual compensation for the three years
prior to his retirement between age 62 (1998) and age 65 (2001) and
to his surviving beneficiary of 61% to 70% of such average annual
compensation, reduced by the then present value of the annual amount
of payments to which he is entitled under all other pension and
retirement plans of FPL Group and former employers. This benefit is
further reduced by the then value of 96,800 shares of restricted
common stock which vest as to 77,000 shares in 1998 (Mr. Broadhead
has elected to defer vesting and payment of these shares until at
least 1999) and as to 19,800 shares in 2001. Upon a change of
control of FPL Group (as defined below under Employment Agreements),
the restrictions on the restricted stock lapse and the full
retirement benefit becomes payable. Upon termination of Mr.
Broadhead's employment agreement (also described below) without
cause, the restrictions on the restricted stock lapse and he becomes
fully vested under the supplemental retirement plan.
A supplemental retirement plan for Mr. Coyle provides for benefits,
upon retirement at age 62 or more, based on two times his credited
years of service. A supplemental retirement plan for Mr. Evanson
provides for benefits based on two times his credited years of
service up to age 65 and one times his credited years of service
thereafter.
FPL Group sponsors a split-dollar life insurance plan for certain of
FPL and FPL Group's senior officers. Benefits under the split-dollar
plan are provided by universal life insurance policies purchased by
FPL Group. If the officer dies prior to retirement, the officer's
beneficiaries generally receive two and one-half times the officer's
annual salary at the time of death. If the officer dies after
retirement, the officer's beneficiaries receive between 50% to 100%
of the officer's final annual salary. Each officer is taxable on the
insurance carrier's one year term rate for his or her life insurance
coverage.
Employment Agreements - FPL Group has entered into an employment
agreement with Mr. Broadhead for an initial term ending
December 1997, with automatic one-year extensions thereafter unless
either party elects not to extend. The agreement provides for a
minimum base salary of $765,900 per year, subject to increases based
upon corporate and individual performance and increases in
cost-of-living indices, plus annual and long-term incentive
compensation opportunities at least equal to those currently in
effect. If FPL Group terminates Mr. Broadhead's employment without
cause, he is entitled to receive a lump sum payment of two years'
compensation. Compensation is measured by the then current base
salary plus the average of the preceding two years' annual incentive
awards. He would also be entitled to receive all amounts accrued
under all performance share grants in progress, prorated for the year
of termination and assuming achievement of the targeted award, and to
full vesting of his benefits under his supplemental retirement plan.
FPL Group and FPL have entered into employment agreements with
certain officers, including the individuals named in the Summary
Compensation Table, to become effective in the event of a change of
control of FPL Group, which is defined as the acquisition of
beneficial ownership of 20% of the voting power of FPL Group, certain
changes in FPL Group's board of directors, or approval by the
shareholders of the liquidation of FPL Group or of certain mergers or
consolidations or of certain transfers of FPL Group's assets. These
agreements are intended to assure FPL Group and FPL of the continued
services of key officers. The agreements provide that each officer
shall be employed by FPL Group or one of its subsidiaries in his or
her then current position, with compensation and benefits at least
equal to the then current base and incentive compensation and benefit
levels, for an employment period of four and, in certain cases, five
years after a change in control occurs.
In the event that the officer's employment is terminated (except for
death, disability or cause) or if the officer terminates his or her
employment for good reason, as defined in the agreement, the officer
is entitled to severance benefits in the form of a lump sum payment
equal to the compensation due for the remainder of the employment
period or for two years, whichever is longer. Such benefits would be
based on the officer's then base salary plus an annual bonus at least
equal to the average bonus for the two years preceding the change of
control. The officer is also entitled to the maximum amount payable
under all long-term incentive compensation grants outstanding,
continued coverage under all employee benefit plans, supplemental
retirement benefits and reimbursement for any tax penalties incurred
as a result of the severance payments.
Director Compensation - All of the directors of FPL are salaried
employees of FPL Group and its subsidiaries and do not receive any
additional compensation for serving as a director.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
FPL Group - The information required by this Item will be included in
FPL Group's Proxy Statement and is incorporated herein by reference.
FPL - FPL Group owns 100% of FPL's common stock. FPL's directors
and executive officers beneficially own shares of FPL Group's common
stock as follows:
<TABLE>
<CAPTION>
Name Number of Shares (a)
<S> <C>
James L. Broadhead ......................................................................... 139,916(b)(c)
Dennis P. Coyle ............................................................................ 9,356(b)
Paul J. Evanson ............................................................................ 13,610(b)
Lawrence J. Kelleher ....................................................................... 25,124(b)(c)
Thomas F. Plunkett ......................................................................... 21,332(b)(c)
C. O. Woody ................................................................................ 25,343(b)(c)
Michael W. Yackira ......................................................................... 23,470(b)(c)
All directors and executive officers as a group ............................................ 271,493(d)
(a) Information is as of January 31, 1998, except for executive officers' holdings under the thrift plans and the Supplemental
Executive Retirement Plan, which are as of December 31, 1997. Unless otherwise indicated, each person has sole voting
and sole investment power.
(b) Includes 11,456, 2,739, 2,437, 1,415, 238, 1,045 and 1,560 phantom shares for Messrs. Broadhead, Coyle, Evanson,
Kelleher, Plunkett, Woody and Yackira, respectively, credited to a Supplemental Matching Contribution Account under the
Supplemental Executive Retirement Plan.
(c) Includes 96,800, 10,000, 15,000, 10,000 and 10,000 shares of restricted stock as to which Messrs. Broadhead, Kelleher,
Plunkett, Woody and Yackira, respectively, have voting but not investment power.
(d) Less than 1% of FPL Group's common stock outstanding.
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance - FPL's
directors and executive officers are required to file initial reports
of ownership and reports of changes of ownership of FPL Group common
stock with the Securities and Exchange Commission. Based upon a
review of these filings and written representations from FPL
directors and executive officers, all required filings were timely
made in 1997.
Item 13. Certain Relationships and Related Transactions
FPL Group - The information required by this Item will be included in
FPL Group's Proxy Statement and is incorporated herein by reference.
FPL - None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
(a) 1. Financial Statements Page(s)
Independent Auditors' Report 15
FPL Group:
Consolidated Statements of Income 16
Consolidated Balance Sheets 17
Consolidated Statements of Cash Flows 18
FPL:
Consolidated Statements of Income 19
Consolidated Balance Sheets 20
Consolidated Statements of Cash Flows 21
Notes to Consolidated Financial Statements 22-36
2. Financial Statement Schedules - Schedules are omitted as
not applicable or not required.
3. Exhibits including those Incorporated by Reference
<TABLE>
<CAPTION>
Exhibit FPL
Number Description Group FPL
<S> <C> <C> <C>
*3(i)a Restated Articles of Incorporation of FPL Group dated December 31, 1984, x
as amended through December 17, 1990 (filed as Exhibit 4(a) to Post-
Effective Amendment No. 5 to Form S-8, File No. 33-18669)
*3(i)b Amendment to FPL Group's Restated Articles of Incorporation dated June 27, x
1996 (filed as Exhibit 3 to Form 10-Q for the quarter ended June 30, 1996,
File No. 1-8841)
*3(i)c Restated Articles of Incorporation of FPL dated March 23, 1992 (filed as x
Exhibit 3(i)a to Form 10-K for the year ended December 31, 1993, File No.
1-3545)
*3(i)d Amendment to FPL's Restated Articles of Incorporation dated March 23, 1992 x
(filed as Exhibit 3(i)b to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)e Amendment to FPL's Restated Articles of Incorporation dated May 11, 1992 x
(filed as Exhibit 3(i)c to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)f Amendment to FPL's Restated Articles of Incorporation dated March 12, 1993 x
(filed as Exhibit 3(i)d to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)g Amendment to FPL's Restated Articles of Incorporation dated June 16, 1993 x
(filed as Exhibit 3(i)e to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)h Amendment to FPL's Restated Articles of Incorporation dated August 31, 1993 x
(filed as Exhibit 3(i)f to Form 10-K for the year ended December 31, 1993,
File No. 1-3545)
*3(i)i Amendment to FPL's Restated Articles of Incorporation dated November 30, x
1993 (filed as Exhibit 3(i)g to Form 10-K for the year ended December 31,
1993, File No. 1-3545)
*3(ii)a Bylaws of FPL Group dated November 15, 1993 (filed as Exhibit 3(ii) to Form x
10-K for the year ended December 31, 1993, File No. 1-8841)
*3(ii)b Bylaws of FPL dated May 11, 1992 (filed as Exhibit 3 to Form 8-K dated x
May 1, 1992, File No. 1-3545)
*4(a) Form of Rights Agreement, dated as of July 1, 1996, between FPL Group x
and the First National Bank of Boston (filed as Exhibit 4 to Form 8-K
dated June 17, 1996, File No. 1-8841)
*4(b) Mortgage and Deed of Trust dated as of January 1, 1944, and Ninety-seven x x
Supplements thereto between FPL and Bankers Trust Company and The
Florida National Bank of Jacksonville (now First Union National Bank of
Florida), Trustees (as of September 2, 1992, the sole trustee is Bankers
Trust Company) (filed as Exhibit B-3, File No. 2-4845; Exhibit 7(a),
File No. 2-7126; Exhibit 7(a), File No. 2-7523; Exhibit 7(a), File No.
2-7990; Exhibit 7(a), File No. 2-9217; Exhibit 4(a)-5, File No. 2-10093;
Exhibit 4(c), File No. 2-11491; Exhibit 4(b)-1, File No. 2-12900;
Exhibit 4(b)-1, File No. 2-13255; Exhibit 4(b)-1, File No. 2-13705;
Exhibit 4(b)-1, File No. 2-13925; Exhibit 4(b)-1, File No. 2-15088;
Exhibit 4(b)-1, File No. 2-15677; Exhibit 4(b)-1, File No. 2-20501;
Exhibit 4(b)-1, File No. 2-22104; Exhibit 2(c), File No. 2-23142; Exhibit
2(c), File No. 2-24195; Exhibit 4(b)-1, File No. 2-25677; Exhibit 2(c),
File No. 2-27612; Exhibit 2(c), File No. 2-29001; Exhibit 2(c), File
No. 2-30542; Exhibit 2(c), File No. 2-33038; Exhibit 2(c), File No.
2-37679; Exhibit 2(c), File No. 2-39006; Exhibit 2(c), File No. 2-41312;
Exhibit 2(c), File No. 2-44234; Exhibit 2(c), File No. 2-46502; Exhibit
2(c), File No. 2-48679; Exhibit 2(c), File No. 2-49726; Exhibit 2(c),
File No. 2-50712; Exhibit 2(c), File No. 2-52826; Exhibit 2(c), File No.
2-53272; Exhibit 2(c), File No. 2-54242; Exhibit 2(c), File No. 2-56228;
Exhibits 2(c) and 2(d), File No. 2-60413; Exhibits 2(c) and 2(d), File
No. 2-65701; Exhibit 2(c), File No. 2-66524; Exhibit 2(c), File No.
2-67239; Exhibit 4(c), File No. 2-69716; Exhibit 4(c), File No. 2-70767;
Exhibit 4(b), File No. 2-71542; Exhibit 4(b), File No. 2-73799; Exhibits
4(c), 4(d) and 4(e), File No. 2-75762; Exhibit 4(c), File No. 2-77629;
Exhibit 4(c), File No. 2-79557; Exhibit 99(a) to Post-Effective Amendment
No. 5 to Form S-8, File No. 33-18669; Exhibit 99(a) to Post-Effective
Amendment No. 1 to Form S-3, File No. 33-46076); Exhibit 4(b) to Form
10-K for the year ended December 31, 1993, File No. 1-3545; Exhibit
4(i) to Form 10-Q for the quarter ended June 30, 1994, File No. 1-3545;
Exhibit 4(b) to Form 10-Q for the quarter ended June 30, 1995, File
No. 1-3545; and Exhibit 4(a) to Form 10-Q for the quarter ended March 31,
1996, File No. 1-3545)
*10(a) Supplemental Executive Retirement Plan, amended and restated effective x
January 1, 1994 (filed as Exhibit 10(a) to Form 10-K for the year ended
December 31, 1995, File No. 1-8841)
10(b) FPL Group Amended and Restated Supplemental Executive Retirement Plan for x
James L. Broadhead effective January 1, 1990
*10(c) Supplement to the FPL Group Supplemental Executive Retirement Plan x
as it applies to Paul J. Evanson effective January 1, 1996 (filed as
Exhibit 10(b) to Form 10-K for the year ended December 31, 1996, File
No. 1-8841)
10(d) Supplement to the FPL Group Supplemental Executive Retirement Plan as x
it applies to Thomas F. Kirk
10(e) Supplement to the FPL Group Supplemental Executive Retirement Plan as x
it applies to Thomas F. Plunkett
*10(f) FPL Group Long-Term Incentive Plan of 1985, as amended (filed as Exhibit x
99(h) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669)
*10(g) Long-Term Incentive Plan 1994 (filed as Exhibit 4(d) to Form S-8, File x
No. 33-57673)
*10(h) Annual Incentive Plan dated as of March 31, 1994 (filed as Exhibit 10(k) x
to Form 10-Q for the quarter ended March 31, 1994, File No. 1-8841)
*10(i) FPL Group Deferred Compensation Plan, amended and restated effective x
January 1, 1995 (filed as Exhibit 10(f) to Form 10-K for the year ended
December 31, 1995, File No. 1-8841)
*10(j) FPL Group Executive Long Term Disability Plan effective January 1, 1995 x
(filed as Exhibit 10(g) to Form 10-K for the year ended December 31,
1995, File No. 1-8841)
*10(k) Employment Agreement between FPL Group and James L. Broadhead dated as of x
December 13, 1993 (filed as Exhibit 10(j) to Form 10-K for the year ended
December 31, 1993, File No. 1-8841)
*10(l) Employment Agreement between FPL Group and James L. Broadhead dated as of x
December 11, 1995 (filed as Exhibit 10(i) to Form 10-K for the year ended
December 31, 1995, File No. 1-8841)
*10(m) Employment Agreement between FPL Group and Dennis P. Coyle dated as of x
December 11, 1995 (filed as Exhibit 10(j) to Form 10-K for the year
ended December 31, 1995, File No. 1-8841)
*10(n) Employment Agreement between FPL Group and Paul J. Evanson dated as of x
December 11, 1995 (filed as Exhibit 10(k) to Form 10-K for the year
ended December 31, 1995, File No. 1-8841)
*10(o) Employment Agreement between FPL Group and Lawrence J. Kelleher dated x
as of December 11, 1995 (filed as Exhibit 10(l) to Form 10-K for the
year ended December 31, 1995, File No. 1-8841)
10(p) Employment Agreement between FPL Group and Thomas F. Kirk dated as of x
June 16, 1997
*10(q) Employment Agreement between FPL Group and Thomas F. Plunkett dated as of x
September 16, 1996 (filed as Exhibit 10 to Form 10-Q for the quarter
ended September 30, 1996)
*10(r) Employment Agreement between FPL Group and C.O. Woody dated as of x
December 11, 1995 (filed as Exhibit 10(m) to Form 10-K for the year
ended December 31, 1995, File No. 1-8841)
*10(s) Employment Agreement between FPL Group and Michael W. Yackira as of x
December 11, 1995 (filed as Exhibit 10(n) to Form 10-K for the year
ended December 31, 1995, File No. 1-8841)
*10(t) FPL Group, Inc. Non-Employee Directors Stock Plan dated as of March 17, x
1997 (filed as Appendix A to FPL Group's 1997 Proxy Statement, File No.
1-8841)
12 Computation of Ratios x
21 Subsidiaries of the Registrant x
23 Independent Auditors' Consent x x
27 Financial Data Schedule x x
* Incorporated herein by reference
</TABLE>
(b) Reports on Form 8-K - None
<PAGE>
FPL GROUP, INC. SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
FPL Group, Inc.
JAMES L. BROADHEAD
James L. Broadhead
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer and Director)
Date: February 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature and Title as of February 26, 1998:
<S> <C>
K. MICHAEL DAVIS
K. Michael Davis
Controller and Chief Accounting Officer
(Principal Financial and Accounting Officer)
Directors:
H. JESSE ARNELLE WILLARD D. DOVER
H. Jesse Arnelle Willard D. Dover
SHERRY S. BARRAT ALEXANDER W. DREYFOOS JR.
Sherry S. Barrat Alexander W. Dreyfoos Jr.
ROBERT M. BEALL, II PAUL J. EVANSON
Robert M. Beall, II Paul J. Evanson
J. HYATT BROWN
J. Hyatt Brown Drew Lewis
ARMANDO M. CODINA FREDERIC V. MALEK
Armando M. Codina Frederic V. Malek
MARSHALL M. CRISER PAUL R. TREGURTHA
Marshall M. Criser Paul R. Tregurtha
B. F. DOLAN
B. F. Dolan
</TABLE>
<PAGE>
FLORIDA POWER & LIGHT COMPANY SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
Florida Power & Light Company
PAUL J. EVANSON
Paul J. Evanson
President and Director
Date: February 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature and Title as of February 26, 1998:
<S> <C>
JAMES L. BROADHEAD
James L. Broadhead
Chairman of the Board
(Principal Executive Officer and Director)
K. MICHAEL DAVIS
K. Michael Davis
Vice President, Accounting,
Controller and Chief Accounting Officer
(Principal Financial and Accounting Officer)
Directors:
DENNIS P. COYLE C. O. WOODY
Dennis P. Coyle C. O. Woody
LAWRENCE J. KELLEHER MICHAEL W. YACKIRA
Lawrence J. Kelleher Michael W. Yackira
THOMAS F. PLUNKETT
Thomas F. Plunkett
</TABLE>
EXHIBIT 10(b)
FPL GROUP, INC.
AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR J.L. BROADHEAD
THIS AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN FOR J.L. BROADHEAD is adopted by FPL Group, Inc. ("Group") as of
the 15th day of September, 1997 and is effective retroactively to
January 1, 1990.
W I T N E S S E T H:
WHEREAS, Group previously established a supplemental
executive retirement plan for J. L. Broadhead, Chief Executive
Officer of FPL Group, Inc., to provide retirement benefits in addi-
tion to those certain other retirement benefits otherwise available
to him, and has entered into such an agreement with Mr. Broadhead to
establish the terms of the plan, which agreement was amended and
restated as of September 16, 1991; and
WHEREAS, Group and Mr. Broadhead desire further to amend
and restate the agreement in its entity;
NOW, THEREFORE, in consideration of the premises herein
contained, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
The following words, when used herein shall have the meaning
indicated unless the context indicates otherwise:
1.01 "Agreement" or "Plan" shall mean the Plan as is set
forth in this document as it may be amended from time to time. This
agreement shall be known as "The FPL Group, Inc. Amended and Restated
Supplemental Executive Retirement Plan for J.L. Broadhead."
1.02 "Annual Incentive Plan" shall mean the short term
incentive plan applicable to Group's executive officers, as in effect
from time to time.
1.03 "Applicable Percentage" shall mean the percentage
determined as follows:
(a) if the Termination Date occurs before January 2, 1998,
the percentage shall be 0%;
(b) if the Termination Date occurs on January 2, 1998, the
percentage shall be 61%;
(c) if the Termination Date occurs on or after January 2,
2001, the percentage shall be 70%;
(d) if the Termination Date occurs after January 2, 1998
and before January 2, 2001, the percentage shall be determined by
mathematical interpolation between 61% and 70% based on the actual
Termination Date;
provided that, notwithstanding the foregoing, the Applicable
Percentage shall be 70%, regardless of Mr. Broadhead's age, if (i)
the Termination Date occurs due to Mr. Broadhead's Total and
Permanent Disability, (ii) if the Termination Date occurs on or after
January 2, 1998 due to Mr. Broadhead s death or (iii) a Change of
Control occurs prior to the Termination Date.
1.04 "Applicable Survivor Percentage" shall mean the
percentage determined as follows:
(a) if the Termination Date occurs before January 2, 1998,
the percentage shall be 0%;
(b) if the Termination Date occurs on January 2, 1998, the
percentage shall be 37.5%;
(c) if the Termination Date occurs on or after January 2,
2001, the percentage shall be 70%;
(d) if the Termination Date occurs after January 2, 1998
and before January 2, 2001, the percentage shall be
determined by mathematical interpolation between 37.5% and
70% based on the actual Termination Date;
provided that, notwithstanding the foregoing, the Applicable Survivor
Percentage shall automatically be deemed to be (i) 70%, if (x) the
Termination Date occurs on or after January 2, 1998 due to Mr.
Broadhead's death or Total and Permanent Disability, or (y) a Change
of Control occurs prior to the Termination Date.
1.04 "Assumed Aggregate Dividend Value" shall mean an
amount equal to all dividends (other than stock dividends) paid to
the Trust (including dividends which have been declared on or prior
to, and which are paid no later than 30 days subsequent to, the
Payment Date), plus imputed interest on each such dividend at a rate
of 8%, compounded annually, from the date such dividend is paid to
other shareholders of Group to the Payment Date.
1.05 "Beneficiary" shall mean Mr. Broadhead's surviving
spouse, except that he may designate a different Beneficiary
hereunder by delivering to Group a written designation of Beneficiary
specifically made with respect to this Plan.
1.06 "Board" shall mean the Board of Directors of FPL
Group, Inc.
1.07 "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i)
any acquisition by the Company or any of its subsidiaries;
(ii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
of its subsidiaries or (iii) any acquisition by any
corporation with respect to which, following such
acquisition, more than 75% of, respectively, the then
outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such acquisition in substantially the same proportions as
their ownership, immediately prior to such acquisition, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened solicitation to which Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act applies or
other actual or threatened solicitation of proxies or
consents; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 75% of, respectively,
the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
more than 75% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
The term "the sale or disposition by the Company of all or
substantially all of the assets of the Company" shall mean a sale or
other disposition, transaction or series of related transactions
involving assets of the Company or of any direct or indirect
subsidiary of the Company (including the stock of any direct or
indirect subsidiary of the Company) in which the value of the assets
or stock being sold or otherwise disposed of (as measured by the
purchase price being paid therefor or by such other method as the
Board determines is appropriate in a case where there is not readily
ascertainable purchase price) constitutes more than two-thirds of the
fair market value of the Company (as hereinafter defined). The "fair
market value of the Company" shall be the aggregate market value of
the then Outstanding Company Common Stock (n a fully diluted basis)
plus the aggregate market value of the Company's other outstanding
equity securities. The aggregate market value of the shares of
Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery
of a definitive agreement with respect to the transaction or series
of related transactions (the "Transaction Date") by the average
closing price of the shares of Outstanding Company Common Stock for
the ten trading days immediately preceding the Transaction Date. The
aggregate market value of any other equity securities of the Company
shall be determined in a manner similar to that prescribed in the
immediately preceding sentence for determining the aggregate market
value of the shares of Outstanding Company Common Stock or by such
other method as the Board shall determine is appropriate.
1.08 "Code" shall mean the Internal Revenue Code of 1986,
as it may be amended from time to time, and the rules and regulations
promulgated thereunder.
1.09 "Committee" shall mean the Compensation Committee of
the Board or any such other committee designated by the Board, which
shall consist of at least three members of the Board who are not
employees of Group or any of its subsidiaries.
1.10 "Disability Plan" shall mean the Long Term Disability
Plan for Employees of FPL Group and Affiliates, as it may be amended
from time to time, or any successor plan thereof.
1.11 "Final Annual Average Compensation" shall equal the
average of the sums of (a) plus (b) below as determined for each of
the three calendar years ended immediately prior to the Payment Date
and the calendar year including the Payment Date:
(a) the amount calculated for each such year by multiplying
the average Monthly Base Salary in effect during all full
months in each such year by twelve, plus
(b) any incentive paid or accrued with respect to each such
year under the Annual Incentive Plan; provided that, solely
for purposes of this calculation, such incentive shall be
calculated without regard to any proration procedures which
might apply under the terms of the Annual Incentive Plan,
and will therefore be annualized with respect to any partial
year of service as though Mr. Broadhead worked a full twelve
months in such calendar year.
The formula above is intended to have the effect of annualizing
Monthly Base Salary and Annual Incentive with respect to any partial
year of service.
1.12 "Group" shall mean FPL Group, Inc.
1.13 "Monthly Base Salary" shall mean the total salary or
wages, including any Tax Saver Member Basic and Tax Saver Member
Supplemental Contributions to the FPL Group Employee Thrift Plan or
any successor plan thereto and including amounts contributed to the
welfare benefit plans maintained by Group through a reduction in the
employee's compensation which, pursuant to Code Section 125, are not
included in gross income for the taxable year in which such amounts
are contributed, and exclusive of amounts received as fringe benefits
irrespective of the includibility of such amounts on a Form W-2, and
exclusive of any amounts received under any incentive compensation
plans of Group or any of its subsidiaries.
1.14 "Payment Date" means the earlier to occur of (i) a
Termination Date occurring on or after the date Mr. Broadhead's
rights under the Plan vest as provided in Section 2.02 or (ii) the
date on which a Change of Control occurs.
1.15 "Pension Plan" shall mean the FPL Group Employee
Pension Plan as it may be amended from time to time, or any other
qualified defined benefit retirement plan or plans Group may from
time to time adopt and any successor plan thereof.
1.16 "Restricted Stock" shall mean two separate awards of
77,000 and 19,800 restricted shares of Group common stock, each of
which was granted on September 16, 1991 pursuant to the FPL Group,
Inc. Long-Term Incentive Plan of 1985, as amended ("LTI Plan").
Notwithstanding the foregoing, to the extent the number and/or kind
of securities related to such shares of Restricted Stock is or are
adjusted or converted under the anti-dilution provisions of the LTI
Plan, the term Restricted Stock shall mean the number and/or kind of
securities into which such Group shares are so adjusted or converted.
1.17 "Restriction Period" means the period of time which
begins on September 16, 1991 and ends no earlier than January 2,
1998, with respect to the award of 77,000 shares of Restricted Stock,
and January 2, 2001, with respect to the award of 19,800 shares of
Restricted Stock. Notwithstanding the foregoing and anything to the
contrary contained in any Restricted Stock Agreement, Mr. Broadhead
may, in his sole discretion, elect to extend the Restriction Period
with respect to any award of Restricted Stock by one or more years by
written notice to Group delivered no later than September 30 of the
calendar year immediately preceding the year in which the Restricted
Period would otherwise lapse (including the end of any Restriction
Period that has been previously extended pursuant to a prior election
made by Mr. Broadhead in accordance with the terms hereof), provided
that, with respect to any Restriction Period which (absent such an
election) would lapse in 1998, such election shall be made not later
than 30 days after the effective date of this restatement.
1.18 "Restricted Stock Agreement" shall mean each and any
Restricted Stock Award Agreement between Group and Mr. Broadhead
governing the award of Restricted Stock.
1.19 "Supplemental Executive Retirement Plan" shall mean
the FPL Group, Inc. Supplemental Executive Retirement Plan, as
amended from time to time, or any successor plan thereof.
1.20 "Termination Date" shall mean the date on which
Mr. Broadhead ceases to be an employee of Group or any of its
subsidiaries for any reason (including cessation of employment on
account of death).
1.21 "Total and Permanent Disability" shall have the
meaning set forth in the Disability Plan.
1.22 "Trust" shall mean the trust established under the
Trust Agreement.
1.23 "Trust Agreement" shall mean the J.L. Broadhead SERP
Trust Agreement, a copy of which is attached hereto as Exhibit "A"
and incorporated herein by reference, as it may be amended from time
to time.
ARTICLE II
AMOUNT OF BENEFIT; PAYMENT
2.01 Lump Sum Benefits
(a) General. As soon as administratively practicable, but
not later than 30 days, after the Payment Date, Mr.
Broadhead (or, if Mr. Broadhead is not then living, his
Beneficiary) shall be entitled to receive a lump sum amount
equal to the excess, if any, of (i) over (ii), where (i) and
(ii) are:
(i) The present value (determined in accordance
with Annex A) of a joint and survivor annuity
providing
(1) annual payments to Mr. Broadhead
equal to the product of (A) his Final Annual
Average Compensation and (B) the Applicable
Percentage; and
(2) annual payments to his Beneficiary
following Mr. Broadhead's death equal to the
product of (A) his Final Annual Average
Compensation and (B) the Applicable Survivor
Percentage.
(ii) The sum of
(1) the present value (determined in
accordance with Annex A) of the annual
amount of pension, retirement or disability
payments which Mr. Broadhead or his
beneficiary or beneficiaries is entitled to
receive under the Pension Plan, the Supple-
mental Executive Retirement Plan, the
Disability Plan and any qualified defined
benefit retirement plan sponsored by a
former employer of Mr. Broadhead based on
his employment with such employer prior to
his employment with Group;
(2) the value of any shares of
Restricted Stock as to which the Restriction
Period has lapsed (which value shall be
determined on the date on which such
Restricted Period lapses); and
(3) the Assumed Aggregate Dividend
Value.
For purposes of this Plan, the value of the Restricted Stock as of
its vesting date shall be the closing market price of the common
stock of Group (or any other securities into which such shares have
been converted pursuant to the LTI Plan) reported in the consolidated
trading prices for New York Stock Exchange traded securities on such
date multiplied by the number of shares of such Restricted Stock. If
the vesting date is not a trading day, the value of the shares of
Restricted Stock shall be the closing market price of Group common
stock on the last trading day immediately preceding such date.
2.02 Vesting of Benefits. Benefits under this Plan shall
become fully vested and nonforfeitable upon the earliest to occur of
the following events, provided that Mr. Broadhead is still an
employee of Group at the date any such event occurs:
(a) January 2, 1998;
(b) the determination of his Total and Permanent
Disability;
(c) his death; or
(d) a Change of Control.
2.03 No Effect on Actual Plan Payments. Any benefit
payable under the Pension Plan, Supplemental Executive Retirement
Plan and Disability Plan shall be paid solely in accordance with the
terms and provisions thereof, and nothing in this Agreement shall
operate or be construed in any way to modify, amend or affect the
terms and provisions of any such plan.
2.04 Satisfaction of Group's Obligations. Upon payment to
Mr. Broadhead or his Beneficiary of the amounts payable pursuant to
this Article II on or following a Payment Date, the determination
that no amounts are due under this Article II, or the occurrence of a
Termination Date prior to Mr. Broadhead becoming vested pursuant to
Section 2.02, Group shall have no further obligations to
Mr. Broadhead or his Beneficiary under this Plan.
2.05 Special Provisions Regarding Medical Taxes. In the
event that Mr. Broadhead's rights to the retirement benefits payable
hereunder vest before the Payment Date, the Company shall lend Mr.
Broadhead an amount equal to the amount of any employment taxes that
become due and payable in respect of the vesting of such retirement
benefits. Any such loan shall bear interest at the lowest applicable
federal rate (within the meaning of Section 1274(d) of the Code) that
can be charged (based on annual compounding of interest) and still
avoid any deemed income to Mr. Broadhead pursuant to Section 7872 of
the Code. The principal amount of any such loan shall be payable in
a single sum payment at the Payment Date and interest shall be
payable annually on the anniversary of the relevant vesting date.
2.06 Excess Restricted Stock Value. Notwithstanding any
other provision of this Plan, if the value of the Restricted Stock
exceeds the amount of the lump sum benefit payable hereunder from
which the value of such Restricted Stock is to be subtracted
hereunder, Mr. Broadhead or his Beneficiary, as the case may be,
shall be entitled to such excess.
ARTICLE III
AMENDMENTS AND TERMINATION;
RIGHTS AGAINST THE COMPANY
3.01 Amendment. This document can only be amended in a
written agreement signed by (i) an officer of the Company who has
been authorized to execute such amendment by the Committee and (ii)
Mr. Broadhead (or, following his death, his Beneficiary). Any such
amendment shall become effective upon the date stated therein.
3.02 Termination of the Plan. Group has established this
Plan with the bona fide intention and expectation that from year to
year it will deem it advisable to continue it in effect. However,
the Committee shall have the right to terminate the Plan in its
entirety should Mr. Broadhead's employment be terminated for Cause
prior to the vesting of benefits hereunder.
For purposes of this Plan, the employment of Mr. Broadhead
shall be deemed to have been terminated for "Cause" if he has: (i)
engaged in one or more acts constituting a felony, or involving fraud
or serious moral turpitude; (ii) willfully refused (except by reason
of incapacity due to accident or illness) to perform substantially
his duties, provided that such refusal shall have resulted in
demonstrable material injury to Group or its subsidiaries; or (iii)
willfully engaged in gross misconduct materially injurious to Group
or its subsidiaries. No act or failure to act on Mr. Broadhead's
part shall, for purposes of this Plan, be considered "willful" unless
done, or omitted to be done, in bad faith and without reasonable
belief that his action or omission was in the best interest of Group
and its subsidiaries. Notwithstanding the foregoing, Mr. Broadhead
shall not be deemed to have been terminated for Cause unless and
until Group shall have delivered to him a copy of a resolution duly
adopted by the affirmative vote of a majority of the entire
membership of the Board at a meeting called and held for that
purpose, after reasonable notice to Mr. Broadhead and an opportunity
for him, together with counsel, to be heard before the Board, finding
that in the good faith opinion of the Board he was guilty of conduct
set forth above in paragraph (i), (ii) or (iii) of this Section 3.02,
and specifying the particulars thereof in detail.
3.03 Expenses. The cost of this Plan and the expenses of
administering the Plan shall be borne by Group.
ARTICLE IV
GENERAL AND MISCELLANEOUS
4.01 Merger or Consolidation or Sale of Assets of Group.
In the event of the merger or consolidation of Group with any other
corporation, or in the event substantially all of the assets of Group
shall be transferred to another corporation, the successor
corporation resulting from the merger or consolidation, or the
transferee of such assets, as the case may be, shall assume the
obligations of Group hereunder.
4.02 Spendthrift Clause. No right, title or interest of
any kind in the Plan shall be transferable or assignable by Mr.
Broadhead or his Beneficiary or be subject to alienation,
anticipation, encumbrance, garnishment, attachment, execution of levy
of any kind, whether voluntary or involuntary nor subject to the
debts, contracts, liabilities, engagements, or torts of Mr. Broadhead
or his Beneficiary. Any attempt to alienate, sell, transfer, assign,
pledge, garnish, attach or other action subject to legal or equitable
process or encumber or dispose of any interest in the Plan shall be
void.
4.03 Governing Law. The validity and effect of this Plan
and the rights and obligations of all persons affected hereby shall
be construed and determined in accordance with the laws of the State
of Florida unless superseded by federal law.
4.04 Dividends on Restricted Stock. Dividends (other than
stock dividends) to be paid or withheld on the Restricted Stock shall
be paid into the Trust, which is a grantor trust subject to the
claims of the general creditors of Group in the event of its
bankruptcy or insolvency established in accordance with the terms of
the Trust Agreement. The assets of the Trust shall be distributed to
Mr. Broadhead under the Trust Agreement at the same times and subject
to the same terms and conditions (specifically including forfeiture
provisions) as are applicable to the shares of Restricted Stock under
the Restricted Stock Agreement. Distribution of trust assets to
Mr. Broadhead shall fully satisfy all of Group's obligations to pay
dividends (other than stock dividends) and earnings with respect to
such shares of Restricted Stock. If Mr. Broadhead forfeits all or a
portion of the shares of Restricted Stock, an equal portion of the
assets in the trust related to such shares will be forfeited and
distributed to Group as soon as practicable following the event
giving rise to such forfeiture. For purposes of this Agreement,
dividends payable in stock shall be treated as though shares of
Restricted Stock constituting part of the award of Restricted Stock
with respect to which such stock dividends are paid.
4.05 Taxes. Mr. Broadhead acknowledges that all amounts
payable hereunder shall be reduced by any and all federal, state and
local taxes imposed upon Mr. Broadhead or his Beneficiary which are
required to be withheld by Group.
4.06 Relationship to Employment Agreement. For purposes of
Section 6 of the Employment Agreement entered into on February 13,
1989 by and between J. L. Broadhead and FPL Group, Inc., and any
similar provision of a successor employment or severance agreement,
this Plan will not be deemed to be one of the Pension Plans (as such
term is defined in Section 6(c) of said Employment Agreement).
Establishment of the Plan shall not be construed to give Mr.
Broadhead the right to be retained in the service of Group or any of
its affiliates.
4.07 Duty to Disclose. Mr. Broadhead shall from time to
time provide Group with written notice of the amount and form of
retirement benefits to which he may be entitled under any qualified
defined benefit retirement plans sponsored by any of his former
employers and shall, upon the request of the Vice President of Human
Resources of Group, authorize a representative of Group to discuss
the amount and form of such other retirement benefits with any former
employer. The notice shall specify that it relates to benefits under
this Plan.
4.08 Notices. All notices provided for in this Plan shall
be in writing and shall be deemed to have been duty given if
delivered in person or by overnight delivery or mailed by registered
mail, return receipt requested:
(a) If to Group, to FPL Group, Inc., 700 Universe
Boulevard, Juno Beach, Florida 33408, Attention: General
Counsel/Secretary; and
(b) If to Mr. Broadhead, to J.L. Broadhead, c/o Group or at
his address appearing in the payroll records of Group; or
(c) To such addresses as may be furnished to Group or
Mr. Broadhead in accordance with this paragraph.
IN WITNESS WHEREOF, J.L. Broadhead has hereunto set his
hand, and FPL Group, Inc. has caused this amended and restated Plan
to be signed by its duly appointed officers and its corporate seal to
be hereunto affixed as of the day and year first written above.
L. J. KELLEHER J.L. BROADHEAD
WITNESS J.L. BROADHEAD
DENNIS P. COYLE
WITNESS
ATTESTED:
FPL GROUP, INC.
By: DENNIS P. COYLE By: L. J. KELLEHER
<PAGE>
Annex A
Present Value Calculation
The present values described in Sections 2.01(a)(i) and (ii) shall be
determined by applying the following calculation rules:
(i) Solely for calculating the present value
described in Section 2.01(a)(i), Mr. Broadhead's Beneficiary
shall be deemed to be a woman born on February 23, 1943 and
who survives Mr. Broadhead's death;
(ii) The amount of the lump sum benefits payable
shall be determined in all circumstances (including the
payment to Mr. Broadhead s beneficiary following his death)
using the UP-1984 mortality tables. This means that any
lump sum benefit payable to Mr. Broadhead s spouse by reason
of his death on or after January 2, 1998 while still in the
employ of FPL shall be determined as though Mr. Broadhead
terminated his employment immediately prior to his death and
was entitled to receive a lump sum payment based on his
Applicable Percentage (as determined taking into account any
increase therein arising due to his death);
(iii) The amount of the lump sum benefits payable
shall be determined using an interest rate of 5%, and
(iv) In calculating the present value described in
Section 2.01(a)(ii), it shall be assumed that any benefit
that Mr. Broadhead or his beneficiary is entitled to receive
under any plan described therein is paid at the earliest
permissible date under the applicable plan, taking into
account Mr. Broadhead's age, length of service and date of
termination of service, regardless of when benefits actually
commence thereunder.
EXHIBIT 10(d)
SUPPLEMENT
TO THE
FPL GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AS IT APPLIES TO
THOMAS F. KIRK
1. Introduction. Section 5.03 of the FPL Group, Inc.
Supplemental Executive Retirement Plan as amended and
restated effective January 1, 1994 (the "Plan") authorizes
the Committee and the Employer to adopt supplements that
modify or add to the terms of the Plan. Pursuant to this
authority the Committee adopts this supplement (the
"Supplement"), which is incorporated by this reference and
forms a part of the Plan.
2. Applicability of This Supplement. The provisions of this
Supplement shall only apply to Thomas F. Kirk (the
"Participant").
3. Definitions. All of the capitalized terms used in this
Supplement shall have the meanings assigned to them in the
Plan, unless explicitly defined in this Supplement. The
following words, when used in the Supplement, shall have the
following meanings:
(a) "Adjusted Years of Service" shall mean the sum of:
(i) Years of Service completed as of March 31,
2010, multiplied by two (2), and
(ii) Years of Service, if any, credited after
such date.
(b) "Participant" shall mean Thomas F. Kirk.
(c) "Supplemental SERP Benefit" shall mean the benefit
described in Section 4 hereof.
(d) "Supplement" shall mean the supplement as set forth
in this document as it may be amended from time to
time.
4. Benefits. To the extent vested (as described in Section 5
hereof), the benefits to be provided under this Supplement
to which the Participant shall be entitled shall be the
Supplemental SERP Benefit. The "Supplemental SERP Benefit"
shall be the difference, if any, between (a) and (b), where:
(a) is the benefit to which the Participant would be
entitled under the Pension Plan, expressed in the
normal form of benefit, if such benefit was computed
(i) as if benefits under such plan were based upon
the Participant's Bonus Compensation and Adjusted
Years of Service, (ii) without the annual
compensation limitation imposed by Section 401
(a)(17) of the Code, and (iii) without the
restrictions or the limitations imposed by Sections
415(b) or 415(e) of the Code; and
(b) is the sum of the benefits payable to the
Participant under the Pension Plan and the Plan,
both expressed in the normal form of benefit.
As between the Plan and this Supplement, there shall be no
duplication of benefits.
5. Vesting of Benefits. The benefits to be provided under
this Supplement shall vest in accordance with Section 3.02
of the Plan.
6. Right to Amend or Terminate this Supplement. The powers
reserved to the Committee with respect to amendment and
termination of the Plan (i.e., Article V of the Plan) shall
apply with equal force to this Supplement.
7. Effective Date. This Supplement shall be adopted effective
as of January 2, 1997.
IN WITNESS WHEREOF, the Committee has caused this instrument
to be executed this 6th day of June, 1997 by their duly authorized
officers, effective as of date and year described above.
FPL GROUP, INC.
By: LAWRENCE J. KELLEHER
Lawrence J. Kelleher
Vice President, Human Resources
EXHIBIT 10(e)
SUPPLEMENT
TO THE
FPL GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AS IT APPLIES TO
THOMAS F. PLUNKETT
1. Introduction. Section 5.03 of the FPL Group, Inc.
Supplemental Executive Retirement Plan as amended and
restated effective April 1, 1997 (the "Plan") authorizes the
Committee and the Employer to adopt supplements that modify
or add to the terms of the Plan. Pursuant to this authority
the Committee adopts this supplement (the "Supplement"),
which is incorporated by this reference and forms a part of
the Plan.
2. Applicability of This Supplement. The provisions of this
Supplement shall only apply to Thomas F. Plunkett (the
"Participant").
3. Definitions. All of the capitalized terms used in this
Supplement shall have the meanings assigned to them in the
Plan, unless explicitly defined in this Supplement. The
following words, when used in the Supplement, shall have the
following meanings:
(a) "Adjusted Years of Service" shall mean the sum of:
(i) Years of Service completed as of August 26,
2004, multiplied by two (2), and
(ii) Years of Service, if any, credited after
such date.
(b) "Participant" shall mean Thomas F. Plunkett.
(c) "Supplemental SERP Benefit" shall mean the benefit
described in Section 4 hereof.
(d) "Supplement" shall mean the supplement as set forth
in this document as it may be amended from time to
time.
4. Benefits. To the extent vested (as described in Section 5
hereof), the benefits to be provided under this Supplement
to which the Participant shall be entitled shall be the
Supplemental SERP Benefit. The "Supplemental SERP Benefit"
shall be the difference, if any, between (a) and (b), where:
(a) is the benefit to which the Participant would be
entitled under the Pension Plan, expressed in the
normal form of benefit, if such benefit was computed
(i) as if benefits under such plan were based upon
the Participant's Base Compensation and Adjusted
Years of Service, (ii) without the annual
compensation limitation imposed by Section 401
(a)(17) of the Code, and (iii) without the
restrictions or the limitations imposed by Sections
415(b) or 415(e) of the Code; and
(b) is the sum of the benefits payable to the
Participant under the Pension Plan and the Plan,
both expressed in the normal form of benefit.
As between the Plan and this Supplement, there shall be no
duplication of benefits.
5. Vesting of Benefits. The benefits to be provided under
this Supplement shall vest upon the Participant s attainment
of age 62 (11/23/01).
6. Right to Amend or Terminate this Supplement. The powers
reserved to the Committee with respect to amendment and
termination of the Plan (i.e., Article V of the Plan) shall
apply with equal force to this Supplement.
7. Effective Date. This Supplement shall be adopted effective
as of December 15, 1997.
IN WITNESS WHEREOF, the Committee has caused this instrument
to be executed this 15 day of December, 1997 by their duly authorized
officers, effective as of date and year described above.
FPL GROUP, INC.
By: LAWRENCE J. KELLEHER
Lawrence J. Kelleher
Vice President, Human Resources
EXHIBIT 10(p)
EMPLOYMENT AGREEMENT
Employment Agreement between FPL GROUP, INC., a Florida
corporation (the "Company"), and Thomas F. Kirk (the "Executive"),
dated as of June 16, 1997.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
shareholders to assure that the Company and its affiliated companies
will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative
to diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive's full
attention and dedication to the Company and its affiliated companies
currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
Therefore, the Company and the Executive agree as follows:
1. Effective Date. The effective date of this Agreement
shall be the date on which a Change of Control occurs (the "Effective
Date"). Anything in this Agreement to the contrary notwithstanding,
if a Change of Control occurs and if the Executive's employment with
the Company or its affiliated companies is terminated or the
Executive ceases to be an officer of the Company or its affiliated
companies prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such
termination of employment or cessation of status as an officer (i)
was at the request of a third party who has taken steps reasonably
calculated to effect the Change of Control or (ii) otherwise arose in
connection with or anticipation of the Change of Control, then for
all purposes of this Agreement the "Effective Date" shall mean the
date immediately prior to the date of such termination of employment
or cessation of status as an officer.
2. Change of Control. For the purposes of this Agreement,
a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any
acquisition by the Company or any or its subsidiaries, (ii) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its subsidiaries or (iii) any
acquisition by any corporation with respect to which, following such
acquisition, more than 75% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of either an actual or threatened solicitation to which Rule 14a-11
of Regulation 14A promulgated under the Exchange Act applies or other
actual or threatened solicitation of proxies or consents; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect
to which all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 75% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their ownership, immediately
prior to such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale
or other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 75% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be.
The term "the sale or disposition by the Company of all or
substantially all of the assets of the Company" shall mean a sale or
other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect
subsidiary of the Company (including the stock of any direct or
indirect subsidiary of the Company) in which the value of the assets
or stock being sold or otherwise disposed of (as measured by the
purchase price being paid therefor or by such other method as the
Board determines is appropriate in a case where there is no readily
ascertainable purchase price) constitutes more than two-thirds of the
fair market value of the Company (as hereinafter defined). The "fair
market value of the Company" shall be the aggregate market value of
the then Outstanding Company Common Stock (on a fully diluted basis)
plus the aggregate market value of the Company's other outstanding
equity securities. The aggregate market value of the shares of
Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery
of a definitive agreement with respect to the transaction or series
of related transactions (the "Transaction Date") by the average
closing price of the shares of Outstanding Company Common Stock for
the ten trading days immediately preceding the Transaction Date. The
aggregate market value of any other equity securities of the Company
shall be determined in a manner similar to that prescribed in the
immediately preceding sentence for determining the aggregate market
value of the shares of Outstanding Company Common Stock or by such
other method as the Board shall determine is appropriate.
3. Employment Period. The Company hereby agrees to
continue the Executive in its or its affiliated companies' employ, or
both, as the case may be, and the Executive hereby agrees to remain
in the employ of the Company, or its affiliated companies, or both,
as the case may be, for a period commencing on the Effective Date and
ending on the 4th anniversary of such date (the "Employment Period").
As used in this Agreement, the term "affiliated companies" shall
include any corporation or other entity controlled by, controlling or
under common control with the Company.
4. Position and Duties. During the Employment Period, the
Executive's position (including status, offices, titles, and
reporting requirements), authority, duties, and responsibilities with
the Company or its affiliated companies or both, as the case may be,
shall be at least commensurate in all material respects with the most
significant of those held, exercised, and assigned at any time during
the 90-day period immediately preceding the Effective Date. The
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or
any location less than 20 miles from such location.
During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full time and attention during normal
business hours to the business and affairs of the Company and its
affiliated companies. It shall not be a violation of this Agreement
for the Executive to serve on corporate, civic or charitable boards
or committees, deliver lectures, fulfill speaking engagements or
teach at educational institutions and manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Company or its affiliated companies in accordance with this
Agreement. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not be deemed to interfere
with the performance of the Executive's responsibilities to the
Company and its affiliated companies.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) Annual Base Salary. The Executive shall be paid an
annual base salary ("Annual Base Salary"), in equal biweekly
installments, at least equal to the annual base salary being paid to
the Executive by the Company and its affiliated companies with
respect to the year in which the Effective Date occurs. The Annual
Base Salary shall be reviewed at least annually and shall be
increased substantially consistent with increases in base salary
generally awarded to other peer executives of the Company and its
affiliated companies. Such increases shall in no event be less than
the increases in the U.S. Department of Labor Consumer Price Index -
U.S. City Average Index. Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after
any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" shall include any
corporation or other entity controlled by, controlling or under
common control with the Company.
(b) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at
least equal to the average annual incentive compensation (annualized
for any fiscal year consisting of less than twelve full months or
with respect to which the Executive has been employed by the Company
for less than twelve full months) paid or payable, including by
reason of any deferral, to the Executive by the Company and its
affiliated companies in respect of the two fiscal years immediately
preceding the fiscal year in which the Effective Date occurs (the
"Recent Average Bonus"). The higher of the Recent Average Bonus or
the most recent Annual Bonus awarded by the Company and its
affiliated companies after the Effective Date is herein called the
"Highest Annual Bonus". Each such Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(c) Long Term Incentive Compensation. During the
Employment Period, the Executive shall be entitled to participate in
all incentive compensation plans, practices, policies, and programs
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies, and programs provide the Executive with incentive
opportunities and potential benefits, both as to amount and
percentage of compensation, less favorable, in the aggregate, than
those provided by the Company and its affiliated companies for the
Executive under the FPL Group Long Term Incentive Plan (including,
without limitation, performance share grants and awards) as in effect
at any time during the 90-day period immediately preceding the
Effective Date or; if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(d) Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all savings
and retirement plans, practices, policies, and programs applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies, and
programs provide the Executive with savings opportunities and
retirement benefit opportunities, in each case, less favorable, in
the aggregate, than the most favorable of those provided by the
Company and its affiliated companies for the Executive under such
plans, practices, policies, and programs as in effect at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any
time after the Effective Date to other peer executives of the Company
and its affiliated companies.
(e) Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies, and programs provided by
the Company and its affiliated companies (including, without
limitation, medical, executive medical, prescription, dental, vision,
short-term disability, long-term disability, executive long-term
disability, salary continuance, employee life, group life, benefits
pursuant to a split dollar arrangement, accidental death and
dismemberment, and travel accident insurance plans and programs) to
the extent applicable generally to other peer executives of the
Company and its affiliated companies but in no event shall such
plans, practices, policies, and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies, and programs in effect
for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(f) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices, and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(g) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits in accordance with the
most favorable plans, practices, programs, and policies of the
Company and its affiliated companies in effect for the Executive at
any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(h) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to the most
favorable of the foregoing provided to the Executive by the Company
and its affiliated companies at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(i) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs, and practices of the Company and
its affiliated companies as in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer incentives of the Company
and its affiliated companies.
6. Termination of Employment.
(a) Disability. If the Company determines in good faith
that the Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 13(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day
after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from
the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to
the Executive or the Executive's legal representative (such agreement
as to acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean (i) repeated violations by the
Executive of the Executive's obligations under Section 4 of this
Agreement (other than as a result of incapacity due to physical or
mental illness) which are demonstrably willful and deliberate on the
Executive's part, which are committed in bad faith or without
reasonable belief that such violations are in the best interests of
the Company and which are not remedied in a reasonable period of time
after receipt of written notice from the Company specifying such
violations or (ii) the conviction of the Executive of a felony
involving an act of dishonesty intended to result in substantial
personal enrichment at the expense of the Company or its affiliated
companies.
(c) Good Reason. The Executive's employment may be
terminated during the Employment Period by the Executive for Good
Reason.
For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4 of this Agreement, or any other
action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any
of the provisions of Section 5 of this Agreement, other than
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than that described in
Section 4 hereof;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 12(c) of this Agreement, provided that such
successor has received at least ten days prior written
notice from the Company or the Executive of the requirements
of Section 12(c) of the Agreement.
For purposes of this Section 6(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in
accordance with Section 13(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
fifteen days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination
any fact or circumstances which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the
Company hereunder or preclude the Executive or the Company from
asserting such fact or circumstance in enforcing the Executive's or
the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or
by the Executive for Good Reason, the date of receipt of the Notice
of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company
other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by
reason of Disability, the Date of Termination shall be the Disability
Effective Date.
7. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause or Disability. If,
during the Employment Period, the Company terminates the Executive's
employment other than for Cause or Disability or the Executive
terminates employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts (such
aggregate being hereinafter referred to as the "Special
Termination Amount"):
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of (x)
the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the
current fiscal year through the Date of Termination,
and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive
(together with any accrued interest or earnings
thereon) (including, without limitation,
compensation, bonus, incentive compensation or
awards deferred under the FPL Group, Inc. Deferred
Compensation Plan or incentive compensation or
awards deferred under the FPL Group, Inc. Long-Term
Incentive Plan of 1985, the FPL Group, Inc. Long
Term Incentive Plan of 1994, or pursuant to an
individual deferral agreement) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) being herein called the
"Accrued Obligations"); and
B. the amount equal to the product of (1)
the greater of two or the number of years (with any
partial year expressed as a fraction) remaining in
the Employment Period and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the Highest
Annual Bonus; provided, however, that such amount
shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of
severance relating to salary or bonus continuation
to be received by the Executive upon termination of
employment of the Executive under any severance
plan, policy or arrangement of the Company; and
C. the maximum amount payable under all
performance share grants and all other long term
incentive compensation grants to the Executive,
calculated as though the Executive had remained
employed by the Company for the remainder of the
Employment Period and on the basis of actual
achievement of performance measures through the end
of the fiscal year preceding the fiscal year in
which the Date of Termination occurs and thereafter
assuming 100% achievement of all performance
measures through the end of the Employment Period;
and
D. a separate lump-sum supplemental
retirement benefit equal to the difference between
(1) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized with
respect to the FPL Group Employee Pension Plan (or
any successor plan thereto) (the "Retirement Plan")
during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the
Retirement Plan and all supplemental and/or excess
retirement plans providing benefits for the
Executive (the "SERP") (including, but not limited
to the Supplemental Pension Benefit (as defined in
the FPL Group, Inc. Supplemental Executive
Retirement Plan)) which the Executive would receive
if the Executive's employment continued at the
compensation level provided for in Sections 5(a) and
5(b) of this Agreement for the remainder of the
Employment Period, assuming for this purpose that
all accrued benefits are fully vested and that
benefit accrual formulas are no less advantageous to
the Executive than those in effect during the 90-day
period immediately preceding the Effective Date, or,
if more favorable to the Executive, as in effect
generally at any time thereafter during the
Employment Period with respect to other peer
executives of the Company and its affiliated
companies, and (2) the actuarial equivalent
(utilizing for this purpose the actuarial
assumptions utilized with respect to the Retirement
Plan during the 90-day period immediately preceding
the Effective Date) of the Executive's actual
benefit (paid or payable), if any, under the
Retirement Plan and the SERP; and
E. a separate lump-sum supplemental
retirement benefit equal to the difference between
(1) the value of the Company Account (as defined in
the FPL Group Employee Thrift Plan or any successor
plan thereto) (the "Thrift Plan") and any other
matching contribution accounts (including, but not
limited to the Supplemental Matching Contribution
Account (as defined in the FPL Group, Inc.
Supplemental Executive Retirement Plan)) under a
SERP which the Executive would receive if (i) the
Executive s employment continued at the compensation
level provided for in Sections 5(a) and 5(b) of this
Agreement for the remainder of the Employment
Period, (ii) the Executive made pre- and after-tax
contributions at the highest permissible rate
(disregarding any limitations imposed by the
Internal Revenue Code, which may or may not be set
forth in the Thrift Plan) for each year remaining in
the Employment Period, (iii) the Company Account and
the matching contribution accounts are fully vested,
and (iv) the matching contribution formulas are no
less advantageous to the Executive than those in
effect during the 90-day period immediately
preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time
during the remainder of the Employment Period with
respect to other peer executives of the Company and
its affiliated companies, and (2) the actual value
of the Executive s Company Account and matching
contribution accounts (paid or payable), if any,
under the Thrift Plan and the SERP; and
(ii) for the remainder of the Employment Period, or
such longer period as any plan, program, practice or policy
may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance
with the plans, programs, practices and policies described
in Sections 5(e) and 5(g) of this Agreement if the
Executive's employment had not been terminated, in
accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated
companies applicable generally to other peer executives and
their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however,
that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical
and other welfare benefits described herein shall be
secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility of the Executive for retiree
benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained
employed until the end of the Employment Period and to have
retired on the last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive
pursuant to this Agreement or otherwise under any plan,
program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits"), but excluding solely for purposes of this
Section 7(a)(iii) amounts waived by the Executive pursuant
to Section 7(a)(i)(B).
(b) Death. Upon the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. All Accrued
Obligations shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of the Date of
Termination. The term Other Benefits as utilized in this Section
7(b) shall include, without limitation, and the Executive's family
shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and any of its affiliated
companies to surviving families of peer executives of the Company and
such affiliated companies under such plans, programs, practices and
policies relating to family death benefits, if any, as in effect with
respect to other peer executives and their families at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive and/or the Executive's family, as
in effect on the date of the Executive's death with respect to other
peer executives of the Company and its affiliated companies and their
families.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits.
All Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. The term Other
Benefits as utilized in this Section 7(c) shall include, and the
Executive shall be entitled after the Disability Effective Date to
receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating
to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable
to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of
the Company and its affiliated companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further obligations to
the Executive other than the obligation to pay to the Executive
Annual Base Salary through the Date of Termination plus the amount of
any compensation previously deferred by the Executive, in each case
to the extent theretofore unpaid. If the Executive terminates
employment during the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and
the timely payment or provision of Other Benefits. In such case, all
Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
8. Non-exclusivity of Rights. Except as provided in
Sections 7(a)(i)(B), 7(a)(ii), and 7(a)(iii) of this Agreement,
nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under
any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by
this Agreement.
9. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and,
except as provided in Section 7(a)(ii) of this Agreement, such
amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur at all stages of proceedings, including, without
limitation, preparation and appellate review, as a result of any
contest (regardless of whether formal legal proceedings are ever
commenced and regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872 (f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the"Code").
10. Certain Additional Payments by the Company. Anything
in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional
payments required under this Section 10) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
11. Confidential Information. The Executive shall hold in
a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company
or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required
by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the
provisions of this Section 11 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
12. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and /or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
13. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without reference
to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Thomas F. Kirk
Martinique II, Apt. 2201ET
4000 Ocean Drive
Singer Island, FL 33404
If to the Company:
FPL Group, Inc.
700 Universe Boulevard
Juno Beach, Florida 33408
Attention: Vice President, Human Resources
or such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or
the Company may hereunder, including, without limitation, the right
of the Executive to terminate employment for Good Reason pursuant to
Section 6(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that, except
as may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the
Executive by the Company is "at will" and, prior to the Effective
Date, may be terminated by either the Executive or the Company at any
time. Moreover, except as provided in Section 1, if prior to the
Effective Date, (i) the Executive's employment with the Company
terminates or (ii) the Executive ceases to be an officer of the
Company, then the Executive shall have no further rights under this
Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the Board of
Directors, the Company has caused these presents to be executed in
its name on its behalf, all as of the day and year first above
written.
THOMAS F. KIRK
Thomas F. Kirk
FPL GROUP, INC.
By LAWRENCE J. KELLEHER
Lawrence J. Kelleher
Vice President Human Resources
EXHIBIT 12
FLORIDA POWER & LIGHT COMPANY
COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
(Millions of Dollars)
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES
Earnings, as defined:
Net income .................................................... $ 627 $ 615 $ 611 $ 568 $ 468
Income taxes .................................................. 321 322 342 319 240
Fixed charges, as below ....................................... 240 262 286 310 348
Total earnings, as defined .................................. $1,188 $1,199 $1,239 $1,197 $1,056
Fixed charges, as defined:
Interest charges .............................................. $ 227 $ 246 $ 270 $ 292 $ 327
Rental interest factor ........................................ 4 5 5 7 10
Fixed charges included in nuclear fuel cost ................... 9 11 11 11 11
Total fixed charges, as defined ............................. $ 240 $ 262 $ 286 $ 310 $ 348
Ratio of earnings to fixed charges .............................. 4.95 4.58 4.33 3.86 3.03
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Earnings, as defined:
Net income .................................................... $ 627 $ 615 $ 611 $ 568 $ 468
Income taxes .................................................. 321 322 342 319 240
Fixed charges, as below ....................................... 240 262 286 310 348
Total earnings, as defined .................................. $1,188 $1,199 $1,239 $1,197 $1,056
Fixed charges, as defined:
Interest charges .............................................. $ 227 $ 246 $ 270 $ 292 $ 327
Rental interest factor ........................................ 4 5 5 7 10
Fixed charges included in nuclear fuel cost ................... 9 11 11 11 11
Total fixed charges, as defined ............................. 240 262 286 310 348
Non-tax deductible preferred stock dividends .................... 19 24 43 40 42
Ratio of income before income taxes to net income ............... 1.51 1.52 1.56 1.56 1.51
Preferred stock dividends before income taxes ................... 29 36 68 62 64
Combined fixed charges and preferred stock dividends ............ $ 269 $ 298 $ 354 $ 372 $ 412
Ratio of earnings to combined fixed charges
and preferred stock dividends ................................. 4.42 4.02 3.50 3.22 2.56
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF FPL GROUP, INC.
<TABLE>
<CAPTION>
State or Jurisdiction
Subsidiary of Incorporation
<S> <C>
1. Florida Power & Light Company (100%-Owned) ............................................. Florida
2. Bay Loan and Investment Bank (a) ....................................................... Rhode Island
3. Palms Insurance Company, Limited (a) ................................................... Cayman Islands
(a) 100%-owned subsidiary of FPL Group Capital Inc
</TABLE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-56869 on Form S-3; Registration Statement
No. 33-57673 on Form S-8; Post-Effective Amendment No. 2 to
Registration Statement No. 33-31487 on Form S-8; Post-Effective
Amendment No. 2 to Registration Statement No. 33-33215 on Form S-8;
Registration Statement No. 33-11631 on Form S-8; Post-Effective
Amendment No. 1 to Registration Statement No. 33-39306 on Form S-3;
Registration Statement No. 33-57470 on Form S-3; Post-Effective
Amendment No. 6 to Registration Statement No. 33-18669 on Form S-8;
Registration Statement No. 333-27079 on Form S-8; Registration
Statement No. 333-30695 on Form S-8; Registration Statement 333-30697
on Form S-8 of FPL Group, Inc., of our report dated February 13, 1998
appearing in this Annual Report on Form 10-K of FPL Group, Inc. for
the year ended December 31, 1997.
We also consent to the incorporation by reference in Registration
Statement No. 33-40123 on Form S-3; Post-Effective Amendment No. 1 to
Registration Statement No. 33-46076 on Form S-3; Registration
Statement No. 33-61390 on Form S-3; and Post-Effective Amendment
No. 2 to Registration Statement No. 33-59429 on Form S-4 of Florida
Power & Light Company, of our report dated February 13, 1998
appearing in this Annual Report on Form 10-K of Florida Power & Light
Company for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Miami, Florida
February 26, 1998
<TABLE> <S> <C>
<S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from FPL Group's and FPL's consolidated balance sheet as of
December 31, 1997 and consolidated statements of income and cash flows for the year ended December 31, 1997 and is qualified in
its entirety by reference to such financial statements.
<CIK> 0000753308
<NAME> FPL Group, Inc.
<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $8,781
<OTHER-PROPERTY-AND-INVEST> $1,861
<TOTAL-CURRENT-ASSETS> $1,101
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $706
<TOTAL-ASSETS> $12,449
<COMMON> $0
<CAPITAL-SURPLUS-PAID-IN> $0
<RETAINED-EARNINGS> $0
<TOTAL-COMMON-STOCKHOLDERS-EQ> $4,845
$0
$226
<LONG-TERM-DEBT-NET> $2,949
<SHORT-TERM-NOTES> $134
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $198
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $4,097
<TOT-CAPITALIZATION-AND-LIAB> $12,449
<GROSS-OPERATING-REVENUE> $6,369
<INCOME-TAX-EXPENSE> $304
<OTHER-OPERATING-EXPENSES> $5,141
<TOTAL-OPERATING-EXPENSES> $5,141
<OPERATING-INCOME-LOSS> $1,228
<OTHER-INCOME-NET> $4
<INCOME-BEFORE-INTEREST-EXPEN> $909
<TOTAL-INTEREST-EXPENSE> $291
<NET-INCOME> $618
$19
<EARNINGS-AVAILABLE-FOR-COMM> $618
<COMMON-STOCK-DIVIDENDS> $332
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $1,597
<EPS-PRIMARY> $3.57 <F1>
<EPS-DILUTED> $3.57 <F1>
<FN>
<F1> Earnings per share (EPS) amounts have been computed in accordance with Statement of Financial Accounting Standards
No. 128, "Earnings per Share." The basic and diluted EPS amounts have been entered in place of primary and fully
diluted, respectively.
</FN>
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from FPL's consolidated balance sheet as of December 31, 1997 and
consolidated statements of income and cash flows for the year ended December 31, 1997 and is qualified in its entirety by
reference to such financial statements.
<CIK> 0000037634
<NAME> Florida Power & Light Company
<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $8,781
<OTHER-PROPERTY-AND-INVEST> $1,007
<TOTAL-CURRENT-ASSETS> $942
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $442
<TOTAL-ASSETS> $11,172
<COMMON> $0
<CAPITAL-SURPLUS-PAID-IN> $0
<RETAINED-EARNINGS> $0
<TOTAL-COMMON-STOCKHOLDERS-EQ> $4,814
$0
$226
<LONG-TERM-DEBT-NET> $2,420
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $40
<LONG-TERM-DEBT-CURRENT-PORT> $180
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $3,492
<TOT-CAPITALIZATION-AND-LIAB> $11,172
<GROSS-OPERATING-REVENUE> $6,132
<INCOME-TAX-EXPENSE> $329
<OTHER-OPERATING-EXPENSES> $4,954
<TOTAL-OPERATING-EXPENSES> $5,283
<OPERATING-INCOME-LOSS> $849
<OTHER-INCOME-NET> $5
<INCOME-BEFORE-INTEREST-EXPEN> $854
<TOTAL-INTEREST-EXPENSE> $227
<NET-INCOME> $627
$19
<EARNINGS-AVAILABLE-FOR-COMM> $608
<COMMON-STOCK-DIVIDENDS> $0
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $1,503
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
