UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified
in their charters, address of principal IRS Employer
Commission executive offices and Identification
File Number Registrants' telephone number Number
- ----------- --------------------------------------- --------------
1-8841 FPL GROUP, INC. 59-2449419
1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
State or other jurisdiction of incorporation or organization: Florida
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) have been subject to such filing
requirements for the past 90 days. Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each class of FPL Group, Inc. common
stock, as of the latest practicable date: Common Stock, $.01 Par Value,
outstanding at June 30, 1998: 181,217,035 shares
As of June 30, 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.
______________________________
This combined Form 10-Q represents separate filings by FPL Group, Inc. and
Florida Power & Light Company. Information contained herein relating to an
individual registrant is filed by that registrant on its own behalf. Florida
Power & Light Company makes no representations as to the information relating
to FPL Group, Inc.'s other operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), FPL Group, Inc. (FPL Group) and
Florida Power & Light Company (FPL) (collectively, the Company) are hereby
filing cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in forward-
looking statements (as such term is defined in the Reform Act) of the Company
made by or on behalf of the Company which are made in this combined Form 10-Q,
in presentations, in response to questions or otherwise. Any statements that
express, or involve discussions as to, expectations, beliefs, plans,
objectives, assumptions or future events or performance (often, but not always,
through the use of words or phrases such as will likely result, are expected
to, will continue, is anticipated, estimated, projection, outlook) are not
statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties 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
Federal Energy Regulatory Commission (FERC), the Florida Public Service
Commission (FPSC) and the Nuclear Regulatory Commission, 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, legal
and administrative proceedings (whether civil, such as environmental, or
criminal) and settlements, and any unanticipated impact of the year 2000,
including delays or changes in costs of year 2000 compliance, or the failure of
major suppliers, customers and others with whom FPL does business to resolve
their own year 2000 issues on a timely basis.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results, and are beyond the control of the Company.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1998 1997 1998 1997
------ ------- ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES .............................................. $1,692 $ 1,587 $3,031 $3,032
OPERATING EXPENSES:
Fuel, purchased power and interchange ......................... 558 560 994 1,104
Other operations and maintenance............................... 319 298 618 567
Depreciation and amortization ................................. 348 262 597 530
Taxes other than income taxes ................................. 150 146 286 285
Total operating expenses .................................... 1,375 1,266 2,495 2,486
OPERATING INCOME ................................................ 317 321 536 546
OTHER INCOME (DEDUCTIONS):
Interest charges .............................................. (64) (74) (127) (145)
Preferred stock dividends - FPL ............................... (4) (4) (7) (10)
Other - net ................................................... 16 4 22 12
Total other deductions - net ................................ (52) (74) (112) (143)
INCOME BEFORE INCOME TAXES ...................................... 265 247 424 403
INCOME TAXES .................................................... 89 83 140 138
NET INCOME ...................................................... $ 176 $ 164 $ 284 $ 265
Earnings per share of common stock (basic and assuming dilution). $ 1.02 $ 0.95 $ 1.65 $ 1.53
Dividends per share of common stock ............................. $ 0.50 $ 0.48 $ 1.00 $ 0.96
Average number of common shares outstanding ..................... 173 173 173 173
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to
Consolidated Financial Statements appearing in the combined Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 (1997 Form 10-K) for FPL
Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997
----------- ------------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property,
including nuclear fuel and construction work in progress ............... $17,955 $17,820
Less accumulated depreciation and amortization ......................... (9,049) (8,466)
Total property, plant and equipment - net ............................ 8,906 9,354
CURRENT ASSETS:
Cash and cash equivalents .............................................. 428 54
Customer receivables, net of allowances of $8 and $9, respectively ..... 613 501
Materials, supplies and fossil fuel inventory - at average cost ........ 282 302
Other .................................................................. 306 244
Total current assets ................................................. 1,629 1,101
OTHER ASSETS:
Special use funds of FPL ............................................... 1,146 1,007
Other investments ...................................................... 399 282
Other .................................................................. 764 705
Total other assets ................................................... 2,309 1,994
TOTAL ASSETS .. .......................................................... $12,844 $12,449
CAPITALIZATION:
Common stock ........................................................... $ 2 $ 2
Additional paid-in capital.............................................. 3,018 3,038
Retained earnings....................................................... 1,915 1,804
Accumulated other comprehensive income.................................. 1 1
Total common shareholders' equity..................................... 4,936 4,845
Preferred stock of FPL without sinking fund requirements ............... 226 226
Long-term debt ......................................................... 2,862 2,949
Total capitalization ................................................. 8,024 8,020
CURRENT LIABILITIES:
Debt and preferred stock due within one year ........................... 456 332
Accounts payable ....................................................... 353 368
Accrued interest, taxes and other ...................................... 1,075 799
Total current liabilities ............................................ 1,884 1,499
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ...................................... 1,428 1,473
Unamortized regulatory and investment tax credits ...................... 374 395
Other .................................................................. 1,134 1,062
Total other liabilities and deferred credits ......................... 2,936 2,930
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ..................................... $12,844 $12,449
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to
Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group
and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1998 1997
----- -----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................... $ 997 $ 953
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ............................................... (327) (230)
Independent power investments ............................................. (395) (237)
Distributions and loan repayments from partnerships and joint ventures .... 236 21
Other - net ............................................................... (43) 28
Net cash used in investing activities ................................. (529) (418)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ................................................ 197 21
Retirement of long-term debt and preferred stock .......................... (189) (205)
Increase (decrease) in short-term debt .................................... 103 (11)
Repurchase of common stock ................................................ (33) (32)
Dividends on common stock ................................................. (172) (166)
Net cash used in financing activities ................................. (94) (393)
Net increase in cash and cash equivalents ................................... 374 142
Cash and cash equivalents at beginning of period ............................ 54 196
Cash and cash equivalents at end of period .................................. $ 428 $ 338
Supplemental disclosures of cash flow information:
Cash paid for interest .................................................... $ 129 $ 139
Cash paid for income taxes ................................................ $ 13 $ 85
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .................................... $ 2 $ 40
Debt assumed for property additions ....................................... - $ 420
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to
Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group
and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Millions of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES ................................. $1,634 $1,541 $2,929 $2,940
OPERATING EXPENSES:
Fuel, purchased power and interchange ............ 546 551 977 1,076
Other operations and maintenance ................. 285 278 553 525
Depreciation and amortization .................... 342 256 585 518
Income taxes ..................................... 96 92 154 150
Taxes other than income taxes .................... 149 144 284 283
Total operating expenses ....................... 1,418 1,321 2,553 2,552
OPERATING INCOME ................................... 216 220 376 388
OTHER INCOME (DEDUCTIONS):
Interest charges ................................. (49) (57) (100) (117)
Other - net ...................................... - 1 (3) 3
Total other deductions - net ................... (49) (56) (103) (114)
NET INCOME ......................................... 167 164 273 274
PREFERRED STOCK DIVIDENDS .......................... 4 4 7 10
NET INCOME AVAILABLE TO FPL GROUP .................. $ 163 $ 160 $ 266 $ 264
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to
Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group
and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997
----------- ------------
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Plant in service, including nuclear fuel and construction work in progress ... $17,340 $17,136
Less accumulated depreciation and amortization ............................... (8,930) (8,355)
Electric utility plant - net ............................................... 8,410 8,781
CURRENT ASSETS:
Cash and cash equivalents .................................................... 357 3
Customer receivables, net of allowances of $8 and $9, respectively ........... 582 471
Materials, supplies and fossil fuel inventory - at average cost .............. 225 242
Other ........................................................................ 291 226
Total current assets ....................................................... 1,455 942
OTHER ASSETS:
Special use funds ............................................................ 1,146 1,007
Other ........................................................................ 451 442
Total other assets ......................................................... 1,597 1,449
TOTAL ASSETS ................................................................... $11,462 $11,172
CAPITALIZATION:
Common shareholder's equity .................................................. $ 4,863 $ 4,814
Preferred stock without sinking fund requirements ............................ 226 226
Long-term debt ............................................................... 2,418 2,420
Total capitalization ....................................................... 7,507 7,460
CURRENT LIABILITIES:
Debt and preferred stock due within one year ................................. 201 220
Accounts payable ............................................................. 324 344
Accrued interest, taxes and other ............................................ 1,033 748
Total current liabilities .................................................. 1,558 1,312
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ............................................ 1,029 1,070
Unamortized regulatory and investment tax credits ............................ 374 395
Other ........................................................................ 994 935
Total other liabilities and deferred credits ............................... 2,397 2,400
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ........................................... $11,462 $11,172
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to
Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group
and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1998 1997
----- -----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES .............................. $ 971 $ 851
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................. (327) (230)
Other - net .......................................................... (43) (47)
Net cash used in investing activities ............................ (370) (277)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ........................................... 197 -
Retirement of long-term debt and preferred stock ..................... (180) (194)
Decrease in commercial paper ......................................... (39) -
Dividends ............................................................ (225) (224)
Net cash used in financing activities .............................. (247) (418)
Net increase in cash and cash equivalents .............................. 354 156
Cash and cash equivalents at beginning of period ....................... 3 78
Cash and cash equivalents at end of period ............................. $ 357 $ 234
Supplemental disclosures of cash flow information:
Cash paid for interest ............................................... $ 99 $ 113
Cash paid for income taxes ........................................... $ 22 $ 197
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations ............................... $ 2 $ 40
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to
Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group
and FPL.
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements should be read in
conjunction with the combined 1997 Form 10-K for FPL Group and FPL. In the
opinion of FPL Group and FPL, all adjustments (consisting of normal recurring
accruals) considered necessary for fair financial statement presentation have
been made. Certain amounts included in the prior year's consolidated financial
statements have been reclassified to conform to the current year's
presentation. The results of operations for an interim period may not give a
true indication of results for the year.
1. Summary of Significant Accounting and Reporting Policies
Revenues and Rates - In March 1998, a large customer of FPL withdrew its
petition requesting a limited scope proceeding to reduce FPL's base rates. The
docket was subsequently closed by the FPSC.
2. Capitalization
FPL Group Common Stock - During the three and six months ended June 30, 1998,
FPL Group repurchased 264,600 shares and 544,600 shares of common stock,
respectively, under its share repurchase program. A total of approximately 1.2
million shares have been repurchased under the share repurchase program that
began in April 1997.
Long-Term Debt - In June 1998, FPL sold $200 million principal amount of first
mortgage bonds maturing in June 2008, with an interest rate of 6%. The proceeds
were used in July 1998 to redeem approximately $200 million principal amount of
first mortgage bonds, maturing in 2007 and 2012, bearing interest at 7.875%.
In July 1998, a subsidiary of FPL Group Capital Inc (FPL Group Capital) sold
$150 million of senior secured bonds maturing in 2018, bearing interest at
7.645%.
Long-Term Incentive Plan - Performance shares granted to date under FPL Group's
long-term incentive plan resulted in assumed incremental shares of common stock
outstanding for purposes of computing both basic and diluted earnings per share
for the three and six months ended June 30, 1998 and 1997. These incremental
shares were not material in the periods presented and did not cause diluted
earnings per share to differ from basic earnings per share.
Other - In the first quarter of 1998, FPL Group adopted Statement of Financial
Accounting Standards No. (FAS) 130, "Reporting Comprehensive Income." The
statement establishes standards for reporting comprehensive income and its
components. Comprehensive income of FPL Group totaling $176 million and $164
million for the three months ended June 30, 1998 and 1997, respectively, and,
$284 million and $265 million for the six months ended June 30, 1998 and 1997,
respectively, includes net income, and changes in unrealized gains (losses) on
securities and foreign currency translation adjustments. Accumulated other
comprehensive income is separately displayed in the condensed consolidated
balance sheets of FPL Group.
3. Commitments and Contingencies
Commitments - FPL has made commitments in connection with a portion of its
projected capital expenditures. Capital expenditures for the construction or
acquisition of additional facilities and equipment to meet customer demand
are estimated to be approximately $2.0 billion for 1998 through 2000.
Included in this three-year forecast are capital expenditures for 1998 of
approximately $620 million, of which $327 million had been spent through
June 30, 1998. Also, in January 1998 FPL Group 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 fourth
quarter of 1998, subject to approval by federal and state regulators.
Commitments for independent power investments, including the acquisition
mentioned above, are approximately $850 million for 1998. FPL Group Capital
and its subsidiaries have guaranteed approximately $221 million of purchase
power agreement obligations, debt service payments and other payments subject
to certain contingencies.
Insurance - Liability for accidents at nuclear power plants is governed by
the Price-Anderson Act, which limits the liability of nuclear reactor owners
to the amount of the insurance available from private sources and under an
industry retrospective payment plan. In accordance with this Act, FPL
maintains $200 million of private liability insurance, which is the maximum
obtainable, and participates in a secondary financial protection system under
which it is subject to retrospective assessments of up to $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 $54
million in retrospective premiums.
In the event of a catastrophic loss at one of FPL's nuclear plants, the
amount of insurance available may not be adequate to cover property damage
and other expenses incurred. Uninsured losses, to the extent not recovered
through rates, would be borne by FPL and could have a material adverse effect
on FPL Group's and FPL's financial condition.
FPL self-insures 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 $269 million at June 30, 1998, 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 thereafter 383 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. Fuel contracts provide for the
transportation and supply of natural gas and coal. Commitments to purchase
Orimulsion, a controversial fuel from Venezuela, have been eliminated as a
result of the rejection in June 1998, by Florida's Power Plant Siting Board,
of FPL's application to burn Orimulsion at its Manatee Power Plant.
The required capacity and minimum payments through 2002 under these contracts
are estimated to be as follows:
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
(Millions of Dollars)
Capacity payments:
JEA and Southern Companies .............. $200 $210 $210 $210 $210
Qualifying facilities (a) ............... $350 $360 $370 $380 $400
Minimum payments, at projected prices:
Natural gas, including transportation ... $250 $210 $210 $210 $240
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
contracts that are currently in dispute. These capacity payments are
subject to the outcome of the related litigation. See Litigation.
Capacity, energy and fuel charges under these contracts were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 Charges 1997 Charges 1998 Charges 1997 Charges
------------------ ------------------ ------------------ ------------------
Energy/ Energy/ Energy/ Energy/
Capacity Fuel (a) Capacity Fuel (a) Capacity Fuel (a) Capacity Fuel (a)
-------- -------- -------- -------- -------- -------- -------- --------
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JEA and Southern Companies .. $54(b) $35 $50(b) $ 38 $105(b) $ 66 $102(b) $ 73
Qualifying facilities........ $75(c) $28 $74(c) $ 31 $149(c) $ 54 $148(c) $ 60
Natural gas ................. - $84 - $112 - $138 - $201
Coal ........................ - $11 - $ 14 - $ 23 - $ 26
(a) Recovered through the fuel and purchased power cost recovery clause (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 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 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 and are vigorously defending the suits.
Accordingly, the liabilities, if any, arising from the proceedings are not
anticipated to have a material adverse effect on their financial statements.
4. Summarized Financial Information of FPL Group Capital
FPL Group Capital's debenture is guaranteed by FPL Group and included in FPL
Group's condensed consolidated balance sheets. For the three months ended
June 30, 1998 and 1997, operating revenues of FPL Group Capital were
approximately $58 million and $46 million, respectively. Operating expenses
were approximately $54 million and $36 million, respectively, and net income
was approximately $18 million and $9 million, respectively, for the same
periods. Operating revenues of FPL Group Capital for the six months ended
June 30, 1998 and 1997 were approximately $102 million and $92 million,
respectively. For the same periods, operating expenses were approximately
$95 million and $83 million, respectively, and net income was approximately
$29 million and $10 million, respectively.
At June 30, 1998, FPL Group Capital had approximately $280 million of current
assets, $1.5 billion of noncurrent assets, $383 million of current
liabilities and $1.0 billion of noncurrent liabilities. At December 31,
1997, FPL Group Capital had current assets of approximately $156 million,
noncurrent assets of $1.4 billion, current liabilities of $252 million and
noncurrent liabilities of $999 million.
Management has not presented separate financial statements and other
disclosures concerning FPL Group Capital because management has determined
that such information is not material to holders of the FPL Group Capital
debenture.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements contained herein and Management's Discussion
and Analysis of Financial Condition and Results of Operations appearing in the
1997 Form 10-K for FPL Group and FPL. The results of operations for an interim
period may not give a true indication of results for the year. In the
following discussion, all comparisons are with the corresponding items in the
prior year.
RESULTS OF OPERATIONS
The generation, transmission, distribution and sale of electric energy by FPL
continues to represent the principal operations of FPL Group. However,
growth in FPL Group's net income for the three and six months ended June 30,
1998 was primarily due to better operating results at FPL Energy, Inc.'s (FPL
Energy) independent power investments. FPL's net income available to FPL
Group also increased, mainly due to higher customer usage and customer
growth, partly offset by higher depreciation and O&M expenses.
FPL's revenues from base rates for the three and six months ended June 30,
1998 increased to $970 million and $1.72 billion, respectively, from $875
million and $1.64 billion for the same period in 1997. The improvements
resulted from increases in energy usage per retail customer of 8.3% and 2.4%,
respectively, primarily due to weather conditions, and customer growth of
1.9% and 1.8%, respectively. Cost recovery clause revenues and franchise fees
comprise substantially all of the remaining operating revenues. Such revenues
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.
O&M expenses increased for the three and six months ended June 30, 1998,
primarily due to additional spending associated with improving service
reliability. Depreciation and amortization expense in all periods presented
includes amortization recorded under the special amortization program, which
is a function of retail base revenues. Depreciation and amortization expense
increased for the three and six months ended June 30, 1998 mainly due to the
increase in revenues discussed above. Also, in June 1998 the FPSC approved,
on an interim basis, higher depreciation rates for FPL. The higher
depreciation rates will result in an annual increase in depreciation expense
of $25 million, half of which was recorded in the second quarter of 1998.
The FPSC is expected to give final consideration to this matter in the fourth
quarter of 1998. Interest and preferred stock dividend requirements declined
for the three and six months ended June 30, 1998, resulting from continued
reductions in average debt and preferred stock balances.
FPL Energy's operating results improved for the three and six months ended
June 30, 1998. The improvements primarily reflect better over-all results
from FPL Energy's earnings in independent power investments.
FPL Group is continuing to work to resolve the potential impact of the year
2000 on the processing of information by its computer systems. An assessment
of the information technology infrastructure, computer applications and
computerized processes embedded in operating equipment has been substantially
completed and work is underway to make the necessary modifications.
Additionally, FPL Group is actively communicating with major suppliers,
customers, financial institutions and others to ensure that electronic
interfaces with these parties will continue to function properly into 2000.
The cost of addressing year 2000 issues is estimated to be approximately $50
million, a small portion of which has been spent to date. The majority of
these costs represent the redeployment of existing resources and therefore,
are not expected to have a significant effect on O&M expenses. Work related
to the year 2000 effort is expected to be completed in 1999.
In June 1998, the Financial Accounting Standards Board issued FAS 133,
"Accounting for Derivative Instruments and Hedging Activities." The
statement establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement requires that changes in
the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. FPL Group is currently assessing
the effect, if any, on its financial statements of implementing FAS 133.
FPL's energy marketing and trading division uses forward contracts and
options to manage fuel costs and to market any excess generation.
Substantially all of the results of these activities are reflected in the
fuel or the capacity clauses and, accordingly, do not affect net income. FPL
Group will be required to adopt the standard in 2000.
LIQUIDITY AND CAPITAL RESOURCES
Using available cash flows from operations, FPL repaid certain series of
secured medium-term notes that matured during the first quarter of 1998.
Additionally, during the three and six months ended June 30, 1998, FPL Group
repurchased 264,600 and 544,600 shares of common stock, respectively. These
actions are consistent with management's intent to reduce debt and preferred
stock balances and the number of outstanding shares of common stock. See
Note 2.
In June 1998, the FPSC denied FPL's request to increase the $20 million
annual storm fund contribution. FPL does not intend to contest the denial.
In March 1998, FPL filed with the FPSC a ten-year power plant site plan that
includes adding approximately 2,500 mw of generating capacity to meet the
electricity needs of a growing customer base. The plan includes repowering
two existing plants by 2002 and 2004, respectively, and adding two new gas-
fired units in 2006 and 2007 at the Martin power plant. For information
concerning capital commitments, see Note 3.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
FPL Group:
(a) The Annual Meeting of FPL Group's shareholders was held on May 18,
1998. Of the 181,512,385 shares of common stock outstanding on the
record date of March 9, 1998, a total of 148,229,362 shares were
represented in person or by proxy.
(b) The following directors were elected effective May 18, 1998:
Votes Cast
-------------------------
Against or
For Withheld
----------- ----------
H. Jesse Arnelle ................. 145,960,657 2,268,705
Sherry S. Barrat ................. 145,943,226 2,286,136
Robert M. Beall, II .............. 145,391,428 2,837,934
James L. Broadhead ............... 145,775,626 2,453,736
J. Hyatt Brown ................... 145,943,100 2,286,262
Armando M. Codina ................ 145,944,064 2,285,298
Marshall M. Criser ............... 146,001,872 2,227,490
B. F. Dolan ...................... 146,014,942 2,214,420
Willard D. Dover ................. 145,475,478 2,753,884
Alexander W. Dreyfoos, Jr......... 146,053,943 2,175,419
Paul J. Evanson .................. 145,979,518 2,249,844
Drew Lewis ....................... 145,860,701 2,368,661
Frederic V. Malek ................ 145,833,806 2,395,556
Paul R. Tregurtha ................ 145,907,034 2,322,328
(c)(i) The vote to ratify the appointment of Deloitte & Touche LLP as
independent auditors for 1998 was 146,584,973 for, 908,692 against
and 735,697 abstaining.
(ii) The vote on a shareholder proposal requesting that FPL Group adopt
cumulative voting for the election of directors was 44,978,047 for,
83,375,404 against, 3,549,605 abstaining and 16,326,306 broker non-
votes.
FPL:
(a) The following FPL directors were elected effective May 18, 1998 by
the written consent of FPL Group, as the sole common shareholder of
FPL, in lieu of an annual meeting of shareholders:
James L. Broadhead
Dennis P. Coyle
Paul J. Evanson
Lawrence J. Kelleher
Thomas F. Plunkett
C. O. Woody
Michael W. Yackira
Item 5. Other Information
(a) Reference is made to Item 1. Business - FPL Operations - General in
the 1997 Form 10-K for FPL Group and FPL.
In June 1998, FPL and the JEA filed a petition with the FPSC seeking
approval of a territorial exchange affecting portions of Duval and
St. John's Counties. FPL will serve an additional portion of St.
John's County and will turn over its service area in Duval County to
the JEA. The FPSC is expected to consider this matter during the
third quarter of 1998. The territorial exchange will involve
approximately 1,800 customers in each area and is not expected to
have a material effect on earnings. The transition is anticipated
to take from one to three years.
(b) Reference is made to Item 1. Business - FPL Operations - System
Capability and Load in the 1997 Form 10-K for FPL Group and FPL.
From June 2, 1998 through June 5, 1998, FPL set four consecutive
records for summertime peak demand, ranging from 17,156 mw to 17,931
mw. Adequate resources were available at the time of each peak to
meet customer demand.
(c) Reference is made to Item. 1 Business - FPL Operations - Nuclear
Operations for FPL.
In June 1998, FPL informed the Nuclear Regulatory Commission (NRC) of
its intent to apply for a 20-year license renewal for Turkey Point
Units Nos. 3 and 4. FPL expects to file the application with the NRC
in approximately 2002. Operating licenses for Turkey Point Units Nos.
3 and 4 expire in 2012 and 2013, respectively.
(d) After February 13, 1999, notice to FPL Group of a shareholder
proposal submitted for consideration at the 1999 Annual Meeting of
Shareholders, which is not submitted for inclusion in FPL Group's
proxy statement and form of proxy, will be considered untimely and
the persons named in the proxies solicited by FPL Group's Board of
Directors for the 1999 Annual Meeting of Shareholders may exercise
discretionary voting power with respect to any such proposal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit FPL
Number Description Group FPL
------- ------------------------------------ ----- ---
4 Ninety-eighth Supplemental Indenture x x
dated as of June 1, 1998 between
FPL and Bankers Trust Company, Trustee
12(a) Computation of Ratio of Earnings to x
Fixed Charges
12(b) Computation of Ratios x
27 Financial Data Schedule x x
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements 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.
FLORIDA POWER & LIGHT COMPANY
(Registrants)
Date: August 3, 1998
K. MICHAEL DAVIS
------------------------
K. Michael Davis
Controller and Chief Accounting Officer of FPL Group, Inc.
Vice President, Accounting, Controller and
Chief Accounting Officer of Florida Power & Light Company
(Principal Financial Officer of the Registrants)
</TABLE>
Exhibit 4
This instrument was prepared by:
K. M. Davis
Florida Power & Light Company
700 Universe Boulevard
Juno Beach, Florida 33408
- -------------------------------------------------------
FLORIDA POWER & LIGHT COMPANY
to
BANKERS TRUST COMPANY
As Trustee under Florida Power & Light
Company's Mortgage and Deed of Trust,
Dated as of January 1, 1944.
Ninety-eighth Supplemental Indenture
Relating to $200,000,000 Principal Amount
of First Mortgage Bonds, 6% Series
due June 1, 2008.
Dated as of June 1, 1998
- -------------------------------------------------------
This Supplemental Indenture has been executed in several counterparts, all of
which constitute but one and the same instrument. This Supplemental Indenture
has been recorded in several counties. and documentary stamp taxes as required
by law in the amount of $700,000, and non-recurring intangible taxes as
required by law in the amount of $55,304.22, were paid on the Supplemental
Indenture recorded in the public records of Palm Beach County, Florida.
Note to Examiner: The new bonds ("New Bonds") being issued in connection with
this Supplemental Indenture are secured by real property and personal property
located both within Florida and outside of Florida. The aggregate fair market
value of the collateral exceeds the aggregate principal amount of (y) the New
Bonds plus (z) the other outstanding bonds secured by the mortgage supplemented
hereby and all previous supplemental indentures thereto. The intangible tax
has been computed pursuant to Section 199.133 (2), Florida Statutes, by (i)
determining the percentage of the aggregate fair market value of the collateral
constituting real property situated in Florida and by multiplying that
percentage times the principal amount of the New Bonds (the result hereinafter
defined as the "Tax Base") and (ii) multiplying the tax rate times the Tax
Base.
NINETY-EIGHTH SUPPLEMENTAL INDENTURE
INDENTURE, dated as of the first day of June, 1998, made and
entered into by and between FLORIDA POWER & LIGHT COMPANY, a corporation of the
State of Florida, whose post office address is 700 Universe Boulevard, Juno
Beach, Florida 33408 (hereinafter sometimes called FPL), and BANKERS TRUST
COMPANY, a corporation of the State of New York, whose post office address is
Four Albany Street, New York, New York 10006 (hereinafter called the Trustee),
as the ninety-eighth supplemental indenture (hereinafter called the Ninety-
eighth Supplemental Indenture) to the Mortgage and Deed of Trust, dated as of
January 1, 1944 (hereinafter called the Mortgage), made and entered into by
FPL, the Trustee and The Florida National Bank of Jacksonville, as Co-Trustee
(now resigned), the Trustee now acting as the sole trustee under the Mortgage,
which Mortgage was executed and delivered by FPL to secure the payment of bonds
issued or to be issued under and in accordance with the provisions thereof,
reference to which Mortgage is hereby made, this Ninety-eighth Supplemental
Indenture being supplemental thereto;
WHEREAS, Section 8 of the Mortgage provides that the form of
each series of bonds (other than the first series) issued thereunder shall be
established by Resolution of the Board of Directors of FPL and that the form of
such series, as established by said Board of Directors, shall specify the
descriptive title of the bonds and various other terms thereof, and may also
contain such provisions not inconsistent with the provisions of the Mortgage as
the Board of Directors may, in its discretion, cause to be inserted therein
expressing or referring to the terms and conditions upon which such bonds are
to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other
things, that any power, privilege or right expressly or impliedly reserved to
or in any way conferred upon FPL by any provision of the Mortgage, whether such
power, privilege or right is in any way restricted or is unrestricted, may be
in whole or in part waived or surrendered or subjected to any restriction if at
the time unrestricted or to additional restriction if already restricted, and
FPL may enter into any further covenants, limitations or restrictions for the
benefit of any one or more series of bonds issued thereunder, or FPL may cure
any ambiguity contained therein, or in any supplemental indenture, or may
establish the terms and provisions of any series of bonds other than said first
series, by an instrument in writing executed and acknowledged by FPL in such
manner as would be necessary to entitle a conveyance of real estate to record
in all of the states in which any property at the time subject to the Lien of
the Mortgage shall be situated; and
WHEREAS, FPL now desires to create the series of bonds
described in Article I hereof and to add to its covenants and agreements
contained in the Mortgage certain other covenants and agreements to be observed
by it and to alter and amend in certain respects the covenants and provisions
contained in the Mortgage; and
WHEREAS, the execution and delivery by FPL of this Ninety-
eighth Supplemental Indenture, and the terms of the bonds, hereinafter referred
to in Article I, have been duly authorized by the Board of Directors of FPL by
appropriate resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That FPL, in
consideration of the premises and of One Dollar to it duly paid by the Trustee
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, and in further evidence of assurance of the estate,
title and rights of the Trustee and in order further to secure the payment of
both the principal of and interest and premium, if any, on the bonds from time
to time issued under the Mortgage, according to their tenor and effect, and the
performance of all the provisions of the Mortgage (including any instruments
supplemental thereto and any modification made as in the Mortgage provided) and
of said bonds, hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms (subject, however, to
Excepted Encumbrances as defined in Section 6 of the Mortgage) unto Bankers
Trust Company, as Trustee under the Mortgage, and to its successor or
successors in said trust, and to said Trustee and its successors and assigns
forever, all property, real, personal and mixed, acquired by FPL after the date
of the execution and delivery of the Mortgage (except any herein or in the
Mortgage, as heretofore supplemented, expressly excepted), now owned (except
any properties heretofore released pursuant to any provisions of the Mortgage
and in the process of being sold or disposed of by FPL) or, subject to the
provisions of Section 87 of the Mortgage,hereafter acquired by FPL and
wheresoever situated, including (without in anywise limiting or impairing by
the enumeration of the same the scope and intent of the foregoing) all lands,
power sites, flowage rights, water rights, water locations, water
appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways,
dams, dam sites, aqueducts, and all rights or means for appropriating,
conveying, storing and supplying water; all rights of way and roads; all plants
for the generation of electricity by steam, water and/or other power; all
power houses, gas plants, street lighting systems, standards and other
equipment incidental thereto, telephone, radio and television systems,
air-conditioning systems and equipment incidental thereto, water works, water
systems, steam heat and hot water plants, substations, lines, service and
supply systems, bridges, culverts, tracks, ice or refrigeration plants and
equipment, offices, buildings and other structures and the equipment thereof;
all machinery, engines, boilers, dynamos, electric, gas and other machines,
regulators, meters, transformers, generators, motors, electrical, gas
and mechanical appliances, conduits, cables, water, steam heat, gas or other
pipes, gas mains and pipes, service pipes, fittings, valves and connections,
pole and transmission lines, wires, cables, tools, implements, apparatus,
furniture, chattels, and choses in action; all municipal and other franchises,
consents or permits; all lines for the transmission and distribution of
electric current, gas, steam heat or water for any purpose including towers,
poles, wires, cables, pipes, conduits, ducts and all apparatus for use in
connection therewith; all real estate, lands, easements, servitudes, licenses,
permits, franchises, privileges, rights of way and other rights in or relating
to real estate or the occupancy of the same and (except as herein or in the
Mortgage, as heretofore supplemented, expressly excepted) all the right, title
and interest of FPL in and to all other property of any kind or nature
appertaining to and/or used and/or occupied and/or enjoyed in connection with
any property hereinbefore or in the Mortgage, as heretofore supplemented,
described.
TOGETHER WITH all and singular the tenements, hereditaments
and appurtenances belonging or in anywise appertaining to the aforesaid
property or any part thereof, with the reversion and reversions, remainder and
remainders and (subject to the provisions of Section 57 of the Mortgage) the
tolls, rents, revenues, issues, earnings, income, products and profits thereof,
and all the estate, right, title and interest and claim whatsoever, at law as
well as in equity, which FPL now has or may hereinafter acquire in and to the
aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by FPL that, subject to the provisions of
Section 87 of the Mortgage, all the property, rights, and franchises acquired
by FPL after the date hereof (except any herein or in the Mortgage, as
heretofore supplemented, expressly excepted) shall be and are as fully granted
and conveyed hereby and as fully embraced within the Lien of the Mortgage, as
if such property, rights and franchises were now owned by FPL and were
specifically described herein and conveyed hereby.
PROVIDED that the following are not and are not intended to be
now or hereafter granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed hereunder and are hereby
expressly excepted from the Lien and operation of this Ninety-eighth
Supplemental Indenture and from the Lien and operation of the Mortgage, as
heretofore supplemented, viz: (1) cash, shares of stock, bonds, notes and other
obligations and other securities not hereafter specifically pledged, paid,
deposited, delivered or held under the Mortgage or covenanted so to be;
(2) merchandise, equipment, materials or supplies held for the purpose of sale
in the usual course of business and fuel (including Nuclear Fuel unless
expressly subjected to the Lien and operation of the Mortgage by FPL in a
future Supplemental Indenture), oil and similar materials and supplies
consumable in the operation of any properties of FPL; rolling stock, buses,
motor coaches, automobiles and other vehicles; (3) bills, notes and accounts
receivable, and all contracts, leases and operating agreements not specifically
pledged under the Mortgage or covenanted so to be; (4) the last day of the term
of any lease or leasehold which may hereafter become subject to the Lien of the
Mortgage; (5) electric energy, gas, ice, and other materials or products
generated, manufactured, produced or purchased by FPL for sale, distribution or
use in the ordinary course of its business; all timber, minerals, mineral
rights and royalties; (6) FPL's franchise to be a corporation; and (7) the
properties already sold or in the process of being sold by FPL and heretofore
released from the Mortgage and Deed of Trust, dated as of January 1, 1926, from
Florida Power & Light Company to Bankers Trust Company and The Florida National
Bank of Jacksonville, trustees, and specifically described in three separate
releases executed by Bankers Trust Company and The Florida National Bank of
Jacksonville, dated July 28, 1943, October 6, 1943 and December 11, 1943, which
releases have heretofore been delivered by the said trustees to FPL and
recorded by FPL among the Public Records of all Counties in which such
properties are located; provided, however, that the property and rights
expressly excepted from the Lien and operation of the Mortgage in the above
subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so
excepted in the event and as of the date that the Trustee or a receiver or
trustee shall enter upon and take possession of the Mortgaged and Pledged
Property in the manner provided in Article XIII of the Mortgage by reason of
the occurrence of a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, pledged, set over or confirmed by FPL as aforesaid, or intended so
to be, unto Bankers Trust Company, the Trustee, and its successors and assigns
forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same
terms, trusts and conditions and subject to and with the same provisos and
covenants as are set forth in the Mortgage, as heretofore supplemented, this
Ninety-eighth Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by FPL that all terms, conditions,
provisos, covenants and provisions contained in the Mortgage shall affect and
apply to the property hereinbefore described and conveyed and to the estate,
rights, obligations and duties of FPL and the Trustee and the beneficiaries of
the trust with respect to said property, and to the Trustee and its successors
as Trustee of said property in the same manner and with the same effect as if
said property had been owned by FPL at the time of the execution of the
Mortgage, and had been specifically and at length described in and conveyed to
said Trustee, by the Mortgage as a part of the property therein stated to be
conveyed.
FPL further covenants and agrees to and with the Trustee and
its successors in said trust under the Mortgage, as follows:
ARTICLE I
Ninety-fifth Series of Bonds
Section 1. (I) There shall be a series of bonds designated
"6% Series due June 1, 2008", herein sometimes referred to as the "Ninety-fifth
Series", each of which shall also bear the descriptive title First Mortgage
Bond, and the form thereof, which shall be established by Resolution of the
Board of Directors of FPL, shall contain suitable provisions with respect to
the matters hereinafter in this Section specified. Bonds of the Ninety-fifth
Series shall mature on June 1, 2008 and shall be issued as fully registered
bonds in denominations of One Thousand Dollars and, at the option of FPL, in
any multiple or multiples of One Thousand Dollars (the exercise of such option
to be evidenced by the execution and delivery thereof); they shall bear
interest at the rate of 6% per annum, payable semi-annually on June 1 and
December 1 of each year commencing December 1, 1998; the principal of and
interest on each said bond to be payable at the office or agency of FPL in the
Borough of Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for public
and private debts. Bonds of the Ninety-fifth Series shall be dated as in
Section 10 of the Mortgage provided.
(II) Bonds of the Ninety-fifth Series shall be redeemable
either at the option of FPL or pursuant to the requirements of the Mortgage
(including, among other requirements, the application of cash delivered to or
deposited with the Trustee pursuant to the provisions of Section 64 of the
Mortgage or with proceeds of Released Property) in whole at any time, or in
part from time to time, prior to maturity, upon notice, as provided in
Section 52 of the Mortgage, mailed at least thirty (30) days prior to the date
fixed for redemption (the "Redemption Date"), at a price equal to 100% of
the principal amount thereof plus accrued and unpaid interest, if any, to
the Redemption Date plus a premium, if any (the "Make-Whole Premium") (the
"Redemption Price"). In no event will the Redemption Price be less than
100% of the principal amount of the bonds of the Ninety-fifth series being
redeemed plus accrued interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any bond
of the Ninety-fifth Series (or portion thereof) to be redeemed will be equal to
the excess, if any, of:
1. the sum of the present values, calculated as of the
Redemption Date, of:
a. each interest payment that, but for such
redemption, would have been payable on the
bond of the Ninety-fifth Series (or portion
thereof) being redeemed on each interest
payment date occurring after the Redemption
Date (excluding any accrued interest for the
period prior to the Redemption Date); and
b. the principal amount that, but for such
redemption, would have been payable at the
final maturity of the bond of the Ninety-fifth
Series (or portion thereof) being redeemed;
over
2. the principal amount of the bond of the Ninety-fifth
Series (or portion thereof) being redeemed.
The present values of interest and principal payments referred
to in clause (1) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
Redemption Date at a discount rate equal to the Treasury Yield (as defined
below) plus 10 basis points.
The Make-Whole Premium will be calculated by an independent
investment banking institution of national standing appointed by the Company;
provided that if the Company fails to make such appointment at least 30
calendar days prior to the Redemption Date, or if the institution so appointed
is unwilling or unable to make such calculation, such calculation will be made
by BancAmerica Robertson Stephens or, if such firm is unwilling or unable to
make such calculation, by an independent investment banking institution of
national standing appointed by the Trustee (in any such case, an "Independent
Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury
Yield" means a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity that
corresponds to the remaining term to maturity of the bonds of the Ninety-fifth
Series, calculated to the nearest 1/12th of a year (the "Remaining Term"). The
Treasury Yield will be determined as of the third business day immediately
preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will
be determined by reference to the most recent statistical release published by
the Federal Reserve Bank of New York and designated "H.15(519) Selected
Interest Rates" or any successor release (the "H.15 Statistical Release"). If
the H.15 Statistical Release sets forth a weekly average yield for the United
States Treasury Notes having a constant maturity that is the same as the
Remaining Term, then the Treasury Yield will be equal to such weekly average
yield. In all other cases, the Treasury Yield will be calculated by
interpolation, on a straight-line basis, between the weekly average yields on
the United States Treasury Notes that have a constant maturity closest to and
greater than the Remaining Term and the United States Treasury Notes that have
a constant maturity closest to and less than the Remaining Term (in each case
as set forth in the H.15 Statistical Release). Any weekly average yields so
calculated by interpolation will be rounded to the nearest 1/100th of 1%, with
any figure of 1/200th of 1% or above being rounded upward. If weekly average
yields for United States Treasury Notes are not available in the H.15
Statistical Release or otherwise, then the Treasury Yield will be calculated by
interpolation of comparable rates selected by the Independent Investment
Banker.
(III) At the option of the registered owner, any bonds of the
Ninety-fifth Series, upon surrender thereof for cancellation at the office or
agency of FPL in the Borough of Manhattan, The City of New York, together with
a written instrument of transfer wherever required by FPL, duly executed by the
registered owner or by his duly authorized attorney, shall (subject to the
provisions of Section 12 of the Mortgage) be exchangeable for a like aggregate
principal amount of bonds of the same series of other authorized denominations.
Bonds of the Ninety-fifth Series shall be transferable
(subject to the provisions of Section 12 of the Mortgage) at the office or
agency of FPL in the Borough of Manhattan, The City of New York.
Upon any exchange or transfer of bonds of the Ninety-fifth
Series, FPL may make a charge therefor sufficient to reimburse it for any tax
or taxes or other governmental charge, as provided in Section 12 of the
Mortgage, but FPL hereby waives any right to make a charge in addition thereto
for any exchange or transfer of bonds of the Ninety-fifth Series.
ARTICLE II
Dividend Covenant
SECTION 2. Section 3 of the Third Supplemental Indenture, as
heretofore amended, is hereby further amended by inserting the words "or
Ninety-fifth Series" immediately before the words "remain Outstanding".
ARTICLE III
Miscellaneous Provisions
SECTION 3. Subject to the amendments provided for in this
Ninety-eighth Supplemental Indenture, the terms defined in the Mortgage, as
heretofore supplemented, shall, for all purposes of this Ninety-eighth
Supplemental Indenture, have the meanings specified in the Mortgage, as
heretofore supplemented.
SECTION 4. The holders of bonds of the Ninety-fifth Series
consent that FPL may, but shall not be obligated to, fix a record date for the
purpose of determining the holders of bonds of the Ninety-fifth Series entitled
to consent to any amendment, supplement or waiver. If a record date is fixed,
those persons who were holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be holders after such record date. No
such consent shall be valid or effective for more than 90 days after such
record date.
SECTION 5. The Trustee hereby accepts the trust herein
declared, provided, created or supplemented and agrees to perform the same upon
the terms and conditions herein and in the Mortgage, as heretofore
supplemented, set forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Ninety-eighth
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made by FPL solely. In general, each and every term
and condition contained in Article XVII of the Mortgage, as heretofore amended,
shall apply to and form part of this Ninety-eighth Supplemental Indenture with
the same force and effect as if the same were herein set forth in full with
such omissions, variations and insertions, if any, as may be appropriate to
make the same conform to the provisions of this Ninety-eighth Supplemental
Indenture.
SECTION 6. Whenever in this Ninety-eighth Supplemental
Indenture either of the parties hereto is named or referred to, this shall,
subject to the provisions of Articles XVI and XVII of the Mortgage, as
heretofore amended, be deemed to include the successors and assigns of such
party, and all the covenants and agreements in this Ninety-eighth Supplemental
Indenture contained by or on behalf of FPL, or by or on
behalf of the Trustee, or either of them, shall, subject as aforesaid, bind and
inure to the respective benefits of the respective successors and assigns of
such parties, whether so expressed or not.
SECTION 7. Nothing in this Ninety-eighth Supplemental
Indenture, expressed or implied, is intended, or shall be construed, to confer
upon, or to give to, any person, firm or corporation, other than the parties
hereto and the holders of the bonds and coupons Outstanding under the Mortgage,
any right, remedy or claim under or by reason of this Ninety-eighth
Supplemental Indenture or any covenant, condition, stipulation, promise or
agreement hereof, and all the covenants, conditions, stipulations, promises and
agreements in this Ninety-eighth Supplemental Indenture contained by or on
behalf of FPL shall be for the sole and exclusive benefit of the parties
hereto, and of the holders of the bonds and coupons Outstanding under the
Mortgage.
SECTION 8. The Mortgage, as heretofore supplemented and
amended and as supplemented hereby, is intended by the parties hereto, as to
properties now or hereafter encumbered thereby and located within the State of
Georgia, to operate and is to be construed as granting a lien only on such
properties and not as a deed passing title thereto.
SECTION 9. This Ninety-eighth Supplemental Indenture shall be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, FPL has caused its corporate name to be
hereunto affixed, and this instrument to be signed and sealed by its President
or one of its Vice Presidents, and its corporate seal to be attested by its
Secretary or one of its Assistant Secretaries for and in its behalf, and
BANKERS TRUST COMPANY has caused its corporate name to be hereunto affixed, and
this instrument to be signed and sealed by one of its Vice Presidents or
Assistant Vice Presidents, and its corporate seal to be attested by one of its
Assistant Vice Presidents or one of its Assistant Secretaries, all as of the
day and year first above written.
FLORIDA POWER & LIGHT COMPANY
By: /s/ K. M. Davis
------------------------
K. M. Davis
Vice President, Accounting, Controller
and Chief Accounting Officer
9250 West Flagler Street
P. O. Box 029100
Miami, FL 33102
Attest:
/s/ Dilek Samil
- -------------------------------------
Dilek Samil
Treasurer and Assistant Secretary
700 Universe Boulevard
Juno Beach, FL 33408
Executed, sealed and delivered by
FLORIDA POWER & LIGHT COMPANY
in the presence of:
/s/ Harold J. McCarthy
- -------------------------------------
/s/ Anderson R. Livingston
- -------------------------------------
Bankers Trust Company
As Trustee
By: /s/ James C. McDonough
----------------------------
James C. McDonough
Vice President
4 Albany Street, 4th Floor
New York, NY 10006
Attest: /s/ Scott F. Thiel
-----------------------------
Scott F. Thiel
Assistant Vice President
4 Albany Street, 4th Floor
New York, NY 10066
Executed, sealed and delivered
by Bankers Trust Company
in the presence of:
/s/ Sonja Eggi
- -------------------------------------
/s/ David Beane
- -------------------------------------
STATE OF FLORIDA
COUNTY OF PALM BEACH SS.:
On the 11th day of June, in the year 1998, before me personally
came K. M. Davis, to me known, who, being by me duly sworn, did depose and say
that he resides at 1101 N.W. 115th Ave., Plantation, FL 33323; that he is a
Vice President, Accounting, Controller and Chief Accounting Officer of FLORIDA
POWER & LIGHT COMPANY, one of the corporations described in and which executed
the above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his
name thereto by like order.
I HEREBY CERTIFY, that on this 11th day of June, 1998, before me
personally appeared K. M. Davis and Dilek Samil, respectively, the Vice
President, Accounting, Controller and Chief Accounting Officer and the
Treasurer and Assistant Secretary of FLORIDA POWER & LIGHT COMPANY, a
corporation under the laws of the State of Florida, to me known to be the
persons described in and who executed the foregoing instrument and severally
acknowledged the execution thereof to be their free act and deed as such
officers, for the uses and purposes therein mentioned; and that they affixed
thereto the official seal of said corporation, and that said instrument is the
act and deed of said corporation.
K. M. Davis and Dilek Samil produced Florida Driver's License
No. D120-513-46-467-0 and Florida Driver's License No.S540-160-55-827-0 as
identification, respectively.
WITNESS my signature and official seal at Juno Beach, in the County
of Palm Beach, and State of Florida, the day and year last aforesaid.
/s/ Francine McGuire
-------------------------------------
Notary Public, State of Florida
Commission No. CC401037
My Commission Expires Oct. 21, 1998
STATE OF NEW YORK
COUNTY OF NEW YORK SS.:
On the 11th day of June, in the year 1998, before me personally
came James C. McDonough, to me know, who, being by me duly sworn, did depose
and say that he resides at 150 Draper lane, Dobbs Ferry, New York; that he is
a Vice President of BANKERS TRUST COMPANY, one of the corporations described in
and which executed the above instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
I HEREBY CERTIFY, that on this 11th day of June, 1998, before me
personally appeared James C. McDonough and Scott F. Thiel, respectively, a Vice
President and an Assistant Vice President of BANKERS TRUST COMPANY, a
corporation under the laws of the state of New York, to me known to be the
persons described in and who executed the foregoing instrument and severally
acknowledged the execution thereof to be their free act and deed as such
officers, for the uses and purposes therein mentioned; and that they affixed
thereto the official seal of said corporation, and that said instrument is the
act and deed of said corporation.
James C. McDonough and Scott Thiel produced New York Driver's
License No. 286 690 794 and New Jersey Driver's License No.T3441 69466 03654 as
identification, respectively.
WITNESS my signature and official seal at New York City, in the
County of New York, and State of New York, the day and year last aforesaid.
/s/ Matthew Sherman
- ------------------------------------
Notary Public, State of New York
Commission No. 01SH5087362
Qualified in Westchester County
My Commission Expires 11/0/99
EXHIBIT 12(a)
FPL GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months
Ended Years Ended December 31,
June 30, ------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ------ ------ ------ ------ ------
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Earnings, as defined:
Net income ............................................ $ 284 $ 618 $ 579 $ 553 $ 519 $ 429
Income taxes .......................................... 140 304 294 329 307 250
Fixed charges, included in the determination of
net income, as below ................................ 134 304 283 308 337 388
Total earnings, as defined ........................ $ 558 $1,226 $1,156 $1,190 $1,163 $1,067
Fixed charges, as defined:
Interest charges ...................................... $ 127 $ 291 $ 267 $ 291 $ 319 $ 367
Rental interest factor ................................ 2 4 5 6 7 10
Fixed charges included in nuclear fuel cost ........... 5 9 11 11 11 11
Fixed charges, included in the determination of net
income .............................................. 134 304 283 308 337 388
Capitalized interest .................................. 2 5 - - - 1
Total fixed charges, as defined ................... $ 136 $ 309 $ 283 $ 308 $ 337 $ 389
Ratio of earnings to fixed charges ...................... 4.10 3.97 4.08 3.86 3.45 2.74
</table
</TABLE>
EXHIBIT 12(b)
FLORIDA POWER & LIGHT COMPANY
COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998
----------------
(Millions of Dollars)
RATIO OF EARNINGS TO FIXED CHARGES
<S> <C>
Earnings, as defined:
Net income ................................................................. $ 273
Income taxes ............................................................... 149
Fixed charges, as below .................................................... 107
Total earnings, as defined ............................................... $ 529
Fixed charges, as defined:
Interest charges ........................................................... $ 100
Rental interest factor ..................................................... 2
Fixed charges included in nuclear fuel cost ................................ 5
Total fixed charges, as defined .......................................... $ 107
Ratio of earnings to fixed charges ........................................... 4.94
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Earnings, as defined:
Net income ................................................................. $ 273
Income taxes ............................................................... 149
Fixed charges, as below .................................................... 107
Total earnings, as defined ............................................... $ 529
Fixed charges, as defined:
Interest charges ........................................................... $ 100
Rental interest factor ..................................................... 2
Fixed charges included in nuclear fuel cost ................................ 5
Total fixed charges, as defined .......................................... 107
Non-tax deductible preferred stock dividends ................................. 7
Ratio of income before income taxes to net income ............................ 1.55
Preferred stock dividends before income taxes ................................ 11
Combined fixed charges and preferred stock dividends ......................... $ 118
Ratio of earnings to combined fixed charges and preferred stock dividends .... 4.48
</table
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from FPL Group's
and FPL's condensed consolidated balance sheet as of June 30, 1998 and
condensed consolidated statements of income and cash flows for the six months
ended June 30, 1998 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> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $8,410
<OTHER-PROPERTY-AND-INVEST> $2,041
<TOTAL-CURRENT-ASSETS> $1,629
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $764
<TOTAL-ASSETS> $12,844
<COMMON> $2
<CAPITAL-SURPLUS-PAID-IN> $3,019
<RETAINED-EARNINGS> $1,915
<TOTAL-COMMON-STOCKHOLDERS-EQ> $4,936
$0
$226
<LONG-TERM-DEBT-NET> $2,862
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $0
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $4,820
<TOT-CAPITALIZATION-AND-LIAB> $12,844
<GROSS-OPERATING-REVENUE> $3,031
<INCOME-TAX-EXPENSE> $140
<OTHER-OPERATING-EXPENSES> $2,495
<TOTAL-OPERATING-EXPENSES> $2,495
<OPERATING-INCOME-LOSS> $536
<OTHER-INCOME-NET> $22
<INCOME-BEFORE-INTEREST-EXPEN> $411
<TOTAL-INTEREST-EXPENSE> $127
<NET-INCOME> $284
$7
<EARNINGS-AVAILABLE-FOR-COMM> $284
<COMMON-STOCK-DIVIDENDS> $172
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $997
<EPS-PRIMARY> $1.65
<EPS-DILUTED> $1.65
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from FPL's
condensed consolidated balance sheet as of June 30, 1998 and condensed
consolidated statements of income and cash flows for the six months ended
June 30, 1998 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> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $8,410
<OTHER-PROPERTY-AND-INVEST> $1,146
<TOTAL-CURRENT-ASSETS> $1,455
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $451
<TOTAL-ASSETS> $11,462
<COMMON> $0
<CAPITAL-SURPLUS-PAID-IN> $0
<RETAINED-EARNINGS> $0
<TOTAL-COMMON-STOCKHOLDERS-EQ> $4,863
$0
$226
<LONG-TERM-DEBT-NET> $2,418
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $201
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $3,754
<TOT-CAPITALIZATION-AND-LIAB> $11,462
<GROSS-OPERATING-REVENUE> $2,929
<INCOME-TAX-EXPENSE> $154
<OTHER-OPERATING-EXPENSES> $2,399
<TOTAL-OPERATING-EXPENSES> $2,553
<OPERATING-INCOME-LOSS> $376
<OTHER-INCOME-NET> ($3)
<INCOME-BEFORE-INTEREST-EXPEN> $373
<TOTAL-INTEREST-EXPENSE> $100
<NET-INCOME> $273
$7
<EARNINGS-AVAILABLE-FOR-COMM> $266
<COMMON-STOCK-DIVIDENDS> $0
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $971
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
