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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified
in their charters, address of principal IRS Employer
Commission executive offices and Identification
File Number Registrants' telephone number Number
----------- --------------------------------------- --------------
1-8841 FPL GROUP, INC. 59-2449419
1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
State or other jurisdiction of incorporation or organization: Florida
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) have been subject to such
filing requirements for the past 90 days. Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each class of FPL Group, Inc. common
stock, as of the latest practicable date: Common Stock, $.01 par value,
outstanding at July 31, 2000: 177,752,216 shares.
As of July 31, 2000, there were issued and outstanding 1,000 shares of
Florida Power & Light Company's common stock, without par value, all of
which were held, beneficially and of record, by FPL Group, Inc.
______________________________
This combined Form 10-Q represents separate filings by FPL Group, Inc. and
Florida Power & Light Company. Information contained herein relating to an
individual registrant is filed by that registrant on its own behalf. Florida
Power & Light Company makes no representations as to the information relating
to FPL Group, Inc.'s other operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), FPL Group, Inc. (FPL Group) and
Florida Power & Light Company (FPL) (collectively, the Company) are hereby
filing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made
by or on behalf of the Company in this combined Form 10-Q, in
presentations, in response to questions or otherwise. Any statements that
express, or involve discussions as to expectations, beliefs, plans,
objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as will likely result, are
expected to, will continue, is anticipated, estimated, projection, outlook)
are not statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions and
uncertainties. Accordingly, any such statements are qualified in their
entirety by reference to, and are accompanied by, the following important
factors that could cause the Company's actual results to differ materially
from those contained in forward-looking statements made by or on behalf of
the Company.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date
on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess
the impact of each such factor on the business or the extent to which any
factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statement.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include changes in laws or regulations, changing governmental policies and
regulatory actions, including those of the Federal Energy Regulatory
Commission (FERC), the Florida Public Service Commission (FPSC), the Public
Utility Regulatory Policies Act of 1978, as amended (PURPA), the Public
Utility Holding Company Act of 1935, as amended and the U. S. Nuclear
Regulatory Commission, with respect to allowed rates of return including
but not limited to return on common equity and equity ratio limits,
industry and rate structure, operation of nuclear power facilities,
acquisition, disposal, depreciation and amortization of assets and
facilities, operation and construction of plant facilities, recovery of
fuel and purchased power costs, decommissioning costs, and present or
prospective wholesale and retail competition (including but not limited to
retail wheeling and transmission costs).
The business and profitability of the Company are also influenced by
economic and geographic factors including political and economic risks,
changes in and compliance with environmental and safety laws and policies,
weather conditions (including natural disasters such as hurricanes),
population growth rates and demographic patterns, competition for retail
and wholesale customers, availability, pricing and transportation of fuel
and other energy commodities, market demand for energy from plants or
facilities, changes in tax rates or policies or in rates of inflation or in
accounting standards, unanticipated delays or changes in costs for capital
projects, unanticipated changes in operating expenses and capital
expenditures, capital market conditions, competition for new energy
development opportunities and legal and administrative proceedings (whether
civil, such as environmental, or criminal) and settlements.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results, and are beyond the control of the
Company.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
OPERATING REVENUES ............................................... $1,670 $1,614 $3,138 $3,026
OPERATING EXPENSES:
Fuel, purchased power and interchange .......................... 605 588 1,146 1,095
Other operations and maintenance................................ 308 327 593 601
Depreciation and amortization .................................. 266 244 525 523
Impairment loss on Maine assets ................................ - 176 - 176
Taxes other than income taxes .................................. 144 144 291 288
Total operating expenses ..................................... 1,323 1,479 2,555 2,683
OPERATING INCOME ................................................. 347 135 583 343
OTHER INCOME (DEDUCTIONS):
Interest charges ............................................... (64) (58) (126) (106)
Preferred stock dividends - FPL ................................ (4) (4) (7) (7)
Gain on sale of Adelphia Communications Corporation stock ...... - - - 149
Other - net .................................................... 26 32 34 41
Total other income (deductions) - net ........................ (42) (30) (99) 77
INCOME BEFORE INCOME TAXES ....................................... 305 105 484 420
INCOME TAXES ..................................................... 101 28 159 134
NET INCOME ....................................................... $ 204 $ 77 $ 325 $ 286
Earnings per share of common stock (basic and assuming dilution).. $ 1.20 $ 0.45 $ 1.91 $ 1.67
Dividends per share of common stock .............................. $ 0.54 $ 0.52 $ 1.08 $ 1.04
Average number of common shares outstanding ...................... 170 171 170 172
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on pages 9 through 13 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, 1999 (1999 Form 10-K) for
FPL Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property,
including nuclear fuel and construction work in progress ....................... $20,220 $19,554
Less accumulated depreciation and amortization ................................... (10,764) (10,290)
Total property, plant and equipment - net ...................................... 9,456 9,264
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 234 361
Customer receivables, net of allowances of $6 and $7, respectively ............... 578 482
Materials, supplies and fossil fuel inventory - at average cost .................. 320 343
Deferred clause expenses ......................................................... 259 54
Other ............................................................................ 219 133
Total current assets ........................................................... 1,610 1,373
OTHER ASSETS:
Special use funds of FPL ......................................................... 1,449 1,352
Other investments ................................................................ 782 611
Other ............................................................................ 899 841
Total other assets ............................................................. 3,130 2,804
TOTAL ASSETS ....................................................................... $14,196 $13,441
CAPITALIZATION:
Common stock ..................................................................... $ 2 $ 2
Additional paid-in capital........................................................ 2,891 2,904
Retained earnings................................................................. 2,606 2,465
Accumulated other comprehensive loss.............................................. - (1)
Total common shareholders' equity............................................... 5,499 5,370
Preferred stock of FPL without sinking fund requirements ......................... 226 226
Long-term debt ................................................................... 3,479 3,478
Total capitalization ........................................................... 9,204 9,074
CURRENT LIABILITIES:
Debt due within one year ......................................................... 823 464
Accounts payable ................................................................. 547 407
Deferred clause revenues ......................................................... 74 116
Accrued interest, taxes and other ................................................ 984 883
Total current liabilities ...................................................... 2,428 1,870
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,176 1,079
Unamortized regulatory and investment tax credits ................................ 289 310
Other ............................................................................ 1,099 1,108
Total other liabilities and deferred credits ................................... 2,564 2,497
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $14,196 $13,441
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on pages 9 through 13 herein and the Notes
to Consolidated Financial Statements appearing in the 1999 Form 10-K for FPL
Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 748 $1,090
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ......................................................... (660) (378)
Independent power investments ....................................................... (294) (1,352)
Other - net ......................................................................... (63) 144
Net cash used in investing activities ........................................... (1,017) (1,586)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt .......................................................... 145 621
Retirement of long-term debt ........................................................ (149) (354)
Increase in commercial paper ........................................................ 363 899
Repurchase of common stock .......................................................... (34) (84)
Dividends on common stock ........................................................... (183) (178)
Net cash provided by financing activities ....................................... 142 904
Net increase (decrease) in cash and cash equivalents .................................. (127) 408
Cash and cash equivalents at beginning of period ...................................... 361 187
Cash and cash equivalents at end of period ............................................ $ 234 $ 595
Supplemental disclosures of cash flow information:
Cash paid for interest (net of amount capitalized) .................................. $ 135 $ 117
Cash paid for income taxes .......................................................... $ 35 $ 104
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 22 $ 28
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on pages 9 through 13 herein and the Notes
to Consolidated Financial Statements appearing in the 1999 Form 10-K for FPL
Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
OPERATING REVENUES ................................................. $1,533 $1,511 $2,871 $2,869
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................ 570 548 1,071 1,033
Other operations and maintenance ................................. 250 284 487 534
Depreciation and amortization .................................... 254 234 501 509
Income taxes ..................................................... 101 95 161 151
Taxes other than income taxes .................................... 140 143 282 285
Total operating expenses ....................................... 1,315 1,304 2,502 2,512
OPERATING INCOME ................................................... 218 207 369 357
OTHER INCOME (DEDUCTIONS):
Interest charges ................................................. (42) (43) (82) (86)
Other - net ...................................................... - 3 (2) 4
Total other deductions - net ................................... (42) (40) (84) (82)
NET INCOME ......................................................... 176 167 285 275
PREFERRED STOCK DIVIDENDS .......................................... 4 4 7 7
NET INCOME AVAILABLE TO FPL GROUP .................................. $ 172 $ 163 $ 278 $ 268
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on pages 9 through 13 herein and the Notes
to Consolidated Financial Statements appearing in the 1999 Form 10-K for FPL
Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Plant in service, including nuclear fuel and construction work in progress ....... $18,576 $18,162
Less accumulated depreciation and amortization ................................... (10,618) (10,184)
Electric utility plant - net ................................................... 7,958 7,978
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 143 -
Customer receivables, net of allowances of $6 and $7, respectively ............... 510 433
Materials, supplies and fossil fuel inventory - at average cost .................. 279 299
Deferred clause expenses ......................................................... 259 54
Other ............................................................................ 194 107
Total current assets ........................................................... 1,385 893
OTHER ASSETS:
Special use funds ................................................................ 1,449 1,352
Other ............................................................................ 455 385
Total other assets ............................................................. 1,904 1,737
TOTAL ASSETS ....................................................................... $11,247 $10,608
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 4,853 $ 4,793
Preferred stock without sinking fund requirements ................................ 226 226
Long-term debt ................................................................... 2,080 2,079
Total capitalization ........................................................... 7,159 7,098
CURRENT LIABILITIES:
Debt due within one year ......................................................... 468 219
Accounts payable ................................................................. 521 379
Deferred clause revenues ........................................................ 74 116
Accrued interest, taxes and other ................................................ 888 719
Total current liabilities ...................................................... 1,951 1,433
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 898 802
Unamortized regulatory and investment tax credits ................................ 289 310
Other ............................................................................ 950 965
Total other liabilities and deferred credits ................................... 2,137 2,077
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,247 $10,608
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on pages 9 through 13 herein and the Notes
to Consolidated Financial Statements appearing in the 1999 Form 10-K for FPL
Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 722 $1,030
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (660) (378)
Other - net ......................................................................... (43) (59)
Net cash used in investing activities ........................................... (703) (437)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt .......................................................... 145 224
Retirement of long-term debt ........................................................ (149) (225)
Increase in commercial paper ........................................................ 253 -
Dividends ........................................................................... (225) (220)
Capital contribution from FPL Group ................................................. 100 -
Net cash provided by (used in) financing activities ............................... 124 (221)
Net increase in cash and cash equivalents ............................................. 143 372
Cash and cash equivalents at beginning of period ...................................... - 152
Cash and cash equivalents at end of period ............................................ $ 143 $ 524
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 89 $ 96
Cash paid (received) for income taxes ............................................... $ (27) $ 84
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 22 $ 28
Transfer of net assets to FPL FiberNet, LLC ......................................... $ 100 $ -
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on pages 9 through 13 herein and the Notes
to Consolidated Financial Statements appearing in the 1999 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 1999 Form 10-K for FPL Group and FPL. In the opinion
of FPL Group and FPL management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair financial statement
presentation have been made. Certain amounts included in the prior year's
consolidated financial statements have been reclassified to conform to the
current year's presentation. The results of operations for an interim period
may not give a true indication of results for the year.
1. Capitalization
FPL Group Common Stock - During the three and six months ended June 30, 2000,
FPL Group repurchased 381,000 shares and 750,400 shares of common stock,
respectively, under its share repurchase program. A total of approximately
4.6 million shares have been repurchased under the share repurchase program
that began in April 1997.
Long-Term Debt - In April 2000, FPL sold approximately $96 million principal
amount of variable-rate pollution control revenue refunding bonds maturing in
July 2022. The proceeds were used in July 2000 to redeem approximately $96
million of pollution control revenue refunding bonds, consisting of $76
million bearing interest at 7.3% and maturing in 2020 and $20 million with
variable rate interest maturing in 2024.
In June 2000, FPL sold approximately $49 million principal amount of
variable-rate solid waste disposal revenue refunding bonds maturing in 2025.
A portion of the proceeds was used to redeem, in June 2000, solid waste
disposal revenue bonds totalling $16 million bearing interest at 7.15% and
maturing in 2023, and $7 million bearing interest at 6.7% and maturing in
2027. The remaining proceeds will be used to redeem solid waste disposal
revenue bonds in August and September 2000, of which $10 million bear
interest at 7.5% and mature in 2020 and $16 million are variable rate and
mature in 2027.
Long-Term Incentive Plan - Performance shares and options granted to date
under FPL Group's long-term incentive plan resulted in assumed incremental
shares of common stock outstanding for purposes of computing both basic and
diluted earnings per share for the three and six months ended June 30, 2000
and 1999. These incremental shares were not material in the periods
presented and did not cause diluted earnings per share to differ from basic
earnings per share.
Other - Comprehensive income of FPL Group, totaling $204 million and $76
million for the three months ended June 30, 2000 and 1999 and $325 million
and $285 million for the six months ended June 30, 2000 and 1999,
respectively, includes net income, changes in unrealized gains and losses on
securities and foreign currency translation adjustments. Accumulated other
comprehensive income is separately displayed in the condensed consolidated
balance sheets of FPL Group.
2. Commitments and Contingencies
Commitments - FPL has made commitments in connection with a portion of its
projected capital expenditures. Capital expenditures for the construction or
acquisition of additional facilities and equipment to meet customer demand
are estimated to be approximately $3.1 billion for 2000 through 2002.
Included in this three-year forecast are capital expenditures for 2000 of
approximately $1.3 billion, of which $629 million had been spent through June
30, 2000. As of June 30, 2000, FPL Energy, LLC (FPL Energy), has made
commitments in connection with the development and expansion of independent
power projects totaling approximately $79 million. FPL Group and its
subsidiaries, other than FPL, have guaranteed approximately $370 million of
purchased 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 $363
million per incident at any nuclear utility reactor in the United States,
payable at a rate not to exceed $43 million per incident per year.
FPL participates in nuclear insurance mutual companies that provide $2.75
billion of limited insurance coverage for property damage, decontamination
and premature decommissioning risks at its nuclear plants. The proceeds
from such insurance, however, must first be used for reactor stabilization
and site decontamination before they can be used for plant repair. FPL
also participates in an insurance program that provides limited coverage
for replacement power costs if a nuclear plant is out of service because of
an accident. In the event of an accident at one of FPL's or another
participating insured's nuclear plants, FPL could be assessed up to $38
million in retrospective premiums.
In the event of a catastrophic loss at one of FPL's nuclear plants, the
amount of insurance available may not be adequate to cover property damage
and other expenses incurred. Uninsured losses, to the extent not recovered
through rates, would be borne by FPL and could have a material adverse
effect on FPL Group's and FPL's financial condition.
FPL self-insures the majority of its transmission and distribution (T&D)
property due to the high cost and limited coverage available from third-
party insurers. As approved by the FPSC, FPL maintains a funded storm and
property insurance reserve, which totaled approximately $216 million at
June 30, 2000, for uninsured property storm damage or assessments under the
nuclear insurance program. Recovery from customers of any losses in excess
of the storm and property insurance reserve will require the approval of
the FPSC. FPL's available lines of credit include $300 million to provide
additional liquidity in the event of a T&D property loss.
Contracts - FPL Group has entered into a $3.7 billion long-term agreement
with General Electric Company for the supply of 66 gas turbines from 2000
through 2004 and parts, repairs and on-site services through 2011. The
turbines are intended to support expansion at FPL and FPL Energy, and the
related commitments for a portion of the 66 gas turbines are included in
Commitments above.
FPL has entered into long-term purchased power and fuel contracts. Take-
or-pay purchased power contracts with the Jacksonville Electric Authority
(JEA) and with subsidiaries of The Southern Company (Southern Companies)
provide approximately 1,300 megawatts (mw) of power through mid-2010 and
383 mw thereafter through 2021. FPL also has various firm pay-for-
performance contracts to purchase approximately 900 mw from certain
cogenerators and small power producers (qualifying facilities) with
expiration dates ranging from 2002 through 2026. The purchased power
contracts provide for capacity and energy payments. Energy payments are
based on the actual power taken under these contracts. Capacity payments
for the pay-for-performance contracts are subject to the qualifying
facilities meeting certain contract conditions. FPL has long-term
contracts for the transportation and supply of natural gas, coal and oil
with various expiration dates through 2021. FPL Energy has long-term
contracts for the transportation and storage of natural gas with expiration
dates ranging from 2005 through 2017, and a contract for the supply of
natural gas that expires in mid-2002.
The required capacity and minimum payments under these contracts for the
remainder of 2000 through 2004 are estimated to be as follows:
<TABLE><CAPTION>
2000 2001 2002 2003 2004
(millions)
<S> <C> <C> <C> <C> <C>
FPL:
Capacity payments:
JEA and Southern Companies .......................................... $110 $210 $210 $200 $200
Qualifying facilities (a) ........................................... $170 $340 $355 $365 $375
Minimum payments, at projected prices:
Natural gas, including transportation ............................... $390 $555 $555 $560 $555
Coal ................................................................ $ 25 $ 45 $ 45 $ 20 $ 10
Oil ................................................................. $145 $195 $ 10 $ - $ -
FPL Energy:
Natural gas, including transportation and storage ..................... $ 10 $ 20 $ 20 $ 15 $ 15
_______________
(a) Excludes capacity payments associated with two contracts that are in dispute. The capacity payments would no
longer be required pursuant to a proposed settlement, which is subject to regulatory approval. See Litigation.
</TABLE>
Charges under these contracts were as follows:
<TABLE><CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 Charges 1999 Charges 2000 Charges 1999 Charges
Energy/ Energy/ Energy/ Energy/
Capacity Fuel Capacity Fuel Capacity Fuel Capacity Fuel
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FPL:
JEA and Southern Companies $51(a) $ 41(b) $49(a) $ 31(b) $102(a) $ 72(b) $101(a) $ 55(b)
Qualifying facilities ......$80(c) $ 28(b) $76(c) $ 28(b) $159(c) $ 59(b) $151(c) $ 49(b)
Natural gas, including .. $ - $130(b) $ - $111(b) $ - $212(b) $ - $186(b)
transportation
Coal .......................$ - $ 11(b) $ - $ 11(b) $ - $ 23(b) $ - $ 23(b)
Oil ........................$ - $ 89(b) $ - $ 29(b) $ - $110(b) $ - $ 40(b)
FPL Energy:
Natural gas transportation $ - $ 4 $ - $ 4 $ - $ 8 $ - $ 8
and storage
_______________
(a) Recovered through base rates and the capacity cost recovery clause (capacity clause).
(b) Recovered through the fuel and purchased power cost recovery clause (fuel 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. The plant owners disputed this claim. In
1997, the plant owners filed for bankruptcy under Chapter XI of the U.S.
Bankruptcy Code 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 to
which the majority bondholders agree, subject to approval by the bankruptcy
court. In 1998, the plant owners (through the attorneys for the majority
bondholders) filed an answer denying the allegations in FPL's complaint and
asserting counterclaims for approximately $2 billion, consisting of all
capacity and energy payments that could have been earned over the 30-year
term of the power purchase agreements and three times their actual damages
for alleged violations of Florida antitrust laws by FPL, FPL Group and FPL
Group Capital Inc (FPL Group Capital), plus attorneys' fees. Recent
disclosures by the plant owners state that they now seek $322.5 million in
damages, plus prejudgement interest. In 1998, the trial court dismissed
all of the plant owners' antitrust claims.
In July 2000, FPL, the majority bondholders, and the trustee of the
indenture under which the bonds were issued entered into a conditional
settlement agreement and release (settlement). Under the terms of the
settlement, the trustee would be paid $222.5 million plus the amount of the
security deposits, to be distributed as directed by the bankruptcy court.
The settlement is conditioned upon (i) the approval of the bankruptcy court
and (ii) the approval of the FPSC determining that the settlement is an
appropriate buyout of the power purchase agreements and authorizing FPL to
recover the settlement amount through the capacity clause and fuel clause.
FPL estimates the net present value of the savings to its customers from
the settlement versus the payments that would have been due under the power
purchase agreements to be in excess of $350 million.
A contract with Cedar Bay Generating Company, L.P. (Cedar Bay), a
qualifying facility, provides FPL with the right to dispatch the Cedar Bay
facility "in any manner it deems appropriate." Despite this contractual
right, Cedar Bay initiated an action in 1997 in the circuit court
challenging, among other things, the manner in which the facility had been
dispatched by FPL. Although the court granted summary judgment to FPL with
regard to Cedar Bay's claim that FPL's dispatch decisions violated the
express terms of the contract, it permitted a jury to hear Cedar Bay's
claim that such dispatch decisions violated an implied duty of good faith
and fair dealing. The jury awarded Cedar Bay approximately $13 million on
this claim. Thereafter, the court entered a declaration that FPL was, in
the future, to dispatch the Cedar Bay facility in accordance with certain
specified parameters. FPL has appealed both the jury award and the court's
declaration. If the jury award is upheld on appeal, FPL expects to recover
this amount through the capacity clause.
In 1999, after FPL filed its notice of appeal in the Cedar Bay action, a
lender, on behalf of itself and a group of other Cedar Bay lenders, filed
an action against FPL in the circuit court alleging breach of contract,
breach of an implied duty of good faith and fair dealing, fraud, tortious
interference with contract and several other claims regarding the manner in
which FPL has dispatched the Cedar Bay facility. It seeks unspecified
damages and other relief. FPL has moved to dismiss all counts of this
complaint.
In 1999, the Attorney General of the United States, on behalf of the U.S.
Environmental Protection Agency (EPA) brought an action against Georgia
Power Company and other subsidiaries of The Southern Company for injunctive
relief and the assessment of civil penalties for certain violations of the
Clean Air Act. Among other things, the EPA alleges Georgia Power Company
constructed and is continuing to operate Scherer Unit No. 4, in which FPL
owns a 76% interest, without obtaining proper permitting, and without
complying with performance and technology standards as required by the
Clean Air Act. The suit seeks injunctive relief requiring the installation
of such technology and civil penalties of up to $25,000 per day for each
violation from an unspecified date after August 7, 1977 through January 30,
1997, and $27,500 per day for each violation thereafter. Georgia Power
Company has filed an answer to the complaint asserting that it has complied
with all requirements of the Clean Air Act, denying the plaintiff's
allegations of liability, denying that the plaintiff is entitled to any of
the relief that it seeks and raising various other defenses.
In June 2000, Southern California Edison Company (SCE) filed with the FERC a
Petition for Declaratory Order (petition) asking the FERC to apply a November
1999 federal circuit court of appeals' decision to all qualifying small power
production facilities, including two solar facilities operated by
partnerships indirectly owned in part by FPL Energy. The federal circuit
court of appeals' decision invalidated the FERC's so-called essential fixed
assets standard, which permitted secondary uses of fossil fuels by qualifying
small power production facilities beyond those expressly set forth in PURPA.
The petition requests that FERC declare that qualifying small power
production facilities may not continue to use fossil fuel under the essential
fixed assets standard and that they may be required to make refunds with
respect to past usage. The partnerships intend to file a Motion to Intervene
and Protest before the FERC, vigorously objecting to the position taken by
SCE in its petition. The partnerships have always operated the solar
facilities in accordance with orders issued by the FERC. Such orders were
neither challenged nor appealed at the time they were granted, and it is the
position of the partnerships that the orders remain in effect.
FPL Group and FPL believe that they have meritorious defenses to all the
above litigation 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.
3. Segment Information
FPL Group's reportable segments include FPL, a regulated utility, and FPL
Energy, an unregulated energy generating subsidiary. Corporate and Other
represents other business activities, other segments that are not separately
reportable and eliminating entries. FPL Group's segment information is as
follows:
<TABLE><CAPTION>
Three Months Ended June 30,
2000 1999
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy & Other Total
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues ..... $ 1,533 $ 114 $ 23 $ 1,670 $ 1,511 $ 93 $ 10 $ 1,614
Net income ............. $ 172 $ 28 $ 4 $ 204 $ 163 $ (86)(a) $ - $ 77
Six Months Ended June 30,
2000 1999
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy(a) & Other(a) Total
(millions)
Operating revenues ..... $ 2,871 $ 222 $ 45 $ 3,138 $ 2,869 $ 134 $ 23 $ 3,026
Net income ............. $ 278 $ 42 $ 5 $ 325 $ 268 $ (77)(a) $ 95(b) $ 286
June 30, 2000 December 31, 1999
FPL Corporate FPL Corporate
FPL(c) Energy & Other(c) Total FPL Energy & Other Total
(millions)
Total assets ........... $11,247 $2,471 $478 $14,196 $10,608 $2,212 $621 $13,441
_______________
(a) Includes effect of $104 million after-tax impairment loss. See
Management's Discussion and Analysis of Financial Condition and Results
of Operations - Results of Operations - FPL Energy.
(b) Includes $96 million after-tax gain on the sale of an investment in
Adelphia Communications Corporation (Adelphia) common stock. See
Management's Discussion and Analysis of Financial Condition and Results
of Operations - Results of Operations - Corporate and Other.
(c) Includes effect of $100 million net asset transfer in January 2000
from FPL to FPL FiberNet, LLC.
</TABLE>
4. Summarized Financial Information of FPL Group Capital
FPL Group Capital provides funding for and holds ownership interest in FPL
Group's operating subsidiaries other than FPL. FPL Group Capital's
debentures are guaranteed by FPL Group and included in FPL Group's
condensed consolidated balance sheets. Summarized financial information of
FPL Group Capital is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(millions) (millions)
Operating revenues .... $138 $103 $268 $157
Operating expenses .... $109 $269 (a) $214 $321(a)
Net income ............ $ 38 $(81)(a) $ 58 $ 31(a)(b)
June 30, December 31,
2000 1999
(millions)
Current assets ......... $ 567 $ 640
Noncurrent assets ...... $3,008 $2,627
Current liabilities .... $ 535 $ 414
Noncurrent liabilities.. $1,851 $1,840
_______________
(a) Includes effect of $176 million ($104 million after-tax) impairment loss.
See Management's Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations - FPL Energy.
(b) Includes $96 million after-tax gain on the sale of an investment in
Adelphia common stock. See Management's Discussion and Analysis of
Financial Condition and Results of Operations - Results of Operations -
Corporate and Other.
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
debentures.
5. Subsequent Event
On July 30, 2000, FPL Group and Entergy Corporation (Entergy) entered into
an Agreement and Plan of Merger (agreement). Based on the number of common
shares currently outstanding, FPL Group shareholders will own 57 percent of
the common equity of the combined company, and Entergy shareholders will
own 43 percent. The new company's board of directors will initially
consist of 15 members, eight from FPL Group and seven from Entergy.
Corporate headquarters of the merged company will be located in Juno Beach,
Florida, while the utility group will be headquartered in New Orleans,
Louisiana. The agreement has been unanimously approved by FPL Group's and
Entergy's Boards of Directors. The merger is conditioned, among other
things, upon the approvals of the shareholders of both companies and is
subject to approval by various regulatory bodies. The companies' objective
is to complete the transaction within 15 months.
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 1999 Form 10-K for FPL Group and FPL. The results of
operations for an interim period may not give a true indication of results
for the year. In the following discussion, all comparisons are with the
corresponding items in the prior year.
RESULTS OF OPERATIONS
FPL Group's earnings for the three and six months ended June 30, 2000
improved over the same periods last year. The improvement, excluding the
effects of nonrecurring transactions in 1999, was primarily the result of
growth at FPL and FPL Energy, as well as positive contributions from the
newly formed subsidiary, FPL FiberNet. Nonrecurring transactions in the
second quarter of 1999 included the impairment loss related to the Maine
assets, which, on a year-to-date basis, more than offset the first quarter
1999 gain on the sale of Adelphia stock.
FPL - FPL's net income for the three and six months ended June 30, 2000 was
higher than the same periods last year despite the rate reduction that went
into effect in mid-April 1999. The improvement in the second quarter was
due to higher sales and lower other operations and maintenance (O&M)
expense partly offset by the effect of the rate reduction agreement and
higher special depreciation expense. FPL's revenues from retail base
operations for the three months ended June 30, 2000 were $850 million, up
from $838 million in 1999. This improvement was due to increased usage per
retail customer of 2.9% primarily due to weather and a 2.5% increase in the
number of customer accounts, partly offset by an increase in the accrual
for revenue refund associated with the rate reduction agreement. During the
second quarter 2000, FPL accrued approximately $37 million associated with
refunds to retail customers, $34 million of which relates to the second
twelve-month period under the rate agreement. No such amount was recorded
in the second quarter of 1999. In June 2000, FPL refunded approximately
$23 million, including interest, to retail customers for the first twelve-
month period under the rate agreement, essentially all of which was accrued
for in 1999. The rate agreement also allows for special depreciation of up
to $100 million, in each year of the three-year agreement period to be
applied to nuclear and/or fossil generating assets. For the three months
ended June 30, 2000, FPL recorded special depreciation of approximately $36
million compared to $20 million for the same period in 1999. Second
quarter earnings also reflect successful cost control efforts, as well as
the timing of expenditures.
Net income for the six months ended June 30, 2000 benefited from higher
sales, lower O&M expense and lower special depreciation expense partly
offset by the rate reduction agreement. FPL's revenues from retail base
operations for the six months ended June 30, 2000 were $1,579 million
compared to $1,598 million in 1999. Increased usage per retail customer of
3.4% and an increase in the number of customer accounts of 2.4% was more
than offset by the reduction in rates combined with the revenue refund
accrual. Special depreciation expense recorded for the six months ended
June 30, 2000 and 1999 was $65 million and $82 million, respectively.
Continued cost control efforts and timing of expenditures also contributed
to lower O&M expense on a year-to-date basis.
FPL Energy - FPL Energy's net income for the three and six months ended
June 30, 2000 benefited from increased revenues generated by the Maine
assets as a result of warmer weather and higher prices in the Northeast
during May 2000. FPL Energy's net income for the three and six months
ended June 30, 1999, includes the effect of a $176 million ($104 million
after-tax) impairment loss recorded in the second quarter of 1999.
Corporate and Other - For the three months ended June 30, 2000, net income
for the corporate and other segment was essentially flat. Net income for
the six months ended June 30, 1999 reflects a $149 million ($96 million
after-tax) gain recorded by FPL Group Capital on the sale of an investment
in Adelphia common stock in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
For financing activity during the six months ended June 30, 2000, see Note
1 - Long-Term Debt. During the three and six months ended June 30, 2000,
FPL Group repurchased 381,000 and 750,400 shares of common stock,
respectively.
For information concerning capital commitments, see Note 2 - Commitments.
For information concerning the announced merger of FPL Group and Entergy,
see Note 5.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3. Legal Proceedings in the 1999 Form 10-K for
FPL Group and FPL.
With regard to a contract dispute between FPL and two qualifying
facilities, in July 2000, FPL, the majority bondholders, and the trustee of
the indenture under which the bonds were issued entered into a settlement.
Under the terms of the settlement, the trustee would be paid $222.5
million plus the amount of the security deposits, to be distributed as
directed by the bankruptcy court. The settlement is conditioned upon (i)
the approval of the bankruptcy court and (ii) the approval of the FPSC
determining that the settlement is an appropriate buyout of the power
purchase agreements and authorizing FPL to recover the settlement amount
through the capacity clause and fuel clause. FPL estimates the net present
value of the savings to its customers from the settlement versus the
payments that would have been due under the power purchase agreements to be
in excess of $350 million.
In June 2000, Southern California Edison Company (SCE) filed with the FERC a
Petition for Declaratory Order (petition) asking the FERC to apply the
November 1999 decision of the U.S. Court of Appeals for the District of
Columbia Circuit in Southern California Edison Co. v. FERC, to all qualifying
small power production facilities, including the SEGS VIII and SEGS IX
facilities owned by Luz Solar Partners Ltd., VIII and Luz Solar Partners
Ltd., IX (collectively, the partnerships), indirectly owned in part by FPL
Energy. The federal circuit court of appeals' decision invalidated the
FERC's so-called essential fixed assets standard, which permitted secondary
uses of fossil fuels by qualifying small power production facilities beyond
those expressly set forth in PURPA. The petition requests that FERC declare
that qualifying small power production facilities may not continue to use
fossil fuel under the essential fixed assets standard and that they may be
required to make refunds with respect to past usage. The partnerships intend
to file a Motion to Intervene and Protest before the FERC, vigorously
objecting to the position taken by SCE in its petition. The partnerships
have always operated the SEGS VIII and SEGS IX facilities in accordance with
orders issued by the FERC. Such orders were neither challenged nor appealed
at the time they were granted, and it is the position of the partnerships
that the orders remain in effect.
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 15,
2000. Of the 178,166,118 shares of common stock outstanding on the
record date of March 6, 2000, a total of 149,201,828 shares were
represented in person or by proxy.
(b) The following directors were elected effective May 15, 2000:
<TABLE><CAPTION>
Votes Cast
Against or
For Withheld
<S> <C> <C>
H. Jesse Arnelle ................................ 146,294,886 2,906,942
Sherry S. Barrat ................................ 146,413,964 2,787,864
Robert M. Beall, II ............................. 146,480,450 2,721,378
James L. Broadhead .............................. 133,839,726 15,362,102
J. Hyatt Brown .................................. 146,071,324 3,130,504
Armando M. Codina ............................... 128,961,380 20,240,448
Marshall M. Criser .............................. 146,343,848 2,857,980
Willard D. Dover ................................ 146,435,696 2,766,132
Alexander W. Dreyfoos, Jr. ...................... 146,471,033 2,730,795
Paul J. Evanson ................................. 146,354,389 2,847,439
Drew Lewis ...................................... 146,294,494 2,907,334
Frederic V. Malek ............................... 146,251,565 2,950,263
Paul R. Tregurtha ............................... 146,335,914 2,865,914
</TABLE>
(c) The vote to ratify the appointment of Deloitte & Touche LLP as
independent auditors for 2000 was 147,228,814 for, 972,189 against and
1,000,825 abstaining.
FPL:
(a) The following FPL directors were elected effective May 15, 2000 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
Armando J. Olivera
Thomas F. Plunkett
Antonio Rodriguez
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE><CAPTION>
Exhibit FPL
Number Description Group FPL
<S> <C> <C> <C>
10(a) Employment Agreement between FPL Group and Armando J. Olivera, x
dated as of June 12, 2000
10(b) Employment Agreement between FPL Group and Antonio Rodriguez, x
dated as of June 12, 2000
12(a) Computation of Ratio of Earnings to Fixed Charges x
12(b) Computation of Ratios x
27 Financial Data Schedule x x
</TABLE>
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on July 31, 2000 by FPL Group reporting one event under Item 5.
Other Events and filing exhibits under Item 7. Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FPL GROUP, INC.
FLORIDA POWER & LIGHT COMPANY
(Registrants)
Date: August 2, 2000 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 Accounting Officer of the Registrants)
