July
25, 2003
FPL Group reports
2003 second quarter earnings
Florida Power & Light | FPL
Energy | Corporate and Other | Profile
JUNO BEACH, Fla. (July 25, 2003) - FPL Group, Inc. (NYSE:
FPL) today reported 2003 second quarter net income on a GAAP basis
of $239 million, or $1.34 per share, compared with $250 million,
or $1.46 per share, in the second quarter of 2002.
FPL Group's net income for the second quarter 2003 included a net
unrealized loss of $2 million after-tax associated with the mark-to-market
effect of non-managed hedges, compared to a net unrealized gain
of $1 million after-tax in the prior year quarter. Excluding the
mark-to-market effect on non-managed hedges, FPL Group's earnings
would have been $241 million, or $1.35 per share for the second
quarter of 2003, compared with $249 million, or $1.45 per share,
in the second quarter of 2002. Management views results expressed
in this fashion as an important indicator of overall operational
performance for the period.
"FPL Group's two main businesses produced solid returns, and our
overall results were in line with our expectations for the quarter,"
said Lew Hay, chairman and chief executive officer. "Florida Power
& Light continued to enjoy strong customer growth, and FPL Energy
posted a record quarter, primarily due to strong contributions from
its Seabrook nuclear power plant operations and additions to its
wind power portfolio."
"Given our performance for the quarter and year-to-date, we remain
comfortable with our full-year earnings outlook of $4.80 to $5.00
per share, excluding the mark-to-market effect of non-managed hedges,
which cannot be determined at this time," said Hay.
Florida Power
& Light
Second quarter net income for Florida Power & Light, FPL Group's
principal subsidiary, was $199 million or $1.12 per share, down
from $205 million or $1.20 per share from the prior year quarter.
FPL has added 96,000 customer accounts over the last twelve months,
an increase of 2.4 percent since the 2002 second quarter.
Electricity usage per customer was up slightly in the quarter.
"FPL continues to enjoy strong customer and underlying usage growth;
however, our results in the quarter were tempered somewhat by milder
weather compared to the prior year quarter. In addition, our results
were impacted by higher operations and maintenance expense, including
increased health care, insurance and power plant maintenance expenses,
as well as higher depreciation associated with our growth in Florida,"
said Hay.
In April the governor and cabinet approved the company's Manatee
and Martin power plant proposals to add generating capacity to serve
anticipated customer growth. Expansion at the two sites will add
approximately 1,900 megawatts and will supply electricity to an
estimated 400,000 customers. Construction of these projects is underway
and is expected to be completed in 2005.
FPL Energy
FPL Energy, the unregulated wholesale energy subsidiary of FPL
Group, reported second quarter net income on a GAAP basis of $49
million or $0.28 cents per share including a net unrealized loss
of $2 million after-tax associated with the mark-to-market effect
of non-managed hedges. This compares to $38 million or $0.22 cents
per share in the prior year quarter, which included a net unrealized
gain of $1 million after-tax associated with the mark-to-market
effect of non-managed hedges.
Excluding the mark-to-market effect of non-managed hedges, earnings
would have been $51 million or $0.29 cents per share compared to
$37 million or $0.21 cents per share in 2002.
More than 340 megawatts of new wind projects and strong performance
at the Seabrook nuclear power station significantly contributed
to FPL Energy's earnings growth. In addition, FPL Energy also benefited
from lower general and administrative expenses and increased contributions
from asset optimization versus the prior year. Positive results
were somewhat offset by a weaker performance of the subsidiary's
existing portfolio. Additionally, FPL Energy's second quarter 2002
results benefited from a favorable insurance settlement.
Earlier this week, FPL Energy announced a new 144-megawatt wind
project in Wyoming and a 16-megawatt expansion of its High Winds
Energy Center in California. To date, the company has announced
wind projects representing approximately 835 megawatts of capacity
that will be added to its portfolio by year-end.
"Our disciplined growth strategy coupled with our diverse portfolio,
industry leading position in wind generation and moderate risk approach
have served us well in these challenging market conditions," Hay
said. "Our recently completed $380 million wind financing and $400
million construction financing confirm our access to multiple sources
of capital and further demonstrate the financial strength and flexibility
of our company."
Corporate and
Other
Corporate and Other's contribution to net income was a negative
$9 million or $0.06 cents per share. FPL FiberNet, an FPL Group
subsidiary that provides fiber-optic networks and related services
in Florida, had a net loss of $3 million, compared to a $13 million
net income in the prior year's quarter. The company said it expects
FPL FiberNet to be at or near break even in 2003 and anticipates
higher corporate expenses, resulting in a drag to earnings of 20
to 30 cents per share for the full year.
Profile
FPL Group, with annual revenues of more than $8 billion, is nationally
known as a high-quality, efficient, and customer-driven organization
focused on energy-related products and services. With a growing
presence in 26 states, it is widely recognized as one of the country's
premier power companies. Its principal subsidiary, Florida Power
& Light Company, serves more than 4 million customer accounts in
Florida. FPL Energy, LLC, an FPL Group energy-generating subsidiary,
is a leader in producing electricity from clean and renewable fuels.
Additional information is available on the Internet at www.fplgroup.com,
www.fpl.com and www.fplenergy.com.
CAUTIONARY STATEMENTS AND RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), FPL Group and FPL are
hereby filing cautionary statements identifying important factors
that could cause FPL Group's or FPL'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 FPL Group
and FPL in this press release, in SEC filings, 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,
target, 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 (in addition to any assumptions
and other factors referred to specifically in connection with such
forward-looking statements) that could cause FPL Group's or FPL's
actual results to differ materially from those contained in forward-looking
statements made by or on behalf of FPL Group and FPL.
Any forward-looking statement speaks only as of the date on which
such statement is made, and FPL Group and FPL undertake 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.
The following are some important factors that could have a significant
impact on FPL Group's and FPL's operations and financial results,
and could cause FPL Group's and FPL's actual results or outcomes
to differ materially from those discussed in the forward-looking
statements:
· FPL Group and FPL are subject to changes in laws or regulations,
including the Public Utility Regulatory Policies Act of 1978, as
amended, and the Public Utility Holding Company Act of 1935, as
amended, changing governmental policies and regulatory actions,
including those of the Federal Energy Regulatory Commission, the
Florida Public Service Commission (FPSC) and the utility commissions
of other states in which FPL Group has operations, and the U.S.
Nuclear Regulatory Commission, with respect to, among other things,
allowed rates of return, industry and rate structure, operation
of nuclear power facilities, operation and construction of plant
facilities, operation and construction of transmission facilities,
acquisition, disposal, depreciation and amortization of assets and
facilities, recovery of fuel and purchased power costs, decommissioning
costs, return on common equity and equity ratio limits, and present
or prospective wholesale and retail competition (including but not
limited to retail wheeling and transmission costs). The FPSC has
the authority to disallow recovery of costs that it considers excessive
or imprudently incurred.
· The regulatory process generally restricts FPL's ability to grow
earnings and does not provide any assurance as to achievement of
earnings levels.
· FPL Group and FPL are subject to extensive federal, state and
local environmental statutes, rules and regulations relating to
air quality, water quality, waste management, natural resources
and health and safety that could, among other things, restrict or
limit the use of certain fuels required for the production of electricity.
There are significant capital, operating and other costs associated
with compliance with these environmental statutes, rules and regulations,
and those costs could be even more significant in the future.
· FPL Group and FPL operate in a changing market environment influenced
by various legislative and regulatory initiatives regarding deregulation,
regulation or restructuring of the energy industry, including deregulation
of the production and sale of electricity. FPL Group and its subsidiaries
will need to adapt to these changes and may face increasing competitive
pressure.
· The operation of power generation facilities involves many risks,
including start up risks, breakdown or failure of equipment, transmission
lines or pipelines, the dependence on a specific fuel source or
the impact of unusual or adverse weather conditions (including natural
disasters such as hurricanes), as well as the risk of performance
below expected levels of output or efficiency. This could result
in lost revenues and/or increased expenses. Insurance, warranties
or performance guarantees may not cover any or all of the lost revenues
or increased expenses, including the cost of replacement power.
In addition to these risks, FPL Group's and FPL's nuclear units
face certain risks that are unique to the nuclear industry including
additional regulatory actions up to and including shut down of the
units stemming from public safety concerns, whether at FPL Group's
and FPL's plants, or at the plants of other nuclear operators. Breakdown
or failure of an FPL Energy operating facility may prevent the facility
from performing under applicable power sales agreements which, in
certain situations, could result in termination of the agreement
or incurring a liability for liquidated damages.
· FPL Group's and FPL's ability to successfully and timely complete
their power generation facilities currently under construction,
those projects yet to begin construction or capital improvements
to existing facilities is contingent upon many variables and subject
to substantial risks. Should any such efforts be unsuccessful, FPL
Group and FPL could be subject to additional costs, termination
payments under committed contracts and/or the write-off of their
investment in the project or improvement.
· FPL Group and FPL use derivative instruments, such as swaps,
options, futures and forwards to manage their commodity and financial
market risks, and to a lesser extent, engage in limited trading
activities. FPL Group could recognize financial losses as a result
of volatility in the market values of these contracts, or if a counterparty
fails to perform. In addition, FPL's use of such instruments could
be subject to prudency challenges by the FPSC and if found imprudent,
cost disallowance.
· There are other risks associated with FPL Group's nonregulated
businesses, particularly FPL Energy. In addition to risks discussed
elsewhere, risk factors specifically affecting FPL Energy's success
in competitive wholesale markets include the ability to efficiently
develop and operate generating assets, the price and supply of fuel,
transmission constraints, competition from new sources of generation,
excess generation capacity and demand for power. There can be significant
volatility in market prices for fuel and electricity, and there
are other financial, counterparty and market risks that are beyond
the control of FPL Energy. FPL Energy's inability or failure to
effectively hedge its assets or positions against changes in commodity
prices, interest rates, counterparty credit risk or other risk measures
could significantly impair its future financial results. In keeping
with industry trends, a portion of FPL Energy's power generation
facilities operate wholly or partially without long-term power purchase
agreements. As a result, power from these facilities is sold on
the spot market or on a short-term contractual basis, which may
affect the volatility of FPL Group's financial results. In addition,
FPL Energy's business depends upon transmission facilities owned
and operated by others; if transmission is disrupted or capacity
is inadequate or unavailable FPL Energy's ability to sell and deliver
its wholesale power may be limited.
· FPL Group is likely to encounter significant competition for
acquisition opportunities that may become available as a result
of the consolidation of the power industry. In addition, FPL Group
may be unable to identify attractive acquisition opportunities at
favorable prices and to successfully and timely complete and integrate
them.
· FPL Group and FPL rely on access to capital markets as a significant
source of liquidity for capital requirements not satisfied by operating
cash flows. The inability of FPL Group and FPL to maintain their
current credit ratings could affect their ability to raise capital
on favorable terms, particularly during times of uncertainty in
the capital markets which, in turn, could impact FPL Group's and
FPL's ability to grow their businesses and would likely increase
interest costs.
· FPL Group's and FPL's results of operations can be affected
by changes in the weather. Weather conditions directly influence
the demand for electricity and natural gas and affect the price
of energy commodities, and can affect the production of electricity
at wind and hydro-powered facilities. In addition, severe weather
can be destructive, causing outages and/or property damage, which
could require additional costs to be incurred.
· FPL Group and FPL are subject to costs and other effects of
legal and administrative proceedings, settlements, investigations
and claims; as well as the effect of new, or changes in, tax rates
or policies, rates of inflation or accounting standards.
· FPL Group and FPL are subject to direct and indirect effects
of terrorist threats and activities. Generation and transmission
facilities, in general, have been identified as potential targets.
The effects of terrorist threats and activities include, among other
things, terrorist actions or responses to such actions or threats,
the inability to generate, purchase or transmit power, the risk
of a significant slowdown in growth or a decline in the U.S. economy,
delay in economic recovery in the U.S., and the increased cost and
adequacy of security and insurance.
· FPL Group's and FPL's ability to obtain insurance, and the cost
of and coverage provided by such insurance, could be affected by
national events as well as company-specific events.
· FPL Group and FPL are subject to employee workforce factors,
including loss or retirement of key executives, availability of
qualified personnel, collective bargaining agreements with union
employees or work stoppage. The issues and associated risks and
uncertainties described above are not the only ones FPL Group and
FPL may face. Additional issues may arise or become material as
the energy industry evolves. The risks and uncertainties associated
with these additional issues could impair FPL Group's and FPL's
businesses in the future.
