-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tb+a3aAcR/69op1Qy8NeKmsplLkrVpppyX8a5vMors+ywwiIhbCr5y8jbCkx2EFn AN4UKVXf3wvnxev5f8LoRg== 0000753308-96-000028.txt : 19961106 0000753308-96-000028.hdr.sgml : 19961106 ACCESSION NUMBER: 0000753308-96-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FPL GROUP INC CENTRAL INDEX KEY: 0000753308 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 592449419 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08841 FILM NUMBER: 96654421 BUSINESS ADDRESS: STREET 1: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 4076944644 MAIL ADDRESS: STREET 1: P O BOX 14000 CITY: JUNO BEACH STATE: FL ZIP: 33408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLORIDA POWER & LIGHT CO CENTRAL INDEX KEY: 0000037634 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 590247775 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03545 FILM NUMBER: 96654422 BUSINESS ADDRESS: STREET 1: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 4076944647 MAIL ADDRESS: STREET 1: P O BOX 14000 CITY: JUNO BEACH STATE: FL ZIP: 33408 10-Q 1 FPL GROUP AND FPL 9/30/96 10-Q 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 September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified in Commission their charters, address of principal executive IRS Employer Iden- File Number offices and Registrants' telephone number tification Number 1-8841 FPL GROUP, INC. 59-2449419 1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775 700 Universe Boulevard Juno Beach, Florida 33408 (561) 694-4647
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 October 31, 1996: 182,998,435 shares As of October 31, 1996 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. PART I - FINANCIAL INFORMATION Item 1. Financial Statements FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 (In thousands, except per share amounts) OPERATING REVENUES ....................................... $1,769,599 $1,587,037 $4,601,392 $4,231,126 OPERATING EXPENSES: Fuel, purchased power and interchange .................. 628,464 480,912 1,578,293 1,284,187 Other operations and maintenance........................ 264,239 297,201 848,849 847,376 Depreciation and amortization .......................... 257,761 212,675 757,341 675,767 Taxes other than income taxes .......................... 160,002 148,314 435,115 414,874 Total operating expenses ............................. 1,310,466 1,139,102 3,619,598 3,222,204 OPERATING INCOME ......................................... 459,133 447,935 981,794 1,008,922 OTHER INCOME (DEDUCTIONS): Interest charges ....................................... (65,525) (70,514) (202,642) (221,811) Dividend requirements on preferred stock of FPL ........ (5,767) (8,990) (17,966) (30,182) Other - net ............................................ 4,421 9,179 (5,443) 15,487 Total other deductions - net ......................... (66,871) (70,325) (226,051) (236,506) INCOME BEFORE INCOME TAXES ............................... 392,262 377,610 755,743 772,416 INCOME TAXES ............................................. 142,146 137,161 261,602 293,826 NET INCOME ............................................... $ 250,116 $ 240,449 $ 494,141 $ 478,590 Earnings per share of common stock ....................... $ 1.44 $ 1.37 $ 2.84 $ 2.73 Dividends per share of common stock ...................... $ 0.46 $ 0.44 $ 1.38 $ 1.32 Average number of common shares outstanding .............. 173,850 175,112 174,217 175,450
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 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, 1995 (1995 Form 10-K) for FPL Group, Inc. (FPL Group) and Florida Power & Light Company (FPL). FPL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31, (Unaudited) 1995 (Thousands of Dollars) PROPERTY, PLANT AND EQUIPMENT: Electric utility plant and other property - at original cost, including nuclear fuel and construction work in progress ...................... $16,901,317 $16,725,231 Less accumulated depreciation and amortization .................................. 7,444,071 6,873,250 Total property, plant and equipment - net ..................................... 9,457,246 9,851,981 CURRENT ASSETS: Cash and cash equivalents ....................................................... 91,715 46,177 Customer receivables, net of allowances of $12,508 and $11,929, respectively .... 564,246 482,326 Materials, supplies and fossil fuel stock - at average cost ..................... 274,751 247,323 Other ........................................................................... 345,632 209,522 Total current assets .......................................................... 1,276,344 985,348 OTHER ASSETS: Special use funds of FPL ........................................................ 745,055 646,846 Other investments ............................................................... 400,195 447,006 Unamortized debt reacquisition costs of FPL ..................................... 287,668 294,844 Other ........................................................................... 215,323 233,201 Total other assets ............................................................ 1,648,241 1,621,897 TOTAL ASSETS ...................................................................... $12,381,831 $12,459,226 CAPITALIZATION: Common shareholders' equity ..................................................... $ 4,597,537 $ 4,392,509 Preferred stock of FPL without sinking fund requirements ........................ 289,580 289,580 Preferred stock of FPL with sinking fund requirements ........................... 42,000 50,000 Long-term debt .................................................................. 3,262,857 3,376,613 Total capitalization .......................................................... 8,191,974 8,108,702 CURRENT LIABILITIES: Accounts payable ................................................................ 327,104 305,126 Debt and preferred stock due within one year .................................... 4,672 390,402 Accrued interest, taxes and other ............................................... 952,020 808,615 Total current liabilities ..................................................... 1,283,796 1,504,143 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ............................................... 1,587,499 1,587,449 Unamortized regulatory and investment tax credits ............................... 411,744 426,317 Other ........................................................................... 906,818 832,615 Total other liabilities and deferred credits .................................. 2,906,061 2,846,381 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES .............................................. $12,381,831 $12,459,226
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL. FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1996 1995 (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................................................... $ 494,141 $ 478,590 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................................................... 757,341 675,767 Other - net ....................................................................... 63,707 144,863 Net cash provided by operating activities ....................................... 1,315,189 1,299,220 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1) ............................................................ (343,862) (499,783) Other - net ......................................................................... (108,784) 24,378 Net cash used in investing activities ........................................... (452,646) (475,405) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of debt .................................................................... - 110,349 Retirement of long-term debt and preferred stock .................................... (333,292) (417,604) Repurchase of common stock .......................................................... (65,746) (59,496) Decrease in commercial paper ........................................................ (178,500) (183,979) Dividends on common stock ........................................................... (240,487) (231,604) Other - net ......................................................................... 1,020 (23,751) Net cash used in financing activities ........................................... (817,005) (806,085) Net increase in cash and cash equivalents ............................................. 45,538 17,730 Cash and cash equivalents at beginning of period ...................................... 46,177 85,750 Cash and cash equivalents at end of period ............................................ $ 91,715 $ 103,480 Supplemental disclosures of cash flow information: Cash paid for interest .............................................................. $ 202,586 $ 228,760 Cash paid for income taxes .......................................................... $ 208,200 $ 242,800 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 59,392 $ 55,502 (1) Capital expenditures exclude allowance for equity funds used during construction.
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 (Thousands of Dollars) OPERATING REVENUES ....................................... $1,760,939 $1,579,549 $4,556,678 $4,182,021 OPERATING EXPENSES: Fuel, purchased power and interchange .................. 628,464 480,912 1,578,293 1,284,187 Other operations and maintenance ....................... 256,369 288,808 806,939 795,514 Depreciation and amortization .......................... 256,395 211,000 753,188 668,982 Income taxes ........................................... 142,948 143,956 281,058 307,699 Taxes other than income taxes .......................... 159,837 148,091 434,713 413,687 Total operating expenses ............................. 1,444,013 1,272,767 3,854,191 3,470,069 OPERATING INCOME ......................................... 316,926 306,782 702,487 711,952 OTHER INCOME (DEDUCTIONS): Interest charges - net ................................. (62,217) (63,979) (186,150) (201,664) Other - net ............................................ (1,682) 2,944 2,200 8,705 Total other deductions - net ......................... (63,899) (61,035) (183,950) (192,959) NET INCOME ............................................... 253,027 245,747 518,537 518,993 DIVIDEND REQUIREMENTS ON PREFERRED STOCK ................. 5,767 8,990 17,966 30,182 NET INCOME AVAILABLE TO FPL GROUP ........................ $ 247,260 $ 236,757 $ 500,571 $ 488,811
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31, (Unaudited) 1995 (Thousands of Dollars) ELECTRIC UTILITY PLANT: At original cost, including nuclear fuel and construction work in progress ....... $16,700,189 $16,531,492 Less accumulated depreciation and amortization ................................... 7,399,429 6,832,201 Electric utility plant - net ................................................... 9,300,760 9,699,291 CURRENT ASSETS: Cash and cash equivalents ........................................................ 65,639 412 Customer receivables, net of allowances of $12,317 and $11,737, respectively ..... 561,738 479,838 Materials, supplies and fossil fuel stock - at average cost ...................... 254,597 230,553 Other ............................................................................ 321,071 180,414 Total current assets ........................................................... 1,203,045 891,217 OTHER ASSETS: Special use funds ................................................................ 745,055 646,846 Unamortized debt reacquisition costs ............................................. 287,668 294,844 Other ............................................................................ 204,828 219,061 Total other assets ............................................................. 1,237,551 1,160,751 TOTAL ASSETS ....................................................................... $11,741,356 $11,751,259 CAPITALIZATION: Common shareholder's equity ...................................................... $ 4,668,156 $ 4,473,708 Preferred stock without sinking fund requirements ................................ 289,580 289,580 Preferred stock with sinking fund requirements ................................... 42,000 50,000 Long-term debt ................................................................... 2,980,701 3,094,050 Total capitalization ........................................................... 7,980,437 7,907,338 CURRENT LIABILITIES: Accounts payable ................................................................. 324,874 299,987 Debt and preferred stock due within one year ..................................... 4,000 382,500 Accrued interest, taxes and other ................................................ 936,521 778,465 Total current liabilities ...................................................... 1,265,395 1,460,952 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,258,331 1,204,315 Unamortized regulatory and investment tax credits ................................ 411,744 426,317 Other ............................................................................ 825,449 752,337 Total other liabilities and deferred credits ................................... 2,495,524 2,382,969 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,741,356 $11,751,259
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1996 1995 (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................................................... $ 518,537 $ 518,993 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................................................... 753,188 668,982 Other - net ....................................................................... 99,844 92,735 Net cash provided by operating activities ....................................... 1,371,569 1,280,710 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1) ............................................................ (335,523) (490,837) Other - net ......................................................................... (136,672) (13,626) Net cash used in investing activities ........................................... (472,195) (504,463) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of debt .................................................................... - 110,349 Retirement of long-term debt and preferred stock .................................... (332,669) (417,438) Decrease in commercial paper ........................................................ (178,500) (174,000) Dividends ........................................................................... (468,975) (463,443) Capital contributions from FPL Group ................................................ 145,000 200,000 Other - net ......................................................................... 997 (29,504) Net cash used in financing activities ........................................... (834,147) (774,036) Net increase in cash and cash equivalents ............................................. 65,227 2,211 Cash and cash equivalents at beginning of period ...................................... 412 535 Cash and cash equivalents at end of period ............................................ $ 65,639 $ 2,746 Supplemental disclosures of cash flow information: Cash paid for interest .............................................................. $ 186,967 $ 210,811 Cash paid for income taxes .......................................................... $ 161,516 $ 321,135 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 59,392 $ 55,502 (1) Capital expenditures exclude allowance for equity funds used during construction.
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 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 1995 Form 10-K for FPL Group and FPL. In the opinion of FPL Group and FPL, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of September 30, 1996, the results of operations for the three and nine months ended September 30, 1996 and 1995 and cash flows for the nine months ended September 30, 1996 and 1995 have been made. Certain amounts included in the prior year's condensed 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 Depreciation and Amortization - In the second quarter of 1995, the Florida Public Service Commission (FPSC) approved, on an interim basis, accelerated amortization of FPL's nuclear units of $30 million per year plus additional amounts based on the level of sales. In March 1996, the FPSC granted final approval of the $30 million per year of special nuclear amortization. The FPSC also approved the additional expense amounts recorded in 1995 based on the level of sales, added certain fossil and regulatory assets to the program and extended the program through 1997. The aggregate amount relating to nuclear and fossil plant assets was fully amortized by the end of the third quarter of 1996. FPL will continue to recognize $30 million of special nuclear amortization per year and the additional expense amounts based on the level of sales are now applied against regulatory assets. Allowance for Funds Used During Construction (AFUDC) - In October 1996, the FPSC approved an accounting rule change that eliminates AFUDC, except for projects that cost in excess of 1/2% of a company's electric utility plant in-service. FPL adopted the rule change retroactive to January 1, 1996. Accrual for Nuclear Maintenance Costs - In October 1996, the FPSC approved a change in the accounting for costs associated with nuclear refueling outages. Under the new method of accounting, FPL will accrue estimated nuclear refueling and maintenance costs relating to each unit's next planned outage while the unit is in operation. Any cost overruns will be expensed when known. This approach will result in FPL recognizing costs equivalent to slightly less than three outages per year based upon the current refueling outage schedule for FPL's four nuclear units. The cumulative effect of adopting this accounting method was $35 million and will be expensed over a period not to exceed five years. 2. Capitalization FPL Group Common Stock - During the nine months ended September 30, 1996, FPL Group repurchased approximately 1.5 million shares of common stock under its share repurchase program. A total of approximately 7.4 million shares have been repurchased since the inception of the share repurchase program in May 1994. Preferred Stock - In January 1996, FPL redeemed all 600,000 outstanding shares of its 7.28% Preferred Stock, Series F, $100 Par Value and all 400,000 outstanding shares of its 7.40% Preferred Stock, Series G, $100 Par Value. The 1996 sinking fund requirements for the 6.84% Preferred Stock, Series Q, $100 Par Value and the 8.625% Preferred Stock, Series R, $100 Par Value were met by redeeming and retiring, in April 1996, 30,000 shares of Series Q and 50,000 shares of Series R. There are no preferred stock sinking fund requirements for the remainder of 1996. Long-Term Debt - In September 1996, FPL redeemed $87 million principal amount of First Mortgage Bonds, 8 1/2% Series due 2022. During the nine months ended September 30, 1996, FPL purchased on the open market and retired approximately $29 million in aggregate principal amount of several series of First Mortgage Bonds, due on dates ranging from 2013 through 2023, at interest rates ranging from 7 3/4% to 8 1/2%. 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 primarily to meet customer demand are estimated to be approximately $1.5 billion for the years 1996 through 1998. Included in this three-year forecast are capital expenditures for 1996 of $511 million, of which $335 million had been spent through September 30, 1996. FPL Group Capital Inc (FPL Group Capital) and its subsidiaries, primarily ESI Energy, Inc., have guaranteed up to approximately $86 million of lease 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 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 $69 million in retrospective premiums. In the event of a subsequent accident at such nuclear plants during the policy period, the maximum additional assessment would be $30 million under the programs in effect at September 30, 1996. FPL also participates in a program that provides $200 million of tort liability coverage for nuclear worker claims. In the event of a tort claim by an FPL or another insured's nuclear worker, FPL could be assessed up to $12 million in retrospective premiums per incident. In the event of a catastrophic loss at one of FPL's nuclear plants, the amount of insurance available may not be adequate to cover property damage and other expenses incurred. Uninsured losses, to the extent not recovered through rates, would be borne by FPL and could have a material adverse effect on FPL Group's and FPL's financial condition. FPL self-insures certain of its transmission and distribution (T&D) property due to the high cost and limited coverage available from third-party insurers. FPL maintains a funded storm and property insurance reserve, which totaled approximately $217 million at September 30, 1996, 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 provide approximately 1,300 megawatts (mw) of power through mid-2010 and 374 mw through 2022. FPL also has various firm pay-for-performance contracts to purchase approximately 1,000 mw from certain cogenerators and small power producers (qualifying facilities) with expiration dates ranging from 2002 through 2026. The purchased power contracts provide for capacity and energy payments. Energy payments are based on the actual power taken under these contracts. Capacity payments for the pay-for-performance contracts are subject to the qualifying facilities meeting certain contract conditions. The fuel contracts provide for the transportation and supply of natural gas and coal and the supply and use of Orimulsion. Orimulsion is a new fuel which FPL expected to begin using in 1998, subject to regulatory approvals. In April 1996, Florida's Power Plant Siting Board denied FPL's request to burn Orimulsion at the Manatee power plant. FPL has appealed the denial to the First District Court of Appeal of the state of Florida. The required annual capacity and minimum payments through 2000 under these contracts are estimated to be as follows:
1996 1997 1998 1999 2000 (Millions of Dollars) Capacity payments: JEA and Southern Companies ............................................... $210 $210 $210 $220 $220 Qualifying facilities .................................................... $300 $310 $320 $340 $350 Minimum payments, at projected prices: Natural gas .............................................................. $280 $210 $210 $210 $210 Orimulsion (1) ........................................................... - - - $140 $140 Coal ..................................................................... $ 50 $ 50 $ 40 $ 40 $ 40 (1) All of FPL's Orimulsion-related contract obligations are subject to obtaining the required regulatory approvals.
Capacity, energy and fuel charges under these contracts were as follows:
Three Months Ended September 30, Nine Months Ended September 30, 1996 Charges 1995 Charges 1996 Charges 1995 Charges Energy/ Energy/ Energy/ Energy/ Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1) (Millions of Dollars) JEA and Southern Companies ... $51(2) $ 45 $45(2) $44 $143(2) $112 $165(2) $110 Qualifying facilities......... $70(3) $ 34 $40(3) $25 $209(3) $ 96 $116(3) $ 63 Natural gas .................. - $131 - $97 $ - $314 $ - $259 Coal ......................... - $ 14 - $13 $ - $ 37 $ - $ 38 (1) Recovered through the fuel and purchased power cost recovery clause. (2) Recovered through base rates and the capacity cost recovery clause (capacity clause). (3) Recovered through the capacity clause.
Litigation - 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 September 1996, the District Court ordered the FMPA to seek a declaratory ruling from the Federal Energy Regulatory Commission (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 all of the litigation described above and are vigorously defending these suits. Accordingly, the liabilities, if any, arising from these proceedings are not anticipated to have a material adverse effect on their financial statements. 4. Summarized Financial Information of FPL Group Capital FPL Group Capital's debentures are guaranteed by FPL Group. Operating revenues of FPL Group Capital for the nine months ended September 30, 1996 and 1995 were approximately $45 million and $49 million, respectively. For the same period, operating expenses were approximately $49 million and $59 million. Net income for the nine months ended September 30, 1996 and 1995 was approximately $11 million and $1 million, respectively. At September 30, 1996, FPL Group Capital had current assets of approximately $92 million, noncurrent assets of approximately $892 million, current liabilities of approximately $15 million and noncurrent liabilities of approximately $745 million. At December 31, 1995, FPL Group Capital had approximately $89 million of current assets, $934 million of noncurrent assets, $24 million of current liabilities and $787 million of noncurrent liabilities. 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 1995 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 Net income for the three and nine months ended September 30, 1996 increased due to higher energy sales, resulting from customer growth and weather conditions, and lower interest and preferred stock dividend requirements, partly offset by higher depreciation expense. The three- month period ended September 30, 1996 also benefitted from lower operations and maintenance expenses (O&M). FPL's revenues from base rates for the three and nine months ended September 30, 1996 increased to approximately $1.03 billion and $2.71 billion, respectively, from approximately $1.00 billion and $2.65 billion for the same periods in 1995. The increases reflect a 1.8% increase in customer accounts and increases in energy usage per retail customer of 1.2% and 0.1%, respectively, primarily due to weather conditions. Revenues from cost recovery clauses and franchise fees comprise substantially all of the remaining portion of operating revenues. Such revenues and costs increased mainly as a result of higher gas prices. These revenues represent a pass-through of costs and do not significantly affect net income. O&M decreased for the three months ended September 30, 1996, primarily due to continued efforts to control costs and costs associated with ongoing organizational reviews recorded in 1995. Included in O&M for the third quarter, and the primary reason for the increase in O&M for the nine months ended September 30, 1996, was a change in the accounting for costs associated with nuclear refueling outages. Under this FPSC-approved method, FPL will accrue estimated nuclear refueling and maintenance costs relating to each unit's next planned outage while the unit is in operation. Any cost overruns will be expensed when known. This approach will result in FPL recognizing costs equivalent to slightly less than three outages per year based upon the current refueling outage schedule for FPL's four nuclear units. Two refueling outages occurred in the fourth quarter of 1995, two refueling outages occurred in the first half of 1996 and no additional refueling outages are scheduled for the remainder of 1996. The cumulative effect of adopting this accounting method was $35 million and will be expensed over a period not to exceed five years. See Note 1 - Accrual for Nuclear Maintenance Costs. In 1995, FPL began recording $30 million of special nuclear amortization per year plus an additional amount based on the level of sales. The additional expense amounts were to be applied against certain fossil and nuclear generating assets, as well as regulatory assets. For the three and nine months ended September 30, 1996, depreciation and amortization expense increased mainly as a result of the special amortization of generating assets and regulatory assets, which amounted to approximately $61 million and $162 million, respectively. In future periods, FPL will continue to recognize $30 million of special nuclear amortization per year and the additional expense amounts based on the level of sales will be applied against regulatory assets. See Note 1 - Depreciation and Amortization. The increased depreciation of nuclear and fossil assets also resulted in increased amortization of related deferred investment tax credits, lowering income tax expense in 1996. In October 1996, the FPSC approved an accounting rule change that eliminates AFUDC, except for projects that cost in excess of 1/2% of a company's electric utility plant in-service. FPL adopted the rule change retroactive to January 1, 1996. The effect of eliminating AFUDC in 1996 and the contribution of AFUDC in prior periods is included in other - net. LIQUIDITY AND CAPITAL RESOURCES Using available cash flows from operations, FPL has redeemed certain series of its preferred stock and first mortgage bonds, thereby reducing dividend requirements on preferred stock and interest expense, and has increased the funding for special use funds. Additionally, FPL Group has repurchased approximately 1.5 million shares of common stock. 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. Other cash flows from operations at FPL Group decreased mainly as a result of non-recurring alternative minimum tax benefits realized in 1995. For information concerning capital commitments, see Note 3. PART II - OTHER INFORMATION Item 5. Other Information (a) Reference is made to Item 1. Business - FPL Operations - Retail Ratemaking in the 1995 Form 10-K for FPL Group and FPL. For information regarding the FPSC's approval of a change in the accounting for costs associated with planned nuclear refueling outages, see Note 1 - Accrual for Nuclear Maintenance Costs. (b) Reference is made to Item 1. Business - FPL Operations - System Capability and Load in the 1995 Form 10-K for FPL Group and FPL. In September 1996, FPL received approval from the Nuclear Regulatory Commission (NRC) to increase the output of each of the Turkey Point nuclear units by 31 mw. The uprating of Turkey Point Units Nos. 3 and 4 was completed in October and November 1996, respectively. (c) Reference is made to Item 1. Business - FPL Operations - Nuclear in the 1995 Form 10-K for FPL Group and FPL. Since mid-1995, the St. Lucie nuclear plant has experienced a series of mechanical and operational problems that have resulted in increased attention and fines from the NRC. A number of self-identified and NRC-identified corrective actions have been implemented, and several changes have been made to St. Lucie's management team. However, the NRC continues to review St. Lucie's overall operations and to identify additional performance issues. In September 1996, FPL submitted an analysis of the pressurized water circulation tubes of the St. Lucie Unit No. 1 steam generators to the NRC. The analysis supported continued operation of St. Lucie Unit No. 1 until at least September 1997, at which time FPL plans to replace the steam generators. The NRC is currently reviewing the analysis. (d) 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 (the Reform Act), FPL Group and FPL (collectively, the Company) are hereby filing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statements (as such term is defined in the Reform Act) of the Company made by or on behalf of the Company which are made in 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 historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions, and uncertainties which 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. The Company cautions that the following important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements of the Company made by or on behalf of the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Some important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements include prevailing governmental policies and regulatory actions, including those of the FERC, the FPSC and the NRC, with respect to allowed rates of return, industry and rate structure, operation of nuclear power facilities, acquisition and disposal of assets and facilities, operation and construction of plant facilities, recovery of purchased power, decommissioning costs, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission costs). The business and profitability of the Company are also influenced by economic and geographic factors including political and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions (including natural disasters such as hurricanes), population growth rates and demographic patterns, competition for retail and wholesale customers, pricing and transportation of commodities, market demand for energy from plants or facilities, changes in tax rates or policies or in rates of inflation, unanticipated development project delays or changes in project costs, unanticipated changes in operating expenses and capital expenditures, capital market conditions, competition for new energy development opportunities, and legal and administrative proceedings (whether civil, such as environmental, or criminal) and settlements. All such factors are difficult to predict, contain uncertainties which may materially affect actual results, and are beyond the control of the Company. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit FPL Number Description Group FPL 10 Employment Agreement between FPL Group and Thomas F. Plunkett dated as of x September 16, 1996 12 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: November 4, 1996 MICHAEL W. YACKIRA Michael W. Yackira Vice President, Finance and Chief Financial Officer of FPL Group, Inc., Senior Vice President, Finance and Chief Financial Officer of Florida Power & Light Company (Principal Financial Officer of the Registrants) EX-12 2 STATEMENT RE COMPUTATION OF RATIOS EXHIBIT 12 FLORIDA POWER & LIGHT COMPANY COMPUTATION OF RATIOS
Nine Months Ended September 30, 1996 (Thousands of Dollars) RATIO OF EARNINGS TO FIXED CHARGES Earnings, as defined: Net income .............................................................................. $518,537 Income taxes ............................................................................ 276,012 Fixed charges, as below ................................................................. 197,859 Total earnings, as defined ............................................................ $992,408 Fixed charges, as defined: Interest expense ........................................................................ $186,150 Rental interest factor .................................................................. 4,012 Fixed charges included in nuclear fuel cost ............................................. 7,697 Total fixed charges, as defined ....................................................... $197,859 Ratio of earnings to fixed charges ........................................................ 5.02 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND DIVIDEND REQUIREMENTS ON PREFERRED STOCK Earnings, as defined: Net income .............................................................................. $518,537 Income taxes ............................................................................ 276,012 Fixed charges, as below ................................................................. 197,859 Total earnings, as defined ............................................................ $992,408 Fixed charges, as defined: Interest expense ........................................................................ $186,150 Rental interest factor .................................................................. 4,012 Fixed charges included in nuclear fuel cost ............................................. 7,697 Total fixed charges, as defined ....................................................... 197,859 Non-tax deductible dividend requirements on preferred stock ............................... 17,966 Ratio of income before income taxes to net income ......................................... 1.53 Dividend requirements on preferred stock before income taxes .............................. 27,488 Combined fixed charges and dividend requirements on preferred stock ....................... $225,347 Ratio of earnings to combined fixed charges and dividend requirements on preferred stock .. 4.40
EX-27 3 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from FPL Group's and FPL's condensed consolidated balance sheet as of September 30, 1996 and condensed consolidated statements of income and cash flows for the nine months ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000753308 FPL Group, Inc. 1,000 DEC-31-1996 SEP-30-1996 9-MOS PER-BOOK $9,300,760 $1,301,736 $1,276,344 $0 $502,991 $12,381,831 $0 $0 $0 $4,597,537 $42,000 $289,580 $3,262,857 $0 $0 $0 $0 $0 $0 $0 $4,189,857 $12,381,831 $4,601,392 $261,602 $3,619,598 $3,619,598 $981,794 ($5,443) $696,783 $202,642 $494,141 $17,966 $494,141 $240,487 $0 $1,315,189 $2.84 $2.84
EX-27 4 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from FPL's condensed consolidated balance sheet as of September 30, 1996 and condensed consolidated statements of income and cash flows for the nine months ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000037634 Florida Power & Light Company 1,000 DEC-31-1996 SEP-30-1996 9-MOS PER-BOOK $9,300,760 $745,055 $1,203,045 $0 $492,496 $11,741,356 $0 $0 $0 $4,668,156 $42,000 $289,580 $2,980,701 $0 $0 $0 $0 $0 $0 $0 $3,760,919 $11,741,356 $4,556,678 $281,058 $3,573,133 $3,854,191 $702,487 $2,200 $704,687 $186,150 $518,537 $17,966 $500,571 $0 $0 $1,371,569 $0 $0
EX-10 5 EMPLOYMENT AGREEMENT EXHIBIT 10 EMPLOYMENT AGREEMENT Employment Agreement between FPL GROUP, INC., a Florida corporation (the "Company"), and Thomas F. Plunkett (the "Executive"), dated as of September 16, 1996. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company and its affiliated companies will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company and its affiliated companies currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. Therefore, the Company and the Executive agree as follows: 1. Effective Date. The effective date of this Agreement shall be the date on which a Change of Control occurs (the "Effective Date"). Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company or its affiliated companies is terminated or the Executive ceases to be an officer of the Company or its affiliated companies prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment or cessation of status as an officer (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment or cessation of status as an officer. 2. Change of Control. For the purposes of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition by the Company or any or its subsidiaries, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (iii) any acquisition by any corporation with respect to which, following such acquisition, more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation to which Rule 14a-11 of Regulation 14A promulgated under the Exchange Act applies or other actual or threatened solicitation of proxies or consents; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be. The term "the sale or disposition by the Company of all or substantially all of the assets of the Company" shall mean a sale or other disposition transaction or series of related transactions involving assets of the Company or of any direct or indirect subsidiary of the Company (including the stock of any direct or indirect subsidiary of the Company) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefor or by such other method as the Board determines is appropriate in a case where there is no readily ascertainable purchase price) constitutes more than two-thirds of the fair market value of the Company (as hereinafter defined). The "fair market value of the Company" shall be the aggregate market value of the then Outstanding Company Common Stock (on a fully diluted basis) plus the aggregate market value of the Company's other outstanding equity securities. The aggregate market value of the shares of Outstanding Company Common Stock shall be determined by multiplying the number of shares of Outstanding Company Common Stock (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement with respect to the transaction or series of related transactions (the "Transaction Date") by the average closing price of the shares of Outstanding Company Common Stock for the ten trading days immediately preceding the Transaction Date. The aggregate market value of any other equity securities of the Company shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the shares of Outstanding Company Common Stock or by such other method as the Board shall determine is appropriate. 3. Employment Period. The Company hereby agrees to continue the Executive in its or its affiliated companies' employ, or both, as the case may be, and the Executive hereby agrees to remain in the employ of the Company, or its affiliated companies, or both, as the case may be, for a period commencing on the Effective Date and ending on the 4th anniversary of such date (the "Employment Period"). As used in this Agreement, the term "affiliated companies" shall include any corporation or other entity controlled by, controlling or under common control with the Company. 4. Position and Duties. During the Employment Period, the Executive's position (including status, offices, titles, and reporting requirements), authority, duties, and responsibilities with the Company or its affiliated companies or both, as the case may be, shall be at least commensurate in all material respects with the most significant of those held, exercised, and assigned at any time during the 90-day period immediately preceding the Effective Date. The Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any location less than 20 miles from such location. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote full time and attention during normal business hours to the business and affairs of the Company and its affiliated companies. It shall not be a violation of this Agreement for the Executive to serve on corporate, civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at educational institutions and manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company or its affiliated companies in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not be deemed to interfere with the performance of the Executive's responsibilities to the Company and its affiliated companies. 5. Compensation. During the Employment Period, the Executive shall be compensated as follows: (a) Annual Base Salary. The Executive shall be paid an annual base salary ("Annual Base Salary"), in equal biweekly installments, at least equal to the annual base salary being paid to the Executive by the Company and its affiliated companies with respect to the year in which the Effective Date occurs. The Annual Base Salary shall be reviewed at least annually and shall be increased substantially consistent with increases in base salary generally awarded to other peer executives of the Company and its affiliated companies. Such increases shall in no event be less than the increases in the U.S. Department of Labor Consumer Price Index - U.S. City Average Index. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any corporation or other entity controlled by, controlling or under common control with the Company. (b) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the average annual incentive compensation (annualized for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) paid or payable, including by reason of any deferral, to the Executive by the Company and its affiliated companies in respect of the two fiscal years immediately preceding the fiscal year in which the Effective Date occurs (the "Recent Average Bonus"). The higher of the Recent Average Bonus or the most recent Annual Bonus awarded by the Company and its affiliated companies after the Effective Date is herein called the "Highest Annual Bonus". Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (c) Long Term Incentive Compensation. During the Employment Period, the Executive shall be entitled to participate in all incentive compensation plans, practices, policies, and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies, and programs provide the Executive with incentive opportunities and potential benefits, both as to amount and percentage of compensation, less favorable, in the aggregate, than those provided by the Company and its affiliated companies for the Executive under the FPL Group Long Term Incentive Plan (including, without limitation, performance share grants and awards) as in effect at any time during the 90-day period immediately preceding the Effective Date or; if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (d) Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies, and programs provide the Executive with savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies, and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (e) Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies, and programs provided by the Company and its affiliated companies (including, without limitation, medical, executive medical, prescription, dental, vision, short-term disability, long-term disability, executive long-term disability, salary continuance, employee life, group life, benefits pursuant to a split dollar arrangement, accidental death and dismemberment, and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies but in no event shall such plans, practices, policies, and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies, and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (f) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices, and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (g) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs, and policies of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (h) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90- day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (i) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs, and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer incentives of the Company and its affiliated companies. 6. Termination of Employment. (a) Disability. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 13(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) repeated violations by the Executive of the Executive's obligations under Section 4 of this Agreement (other than as a result of incapacity due to physical or mental illness) which are demonstrably willful and deliberate on the Executive's part, which are committed in bad faith or without reasonable belief that such violations are in the best interests of the Company and which are not remedied in a reasonable period of time after receipt of written notice from the Company specifying such violations or (ii) the conviction of the Executive of a felony involving an act of dishonesty intended to result in substantial personal enrichment at the expense of the Company or its affiliated companies. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4 of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 5 of this Agreement, other than isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4 hereof; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 12(c) of this Agreement, provided that such successor has received at least ten days prior written notice from the Company or the Executive of the requirements of Section 12(c) of the Agreement. For purposes of this Section 6(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstances which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of Disability, the Date of Termination shall be the Disability Effective Date. 7. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause or Disability. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts (such aggregate being hereinafter referred to as the "Special Termination Amount"): A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Highest Annual Bonus and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) (including, without limitation, compensation, bonus, incentive compensation or awards deferred under the FPL Group, Inc. Deferred Compensation Plan or incentive compensation or awards deferred under the FPL Group, Inc. Long-Term Incentive Plan of 1985, the FPL Group, Inc. Long Term Incentive Plan of 1994, or pursuant to an individual deferral agreement) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) being herein called the "Accrued Obligations"); and B. the amount equal to the product of (1) the greater of two or the number of years (with any partial year expressed as a fraction) remaining in the Employment Period and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; provided, however, that such amount shall be paid in lieu of, and the Executive hereby waives the right to receive, any other amount of severance relating to salary or bonus continuation to be received by the Executive upon termination of employment of the Executive under any severance plan, policy or arrangement of the Company; and C. the maximum amount payable under all performance share grants and all other long term incentive compensation grants to the Executive, calculated as though the Executive had remained employed by the Company for the remainder of the Employment Period and on the basis of actual achievement of performance measures through the end of the fiscal year preceding the fiscal year in which the Date of Termination occurs and thereafter assuming 100% achievement of all performance measures through the end of the Employment Period; and D. a separate lump-sum supplemental retirement benefit equal to the difference between (1) the actuarial equivalent (utilizing for this purpose the actuarial assumptions utilized with respect to the FPL Group Employee Pension Plan (or any successor plan thereto) (the "Retirement Plan") during the 90-day period immediately preceding the Effective Date) of the benefit payable under the Retirement Plan and all supplemental and/or excess retirement plans providing benefits for the Executive (the "SERP") (including, but not limited to the Supplemental Pension Benefit (as defined in the FPL Group, Inc. Supplemental Executive Retirement Plan)) which the Executive would receive if the Executive's employment continued at the compensation level provided for in Sections 5(a) and 5(b) of this Agreement for the remainder of the Employment Period, assuming for this purpose that all accrued benefits are fully vested and that benefit accrual formulas are no less advantageous to the Executive than those in effect during the 90-day period immediately preceding the Effective Date, or, if more favorable to the Executive, as in effect generally at any time thereafter during the Employment Period with respect to other peer executives of the Company and its affiliated companies, and (2) the actuarial equivalent (utilizing for this purpose the actuarial assumptions utilized with respect to the Retirement Plan during the 90-day period immediately preceding the Effective Date) of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP; and E. a separate lump-sum supplemental retirement benefit equal to the difference between (1) the value of the Company Account (as defined in the FPL Group Employee Thrift Plan or any successor plan thereto) (the "Thrift Plan") and any other matching contribution accounts (including, but not limited to the Supplemental Matching Contribution Account (as defined in the FPL Group, Inc. Supplemental Executive Retirement Plan)) under a SERP which the Executive would receive if (i) the Executive s employment continued at the compensation level provided for in Sections 5(a) and 5(b) of this Agreement for the remainder of the Employment Period, (ii) the Executive made pre- and after-tax contributions at the highest permissible rate (disregarding any limitations imposed by the Internal Revenue Code, which may or may not be set forth in the Thrift Plan) for each year remaining in the Employment Period, (iii) the Company Account and the matching contribution accounts are fully vested, and (iv) the matching contribution formulas are no less advantageous to the Executive than those in effect during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time during the remainder of the Employment Period with respect to other peer executives of the Company and its affiliated companies, and (2) the actual value of the Executive s Company Account and matching contribution accounts (paid or payable), if any, under the Thrift Plan and the SERP; and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Sections 5(e) and 5(g) of this Agreement if the Executive's employment had not been terminated, in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period; and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive pursuant to this Agreement or otherwise under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), but excluding solely for purposes of this Section 7(a)(iii) amounts waived by the Executive pursuant to Section 7(a)(i)(B). (b) Death. Upon the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. All Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. The term Other Benefits as utilized in this Section 7(b) shall include, without limitation, and the Executive's family shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and any of its affiliated companies to surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peer executives and their families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their families. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. All Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. The term Other Benefits as utilized in this Section 7(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other Than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 8. Non-exclusivity of Rights. Except as provided in Sections 7(a)(i)(B), 7(a)(ii), and 7(a)(iii) of this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 9. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set- off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 7(a)(ii) of this Agreement, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur at all stages of proceedings, including, without limitation, preparation and appellate review, as a result of any contest (regardless of whether formal legal proceedings are ever commenced and regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872 (f)(2)(A) of the Internal Revenue Code of 1986, as amended (the"Code"). 10. Certain Additional Payments by the Company. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 11. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 11 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 12. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and /or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Thomas F. Plunkett 11751 Stonehaven Way West Palm Beach, FL 33412 If to the Company: FPL Group, Inc. 700 Universe Boulevard Juno Beach, Florida 33408 Attention: Vice President, Human Resources or such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 6(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, except as provided in Section 1, if prior to the Effective Date, (i) the Executive's employment with the Company terminates or (ii) the Executive ceases to be an officer of the Company, then the Executive shall have no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. THOMAS F. PLUNKETT Thomas F. Plunkett FPL GROUP, INC. By LAWRENCE J. KELLEHER Lawrence J. Kelleher Vice President Human Resources -----END PRIVACY-ENHANCED MESSAGE-----