-----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, M01XOyyg81bWZBUtAPtOASftgbpBmPC5we9zPd6P2NSQ8WbRqRum5+Op7N7zwJS3 aFeMWfN6+NHEkBL76prW9g== 0000753308-01-500043.txt : 20010813 0000753308-01-500043.hdr.sgml : 20010813 ACCESSION NUMBER: 0000753308-01-500043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 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: 1702997 BUSINESS ADDRESS: STREET 1: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 5616944000 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: 002-27612 FILM NUMBER: 1702998 BUSINESS ADDRESS: STREET 1: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 5616944000 MAIL ADDRESS: STREET 1: P O BOX 14000 CITY: JUNO BEACH STATE: FL ZIP: 33408 10-Q 1 file10q.txt FORM 10-Q JUNE 30, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Exact name of registrants as specified in their charters, address of principal IRS Employer Commission executive offices and Identification File Number registrants' telephone number Number - ----------- --------------------------------------- -------------- 1-8841 FPL GROUP, INC. 59-2449419 1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775 700 Universe Boulevard Juno Beach, Florida 33408 (561) 694-4000 State or other jurisdiction of incorporation or organization: Florida Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) have been subject to such filing requirements for the past 90 days. Yes X No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each class of FPL Group, Inc. common stock, as of the latest practicable date: Common Stock, $.01 par value, outstanding at July 31, 2001: 175,872,617 shares. As of July 31, 2001, there were issued and outstanding 1,000 shares of Florida Power & Light Company's common stock, without par value, all of which were held, beneficially and of record, by FPL Group, Inc. ______________________________ This combined Form 10-Q represents separate filings by FPL Group, Inc. and Florida Power & Light Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Florida Power & Light Company makes no representations as to the information relating to FPL Group, Inc.'s other operations. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (Reform Act), FPL Group, Inc. (FPL Group) and Florida Power & Light Company (FPL) (collectively, the Company) are hereby filing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statements (as such term is defined in the Reform Act) made by or on behalf of the Company in this combined Form 10-Q, in presentations, in response to questions or otherwise. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as will likely result, are expected to, will continue, is anticipated, estimated, projection, outlook) are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause the Company's actual results to differ materially from those contained in forward-looking statements made by or on behalf of the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Some important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements include changes in laws or regulations, changing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC), the Florida Public Service Commission (FPSC), the Public Utility Regulatory Policies Act of 1978, as amended (PURPA), the Public Utility Holding Company Act of 1935, as amended, and the U. S. Nuclear Regulatory Commission, with respect to allowed rates of return including but not limited to return on common equity and equity ratio limits, industry and rate structure, operation of nuclear power facilities, acquisition, disposal, depreciation and amortization of assets and facilities, operation and construction of plant facilities, recovery of fuel and purchased power costs, decommissioning costs, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission costs). The business and profitability of the Company are also influenced by economic and geographic factors including political and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions (including natural disasters such as hurricanes), population growth rates and demographic patterns, competition for retail and wholesale customers, availability, pricing and transportation of fuel and other energy commodities, market demand for energy from plants or facilities, changes in tax rates or policies or in rates of inflation or in accounting standards, unanticipated delays or changes in costs for capital projects, unanticipated changes in operating expenses and capital expenditures, capital market conditions, competition for new energy development opportunities and legal and administrative proceedings (whether civil, such as environmental, or criminal) and settlements. All such factors are difficult to predict, contain uncertainties which may materially affect actual results, and are beyond the control of the Company. PART I - FINANCIAL INFORMATION Item 1. Financial Statements FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (millions, except per share amounts) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 OPERATING REVENUES ............................................... $2,166 $1,670 $4,107 $3,138 OPERATING EXPENSES: Fuel, purchased power and interchange .......................... 1,054 605 2,005 1,146 Other operations and maintenance................................ 313 308 623 593 Merger-related ................................................. - - 30 - Depreciation and amortization .................................. 245 266 485 525 Taxes other than income taxes .................................. 174 144 344 291 Total operating expenses ..................................... 1,786 1,323 3,487 2,555 OPERATING INCOME ................................................. 380 347 620 583 OTHER INCOME (DEDUCTIONS): Interest charges ............................................... (82) (64) (167) (126) Preferred stock dividends - FPL ................................ (4) (4) (7) (7) Other - net .................................................... 34 26 48 34 Total other deductions - net ................................. (52) (42) (126) (99) INCOME BEFORE INCOME TAXES ....................................... 328 305 494 484 INCOME TAXES ..................................................... 109 101 165 159 NET INCOME ....................................................... $ 219 $ 204 $ 329 $ 325 Earnings per share of common stock (basic and assuming dilution).. $ 1.30 $ 1.20 $ 1.95 $ 1.91 Dividends per share of common stock .............................. $ 0.56 $ 0.54 $ 1.12 $ 1.08 Weighted-average number of common shares outstanding: Basic .......................................................... 169 170 169 170 Assuming dilution .............................................. 169 171 169 171
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements (Notes) herein and the Notes to Consolidated Financial Statements appearing in the combined Annual Report on Form 10-K/A for the fiscal year ended December 31, 2000 (2000 Form 10-K) for FPL Group and FPL. FPL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (millions) (unaudited)
June 30, December 31, 2001 2000 PROPERTY, PLANT AND EQUIPMENT: Electric utility plant in service and other property, including nuclear fuel and construction work in progress ....................... $22,145 $21,022 Less accumulated depreciation and amortization ................................... (11,508) (11,088) Total property, plant and equipment - net ...................................... 10,637 9,934 CURRENT ASSETS: Cash and cash equivalents ........................................................ 72 129 Customer receivables, net of allowances of $7 at each date ....................... 670 637 Materials, supplies and fossil fuel inventory - at average cost .................. 373 370 Deferred clause expenses ......................................................... 473 337 Other ............................................................................ 275 308 Total current assets ........................................................... 1,863 1,781 OTHER ASSETS: Special use funds of FPL ......................................................... 1,585 1,497 Other investments ................................................................ 901 651 Other ............................................................................ 1,573 1,437 Total other assets ............................................................. 4,059 3,585 TOTAL ASSETS ....................................................................... $16,559 $15,300 CAPITALIZATION: Common stock ..................................................................... $ 2 $ 2 Additional paid-in capital ....................................................... 2,798 2,788 Retained earnings ................................................................ 2,944 2,803 Accumulated other comprehensive income ........................................... 5 - Total common shareholders' equity .............................................. 5,749 5,593 Preferred stock of FPL without sinking fund requirements ......................... 226 226 Long-term debt ................................................................... 4,474 3,976 Total capitalization ........................................................... 10,449 9,795 CURRENT LIABILITIES: Debt due within one year ......................................................... 1,562 1,223 Accounts payable ................................................................. 622 564 Accrued interest, taxes and other ................................................ 1,127 976 Total current liabilities ...................................................... 3,311 2,763 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,398 1,378 Unamortized regulatory and investment tax credits ................................ 248 269 Other ............................................................................ 1,153 1,095 Total other liabilities and deferred credits ................................... 2,799 2,742 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $16,559 $15,300
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) (unaudited)
Six Months Ended June 30, 2001 2000 NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 849 $ 748 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures of FPL ......................................................... (595) (660) Independent power investments ....................................................... (899) (294) Other - net ......................................................................... (55) (63) Net cash used in investing activities ........................................... (1,549) (1,017) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt .......................................................... 493 145 Retirement of long-term debt ........................................................ (66) (149) Increase in commercial paper ........................................................ 404 363 Repurchase of common stock .......................................................... - (34) Dividends on common stock ........................................................... (188) (183) Net cash provided by financing activities ....................................... 643 142 Net decrease in cash and cash equivalents ............................................. (57) (127) Cash and cash equivalents at beginning of period ...................................... 129 361 Cash and cash equivalents at end of period ............................................ $ 72 $ 234 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 24 $ 22
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (millions) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 OPERATING REVENUES ................................................. $1,935 $1,533 $3,582 $2,871 OPERATING EXPENSES: Fuel, purchased power and interchange ............................ 939 570 1,702 1,071 Other operations and maintenance ................................. 256 250 510 487 Merger-related ................................................... - - 26 - Depreciation and amortization .................................... 226 254 449 501 Income taxes ..................................................... 107 101 169 161 Taxes other than income taxes .................................... 174 140 337 282 Total operating expenses ....................................... 1,702 1,315 3,193 2,502 OPERATING INCOME ................................................... 233 218 389 369 OTHER INCOME (DEDUCTIONS): Interest charges ................................................. (47) (42) (100) (82) Other - net ...................................................... - - (2) (2) Total other deductions - net ................................... (47) (42) (102) (84) NET INCOME ......................................................... 186 176 287 285 PREFERRED STOCK DIVIDENDS .......................................... 4 4 7 7 NET INCOME AVAILABLE TO FPL GROUP .................................. $ 182 $ 172 $ 280 $ 278
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (millions) (unaudited)
June 30, December 31, 2001 2000 ELECTRIC UTILITY PLANT: Plant in service, including nuclear fuel and construction work in progress ....... $19,475 $19,033 Less accumulated depreciation and amortization ................................... (11,307) (10,919) Electric utility plant - net ................................................... 8,168 8,114 CURRENT ASSETS: Cash and cash equivalents ........................................................ 8 66 Customer receivables, net of allowances of $6 and $7, respectively................ 575 489 Materials, supplies and fossil fuel inventory - at average cost .................. 315 313 Deferred clause expenses ......................................................... 473 337 Other ............................................................................ 167 211 Total current assets ........................................................... 1,538 1,416 OTHER ASSETS: Special use funds ................................................................ 1,585 1,497 Other ............................................................................ 920 993 Total other assets ............................................................. 2,505 2,490 TOTAL ASSETS ....................................................................... $12,211 $12,020 CAPITALIZATION: Common shareholder's equity ...................................................... $ 5,410 $ 5,032 Preferred stock without sinking fund requirements ................................ 226 226 Long-term debt ................................................................... 2,577 2,577 Total capitalization ........................................................... 8,213 7,835 CURRENT LIABILITIES: Debt due within one year ......................................................... 192 625 Accounts payable ................................................................. 490 458 Accrued interest, taxes and other ................................................ 1,054 859 Total current liabilities ...................................................... 1,736 1,942 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,079 1,084 Unamortized regulatory and investment tax credits ................................ 248 269 Other ............................................................................ 935 890 Total other liabilities and deferred credits ................................... 2,262 2,243 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,211 $12,020
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) (unaudited)
Six Months Ended June 30, 2001 2000 NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 905 $ 722 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ................................................................ (595) (660) Other - net ......................................................................... (24) (43) Net cash used in investing activities ........................................... (619) (703) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt .......................................................... - 145 Retirement of long-term debt ........................................................ (66) (149) Increase (decrease) in commercial paper ............................................. (368) 253 Dividends ........................................................................... (210) (225) Capital contributions from FPL Group ................................................ 300 100 Net cash provided by (used in) financing activities ............................... (344) 124 Net increase (decrease) in cash and cash equivalents .................................. (58) 143 Cash and cash equivalents at beginning of period ...................................... 66 - Cash and cash equivalents at end of period ............................................ $ 8 $ 143 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 24 $ 22 Transfer of net assets to FPL FiberNet, LLC ......................................... $ - $ 100
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2000 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 2000 Form 10-K for FPL Group and FPL. In the opinion of FPL Group and FPL management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period may not give a true indication of results for the year. 1. New Accounting Rules Accounting for Derivative Instruments and Hedging Activities - Effective January 1, 2001, FPL Group and FPL adopted Statement of Financial Accounting Standards No. (FAS) 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by FAS 137 and 138 (collectively, FAS 133). As a result, beginning in January 2001, derivative instruments are recorded on FPL Group's and FPL's balance sheets as either an asset or liability (in other current assets, other assets, other current liabilities and other liabilities) measured at fair value. FPL Group and FPL use derivative instruments (primarily swaps, options and futures) to manage the commodity price risk inherent in fuel purchases and electricity sales, as well as to optimize the value of power generation assets. At FPL, changes in fair value are deferred as a regulatory asset or liability until the contracts are settled. Upon settlement, any gains or losses will be passed through the fuel and purchased power cost recovery clause (fuel clause) and the capacity cost recovery clause (capacity clause). For FPL Group's unregulated operations, predominantly FPL Energy, LLC (FPL Energy), changes in the derivatives' fair value are recognized currently in earnings (in other-net) unless hedge accounting is applied. While substantially all of FPL Energy's derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria are met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective. The hedging instrument's effectiveness is assessed utilizing regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life. Hedges are considered highly effective when a correlation coefficient of .8 or higher is achieved. Substantially all of the transactions that FPL Group has designated as hedges are cash flow hedges. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period(s) during which the transaction being hedged affects earnings. The ineffective portion of these hedges flows through earnings in the current period. Settlement gains and losses are included within the line items in the statements of income to which they relate. In January 2001, FPL Group recorded in other-net a $2 million loss as the cumulative effect on FPL Group's earnings of a change in accounting principle representing the effect of those derivative instruments for which hedge accounting was not applied. For those contracts where hedge accounting was applied, the adoption of the new rules resulted in a credit of approximately $10 million to other comprehensive income for FPL Group. Included in FPL Group's accumulated other comprehensive income at June 30, 2001 is approximately $5 million of net unrealized gains associated with cash flow hedges of forecasted fuel purchases through December 2003. Approximately $1 million of FPL Group's accumulated other comprehensive income at June 30, 2001 will be reclassified into earnings within the next 12 months as the hedged fuel is consumed. Within other comprehensive income, approximately $8 million and $6 million represent the effective portion of the net loss on cash flow hedges during the three and six months ended June 30, 2001, respectively. See Note 3 - Other. In June 2001, the Financial Accounting Standards Board (FASB) reached conclusions on several derivative accounting issues related to the power generation industry, which became effective July 1, 2001. Management is in the process of evaluating the conclusions reached by the FASB and is unable to estimate the effects, if any, on FPL Group's financial statements. One possible result of the FASB's conclusions could be that certain power purchase and power sales contracts will have to be recorded at fair value with changes in fair value recorded in the income statement each reporting period. Goodwill and Other Intangible Assets - In July 2001, the FASB issued FAS 142, "Goodwill and Other Intangible Assets." Under this statement, the amortization of goodwill will no longer be permitted. Instead, goodwill will be assessed for impairment at least annually by applying a fair-value based test. At June 30, 2001, FPL Group had approximately $380 million of goodwill recorded in other assets. Management is in the process of evaluating the impact of implementing FAS 142 and is unable to estimate the effect, if any, on FPL Group's financial statements. FPL Group will be required to adopt FAS 142 beginning in 2002. 2. Rate Matters In May 2001, the FPSC ordered FPL to submit minimum filing requirements (MFRs) to initiate a base rate proceeding regarding FPL's future retail rates. FPL expects to file MFRs with the FPSC by October 15, 2001. Any change in base rates would become effective after the expiration of the current rate agreement on April 14, 2002. FPL as well as other investor- owned utilities in Florida had requested that the FPSC open a separate generic docket to address issues related to the utilities' participation in an independent regional transmission organization (RTO), pursuant to the FERC's Order 2000. In June 2001, the FPSC decided to address on an expedited basis the RTO matters in conjunction with the base rate proceeding instead of in a generic docket. In mid-July 2001, the FERC initiated a mediation process directed toward forming a single RTO for the Southeast region of the United States. FPL is participating in the mediation process, scheduled to last 45 days. 3. Capitalization FPL Group Common Stock - In April 2001, FPL Group's $570 million share repurchase program authorized in connection with the merger agreement with Entergy Corporation was terminated. As of June 30, 2001, FPL Group had repurchased a total of approximately 4.6 million shares of common stock under the 10 million share repurchase program that began in April 1997. No FPL Group shares have been repurchased in 2001. Long-Term Debt - In February 2001, FPL redeemed approximately $65 million principal amount of solid waste disposal revenue refunding bonds, consisting of $16 million bearing interest at 7.15% maturing in 2023 and $49 million with variable rate interest maturing in 2025. In May 2001, FPL Group Capital Inc (FPL Group Capital) sold $500 million principal amount of 6 1/8% debentures maturing in 2007. In July 2001, a subsidiary of FPL Energy issued $435 million of 7.52% senior secured bonds maturing in 2019. Long-Term Incentive Plan - Performance shares and options granted to date under FPL Group's long-term incentive plan resulted in assumed incremental shares of common stock outstanding for purposes of computing diluted earnings per share for the three and six months ended June 30, 2001 and 2000. These incremental shares were not material in the periods presented and did not cause diluted earnings per share to differ from basic earnings per share. Other - Comprehensive income of FPL Group, totaling $211 million and $204 million for the three months ended June 30, 2001 and 2000 and $333 million and $325 million for the six months ended June 30, 2001 and 2000, respectively, includes net income, changes in unrealized gains and losses on securities and foreign currency translation adjustments. For the three and six months ended June 30, 2001, comprehensive income of FPL Group also includes approximately $8 million of net unrealized losses and $5 million of net unrealized gains, respectively, on cash flow hedges of forecasted fuel purchases. Accumulated other comprehensive income is separately displayed in the condensed consolidated balance sheets of FPL Group. 4. Commitments and Contingencies Commitments - FPL has made commitments in connection with a portion of its projected capital expenditures. Capital expenditures for the construction or acquisition of additional facilities and equipment to meet customer demand are estimated to be approximately $3.3 billion for 2001 through 2003. Included in this three-year forecast are capital expenditures for 2001 of approximately $1.1 billion, of which $548 million had been spent through June 30, 2001. As of June 30, 2001, FPL Energy has made commitments in connection with the development and expansion of independent power projects totaling approximately $860 million. In July 2001, an additional $440 million was committed by FPL Energy for project development and expansion. Subsidiaries of FPL Group, other than FPL, have guaranteed approximately $690 million of prompt performance payments, lease obligations, purchase and sale of power and fuel agreement obligations, debt service payments and other payments subject to certain contingencies. In addition, at June 30, 2001 approximately $183 million of cash collateral was posted pursuant to a project financing agreement and is included in other assets in FPL Group's condensed consolidated balance sheets. Insurance - Liability for accidents at nuclear power plants is governed by the Price-Anderson Act, which limits the liability of nuclear reactor owners to the amount of the insurance available from private sources and under an industry retrospective payment plan. In accordance with this Act, FPL maintains $200 million of private liability insurance, which is the maximum obtainable, and participates in a secondary financial protection system under which it is subject to retrospective assessments of up to $363 million per incident at any nuclear utility reactor in the United States, payable at a rate not to exceed $43 million per incident per year. FPL participates in nuclear insurance mutual companies that provide $2.75 billion of limited insurance coverage for property damage, decontamination and premature decommissioning risks at its nuclear plants. The proceeds from such insurance, however, must first be used for reactor stabilization and site decontamination before they can be used for plant repair. FPL also participates in an insurance program that provides limited coverage for replacement power costs if a nuclear plant is out of service because of an accident. In the event of an accident at one of FPL's or another participating insured's nuclear plants, FPL could be assessed up to $36 million in retrospective premiums. In the event of a catastrophic loss at one of FPL's nuclear plants, the amount of insurance available may not be adequate to cover property damage and other expenses incurred. Uninsured losses, to the extent not recovered through rates, would be borne by FPL and could have a material adverse effect on FPL Group's and FPL's financial condition. FPL self-insures the majority of its transmission and distribution (T&D) property due to the high cost and limited coverage available from third- party insurers. As approved by the FPSC, FPL maintains a funded storm and property insurance reserve, which totaled approximately $247 million at June 30, 2001, for uninsured property storm damage or assessments under the nuclear insurance program. Recovery from customers of any losses in excess of the storm and property insurance reserve will require the approval of the FPSC. FPL's available lines of credit include $300 million to provide additional liquidity in the event of a T&D property loss. Contracts - FPL Group has a long-term agreement for the supply of gas turbines through 2004 and for parts, repairs and on-site services through 2011. In addition, FPL Energy has entered into a contract to purchase 866 wind turbines through 2001, of which approximately 240 were placed in service as of June 30, 2001 and the remainder are expected to be in operation by the end of 2001. FPL Energy has also entered into various engineering, procurement and construction contracts to support its development activities through 2003. All of these contracts are intended to support expansion, primarily at FPL Energy, and the related commitments are included in Commitments above. FPL has entered into long-term purchased power and fuel contracts. Take- or-pay purchased power contracts with the Jacksonville Electric Authority (JEA) and with subsidiaries of The Southern Company (Southern Companies) provide approximately 1,300 megawatts (mw) of power through mid-2010 and 388 mw thereafter through 2021. FPL also has various firm pay-for- performance contracts to purchase approximately 900 mw from certain cogenerators and small power producers (qualifying facilities) with expiration dates ranging from 2002 through 2026. The purchased power contracts provide for capacity and energy payments. Energy payments are based on the actual power taken under these contracts and the Southern Companies' contract is subject to minimum quantities. Capacity payments for the pay-for-performance contracts are subject to the qualifying facilities meeting certain contract conditions. In 2001, FPL entered into agreements with several electricity suppliers to purchase an aggregate of up to approximately 1,300 mw of power with expiration dates ranging from 2003 through 2007. In general, the agreements require FPL to make capacity payments and supply the fuel consumed by the plants under the contracts. FPL has long-term contracts for the transportation and supply of natural gas, coal and oil with various expiration dates through 2022. FPL Energy has long-term contracts for the transportation and storage of natural gas with expiration dates ranging from 2005 through 2017, and a contract for the supply of natural gas that expires in mid-2002. The required capacity and minimum payments under these contracts for the remainder of 2001 (July-December) and for 2002 through 2005 are estimated to be as follows:
2001 2002 2003 2004 2005 (millions) FPL: Capacity payments: JEA and Southern Companies .......................................... $110 $200 $200 $200 $200 Qualifying facilities ............................................... $185 $330 $340 $350 $340 Other electricity suppliers ......................................... $ 5 $ 75 $ 95 $ 95 $ 45 Minimum payments, at projected prices: Southern Companies - energy ......................................... $ 30 $ 50 $ 60 $ 50 $ 60 Natural gas, including transportation ............................... $340 $715 $695 $720 $720 Coal ................................................................ $ 20 $ 45 $ 20 $ 10 $ 10 Oil ................................................................. $100 $ 10 $ - $ - $ - FPL Energy: Natural gas, including transportation and storage ................... $ 15 $ 20 $ 15 $ 15 $ 15
Charges under these contracts were as follows:
Three Months Ended June 30, Six Months Ended June 30, 2001 Charges 2000 Charges 2001 Charges 2000 Charges Energy/ Energy/ Energy/ Energy/ Capacity Fuel Capacity Fuel Capacity Fuel Capacity Fuel (millions) FPL: JEA and Southern Companies $50(a) $ 44(b) $51(a) $ 41(b) $101(a) $ 84(b) $102(a) $ 72(b) Qualifying facilities .... $79(c) $ 35(b) $80(c) $ 28(b) $156(c) $ 69(b) $159(c) $ 59(b) Other electricity suppliers $ 3 $ 2 $ - $ - $ 3 $ 2 $ - $ - Natural gas, including transportation ......... $ - $215(b) $ - $130(b) $ - $416(b) $ - $212(b) Coal ..................... $ - $ 12(b) $ - $ 11(b) $ - $ 24(b) $ - $ 23(b) Oil ...................... $ - $ 91(b) $ - $ 89(b) $ - $189(b) $ - $110(b) FPL Energy: Natural gas, including trans- portation and storage .. $ $ 4 $ - $ 4 $ - $ 8 $ - $ 8 _______________ (a) Recovered through base rates and the capacity clause. (b) Recovered through the fuel clause. (c) Recovered through the capacity clause.
Litigation - In 1999, the Attorney General of the United States, on behalf of the U.S. Environmental Protection Agency (EPA), brought an action against Georgia Power Company and other subsidiaries of The Southern Company for certain alleged violations of the Clean Air Act. In May 2001, the EPA amended its complaint. The amended complaint alleges, among other things, that Georgia Power Company constructed and is continuing to operate Scherer Unit No. 4, in which FPL owns a 76% interest, without obtaining proper permitting, and without complying with performance and technology standards as required by the Clean Air Act. It also alleges that unspecified major modifications have been made at Scherer Unit No. 4 that require its compliance with the aforementioned Clean Air Act provisions. The EPA seeks injunctive relief requiring the installation of best available control technology and civil penalties of up to $25,000 per day for each violation from an unspecified date after June 1, 1975 through January 30, 1997, and $27,500 per day for each violation thereafter. Georgia Power Company has answered the amended complaint, asserting that it has complied with all requirements of the Clean Air Act, denying the plaintiff's allegations of liability, denying that the plaintiff is entitled to any of the relief that it seeks and raising various other defenses. In June 2001, the Court stayed discovery and administratively closed the case pending resolution of the EPA's motion for consolidation of discovery in several Clean Air Act cases that was filed with a Multi- District Litigation (MDL) panel. The MDL panel has heard oral argument on the motion for consolidation but has not yet ruled on it. In 2000, Southern California Edison Company (SCE) filed with the FERC a Petition for Declaratory Order (petition) asking the FERC to apply a November 1999 federal circuit court of appeals' decision to all qualifying small power production facilities, including two solar facilities operated by partnerships indirectly owned in part by FPL Energy (the partnerships) which have power purchase agreements with SCE. The federal circuit court of appeals' decision invalidated the FERC's so-called essential fixed assets standard, which permitted uses of fossil fuels by qualifying small power production facilities beyond those expressly set forth in PURPA. The petition requests that the FERC declare that qualifying small power production facilities may not continue to use fossil fuel under the essential fixed assets standard and that they may be required to make refunds with respect to past usage. In August 2000, the partnerships filed motions to intervene and protest before the FERC, vigorously objecting to the position taken by SCE in its petition. The partnerships contend that they have always operated the solar facilities in accordance with certification orders issued to them by the FERC. Such orders were neither challenged nor appealed at the time they were granted, and it is the position of the partnerships that the orders remain fully in effect. Briefing in this proceeding is complete and the parties are currently awaiting a final determination from the FERC. In June 2001, SCE and the partnerships entered into an agreement that provides, among other things, that SCE and the partnerships will take all necessary steps to suspend or stay, during a specified period of time, the proceeding initiated by the petition. The agreement is conditioned upon, among other things, legislative action in California and completion of SCE's financing plan. The agreement provides that, if the conditions of the agreement are satisfied, then SCE and each of the partnerships agree to release and discharge each other from any and all claims of any kind arising from either parties' performance under the power purchase agreements. Such a release would include release of the claim made by SCE in the petition for refunds with respect to past usage. For additional information regarding the agreement, see Management's Discussion and Analysis of Financial Condition and Results of Operations (Management's Discussion) - Results of Operations - FPL Energy. FPL Group and FPL believe that they have meritorious defenses to the pending litigation discussed above and are vigorously defending the suits. Accordingly, the liabilities, if any, arising from the proceedings are not anticipated to have a material adverse effect on their financial statements. 5. Segment Information FPL Group's reportable segments include FPL, a rate-regulated utility, and FPL Energy, a non-rate regulated energy generating subsidiary. Corporate and Other represents other business activities, other segments that are not separately reportable and eliminating entries. FPL Group's segment information is as follows:
Three Months Ended June 30, 2001 2000 FPL Corporate FPL Corporate FPL Energy & Other Total FPL Energy & Other Total (millions) Operating revenues .......... $ 1,935 $ 199 $ 32 $ 2,166 $ 1,533 $ 114 $ 23 $ 1,670 Net income .................. $ 182 $ 38 $ (1) $ 219 $ 172 $ 28 $ 4 $ 204 Six Months Ended June 30, 2001 2000 FPL Corporate FPL Corporate FPL Energy & Other Total FPL Energy & Other Total (millions) Operating revenues .......... $ 3,582 $ 463 $ 62 $ 4,107 $ 2,871 $ 222 $ 45 $ 3,138 Net income (a)............... $ 280 $ 56 $ (7) $ 329 $ 278 $ 42 $ 5 $ 325 June 30, 2001 December 31, 2000 FPL Corporate FPL Corporate FPL Energy & Other Total FPL Energy & Other Total (millions) Total assets ................ $12,211 $3,707 $641 $16,559 $12,020 $2,679 $601 $15,300 _______________ (a) Includes merger-related expense in 2001 of $19 million after-tax, of which $16 million was recognized by FPL and $3 million by Corporate and Other.
6. Summarized Financial Information of FPL Group Capital FPL Group Capital, a 100% owned subsidiary of FPL Group, provides funding for and holds ownership interest in FPL Group's operating subsidiaries other than FPL. FPL Group Capital's debentures are fully and unconditionally guaranteed by FPL Group. Condensed consolidating financial information is as follows Condensed Consolidating Statements of Income
Three Months Ended Three Months Ended June 30, 2001 June 30, 2000 FPL FPL Group FPL FPL Group FPL Group Other Consoli- FPL Group Other Consoli- Group Capital (a) dated Group Capital (a) dated (millions) Operating revenues ................ $ - $ 231 $ 1,935 $ 2,166 $ - $ 138 $ 1,532 $ 1,670 Operating expenses ................ - (193) (1,593) (1,786) - (109) (1,214) (1,323) Interest charges .................. (7) (35) (40) (82) (8) (22) (34) (64) Other income (deductions) - net ... 224 45 (239) 30 210 35 (223) 22 Income before income taxes ........ 217 48 63 328 202 42 61 305 Income tax expense (benefit) ...... (2) 6 105 109 (2) 4 99 101 Net income (loss) ................. $ 219 $ 42 $ (42) $ 219 $ 204 $ 38 $ (38) $ 204 Six Months Ended Six Months Ended June 30, 2001 June 30, 2000 FPL FPL Group FPL FPL Group FPL Group Other Consoli- FPL Group Other Consoli- Group Capital (a) dated Group Capital (a) dated (millions) Operating revenues ................ $ - $ 525 $ 3,582 $ 4,107 $ - $ 268 $ 2,870 $ 3,138 Operating expenses ................ - (463) (3,024) (3,487) - (214) (2,341) (2,555) Interest charges .................. (15) (66) (86) (167) (16) (44) (66) (126) Other income (deductions) - net ... 339 73 (371) 41 337 55 (365) 27 Income before income taxes ........ 324 69 101 494 321 65 98 484 Income tax expense (benefit) ...... (5) 6 164 165 (4) 7 156 159 Net income (loss) ................. $ 329 $ 63 $ (63) $ 329 $ 325 $ 58 $ (58) $ 325 - --------------- (a) Represents FPL, other subsidiaries and consolidating adjustments.
Condensed Consolidating Balance Sheets
June 30, 2001 December 31, 2000 FPL FPL Group FPL FPL Group FPL Group Other Consoli- FPL Group Other Consoli- Group Capital (a) dated Group Capital (a) dated (millions) PROPERTY, PLANT AND EQUIPMENT: Electric utility plant in service and other property .......................... $ - $ 2,663 $19,482 $22,145 $ - $1,984 $19,038 $21,022 Less accumulated depreciation and amortization ............................ - (202) (11,306) (11,508) - (170) (10,918) (11,088) Total property, plant and equipment - net - 2,461 8,176 10,637 - 1,814 8,120 9,934 CURRENT ASSETS: Cash and cash equivalents ................. 1 63 8 72 12 51 66 129 Receivables ............................... 1 668 168 837 56 418 409 883 Other ..................................... 1 79 874 954 - 66 703 769 Total current assets .................... 3 810 1,050 1,863 68 535 1,178 1,781 OTHER ASSETS: Investment in subsidiaries ................ 6,413 - (6,413) - 5,967 - (5,967) - Other ..................................... 124 1,838 2,097 4,059 141 1,365 2,079 3,585 Total other assets ...................... 6,537 1,838 (4,316) 4,059 6,108 1,365 (3,888) 3,585 TOTAL ASSETS ................................ $ 6,540 $ 5,109 $ 4,910 $16,559 $ 6,176 $3,714 $ 5,410 $15,300 CAPITALIZATION: Common shareholders' equity ............... $ 5,749 $ 1,003 $(1,003) $ 5,749 $ 5,593 $ 935 $ (935) $ 5,593 Preferred stock of FPL without sinking fund requirements ............... - - 226 226 - - 226 226 Long-term debt ............................ - 1,897 2,577 4,474 - 1,400 2,576 3,976 Total capitalization .................... 5,749 2,900 1,800 10,449 5,593 2,335 1,867 9,795 CURRENT LIABILITIES: Accounts payable and commercial paper ..... - 1,502 682 2,184 - 705 1,017 1,722 Other ..................................... 684 174 269 1,127 467 186 388 1,041 Total current liabilities ............... 684 1,676 951 3,311 467 891 1,405 2,763 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes and unamortized tax credits ................. - 423 1,223 1,646 - 399 1,248 1,647 Other ..................................... 107 110 936 1,153 116 89 890 1,095 Total other liabilities and deferred credits ............................... 107 533 2,159 2,799 116 488 2,138 2,742 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ........ $ 6,540 $ 5,109 $ 4,910 $16,559 $ 6,176 $3,714 $ 5,410 $15,300 - ---------------- (a) Represents FPL, other subsidiaries and consolidating adjustments.
Condensed Consolidating Statements of Cash Flows
Six Months Ended Six Months Ended June 30, 2001 June 30, 2000 FPL FPL Group FPL FPL Group FPL Group Other Consoli- FPL Group Other Consoli- Group Capital (a) dated Group Capital (a) dated (millions) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ..................... $ 485 $(330) $ 694 $ 849 $ 356 $ (107) $ 499 $ 748 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures and independent power investments ....................... - (899) (595) (1,494) - (294) (660) (954) Capital contributions to subsidiaries...... (300) - 300 - (118) - 118 - Other - net ............................... (8) (24) (23) (55) 6 (24) (45) (63) Net cash used in investing activities ............................ (308) (923) (318) (1,549) (112) (318) (587) (1,017) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt ................ - 493 - 493 - - 145 145 Retirement of long-term debt .............. - - (66) (66) - - (149) (149) Increase (decrease) in commercial paper.... - 772 (368) 404 - 110 253 363 Capital contributions from FPL Group ...... - - - - - 18 (18) - Repurchases of common stock ............... - - - - (34) - - (34) Dividends ................................. (188) - - (188) (183) - - (183) Net cash provided by (used in) financing activities .................. (188) 1,265 (434) 643 (217) 128 231 142 Net increase (decrease) in cash and cash equivalents .......................... (11) 12 (58) (57) 27 (297) 143 (127) Cash and cash equivalents at beginning of period.................................. 12 51 66 129 (16) 376 1 361 Cash and cash equivalents at end of period... $ 1 $ 63 $ 8 $ 72 $ 11 $ 79 $ 144 $ 234 - ----------------- (a) Represents FPL, other subsidiaries and consolidating adjustments.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion should be read in conjunction with the Notes contained herein and Management's Discussion appearing in the 2000 Form 10-K for FPL Group and FPL. The results of operations for an interim period may not give a true indication of results for the year. In the following discussion, all comparisons are with the corresponding items in the prior year. RESULTS OF OPERATIONS FPL Group's net income increased for the three and six months ended June 30, 2001 primarily as a result of increased earnings at both FPL and FPL Energy. The adoption of FAS 133, which became effective January 1, 2001, positively affected FPL Group's and FPL Energy's earnings by $5 million for both the three and six months ended June 30, 2001. For additional information regarding FAS 133, see Note 1 - Accounting for Derivative Instruments and Hedging Activities. FPL Group's earnings for the six months ended June 30, 2001 also include approximately $19 million after-tax of merger-related expenses, of which $16 million relates to FPL and $3 million relates to the Corporate and Other segment. The discussion of results of operations below excludes the effects of FAS 133 and merger- related expenses. FPL - FPL's net income for the three months ended June 30, 2001 improved mainly due to lower depreciation expense, partially offset by higher other operations and maintenance (O&M) expenses and higher interest charges. Revenues from retail base operations were $880 million for the second quarter of 2001 compared to $874 million for the same period last year. This reflects an increase in the average number of customer accounts of 2.3% offset by a decrease in usage per customer of 2.2% due to milder weather. During the second quarter of 2001, FPL accrued $38 million associated with refunds to retail customers under the rate reduction agreement, approximately the same amount as in 2000. In June 2001, FPL refunded approximately $109 million, including interest, to retail customers for the second twelve-month period under the rate agreement. Primarily all of this refund was accrued in periods prior to the second quarter of 2001. In June 2000, approximately $23 million was refunded to retail customers for the first twelve-month period, primarily all of which was accrued in 1999. FPL's revenues and fuel, purchased power and interchange expense have increased for both the three-month and six-month periods. This is the result of an increase in FPL's fuel charge to retail customers in mid-2000 and in 2001 in response to higher fuel costs. FPL's fuel costs are substantially a pass-through and do not significantly affect net income. Depreciation expense declined during the quarter ended June 30, 2001 reflecting lower special depreciation under the rate reduction agreement. Interest expense increased due to higher debt balances required to fund FPL's capital expansion and under-recovered fuel costs. Net income for the six months ended June 30, 2001 improved mainly due to higher energy sales and lower depreciation expense, partially offset by higher O&M expenses and higher interest charges. Revenues from retail base operations were $1,664 million for the six months ended June 30, 2001 compared to $1,632 million for the same period last year. This reflects an increase in the average number of customer accounts of 2.3% and an increase in usage per customer of 1.4%. The increase in usage reflects cold weather conditions, primarily in January, partly offset by the milder weather in the second quarter. Partially offsetting the increase in revenues due to higher usage and customer growth was a higher provision for revenue refund under the rate reduction agreement. During the six months ended June 30, 2001, FPL accrued approximately $78 million relating to refunds to retail customers, compared to $37 million in 2000. Depreciation expense declined during the six-month period reflecting lower special depreciation under the rate reduction agreement. FPL's O&M expenses increased primarily due to additional fossil plant outage costs, partly due to timing, and higher employee-related costs. Interest expense increased due to higher debt balances required to fund FPL's capital expansion and under-recovered fuel costs. In January 2001, the Energy 2020 Study Commission issued a proposal for restructuring Florida's wholesale electricity market anticipating that the proposal would be considered in the 2001 legislative session. In May 2001, the Florida legislative session ended with no action taken on the commission's proposal. The commission is scheduled to develop a recommendation addressing retail competition by the end of 2001. Both wholesale and retail competition issues may then be addressed in the 2002 legislative session. In May 2001, the FPSC ordered FPL to submit MFRs to initiate a base rate proceeding regarding FPL's future retail rates. FPL expects to file MFRs with the FPSC by October 15, 2001. Any change in base rates would become effective after the expiration of the current rate agreement on April 14, 2002. FPL as well as other investor-owned utilities in Florida had requested that the FPSC open a separate generic docket to address issues related to the utilities' participation in an independent RTO, pursuant to the FERC's Order 2000. In June 2001, the FPSC decided to address on an expedited basis the RTO matters in conjunction with the base rate proceeding instead of in a generic docket. In mid-July 2001, the FERC initiated a mediation process directed toward forming a single RTO for the Southeast region of the United States. FPL is participating in the mediation process, scheduled to last 45 days. FPL Energy - FPL Energy's net income for the three and six months ended June 30, 2001 benefited from a power generation portfolio with approximately 1,200 more mw in operation and improved performance from the wind projects. These benefits were somewhat offset in the second quarter of 2001 by lower income from the Northeast region, mainly reflecting lower market prices and transmission constraints affecting the Maine assets. FPL Energy is continuing its expansion plans, which include adding 11 plants with more than 5,800 mw by the end of 2003. FPL Energy has a net ownership interest in approximately 540 mw in California, most of which are wind, solar and geothermal qualifying facilities. The output of these projects is sold predominantly under long- term contracts with California utilities. Increases in natural gas prices and an imbalance between power supply and demand, as well as other factors, have contributed to significant increases in wholesale electricity prices in California. Utilities in California had previously agreed to fixed tariffs to their retail customers, which resulted in significant under- recoveries of wholesale electricity purchase costs. FPL Energy's projects have not received the majority of payments due from California utilities for electricity sold from November 2000 through March 2001. In April 2001, Pacific Gas & Electric Company (PG&E) filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In July 2001, an agreement was reached between PG&E and FPL Energy regarding most of the qualifying facility contracts between the companies. The agreement requires a fixed payment structure over the next five years as well as payment of all outstanding receivables subject to approval of PG&E's reorganization plan by the bankruptcy court and PG&E's creditors. In June 2001, an agreement was reached between SCE and FPL Energy regarding the qualifying facility contracts with SCE. The agreement with SCE also requires a fixed payment structure over the next five years as well as payment of all outstanding receivables but is conditioned upon, among other things, legislative action in California and completion of SCE's financing plan. No assurance can be given that the conditions to the agreements with PG&E and SCE will be satisfied. FPL Group's earnings exposure relating to past due receivables from these California utilities at June 30, 2001 was approximately $15 million. At June 30, 2001, FPL Energy's net investment in California projects was approximately $290 million. It is impossible to predict what the outcome of the situation in California will be or its effect, if any, on FPL Group's financial statements. New Accounting Rules - For information concerning FAS 142, which FPL Group will be required to adopt in 2002, see Note 1 - Goodwill and Other Intangible Assets. LIQUIDITY AND CAPITAL RESOURCES For financing activity during the six months ended June 30, 2001, see Note 3 - Long-Term Debt. In July 2001, a subsidiary of FPL Energy issued $435 million of 7.52% senior secured bonds maturing in 2019, the proceeds of which will be used in part to reduce FPL Group Capital's commercial paper balance. Principal will be payable in semi-annual installments beginning December 31, 2001. For information concerning capital commitments and posting of cash collateral, see Note 4 - Commitments. PART II - OTHER INFORMATION Item 1. Legal Proceedings Reference is made to Item 3. Legal Proceedings in the 2000 Form 10-K for FPL Group and FPL and Part II, Item 1. Legal Proceedings in the March 31, 2001 Form 10-Q for FPL Group and FPL. In November 1999, the Attorney General of the United States, on behalf of the EPA, brought an action in the U.S. District Court for the Northern District of Georgia against Georgia Power Company and other subsidiaries of The Southern Company for certain alleged violations of the Prevention of Significant Deterioration (PSD) provisions and the New Source Performance Standards (NSPS) of the Clean Air Act. In May 2001, the EPA amended its complaint. The amended complaint alleges, among other things, that Georgia Power Company constructed and is continuing to operate Scherer Unit No. 4, in which FPL owns a 76% interest, without obtaining a PSD permit, without complying with the NSPS requirements, and without applying best available control technology for nitrogen oxides, sulfur dioxide and particulate matter as required by the Clean Air Act. It also alleges that unspecified major modifications have been made at Scherer Unit No. 4 that require its compliance with the aforementioned Clean Air Act provisions. The EPA seeks injunctive relief requiring the installation of best available control technology and civil penalties of up to $25,000 per day for each violation from an unspecified date after June 1, 1975 through January 30, 1997, and $27,500 per day for each violation thereafter. Georgia Power Company has answered the amended complaint, asserting that it has complied with all requirements of the Clean Air Act, denying the plaintiff's allegations of liability, denying that the plaintiff is entitled to any of the relief that it seeks and raising various other defenses. In June 2001, the Court stayed discovery and administratively closed the case pending resolution of the EPA's motion for consolidation of discovery in several Clean Air Act cases that was filed with a MDL panel. The MDL panel has heard oral argument on the motion for consolidation but has not yet ruled on it. For discussion of litigation filed by SCE with the FERC against partnerships that are partially owned by FPL Energy, see Note 4 - Litigation. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of FPL Group's shareholders was held on May 14, 2001. Of the 175,838,735 shares of common stock outstanding on the record date of March 5, 2001, a total of 148,182,117 shares were represented in person or by proxy. The following directors were elected effective May 14, 2001: Votes Cast Against or For Withheld H. Jesse Arnelle ........... 137,309,390 10,872,727 Sherry S. Barrat ........... 137,420,056 10,762,061 Robert M. Beall, II ........ 137,404,792 10,777,325 James L. Broadhead ......... 127,817,453 20,364,664 J. Hyatt Brown ............. 137,393,592 10,788,525 Armando M. Codina .......... 137,349,906 10,832,211 Willard D. Dover ............ 137,352,766 10,829,351 Alexander W. Dreyfoos, Jr. .. 137,423,426 10,758,691 Paul J. Evanson .............. 137,307,240 10,874,877 Frederic V. Malek ............ 137,370,662 10,811,455 Paul R. Tregurtha ............ 137,395,206 10,786,911 Item 5. Other Information (a) Reference is made to Item 1. Business - FPL Operations - Retail Ratemaking in the 2000 Form 10-K for FPL Group and FPL. For information regarding FPL's base rate proceeding with the FPSC, see Note 2. (b) Reference is made to Item 1. Business - FPL Operations - System Capability and Load in the 2000 Form 10-K for FPL Group and FPL. For information regarding additional purchase power contracts, see Note 4 - Contracts. On July 30, 2001, FPL set an all-time record for energy peak demand of 18,354 mw. Adequate resources were available at the time of the peak to meet customer demand. (c) Reference is made to Item 1. Business - FPL Operations - Fuel in the 2000 Form 10-K for FPL Group and FPL. Based on current projections, FPL will lose its ability to store spent fuel on site for St. Lucie Unit No. 1 in 2005, St. Lucie Unit No. 2 in 2007, Turkey Point Unit No. 3 in 2009 and Turkey Point Unit No. 4 in 2011. In addition, degradation in a material used in the spent fuel pools at St. Lucie Unit No. 1 and Turkey Point Units Nos. 3 and 4 could result in implementation of alternative spent fuel storage options sooner than projected. FPL is pursuing various approaches to expanding spent fuel storage at the sites, including increasing rack space in its existing spent fuel pools and/or developing the capacity to store spent fuel in dry storage containers. (d) Reference is made to Item 1. Business - FPL Energy Operations in the 2000 Form 10-K for FPL Group and FPL. For information regarding FPL Energy's California projects, see Item 2. Management's Discussion - Results of Operations - FPL Energy. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit FPL Number Description Group FPL 4 Officer's Certificate of FPL Group Capital dated May 11, 2001, x creating the 6 1/8% Debentures, Series due May 15, 2007 10(a) FPL Group, Inc. Deferred Compensation Plan, amended and restated x effective January 1, 2001 10(b) Amendment to Employment Agreement between FPL Group, Inc. and x Thomas F. Plunkett, dated as of May 7, 2001 12(a) Computation of Ratio of Earnings to Fixed Charges x 12(b) Computation of Ratios x
FPL Group agrees to furnish to the Securities and Exchange Commission upon request any instrument with respect to long-term debt that FPL Group has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K. (b) Reports on Form 8-K A current report on Form 8-K was filed with the Securities and Exchange Commission on April 2, 2001 by FPL Group and FPL filing exhibits under Item 7. Financial Statements and Exhibits. A current report on Form 8-K was filed with the Securities and Exchange Commission on April 10, 2001 by FPL Group and FPL filing an exhibit under Item 7. Financial Statements and Exhibits and Item 9. Regulation FD Disclosure. A current report on Form 8-K was filed with the Securities and Exchange Commission on May 18, 2001 by FPL Group and FPL reporting one event under Item 5. Other Events. A current report on Form 8-K was filed with the Securities and Exchange Commission on June 13, 2001 by FPL Group and FPL reporting one event under Item 5. Other Events. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. FPL GROUP, INC. FLORIDA POWER & LIGHT COMPANY (Registrants) Date: August 8, 2001 K. MICHAEL DAVIS ---------------- K. Michael Davis Controller and Chief Accounting Officer of FPL Group, Inc. Vice President, Accounting, Controller and Chief Accounting Officer of Florida Power & Light Company (Principal Accounting Officer of the Registrants) EX-4 3 exh4.txt EXHIBIT 4 Exhibit 4 FPL GROUP CAPITAL INC OFFICER'S CERTIFICATE Creating the 6 1/8% Debentures, Series due May 15, 2007 Paul I. Cutler, the Assistant Treasurer and Assistant Secretary of FPL Group Capital Inc (the "Company"), pursuant to the authority granted in the accompanying Board Resolutions (all capitalized terms used herein which are not defined herein but are defined in the Indenture referred to below, shall have the meanings specified in the Indenture), and Sections 201 and 301 of the Indenture, does hereby certify to The Bank of New York (the "Trustee"), as Trustee under the Indenture of the Company (For Unsecured Debt Securities) dated as of June 1, 1999 (the "Indenture") that: 1. The securities of the fourth series to be issued under the Indenture shall be designated "6 1/8% Debentures, Series due May 15, 2007" (the "Debentures of the Fourth Series"), and shall be issued in substantially the form set forth in Exhibit A hereto; 2. The Debentures of the Fourth Series shall mature and the principal shall be due and payable together with all accrued and unpaid interest thereon on May 15, 2007; 3. The Debentures of the Fourth Series shall bear interest as provided in the form thereof set forth in Exhibit A hereto; 4. Each installment of interest on a Debenture of the Fourth Series shall be payable as provided in the form thereof set forth as Exhibit A hereto; 5. Registration and registration of transfers and exchanges in respect of the Debentures of the Fourth Series may be effected at the office or agency of the Company in The City of New York. Notices and demands to or upon the Company in respect of the Debentures of the Fourth Series may be served at the office or agency of the Company in The City of New York. The Corporate Trust Office of the Trustee will initially be the agent of the Company for such payment, registration and registration of transfers and exchanges and service of notices and demands and the Company hereby appoints the Trustee as its agent for all such purposes; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates, any such office or agency and such agent. The Trustee will initially be the Security Registrar and the Paying Agent for the Debentures of the Fourth Series; 6. So long as the Debentures of the Fourth Series are registered in the name of The Depository Trust Company ("DTC") or its nominee, the Regular Record Date for the interest payable on any given Interest Payment Date with respect to the Debentures of the Fourth Series shall be the close of business on the business day immediately preceding such Interest Payment Date; provided, however, if the Debentures of the Fourth Series are not held by DTC or its nominee, the Regular Record Date will be the close of business on the 15th calendar day next preceding such Interest Payment Date; 7. The Debentures of the Fourth Series shall be redeemable, at the option of the Company, in whole at any time or in part from time to time, on any date prior to maturity (each a "Redemption Date"). The Company shall give notice of its intent to redeem Debentures of the Fourth Series at least 30 days prior to a Redemption Date. If the Company redeems all or any part of the Debentures of the Fourth Series, it will pay a redemption price for such Debentures of the Fourth Series ("Redemption Price") equal to the sum of (1) 100% of the principal amount of the Debentures of the Fourth Series being redeemed plus (2) accrued and unpaid interest thereon, if any, to the Redemption Date plus (3) any applicable "make-whole premium." The Redemption Price for a Debenture of the Fourth Series shall never be less than 100% of the principal amount of the Debenture of the Fourth Series plus accrued and unpaid interest thereon to the Redemption Date. The amount of the make-whole premium with respect to any Debentures of the Fourth Series to be redeemed shall be equal to the excess, if any, of: (1) the sum of the present values, calculated as of the Redemption Date, of: (a) each interest payment that, but for such redemption, would have been payable on the Debentures of the Fourth Series being redeemed on each interest payment date occurring after the Redemption Date (excluding any accrued interest for the period prior to the Redemption Date); and (b) the principal amount that, but for such redemption, would have been payable at the final maturity of the Debentures of the Fourth Series being redeemed; over (2) the principal amount of the Debentures of the Fourth Series being redeemed. The present values of interest and principal payments referred to in clause (1) above shall be determined in accordance with generally accepted principles of financial analysis. Such present values shall be calculated by discounting the amount of each payment of interest or principal from the date that each such payment would have been payable, but for the redemption, to the Redemption Date at a discount rate equal to the Treasury Yield (as defined below) plus 25 basis points. The Company shall appoint an independent investment banking institution of national standing to calculate the make-whole premium; provided that Merrill Lynch, Pierce, Fenner & Smith Incorporated will make such calculation if (1) the Company fails to make such appointment at least 30 calendar days prior to the Redemption Date, or (2) the institution so appointed is unwilling or unable to make such calculation. If Merrill Lynch, Pierce, Fenner & Smith Incorporated is to make such calculation but is unwilling or unable to do so, then the Trustee shall appoint an independent investment banking institution of national standing to make such calculation. In any case, the institution making such calculation is referred to herein as an "Independent Investment Banker." For purposes of determining the make-whole premium, "Treasury Yield" shall mean a rate of interest per annum equal to the weekly average yield to maturity of United States Treasury Notes that have a constant maturity that corresponds to the remaining term to maturity of the Debentures of the Fourth Series, calculated to the nearest 1/12th of a year (the "Remaining Term"). The Independent Investment Banker shall determine the Treasury Yield as of the third business day immediately preceding the applicable Redemption Date. The Independent Investment Banker shall determine the weekly average yields of United States Treasury Notes by reference to the most recent statistical release published by the Federal Reserve Bank of New York and designated "H.15(519) Selected Interest Rates" or any successor release (the "H.15 Statistical Release"). If the H.15 Statistical Release sets forth a weekly average yield for United States Treasury Notes having a constant maturity that is the same as the Remaining Term, then the Treasury Yield shall be equal to such weekly average yield. In all other cases, the Independent Investment Banker shall calculate the Treasury Yield by interpolation, on a straight-line basis, between the weekly average yields on the United States Treasury Notes that have a constant maturity closest to and greater than the Remaining Term and the United States Treasury Notes that have a constant maturity closest to and less than the Remaining Term (in each case as set forth in the H.15 Statistical Release). The Independent Investment Banker shall round any weekly average yields so calculated to the nearest 1/100th of 1%, and shall round upward for any figure of 1/200th of 1% or above. If weekly average yields for United States Treasury Notes are not available in the H.15 Statistical Release or otherwise, then the Independent Investment Banker shall select comparable rates and calculate the Treasury Yield by reference to those rates; 8. No service charge shall be made for the registration of transfer or exchange of the Debentures of the Fourth Series; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the exchange or transfer; 9. If the Company shall make any deposit of money and/or Eligible Obligations with respect to any Debentures of the Fourth Series, or any portion of the principal amount thereof, as contemplated by Section 701 of the Indenture, the Company shall not deliver an Officer's Certificate described in clause (z) in the first paragraph of said Section 701 unless the Company shall also deliver to the Trustee, together with such Officer's Certificate, either: (A) an instrument wherein the Company, notwithstanding the satisfaction and discharge of its indebtedness in respect of the Debentures of the Fourth Series, shall assume the obligation (which shall be absolute and unconditional) to irrevocably deposit with the Trustee or Paying Agent such additional sums of money, if any, or additional Eligible Obligations (meeting the requirements of Section 701), if any, or any combination thereof, at such time or times, as shall be necessary, together with the money and/or Eligible Obligations theretofore so deposited, to pay when due the principal of and premium, if any, and interest due and to become due on such Debentures of the Fourth Series or portions thereof, all in accordance with and subject to the provisions of said Section 701; provided, however, that such instrument may state that the obligation of the Company to make additional deposits as aforesaid shall be subject to the delivery to the Company by the Trustee of a notice asserting the deficiency accompanied by an opinion of an independent public accountant of nationally recognized standing, selected by the Trustee, showing the calculation thereof; or (B) an Opinion of Counsel to the effect that, as a result of a change in law occurring after the date of this certificate, the Holders of such Debentures of the Fourth Series, or portions of the principal amount thereof, will not recognize income, gain or loss for United States federal income tax purposes as a result of the satisfaction and discharge of the Company's indebtedness in respect thereof and will be subject to United States federal income tax on the same amounts, at the same times and in the same manner as if such satisfaction and discharge had not been effected; 10. The Debentures of the Fourth Series will be absolutely, irrevocably and unconditionally guaranteed as to payment of principal, interest and premium, if any, by FPL Group, Inc., as Guarantor (the "Guarantor"), pursuant to a Guarantee Agreement, dated as of June 1, 1999, between the Guarantor and The Bank of New York (as Guarantee Trustee) (the "Guarantee Agreement"). The following shall constitute "Guarantor Events" with respect to the Debentures of the Fourth Series: (A) the failure of the Guarantee Agreement to be in full force and effect; (B) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Guarantor in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Guarantor a bankrupt or insolvent, or approving as properly filed a petition by one or more entities other than the Guarantor seeking reorganization, arrangement, adjustment or composition of or in respect of the Guarantor under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official for the Guarantor or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief or any such other decree or order shall have remained unstayed and in effect for a period of 90 consecutive days; or (C) the commencement by the Guarantor of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Guarantor in a case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Guarantor or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the authorization of such action by the Board of Directors of the Guarantor. Notwithstanding anything to the contrary contained in the Debentures of the Fourth Series, this certificate or in the Indenture, the Company shall, if a Guarantor Event shall occur and be continuing, redeem all of the Outstanding Debentures of the Fourth Series within 60 days after the occurrence of such Guarantor Event at a redemption price equal to the principal amount thereof plus accrued interest to the date of redemption unless, within 30 days after the occurrence of such Guarantor Event, Standard & Poor's Ratings Service (A Division of the McGraw Hill Companies, Inc.) and Moody's Investors Service, Inc. (if the Debentures of the Fourth Series are then rated by those rating agencies, or, if the Debentures of the Fourth Series are not then rated by those rating agencies but are then rated by one or more other nationally recognized rating agencies, then at least one of those other nationally recognized rating agencies) shall have reaffirmed in writing that, after giving effect to such Guarantor Event, the credit rating on the Debentures of the Fourth Series shall be investment grade (i.e. in one of the four highest categories, without regard to subcategories within such rating categories, of such rating agency); 11. With respect to the Debentures of the Fourth Series, each of the following events shall be an additional Event of Default under the Indenture: (A) the consolidation of the Guarantor with or merger of the Guarantor into any other Person, or the conveyance or other transfer or lease by the Guarantor of its properties and assets substantially as an entirety to any Person, unless (a) the Person formed by such consolidation or into which the Guarantor is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Guarantor substantially as an entirety shall be a Person organized and existing under the laws of the United States, any State thereof or the District of Columbia, and shall expressly assume the obligations of the Guarantor under the Guarantee Agreement; and (b) immediately after giving effect to such transaction, no Event of Default (as defined in the Indenture) and no event which, after notice or lapse of time or both, would become an Event of Default (as defined in the Indenture), shall have occurred and be continuing; and (B) the failure of the Company to redeem the Outstanding Debentures of the Fourth Series as required by paragraph 10 hereof; 12. If a Guarantor Event occurs and the Company is not required to redeem the Debentures of the Fourth Series pursuant to paragraph 10 hereof, the Company will provide to the Trustee and the Holders of the Debentures of the Fourth Series annual and quarterly reports containing the information that the Company would be required to file with the Securities and Exchange Commission under Section 13 or Section 15(d) of the Securities Exchange Act of 1934 if it were subject to the reporting requirements of those Sections. If the Company is, at that time, subject to the reporting requirements of those Sections, the filing of annual and quarterly reports with the Securities and Exchange Commission pursuant to those Sections will satisfy this requirement; 13. The Debentures of the Fourth Series will be initially issued in global form registered in the name of Cede & Co. (as nominee for DTC). The Debentures of the Fourth Series in global form shall bear the depository legend in substantially the form set forth in Exhibit A hereto. The Debentures of the Fourth Series in global form will contain restrictions on transfer, substantially as described in the form set forth in Exhibit A hereto; 14. The Debentures of the Fourth Series shall have such other terms and provisions as are provided in the form set forth in Exhibit A hereto; 15. The undersigned has read all of the covenants and conditions contained in the Indenture relating to the issuance of the Debentures of the Fourth Series and the definitions in the Indenture relating thereto and in respect of which this certificate is made; 16. The statements contained in this certificate are based upon the familiarity of the undersigned with the Indenture, the documents accompanying this certificate, and upon discussions by the undersigned with officers and employees of the Company familiar with the matters set forth herein; 17. In the opinion of the undersigned, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion whether or not such covenants and conditions have been complied with; and 18. In the opinion of the undersigned, such conditions and covenants and conditions precedent, if any (including any covenants compliance with which constitutes a condition precedent) to the authentication and delivery of the Debentures of the Fourth Series requested in the accompanying Company Order No. 4 have been complied with. IN WITNESS WHEREOF, I have executed this Officer's Certificate this 11th day of May, 2001 in New York, New York. /s/ Paul I. Cutler -------------------------------- Paul I. Cutler Assistant Treasurer and Assistant Secretary Exhibit A [Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to FPL Group Capital Inc or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] No._______________ Cusip No. 302570 AN 6 [FORM OF FACE OF DEBENTURE] FPL GROUP CAPITAL INC 6 1/8% DEBENTURES, SERIES DUE MAY 15, 2007 FPL GROUP CAPITAL INC, a corporation duly organized and existing under the laws of the State of Florida (herein referred to as the "Company", which term includes any successor Person under the Indenture), for value received, hereby promises to pay to or registered assigns, the principal sum of ____________________ Dollars on May 15, 2007 and to pay interest on said principal sum semi-annually on May 15 and November 15 of each year commencing November 15, 2001 (each an "Interest Payment Date") at the rate of 6 1/8% per annum until the principal hereof is paid or made available for payment. Interest on the Securities of this series will accrue from and including May 11, 2001, to and excluding November 15, 2001, the first Interest Payment Date, and thereafter will accrue from and including the last Interest Payment Date to which interest has been paid or duly provided for. No interest will accrue on the Securities with respect to the day on which the Securities mature. In the event that any Interest Payment Date is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of such delay) with the same force and effect as if made on the Interest Payment Date. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on Regular Record Date which shall be the business day immediately preceding such Interest Payment Date so long as the Securities are registered in the name of The Depository Trust Company ("DTC") or its nominee, provided, however, that if the Securities are not held by DTC or its nominee the Regular Record Date will be the close of business on the 15th calendar day next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture referred to on the reverse hereof. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, the State of New York in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, provided, however, that, at the option of the Company, interest on this Security may be paid by check mailed to the address of the person entitled thereto, as such address shall appear on the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed in New York, New York. FPL GROUP CAPITAL INC By:____________________ [FORM OF CERTIFICATE OF AUTHENTICATION] CERTIFICATE OF AUTHENTICATION Dated: May 11, 2001 This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By:_____________________________ Authorized Signatory [FORM OF REVERSE OF DEBENTURE] This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture (for Unsecured Debt Securities), dated as of June 1, 1999 (herein, together with any amendments thereto, called the "Indenture", which term shall have the meaning assigned to it in such instrument), between the Company and The Bank of New York, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture, including the Board Resolutions and Officer's Certificate filed with the Trustee on May 11, 2001 creating the series designated on the face hereof, for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof. This Security shall be redeemable either at the option of the Company or pursuant to the requirements of the Indenture in whole at any time, or in part from time to time, prior to maturity, upon notice (which may be made subject to receipt of the redemption moneys by the Trustee before the date fixed for redemption) mailed at least thirty (30) days prior to the date fixed for redemption (the "Redemption Date"), at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the Redemption Date plus any applicable make-whole premium (the "Redemption Price"). In no event will the Redemption Price be less than 100% of the principal amount of the Securities being redeemed plus accrued and unpaid interest, if any, to the Redemption Date. The make-whole premium will be calculated by an independent investment banking institution of national standing appointed by the Company or the Trustee, all as described in the Officer's Certificate dated May 11, 2001, establishing the Securities. The Securities will be absolutely, irrevocably and unconditionally guaranteed as to payment of principal, interest and premium, if any, by FPL Group, Inc., as Guarantor (the "Guarantor"), pursuant to a Guarantee Agreement, dated as of June 1, 1999, between the Guarantor and The Bank of New York (as Guarantee Trustee) (the "Guarantee Agreement"). The following shall constitute "Guarantor Events" with respect to the Securities: (A) the failure of the Guarantee Agreement to be in full force and effect; (B) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Guarantor in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Guarantor a bankrupt or insolvent, or approving as properly filed a petition by one or more entities other than the Guarantor seeking reorganization, arrangement, adjustment or composition of or in respect of the Guarantor under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official for the Guarantor or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief or any such other decree or order shall have remained unstayed and in effect for a period of 90 consecutive days; or (C) the commencement by the Guarantor of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Guarantor in a case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Guarantor or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the authorization of such action by the Board of Directors of the Guarantor. Notwithstanding anything to the contrary contained in the Securities, the Officer's Certificate dated May 11, 2001, establishing the Securities, or in the Indenture, the Company shall, if a Guarantor Event shall occur and be continuing, redeem all of the Outstanding Securities within 60 days after the occurrence of such Guarantor Event at a redemption price equal to the principal amount thereof plus accrued interest to the date of redemption unless, within 30 days after the occurrence of such Guarantor Event, Standard & Poor's Ratings Service (a Division of the McGraw Hill Companies, Inc.) and Moody's Investors Service, Inc. (if the Securities are then rated by those rating agencies, or, if the Securities are not then rated by those rating agencies but are then rated by one or more other nationally recognized rating agencies, then at least one of those other nationally recognized rating agencies) shall have reaffirmed in writing that, after giving effect to such Guarantor Event, the credit rating on the Securities shall be investment grade (i.e. in one of the four highest categories, without regard to subcategories within such rating categories, of such rating agency). If a Guarantor Event occurs and the Company is not required to redeem the Securities pursuant to the preceding paragraph, the Company will provide to the Trustee and the Holders of the Securities annual and quarterly reports containing the information that the Company would be required to file with the Securities and Exchange Commission under Section 13 or Section 15(d) of the Securities Exchange Act of 1934 if it were subject to the reporting requirements of those Sections. If the Company is, at that time, subject to the reporting requirements of those Sections, the filing of annual and quarterly reports with the Securities and Exchange Commission pursuant to those Sections will satisfy the requirements of this paragraph. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance with certain conditions set forth in the Indenture. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of all series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in aggregate principal amount of Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and integral multiples thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor and of authorized denominations, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the absolute owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Notwithstanding any provision in the Support Agreement, dated as of December 18, 1985, between the Company and FPL Group, Inc., as from time to time in effect (the "Support Agreement"), no Holder of this Security shall be entitled to enforce the covenants and agreements contained in the Support Agreement with respect to this Security and no Holder of this Security shall have any rights to consent or object to any amendment, modification, waiver, forbearance or termination of the Support Agreement. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. EX-10 4 exh10a.txt EXHIBIT 10A Exhibit 10a FPL GROUP, INC. DEFERRED COMPENSATION PLAN Amended and Restated Effective January 1, 2001 FPL GROUP, INC. DEFERRED COMPENSATION PLAN TABLE OF CONTENTS Page ARTICLE 1 Definitions 1.01 Account or Accounts 2 1.02 Administrator 2 1.03 Annual Deferral Election Form 2 1.04 Award Agreement 2 1.05 Base Salary 2 1.06 Beneficiary Designation Form 2 1.07 Board 2 1.08 Bonus 2 1.09 Change of Control 2 1.10 Committee 4 1.11 Common Stock 4 1.12 Company 4 1.13 Director's Fees 4 1.14 Disability 4 1.15 Distribution Election Form 4 1.16 Distribution Starting Date 5 1.17 Election Period 5 1.18 Employee 5 1.19 Employer 5 1.20 ERISA 6 1.21 Exchange Act 6 1.22 Investment Account 6 1.23 Investment Election Form 6 1.24 IRC 6 1.25 LTIP 6 1.26 LTIP Award 6 1.27 Market Value Per Share 6 1.28 Non-Employee Director 6 1.29 Officer 6 1.30 Participant 7 1.31 Phantom Stock Account 7 1.32 Phantom Shares 7 1.33 Plan 7 1.34 Plan Year 7 1.35 Section 16 Committee 7 1.36 Section 16 Reporting Person 7 ARTICLE 2 Eligibility 2.01 Eligibility to Participate in the Plan 7 ARTICLE 3 Deferred Compensation Benefits 3.01 Deferral Election 7 3.02 Investment Allocation 8 3.03 Deferral in Phantom Shares 9 3.04 Deferral in Dollars 10 ARTICLE 4 Distributions 4.01 Manner of Distribution 11 4.02 Form of Distribution 11 4.03 Hardship Distributions 12 4.04 Distribution Upon a Termination of Employment following Change of Control 12 4.05 Beneficiary Designation 12 4.06 Taxes 13 4.07 Distributions under Domestic Relations Orders 13 ARTICLE 5 Administration 5.01 Administration 13 5.02 Liability of Committee and Administrator; Indemnification 13 5.03 Determination of Benefits 14 5.04 Expenses 15 5.05 Compliance with Securities Laws 16 ARTICLE 6 Miscellaneous 6.01 No Trust Created 16 6.02 No Requirement to Fund 16 6.03 Benefits Payable from General Assets 16 6.04 Successors 16 6.05 No Contract of Employment 16 6.06 Amendment or Termination of Plan 17 6.07 Top Hat Plan 17 6.08 Governing Law 17 6.09 Severability 17 6.10 Construction 17 6.11 Merger or Consolidation or Sale of Assets of Employer 17 6.12 Transfer to an Affiliate of the Employer 17 6.13 Assignment 18 6.14 Incapacity 18 6.15 Effect on Benefits Under Other Plans 18 6.16 Indemnity Upon Change of Control 18 6.17 No Rights as Stockholders 18 Execution Page 19 FPL GROUP, INC. DEFERRED COMPENSATION PLAN THIS FPL GROUP, INC. DEFERRED COMPENSATION PLAN (the "Plan") effective as of January 1, 2001 (the "Restated Effective Date"), is an amendment and restatement of the FPL Group, Inc. Deferred Compensation Plan as amended and restated effective January 1, 1995 (the "Prior Plan"), which restated the original Plan (the "Original Plan") that was adopted by the Board of Directors of FPL Group, Inc. (the "Company") effective as of January 1, 1995 (the "Effective Date"). W I T N E S S E T H T H A T: WHEREAS, the officers and a select group of management or highly compensated employees of the Company and its subsidiaries and affiliates (hereinafter collectively referred to as the "Employer") are entitled to compensation which results from or is attributable to their performance of services as officers and employees of the Employer and may be awarded bonuses and performance related compensation pursuant to the Annual Incentive Plan, the FPL Group Long Term Incentive Plan 1985, the FPL Group, Inc. Long Term Incentive Plan 1994 and other incentive compensation plans; and WHEREAS, directors of the Employer are entitled to fees which result from or are attributable to their performance of services as directors of the Employer; and WHEREAS, the Company established the Original Plan to provide deferred compensation to the officers, directors, and a select group of management or highly compensated employees of the Employer in order to permit such individuals to elect to defer receipt of all or a portion of their base salary, bonuses, incentive plan awards and/or directors' fees in accordance with the provisions of the Plan; and WHEREAS, the Company desires to amend and restate the Prior Plan so as to conform the terms of the Plan with the manner in which it has been operated, and to simplify and reduce the administrative burdens of maintaining the Plan; and WHEREAS, the Employer continues to intend that this Plan be considered an unfunded arrangement that is maintained primarily to provide deferred compensation to members of a select group of management or highly compensated employees of the Employer, for purposes of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); NOW, THEREFORE, the Company hereby amends and restates the Prior Plan effective as of the Restated Effective Date for the exclusive benefit of participants and their beneficiaries on the following terms and conditions: ARTICLE I DEFINITIONS The following terms when used herein shall have the designated meaning unless a different meaning is plainly required by the context in which the term is used: 1.01 "Account" or "Accounts" shall mean the account or accounts established and maintained for a Participant pursuant to Article III of the Plan. A Participant's Account shall consist of the Participant's Phantom Stock Account and/or the Participant's Investment Account. 1.02 "Administrator" shall mean an officer or officers of the Employer designated by the Company to administer the Plan or, until the Company designates such an officer or officers, the Vice President of Human Resources of the Company. 1.03 "Annual Deferral Election Form" shall mean the form or forms that may be approved by the Administrator from time to time for use by a Participant to elect to defer Base Salary, Bonuses, LTIP Awards, and/or Director's Fees under the Plan, subject to the applicable limitations contained in the Plan. 1.04 "Award Agreement" shall mean an agreement executed between the Company and an Officer pursuant to the LTIP setting forth the manner and form of distribution of such Officer's LTIP Award. 1.05 "Base Salary" shall mean the base salary of a Participant paid by the Employer, exclusive of Bonuses, LTIP Awards, and Director's Fees. 1.06 "Beneficiary Designation Form" shall mean the form or forms that may be approved by the Administrator from time to time for use by a Participant to designate a beneficiary or beneficiaries pursuant to Section 4.05. 1.07 "Board" shall mean the Board of Directors of the Company. 1.08 "Bonus" shall mean any bonus that the Participant is awarded pursuant to the Annual Incentive Plan and such other payments awarded under such other incentive compensation plans that are designated by the Administrator as eligible for deferral under this Plan. 1.09 "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 Exchange Act of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition by the Company or any of its subsidiaries, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, or (iii) any acquisition by any corporation with respect to which, following such acquisition, more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or (b) Individuals who, as of the Effective Date, 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 Effective Date 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. For purposes of this Subsection (d), 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). For purposes of this Subsection (d), 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. 1.10 "Committee" shall mean the Compensation Committee of the Board or any such other committee designated by the Board, which shall consist of at least three members of the Board each of whom are not employees of the Company or any of its subsidiaries or affiliates. 1.11 "Common Stock" shall mean the common stock, $.01 par value per share, of the Company. 1.12 "Company" shall mean FPL Group, Inc. 1.13 "Director's Fees" shall mean the fees of a Participant which result from or are attributable to the performance of services by such Participant as a director of the Employer. 1.14 "Disability" shall have the meaning set forth in the Long Term Disability Plan For Employees of FPL Group and Affiliates. 1.15 "Distribution Election Form" shall mean the form or forms that may be approved by the Administrator from time to time for use by a Participant to elect a Distribution Starting Date and payment schedule pursuant to Sections 1.16 and 4.01. 1.16 "Distribution Starting Dat" shall mean: (a) the first day of the first month following the earliest of the Participant's retirement, death, Disability, or other termination of service; (b) the first day of the first Plan Year following the earliest of the Participant's retirement, death, Disability, or other termination of service; or (c) subject to the Administrator authorizing a Participant to select a specific date on which his or her benefits under the Plan shall commence, a specific date specified by the Participant, or as soon thereafter as is administratively feasible, as elected by the Participant in his or her Distribution Election Form. Effective for distributions commencing before the Restated Effective Date, in the event the Participant fails to elect one of the dates described above, his or her "Distribution Starting Date" shall be the first day of the first month following the earliest of the Participant's retirement, death, Disability, or other termination of service, or as soon thereafter as is administratively feasible. Effective for distributions commencing on or after the Restated Effective Date, in the event the Participant fails to elect one of the dates described above, his or her "Distribution Starting Date" shall be the first day of the first Plan Year following the earliest of the Participant's retirement, death, Disability, or other termination of service, or as soon thereafter as is administratively feasible. For purposes of this Plan, if the Participant transfers from one subsidiary or affiliate of the Employer to another subsidiary or affiliate of the Employer, such transfer shall not be considered a termination of service, and a termination of service shall occur only when the Participant separates from the employ of all subsidiaries and affiliates of the Employer. 1.17 "Election Period" shall mean the period that occurs annually, as established by the Administrator, during which a Participant may deliver an Annual Deferral Election Form and a Distribution Election Form to the Administrator and which shall commence during the calendar year prior to the deferral and shall end before the date on which a Participant's benefits under the Plan would otherwise be treated as constructively received or the economic benefit of which would be enjoyed (within the meaning of the Federal tax laws). 1.18 "Employee" shall mean an employee of the Employer in grade 12 or above who is designated by the Administrator as eligible to participate in the Plan, provided that such individual is among a select group of management or highly compensated employees within the meaning of ERISA 201(2). 1.19 "Employer" shall mean the Company and its subsidiaries and affiliates. 1.20 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.21 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1.22 "Investment Account" shall mean an account established and maintained for a Participant pursuant to Section . 1.23 "Investment Election Form" shall mean the form or forms that may be approved by the Administrator from time to time for use by a Participant (i) to allocate deferred Base Salary, Bonuses, LTIP Awards, and/or Director's Fees between his or her Phantom Stock Account and Investment Account, if any, pursuant to Section 3.02, and (ii) to the extent such deferrals are allocated to the Participant's Investment Account, to allocate such deferrals among the investment funds selected by the Company pursuant to Section 3.04(b). 1.24 "IRC" shall mean the Internal Revenue Code of 1986, as amended. 1.25 "LTIP" shall mean the FPL Group, Inc. Long Term Incentive Plan 1994 or the FPL Group, Inc. Long Term Incentive Plan 1985, as applicable. 1.26 "LTIP Award" shall mean an award granted pursuant to the terms of the LTIP, other than an award of Restricted Stock (as defined in the LTIP) that may be settled in shares of Common Stock unless the Administrator, after determining that the deferral of such award under this Plan will defer the federal income taxation of such award, authorizes the deferral of such Restricted Stock award, in its sole and absolute discretion. 1.27 "Market Value Per Share" shall mean the closing sales price on the relevant date for shares of Common Stock as reported on the Composite Transactions Tape of the New York Stock Exchange, Inc. on such date. If such date is not a trading day or no sales occur on such date, the "Market Value Per Share" means the weighted average of the closing prices on the nearest date before and the nearest date after the valuation date. The average is to be weighed inversely by the respective number of trading days between the selling dates and the valuation date. 1.28 "Non-Employee Director" shall mean a member of the Board who is not an employee of the Company or any of its subsidiaries or affiliates. 1.29 "Officer" shall mean an officer of the Employer who is designated by the Administrator as eligible to participate in the Plan, provided that such individual is among a select group of management or highly compensated employees within the meaning of ERISA 201(2). 1.30 "Participant" shall mean a Non-Employee Director, Officer or Employee who is eligible to participate in the Plan and has elected to defer Base Salary, Bonuses, LTIP Awards and/or Director's Fees, as provided in Section . 1.31 "Phantom Stock Account" shall mean an account established and maintained for a Participant pursuant to Section . 1.32 "Phantom Shares" shall mean hypothetical shares of Common Stock. 1.33 "Plan" shall mean the FPL Group, Inc. Deferred Compensation Plan, as contained herein, and as may be amended from time to time. 1.34 "Plan Year" shall mean the calendar year. 1.35 "Section 16 Committee" shall mean the committee of the Board established for the purposes of approving certain matters relating to Section 16 Reporting Persons. 1.36 "Section 16 Reporting Person" shall mean any (a) director of the Company or (b) officer of the Employer designated by the Board to be an "executive officer" for purposes of Section 16(a) of the Exchange Act. ARTICLE II ELIGIBILITY 2.01 Eligibility to Participate in the Plan. A Non-Employee Director, Officer or Employee shall be eligible to participate in the Plan to the extent provided herein. ARTICLE III DEFERRED COMPENSATION BENEFITS 3.01 Deferral Election. (a) In General. A Non-Employee Director, Officer or Employee may elect to defer all or a portion of his or her Base Salary, Bonuses, LTIP Awards, and/or Director's Fees to the extent provided in this Section into a Phantom Stock Account and/or an Investment Account with respect to any Plan Year commencing on or after the Effective Date by completing, signing, and delivering an Annual Deferral Election Form to the Administrator during an Election Period: (1) A Non-Employee Director may defer all or a part of his or her Director's Fees; (2) An Officer may defer all or a portion of his or her Base Salary, Bonuses, and/or LTIP Awards; and (3) An Employee may defer all or a portion of his or her Bonuses, and, to the extent that the Administrator may in its sole discretion permit, any Employee may defer all or a portion of his or her Base Salary and/or LTIP Awards. (b) Modification or Revocation of Deferral Elections. A deferral election made pursuant to Subsection (a) during the Election Period by a Participant (other than a Section 16 Reporting Period) may be modified or revoked at any time during the Plan Year by the making of a new deferral election on the Annual Deferral Election Form. Such new deferral election shall be effective only with respect to Base Salary, Bonuses, LTIP Awards, and/or Director's Fees attributable to services performed subsequent to the date such election is delivered to and accepted by the Administrator, and such election shall in no event be effective with respect to any such items of compensation attributable to services performed on or prior to such date. If a Section 16 Reporting Person incurs a financial hardship (as defined in Section 4.03) and such Section 16 Reporting Person requests in writing a reduction or elimination of deferrals for the remainder of a Plan Year, the Administrator, in its sole and absolute discretion, but with the prior approval of the Section 16 Committee, may reduce or eliminate such future deferrals for the remainder of the Plan Year. (c) Limitation on Deferrals. Notwithstanding anything to the contrary in this Plan, the amount to be deferred under this Plan may not reduce the amount of Base Salary, Bonuses, LTIP Awards, and/or Director's Fees which would be paid to the Participant (determined after taking the election into account) below that required to pay the Participant's portion of any taxes due under Chapter 21 (Federal Insurance Contributions Act) of the IRC, any other employment taxes, and the amount, if any, required to be withheld for income tax purposes. 3.02 Investment Allocation. (a) In General. A Phantom Stock Account and/or an Investment Account shall be established and maintained for each Participant. The Phantom Stock Account shall be measured in Phantom Shares and the Investment Account shall be measured in dollars. The Accounts shall be hypothetical in nature and shall be maintained for bookkeeping purposes only. Neither the Plan nor any of the Accounts shall hold or be required to hold any actual funds or assets. (1) Phantom Stock Account. (i) So long as a Participant is a Section 16 Reporting Person, the Participant's Phantom Stock Account shall, pursuant to an Award Agreement, be credited as described in Section with any deferred amounts attributable to LTIP Awards (other than shareholder value awards) and may, upon a Participant's election, be credited with Director's Fees. With respect to shareholder value awards granted under the LTIP, a Section 16 Reporting Person may elect to credit his or her Investment Account as described in Section 3.04 with any deferred amounts attributable to such awards. (ii) A Participant who formerly was a Section 16 Reporting Person and who is no longer a Section 16 Reporting Person may elect to credit his or her Investment Account as described in Section 3.04 with any deferred amounts attributable to LTIP Awards. (2) Investment Account. A Participant's Investment Account shall, upon a Participant's election, be credited as described in Section with any deferred amounts attributable to Base Salary, Bonuses, Director's Fees and/or, subject to Section 3.02(a)(1), LTIP Awards. (b) A Participant shall submit to the Administrator during an Election Period an Investment Election Form allocating his deferred Base Salary, Bonuses, LTIP Awards and/or Director's Fees between the Participant's Phantom Stock Account and/or Investment Account subject to Section 3.02(a)(1). A Participant may not change the allocation of deferred amounts between the Phantom Stock Account and the Investment Account on his or her Investment Election Form with respect to any Plan Year. Moreover, a Participant shall be prohibited from transferring any amounts credited to his Phantom Stock Account to his Investment Account and from transferring any amounts credited to his Investment Account to his Phantom Stock Account. (c) The Administrator shall provide to each Participant, within 120 days after the end of each Plan Year, a statement setting forth the balance of Phantom Shares in the Participant's Phantom Stock Account and the dollar value of the Participant's Investment Account as of the end of the Plan Year. 3.03 Deferral in Phantom Shares. (a) Stock Award Deferral. When a Participant's Phantom Stock Account is to be credited for deferred amounts attributable to LTIP Awards which would have otherwise been distributed to the Participant in the form of shares of Common Stock, then the number of shares of Common Stock which would have otherwise been distributed to the Participant shall be credited to the Participant's Phantom Stock Account as of the date that such distribution to the Participant would have otherwise occurred. (b) Cash Deferral. When a Participant's Phantom Stock Account is to be credited for deferred amounts or dividends which would have otherwise been distributed to the Participant in the form of cash, then the Participant's Phantom Stock Account shall be credited with the number of Phantom Shares equal to the number of shares of Common Stock that could have been purchased with such cash amounts at the Market Value Per Share on the date that such cash amounts would have otherwise been distributed to the Participant. The number of such Phantom Shares shall be computed to three decimal places. (c) Stock Dividends. A Participant's Phantom Stock Account shall be credited on each record date for a stock dividend paid to holders of Common Stock with that number of full and fractional shares of Common Stock which the Participant would have received if on that record date such Participant had been the holder of record of a number of shares of Common Stock equal to the number of Phantom Shares (including fractions) then credited to his or her Phantom Stock Account. (d) Adjustments. The number of Phantom Shares shall be adjusted as determined in the discretion of the Administrator to reflect (i) any change in the outstanding Common Stock by reason of any stock dividend or split, recapitalization, reorganization, merger, consolidation, split-up, spin-off or any similar corporate change affecting the Common Stock; (ii) unusual or nonrecurring events affecting the Company or any subsidiary or the financial statements of the Company or any subsidiary; or (iii) changes in applicable laws, regulations, or accounting principles. 3.04 Deferral in Dollars. (a) Deferred Amounts. When a Participant's Investment Account is to be credited with a deferred amount measured in dollars, that amount shall be credited to the Investment Account as of the close of business on the date that such amount would have otherwise been paid to the Participant. (b) Investment Funds. The Administrator may permit a Participant to allocate the Participant's Investment Account among one or more investment funds selected by the Company on an Investment Election Form, except that a Section 16 Reporting Person may not allocate any portion of the deferred amounts in his or her Investment Account to an investment fund investing all or a portion of its funds in Common Stock. A Participant may re-allocate the deferred amounts among such investment funds at any time or from time to time by submitting a new Investment Election Form to the Administrator, except that a Section 16 Reporting Person may not re-allocate any portion of the deferred amounts in his or her Investment Account to an investment fund investing all or a portion of its funds in Common Stock. Deferred amounts allocated to an investment fund shall be deemed to be invested in such investment fund and shall be adjusted each business day to reflect the hypothetical income, gain and loss, including any unrealized appreciation or depreciation of such investment fund. (c) Unallocated Funds. In the event a Participant fails to elect one or more investment funds on an Investment Election Form, the Participant's Investment Account shall be invested in an investment fund designated by the Administrator until such time as the Participant shall submit an Investment Election Form to the Administrator. ARTICLE IV DISTRIBUTIONS 4.01 Manner of Distribution. The Employer shall pay to the Participant (or his or her beneficiary or beneficiaries if the Participant is deceased) his or her entire Account: (a) on the Distribution Starting Date; (b) in substantially equal monthly installments commencing on the Distribution Starting Date and continuing for a period of up to 10 years; or (c) in accordance with such other distribution schedule as may be approved by the Administrator; as elected by the Participant in his or her Distribution Election Form. The Participant may make a separate distribution election with respect to each of his or her Phantom Stock Account and Investment Account. For a distribution election to be valid, it must be made during an Election Period unless otherwise approved by the Administrator, and in the case of Section 16 Reporting Persons, with the additional prior approval by the Section 16 Committee. In the event the Participant fails to make such a distribution election, the Employer shall pay to the Participant (or his or her beneficiary or beneficiaries if the Participant is deceased) his or her entire Account in a single sum on the Distribution Starting Date. It is the intent of the Employer that such Election Period with respect to a Participant end before the date on which a Participant's benefits under this Plan would otherwise be treated as constructively received or the economic benefit of which would be enjoyed (within the meaning of the Federal tax laws). After distribution of a Participant's Account has commenced, a Participant's right to amend his or her distribution election or elections ceases. Distribution Election Forms submitted after distribution of a Participant's Account has commenced shall be null and void. The distribution election made in a Participant's most recent Distribution Election Form shall govern over the distribution elections made in all prior Distribution Election Forms for such deferred amounts; provided, however, that the distribution of such deferred amounts commences no sooner than six months after the date of the most recent Distribution Election Form. If the distribution of such deferred amounts commences within six months after the date of the most recent Distribution Election Form, the Distribution Election Form that was delivered to the Administrator on the most recent date which is more than six months prior to the distribution of such deferred amounts shall govern over the distribution election in the Participant's most recent Distribution Election Form. 4.02 Form of Distribution. Benefits attributable to the value of the Investment Account shall be distributed to the Participant in cash. Benefits attributable to the Phantom Stock Account shall be distributed to the Participant in the form of cash and/or shares of Common Stock in accordance with the terms of the Participant's Award Agreement (or, in the event such Award Agreement provides the Committee the discretion to determine the form of payment or otherwise fails to specify the form of payment, the Committee shall have the sole and absolute discretion to determine the form of payment). To the extent that the distribution is in the form of shares of Common Stock, such distribution shall be subject to all applicable securities laws andregulations, and the Company shall have taken all steps, if any, including registration and listing, as may be necessary to make the shares immediately transferrable (by sale or otherwise) by the Participant without further regulatory action or compliance on the part of the Participant. The Participant shall reasonably cooperate with the Company, at the Company's expense, to facilitate such compliance and related actions by the Company. 4.03 Hardship Distributions. The Participant shall be entitled to a distribution of all or a portion of his or her Account upon written application to the Administrator and the determination of the Administrator, in its sole and absolute discretion, except that in the case of a Section 16 Reporting Person, with the additional prior approval of the Section 16 Committee, that without such distribution, the Participant would suffer or continue to suffer a financial hardship. A "financial hardship" is a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in IRC section 152(a)) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Withdrawals of amounts because of a financial hardship shall only be permitted to the extent reasonably needed to satisfy the financial need. 4.04 Distribution Upon a Termination of Employment following a Chance of Control. Anything in this Plan to the contrary notwithstanding, if a Change of Control occurs and as a result of such Change of Control the Participant's employment with the Company or its subsidiaries and affiliates is terminated, then the Employer shall pay to the Participant (or his or her beneficiary or beneficiaries if the Participant is deceased) his or her entire Account in a single sum on the first day of the month following the termination of employment. 4.05 Beneficiary Designation. For purposes of this Plan, a Participant's beneficiary or beneficiaries under this Plan shall be the person or persons last designated by a Participant, by written notice filed with the Administrator, to receive a Plan benefit upon the death of the Participant. The designation of a beneficiary other than the spouse of the Participant, if any, shall be void unless such spouse consents to such non-spouse beneficiary designation. In the event a Participant fails to designate a person or persons as provided above, or if no beneficiary so designated survives the Participant, then for all purposes of this Plan, the beneficiary shall be the spouse of the Participant, if living. If the spouse is not living, then payment shall be made to the beneficiary or beneficiaries designated by such Participant for the death benefits provided pursuant to the split dollar arrangement entered into with the Employer. If a Participant has not entered into a split dollar arrangement with the Employer, such Participant's beneficiary or beneficiaries under this Plan shall be the beneficiary or beneficiaries of his or her death benefits under the Medical, Dental and Life Insurance Plan for Employees of FPL Group, Inc. (or any successor plan thereof). If a Participant is not a participant in either of the above described plans, the Participant's beneficiary shall be his or her estate. 4.06 Taxes. All amounts payable to any Participant hereunder may be reduced by any and all federal, state and local taxes imposed upon the Participant or his or her beneficiary or beneficiaries which are required to be withheld by the Employer. 4.07 Distributions under Domestic Relations Orders. Nothing contained in this Plan prevents the Employer, in accordance with the direction of the Administrator, from complying with the provisions of a judgment, decree, or order (including approval of a property settlement agreement) resulting from a divorce, legal separation, annulment or change in legal custody that assigns to a spouse, former spouse, child or other dependent of a Participant (an "Alternate Payee") the right to receive all or a portion of the benefits of a Participant under the Plan in a form of payment permitted under the terms of the Plan (a "Domestic Relations Order"). The Employer shall make any payments required under this Section 4.07 by separate checks to each Alternate Payee, unless otherwise explicitly provided in the Domestic Relations Order. Distribution to an Alternate Payee under a Domestic Relations Order is permitted at any time, irrespective of whether the Participant is currently entitled to a distribution of his or her benefits under the Plan. A distribution to an Alternate Payee prior to the time the Participant is entitled to a distribution of his or her benefits under the Plan is available only if the Domestic Relations Order explicitly requires distribution at that time. Notwithstanding the foregoing, nothing in this Section 4.07 provides a Participant the right to receive a distribution of his or her benefits at a time not otherwise permitted under the terms of the Plan nor does it permit the Alternate Payee to receive a form of payment not otherwise permitted under the Plan. Within a reasonable period of time after receiving the Domestic Relations Order, the Administrator will determine whether such order complies with the terms of the Plan and will notify the Participant and each Alternate Payee of its determination. If any portion of the Participant's benefit is payable during the period the Administrator is making such determination, the Administrator shall make a separate accounting of the amounts payable. ARTICLE V ADMINISTRATION 5.01 Administration. The Administrator shall administer and interpret this Plan in accordance with the provisions of the Plan in its sole and absolute discretion. Any determination or decision by the Administrator shall be conclusive and binding on all persons who at any time have, have had, or may have a claim to any interest whatsoever under this Plan. 5.02 Liability of Committee and Administrator; Indemnification. To the extent permitted by law, no member of the Committee (or its delegatee) or the Administrator shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his or her own gross negligence or willful misconduct. The Employer shall indemnify the members of the Committee (or its delegatee) and the Administrator against any and all claims, losses, damages, expenses, including any counsel fees and costs, incurred by them, and any liability, including any amounts paid in settlement with their approval, arising from their action or failure to act, except when the same is judicially determined to be attributable to their gross negligence or willful misconduct. 5.03 Determination of Benefits. (a) Claim for Benefits. A person, or his or her duly authorized representative, who believes that he or she is being denied a benefit to which he or she is entitled under the Plan (hereinafter referred to as a "Claimant") may file a written request for such benefit with the Administrator, setting forth his or her claim. The request must be addressed to the Company at its then principal place of business. (b) Timing and Notification of Benefit Determination. (1) Timing. If a claim is wholly or partially denied, the Administrator shall notify the Claimant of the Plan's adverse benefit determination (as defined in DOL Reg. 2560.503-1(m)(4)) within a reasonable period of time, but not later than 90 days after receipt of the claim by the Plan, unless the Administrator determines that special circumstances require an extension of time for processing the Claim. If the Administrator determines that an extension of time for processing is required, notice (as defined in DOL Reg. 2560.503-1(m)(5)) of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period; however, in no event shall such extension exceed a period of 90 days from the end of such initial period. Any extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the benefit determination. For purposes of this Subsection (b), the period of time within which a benefit determination is required to be made shall begin at the time a Claim is filed in accordance with the procedures set forth in this Subsection (b), without regard to whether all the information necessary to make a benefit determination accompanies such filing. (2) Manner and Content of Notification of Benefit Determination. The Administrator shall provide a Claimant with written or electronic notification of any adverse benefit determination. Any electronic notification shall comply with the standards imposed by DOL Reg. 2520.104b-1(c)(1)(i), (iii), and (iv). The notification shall set forth, in a manner calculated to be understood by the Claimant (i) the specific reason or reasons for the adverse determination, (ii) reference to the specific Plan provisions on which the determination is based, (iii) a description of any additional material or information necessary for the Claimant to perfect the Claim and an explanation of why such material or information is necessary, and (iv) a description of the Plan's review procedures and the time limits applicable to such procedures, including a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. (c) Appeal of Adverse Benefit Determination; Full and Fair Review. Within 60 days after the receipt by the Claimant of the written opinion described in Subsection (b), the Claimant may request in writing that the Committee review the claim and the Administrator's initial adverse benefit determination. Such request must be addressed to the Company at its then principal place of business, and may include the submission of written comments, documents, records, and other information relating to the claim for benefits. The Claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant (as defined in DOL Reg. 2560.503-1(m)(8)) to the Claimant's claim for benefits. The Committee's review shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. If the Claimant does not request a review of the Administrator's initial determination within such 60 day period, he shall be barred and estopped from challenging such determination. (d) Notification of Benefit Determination on Review. (1) Timing of Notification of Benefit Determination on Review. The Committee shall notify a Claimant of the Plan's determination of a request for review within a reasonable period of time, but not later than 60 days after receipt of the Claimant's request for review by the Plan, unless the Committee determines that special circumstances require an extension of time for processing the Claim. If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60-day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review. For purposes of this Subsection (d), the period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is filed in accordance with the procedures set forth in Subsection (c), without regard to whether all the information necessary to make a benefit determination on review accompanies such filing. In the event that a period of time is extended due to a Claimant's failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the Claimant until the date on which the Claimant responds to the request for additional information. (2) Manner and Content of Notification of Benefit Determination on Review. The Committee shall provide a Claimant with written or electronic notification of a Plan's benefit determination on review. Any electronic notification shall comply with the standards imposed by DOL Reg. 2520.104b-1(c)(1)(i), (iii), and (iv). In the case of an adverse benefit determination, the notification shall set forth, in a manner calculated to be understood by the Claimant (i) the specific reason or reasons for the adverse determination, (ii) reference to the specific Plan provisions on which the benefit determination is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's claim for benefits, and (iv) a statement of the Claimant's right to bring a civil action under ERISA Section 502(a). 5.04 Expenses. The cost of this Plan and the expenses of administering the Plan shall be borne by the Employer. 5.05 Compliance with Securities Laws. Notwithstanding anything else to the contrary contained herein, (a) the Section 16 Committee shall have sole and absolute discretion with respect to the application, administration and interpretation of the Plan with regard to, and the deferral of compensation by, any Participant who is a Section 16 Reporting Person; and (b) a Section 16 Reporting Person shall not take any actions or make any elections which could result in short-swing trading liability under Section 16 of the Exchange Act. ARTICLE VI MISCELLANEOUS 6.01 No Trust Created. Nothing contained in this Plan, and no action taken pursuant to its provisions by any party shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between the Employer and the Participants or their beneficiaries. 6.02 No Requirement to Fund. The Employer is not required to and shall not fund (within the meaning of the Federal tax laws) this Plan. Even though amounts deferred under this Plan are credited to the Accounts of the Participants, the Employer shall not be required to earmark, deposit, contribute to a trust, or otherwise set aside funds for such Accounts. 6.03 Benefits Payable from General Assets. The benefits payable under this Plan to a Participant or his or her beneficiary or beneficiaries may be made from the general assets of the Employer or from such other assets earmarked, deposited, contributed to a trust, or otherwise set aside to fund benefits under this Plan. It is intended that the Employer's obligation under this Plan be an unfunded and unsecured promise to pay money in the future. Any funds earmarked, deposited, contributed to a trust, or otherwise set aside by the Employer to assist it in satisfying its obligations under this Plan shall be subject to the claims of general creditors of the Employer. The Participants' (or their beneficiaries') rights to benefits under this Plan which are payable by the Employer shall be no greater than the right of any unsecured general creditor of the Employer, and the Participants (and their beneficiaries) shall not have any security interest in any assets (including, but not limited to, assets earmarked, deposited, contributed to a trust, or otherwise set aside to fund benefits provided under this Plan) of the Employer. 6.04 Successors. This Plan shall be binding upon the Employer and its successors and assigns, and the Participant, his or her successors, heirs, executors, administrators and beneficiaries. 6.05 No Contract of Employment. Nothing contained in this Plan shall be construed to be a contract of employment or as conferring upon an eligible Non-Employee Director, Officer or Employee the right to continue to be employed by the Employer in his or her present capacity, or in any capacity, or any rights as an officer or director of the Employer. 6.06 Amendment or Termination of Plan. Except to the extent otherwise reserved to the Administrator, the President or any Vice President or the General Counsel of the Company (the "Corporate Officers") shall have the right to amend this Plan at any time and from time to time, including a retroactive amendment. The Committee expressly reserves the right to terminate the Plan and to amend Sections 1.05, 1.08, 1.09, 1.10, 1.11, 1.12, 1.13, 1.14, 1.16, 1.18, 1.19, 1.27, 1.28, 1.29, 1.30, 2.01, 3.01, 4.01, 4.03, 4.04, 6.02, 6.03, and 6.06 hereof and shall have the right to amend any such section or sections at any time or from time to time, including a retroactive amendment. No amendment or termination of the Plan shall, without the consent of any person affected thereby, modify or in any way affect any right or obligation under this Plan created prior to such amendment or termination. 6.07 Top Hat Plan. It is the Employer's intention that this Plan be construed as an unfunded, non-qualified deferred compensation plan maintained for a select group of management or highly compensated employees within the meaning of ERISA 201(2). 6.08 Governing Law. The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Florida unless superseded by federal law. 6.09 Severability. In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said illegal or invalid provisions had never been inserted herein. 6.10 Construction. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of the Plan. Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. 6.11 Merger or Consolidation or Sale of Assets of Employer. Subject to the requirement that the Employer make distributions upon termination of a Participant's employment following a Change of Control pursuant to Section 4.04, in the event of the merger or consolidation of the Employer with any other entity, or in the event substantially all of the assets of the Employer are to be transferred to another entity, the successor entity resulting from the merger or consolidation, or the transferee of such assets, as the case may be, shall assume the obligations of the Employer hereunder and shall be substituted for the Employer hereunder. 6.12 Transfer to an Affiliate of the Employer. An election to defer Base Salary, Bonuses, LTIP Awards, and/or Director's Fees under this Plan shall apply with respect to such items of compensation paid by a Participant's Employer at the time such deferral election is properly made. In the event the Participant has a deferral election in effect and transfers from one subsidiary or affiliate of the Employer to another subsidiary or affiliate of the Employer, the new Employer shall to the extent possible continue to comply with such deferral election (and the other related administrative elections). As soon as administratively practicable, the Administrator shall notify such new Employer of the Participant's elections in effect and shall make available copies of the relevant forms on which such elections were made. 6.13 Assignment. No right, title or interest of any kind in the Plan shall be transferable or assignable by a Participant or beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy or any kind, whether voluntary or involuntary nor subject to the debts, contracts, liabilities, engagements, or torts of a Participant or beneficiary, except as provided by Sections 4.06 and 4.07. Except as provided in this Section , any attempt to alienate, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void. 6.14 Incapacity. If the Administrator determines that any person to whom any distribution is payable under this Plan is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim thereto has been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Administrator to have incurred expense for such person otherwise entitled to payment, in such manner as the Administrator may determine. Any such payment shall be a complete discharge of the liabilities of the Employer under this Plan. 6.15 Effect on Benefits Under Other Plans. Any Base Salary, Bonuses, LTIP Award, and/or Director's Fees deferred hereunder and any benefits payable under this Plan shall not be considered salary or other compensation to the Participant for the purposes of computing benefits to which he or she may be entitled under any other employee benefit plan established or maintained by the Employer, except to the extent provided in such other employee benefit plan. 6.16 Indemnity Upon Change of Control. If upon a Change of Control it becomes necessary for a Participant (or his or her beneficiary or beneficiaries) to institute a claim, by litigation or otherwise, to enforce his or her rights under this Plan, the Employer (and its successors or transferee in accordance with Section ) shall indemnify such Participant (or his or her beneficiary or beneficiaries) from and against all costs and expenses, including legal fees, incurred by him or her in instituting and maintaining such claim. 6.17 No Rights as Stockholders. No Participant who elects to defer compensation into a Phantom Stock Account pursuant to Section will have any rights arising out of the ownership of Common Stock as a result of such deferral election. IN WITNESS WHEREOF the Committee has caused this Plan to be signed by a duly appointed officer of the Company and the Company's corporate seal to be hereunto affixed as of this 30th day of July, 2001. ATTEST: FPL GROUP, INC. By: DENNIS P. COYLE __________________________________ Dennis P. Coyle, General Counsel and Secretary (Seal) EX-10 5 exh10b.txt EXHIBIT 10B Exhibit 10b AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT to Employment Agreement (the "Amendment") is dated as of May 7, 2001 between FPL Group, Inc., a Florida corporation (the "Company"), and Thomas F. Plunkett (the "Executive"). WHEREAS, the Company and the Executive are parties to that certain Employment Agreement dated as of May 10, 1999 (the "Agreement"); and WHEREAS, pursuant to its terms, the Agreement became effective as a result of the change of control of the Company (as defined in Section 2 thereof) that occurred on December 15, 2000; and WHEREAS, pursuant to Section 14 of the Agreement the parties may amend the Agreement by written agreement executed by the parties; and WHEREAS, the parties desire to amend the Agreement pursuant to the terms and conditions hereof, effective as of June 4, 2001 (the "Amendment Effective Date"); NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements herein contained, the Company and the Executive hereby amend the Agreement as follows: 1. Shortened Employment Period. Section 3 of the Agreement is hereby revised in its entirety to read as follow: Employment Period. The Company hereby agrees to continue the Executive in its employ and the Executive hereby agrees to remain in the employ of the Company for a period commencing on the Effective Date and ending on November 30, 2001 (the "Employment Period"). Notwithstanding the foregoing, during the period beginning June 4, 2001 and ending on November 30, 2001 (the "Expiration Date"), the Company will permit the Executive to perform his services for the Company at his principal residence, provided, however, that the Executive understands and agrees that the Company may require him to perform his services for the Company at its headquarters from time to time, as needed. 2. Resignation Without Good Reason. The Executive hereby acknowledges that his resignation from his employment with the Company as of the Expiration Date is without Good Reason (as defined in Subsection 6(c) of the Agreement). 3. Payments and Benefits Upon Resignation Without Good Reason. Effective as of the Expiration Date, the Company and the Executive agree that the Executive shall not be entitled to the payments and benefits set forth in Subsections 7(a), (b) and (c) of the Agreement (relating to payments and benefits upon Executive's death, disability, or termination other than for Cause or resignation for Good Reason), but shall be entitled to the payments and benefits set forth in Subsection 7(d) of the Agreement (relating to payments and benefits as a result of a resignation without Good Reason), except as follows: (a) Vacation. Effective as of the Amendment Effective Date, Subsection 5(i) of the Agreement (relating to vacation benefits) is hereby deleted in its entirety, and the Executive hereby agrees to forfeit any vacation benefits to which he otherwise would be entitled under the Agreement or any other plan, policy, program, or practice, absent this Amendment. (b) Annual Bonus. Subsection 5(b) of the Agreement (relating to annual bonuses) is hereby deleted in its entirety, and the Executive hereby acknowledges and agrees that he may be awarded, in the sole and absolute discretion of the Company, an annual bonus for the portion of the Company's 2001 fiscal year during which he was employed. (c) Welfare Benefits. Subsection 5(e) of the Agreement (relating to health and other employee welfare benefits) is hereby deleted in its entirety, and the Executive hereby acknowledges that notwithstanding any provision of the Agreement to the contrary, he (i) shall participate only in the Company's retiree health and retiree life plans, and (ii) shall be eligible to participate, at his own expense, in the Company's executive medical, dental, and vision plans in accordance with Part 6 of Title I of the Employee Retirement Income Security Act of 1974 (commonly referred to as COBRA coverage). (d) Long Term Incentive Awards. Subsection 5(c) of the Agreement (relating to long term incentive awards) is hereby deleted in its entirety. The Executive hereby agrees that all outstanding shareholder value, performance share, restricted stock, and stock option awards to which he would otherwise be entitled under the Company's Long Term Incentive Plan, absent this Amendment, shall be cancelled and, in lieu of such awards, Executive shall be paid $1,000,000 (One Million Dollars), less any required tax withholding, on the Company payroll date coincident with or immediately following the Expiration Date or as soon thereafter as is administratively practicable. (e) Other Benefits. Subsections 5(d) (relating to the pension and thrift plans), (f) (relating to reimbursement of expenses), (g) (relating to fringe benefits), and (h) (relating to office and support staff) of the Agreement are hereby deleted in their entirety. 4. General Release. In exchange for the payments and benefits described above, the Executive hereby agrees that on or about the Expiration Date he shall execute a general release of all claims, actions, causes of action and the like in a form and manner satisfactory to the Company. 5. Effective Date. This Amendment shall be effective as of the Amendment Effective Date, except as otherwise provided herein. In all other respects, the Agreement shall remain unchanged by this Amendment. EXECUTIVE THOMAS F. PLUNKETT ---------------------- Thomas F. Plunkett FPL GROUP, INC. By: LAWRENCE J. KELLEHER --------------------------- Lawrence J. Kelleher, VP Human Resources EX-12 6 exh12a.txt EXHIBIT 12A EXHIBIT 12(a) FPL GROUP, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Six Months Ended June 30, 2001 (millions) Earnings, as defined: Net income .............................................................................. $ 329 Income taxes ............................................................................ 165 Fixed charges included in the determination of net income, as below ..................... 175 Distributed income of independent power investments...................................... 16 Less: Equity in earnings of independent power investments ............................... 52 Total earnings, as defined ............................................................ $ 633 Fixed charges, as defined: Interest charges ........................................................................ $ 167 Rental interest factor .................................................................. 5 Fixed charges included in nuclear fuel cost ............................................. 3 Fixed charges included in the determination of net income ............................... 175 Capitalized interest .................................................................... 16 Total fixed charges, as defined ....................................................... $ 191 Ratio of earnings to fixed charges ........................................................ 3.31
EX-12 7 exh12b.txt EXHIBIT 12B EXHIBIT 12(b) FLORIDA POWER & LIGHT COMPANY COMPUTATION OF RATIOS
Six Months Ended June 30, 2001 (millions) RATIO OF EARNINGS TO FIXED CHARGES Earnings, as defined: Net income .............................................................................. $ 287 Income taxes ............................................................................ 164 Fixed charges, as below ................................................................. 106 Total earnings, as defined ............................................................ $ 557 Fixed charges, as defined: Interest charges ........................................................................ $ 100 Rental interest factor .................................................................. 3 Fixed charges included in nuclear fuel cost ............................................. 3 Total fixed charges, as defined ....................................................... $ 106 Ratio of earnings to fixed charges ........................................................ 5.25 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Earnings, as defined: Net income .............................................................................. $ 287 Income taxes ............................................................................ 164 Fixed charges, as below ................................................................. 106 Total earnings, as defined ............................................................ $ 557 Fixed charges, as defined: Interest charges ........................................................................ $ 100 Rental interest factor .................................................................. 3 Fixed charges included in nuclear fuel cost ............................................. 3 Total fixed charges, as defined ....................................................... 106 Non-tax deductible preferred stock dividends .............................................. 7 Ratio of income before income taxes to net income ......................................... 1.57 Preferred stock dividends before income taxes ............................................. 11 Combined fixed charges and preferred stock dividends ...................................... $ 117 Ratio of earnings to combined fixed charges and preferred stock dividends ................. 4.76
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