-----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, LKb2KNhorJPFxJsDhP8oXSmb5lDpPZFikUOD+qahtdVgzS3QNFBnLrJDExmj6Xi/ +tSVu8E798zin4csqRr6zQ== 0000753308-98-000009.txt : 19980504 0000753308-98-000009.hdr.sgml : 19980504 ACCESSION NUMBER: 0000753308-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980501 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FPL GROUP INC CENTRAL INDEX KEY: 0000753308 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 592449419 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08841 FILM NUMBER: 98608340 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: SEC FILE NUMBER: 001-03545 FILM NUMBER: 98608341 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 FPL GROUP AND FPL 3/31/98 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Exact name of Registrants as specified in their charters, address of principal IRS Employer Commission executive offices and Identification File Number Registrants' telephone number Number - ----------- --------------------------------------- -------------- 1-8841 FPL GROUP, INC. 59-2449419 1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775 700 Universe Boulevard Juno Beach, Florida 33408 (561) 694-4000 State or other jurisdiction of incorporation or organization: Florida Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) have been subject to such filing requirements for the past 90 days. Yes X No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each class of FPL Group, Inc. common stock, as of the latest practicable date: Common Stock, $.01 Par Value, outstanding at March 31, 1998: 181,482,385 shares As of March 31, 1998, there were issued and outstanding 1,000 shares of Florida Power & Light Company's common stock, without par value, all of which were held, beneficially and of record, by FPL Group, Inc. ______________________________ This combined Form 10-Q represents separate filings by FPL Group, Inc. and Florida Power & Light Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Florida Power & Light Company makes no representations as to the information relating to FPL Group, Inc.'s other operations. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT 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) of the Company made by or on behalf of the Company which are made in this combined Form 10-Q, in presentations, in response to questions or otherwise. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as will likely result, are expected to, will continue, is anticipated, estimated, projection, outlook) are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause the Company's actual results to differ materially from those contained in forward-looking statements of the Company made by or on behalf of the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Some important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements include prevailing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC), the Florida Public Service Commission (FPSC) and the Nuclear Regulatory Commission, with respect to allowed rates of return, industry and rate structure, operation of nuclear power facilities, acquisition and disposal of assets and facilities, operation and construction of plant facilities, recovery of fuel and purchased power costs, decommissioning costs, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission costs). The business and profitability of the Company are also influenced by economic and geographic factors including political and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions (including natural disasters such as hurricanes), population growth rates and demographic patterns, competition for retail and wholesale customers, pricing and transportation of commodities, market demand for energy from plants or facilities, changes in tax rates or policies or in rates of inflation, unanticipated development project delays or changes in project costs, unanticipated changes in operating expenses and capital expenditures, capital market conditions, competition for new energy development opportunities, 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 (In millions, except per share amounts) (Unaudited)
Three Months Ended March 31, 1998 1997 OPERATING REVENUES .................................................................... $1,338 $1,445 OPERATING EXPENSES: Fuel, purchased power and interchange ............................................... 436 544 Other operations and maintenance..................................................... 299 269 Depreciation and amortization ....................................................... 249 268 Taxes other than income taxes ....................................................... 136 139 Total operating expenses .......................................................... 1,120 1,220 OPERATING INCOME ...................................................................... 218 225 OTHER INCOME (DEDUCTIONS): Interest charges .................................................................... (63) (71) Preferred stock dividends - FPL ..................................................... (4) (6) Other - net ......................................................................... 7 8 Total other deductions - net ...................................................... (60) (69) INCOME BEFORE INCOME TAXES ............................................................ 158 156 INCOME TAXES .......................................................................... 50 55 NET INCOME ............................................................................ $ 108 $ 101 Earnings per share of common stock (basic and assuming dilution) ...................... $ 0.63 $ 0.58 Dividends per share of common stock ................................................... $ 0.50 $ 0.48 Average number of common shares outstanding ........................................... 173 173
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the combined Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (1997 Form 10-K) for FPL Group and FPL. FPL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Millions of Dollars)
March 31, 1998 December 31, (Unaudited) 1997 PROPERTY, PLANT AND EQUIPMENT: Electric utility plant in service and other property, including nuclear fuel and construction work in progress ......................................... $17,908 $17,820 Less accumulated depreciation and amortization ................................... (8,704) (8,466) Total property, plant and equipment - net ...................................... 9,204 9,354 CURRENT ASSETS: Cash and cash equivalents ........................................................ 72 54 Customer receivables, net of allowances of $7 and $9, respectively ............... 438 501 Materials, supplies and fossil fuel inventory - at average cost .................. 289 302 Other ............................................................................ 243 244 Total current assets ........................................................... 1,042 1,101 OTHER ASSETS: Special use funds of FPL ......................................................... 1,102 1,007 Other investments ................................................................ 395 282 Other ............................................................................ 728 705 Total other assets ............................................................. 2,225 1,994 TOTAL ASSETS ....................................................................... $12,471 $12,449 CAPITALIZATION: Common stock ..................................................................... $ 2 $ 2 Additional paid-in capital ....................................................... 3,028 3,038 Retained earnings ................................................................ 1,825 1,804 Accumulated other comprehensive income ........................................... 1 1 Total common shareholders' equity .............................................. 4,856 4,845 Preferred stock of FPL without sinking fund requirements ......................... 226 226 Long-term debt ................................................................... 2,950 2,949 Total capitalization ........................................................... 8,032 8,020 CURRENT LIABILITIES: Debt and preferred stock due within one year ..................................... 310 332 Accounts payable ................................................................. 297 368 Accrued interest, taxes and other ................................................ 837 799 Total current liabilities ...................................................... 1,444 1,499 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,528 1,473 Unamortized regulatory and investment tax credits ................................ 383 395 Other ............................................................................ 1,084 1,062 Total other liabilities and deferred credits ................................... 2,995 2,930 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,471 $12,449
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group and FPL. FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of Dollars) (Unaudited)
Three Months Ended March 31, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income ......................................................................... $ 108 $ 101 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................................................... 249 268 Other - net ...................................................................... 97 142 Net cash provided by operating activities ...................................... 454 511 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures of FPL ........................................................ (159) (110) Independent power investments ...................................................... (350) (9) Distributions and loan repayments from partnerships and joint ventures ............. 221 13 Other - net ........................................................................ (23) 15 Net cash used in investing activities .......................................... (311) (91) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt ......................................................... - 5 Retirement of long-term debt and preferred stock ................................... (180) (126) Increase in commercial paper ....................................................... 158 - Repurchase of common stock ......................................................... (17) (17) Dividends on common stock .......................................................... (86) (83) Net cash used in financing activities .......................................... (125) (221) Net increase in cash and cash equivalents ............................................ 18 199 Cash and cash equivalents at beginning of period ..................................... 54 196 Cash and cash equivalents at end of period ........................................... $ 72 $ 395 Supplemental disclosures of cash flow information: Cash paid for interest ............................................................. $ 51 $ 68 Cash paid for income taxes ......................................................... - $ 28 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations ............................................. $ 1 $ 18 Debt assumed for property additions ................................................ - $ 410
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Millions of Dollars) (Unaudited)
Three Months Ended March 31, 1998 1997 OPERATING REVENUES .................................................................... $1,295 $1,399 OPERATING EXPENSES: Fuel, purchased power and interchange ............................................... 430 525 Other operations and maintenance .................................................... 268 246 Depreciation and amortization ....................................................... 244 263 Income taxes ........................................................................ 57 58 Taxes other than income taxes ....................................................... 137 139 Total operating expenses .......................................................... 1,136 1,231 OPERATING INCOME ...................................................................... 159 168 OTHER INCOME (DEDUCTIONS): Interest charges .................................................................... (50) (59) Other - net ......................................................................... (2) 1 Total other deductions - net ...................................................... (52) (58) NET INCOME ............................................................................ 107 110 PREFERRED STOCK DIVIDENDS ............................................................. 4 6 NET INCOME AVAILABLE TO FPL GROUP ..................................................... $ 103 $ 104
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Millions of Dollars)
March 31, 1998 December 31, (Unaudited) 1997 ELECTRIC UTILITY PLANT: Plant in service, including nuclear fuel and construction work in progress ....... $17,219 $17,136 Less accumulated depreciation and amortization ................................... (8,590) (8,355) Electric utility plant - net ................................................... 8,629 8,781 CURRENT ASSETS: Cash and cash equivalents ........................................................ 12 3 Customer receivables, net of allowances of $7 and $9, respectively ............... 414 471 Materials, supplies and fossil fuel inventory - at average cost .................. 234 242 Other ............................................................................ 211 226 Total current assets ........................................................... 871 942 OTHER ASSETS: Special use funds ................................................................ 1,102 1,007 Other ............................................................................ 442 442 Total other assets ............................................................. 1,544 1,449 TOTAL ASSETS ....................................................................... $11,044 $11,172 CAPITALIZATION: Common shareholder's equity ...................................................... $ 4,823 $ 4,814 Preferred stock without sinking fund requirements ................................ 226 226 Long-term debt ................................................................... 2,420 2,420 Total capitalization ........................................................... 7,469 7,460 CURRENT LIABILITIES: Debt and preferred stock due within one year ..................................... 54 220 Accounts payable ................................................................. 281 344 Accrued interest, taxes and other ................................................ 777 748 Total current liabilities ...................................................... 1,112 1,312 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,127 1,070 Unamortized regulatory and investment tax credits ................................ 383 395 Other ............................................................................ 953 935 Total other liabilities and deferred credits ................................... 2,463 2,400 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,044 $11,172
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of Dollars) (Unaudited)
Three Months Ended March 31, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income ......................................................................... $ 107 $ 110 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................................................... 244 263 Other - net ...................................................................... 102 107 Net cash provided by operating activities ...................................... 453 480 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ............................................................... (159) (110) Other - net ........................................................................ (21) (23) Net cash used in investing activities .......................................... (180) (133) CASH FLOWS FROM FINANCING ACTIVITIES: Retirement of long-term debt and preferred stock ................................... (180) (125) Increase in commercial paper ....................................................... 14 - Dividends .......................................................................... (98) (104) Net cash used in financing activities .......................................... (264) (229) Net increase in cash and cash equivalents ............................................ 9 118 Cash and cash equivalents at beginning of period ..................................... 3 78 Cash and cash equivalents at end of period ........................................... $ 12 $ 196 Supplemental disclosures of cash flow information: Cash paid for interest ............................................................. $ 48 $ 62 Cash paid for income taxes ......................................................... $ - $ 72 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations ............................................. $ 1 $ 18
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1997 Form 10-K for FPL Group and FPL. FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The accompanying condensed consolidated financial statements should be read in conjunction with the combined 1997 Form 10-K for FPL Group and FPL. In the opinion of FPL Group and FPL, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of March 31, 1998 and the results of operations and cash flows for the three months ended March 31, 1998 and 1997 have been made. Certain amounts included in the prior year's consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period may not give a true indication of results for the year. 1. Summary of Significant Accounting and Reporting Policies Revenues and Rates - In March 1998, a large customer of FPL withdrew its petition requesting a limited scope proceeding to reduce FPL's base rates. The docket was subsequently closed by the FPSC. 2. Capitalization FPL Group Common Stock - During the three months ended March 31, 1998, FPL Group repurchased 280,000 shares of common stock under its share repurchase program. A total of approximately 1 million shares have been repurchased under the share repurchase program that began in April 1997. Long-Term Incentive Plan - Performance shares granted to date under FPL Group's long-term incentive plan resulted in assumed incremental shares of common stock outstanding for purposes of computing both basic earnings per share and diluted earnings per share for the three months ended March 31, 1998 and 1997. These incremental shares were not material and did not cause diluted earnings per share to differ from basic earnings per share. Other - In the first quarter of 1998, FPL Group adopted Statement of Financial Accounting Standards No. (FAS) 130, "Reporting Comprehensive Income." The statement establishes standards for reporting comprehensive income and its components. Comprehensive income of FPL Group totaling $109 million and $102 million for the three months ended March 31, 1998 and 1997, respectively, includes net income, unrealized gains (losses) on securities and foreign currency translation adjustments. Accumulated other comprehensive income is separately displayed in the condensed consolidated balance sheets of FPL Group. 3. Commitments and Contingencies Commitments - FPL has made commitments in connection with a portion of its projected capital expenditures. Capital expenditures for the construction or acquisition of additional facilities and equipment to meet customer demand are estimated to be approximately $2.0 billion for 1998 through 2000. Included in this three-year forecast are capital expenditures for 1998 of approximately $620 million, of which $159 million had been spent through March 31, 1998. Also, in January 1998 FPL Group announced plans to purchase all of Central Maine Power Company's (Central Maine) non-nuclear generation assets. The Central Maine transaction is expected to close in the fourth quarter of 1998 and is subject to approval by federal and state regulators. Commitments for independent power investments, including the acquisition mentioned above, are approximately $850 million for 1998. FPL Group Capital Inc (FPL Group Capital) and its subsidiaries have guaranteed approximately $235 million of lease obligations, debt service payments and other payments subject to certain contingencies. Insurance - Liability for accidents at nuclear power plants is governed by the Price-Anderson Act, which limits the liability of nuclear reactor owners to the amount of the insurance available from private sources and under an industry retrospective payment plan. In accordance with this Act, FPL maintains $200 million of private liability insurance, which is the maximum obtainable, and participates in a secondary financial protection system under which it is subject to retrospective assessments of up to $327 million per incident at any nuclear utility reactor in the United States, payable at a rate not to exceed $40 million per incident per year. FPL participates in nuclear insurance mutual companies that provide $2.75 billion of limited insurance coverage for property damage, decontamination and premature decommissioning risks at its nuclear plants. The proceeds from such insurance, however, must first be used for reactor stabilization and site decontamination before they can be used for plant repair. FPL also participates in an insurance program that provides limited coverage for replacement power costs if a 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 $68 million in retrospective premiums. In the event of a catastrophic loss at one of FPL's nuclear plants, the amount of insurance available may not be adequate to cover property damage and other expenses incurred. Uninsured losses, to the extent not recovered through rates, would be borne by FPL and could have a material adverse effect on FPL Group's and FPL's financial condition. FPL self-insures certain of its transmission and distribution (T&D) property due to the high cost and limited coverage available from third-party insurers. FPL maintains a funded storm and property insurance reserve, which totaled approximately $261 million at March 31, 1998, for T&D property storm damage or assessments under the nuclear insurance program. Recovery from customers of any losses in excess of the storm and property insurance reserve will require the approval of the FPSC. FPL's available lines of credit include $300 million to provide additional liquidity in the event of a T&D property loss. Contracts - FPL has entered into certain long-term purchased power and fuel contracts. Take-or-pay purchased power contracts with the Jacksonville Electric Authority (JEA) and with subsidiaries of the Southern Company (Southern Companies) provide approximately 1,300 megawatts (mw) of power through mid-2010, and thereafter 374 mw through 2022. FPL also has various firm pay-for-performance contracts to purchase approximately 1,000 mw from certain cogenerators and small power producers (qualifying facilities) with expiration dates ranging from 2002 through 2026. The purchased power contracts provide for capacity and energy payments. Energy payments are based on the actual power taken under these contracts. Capacity payments for the pay-for-performance contracts are subject to the qualifying facilities meeting certain contract conditions. The fuel contracts provide for the transportation and supply of natural gas and coal and the supply and use of Orimulsion. Orimulsion is a controversial new fuel, the use of which is subject to approval by Florida's Governor and Cabinet acting as the Power Plant Siting Board. The required capacity and minimum payments through 2002 under these contracts are estimated to be as follows:
1998 1999 2000 2001 2002 (Millions of Dollars) Capacity payments: JEA and Southern Companies ...................................... $200 $210 $210 $210 $210 Qualifying facilities (a) ....................................... $350 $360 $370 $380 $400 Minimum payments, at projected prices: Natural gas, including transportation ........................... $230 $220 $220 $220 $220 Orimulsion (b) .................................................. - - $140 $140 $140 Coal ............................................................ $ 50 $ 40 $ 40 $ 40 $ 40 (a) Includes approximately $35 million, $40 million, $40 million, $40 million and $45 million, respectively, for capacity payments associated with two projects that are currently in dispute. These capacity payments are subject to the outcome of the related litigation. See Litigation. (b) All of FPL's Orimulsion-related contract obligations are subject to obtaining the required regulatory approvals.
Capacity, energy and fuel charges under these contracts were as follows:
Three Months Ended March 31, 1998 Charges 1997 Charges Energy/ Energy/ Capacity Fuel (a) Capacity Fuel (a) (Millions of Dollars) JEA and Southern Companies .......................................... $49(b) $31 $52(b) $35 Qualifying facilities................................................ $74(c) $25 $73(c) $29 Natural gas ......................................................... - $54 - $89 Coal ................................................................ - $13 - $11 (a) Recovered through the fuel clause. (b) Recovered through base rates and the capacity cost recovery clause (capacity clause). (c) Recovered through the capacity clause.
Litigation - In 1997, FPL filed a complaint against the owners of two qualifying facilities (plant owners) seeking an order declaring that FPL's obligations under the power purchase agreements with the qualifying facilities were rendered of no force and effect because the power plants failed to accomplish commercial operation before January 1, 1997, as required by the agreements. In 1997, the plant owners filed for bankruptcy under Chapter XI of the United States Bankruptcy Code, ceased all attempts to operate the power plants and entered into an agreement with the holders of more than 70% of the bonds that partially financed the construction of the plants. This agreement gives the holders of a majority of the principal amount of the bonds (the majority bondholders) the right to control, fund and manage any litigation against FPL and the right to settle with FPL on any terms such holders approve, provided that certain agreements are not affected and certain conditions are met. In January 1998, the plant owners (through the attorneys for the majority bondholders) filed an answer denying the allegations in FPL's complaint and asserted a counterclaim for approximately $2 billion, consisting of all capacity payments that could have been made over the 30-year term of the power purchase agreements, plus some security deposits. The plant owners also seek three times their actual damages for alleged violations of Florida antitrust laws, plus attorneys' fees. The Florida Municipal Power Agency (FMPA), an organization comprised of municipal electric utilities, has sued FPL for allegedly breaching a "contract" to provide transmission service to the FMPA and its members and for breaching antitrust laws by monopolizing or attempting to monopolize the provision, coordination and transmission of electric power in refusing to provide transmission service, or to permit the FMPA to invest in and use FPL's transmission system, on the FMPA's proposed terms. The FMPA seeks $140 million in damages, before trebling for the antitrust claim, and court orders requiring FPL to permit the FMPA to invest in and use FPL's transmission system on "reasonable terms and conditions" and on a basis equal to FPL. In 1995, the Court of Appeals vacated the District Court's summary judgment in favor of FPL and remanded the matter to the District Court for further proceedings. In 1996, the District Court ordered the FMPA to seek a declaratory ruling from the FERC regarding certain issues in the case. All other action in the case has been stayed pending the FERC's ruling. A former cable installation contractor for Telesat Cablevision, Inc. (Telesat), a wholly-owned subsidiary of FPL Group Capital, sued FPL Group, FPL Group Capital and Telesat for breach of contract, fraud, violation of racketeering statutes and several other claims. The trial court entered a judgment in favor of FPL Group and Telesat on nine of twelve counts, including all of the racketeering and fraud claims, and in favor of FPL Group Capital on all counts. It also denied all parties' claims for attorneys' fees. However, the jury in the case awarded the contractor damages totaling approximately $6 million against FPL Group and Telesat for breach of contract and tortious interference. All parties have appealed. FPL Group and FPL believe that they have meritorious defenses to the litigation to which they are parties and are vigorously defending the suits. Accordingly, the liabilities, if any, arising from the proceedings are not anticipated to have a material adverse effect on their financial statements. 4. Summarized Financial Information of FPL Group Capital FPL Group Capital's debenture is guaranteed by FPL Group and included in FPL Group's consolidated balance sheets. Operating revenues of FPL Group Capital for the three months ended March 31, 1998 and 1997 were $44 million and $46 million, respectively. For the same periods, operating expenses were $41 million and $47 million, respectively, and net income was $11 million and $1 million, respectively. At March 31, 1998, FPL Group Capital had $291 million of current assets, $1.6 billion of noncurrent assets, $386 million of current liabilities and $1.1 billion of noncurrent liabilities. At December 31, 1997, FPL Group Capital had current assets of $156 million, noncurrent assets of $1.4 billion, current liabilities of $252 million and noncurrent liabilities of $999 million. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion should be read in conjunction with the Notes to Condensed Consolidated Financial Statements contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 1997 Form 10-K for FPL Group and FPL. The results of operations for an interim period may not give a true indication of results for the year. In the following discussion, all comparisons are with the corresponding items in the prior year. RESULTS OF OPERATIONS FPL continues to represent the predominant portion of FPL Group's operations. However, for the three months ended March 31, 1998, FPL Group's net income increased primarily due to better operating results in FPL Energy, Inc.'s (FPL Energy) independent power investments. FPL's net income was essentially flat compared with the prior year. FPL's revenues from base rates for the three months ended March 31, 1998 decreased to $750 million from $769 million for the same period in 1997. The decline in base revenues resulted from milder weather, as well as the impact of several severe storms and tornadoes during the first quarter of 1998. Partly offsetting this decline was a 1.7% increase in customer accounts. Cost recovery clause revenues and franchise fees comprise substantially all of the remaining portion of operating revenues. Such revenues represent a pass-through of costs and do not significantly affect net income. Fluctuations in these revenues are primarily driven by changes in energy sales, fuel prices and capacity charges. In March 1998, a large customer of FPL withdrew its petition requesting a limited scope proceeding to reduce FPL's base rates. The docket was subsequently closed by the FPSC. O&M expenses increased for the three months ended March 31, 1998, primarily due to additional spending associated with improving service reliability and storm restoration costs. Depreciation and amortization expense in all periods presented includes amortization recorded under the special amortization program, which is a function of retail base revenues. Depreciation and amortization expense decreased for the first quarter of 1998 mainly due to the decline in revenues discussed above. In March 1998, FPL filed depreciation studies with the FPSC. If approved, the new studies would result in a $26 million annual increase in depreciation expense. The FPSC is scheduled to consider this matter in the fourth quarter of 1998. Interest and preferred stock dividend requirements also declined during the first quarter of 1998, resulting from reductions in average debt and preferred stock balances. FPL Energy's operating results improved for the three months ended March 31, 1998. The improvements were mainly in natural gas and wind projects, including two gas-fired plants located in Massachusetts and New Jersey in which an interest was acquired during the first quarter of 1998. FPL Group is continuing to work to resolve the potential impact of the year 2000 on the processing of information by its computer systems. An assessment of identified software, including vendor-supplied software, has been substantially completed and work is underway to make the necessary modifications. The estimated cost of addressing year 2000 issues in software applications is not expected to have a material adverse effect on FPL Group's financial statements. FPL Group continues to assess the potential financial and operational impacts of computerized processes embedded in operating equipment and has begun to evaluate the year 2000 readiness of major suppliers, customers, financial institutions and others with whom transactions and information flow electronically. LIQUIDITY AND CAPITAL RESOURCES Using available cash flows from operations, FPL repaid certain series of secured medium-term notes that matured during the first quarter of 1998. Additionally, during the three months ended March 31, 1998, FPL Group repurchased 280,000 shares of common stock. These actions are consistent with management's intent to reduce debt and preferred stock balances and the number of outstanding shares of common stock. See Note 2. In March 1998, FPL filed with the FPSC a ten-year power plant site plan that includes adding approximately 2,500 mw of generating capacity to meet the electricity needs of a growing customer base. The plan includes repowering two existing plants by 2002 and 2004, respectively, and adding two new gas- fired units in 2006 and 2007 at the Martin power plant. These proposed projects are not expected to have a significant effect on capital expenditures for 1998 and 1999, but will increase capital expenditures in 2000 by approximately $200 million. For information concerning capital commitments, see Note 3. PART II - OTHER INFORMATION Item 5. Other Information (a) Reference is made to Item 1. Business - FPL Operations - Regulation in the 1997 Form 10-K for FPL Group and FPL. In March 1998, a large customer of FPL withdrew its petition requesting a limited scope proceeding to reduce FPL's base rates. The docket was subsequently closed by the FPSC. (b) Reference is made to Item 1. Business - FPL Operations - System Capability and Load in the 1997 Form 10-K for FPL Group and FPL. In March 1998, FPL filed with the FPSC a ten-year power plant site plan that includes adding approximately 2,500 mw of generating capacity to meet the electricity needs of a growing customer base. The plan includes repowering two existing plants by 2002 and 2004, respectively, and adding two new gas-fired units in 2006 and 2007 at the Martin power plant. These proposed projects are not expected to have a significant effect on capital expenditures for 1998 and 1999, but will increase capital expenditures in 2000 by approximately $200 million. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit FPL Number Description Group FPL ------- ----------------------- ----- --- 12 Computation of Ratios x 27 Financial Data Schedule x x (b) Reports on Form 8-K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FPL GROUP, INC. FLORIDA POWER & LIGHT COMPANY (Registrants) Date: May 1, 1998 K. MICHAEL DAVIS K. Michael Davis Controller and Chief Accounting Officer of FPL Group, Inc. Vice President, Accounting, Controller and Chief Accounting Officer of Florida Power & Light Company (Principal Financial Officer of the Registrants) EX-12 2 STATEMENT RE COMPUTATION OF RATIOS EXHIBIT 12 FLORIDA POWER & LIGHT COMPANY COMPUTATION OF RATIOS
Three Months Ended March 31, 1998 (Millions of Dollars) RATIO OF EARNINGS TO FIXED CHARGES Earnings, as defined: Net income .............................................................................. $ 107 Income taxes ............................................................................ 54 Fixed charges, as below ................................................................. 54 Total earnings, as defined ............................................................ $ 215 Fixed charges, as defined: Interest expense ........................................................................ $ 50 Rental interest factor .................................................................. 1 Fixed charges included in nuclear fuel cost ............................................. 3 Total fixed charges, as defined ....................................................... $ 54 Ratio of earnings to fixed charges ........................................................ 3.98 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Earnings, as defined: Net income .............................................................................. $ 107 Income taxes ............................................................................ 54 Fixed charges, as below ................................................................. 54 Total earnings, as defined ............................................................ $ 215 Fixed charges, as defined: Interest expense ........................................................................ $ 50 Rental interest factor .................................................................. 1 Fixed charges included in nuclear fuel cost ............................................. 3 Total fixed charges, as defined ....................................................... 54 Non-tax deductible preferred stock dividends .............................................. 4 Ratio of income before income taxes to net income ......................................... 1.50 Preferred stock dividends before income taxes ............................................. 6 Combined fixed charges and preferred stock dividends ...................................... $ 60 Ratio of earnings to combined fixed charges and preferred stock dividends ................. 3.58
EX-27 3 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from FPL Group's and FPL's condensed consolidated balance sheet as of March 30, 1998 and condensed consolidated statements of income and cash flows for the three months ended March 30, 1998 and is qualified in its entirety by reference to such financial statements. 0000753308 FPL Group, Inc. 1,000,000 DEC-31-1997 MAR-31-1998 3-MOS PER-BOOK $8,629 $2,072 $1,042 $0 $728 $12,471 $2 $3,029 $1,825 $4,856 $0 $226 $2,950 $0 $0 $0 $0 $0 $0 $0 $4,439 $12,471 $1,338 $50 $1,120 $1,120 $218 $7 $171 $63 $108 $4 $108 $86 $0 $454 $0.63 $0.63
EX-27 4 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from FPL's condensed consolidated balance sheet as of March 30, 1998 and condensed consolidated statements of income and cash flows for the three months ended March 30, 1998 and is qualified in its entirety by reference to such financial statements. 0000037634 Florida Power & Light Company 1,000,000 DEC-31-1997 MAR-31-1998 3-MOS PER-BOOK $8,629 $1,102 $871 $0 $442 $11,044 $0 $0 $0 $4,823 $0 $226 $2,420 $0 $0 $54 $0 $0 $0 $0 $3,521 $11,044 $1,295 $57 $1,079 $1,136 $159 ($2) $157 $50 $107 $4 $103 $0 $0 $453 $0 $0
-----END PRIVACY-ENHANCED MESSAGE-----