October 17, 2002

FPL Group announces third quarter results

• Reports Net Income of $315 million or $1.79 per share, excluding nonrecurring items

Increases 2002 Full Year Earnings Forecast:

• Expects $4.75 to $4.80 per share, excluding nonrecurring items
• Up from $4.70 to $4.75 earlier forecast

Expects 2003 earnings from $4.80 to $5.00 per share

Financial Reports (42kb .xls file)

JUNO BEACH, Fla. - FPL Group, Inc., (NYSE: FPL) today announced 2002 third quarter recurring net income of $315 million, compared to $336 million a year ago. Related earnings per share were $1.79, compared to $1.99 the prior year. The results exclude the recently announced nonrecurring charges of $167 million after tax and the mark-to-market effect of non-managed hedges (a $2 million after-tax gain in this year's quarter and a $2 million after-tax loss in 2001.) Including the nonrecurring items, net income for the quarter was $150 million or 85 cents per share.

"As we had indicated earlier, we expected our third quarter earnings to be down slightly from the prior year and fourth quarter earnings to be up," said Lew Hay, chairman and chief executive officer. "Despite some rather challenging conditions in the energy sector, we expect to exceed our earlier earnings forecast for the full year 2002 and are revising our guidance upward."

"Excluding nonrecurring items, we now expect higher earnings per share in the range of $4.75 to $4.80," Hay said. "Our new forecast assumes that in the fourth quarter Florida Power & Light will see customer growth consistent with the first three quarters of the year and normal weather and FPL Energy will experience forward market prices at current levels."

Hay said based on current market conditions and anticipated normal weather in Florida he expects FPL Group 2003 earnings to be in the range of $4.80 to $5.00 per share. "Our forecast for 2003 reflects our confidence in continued customer growth at Florida Power & Light and the fact that we already have nearly three-fourths of the output of FPL Energy power plants and more than 85 percent of the subsidiary's anticipated gross margin under contract for next year." Hay said the contracted output includes that from the Seabrook Nuclear Station the company expects to add to its portfolio in November.

Florida Power & Light

Third quarter net income for FPL Group's principal subsidiary, Florida Power & Light Company, was $284 million, down 2 percent from the prior year quarter. Contributions to earnings per share were $1.61 compared to $1.72 in the 2001 quarter.

A 5.8 percent increase in retail kilowatt-hour sales partially offset a $250 million annual rate reduction that became effective mid-April. However the utility experienced higher taxes and operations and maintenance expenses which more than offset lower depreciation and the increased sales.

Since the third quarter of 2001, FPL has added 86,000 new customer accounts, a 2.2 percent increase. Usage per customer was up 3.6 percent, reflecting warmer temperatures in September.

"Florida Power & Light, which provides more than 85 percent of FPL Group's earnings, continues to enjoy the benefits of a vibrant economy in Florida," said Hay. "Although earnings are down slightly for the utility this quarter, we expect to see earnings growth for the full year 2002 and 2003, assuming continued growth in customer accounts, normal weather and gains in productivity."

FPL Energy

Excluding the mark-to-market effect of non-managed hedges and nonrecurring charges, FPL Energy reported third quarter net income of $37 million compared to $46 million in the 2001 quarter. Contributions to earnings per share were 21 cents compared to 27 cents in the 2001 quarter. Including the nonrecurring items, net income for FPL Energy was a loss of $34 million or 19 cents per share.

Operationally, FPL Energy's results were down slightly from last year. Power plant additions, totaling more than 1,100 megawatts since the prior-year quarter, and improved operating results at several existing assets, including wind-driven electricity generating facilities, together added $9 million to net income. Offsets included lower prices due in part to milder weather in Texas, which reduced earnings by $6 million, and a $7 million reduction from the company's Maine assets reflecting the impact of new, more efficient generation displacing FPL Energy's older, less efficient fossil plants in that state.

"FPL Energy today has a solid portfolio comprised primarily of state-of-the-art clean energy power plants," said Hay. "Our strategy going forward will be to focus on improving operational performance, completing construction of several projects, and profitably growing our portfolio through added wind power facilities and highly selective asset acquisitions."

"We expect FPL Energy to have a strong fourth quarter and are optimistic that it can achieve earnings growth of 30 to 50 percent in 2003," he said.

Corporate and Other

Excluding nonrecurring charges, Corporate and Other negatively impacted net income by $6 million or 3 cents per share. The results included interest expenses and a modest loss at FPL FiberNet. FPL FiberNet expects recurring operations to be profitable for the full year 2002 and close to breakeven for the near future as the telecommunications market continues to experience downward pressure.

As a result of market conditions, FPL FiberNet recorded a nonrecurring charge of $64 million after tax in the third quarter. FPL Group also recorded a nonrecurring after-tax charge of $30 million associated with interests in certain leveraged leases which the company entered into in 1988 and of which the lessee is now in default.

Favorable Tax Ruling Provides $300 million in Cash Flow Benefits

During the quarter, Florida Power & Light modified its tax treatment of certain expenditures. As a result, the company expects to receive tax refunds of approximately $300 million, of which $229 million was received in the third quarter. While the tax refunds have a positive cash flow benefit for the company, they have no direct effect on reported net income.

Profile

FPL Group, with annual revenues of more than $8 billion, is nationally known as a high quality, efficient, and customer-driven organization focused on energy-related products and services. With a growing presence in 23 states, it is widely recognized as one of the country's premier power companies. Its principal subsidiary, Florida Power & Light Company, serves approximately 4 million customer accounts in Florida. FPL Energy, LLC, an FPL Group energy-generating subsidiary, is a leader in producing electricity from clean and renewable fuels. Additional information is available on the Internet at www.fplgroup.com, www.fpl.com and www.fplenergy.com.

CAUTIONARY STATEMENTS AND RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, FPL Group, Inc. is hereby presenting cautionary statements identifying important factors that could cause its actual results to differ materially from those projected in forward-looking statements (as such term is defined in the Reform Act) made by or on behalf of FPL Group in this press release, 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 (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) 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 have a significant impact on FPL Group's operations and financial results, and could cause FPL Group's actual results or outcomes to differ materially from those discussed in the forward-looking statements, include:

• FPL Group is subject to changes in laws or regulations, including the Public Utility Regulatory Policies Act of 1978, as amended, and the Public Utility Holding Company Act of 1935, as amended, changing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission, the Florida Public Service Commission and the utility commissions of other states in which FPL Group has operations, and the U.S. Nuclear Regulatory Commission, with respect to allowed rates of return including but not limited to industry and rate structure, operation of nuclear power facilities, operation and construction of plant facilities, operation and construction of transmission facilities, acquisition, disposal, depreciation and amortization of assets and facilities, recovery of fuel and purchased power costs, decommissioning costs, return on common equity and equity ratio limits, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission costs).
• The regulatory process generally restricts FPL's ability to grow earnings and does not provide any assurance as to achievement of earnings levels.
• FPL Group is subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, natural resources and health and safety that could, among other things, restrict or limit the use of certain fuels required for the production of electricity. There are significant capital, operating and other costs associated with compliance with these environmental statutes, rules and regulations, and those costs could be even more significant in the future.
• FPL Group operates in a changing market environment influenced by various legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the energy industry, including deregulation of the production and sale of electricity. FPL Group and its subsidiaries will need to adapt to these changes and may face increasing competitive pressure.
• The operation of power generation facilities involves many risks, including start up risks, breakdown or failure of equipment, transmission lines, pipelines, the dependence on a specific fuel source or the impact of unusual or adverse weather conditions (including natural disasters such as hurricanes), as well as the risk of performance below expected levels of output or efficiency. This could result in lost revenues and/or increased expenses. Insurance, warranties or performance guarantees may not cover any or all of the lost revenues or increased expenses, including the cost of replacement power. In addition to these risks, FPL's nuclear units face certain risks that are unique to the nuclear industry including additional regulatory actions up to and including shut down of the units stemming from public safety concerns both at FPL's plants and at the plants of other nuclear operators. Breakdown or failure of an FPL Energy, LLC operating facility may prevent the facility from performing under applicable power sales agreements which, in certain situations, could result in termination of the agreement or incurring a liability for liquidated damages.
• FPL Group's ability to successfully and timely complete its power generation facilities currently under construction, those projects yet to begin construction or capital improvements to existing facilities is contingent upon many variables and subject to substantial risks. Should any such efforts be unsuccessful, FPL Group could be subject to additional costs, termination payments under committed contracts and/or the write off of its investment in the project or improvement.
• FPL Group uses derivative instruments, such as swaps, options, futures and forwards to manage their commodity and financial market risks, and to a lesser extent, engage in limited trading activities. FPL Group could recognize financial losses as a result of volatility in the market values of these contracts, or if a counterparty fails to perform.
• There are other risks associated with FPL Group's nonregulated businesses, particularly FPL Energy. In addition to risks discussed elsewhere, risk factors specifically affecting FPL Energy's success in competitive wholesale markets include the ability to efficiently develop and operate generating assets, the price and supply of fuel, transmission constraints, competition from new sources of generation and demand for power. There can be significant volatility in market prices for fuel and electricity, and there are other financial, counterparty and market risks that are beyond the control of FPL Energy. FPL Energy's inability or failure to effectively hedge its assets or positions against changes in commodity prices, interest rates, counterparty credit risk or other risk measures could significantly impair its future financial results. In keeping with industry trends, a portion of FPL Energy's power generation facilities operate wholly or partially without long-term power purchase agreements. As a result, power from these facilities is sold on the spot market or on a short-term contractual basis, which may affect the volatility of FPL Group's financial results. In addition, FPL Energy's business depends upon transmission facilities owned and operated by others; if transmission is disrupted or capacity is inadequate or unavailable FPL Energy's ability to sell and deliver its wholesale power may be limited.
• FPL Group is likely to encounter significant competition for acquisition opportunities that may become available as a result of the consolidation of the domestic power industry. In addition, FPL Group may be unable to identify attractive acquisition opportunities at favorable prices and to successfully and timely complete and integrate them.
• FPL Group relies on access to capital markets as a significant source of liquidity for capital requirements not satisfied by operating cash flows. The inability to raise capital on favorable terms, particularly during times of uncertainty in the capital markets, could impact FPL Group's ability to grow their businesses and would likely increase their interest costs.
• FPL Group is subject to costs and other effects of legal and administrative proceedings, settlements, investigations and claims; as well as the effect of new, or changes in, tax rates or policies, rates of inflation or accounting standards.
• FPL Group's ability to obtain insurance, and the cost of and coverage provided by such insurance, could be affected by recent national events.
• FPL Group is subject to employee workforce factors, including loss or retirement of key executives, availability of qualified personnel, collective bargaining agreements with union employees or work stoppage.

The issues and associated risks and uncertainties described above are not the only ones FPL Group may face. Additional issues may arise or become material as the energy industry evolves. The risks and uncertainties associated with these additional issues could impair FPL Group's businesses in the future.

NOTE: A Webcast of FPL Group's third quarter earnings conference call, scheduled at 9 a.m. ET on Thursday, October 17, 2002, is available on FPL Group's Web site, www.fplgroup.com, by following the link provided.