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To Our Shareholders
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Despite these tumultuous events, FPL Group turned in an outstanding year. All three of our businesses delivered strong growth, record earnings and excellent operating performance. Net income, excluding merger-related expenses and the effects of accounting standard FAS 133, reached $792 million, an all-time high, compared with $745 million in 2000. |
Consistent Earnings Per Share Growth |
Earnings per share, excluding the same items, increased by 7 percent to $4.69 per share, meeting our target.
Florida Power & Light: An Outstanding Utility
FPL is among the very best performing utilities in the nation, and this was surely evident last year.
- Our residential base rates are 12 percent below the industry average.
- Our operational performance places us in the top 10 percent of the industry in virtually every meaningful performance measure. Fossil plant availability of 95 percent equaled the best we've ever achieved and nuclear availability of 92 percent, despite three refueling outages last year, significantly exceeded the industry average. And the average amount of time our customers were without power during the year was just 69 minutes - 36 percent better than the national average.
- We continued to expand our electric system infrastructure to meet growing demand in our service territory, adding 1,200 megawatts of generating capacity and expanding our network to serve almost 87,000 new customer accounts.
- Despite this expansion, we remained a low-cost provider. Both our operations and maintenance costs and our capital investment per customer are well below industry averages.
FPL Energy: Growth and Asset Optimization
We continued the disciplined growth of our national wholesale power business, FPL Energy.
- In 2001, excluding merger-related expenses and the effects of FAS 133, this business represented 13 percent of FPL Group's net income and its contributions to earnings per share increased 27 percent.
- We started the year with 4,110 net-megawatts of generation in operation and have since brought 1,014 new megawatts online, growing by more than 20 percent.
- We have focused on building a diversified portfolio - by region and by fuel mix - and operating these plants at the same high performance levels as those in our regulated utility.
- We further added to shareholder value through the efforts of our significantly enhanced asset optimization organization, which allowed us to maintain operating margins despite declining electricity prices.
FPL FiberNet: Profitability Amidst Difficult Industry Conditions
The telecommunications sector has undergone tremendous changes, especially with the bursting of the "dot-com bubble." Despite this depressed telecom market, FPL FiberNet, our wholesale fiber-optic business, has done an outstanding job of continuing to grow - and grow profitably. In fact, this is one of the few fiber-optic network businesses to make a profit in 2001.
Sound Strategic Direction
For more than a decade now, the company has successfully pursued a strategy focused on energy-related businesses. Begun thanks to the visionary leadership of Jim Broadhead, who served as chairman and CEO for 13 years until his retirement in December, this strategy has served shareholders very well. We plan to continue to build on that strategy going forward.
- As an owner and operator of assets in what is fundamentally a commodity business, we must be a low-cost producer and provide superior service in order to succeed. We do very well in both areas and are committed to getting even better.
- Our financial strength and discipline have also served us well in the past and will continue to do so as we pursue further opportunities for profitable growth.
- Our business portfolio is diversified by region and by fuel type, and we participate successfully in both the traditional, regulated utility sector and the newer competitive wholesale sector.
- We limit our exposure to market volatility by focusing our trading activities primarily on optimizing the profitability of our assets, rather than engaging in speculative trading.
By staying focused and playing to our strengths, we have avoided many of the mistakes that have proven costly for some in our industry and are confident we can continue our successful track record of profitable growth and outstanding operational performance.
Prospects for 2002 and Beyond
Florida Power & Light
FPL is well positioned for future growth. Though we will continue to feel some effects in 2002 from the aftermath of September 11th and the continued economic slowdown, we are located in one of the fastest growing markets in the country. To meet that growing demand for electricity, we will add more than 4,000 megawatts of clean, state-of-the-art generating capacity by the end of 2005. |
FPL Energy; A Growing Portfolio |
This new generation, along with demand management programs and additional short-term purchases, will allow us to maintain a strong 20 percent reserve margin.
In March, the Florida Public Service Commission approved a new four-year incentive-based agreement with the Florida Public Counsel and others which reduces base rates for customers by approximately $1 billion through 2005. The new agreement, which builds upon the current agreement in place since 1999, becomes effective April 15, 2002.
The reduction benefits our customers by lowering the base rates they pay for electricity by 7 percent. Although the new agreement reduces FPL revenues, it also provides important incentives that would allow FPL to grow earnings through continued operational productivity enhancements and other actions.
Going forward, we are confident that, given our track record of providing reliable power at reasonable rates and our presence in a growing service territory, we will build on our impressive 2001 results and achieve even greater levels of performance in future years. |
Over a Decade of O&M Expense Reductions |
FPL Energy
Opportunities for growth at FPL Energy are significant. We expect its recent growth trend to continue, with earnings per share contributions increasing an average of between 20 and 30 percent over the next several years. Much of this growth will be driven by our growing portfolio of generating assets which, based on projects already announced or under construction, is expected to exceed 10,000 net-megawatts by 2004.
We expect this growth to be further augmented by new wind generation projects. We are the leading developer and operator of wind-powered generation in the U.S. With Congress extending the production tax credit through 2003, we are targeting the addition of 1,000 to 2,000 megawatts of new wind generation over that timeframe.
Given the short-term abundance of generating capacity, we envision less new project development activity in the next few years. Instead, we expect to be able to capitalize on our financial strength and look to attractively priced acquisition opportunities as some companies may elect to sell generating assets.
FPL FiberNet
Our building program at FPL FiberNet is largely complete, and we are well positioned for continued revenue growth within our existing network. With a high proportion of our fiber-optic cable ready for service, we have plenty of capacity available to offer to existing or new customers.
A Top-Notch Team
We are committed to maintaining a team approach at FPL Group.
During the year we further strengthened an already outstanding team by adding several key executives, including Ron Green as president of FPL Energy, Moray Dewhurst as chief financial officer and Mark Maisto as president of Power Marketing Inc., our energy trading & marketing group. I am confident that the energy and unique perspectives these talented executives have brought, coupled with a focus on getting the best ideas from all of our people, will help us achieve even greater levels of performance.
This team approach extends to other important groups as well, including our customers, without whom we would not exist and whose needs we are continually working hard to anticipate and satisfy, and our suppliers, whose partnership is critical to satisfying the customers we both share.
None of our achievements would be possible, of course, without the outstanding contributions of an extremely talented workforce, and the ongoing confidence our shareholders place in us. We appreciate the support of both groups.
Several key leaders also retired during the year, most notably Jim Broadhead, as I mentioned earlier in this letter. In addition, Marshall Criser retired from our board of directors after 13 years of distinguished service, and Tom Plunkett retired after 11 years of outstanding service during which time he led our nuclear division to its current position as one of the best performing nuclear operations in the country. We thank each of them for their contributions to our success and wish them all well.
Looking Forward
We're in an exciting industry, and I'm very confident of the inherent strength of FPL Group and its businesses. We have in place:
- an excellent leadership team and a talented and committed workforce
- three well-performing businesses, each with attractive growth opportunities
- financial strength
- and what is perhaps our greatest strength, a commitment to continuous improvement in every part of our business.
The creation of shareholder value, of course, will be the ultimate measure of our success. Be assured that we have the utmost confidence in the ability and resolve of our talented and highly motivated team of employees to execute our plans and create this all-important value for our shareholders.
Lewis Hay III
Chairman, President and Chief Executive Officer
March 22, 2002
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