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FPL Energy
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During the year, FPL Energy restructured to better align the company's organization and business strategy to the current realities of the marketplace. Wholesale energy markets across the nation have witnessed dramatic change, with sharp price decreases and the withdrawal of a number of key players. Responding to these changes, the restructuring included a reduction of general and administrative expenses and the corporation's financial obligation for additional gas turbines from 32 to 7, as well as the cancellation or postponement of new gas-fired power plant projects. |
A Diversified Portfolio at FPL Energy |
The company's generating portfolio grew by nearly 2,200 megawatts during 2002 with the completion of several wind and natural gas projects and the acquisition of a majority interest of the Seabrook Station nuclear power plant in New Hampshire. Total generation is now more than 7,200 net-megawatts, including leased capacity.
FPL Energy currently has projects in operation or construction in 22 states. With more than 80% of its generation fueled by natural gas, nuclear or renewable sources, we are among America's leading clean energy providers.
FPL Energy continues to successfully execute its strategy of:
- Profitably growing a geographically diverse portfolio;
- Focusing on clean energy generation; and
- Optimizing its assets through operational excellence, sound business management, and conservative marketing and trading practices.
In 2003, FPL Energy plans to focus on portfolio growth through building new wind assets, completing existing gas-fired power plant construction projects and making selective acquisitions that strategically fit the portfolio and add long-term value.
#1 in wind power
Wind is the nation's fastest growing source of power and a profitable business for FPL Energy. We lead the nation in the development and operation of wind power with more than one-third of the installed capacity, and our share is increasing. In 2002, FPL Energy was responsible for roughly half of all new wind power projects completed in the U.S.
The company's 28 wind facilities - located in 10 states - provide approximately 1,700 megawatts of electricity, or nearly 25% of our total generation capacity. Despite the current surplus in generating capacity across much of the U.S., demand for new wind generation remains strong, and due to its many environmental benefits, it is encouraged by numerous laws at both the state and federal levels.
In early 2002 the federal wind production tax credit, which provides for tax credits of 1.8 cents per kilowatt-hour for the first ten years of a facility's operation, was extended through 2003. The company is currently working with members of Congress in efforts to extend the tax credit beyond 2003.
During 2002 new wind energy centers were completed in West Virginia (66 megawatts) and Iowa (98 mega-watts). In addition, the Stateline facility on the Oregon/Washington border was expanded by 37 megawatts to 300 megawatts, making it the largest wind facility in the United States. Also, 123 megawatts of wind assets were acquired in Texas and Pennsylvania.
FPL Energy is targeting to add another 700 to 1,200 megawatts of wind power in 2003. Announced projects include a 204-megawatt facility in eastern New Mexico, a 150-megawatt facility in northern California, and 40-megawatt facilities in both North Dakota and South Dakota.
Natural gas enhances `clean' portfolio
Clean-burning natural gas is the fuel source for approximately 45% of FPL Energy's generation, and nearly 900 megawatts of new gas-fired facilities were placed into operation during 2002. These included combined-cycle power plants in Rhode Island (550 megawatts of leased capacity) and Texas (283 net-megawatts), and a 54-megawatt peaking unit in New York City. Combined-cycle technology enables a plant to produce electricity more efficiently and cost effectively, while peaking units are used to provide power during short-term periods of high energy demand.
FPL Energy expects to add nearly 3,000 megawatts of combined-cycle power during 2003 from projects that include:
- A 517-megawatt plant in Blythe, California, which is strategically located to serve California, Arizona and Nevada (mid-2003);
- A 668-megawatt facility in northeastern Alabama, which has a long-term purchase power agreement with a regional utility (mid-2003);
- A 1,700-net-megawatt facility near Dallas that is well positioned to serve the growing north Texas market (mid-2003), and;
- A 54-megawatt peaking unit to supply electricity to the Long Island Power Authority for the Rockaway Peninsula in Queens County, New York City (mid-2003).
In addition, a 744-megawatt plant is scheduled to begin operation in Pennsylvania in mid-2004.
Selective acquisitions
A major achievement for FPL Energy in 2002 was acquiring a controlling interest in New England's premier nuclear power facility - the 1,161-megawatt Seabrook Station - in early November.
Strategically located just north of Boston, Seabrook provides more than 7% of the electricity used in New England and is similar in design to Florida Power & Light's Turkey Point and St. Lucie nuclear power plants. The plant has a strong history of safe and reliable operations since its start-up in 1991. As one of the nation's newest nuclear power plants, Seabrook is well positioned to provide the region with long-term, reliable and low-cost energy. FPL Energy is drawing upon the expertise of FPL's nuclear division to help manage and operate the Seabrook plant.
Acquiring Seabrook enables FPL Energy to add nuclear power to its already diversified clean energy portfolio. It also complements the company's hydro-electric and fossil-fueled holdings in New England and strengthens our position as a major energy provider in the Northeast.
More than 95% of the plant's 2003 generating output is contracted to be sold. Approximately 80% of the plant's 2004 generation is under contract, with about 60% under contract for 2005 and about 50% for 2006.
Outlook
Although market conditions in the wholesale energy sector are not expected to improve appreciably over the next 1-2 years, FPL Energy is in a strong position to continue its profitable growth. More than 90% of our expected gross margin for generation in 2003 is already under contract. Earnings growth of 30-50% is expected in 2003.
