Nineteen ninety-eight was a year of outstanding accomplishments for FPL Group in which we achieved record operating and financial results

Record financial results | Excellent performance at Florida Power and Light | Growth at FPL Energy | Other developments | Outlook for the future

We also continued to strengthen our principal subsidiary, Florida Power & Light Company; significantly expanded our energy operations outside of Florida through our subsidiary, FPL Energy; and divested unrelated businesses. These accomplishments and our continued focus on enhancing our capabilities as a high performance organization position us well for profitable growth in the years ahead.

Record financial results

Our financial results were exceptional in 1998.

Net income reached an all-time high of $664 million, an increase of 7.4% from the previous year.

Earnings per share increased nearly 8% to a record $3.85.

Reductions of debt and preferred stock further strengthened our balance sheet.

Excellent performance at Florida Power and Light

Florida Power & Light continued to increase its productivity, improve reliability, and provide better service to its customers.

The percentage of time our plants were available to produce power reached the highest levels in the history of our company, and unplanned outages dropped to an all-time low.

Our fossil fuel plant availability of 94% is among the best of any large fossil fleet in America.

Nuclear plant availability of 93% also was an all-time high and well above the industry average.

The Turkey Point plant south of Miami became the first nuclear facility in the country to receive three consecutive "superior" ratings from the Nuclear Regulatory Commission. The St. Lucie nuclear units on Hutchinson Island established a company record for continuous operation and improved their NRC ratings as well.

The overall strength of our nuclear operations in 1998 was reflected by the 'World Association of Nuclear Operators' "performance index," which ranked Turkey Point number one and St. Lucie number three out of 36 multiple-unit nuclear sites in the United States.

One of our top priorities in 1998 was to improve service reliability, and we did so dramatically, reducing by 27% the amount of time our customers were without power. FPL's reliability now exceeds the national average by 41%.

Our safety record improved 20% compared to 1997, and the number of incidents is well below the industry average.

We continued to improve our productivity as operating and maintenance costs per kilowatt-hour declined for the eighth consecutive year. We have reduced these costs 33% since 1990.

Our success in controlling costs has helped keep down the price FPL customers pay for electricity. The price of FPL's residential electricity is 9% lower today than in the mid-1980s. During the same period, the Consumer Price Index has risen 56%.

Growth at FPL Energy

Early last year we formed FPL Energy to consolidate our electric operations outside of Florida. FPL Energy is an independent power producer with plants in operation, under construction, or being developed in 11 states and two foreign countries.

FPL Energy's improved operating results significantly contributed to the growth in FPL Group's earnings per share.

Earnings grew from enhanced project performance and the addition of more than 600 net megawatts of natural gas, wind, and geothermal generation projects. The company now owns about 1,900 net megawatts of generating capacity, almost all being sold under long-term contracts.

These additions added to FPL Energy's position as a leading clean electricity provider. Nearly 95% of its generation is derived from natural gas, wind, solar, or geothermal plants. It is the largest developer of wind generation in the U.S.

Also, FPL Energy has already added significantly to its generation fleet in 1999. In January and February, plans were announced for the development of 1,250 megawatts of natural gas-fired power plants - a 1,000-megawatt plant in Texas to begin operation in mid-2000 and a 248-megawatt plant in Washington to be producing power by mid-2001.

FPL Energy is positioned to be a significant clean-energy provider in emerging non-regulated power generation markets.

Other developments

In 1998 we completed the sale of our citrus subsidiary, Turner Foods, and, in January 1999 we reached an agreement to sell our cable TV interests. These transactions essentially complete our program of divesting unrelated businesses that were acquired in the 1980s.

One disappointment in 1998 was the decline in our stock price during the last quarter of the year. This was due primarily to uncertainty created by the staff of the Florida Public Service Commission (and later by the Office of Public Counsel) regarding FPL's electricity rates. We are confident this matter of rates will be resolved expeditiously.

Outlook for the future

Nothing is more important to long-term success than capable management. Earlier this year, we added a new member to our already strong senior management team. Roger Young, who previously served as CEO of Scottish Hydro-Electric plc, became president and a director of FPL Group. During his very successful tenure at the UK-based company Roger demonstrated excellent strategic and operational skills as well as a management style highly compatible with FPL Group. We welcome him to our organization.

During the 1990s we have consistently focused on reducing costs, improving quality and customer focus, increasing speed and flexibility, and investing outside of Florida in environmentally favored generation technologies. We have made enormous strides in all of these areas and, as a consequence, FPL Group is one of the largest, cleanest, most efficient, and financially sound providers of electricity in the country.

At the same time we have provided returns to our shareholders that are well above the industry average. Since 1990 our stock has produced an annualized return of nearly 16%, exceeding the 12.7% annualized return of the Dow Jones Electric Utilities Index. During that period we saw the power industry undergo continuous change as federal and state governments introduced new forms of regulation governing the generation, transmission, and sale of electricity. While the precise final shape of the industry is unclear, the comprehensive strategic plan we adopted to meet these competitive challenges has served us well and will continue to do so in the future.