To Our Shareholders

Looking ahead

1999 was a year of substantial accomplishment for FPL Group. The operating performance of our two major subsidiaries, Florida Power & Light Company and FPL Energy, was very strong, and financial results reached new records. These achievements were the consequence of the execution of a decade-long strategy that has successfully transformed our company from a traditional electric utility with unrelated business holdings to a productive, high quality, and customer-focused power company with a growing presence in 15 states.

We were disappointed, however, that this strong performance did not immediately translate into enhanced shareholder returns. The stock market in 1999 was not kind to electric power companies.

The Standard & Poor's Electric Utilities Index returned a negative 19%, under-performing the Standard & Poor's 500 Index by more than 40%, the largest margin in history. Further, FPL Group under-performed the electric utilities index by 8 percentage points. This was due largely to a $350 million per year reduction in the rates charged by Florida Power & Light and a write-down taken on FPL Energy's power generating assets in Maine as a result of unexpected changes in federal regulations.

Record financial results

Net income, excluding nonrecurring items, in 1999 rose to an all-time high of $681 million, an increase of 2.6% from the previous year. Including nonrecurring items, net income was even higher, reaching $697 million, an increase of 5% over 1999.

Earnings per share, excluding nonrecurring items, increased to a record $3.98, up 3.4% from the year before. Including nonrecurring gains and charges, earnings per share rose to $4.07, an increase of 5.7%.

Nonrecurring gains during 1999 included the sale of shares in Adelphia Communications Corporation and the redemption of our ownership interest in a cable television limited partnership. In addition to the Maine write-down, charges were taken in connection with the settlement by Florida Power & Light of a dispute with the Florida Municipal Power Agency.

Achievements of Florida Power & Light

Florida Power & Light continued to improve both productivity and reliability, enabling customers to benefit from better service at lower prices.

In 1999 operating and maintenance costs per kilowatt- hour declined for the ninth consecutive year, from 1.82 cents per kilowatt- hour I n 1990 to 1.17 cents per kwh - a 36% reduction.
Plant performance remained at exceptionally high levels. Our fossil plant availability of 93% was among the best in the nation.

· Nuclear plant availability climbed to an all-time high of 94%. Both our Turkey Point and St. Lucie plants were among the country's top-rated nuclear sites.

Nuclear plant availability climbed to an all-time high of 94%. Both our Turkey Point and St. Lucie plants were among the country's top-rated nuclear sites.
Our electric service reliability, which was already well above the national average, continued to improve in 1999. The average number of interruptions per FPL customer was down 19%, while the length of interruptions declined 7%.
In customer satisfaction, FPL rated among the nation's top performing utilities in a nationwide survey undertaken in part by J.D. Powers and Associates. FPL scored especially high in such key areas as response time and follow-through on customer inquiries.
In addition, once again our employees displayed their skills and resolve during times of crisis, quickly restoring electric service to millions of customers affected by Hurricanes Irene and Floyd. The Edison Electric Institute, in presenting FPL with its Emergency Response Reward, described our emergency performance as "a model for electric utilities everywhere."

Our continuous improvements in productivity reduced costs to the point that the Florida Public Service Commission reduced our rates in 1999. While we would have preferred to keep more of these savings for shareholders, the reduction has at least benefited individuals and businesses throughout our service territory by significantly lowering the prices they pay for electricity. In addition, the rate agreement we reached with the Commission and Public Counsel offers some important incentive features, including the ability to keep the benefits of future gains in productivity for our shareholders, as well as an allowance for special depreciation of up to $100 million annually.

Growth at FPL Energy

FPL Energy, our independent power subsidiary that operates outside of Florida, continued to show rapid growth in both revenue and earnings, and its contributions to FPL Group's net income, excluding nonrecurring items, rose from $32 million in 1998 to $58 million in 1999 - an increase of 81%.

In 1999 FPL Energy expanded its generating operations and construction projects to 13 states. Its generating capacity grew by nearly 60% to more than 3,000 megawatts.
In Maine, FPL Energy acquired nearly 400 megawatts of hydro-powered generation, and more than 700 megawatts of fossil-fueled generation.
Wind-powered plants totaling 117 megawatts were constructed in Iowa and Texas, and construction began on a 1,000-megawatt natural gas-fired power plant near Paris, Texas.
FPL Energy continues to focus on the generation of electricity using "clean" technologies and fuels such as natural gas and renewable resources, including wind, solar, and hydro energy. It is one of the nation's largest producers of electricity from wind power, and approximately 75% of its generation in operation is derived from clean fuels.

New telecommunications subsidiary

On January 1, 2000, we established a new subsidiary, FPL FiberNet, to sell fiber-optic capacity.

This subsidiary acquired 1,600 miles of inter-city fiber network from Florida Power & Light and is selling network capacity to telephone, cable television, Internet, and other telecommunications companies.

The company plans to expand the network to major cities throughout Florida and expects to complete construction of 15 metropolitan networks by 2002. First year revenues of the company are expected to be between $30 million and $40 million, and we anticipate the business will enhance earnings near-term.

Summary and outlook

In recent years we have added to the value of our company by reducing Florida Power & Light's costs, improving quality and customer service, and expanding the operations of FPL Energy for profitable growth. As a result, we are better prepared than ever to succeed in today's rapidly changing business environment and to provide attractive returns to our shareholders.

James L. Broadhead
Chairman and Chief Executive Officer
Florida Power & Light
Powering Florida