FPL Energy
Rapid Growth
FPL Energy is the independent power generation
subsidiary of FPL Group and the company's fastest growing business.
The subsidiary grew its portfolio by nearly 60% in 1999, while
significantly improving the operating performance of its existing
plants. Net income, excluding nonrecurring items, rose 81% from
$32 million in 1998 to $58 million.
At the end of 1999, FPL Energy had in operation
more than 3,000 megawatts of net generating capacity. It had plants
operating in or under construction or development in 13 states,
as well as South America.
FPL Energy emphasizes the use of clean fuels
and generation technologies throughout its operations. Of its power
plants in operation or under construction, more than half use or
will use clean-burning natural gas as fuel. Nearly one-third of
its capacity comes from renewable resources including wind, solar,
and hydro. The company's use of natural gas and renewable resources
makes it one of the cleanest power producers in the United States.
FPL Energy's strategy for income growth takes
into account both diversity of fuel and geography. The strategy
includes:
- optimizing profitability of current assets
through operating improvements, trading marketing, and site expansions;
- acquiring independent power projects, portfolios
and/or companies, as well as assets being divested by electric
utility companies;
- developing, building, and operating new power
plants; and
- financial and ownership restructuring.
In pursuing its strategy for growth, FPL Energy
combines its skills with those of the energy marketing and trading
division and the power generation division of FPL.
Energy marketing and trading, or EMT, was formed
in 1997 to enhance FPL Group's generating assets. It supports the
growth of FPL Energy through fuel procurement, excess power sales,
and asset-backed trading of both fuel and electricity.
The power generation division provides expertise
in all generation technologies and successfully utilizes benchmarking
and best practices to achieve operational excellence. It has developed
an operational model by which it can rapidly deploy a high-performance
culture and share best practices with the workforce at newly acquired
or constructed assets.
At the 665-megawatt Doswell natural gas-fueled
plant near Richmond, Virginia, staffing has been reduced 38% since
1997, and non-fuel operations and maintenance costs are down 45%.
At the same time, plant availability has increased from 86% to
97%. Output from the Doswell plant is sold under a long-term contract
that was renegotiated in late 1998, resulting in more favorable
terms for FPL Energy.
Since acquiring 50% ownership in two 300-megawatt
plants in Bellingham, Massachusetts, and Sayreville, New Jersey,
FPL Energy has increased plant profitability through a variety
of actions, including reducing plant personnel and lowering non-fuel
costs. Almost all of the output from the plants is sold under long-term
contracts to local utilities.
Operating improvements also were achieved at
the Wyman plant, one of FPL Energy's newly acquired plants in Maine,
including an increase in plant availability and lowering of the
forced outage rate. This 610-megawatt plant was among the more
than 1,100 megawatts of generating assets acquired from Central
Maine Power in April of 1999. The acquisition also included 373
megawatts of hydro-powered units that provide the lowest-cost power
in New England. The output is sold either through wholesale contracts
or to the New England Power Pool, or NEPOOL.
As part of its acquisition strategy, FPL Energy
looks to buy generating assets from independent power producers,
as well as those put up for auction by utilities.
FPL Energy's development strategy concentrates
on base load and peaking generation within particular regions.
By establishing and enhancing its regional offices, FPL Energy
is able to benefit from local knowledge and achieve a more in-depth
understanding of local regulatory and market issues. FPL Energy's
operational and construction expertise, knowledge of energy marketing
and trading, and FPL Group's strong balance sheet provide substantial
advantages in its development activities.
For example, in Texas, the construction of a
1,000-megawatt natural gas-fired power plant near the city of Paris
continues ahead of schedule with the plant scheduled to begin operation
by mid-2000. Approximately 70% of the plant's output is to be sold
under one- to five-year contracts.
FPL Energy completed construction during 1999
on two wind energy sites in Texas and Iowa totaling almost 120
megawatts. With net wind generation of more than 450 megawatts,
FPL Energy is one of the nation's largest generators of electricity
from wind.
Effective July 1999, Congress extended for 30
months wind energy production tax credits. In addition, some states
now require a portion of generating capacity to come from renewable
sources. These factors have the potential to further expand the
market for wind-generated power.
After acquiring a 50-megawatt power plant at
Sunoco's Marcus Hook refinery near Philadelphia in 1999, FPL Energy
announced plans to build and operate a 725-megawatt natural gas-fired
facility at the same refinery. The company expects the plant to
be operational by 2003.
In recent years, FPL Energy has undergone a transformation
from a passive investor in small, geographically and technically
disparate projects to a company focused on developing and acquiring
larger generating projects. FPL Energy is currently in the process
of opening offices in regions where its interest and development
opportunities are greatest. Two offices - in Texas and Pennsylvania
- were opened in 1999. Additional offices are expected to open
by the end of 2000.
In addition to its strong existing portfolio
and its ability to improve the performance and profitability of
its current assets, FPL Energy has a pipeline of potential projects
sufficient for continued growth. If the portfolio grows at the
same rate as the past two years, it would exceed 10,000 megawatts
by 2003.
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