To Our Shareholders

A landmark year

2000 was a landmark year for FPL Group. Our core businesses, Florida Power & Light and FPL Energy, produced outstanding operating results, and our new subsidiary, FPL FiberNet, achieved profitability in its first year of operation. This performance enabled us to reach new records of net income and earnings per share, and shareholders were rewarded with exceptionally attractive returns.

Record financial results

Net income, excluding special charges related to the pending merger, reached an all-time high of $745 million.

Earnings per share increased by 10% to a record $4.38.

Shareholder returns

Electric utility stocks fared very well in 2000 compared with the overall stock market, and FPL Group performed substantially better than the industry as a whole. The total return on the company's common stock - dividends plus stock price appreciation - was 74.8%. The return of the Standard & Poor's Electric Companies Index was 53.4%. More importantly, the stock of FPL Group has been a sound long-term investment. Since we began restructuring our company in 1990, the annualized total return to our shareholders has been 15.2%, compared to the 12.3% return for the Standard & Poor's Electric Companies Index.

Major achievements of Florida Power & Light

The key to FPL's success in recent years has been its ability to lower costs while improving customer service and reliability. Outstanding achievements continued in all of these areas.

Operations and maintenance costs per kilowatt-hour declined for the tenth consecutive year. Since 1990, we have reduced O&M costs by 40% - from 1.82 cents per kWh to 1.09 cents. What's more, the lower costs have been achieved during a period when the Consumer Price Index has risen nearly 38% and FPL has added more than 700,000 new customers.
Power plant performance, already among the best in the nation, continued to reach new levels.
The 95% "availability factor" of our fossil plants was the highest ever and substantially above the industry average.
Our nuclear plant availability of 93% was far superior to the industry average. It was less than one percentage point short of the previous year's record, despite an additional scheduled refueling outage.
Service reliability again improved, and FPL's reliability is within the top 20% of the industry.
FPL's customer satisfaction surveys, carried out by an independent agency, rewarded us with some of the highest marks for service in the last decade.

Accomplishments of FPL Energy

FPL Energy, our non-regulated wholesale power business that operates outside Florida, is an industry leader in the use of environmentally friendly fuels. Approximately 80% of its electricity is generated from clean fuels, including natural gas and renewable resources such as wind and solar. It is the largest developer of wind generation in the country and operates the two largest solar plants in the world.

In 2000 FPL Energy constructed and began operation of a 1,000-megawatt natural gas-fired plant in Texas and purchased a 104-megawatt wind facility in Minnesota. This increased its generating capacity by over one-third - from 3,000 to more than 4,100 megawatts.
The company now has power plants in operation in 12 states. Additional announced projects aggregating more than 2,700 megawatts are under late-stage development or construction. These projects will further enhance the company's regional portfolios.
FPL Energy's contributions to earnings, excluding nonrecurring charges and merger-related expenses, increased to $83 million, up 43% from $58 million in 1999. With a solid pipeline of potential projects, we expect FPL Energy's healthy growth to continue.

A growing network at FPL FiberNet

FPL FiberNet provides fiber-optic services and fiber-optic cable to telecommunications companies within Florida.

In 2000 the company continued installing intra-city, metropolitan fiber networks that are tied together by its inter-city, long distance network. The company currently owns about 2,000 route-miles of long distance and metropolitan fiber network, which represent approximately 122,000 fiber-miles.
FPL FiberNet is already a profitable business and is well positioned to make a growing contribution to earnings.

Proposed merger terminated

Just prior to the publication of this annual report, we announced the termination of our proposed merger with Entergy Corporation. When the merger was announced in late July, and submitted to shareholders later in the year, we felt that combining our companies would prove beneficial to shareholders and customers alike. However, a number of factors led us recently to conclude that the merger would neither achieve the synergies nor create the shareholder value on which our original agreement was based. Although I am disappointed, this does not diminish in any way our positive outlook for FPL Group's future.

Summary and outlook

We are in a period of rapid change in the electric power industry. Federal legislation was enacted during the early 1990s that opened transmission lines to all competitors and created a new class of wholesale generators. In addition, in recent years many states have restructured their electric power businesses with varying results.

Going forward, the governor of Florida has established a commission to examine the state's energy policy and make recommendations regarding the future structure of the electricity system. Although a full report is not due until December 2001, the commission's initial proposal calls for creating a fully competitive wholesale power market in Florida. Also, we have responded to the Federal Energy Regulatory Commission's request to all utilities and submitted a proposal to create a separate and independent for-profit company known as a "Transco" to operate Florida's electric transmission system.

No one can predict precisely the ultimate industry structure, but over the last ten years we have worked hard to build an organization that will thrive under any set of circumstances. We are confident that under any fair rules, we will be successful and continue to generate value for our shareholders.