1 Salomon Smith Barney Power & Merchant Energy Conference May 15, 2002 Salomon Smith Barney Power &...

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Salomon Smith Barney Power & Merchant Energy Conference

May 15, 2002

Salomon Smith Barney Power & Merchant Energy Conference

May 15, 2002

Lew HayLew HayChairman and Chief Executive OfficerChairman and Chief Executive OfficerMoray DewhurstMoray DewhurstChief Financial OfficerChief Financial Officer

Safe Harbor Statement: Any statements made herein about future operating results or other future events are forward-looking statements under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ substantially from such forward-looking statements. A discussion of factors that could cause actual results or events to vary is contained in FPL Group's 2001 SEC Form 10-K.

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Growing, Top-Tier US Electric Company

21,682 mw21,682 mw Operations Operations

in 20 statesin 20 states 4 million4 million

customers customers $11.0 billion $11.0 billion

market market capitalizationcapitalization

52001 net income and EPS, excluding merger-related items and effects of FAS 133

Three Strong Businesses

Net income: $792 mEPS growth: +7%Net income: $792 mEPS growth: +7%

FPLFPLEnergyEnergy

FPLFPLEnergyEnergy FPLFPLFPLFPL FPLFPL

FiberNetFiberNetFPLFPL

FiberNetFiberNet

FPLGROUP

FPLGROUP

$105 m+27%$105 m+27%

$695 m +8%$695 m +8%

$15 m +80%$15 m +80%

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Three Fundamental Attributes

FPLFPLEnergyEnergy



FiberNetFiberNet

FinancialDisciplineFinancialDiscipline

OperationalExcellenceOperationalExcellence

FPLGROUP

FPLGROUP

FinancialStrengthFinancialStrength

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FPL Group

Solid, integrated Solid, integrated electric companyelectric company

Attractive growth Attractive growth opportunities in all opportunities in all three businessesthree businesses

FPLFPLEnergyEnergy



FiberNetFiberNet


OperationalExcellence

OperationalExcellence

FPLFPLGROUPGROUP

FPLFPLGROUPGROUP

FinancialStrength

FinancialStrength

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Favorable customer mix Favorable customer mix Strong customer growth Strong customer growth Operational excellence Operational excellence Proven cost management Proven cost management Constructive regulatory environment Constructive regulatory environment

Premier Electric Utility

Attractive financial returnsAttractive financial returns

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4 million customer 4 million customer accountsaccounts

Consistent strong Consistent strong growth growth

– 2.1% in customer accounts

– 1.1% in usage per customer

High percentage High percentage of residential & of residential & small commercial small commercial customerscustomers

Attractive Customer Demographics

Florida Power & Light

Industry Average

Residential

Commercial

Industrial

Other4%3%

32%

32%

33%

37%

56%

3%

Customer Mix

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Operational Excellence

Industry Average

Fossil Plant Availability

St. Lucie 2 & 1

Turkey Point 4 & 3

2001 WANO Performance IndexAll U.S. Sites

Data Source: Institute of Nuclear Power Operators (INPO) U.S. sites

95%

82%

-

25

50

75

100

90 92 94 96 98 99 00 01

(%)

-

25

50

75

100

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Operational Excellence

69

107

0

20

40

60

80

100

120

FPL Industry Average

FPL = 36% better than average

Service Reliability(2001 total outage time per customer; minutes)

527

481

275

407

250

300

350

400

450

500

550

600

91 92 93 94 95 96 97 98 99 00

Industry Average

FPL

Cost Management(O&M $ per customer)

FPL = 48% better than average

Source: FERC Form 1

Excludes Fuel, Purchased Power & ECCR

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Constructive Regulatory Environment

““Rate certainty” through end of 2005Rate certainty” through end of 2005 Incentive-based agreementIncentive-based agreement

– no ROE limits

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Revenue-Sharing Thresholds($ millions)

2002 2003 2004 2005

2002 est. revenue* 3,470

2/3 to customers 3,580 3,680 3,780 3,880

100% to customers 3,740 3,840 3,940 4,040

* Retail base rate revenue, as filed in Minimum Filling Requirements.

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Constructive Regulatory Environment


– no ROE limits– shareholders benefit from productivity improvements

Ability to reduce depreciation expense by up to Ability to reduce depreciation expense by up to $125 million per year$125 million per year

Limited support for deregulationLimited support for deregulation


– no ROE limits– shareholders benefit from productivity improvements

Ability to reduce depreciation expense by up to Ability to reduce depreciation expense by up to $125 million per year$125 million per year

Limited support for deregulationLimited support for deregulation

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Major US Wholesale Generator

Presence in 18 statesPresence in 18 states 5,063 mw portfolio5,063 mw portfolio Experience in developing, Experience in developing,

constructing, operating constructing, operating and acquiring power plantsand acquiring power plants

Strong asset optimization Strong asset optimization teamteam

Major diversified wholesale electric generator whichMajor diversified wholesale electric generator whichadds value by actively managing and trading energyadds value by actively managing and trading energy

commodities in conjunction with our assets commodities in conjunction with our assets

Major diversified wholesale electric generator whichMajor diversified wholesale electric generator whichadds value by actively managing and trading energyadds value by actively managing and trading energy

commodities in conjunction with our assets commodities in conjunction with our assets

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NortheastNortheast

Mid-AtlanticMid-Atlantic20%20%

28%28%

16%16%

36%36%

WestWest

Regional DiversityRegional Diversity Fuel Diversity

GasGas46%46%

28%28%WindWind

OtherOther4%4%

OilOil15%15% 7%7%

HydroHydro

Diversified Portfolio

5,063 Net MW in Operation5,063 Net MW in OperationYear-end 2001Year-end 2001

CentralCentral

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NortheastNortheast

Mid-AtlanticMid-Atlantic21%21%

26%26%

16%16%

37%37%

WestWest

Regional DiversityRegional Diversity Fuel Diversity

GasGas59%59%

21%21%WindWind

OtherOther2%2%

HydroHydro3%3% 7%7%

OilOil

Diversified Portfolio

11,588 Net MW in Operation11,588 Net MW in OperationYear-end 2004Year-end 2004

CentralCentral

NuclearNuclear9%9%

Assumes addition of 1,000 mw of wind. Percentages may not add to 100% due to roundingAssumes addition of 1,000 mw of wind. Percentages may not add to 100% due to rounding.

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13

32

58

83

105

-

25

50

75

100

125

1997 1998 1999 2000 2001

($)

Excluding non-recurring items and effects of FAS 133

Track Record of Consistent, Strong Earnings Growth

($ millions)

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Disciplined Growth Strategy

Grow generation portfolio in prudent wayGrow generation portfolio in prudent way– aggressive wind development – focused fossil development– pursuit of M&A opportunities

Optimize asset valueOptimize asset value – integrated operations, business management and

marketing and trading capabilities Hedge position via substantial contract coverageHedge position via substantial contract coverage Moderate risk by regional and fuel diversity Moderate risk by regional and fuel diversity Manage portfolio activelyManage portfolio actively

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Achievable Growth Strategy

20%-30% Average Annual Earnings Growth20%-30% Average Annual Earnings Growth20%-30% Average Annual Earnings Growth20%-30% Average Annual Earnings Growth

Existing Portfolio

Portfolio

Build-out

Optimization of assets (5,063 mw)

4,000+ mw of announced gas-fired plants

Close Seabrook by YE 2002

1,000-2,000 mw of wind projects

Assumes prices roughly equivalent to current market forwards

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Achievable Growth Strategy

Additional Additional Greenfield Greenfield

DevelopmentDevelopmentAcquisitionsAcquisitions

Focused on high contract coverage projects

Gas Wind

Ranging from single plants to IPPs

Multiple fuels– gas– nuclear– wind– coal– hydro

Additional Upside Potential

20%-30% Average Annual Earnings Growth20%-30% Average Annual Earnings Growth20%-30% Average Annual Earnings Growth20%-30% Average Annual Earnings Growth

Existing Portfolio

Portfolio

Build-out

Optimization of assets (5,063 mw)

4,000+ mw of announced gas-fired plants

Close Seabrook by YE 2002

1,000-2,000 mw of wind projects

Assumes prices roughly equivalent to current market forwards

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Wind Energy: Capitalizing on our Strength

Nearly 1,500 net mw in operation Nearly 1,500 net mw in operation Wind is profitable Wind is profitable We have a leading positionWe have a leading position We can build projects faster and cheaperWe can build projects faster and cheaper We can operate with higher availabilityWe can operate with higher availability 1,000 - 2,000 mw of new wind projects 1,000 - 2,000 mw of new wind projects

by year-end 2003 by year-end 2003

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Seabrook Acquisition

Attractive priceAttractive price Plays to our strengthsPlays to our strengths

– superior operating skills– northeast trading expertise

Immediately accretiveImmediately accretive– 1 - 4 cents in 2003– 10 - 12 cents avg. ‘03-’06– accelerating thereafter

Attractive financial returnsAttractive financial returns– strong cash flow– substantial NPV– 18 - 20% ROE

Based on current forward price curves

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Well-Hedged Position

2002 = 80%2003 = 50%

0%

20%

40%

60%

80%

100%

Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06

Delivery Period

Committed mw

Merchant mw

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FPL FiberNet

Profitable niche businessProfitable niche business– despite poor

telecom market Great example of Great example of

leveraging FPL skillsleveraging FPL skills

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Three Fundamental Attributes

FPLFPLEnergyEnergy



FiberNetFiberNet


OperationalExcellenceOperationalExcellence

FPLGROUP

FPLGROUP

FinancialStrengthFinancialStrength

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3.573.85

3.98

4.38

4.69

2.00

2.50

3.00

3.50

4.00

4.50

5.00

1997 1998 1999 2000 2001

($)

7.1% average annual EPS

growth rate

Excluding nonrecurring items and effects of FAS 133

Financial StrengthEPS Growth

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Debt Ratio

52

61

25

50

75

FPLGroup

IndustryAverage

(%)

Financial Strength

Strong balance sheet Strong balance sheet Strong credit ratingsStrong credit ratings

– A = FPL Group Strong cash flowStrong cash flow

– $1.4 billion 2001 operating cash flow

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Healthy 3.7% Healthy 3.7% yieldyield

48% payout48% payoutratio allowsratio allowsfor growthfor growth

-

1

2

3

4

5

93 94 95 96 97 98 99 00 01

($)

Earnings per share

Dividends per share

Financial DisciplinePrudent Dividend Policy

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87%

13%

FPL 100%

FPL Energy 50 - 83%

Total FPL Group 94 - 98%(weighted average)

Financial DisciplineWell-Hedged Position

Florida Power & Light

FPL Energy

Capacity% contracted:

EPS Contribution %2001

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Marketing & Trading Serves Two Fundamental Purposes

Marketing & Trading

Risk ReductionAsset

Optimization

Risk ControlRisk ControlRisk ControlRisk Control

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ERCOT Spark Spreads($ per mwh)

Current Forward Contract % under

Spark Spread Spark Spread Contract

2002 $9.58 $14.31 79%

2003 $7.48 $15.92 48%

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Enhancing Profitability in ERCOT

0

2

4

6

8

10

12

14

16

18

20

CurrentForward Spark

Spread

North/SouthSpread

Firm vs Non-Firm Contracts

Water Cooled AdditionalTrading

Opportunities

PotentialRealized Spark

Spreads

($)

6.00 - 7.00

7.00 - 8.00

0.50 - 1.50 0.2514.75 - 17.001.00+

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Projected Capital Sources & Uses2002 - 2005

($ billion)

Operating cash flow less dividends

Equity issuance

Incremental debt capacity

FPL commitments

FPL Energy commitments

Seabrook

Additional wind

$7.9 - $9.9 $8.2 - $10.2

$1.4 - $1.9

$1.3 - $2.0

$5.5 - $6.3

$1.0 - $2.0

$4.5 - $5.5

$0.8

$1.6

Sources Uses

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Strong Rating Valuable, but not a Fixed Target

Long-term goal: ‘A’ Long-term goal: ‘A’ or equivalent…or equivalent…

……subject to subject to fluctuating agency fluctuating agency standardsstandards

CreditCreditRatingRating

InvestmentInvestmentGradeGrade

Absolute goal - strong investment gradeAbsolute goal - strong investment grade

Relative goal - upper band of peer groupRelative goal - upper band of peer group

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Earnings Guidance for 2002

FPL approximately flat with 2001FPL approximately flat with 2001– assuming normal weather

FPL Energy up 15 - 20%FPL Energy up 15 - 20%– reflects modest capacity growth and delay in PTC’s– reflects poor hydro conditions in 1st quarter – assumes no major changes in market prices

FPL Group EPS $4.78 - $4.82FPL Group EPS $4.78 - $4.82

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Earnings Guidance for 2003 and Beyond

Expect FPL to return to strong underlying Expect FPL to return to strong underlying fundamentalsfundamentals– 4%-5% average annual earnings growth

Continue to target average annual growth of 20% Continue to target average annual growth of 20% - 30% at FPL Energy- 30% at FPL Energy

FPL Group Average EPS Growth: 6% - 8%FPL Group Average EPS Growth: 6% - 8%FPL Group Average EPS Growth: 6% - 8%FPL Group Average EPS Growth: 6% - 8%

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Relative Low Risk, High Return

FPL Group represents one of best combinations of risk, return and earnings growth among major electric companies

Risk

FPL Group

Earnings Growth/Return

Low

High

High

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