JUNO BEACH, Fla. (Oct. 30, 2006) - FPL Group, Inc. (NYSE: FPL) today reported 2006 third quarter net income on a GAAP basis of $524 million, or $1.32 per share, compared with $339 million, or $0.87 per share, in the third quarter of 2005. FPL Group’s net income for the third quarter of 2006 included a net after-tax gain of $74 million associated with the mark-to-market effect of non-qualifying hedges and $7 million of after-tax merger related costs. The results for last year’s third quarter included a net after-tax loss of $56 million associated with the mark-to-market effect of non-qualifying hedges.
Excluding the mark-to-market effect of non-qualifying hedges and merger-related costs, FPL Group’s earnings would have been $457 million, or $1.15 per share, for the third quarter of 2006, compared with $395 million, or $1.01 per share, in the third quarter of 2005.
FPL Group’s management uses adjusted earnings internally for financial planning, for analysis of performance, for reporting of results to the Board of Directors and for the company’s employee incentive compensation plan. FPL Group also uses earnings expressed in this fashion when communicating its earnings outlook to analysts and investors. FPL Group management believes that adjusted earnings provide a more meaningful representation of FPL Group’s fundamental earnings power.
“FPL Group had very healthy third quarter results, once again driven by the strength of FPL Energy,” said Lew Hay, chairman, president and chief executive officer of FPL Group. “FPL Group’s adjusted results increased approximately 14 percent, with FPL Energy’s adjusted results increasing 40 percent over the prior year quarter. Florida Power & Light posted solid results, although weather-related sales comparisons were unfavorable quarter over quarter.
“With three-quarters of the year now behind us, FPL Group remains on track to deliver at the upper end of its 2006 adjusted earnings expectations of $2.80-$2.90, including the $0.07 impact of storm cost disallowances earlier this year.”
Florida Power & Light
Florida Power & Light Company, FPL Group's principal subsidiary, reported third quarter 2006 net income of $328 million or $0.82 per share, compared to $311 million or $0.80 per share for the prior-year quarter.
In the last 12 months, the average number of FPL accounts increased by 79,000, or 1.8 percent, which is below the average growth experienced in the last several years, and slightly below longer term historical levels. Retail sales of electricity were down 4.2 percent during the third quarter, which witnessed temperatures about normal but below the prior-year quarter. Weather-normalized usage per customer was down, largely due to the impact of higher retail prices, driven by fuel costs.
Operations and maintenance (O&M) expense were essentially flat compared to the prior-year quarter, although this trend is not expected to continue. Looking forward, the company anticipates continued increases in employee benefit costs, and distribution expenses and capital expenditures are also expected to increase as a result of the Storm SecureSM initiative, a ten-year program to harden FPL's infrastructure to be more resilient to hurricanes.
Depreciation and amortization expense decreased $49 million to $197 million for the third quarter of 2006, primarily driven by the extension of the useful lives on the generation fleet and the elimination of the nuclear decommissioning accrual, both of which were implemented as a result of last year’s base rate stipulation and settlement agreement.
During the quarter, FPL announced plans to build an advanced technology coal power plant, comprised of two 980-megawatt generating units in Glades County, Florida to meet the growing demand for electricity in the state and help diversify its existing fuel supply. FPL plans to file a site certification application with the Florida Department of Environmental Protection by the end of 2006. Licensing is expected to take approximately 12 to 18 months. Construction of the new plant is expected to take five years with Unit 1 scheduled to become operational in 2012 and Unit 2 in 2013. Once complete, the facility will generate enough power for more than 650,000 homes. FPL expects the units to have emissions profiles better than current IGCC technology.
“FPL posted good results, despite weak revenue comparisons to the year-ago quarter, which were largely a function of weather,” said Hay. “Customer growth continues to be strong, although it is slightly below the 10 to 15 year historical average. While the Florida economy appears to be cooling, it is still strong, as reflected in continued job and income growth. Housing starts have fallen significantly and we expect that the market will need to work off some excess capacity. Looking forward we see moderate customer growth and a return to positive usage growth in 2007.”
FPL Energy, the competitive energy subsidiary of FPL Group, reported third quarter 2006 net income on a GAAP basis of $215 million or $0.54 per share, compared to $44 million or $0.11 per share in the prior-year quarter. FPL Energy’s net income for the third quarter of 2006 included a net after-tax gain of $74 million associated with the mark-to-market effect of non-qualifying hedges. The results for last year’s third quarter included a net after-tax loss of $56 million associated with the mark-to-market effect of non-qualifying hedges.
Excluding the mark-to-market effect of non-qualifying hedges, third quarter 2006 adjusted earnings for FPL Energy were $141 million, or $0.35 per share, compared to $100 million, or $0.25 per share, in 2005.
FPL Energy’s growth in adjusted earnings in the third quarter is due primarily to the addition of new wind projects and its 70 percent ownership interest in the Duane Arnold Nuclear Plant, together with good results from wholesale load following contracts and continued excellent performance in the merchant fleet. These favorable conditions were partially offset by increases in overhead costs to support the future growth of the business and by increased interest expense.
During the third quarter FPL Energy continued to make good progress selling forward the output from its power plants primarily for 2008. For 2007, FPL Energy now has more than 90 percent of its expected gross margin from its wholesale generation fleet protected against fuel and power market volatility. In addition, as of Oct. 13, 2006, FPL Energy has approximately 80 percent of its 2008 expected gross margin from its wholesale generation fleet protected against fuel and power market volatility.
FPL Energy’s 2006 wind program continues to make excellent progress with approximately 760 megawatts of new wind projects – excluding acquisitions – either already completed or expected to reach commercial operation by the end of the year. In the last twelve months, FPL Energy has added 932 megawatts of new wind to its portfolio.
“FPL Energy once again had an exceptionally strong quarter which is reflected by its double digit growth in adjusted earnings,” said Hay. “Although all areas of the business are performing well, and market conditions remain favorable, we were particularly pleased with the comparative performance of the existing merchant portfolio, which had a strong third quarter last year but did even better this quarter.”
Corporate and Other
Corporate and Other negatively impacted third quarter 2006 net income by $19 million, or $0.04 per share, primarily driven by interest and merger-related expenses partially offset by the impact of certain state tax benefits.
“The strong performance through three-quarters of the year at FPL Energy positions us well to deliver results at FPL Group at the high end of our previously announced range for 2006 adjusted earnings per share of $2.80-$2.90, including the $0.07 negative impact from the storm cost disallowance” said Hay. “For 2007, our business plans are now sufficiently far along for us to share adjusted earnings expectations in a range of $3.35 to $3.45. For 2008, our prospects are also strong and we presently see a range of $3.60 to $3.80 per share.”
As always, FPL Group earnings expectations assume normal weather and exclude the effect of adopting new accounting standards and the mark-to-market effect of non-qualifying hedges, none of which can be determined at this time.
“I remain very confident in FPL Group’s future growth prospects. FPL is one of the premier electric franchises in the country with strong customer growth. FPL Energy is one of the best performing competitive energy companies in the industry with outstanding growth prospects. In addition, FPL Group has a strong balance sheet, affording us the opportunity to continue to invest in our businesses,” Hay added.
|As previously announced, FPL Group’s third quarter earnings conference call is scheduled for
9 a.m. ET on Monday, Oct. 30, 2006. The webcast is available on FPL Group’s website by accessing the following link,http://www.FPLGroup.com/investor/contents/investor_index.shtml. The slides accompanying the presentation may be downloaded at www.FPLGroup.com beginning at 7:30 a.m. ET today. For persons unable to listen to the live webcast, a replay will be available for 90 days by accessing the same link as listed above.
This press release should be read in conjunction with the attached unaudited financial information.
FPL Group, with annual revenues of more than $11 billion, is nationally known as a high-quality, efficient, and customer-driven organization focused on energy-related products and services. With a growing presence in 26 states, it is widely recognized as one of the country's premier power companies. Its principal subsidiary, Florida Power & Light Company, serves more than 4.4 million customer accounts in Florida. FPL Energy, LLC, FPL Group’s competitive energy subsidiary, is a leader in producing electricity from clean and renewable fuels. Additional information is available on the Internet at www.FPLGroup.com, www.FPL.com andwww.FPLEnergy.com.
Cautionary Statements And Risk Factors That May Affect Future Results
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (Reform Act), FPL Group, Inc. (FPL Group) and Florida Power & Light Company (FPL) are hereby providing cautionary statements identifying important factors that could cause FPL Group's or FPL's actual results to differ materially from those projected in forward-looking statements (as such term is defined in the Reform Act) made by or on behalf of FPL Group and FPL in this press release, on their respective websites, in response to questions or otherwise. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as will likely result, are expected to, will continue, is anticipated, believe, could, estimated, may, plan, potential, projection, target, outlook) are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could cause FPL Group's or FPL's actual results to differ materially from those contained in forward-looking statements made by or on behalf of FPL Group and FPL.
Any forward-looking statement speaks only as of the date on which such statement is made, and FPL Group and FPL undertake no obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
The following are some important factors that could have a significant impact on FPL Group's and FPL's operations and financial results, and could cause FPL Group's and FPL's actual results or outcomes to differ materially from those discussed in the forward-looking statements:
FPL Group and FPL are subject to complex laws and regulations and to changes in laws and regulations as well as changing governmental policies and regulatory actions, including initiatives regarding deregulation and restructuring of the energy industry. FPL holds franchise agreements with local municipalities and counties, and must renegotiate expiring agreements. These factors may have a negative impact on the business and results of operations of FPL Group and FPL.
The operation of power generation facilities, including nuclear facilities, involves significant risks that could adversely affect the results of operations and financial condition of FPL Group and FPL.
The construction of, and capital improvements to, power generation facilities involve substantial risks. Should construction or capital improvement efforts be unsuccessful, the results of operations and financial condition of FPL Group and FPL could be adversely affected.
The use of derivative contracts by FPL Group and FPL in the normal course of business could result in financial losses that negatively impact the results of operations of FPL Group and FPL.
FPL Group's competitive energy business is subject to risks, many of which are beyond the control of FPL Group, that may reduce the revenues and adversely impact the results of operations and financial condition of FPL Group.
FPL Group's ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including the effect of increased competition for acquisitions resulting from the consolidation of the power industry.
Because FPL Group and FPL rely on access to capital markets, the inability to maintain current credit ratings and access capital markets on favorable terms may limit the ability of FPL Group and FPL to grow their businesses and would likely increase interest costs.
Customer growth in FPL's service area affects FPL Group's results of operations.
Weather affects FPL Group's and FPL's results of operations.
FPL Group and FPL are subject to costs and other effects of legal proceedings as well as changes in or additions to applicable tax laws, rates or policies, rates of inflation, accounting standards, securities laws and corporate governance requirements.
Threats of terrorism and catastrophic events that could result from terrorism may impact the operations of FPL Group and FPL in unpredictable ways.
The ability of FPL Group and FPL to obtain insurance and the terms of any available insurance coverage could be affected by national, state or local events and company-specific events.
FPL Group and FPL are subject to employee workforce factors that could affect the businesses and financial condition of FPL Group and FPL.
The risks described herein are not the only risks facing FPL Group and FPL. Additional risks and uncertainties not currently known to FPL Group or FPL, or that are currently deemed to be immaterial, also may materially adversely affect FPL Group's or FPL's business, financial condition and/or future operating results.