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FPL Group hosts annual meeting; Chairman and CEO expects continued strong performance

JUNO BEACH, Fla. - The success of FPL Group, Inc. (NYSE: FPL) continues to be driven by three fundamental factors - financial strength, financial discipline and a commitment to operational excellence, Lew Hay, chairman and CEO, told shareholders at the company's annual meeting today.

"Although 2002 was another tumultuous year for the electric power industry, FPL Group weathered the storm by continuing to pursue a strategy focused on its core business. As a result, we delivered significant value to shareholders, providing an 11 percent total return and out-performing both our peer group and the S&P 500," Mr. Hay said. "We expect to deliver solid returns in 2003 as well," he added.

"Our financial position remains a key competitive advantage and helps differentiate us from our peers. We have a disciplined investment strategy, a strong credit rating and a prudent dividend policy. In addition, we have successfully managed the risk inherent in certain portions of the energy business," he said.

"Today, we have a balanced portfolio comprised of a regulated utility that provides approximately 85 percent of our earnings and a wholesale generating subsidiary with a majority of its capacity under contract," said the chairman of one of the nation's largest electricity providers.

Mr. Hay illustrated the strong performance of the company in 2002 by highlighting some key accomplishments including:

  • Florida Power & Light achieved strong earnings and customer growth, lowered its base rates, expanded its generating capability and enhanced reliability and customer responsiveness.
  • FPL Energy continued the disciplined growth of its power generation portfolio, expanded its leadership positioning wind energy and restructured the business to better position it for the future.

Mr. Hay said that FPL Group's excellent performance has been achieved through the efforts of more than 11,000 employees dedicated to reducing costs, improving service reliability and satisfying customers. He said the company has launched a renewed commitment to quality to maintain and enhance its performance record.

Paul Evanson, president of Florida Power & Light Company, remarked that FPL continues to be one of the premier utilities in the industry due to strong customer growth, the company's focus on operational excellence, proven cost management, and a constructive regulatory environment.

"Our fundamental strengths have helped us achieve average earnings growth of five percent over the last decade," said Mr. Evanson. He also provided several examples of operational excellence and noted that, despite slightly higher operating and maintenance expenses in 2002, "FPL continues to manage its costs better than practically anyone in the industry."

Mr. Evanson added, "Our ability to maintain attractive rates and high reliability is supported by one of the best regulatory climates in the nation." He pointed out that under last year's rate agreement, FPL customers will save approximately $1 billion through 2005.

Jim Robo, president of FPL Energy, reviewed the subsidiary's business strategy and growth opportunities. "We will maintain our focus on being a low cost provider and minimize risk by continuing to sell forward a majority of the output from our plants instead of relying on the volatile spot market," Mr. Robo said. "We will continue to expand our industry-leading wind portfolio and will look for acquisition opportunities that are accretive, strategically attractive, financeable and enhance shareholder value." Mr. Robo pointed to the company's successful acquisition of a controlling interest in the Seabrook Nuclear plant in New Hampshire as such a transaction.

FPL Energy has a diversified portfolio of more than 7,250 megawatts in operation in 23 states. More than 80 percent of FPL Energy's capacity comes from clean, renewable sources such as wind, solar, hydro and nuclear. The company expects to add more than 2,800 megawatts of natural gas-fired generation to its portfolio this summer and 700 to 1,000 megawatts of wind generation by the end of 2003.

Moray Dewhurst, FPL Group's chief financial officer, reconfirmed at the meeting that the company expects in 2003 to achieve earnings per share of $4.80 to $5.00. He said, "Our financial condition remains strong, underpinned by our operating cash flows, which amounted to $1.9 billion, net of dividends to shareholders.

"Our strong financial position has enabled us to continue to pursue attractive investment opportunities that can help us achieve future growth, even in an industry environment that has been very challenging overall," Mr. Dewhurst added.

During his address to shareholders, Mr. Hay discussed the importance of corporate responsibility and corporate governance. Mr. Hay said, "There is no issue of greater importance to our board of directors, our senior executive team or to me personally. Corporate governance is not just about compliance with federal law or New York Stock Exchange rules or having an independent Board. It's also about taking the right actions to sustain the company's success -- satisfying customers and building shareholder value. Acting with integrity is a critical element of FPL Group's philosophy and ultimate success."

Mr. Hay pointed out that 9 of 11 FPL Group directors are independent and that the compensation and audit committees have been comprised solely of independent directors for many years. Additionally, he said, the corporate governance committee has been comprised of independent directors since its inception in 2001.

During the meeting, shareholders elected the following slate of directors to a one-year term: H. Jesse Arnelle, Sherry S. Barrat, Robert M. Beall, II, J. Hyatt Brown, James L. Camaren, Alexander W. Dreyfoos, Jr., Paul J. Evanson, Lewis Hay III, Frederic V. Malek, Paul R. Tregurtha, and Frank G. Zarb.

Shareholders also ratified the appointment of Deloitte & Touche LLP as the independent public accountants to audit the accounts of FPL Group and its subsidiaries for the fiscal year ending December 31, 2003.

A third proposal that had been presented to shareholders was withdrawn prior to the meeting by the United Brotherhood of Carpenters and Joiners of America. The union's proposal requested that FPL Group establish a policy of expensing in the company's annual income statement the costs of all future stock options issued by the company. FPL Group adopted such a policy after the Financial Accounting Standards Board's April 22 announcement indicating it had decided to require all companies to expense options using the "fair value" method and discussions with union representatives.

Also today, the board of directors declared a regular quarterly common stock dividend of 60 cents a share, payable June 16 to stockholders of record June 6. The declaration marks the 230th consecutive quarterly dividend paid to common stockholders over the past 57 years.

FPL Group, with annual revenues of more than $8 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 24 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 million customer accounts in Florida. FPL Energy, LLC, an FPL Group energy-generating subsidiary, is a leader in producing electricity from clean and renewable fuels. Additional information is available on the Internet at www.FPLGroup.comwww.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 filing 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, in SEC filings, in presentations, 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, estimated, 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 after the date on which such statement is made or to reflect the occurrence of unanticipated events. 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 changes in laws or regulations, including the Public Utility Regulatory Policies Act of 1978, as amended (PURPA), and the Public Utility Holding Company Act of 1935, as amended (Holding Company Act), changing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC), the Florida Public Service Commission (FPSC) and the utility commissions of other states in which FPL Group has operations, and the U.S. Nuclear Regulatory Commission (NRC), with respect to, among other things, allowed rates of return, industry and rate structure, operation of nuclear power facilities, operation and construction of plant facilities, operation and construction of transmission facilities, acquisition, disposal, depreciation and amortization of assets and facilities, recovery of fuel and purchased power costs, decommissioning costs, return on common equity and equity ratio limits, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission costs). The FPSC has the authority to disallow recovery of costs that it considers excessive or imprudently incurred.
  • The regulatory process generally restricts FPL's ability to grow earnings and does not provide any assurance as to achievement of earnings levels.
  • FPL Group and FPL are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, natural resources and health and safety that could, among other things, restrict or limit the use of certain fuels required for the production of electricity. There are significant capital, operating and other costs associated with compliance with these environmental statutes, rules and regulations, and those costs could be even more significant in the future.
  • FPL Group and FPL operate in a changing market environment influenced by various legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the energy industry, including deregulation of the production and sale of electricity. FPL Group and its subsidiaries will need to adapt to these changes and may face increasing competitive pressure.
  • The operation of power generation facilities involves many risks, including start up risks, breakdown or failure of equipment, transmission lines or pipelines, the dependence on a specific fuel source or the impact of unusual or adverse weather conditions (including natural disasters such as hurricanes), as well as the risk of performance below expected levels of output or efficiency. This could result in lost revenues and/or increased expenses. Insurance, warranties or performance guarantees may not cover any or all of the lost revenues or increased expenses, including the cost of replacement power. In addition to these risks, FPL Group's and FPL's nuclear units face certain risks that are unique to the nuclear industry including additional regulatory actions up to and including shutdown of the units stemming from public safety concerns, whether at FPL Group's and FPL's plants, or at the plants of other nuclear operators. Breakdown or failure of an FPL Energy, LLC (FPL Energy) operating facility may prevent the facility from performing under applicable power sales agreements which, in certain situations, could result in termination of the agreement or incurring a liability for liquidated damages.
  • FPL Group's and FPL's ability to successfully and timely complete their power generation facilities currently under construction, those projects yet to begin construction or capital improvements to existing facilities is contingent upon many variables and subject to substantial risks. Should any such efforts be unsuccessful, FPL Group and FPL could be subject to additional costs, termination payments under committed contracts and/or the write-off of their investment in the project or improvement.
  • FPL Group and FPL use derivative instruments, such as swaps, options, futures and forwards to manage their commodity and financial market risks, and to a lesser extent, engage in limited trading activities. FPL Group could recognize financial losses as a result of volatility in the market values of these contracts, or if a counterparty fails to perform. In addition, FPL's use of such instruments could be subject to prudency challenges by the FPSC and if found imprudent, cost disallowance.
  • There are other risks associated with FPL Group's non-rate regulated businesses, particularly FPL Energy. In addition to risks discussed elsewhere, risk factors specifically affecting FPL Energy's success in competitive wholesale markets include the ability to efficiently develop and operate generating assets, the price and supply of fuel, transmission constraints, competition from new sources of generation, excess generation capacity and demand for power. There can be significant volatility in market prices for fuel and electricity, and there are other financial, counterparty and market risks that are beyond the control of FPL Energy. FPL Energy's inability or failure to effectively hedge its assets or positions against changes in commodity prices, interest rates, counterparty credit risk or other risk measures could significantly impair its future financial results. In keeping with industry trends, a portion of FPL Energy's power generation facilities operate wholly or partially without long-term power purchase agreements. As a result, power from these facilities is sold on the spot market or on a short-term contractual basis, which may affect the volatility of FPL Group's financial results. In addition, FPL Energy's business depends upon transmission facilities owned and operated by others; if transmission is disrupted or capacity is inadequate or unavailable FPL Energy's ability to sell and deliver its wholesale power may be limited.
  • FPL Group is likely to encounter significant competition for acquisition opportunities that may become available as a result of the consolidation of the power industry. In addition, FPL Group may be unable to identify attractive acquisition opportunities at favorable prices and to successfully and timely complete and integrate them.
  • FPL Group and FPL rely on access to capital markets as a significant source of liquidity for capital requirements not satisfied by operating cash flows. The inability of FPL Group and FPL to maintain their current credit ratings could affect their ability to raise capital on favorable terms, particularly during times of uncertainty in the capital markets which, in turn, could impact FPL Group's and FPL's ability to grow their businesses and would likely increase interest costs.
  • FPL Group's and FPL's results of operations can be affected by changes in the weather. Weather conditions directly influence the demand for electricity and natural gas and affect the price of energy commodities, and can affect the production of electricity at wind and hydro-powered facilities. In addition, severe weather can be destructive, causing outages and/or property damage, which could require additional costs to be incurred.
  • FPL Group and FPL are subject to costs and other effects of legal and administrative proceedings, settlements, investigations and claims; as well as the effect of new, or changes in, tax rates or policies, rates of inflation or accounting standards.
  • FPL Group and FPL are subject to direct and indirect effects of terrorist threats and activities. Generation and transmission facilities, in general, have been identified as potential targets. The effects of terrorist threats and activities include, among other things, terrorist actions or responses to such actions or threats, the inability to generate, purchase or transmit power, the risk of a significant slowdown in growth or a decline in the U.S. economy, delay in economic recovery in the U.S., and the increased cost and adequacy of security and insurance.
  • FPL Group's and FPL's ability to obtain insurance, and the cost of and coverage provided by such insurance, could be affected by national events as well as company-specific events.
  • FPL Group and FPL are subject to employee workforce factors, including loss or retirement of key executives, availability of qualified personnel, collective bargaining agreements with union employees or work stoppage.

The issues and associated risks and uncertainties described above are not the only ones FPL Group and FPL may face. Additional issues may arise or become material as the energy industry evolves. The risks and uncertainties associated with these additional issues could impair FPL Group's and FPL's businesses in the future.