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FPL Group hosts annual meeting of shareholders; Chairman and CEO expects continued strong performance - May 2004

JUNO BEACH, Fla. – FPL Group, Inc. (NYSE: FPL) enjoyed another great year in 2003 because the company continued to pursue a strategy focused on its core business, its core strengths and its commitment to building shareholder value, Lew Hay, chairman and CEO, told shareholders at the company's annual meeting today.

"Our industry was presented with numerous challenges in 2003, including a sluggish economy and continued pressure on credit ratings. Nevertheless, it was a year of significant accomplishment for FPL Group,” Mr. Hay said.

"There are many reasons for our strong performance, but the three key attributes that define our company and differentiate us from many of our peers are financial strength, financial discipline and operational excellence within a culture that focuses on quality and continuous improvement. As a result, FPL Group achieved a total shareholder return of 13 percent, which enabled the company to outperform its peers as well as the S&P 500 index when viewed over the last two-year and five-year periods. We expect to continue to deliver solid returns in 2004,” Mr. Hay added.

"Our financial position remains a key competitive advantage. We have always maintained strong credit ratings, and, in fact, have some of the strongest ratings in our industry. We have a prudent dividend policy, are well capitalized and have a strong balance sheet. 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 electric company that provides a high level of certainty in earnings and a wholesale generating subsidiary with a majority of its capacity under contract," he added.

Mr. Hay illustrated the strong performance of the company in 2003 by highlighting some key accomplishments including:

  • Florida Power & Light Company achieved strong earnings and customer growth and expanded its generating capability and enhanced reliability and customer responsiveness.
  • FPL Energy continued the disciplined growth of its power generation portfolio, increased its leadership position in wind energy, completed integration of the Seabrook Station into its portfolio and continued the successful execution of its disciplined hedging strategy.

Mr. Hay highlighted several noteworthy commendations received in 2003 in his address to shareholders. The honors included the Edison Award from the Edison Electric Institute, the power industry’s highest honor, for successfully implementing a clean energy strategy while delivering strong financial performance. In addition, for the third straight time, FPL Group was recognized as the best in the industry in environmental management by Innovest, a Wall Street research firm.

Florida Power & Light’s storm restoration team earned national recognition for its response to the call for help by other electric companies after Hurricane Isabel, and FPL Energy was named the “Renewable Company of the Year” by Platts, the energy information unit of The McGraw-Hill Companies, for the company’s leadership in wind energy and other renewable energy sources.

Continued Customer Growth and Investment at Florida Power & Light

Armando Olivera, president of Florida Power & Light Company, remarked that FPL continues to be one of the premier electric companies in the industry due to strong customer growth, the company’s focus on operational excellence, proven cost management, a constructive regulatory environment and superior environmental performance.

"Florida Power & Light continues to enjoy some of the strongest customer growth in the industry. We are making significant investments in both power generation and our delivery systems to meet the needs of this growing customer base,” said Mr. Olivera. “We added 97,000 new accounts in 2003, the most we’ve added since the late 1980s, and far more than any other investor-owned electric company in the nation.”

Mr. Olivera pointed out that the consequence of FPL’s growth has been and will continue to be significant investment in new plants and infrastructure.

"In 2003, we added 850 megawatts with the repowering of our Sanford power plant and added peaking units at our Fort Myers power plant. Expansions at our Martin and Manatee power plant sites will add 1,900 megawatts in 2005, and subject to approvals, a new natural gas-fired unit at our Turkey Point plant site will provide an additional 1,100 megawatts in 2007,” Mr. Olivera added.

"In addition to new power plants, we are also making significant investments to expand and enhance our power delivery systems. In the last five years we spent $3 billion to enhance the reliability of our system for our customers and we anticipate spending nearly $3.4 billion in the next five years. All told, our investment in new plants and infrastructure from 1999 through 2008 is expected to be approximately $13.6 billion - or 60 percent higher than the previous decade,” he said.

Maximizing Value of FPL Energy Assets

Jim Robo, president of FPL Energy, reviewed the subsidiary's growth opportunities and business strategy.

"We will continue our focus on maximizing the value we derive from our existing assets and building on our industry-leading wind portfolio. In addition, we are enhancing the products and services offered to customers, and we are continuing to look for acquisition opportunities that are accretive, strategically attractive and financeable and that enhance shareholder value,” said Mr. Robo. "As always, we are focused on being a low-cost provider committed to operational excellence. We will continue to minimize the risk inherent in our business through high performing plant operations and the execution of our disciplined hedging strategy,” he added.

FPL Energy has a diversified portfolio of more than 11,000 megawatts in operation in 24 states. More than 90 percent of FPL Energy’s capacity comes from clean or renewable sources such as natural gas, wind, solar, hydro and nuclear. The company grew its portfolio by nearly 3,800 megawatts during 2003.

Outlook for 2004 Reaffirmed

Moray Dewhurst, FPL Group’s chief financial officer, reconfirmed at the meeting that the company expects in 2004 to achieve earnings per share of $4.95 to $5.20 excluding the cumulative effect of adopting new accounting standards as well as the mark-to-market effect of non-qualifying hedges which cannot be determined at this time. He said, “Our financial condition remains strong, supported by our operating cash flows, which amounted to $1.8 billion in 2003, net of dividends to shareholders.

“Our financial strength and discipline provide us with the opportunity to continue to pursue attractive investment opportunities that can help us achieve future growth,” Mr. Dewhurst added.

Committed to Strong Corporate Governance

During his address to shareholders, Mr. Hay discussed the importance of corporate governance and the commitment of the company and leadership team to unquestioned integrity.

Mr. Hay said, “Corporate governance is about all of us at FPL Group being accountable and taking the right actions day-in and day-out to sustain the company’s success - satisfying customers, shareholders and other key stakeholders over the long term. In essence, it’s doing the right thing. Acting with integrity is a critical element of FPL Group’s philosophy and ultimate success, and we are committed to doing just that.”

Shareholders Approve All Proposals

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, Lewis Hay III, Frederic V. Malek, Michael Thaman, Paul R. Tregurtha and Frank G. Zarb.

Alexander W. Dreyfoos, Jr., a director since 1997, had reached the mandatory retirement age and did not stand for re-election. Mr. Hay thanked Mr. Dreyfoos for his many years of service and contributions to the company.

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, 2004.

In addition, shareholders approved the amended and restated long-term incentive plan and the annual incentive plan. Shareholders also gave their approval to increase the number of shares of common stock the company is authorized to issue.

Dividend Declared

Also today, the board of directors declared a regular quarterly common stock dividend of 62 cents a share, payable June 15 to stockholders of record June 4. The declaration marks the 234th consecutive quarterly dividend paid to common stockholders over the past 58 years.

Profile

FPL Group, with annual revenues of more than $9 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 4.2 million customer accounts in Florida. FPL Energy, LLC, an FPL Group wholesale electricity generating 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 and www.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 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 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 by FPL 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, wildlife mortality, natural resources and health and safety that could, among other things, restrict or limit the output of certain facilities or the use of certain fuels required for the production of electricity and/or increase costs. 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.
  • FPL Group's and FPL's results of operations could be affected by their ability to renegotiate franchise agreements with municipalities and counties in Florida. 
    The operation of power generation facilities involves many risks, including start up risks, breakdown or failure of equipment, transmission lines or pipelines, use of new technology, 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 the ability to dispose of spent nuclear fuel, as well as 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 the absence of actively quoted market prices and pricing information from external sources, the valuation of these derivative instruments involves management's judgment or use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts. In addition, FPL's use of such instruments could be subject to prudency challenges and if found imprudent, cost recovery could be disallowed by the FPSC.
  • 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 successful and timely completion of project restructuring activities, maintenance of the qualifying facility status of certain projects, 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, accounting standards, securities laws or corporate governance requirements.
  • 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 United States, 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.

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