JUNO BEACH , Fla. - FPL Group, Inc. (NYSE: FPL) today reported 2004 fourth quarter net income on a GAAP basis of $173 million, or $0.94 per share, compared with $145 million or $ 0.81 per share, in the fourth quarter of 2003. FPL Group’s net income for the fourth quarter 2004 included a net unrealized loss of $2 million after-tax associated with the mark-to-market effect of non-qualifying hedges. The results of last year’s fourth quarter included a net unrealized gain of $12 million after-tax associated with the mark-to-market effect of non-qualifying hedges.
Excluding the mark-to-market effect on non-qualifying hedges, FPL Group’s earnings would have been $175 million or $0.95 per share for the fourth quarter of 2004, compared with $133 million or $0.74 per share, in the fourth quarter of 2003.
For the full year 2004, FPL Group reported net income on a GAAP basis of $887 million or $4.91 per share, compared with $890 million or $5.00 per share in 2003.
FPL Group’s results for the full year 2004 included a net unrealized loss of $3 million after-tax associated with the mark-to-market effect of non-qualifying hedges. Results for the full year 2003 included an after-tax charge of $3 million or $0.02 per share due to a change in accounting principle (FIN 46 – Consolidation of Variable Interest Entities); and a net unrealized gain of $22 million after-tax or $0.13 per share associated with the mark-to-market effect of non-qualifying hedges.
Excluding the mark-to-market effect of non-qualifying hedges, FPL Group’s 2004 earnings would have been $890 million, or $4.93 per share for the full year, compared with $871 million, or $4.89 per share, for the full year 2003. 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.
"Although 2004 will be remembered for an unprecedented hurricane season it was also a year of significant achievement for FPL Group. We continued to profitably grow our business, improved our financial strength and flexibility and increased our dividend twice to provide more immediate value to our shareholders,” said Lew Hay, chairman and chief executive officer. “Florida Power & Light continued to enjoy solid customer growth, while FPL Energy performed remarkably well during the year and continues to benefit from its industry leading wind portfolio, outstanding operational performance and successful execution of its disciplined hedging strategy.
“Our results for the fourth quarter contain a number of unusual items that are included in GAAP and adjusted earnings results. At the FPL Group level these items largely offset but they do impact the contribution for each business segment. While our reported results are complicated by these unusual items our underlying business performance was in-line with our expectations.”
Florida Power & Light
Florida Power & Light continued to enjoy strong customer growth during the fourth quarter of 2004. The average number of FPL customer accounts increased by 94,000 or 2.3 percent. For the full year, the average number of FPL customer accounts increased by 107,000, an increase of 2.6 percent.
For the fourth quarter of 2004, operations and maintenance (O&M) expense was down on a comparative basis due primarily to the receipt of funds associated with the settlement of the shareholder litigation and certain reductions in O&M related to clauses . Smaller impacts also contributing to the lower O&M included the timing of plant outages, improved workers’ compensation experience and certain legal expenses.
For the full year, O&M expense was down due primarily to the receipt of funds associated with the shareholder litigation. In addition, legal expenses were lower in 2004. Looking ahead, the company said it expects to see continued upward trends in nuclear maintenance, insurance and employee related costs as well as some increases in fossil generation O&M as a number of older units go through major overhauls.
Depreciation expense was down for the quarter as a result of certain items being fully depreciated quarter over quarter. In addition, construction of power delivery projects was somewhat delayed by the impact of the hurricanes and plant in service growth was lower than it otherwise would have been.
Depreciation for the full year was up compared to the full year 2003 reflecting investment in new power plants and delivery systems to help meet the continued growth in Florida .
“Although we are encouraged by the continued customer growth experienced during the fourth quarter and for the full year 2004, we remain uncertain as to the overall impact last year’s hurricane season will have on Florida Power & Light’s short-term revenue growth,” said Hay. “As we begin 2005, we continue to believe that the medium and longer term growth prospects in our service territory are good. We remain prepared to continue making significant investments to support growth while being flexible in the short term.”
During the year, the company continued work to add generation capacity to meet the needs of its customers. New gas-fired combined cycle generation units at its power plant sites in Martin and Manatee counties will add 1,900 megawatts of capacity in mid-2005. In addition, the Florida Public Service Commission approved the proposed 1,100-megawatt gas-fired power plant at FPL’s Turkey Point site as the best most cost-effective project to meet customer needs for electricity beginning in 2007. Additional reviews and approvals are needed from several state and federal agencies, and a final decision on the project is expected from the governor and Cabinet early this year.
FPL Energy’s net income for the fourth quarter 2004 included a net unrealized loss of $2 million after-tax associated with the mark-to-market effect of non-qualifying hedges. The results of last year’s fourth quarter included a net unrealized gain of $12 million after-tax associated with the mark-to-market effect of non-qualifying hedges.
Excluding the mark-to-market effect of non-qualifying hedges, earnings would have been a loss of $9 million or a negative $0.05 per share for 2004, compared to income of $26 million or $0.14 per share in 2003.
For the full year 2004, FPL Energy reported net income on a GAAP basis of $172 million or $0.95 per share, compared to $194 million or $1.09 per share in 2003.
FPL Energy’s results for the full year 2004 included a net unrealized loss of $3 million after-tax associated with the mark-to-market effect of non-qualifying hedges. Results in the full year 2003 included an after-tax charge of $3 million or $0.02 per share due to a change in accounting principle (FIN 46 – Consolidation of Variable Interest Entities); and a net unrealized gain of $22 million after-tax or $0.13 per share associated with the mark-to-market effect of non-managed hedges.
Excluding the mark-to-market effect of non-qualifying hedges, FPL Energy’s earnings would have been $175 million or $0. 97 per share for the full year 2004, compared with $175 million or $0.98 per share for the full year 2003.
During the quarter, FPL Energy began commercial operation of its 744-megawatt natural gas-fired Marcus Hook power plant in Pennsylvania and restructured the steam sales agreement associated with the plant which resulted in an after-tax loss of approximately $48 million on this restructuring. The transaction is expected to improve both cash flow and net income going forward.
New wind projects, the absence of an outage at the Seabrook Station and improvements among older assets associated with prior contract restructurings all had a positive impact on the fourth quarter of 2004.
Increased interest expense associated with the expansion of FPL Energy’s asset base was somewhat offset by the partial recovery of a legal judgment related to the Karaha Bodas project.
For the full year 2004, FPL Energy’s adjusted earnings were down slightly due primarily to the Marcus Hook contract restructuring. Full year 2004 results were positively impacted by new wind projects added in 2003, a strong operating performance across the portfolio, improved market conditions in NEPOOL and the commencement of a contract on the remaining 50 percent of capacity at FPL Energy’s peaking facility in Alabama .
“FPL Energy had an outstanding year in 2004 with significant contributions from both its existing portfolio and new investments,” Hay said. “Looking ahead, we expect to benefit from new wind projects, (of which we already have approximately 220 megawatts under construction), an uprate of capacity at the Seabrook Station and continued outstanding operational performance across the fleet. With more than 85 percent of our expected gross margin from our generation fleet already hedged, we feel very good about 2005 at FPL Energy.”
Corporate and Other
Outlook for 2005
FPL Group’s fourth quarter earnings conference call is scheduled for 9 a.m. ET on Friday, January 21, 2005. The webcast is available on FPL Group’s website by accessing the following link,http://www.FPLGroup.com/investor/contents/investor_index.shtml
This press release should be read in conjunction with the attached unaudited financial information.
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:
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.