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Title: EEI%20International%20Financial%20Conference


1
EEI International Financial Conference
  • February 20 23, 2005

2
Cautionary Statements And Risk Factors That May
Affect Future Results
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
materially from such forward-looking statements.
A discussion of factors that could cause actual
results or events to vary is contained in the
Appendix herein.
3
FPL Group A Premier U.S. Electric Company
  • Proven ability to operate effectively in
    regulated and de-regulated markets
  • Track record of operational excellence and
    continuous improvement
  • Among the leaders in environmental excellence
  • Strong financial position
  • Commitment to creating shareholder value

5-year Total Shareholder Return (12/31/99
12/31/04)
4
With Two Strong Businesses
  • One of the largest U.S. electric utilities
  • Vertically integrated, retail rate-
  • regulated utility
  • 18,940 mw in operation
  • 4.2 million customers
  • 8.7 billion operating revenue
  • Successful wholesale generator
  • U.S. market leader in wind-generation
  • 11,520 mw in operation
  • 1.7 billion operating revenue

Financial data as of 12/31/04
5
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6
FPL One of the Best Electric Utilities in the
U.S.
Historically In 2005 1 Beyond 2005 1
Among strongest customer growth rates in the nation Slowdown possible due to 2004 hurricanes Expect growth to continue at historic pace
Investing to meet the demands of customer growth Addition of 1,900 gas-fired mw at Martin and Manatee Addition of 1,150 gas-fired mw at Turkey Point in 2007
Focus on operational excellence and productivity Top quartile reliability Managing continued cost pressures Continued cost management
One of the lowest emitting utilities in the U.S. Increasing natural gas usage Plans to introduce LNG into our fuel mix
Constructive regulatory environment Regulatory issues storm cost recovery and rate base case Evaluating the addition of solid fuel generation
5-yr Adjusted EPS CAGR of 2.8 2 EPS estimates of 3.95 to 4.10 Long-term EPS growth potential of 3 to 4
See appendix for reference notes
7
Strong Customer Growth
  • Average Customer Accounts(millions)

CAGR 2.1
8
Requires Significant Investment
  • Capital Expenditures(billions)

2001-2005 cumulativeCapEx of 7.0 bn
9
Florida has a Constructive Regulatory Environment
  • Appointed public service commission
  • 5 commissioners with staggered terms
  • Fuel, purchased power directly passed through
  • History of progressive and innovative regulatory
    solutions
  • Rate certainty through end of 2005
  • incentive-based agreement allowing shareholders
    to benefit from productivity improvements
  • win-win revenue sharing provision instead of
    ROE measure
  • No current activity on wholesale or retail
    restructuring

10
First Base Rate Increase Request in More Than 20
years
  • Major investment in infrastructure due to strong
    customer growth and higher operating expenses
    prompted the request
  • Base rate request between 400 and 450 million
    likely
  • If approved, new rates would go into effect on
    Jan 1, 2006 when the current agreement expires
  • Additional increase of 65 million (130 million
    on an annualized basis) necessary in mid-2007 to
    cover costs of Turkey Point expansion

11
Estimated Base Rate Case Timeline
Month Event
January Notified FPSC of upcoming request
Now March Prepare Minimum Filing Requirements (MFRs) and testimony
March File formal rate request
May June Quality of service hearings
June August Intervenor, staff, and FPL rebuttal testimony
August Rate hearings
November Final decision by FPSC expected
12
FPL Base Rate Case History
Nature of Case Amount (mm)
1983 FPL Request 238 3
1984 FPL Request 84 3
1985 FPL Request 120 3
1990 Tax Savings - Settlement (42) 3
1999 Negotiated Settlement (350) 3
2000 Yr 1 Refund (22) 4
2001 Yr 2 Refund (105) 4
2002 Yr 3 Refund (85) 4
2002 Negotiated Settlement (250) 3
2002 Yr 1 Refund (11) 4
2003 Yr 2 Refund (3) 4
See appendix for reference notes
13
Beginning Base Rate Review with One of the Best
Track Records in the Industry
Outage Time per Customer (minutes) 5
  • Excellent operational performance
  • Superior cost management
  • Among leaders in environmental performance
  • Outstanding hurricane restoration efforts
  • Meeting FPSC-required 20 reserve margin

6
OM per Retail kwh(cents)
Industry
FPL
See appendix for reference notes
14
Overview of Storm Reserve Fund
  • Established in 1946 as an unfunded reserve and
    first funded in 1958
  • Designed to cover non-insured storm losses and
    insurance deductibles
  • Became more significant after 1992
  • due to lack of affordable insurance after
    Hurricane Andrew
  • FPL maintains commercial insurance for its power
    plants
  • Lost revenues are not recoverable
  • Regulated by the FPSC
  • sets ratemaking and accounting treatment
  • establishes estimated reserve, annual accrual and
    contributions
  • has no specific investment restrictions
  • FPL currently accrues 20 million per year for
    the storm reserve
  • rate case requests substantial increase
  • Current rate agreement contemplated possibility
    of restoration costs above reserve and recovery
    of deficit

15
Restoration Cost Recovery Update
  • Accrued restoration costs to date of 890 million
  • Costs exceed the storm reserve by 536 million
  • they have been deferred
  • FPSC granted approval to begin recovery of the
    excess through a customer surcharge starting in
    mid-February, subject to refund
  • All amounts subject to prudency hearing in April
  • Final decision to be rendered in July

16
Solid Earnings and Good Growth Prospects at FPL
  • 2005 Drivers
  • Good revenue growth but with some uncertainty
  • Addition of 1,900 mw at Martin and Manatee
    mid-year
  • Managing continued cost pressures
  • Long-term Growth Drivers
  • Strong customer growth
  • Track record of good cost management
  • Continued consistent and fair regulation

Historical Adjusted EPS 2
4.10
1, 7
See appendix for reference notes
17
FPL 2005 Earnings Contribution DriversRelative
to 2004

Weather-normalized 2005 EPS contribution range of
3.95 to 4.10 1, 9
See appendix for reference notes
18
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19
FPL Energy PortfolioBy Asset Type
11,520 Net mw in Operation
As of 12/31/04
20
FPL Energy A Growing, Profitable Wholesale
Generator
Historically In 2005 1 Beyond 2005
U.S. leader in wind energy Addition of 250 750 mw, with 220 mw under construction Potential to add 200 500 mw annually over 5 yrs, dependant on PTCs
Seabrook nuclear plant great performer in a good market Uprate of 71 mw during Spring outage 2nd phase of uprate (13 mw) in Fall 2006 outage Continued solid earnings, due to new contracts at higher prices
Contracted assets favorable QF contracts with stable earnings Improving income due to prior restructurings Expect steady income and further potential contract restructurings
Gas merchant portfolio well positioned, but in depressed markets Drag on EPS of 0.30 to 0.40, but cash flow positive Upside leverage could be worth up to 1.00/share when equilibrium returns
Disciplined risk management and training 78 of mw under contract and over 85 margin hedged Expect to continue our practice of hedging 75. New hedges placed at higher prices
5-yr Adjusted EPS CAGR of 23.3 2 EPS estimates of 1.30 to 1.45
Free cash flow positive Positioned for strong earnings and cash flow in the future
21
U.S. Leader in Wind Energy
Wind Generation Market Share
  • Public policy support required
  • Long-term contracts
  • 15-25 years
  • Superior returns
  • ROEs in high teens/low 20s
  • accretive in first full year
  • Capital market financing
  • validates business model

22
Contracted Portfolio Profile
2,236 Net mw in Operation
Fuel Diversity
Contract Maturity
As of 2/4/05
23
Merchant Portfolio Profile
Regional Diversity
  • Premier nuclear asset in the Northeast
  • Seabrook 1,095 net mw
  • Low cost, efficient base load combined cycle
    units
  • Gas assets well positioned in liquid,
    gas-on-margin markets
  • Long-term upside potential

6,663 net mw
Financial data as of 2/4/05 projected year-end
2005
24
Contract Coverage in 2005
More than 85 percent of expected 2005 gross
margin hedged
As of 12/31/04. See appendix for reference notes
25
Excellent Growth Prospect atFPL Energy
  • 2005 Drivers
  • Build-out of new wind generation
  • Uprate and refueling outage at Seabrook
  • Modest drag from Marcus Hook
  • Increased interest expense
  • Long-term Growth Drivers
  • Wind projects
  • Acquisitions
  • Contract restructurings
  • Improving merchant markets

1, 14
13

See appendix for reference notes
26
FPL Energy 2005Earnings Contribution
DriversRelative to 2004
Potential 2005 EPS contribution range of 1.30 to
1.45 1
See appendix for reference notes
27
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28
FPL Group Financially Strong and Positioned for
Long-term Growth
Historically In 2005 1 Beyond 2005 1
Conservative balance sheet warrants strong credit rating Moodys upgraded outlook on Capital to Stable Fitch reaffirmed all ratings Maintain a conservative balance sheet
Build-out of merchant meant CapEx exceeded cash generation Gas merchant build-out complete. Free cash flow positive Expect to remain cash flow positive subject to investment opportunities
Dividend raised every year since 1995 Strong financial position can support continued competitive dividend payout Dividend payout comparable to that of our peers
5-yr EPS CAGR of 4.4 2 EPS estimates of 5.00 to 5.20 Potential 5-yr EPS growth rate of 5 to 9
See appendix for reference notes
29
Sound Credit Profile Reflected on Balance Sheet
and Credit Ratings
Total Debt toTotal Capitalization
SP Moodys Fitch
FPL Group, Inc. Issuer FPL Group, Inc. Issuer FPL Group, Inc. Issuer A/Negative A2/Stable A/Stable
FPL First Mortgage Bonds FPL First Mortgage Bonds A/Negative Aa3/Stable AA-/Stable
FPL Group Capital Senior Unsecured FPL Group Capital Senior Unsecured FPL Group Capital Senior Unsecured A-/ Negative A2/ Stable A/Stable
Total Debt to Total Capitalization as of 12/31/04
for FPL Group and 9/30/04 for the Industry
Average. See appendix for reference notes
30
Growing, Stable Dividend
Raised dividend by 13
Historical Dividend
Dividend Payout 16
See appendix for reference notes
31
Growth Prospects at FPL Group
  • 2005 Drivers
  • Challenging year at FPL
  • Expect strong growth at FPL Energy
  • Free cash flow positive
  • Dilution due to conversion of equity units
  • Share repurchase
  • Long-term Growth Drivers
  • Continued strong growth at FPL and FPL Energy
  • Continued strong cash flow
  • Disciplined approach to transactions that create
    shareholder value

1, 17
See appendix for reference notes
32
A Powerful Investment
  • Sound fundamentals, disciplined approach
  • attractive Florida service territory
  • culture of operational excellence
  • financial discipline
  • strong corporate governance policies
  • Proven track record
  • meeting commitments
  • creating shareholder value
  • Attractive, realistic growth prospects
  • Clean energy strategy
  • Moderate risk profile

33
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34
Appendix
35
Although the Damage Was Extensive
Jeanne
Frances
Hurricane Hurricane Hurricane
Charley Frances Jeanne
Landfall on 08/13 09/05 09/26
Category 4 2 3
Affected
Customers 874,000 2,786,300 1,737,400
Counties 22 35 35
Replaced
Poles 7,226 3,890 2,390
Transformers 5,159 3,011 3,037
Miles of conductor 925 575 254
Personnel 13,500 16,738 16,566
Days of restoration 13 12 8
Charley
Data as of 12/03/04
36
Progress Was Quickly Made During Restoration
Efforts
Jeanne
Frances
Charley
Data as of 12/03/04
37
FPL Group Schedule ofTotal Debt and Equity
As of 01/21/05. See appendix for reference notes
38
Selected Cash Flow Items 20
See appendix for reference notes
39
FPL - Reconciliation GAAP to Adjusted EPS
There were no adjustments to GAAP earnings in
2002, 2003, and 2004
40
FPL Energy - Reconciliation GAAP to Adjusted EPS
41
FPL Group - Reconciliation GAAP to Adjusted EPS
42
Reference Notes
  • Estimates include share dilution of 3-4.
    Excluding the cumulative effect of adopting new
    accounting standards as well as the
    mark-to-market effect of non-qualifying hedges
    neither of which can be determined at this time
  • See pages 39 - 41 for reconciliation of GAAP to
    adjusted amounts
  • Represents a permanent change in base rates
  • Represents a 1-year refund to customers
  • Preliminary 2004 for FPL 2003 for the industry
  • Excluding the impact of the three hurricanes that
    hit FPLs service territory
  • EPS estimates of 3.95 to 4.10 in 2005
  • Includes impact on depreciation, interest and
    AFUDC
  • Normalizes for 2004 weather, including the impact
    of 2004 hurricanes. Typical weather variability
    around 2005 expectations would be approximately
    15 with 80 probability
  • Weighted to reflect in-service dates, planned
    maintenance, and a refueling outage at Seabrook
  • Reflects Round-the-Clock mw
  • Reflects on-peak mw
  • Includes the impact of the Marcus Hook contract
    restructuring, (0.26)/share and the receipt of a
    portion of the Karaha Bodas claim, 0.03/share
  • EPS estimates of 1.30 to 1.45 in 2005
  • See page 37 for more detailed credit statistics
  • Annualized latest quarterly dividend divided by
    2005 First Call EPS estimate
  • EPS estimates of 5.00 to 5.20 in 2005
  • Ratios exclude impact of imputed debt for
    purchase power obligations
  • Adjusted to reflect preferred stock
    characteristics of these securities (preferred
    trust securities)

43
Cautionary Statements And Risk Factors That May
Affect Future Results
  • In connection with the safe harbor provisions of
    the Reform Act, FPL Group and 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
    combined Form 10-K, 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,
    believe, could, estimated, may, plan, potential,
    projection, target, outlook) are not statements
    of historical facts and may be forward-looking.  F
    orward-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 PURPA, and the
    Holding Company Act, changing governmental
    policies and regulatory actions, including those
    of the FERC, the FPSC and the utility commissions
    of other states in which FPL Group has
    operations, and the 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 require additional
    pollution control equipment and otherwise
    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.

44
  • 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 FPL's 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
    or contracted 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
    store and/or 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 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 FPL Group's 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.

45
  • 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, FPL
    Group Capital 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 are
    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 laws,
    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,
    local or geographic 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.

46
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