NEE

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2000, for FPL Group, Inc. (FPL Group) and its principal subsidiary, Florida Power & Light Company (FPL). FPL Group is a public utility holding company incorporated in Florida, with FPL serving as a regulated utility providing electric service to approximately 3.8 million customers in Florida. FPL Group also operates unregulated energy businesses through FPL Energy and telecommunications assets via FPL FiberNet. A significant corporate event during the period was the shareholder approval in December 2000 of a proposed merger with Entergy Corporation, expected to close by the end of 2001.

Key Financial Metrics

Segment Performance (FPL Group):

• FPL (Regulated Utility): Operating revenues of $6,361 million; Net income of $607 million.
• FPL Energy (Unregulated): Operating revenues of $632 million; Net income of $82 million.
• Corporate & Other: Net income of $15 million.

Liquidity: Cash and cash equivalents totaled $129 million at year-end. Available lines of credit aggregated $3.0 billion.

Material Changes vs. Prior Period

• Revenue Growth: Consolidated operating revenues increased 10% to $7.082 billion, driven by higher fuel and purchased power costs passed through to customers and growth in FPL Energy's portfolio.
• Profitability: Net income increased slightly to $704 million. However, this included a $67 million pre-tax charge for merger-related expenses. Excluding these expenses and non-recurring items from 1999, adjusted net income increased 9.4% to $745 million.
• Debt Levels: Long-term debt increased by approximately $500 million to $3.976 billion to fund capital expansion and under-recovered fuel costs.
• Capital Expenditures: Total capital expenditures and investments decreased to $1.896 billion in 2000 from $2.479 billion in 1999, primarily due to the large acquisition of Maine assets in 1999.
• Rate Agreement Impact: A 1999 regulatory agreement reduced FPL's annual retail base revenues by $350 million. This was partially offset by lower special depreciation charges and increased usage per customer.

Guidance, Outlook, and Risks

Merger Outlook: FPL Group and Entergy aim to complete their merger by the end of 2001, subject to regulatory approvals. The merger is expected to create a larger entity with enhanced capabilities in the competitive energy marketplace.

Capital Plan: FPL projects capital expenditures of approximately $3.3 billion for the 2001-2003 period, including $1.1 billion in 2001. FPL Energy has commitments of approximately $380 million for independent power projects.

Regulatory and Market Risks:

• Deregulation: Florida is considering restructuring its wholesale electricity market, which could shift from cost-based to market-based rates. FPL is participating in a proposal to form an independent transmission company (GridFlorida).
• Fuel Costs: Higher oil and natural gas prices in 2000 resulted in $518 million of under-recovered fuel costs, to be recovered over two years starting in 2001. An additional $78 million in under-recovered costs was identified in early 2001.
• Legal Proceedings: FPL faces litigation regarding Clean Air Act violations at the Scherer Unit No. 4 (in which FPL owns a 76% interest) and challenges to FERC rulings regarding qualifying facilities. Management believes liabilities, if any, will not be material.
• Nuclear Decommissioning: FPL is accruing costs for the decommissioning of four nuclear units, with ultimate costs estimated at $6.8 billion (including spent fuel storage).

Investor Verification Checklist

• Merger Completion: Verify the status of regulatory approvals required to close the Entergy merger by the end of 2001.
• Fuel Cost Recovery: Monitor the Florida Public Service Commission's (FPSC) approval of the fuel adjustment increase to recover the additional $78 million in under-recovered costs.
• Regulatory Changes: Track the progress of the Florida Energy 2020 Study Commission's recommendations regarding wholesale market restructuring and potential retail rate freezes.
• Legal Exposure: Review developments in the EPA lawsuit regarding Scherer Unit No. 4 and the FERC petition concerning qualifying facilities.
• Capital Allocation: Assess the execution of the $3.3 billion capital expenditure plan for 2001-2003 and its impact on debt levels.