NEE

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 1995, for FPL Group, Inc. and its principal subsidiary, Florida Power & Light Company (FPL). FPL Group is a public utility holding company incorporated in Florida, with FPL serving as the primary operating subsidiary engaged in the generation, transmission, distribution, and sale of electric energy to approximately 3.5 million customer accounts in Florida. Other operations include non-utility energy investments and agricultural activities.

Key Financial Metrics

Profitability & Margins: FPL reported a retail regulatory Return on Equity (ROE) of 12.3% in 1995, within the authorized range of 11% to 13%. Operating income increased to $1,197.1 million in 1995 from $1,148.4 million in 1994.

Material Changes vs. Prior Period

• Revenue Growth: Operating revenues increased 3.1% year-over-year, driven by a 1.9% increase in retail customers and abnormal weather conditions that boosted energy sales by 3.5%.
• Expense Management: Other operations and maintenance (O&M) expenses decreased to $1,206.4 million in 1995 from $1,304.0 million in 1994, reflecting workforce reductions and efficiency improvements.
• Depreciation Increase: Depreciation and amortization expenses rose significantly to $917.9 million (from $723.9 million) due to interim regulatory approval for special amortization of nuclear units ($126 million) and amortization of plant-related regulatory assets ($37 million).
• Decommissioning Costs: The annual accrual for nuclear decommissioning costs increased to $85 million in 1995, up from $38 million in 1994, following regulatory approval of updated cost studies.
• Debt Reduction: Long-term debt decreased by approximately $488 million as the company continued efforts to reduce leverage, retiring approximately $380 million of debt and preferred stock during the year.

Guidance, Outlook, and Risks

• Capital Expenditures: FPL projects capital expenditures of approximately $1.5 billion for the 1996-1998 period, including $511 million for 1996. No new generating plants are expected before 2004.
• Regulatory & Competitive Risks: The company faces increasing competitive pressures in wholesale markets and potential retail deregulation. FPL is actively pursuing cost controls and has received interim approval to accelerate recovery of nuclear facility costs.
• Legal Proceedings: FPL is a defendant in several antitrust suits, including one by the Florida Municipal Power Agency (FMPA) seeking $140 million in damages. A settlement regarding a cogeneration project dispute was reached in early 1996, contingent on regulatory approval.
• Environmental & Fuel: FPL expects to commence using Orimulsion (a bitumen-water emulsion) at the Manatee units in 1998, pending environmental approvals. The company is also monitoring potential changes in accounting standards regarding nuclear decommissioning liabilities.
• Liquidity: The company maintains $1.3 billion in available bank lines of credit and a $177 million storm reserve fund to manage liquidity and weather-related risks.

Investor Verification Checklist

• Regulatory ROE: Verify the final decision on the accelerated recovery of nuclear facility costs, expected by mid-1996, to confirm the sustainability of the 12.3% ROE.
• Legal Exposure: Monitor the status of the FMPA antitrust litigation and the FPSC approval of the cogeneration project settlement to assess potential financial impacts.
• Decommissioning Liability: Review the impact of the new Financial Accounting Standards Board exposure draft on nuclear decommissioning accounting, which could alter balance sheet liabilities without affecting cash flow.
• Orimulsion Project: Track the environmental permitting process for the Manatee units to confirm the 1998 start date for Orimulsion usage.
• Dividend Policy: Note the board's decision to reduce the dividend payout ratio in 1994 due to industry competition; verify if the current $1.76 per share dividend remains sustainable given capital requirements.