FPL Group announces
restructuring of unregulated businesses and favorable IRS ruling
FPL Energy Restructures,
Adjusts Strategy | Other Operations to Take
Special Charges | Favorable Tax Ruling Provides
Cash Flow Benefits | Outlook for FPL Group
Remains Solid
- Anticipates Non-Cash Charges of $140
Million to $175 Million After Tax
- Expects $300 Million Added Cash Flow
from Tax Ruling
- Reaffirms Ongoing Earnings Per Share
for 2002 of $4.70 to $4.75
JUNO BEACH, Fla. -- FPL Group, Inc. (NYSE: FPL) today announced
it is restructuring its wholesale energy and telecommunications
businesses in response to current challenging market conditions.
As a result, the company said that in the third quarter of 2002
it expects to take one-time, non-cash restructuring and other charges
in the range of $140 million to $175 million after tax. Also, the
company said it has received recently a $229 million tax refund
out of an estimated $300 million it expects to receive as a result
of a recent IRS ruling.
The company reaffirmed that it expects 2002 earnings of $4.70 to
$4.75 per share, excluding nonrecurring items. Third quarter earnings
are expected to be down slightly from the prior-year quarter at
$1.74 to $1.78 per share, excluding nonrecurring items, but earnings
in the fourth quarter are expected to be above last year's quarter
at $.69 to $.71 per share. The restructuring and other charges will
negatively impact reported earnings in the third quarter by $.82
to $.99 per share.
"We remain optimistic about the outlook for FPL Group,"
said Lew Hay, chairman and chief executive officer. "We expect
increased earnings in 2003 - anywhere from slightly above 2002 levels
to over $5.00 per share."
FPL Energy Restructures,
Adjusts Strategy
"The wholesale energy sector has been facing difficult market
conditions including reduced profit margins, decreased market liquidity
and continued low price volatility," said Hay. "As a result,
we have undertaken a thorough review of business development plans,
organizational structure and expenses, and have taken steps to modify
our business strategy and align our organization to better ensure
success in the future."
Major elements of the restructuring include:
- Successful contract renegotiations to significantly
reduce overall commitments for gas turbines and other related
equipment, resulting in a termination charge of $10 million after
tax. In a separate agreement, FPL Energy has committed to purchase
wind turbines to support its industry-leading wind development
activities.
- With only a few exceptions, exiting the
fossil-fueled greenfield power plant development business, resulting
in a $40 million to $45 million after-tax charge for site development
and other associated capitalized expenses.
- Realigning the organization structure and
other actions associated with the restructuring, resulting in
approximately $5 million to $10 million after tax charge in the
quarter.
In addition, FPL Energy said it expects to take a charge ranging
from $5 million to $15 million after tax associated with certain
regulatory issues involving FPL Energy's partner in two wind facilities
built in the early 1990s.
"We are very pleased to have restructured our turbine contract
- greatly reducing our financial obligation for gas turbines to
a level consistent with our current needs, while at the same time
securing wind turbines for our planned portfolio growth. This, plus
the other actions, will better position FPL Energy in the competitive
energy market," said Hay. "Our strategy going forward
will be to focus on improved operating performance and profitable
growth through added wind power facilities and highly selective
asset acquisitions."
Other Operations
to Take Special Charges
The company also said it has been reviewing the impact of the changing
telecommunications market on its fiber optic network business, FPL
FiberNet. The subsidiary has decided to defer indefinitely its planned
build-out of metro fiber rings in certain second-tier cities in
Florida and has reduced its expectations for future revenue growth
due to continued deterioration of the market. As a result, the subsidiary
expects to record charges of approximately $50 million to $65 million
after tax.
FPL Group also expects to take an after-tax charge of approximately
$30 million associated with interests in certain leveraged leases
of fiber optic cable of which MCI has been the lessee since 1988
and is now in default.
Favorable Tax Ruling
Provides Cash Flow Benefits
In response to a recent IRS ruling, Florida Power & Light has
modified its tax treatment of certain expenditures. As a result,
the company expects to receive tax refunds of approximately $300
million, of which $229 million has been received in the third quarter.
While the tax refunds have a positive cash flow benefit for the
company, they have no direct effect on reported net income.
Outlook for FPL Group
Remains Solid
"Despite significant turmoil in the energy and telecommunications
sectors, FPL Group remains a solid performer, especially relative
to our industry peers," said Hay.
"Florida Power & Light Company, our utility subsidiary,
provides more than 85 percent of our earnings and benefits
from a vibrant economy in Florida as evidenced by continued growth
in new customer accounts and usage per customer. It also operates
under an incentive-based rate agreement that will remain in effect
through 2005," said Hay.
"FPL Energy is on track to realize 10 to 15 percent earnings
growth in 2002, excluding nonrecurring items, and we remain confident
about its future growth prospects. It expects to nearly double its
wind energy portfolio by the end of 2003, maintaining its leadership
in this fast-growing clean-energy segment. In addition, its fossil-fueled
portfolio includes highly efficient plants, geographically diversified
and strategically positioned throughout the United States."
"Although we are experiencing tough market conditions, we
are committed to meeting our earnings expectations in 2002,"
said Hay, "and we remain confident that we will see increased
earnings in 2003."
FPL Group, with annual revenues of more than $8 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 21 states, it is widely recognized as one of the country's
premier power companies. Its principal subsidiary, Florida Power
& Light Company, serves approximately 4 million customer accounts
in Florida. FPL Energy, LLC, an FPL Group energy-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.
Safe Harbor Statement: 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 substantially
from such forward-looking statements. A discussion of factors that
could cause actual results or events to vary is contained in FPL
Group's most recent SEC Form 10-Q.
NOTE: A Webcast of a conference call hosted by FPL Group
is scheduled at 5 p.m. ET on Thursday, September 26, 2002, and will
be available on FPL Group's Web site,
www.fplgroup.com,
by following the link provided.
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