Everything Else…..Kathy BeilhartAssistant Treasurer

Constructive Regulatory Environment in Florida

• Appointed public service commission– 5 commissioners with staggered terms

• Direct pass through of certain costs– fuel and purchased power– incremental environmental costs– conservation costs

• “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 restructuring

Current Rate Agreement• Commenced April 15, 2002; expires December 31, 2005Commenced April 15, 2002; expires December 31, 2005• Incentive-based agreementIncentive-based agreement

– no ROE limitsno ROE limits– shareholders benefit from productivity improvementsshareholders benefit from productivity improvements

• Depreciation expense reduced by $125 million per yearDepreciation expense reduced by $125 million per year• Revenue sharing thresholdsRevenue sharing thresholds

• Commenced April 15, 2002; expires December 31, 2005Commenced April 15, 2002; expires December 31, 2005• Incentive-based agreementIncentive-based agreement

– no ROE limitsno ROE limits– shareholders benefit from productivity improvementsshareholders benefit from productivity improvements

• Depreciation expense reduced by $125 million per yearDepreciation expense reduced by $125 million per year• Revenue sharing thresholdsRevenue sharing thresholds

1 Refund was limited to 71.5% of the revenues from base rate operations exceeding the thresholds (representing the period April 15 through December 31, 2002)

($ Millions) 20021 2003 2004 2005

66 2/3% to customers 3,580 3,680 3,780 3,880

100% to customers 3,740 3,840 3,940 4,040

Potential Outcomes• Negotiated settlement• Full rate review• Legislative action

Fuel Hedging Program

FPL Energy Mix• Low environmental

exposure• Currently dependent on

gas from Gulf of Mexico

• Potential for future solid fuel ???

• Challenged by gas volatility

Oil19%

Coal6%

20%21%

Natural Gas34%

NuclearPurchased Power

Diversified Energy Mix

Based on kilowatt-hours produced in 2003

Fuel Hedging Program• Purpose of program – stabilize (not reduce)

fuel costs• Limited program in 2003• More extensive in 2004• Gas & oil• Swaps, options, futures and forwards• Increased credit requirements

Credit Ratings

Credit Profile: Continued Pressure for the Industry

321

8

88

Upgrades DowngradesFirst-Half 2004 First-Half 2003

“The average rating for the power industry and energy sector as a whole remains solidly entrenched in the mid ‘BBB’ category. Although the number of companies rated in the ‘BBB’ category has marginally declined, the number of companies rated speculative grade has increased over the past twelve months.”

Industry Average Q2 2004 Rating Distribution

Source: Industry averages and quote per S&P publication dated 7/29/04

A35%

BBB44%

BB9%

B 8%

AA2%

CCC & lower

2%

Ratings Actions

Upgrades Downgrades

Credit Profile: FPL Group Credit Remains Strong

S&P Moody’s FitchFPL Group, Inc. Issuer A/Negative - A/Stable

FP&L First Mortgage Bonds

A/Negative Aa3/Stable AA-/Stable

FPL Group Capital Senior Unsecured

A-/ Negative

A2/ Negative

A/Stable