Our Business Is - nrc.gov

Our Business Is....Since its incorporation in 1925, FPL has been engaged primarily inthe electric utilitybusiness. As the map on the opposite pageshows, the Company today supplies service to most of theterritory along the east and lower west coasts of Florida, to theagricultural area around southern and eastern Lake Okeechobeeand to portions of central and north centi+1 Florida. Within the27,650-square-mile area, which encompasses'll or part of 35Florida counties, service is provided to approximately 700communities and to more than two million customers.

Power Supply and FacilitiesThe company operates 10 power plants having total capacity of10,941 megawatts (mw). Individual plants and installed netcapability are 'Ibrkey Point, 2,079.5 mw; Port Everglades 1,581.5;Manatee, 1,528; Fort Myel, 1,176; Lauderdale, 1,126; Sanford, 861;St. Lucie, 777; Cape Canaveral, 729; Riviera, 653; and Putnam,430. Additionally, five fossil units with 371 mw are on cold standbystatus at Cutler (three units, 264 mw) and Palatka (two units, 107

mw). Other physical properties include 74 service centers andsatellites, 404 substations and 38,689 miles of transmission anddistribution lines.

People.. ~ Serving PeopleAt year end, the Company had 9,750 employees. As evidence oftheir commitment to what always has been FPL's foremostresponsibility, providing the public with the best possible service atthe lowest possible cost, the Company serves 192,255 morecustomers with 115 fewer employees than two years ago. Over thelong run, it is this same commitment to service that requires theCompany to earn profits sufficient to justify the continuingconfidence of its inves'tors.

FPL Believes. ~ ..The Company is ever mindful that customers and investors alikehave much in common, including the need for a reasonable return.This then allows the Company to compete effectively in the moneymarkets. A company with good earnings and strong credit ratingscan raise funds to build facilities at less cost than a companyexperiencing financial difficulties. In the end, then, customers of afinancially healthy company willpay less for their electricity.

Highlights of the YearOperating results for 1978 reflect the combined and continuingefforts of FPL directors, management and employees to enhancethe Company's business capabilities and the value of its services tothe public. As you willread later, in Management's Analysis ofOperating Results on pages four through six, virtually everyyardstick of Corporate performance indicates improved conditions.Specific information is available at a glance in the 5-YearConsolidated Summary of Operations on page seven.

q 9032900 x5

My Fellow Shareholders

It is ahvays gratifying when themanagement of a company canpresent a report like the one whichfollows. With continued reliableservice to a growing number ofcustomers, increases in bothrevenues and earnings and significantachievements recorded by the finepeople who work for us, 1978 canjustly be called "a good year." And welaunched 1979 on a positive note withthe selection by the Board of John J.Hudiburg as president and chiefoperating officer. This choice of anFPL veteran with 28 years of serviceto our Company is a clear signal ofour success in developing managerialtalent within the organization. The"Search Committee" acknowledgedthat management development whenit noted the many qualifiedcandidates within FPL ranks and thelong selection time required.

My responsibility, however, goesbeyond transmitting to you thisreport on the achievements andstatus of our Company. It is alsoimportant to assess the environmentin which our Company hasaccomplished these results and inwhich we must work in the future.

Our nation became a superpower-in the industrial, the commercial andthe military sense —because we had

adequate energy, available atcompetitive prices. 'Ibday'sAmericans and the standard of livingwe enjoy have been nurtured by thisfavorable circumstance. We have hadno experience of living in a UnitedStates which cannot competeadvantageously with other nations.That, however, is precisely the threatwe face today. Other major industrialnations are taking action to provideadequate energy sources for thefutuiv. We are not.

Like the U.S.A., these other majornations long ago abandoned pastoraland cottage industry as economicallyundesirable. Human and animalpower gave way to machine power. Itis more productive. It relievesmankind from poverty and drudgegr.It permits vast numbers of people toenjoy a life of comfort and goodhealth unknown even to royalty justa few centuries ago.

Machine power, however, requiresreliable sources of energy. Forreasons which range from eQiciencyto cleanliness, electricity has becomethe preferred form of that enemy. Ithas been said that electricity—usedfor laundering and dishwashing,cooking, housecleaning and othertasks —has liberated more womenthan any political movement.

But electricity is a secondary formof energy. It is derived from aprimary enei~ soui.ce such as coal,oil or nuclear fission. 'Ibday each ofthese primary energy sources hasbecome enmeshed in politics. Eachhas powerful special interestsworking to hobble its use.

Reliance on coal is discouraged byrestrictive mining legislation and awelter of environmental regulations.Oil is virtually outlawed as a fuel fornew power plants because of thethreat to our economy and securityposed by dependence on foreignsources. Nuclear power is beset bylegal and administrative roadblocksthat seem designed for abuse byanti-nuclear extremists. The presentnational Administration's responsehas been spineless. Indeed, theAdministration's attitude seems tosupport anti-nuclear sentiments. As aresult, the financial risks of nucleargeneration are almost prohibitive.

Yet electric utilities like FPL havean obligation to provide electricservice to satisfy customer needs. Wemust assess the risks that go witheach of the primary energy sources.And we must accept the calculatedrisk of choosing one as a fuel forfuture generating plants. At present,we are giving important

Marshall McDonald Chairman of the Board John J. lludiburg President

consideration to coal. But this is notfor oveisvhelming positive reasons. Itis, rather, because of a wishy-washynational policy that gives us littlechoice but promises major headaches.

Can we do more than complain?Yes. In fact, we'e doing

everything we think willbeproductive. In the first place, werealize that we must enter the publicarena. We must present the case for apositive, productive enemy policy.We must show the direct relationshipbetween energy and our country'strength and prosperity. We mustdeliver the warning that energycannot be taken for granted.

You are part of this effort. As aresponsible citizen. And as partowner of an enemy company.Individually, you can help impressthe facts upon media and politicians.

Among friends and associates, youcan stimulate discussions aboutAmerica's energy future. You canpoint out the dangers of energystarvation. The rewards of enemyabundance. You can explain thetechnological means of achievingabundance which are available toAmerica, ifwe willbut use them.Call on us for any supportingmaterials you may need.

Meanwhile, we continue urging ourcustomers to use energy wisely. Wepublished FPL's original WattWatche"s Guide long before many oftoday's self-appointed "consumerists"stepped into the headlines. Andwe'e still providing energy-savingtips.iWe have launched a majorprogram in support of homesdesigned for Watt-Wise Living'". Wehave made energy audits for heavyusers of electricity. We'e working onload-management techniques tosmooth out the peaks and valleys ofdemand, so we can defer building thenext generating plant.

These are worthwhile objectives,in keeping with the nationalconservation program. But we mustbe realistic. The total energy whichcan be saved painlessly is minor.

IfAmericans really want toachieve significant energy savingsthrough conservation, they must beready to accept drastic changes inlifestyle. Consider, for example,transportation. For years, it hasbeen our largest single enei~ user.WillAmericans walk... pedal bikes... ride mass transit... instead ofdriving personal cars? Willall cars besmall, low in power and used only tocarry a full load of passengers?

Going beyond transportation, willalarge portion of Americans changetheir daily schedules? Willthey work,cook and wash late at night? It's theonly way to spread out peak loadsthat now come in daytime.

These questions are critical. Norealistic conservation effort willsatisfy our power needs ifwewant to maintain our standard of living

There's another side to theequation. Ifwe cannot eliminate theneed for more power, can we developmore power to fillthe need? Likeother utilities, FPL has investedresources in the search for ways tosupply the energy our customers willneed tomorrow. We have investeddirectly in solar and wind powerresearch. We'e also explored gas, oiland geothermal prospects right herein Florida. And last year, wecontributed more than $5.1 million tothe Electric Power ResearchInstitute. EPRI combines utilitycontributions to support manyprojects aimed at expanding andoptimizing energy resources.

Meanwhile, there are severalpractical ways for our nation toensure the energy supply needed forthe next 40 years or so. For example,we can moderate the unreasonablerestrictions on mining and burningcoal. We can join other industrializednations of the world in high-priority

development of the nuclear breederreactor. A strong policy ofpositivesupport for such steps wouldpreserve Americans from a drasticchange in our way of life.

There are major technologicalchallenges in positive steps likethese. We must meet thesechallenges. This is more than anarrow, selfish priority of the energyindustry In truth, companies likeFPL could endure and thrive even inan energy-short economy. Customerswould simply have to adjust theirdemands to fitour ability to supply.But the economic and social dangersof a future with energy too short insupply and too high in cost shouldconcern all of us very seriously.

The overriding challenge in enei~'owever,is not technical. Nor is it

economic. Today the challenge to anenergy-rich future is political.

We have an administrationtopheavy with zealots drawn fromspecial-interest gix)ups which preachno-growth and anti-businesspropaganda. This Administration hasbeen waffling on nuclear power andstifling breeder reactor progress.These same people have woven amesh of restrictive, non-cost-effectiveregulation around coal. They arecrippling the whole energy effort.

We must secure America's essentialenemy supply at competitive prices.I have discussed with you on earlieroccasions how necessary it is that Idedicate a good deal of time and workto this effort. It is work that servesboth our Company and our country.In this work, I willcontinue to askfor your suppoit.

Sincerely,

Marshall McDonaldChairman of the BoardFebruary 12, 1979

Management's Analysis of Operating Results

Its financial well-being restored to alarge extent, FPL emerged from 1978showing unmistakable signs ofrenewed vitality.

Despite the squeeze of highercapital and operating costs, magnifiedby inflation, the Company managednot only to keep pace with Florida'sflourishing growth, but also to reachrecord levels ofearnings and dividends.

EarningsEarnings per share increased to $4.54in 1978 from $3.81 in 1977. Thismarked improvement in profitabilityreflects financial recovery resultingfrom a rate adjustment granted bythe Florida Public ServiceCommission (FPSC) in 1977 and froma vigorous customer growth ratewhich has shown little sign of letup.

Of the 1978 earningsaccomplishment, newly electedPresident John J. Hudiburg noted,"This improved level of operatingperformance and financial integritymeans that the new rates approvedin 1977 are working as intended."

The rate of return earned by theCompany in 1978 reached itshealthiest level in two yean. Still, itwas somewhat below the amount

allowed by the FPSC in its June 1977ordei:

DividendsDividends on common stock wereraised to a quarterly rate of 52 centsper share from 44 cents (an eQ'ectiveannual rate of $2.08, up from $1.76),commencing with the June 15, 1978,quarterly payment.

Total dividend payments were$2.00 per share in 1978, comparedwith $1.66 the previous year.

Dividend actions were taken inrecognition of the growing investmentby common shareholders through re-investment of a large portion of theirearnings. The 1978 increase not onlyprovides a return on this additionalinvestment, but also reflects FPL'sdesire to move closer to the industryratio of dividends to earnings.

F<iscal StrategyAn attractive dividend policy is butone key element in the Company'slong-range plans for strengtheningits financial base.

Another essential componentis a sound capital structure.Capitalization ratios at the close of1978 were approximately 38 percent

common equity, 11 percent preferredstock and 51 percent long-term debt.

F<PL intends to enlarge commonequity by continuing to reinvest aportion of earnings and issuingcommon stock to employee benefitplans. The Company's goal is acapitalization mix of 38-43 percentcommon equity, 5-10 percentpreferred stock and 50-52 percentlong-term debt. The time required toreach this mix willdepend on themarket price of FPL common stock,since the Company desires toachieve these ratios without a publicsale of common stock at the currentprice levels.

'Ib provide more financialflexibility, I<'PL obtained bondholderapproval in February 1979 to modifythe mortgage securing first mortgagebonds, the principal source oflong-term financing used by FPL.

Operating RevenuesRevenues passed the $1.6 billionmark for the first time in 1978, rising$182.6 million, or 12 percent, over the1977 total of $1.46 billion. Abouttwo-thirds of the 1978 rise was

~ attributable to higher kilowatt hour(kwh) sales and the remainder

3.48

3.81

2.76

'2.39

1.701.56 1.66

1.3251.435

0.895

1968 1974 1975 1976 1977 1978

Earnings Per Share1968 1974 1975 1976 1977 1978

Dividends Paid Per Share

primarily to the 1977 rate increase.By comparison, nearly two-thirds

of the 23 percent increase of 1977revenues over those of 1976 was theresult of rate increases and therecovery of increased fuel coststhrough the fuel adjustment clause.Growth in kwh sales accounted formost of the balance.

Average revenue per kwh,including fuel adjustment revenue,for total customers rose to 4.02 centsin 1978, the first fullyear that thepresent rates were in effect. Thiscompares to 3.87 cents in 1977 and3.38 cents in 1976, the last fullyearthe prior rates were in effect.

Energy SalesKwh sales climbed by 3.1 billion, or8 percent, to 40.6 billion in 1978. Thecorresponding figures for 1977 were2.6 billion, 7 percent, and 37.5 billion.

The increases were indicative ofgrowth in average customers of4.9percent in 1978 and 4.5 percent in1977. Per-customer consumption alsoincreased 3.2 percent in 1978 and 2.9percent in 1977.

Looking Ahead....Since rates established in the 1977

rate case have been in effect morethan a fullyear now, the key factoraffecting 1979 revenues is expected tobe kwh sales growth resultingprimarily from new customers.

ConstructionConstruction aimed at providingadditional generation to meetanticipated demand in the early 1980sis proceeding both on schedule andwithin budget.

Included are two oil-burning unitsat Martin Plant scheduled forcompletion in 1980 and 1981 and theCompany's fourth nuclear unit, St..Lucie No. 2. The latter has anoperational target date of 1983.

FPL also has initiated a coal plantproject of its own and is consideringpossible joint ownership of another.

Throughout the course of 1978, theCompany invested $473 million innew facilities and nuclear fuel.

FinancingThe charts on these pages showthat the Company has generatedsubstantial amounts of its financingrequirements from currentoperations, with a correspondingreduction in reliance on the capital

markets. In the 5-year period1974-78, 47 percent of the funds werefrom operations.

In 1978, $152 million was raisedthrough the sale of new securities.Involved were 30-year first mortgagebonds with 9Vs percent interest rate($75 million), a new issue of 8.84percent preferred stock ($50 million),a 30-year obligation with 6.10 percentinterest rate in connection with apollution control financing ($19.4million) and approximately $7.5million of common shares issued toemployee benefit plans. During 1977,

$33 million of securities were issued,and capital expenditures were $875million. Funds from operationsprovided the balance of fundsneeded for construction and, in 1977,debt redemption.

Thes'e transactions resulted inhigher interest expense andpreferred dividend requirements,portions of which were capitalizedthrough the allowance for funds usedduring construction (AFUDC).

AFUDC increased in 1978 by $5.5million (19 percent) as a result ofincreases in construction work inprogress and capitalization ofAFUDC on nuclear fuel.

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662

49?470

376

419

273

176

110

162

1968 1974 1976 1976 1977 1978 1979

Capital Expondituros1968 1974 1976 1976 1977 1978 1979

External Financing

Operating ExpensesTotal 1978 operating expensesclimbed 14 percent, or $163 million, toreach a new high of $1.3 billion.Comparative figures for 1977 were 17percent, or $167 million, and $1.2billion, respectively.

Still greater revenue growthresulted in increases in operatingincome of 7 percent in 1978 and 56percent in 1977.

Increases in the past year wereprimarily in the followingareas:

Fuel Expense-Greater use of moreexpensive fossil fuel generation tomeet growing system demand and toprovide for greater interchangedeliveries resulted in a fuel expenseincrease of 11 percent in 1978.

Meanwhile, the Company's threenuclear units, which have providedover 30 percent of total generationsince St. Lucie Unit No. 1 was addedin December 1976, continued to makeconsistent contributions.

The oil portion of fuel expense wasup $39 million in 1978 as the amountof oil consumed rose by 4.7 millionbarrels, or 15 percent, over 1977levels. Generally lower oil pricespartially offset the effects of thegreater amount of oil burned.

Conversely, the price of oil used in1977 had risen 11 percent over theyear before. That increase waspartially offset, in turn, by a drop inthe amount of oil burned, thanks tothe additional nuclear capabilityprovided by St. Lucie.

The price ofgas rose 18 percentin 1978, in part a result of actionstaken by a supplier to increase theoutput of certain wells. The priceincrease added about $12 million tofuel expense.

Fluctuations in fuel expensegenerally are reflected in revenues,after a 2-month lag, through the fueladjustment clause.

Depreciation Expense-Increases indepreciation expense in 1977 and 1978were principally the outcome ofadditional plant in service. Severalnew generating units were placed incommercial service in the past threeyears. Manatee Unit No. 1 and St.Lucie Unit No. 1 went in service in1976, the first Putnam unit andManatee Unit No. 2 in 1977 and thesecond Putnam unit in 1978.

These plants alone added about$22.4 million to depreciation expensein 1977 and about $7.5 million in 1978.

Amortization of $5.8 million of

costs in connection with theCompany's canceled South DadeProject also was included in 1978depreciation expense.

Other Operation and MaintenanceExpenses —These expenses

'ncreased primarily due to higherpayroll and related employee benefitcosts. The increase in maintenanceexpense reflected additional newproperties, as well as workperformed during the first refueling,overhaul and inspection of St. LucieUnit No. 1 in mid-1978.

1hz Eapensc-Increased income taxprovisions stemmed from greatertaxable income provided by higherrevenues. Taxes other than incometaxes also increased in 1977 and 1978,largely as a product of the greaterrevenues and additions to property.

The Bottom Line....After meeting operating expenses,interest and preferred dividendrequirements, the growth inrevenues experienced in 1978produced net income applicable tocommon stock of $182.1 million, anincrease of $29.3 million.

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E.A. Adomat cleft) and EE.Autrey are FPL's ExecutiveVice Presidents. Adomat is incharge of operations, and Autreydirects commercial activities.

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1968 1974 1975 1970 1977 1978 1979

Kwh Sales

Florida Power & Light Company and SubsidiariesConsolidated Summary of Operations, The Past Five Years

(Thousands of Dollars Except Per-Share Data) 1978 1977 1976 1975 1974

Operating RevenuesOperating Expenses:

Fuel .

Other Operation .

Maintenance .

Depreciation .

Income TaxesTaxes Other Than Income Taxes ...........

Total Operating Expenses ...............Operating Income .

Other Income (Deductions):Allowance for Funds Used During

ConstructionAllowance for Other Funds Used During

Construction .

Income TaxesOther —Net .

Other Income —Net .

Income Before Interest Charges .............Interest Charges:

Interest Expense .Allowance for Borrowed Funds Used During

Construction .

Interest Charges —NetNet Income .

Preferred Dividend Requirements............Net Income Applicable to Common Stock .....Average Number of Common Shares

Outstanding —(in Thousands) .............Earnings Per Average Share of Common Stock.

$ 1 647 226 $ 1 464 584 $ 1 189 680 $ 1 182 644 $ 951 055

551,876216,65385,865

144,267198,163132 205

497,015187,01167,579

125,166171,098117 807

482,347178,12767,06288,59185,36896 972

461,385160,15159,64682,322

114,82287 558

400,115187,52257,47274,77551,30671 241

65,497 48,486 39,907

20,819 16,009827 '1,558) (298)

3 382 (1 731) 1 0055,350 11,676

(850) (1 734)24 528 ,. 12 720

343 225 311 62866 204

257 41752 986 49 849

269 796 208 473

146,096

(14 112)

144,088

(12 893)

140,572 124,575 102,999

131 984 131 190 140 572 124 575 102 999211,241 180,488 116,845 145,221 105,47429,138 27 653 22 378 20 066 11 654

6 182 103 8 152 785 8 94 467 8 125 155 8 93 820

40,120$4.54

40,050$3.81

39,542$2.39

35,940$3.48

34,050$2.76

1 328 529 1 165 676 998 467 965 834 792 431318 697 298 908 191 213 216 810 168 624

!Common Stock Data

Shares Outstanding, Year End —Thousands .

Dividends Paid Per ShareDividend Rate —Year End ................Dividend Payout Percentage...............Price/Earnings Ratio —Year End ..........Book Value Per Share —Year End..........

Operating and Financial StatisticsKwh Sales —Thousands.Customers —Year End .

Revenue per Kwh—Residential ~....... ~ ..Kwh per Customer —Residential ..........Net Warm Weather Capability, Kw-

Year End .

Peak Load, Summer, Kw—60-minute ......Peak Load, Winter, Kw—60-minute........Reserve Capability Percentage-

at Time of Summer Peak ................Nuclear Generation, Kwh—Thousands .....Total UtilityPlant —Thousands of Dollars ..Capital Expenditures (including nuclear fuel

and AFUDC)—Thousands of Dollars .....External Financing —Thousands of Dollars ..Employees —Year End .

40,315$2.00$2,0844.1

5.8$32.49

40,602,0762,032,298

4.10'1,790

10,941,0008,345,0008,617,000

30.413,273,383$4,983,794

$472,830$151,866

9,750

40,050$ 1.66$ 1.76

40,050$ 1.56$ 1.56

48.6 65.37.1 11.6

$29.97, $27.81

87,050$ 1.485

$ 1.4641.2

7.7$27.21

34>050$ 1.825

$ 1.3648.1

5.6$25.60

37,529,3971,927,668

3.96/11,870

10,64410007,841,0008,606,000

9,740,0007,598,0007,287,000

8,927,0007,076,0005,807,000

9,015,0007,235,0006,258,000

28.013,452,276$4,525,916

$875,860$38,240

9,415

13.88,647,474

$4,181,839

$469,750$272,540

9,865

27.48,369,810

$3,724,270

$497,238$418,925

9,911

24.67,877,826

$3,252,397

$604,946$425,000

9,769

34,929,541 34,110,898 32,711,1361;840,043 1,772,304 1,721,841

3.50/ 3.53/ '.95/10,968 11,127 11,215

The Year in Review

In the constant quest to improveprofitabilityand levels of service,FPL's long-tenn Corporate objectiveis to keep increases in the cost ofserving customers at or below therate of inflation. With thatcommitment in mind, Corporategoals are established annually as thebasis of budgets and plans for thecoming year.

Corporate GoalsFPL management established threemain goals for 1978:

~ To limitcapital expenditures inorder to avoid a public sale ofcommon stock. 'Ibugh controls onspending brought that goal tofruition.

~ To identify areas where theCompany is perceived by customersand employees to be in need ofimprovement and to take action, asappropriate. Several programs,including a customer survey, wereinitiated along these lines.

~ .To keep the increase inpet customer operating costs at orbelow the increase in the ConsumerPrice Index (CPI). For the year, thegoal was not met. Actual increasesper customer exceeded the increasein the CPI as FPL coped with

increased costs for items notmeasured by the CPI.

However, the Company is satisfiedthat budgetary controls workedeffectively to minimize theseincreases.

Performance Goals for 1979

Having either hit or come close tothose three marks, the Company in1978 established similar aims for1979.

Again, one goal is to operate theCompany so that the increase in costper customer is kept in line withincreases in consumer prices.

Next, the Company intends tocarefully control capital andoperating expenditures so as toreduce the need to sell common stockunder unfavorable market conditions.

A measurable increase incustomers who regard FPL as beingresponsive to their service needs isthe final 1979 goal.

Board of DirectorsWith the election ofJohn J. Hudiburgand Gene A. Whiddon on Jan. 15,1979, Board membership grew to 11

directors. Nine are outside directorsand two are Company officers. Allbut one live in the FPL service area.

Hudiburg, 51, was elected to theBoard when he was chosen tosucceed Marshall McDonald as FPLpresident. In that capacity he alsoserves as chief operating officer.

McDonald, 60, became Chairman ofthe Board, a position vacant since theretirement of R.C. Fullerton in May1977. He also continues to serve aschief executive officer.

Whiddon, 50, is a Fort Lauderdalebusinessman.

Director Joseph P. Taravella diedNov. 23, 1978. Ihravella, presidentand chairman of the Board of CoralRidge Properties Inc., had served onthe Board since 1972. He was 59.

Organizational StructureWith the appointments of McDonaldand Hudibuig, the Company inJanuary 1979 redrew lines ofreporting responsibilities within theorganization.

In prior actions designed toimprove effectiveness of FPL'smanagement-by-objectives system,H.L. Allen and L.C. Hunter wereappointed senior vice presidents andfive division general managers werenamed to the new (non-Corporateofficer) positions of division vicepresident. They are L.H. Adams,

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The Company's four SeniorVice Presidents serve on theSenior Management PlanningCouncil. They are (above, fromleft) H.L. Allen and L.C. Hunterand (below, from leit) J.G.Spencer Jr. and R.W. Wall Jr.

FPL at work around the clock.Left: Nuclear control room atSt. Lucie Plant. Center: Fleet oftroublemen's bucket trucks. Right:Linemen strike a pose familiarto FPL customers everywhere.

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Southern (Miami) Division; K.R.Beasley, Western (Sarasota); T.R.MoffettJr., Eastern (West PalmBeach); J.N. Scott, Northeastern(Daytona Beach); and G.E. Sullivan,Southeastern (Fort Lauderdale).

The appointment of Scott wasmade in conjunction withconsolidation of FPL's formerNorthern and North CentralDivisions into the new NortheasternDivision. In keeping with thatchange, which brought the divisionsmore closely in line in terms ofcustomers served, the Southern andSoutheastern Divisions were giventheir new names in early 1979.Formerly, they were known as theMiami and Southeast Divisions.

Human ResourcesAt year end, the Company had 9,750employees.

In order to attract, and hold,employees who have the willandability to learn skills necessary tomeet customers'eeds, the Companyhas a stated personnel objective ofproviding compensation that is bothinternally equitable and externallycompetitive.

Through effective supervision andtraining, FPL commits no lessenergy to the development of its

human resources than it does totechnical resources.

In the field of training, forexample, employees'apabilitieshave been broadened throughprograms such as transactionalanalysis and decision-making courses.A talent assessment program wasintroduced in 1978 to assist inplanning for management succession.

Other examples of the Company'sinterest in self-development include acollege tuition aid program, a salaryadministration program based solelyon merit and encouragement ofemployee involvement in civic,educational and cultural affairs.

In the year ahead, overallemployment is expected to riseslightly as the Company continues tostaff the Martin Plant and provideservice to a growing number ofcustomers.

CustomersFPL people today are serving moreFloridians than ever before. TheCompany reached a milestone in 1978when it greeted its two millionthcustomer, the Charles H. Robertsfamily of suburban West Palm Beach.

With the arrival of the Roberts,who moved from Kentucky, FPLjoined a select group of investoi

owned electric utilities in the nationhaving two million or morecustomers.

Whereas it took FPL 41 years toreach the million-customer level in1966, it took just 12 years to doublethat figure.

When welcoming the Robertsfamily, a Company spokesman notedthat the event "reflects Florida'scontinued rapid growth andunderscores the challenge faced bythe Company in serving that growth."

Another rise in new customers isexpected for 1979, with a yeai endtotal of more than 2.1 millioncustomers anticipated.

Area DevelopmentFlorida's gains in tourism, industrialdevelopment and population were ofparticular significance in 1978.

State tourism oflicials placed thenumber of tourist arrivals at 32.6million, up from 30 million a yearago. Pet capita spending rose, aswell, and the South Florida area,especially, benefited from a heavyinflux of Latin American visitors.

The state continues to successfullyemphasize light, clean manufacturingas a source of economic development.

Industrial development, givengovernment encouragement, grew in

Vice Presidents have been assigned controlof 11 specific areas of activity. Above (fromIeit) are D.K. Baldwin, Corporate Services;E.L. Bivans, System Planmng, and MichaelC. Cook, Fuel Resources and CorporateDevelopment. Photos of the other vicepresidents appear on pages 12, 14 and 16.

FPL at work making Florida a better placeto live and work. Upper Left: Undergroundservice is supplied to new Miami home.Lower Left: FPL serves DictaphoneCorporation's new headquarters atMelbourne. Center: Company signs pointthe way to new energy-eQicient housing.Upper Right: Space shuttle craftEnterprise serves as a backdrop for FPLworkman at Cape Kennedy. Lower Right:Amid lush foliage of avocado grove,Company crew tackles rural assignment.

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1978, both as a result of expandedexisting operations and of newoperations moving into the state.Among newcomers attracted to theFPL service area recently were suchfamiliar business names asDictaphone Corp., The Harris Co.Inc., Siemens Corp., HoudailleIndustries Inc. and WestinghouseElectric Corp.

Those expanding existing facilitiesincluded Sikorsky Aircraft, MotorolaInc. and International BusinessMachines Corp.

The perception of Florida as adesirable place to live and work,coupled with the availability of moreJob opportunities, had a pronouncedeffect on FPL in 1978. During theyear, the Company added 104,600customers.

Meanwhile, population of the stateincreased to 8.97 million, a gain of2.9 percent over 1977. Estimatedpopulation of FPL's service territoryfor the year was 4.6 million, a gain of3.7 percent over 1977.

One recent survey indicated 11 ofthe nation's 30 fastest growingmetropolitan areas are in Florida,and six—Fort Myers, FortLauderdale-Hollywood, Sarasota,West Palm Beach-Boca Raton,Bradenton and Daytona Beach —arein FPL's service area.

The increase in population broughtwith it increased demand for housing.Florida housing starts were running48 percent ahead of last year.

Agriculture, another staple in theeconomy of the area serviced byFPL, continued to make strongcontributions.

As for 1979, the economy isexpected to show improvement inseveral areas. 'Ibtal Floridaemployment is expected to increase.This is expected to contribute to anincrease in personal income forFloridians.

Also on the horizon is anotherdevelopment which could favorablyinfluence Florida's economy —thespace shuttle. The first shuttle test isscheduled in September at KennedySpace Center, the nation's prime

spaceport. Observers note that couldsignal "the start of a whole new era."

Thus, the picture emerging for1979 is one of continued growth,moderated perhaps by a slowdown inthe national economy which could, ofcourse, affect Florida.

Vse of ElectricityFPL customers, most of whom areresidential, consumed more electricenergy in 1978 than in 1977.

FPL's average residential userconsumed 11,790 kwh during theyear, 3.7 percent more than the11,370 of 1977. In contrast, thenational average among investoiowned utilities for the 12 monthsended October 1978 was 8,419 kwh.

For 1978, 89 percent of theCompany's customers wereresidential and 11 percent werecommercial and industrial.

Peak DemandBecause of heavy air conditioningrequirements, FPL in recent yearshas been a summer peaking utility.Although cold-weather peaks havebeen measured the past threewinters, the Company continues tobuild around summer peakprojections.

In the summer just passed, for

example, the peak of8,345 mw wasreached between 5 and 6 p.m. onAugust 29. It was 6 percent greaterthan the summer peak of 1977.

The Company's record peakdemand of 8,791 mw was establishedduring a cold snap on Feb. 2, 1979. Itsurpassed the previous mark of 8,617mw set Feb. 23, 1978.

Load ForecastIn its forecasting, FPL projects arange ofgrowth rates in both salesand peak. Through 1988, the range ofgrowth for peak load is projected tobe between 3.4 and 5.1 percent peryear.

Key variables affecting loadgrowth are customer growth,per-capita income, employment andthe price of electricity. Other majorfactors in load projections are theweather, conservation practices,electric appliance saturation andimproved appliance efficiency. Floridahas proved to be unique in somerespects because of a large retireepopulation and a significant numberof seasonal residents and secondhomes. The Company already hasbegun to feel the impact of newreplacement appliances that are moreenergy efficient.

Industrial and commercialsegments, having few other sourcesof fuel available, plready are heavilydependent on electricity. Here, again,the Company has begun to feel theimpact of energy conservationpractices. Effects of these measuresand more efficient appliances arereflected in the forecast of load growth.

F<PL maintains flexibilityin itsplanning. Should growth be higherthan forecast, for instance, there arefive generating units on cold standbythat can be reactivated. Also, theCompany has additional options of

'purchasing gas turbines and/orinitiating load managementtechniques.

Energy ManagementWith customers intent on savingenergy and holding down risingcosts, FPL, like most utilities,has initiated programs in loadmanagement and enei~conservation.

These activities include a broadcommunications program showingcustomers how to be moreconservation-conscious; anexperimental project allowing theCompany to interrupt service,through remote control, to heating,ail conditioning and water heating

From leit, Vice Presidents H.J. Dager Jr.,Engineering, Project Management andConstruction; Tracy Danese, Public Affairs;and J.H. Francis Jr., CorporateCommunications.

FPL at work maintaining air quality. Leit:Stacks at Turkey Point Plant jutmajestically into blue South Florida skies.Center: Pollution control equipment beingadded to several FPL power plants. Right:Welders install new emission-reducing odburner at Cape Canaveral Plant.

5

systems in 125 Boca Raton homes; aprogram encouraging architects andbuilders to produce structuresdesigned for Watt-Wise Living™;solar technology activities, includingparticipation and sponsorship in thenational "Sun Day" observance; andresearch into microwave oven andwater heater usage.

Additional evidence of theCompany's interest in this area is itssupport of the Electric PowerResearch Institute, the research anddevelopment arm of the electricutilityindustry. FPL's contribution tothis cooperative effort of looking fornew and better ways to meet thenation's growing energy needs was$5.1 million in 1978 and is expected togrow to $5.7 million in 1979.

The Company has numerous R&Dinvolvements of its own, as well.Among them are a lightning researchproject, a solar heating and off-peakaii conditioning study and a programaimed at combating corrosion ofunderground power lines. Companyresearchers also track progress madeby other utilities and governmentenergy agencies in such areas aspricing concepts, remote meterreading and the development ofenergy-efficient modernizationprograms for existing buildings.

In another venture, FPL hascontracted to buy steam from acounty-owned resource recoveryplant that willrecycle energy fromsolid waste when the plant becomesoperational in the early 1980s. Thepurchased steam willbe used togenerate electricity.

In each instance, the ultimate goalis to conserve energy and to shavepeak demand and thereby helppostpone building the generatingcapability required to meet futuredemand.

Improving EfficiencyStrict budgetary considerations andthe eEorts of FPL employees inimproving operating efficiency werestrong contributors to the Company's1978 financial performance. Likewise,the 1979 Corporate goal of keepingcost increases near the rate ofinflation requires a tight control on

the number of employees and putsthe spotlight on increasedproductivity and efficiency.

An excellent example of theCompany's pursuit of better ways todo things involves looking at methodsto save fuel costs. Right now, forinstance, FPL is installinghigh-efficiency oil burners capable ofburning lower grade, cheaper fuelswithout causing environmental harm.

Other efforts include use ofan analytical computer program toassist in nuclear licensing activities,installation in district offices ofequipment to electronically displaycustomer information andemployment of environmentallyacceptable chemicals to controlgrowth of vegetation along Companyrights-of-way.

As a rule, increased efficiencytranslates into lower costs and moredependable service. When therigorous search for improvementhelps to reduce the growth in energydemands, it also helps to postponethe need to build a new power plant,thereby saving both energy costs andcapital costs.

Generating CapacityWith the placing into commercialoperation of the second Putnam unit

on April24, 1978, the Company'sinstalled generating capacity rose to10,886 mw.

The combined-cycle unit was theonly new generating unit put intoservice during the year.

However, in December, RivieraUnits No. 1 and 2 were brought backon line from cold standby reserve.

At year's end, system capabilitystood at 10,941 mw.

Generation MixThe Company's generating plantsutilize residual oil, distillate oil,natural gas and nuclear fuel. Noneburn coal, although the Companyplans to build coal units for service inthe mid-1980s.

The proportion ofgeneration byfuel for 1978 consisted of residual oil,49 percent; nuclear, 30; natural gas,18; gas turbines-distillate oil andnatural gas, 2; and combined-cycle-oil, 1.

Average fuel costs per kwh, inmills, were nuclear, 2; natural gas,8.49; residual oil, 19.57; gasturbines-distillate oil and natural gas,21.15; and combined-cycle-oil, 26.29.F<or all fuels, average cost was 12.41mills per kwh generated.

Nuclear PowerGenerating capability includes twonuclear units at Turkey Point Plantwith 1,332 mw and one unit at St.Lucie Plant with 777 mw of capacity.In 1978, the three units generated13.3 billion kwh. In comparison, itwould have taken 21 million bart>is ofoil at an increased cost of $233 millionto produce an equivalent amount ofpower. Since FPL fimt began nucleargeneration in 1972, fuel savings of$924 million compared to the cost ofoil have been realized.

Work is proceeding on a secondnuclear unit at St. Lucie. It hasapproximately the same plannedcapability as the first unit and isscheduled for completion in 1983.

In December 1978, the U.S. Courtof Appeals for the District ofColumbia Circuit rendered ajudgment which affirmed decisions ofthe Nuclear Regulatory Commission(NRC) authorizing construction ofthe unit. However, certain mattersconcerning the construction permitare pending before the Atomic Safetyand Licensing Appeal Board.

At %n'key Point Units 3 and 4, theCompany is experiencing problemswith the steam generators and hashad to plug certain pressurized water

I

I

From left, Vice Presidents R.J. Gardner,Strategic Planning; W.M. Klein, EconomicDevelopment; and A.D. Schmidt, PowerResources.

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FPL at work providing the fuels fromwhich electricity is made. Left: Fuel costsfor nuclear plants, such as this one at St.Lucie, are lower than for fossil-fuel plants.Right: Oil tanker discharges its preciouscargo into Riviera Plant storage containers.

14

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circulation tubes in the steamgenerators. Approximately 17.3percent of the tubes in Unit No. 3and 18.7 percent of the tubes in UnitNo. 4 have been plugged. Both unitsare licensed to have up to 25 percentof the tubes plugged and still operateat full power.

No decision has been made as towhen permanent repairs willbegin.The Company estimates that theamount of time required to repaireach unit willbe a period of 6-9months, not 9-12 months as originallyanticipated. The cost to replace thesteam generator tube bundles isestimated to be $51 million per unit.

Unit No. 3 was taken oQ'the line inJanuary 1979 for its annual refuelingand overhaul. The outage isscheduled to last into April1979,allowing time for a planned overhaulof the turbine-generator.

During the 1978 refueling outage ofSt. Lucie Unit No. 1, minor corrosionwas detected in its steam generators.This year during the annual refuelingoutage in the spring, FPL plans tochemically clean the steamgenerators.

In other proceedings before theNRC, an antitrust hearing has beenordered concerning St. Lucie Unit

No. 2. The NRC also has indicated itis considering initiating a proceedingconcerning the licenses of the threeoperating nuclear units as a result ofthe decision in the GainesvilleAntitrust Suit. A discussion of thatlitigation is contained in Note 7 ofNotes to Consolidated FinancialStatements.

Coal in the Fuel Mix'lb keep pace with anticipated futuregeneration needs, the Company hasto plan at least 10 years ahead, sincethat is the lead time required to builda new generating plant. Theincreasingly complex governmentrequirements and approvals thatmust be met require an even longerplanning horizon for building nuclearplants. As a result of red tapeassociated with nuclear projects, plusfederally mandated prohibitions onthe use ofgas and oil in new plants,FPL has turned its sights to coal.

On the drawing boards now aretwo coal-fired units to be built at theexisting Martin Plant site along theeastern shores of Lake Okeechobee.The first unit is estimated to cost$830 million. Planned capability is inthe 700-mw range for each unit. Theunits are scheduled for the mid-1980s.

Meanwhile, construction iscontinuing on two oil-fired units atthe site. They are expected to befinished in 1980 and 1981. Capabilityis planned at 775 mw apiece.

FPL also is discussing plans withthe Jacksonville Electric Authorityfor possible joint construction of acoal plant in Northeast Florida forthe late 1980s. Supply alternativesand the question of how to transportthe coal are being evaluated. Rail,barge, slurry pipeline orcombinations of those three methodsare being considered.

Fuel SupplyOil, gas and uranium have been thelifeblood of FPL's power production.

The Company has a contract withExxon Corp. that provides asubstantial portion of residual oilrequirements through 1981. FPL alsohas a contract for most of the distillatefuel requirements through early 1980.

Additional fuel may be acquiredthrough competitive open-marketpurchases or new contracts.

As of Feb. 6, 1979, the price ofresidual oil at Port Everglades Plant „

was $15.41 per barrel, $1.28 higherthan at year end.

The Company's natural gas

I

From left, Vice PresidentsR.E. Talion, Divisions andR.E. Uhrig, Advance<iSystems and Technology.

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FPL at work building to meetcustomer needs. Leit: Workon high-voltage transmissionline through the Everglades isdone from barges. Right:Superstructure of MartinPlant takes shape, silhouettedagainst cloudless heavens.

16

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contract with Sun Oil Co. expires inJune 1979. It covers approximately20 percent of the Company's gassupplies. Expiration of this contractwillincrease Company reliance onmore expensive fuel oil. Discussionsare undenvay to seek possibleadditional gas supplies.

Another contract which expires in1988 provides for the balance of thegas supply.

In 1978, the Company also movedcloser to its goal of assuring adequatesupplies of nuclear fuel when itsigned two long-term contracts foruranium. The uranium would beproduced as a by-product of a Floridaphosphate fertilizer operation. Thefuel would be extracted fromphosphoric acid at facilities to bebuilt in Polk County east ofTampa.

In October 1978, a federal judgeruled that Westinghouse ElectricCorp. was not excused from honoringits fuel supply contract with theCompany. A second phase of the trialwillcommence in May 1979 todetermine the extent of damagesowed to FPL. The 8-yeai old suitinvolves the fuel service contract forboth Turkey Point nuclear units.

In 1979, oil is expected to continueas the main fuel source. Meanwhile,

FPL willbe seeking additionallong-term suppliers for its increasedoil and uranium requirements.

Construction BudgetThe Company estimatesexpenditures under its 1979-81construction program willapproximate $2 billion, and $662millionhas been budgeted for 1979.

As with load forecasts, theconstruction budget is subject tocontinuing scrutiny and adjustment.FPL is keeping the program asflexible as possible to accommodatefactors that develop or change.

Financing in 1979

External financing willpick up in1979. The Company estimates $275million willhave to be raised fromexternal sources, includingapproximately $14 million throughissuance of common stock toemployee benefit plans.

The Company is investigating a$50 million nuclear fuel leasearrangement which is expected toprovide a portion ofneeded financingin the first half of 1979. A significantportion of the balance of 1979requirements is likely to be firstmortgage bonds. In that regard, FPL

management feels it is important tomaintain flexibility,especially inareas which affect the timing andtype of securities that willbe used tomeet cash requirements.

The objective of this approachis to position the Company so neededfunds can be raised at the lowestpossible cost.InterconnectionsFPL has interconnection agreementswith nine neighboring utilities—seven municipal and twoinvestoi owned. An interconnectionwith Georgia Power Corp. isplanned. The two systems willbelinked in 1980 with 240-kilovolt (kv)lines in order to enhance FPL systemstability and reliability.

Power DeliveryFPL made considerable progress in1978 in expanding its high-voltagetransmission system. Workproceeded on several legs of a 500-kvgrid destined to criss-cross FPL'sterritory by the early 1980s.

The next stretch planned forcompletion willpermit a greatertransfer of bulk power into extremeSouth Florida from upstate.

In 1978, Company officials initiateda study to determine future power

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Principal FPL officers include (from left)J.L. Howard, Treasurer; Astrid Pfeiffer,Secretary; and H.P. Williams Jr., Comptroller.

FPL at work out of doors. Barley BarberSwamp was saved when the Company builtthis cooling system at Martin Plant aroundit, not through it. The swamp containsabundant ammal and bird life, including anactive eagle's nest, and is home to one of thestate's oldest cypress trees. Right: ManateePlant workman examines turbine blades.

18

needs for Dade County where aboutone-third of FPL customers live.Dade County presents a uniqueplanning dilemma because only oneplant, 'Ibrkey Point, is located there.The Company willapply the findingsof the study to its consideration ofboth transmission and generationalternatives. Options to be

jconsidered are new generation,including coal, for the early 1990s onCompany property adjoining TurkeyPoint Plant; new transmission routesacross environmentally sensitive areasto other sites; or a combination thereof.

In all, 1979 activity promises to beeventful with approximately 340miles of transmission line underconstruction. Never before has theCompany had as much line-buildingactivity in one given year.

Also of significance in the area ofpower delivery willbe the completionthis year of a new computerizedsystem control center in Miami. Itwillmonitor and control the entireFPL electrical system, integratingdivisional systems being installed inSanford, Sarasota, West Palm Beachand Fort Lauderdale.

Regulation and RatesFPL rates for retail sales are

regulated by the Florida PublicService Commission (FPSC) and, forwholesale sales, by the FederalEnergy Regulatory Commission(FERC), an agency of the U.S.Department of Energy.

, A number of signiTicant regulatoryevents involving the two commissionstook place in 1978.

F'PSC —Effective Jan. 2, 1979, theFPSC was restructured by the statelegislature, becoming a 5-memberappointed Commission withstaggered 4-year terms. Previously,it had been a 3-member electedpanel.

Two new Commissioners wereappointed by former Gov. ReubinAskew.'Their terms commenced onJan. 2, 1979, and willrun for fouryears. The newly appointedCommissioners are Joe Cresse, whoserved as budget director for theState of Florida, and Gerald L.Gunter, who served on the 'HtusvilleCity Council.

The nominating council has sent alist of nominees to Gov. RobertGraham for appointment to the threeseats currently being filled byCommissioners Paula F. Hawkins,W.T. Mayo and R.T. Mann.

At press time, the appointmentshad not been made.

No applications for rate increaseswere filed with the FPSC in 1978,and Company officers have gone onpublic record saying that, barringemergencies, they do not expect baserates to be increased in 1979.

In the Company's last rate case,which took effect July 8, 1977, aninverted residential rate feature wasincluded that provides for the first750 kwh to be billed at a lower ratethan consumption above 750 kwh. Asa result of its implementation, 1978revenue was approximately $5 millionhigher than it would have been underthe traditional declining block ratestructure.

In non-rate-related developmentsafi'ecting FPL in 1978, the FPSC:

~ sanctioned a deposit refund planfor FPL customers. By year end, theCompany had refunded over $20million to customers havingcontinuous service for at least 25months and a satisfactory paymentrecord during the last 12 of thosemonths.

~ broadened the Company'sfinancing flexibilityby increasing themaximum amount of allowableshort-term debt that can beoutstanding.

~ initiated a formal proceeding todetermine whether, as a result of thereduction in income taxes caused byenactment of the Revenue Act of1978, electric utilities are earning inexcess of their allowed return.Hearings willbe held at a later date.

~ ordered the Company to adopt aplan allowing customers to have athird party receive copies ofdelinquency notices advising ofpossible service termination.

~ opened several dockets dealingwith implementation of the PublicUtilityRegulatory Policy Act of 1978,

including mandated conservation andrate structures.

FERC-In the only rate activity ofthe year, an FPL request for an

'ncreasein sale-foi~resale rates whichwas filed in 1977 was placed in effectin March 1978, subject to refund withinterest, pending final disposition ofthe case by the FERC.

In other developments during theyear, the FERC:

~ approved FPL's petition towithdraw an application for approvalof a proposed acquisition of the Cityof Vero Beach electric system.

~ called for an investigation ofFlorida Gas%ansmission Co. andAmoco Production Co. concerningpossible violations of the Natural GasAct. FPL also is party to theinvestigation because it hascontractual arrangements with bothfirms.

~ issued a show-cause orderconcerning allegations by a municipalutilityauthority that the Companyviolated provisions of itssale-foi resale tari6'and the FederalPower Act by refusing to provideservice to the authority. A responsewas filed by FPL in July 1978.

A previous FERC decision thatFPL's gas supply is not subject to thecurtailment plan of Florida Gas%ansmission Co. has been appealedto the courts.

Environmental AffairsFPL continues to work aggressivelyto protect natural resources and thehealth and welfare of Floridians.Toward that end, the Companyworks frequently and regularly withfederal, state and local governmentenvironmental agencies oncompliance with laws andregulations, both existing andproposed.

As these laws and regulationsproliferate and become more complexand demanding, the cost ofcompliance becomes a matter ofincreasing concern for customers and

stockholders alike. During 1978, FPLcapital expenditures included about$22 million to achieve a cleanerenvironnient. Similarly, theconstruction program for 1979includes approximately $29 million tomeet environmental requirements.New legislation or regulation couldresult, of course, in even furtherincreases.

FPL is working on many projectsto improve the environment. In 1978,a great deal of attention focused onBarley Barber Swamp, anenvironmentally valuable area whichthe Company preserved whiledeveloping the cooling reservoir atMartin site.

The Company also was commendedfor its work with the AudubonSociety to save manatees, or seacows. The species is threatened withextinction.

Energy LegislationAn important issue to the Companyin 1979 is interpretation of nationalenergy legislation enacted inNovember 1978.

= The Powerplant and IndustrialFuel Use Act of 1978, a part of thenational energy legislation, requiresoil-burning plants for whichconstruction or acquisition began on adate after April20, 1977 to convertto coal unless an exemption isobtained from the EconomicRegulatory Administration (ERA).The ERA has issued interimregulations that define "constructionbegan" as "operational" and hasadvised the Company that based on apreliminary review some of theCompany's units may be covered bythe interim regulations. In theopinion of the Company, these-regulations are not in compliancewith the Act. Allof the Company'sunits began construction well beforeApril20, 1977. Should the Companyhave to convert some units to coal,the Company's financial positioncould be adversely affected to theextent it would be unable to recoverthese conversion costs, which wouldbe substantial, through its rates. The

Company's generating reserves couldbe adversely affected.

Legal ProceedingsThe Company is a party to variouslegal proceedings. Details arecontained in Note 7 of Notes toConsolidated Financial Statements.

Governmental RelationsIn an area of increasing importance,FPL has identified the need toparticipate in the legislative processto bring sense and fairness into theconsideration of energy legislation.The program is based on theconviction of Chairman MarshallMcDonald that "it is imperative weexplain what we are doing, why weare doing it and what results areexpected."

In Retrospect....During 1978, FPL experienced adistinct improvement in theCompany's financial integrity, whichwas achieved through rate relief anddetermined eQ'orts at internal costcontrol. FPL continued to providereliable service for a rapidlyincreasing number of customers. Atthe same time, numerousadvancements and improvementswere made in Company operations.

Looking to the future, however,FPL is faced with the evei presentpressures of inflation and newchallenges in the public and politicalarenas. These forces emphasize theneed for increasing Corporateexcellence in order for the Companyto be able to serve the best interestsof customers, employees andinvestors alike. IfFPL is to succeedin its aim of continuing to be a wellmanaged electric utility, it mustmaintain financial strength, satisfiedcustomers and dedicated employees.

These are constant Companyobjectives, which must be supportedby shoit-term goals —measurablestandards of performance. FPL'ssuccess as a Company depends to agreat extent on how well it measuresup to these standards.

20

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28

Florida Power 8 Light CompanyFinancial & Statistical Information 1978

Contents

Balance Sheets

Statements of Capitalization

Statements of Income

Statements of RetainedEarnings

Statements of Changes inFinancial Position

Schedule ofTaxes

30

Schedule of Allowance for FundsUsed During Construction

Notes to Consolidated FinancialStatements

Management's Discussion and Analysis of theConsolidated Summary of Operations,together with the Consolidated Summary ofOperations, appears on pages 4-7.

Opinion of IndependentCertified Public AccountantsTo the Board of Directors and Shareholders,Florida Power & Light Company:

We have examined the consolidated balance sheets ofFlorida Power & Light Company and subsidiaries as ofDecember 31, 1978 and 1977 and the related consolidatedstatements of capitalization, income, retained earnings andchanges in financial position for the years then ended. Ourexaminations were made in accordance with generallyaccepted auditing standards and, accordingly, includedsuch tests of the accounting records and such otherauditing procedures as we considered necessary in thecircumstances.

In our opinion, such consolidated financial statementspresent fairly the financial position of the Company and itssubsidiaries as of December 31, 1978 and 1977 and theresults of their operations and the changes in theirfinancial position for the years then ended, in conformitywith generally accepted accounting principles applied on aconsistent basis.

DELOITTE HASKINS Er, SELLS

February 12, 1979

Florida Power & Light Company and SubsidiariesConsolidated Balance Sheets, December 31, 1978 and 1977

(Thousands of Dollars)

Assets

1978 1977

ELECTRIC UTILITYPLANT (Notes 1 and 6):At original cost .

Less accumulated depreciation

Net .

Construction work in progress .

Nuclear fuel (less accumulated amortization of $21,673 at December 31, 1978and $ 10,692 at December 31, 1977) .

Electric utilityplant—net .........................

$4,025,649869 887

3,155,762806,471

$3,821,809741 862

3,079,947674,813

130 001 118 702

4 092 234 3 778 462

INVESTMENTS:Storm and property insurance reserve fund (Note 1) .

Other ~ ~ ~ ~ ~ ~ ~ ~ ~

'Ibtal investments ........ ~ ..-. ~ .................................

15,0996 354

21 453

14,4068 125

22 531

CURRENT ASSETS:Cash (Note 4)Temporary investments (at cost which approximates market)Accounts receivable:

Customers (less allowance for uncollectible accounts of $3,478and $4,602 at December 31, 1977) .

Employees and miscellaneous .

Materials and supplies —at average cost.Fossil fuel stock —at average cost .

Prepaid expenses0 ther.

'Ibtal current assets .

at December 31, 1978

4,95228,701

3,824

93,4546,838

61,76585)14521,47114 742

80,1306,172

66,66266,082

9,8154 394

317 063 237 079

DEFERRED DEBITS:Unamortized cancelled project costs (Note 6).....Accumulated deferred income taxes (Note 1) .

Unamortized debt expense and loss on reacquired debt... ~....Other.....

'Ibtal deferred debits

Total .

14,8427,9975,653

898

29,390

84 460 145

20,2785,0845,0567 812

38 230

34 071 302

The accompanying Schedules and Notes to Consolidated Financial Statements are an integral part of these statements.

22

Florida Power & Light Company and SubsidiariesConsolidated Balance Sheets, December 31, 1978 and 1977


Liabilities

1978 1977

CAPITALIZATION(See Statements of Capitalization):Common shareholders'quityPreferred stockLong-term debt

'Ibtal capitalization

$ 1,200,189336,250

1 744 243

$1,309,862386,250

1 766 861

3 462 973 3 280 682

CURRENT LIABILITIES:Long-term debt —current portionAccounts payable —trade .

Customers'eposits'Income taxes (Note 1)

Other taxesInterest accruedPension cost accrued (Note 1)

Tax collections payableOther

'Ibtal current liabilities

DEFERRED CREDITS:Accumulated deferred income taxes (Note 1)

Unamortized investment credit (Note 1) .

Other'Ibtal deferred credits.

62,61846,48079,12057,25735,11839,05531,91913,88244,753

410 202

370,329176,883

14 939

562 151

12,69339,50884,60744,87433,48534,40525,46011,62829 499

316 049

299,722141,237

11 040

451 999

RESERVES:Storm and property insurance (Note 1) .

Injuries and damages and other .

Total reserves .

COMMITMENTSAND CONTINGENCIES (Notes 6 and 7)

15,0999,720

14,4068 166

24 819 22 572

Total $4 460 145 $4 071 302


Florida Power & Light Company and SubsidiariesConsolidated Statements of Capitalization, December 31, 1978 and 1977

(Thousands of Dollars) 0 978 1977

$ 749,375(3,715)

464 529

1 200 189

CurrentRedemption

Price

$101.00101.00101.00103.00103.50102.00106.57106.23115.00111.50109.85109.84

Shares~Ontstandin

100,00050,00050,00062,50050,00050,000

600,000400,000500,000750,000750,000500,000

4k% Series4'k% Series A4'k% Series B .

42/e% Series C .

4.32% Series D .

4.35% Series E..........7.28% Series F .

7.40% Series G9.25% Series H

10.08% Series J .

~ 8.70% Series K8.84% Series L

'Ibtal Preferred Stock

10,0005,0005,0006,2505,0005,000

60,00040,00050,00075,00075,00050 000

10,0005,0005,0006,2505,0005,000

60,00040,00050,00075,00075,000

386 250 336 250

COMMON SHAREHOLDERS'QUITY:Common Stock, no par, authorized 50,000,000 shares; outstanding —40,314,552 shares

in 1978 and 40,050,000 shares in 1977 (Note 3) .............................. 3 756,841Capital stock premium and expense . (3,751)Retained earnings...................................................... 556 772

'Ibtal common shareholders'quity 1,309 862

PREFERRED STOCK—$ 100 Par Value, authorized5,000,000 shares (Note 3):

LONG-TERM DEBT (Notes 1 and 3):First Mortgage Bonds:

Maturing through 1983—3'/e% Due June 19783% Due June 1979.8/s% Due August 1980...3/s% Due November 1981.8/e% Due May 198237/s% Due April 1983 .

Maturing 1984 through 1993 —3/e% to 9/s%Maturing 1994 through 2003 —4/s% to 8% .

Maturing 2004 through 2008 —8'h% to 10'/s%.Pollution Control Series A, 6.10% Due January 2008 .

10/4% Notes Due November 1981Note, 1% over prime Due February 1982 .

Bank Notes (under term loan agreement) Due June 1979Installment Purchase and Security Contracts —5.40% to 6.15%Promissory Notes 6% to 8/4% Due Various to September 1987Unamortized Premium and Discount ..Short-term debt refinancedPromissory Notes of Subsidiaries —7/e% to 9/s% Due Various t

Total long-term debtLess current maturities .

Long-term debt excluding current maturities.Total capitalization .

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

due 2004 through 2007

o December 1995 ..

10,00050,00010,000

100,00015,000

225,000675,000436,289

19,400125,000

6,04850,00092,0904,1454,922

6 585

1,829,47962 618

1 766 861

$3,462,973

11,00010,00050,00010,000

100,00015,000

225,000675,000361,289

125,0007,560

50,00092,0904,2005,0859,0006 712

1,756,93612 698

1 744 248

63 280 682


Florida Power 8 Light Company and SubsidiariesConsolidated Statements of Incomefor the years ended December 31, 1978 and 1977


OPERATING REVENUE<S (Notes 1 and 5) ..

OPERATING EXPENSES:Operations:

FuelOther production .. ~ ~ ~ ~...... ~ ~

,% ansmission and distributionCustomersAdministrative and general .....

MaintenanceDepreciation (Notes 1 and 6)Income taxes (Note 1) ............Taxes other than income taxes ~

Total operating expenses

OPERATING INCOME

1978

31 647 226

551,37617,03146,17642,839

110,60?85,865

144,267198,163132 205

1 328 529

318 697

1977

31 464 584

497,01514,70942,95338,08291,26767,579

125,166171,098117 807

1 165 676

298 908

OTHER INCOME (DEDUCTIONS):Allowance for other funds used during construction (Note 1) .

Income taxes (Note 1)Other —net

Other income —net .

INCOME BEFORE INTE<REST CHARGES

INTEREST CHARGES:Interest on first mortgage bonds.Interest on other long-term debt.Other interest .............. ~ ~

Allowance for borrowed funds used during construction (Note 1)

Interest charges —net

NET INCOME .

PREFERRED DIVIDENDREQUIREMENTS .....NET INCOME APPLICABLETO COMMON STOCK .

20,319827

3 382

~ 16,009(1,558)(1 731)

24 528 12 720

343 225 311 028

116,44624,031

5,619(14 112)

113,53022,947

7,606(12 898)

131 984 131 190

211,24129 138

180,43827 058

3 182 103 2 152 785

Average number of common shares outstanding (in thousands)Earnings per average share of Common Stock .

Dividends per share of Common Stock

40,120$4.54

$2.00

40,050$3.81

$ 1.66


25

Florida Power & Light Company and SubsidiariesConsolidated Statements of Retained Earningsfor the years ended December 31, 1978 and 4 977

(Thousands of Dollars) 1978 1 977

BALANCEAT BEGINNINGOF YEARNE<T INCOME

Total

DE<DUCT CASH DIVIDENDS:Preferred stock:

4%% Series ($4.50 a share)4'%eries A ($4.50 a share) .

4'%eries B ($4.50 a share) .

4%% Series C ($4.50 a share) .

4.32% Series D ($4.32 a share) .

4.35% Series E ($4.35 a share) .

7.28% Series F ($7.28 a share) .

7.40% Series G ($7.40 a share)9.25% Series H ($9.25 a share)

10.08% Series J ($10.08 a share)8.70% Series K ($8.70 a share)8.84% Series L ($2.23 a share) .

Common stock .

TotalBALANCEAT END OF YEAR ......

450225225281216218

4,3682,9604,6257,5606,525

66 48S

108 998 94 136

S556 772 ~454 529

450225225281216218

4,3682,9604,6257,5606,5251,117

80 228

$454,529 $368,227211 241 180 438

665 770 548 065

Dividend Restrictions: The Charter, Mortgage and Deed ofTrust and 10'%ote Indenture contain provisions which,under certain conditions, restrict the payment of dividends and other distributions to common shareholders. Under themost restrictive of these provisions $454.3 millionof retained earnings is available for payment ofdividends on CommonStock at December 31, 1978. In the event that the Company should be in arrears on its sinking fund obligations, whichcommence in 1980, for the 10.08% Preferred Stock, the Company may not pay dividends on Common Stock.


Florida Power & Light Company and SubsidiariesConsolidated Statements of Changes in Financial Positionfor the years ended December 3C, 1978 and 1977

(Thousands of Dollars) 1978 4977

Sources of Funds:Current operations:

Net income ~ ~ ~ ~ 0 \ I ~ I 0 I ~ ~ 0 \ \ \ ~ ~ ~ ~

Depreciation .

Amortization of nuclear fuel assembliesDeferred investment credit —netDeferred income taxesAllowance for other funds used during construction

TotalSale of first mortgage bonds .

Reimbursement by trustee from pollution control and industrialdevelopment financings for construction expenditures .

Issuance of other long-term debt.... ~.........................Issuance of common stockSale ofpreferred stockOther sources ............ ~ ~ ~ ................Decrease in working capital . ~..................................

Total .

Application of Funds:Construction expenditures*Nuclear fuel* .

Retirement, redemption and current maturity of long-term debtDividends ~ ~ I ~ ~ ~ ~ ~ ~ ~ ~ 0 ~ ~ ~ ~ ~ ~ ~ ~

Other apphcations ....................................... ~ ..Total

$211,241144,267

11,08135,64667,695

(20 319)

449,61175,202

18,476

7,46650,13420,82514 164

$ 635 878

$432,58619,92571,617

108,9982 752

$635 878

8180,438125,166

9,48735,51391>660

~(16 009

426,255

32,2919,000

12,52459 706

$539 776

$316>43442,91776,40594>136

9 884

$ 539 776

Change in Working Capital Effected By:Increase (Decrease) in current assets:

Cash and temporary investmentsAccounts receivable ..... ~.................. ~............Fossil fuel stock .

Other changes —net .

Decrease (Increase) in current liabilities:Notes payable and current portion of long-term debt ...Accounts payable .

Customers'epositsIncome taxes .

Revenue refunds.Other changes —net . ~ ~ ~ ~ ~ I ~ ~ 0 ~ ~ ~ ~ I ~ 0 \ ~

Increase (Decrease) in Working Capital

$ 29,82913,99019,06317,107

(49,925)(6,972)5,387

(12,383)

(30 260)

$ (4,824)(29,687)12,545(4,929)

19,029(8,208)

(13,563)(37,064)24,558

(17 563)

$ (14 164) 8 (59 706)

*Excluding Allowance for other funds used during construction. See Note 1 —AFUDC.


Florida Power & Light Company and SubsidiariesSchedule of Taxes for the years ended December 34, 1978 and 1977


Income Taxes

Federal:Charged to operating expenses:

CurrentDeferred

Accelerated depreciationDebt component of AFUDC ..Repair allowance .

OtherDeferred in prior years

Accelerated depreciationDebt component of AF(UDCRepair allowance .

Estimated revenue refundsOther

Charge equivalent to the investment creditAmortization of investment credit.

TotalCharged to other income:

Current.Deferred —net

'Ibtal Federal

State:Charged to operating expenses:

Current;.......Deferred

Accelerated depreciation .

Debt component of AF(UDC .

Repair allowance .

Other .

Deferred in prior yearsAccelerated depreciation .

Debt component of AFUDC .

Repair allowance .

Estimated revenue refunds .

Other.Total

Charged to other income:Current.Deferred —net .

'Ibtal State .

'Ibtal income taxes

1978

$ 739659

53,2206,4055,117

(1,617)

(1,934)(662)(931)

2,00247,535(4 695)

178,099

(212)(585)

177,302

13,320

5,835702561

(178)

(198)(73)

(102)

197

20,064

34(64)

20 084

8197 886

1977

$ 37,573

46,5215,9838,9132,583

(3,078)(526)(709)

11,1982,371

46,628(8 655)

153,802

(7,878)9

247'55

171

9,155

5,099665977284

(332)(58)(78)

1,228356

17,296

(825)1

014'7

485

172 656

'Deferred federal and state income tax provisions charged to other income in 1977 related to the cancelled South Dadeproject costs described in Note 6—Construction Program.

Schedule of Taxes (Continued)

Computed at statutory rate .

Increases, (reductions) in tax resulting from:Allowance for other funds used during construction.....State income taxes —net of federal tax benefits .......Other —net.......

Recorded income tax expense

(9,753)10,418

554

(2.4)2.60.1

48.3%%uo$ 197 386

Other Taxes

Total income taxes differ from the amount computed by applying the statutory federalbefore taxes. The reasons for the differences are as follows: 1978

%ofPre-Ttx

Amount Income

$196,117 48.0%%uo

Amount

$ 169,485

%ofPre-TtxIncome

48.0%%uo

(7,684)9,0921 763

$ 172 656

1978

(2.2)2.60.5

48.9%%uo

1977

income tax rate to income

1977

Taxes other than federal and state income taxes:Federal and state payrollReal and personal property .

State gross receipts .

Franchise chargesMiscellaneous .

Total other taxes .

Charged to:Operating expenses —other taxesUtilityplant and other accounts .

'lbtal .

$ 11,34341,30823,95555,86214 997

$ 147 375

$ 132120515 179

$ 147 375

$ 9,50638,84821,12547,967

7 929

$ 125 875

$117,8077 568

$ 125 875

Schedule of Allowance for Funds Used During Constructionfor the years ended December 31, 1978 and 1977

(Millionsof Dollars) 1978 1977

Monthly average Construction work in progress (CWIP) .

Less:Amount included in rate baseAFUDC previously capitalized and included in monthly average CWIP .

Other .

CWIP base for computing AFUDCNuclear fuel base for computing AFUDC (1) .

Total base for computing AFUDC .

Capitalization rate (2)

Total AFUDC charged to CWIP and nuclear fuelAmount, credited to interest charges

Amounts credited to other income ~

Ttx effect of debt portion of AFUDC for which deferred taxes have been provided (3) .......

$669.9

200.060.976.9

332.146.3

378.49.10%%uo

34.414.1

$ 20.3

8 7.1

$625.2

200.060.353.4

311.5

311.59.28%%uo

28.912.9

$ 16.0

6.6

(1) See Note 1 —AFUDC for information regarding a change in the method of capitalizing AFUDC on certain nuclear fuel.

(2) The AFUDG rate is calculated by applying the capital ratio to the current embedded cost ofeach component ofcapital, except for common equity,which is based on the rate allowed in the Company's last rate case. The debt component is not reduced by the applicable income taxes.

(3) Allowed by the FPSC as an operating expense for ratemaking purposes.

29

Florida Power 8 Light Company and SubsidiariesNotes to Consolidated Financial Statementsfor the years ended December 31, 1978 and 1977

1 ~ Summary of SignificantAccounting and ReportingPoliciesRegulation: Accounting andreporting policies of the Company aresubject to regulation by the FloridaPublic Service Commission (FPSC)and the Federal Energy RegulatoryCommission (FERC). The followingsummarizes the more significant ofthese policies.

Basis of Consolidation: Theconsolidated financial statementsinclude the accounts of the Companyand its wholly-owned subsidiaries.Allsignificant intercompany balancesand transactions have beeneliminated. See Note 2.

Rates and Revenues: Revenues arerecognized based on monthly cyclebillings to customers. Retail andwholesale rate schedules areapproved by the FPSC and theFERC, respectively. The rateschedules contain a fuel a@ustmentclause which gives effect to changesin efficiency, the cost of fuel as woll,as the fuel component of purchasedpower, the total energy cost ofeconomy interchange and thegeneration mix of fossil and nuclearfuels. Generally, the effects arereflected in customer billings abouttwo months after the changes occur.See Note 5 for additional informationregarding current rate matters.

Electric UtilityPlant andDepreciation: The cost of additions,replacements, and renewals of unitsof property is added to utilityplant.The cost (estimated, ifnot known) ofunits ofproperty retired, less netsalvage, is charged to accumulateddepreciation. Maintenance andrepairs of property, and replacementsand renewals of items determined tobe less than units of property, arecharged to operating expenses—maintenance.

Book depreciation is provided on astraight-line service-life basis byprimary accounts as directed by theFPSC using the following rates:

Steam production plant ..... 3.2k-4.6%%uo

Nuclear production plant.... 3.2%%uo-6.2%

Other production plant...... 5.0%%uo-6.5%

Transmission plant ......... 1.5%-3.3%Distribution plant .......... 2.0%-6.6%General plant .............. 2.1%%uo-7.8%

Transportation equipment ... 9.0%

The weighted annual compositedepreciation rate was approximately3.8% and 3.7% in 1978 and 1977,respectively. The nuclear productionplant rates include estimatednegative net salvage values ofapproximately 20% for certaincomponents, reflecting estimateddecommissioning costs. Thetransmission and distrib'ution plantrates include negative net salvagevalues.

Substantially all utilityplant is .subject to the lien of the Mortgageand Deed ofTrust (as supplemented)securing the First Mortgage Bonds.

Amortization of Nuclear Fuel: Thecost of nuclear fuel for St. Lucie UnitNo. 1, with a provision for zero netsalvage, is amortized to fuel expenseon a unit ofproduction method. Noprovision for estimated future spentfuel storage or disposal costs ispresently included in fuel expense.The suppliers of the nuclear fuelcores in the reactors are undercontract to provide spent fuelremoval and, in the case of St. LucieUnit No. 1, to buy back spent fuel,but have indicated that they arepresently unable to perform suchservices due to the unavailability ofstorage and/or reprocessing. TheCompany has expanded its spentnuclear fuel storage facilities and hasadequate facilities for storage ofspent fuel until the mid-1980's undernormal refueling conditions.

Allowance for Funds Used DuringConstruction: The Companycapitalizes as an additional cost ofproperty an allowance for funds used

during construction which representsthe allowed cost of capital used tofinance a portion of CWIP andnuclear fuel. The portion of AFUDCattributable to borrowed funds isrecorded as a reduction of Interestcharges and the portion attributableto.other funds as Other income. Seethe Schedule of AFUDC for detailedmformation.

Commencing in 1978 the Companycapitalized AFUDC on its investmentin nuclear fuel in excess of theamount in the Company's rate base.In 1978 approximately $4.2 millionofAFUDC on nuclear fuel wasrecorded.

Storm and Property InsuranceReserve and Related Fund: Thestorm and property insurancereserve fund is maintained at anamount equivalent'to the reserve.The reserve provides co'verage ofstorm damage costs and possiblepublic liabilitylosses stemming froma nuclear incident. Earnings from thefund, net of taxes, are reinvested inthe fund. Securities held in the fundare recorded at cost whichapproximates market value.

Employee Benefit Plans: TheCompany has a non-contributoryemployees'ension plan coveringsubstantially all employees. TheCompany's policy is to fund eachyear's accrued pension costs,including amortization of theestimated unfunded prior servicecosts. In April1978 the Companyreduced the amortization period forprior service costs from 30 years to 10

years, effective October 1, 1977. Thechange increased 1978 pension costsby approximately $5.6 million.Pension costs for 1978 and 1977 were$26.2 million and $20.5 million,respectively. The estimated unfundedprior service cost of the pensionplan at October 1, 1978 wasgS million using the entry agenormal cost method. There was noexcess of vested benefits over the

30

fund balance as of October 1, 1978. In1978 the Board of Directors approveda plan amendment which changed thepension plan year from a fiscal yearbeginning October 1 to a calendaryear commencing January 1, 1979.

The Employee ThriftPlan providesfor basic contributions by eligibleemployees of up to 6% of their basesalaries, which are matched 50% bythe Company. Supplementalcontributions by employees may bemade up to an additional 6%. TheCompany matching contributions for1978 and 1977 were $2.0 million and$1.7 million, respectively. SeeNote 3 —Common Stock.

In 1976 an Employee StockOwnership Plan (ESOP) was adoptedpursuant to the Tax Reduction Act of1975. The Act permits the Companyto claim an additional 1% investmenttax credit, provided that the entireamount of the credit is contributed toan employee stock ownership planand invested in Company CommonStock for the benefit of employees. In1978 the Board of Directors amendedthe ESOP to enable the Company toclaim a further investment tax creditup to h% to the extent that the k%credit is matched by voluntarycontributions by participatingemployees pursuant to the TaxReform Act of 1976. Since thepayments to the Plan are in lieu ofincome tax payments, there is noeffect on net income. Provisions forCompany contributions to the ESOPwere $7.2 millionand $7.5 million in1978 and 1977, respectively. SeeNote 3—Common Stock.

Income Taxes: Deferred incometaxes are provided on all significantbook-tax timing differences aspermitted for rate-making purposesby the FPSG. Investment tax creditsused to reduce current federal incometaxes are deferred and amortized to

income at a rate approximating thelives of the related property. SeeSchedule of Taxes.

2. Investment in Subsidiaries

The Company's wholly-ownedsubsidiaries, FSS, LRIC and EFC,are engaged in activitiescomplementary to those of theCompany. FSS is engaged in oil andgas and uranium explorationventures and proprietary fuelresearch and development projects.FSS is not presently subject toregulation by the FPSC or FERC.LRIC holds real properties used or tobe used by the Company in its utilityoperations for the purpose ofincreasing financing options beyondthose permitted by the Company'sMortgage and Deed ofTrust. EFCwas organized for the purpose ofsupplying engineering, fabricationand construction services for powerplants. In 1977, EFC entered into ajoint venture, NISCO-South, whichwas terminated in 1978.

The Company's total investment inFSS and EFC is not material. TheCompany's net investment in LRICapproximates $36.8 million.

3. CapitalizationCommon Stock: In June 1978 theCompany reserved 1,000,000 sharesof Common Stock for issuance inconnection with the Employee ThriftPlan and Employee Stock OwnershipPlan. In 1978 the Company issued49,600 shares for $1.4 millionunderthe ThriftPlan and 214,952 shares for$6.1 million under the ESOP.

Preferred Stock: The 10.08%Preferred Stock is entitled to asinking fund to retire a minimum of37,500 shares and a maximum of75,000 shares at $101.50 per share,plus accrued dividends to theredemption date on April1 of eachyear, commencing on April1, 1980.Minimum payments are designed toretire the entire issue by April1, 1999.

The Company's Charter authorizesthe issuance of 10;000,000 shares ofPreferred Stock, no par value, and5,000,000 shares of SubordinatedPreferred Stock, no par value, to beknown as "Preference Stock." None ofthese shares is outstanding.

Long-'Iform Debt: Certain series ofthe Company's First Mortgage Bondshave sinking fund requirementsthrough 1995 which may be satisfiedby certification of property additionsat the rate of 167% of suchrequirements. Such requirements areapproximately $4 million for each ofthe next five years. Annualmaturities of long-term debt'reapproximately $63 million in 1979,

$52 million in 1980, $137 million in1981, $102 million in 1982 and $16

million in 1983.Interest on the Bank Notes due

June 1979 is based on the cuiventcommercial loan interest rate up to amaximum average interest rate of7~/4% over the term of the loan.

Commercial paper aggregating $9millionat December 31, 1977 wasrepaid from proceeds from long-tennfinancing in January 1978.

Accordingly, the commercial paperwas classified as long-term debt. Thefinancing included the sale of $75million of 9'%irst Mortgage Bondsand $19.4 millionof 6.1% PollutionControl Series A First MortgageBonds. The latter Bond series wasissued concurrently with theexecution by the Company of aninstallment purchase contract assecurity for payment of pollutionconti'evenue bonds issued byMartin County, Florida, to providefinancing to the Company for certainpollution control facilities.

Changes in Capital Accounts: Thechanges in Common Stock, PreferredStock and Capital Stock Premiumand Expense for 1977 and 1978 areshown below (in thousands):

31

Florida Power & Light Company and SubsidiariesNotes to Consolidated Financial Statements (Continued)

CapitalStock

Common Stock Preferred Stock Premiumand

Shams Amount Shares Amount ~Ex ense

Balances, January 1, 1977......Expenses recorded in 1977.....Balances, December 31, 19Z7...Sales in 1978Issued to benefit plans in 1978 ..Balances, December 31, 1978...

40,050

40,050

265

40,316

$749,3Z5

749,3Z6

7,466

$756,841

3,362 $336,250

3,362 336,250500 50,000

3,862 $386,250

$(3,612)(103)

(3,716)(30)

(6)

$(3,761)

OtherFinancial

Commercial Bank Commercial Bank Insti-~Pa r B~ormwin ~Pa er B~orrowin s tutions


Average aggregateborrowings.......

Maximum month-endbalances ...........

Weighted daily averageinterestrate .........

Weighted average interestrate on amountsoutstanding at endofperiod...............

Maximum combinedborrowings at anymonth-end .............

$4,866 $ 300

$37,300

7.7% Z.6%

s$37 300

$ 10,880 $16,394 $ 1,677

$37,600 $89,000 $10,035

5.4% 6.5% 5.9%

$39,000

5. Revenues

FPSC: In 1977 the Company was granted a retail rate increase designed toproduce increased revenues of $195.5 million on an annual basis. The newrates went into effect July 8, 1977. Interim rate relief providing additionalannual revenues of $87.9 millionwas effective March 14, 1977 and wasincluded in the July rate increase. The new residential rates include aninverted rate structure.FERC: A request for a rate increase on sales to customers for resale filedwith FERC in 1977 was placed in effect March 1, 1978 subject to refund withinterest. The Company is seeking an annual increase in wholesale revenues ofapproximately $6.7 million based on a 1978 projected test year. Adequateprovision has been made for refunds which may be required after finalsettlement with FERC.

4. Short. Term Debt

Unused available bank credit aggregated approximately $201.8 millionatDecember 31, 1978, and is based on informal arrangements which are subjectto cancellation without notice. Compensating balances maintained inconnection with these credits arise in the normal course of business and are

not material to the Company's financial position and borrowing costs.

Details of short-term borrowings for the years ended December 31, 1978

and 1977 are shown below:

6. Commitmentsand Contingencies

Construction Program:Commitments in connection with theconstruction program for electric

, utilityplants, generating units andrelated facilities were estimated atapproximately $1.4 billion atDecember 31, 1978 including $500million for nuclear fuel cores. Theseestimates are based on the presentlyproposed construction program andare not necessarily contractualobligations. Certain of thesecommitments are also subject toescalation for increases in labor,services and material costs.

In 1977 the Company cancelled thetwo nuclear units previouslyproposed for a South Dade site anddeferred the costs, includingcancellation penalties, of the projectof approximately $ 14.9 millionbeforeincome taxes. The Company obtainedauthorization from the FPSC toamortize these costs over a five-yearperiod. In 1978 an additional $7.9million of costs related to the projectwere determined to be notrecoverable. These costs were addedto the original amount of cancelledproject costs and are being amortizedover the same five-year amortizationperiod. Depreciation expense in 1978

includes $5.8 millionof amortization ofthese costs. In 1977 $2.2 millionofsuch amortization was charged toOther income.

Rental and Nuclear Fuel Expense:The annual lease expense and theminimum rental commitments underproperty and equipment leases arenot material. The Company hasvarious contracts for supplies of fuelincluding a contract for nuclear fuelservices for its two Turkey PointPlant nuclear units. However, inSeptember 1975 the Company wasnotified by the supplier that it is

32

taking the position that it is excusedfrom the complete performance of itsobligations to supply uranium underthe contract. See Note 7—NuclearFuel Suit. Expenses under thenuclear fuel services contract for1978 and 1977 which were changed tooperating expenses were $15.4million and $ 16.9 million,respectively. The Company iscommitted to pay a minimum annualcharge per nuclear unit of $1,260,000under the Turkey Point nuclear fuelsupply contract; however, annualcharges on a usage basis may besubstantially in excess of theminimum charge and are subject toescalation for increases in certaincosts to the supplier. The presentvalue of the minimum leasecommitments, including the nuclearfuel supply contract, and the impacton net income ifcertain leases andthe nuclear fuel supply contract hadbeen capitalized, are not materialand, therefore, not presented.

Nuclear Insurance: The Company isa member of Nuclear MutualLimited, which provides insurancecoverage against property damage tomembers'uclear generatingfacilities. The Company could besubject to a maximum assessment ofapproximately $39 million, based onestimated 1978 premiums, in theevent losses occur at a nuclear plantof a member utility, and is aself-insurer for any such loss inexcess of $225 million.

Under the Price-Anderson Act,the Company maintains privateinsurance and agreements ofindemnity with the NuclearRegulatory Commission (NRC) tocover third-party liabilityarisingfrom a nuclear incident which mightoccur at the Company's nuclearpower plants. The Act currentlylimits the liabilityof owners of alicensed nuclear unit to $560 millionfor a single nuclear incident andprovides for the Federal Government

to indemnify such owners againstthiA-party liabilityclaims inamounts up to $560 million, lessliabilityinsurance available frominsurance companies (currentlylimited to $140 million) andcontributions by owners. In theevent ofpublic liabilitylosses arisingfrom a nuclear incident at a facilitycurrently covered by governmentindemnification, the Company isobligated to pay a deferred premiumof up to $5 millionper incident foreach of its three licensed reactors butnot more than $10 million in acalendar year for each of its threelicensed reactors under regulationsadopted by the NRC. The Companycould be assessed up toapproximately $30 million in a yearunder such regulations.

Nuclear Units:Turkey Point Unit Nos. 8 and 4-TheCompany is experiencing problemswith the steam generators of theseunits and has had to plug certainpressurized water circulation tubes inthe steam generators.

Unit No. 4 returned to service inearly October 1978 following itsannual refueling and overhaul. Whilethe unit was offthe line, inspectionsof the steam generator tubes wereperformed and additional tubes wereplugged. Atpresent approximately18.7% of the tubes in Unit No. 4 havebeen plugged. Unit No. 4 is presentlyauthorized by the NRC to operateuntil the next scheduled refueling inApril 1979 at which time aninspection of the steam generatorsmust be performed and NRCapproval obtained for continuedoperation.

Unit No. 3 came offthe line inJanuary 1979 for its annual refueling,overhaul and inspection. While theunit is offthe line, additional tubes

have been plugged, bringing thepercentage of tubes in Unit No. 3which have been plugged toapproximately 17.3%. In addition,temporary repairs are being made toparts of the blades in each of the twolow pressure turbine rotors of theunit. Permanent repairs willbe madewhen Unit No. 3 is refueled in late1979. NRC approval must beobtained before the unit may bereturned to service.

In September 1978 the Companyobtained approval from the NRC toplug up to 25% of the tubes in bothUnit No. 3 and No. 4 withoutreducing the output of the units. Todate, steam generator tube plugginghas not required a reduction in theoutput of the units. Ifa significantpattern of leaks occurs in a steamgenerator of either unit, aninspection must be performed andNRC approval would be requiredbefore returning the affected unit toservice.

The Company has executed acontract to obtain new steamgenerator tube bundles with deliveryanticipated in the second half of 1979.

The new steam generator tubebundles willincorporate differentmaterials and design which theCompany anticipates willprevent arecurrence of the present problems.No decision has been made as towhen the permanent repairs of thesteam generators willbegin, The costto replace the tube bundles isestimated at approximately $51

million per unit. A total of $31 millionhas been expended through'December 31, 1978. The balance ofthese costs are reflected in theconstruction commitments (Note 6—Construction Program). Repair of thesteam generators may require eachunit to be out of service for about sixto nine months and willrequireamendments to the operating licensesfor each unit. While the Company has

applied to the NRC for the necessary

33.

Florida Power & Light Company and SubsidiariesNotes to Consolidated Financial Statements (concluded)

amendments to the operatinglicenses, NRC procedures governingthe issuance of the amendments havenot yet been completed. TheCompany anticipates that generationlost when a unit is out of service oroperating at reduced power levelswould be made up by fossil-firedgeneration, the additional cost ofwhich should be recoverable throughits fuel adjustment clause aspresently in effect. Power resourcescould be inadequate and the southernpart of the Company's system couldbe without adequate power from timeto time during any period that bothunits were simultaneously out ofservice. The Company's financialposition could be adversely affected.

In May 1978 the Company filed suitfor damages in the U.S. DistrictCourt for the Southern District ofFlorida against WestinghouseElectric Corporation, the supplier ofthe steam generators. The matter ispending.St,. Lrucie No. 1-During routineinspection at the Spring 1978refueling of this unit, minor corrosionwas detected in the steamgenerators. An additional inspectionwas performed in November 1978.Additional inspections are scheduledfor the unit's next refueling in theSpring of 1979, at which time theCompany anticipates chemicallycleaning the steam generators.St. Lucie No. 8-Construction workon the unit resumed in June 1977following the issuance of aconstruction permit. In December1978 the U.S. Court of Appeals forthe District of Columbia Circuitrendered a judgment which affirmedthe NRC decisions authorizingconstruction of this unit.

Energy Legislation: The Powerplantand Industrial Fuel Use Act of 1978requires oil burning plants for whichconstruction or acquisition began on adate after April20, 1977 to convert to

coal unless an exemption is obtainedfrom the Economic RegulatoryAdministration (ERA). The ERA hasissued interim regulations that define"construction began" as "operational",and has advised the Company thatbased on a preliminary review someof the Company's units may becovered by the interim regulations.In the opinion of the Company, theseinterim regulations are not incompliance with the Act. Allof theCompany's units began constructionwell before April20, 1977. Should theCompany have to convert these unitsto coal, the Company's financialposition could be adversely affectedto the extent it would be unable torecover these conversion costs, whichwould be substantial, through itsrates. The Company's electricalgenerating reserves could beadversely affected.

Federal Income Taxes: The IRS hasexamined the Company's income taxreturns for 1971, 1972, and 1973 and,in August 1977, proposed additionalincome taxes aggregating $22.1million, exclusive of interest. Theprincipal issue ($18.5 million) is thetaxability of customer deposits. TheCompany filed a formal protest andconferences are being held at theAppellate Division of the IRS.

Any liabilityfor taxes and interestresulting from final settlement withthe IRS would not have a materialeffect on net income. Income taxes oncustomer deposits would benormalized and adequate provisionshave been made for the taxes relatedto the other issues.

?. Legal ProceedingsNuclear Fuel Suit: The Companyhas a contract with WestinghouseElectric Corporation covering its fullnuclear fuel requirements and relatedservices, including removal of spentfuel, for Turkey Point Units No. 3and 4 thi'ough 1982 and 1983,respectively. See Note 6 —Rentaland Nuclear Fuel Expense. In 1975Westinghouse took the position that

it was excused from performing itsobligations to supply uranium andfrom removing spent fuel pursuant tothe contract for the Turkey Pointsite.

In 1975 the Company filed suitagainst Westinghouse. The actionwas consolidated with suits broughtby other utilitycustomers againstWestinghouse in the U.S. DistrictCouit for the Eastern District ofVirginia (District Court).

In October 1978 the District Courtruled that Westinghouse was notexcused from performing its contractwith the Company with respect tothe uranium issue. The damage phaseof the litigation willcommence inMay 1979. Prior to the damage phasethe Court set aside for lateradjudication the Company's disputewith Westinghouse over spent fuelremoval. This issue willbe triedimmediately after the conclusion ofthe damage trial.

Gainesville Antitrust Suit: A trebledamage suit was brought in 1968

against the Company, seekingdamages ofapproximately $11

million, before trebling. The case wastried in 1975 and resulted in a juryverdict for the Company. Plaintiffsappealed to the U.S. Couit ofAppeals for the Fifth Circuit. In May1978 the Couit of Appeals ruled thatcertain matters peitaining to the caseshould be re-tried by the DistrictCourt. At issue in the case onremand is whether an agreement,understanding or concert of action, towhich the Court ofAppeals found theCompany was a party, was asubstantial factor in plaintiffs'ailureto obtain an interconnection. Ifthejury should find in favor of plaintiffs,it will then have to assess whatdamages, ifany, plaintiffs sustained.

'IHal Counsel has advised theCompany that it is impossible topredict the outcome of this litigationat the present time because of the

34

ambiguities in the opinion of theCourt of Appeals and the unceitaintyas to how the trial judge willinterpret the law in charging the juryas well as its being unable to predictwhether or not the plaintiffs willhave a new theory of damages oradditional facts upon which topredicate their claims. However,Trial Counsel does not believe, basedon the facts as it knows them at thistime, that the Company willlikelyincur a liabilitythat willbe materialin relation to its consolidatedfinancial statements.

Alleged Discrimination Claims: InApril1976 the Company was namedas the defendant in an alleged classaction. The complaint allegespatterns and practices ofdiscrimination by the Companyagainst blacks and females. Thecomplaint, seeks, among other things,injunctive relief, reimbursement forlost pay and benefits and damages.Discovery is proceeding. InSeptember 1978 a U.S. District Courtconditionally certified the suit as aclass action concerning only blacksand trial has been set for mid-1979.

In November 1977 a Commissionerof the Equal EmploymentOpportunity Commission filed a

charge ofunlawful labor employmentpractices against the Company,certain labor organizations and ajoint Company/labor organizationcommittee. Alleged discriminatorypractices charged against theCompany are substantially similar tothose described in the precedingparagraph except that the chargeconcerns Spanish-surnamedAmericans, blacks and females.

In June 1978 the Company and alabor organization were named asdefendants in an alleged class actionfiled in U.S. District Court for theMiddle District of Florida. Allegeddiscriminatory practices chargedagainst the Company are similar tothose described in the preceding twoparagraphs.

The Company cannot predict theoutcome of these claims but, based onthe facts that so far have come to itsattention, the Company is of theopinion that the likelihood that theultimate outcome of these claims willhave a material adverse effect on thefinancial condition of the Company isremote.

Bond Redemption Suit: In 1977 apurported class action was broughtagainst the Company allegingdamages in excess of $9 million,based on alleged breach of contractand violations of the federal

securities laws with respect to theredemption on September 2, 1977 bythe Company of approximately $63.7million of its 10'%eries FirstMortgage Bonds due March 1, 2005.Discovery has commenced and amotion to certify the suit as a classaction is pending. The Company'sGeneral Counsel has stated that atthis early stage in the proceedingsthey cannot predict the outcome.However, the facts that have so farcome to their attention do notindicate that the outcome of the suitwillhave a material adverse eQ'ect onthe financial condition of the Company.

8. Quarterly Data (Unaudited)F<or the periods shown below, the unaudited Operating Revenues, OperatingIncome, Net Income and Earnings per average share of Common Stock (afterdividend requirements on Prefened Stock) are as follows: Earnings

per averageshare of

Net CommonQuarter Ended Income Stock

Operating OperatingRevenues Income


hlarch 31, 1977 .....June 30, 1977.......September 30, 1977 .

December 31, 1977 ..March 31, 1978 .....June 30, 1978.......September 30, 1978 .

December 31, 1978 ..

$334,589307,517468,099354,379371,901371,185496,785407,365

$ 71)90145,269

102,66479,07474,65557,241

104,30482,597

$42,90716,59973,10747,82548,67929,59476,77456,194

$0.900.241.651.021.040.571.731.20

9. Replacement Cost Data (Unaudited)

One result of inflation experienced by the Company in recent years isreplacement costs of productive capacity that are significantly greater thanthe historical costs of such assets reported in the Company's financialstatements. The Company's annual report to the Securities and ExchangeCommission for 1978 on F<orm 10-K contains specific replacement costinformation and is available upon request.

In the opinion of the Company all adjustments (consisting of only normalrecurring accruals) necessary to present a fair statement of such amounts forsuch periods have been made.

The Company is of the opinion that comparisons of the most recent quarterto the quarter immediately preceding it may not give a true indication ofoverall trends and changes in the Company's operations and may bemisleading to an understanding of the results of operations as the revenuesand expenses of the Company are subject to periodic fluctuations due tochanges in weather conditions, customer usage, number of customers and theproportion of generation by various fuels.

35

Stockholder Information

Annual MeetingThe 1979 Annual Meeting of FPLshareholders willbe in Port St.Lucie, Fla., on 'Ibes., April17, at 10a.m. Notices of the meeting, togetherwith a proxy statement and form ofproxy, willbe mailed to shareholderson or about March 18, at which, timeproxies willbe requested by themanagement.

The 1978 gathering at Ravine StateGardens in Palatka attracted aturnout of 274 persons. During themeeting, shareholders re-elected 10directors to the Board and ratifiedthe selection of Deloitte Haskins &Sells as auditors. Proposals to restorelimited pre-emptive rights and tofurnish transcripts of the AnnualMeeting were defeated.

Nearly 86 percent of outstandingshares were voted.

Form 10-K for 1978

A copy of the Company's AnnualReport on Form 10-K filed with theSecurities and Exchange Commissionis available, without charge, tointerested stockholders. Requestsmust be in writing and should beaddressed to J.E. Moore, Director ofStockholder Information, FloridaPower & Light Company, P.O. Box529100, Miami, Fla. 38152.

Board of Directors MeetingsRegular meetings of the Board ofDirectors are scheduled on Mondayfollowing the second Friday of eachmonth. The sessions generally are inthe Company's principal offices atMiami, Fla.

Company OwnershipAt the end of 1978, the Company had40,314,552 shares of common stockoutstanding, owned by 32,089 holdersof record. These shareholders areindividuals or institutions, such asfoundations, insurance companies andpension funds, which in turn holdlarge blocks of stock on behalf ofstillmore individuals.

As a result of direct purchases orof shares acquired through the FPLThriftand Employee StockOwnership Plans, nearly allemployees maintain ownership and

DividendsFor many years, FPL's policy hasbeen to share gains in earnings withstockholders in the form of increasedcash dividends. Accordingly,dividends paid per share haveincreased every year since FPLbegan quarterly payments in 1946.

The following table indicatesdividends paid on common stock inthe past two years:

1978

First Quarter $0.44Second Quarter $0.52Third Quarter $0.52Fourth Quarter $0.52

On Feb. 12, 1979, the Boarddeclared the regular quarterlydividend of 62 cents, the 133rdconsecutive payment. It is payableMarch 15 to holders of record as ofFebruary 28.

Dividend Reinvestment PlanShareholders may elect to have theirdividends automatically reinvested inadditional FPL shares through alow-cost Automatic DividendReinvestment Service offered by theFirst National Bank of Boston.Participants in the plan also have theoption of making supplemental cashdeposits of up to $8,000 per quarterfor investment. Shareholders, usingthis convenient method of increasing

1977

$0.39$0.39

$0.44

$0.44

therefore have direct interest inbusiness activities of the Company.

Common Stock DataPrincipal market for FPL commonstock is the New York StockExchange. Ticker symbol is FPL.The following table indicates therange (high/low) of trading prices forthe past two years:

1978 1977

First Quarter 27V4/23s/s 28 /23'/sSecond Quarter 27~/s/24'5 27~/s/21%

Third Quarter '9%/267/s 28%/24%Fourth Quarter 285/25s/4 27%/24%

Transfer agent, registrar anddividend disbursing agent for thestock is The First National Bank ofBoston, Shareholder ServicesDivision, P.O. Box 644, Boston,Mass. 02102. Telephone 617/434-6562.

their FPL holdings, invested anadditional $466,000 during 1978 alone.

Information and enrollment cardsmay be obtained by writing The FirstNational Bank of Boston, AutomaticDividend Reinvestment and CashStock Purchase Plan, P.O. Box 1681,Boston, Mass. 02102.

Investor CommunicationsFlorida Hi-Lights, a newsletterprepared especially for shareholders,is published several times each yearand sent to holders of common andpreferred stock.

Statistical SupplementA Financial & Statistical Reportcontaining comprehensive data forthe years 1968-78 is published forprofessionals in the investmentcommunity and is available to othersas a supplement to this report.Requests for copies should be sent toStockholder InformationDepartment, Florida Power & LightCompany, P. 0. Box 629100, Miami,Fla. 88152.

InquiriesInquiries concerning the Company'sactivities, including requests forcopies of F~PL's QuarterlyConsolidated Financial Statements,should be directed to Stockholder.Information Department, FloridaPower & Light Company, P.O. Box529100, Miami, Fla. 33152. Telephone305/552-4046.

AuditorsDeloitte Haskins & SellsCertified Public Accountants1 Southeast Third AvenueMiami, Fla. 33131

General CounselSteel Hector & DavisSoutheast First NationalBank BuildingMiami, Fla. 33131

Principal Company OfficesFlorida Power & Light Company9250 W. Flagler St.P.O. Box 529100Miami, Fla. 33152Telephone 305/652-3552

Directors Principal Officers

Anthony

udiburg

McCarty

Price

Whiddon

Biumberg

H'

9,)

Bennett

Davis

Knight

McDonald

Wadsworth

'M.P. AnthonyWest Palm Beach, Florida. President,Anthony's Inc., a chain of ladies ready-to-wear retail stores. Serving since 1977.

George F. BennettBoston, Massachusetts. President andChief Executive Officer of State StreetInvestment Corporation and of FederalStreet Fund Inc., investment companies;Managing Partner of State StreetResearch and Management Company.Serving since 1970.

'David B1umbergMiami, Florida. President, PlannedDevelopment Corporation, a building anddevelopment firm. Serving since 1973.

Jean McArthur DavisMiami, Florida. President, McArthurDairy Inc. and McArthur Farms Inc.,engaged in the production, processing,distribution and sale of dairy products.Serving since 1977.

John J. HudiburgMiami, Florida. President of theCompany since Jan. 15, 1979. FormerlyExecutive Vice President, Finance.Serving since January 1979.

Robert B. KnightCoral Gables, Florida. Chairman,National Food Services Inc., a restaurantmanagement company. Serving since 1977.

John M. McCartyFort Pierce, Florida. Attorney. Servingsince 1973.

tMarshall McDonaldMiami, Florida. Chairman of the Board ofDirectors of the Company. FormerlyPresident and Chairman of Meetings ofthe Board. Serving since 1971.

t'Edgar H. Price Jr.Bradenton, Florida. President andDirector ofThe Price Company Inc.,consultant firm. Serving since 1972.

tLewis E. WadsworthBunnell, Florida. Engaged in the forestryand cattle businesses. Serving since 1970.

Gene A. WhiddonFort Lauderdale, Florida. President,Causeway Lumber Company Inc.,engaged in retail lumber and businessmaterials. Serving since January 1979.

t Executive Committee'udit Committee

Marshall McDonaldChairman of the Board andChief Executive Officer

John J. HudiburgPresident and Chief Operating Officer

E.A. AdomatExecutive Vice President, Operations

F.E. AutreyExecutive Vice President, Commercial

H.L. AllenSenior Vice President

L.C. HunterSenior Vice President

J.G. Spencer Jr.Senior Vice President

R.lU. Wall Jr.Senior Vice President andAssistant Secretary

D.K. BaldwinVice President, Corporate Services

E.L. BivansVice President, System Planning

Michael C. CookVice President, Fuel Resourcesand Corporate Development

H.J. Dager Jr.Vice President, Engineering,Project Management and Construction

Tracy DaneseVice President, Public Affairs

J.H. Francis Jr.Vice President,Corporate Communications

R.J. GardnerVice President, Strategic Planning

W.M. KleinVice President, Economic Development

A.D. SchmidtVice President, Power Resources

R.E. 'IhllonVice President, Divisions

R.E. UhrigVice President, Advanced Systemsand Technology

J.L. Howard'lh.asurer

Astrid PfeifferSecretary

H.P. williams Jr.Comptroller

(Photographs appear on pages 2-18.)

ADE~-'LOI1ICN k7wtlt ~ LCM'OMEY

9260 West Flagler StreetP.O. Box 629100Miami, Florida 33162

BULKRATE .

U.S. POSTAGEPAID

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